30.8.85 OfficialJournaloftheEuropeanCommunities NoL233/1
II
(Actswhosepublicationisnotobligatory)
COMMISSION
COMMISSION DECISION
of10July1985
relatingtoaproceedingunderArticle85oftheEECTreaty
(IV/29.420-Grundig'sEECdistributionsystem)
(OnlytheGermantextisauthentic)
(85/404/EEC)
Grundigdistributesitstelevisionsets,videorecorders,hi-fi
equipmentandrelatedaccessoriesintheFederalRepublicof
Germanythroughanetworkofspecialistwholesalersand
retailersandintheotherMemberStatesthroughsole
distributors (someofthemsubsidiariesofGrundig)
supplyingspecialistwholesalersandretailers.Altogether,
some28000dealersbelongtotheGrundigsalesnetworkin
theCommunity .Grundigdoesnotissuerecommended prices
foritsproducts.THECOMMISSION OFTHEEUROPEAN COMMUNITIES ,
HavingregardtotheTreatyestablishingtheEuropean
EconomicCommunity ,
HavingregardtoCouncilRegulationNo17of6February
1962,firstRegulationimplementingArticles85and86of
theTreaty0),aslastamendedbytheActofAccessionof
Greece,andinparticularArticles6and8thereof,
HavingregardtothenotificationfiledbyGrundigAGon
29March1977ofitsEECdealershipagreementswith
specialistwholesalersandretailers,
Havingpublishedasummaryoftheagreementsin
accordancewithArticle19(3)ofRegulationNo17(2),
HavingconsultedtheAdvisoryCommitteeonRestrictive
PracticesandDominantPositions,GrundigisoneofEurope'slargestmanufacturers of
consumerelectronicsequipmentwithaturnoverin1983/84
ofapproximately DM2,8billion.Foritstop-sellinglines,
colourtelevisionsandvideorecorders,ithasEECmarket
sharesof10,6%and6%respectively .InsomeMember
Statesitssharesarehigher.Forcolourtelevisionsithasa
shareof19,5%intheFederalRepublicofGermany,12,4%
inItalyand9,6%inFrance.Forvideorecordersitsmarket
shareinthesamecountriesis16,5%,5,5%and3,3%.
Whereas:
I.FACTSSince1April1984GrundighasbeencontrolledbyPhilips
(Philips-Gloeilampenfabrieken ,Eindhoven,theNether­
lands),whichhadhada24,5%stakeinthecompanysince
1979.
B.Grundig'sdistributionsystemA.Grundig'sdistributionsystemandmarketposition
On29March1977,GrundigAG,Fiirth,FederalRepublicof
Germany(hereinafter'Grundig'),notifiedtotheCommission
thedealershipagreementsformingthebasisofaselective
distributionsystemforitsconsumerelectronicsproductsin
thecommonmarket.Itintroducedthesystemon1April
1977.Thedealershipagreementsformingthebasisoftheselective
distributionsystemwhichGrundigintroducedon1April
1977wereframedinthelightoftheprincipleswhichthe
CommissionhadestablishedinitsDecision76/159/EEC(3)
0)OJNo13,21.2.1962,p.204/62.
(2)OJNoC276,16.10.1984,p.2. (3)OJNoL28,3.2.1979,p.19.

NoL233/2 OfficialJournaloftheEuropeanCommunities 30.8.85
onSABA'sdistributionsystem.Followingthemodifications
intheCommission'spolicytowardsselectivedistributionin
theconsumerelectronicssectorsignalledinitssecond
DecisionontheSABAsystem,Decision83/672/EEC
(hereinefter'SABAII')(*),Grundigamendeditsdealership
agreementstomeetthenewrequirements .
Grundig'sdistributionofitsproductsintheEECisnow
basedon:
—theGrundigEECdealershipagreementwithwholesalers
and
—theGrundigEECdealershipagreementwithretailers.
Themaintermsoftheseagreementsareasfollows:
1.(a)UndertheGrundigEECdealershipagreementwith
wholesalers,Grundigadmitstoitsnetworkasa
wholesaleranywholesalerwho,interalia:
—carriesonawholesalebusinessspecializingin
thesaleofconsumerelectronicsequipment,or
haswithinhisbusinessadepartmentspecializing
inthesaleofsuchequipmentwhichisequivalent
tosuchaspecialistwholesalebusiness,
—employsatechnicallytrainedstaffanda
professionalsalesforcecapableofproviding
expertadvicetocustomers,
—hasthenecessaryfacilitiesandresourcestocarry
andstockasfaraspossiblethewholeGrundig
rangeandensurepromptdeliverytohis
customers,andnecessarywiththetrusteeappointedbyGrundig
whetherheisauthorizedbyGrundigtosellits
products;
—tosellGrundigproductstoconsumersonly
wheretheycarryonabusiness,purchasethe
goodsforuseinthatbusinessandfurnish
objectivelyverifiableevidencetothateffectby
signingaspecialdeclaration ;
—tokeeprecordsofallGrundigproductssoldso
thattheycan,ifnecessary,betracedbytheir
serialnumbers,andtopreservesuchrecordsfor
atleastthreeyears;
—toassistGrundiginkeepingtheselective
distributionsystemintactandinproceeding
againstbreachesofthedealershipagreement.
(c)Grundigspecialistwholesalersareentitledtoadmit
totheGrundigspecialistdealernetworkany
specialistretailerwhosatisfiestheselectioncriteria
laiddownintheGrundigEECdealershipagreement
withretailers.
(d)Grundigspecialistwholesalersarefreetosupplyor
takesuppliesfromanyGrundigdealeranywherein
thecommonmarketandtosettheirownresale
prices.
(e)Grundigundertakes,interalia,toguaranteethe
integrityofitsEECselectivedistributionsystemand
tomaintainanup-to-datelistofallauthorized
Grundigdealerswithatrustee,whoisresponsible
foransweringinquiriesastowhetherparticular
dealersaremembersofthenetwork.
(f)WhereaGrundigspecialistwholesalerisfoundnot,
ornolonger,tosatisfytheadmissioncriteria
Grundigmayterminatethewholesaler'sdealership
forthwith,specifyinginwritingitsreasonsfor
sodoing.Whereawholesalerisfoundtohave
breachedthetermsofthedealershipinamanner
whichendangersthedistributionsystem,Grundig
maytemporarilyor,inthecaseofrepeatedbreaches,
indefinitelywithholdsuppliesfromthewholesaler
andterminatehisdealershipforthwith.Wherethe
breachinvolvesaninfringementofnationallaw
againstunfaircompetition,Grundigmayapplythis
sanctiononlyiftheinfringementisnotdeniedorhas
beenprovedinacourtoflaw.Apowerofordinary
terminationisenjoyedbyGrundigonlyintheevent
ofitsabandoningitsEECdistributionsystem.
2.(a)UndertheGrundigEECdealershipagreementwith
retailers,aretailermustsatisfy,interalia,the
followingcriteriatobeadmittedtotheGrundig
networkasaspecialistretailer.Hemust:
—carryonaretailbusinessspecializinginthe
saleofconsumerelectronicsequipment,or
alternatively ;
—havewithinhisbusinessadepartment
specializinginthesaleofconsumerelectronics
equipmentwhichiscomparabletoaspecialist
consumerelectronicsbusiness;—signstheGrundigEECdealershipagreement.
IfGrundigfailstoprocessawholesaler'sapplication
foradmissiontothenetworkwithinfourweeks,the
wholesalerisdeemedadmittedandGrundig
undertakestosignadealershipagreementwithhim
immediatelyandtoplacehimonthelistof
authorizedGrundigdealers.
(b)Grundigspecialistwholesalersundertakethe
followingobligations,interalia:
—tosupplyGrundigproductsforresaleinthe
commonmarketonlytoauthorizedGrundig
dealersandbeforesupplyingadealertocheckif
(x)OJNoL376,31.12.1983,p.41.

30.8.85 OfficialJournaloftheEuropeanCommunities NoL233/3
However,itinsistsontherequirementsthatretailers
bespecialists,runashopwithunrestrictedaccessto
anymemberofthepublic,displayGrundigproducts
attractively,employtrainedsalesstaffandprovide
after-salesandwarrantyservices.demonstrateGrundigproductsanddisplaya
representativeselectionoftheminsalespremises
whoseappearanceisinkeepingwiththeprestige
oftheGrundigbrand.Specialistdepartmentsin
storesmustbeseparatefromthestore'sother
departments ;
employtrainedsalesstaffpossessingthe
requisitetechnicalknowledgetoadvise
customersinacompetentmanner;
presentas.fullarangeofGrundigproducts
asisreasonableforaspecialistbusinessor
departmentofthatsize;(c)Grundigspecialistretailersundertakethefollowing
obligations,interalia:
—tosupplyGrundigproductsforresaleinthe
commonmarketonlytoauthorizedGrundig
dealersandbeforesupplyingadealertocheckif
necessarywiththetrusteethatheisamemberot
theGrundignetwork;
—tokeeprecordsofallGrundigproductssoldto
dealerssothattheproductscanifnecessarybe
tracedbytheirserialnumbers,topreservesuch
recordsforatleastthreeyearsandtoletGrundig
knowshouldthereappeartobeaneedtocheck
distributionchannelseitherfortechnicalreasons
orincasesofreasonablesuspicionofabreachof
theEECdealershipagreement.
TheGrundigEECdealershipagreementwith
retailersexpresslyprovidesthattheretailersarefree
tosupplyortotakesuppliesfromanyapproved
Grundigdealeranywhereinthecommonmarket
andtosettheirownresaleprices.keepadequatestocksofarepresentative
selectionoftherelevantGrundigrange,
commensurate withthesize,localimportance
andturnoverofthebusiness,andorder
immediatelyanyGrundigproductsdemanded
bycustomerswhichhedoesnothavein
stock;
providecompetentandpromptafter-sales
serviceandallrepairsandservicingunder
warranty,eitherinhisownworkshoporina
workshopunderpermanentcontracttohim;
signtheGrundigEECdealershipagreement
withretailers.(d)Grundig'sobligationtoguaranteetheintegrityof
thedistributionsystemandtoappointatrustee,and
therulesgoverningordinaryterminationand
terminationforbreachofcontract,correspond
tothoseforwholesalers (seeI.B.I,(e)and(f)
above). Theretailerisprohibitedfromadvertisingor
conductinghisbusinessinsuchawayastoputhis
exclusivecapacityasaretailerindoubt,from
makingmisleadingreferencesinnoticesor
advertising,inconnectionwiththesaleofGrundig
products,tosellatcash-and-carry ,self-serviceor
take-awaypricesandfromsellingGrundigproducts
bymailorder.C.Theextentofselectivedistributionforconsumer
electronicsproducts
(b)Grundigwilladmittoitsnetworkanyretailer
fulfillingtheselectioncriteria.Grundigwholesalers
arealsoentitledtoadmitretailers,asstatedabove.
ApplicationstoGrundigwillbedeemedtohave
beenacceptedifGrundigfailstoprocessthem
withinfourweeks,inwhichcaseGrundig
undertakestosignthedealershipagreementwith
theretailerimmediatelyandtoputhimonthe
Grundigdealerlist.Theextentofselectivedistribution intheconsumer
electronicsindustryvariesindifferentMemberStates.In
theFederalRepublicofGermany,inparticular,ithas
traditionallybeenacommonmethodofdistributing
consumerelectronicsproducts.InotherMemberStates,itis
muchlesswidespread .Atallevents,inallMemberStates
therearealargenumberofmanufacturers sellingtheir
productswithoutdealerselectionandinmostcasesthese
accountforthebulkofsalesoftheproductsintheMember
Stateconcerned.Thedistribution systemsofthe
manufacturers whodorequiretheirdealerstomeetselection
criteriaalsovarywidely.Someofthesystemsnotifiedtothe
Commissionarepurelynationalandsodonotcoverthe
wholeCommunity .Someonlylaydownrequirements
pertainingtothedealer'sprofessional ,specialiststatus,
whichdonotfallunderArticle85(1).Finally,severalofthe
manufacturers practisingdealerselectiondonotsellafullInviewofthefactthatthedealershipagreementis
standardthroughoutthecommonmarket,Grundig
hasreservedtherighttowaiveindividualadmission
conditionsinthelightofnationalcircumstances .

NoL233/4 OfficialJournaloftheEuropeanCommunities 30.8.85
rangeofconsumerelectronicsproductsbutareonly
representedinparticularsegmentsofthemarket.Allinall,
thenumberofselectivedistributionsystemsnotifiedtothe
Commissionhasnotincreasedsincethejudgmentof
theCourtofJusticeof24October1977inCase26/76,
Metro(l).andthecharacterofsalespremisesarenomore
onerousthanisnecessaryinaselectivedistribution
systembasedonqualitativecriteriaforsuch
technicallysophisticated goodsasconsumer
electronicsproducts.Thefastpaceofinnovation
thatischaracteristicoftheindustrynotonlymeans
thatcompletelynewproductsarebeingdeveloped
allthetimebutalsothattheusesofestablished
productsareconstantlybeingextended.Another
featureofthepresent-dayindustryistheincreasing
interpenetration betweenconsumerelectronicsand
datatransmissionandprocessing,whichmeans,for
instance,thatdomestictelevisionsetsarenowused
asterminalsforconnectingupmanytypesof
peripheralequipmentaswellasfortheiroriginal
purpose.Requirements astothedealer'stechnical
competencetoprovideadviceandwarrantyservices
arethereforestillnecessary.Thisistrueeventhough
modernconsumerelectronicsproductsareless
likelytoneedrepairthantheyusedto.Apartfrom
thefactthatwarrantyandrepairworkisonlyoneof
thecomprehensive rangeofservicesprovidedby
specialistdealers,acompetentrepairservicestill
needstobeprovidedtorectifysuchfaultsasdo
occur,eveniftheyarenotasfrequentasinthe
past.D.Commentsbythirdparties
InresponsetopublicationofasummaryoftheGrundig
dealershipagreementstheCommission receivedfour
submissionsfrominterestedparties.Theirprincipal
argumentswerethattheGrundigdistributionsystem,in
combinationwiththesimilarsystemsoperatedbyother
manufacturers ,ledtothedefactoexclusionofthe
non-specialisttradefromthissectorandtoarestrictionof
competitionbetweenGrundigdealers,especiallyonprices,
andtopricerigidity.Doubtwasexpressedastowhetherin
practicetheapproveddealersactuallyprovidedtheadvice
andafter-salesservicerequiredunderthedealership
agreements .After-salesservicewas,itwassuggested,inany
casenolongeressentialforaproperdistributionofmodern
consumerelectronicsproductssincetheywerelesslikelyto
needrepairthanwas.thecaseinthepast.Onesubmission
alsocriticizedoneoftheselectioncriteriaforretailers,
concerningthe'characterofsalespremisesandtheattractive
displayoftheproducts,asbeingtoovague.
II.LEGALASSESSMENT(b)Therequirementthatdealersshoulddemonstrate
Grundigproductsinsuitablesalespremisesand
displaythemattractivelymustalsoberegardedas
necessary.Grundighasalegitimateinterestin
ensuringthatitshigh-qualityproductsarepresented
totheconsumerinappropriatesurroundings ,and
anobligationofthisnatureisboundtobecouched
ingeneraltermswhichleavesomeroomfor
discretion.Furthermore ,thereislittledangerof
Grundig'sbeingabletoapplythisconditionina
discriminatory fashion,sincethepowertoadmit
retailers,andhencethepowertocheckthatthis
conditionisfulfilled,isalsodelegatedto
wholesalersandanyretailerrefusedadmissionby
Grundigisfreetochallengethedecisionincourt.A.Article85(1)
1.Themajorityoftheobligationscontainedinthestandard
dealershipagreementswithwholesalersandretailers
whichformthebasisofGrundig'sEECdistribution
systemarepurelyqualitativeand,assuch,donotfall
underArticle85(1).Theagreementscontainfewclauses
whichhaveastheirobjectandeffectarestrictionof
competitionwithinthecommonmarketandwhichare
liabletoaffecttradebetweenMemberStates,andwhich
thereforerequireexemptionunderArticle85(3).
2.InsofarastheGrundigEECdealershipagreements
merelylaydownprofessionalcriteriafordealers,which
areappliedinanon-discriminatory fashionandwhich
determinetheprocedureforadmissiontothenetwork
andimposeancillarypolicingobligations,theydonot
bringtheagreementswithinthescopeofArticle85(1).
Thisapplies,inparticular,tothefollowingprovisionsof
theagreements :
(a)Therequirements regardingtheprofessional
qualificationsofdealers,thespecialistknowledgeof
theirsalesstaff,theprovisionofafter-salesservice(c)TheprohibitionondealersadvertisingGrundig
productsat'cash-and-carry ,self-serviceor
take-awayprices'isjustifiedbecausealldealersare
obligedunderthedealershipagreementtoprovide
certaintypesofadvisoryandafter-salesservices.
Thismeansthatdealersarenotallowedtopursuea
marketingpolicywhichdoesnotingeneralinclude
theseservices.Yetifadealeradvertisesoroffersfor
saleGrundigproductsat'take-awayprices'orthe
like,heisencouragingtheconsumertowaivesuch
services.Thecontractualprohibitionofsuch
marketingpracticescanthusbesubsumedunderthe
qualitativeselectioncriteria.Thereisnogroundto
fearthatadealerisconsistentlyabandoningapolicy
ofprovidingafter-salesservices,however,wherehe
doesnotprovidesuchservicestoacustomeratthe f1)ECR1875(1977.

30.8.85 OfficialJournaloftheEuropeanCommunities NoL233/5
(aa)Grundigmustdecideonapplicationstojoin
thenetworkwithinfourweeks.customer'sownrequest.Insuchcasesthereis
nothinginthedealershipagreementtopreventthe
dealerfromgrantingthecustomeradiscountforthe
resultantcostsavings. (bb)Approvedwholesalers,too,canadmit
qualifiedretailerstothenetwork.
ThebanonsellingGrundigproductsbymailorder
canalsobesubsumedundertheobligationto
providecustomerswithadviceandtodisplaythe
products.Adealerisnotprohibitedfrommailing
equipmenttoacustomeratthecustomer'sown
request,however.(cc)Dealershipscannotbeterminated,otherthan
forbreachesofthetermsofthedealership,
exceptintheeventofGrundig'sabandoning
theentireselectivedistributionnetwork.
(dd)Termination ofadealershipand/or
withdrawalofthedealer'ssuppliesonthe
groundofabreachofthelawagainstunfair
competitionisonlypossibleiftheallegations
arenotdeniedor,ifdenied,havebeenproved
incourt.
(d)ThequalitativeselectioncriteriaappliedbyGrundig
arealegitimatemeansofensuringthatitsproducts
aredistributedbysuitablyqualifieddealers.The
vettingofdealersbeforetheyareadmittedtothe
network,andthechecksmadeonthemafterwards
wherenecessary,areintendedtoensurethatall
dealersactuallymeettheselectioncriteria.With
suchalargenumberofdealersintheGrundig
network,thereisboundto.beapossibilitythat
individualdealerswillfailtodischargetheir
obligationsproperly.However,thispossibilitydoes
nottakeawayGrundig'srighttocontinuetoselect
itsdealersonthebasisofqualitativecriteria.3.Adifferentviewmustbetaken,however,ofselective
distributionsystemswhichimposeobligationsonthe
undertakingsconcernedorcontainselectioncriteria
whichgobeyondthelimitsindicatedabove.Theythen
fallunderArticle85(1),butcaninappropriatecasesbe
exemptedunderArticle85(3).
Initsdealershipagreementswithwholesalersand
retailersGrundigundertakesnottosupplydealerswho
donotbelongtoitsdistributionnetwork.Grundig
dealers,fortheirpart,areforbiddentosupplydealers
whohavenotbeenadmittedtothenetworkbyGrundig
itselforbyaGrundigwholesaler .
Inthepresentcasetheseobligationsconstitutea
restrictionofcompetitionbecauseinordertobe
admittedtothenetworkdealersmustnotonlysatisfy
certaingeneraltechnicalandprofessionalcriteriabut
mustalsobepreparedtomakespecificcommitments in
termsofsaleseffortandtoprovideparticularservices.
GrundigretailersmustdisplayasfullarangeofGrundig
productsasisreasonableforaspecialistbusinessor
departmentofthatsizeandmustkeepstocksofa
representative selectionofthecurrentGrundigrange.(e)Thepolicingobligationslaidupondealerswhen
sellingtootherdealersandtheobligationon
wholesalerstoassistGrundiginkeepingtheselective
distributionsystemintactdonothavean
independentanti-competitive character.Grundig's
exerciseofitsrighttoinspectadealer'srecordsis
expresslylimitedtocasesofreasonablesuspicionof
abreachofcontractbythedealerorbyanother
customer.Theobligatorycheckonwhethera
prospectivetradecustomeris(still)ontheapproved
GrundigdealerlistcanbemadeeitherwithGrundig
orwithatrustee.Thus,anypossibilityofthese
clausesbeingappliedinananti-competitive manner
canberuledout.
Grundigwholesalersmusthavethenecessaryfacilities
andresourcestocarryandstockasfaraspossiblethe
wholeGrundigrange.
Theseobligationsgobeyondwhatisnecessaryfora
competentdistributionoftheproductsanddoconstitute
restrictionsofcompetition,sincetheycreate
impedimentstothecommercialindependenceofthe
authorizeddealers.(f)Thebanonwholesalerssupplyingprivate
consumersdoesnotfallwithinArticle85(1)because
itismeanttounderpinthedivisionoffunctions
betweenwholesalingandretailingandprevent
distortionsofcompetition (cf.judgmentoftheCourt
ofJusticeinCase26/76,Metro/1977/ECR1875
at1908,ground28).
(g)Noraretherulesoftheprocedureforadmitting
dealerstoandexcludingthemfromthenetwork
liabletocauseanysignificantrestrictionof
competition ,sincehereGrundighasfollowedthe
principlesestablishedintheCommission'sSABAII
Decision(atII.A.6(b)and(c)thereof):4.Grundig'sEEC-widedistribution system,which
containstherestrictionsofcompetitiondescribedabove
atpoint2,isinherentlylikelytoaffecttradebetween
MemberStates.Therecanbenodoubtthatthiseffectis
appreciable,inviewofthemarketsharesheldby
GrundiginindividualMemberStates.

NoL233/6 OfficialJournaloftheEuropeanCommunities 30.8.85
B.Article85(3)
TheagreementsmakingupGrundig'sEECdistribution
systemfulfiltheconditionsofArticle85(3).3.TherestrictionsofcompetitioncontainedintheGrundig
selectivedistributionsystemareindispensableforthe
attainmentoftheaboveadvantages .Thisappliesbothto
thebanonsupplyingGrundigproductstodealersnotin
thenetworkandtothesalescommitmentrequiredof
dealerswhoare.Withouttheseclausesinthedealership
agreement,theadvantageintermsofthedistributionof
theproductsandtheresultingbenefitsfortheconsumer
couldnotbeattained.Itshouldbenotedthat
indispensability doesnotmeanthattheremustbeno
otherfeasiblewayofdistributingtheproducts,butonly
thattherestrictionsofcompetitionarenecessaryforthe
particularmarketingstrategyadoptedbythe
manufacturer ,whichisjudgedtohavethebeneficial
effectsreferredtoinArticle85(3).Anotherrelevant
consideration isthefactthatsincetheCommission 's
SABAIIDecision,Grundighasmadechangestothe
procedureforgrantingandterminatingdealerships
whichmakesuchdecisionsmoreobjectiveandofferno
scopeforthemanufacturer tomisusetheselective
distributionsystemforanticompetitive ends.1.Thequalitativeselectioncriteriaandthespecial
commitments whichwholesalersandretailersmustmake
intermsofsalesefforttogethercontributetoimproving
thedistributionofGrundigproducts,becausethey
ensurethattheproductsaredistributedonlybydealers
whowillgivecustomerscompetentadviceandprovide
after-salesservicetoinstall,runinandmaintainthe
equipmentandarealsopreparedtomakeaparticular
efforttosellthemanufacturer'sproducts.Inthisway,
Grundigcanrelyonanetworkofprofessionallyqualified
dealerstopresentasuitablybroadselection-ofits
productstotheconsumerandhavetheminstocksothey
arereadilyavailabletointendingpurchasers .These
arrangementarelikelytomakethedistributionofits
productsmoreefficient.Theywillthereforetendto
increasecompetitionbetweenGrundigandotherbrands
withoutlesseningcompetitionbetweenindividual
Grundigdealers.4.Finally,theagreementsmakinguptheGrundigselective
distributionsystemdonotaffordtheundertakings
concernedthepossibilityofeliminatingcompetitionin
respectofasubstantialpartoftheproductsin
question.
(a)Therestrictionscontainedinthedealership
agreementsaffectonlytherelationsbetween
Grundiganditsdealers.Theyhavenoappreciable
effectoncompetitionbetweenGrundigandother
consumerelectronicsmanufacturers .Inparticular,
dealersareinnowaypreventedbythedealership
agreementfromsellingorpromotingcompeting
brands.2.Theresultingadvantages,particularlytheefficient
after-salesserviceandtheavailabilityofawiderrange
andfasterdeliveryfromwholesalersandretailers,areof
immediatebenefittotheconsumer .
Withtheirprofessionalexpertise,Grundigdealersare
ablebothtoadviseconsumersongeneraltechnical
developments inconsumerelectronics,explaininghow
newproductsworkandestablishedproductscanbe
usedinnewways,andtogivethemanindicationof
thespecificcharacteristics ofdifferentbrands.
Manufacturers 'salesbrochuresandevenreportsin
technicaljournalsandconsumermagazinesareonlya
partialsubstituteforaperson-to-person talkbetweenthe
specialistdealerandtheconsumer,andthenonlyforthe
relativelysmallsectionofthepopulationthatis
technicallyinterested.FromGrundigdealers,consumers
canalsogainagoodideaofatleastthemainitemsinthe
Grundigrangeandcanbesureofimmediate,oratleast
veryquick,deliveryshouldtheydecidetobuyaGrundig
product.Finally,havingdecidedtobuy,theconsumer
canbesurethatthedealerwillgivehimexpertadviceon
howtooperatetheequipmentandifnecessarywillinstall
andsetitupforhiminhishomeandprovideafter-sales
serviceandcarryoutrepairsoftheproductbothduring
andaftertheguaranteeeperiod.(b)NordoesGrundig'sselectivedistributionsystem
eliminatecompetitionbetweendealers.
Thisisguaranteedbythetermsofthedealership
agreementitself:
Theadmissionprocedureinitspresentformensures
thatanydealerfulfillingtheselectionconditionscan
beadmittedtothenetwork.Withinthenetwork
dealersthroughoutthecommonmarket,atboth
wholesaleandretaillevels,cancompetewithone
another,arefreetosettheirownpricesandcantake
advantageofthemostfavourablesourceofsupply
intheparticularcircumstances sincethereareno
restrictionsatallondealerswithinthenetwork
supplyingoneanother.
Also,Grundigdoesnothaveastrongenough
positioneitherinthecommonmarketasawholeor
inasubstantialpartofittoeliminatecompetition
betweendealers.Thesebenefitswillaccruetotheconsumerwithouthis
havingtopaysignificantlyhigherpricesasaresult,given
thecontinuingfiercepricecompetitionthatexistsinthe
sector,especiallybetweenspecialistdealers(see4
below).

30.8.85 OfficialJournaloftheEuropeanCommunities NoL233/7
Eveninthegeographicalandproductmarketwhere
Grundigisstrongest,theGermancolourtelevision
market,whereithasashareof19,5%,Grundig
faceseffectivecompetitionfromfirmsinthe
Thomson-Brandt group(Telefunken,SABA,
Nordmende),whichhaveamarketshareofaround
23%,andotherlargefirms,andsocannotexerta
decisiveinfluenceoncompetitionbetweendealers
throughitsselectivedistributionsystem.Inthe
prevailingcompetitiveconditionsthisstillholds
trueeveniftheshareofthismarketsegmentheldby
Philips,whichcontrolsGrundig,isaddedto
Grundig'sown,makingacombinedshareof
33,5%.ThisdoesnotputGrundigandPhilips
togetherinapositiontoeliminatecompetitioninthe
distributionofcolourtelevisionsinGermany.In
anycase,adangerofareductionincompetitionat
thedistributionstagewouldonlyariseifGrundig
andPhilipshadauniformoratleastverysimilar
policyfordistributingtheirproducts.Thisisnotthe
case.Philipsdoesnotoperateaselectivedistribution
systeminanyMemberState.pricessoonafterbeinglaunchedonthemarket
becauseofthepressureofcompetition .The
pricesofconsumerelectronicsproductshave
ingeneral,despitetechnicalimprovements ,
risenmuchlessthantherateofinflation.
Colourtelevisionsets,forexample,areinreal
termsonlyhalfasexpensiveasin1968despite
theirimprovedperformance .
(bb)NorhastheCommissionfoundthatbecause
ofselectivedistributionsystemscertaintypes
ofoutletsuchasdiscountstores,
cash-and-carry wholesalers andretail
supermarkets aresystematically excluded
fromsellingsuchproducts.Self-servicestores,
likeanyotheroutlet,arenaturallyexcluded
fromsellingGrundigproductsbytheselective
distributionsystemiftheyarenotpreparedto
fulfiltheselectionconditions,mostofwhich
arequalitativeandsodonotfallwithin
Article85(1),providedtheyarenotappliedin
adiscriminatory fashion.Ifsuchoutletsdo
meettheconditionsforadealership,however,
theycansellGrundigproductsandseveral
storesthatsellmainlybyself-servicebuthave
setupspecializedconsumerelectronics
departmentswithspecialiststaffareinfactin
theGrundignetwork.
Apartfromthefactthatitisopentoany
interesteddealertotakethenecessarysteps
himselftogainadmissiontothenetworkof
amanufacturer operatingaselective
distributionsystem,onlyaminorityof
manufacturers intheCommunity ,andevenin
theFederalRepublicofGermanynotallthe
majorones,havesuchasystem.Furthermore ,
inthecaseofthemanufacturers whoonly
operateanationalselectivedistribution
system,self-servicestorescanbypassthe
systembyobtainingthemanufacturer's
productsforexamplethroughparallelimports
andcannotlegallybepreventedfromselling
thosegoodsinGermany.
Therefore,thereisnodefactoexclusionofthe
abovetypesofoutletfromthesaleofconsumer
electronicsproductseitherintheCommunity
asawholeorinasubstantialpartofit.Finally,thisconclusionisnotupsetbya
consideration ofthesimilarselectivedistribution
systemsoperatedbyothermanufacturers-an
aspectwhichonlyrequiresexaminationinthecase
oftheFederalRepublicofGermany.Apartfromthe
factthatthesesystemsshowconsiderable
differencesfromoneanother(EEC-wideorpurely
national,opentoanyspecialistdealerorsubjectto
additionalsalescommitments ,andcoveringoneor
twolevelsofdistribution),theyhavenotledtoprice
rigidityortothedefactoexclusionofcertaintypes
ofsalesoutlet.
(aa)AlthoughtheCourtofJusticeinitsleading
judgmentsinCase26/76,Metro,ground21,
andinCase107/82,AEG-Telefunken ,
ground42(x),assumedthatinselective
distributionsystemstheemphasiswillbeon
serviceratherthanpricecompetitionand
acceptedthisreducedpricecompetitionin
returnforthestimulationofcompetitionin
otherareas,theCommission'sexperienceover
manyyearsofmonitoringthesituationinthe
MemberStatewhereselectivedistributionin
thissectorismostwidespreadhasbeenthat
thereisinfactfiercepricecompetitioninthe
retailtradegenerally,andbetweenGrundig
dealersinparticular.Thisisalsotrueof
differentproductlines,withevencompletely
newproductsshowingsubstantialfallsinC.Articles6and8ofRegulationNo17
GrundignotifieditsEECdealershipagreementswith
wholesalersandretailerstotheCommission on29March
1977.Atthattimetheagreementsconformedinallessential
respectstothestandardssetforsuchagreementsinthe (MECR(1983)3151,pp.3196-97.

NoL233/8 OfficialJournaloftheEuropeanCommunities 30.8.85
Commission'spracticeandtheCourt'scaselaw.
Subsequently ,inthelightofnumerousinvestigationsofthe
consumerelectronicsbusinesstheCommissionmodifiedits
policyoncertaincommonprovisionsofselectivedistribution
systemsgoverningtheprocedureforadmittingdealerstoand
excludingthemfromthenetwork,althoughnotonthe
qualitativeselectioncriteriaandsalescommitmentswhich
formthesubstantivecoreofsuchsystems.excludingwholesalersorretailersfromthenetwork.
GrundigmustthereforeberequiredtosendtheCommission
everyyearareportofeverycaseinwhichithasrefusedto
grantawholesalerorretaileradealershiporhasterminateda
dealershiporwithdrawnadealer'ssuppliesorhasdemanded
toinspectadealer'srecordsoftheserialnumbersof
equipmentpassingthroughhishands.Thispartofthe
DecisionisbasedonArticle8(1)ofRegulationNo17,
HASADOPTEDTHISDECISION :
Article1
PursuanttoArticle85(3)oftheEECTreaty,theprovisions
ofArticle85(1)areherebydeclaredinapplicableto:
—theGrundigEECdealershipagreementwithwholesalers,
and
—theGrundigEECdealershipagreementwithretailers.
Thisexemptionshallapplyfrom29March1977until
28March1989.AftertheCommissionhadinformedGrundigofitsmodified
approachtowardsadmissionandexclusionprocedures,
Grundigbroughtitsagreementsintolinewiththenew
standards.Itisthereforeappropriatetosetthedateforthe
exemptionpursuanttoArticle85(3)oftheEECTreatyto
takeeffectunderArticle6ofRegulationNo17at29March
1977.UptothetimetheCommissioninformedGrundigof
thechangeinitsapproachandgaveitanopportunitytobring
itsagreementsintolinewiththenewstandards,the
agreementscanbejudgedagainsttheoldstandards.Itis
foundthatGrundig'sEECselectivedistributionsysteminits
oldformfulfilledtheexemptionconditionssetbythe
CommissionandconfirmedbytheCourtofJusticeatthe
time.Furthermore ,theCommission'sinvestigations into
pricecompetitionandGrundig'soperationoftheselective
distributionsystemdidnotrevealanyfactorsliabletorender
theselectivedistributionsystemineligibleforexemption.
TheCommission'saiminsettingthenewstandardsfor
admissionandexclusionistoprovidestrongersafeguards
againstpotentialdiscriminatory applicationofselective
distributionsystemsinthefuture.Therearenogroundsfor
applyingthenewstandardstopastpractice,sincehow
selectivedistributionsystemswereoperatedinpracticeinthe
pastcanbeinvestigated,asithasbeeninGrundig'scase.The
newstandardsshouldthereforebeapplicableonlyfromthe
timeGrundigwasinformedofthem.Article2
GrundigAGshallsubmitannualreportstotheCommission ,
thefirstofthemby31December1985,settingoutallcasesin
whichithas:
—refusedtograntawholesalerorretaileradealershipor
hasterminatedadealershiporwithdrawnadealer's
supplies;
—exerciseditsrighttoinspectadealer'srecordsofserial
numbers. TheGrundigselectivedistributionsystem,thesubstantive
coreofwhichconformedfromtheoutsettothe
Commission'sstandards,whichhavenotchanged,has
thereforebeeneligibleforexemptioninitsamendedandits
originalformsincethedateofnotification .Article3
ThisDecisionisaddressedto:
GrundigAG,
KurgartenstralSe 37,
D-8510Furth.
DoneatBrussels,10July1985.Inviewofthetimethathaselapsedsincethenotification,itis
desirabletofixtheperiodofexemptionunderArticle8(1)of
RegulationNo17asextendinguntil28March1989.The
Commissionwillthenbeabletolookagainattheeffectson
competitionofGrundig'sdistributionsystemaftera
relativelyshorttime.
CertainobligationsmustbeattachedtotheDecisionto
enabletheCommissiontocheckthatGrundigdoesnotactin
adiscriminatory fashioninrefusingadmissiontoorFortheCommission
PeterSUTHERLAND
MemberoftheCommission