COMMISSION DECISION of 14 October 1998 relating to a proceeding pursuant to Article 85 of the EC Treaty Case IV/F-3/33.708 - British Sugar plc, Case IV/F-3/33.709 - Tate & Lyle plc, Case IV/F-3/33.710 - Napier Brown & Company Ltd, Case IV/F-3/33.711 - James Budgett Sugars Ltd (notified under number C(1998) 3061) (Only the English text is authentic) (1999/210/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 the Act of Accession of Austria, Finland and Sweden, and in particular Article 15(2) thereof,

Having regard to the decision taken by the Commission on 4 May 1992 to initiate proceedings in this case,

Having given the undertakings concerned the opportunity of being heard on the matters to which the Commission has taken objection, in accordance with Article 91(1) of Regulation No 17 and Commission Regulation No 99/63/EEC of 25 July 1963 on the hearings provided for in Article 19(1) and (2) of Council Regulation No 17 (2),

After having consulted the Advisory Committee on Restrictive Practices and Dominant Positions,

Whereas:

I. INTRODUCTION AND PROCEDURE

(1) This Decision is concerned with the coordination by the two sugar manufacturers in Great Britain, British Sugar plc (hereinafter referred to as 'British Sugar` (3)) and Tate & Lyle plc (hereinafter 'Tate & Lyle` (4)), and two sugar merchants, Napier Brown & Company Ltd (hereinafter 'Napier Brown`) and James Budgett Sugars Ltd (hereinafter 'James Budgett`) of their pricing policy for industrial white granulated sugar in Great Britain. It is also concerned with the coordination by the two sugar manufacturers of their pricing policy for retail white granulated sugar in Great Britain. The period during which the infringement took place (hereinafter 'the relevant period`) was between 20 June 1986 and 2 July 1990 with respect to British Sugar and Tate & Lyle, and between late 1986 and 2 July 1990 with respect to Napier Brown and James Budgett.

(2) The starting point of the Commission's procedure in this case, and of a parallel procedure by the UK Office of Fair Trading (OFT) (5), is with two self-incriminating letters which Tate & Lyle wrote to the OFT on 16 July 1990 and on 29 August 1990. On 4 May 1992, the Commission initiated proceedings against the four abovementioned parties, as well as against other European sugar producers, and on 12 June 1992 the Commission sent a statement of objections to all of them. This initial statement of objections concerned several instances of anti-competitive conduct relating to the sugar trade in the United Kingdom and infringing Articles 85(1) and 86 of the Treaty. In the light of the parties' written replies and the submissions made at the oral hearing in relation to the initial statement of objections, the Commission decided to re-direct its case and to concentrate on the infringement that could be sustained with the high degree of proof required by the case-law of the Court of Justice of the European Communities. Accordingly, on 18 August 1995, a revised statement of objections, replacing the initial one, was sent to the parties. this Decision takes into consideration the parties' written replies to the revised statement of objections, their submissions made at the oral hearing on 18 and 19 April 1996 and thereafter, as well as the parties' replies to the initial statement of objections and their submissions at the oral hearing following that initial statement of objections, in so far as they remain relevant in relation to the allegations made in the revised statement of objections.

II. FACTS

A. THE PRODUCT

(3) The product concerned by this case is white granulated sugar.

Sugar is produced from sugar beet or sugar cane. With the exception of a very small part of the south of Spain and the French overseas departments, sugar cane is not grown in the Community. For the purposes of this Decision (6), a distinction can be made between the three main different types of sugar: white granulated, liquid and speciality sugars.

White granulated sugar, which is often simply called 'white sugar`, is the final product after processing and refining beet or cane. Different qualities are identified in Community Regulations (7). The standard quality is EC II sugar. White granulated sugar represents by far the most important part of the sugar production and consumption in the Community as a whole and in the UK and Great Britain in particular (8). It is sold to industry (hereinafter referred to as 'industrial sugar`) and to the retail trade (hereinafter referred to as 'retail sugar`).

Liquid sugars are mainly used in the food-processing industry. The highest quality liquid sugar is made by dissolving white granulated sugar. Lower grades are made only from cane, by blending liquors produced at various stages of the cane-sugar refining process.

Speciality sugars consist of all sugars other than white granulated. This category includes African, Caribbean and Pacific (ACP) direct consumption raw, brown sugars, caster sugars, icing sugars and other milled sugars, and also syrups and treacles (9).

B. THE COMMON AGRICULTURAL POLICY SUGAR SCHEME

(4) The sugar scheme of the common agricultural policy is designed to support and protect the production of sugar within the Community. Sugar production from beet and cane harvested in the Community is restricted by means of national quotas ('A` and 'B` quotas) which are decided by the Council. In principle, these quotas have remained unchanged since 1981. The quota allocated to each country is then divided amongst the national sugar producers by the government in question.

A system of price support exists, but only for A/B quota sugar. Any sugar produced by Community undertakings in addition to their A/B quota is referred to as 'C` sugar, and must be sold on the world market - that is, to non-member countries, without support, or stored for at least 12 months and used as part of the following years' A/B sugar.

(5) In addition to A/B sugar, the Community provides price support for a limited amount of sugar imported pursuant to the Lomé Convention (10). During the period from 1986 to 1990, total preferential imports were set at 1 305 000 tonnes. Almost all of the preferential sugar is (and was during the relevant period) imported by Tate & Lyle in the form of partially processed cane sugar, which is then further refined into finished sugar products. Importers and refiners of ACP cane sugar receive a margin ('the institutional margin`) for this activity. This refining margin, is set in a manner different from that used to calculate the manufacturing margin fixed for sugar produced from beet, because of the specific nature of the refining operation. During the relevant period, the institutional margin for sugar refined from cane was lower than the margin available for the processing of beet sugar. As a result, during the relevant period, the refiners of preferential cane sugar suffered a structural margin disadvantage compared to the Community's beet processors (11).

(6) Each year the Council fixes a number of institutional prices in relation to the purchase of sugar beet and its processing and sale, the most important of which is the intervention price: the price at which any manufacturer may sell his A/B sugar to national intervention boards. Companies selling into intervention will receive the intervention price for their processed sugar. However, no sugar has been sold into intervention in recent years. As part of the measures to ensure that the sugar scheme is self-financing (12) a storage levy is applied equally to all A/B sugar which is not sold into intervention. Intervention price plus the storage levy therefore represent the guaranteed minimum price for A/B sugar. This is known as the effective support price. Preferential sugar imported pursuant to the Lomé Convention does not participate in the system of storage costs reimbursement and therefore the storage levy is not applied to it.

During the relevant period, the Council also set a threshold price. This was the price at which non-quota sugar might be imported from third countries. Such imports had to pay a levy representing the difference between the free market price on the world market and the threshold price. Form 1 July 1995 onwards (Uruguay Round implementation), the variable levy has been replaced by first a fixed duty, and secondly by an additional duty as safeguard clause in the event of very low world market prices.

Community regulations therefore have the effect of fixing minimum (intervention plus storage levy) prices for sugar to be sold in the Community.

The Council also fixes minimum prices that the processors must pay to beet growers for the sugar beet.

(7) Processors of beet sugar may sell A/B sugar freely throughout the Community. If they are unable to sell all their A/B sugar in this way they may either sell it into intervention or export it onto the world market. If they choose the latter option they receive an export refund which is calculated on the basis of a tender system. Normally, such 'selling into restitution` is more attractive than selling into intervention (13).

C. THE UNDERTAKINGS CONCERNED AND THEIR POSITION IN THE UNITED KINGDOM AND SPECIFICALLY IN GREAT BRITAIN

1. The producers of sugar in the United Kingdom

1.1. British Sugar

(8) British Sugar is the sole UK processor of sugar beet. The entire annual United Kingdom A/B sugar quota of some 1,144 million tonnes is allocated to it. In the business year ending on 30 September 1989, British Sugar's worldwide turnover in all products was GBP 677,6 million. Between 1982 and 1990, British Sugar was a subsidiary of S & W Berisford plc (14). It was acquired by Associated British Foods plc (15) in December 1990/January 1991.

1.2. Tate & Lyle

(9) From the beginning of the relevant period to the present day, the structure of the Tate & Lyle group has not changed. Tate & Lyle is the ultimate parent company of the group whose companies operate worldwide in different sectors of the economy. Within this group, Tate & Lyle Industries Ltd, a direct subsidiary of Tate & Lyle plc, is responsible for the business of refining cane sugar in the UK. This is carried out by its operating division, Tate & Lyle Sugars (TLS). The overwhelming majority of Community imports of preferential raw cane sugar are refined by Tate & Lyle in its refineries in Great Britain. To ensure its provision of raw cane sugar, Tate & Lyle has concluded supply contracts with a number of ACP producers on a five-year rolling basis. It had two refineries in Great Britain, one in London (Silvertown) and one in Scotland (Greenock). Meanwhile, the refinery in Scotland has been closed. Both refineries had been working at or near to full capacity since the financial year 1982/83. Besides the refining of sugar in the United Kingdom, Tate & Lyle is a refiner of sugar in other countries including Portugal, the USA, Canada, Australia and Zimbabwe. It is furthermore in the business of cereal sweeteners and starch production in Europe and North America. In the business year which ended on 30 September 1989, Tate & Lyle's worldwide group turnover in all products was GBP 3 359,9 million.

2. The sugar merchants

(10) During the relevant period, the distribution of sugar in Great Britain was performed by British Sugar and Tate & Lyle, by one Continental sugar producer (De Danske Sukkerfabrikker) through an exclusive agent (Czarnikow Ltd), and by independent merchants. The main merchants in Great Britain were Napier Brown, James Budgett, Billington and J. M. Thomas.

(11) The merchants carry out business in two forms: 'nominal merchanting` and 'principal merchanting`. In their nominal merchanting business, the merchants act as agents for the two UK producers (British Sugar and Tate & Lyle), for which they receive a fixed commission or fee. In this function, they take care of order processing, invoicing and collecting payments. They are not involved in the price negotiations, which take place directly between the producer and the customer (16). Even though this activity is normally not very attractive financially, it does provide market share and therefore a platform for selling sugar on other more profitable terms known as principal merchanting (17). In this business, the merchant purchases sugar on its own account and sells it in its own name fixing the terms and consequently the profit for itself. The sources of supply for the principal merchanting business are the two UK producers and imports. The merchants engage in imports on their own account and in their own name (18). During the relevant period, Napier Brown and James Budgett imported sugar from the Continent. James Budgett also imported Community sugar from the Republic of Ireland.

2.1. Napier Brown

(12) Napier Brown is the largest of the four sugar merchants in Great Britain. Its nominal merchanting business for British Sugar and Tate & Lyle has gradually decreased from some 33 % to 23 % of its total granulated sugar business. Its principal merchanting business has varied between some 67 % and 77 %. During the business year which ended on 31 March 1990 and ever since, Napier Brown has been a wholly owned subsidiary of Napier Brown Holdings Ltd whose activities consist of trading, processing and packaging of sugar, dried fruits, nuts and chilled foods. In the business year ending on 31 March 1990, Napier Brown attained a worldwide turnover in all products of GBP 258,2 million.

2.2. James Budgett

(13) James Budgett is the second largest merchant in Great Britain. Its nominal merchanting business for Tate & Lyle and British Sugar decreased from some 70 % of its total granulated sugar business in 1986 to some 50 % by 1990. Its principal merchanting business with sugar from the two UK producers has over the same period of time increased from some 20 % to about 40 %. Its import business tripled between 1986 and 1990 to constitute some 10 % of its sugar business. During the business year ending on 31 March 1990 and ever since, the majority of the shares in James Budgett have been owned by ED & F Man Ltd, the world's largest sugar trader, which was renamed ED & F Man Group plc in 1994. On 17 May 1989, Irish Sugar acquired 33,3 % of the shares in James Budgett. At the same date, James Budgett became the exclusive distributor of Irish Sugar in Great Britain. On 10 August 1992, James Budgett changed its name from James Budgett & Son Ltd to James Budgett Sugars Ltd. In the business year ending 31 March 1990, James Budgett's worldwide turnover in all products was GBP 163,8 million.

D. PRODUCTION AND SUPPLY OF SUGAR IN THE UNITED KINGDOM AND SPECIFICALLY IN GREAT BRITAIN

1. Market shares

(14) Supply and demand for sugar in the UK is largely in balance, and has been during the relevant period. This can be seen from the following table (19):

>TABLE>

The table expresses all figures in 'white sugar equivalent` (WSE) which covers all kinds of sugars including in particular the main three categories, i. e. white granulated sugar, liquid sugar and speciality sugar (20) and which applies a conversion factor to all types of sugar which are not white granulated. With regard to the figures for imports from other Member States, which are most important for the present case, it is uncontested that the vast majority of these imports enter the UK as white granulated sugar in the form of bulk (tanker), 50 kilogram bags or retail packets.

(15) British Sugar and Tate & Lyle have, during the relevant period, produced between them more than 90 % of the sugar supplied in the United Kingdom. Market shares in the United Kingdom have been stable during the relevant period (21). If one considers the market for granulated sugar as a whole, British Sugar has held a share of between 51 % and 54 % between 1986/87 and 1989/90, Tate & Lyle has held between 38 % and 40 %, retail sales by Napier Brown have accounted for an overall [deleted, business secret] % of the market, and imports have accounted for between 6 % and 8 % (22). The sources of these imports were mainly Denmark, France and Ireland. Imports from all of these three countries, and in particular from Denmark and France, increased between 1986/87 and 1989/90 (23).

2. Imports from other Member States into the United Kingdom and specifically into Great Britain

(16) British Sugar has confirmed (24) that, during the relevant period, it followed the policy of attempting to set its prices just below the level at which Continental sugar producers would export significant quantities of sugar to the United Kingdom, thus threatening British Sugar's ability to sell its entire A/B sugar quota in the UK. This statement is accepted by all the other parties to this proceeding and it matches the Commission's findings in its Napier Brown decision (25). While most of these sources mention the United Kingdom as such, the findings (26) are in particular true of Great Britain. The fact that in some respects different conditions prevail in Northern Ireland (27) does not hinder the application of these findings on the market in Great Britain. In the market in Great Britain, the sugar price is somewhat higher than the current price in markets of neighbouring Member States. This is due to the costs incurred in transporting sugar across the English Channel. It is also due to the fact that, in order to secure a substantial volume of imports, a considerably higher price is necessary in Great Britain than on the Continent because potential exporters may require a significant premium to persuade them to export large quantities of sugar to Great Britain for fear of retaliatory exports by the British producers (28).

(17) During the relevant period, Tate & Lyle adopted an active policy of attempting to deter imports (29). It contacted all the major Continental sugar producers that had traditionally sold significant quantities of sugar in Great Britain: Béghin-Say (France), Irish Sugar and De Danske Sukkerfabrikker, informing them that if they decided to export larger amounts of sugar to the United Kingdom than had traditionally been the case, Tate & Lyle would react by selling larger quantities into their home markets (30). The reason for this policy to sell its entire A/B quota on the United Kingdom market (31), and that, as the price was in 1984 to 1986 had shown, if necessary British Sugar was willing and able to drop its prices to do so. As United Kingdom production and consumption during the relevant period were largely in balance, it follows that if imports of A/B sugar from the Continent were successfully marketed in the United Kingdom, a quantity similar to the amount imported had to be exported by one of the two UK producers to other Member States, or sold into restitution or into intervention (32). In a renewed price war in which both UK producers (British Sugar and Tate & Lyle) would have tried to sell their traditional quantity in the UK market in spite of the imports, Tate & Lyle would have been in a weaker position than British Sugar. Moreover, in the absence of such a price war, sales in the UK market were for both UK producers more profitable than exporting to other Member States or selling into restitution or intervention. Against this backdrop, it was Tate & Lyle's particular interest to deter as many imports as possible.

As in recital 16 the description and analysis made for the United Kingdom in relation to other Member States also applies mutatis mutandis to Great Britain in relation to the other Member States.

(18) A number of factors contributed in the relevant period, and continue to contribute, to limiting imports into the sugar market of the UK as a whole, and of Great Britain in particular. Many customers require frequent and rapid (just-in-time) deliveries (33), as well as guaranteed and regular deliveries (34). Meeting such needs with deliveries from Continental supply points is an unlikely option. Continental producers willing to meet such requirements would therefore need to invest in distribution facilities based in Great Britain (35).

(19) Traditionally, imports of approximately 4 to 10 % of national consumption do enter the United Kingdom each year. This is because many of the larger customers wish to maintain a further source of supplies from Continental EC producers (36), first as a bargaining tool when engaging in price discussions with the domestic British producers, and second to provide a mechanism that might assist them in obtaining alternative supplies in the event of a shortage of domestic sugar, due for example to crop failure (37). Such sugar is either ordered direct from the Continental producer by the company in question or acquired via merchant. Merchants therefore purchase Continental sugar for that reason, and also to act as a bargaining tool when they enter discussions with the domestic suppliers for the sugar they wish to purchase for their principal merchanting activities, for which they are to a large extent dependent on the domestic suppliers. Additionally, sugar is imported by the merchants during periods when Continental sugar is cheaper than domestic sugar, which may occur in particular for rather limited periods due to currency fluctuations (38).

(20) During the sugar campaign years (1 October to 30 September) which cover the relevant period, imports of sugar from other Member States into the UK increased form 88 000 tonnes in 1986/87 to 110 000 tonnes in 1987/88, then 132 200 tonnes in 1988/89 to finally 153 00 tonnes in 1989/90. This is an increase of 73,9 %, representing an increase of the import share in the total national consumption from 3,9 % in 1986/87 to 6,7 % in 1989/90 (39). The import figure for 1985/86 is 137 000 tonnes. The increase between 1985/86 and 1989/90 is 11,7 %. The vast bulk of the sugar imported from other Member States into the UK was white granulated sugar.

(21) In the calendar years from 1986 to 1990 inclusive, Napier Brown's imports of white sugar into the UK increased by 60 % (40). In the calendar years from 1 January 1986 to 31 December 1990, James Budgett's imports of sugar in the UK nearly trebled (41).

E. THE RELATIVE COMPETITIVE POSITIONS OF BRITISH SUGAR, TATE & LYLE, NAPIER BROWN AND JAMES BUDGETT

(22) Due to the specific characteristics of the common agricultural policy (42), British Sugar, being a beet-sugar processor, has benefited during the relevant period from a built-in advantage compared to the cane-refiner Tate & Lyle, because it has received a higher margin for the sugar it produced and sold. As a consequence of this it is widely accepted (43), and the Commission takes the view, that British Sugar during the relevant period was the price leader on the markets for sugar (including white granulated sugar) in Great Britain, and that Tate & Lyle was a price follower of British Sugar on this market. The fact that British Sugar had the decisive influence in determining the price level was also apparent in the price war between 1984 and 1986 (44). However, as will be shown, British Sugar's position as a price leader did not preclude competition by Tate & Lyle in the markets for industrial and retail sugar in Great Britain, which for the purpose of the present case are the markets relevant to the relationship between these two companies (45).

(23) Napier Brown and James Budgett were also to a large extent price followers of British Sugar (46) on the sugar markets (including white granulated sugar) in Great Britain during the relevant period. British Sugar has confirmed that during the relevant period its policy has been to attempt to set its prices just below the level at which Continental sugar producers would export significant quantities of sugar to the UK, thereby threatening British Sugar's ability to sell its entire A/B sugar quota in the UK (47). In such circumstances, Napier Brown and James Budgett were dependent on the two UK sugar producers (British Sugar and Tate & Lyle) for a significant part of the sugar that they sold in their capacities either as principal or nominal merchants, although imports allowed them a certain margin and could have been used as a bargaining tool (48). Thus the pricing policy options available to them, including those for white granulated sugar, were to a large extent dependent on the pricing decisions of their major supplies. However, as will be shown, British Sugar's price leadership did not preclude competition by Napier Brown and James Budgett against British Sugar or Tate & Lyle on the industrial sugar market in Great Britain, which for the purpose of the present case, is the market relevant to the relationship between all four parties (49).

F. FACTS UNDERLYING THE INFRINGEMENT OF THE COMPETITION RULES

1. Background facts

(24) Between 1984 and 1986 a price war took place on the sugar market in Great Britain, including the market for white granulated sugar (50). This resulted largely from an aggressive pricing strategy adopted by British Sugar in an attempt to maximise its sugar sales in Great Britain. The consequence was to drive prices down to very low levels.

(25) In 1988, the Commission acting on a formal complaint, adopted a decision (51) pursuant to Article 86 of the Treaty, finding that British Sugar had abused the dominant position that it held on the markets for industrial and retail sugar in Great Britain. The practices pursued by British Sugar, found to be an infringement of Article 86, consisted of a number of actions intended to remove Napier Brown from the market for retail white granulated sugar. This Decision was preceded by an interim measures statement of objections which was sent to British Sugar on 8 July 1986 and which sought the termination of the infringement of Article 86.

(26) On 5 August 1986, British Sugar wrote to the Commission offering undertakings which were intended to terminate the practices which the Commission in its abovementioned interim measures statement of objections had considered to be infringements of the Community competition rules. The Commission accepted the undertakings by letter of 7 August 1986. Of particular relevance to the present proceeding is the following undertaking:

'(C) British Sugar accepts the need for sugar merchants and believes that they have a useful function to perform in the UK market. British Sugar has no intention now or in the future of undertaking any pricing practice which may in any way damage the continued existence of the merchants.

British Sugar undertakes to the Commission that it will engage in normal and reasonable pricing practices which can in no way be construed as predatory. British Sugar recognises the Commission's concern that an insufficient margin between its price for industrial sugar and its price for retail sugar might be considered to be an unreasonable pricing practice.` (52).

(27) In October 1986, British Sugar informed the Commission that it intended to adopt a Community competition law compliance programme. This programme, which was adopted in December 1986, describes the particular responsibilities of a dominant firm, but also sets out in detail the obligations that flow from Article 85(1). Of particular relevance to the present proceeding is the following section of the compliance programme:

'Article 85(1) Anti-competitive agreements

(. . .) Agreements or concerted practices fixing prices, limiting production or markets, sharing markets, collective boycotts of actual or potential customers or suppliers and tie-in agreements, are all, for instance, prohibited.

(. . .) Article 85(1) also prohibits agreements or concerted practices for the exchange of information between competitors about prices, trading terms, credit notes, discounts and so on, and may even apply where such information is given unilaterally.

(. . .) In line with its policy of complying with all applicable laws the company is therefore committed to compliance with the EEC competition rules and will take every step to ensure observance of that policy. It is also the company's policy not only to observe the law but to go beyond mere compliance with the strict letter of the law and seek to avoid any conduct which may give rise to doubt as to whether or not it has acted lawfully.` (53).

(28) The provision of the undertakings and the adoption of the compliance programme were taken into account by the Commission in its Napier Brown Decision of 1988 (54) as mitigating factors when setting the fine, which was fixed at ECU 3 million.

2. The anti-competitive conduct

2.1. Summary

(29) The facts and evidence compiled by the Commission demonstrate that:

(a) as regards industrial sugar, British Sugar informed Tate & Lyle at a meeting of 20 June 1986, and also informed Napier Brown and James Budgett at a subsequent meeting which took place before the end of 1986, of its intention to end the sugar price war and to cease the low pricing policy, which had been designed to increase market share, and of its intention to increase the price level in Great Britain. Tate & Lyle confirmed that it intended to follow this pricing policy. After the bilateral meeting of 20 June 1986, 18 meetings about industrial sugar between all four parties took place at regular intervals throughout the relevant period up to 13 June 1990. During these meetings, British Sugar informed Tate & Lyle, Napier Brown and James Budgett of the price increases it intended to seek to obtain with respect to industrial sugar. This was done by reference to a 'pricing matrix` specifying British Sugar's target pricing according to volume of purchases. Owing to this structure, the matrix necessarily also indicated the price differentials between purchasers of larger and of smaller quantities of industrial sugar. At least once, a copy of the written matrix was supplied to Tate & Lyle, Napier Brown and James Budgett, and at other meetings information of a similar nature to that contained in the matrix was supplied by British Sugar also made indications to the other three companies of its intention to change some or all list prices, at times as much as nine months ahead of the actual change.

(b) with regard to retail sugar, British Sugar informed Tate & Lyle at the meeting of 20 June 1986 that in this business it also intended to cease the low-pricing policy, which had been designed to increase market share, and that it now intended to increase the price level in Great Britain. Subsequently, between 25 February 1987 and 9 May 1990, eight meetings concerning retail sugar took place between the two companies. In the course of at least two of these meetings, British Sugar gave to Tate & Lyle a copy of its new retail price list a few days before it was officially circulated to the trade. During their meetings, the two companies also discussed their respective discount policies towards larger retail customers. However, there is not sufficient evidence that British Sugar informed Tate & Lyle of any specific price or discount to be applied to a specific customer. Furthermore, British Sugar signalled retail price rises to Tate & Lyle at least two or three weeks before the new written price list had been produced and could have been circulated to the trade.

2.2. Detailed presentation

(30) Almost two months prior to writing to the Commission formally offering undertakings, the then Chairman of S & W Berisford telephoned the chairman of Tate & Lyle on 17 and 18 June 1986, informing him that the senior management of British Sugar was going to be changed imminently, and suggesting a meeting with Tate & Lyle to introduce British Sugar's new team (55). Such a meeting was held between the senior management of the two companies on 20 June 1986. During the meeting, British Sugar informed Tate & Lyle of its decision to end the sugar price war which had been based on low pricing designed to increase market share. The following is an extract of the letter written by a director of Tate & Lyle of the Office of Fair Trading on 29 August 1990, of which the Commission obtained a copy, setting out his company's understanding of what happened during that meeting (56):

'The Tate & Lyle representatives came away with the understanding that the price war that had been going on for some two years would cease. It was also understood that the retail market shares enjoyed by Tate & Lyle and British Sugar at that moment should remain and that neither party would price in an aggressive manner. It was also accepted by Tate & Lyle that British Sugar could not be prevented from putting their full A + B quota of 1 144 000 tonnes into the United Kingdom market. The implication of these discussions, as understood by Tate & Lyle, was that British Sugar would not disturb the market by importing sugar because to do so would be to restart the price war, since the market was in balance. In order to give these matters commercial substance, Mr Pepler for Tate & Lyle Sugars carried the message back to his staff that they should not cut prices so as to try to gain market share from British Sugar.

This meeting was significant in that it set the background principles against which all future discussions were held.` (57).

(31) According to both British Sugar and Tate & Lyle, this statement does not mean that the companies agreed to fix prices, market shares or to take a common position regarding imports. In a joint memorandum submitted by both British Sugar and Tate & Lyle to the Office of Fair Trading (58) the parties gave their common understanding of what took place. The relevant part of this memorandum states the following:

'4 BS announced at a meeting on 20 June 1986 that the price war then current in the United Kingdom sugar market, resulting from BS's then commercial policy, would cease. In the context of the ongoing EEC Commission investigation into the affairs of BS pursuant to the Napier Brown Decision, BS was concerned to ensure that there was no further possibility of BS engaging in a form of pricing policy which could give rise to a complaint to the EEC Commission or the OFT of predatory pricing or other such abuses of its dominant position. Both TLS and British Sugar believed that as a consequence of the unilateral decision taken by British Sugar to end the price war:

(a) retail market shares would tend to remain at around the level the parties believed existed at the time of the making of the announcement by British sugar; and further to that end;

(b) British Sugar would not price aggressively with the result that TLS would not price aggressively although there would nevertheless still be a band of tolerance in relation to their respective market shares.

During the arrangement, BS informed TLS, before it made a general announcement to its customers, of changes in list prices, and discount policy, although TLS was not informed of any specific price or discount which was to be quoted to a specific customer. Prior to TLS being given any such information all major customers of BS would have known of its general intentions as to the order of magnitude of its price increases for the relevant period. At times the parties would be in contact about whether their shares in the retail market were within the band of tolerance.` (59).

(32) Subsequent to the meeting between British Sugar and Tate & Lyle on 20 June 1986, British Sugar held a series of meetings up to and including 13 June 1990 with Tate & Lyle, together in some cases with Napier Brown and James Budgett. Tate & Lyle provided a list of the meetings of which it is aware to the Commission (60). This was drawn up on the basis of the diary records of its employees. In detail, the list states the date, the individual participants and the company to which they belong, the venue and the topic discussed at each meeting.

(33) A total of 40 meetings are detailed in the list provided by Tate & Lyle. British Sugar, Napier Brown and James Budgett accept that the meetings took place and they also accept that these meetings took place as described and detailed in the list provided by Tate & Lyle (61). In this list, Tate & Lyle has indicated that there is doubt as to whether the meeting of 5 November 1987 actually took place. Apart from specifying the venue where the meetings took place, the list gives the following information.

>TABLE>

(34) The subject matter of the meetings breaks down as follows:

>TABLE>

(35) The list shows that - apart from the first bilateral meeting between British Sugar and Tate & Lyle on 20 June 1986 - there were 18 meetings about industrial sugar in which all four parties participated - that is, 17 meetings under the heading 'industrial` and one under the heading 'industrial/institutional price changes`. As to the first quadripartite meeting (between British Sugar, Tate & Lyle, Napier Brown, James Budgett) on industrial sugar, it is recorded on the list, and it is uncontested, that it took place in late 1986, which means after 16 September 1986 and before the end of 1986.

As to retail sugar, there were - apart from the first bilateral meeting of 20 June 1986 - eight meetings between British Sugar and Tate & Lyle: seen under the heading 'retail` and one under the heading 'general/retail`.

The other meetings listed are not relevant for this case.

(36) In a letter dated 16 July 1996 (62) to the Office of Fair Trading from the chairman of Tate & Lyle, of which the Commission obtained a copy, Tate & Lyle set out its understanding of the meetings:

'Certain meetings took place, at which British Sugar indicated its paramount commercial and political requirement to sell all its A and B quota sugar in the United Kingdom. They also indicated their desire to see United Kingdom price levels rise from the low levels that they had by then reached, and also to see differentials between customers taking different volumes restored to more sensible and logical levels. As a price follower, and given the parlous state of the cane refining business, Tate & Lyle had little commercial alternative to falling in with British Sugar's new pricing policy.

Views were exchanged between the companies as to the minimum prices which British Sugar wanted to achieve in the industrial and retail markets and the likely phasing of price increases. Tate & Lyle stressed that its commercial policy was both to follow British Sugar's price leadership and to defend its then market share of around one third of the retail market. British Sugar subsequently introduced industrial and retail price increases in the United Kingdom during the summer of 1986, and Tate & Lyle followed with substantially similar increases. Tate & Lyle understood that it could not prevent British Sugar selling the whole of its A and B quota in the United Kingdom, and that British Sugar would not import sugar into this country.

As regards sales of sugar in the industrial market, it appears that since that time meetings have taken place two or three times a year between representatives of British Sugar and Tate & Lyle. At some of these meetings, British Sugar tabled the minimum net prices to customers in various volume bands it intended to achieve over the coming year. This matrix and other matters relating to prices, has been the subject of communication between the companies and also representatives of Napier Brown and Budgetts. The timing of changes in list prices, and the content of such changes, has also been the subject of communication as have matters such as drop sizes, customer credit-worthiness, etc. It also appears that sometimes information was exchanged between the companies about the volume discounts being applied to specific customers.

(. . .)

As regards retail prices there have also been contacts between the companies, in which British Sugar indicated the dates and timing of increases in its retail price list. In connection with customer negotiations information has been exchanged about changes in the discounts that would be offered to some of the larger customers (who took supplies from both companies). Tate & Lyle has consistently made it clear that it would defend its one-third share of the retail market and has made every effort to prevent British Sugar from eroding that share. It has not been in Tate & Lyle's commercial interests to attack British Sugar's market position, nor undermine British Sugar's commercial objective of improving its returns from the United Kingdom sugar market (63).`

2.2.1. Industrial sugar pricing, and in particular the matrix

(37) In an annex to the abovementioned letter of 16 July 1990, Tate & Lyle provided a copy of a pricing matrix handed to Tate & Lyle by British Sugar during a meeting held in 1989. This matrix, which concerns industrial sugar only, sets out British Sugar's target price on a quarterly basis for the 1990 calendar year, broken down into 10 columns according to the tonnage purchased.

(38) Whilst British Sugar believes that the matrix was handed over during only one meeting they accept (64) that 'on all the other occasions, I think we admit, I don't think we've anything to fear, the matrix was discussed in general terms but we have found no instance where another printed or written document was handed to Tate's or the merchants` (65). During investigations carried out at British Sugar, a representative of the company stated (66) 'what we would normally do is just announce that we were attempting to move, if you like, the 50 000 tonne band by a certain amount and thereafter an increase for the balance lower down, so it might have been 2£/2,5£/3£ and so on` (67). James Budgett also states that the matrix was only handed over on one occasion (68). On the other hand, during investigations at Tate & Lyle, a representative of the company stated that the British Sugar matrix was handed over to Tate & Lyle, 'twice or three times possibly` (69). Moreover, answering the investigator's enquiry as to the nature of the information which was provided to Tate & Lyle on those occasions where the matrix was not handed over, a representative of the company stated (70) '. . . the point was really that they presented a piece of paper which they said was their intent in terms of moving the market price (. . .) Now it wasn't a matter of it appearing every time. It related to their intent for a subsequent period, a year ahead` (71). In its written reply to the revised statement of objections (72), Tate & Lyle maintained that by referring to the presentation of 'a piece of paper` its representative was referring to the matrix on the occasions when it was handed over. According to Tate & Lyle (73), 'other than on the one or possibly two or three occasions when the matrix was handed to T & L and the merchants, no written or printed pricing information was passed to T & L. T & L therefore agrees with BS that, except for the matrix, no other printed or written documents were handed to T & L` (74).

However, none of the parties has called the revised statement of objections into question in so far as it reports - as reiterated in this Decision (75) - British Sugar's recollection of what happened when the matrix was not handed over, namely discussion of the matrix 'in general terms` and an announcement by British Sugar of the levels by which it was intending to move the various volume bands. A comparison shows that the information provided by British Sugar on these occasions was of a similar nature to the information provided by the actual handing-over of the matrix to the other parties. Napier Brown expressly agrees (76) with the Commission's description of the facts as put forward in its revised statement of objections (77) and as reiterated in this Decision (78): 'At least once a copy of the written matrix was provided to Tate & Lyle, Napier Brown and James Budgett, and on other occasions information of a similar nature to that of the matrix was provided by British Sugar . . .` (79).

(39) In its reply to the initial statement of objections (80), Tate & Lyle states that 'while the matrices were talked about at the meetings, they were not "proposed" by BSC for discussion and amendment but represented BSC's unilateral decision` (81). It goes on to state (82) that 'the "matrix" was a BSC internal document which, for its own reasons, it chose on occasion (although not invariably) to disclose to T & L and the two merchants` (83).

(40) Further clarification as to the nature of the matrix can be gained from the following. At the oral hearings in this case, British Sugar described (84) the matrix as 'an internal document, it is a vertical document, if you like, within British Sugar` (85). It specified the prices below which British Sugar's sales representative were not permitted to sell industrial sugar without the express permission of the general manager responsible for industrial sugar sales (86). British Sugar also pointed out, however, that in many cases the actual price at which industrial sugar was sold was below the matrix price.

James Budgett, in its written reply to the initial statement of objections (87) stressed that it never 'considered the volume/price matrix tabled by BS as anything other than a guide as to the price BS was asking its salesmen to seek. This information was not secret (it was available to industrial customers who enquired)` (88). In its written reply to the revised statement of objections, James Budgett described (89) the matrix to be 'understood to constitute only a British Sugar internal guide to its salesmen, which they could depart from (but should first seek internal management approval) (90)`, thus providing 'an internal monitoring mechanism` (91).

Tate & Lyle during investigations stated (92) that 'they (British Sugar) presented a piece of paper which they said was their intent in terms of moving the market price (. . .) this presentation was for the benefit of the others so that we would know what they intended to do` (93).

(41) British Sugar has informed the Commission that the matrix was not - otherwise than at the meetings between the parties which are at issue in this proceeding - given to customers (94). The document was thus not freely available. However, looking at timing, British Sugar states that in practice well before it disclosed the matrix to others it had already embarked on negotiations and even concluded some major industrial sugar contracts. According to British Sugar, at the time the matrix was disclosed, its activities in the industrial sugar market place were already known to its rivals. The matrix did not offer surprises and did not serve to reduce any uncertainty over British Sugar's prices to its customers (95). Referring more specifically to the point in time when Tate & Lyle obtained from British Sugar the information contained in the matrix, Tate & Lyle explained during investigations (96) that 'in general` the information was given to it 'at the early stages` of its annual negotiations with industrial buyers when 'we might have been already negotiating with some, maybe not with others` (97). Tate & Lyle maintained that in the event it had not been provided with the matrix information by British Sugar it would have to a certain extent been able, by talking to buyers, to obtain the information via the market. (98). However, on the same occasion, Tate & Lyle confirmed (99) that the information contained in the matrix was useful to it by stating 'it would be foolish to say it wasn't useful, it was useful (. . .) if we had an indication of their intents it had some bearing perhaps on the way in which we might have seen it. We are followers` (100).

(42) Moreover, there is evidence that the information conveyed by British Sugar to Tate & Lyle, Napier Brown and James Budgett regarding industrial sugar was not limited simply to the advance handing over of industrial price matrices, or the giving of equivalent information, but that British Sugar also provided those companies with considerable advance warning of its intention to raise prices, before detailed matrices had been produced. In a written reply, dated 15 January 1991 (101), to questions raised by the Commission regarding industrial sugar, Tate & Lyle stated that, whilst it never received draft list price changes from British Sugar, 'indications of an intention to change some or all list prices were at times made as much as nine months ahead. Please note that the majority of industrial sales are not contracted at List Price` (102).

(43) With regard to the Commission's conclusion that Tate & Lyle had confirmed during the investigations of 27 May 1994 that the information provided a higher degree of certainty and advance knowledge, Tate & Lyle, in its written reply to the revised statement of objections, stated (103): 'Price lists in the industrial sector are of very little relevance in terms of the actual prices charged to individual customers. The information provided by BS was of far more relevance to the merchants to enable them to base their prices. In terms of competing with BS on individual accounts such information was of little value to T & L. Therefore, (. . .) the information was of use as to BS' probable intentions rather than providing any certainty` (104).

As to the aspect of advance knowledge, Tate & Lyle stated (105): 'Although the matrix itself was not given to customers, the information it contained, by the time T & L received it, would have been available to customers at the same time as it was released to T & L. Consequently, T & L would have already begun to pick up the information from the market or at the very least, would have obtained that information very quickly thereafter. T & L did not therefore receive information on the content of BS' price intentions in advance of BS' customers (see also paragraphs 152 and 160 of BS's response to the First SO` (106).

(44) Furthermore, it is clear that during the meetings on industrial sugar the differentials to be maintained or created between the prices charged to purchasers of large quantities of sugar compared to purchasers of smaller quantities were indicated. In its letter to the Office of Fair Trading dated 16 July 1990 (107), Tate & Lyle states that during the meetings British Sugar 'indicated their desire to see United Kingdom price levels rise from the low levels that they had by then reached, and also to see differentials between customers taking different volumes restored to more sensible and logical levels` (108).

Indeed, the fact that British Sugar tabled its pricing matrix during at least some of these meetings, and that this matrix stated their intended minimum price for customers according to the size of their purchases, meant that consideration of differentials during these meetings was inevitable, This is confirmed by British Sugar. During investigations it stated (109) that the 'sharing of the matrix . . . was designed to be able to impress upon them that certain relativities between price and volume would be preserved` (110); and in its written reply to the initial statement of objections (111) it stated that such meetings 'considered industrial price differentials between larger and smaller purchases of sugar` (112). This is also confirmed in Tate & Lyle's letter to the Office of Fair Trading dated 29 August 1990 (113), which states that at the meetings regarding industrial sugar 'matters discussed included price changes, differentials, delivery terms, credit terms, concerns about volume loss and, in some cases, the situation in particular accounts` (114).

(45) Napier Brown and James Budgett have given evidence that, as merchants, they had a particular interest in the restoration and maintenance of appreciable price differentials between the purchasers of larger and of smaller volumes of industrial sugar. This is due in particular to the fact that in the industrial sugar business the purchasers of larger quantities were mainly customers of British Sugar whereas the purchasers of smaller quantities were the traditional customers of the merchants. Napier Brown, in its written reply to the revised statement of objections, made it clear (115) that it derived reassurance from the meetings that British Sugar would no longer pursue with regard to industrial sugar pricing 'the unrealistically "flat" structure which had developed during the course of the price war` (116) due to 'British Sugar's policy of drastically reducing the differentials between prices charged to customers taking large quantities of sugar (who were frequently existing customers of British Sugar) and customers taking smaller quantities, who were the traditional customers of the merchants` (117).

James Budgett, in its written reply to the revised statement of objections, explained (118): 'Budgett had just been suffering, not from the absolute level of average prices for industrial sugar (. . .) but rather from the lack of distinction in the price charged by British Sugar to different sizes of customers. (. . .) From Budgett's point of view therefore, elimination of differentials was clearly the main unfair pricing practice conducted by British Sugar, and one which had inflicted substantial damage on Budgett. (. . .) From Budgett's point of view, the meetings provided reassurance that British Sugar's determination to avoid unfair pricing practices which damaged the merchants, evident at a senior management level, was also subject to some internal mechanism concerning the day to day activity of British Sugar's salesmen` (119).

2.2.2. Retail sugar pricing

(46) With regard to the meetings on retail sugar, Tate & Lyle was also invited to comment, during the investigations of 27 May 1994, on the indications that British Sugar provided a number of price lists at a number of stages before the actual prices became generally available, and that British Sugar provided Tate & Lyle with advance warning of price list increases. Asked about what was given, when and how far in advance, a representative of Tate & Lyle stated (120): 'It tended to be a matter of three or four weeks I think before the official date of the price increase and I think it was really just to get the information across so that we weren't totally unaware and they (British Sugar) were comfortable that we were going to follow. We always had followed and they always assumed that we would. And it was just to make themselves comfortable that we were going to follow on that occasion` (121). Tate & Lyle confirmed (122) that it would amend its prices shortly thereafter and 'go the same increase per tonne in general`. Tate & Lyle also admitted (123) that the information provided by British Sugar was a 'safety factor`.

(47) Commenting on the certainty and advance knowledge provided by British Sugar on retail prices, Tate & Lyle, in its written reply to the revised statement of objections, stated (124) that 'T & L was provided with copies of BS's price lists on only three occasions during the period in question, once five days and once two days before the price lists were officially circulated to the trade. T & L was on the third occasion handed a copy of the price lists four days after its official circulation to the trade. However, BS would invariably have spoken to its customers before talking to T & L and in particular would have indicated to customers two or three weeks in advance that it was going to increase its prices. T & L were not therefore given any privileged information. Any "advance" knowledge was only in advance of the official circulation of the price lists and not in advance of BS' customers being made aware of new prices` (125).

(48) However, there is evidence that the information provided by British Sugar to Tate & Lyle regarding retail sugar, was not limited simply to the provision of retail price lists. British Sugar also provided Tate & Lyle with considerable advance warning of its intention to raise retail prices, before detailed price lists had been produced. In a written statement, dated 12 December 1990 (126), given to the Commission, the national retail sales manager of Tate & Lyle, stated the following regarding retail sugar: 'Since my first meeting with BS in February 1987, I cannot remember any subsequent price increase that they initiated that was not signalled to me at least 2 to 3 weeks in advance of their official trade circular` (127). during the investigations carried out at Tate & Lyle on 27 May 1994, a representative of the company confirmed (128) that 'signalling` meant that British Sugar 'would actually say the amount of the price intended listings` and that this was done on the basis of a standard list price. Also in relation to retail sugar, the Commission's question, put at some other point during the same investigations, about the advance provision of price lists and the advance warning of price list increases provided by British Sugar, was answered by a representative of Tate & Lyle (129) summarily to the effect that 'it tended to be a matter of three or four weeks I think before the official date of the price increase` (130).

2.2.3. The availability and value of the sugar-pricing information

(49) As to the availability and value of the pricing information provided by British Sugar at the meetings, the Commission notes as a fact that technically it is always more difficult and burdensome to obtain information about a competitor's pricing intentions on a piecemeal basis by talking to a number of his potential customers than by receiving this information directly and comprehensively from the competitor himself in meetings with him. Moreover, it is common experience that second-hand information obtained by a number of third parties (here British Sugar's potential buyers) is less reliable and accurate than first-hand information obtained from the source itself (here British Sugar). This is confirmed by Tate & Lyle's letter to the Office of Fair Trading dated 16 July 1999 (131), in which it stated that 'information passing between customer and producer may often be unreliable if not totally misleading. This has been especially true of the sugar market over the past few years` (132). In this letter, Tate & Lyle also stated that statements by one competitor to another may be unreliable. However, Tate & Lyle later confirmed that the information provided by British Sugar was useful to it (133); this can also be deduced from the fact that Tate & Lyle continued to attend the meetings on a regular basis.

James Budgett stated in its reply to the initial statement of objections (134) that 'market sources, although they might not give perfect, immediate information as to prices to individual accounts (e. g. individual buyers might quote misleading buy-in prices from third parties) provided very accurate, rapid information about general price levels. The unique market structure was ideally suited to this` (135). It also stated (136) that the 'information concerning BS's matrix was rapidly and accurately communicated via the market (especially customers) to all major players at least` (137). Napier Brown shares this view as expressed by James Budgett (138). Similarly, British Sugar considers (139) that the merchants could have obtained the information from the market place, and that the information merely 'had an effect in terms of providing a degree of assurance to merchants` (140).

2.2.4. Further accounts of the meetings

(50) In the letter to the OFT of 29 August 1990 (141), Tate & Lyle further explains its recollection of the subjects discussed during the meetings.

'2. Industrial sales

(. . .)

Mr Smith's recollection is that at the first of these meetings of the four representatives a minimum floor price in the region of £370 per tonne was accepted for industrial sugar. At subsequent meetings this floor price was assumed to be upgraded in accordance with the general increase in prices shown by the "matrix" which was produced by British Sugar and which gave minimum net prices for specific volume bands. Matters discussed included price changes, differentials, delivery terms, credit terms, concerns about volume loss and, in some cases, the situation in particular accounts. In the early days the meetings appeared to Tate & Lyle to be partly a fence mending exercise for British Sugar and the merchants. During the price war the merchants had suffered substantial losses of tonnage in small accounts and British Sugar were gradually surrendering the small accounts back to them. Tate & Lyle Sugars was not involved in this since they had never had much presence in small accounts.

(. . .)

3. Retail sales

Meetings between the individuals at British Sugar and Tate & Lyle responsible for retail marketing, Mr (deleted, business secret) and Mr (deleted, business secret) respectively, occurred in two situations: first, to enable British Sugar to inform Tate & Lyle of an imminent price increase, and secondly when specific instances arose leading one of the sugar producers to believe that the other was soliciting business from his customers by undercutting price. At price change meetings British Sugar would hand over its price list a few days before publication and inform Tate & Lyle of the level of discount that it would quote to the multiples to ensure that the multiples profit margin was not reduced. However, Tate & Lyle was not informed of any specific price which was to be quoted to a specific customer` (142).

(51) In a letter to the OFT dated 7 August 1990 (143), British Sugar commented on Tate & Lyle's letter to the OFT of 16 July 1990 (144) and set out its own recollection of the meetings in question. Both Napier Brown and James Budgett concur with these recollections (145):

'Paragraph 3 on page 4 of Mr Shaw's letter refers to sales of industrial sugar, and to meetings and communications between the two companies and the major sugar merchants, Napier Brown and Budgetts. Initial meetings (146) were with the merchants. One of the complaints made by Napier Brown and upheld by the Commission as constituting an infringement of Article 86 was that British Sugar had reduced its prices for retail and industrial sugar. The initial purpose of the meetings and of British Sugar confirming what the merchants (who were also customers of British Sugar) would have discovered in the market place was to give comfort to the merchants that the problem was not about to recur. Later at these meetings, information was given on British Sugar's pricing intentions. Meetings with Tate & Lyle began in late 1987. The British Sugar representative at these meetings announced the prices that British Sugar intended to achieve in future quarterly periods. As is normal business practice in such situations, a pricing matrix was developed on a volumetric sugar usage basis for guidance of British Sugar's own sales force - identifying minimum prices below which it must seek managerial approval. The existence of this matrix was known to both the trade and competition - there was even discussion as to the publishing of the matrix. The matrix was developed within the annual planning process of British Sugar and was one of the key elements in the profit mix. It also represented a deliberate move to satisfy the indication which British Sugar had received from the European Commission that it ought to have a cost-related price structure. Thus, it must be emphasised, what was communicated to the other companies were commercial decisions which had already been taken by British Sugar. At no time were prices which were to be charged to particular customers agreed. Likewise, there was no agreement between the parties as to prices which were to be quoted. The information was centred upon the price increases British Sugar intended to apply to customers purchasing different volumes. However, this information would also have been available to any industrial customers of British Sugar at the same time as it was released to Tate & Lyle and the sugar merchants (147). Though discussion did take place, on no occasion were British Sugar decisions and consequently its business plan amended. Additional discussion did take place concerning market issued such as customer credit worthiness. At all times Tate & Lyle and the merchants had the opportunity, and in practice took the opportunity, to make their own pricing decisions(146) That is, Tate & Lyle's letter to the OFT of 16 July 1990.

(147) This statement is irreconcilable with all other statements by British Sugar. In its written reply to the initial statement of objections and in its written reply to the revised statement of objections, as well as in the two hearings which took place, British Sugar never disputed the Commission's finding that its meetings with Tate & Lyle started on 20 June 1986.` (146).

As regards retail sugar, British Sugar stated in the same letter of 7 August 1990: 'it appears that British Sugar has, on occasion, indicated to Tate & Lyle the dates and timing of increases in its retail price list. Again, the information flow appears to have been entirely one-sided. We are assured that at no time has information been exchanged about the level of specific discounts which would be offered to particular customers. For the most part, the information as to the timing of price increases which was given to customers was a matter of public knowledge within the industry. Prices are increased annually with effect from 1 July, to reflect changes in the Community pricing structure. Thus, on the 11 May this year, British Sugar informed its customers of the price increases which would be effective as of 1 July. Tate & Lyle was given the information on 9 May. If any particular customer inquires of British Sugar whether it intends to increase its prices at other times during the year, that customer will be informed of British Sugar's current intentions and, if possible, the likely amount of the proposed increase` (147).

2.2.5. The parties' understanding of the market situation during the relevant period

(52) A number of other documents illustrate the parties' understanding of the market situation during the relevant period:

(53) A document entitled 'James Budgett & Son Limited - Business strategy 1987-1990` (148) in its first section, headed 'Sugar dealing, distribution and processing`, states that: 'It is now in British Sugar's interest to switch to a high price strategy, since they are ex growth in volume terms, and to rebuild market premiums. To achieve this they require, and are currently seeking, the dealers' cooperation because aggressive marketing of imports can entirely frustrate their ambitions. Progress towards an orderly market is under way. Improved refiners commissions are under negotiation and profits from dealing are improving` (149).

(54) A market report submitted to the board of James Budgett in preparation for a board meeting to be held on 2 August 1990 (150) states that 'Recent independent discussions with BS and T & L suggest minimum increase of £3-£4 per tonne will be sought by British Sugar and no doubt T & L will follow` (151).

(55) A document minuting a meeting held between the executive director of De Danske Sukkerfabrikker and senior management of British Sugar on 26 June 1987 (152) states that 'discussions are under way between T & L and BSC to attempt to coordinate the development of the market but BSC does not want to risk anything in this. PJ (155) claims that T & L always break their agreements while BSC always stick to their minimum prices, do not grant secret special discounts, etc.

(155) Peter Jacobs, at that time managing director of British Sugar.` (153).

(56) An internal Tate & Lyle memorandum addressed, inter alia, to the sales and marketing director (industrial sugar) (154) states: 'BS have indicated that the bottom line loss to them, following a 5 % cut in support levels, would be of the order of £ 9 m. They are proposing to advise the trade (industrial) that with effect from January 1990 price levels will need to increase by £ 20 per tonne to retrieve a position which would permit them to continue with their necessary levels of investment for the future!! They have obviously discussed this with Ridgwell (158) who rang me to put this point across

(158) Mr Ridgwell is the chairman and joint managing director of Napier Brown.` (155).

2.2.6. The gap between institutional price increases and British Sugar's price increases

(57) Finally, it is established that in the relevant period, British Sugar increased its industrial sugar prices as well as its retail sugar prices beyond the institutional price increases, so that the gap between the institutional prices and the prices charged by British Sugar in the market widened. During the oral hearing, the Commission stated that a comparison of the Commission's figures for institutional prices (which means intervention price plus storage levy representing the guaranteed minimum price for A/B sugar (156) between January 1986 and December 1990 with British Sugar's figures (157) for its market prices applied to major customers during the same period had shown that the maximum surplus of British Sugar's prices over the institutional prices had doubled between January 1986 and December 1990. British Sugar did not dispute the Commission's mathematics, nor that there had been a widening of the gap in the amount stated by the Commission. However, British Sugar considered this widening to be minimal and pointed out that it had merely pursued its publicly known commercial aspiration, namely to try and obtain in the market place price increases beyond the institutional increases (158).

G. PARALLEL PROCEDURE BY THE UK OFFICE OF FAIR TRADING

(58) Since 1990, the UK Office of Fair Trading (OFT) had undertaken a parallel procedure against British Sugar and Tate & Lyle on the same matter. As was mentioned in recital 2, in July and August 1990, Tate & Lyle wrote two self-incriminating letters to the OFT. On 15 April 1991, Tate & Lyle and British Sugar submitted to the OFT a memorandum describing the arrangements which existed between these two companies in the period from 20 June 1986 to 2 July 1990 (159). In June 1991, this memorandum was placed on the Register of Restrictive Trading Agreements. Some time after the Commission had issued its initial statement of objections in the current proceedings in June 1992, British Sugar applied to the Restrictive Practices Court seeking to remove the memorandum from the Register. British Sugar's arguments were, first, that this memorandum did not accurately record the arrangements between British Sugar and Tate & Lyle and, second, that even if the record was correct it did not disclose a restrictive agreement. Tate & Lyle did not make any application. By judgment of 21 August 1996, the Restrictive Practices Court rejected both of British Sugar's arguments. The court held that the memorandum accurately recorded the arrangements and disclosed the existence of a restrictive agreement between British Sugar and Tate & Lyle in the period between 20 June 1986 and 2 July 1990. British Sugar did not appeal against this judgment within the time limit and so it became definite. On 10 December 1996, British Sugar and Tate & Lyle gave undertakings to the Restrictive Practices Court not to operate a restrictive pricing agreement nor to enter into any similar arrangement in the future and not to enforce any other registrable agreement details of which had not been notified to the OFT in time. The undertakings apply to both companies' whole range of business (160).

III. LEGAL ASSESSMENT

A. DEFINITION OF THE RELEVANT MARKET

1. The relevant product market

(59) The relevant product market is white granulated sugar. This market is further subdivided into two sub-markets of sugar for sale to retail clients ('retail sugar`) and sugar for sale to industrial clients ('industrial sugar`).

Speciality sugars and liquid sugars, being used for different purposes than white granulated sugar, do not meet the same needs and are not therefore part of the relevant product market because they are not substitutable from the customer's point of view.

Industrially produced sugar substitutes such as saccharin, cyclamates or aspartame only compete with natural sugar for limited uses, e. g. as diet products, and thus do not form part of the same relevant product market as white granulated sugar (161).

2. The relevant geographical market

(60) The sugar scheme of the common agricultural policy (162) allocates a specific sugar quota to each Member State. This national sugar quota is divided between beet-processing companies in each Member State. During the relevant period and ever since, British Sugar has been the sole processor of sugar beet in the United Kingdom and has received the entire UK A/B sugar quota (163). The Court of Justice has recognised that the common organisation of the sugar market has a significant influence on the production and sales of sugar in the Community, and that it contributes to consolidating a partitioning of national markets:

'It is beyond doubt that, as the aforementioned system of national quotas stopped production moving gradually to areas particularly suitable for the cultivation of sugar beet and, in addition prevented any large increase in production, it cut down the quantities which producers can sell in the common market` (164).

'This restriction together with the relatively high transport costs, is likely to have a not inconsiderable effect on one of the essential elements in competition, namely the supply, and consequently on the volume and pattern of trade between Member States` (165).

'Whatever criticism may be made of a system, which is designed to consolidate a partitioning of national markets by means of national quotas, the effects of which will be examined later, the fact remains that it leaves in practice a residual field of competition, that field comes within the provisions of the rules of competition` (166).

(61) Taking into account the processing and refining activity of both British Sugar and Tate & Lyle, enough sugar is produced in the United Kingdom to cover nearly the entire domestic demand for all different kinds of sugar.

(62) Imports do, however, enter the United Kingdom, because purchasers of sugar demand a further source of supply from outside the United Kingdom in order to ensure continuity of supplies, particularly so as to protect against the risk of a shortage of sugar developing as happened in the 1974/75 season, and in order to use it as a competitive threat to the two UK producers (167). Furthermore, merchants import sugar when conditions are favourable. As far as sugar imports from other Member States into the UK are concerned, by far the largest part of these imports has always been in the form of white granulated sugar.

(63) In recent years, imports from other Member States into the UK have made up approximately 4 % to 10 % of total UK sugar consumption. This amount appears to represent, to a large extent, a structural limit on imports, which are unlikely to exceed this figure (168). This is mainly due to the peculiarities of the sugar market in Great Britain as opposed to neighbouring markets:

(i) because of the natural barrier of the English Channel, which gives rise to additional transport costs, British producers of sugar are able to charge a premium on the price of sugar compared with Continental prices. British prices generally correspond to British Sugar's prices. It is established that during the relevant period (169) British Sugar attempted to set its prices near the ceiling at which it would expect significant quantities of imports to be drawn into the domestic market, thus threatening its ability to sell its entire A/B sugar quota on that market;

(ii) if customers requiring large, frequent and rapid deliveries upon order were to be supplied by imports, stocks for the storage of imported sugar would have to be built up and run in Great Britain; an additional cost would thereby have to be incurred;

(iii) furthermore, as the MMC pointed out in its second report (170), in order to ensure a substantial volume of imports, a higher price in Great Britain than on the Continent would be necessary. Potential exporters may require a large premium to persuade them to export large quantities of sugar to Great Britain for fear of retaliatory exports by the British producers (171).

(64) The only part of the United Kingdom in which different conditions prevail is Northern Ireland, which does not form part of the relevant geographical market for the purposes of this case (172).

While both Tate & Lyle and British Sugar supply sugar in Northern Ireland, neither has refining facilities in Northern Ireland and no sugar is produced there. Because of transport costs, most sugar supplies in Northern Ireland are imported from the Republic of Ireland by Irish Sugar, which accounts for 60 % to 70 % of the sugar market in Northern Ireland. British Sugar and Tate & Lyle account for the remaining sugar supplies in Northern Ireland. Both companies include in their price a standard surcharge for the additional sea freight to Northern Ireland (173).

(65) The Commission therefore concludes that for the purposes of these proceedings the relevant market is that of retail and industrial white granulated sugar in Great Britain, which is a significant part of the common market.

On the basis of the information available to the Commission it can be said that during the relevant period British Sugar, Tate & Lyle, Napier Brown and James Budgett together held over 90 % of the market for industrial sugar in Great Britain, and that British Sugar and Tate & Lyle together held approximately 89 % of the market for retail sugar in Great Britain. Against this backdrop, the Commission takes the view that both markets were tightly oligopolistic in structure.

B. AGREEMENT AND/OR CONCERTED PRACTICE BETWEEN UNDERTAKINGS WITH THE OBJECT OR EFFECT OF AN APPRECIABLE RESTRICTION OF COMPETITION

1. The Commission's assessment

1.1. Agreement and/or concerted practice between undertakings

(66) From the case-law of the Court of Justice of the European Communities and the Court of First Instance, it may be seen that an agreement within the meaning of Article 85(1) can be said to exist when the parties have reached a consensus, even in broad terms, as to the lines of their mutual action, or abstention from action, in the market. It may involve joint decision-making and commitment to a common scheme. It suffices that the undertakings in question should have expressed their joint intention to conduct themselves on the market in a specific way (174). The agreement does not have to be made formally or in writing, and no express sanctions or enforcement measures need be involved.

(67) A concerted practice within the meaning of Article 85(1), on the other hand, does not require that the participants should have reached an agreement in terms as to what each should precisely do or not do in the market. The object of the Treaty in creating the concept of concerted practice in addition to that of agreement was to forestall the possibility of undertakings evading the prohibition of Article 85(1) by a form of coordination which, without having reached the stage where an agreement in the sense described above has been concluded, knowingly substitutes practical cooperation between them for the risks of competition (175). In the ICI judgment (176), the Court of Justice went on to say that a concerted practice might arise inter alia out of coordination by the participants. although parallel behaviour may not by itself constitute a concerted practice, it may nonetheless amount to strong evidence of such a practice if it has led to conditions of competition which do not correspond to the normal conditions of the market, regard being had to the nature of the products, the size and number of the undertakings, and the volume of the said market. The Court of Justice said that this was especially the case if the parallel conduct was such as to enable those concerned to attempt to stabilise prices at a level different from that to which competition would have led, and to consolidate established positions to the detriment of effective freedom of movement of the products in the common market and of the freedom of consumers to choose their suppliers.

(68) In its judgment of 16 December 1975 (177), the Court of Justice held that the criteria of coordination and cooperation laid down by the case-law of the Court, which in no way required the working out of an actual plan, had to be understood in the light of the concept inherent in the provisions of the Treaty relating to competition: each economic operator must determine independently the commercial policy which he intends to adopt in the common market. This requirement of independence did not deprive undertakings of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors, but it did strictly preclude any direct or indirect contact between them the object or effect whereof was either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves had decided to adopt or contemplated adopting on the market.

(69) Thus conduct may fall under Article 85(1) as a concerted practice where the parties have not agreed or decided in advance among themselves what each will do in the market, but knowingly adopt or adhere to some collusive device which encourages or facilitates the coordination of their commercial behaviour.

(70) The Court of First Instance in various judgments (178) made it clear that it was not necessary, particularly in the case of a complex infringement of considerable duration, for the Commission to characterise it as exclusively an agreement or concerted practice, or to split it up into separate infringements. Indeed, it might not even be feasible or realistic to make any such distinctions, as the infringement as a whole might present characteristics of both types of prohibited conduct, while considered in isolation some of its manifestations could more accurately be described as one rather than the other. In particular, it would be artificial to subdivide continuous conduct, having one and the same overall objective, into several discrete infringements. The Court of First Instance in its judgments therefore endorsed the Commission's dual characterisation of the single infringement as an agreement and a concerted practice, and stated that this had to be understood, not as requiring, simultaneously and cumulatively, proof that each of the factual elements contained in the continuous conduct presented the constituent elements both of an agreement and of a concerted practice, but rather as referring to a complex whole which comprised a number of factual elements some of which in isolation would be characterised as agreements whereas others would be considered concerted practices.

(71) The Commission is of the opinion that the above described facts evidence a complex infringement of considerable duration (179) in which British Sugar, Tate & Lyle, Napier Brown and James Budgett participated, and which during the relevant period involved elements which in isolation could be characterised as agreements as well as elements which could be categorised as concerted practices. Even if one does not accept that some, or indeed any, of these elements could be characterised as agreements (180), all the elements of the complex infringement not constituting agreements would at least fall into the category of concerted practices (181). However, it would be artificial to subdivide this complex conduct of considerable duration into separate infringements, since it was a continuing common scheme which, taken as a whole, served one and the same object as detailed in recitals 72 to 76. For the purpose of this appraisal, under Article 85(1) the conduct at issue is therefore referred to as an agreement and/or a concerted practice.

1.2. Object or effect of an appreciable restriction of competition

1.2.1. Pricing coordination

(72) On 20 June 1986, British Sugar and Tate & Lyle came to an understanding to increase the price level for white granulated sugar in Great Britain and to refrain form increasing market shares by lowering prices. While British Sugar as a price leader in the market has been at the origin of the decision to end the price war and to adopt the new pricing strategy, it did so in consensus with Tate & Lyle. The latter gave comfort to British Sugar with respect to its pricing intentions by confirming, during the abovementioned meeting, that it intended to follow the same pricing policy. Napier Brown and James Budgett were informed by British Sugar of the new pricing policy at a meeting subsequent to the meeting of 20 June 1986. The systematic participation of all four parties at the regular meetings over a considerable period subsequent to the meeting of 20 June 1986 and the provision and receipt of information on industrial sugar prices between all four parties, as well as on retail sugar prices between British Sugar and Tate & Lyle at these meetings, is evidence of their collusive behaviour. It created the necessary atmosphere of mutual certainty as to the participants' intentions concerning future pricing whereby each of them could rely, if not on the precise price levels of the other participants, at least on their continual pursuit of a collaborative strategy of higher pricing. For all the participants this mutual assurance was of interest, particularly - though not exclusively - in the price range above the break-even point, where price competition was possible while still profitable. Moreover, as was shown earlier (182), the merchants Napier Brown and James Budgett, always had a particular interest in the industrial sugar pricing differentials according to volumes as indicated by the matrix. Finally, British Sugar and Tate & Lyle had an additional interest in involving Napier Brown and James Budgett in the collusion, because the merchants, by virtue of their traditional connections with Continental producers, could - by way of imports - have substantially frustrated British Sugar's and Tate & Lyle's joint strategy of increasing prices on the white granulated sugar market in Great Britain.

(73) The parties' conduct is to be qualified as an agreement and/or concerted practice which had as its object the restriction of competition by the coordination of their pricing policy on the market for industrial sugar in Great Britain as concerns all four parties, and on the market for retail sugar in Great Britain as concerns British Sugar and Tate & Lyle. In particular, the object of the agreement and/or concerted practice was to increase industrial and retail sugar prices in Great Britain through a coordinated pricing policy, and to refrain from aggressive price cutting aimed at gaining market share. Moreover, with regard to industrial sugar, the object of the agreement and/or concerted practice included a coordinated policy concerning price differentials to be restored and maintained between the purchasers of larger and smaller quantities of sugar. Thus, in summary, the object of the parties' collusion was the restriction of price competition in the industrial and retail sugar markets in Great Britain, which markets were already characterised by a tendency toward reduced competition due to the concentration of the market and the high entry barriers.

(74) The fact that during the relevant period Tate & Lyle, James Budgett and Napier Brown were 'price followers` in respect of British Sugar does not detract from the fact that, through their conduct, they pursued the anti-competitive object of pricing coordination. This becomes clear by taking a closer look at the function of the continuous meetings and the scope for competition which exists even in a market characterised by price leadership. The meetings provided - not only for all four parties in relation to industrial sugar, but also for British Sugar and Tate & Lyle in relation to retail sugar - the assurance of an ongoing higher pricing policy on the part of their competitors. Accordingly, each of the participants at the meetings (including British Sugar) could act differently than if it was obliged to rely merely on its own perception of the market. Each of the undertakings as in a position to assess the market situation, and its future development, with more certainty than would otherwise have been the case. The fact that each of them (including British Sugar) was assured at the meetings that the other companies were all equally aware of British Sugar's pricing strategy, and that moreover each of the three 'followers` also in the future intended closely to follow British Sugar's strategy, meant that all of them (including British Sugar itself) could pursue a policy of price increases in the knowledge that the others would not - whether intentionally or perhaps through ignorance or misinterpretation of what could be perceived of British Sugar's pricing policy by simply monitoring the market - continue to price at lower levels or start to undercut competitors's prices, or follow British Sugar's price leadership less closely than before (183). White granulated sugar is a homogeneous product and price therefore is clearly the most important competition parameter. Customers are very price sensitive and have low switching costs between different suppliers. Consequently, uncertainty as to the competitors' pricing policy is likely to increase competition by exerting a downward pressure on the pricing policies of individual sugar companies. By the far-reaching elimination of this uncertainty brought about by the meetings, the parties pursued the anti-competitive object of restricting price competition between them. Despite British Sugar's price leadership, such price competition was possible, in particular - though not exclusively - in the price range above the break-even point, because in this range price competition was feasible, while still profitable, for all the four parties.

(75) On the basis of the case-law of the Court (184), the Commission holds the view that once the anti-competitive object of the parties' conduct has been established, there is no need to take account of the possible effects of the agreement and/or concerted practice.

(76) The participation in the agreement and/or concerted practice commenced, for British Sugar and Tate & Lyle, with their first bilateral meeting on 20 June 1986 and, for Napier Brown and James Budgett, with the first quadripartite meeting in late 1986. For all four parties, their participation in the agreement and/or concerted practice ended only on 2 July 1990, when the chairman and chief executive of Tate & Lyle ordered an end to all contacts with competitors of the kind which are the subject of this procedure (185). The list provided by Tate & Lyle (186) shows that the industrial sugar meetings as well as the retail sugar meetings, at regular one- to three-month intervals, continued throughout the relevant period. As the last bilateral retail sugar meeting took place only on 9 May 1990, and the last quadripartite industrial sugar meeting was only on 13 June 1990, the Commission has no reason to believe that the participation of any of the four parties in the agreement and/or concerted practice ended before 2 July 1990.

1.2.2. Appreciability

(77) Given the market shares of the undertakings in question, and in particular the fact that the four companies together accounted during the relevant period for almost the entire white granulated sugar market in Great Britain, the restrictions of competition which they pursued by their agreement and/or concerted practice were appreciable.

1.3. Conclusion

(78) In conclusion, the above described facts establish for the relevant period the existence of an agreement and/or concerted practice, which had the object of restricting competition within the meaning of Article 85(1) by coordinating the pricing policy on the industrial sugar market in Great Britain between all four parties, and additionally by coordinating the pricing policy on the retail sugar market in Great Britain between British Sugar and Tate & Lyle.

2. The arguments of the parties and the Commission's replies

2.1. No agreement, no concerted practice; British Sugar's price leadership

2.1.1. British Sugar's arguments

(79) With respect to the fact that British Sugar convened a meeting with Tate & Lyle on 20 June 1986 and subsequently also met Napier Brown and James Budgett in order to indicate that the price war was over and to reassure them of its intention not to recommence an aggressive low-pricing policy but to seek price increases instead, British Sugar argues that this action could not have had any appreciable effect on the behaviour of these companies. British Sugar had already taken the decision to end the price war. Tate & Lyle, Napier Brown and James Budgett, being price followers, had no choice but to follow this initiative, and would have done so, whether they had learned of British Sugar's intentions directly, through the trade, or via the press. Thus, argues British Sugar (187), the agreement of the other companies to British Sugar's unilateral decision was unnecessary and irrelevant and there was therefore no agreement within the meaning of Article 85(1).

(80) In its reply to he revised statement of objections (188), British Sugar cites Tate & Lyle's confirmation that British Sugar decided upon its pricing moves unilaterally and that there was no agreement of any kind at any point in time during the relevant period. British Sugar accepts that the legal concept of 'agreement` must be interpreted flexibly, but it stresses that there should be evidence of a consensus as to future joint conduct. According to British Sugar, all the evidence points to the absence of any joint intention of the parties to conduct themselves in a particular way. Moreover, British Sugar submits that, as regards classification of an arrangement, the distinction between agreement and concerted practice becomes irrelevant only when there is evidence supporting the existence of both them.

(81) Continuing this approach, British Sugar then argues (189) that neither was there a concerted practice, because the Commission cannot identify any effect on the market arising from the meetings. According to British Sugar, the comparison which the Commission makes, in its revised statement of objections, with the judgment of the Court of First Instance in Rhône-Poulenc v. Commission (190) is unfair and prejudicial. In British Sugar's view, the Court did not endorse the Commission's theory according to which there is a concerted practice as soon as there is concerted action having as its object the restriction of the autonomy of the undertakings in relation to each other, even if no actual effect has been found on the market. According to British Sugar, the Court of First Instance made its finding in that case on the basis of ample evidence of an effect produced by the parties' conduct in the market place, and identified what took place as an 'agreement`. British Sugar alleges that the Court stated that it was an open question in European competition law whether a concerted practice could exist in the absence of any effect but, from the fact that the Court then went on to analyse the effects produced in that case, British Sugar draws the conclusion that the identification of an effect capable of restricting competition is necessary.

2.1.2. Tate & Lyle's arguments

(82) In its written reply to the revised statement of objections (191), Tate & Lyle argues that there was no need for any agreement or collaborative strategy on prices because British Sugar's dominance enabled it unilaterally to set prices which Tate & Lyle, Napier Brown and James Budgett were bound to follow. Tate & Lyle argues that British Sugar never needed any assurance of a continued higher pricing policy because it alone determined prices. The 'certainty` and 'reassurance` that Tate & Lyle, Napier Brown and James Budgett would follow British Sugar's pricing had been, and still was, a consequence of the nature of the UK sugar market, resulting from the operation of the Community sugar scheme and not from the parties' participation in the meetings.

(83) The foregoing statements contrast with Tate & Lyle's reply to the initial statement of objections in which it acknowledged (192) 'that the contacts gave rise to an Arrangement which, subject to the appreciability of its effect on trade between Member States, fell within the prohibition of Article 85` (193). Moreover, in its reply to the revised statement of objections, Tate & Lyle continues to acknowledge (194) 'that it was party to arrangements which, subject to the appreciability of their effect on inter-State trade, infringed Article 85(1). In those circumstances and given the reduction in the scope of the allegations in the SO, there is substantial common ground between T & L and the Commission` (195). Whilst Tate & Lyle argues that it would have followed British Sugar's move to a higher pricing strategy, when the latter decided to end the price war, whether or not it had been directly informed of this fact by British Sugar, it accepts (196), that 'the contacts that took place may have affected the speed of the ending of the price war, but they could not affect the outcome` (197). Tate & Lyle admits that the arrangements in question had anti-competitive effects but argues that these effects were 'minimal` (198) or 'very limited` (199).

2.1.3. Napier Brown's arguments

(84) Napier Brown in its written reply to the revised statement of objections (200) states that 'coordination` of pricing policy, which implied a consensus between the different suppliers, was meaningless where the policy was dictated by one dominant supplier which all the other suppliers were bound to follow.

2.1.4. James Budgett's arguments

(85) James Budgett in its written reply to the revised statement of objections (201) pointed out that apart from being commercially obliged to maintain some of its unattractive nominal merchanting business, Budgett's commercial position in respect of principal merchanting was also largely dependent on the attitude taken by the two UK refiners (British Sugar, in particular, and Tate & Lyle) which could in practice determine the profitability of Budgett's principal merchanting business. Moreover, Budgett criticises (202) the fact that the Commission wrongly assumed that any arrangements or understandings between British Sugar and Tate & Lyle were 'extended` to Napier Brown and James Budgett.

2.1.5. The Commission's replies

(a) British Sugar's price leadership

(86) With regard to British Sugar's price leadership, the Commission notes several inconsistencies in the parties' argumentation. The gist of the issue is whether British Sugar's price leadership in the markets for industrial and retail sugar in Great Britain during the relevant period left scope for competition by the other three companies. On the one hand, the parties seem to suggest that there was no such scope when they stress that due to British Sugar's strength on these markets there was no need for the other three companies to coordinate pricing policy with it, because they had no other choice but to follow British Sugar's pricing moves. This contrasts sharply with the confirmation by all parties, reiterated in their written replies to the