Commission Decision

of 10 October 2001

relating to a proceeding under Article 81 of the EC Treaty

(Case COMP/36.264 - Mercedes-Benz)

(notified under document number C (2001) 3028)

(Only the German text is authentic)

(Text with EEA relevance)

(2002/758/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation No 17 of 6 February 1962, first Regulation implementing Articles 85 and 86 of the Treaty(1), as last amended by Regulation (EC) No 1216/1999 of 10 June 1999(2), and in particular Articles 3, 15(2) and 16(1) thereof,

Having regard to the Commission decision of 30 March 1999 to initiate proceedings in this case,

Having given the parties concerned the opportunity, pursuant to Article 19(1) of Regulation No 17 and Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in certain proceedings under Articles 85 and 86 of the EC Treaty(3), to make known their views on the objections raised by the Commission,

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

Having regard to the final report of the Hearing Officer,

Whereas:

1. FACTS

1.1. PROCEDURE

(1) Since the beginning of 1995 the Commission had been receiving letters from consumers complaining about restrictions on the export of new motor vehicles of the Mercedes-Benz make by affiliates of Daimler-Benz AG in various Member States. The Commission thus had indications that firms belonging to the Daimler-Benz group were operating a foreclosure of the market in contravention of Article 81(1) of the EC Treaty.

(2) On 4 December 1996 the Commission issued a decision ordering investigations pursuant to Article 14 of Regulation No 17. These investigations were carried out on 11 and 12 December 1996 at the premises of the following companies:

- Germany: Daimler-Benz AG, Stuttgart; Mercedes-Benz AG, Stuttgart,

- Belgium: Mercedes-Benz Belgium SA/NV; Van Steen SA/NV, Mechelen,

- Netherlands: Mercedes-Benz Nederland NV, Utrecht; Autocentrum Pordon BV, Utrecht; Van Kooy BV, Hilversum,

- Spain: Mercedes-Benz España SA, Madrid; Itarsa, Madrid; Itra SL, Madrid.

(3) On 21 October 1998 the Commission addressed a request for information under Article 11 of Regulation No 17 to Daimler-Benz AG. This was replied to on 10 November 1998. On 15 June 2001 the Commission addressed a further request for information to DaimlerChrysler AG, which was replied to on 9 July 2001.

(4) On 31 March 1999 the Commission sent a statement of objections to DaimlerChrysler AG.

(5) DaimlerChrysler AG commented on the Commission's objections in writing by letter dated 14 June 1999 and orally at a hearing on 29 June 1999. Moreover, on 7 December 1999 it presented a report by Professor Ulmer which assessed the marketing of motor vehicles via dealers in Germany pursuant to Article 81(1). On 4 September 2000 DaimlerChrysler sent a further letter on the subject of the assessment of evidence in which it referred to the assessment of evidence by the Court of First Instance of the European Communities in its judgment in Case T-62/98 Volkswagen v Commission [2000] ECR II-2707.

(6) This Decision is based on documents found during the investigations, answers to requests for information and the comments presented by DaimlerChrysler AG.

1.2. THE FIRMS IN QUESTION AND THEIR MARKETING NETWORK

1.2.1. DAIMLERCHRYSLER AG

(7) Daimler-Benz AG merged with DaimlerChrysler AG on 21 December 1998 on the basis of the "Business combination agreement" of 7 May 1998. DaimlerChrysler AG thus became the legal successor to Daimler-Benz AG. Under section 20(1) of the Conversion Act (Umwandlungsgesetz (UmwG))(4), all of the latter's rights, assets, liabilities and obligations were transferred to DaimlerChrysler AG(5). In 2000 DaimlerChrysler's worldwide turnover came to EUR 162,384 billion, and its Community-wide turnover to EUR 50,348 billion.

(8) In 2000, with world sales of 1052742 passenger cars, the Mercedes-Benz make accounted for a turnover of EUR 43,133 billion. In 2000, 666198 Mercedes-Benz passenger cars were sold in the Community, worth EUR 25,050 billion(6).

1.2.2. DAIMLER-BENZ AG AND MERCEDES-BENZ AG

(9) Until 21 December 1998 Daimler-Benz AG was the umbrella company of the Daimler-Benz group. Together with its subsidiaries, it was active worldwide in manufacturing and marketing motor vehicles, motor-vehicle electronics, railway vehicles, diesel engines, aircraft, spacecraft and defence systems, and in the financial-services, insurance-brokerage, information-technology, telecommunications-technology, commercial and property-management services sectors.

(10) In 1997 the consolidated worldwide group turnover of Daimler-Benz AG was ECU 64963 million, while its turnover in the Community was ECU 37995 million. In the same year, the group's worldwide turnover in respect of passenger cars was ECU 21955 million.

(11) Until 1989, passenger cars and commercial vehicles of the Mercedes-Benz make were manufactured and marketed by Daimler-Benz AG and its subsidiaries. From 1989 until 26 May 1997, passenger cars were manufactured by Mercedes-Benz AG, a subsidiary of Daimler-Benz AG. In Germany, they were marketed directly by Mercedes-Benz AG, in Belgium and in Spain via the subsidiaries of Daimler-Benz AG, Mercedes-Benz Belgium SA/NV and Mercedes-Benz España SA.

(12) Mercedes-Benz AG was merged into Daimler-Benz AG on 25 May 1997. Since that date, Mercedes-Benz has been the motor-vehicle division within Daimler-Benz AG, now DaimlerChrysler AG. For the sake of simplicity, the expression "Mercedes-Benz" is used below where appropriate, irrespective of whether the reference is to Daimler-Benz AG (up to 1989), Mercedes-Benz AG (up to 1997), Daimler-Benz AG (1997/98) or DaimlerChrysler AG (from 1998).

(13) In 2000 the turnover achieved with Mercedes-Benz passenger cars, including sales to company employees, in Germany came to EUR 15,494 billion(7).

(14) The car trade in Germany may be portrayed in figures as follows(8):

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(15) Mercedes-Benz passenger cars are marketed(9) in Germany essentially via 43 (1996), 41 (1998) or 35 (2000) branches belonging to the group, 237 (1996), 208 (1998) or 110 (2000) agents (also known as contracting partners) with the status under German law of commercial agents appointed to negotiate business transactions (section 84(1), first sentence, first alternative, of the Commercial Code), and via three commission agents ("principal agents")(10), one of which is a firm within the Mercedes-Benz group(11). Although the principal agents act in their own name, they operate on the same footing(12) as the other agents in their internal relationship with Mercedes-Benz. Since the contracts with principal agents and agents are broadly identical in content, the following information concerning agents also applies, unless otherwise stated, to the principal agents. There are also some 500 contracted workshops in Germany. These can act as commercial agents as a sideline under section 92b of the Commercial Code, negotiating sales of new vehicles on behalf of the agent or Mercedes-Benz branch responsible for their area.

Of all Mercedes-Benz passenger cars sold in Germany, on average during the period 1996-2000 around [...] % were sold through Mercedes-Benz branches and around [...] % through contracting partners acting as commercial agents (hereinafter referred to as "agents"). Even if the criterion is the level of turnover achieved with new vehicles sold through these marketing companies, the same percentage figures are obtained(13). The sales/turnover of the German contracted workshops that negotiate sales contracts for new vehicles on behalf either of a branch or of an agent are included in these percentages and amount to some [...] % in all.

(16) The German (principal) agents of Mercedes-Benz bear a number of risks under the agency agreement(14) which are intrinsically linked to their work in negotiating the sale of new vehicles. These are described in detail in recital 153 et seq.

1.2.3. MERCEDES-BENZ BELGIUM SA/NV

(17) Mercedes-Benz Belgium SA/NV (hereinafter referred to as "MBBel") was a subsidiary of Daimler-Benz Holding Belgium SA, which was in turn controlled directly or indirectly by Daimler-Benz AG. MBBel had since an unknown date been a wholly owned subsidiary of Daimler-Benz AG. Since 21 December 1998 it has been a wholly owned subsidiary of DaimlerChrysler AG.

(18)

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(19) The passenger-car sales network in Belgium consists of the importer, MBBel, which during the period at issue here itself sold new vehicles via at least two branches(15), and of approximately 45 dealers(16). There are also approximately 44 agencies/workshops in Belgium which also negotiate new-vehicle sales contracts.

1.2.4. MERCEDES-BENZ ESPAÑA SA

(20) Mercedes-Benz España SA (hereinafter referred to as "MBE") is a wholly owned subsidiary of the national holding company Daimler-Benz España SA, 99,88 % of which was owned by Daimler-Benz AG. Since 21 December 1998 this holding company has been a wholly owned subsidiary of DaimlerChrysler AG. MBE operates body and assembly plants for transporters and V-class (large-capacity) passenger cars, manufactures engines, transmissions and axle components for transporters, and sells Mercedes-Benz vehicles and Daimler Benz products.

(21) Passenger cars are sold in Spain via three branches of MBE and approximately 70 dealers. There are also contracted workshops in Spain(17), although these do not sell vehicles but only negotiate sales contracts.

(22)

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1.3. THE IMPORTANCE OF THE COMPANIES INVOLVED IN THE AREA OF PASSENGER CARS

(23) The market for passenger cars can be divided into a number of segments based on factors such as purchase price and vehicle length. By contrast, other factors, such as engine capacity, quality and brand image play a smaller role in determining the segment to which a vehicle belongs. A distinction is normally made between the following segments: A: very small cars; B: small cars; C: medium cars; D: upper-medium cars; E: executive cars; F: luxury cars; and G: multi-purpose vehicles and sports cars. Segment G is occasionally subdivided still further. The following tables show the market share of Mercedes-Benz cars in the Community and in Member States on the basis of the number of vehicles sold. There are strong indications that, if market share were calculated on the basis of vehicle price, the share of Mercedes-Benz, which mainly offers expensive vehicles, would be even larger.

(24)

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(25)

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(26)

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(27)

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(28)

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(29)

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1.4. PARALLEL TRADING IN MERCEDES-BENZ PASSENGER CARS IN GERMANY, BELGIUM AND SPAIN, AND ITS CAUSES AND SCALE

1.4.1. PRICE DIFFERENCES BETWEEN MEMBER STATES

(30) The Commission publishes a review of car prices in the Community(18) twice a year. Data are provided by manufacturers. One of the aims of the Commission in publishing these reviews is to increase price transparency so that final consumers are better able to purchase motor vehicles in those Member States in which prices and other purchasing conditions are most favourable. The Commission's purpose is not to establish equal prices within the Community, but rather, on the basis of price transparency, to reduce price differences through market forces.

(31) On the basis of these price data, differences in the prices of the most commonly sold models between the various Member States can be represented as follows (the pre-tax price in the country with the lowest prices is, in each case, 100):

(32)

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(33)

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(34)

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1.4.2. CAUSES AND SCOPE OF PARALLEL TRADING IN MERCEDES-BENZ PASSENGER CARS IN EUROPE, IN PARTICULAR IN GERMANY, BELGIUM AND SPAIN

1.4.2.1. Germany

(35) Documents found during the investigations reveal that, in 1995 and 1996, a substantial number of new and new-value vehicles were sold by German Mercedes branches either directly or through German commercial agents to independent dealers not belonging to the official sales network and, in some cases, to final consumers, particularly from Belgium and Spain.

(36) In all, [...] new Mercedes cars were supplied from Germany to Belgium in 1992, [...] in 1993, [...] in 1994, [...] in 1995(19) and [...] in the first six months of 1996(20). These vehicles were not delivered to Belgium via the official importer MBBel, but were sold by German branches/commercial agents to Belgian final consumers or parallel dealers. This high level of parallel imports, which MBBel openly denounced in 1996(21), is attributed by MBBel and the Belgian dealers to the following circumstances.

(37) In MBBel's opinion, as expressed on 17 October 1995, the Mercedes-Benz price strategy in Belgium, with an index of 103 compared with the German index of 100, was responsible for the high level of parallel trading. It claimed that this was resulting in a price difference of some 7 % above the parallel market in Belgium(22). Price differences had already been regarded previously as a cause of parallel trading: as early as 1992 MBBel pointed out to Mercedes-Benz that the sales planned by Mercedes-Benz for the Belgian market could not be achieved unless they succeeded in clearly suppressing the grey market by adjusting their prices. MBBel assumed that "this could be achieved by greater price harmonisation, with a difference of only 2 % compared to domestic prices for all makes including those with special equipment"(23). Apart from price differences, other reasons for the widespread parallel trading in new vehicles, particularly of class W 210 (new E-class), are mentioned in the extensive correspondence between MBBel and Mercedes-Benz, with MBBel speaking of "an invasion of W 210s from Germany". In MBBel's opinion, the reason for this was that various Mercedes branches could not sell their W 124 (old E-class) models and were offering them as a package together with new W 210s at a discount of 30 % on the W 124 and 10 % on the W 210. In addition, Belgian grey market dealers had a stock of W 210s and could deliver custom-made new vehicles within six to eight weeks, whereas the delivery times of the official Belgian distributors were more than 18 weeks(24). By April 1996, MBBel considered that the W 210 situation had worsened still further: official Belgian distributors were offering delivery times of six months for this vehicle, while the parallel market dealers could deliver vehicles with any equipment within four weeks. They felt that explained why a total of 411 W 210s had been supplied by German distributors to Belgium between June 1995 and the end of March 1996(25).

(38) The Belgian Mercedes Dealers Association also wished to complain about the "harmful and parasitic effects of the parallel market which have been experienced in Belgium for years". In the draft of the letter which MBBel forwarded to Mercedes-Benz on 25 January 1993, they stressed their disappointment at the fact that, of the 2000 vehicles that had again been delivered to Belgium 1992, 800 had been supplied by German distributors. Mercedes-Benz was asked to verify whether measures had been taken within the German distribution organisation to ensure the survival of the Belgian dealer network. The Belgian Dealers Association wrote several letters to MBBel complaining of the large number of grey imports and of the fact that the delivery times of Mercedes dealers would have to be 12 months because of small allocations, a fact which benefited the "hunters of the grey market". These delivery times, they said, were much longer than in Germany. Moreover, parallel importers could already "boast" a new model (the Mercedes 300 S D), which not even all Belgian dealers had received(26).

(39) It is to be assumed that these circumstances are also the reason why German customers were purchasing new vehicles and immediately reselling them in Belgium. That this was happening is apparent from a large number of letters written in 1995 and 1996 about vehicles sold in Germany and registered in Belgium(27). In some cases, customers would only resell one vehicle, while in others, they would repeatedly resell vehicles in Belgium(28). However, some of the vehicles in question were demonstration cars. Occasional sales to final consumers were also identified in this research(29).

(40) German Mercedes branches also sold new vehicles to Spanish final consumers. According to MBE, this happened in 1994 in "enough cases" with the knowledge of Mercedes-Benz and on terms which the Spanish distributors could not offer(30). New vehicles were supplied directly to Spanish final consumers even more recently: in 1996, for example, an E 50 AMG was supplied by the Munich branch(31) and Mercedes E 300 D vehicles by Mercedes-Benz agent Hirschvogel(32).

(41) In a letter dated 2 September 1996 to the Spanish dealer Itra SL(33), MBE expressed regret that the Mercedes-Benz Berlin branch was advertising vehicles in Spain in the newspaper El País, the largest-circulation Spanish daily, and had even set up an "export service hotline" on which Spanish could be spoken.

(42) In general, MBE assumes that 85 % of parallel vehicle imports into Spain come from Germany(34). For imports of new vehicles to Spain (see recital 52), this assumption would mean that approximately [...] new vehicles from Germany were subject to parallel import into Spain in 1993, approximately [...] in 1994, approximately [...] in 1995 and approximately [...] in the first 10 months of 1996.

1.4.2.2. Belgium

(43) According to the available documents, only a few vehicles have been exported to Germany. In 1996, for example, a Mercedes 290 TD estate car sold from Belgium to Germany turned up at a parallel dealer's premises in Sörup(35). Two Mercedes 190 D cars were exported from Belgium to Germany as early as in 1993(36) DaimlerChrysler(37) does not rule out the possibility that even more vehicles were supplied to Germany.

(44) Vehicles have also been supplied from Belgium to Spain. For example, according to its own data, the Garage Etoile in Wavre supplied at least 10 vehicles to Spanish final consumers in the first seven months of 1995(38).

(45) As described, a considerable number of new vehicles have been imported into Belgium. In this connection, MBBel has drawn up monthly lists indicating the vehicles subject to parallel import with the name and address of the owner, the type, chassis number and country of origin(39). A separate list indicates the German distributor via which a vehicle was delivered to Belgium or, in the case of vehicles coming from other countries, the country in question. In 1995, a total of 1314 vehicles were delivered, of which 599 came from Germany, 327 from Italy, 119 from the Netherlands, 105 from France, 97 from Luxembourg, six from Spain and two each from Austria and Sweden(40). In the first six months of 1996, a total of 1003 new vehicles was imported into Belgium, of which 827 from Germany, 120 from Italy, 83 from the Netherlands, 102 from France, 45 from Luxembourg, two from Spain and one vehicle from Austria(41). DaimlerChrysler(42) confirms these figures and has verified in an impressive manner the extent of activity of some 45 unauthorised resellers operating in Belgium and dealing in new Mercedes-Benz vehicles.

(46) It is apparent from the available documents that new vehicles were constantly being supplied to Belgium from the Netherlands. In the first six months of 1996, there were [...] cases of this happening, with [...] in 1995, [...] in 1994, [...] in 1993 and [...] in 1992(43).

(47) The reason for this was that prices in Belgium were 3 % to 6 % higher than in the Netherlands(44).

1.4.2.3. Spain

(48) MBE has listed all vehicles exported abroad in 1994 and 1995, and for 1995 there is even data concerning exports reported by dealers (78 vehicles) and exports not reported (67 vehicles). According to the list 145 (243) vehicles were exported in 1995 (in 1994), of which 51 (169) went to Portugal. In 1995, 76 vehicles were also exported to the Netherlands, 10 to Austria and two to France(45).

(49) After the checks had started on 11 December 1996, the Spanish Mercedes dealer Louzao MBE stated in a fax of 11 December 1996(46) that he had sold a total of eight vehicles to Portuguese final consumers. The Spanish Mercedes dealer Garza Automoción likewise reported to MBE in a fax of 11 December 1996 that four vehicles had been sold to Portugal(47). At the end of the letter, the dealer states that Mercedes-Benz does nothing to impede such transactions.

(50) In 1995, a total of six new vehicles were further supplied from Spain to Belgium, with 13 in 1994, and one in both 1993 and 1992.

(51) To explain the considerable scale of parallel imports of vehicles into Spain, MBE(48) recorded the registration figures for the Cadiz registration district for the first nine months of 1996. The following were registered in Cadiz:

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(52) According to documents found during the investigations, the following numbers of new Mercedes vehicles were sold in Spain from January 1993 to October 1996(49):

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(53) MBE generally assumes that 85 % of the vehicles subject to parallel import into Spain come from Germany(50). The documents do not indicate from which countries the remaining vehicles were supplied.

1.5. TERMS RELEVANT TO CROSS-BORDER SALES OF MOTOR VEHICLES

(54) This section examines the terms used in the notices to the individual distributors or to the entire distribution network of a Member State by the Mercedes-Benz group to denote the sale of vehicles to customers abroad, i.e. resellers and final consumers alike. Documents found during the investigations reveal three different terms that are used in connection with such business: grey market, parallel market and deliveries. For sales to foreign customers from a country within the European Economic Area (EEA), the term Komm-Kunden(51) is also used.

1.5.1. THE TERM "GREY MARKET"

(55) The term "grey market activities" was defined in a presentation given by Mr E. Herzog at a meeting of the passenger car sector on 17 February 1989(52). Mr Herzog observed that, "As we understand it, the defining factor in grey market activities is that independent sellers (and I deliberately use the term 'seller' rather than 'trader', as they may very well be private individuals: many a diplomat and many a small supplier too has - perhaps during an economic downturn - used this method to earn himself a tidy little sum on the side), as I was saying, that independent sellers sell vehicles abroad outside the manufacturer's official dealer network in order to make a profit. The market segment served by such sellers is the 'grey market'."(53). He then went on to explain why the grey market existed (differences in prices and availability) and how big it was (around 30000 units, including 14000 in Italy and 8000 in Japan). He also alluded to the fact that, on the suppliers' side, "the VOI(54) is clearly dominant with, as it happens, also around 22000 units per year". Finally, making a general assessment of sales policy, Mr Herzog stressed that, "a strict ban on grey market transactions of any kind, with the threat and application of extensive penalties, seems to me neither practicable nor useful. For one thing, each case would have to be proven beyond doubt, which would generally require an effort on the scale of a criminal investigation. Second, particularly bearing mind our present situation regarding capacity, we should be concentrating instead on a Europe-wide fine-tuning exercise (price harmonisation). One situation we can't do very much about is where, unbeknown to our organisation, individuals are actually 'front men' making intermediate purchases. In such cases we are generally required to deliver. We can refuse only if we are able to obtain evidence - usually after arduous research - that the buyer is going to sell the vehicle on. Here, data-protection rules now impose tougher constraints on us than in the past".

(56) An internal letter from the VP/VEV1 department(55) to Mr Rau mentions that sales to final consumers were also discussed at the meeting on the grey market in Belgium on 26 June 1992. Among other things, it was established at the meeting that MBNL(56) had sold vehicles to final consumers who were Dutch nationals living in Belgium. It was also established that Meris, a Mercedes-Benz dealer in Luxembourg, had sold vehicles to frontier workers employed in Luxembourg, European officials with two places of residence and rental firms with registered offices in Luxembourg and Brussels(57).

(57) In a internal memo dated 16 January 1996(58), Dr Schütz of Mercedes-Benz's legal department wrote that, on looking through the files of VP/M2, he was "(simply) struck by the fact that the term 'grey market' is used somewhat vaguely or that no clear distinction is drawn between the activities of independent resellers and those of final consumers". However, at the end of his memo, he stressed that, "in the countries of supply, particularly Italy, the relevant circulars and instructions do carefully distinguish between independent resellers and final consumers".

(58) The Commission believes that Mercedes-Benz's failure to distinguish clearly on all occasions between sales to resellers and to final consumers is also evident from the following facts. Two virtually identical handwritten memos(59) from Mr Stolberg of the VP/EM1 department of Mercedes-Benz to MBBel distinguish between grey market transactions and other transactions with final consumers. The first memo, dated 14 May 1995, calls on MBBel to check "whether the parallel import of a vehicle into Spain may constitute a 'grey market transaction' by a Mercedes-Benz dealer in Wavre". In the second memo, dated 3 July 1995, MBBel is asked to check information given in an annex to determine "whether these were purely tourist transactions or in fact 'grey market re-exports'. This might enable you to close down a previously undiscovered grey-market channel". In both memos, the choice of words suggests that a distinction is being made between "grey market transactions" and other transactions, with final consumers. Yet a letter from MBBel to Mr Roth of Mercedes-Benz dated 19 July 1995 concerning the sale of a second-hand Mercedes in Germany to a Rotary Club member in Belgium, i.e. a transaction with a final consumer, describes that deal as "a grey import"(60).

(59) To sum up, it can be established that the term "grey market" was sometimes used at Mercedes-Benz to denote sales to unauthorised resellers and sometimes also used to denote cross-border sales to final consumers. In any event, to the extent that the term was used in the context that is relevant here, it must be concluded from the circumstances that Mercedes also meant the term to cover sales to final consumers.

(60) Regarding the term "grey market", DaimlerChrysler admits that there was no consistent terminology within the Mercedes-Benz organisation and no binding definition of the concept, which could have a wider or narrow meaning in individual documents. The uncertainty over the definition was compounded by the use of different languages. The meaning of the term in each individual case could be determined only from the overall context of the documents and in the light of past events. Thus, the term "grey market" was used to describe sales to resellers or in classifying cross-border transactions, where it was not known whether they were admissible ("white") or inadmissible ("black")(61). Moreover, the term was - most importantly - not used in the countries of supply, but only in the countries of receipt, i.e. where it was not known whether the transaction was admissible or not. From a competition angle, the important thing was what terms were used in the country of supply.

(61) The Commission cannot agree with this last assertion. In a letter dated 14 September 1994(62), Mercedes-Benz wrote that, "Naturally we are ready and willing to investigate any further indications of professional grey market transactions", i.e. the term "grey market" is used here in the country of supply to describe sales to independent resellers. By contrast, in the fax from Mercedes-Benz to MBE dated 29 July 1994(63), the term "grey market import" is used to describe two vehicle transactions with the footballer R. The first concerns a Mercedes 600 SEC, which was sold to him by Mercedes in a company deal, while the second concerns a second-hand SL 600 sold on to the footballer by a German customer who had used it at his second residence in Spain. These documents confirm that the term "grey market" was also used by Mercedes-Benz itself in the countries of supply (the Mercedes 600 SEC was sold in Germany to a Spanish customer) to denote cross-border transactions with final consumers.

1.5.2. THE TERM "DELIVERIES"

(62) In many documents cross-border sales of vehicles are described as Einlieferungen (deliveries) or Fahrzeugeinlieferungen (vehicle deliveries)(64) to the country of import. This term is used in subsequent inquiries into the whereabouts of vehicles which were delivered in Germany or in other Member States to foreign final consumers, unauthorised resellers or domestic final consumers who sold them on abroad(65). The general report on "Vehicle deliveries to Belgium - Situation at September 1995"(66) indicates - for each individual German region/branch - how many new vehicles and demonstration vehicles were delivered to Komm-Kunde or the "grey market" in the first nine months of 1995. The same terminology was used in a memo from the Southern Region VP to the MBVD(67)/VP department of Mercedes-Benz dated 23 April 1996. The memo - headed "W 210 vehicle deliveries to Belgium in January and February 1996" - points out that two thirds of vehicles delivered from the Southern Region to Belgium are sold on by customers and around one third are former demonstration vehicles. The memo states further that, "In total only four vehicles were sold direct to Komm-Kunde in Belgium"(68).

(63) It can therefore be established that the term "delivery" covers all kinds of cross-border transactions, including sales to foreign final consumers from an EEA country, who are known as Komm-Kunde (see recital 68).

(64) In its reply to the statement of objections(69), DaimlerChrysler states that this term was used indiscriminately for all forms of cross-border trade.

1.5.3. PARALLEL IMPORTS

(65) The term "parallel imports" is used for example in an information memo on the Commission's proceedings in Case IV/35.733 - VW, in which one of the points at issue was that Volkswagen and Audi had forbidden their Italian dealers from selling new vehicles to final consumers from other Member States. The term was also used in a letter from MBBel to MBF(70) in connection with the sale of vehicles by French dealers to Belgian customers(71).

(66) Thus, the term "parallel imports" was used by firms in the Mercedes-Benz group at least partly to describe cross-border transactions with final consumers.

(67) In its reply to the statement of objections(72), DaimlerChrysler states that this term was used indiscriminately for all forms of cross-border trade.

1.5.4. KOMM-KUNDEN

(68) An internal note dated 8 August 1995 from the legal department of Daimler-Benz to the PR/P department(73) suggests a text for an "official reply" stating that Komm-Kunde are foreign customers from EEA countries who turn to a dealer on their own initiative. A letter from Mercedes-Benz to MBNL dated 23 October 1992(74) and circular No 76/92 dated 9 November 1992(75) show that the term "Komm-Kunde" is used in connection with cross-border sales to final consumers from another Member State of the Community.

1.5.5. SUMMARY

(69) It can therefore be established that, within the Mercedes-Benz group, the terms "deliveries" and "parallel imports" were used to describe sales of vehicles to all kinds of foreign customers, i.e. sales to unauthorised resellers not belonging to the distribution network, but also sales to final consumers. The term "grey market" also had this wide meaning. By contrast, the term "Komm-Kunde" was clearly used only in connection with sales of vehicles to final consumers from another Member State of the Community or the EEA established outside the contract territory.

1.6. THE ANTI-COMPETITIVE MEASURES IN DETAIL

1.6.1. EXPORT RESTRICTIONS (GERMANY)

1.6.1.1. Instruction to German distributors not to sell to customers outside their contract territory

(70) It is apparent from documents in the Commission's possession that Mercedes-Benz has for a long time been taking steps to restrict the parallel trade.

(71) A memo dated 28 October 1985 concerning "right-hand drive car sales in Germany"(76), sent by the VOI/VNM department in reply to a note from the legal department, states that:

"Now that we are not allowed to stop our contracting partners from arranging the sale of right-hand drive vehicles to British Komm-Kunden, we should also refrain from imposing any official ban on such deals on our branches. However, we should make it clear to both branches and contracting partners that they are entitled, but not obliged, to deal in or sell right-hand drive vehicles. We should also make it clear that, ultimately, it is in the interests of every branch and every contracting partner to use their available quotas exclusively to serve customers and interested parties from their own territory. Special emphasis should be placed here on the following points:

- quality of service,

- workshop capacity, and

- market penetration.

If the legal department has no objections, these instructions should be given in writing. Otherwise the information should be passed on at the forthcoming meetings for branch managers, sales managers and district managers.

Klein Dr Fahr"

(72) According to the minutes of an MBVD(77) department meeting on 28 July 1995(78) under the heading "Transactions involving demonstration vehicles", it was established that "clear rules exist [for transactions involving demonstration vehicles] including the requirement that vehicles may be sold before the end of their useful life only in exceptional cases and then only in the firm's own territory. This rule must be observed more strictly. In exceptional cases the rules for new vehicle transactions apply." These minutes prove that, even before 28 July 1995, there were clear rules for sales in Germany under which demonstration vehicles could be sold only after the end of their useful life and that, in exceptional cases, new vehicles too could only be sold in the firm's own contract territory.

(73) The following facts confirm that, at least in individual cases, Mercedes-Benz had directly impeded the sale of new vehicles to final consumers from other Member States already at an earlier date: in a fax from Mercedes-Benz, Western Region, dated 10 November 1995, the MBVD/VP department of Mercedes-Benz was informed of the sale of a vehicle by Hess, the Mercedes-Benz agent in Trier, to a Belgian Komm-Kunde, i.e. a final consumer(79). The fax includes the following passage: "Hess is requested by the area management to refrain from such actions in future".

(74) Another letter which is clearly directed against the sale of new vehicles to foreign customers is that from Mercedes-Benz, Vertriebsorganisation Deutschland, Western Region, to Hess (the same agent in Trier) sent on 17 November 1995(80). The letter reads as follows:

"Transactions with Belgium

Dears Sirs,

We have been informed by central office that in September of this year your company supplied an E 300 D (W 210) vehicle to a Belgian national resident in Belgium.

The order number concerned was 05 231 05231.

We strongly disagree with your view, as already expressed by Mr Premm on the telephone, that this was a transaction with a Komm-Kunde.

The term Komm-Kunde is clearly defined for the purposes of MBVD, but not for other countries. As in the past, the tourist rules should be applied for new car purchases involving persons from other countries.

We urgently request that you follow this procedure.

We are particularly surprised that you should act in this way with a W 210, as you have always argued that you had too few vehicles for the customers in your territory.

Yours faithfully,

Mercedes-Benz Aktiengesellschaft

Western Region - Mannheim Office

Niedorff Scheele"

(75) The instruction contained in this letter to apply the "tourist rules" instead of the Komm-Kunden rules laid down for sales to EU customers has the effect of raising a serious practical obstacle to the sale of vehicles to EU customers. A 1985 circular from Mercedes-Benz to the entire German sales organisation(81) states that a tourist must submit the order for a new car in person and pick up the new car in person. Furthermore, in such cases, the agent or branch carrying out the sale must pay a customer service commission of 3 %(82). By contrast, EU customers are covered by the much more lenient Komm-Kunden arrangements (see recital 68), which allow them to order a vehicle via an agent who has written authorisation and to have it picked up by that agent. Moreover, in this case the agent or branch carrying out the sale need not pay any customer service commission when the vehicle is brought into the contract territory of another dealer within six months of the sale.

(76) In its reply to the statement of objections(83), DaimlerChrysler admitted that the instruction to use the tourist rules rather than the Komm-Kunde rules for the sale of vehicles to final consumers from other Member States of the Community was inappropriate.

(77) In a fax from Mercedes-Benz, Western Region, dated 24 November 1995, MBVD/VP was told with respect to another new car sale by Hess to a Belgian: "This case clearly involves inappropriate behaviour on the part of Hess, the agent in Trier. The vehicle was delivered direct to a Belgian. You will find attached a letter from Western Region to the sales manager of Hess, clearly and unambiguously reminding his company once again of the rules"(84). The annex was not found during the investigations. A similar warning letter from Western Region to Hess dated 17 November 1995 is mentioned at recital 74, although it concerns a different transaction involving a Belgian customer.

(78) On 6 February 1996 Mercedes-Benz proceeded to urge all German distributors without exception to refrain from selling outside their contract territory. In a memo from Mercedes-Benz's MBVD/VP department, written by Mr Panka and Dr Fahr on 6 February 1996 and addressed to heads of branches, owners/managing directors, agents and principal agents, the entire German distribution network was informed of the following(85):

"Dear Sir/Madam,

Since its introduction on the market, demand for the W 210 series has been high and stable. In 1995 we received 390 orders for the new E-class per working day. This year we have started well - with 326 orders per working day.

The worldwide picture is similar. We shall therefore be suffering from a clear shortfall in production, particularly in the first half of 1996, and there may be considerable problems with delivery times.

In these circumstances we shall have no sympathy for retail firms which, in selling their allocation of the W 210 series, fail to concentrate on their own territory and seek to attract customers not through the service they provide but by engaging in competition on prices and conditions.

We would therefore ask you, in your day-to-day transactions, to consider the prices laid down in the target agreements for 1996 as the mandatory basis for your decisions in individual cases.

We are convinced that, by adhering strictly to this policy, we can effectively combat internal competition not only in the W 210, but also in other series. We therefore count on your unconditional support.

With respect to the W 210 series, we would also like to draw your attention to the notable increase in reselling activities. Already last year we detected grey-market exports, particularly bound for Belgium and Turkey, which caused appreciable problems for our sales organisation there, especially as they have very limited quotas of vehicles in the W 210 series. The situation has not changed this year. We therefore ask you to do your utmost to put a complete stop to reselling transactions, particularly involving the W 210 series. In the event of any clear breaches of this ban on supplying vehicles to resellers, we reserve the right to reduce the W 210 quotas of the retail firms involved by the number of units that are delivered abroad via resellers which could have been recognised as such had the firms properly discharged their duty of care.

Nothing would please us more than to see all firms receive their full production allocations. But we shall not hesitate to withhold vehicles in the W 210 series, should we discover that an allocation is not warranted by the absorption capacity of a specific territory. It is entirely up to you to prevent this happening.

Yours faithfully,

Mercedes Benz Aktiengesellschaft

Panka Dr Fahr"

(79) DaimlerChrysler points out that the first five paragraphs of this memo, which are directed solely at the German sales organisation, relate only to internal German competition and that only the sixth paragraph relates to the activities of resellers, inter alia, in Belgium. It claims that the instruction in the last paragraph to stop such sales and the threat to withhold vehicles in the W 210 series when production allocations are not warranted by the absorption capacity of individual areas, relate to the activities of resellers and cannot therefore be the subject of an objection(86).

(80) With regard to DaimlerChrysler's claims that the text in the sixth paragraph ("With respect to ... duty of care.") relates to transactions with resellers, the Commission does not contradict this (see paragraph 82, fourth indent of the statement of objections).

(81) In other respects, however, the Commission cannot agree with DaimlerChrysler's interpretation. The second paragraph of the memo refers to "worldwide" demand for the W 210 and not to sales trends in Germany. The third paragraph follows on from this statement ("In these circumstances we shall have no sympathy ...") and calls on distribution partners in Germany to concentrate on their own areas and not to entice customers from outside their contract territory by offering more favourable conditions. The fourth paragraph too refers to the fact that the target agreements(87), i.e. agreements on the vehicles to be marketed by branches in their own territory, should serve as a reference for day-to-day transactions. As stated in the fifth paragraph, this would make it possible to "combat [effectively] internal competition not only in the W 210, but also in other series". Thus, in the first five paragraphs of the memo, German distribution partners are referred to their own contract territory. The inevitable consequence of this is that they can also be encouraged to sell vehicles belonging not only to the W 210 series, but also to other series exclusively to customers from their own contract territory, and not to customers from other contract territories in Germany or abroad. The document of 26 February 1996 cited in recital 84 confirms this.

(82) The seventh paragraph of the memo cannot in any way refer solely to the previous, sixth paragraph criticising transactions with resellers, which has not prompted any objections from the Commission.

(83) This is because, in the last paragraph, the threat of withholding W 210s is made in general terms for cases where it is found that the absorption capacity of individual territories does not warrant the production allocation of W 210s. In terms of both wording and meaning, this paragraph does not refer solely to the transactions with resellers mentioned in the sixth paragraph, but to all the statements that precede it, i.e. also to paragraphs one to five, which call on distribution partners to concentrate on their own contract territory and to sell their vehicle allocation for all series there. In this respect the memo contains at the very least an instruction to distribution partners to avoid a reduction in deliveries of new vehicles in the W 210 series in their contract territory, i.e. not to sell them to customers who do not reside in or are not established in their contract territory. The document dealt with below, which refers expressly to the memo of 6 February 1996 described in recital 78, confirms the Commission's interpretation.

(84) At the LVP(88) meeting on 26 February 1996, attention was once again drawn to the importance of abiding by the memo of 6 February 1996. Under item 4(c) of the minutes of the meeting (Deliveries to Belgium) the following statement is recorded:

"Mr Bruhn distributed the list of deliveries to Belgium in January 1996 (over 100 W 210s) and spoke about the plan to give MB Bel 200 W 210s to cut delivery times. If the reductions were carried out, the breakdown by region would be determined by MB Bel. Each region would then break the cuts down further by individual branches.

Attention was once again explicitly drawn to the need to comply with the memo from Mr Panka and Dr Fahr."

(89).

(85) As described at recital 63, the term "delivery" covers all kinds of cross-border sales, including sales to final consumers. All passenger car sales managers (VLPs) and passenger car area managers (GBL-Ps) in the Northern Region - with branches in Bielefeld, Braunschweig, Bremen, Dortmund, Emden, Hamburg, Hannover, Kassel, Kiel and Lübeck - were informed in an annex to a memo dated 15 March 1996 from the MBVD/RNP department (title of annex - "Grey market registrations (new cars) - Deliveries to Belgium at 2/96")(90) that, once again, a total of 23 vehicles were delivered to Belgium in January and February 1996. The annex goes on to state that:

"Once again we call on you urgently to do everything in your power to prevent such deliveries. If evidence is found that branches in the Northern Region are responsible for any future deliveries, such infringements will be punished accordingly."

(86) Although the memo was addressed only to branches in the Northern Region, the wording suggests that the aim was not just to prevent branches dealing with Belgium - an internal company matter and hence not a valid reason for objections under restrictive practices law. Instead, the expression "If ... branches in the Northern Region are responsible" suggests that the ban should also extend to transactions conducted by contracting partners or agents with Belgian customers of any kind, i.e. also with Belgian final consumers.

(87) It is possible for branches to take such action, since they check offers to customers for the purchase of new cars - which must be passed on to them by the contracting partners/agents - and, where appropriate, confirm them by sending the purchaser an order confirmation(91). The memo also targets these order confirmations by branches, thereby ensuring that branches do not confirm orders from foreign final consumers (known as Komm-Kunden) submitted by agents.

(88) This is not contested by DaimlerChrysler in the reply to the statement of objections(92). DaimlerChrysler claims, however, that the term "deliveries" used indiscriminately in both documents refers only to sales to resellers and that the memo to branches in the Northern Region relates only to sales to Belgian resellers. These branches are said to have supplied Belgian resellers on a large scale. There was no reason for any measures whatever against final consumers.

(89) The Commission would point out here that, at the LVP meeting on 26 February 1996, reference was made to the memo of 6 February 1996 to the German distribution network (see recital 84). Indeed, "attention was once again explicitly drawn to the need to comply with [that] memo", which, as pointed out above (recital 81), relates to cross-border transactions of any kind. The message conveyed in the memo of 6 February 1996 was therefore reinforced by the instructions given on 26 February 1996.

(90) The instruction in the memo of 15 March 1996 to "prevent deliveries" to Belgium also means that all types of transactions with a foreign country were to be stopped. The question of whether or not there were substantive reasons for such an instruction is irrelevant to the interpretation of the content of such a memo, which was addressed to a broad circle of recipients, who were not necessarily familiar with the background. Nor did the memo contain any allusion to that background or explain clearly that deliveries to Belgium only meant sales to independent resellers.

(91) The Commission considers that a memo advising against the supply of independent resellers must be clearly and unambiguously worded. Only then can its recipients establish immediately and with the requisite clarity what they must cease to do and what is still permitted. The Commission notes that DaimlerChrysler itself admits(93) that it cannot be ruled out that measures directed against sales to resellers were worded in a way that "overstepped the mark" and, with hindsight at least, could be construed as covering admissible sales to final consumers.

(92) It is apparent, moreover, from the abovementioned documents that Mercedes-Benz repeatedly reinforced these instructions to German agents directed against parallel exports by advising the German distribution network, including agents, to avoid "internal competition" between distributors as much as possible.

Thus in the memo - reproduced in its entirety above (recital 78) - of 6 February 1996 from Mercedes-Benz's MBVD/VP department to heads of branches, owners/managing directors, agents and principal agents(94), the addressees were informed that there would be "no sympathy for retail firms which ... fail to concentrate on their own territory and seek to attract customers not through the service they provide but by engaging in competition on prices and conditions." The memo goes on to say: "We are convinced that, by adhering strictly to this policy, we can effectively combat internal competition not only in the W 210, but also in other series. We therefore count on your unconditional support."

(93) The rule, already mentioned above in recital 72, on transactions involving demonstration vehicles is referred to in a letter dated 26 June 1996 from BVMB eV (the Federal Association of Mercedes-Benz Agents)(95) to Mercedes-Benz, which mentions the sale of an S 500 demonstration vehicle by the Regensburg branch to a customer from the contract territory of a Mercedes agent at a 31,5 % discount (apparently discounts of up to 38 % are granted in comparable cases). BVMB argues that such discounts restrict or rule out the possibility of agents using S-class vehicles as company or demonstration cars. This also reduces their scope for concluding deals in their own contract territory. In the interests of maximum geographical coverage of the S-class and the safeguarding of sales as a result, Mercedes-Benz is asked "to take specific action to ensure compliance with the agreed rules in order to thwart internal competition in the retail organisation as a whole."

The letter adds:

"Once again we would stress that the agents' committee has always supported measures to curb internal competition and appropriate steps against retail firms, whether they be branches or agents, which pursue other aims and in so doing undermine exclusive marketing rights by engaging in aggressive competition."

(94) In the reply from Mercedes-Benz dated 22 July 1996(96), BVMB was informed that the sale of demonstration vehicles on attractive or excessively attractive terms was allowed only in individual cases and must be confined to an agent's own territory: "Otherwise there will indeed be internal competition, which we firmly reject and oppose as much as you do. We believe we have already proven this on several occasions in the past."

(95) In its reply to the statement of objections(97), DaimlerChrysler claims that the restrictions mentioned referred only to domestic sales, not to sales abroad and that, consequently, the facts in question are not relevant to the export restrictions being investigated by the Commission.

(96) The Commission cannot agree with this view: the instructions to agents to sell the vehicles in question only in their own contract territory are designed to prevent all customers whose place of residence lies outside the agent's contract territory - including, therefore, foreign customers - from acquiring such advantageously priced vehicles; that is to say, Mercedes-Benz wishes to avoid a situation where Mercedes customers are induced by attractive prices and conditions to purchase a vehicle from a distributor other than that in whose contract territory they reside. As is apparent from the wording of Mercedes-Benz's reply of 22 July 1996, the "internal" competition was duly rejected and combated, as was already alluded to, moreover, in the fifth paragraph of the memo of 6 February 1996(98).

(97) In order to emphasise the above instructions to German distributors, Mercedes-Benz also reduced, or at least threatened to reduce, vehicle deliveries to German distributors, as is apparent from the following:

(98) The memo from Mercedes-Benz, MBVD department, dated 5 March 1996(99) to all regions and car sales managers runs:

"W 210 cuts

for MB Belgium

As agreed at the LVP meeting on 26 February 96, allocations of series W 210 to a number of branches are being cut.

This is because of deliveries of vehicles to Belgium in January.

The attached document gives an overview of the cuts for June and July.

Unless deliveries to Belgium are reduced, we will extend this measure to the new series."

(99) In its reply to the statement of objections, DaimlerChrysler stated that this memo was addressed only to the branches, which raised no legal problems(100). It asserted that the deliveries to Belgium were almost exclusively sales to unauthorised resellers and that cuts were applied only to branches that had done business with resellers. It denied having taken measures against agents, as the Commission asserts in paragraph 114 of the statement of objections.

(100) In response the Commission would point out that the Regensburg branch, as already stated in paragraph 102 of the statement of objections, informed the Southern Region in a memo dated 12 March 1996 that a vehicle that had arrived in Belgium had been sold on by a German customer. This customer had never previously sold on a vehicle. The branch therefore contested the cut(101). This document clearly shows that Mercedes-Benz made general and sweeping cuts in the allocations of new vehicles to branches on the basis of exports to Belgium without clearing up the details in advance, rather than only in cases where new vehicles had been proved to have been sold on to resellers.

(101) DaimlerChrysler's assertion that measures had not been taken against agents(102) is not valid. In view of the interests involved it is inconceivable that foreign sales lead only to reductions of supplies at the branches and not also at agents. The following documents confirm this. In documents obtained during the investigations, the principal agents in Munich (Auto Henne) and Karlsruhe (Schönperlen) were also described as "branches" that had delivered vehicles to Belgium(103). Secondly, a comparison of the order numbers of the vehicles delivered to Belgium by the agent Hirschvogel in Straubing(104) with the lists drawn up by MBBel shows that the vehicles delivered by the agents are attributed by MBBel on the basis of the order numbers to the branches, even if a vehicle sale was negotiated by an agent(105). Lastly, the handwritten note from Mr Bruhn dated 4 March 1996(106) indicates that 200 additional W 210 vehicles were to be delivered to Belgium, and that they would be deducted from the allocations for the branches or agents: "Cuts agreed with the LVPs must be applied to branches/agents that deliver to Belgium!". All this serves to refute DaimlerChrysler's objection that only the allocation to the branches, but not to the agents, was to be cut.

1.6.1.2. Instruction to agents to require a 15 % deposit in cases of parallel exports

(102) The instructions to agents to require in cases of parallel exports, i.e. business with Komm-Kunden, a 15 % deposit is also a measure which makes parallel exporting more difficult.

(103) It can be seen from Mercedes-Benz circular No 52/85(107) (Effects on the domestic sales structure) on the EC block exemption Regulation, dated 12 September 1985 and sent, among others, to the principal agents and agents and to the authorised workshops, that, in cases of sales to Komm-Kunden from the Community or the EEA, a deposit of 15 % of the purchase price was to be required. This applies to nearly all transactions with Komm-Kunden, as can be seen from the circular, where it is stated:

"...

In the case of EC customers, in accordance with the new agency contracts and in conformity with the provisions of the EC block exemption Regulation the following rules apply:

...

...

Deposits for business with EC customers

As was previously customary in tourist transactions worldwide, we think that a deposit should be required in the following cases - including from EC customers.

1. Orders of non-domestic specification vehicles, on account of the difficulty of selling the vehicle at home if it is not purchased by the customer.

2. Multiple orders by an EC customer for his own commercial use.

3. For vehicles with extensive special fittings, as in the event of non-purchase, a discount might have to be granted on resale. This corresponds to established practice for domestic customers.

4. We also think a deposit should be required from EC customers who order vehicles in domestic specifications. This is because it is necessary to have evidence of a foreign customer's serious intention to purchase. In addition, in view of his residence abroad, the financial risk is higher if, for example, difficulties arise with the purchase of the vehicle and its payment such as may entail more extensive processing for us and the possibility of proceedings for collection of the debt.

In all of the above cases, a deposit of 15 % of the purchase price must be required (corresponding to the fixed amount for non-purchase in the terms of sale for new vehicles).

...

We would ask you to inform all your sales staff of the new rules in full. If you have any further questions, please contact us."

(104) DaimlerChrysler confirms the accuracy of the comments in recital 103 on the content of the circular(108).

1.6.2. RESTRICTIONS ON SUPPLY TO LEASING COMPANIES (GERMANY AND SPAIN)

(105) Article 2(1)(d) of Mercedes-Benz's German agency agreement in the July 1987 version(109) contains the following rules on the procurement of vehicles for leasing companies(110). It states:

"The agent is not authorised to procure business with

...

(d) leasing companies, except in the following circumstances:

- the vehicle is intended for the leasing company's own use,

- the vehicle is for a lessee (final consumer) within the contract territory,

- a purchase contract negotiated by the agent with a final consumer within the contract territory is subsequently changed to a leasing contract,

- the lessee contacted the branch/agent on his own initiative."

(106) On 6 August 1996 the Mercedes-Benz MBVD/VP department sent a memo to the branch heads and all agent owners and managing directors regarding outside leasing companies(111). These are leasing companies which are independent of the Daimler-Benz group. The memo runs:

"Dear Sirs,

Outside leasing companies

We are unfortunately increasingly finding that outside leasing companies are making leasing offers to Mercedes-Benz customers and potential buyers that include discounts even in individual transactions, which we would not be prepared to grant in the respective cases. We have evidence and specific examples of leasing offers that are granted on condition that the customer obtain the vehicle from the leasing company and not from his distribution intermediary.

The attractiveness of the outside leasing company's offer is therefore not derived from its being granted on terms agreed between intermediary and customer or from the fact that high residual values and low own margins confer advantages over leasing companies belonging to MB or its agents. Rather, it derives from the fact that outside leasing companies acquire stocks of vehicles or have general supply agreements with intermediaries belonging to our organisation, under which corresponding discounts are also granted.

We would remind you that supplies to leasing companies are permitted only in the following cases:

- the vehicle is intended for the leasing company's own use,

- the vehicle is for a lessee (final consumer) within the contract territory,

- a purchase contract concluded on the instructions of a branch or negotiated by an agent with a final consumer within the contract territory is subsequently changed to a leasing contract,

- the lessee contacted the branch/agent on his own initiative.

In cases where these conditions are not met, we will deduct the branch's or agent's full vehicle commission and reserve the right to take action at a personal level or under contract law.

We are sure that you share our basic position and will unreservedly support us in implementing it in the market."

(107) The Spanish dealer agreement has also contained at least since 1 October 1996 a corresponding rule on the sale of vehicles to outside leasing companies, at Article 4(d)(112).

(108) In the new version of Daimler-Benz AG's agency agreement (July 1997 version), these rules are also set out, albeit in an expanded form: the agent may also negotiate the sale of a new vehicle to a leasing company in the following case:

"- the leasing company contacted an agent on behalf of a specific final consumer on its own initiative."

(109) The principal agency agreement contains, in Article 2(1)(d), a similar set of rules(113).

(110) It should be pointed out first of all that these contractual provisions on the supplying of leasing companies do not take account of whether under the leasing contracts used by the leasing company a leased vehicle may be acquired by the lessee immediately or only at the end of the leasing contract.

(111) The rules on the supplying of leasing companies mean, inter alia, that there can be no supplying of such companies with "stocks" of vehicles. They thus prevent leasing companies from offering at short notice to a customer who needs a leased vehicle a vehicle which has already been ordered (and which may or may not have already been delivered).

(112) These rules, to which the memo of 6 August 1996 expressly refers, mean moreover that leasing companies do not receive quantity discounts because it is not they but the lessee that Mercedes-Benz regards as the final consumer. The quantity discount is accordingly determined by the number of vehicles needed by the individual lessee, which is considerably smaller than the number of vehicles which a leasing company acquires from Mercedes-Benz in the course of a single transaction.

1.6.3. SETTING SALES PRICES IN BELGIUM

(113) On 20 April 1995 nine members of the Belgian Association of Mercedes-Benz Dealers (Amicale des Concessionnaires Mercedes-Benz) met with the MBBel management, whose representatives included Dr Pfahls, Managing Director/Chairman, Mr Uyttenhoven, Director for passenger cars and eight other members of the MBBel management(114). At the meeting, "action against price slashing" was discussed. One of the dealers present reported that this action had improved relations between the dealers, although another complained about the price slashing practised by the Mercedes branches in Brussels. As a result of the discussion, it was agreed that an external agency would carry out test purchases ("ghost shopping") in order to check the level of discounts for the W 210. If this should reveal that discounts of more than 3 % were being granted, the vehicle allocation for the rest of 1995 would be cut(115).

(114) DaimlerChrysler argues that this action was a dealer initiative. MBBel, it said, had always rejected proposals by the Amicale to set sales prices. The proposal to commission an external agency to ghost shop and cut the vehicle allocation until the end of 1995 if discounts of more than 3 % were found was also suggested by the dealers and was not implemented.

(115) The Commission points out that a number of senior representatives of MBBel, which, according to the minutes, runs branches under the name Mercedes Europa in Brussels(116) and Antwerp(117), took part in this discussion(118). In the minutes of this meeting between MBBel and the Belgian dealers' association on 20 April 1995, drawn up by MBBel's manager for dealer development(119), Mr Rauw, it was stated that an independent agency should be commissioned to carry out ghost shopping. Mr Rauw also noted in the minutes that if discounts of more than 3 % were found, the vehicle allocation would be reduced. According to the minutes, it was decided at this meeting to commission an agency to carry out ghost shopping. MBBel was involved in this decision as the importer present at the meeting, but also as the owner of two branches, i.e. of companies with dealers' interests. Mercedes's active participation is evident from the fact that the penalties mentioned in the decision (reduction of the quota of new cars) could be applied only by MBBel as supplier of the dealers. It is also evident that MBBel was ready to actively support this price fixing, the price checks and any sanctioning of non-observance and that it did not reject the action, as subsequently claimed by DaimlerChrysler.

(116) DaimlerChrysler's objection that this was merely a suggestion by the dealers' association is at all events not convincing. Mr Rauw clearly distinguished in the minutes between statements made by individuals present and decisions or outcomes of the meeting. At the passage in question, he did not record that this was a proposal from the dealers' association. That the minutes were kept very precisely is clear from the way the previous statements are recorded, since they are even attributed to specific, named participants in the meeting.

(117) It is apparent from various documents that ghost shopping formed a perfectly normal part of MBBel's practices and that the announcement to that effect therefore had to be taken seriously. The minutes of the meeting of Mercedes dealers in the Antwerp region on 27 March 1996(120), in which MBBel's district manager for the Antwerp region, Koen Van Hout, took part, reveal that prior to 27 March 1996 five Mercedes dealers from the region and a parallel trader had been visited by a ghost shopper. Their discount policy was checked and it was found that the dealers granted discounts of between 5 % and 7 % for the W 210 (Mercedes E 290 TD).

(118) Another check on discount practice covered the C-Class: on 26 November 1996 MBBel commissioned Tokata SA to carry out test purchases at all 47 Belgian dealerships(121). Discount practice in relation to the C-Class Estate 220 diesel and Estate 250 turbodiesel was to be checked. The ghost shopper was to try to obtain a discount of at least 7 %, irrespective of delivery times.

(119) The following are illustrations of the considerable store set by MBBel on moderate discounting by Belgian Mercedes dealers. In a message from MBBel to Mercedes-Benz dated 17 October 1995 it was stated that: "we are doing all we can to carry out our work correctly (we are avoiding exports), we are attempting to keep our average price at a high level..."(122). A letter from MBBel to the Belgian dealer Garage de l'Avenue in Charleroi on 14 March 1996(123) concerned a Mercedes W 210 model, type E 200 sold during the Brussels Car Show. The letter first criticises the conduct of the dealer's sales representative, who had introduced himself as the sales representative for the Namur region, which led the customer to order the vehicle from him. When it later turned out that the purchase contract was with the dealer in Charleroi, the customer complained to MBBel. In the abovementioned letter, MBBel not only complains about these facts, but also takes the opportunity to point out the discount of 6 % on the price of the new car. From the context it is clear that MBBel considers this discount to be too high.

(120) DaimlerChrysler confirms, moreover, in the reply to the statement of objections(124) that this discount was unusually high and that the Namur dealer responsible for the area had to take over this disadvantageous contract. In short, the Commission assumes that at the meeting of 20 April 1995, in which MBBel and nine representatives(125) of the Belgian dealers' association took part, a decision was taken on the monitoring of the discounts on the W 210 practised by the Belgian Mercedes dealers by a ghost shopper. Discounts of more than 3 % were not to be granted, otherwise supplies would be cut(126). MBBel, according to the minutes, supported this procedure, including the imposition of penalties.

2. LEGAL ASSESSMENT

2.1. ARTICLE 81(1)

2.1.1. UNDERTAKING

2.1.1.1. DaimlerChrysler and the Mercedes dealers in Belgium and Spain

(121) DaimlerChrysler AG and its predecessors Daimler-Benz AG/Mercedes-Benz AG, the companies MBBel and MBE belonging to the group, and the Mercedes-Benz dealers in Belgium and Spain all constitute undertakings within the meaning of Article 81(1).

2.1.1.2. Mercedes-Benz agents in Germany

(122) Mercedes-Benz distributes cars in Germany via its own branches and via commercial agents in the form of agents appointed to negotiate business transactions (Vermittlungsvertreter) within the meaning of section 84(1), first sentence, first alternative, of the German Commercial Code.

(123) The Mercedes-Benz agents are undertakings within the meaning of Article 81(1). An undertaking is any legal subject which independently exercises a commercial or economic activity and, in so doing, bears the associated financial risks(127). An agent appointed to negotiate business transactions is defined in Articles 1(2)(7) and 84(1), first sentence, first alternative, of the German Commercial Code as a trader and, as such, pursues an economic activity. The Mercedes-Benz agents also exercise their activity independently. DaimlerChrysler shares the view that the agents are independent businesses(128).

2.1.2. AGREEMENT BETWEEN UNDERTAKINGS

(124) The agreements concluded between Mercedes-Benz and its agents in Germany constitute agreements between undertakings. The same applies to the dealer agreements concluded between the subsidiary MBE linked to Mercedes-Benz on the one hand and its Mercedes-Benz contractual dealers on the other.

(125) Account should also be taken of the fact that the agency or dealer agreements between the companies belonging to the Mercedes-Benz group on the one hand and the agents and dealers on the other form part of an exclusive and selective marketing system which, as long-term commitments, often exist for several decades. Since, for example, the development of the model range, maintenance strategies or marketing strategy are not foreseeable when a commercial agency or dealer contract is concluded, agreements must of necessity leave certain aspects to a subsequent decision by the manufacturer. The licensing of an agent or dealer as business partner presupposes that each business partner is in agreement with the evolving sales policy of the manufacturer(129). This applies to changes to the range of vehicles supplied to the dealer or agent for sale, but also to other changes to the manufacturer's sales policy affecting the dealer's or agent's sales opportunities, which are usually communicated to the sales partner by means of manufacturer's circulars or instructions, which the partner expressly or tacitly accepts. These circulars and instructions have therefore become part of Mercedes-Benz's agreements with agents since they form part of an ongoing business relationship based on an existing general agreement (agency agreement).

(126) DaimlerChrysler itself states that the circulars it addressed to distributors have become part of the contractual agreements. This is apparent from the following: under section 15(3) of the agency agreements(130) and the principal agency agreement(131) in the July 1997 version, original spare parts cannot be sold to resellers with their place of business outside the agent's contract territory, even if they require these spare parts for the repair or maintenance of vehicles. The Commission objected to this wording in the statement of objections of 31 March 1999(132).

(127) DaimlerChrysler commented on this point(133) that the misleading wording of this clause had been recognised since 1988. That is why it was made clear in a letter dated 10 October 1988 to the German agents and a letter dated 31 August 1988 to the general agents that the wording of the agreement was misleading and that original spare parts could be supplied to all resellers in the Community and associated countries. A situation corresponding to Article 3(10)(b) of Commission Regulation (EEC) No 123/85 of 12 December 1984 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements(134) and Commission Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements(135) was brought about by the dispatch of the abovementioned letters to the German distribution network.

(128) The Commission agrees with this argument and assumes that the above letters did bring about a situation that substantively complied with Article 81(1) to the extent that the sales companies received the circular.

(129) The fact that circulars and instructions become part of the contractual relations is also apparent from the fact that failure to comply with them might result in the imposition of severe sanctions, including the possibility of the supply of new vehicles being cut.

(130) In the light of these principles, all the practices that are of relevance here are to be regarded as agreements, as is explained in greater detail below.

2.1.2.1. Export restrictions (Germany)

(131) The instruction in the memo of 6 February 1996 to German agents to the effect that they should concentrate on their own territory and refrain from selling vehicles to customers from outside that territory if they did not want to jeopardise their vehicle allocation (see recital 78), which was essentially repeated in the memo of 15 March 1996 to the Northern Region with the threat that infringements would be "punished accordingly" (see recital 85), and the various instructions to the effect that internal competition should be avoided, are indicative of marketing policy in Germany, which agents agreed to by concluding their agency agreement. The memos have thus become part of the agreements between Mercedes-Benz and its agents.

(132) In its letter of 22 July 1996 to the Federal Association of Mercedes-Benz Agents Mercedes-Benz not only commented on demonstration vehicle sales, but it also confirmed that it too firmly rejected and opposed internal competition, adding that "we believe we have already proven this on several occasions in the past" (see recital 94). This letter confirms in general terms the intention, already declared on 6 February 1996, of excluding "internal competition". It renews the agreement of that date, at least vis-à-vis those agents who had knowledge of it.

(133) The fact that, according to circular No 52/85 of 12 September 1985 (see recital 103), which was addressed to, inter alia, branches, principal agents and agents in Germany, a deposit of 15 % is payable in practically all cases of sale to Komm-Kunden is indicative of business policy regarding the sale of vehicles to final customers from other Member States of the Community. This rule therefore forms part of the agreements concluded between Mercedes-Benz and the German agents.

(134) This is also apparent from point 4 of the circular, where express reference is made to the supply conditions for parallel exports in the Community, which were amended after Regulation (EEC) No 123/85 entered into force and which were incorporated in the agency agreements and set out once more in the circular. It is stated there that "Under the new agency agreements, and in accordance with the provisions of the EC block exemption regulation, the following rules apply to EC customers: ...". Immediately after the enumeration of the new agreements in the agency agreement, reference is made to the need to pay 15 % of the purchase price. Lastly, it is clear from the circular's penultimate sentence that, in Mercedes-Benz's view, the contents of the circular formed a binding part of the distribution agreements since it described them as "rules" ("We would ask you to inform all your sales staff of the new rules in full").

(135) DaimlerChrysler takes the view that the measures referred to are unilateral measures and do not form part of the distribution agreements between Mercedes-Benz and its distribution partners. Moreover, it continues, they were not inserted in the distribution agreements because they would have contradicted the rules laid down in those agreements(136). Mercedes-Benz also claims that it has not reserved the right to amend the distribution agreements by means of unilateral declarations. In this respect, it argues, this case differs from the distribution agreement which was the subject of the dispute in Ford v Commission(137). In the Ford dealer agreement, Ford expressly reserved the right to determine which models of vehicle would be supplied. Mercedes Benz, so it claims, has, by contrast, not reserved that right.

(136) The Court of First Instance made it clear in its judgment in the Volkswagen case, with express reference to the judgments in Ford and BMW, that a call by a manufacturer to its authorised dealers constitutes an agreement if it is "[intended] to influence the ... dealers in the performance of their contract with [the manufacturer or importer]"(138). This condition was clearly met in this case. It is therefore irrelevant whether the agreement contained a specific clause on which basis the Mercedes-Benz's call was made or whether this call was inconsistent with another clause in the agreement.

(137) Mercedes-Benz's agency agreements contain a rule according to which instructions are binding on agents: section 4(1) of the agency agreement(139) and of the principal agency agreement(140) stipulate that the agent is required to negotiate vehicle transactions in accordance with the current prices determined by Mercedes-Benz and "according to its instructions". On the basis of these contractual provisions, as illustrated by the memos described in recitals 78, 103 and 106, new rights(141), but also new obligations(142), have been created by Mercedes-Benz for the distribution partners and the distribution agreement has thus been supplemented. Express provision is thus made in the Mercedes-Benz distribution agreements, in a similar way as in the Ford distribution agreements, for introducing amendments to the agreement to take account of changing circumstances by means of circulars from the manufacturer or importer and other instructions.

2.1.2.2. Restrictions on supply to leasing companies (Germany and Spain)

(138) The ban on supplying leasing companies where there is no lessee is laid down by the agency agreements (section 2(1)(d))(143) and the Spanish dealer agreements (section 4(d))(144) and thus forms part of the agreements between Mercedes-Benz and its distribution partners. German agents were reminded of these agreements once more by the memo of 6 August 1996. This circular's penultimate paragraph reads: "In cases where these conditions are not met, we will deduct the branch's or agent's full vehicle commission and reserve the right to take action at a personal level or under contract law." (underlining added). The threat of action under contract law demonstrates that the circular also forms part of the contractual relationship and is not merely a one-sided, non-binding appeal for agents and others to change their business practices.

2.1.2.3. Setting sales prices in Belgium

(139) On 20 April 1995 nine representatives of the Belgian Association of Mercedes-Benz Dealers met with the MBBel management and reported on "action against price slashing" by dealers (see recital 113). The dealers indicated that they were satisfied with the outcome of this action. It had improved relations among them. This indicates that the implementation of such action had already been agreed upon on an earlier occasion. At the meeting, MBBel supported the agreement, and a maximum rate of 3 % for discounts was decided on. To continue the action, it was agreed that a test buyer should check discounting conduct on the new E-class vehicle, the W 210, and that if discounts of more than 3 % were being granted, the vehicle allocation for the rest of 1995 would be cut.

(140) The decision of 20 April 1995 constitutes an agreement between MBBel and the association of dealers.

(141) In this connection MBBel behaved both as a competitor of the dealers, namely as operator of two branches, and as a supplier to the dealers. The latter, vertical aspect was clearly the focal point of the agreement, as is illustrated by various elements. Firstly, MBBel was represented at the meeting by members of its board. Secondly, it agreed to back and enforce the policy of limiting discounts with a cut in vehicle supplies to all dealers (and not only to the nine association members present at the meeting). MBBel confirmed this, moreover, to Mercedes-Benz AG on 17 October 1995 (see recital 119: "we are attempting to keep our average price at a high level").

(142) These express agreements were also binding on all Belgian dealers in their capacity as importers of Mercedes-Benz vehicles and as competitors of MBBel's branches.

2.1.3. RESTRICTION OF COMPETITION

2.1.3.1. Market definition

2.1.3.1.1. Relevant product market

(143) The measures established in this case relate to the retailing of Mercedes passenger cars.

(144) The broadest relevant product market might be deemed to be the market for all cars. The relevant market would then extend from very small cars through luxury cars to sports cars. However, this cannot be accepted. It is obvious that, from the point of view of the buyer, very small cars are, for example, not interchangeable with medium-sized or luxury cars: a buyer (private customer, commercial user of passenger vehicles) will not regard the various segments to be interchangeable if the focus is on the characteristics relevant to the selection of a certain vehicle. The characteristics of a very small car are its small external dimensions, small engine, relatively low purchase price, low prestige value and the fact that many of these vehicles are purchased as second cars or for short journeys. Small cars are larger, have a more powerful engine, cost more and offer greater comfort. The same applies mutatis mutandis to the next category. Executive and luxury vehicles are, for example, purchased primarily by drivers who drive frequently and wish to cover large distances comfortably. The price, prestige value and comfort of these vehicles is decidedly greater than in the case of cars of the lower categories. Sports cars, whether coupé or cabriolet, differ from passenger cars primarily in the sporty design of their bodywork and the fact that they have only two doors. From the buyer's point of view, the general car market is therefore not the relevant product market.

(145) The automobile industry and market analysts traditionally categorise cars into "segments" on the basis of objective criteria such as car length, purchase price, body type, performance, in particular engine performance, and brand image(145). A distinction is normally made between the following "segments": A: very small cars; B: small cars; C: medium cars; D: upper-medium cars; E: executive cars; F: luxury cars; and G: multipurpose vehicles and sports cars. segment G is occasionally subdivided still further, sometimes into the segments low-priced sports cars, high-priced sports cars, multipurpose vehicles and off-road vehicles(146), and sometimes into the segments multipurpose vehicles, coupes, cabriolets and off-road vehicles(147). The Commission's six-monthly reports on car prices in the Community are also based on this classification and contain price data on car models grouped according to the abovementioned seven segments A to G so as to be able to represent together models which are comparable from the consumer's standpoint.

(146) In its reply to the Commission's request for information of 21 October 1998, Daimler-Benz AG indicated that it did not agree with the subdivision of the car market into segments.

(147) However, a brochure on the Daimler-Chrysler merger entitled "Expect the extraordinary"(148), issued by Mercedes-Benz on 17 November 1998, presents the broad product range of the new company and divides it into individual segments, whereby yet a further distinction is made regarding the pricing of vehicles in the individual segments (premium, mid-price and economy). Moreover, MBE documents found during the investigations reveal that an assumption is made within the company that there are certain categories of comparable vehicles with regard to the positioning of C-, E- and S-class models compared with the competition. In 1996, in a comparison of Mercedes volume models (the A-class was not yet on sale), MBE distinguished between three different segments: the lowest segments contained the C-class, the Audi A4, the BMW 3-series and the Volvo 400 series, followed by a segment containing the E-class, the Audi A6, the BMW 5-series and the Volvo 800/900. The highest segment contained the S-class Mercedes, the Audi A8 and the BMW 7 and 8-series(149). In addition, a price comparison between Spain, Germany and Italy prepared by MBE for volume models also divided vehicles into three segments. The first segment comprises the Mercedes C 180, the Audi A4 and the BMW 316, the second the Mercedes E 200, the Audi A 6 and the BMW 520 i, and the third the Mercedes S 320, the BMW 730 I and the Volvo 960(150). Mention should also be made of the 23rd best-car survey conducted by the magazine "Auto, Motor und Sport"(151). This shows that the segmentation of the passenger vehicle market is relevant from the consumer's point of view. In it, 277 passenger vehicle models are divided into a total of 10 categories(152). The six categories A (very small cars), B (small cars), C (lower medium-sized cars), D (medium-sized cars), E (upper medium-sized cars) and F (luxury cars) correspond to the first six of the segments referred to in recital 144, as can be seen from a comparison of the passenger car models listed in the respective category or segment. Coupés, cabriolets, off-road vehicles and vans were listed separately in separate segments.

(148) The fact that there may be a degree of overlapping or difficulty in distinguishing between vehicles at the edge of adjoining segments and that vehicles must be allocated on the basis of an analogy between similar vehicle types, as Daimler-Benz states in its letter of 8 December 1998, does not contradict the assumption that the car models allocated to a given segment form a relevant product market in each case.

(149) It is not necessary in these proceedings to decide conclusively what the exact segmentation between markets is. As will be explained, a restriction of competition is appreciable not only if account is taken of the market position of Mercedes-Benz in the individual segments. It is also appreciable if account is taken of the fact that competition exists between each of the segments relevant to these proceedings and one or both of the adjoining segments, particularly at the edge of each segment, or if the segments relevant in this case are even combined with both adjoining segments to form one relevant product market.

2.1.3.1.2. Relevant geographic market

(150) There are grounds for considering the relevant geographic market to comprise the Community. The technical barriers between Member States have, for example, disappeared since the introduction of the Community certificate of conformity. Any passenger vehicle purchased in the Community can now be registered in any Member State without being resubmitted for technical checks.

(151) However, there is much to be said in favour of the view that, from a geographic standpoint, every Member State forms a separate relevant market in the case of passenger cars. There are still considerable differences between Member States as regards the competitive and material conditions of passenger car supply. This is apparent from the Commission's six-monthly price surveys, in which car prices, adjusted for differences in equipment levels, are compared. Although price differentials have recently narrowed, as can be seen from the comparison of prices for three Mercedes models in recitals 32 to 34, they remain sizeable. They stem partly from national rules and regulations, such as the heavy registration, luxury and environmental taxes that are imposed in some countries, and partly from the fact that, in the event of currency fluctuations between Member States, manufacturers make no, or insufficient, price adjustments. They can also be explained in terms of manufacturers' marketing strategies with regard to customers' differing purchasing power. In addition, manufacturers offer very different standard equipment and equipment packages for new cars from one Member State to another. What is more, it remains difficult for final consumers or their appointed agents to purchase new cars in a Member State other than that in which the customer is resident or domiciled, the expense always being greater than when buying from a dealer belonging to the domestic network. Many agents and dealers prefer to serve local customers, especially if they consider a sale possible to customers in their contract territory and even more so in the case of popular models. Moreover, they often require large deposits from foreign customers, as is apparent from the large number of complaints submitted to the Commission from consumers wishing to buy a car abroad. All this suggests that the relevant geographic markets for passenger cars are still national markets.

(152) The question whether the markets for passenger cars are Community-wide or whether each Member State constitutes a separate relevant geographic market can be left open here since the restriction of competition is appreciable irrespective of the definition of the geographic market.

2.1.3.2. The applicability of Article 81 to the restrictions agreed with the Mercedes-Benz agents

(153) In the statement of objections (point 152), the Commission indicated that the Mercedes-Benz agents have to bear a number of commercial risks(153) inextricably linked to their function as agent which result in Article 81 being applicable to the agreements between Mercedes-Benz and the agents in the same way as with regard to dealers.

(154) In DaimlerChrysler's view(154), even if account is taken of the aspect of risk allocation, the Mercedes-Benz agents should not be equated with dealers. It claims that agents do not bear any of the contractual risks associated with new-vehicle business, such as the risks of marketing, transport, storage, price, guarantee or default. If the contracting partner offers customers concessions by passing on some of its commission or accepting used vehicles in part exchange at inflated prices, it does so in the context of the leeway it is granted in respect of its commission. Agents therefore bear only the commission risk and thus not any other price risk directly associated with the sale of new vehicles, as dealers do. Agents do not bear the guarantee risk either since claims made by the buyer under the guarantee exist solely vis-à-vis Mercedes-Benz and not against the contracting partner. Even the fact that the contracting partner is required to buy and sell demonstration and business vehicles for its own account and at its own risk does not constitute a contractual risk associated with the negotiation of contracts concerning the purchase of new vehicles but is one of the obligations entered into by the contracting partner under Article 7(155) of the agency agreement(156). It is one of the advertising and sales-development activities which an agent has to perform at his own risk. This also applies to the business vehicles used by the agent's staff for business purposes. The fact that 21,66 % of the turnover of branches and agents can be attributed to demonstration and business vehicles (the percentage is, according to DaimlerChrysler, even higher for agents) means that an agent with a turnover of 500 vehicles per year buys 70-80 vehicles per year and, in view of the fact that they are kept for three months and are driven for 3000 km, an agent will always have approximately 20 vehicles in his possession so that he can allow all customers to use a demonstration vehicle on an hourly or daily basis. They form part of his fixtures and of his expenses as an independent trader. The associated risks are borne by the contracting partners even if vehicles are intended for use in their business to satisfy the intermediary and workshop functions(157).

(155) This argument must be rejected. The Mercedes-Benz agent bears a considerable share of the price risk associated with the vehicles whose sale he negotiates.

(a) If an agent makes price concessions on the sale of new vehicles to which Mercedes-Benz agrees, these are deducted entirely from the agent's commission (see list of commissions under the agency agreement(158). The same applies where, in connection with the sale of a new vehicle, the agent uses his commission in order to be able to accept a used vehicle in part exchange at a price higher than the market price(159).

(b) Volume or user discounts granted by agreement to large and certain other buyers, e.g. car-hire companies, taxi firms or journalists, can amount to as much as 6 % plus bonuses, and these are deducted from the agent's commission (see list of commissions under the agency agreement(160).

(156) According to these rules, in the first case the agent bears all, and in the second case a very considerable part, of the risk that the list price set by Mercedes-Benz cannot be enforced against a customer. Even if the agent does not have to keep any stocks of new vehicles, he is approximated by these payment rules from a financial point of view to a car dealer who by way of remuneration is granted by the manufacturer a margin(161) which he uses not only to finance his new-car sales business in general but also and above all to grant price concessions to car buyers.

(157) The agent also bears the transport and transport cost risk in respect of new vehicles. Pursuant to Article 4(4) of the agency agreement, he must deliver to the customer a new vehicle ready for delivery which the customer does not wish to collect at the factory. The agent has to agree with the customer the level of remuneration payable in order to cover the expenditure incurred in connection with the delivery, and in particular the cost of transport. Under the agency agreement, therefore, Mercedes-Benz does not assume the transport and transport cost risk, this being borne by the agent. Like a dealer, the agent is required to pass on the costs and the transport risk contractually to the customer.

(158) The agent must also use to a very considerable extent his own resources for purposes of sales promotion. In particular, he must acquire demonstration vehicles for his own account (Article 4(7) of the agency agreement). Either Mercedes-Benz and the agent have to agree on the number and type of these vehicles, or Mercedes-Benz stipulates the number itself. In so doing, it takes account of what is appropriate in its experience and what can be expected of the agent financially (Article 4(7) of the agency agreement). Including agents' business vehicles - these must be Mercedes-Benz vehicles and they are also used as demonstration vehicles - in 1998 an average of [...] %(162) of the turnover of branches and agencies was accounted for by demonstration and business vehicles. According to DaimlerChrysler, the share of these vehicles in turnover is somewhat higher for agents than for branches. Mercedes-Benz grants special conditions for the purchase of demonstration and business vehicles, and they are therefore subject to a minimum retention period of three to six months and a minimum running distance of 3000 km. Thereafter, the agent can resell the vehicles second-hand, bearing the sales risk for this not inconsiderable number of vehicles.

(159) The activity of a Mercedes-Benz agent is also inevitably associated with a series of other commercial risks, acceptance of which is a precondition for becoming a Mercedes-Benz agent.

(a) Such contractual risks arise from the rules concerning the manufacturer's guarantee for new Mercedes-Benz vehicles (irrespective of whether their sale is arranged by an agent or the vehicle is purchased from another distributor). Under these rules, the agent (and, likewise, the Mercedes-Benz dealer outside Germany) is not liable for any claims which the buyer of a new vehicle may have under the guarantee. Under general civil law, such claims are effective vis-à-vis Mercedes-Benz as the guarantor. However, a different situation emerges from point VII.2(A) of the general terms of trade applicable to the sale of new vehicles by Mercedes-Benz(163). Under that provision, Mercedes-Benz grants buyers of new vehicles a right to have any defects rectified within the manufacturer's guarantee period of one year from delivery of the vehicle. This right may be exercised "with the seller [Commission note: i.e. in this case, Mercedes-Benz] or other operators approved by the manufacturer for the purpose of attending to the sold article ...". This clause corresponds to the agent's obligation under Article 13(1) of the agency agreement "to carry out guarantee work on the vehicles supplied by Daimler-Benz irrespective of where and via whom they have been sold". When an agent carries out repairs under guarantee, the customer may not be invoiced any "charge for the expenditure required to rectify defects" (Article 13(2) of the agency agreement). If an agent has carried out such repairs, he receives a "guarantee indemnity" calculated on the basis of the average customer cost rate and the cost price of materials he has used, plus a materials cost premium(164). The agent has to provide the necessary equipment and staff at his own cost and risk and initially to carry out the work also at his own cost and risk. Moreover, he is not completely discharged of the risk associated with providing this service: for carrying out defect-rectification work, he receives an indemnity based on standard rates which differ from and do not necessarily cover the currently applicable wages for carrying out ordinary repairs and the spare-part sales prices applicable