COMMISSION DECISION of 24 July 1991 relating to a proceeding pursuant to Article 86 of the EEC Treaty (IV/31043 - Tetra Pak II) (only the English and French texts are authentic) (92/163/EEC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic 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 Spain and Portugal, and in particular Articles 3 and 15 (2) thereof,

Having regard to the application made to the Commission on 7 September 1983 by Elopak Italia SRL of Milan, Italy, to find, pursuant to Article 3 of Regulation No 17, that Tetra Pak Italiana of Modena, Italy, and its associated companies had infringed

Article 86

of the Treaty,

Having regard to the Commission's Decision of 9 December 1988 to initiate proceedings in this case,

Having given the undertaking concerned the opportunity to make known its views on the objections raised by the Commission, in accordance with Article 19 (1) of Regulation No 17 and with 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 consulting the Advisory Committee on Restrictive Practices and Dominant Positions,

Whereas:

A. THE FACTS

INTRODUCTION

I. The Tetra Pak group of companies

(1) The Tetra Pak group of companies (Tetra Pak) is one of the world leaders in the field of the packaging of liquid and semi-liquid foods in cartons. The group operates both in the field of the non-aseptic packaging of fresh products and in the field of the aseptic packaging of long-life products, and holds a virtual monopoly in the latter.

Originally Swedish, Tetra Pak has acquired a global dimension and interests throughout the world. Its consolidated turnover amounted to ECU 2 billion in 1985, to ECU 2,4 billion in 1987 and to ECU 3,6 billion approximately in 1990. Some 90 % of the group's turnover is in the carton sector and the remaining 10 % in the field of packaging equipment and associated operations. The Community share in this turnover amounts to a little more than 50 %. Tetra Pak international SA (formerly Tetra Pak Rausing SA), located in Pully in Switzerland, is currently responsible for coordinating the policies of the group, whose companies are spread throughout the world.

(2) Tetra Pak's first commercial operations in Italy - the country originally involved in the Elopak complaint - date back to 1955. In 1965 the first carton production unit was opened, to be followed in 1980 by a machine assembly plant. Italy is one of the countries, if not the country, in the Community in which Tetra Pak is most firmly established. The consolidated turnover of the seven Italian companies within the group stood at ECU 204 million in 1987.

II. Elopak's Complaint

1. The Elopak group of companies

(3) The Elopak group of companies (Elopak) is Tetra Pak's main competitor in the field of the packaging of liquid foods in cartons, but its operations have not so far extended into the aseptic sector.

Formed in 1957, Elopak is of Norwegian origin. It can be estimated that the ratio between Tetra Pak and Elopak as far as their respective turnover figures are concerned was approximately 7,5 to 1 in 1987 (Elopak had a consolidated worldwide turnover of some ECU 320 million).

(4) Elopak operates in Italy via a subsidiary, Elopak Italia (Milan), founded in 1969. This company does not produce cartons in Italy but imports them from other subsidiaries of the group. A production unit was in fact constructed at Pisa in 1982 but, in view of the poor development of Elopak's operations in Italy, carton production never got off the ground and the buildings were sold in 1987.

2. The complaint

(5) On 27 September 1983, Elopak Italia filed a complaint with the Commission against Tetra Pak Italiana and its associate companies in Italy.

The group considered that Tetra Pak had attempted over the years to reduce Elopak's competitiveness in Italy by engaging in trading practices which, for an undertaking in a dominant position, must be deemed to be abuses.

According to Elopak, these practices essentially involved the sale of a certain type of carton ('Rex' cartons)(3) at predatory prices, the imposition of unfair conditions on the supply of machines for filling these cartons and, in certain cases, the sale of this equipment at predatory prices as well. Elopak finally reported attempts at excluding it from certain advertising media.

The various elements of Elopak's complaint were explained in detail in the statement of objections(4) . (pp. 3 to 7)

III. Markets and products(5)

1. The packaging of liquid foods

(6) Although the carton is in theory suited to the packaging of a variety of liquid and semi-liquid foods, the latest available figures (1987) show that some 79 % of cartons are in fact used for packaging milk (72 %) and other liquid milk products (7 %), 16 % for fruit juice, with other food products - wine, mineral water, tomato-based products, soup, sauces and baby food - together accounting for only 5 % or so of cartons used. At the time the complaint was filed, some 90 % of cartons were used for the packaging of milk or milk products.

(7) Intended originally for the packaging of milk, the carton is in fact the type of packaging most widely used at present for this product: it is estimated that over 60 % of milk within the Community is sold in cartons, and this percentage is increasing. Practically the only other forms of packaging used for milk are glass and plastic bottles. Although there are fairly major differences between countries in this respect, these are due essentially to differences in consumer preferences.

The use of cartons for packaging fruit juice is also widespread, although this is a much more recent phenomenon. It is estimated that some 50 % of fruit juice consumed in the Community is packaged in cartons (against some 34 % in glass bottles and some 13 % in plastic bottles). However, fruit juice accounts for only a relatively small market share (some 16 %, cf. recital 6 above) of the market for this type of packaging, a share which seems to be stabilizing.

For the other liquids referred to in paragraph 6 above, the use of the carton as a form of packaging remains marginal. However, it is likely to increase in future as consumer habits evolve.

2. Milk packaging

(8) Milk is essentially sold in a pasteurized form (fresh milk) or after ultra-high temperature treatment under aseptic conditions (UHT milk), the latter making it possible to attain a storage period of several months in a non-refrigerated environment(6) .

(9) For each of these two milk processing techniques, there are different methods and forms of packaging. The corresponding products (packaging machines and cartons) in turn form separate markets in the sense that their substitution flexibility in relation to prices is low, this being due to a combination of factors: the marginal nature of packaging in the total cost price of the packaged products(7) , the specific nature of the various types of packaging in the eyes of the consumer, and the inflexibility encountered on the supply side(8) .

(10) The cartons used for packaging fresh milk are generally of the 'gable top' variety: these have an elongated shape and can be grasped at the top, which is opened out to form a pouring spout. The cartons used to package UHT milk are normally 'brick'-type cartons: these are in the shape of a brick and are produced from a finer card lined with aluminium film.

3. Markets and competitors

(11) Four separate markets must be identified as regards the packaging in cartons of liquid and semi-liquid foods:

(a) the market for machinery incorporating technology for the sterilization of cartons and the packaging in those cartons, under aseptic conditions, of UHT-treated liquid foods(9) ;

and

(b) the corresponding market for packaging cartons;

(c) the distinct but neighbouring market for machinery enabling fresh liquid foods to be packaged in cartons;

and likewise,

(d) the corresponding market for packaging cartons;

For the sake of convenience, markets (a) and (b) will hereinafter be referred to as the 'aseptic sector' and the latter markets (c) and (d) as the 'non-aseptic sector'.

(12) The structure of the aseptic sector in the Community is quasi-monopolistic, with Tetra Pak holding a market share of approximately 90 to 95 %(10) for both cartons and packaging machines.

Tetra Pak's only real competitor in the aseptic sector is PKL - controlled by a Swiss company, SIG (Société industrielle générale) - which accounts for almost all the remaining market share, i. e. approximately 5 to 10 %.

(13) The structure of the non-aseptic sector in the Community is more open but is still oligopolistic. Here too, Tetra Pak is the market leader, currently holding some 50 to 55 % of the market.

In the non-aseptic sector, Tetra Pak's main rival is Elopak, which held, in 1985, some 27 % of the market, followed by PKL with around 11 % (1985)(11) .

The rest of the market - approximately 12 % - was, at that time, to all intents and purposes divided, as far as cartons were concerned, between three other companies: Schouw Packing (Denmark, ±7 %(12) , Mono-Emballage/Scalpak (France/Netherlands, ±2,5 %) and Van Mierlo (Belgium, ±0,5 %). These companies, whose respective markets remain concentrated in one or more countries, manufacture their own cartons, but generally under licence (Ex-Cell-O,(13) Nimco, Sealright, etc.), and act only as distributors as far as machines are concerned.

The 13 % or so of the non-aseptic machines market left in the Community, once Tetra Pak, Elopak and PKL had been accounted for, was shared between some ten producers, the main ones being Nimco (USA, 4 %), Cherry Burrel (USA, 2,5 %), and Shikoku (Japan, 1 %). In this connection, it is to be noted that Tetra Pak, Elopak and PKL operated, even if only occasionally, as distributors for these other producers.

Although access to the aseptic packaging sector is, mainly for technological reasons(14) , still difficult for a producer in the non-aseptic field - although many attempts at penetration have been made(15) - it would on the other hand be relatively easy for a producer from the aseptic sector to enter the non-aseptic sector for the packaging of fresh liquid foods.

4. Products

4.1 Cartons

(14) Tetra Pak originally developed the continuous packaging process using (form-fill-seal) its Tetrahedron cartons (in the shape of a tetrahedron, as the name suggests) (1952), but this technology really took off with the use of brick cartons (1963). This originally non-aseptic packaging process has proved to be particularly well suited for aseptic packaging techniques, for which Tetra Pak developed its own technology during the sixties. The cartons are delivered to the user in the form of a roll (roll-fed), which is sterilized in the machine itself by being soaked in a hydrogen peroxide bath, and is then used to package the liquid as it flows in an aseptic environment. PKL also produces aseptic cartons of the brick type, so-called Combibloc cartons, but these are pre-shaped at the time of packaging.

(15) On the non-aseptic carton market, Tetra Pak initially used brick cartons and continues to do so, but its main product on this market is now a gable-top carton known as the Rex carton. This carton is in direct competition with the Pure-Pak carton produced by Elopak. Mention must also be made of the presence on this market of PKL's non-aseptic Combibloc, Quadrobloc and Pergabloc cartons, with other producers' cartons holding only a marginal market share.

4.2 Machines

(16) Tetra Pak manufactures its own machines for both the aseptic and non-aseptic markets. On the latter, however, it also occasionally sells Cherry Burrel and Nimco machines.

Although Elopak has been producing cartons for a long time, it was, until it purchased the packaging machine division of Ex-Cell-O in 1987, only a distributor of machines on the market, manufacturing only accessory equipment (handling equipment, etc.) itself. It should also be remembered that Elopak's operations are limited entirely to the non-aseptic sector.

With the exception of PKL, which manufactures its own machines and cartons for the aseptic and non-aseptic markets, other manufacturers hold a marginal share of the European market.

5. Manufacture and distribution of cartons

(17) Packaging cartons are manufactured from a basic card, delivered in the form of a roll known as a board. The market for this product - which alone represents 60 to 70 % of the cost of cartons(16) - is itself oligopolistic, and the carton manufacturers obtain supplies from the same suppliers.

For the manufacture of gable-top and certain brick cartons (e.g. PKL's Combibloc), the rolls of board are printed with the customer's colours and text, and subsequently cut, pre-folded and partly glued by the manufacturer, to make what are known as blanks. These blanks are delivered to the customers (dairies or fruit juice producers etc.) where they take their final shape before being filled and sealed.

For the manufacture of Tetra Pak brick cartons, the rolls of board are only printed and cut into narrower rolls by the manufacturer, and it is not until the liquid is packed on the customer's premises that the rolls - possibly after having been soaked in a concentrated hydrogen peroxide bath to sterilize them - are folded in a continuous operation around the liquid and then cut, glued and folded into shape.

6. Entry barriers

(18) For technological reasons(17) and because of the existence of a large number of patents and restrictive trade practices(18) , barriers to entry into the aseptic sector are very high. They are considerably less so in the non-aseptic sector, at least as far as the technological barriers are concerned(19) .

IV. Tetra Pak's trading policy

Methodological approach

(19) In this section, consideration will be given to the various aspects of the trading policy implemented by Tetra Pak on the four aseptic and non-aseptic markets defined at point 11. For most of these aspects, the study will cover the Community as a whole, thus going beyond the geographical area to which Elopak's complaint relates (Italy). However, in certain cases the Commission has been required to concentrate more specifically on Tetra Pak's conduct in Italy, either because it has been necessary to examine certain aspects of Elopak's complaint more closely or because the results of the initial general study have directed the Commission's further enquiries towards Italy(20) .

1. Production and marketing of products

(20) In the Community, Tetra Pak has a machine assembly plant in Italy and carton production units in Germany, France, the United Kingdom, Italy, the Netherlands, Portugal and Spain. Nowhere in the world has Tetra Pak granted any manufacturing licences for its machines. This also applies to its cartons, except in a few non-Community countries.

(21) Throughout the Community, distribution of both cartons and machines to dairies or other end users is undertaken directly by companies within the Tetra Pak group. There are no independent distributors(21) and there is therefore no possibility of intra-brand competition.

(22) Finally, Tetra Pak has pursued a particularly extensive patents policy. The group has not merely patented all the basic technology which it has developed in relation to machines, cartons and processes, but has also patented all modifications, however minor, made subsequently to these products, as well as certain secondary techniques (e. g. the method of folding the carton). As a result, although the basic technology for the aseptic brick cartons was developed in the 1960s and has remained basically the same ever since, the latest patents relating to these cartons expire in the early years of the next century. This is of course assuming that no new patents are registered which would extend protection even further. At present, Tetra Pak claims over 100 patents for cartons and a further 100 or more patents for machines.

2. Contractual conditions governing the sale and leasing of Tetra Pak equipment and cartons

(23) Tetra Pak's conditions for the sale and leasing of packaging equipment and for the supply of cartons, as described below, have been extracted from standard contracts in force within the various Member States of the Community. In some countries, Tetra Pak will only lease equipment; in others, the user has the choice between buying or leasing(22) . There therefore exist standard purchase contracts and standard lease contracts for machines (including associated equipment and accessories) and standard supply contracts for cartons.

Although differences exist from one country to another in the wording of the standard contracts, the most important conditions relating to the group's policy are included in the majority of them. Mention will be made below of any clause which has implications for competition and which appears in one wording or another in any of the contracts. These clauses are identified by a roman numeral, and a summary table in the Annex (Annex II) indicates the articles in the standard national contracts to which these clauses refer.

Details of the content of these clauses are given in the statement of objections (pp. 14 to 26).

2.1. Conditions of sale of Tetra Pak equipment (Annex II.1)

(24) Standard purchase contracts exist in the following five countries: Greece, Ireland, Italy, Spain and the United Kingdom. For each clause, the country or countries in which it is applicable are indicated in brackets.

2.1.1. Equipment configuration

(25) In Italy, Tetra Pak reserves an absolute right of control over the equipment configuration by prohibiting the buyer:

(i) from adding accessories to the machine (Italy);

(ii) from making modifications to the machine, and adding or removing anything to or from it (Italy);

(iii) from moving the machine (Italy).

2.1.2. Operation and maintenance of equipment

(26) There are five clauses concerning the operation and maintenance of equipment, which are intended to give Tetra Pak an exclusivity and a right of inspection in this area:

(iv) it has an exclusive right to maintain and repair equipment (all countries except Spain);

(v) it has an exclusive right to supply spare parts (all countries except Spain);

(vi) it has the right to provide, free of charge, assistance, training, maintenance and updating services not requested by the client (Italy);

(vii) there is a sliding scale for part of the charges made for assistance, maintenance and technical updating (with a possible discount of up to 40 % of the basic monthly charge) depending on the number of cartons used on all Tetra Pak machines of the same type (Italy);

(viii) the purchaser is required to inform Tetra Pak of any improvements or modifications to the equipment and to grant Tetra Pak ownership of any resulting intellectual property right (Italy).

2.1.3. Cartons

(27) There are four clauses relating to cartons which also give Tetra Pak an exclusive right of control over the product:

(ix) the purchaser must use only Tetra Pak cartons on the machines (all countries);

(x) the purchaser must obtain supplies of cartons from Tetra Pak or a supplier designated by Tetra Pak (all countries);

(xi) the purchaser is required to inform Tetra Pak of any improvements or technical modifications made to the cartons and to grant Tetra Pak ownership of any resulting intellectual property rights (Italy);

(xii) Tetra Pak reserves the right to inspect the wording to be used on cartons (Italy).

2.1.4. Inspections

(28) Two clauses are more specifically concerned with monitoring the purchaser's compliance with his contractual obligations:

(xiii) the purchaser is required to submit a monthly report (Italy);

(xiv) Tetra Pak has the right to carry out inspections without notice (Italy).

2.1.5. Transfer of ownership or use of equipment

(29) Two clauses in the contract limit the purchaser's right to resell or transfer the equipment to third parties:

(xv) the purchaser is required to obtain Tetra Pak's agreement before selling or transfering the use of the equipment (Italy), resale is subject to conditions (Spain), and Tetra Pak reserves the right to repurchase the equipment at a pre-arranged fixed price (all countries); failure to comply with this clause may give rise to a specific penalty (Greece, Ireland, United Kingdom);

(xvi) the purchaser must ensure that any third party to whom he resells the equipment assumes all his obligations (Italy, Spain).

2.1.6. Guarantee

(30) (xvii) The guarantee given on the equipment applies only if the purchaser complies with all of his contractual obligations (Italy) or, at the very least, uses only Tetra Pak cartons (other countries).

2.2. Conditions for the leasing of Tetra Pak equipment (Annex II.2)

(31) Standard lease contracts exist in all countries within the Community except Greece and Spain.

These contracts include the majority of the clauses contained in purchase contracts, adapted to the circumstances of leasing.

Other conditions are specific to leasing but invariably pursue the same goal, i.e. maximum reinforcement of the links between Tetra Pak and its customer.

2.2.1. Equipment configuration

(32) Clauses (i), (ii) and (iii) (Italy in the case of clause (i); all countries in the case of clause (ii); France, Ireland, Italy, Portugal, United Kingdom in the case of clause (iii)) are included.

(xviii) An additional clause requires the leaseholder to use only cases, outer packages and/or containers supplied by Tetra Pak for transport purposes (Germany, Belgium, Italy, Luxembourg, the Netherlands) or if the conditions are equal to give preference to obtaining supplies from Tetra Pak (Denmark, France).

2.2.2. Operation and maintenance of equipment

(33) Clauses (iv) and (v) (all countries) are included, granting Tetra Pak exclusive rights.

Likewise, clause (viii) appears, conferring on Tetra Pak ownership of the intellectual property rights to any modifications made by the user (Belgium, Germany, Italy, Luxembourg, the Netherlands) or, at the very least, requiring the leaseholder to grant an operating licence to Tetra Pak (Denmark, France, Ireland, Portugal, United Kingdom).

2.2.3. Cartons

(34) Contracts also contain clauses (ix) (all countries) and (x) (Italy) concerning the exclusive use of Tetra Pak cartons, clause (xi) conferring on Tetra Pak ownership of the rights to any improvements (Denmark, Italy) or, at the very least, requiring leaseholders to grant an operating licence to Tetra Pak (France, Ireland, Portugal, United Kingdom), and clause (xii) giving Tetra Pak the right to inspect the wording or brand names which the client wishes to use on the cartons (Germany, Spain, Greece, Italy, the Netherlands, Portugal, United Kingdom).

2.2.4. Inspections

(35) In the case of sale, the leaseholder must return a monthly report (clause (xiii) - all countries), failure to do so giving rise to fixed-rate invoicing (Belgium, Luxembourg, the Netherlands), and allow the premises at which the equipment is installed to be inspected (clause (xiv) - all countries) without notice (all countries except Denmark, Germany, Ireland, Portugal and the United Kingdom).

(xix) A further clause allows Tetra Pak to examine - at any time (Denmark, France) - the accounts of the company leasing the equipment (all countries) and (depending on the country) its invoices, correspondence or any other documents necessary to check the number of cartons used.

2.2.5. Transfer of the lease, sub-leasing, transfer of use or use on behalf of third parties

(36) In the case of sale, ownership may be subsequently transferred only where very restrictive conditions are complied with.

(xx) The terms of lease contracts likewise exclude the transfer of the lease, sub-leasing (all countries) or even simple commission work on behalf of third parties (Italy).

2.2.6. Guarantee

(37) The wording of lease contracts is less precise than that of purchase contracts: they link the guarantee to compliance with 'instructions' given by Tetra Pak concerning the 'maintenance' and 'proper handling' of the machine (all countries). However, the terms 'instructions', 'maintenance' and 'proper handling' are sufficiently broad to be interpreted as also including at least the sole use of Tetra Pak spare parts, repair and maintenance services and packaging materials. Such an interpretation is confirmed by the written and oral replies given by Tetra Pak to the statement of objections.

2.2.7. Fixing of rental and conditions of payment

(38) The rental is made up of the following components (all countries):

(a) (xxi) A 'base rental' payable at the time the machine is placed at the leaseholder's disposal. Its amount is not necessarily any lower than the selling price of the machines concerned and in fact makes up almost the total sum of present and future rental payments (more than 98 % in some cases)(23) ;

(b) an anual rental, payable quarterly in advance;

(c) (xxii) a monthly production rental, the amount of which decreases according to the number of cartons used on all Tetra Pak machines of the same type. This component replaces the sliding scale of charges - set at a similar level - for part of the maintenance costs payable in the case of sale (see clause (vii));

In some countries (Germany, France, Portugal), there is a specific penalty if this fee is not paid within the prescribed period.

2.2.8. Term of the lease

(39) The term of the lease and the conditions for its termination vary from one Member State to another:

(xxiii) The minimum term of the lease ranges from three years (Denmark, Ireland, Portugal, United Kingdom) to nine years (Italy).

2.2.9. Penalty clause

(40) (xxiv) Over and above the usual damages and interest, Tetra Pak reserves the right to impose a penalty on any leaseholder who infringes any of his obligations under the contract, the amount of such penalty being fixed at Tetra Pak's discretion, up to a maximum threshold, according to the gravity of the case (Italy).

2.3. Conditions for the supply of cartons (Annex II.3)

(41) Standard supply contracts exist in Greece, Ireland, Italy, Spain and the United Kingdom: they are compulsory whenever a client purchases rather than leases a machine.

2.3.1. Exclusive supplies

(42) (xxv) The purchaser must undertake to obtain supplies of all packaging materials to be used on the given Tetra Pak machine(s) (all countries) and on any other Tetra Pak machine purchased subsequently (Italy) solely from Tetra Pak.

2.3.2. Contract term

(43) (xxvi) The contract is signed for an initial period of nine years, renewable for a further period of five years (Italy) or for the period during which the purchaser remains in possession of the machine (Greece, Ireland, Spain, United Kingdom).

2.3.3. Fixing of prices(24)

(44) (xxvii) Cartons are delivered at the price applicable at the time of order. No system of adjustment or indexing is provided for (all countries).

2.3.4. Wording

(45) Contracts again include Tetra Pak's right to inspect the wording or brand names which the client wishes to use on cartons (clause (xii)).

3. Trading policy in relation to the sale of cartons

(46) A vital aspect of Elopak's complaint related to the prices charged by Tetra Pak for Rex cartons in Italy, these prices being considered predatory. Tetra Pak rejected this accusation, supplying in its defence a profitability study for this product relating to Italy in 1983.

The Commission has considered it necessary to widen the scope of its inquiry on this matter and, in order to have a better understanding of the policy pursued by the group, to carry out a complete analysis of 1. sales, 2. profitability and 3. prices of the various Tetra Pak products, over a number of years (1981 to 1984) and for all Community countries. This analysis - which is based on the operating accounts supplied by Tetra Pak - was dealt with in detail in the statement of objections(25) , and only the main conclusions reached are summarized here.

3.1. Carton sales and their profitability

3.1.1. Carton sales (Annexes III.1 and III.2)

(47) 1. Geographical breakdown of sales:

Three countries, each having almost equal shares, account for 70 % of sales of Tetra Pak cartons in the Community (1984)(26) : Germany (24,8 %), France (23,5 %) and Italy (20,3 %). The United Kingdom is in fourth place, with a share approximately half as large as those three countries (12 %).

2. Breakdown of sales by type of carton:

The aseptic brick alone accounts for nearly 80 % of carton sales and more than 70 % of the group's total turnover. The Rex and non-aseptic brick account for only 11 and 7 % respectively of carton sales. The various other models (Tetrahedron, Tetra King, etc.) make up the remaining 2 % and are therefore of only marginal importance (1984).

3. Growth rate of products:

Over the period under review, the Rex carton is the product with the highest growth rate, and it is gradually supplanting the non-aseptic brick as the main carton for fresh products. Italy is becoming the principal producer of this type of carton.

3.1.2. Carton profitability (Annexes III.3 to III.5)

(48) 1. The aseptic brick, which faces virtually no effective competition, is proving to be by far the most profitable product, with a net margin of [...] to [...] of turnover [...] to [...] in Italy, contributing in itself to [...] of the group's total profits in all countries represented and to more than 100 %(27) in the United Kingdom throughout the period under review and, in 1983 to 1984, in France(28) . Taking cartons in isolation, the contribution to profits of the aseptic brick varies from [...] to 102 % for all Member States represented, with the 100 % rate being reached or exceeded in Germany, Italy and the United Kingdom (114 %) in 1981, again in the United Kingdom in 1982, and in Belgium/Luxembourg in 1983.

2. The non-aseptic brick has a low but, with a few exceptions, still positive profitability (net margin of [...] to [...]).

3. The same cannot be said of the Rex carton, the profitability of which is frequently negative: this was the case in 1981 and 1982 in Italy, Germany, France and the United Kingdom, in 1983 in Belgium/Luxembourg, and in 1984 in Denmark, Belgium/Luxembourg and again in the United Kingdom. In 1981, profitability was negative overall (-11,2 %) in all the Member States considered. The figures also show that this phenomenon has been particularly apparent in Italy (net margin of -34,4 % in 1981).

3.1.3. Profitability of Rex cartons in Italy (Annexes IV.1 to IV.5)

(49) This latter observation has led the Commission to examine the situation in Italy more thoroughly and to ask Tetra Pak to supply it with the necessary data for a calculation of the profitability of its products since the year in which Rex was introduced into that country (1976). An analysis of these figures has produced the following main findings:

1. the losses recorded on Rex cartons were not of an accidental nature: they extended over a period of seven years (1976 to 1982) and amounted to between -10 and -34 % of turnover (net profit margin);

2. these losses were so great that the selling price came nowhere near to covering even direct variable costs (with the gross margin(29) permanently(30) and substantially negative: between -9,8 and -33 %) and even, in some years, covering no more than the cost of raw materials;

3. from 1976 to 1980, Tetra Pak (which did not produce its Rex cartons in Italy but imported them from group companies) resold these cartons on the Italian market at prices which were 10 to 34 % lower than their purchase price;

4. during the period under review, Tetra Pak sold its Rex cartons at prices which were considerably lower than those charged by Elopak for its rival Pure-Pak carton, and the difference in price between the two has been growing (up to 30 % and, at one time, as much as 50 %);

5. during this period, sales of Rex cartons progressed slowly at first, even stagnating to a certain extent (index 100 in 1976, 215 in 1977, 177 in 1978 and 259 in 1979), but then increased at an exceptional rate (index 6 353 in 1984), while Elopak saw sales of its Pure-Pak carton stop increasing and then begin to decrease (index 69 in 1986 against 100 in 1981), although there was a certain time-lag between these two developments.

Elopak's share of the Italian market(31) in non-aseptic cartons, which increased from 9 % in 1977 to some 25 % in 1981, fell to 17,5 % in 1986, while that of Tetra Pak's other competitors fell from 12 to 6 %, and then to some 2 %. Conversely, Tetra Pak's market share, which had fallen from 79 to some 70 % between 1977 and 1981(32) , increased to 80,5 % by 1986, while that of Rex cartons taken in isolation increased from 2 to 7,5 % and then to 38,5 % respectively.

(50) During an inspection visit on 27 and 28 January 1987 at Tetra Pak's premises in Italy, Commission officials collected documents dating from 1981 and relating to orders involving 420 000 one-litre Rex cartons, 235 000 two-litre Rex cartons, 253 000 quarter-litre Rex cartons and 102 500 quarter-litre Rex cartons imported from Sweden and resold at prices which were 24, 17, 29 and 23 % lower respectively than the purchase price. These documents therefore corroborate what has been established on the basis of accounting data.

(51) Reports issued by the Board of Directors of Tetra Pak Italiana in 1979 and 1980 refer, moreover, to the need to make major financial sacrifices in the area of prices and supply terms in order to fight competition, in particular from Pure-Pak. The 1979 report indicates that 'sacrifices of an economic and financial nature involving considerable sums' are necessary, and the 1980 report that an attempt should be made to forestall competition 'even by means of special supply terms and prices'. This last sentence refers to the non-aseptic market.

3.2. Prices charged in different Member States

3.2.1. Average prices (Annex V.1)

(52) Annex V.I gives a comparison of average prices (turnover/number of cartons sold) charged in the various Member States between 1981 and 1984 (figures given in ecus and indexed in relation to Italy) for the three main types of Tetra Pak carton: Rex, the non-aseptic brick and the aseptic brick. This table gives rise to the following observations:

1. there are considerable price disparities between Member States;

2. these are particularly great between Italy and the other Member States, easily reaching 50 % with a minimum of some 20 to 25 % (with a few exceptions);

3. these disparities are neither uniform nor one-way in all cases: from one country to another, they vary in size and sometimes in direction depending on the product concerned;

4. for all types of carton, however, Italy is the country in which prices are the lowest.

3.2.2. Price lists (Annexes V.2 and V.3)

(53) In order for data relating to average prices to be fully comparable, the breakdown of turnover by cartons of different sizes and average quantities ordered would have to be the same for each country, which is not the case. However, the differences observed are too great to be explained by such objective material differences. Furthermore, figures taken from the price lists(33) in the Commission's possession and given in Annexes V.2 and V.3 reveal, over longer periods of time (1978 to 1984) that disparities exist between Member States on a scale comparable to that reported for average prices, which confirms the assertions made at point 52 above.

4. Trading policy in relation to the sale and lease of machines(34)

4.1. Machine sales and leasing operations and their profitability

4.1.1. Machine sales and leasing operations (Annexes III.1 and III.2)

(54) 1. Geographical breakdown of sales/leasing operations:

Four countries account for 88 % of turnover from machine sales and leasing operations: Germany (24,8 %), Italy (23,5 %), France (20,3 %) and the United Kingdom (19 %) (1984). These are the same principal markets as for cartons, although the turnover in the United Kingdom is much the same as in the other countries. This is a recent development, however. Up to 1981, machine sales and leasing operations in the United Kingdom (11 % of total turnover) were only a third of what they were in Germany and a half of the equivalent figures for France and Italy.

It is moreover in the United Kingdom that the contribution of machines to total turnover has grown to the highest level [...] against an average of [...] (1984).

(55) 2. Growth rate:

It can be seen in all countries, with the exception of the United Kingdom, that there is a fairly clear trend towards reducing the relative importance of machines in Tetra Pak's total turnover figures. Overall, it fell from [...] in 1981 to [...] in 1984, during which time the growth rate for machines was only 12 compared to 60 % for all Tetra Pak products combined. Here again, the United Kingdom is an exception with a growth rate of [...] for machines, seven times greater than recorded in all countries examined.

4.1.2. Machine profitability (Annexes III.3 to III.5)

(56) Over the period under review, the profitability of machine operations was positive overall, except in 1984 [...]. There is, moreover, a not insignificant number of exceptions. For example, machine operations in Germany showed a deficit in 1984 -[...]. The same applied to the Netherlands in 1983 and 1984 -[...] and -[...], where receipts were considerably lower than direct variable costs in 1984 (gross profit margin of -[...]). In France, one of the two Tetra Pak companies had a negative net margin in 1981, 1982 and 1984 -[...], -[...] and -[...] and a negative gross margin in 1982 -[...]. However, the United Kingdom differs from these other countries by showing constant and growing losses: there was a net margin of -0,1 %, -12,5 %, -20,2 % and -42,2 % over the period 1981 to 1984 and, according to Tetra Pak estimates,(35) a semi-gross profit margin of -1,3, -8,1 and -28 % approximately over the period 1982 to 1984.

4.2. Prices charged

4.2.1. Prices charged in the various Member States (Annexes VI.1 to VI.3)

(57) Annexes VI.1 and VI.3 show, respectively, the selling and leasing prices charged for in the main machines produced by Tetra Pak, i.e. Rex, aseptic brick and non-aseptic brick machines, for the years 1984 to 1986.

The figures supplied by Tetra Pak are not uniform since, as far sales are concerned, the prices quoted for some countries are average prices whereas others are prices taken from price lists. Despite these shortcomings, the following conclusions may be drawn.

(a) Selling prices of machines in the various Member States (Annex VI.1)

(58) 1. Major price differences exist between the Member States: in most cases they are around 50 %, rising to between 70 and 100 % in some cases.

2. As in the case of cartons, the country in which machine prices are clearly at their lowest is again Italy. Conversely, it is in Ireland that the highest prices are charged.

3. In the case of Italy, where prices are lowest, the figures submitted are for average prices, while for the other countries (except Greece) they are taken from price lists. It must be deduced that Tetra Pak grants considerable discounts on its standard list prices, and probably in more cases than have been indicated to the Commission(36) . However, the price differences between Italy and the other countries are so great that they cannot reasonably be the result of price discounts alone.

(b) Leasing prices of machines in the various Member States (Annex VI.2)

1. The three components of machine rental

(59) An analysis of contract terms has shown that machine rental is made up of three components: a base rental payable at the time the machine is installed, a quarterly rental and a monthly production rental calculated on a sliding scale according to the number of cartons used. Consequently, an exhaustive comparison of the leasing prices charged in the various Member States would, in principle; require account to be taken of all three rental components.

Monthly production rentals cannot of course be calculated in advance since they are determined on the basis of the number of cartons used, but they appear to be negligible compared to the base rental(37) .

With regard to the quarterly rental, it is possible to compare this with the base rental charge by adding together the quarterly charges payable during the entire term of the lease contract and adjusting them on the basis of a given interest rate. It will thus be seen that, although the volume varies according to country and machine concerned, it represents only a very small proportion (a few percent) of the base rental charge. For example, considering that the base rental for a Rex RC4 machine stood in 1986 (Germany) at ECU [...] and the quarterly rental charge was ECU [...] it can be seen that the adjusted value of the sum of quarterly payments (at an interest rate of 8 %, which is representative for the medium-term ECU market in that year), amounted to ECU [...] for a lease period of three years, i.e. barely 1,52 % of the base rental.

It follows that a valid comparison of leasing prices can be made by comparing base rentals alone since these represent virtually all present and future rental payments. It also follows, since the leaseholder pays virtually the entire rental sum in advance, that the leasing of Tetra Pak machines must, from a financial point of view, be considered equivalent to a sale(38) .

2. Leasing prices of machines

(60) An analysis of Annex VI.2 gives rise to the same general observations as those made for selling prices:

- the difference between leasing prices (base rentals) charged in the various Member States are considerable; indeed they are much greater (by up to 200, 300 or even 400 %) than those observed for selling prices;

- with a few exceptions, the countries in which the lowest leasing prices are charged (Belgium, Denmark) are those for which the figures supplied by Tetra Pak relate to average prices (as opposed to prices taken from price lists).

It should also be noted that, although the size and sometimes the direction of these differences between the Member States may vary from one type of machine to another, rentals are, overall, highest in France and then Germany.

(c) Comparison of selling and leasing prices in the various Member States (Annex VI.3)

(61) The comparison made in Annex VI.3 between the prices charged in Member States in which Tetra Pak sells its machines and those in which it leases them also shows that in some countries the base rental is alone far higher than the selling price charged in other countries.

Solely by way of example, the base rental for a B8 machine in Germany in 1985 was more than double the average selling price for these machines in Italy during the same year. The former is no doubt a price taken from price lists and the latter an average price. But as we have seen, these disparities, whilst suggesting the existence of very large discounts, are so great that it cannot be assumed that discounts are the only explanation.

Furthermore, comparing only the prices taken from price lists (for countries where such lists exist), it can be seen that, although the disparities are smaller, it is not rare to find cases in which base rental charges are considerably higher than the selling prices indicated on such lists, with differences rising to 40 % or more in some cases.

4.2.2. Prices charged in Italy

(62) One of the points raised in Elopak's complaint of 27 September 1983 related to the policy pursued by Tetra Pak in Italy in relation to selling and leasing prices for machines. Elopak complained in particular of the excessive discounts granted by Tetra Pak to win contracts, and considered that in some cases the size of these discounts could only amount to predatory prices.

Apart from comparing prices at Community level, the Commission has therefore conducted a more thorough analysis of the prices charged by Tetra Pak in Italy. In this context, it analysed the bulk of contracts (more than 200) placed by Tetra Pak with Italian dairies and then went on to examine more closely the conditions governing a number of sales and leasing operations in Italy.

4.2.2.1. Nominal prices and payment terms appearing in contracts

1. Payment terms

(63) The standard terms for payment of the selling price or base rental, as revealed by an analysis of contracts, are as follows: one-third is payable upon signing the contract, one-third upon delivery of the machine, and one-third after complete installation of the machine. However, it appears upon reading the contracts that deviations from these standard provisions are numerous and varied. In view of the absence of a reference standard (average payment period in usual cases), it is not possible to calculate the effect that these deviations have on the selling price or base rental. However, it must be considered a priori that it is generally very small since the differences relate in the majority of cases only to very short payment periods compared to the lifespan or lease period of machines. It will be seen in the following section, however, that more major deviations do not normally appear in contracts but are covered by counter-agreements, and that in these cases the conclusions to be drawn may be quite different.

2. Prices (Annex VI.4)

(64) Annex VI.4 shows nominal selling and leasing prices, as obtained from an analysis of contracts. These prices have been broken down by machine type and arranged in chronological order for each of these types. Columns (A) and (B) give current values, columns (C) and (D) constant values, calculated in order to eliminate the bias of inflation from the comparison over time(39) .

(a) Chronological series at current prices

(65) A glance at the chronological series at current prices (columns A and B) is enough to identify a number of anomalies. It is, for example, not rare for some sales or leasing operations to have occurred at prices considerably lower - often by 25 to 50 % - than those charged for other operations concluded either at about the same time or indeed much earlier. Only a few cases will be cited here.

Item 1, Rex RC6 machines: Sales 19 and 20 concluded in February 1983 at a price of Lit [...] each, against Lit [...] for sales 16 to 18 concluded at the end of 1982, i.e. a difference of over 30 %.

Item 9, AB/1000 machines: Sales 42 and 43 (January and March 1982) at prices of Lit [...] and [...] million, against Lit [...] million for sale 41 (November 1981), i.e. differences of 26 and 31 %. It can also be seen that sales 42 and 43 were concluded in 1982 at prices lower than those charged in 1981 and 1980 and the same in fact as in 1979, despite the fact that the general price index for industrial products (referred to in footnote (1), page 13) rose during that period by more than 50 %.

Item 14, AB/500 machines: Sales 4 and 5 concluded at prices of Lit [...] and [...] million (September 1983 and November 1984), against Lit [...] million for sale 3 (February 1983), i.e. differences of 50 and 37 %. These prices are in fact lower than those charged in 1982.

A detailed analysis of Annex VI.4 even shows the existence of extreme differences. It is however possible that such cases relate, as Tetra Pak affirms, to second-hand machines, but there is no such indication in the contracts concerned.

(b) Chronological series at constant prices

(66) The chronological series at constant prices (columns C and D) allow comparisons to be made which are valid for the entire series. Analysing them gives rise to the following main conclusions:

1. the series confirms the existence of major differences, some of which were already apparent in the current-price chronological series, and of many cases in which rental charges are higher than selling prices;

2. the differences observed are spread across the entire period covered by these series and amount in the extreme to a doubling or trebling of prices, or even more;

3. finally, a more detailed analysis of these differences (calculation of standard deviations for the two price series) shows that they are greater for Rex machines - which face stiffer competition - than for brick machines.

Although the results obtained in this way must to a certain extent be considered approximate(40) , the differences which emerge are often too great to be attributed solely to the inaccuracies inherent in the method used.

(c) Conclusions

(67) Comparing the prices charged in the various Member States revealed in particular the existence of major differences between them and the frequent existence of base rental charges which in themselves are the same or higher than selling prices. A detailed analysis of Tetra Pak contracts in Italy shows that these same phenomena arise within one and the same Member State. Moreover, the very scale of these differences makes it likely that machines are being sold ar leased at a loss in the case of the most disadvantageous transactions.

4.2.2.2. Analysis of a number of machine sales and leasing operations

(68) In order to complete the analysis of prices and payment terms included in the various contracts and to improve its understanding of actual sales and leasing operations, the Commission has carried out detailed investigations with a number of Italian dairies. It would be too long-winded to deal with each case individually in this Decision, and reference should therefore be made to the statement of objections(41) . However, the main conclusions can be summarized as follows.

1. Real prices - which often emerge from counter-agreements drawn up alongside the contracts and which contradict their terms - are generally much lower than the nominal prices which appear in the contracts, with differences in some cases of perhaps 50 % or more. The means of reducing them vary considerably and are often used in conjunction with each other:

- the buying-up of Tetra Pak's competitor's machines, with little or no residual value at extravagantly exaggerated prices (nearly equal to or even exceeding their original purchase prices),

- trading in old Tetra Pak machines equally at exaggerated prices,

- fictitious buying-up of old machines which are in fact left at the client's disposal,

- payment by Tetra Pak of transport and installation costs,

- payment by Tetra Pak of high advertising costs,

- reductions - over and above those included under the contract - on carton prices (by fixing those prices for a given period),

- leasing of a machine being subsequently changed upon its purchase to availability free of charge.

However, the most frequent method of reduction or discount is the first one mentioned, i.e. the purchase of the client's old machines at inflated prices.

2. Moreover, actual payment terms are often more advantageous than those specified in the contract, thus reducing the real cost of the transaction. They take the form of payment periods which are considerably longer and on which no interest is payable. In certain cases, this free credit runs for one or several years and is accompanied by an exemption from repayment.

3. When it is remembered that the net profit margin on sales of machines in Italy is between 8 and 17 % and the gross margin between 16 and 24 %(42) , those operations for which discounts of up to 50 % or more (sometimes 75 %), compared to the prices indicated in the contracts, were granted could clearly be nothingother than sales at a loss.

4. Finally, the price paid by Tetra Pak to purchase its old machines (or those of its competitors) when selling or leasing new machines, bears no relation to the price fixed contractually (see clause (xv) by the group for the purpose of exercising its right of pre-emption (where the client wishes to resell his machine to a third party), the former being greatly above, and the latter possibly below, the going rate.

4.2.2.3. Reports of the Board of Directors(43)

(69) The reports issued by the board of directors of Tetra Pak Italiana in 1979 and 1980 referred generally to the need to make major financial sacrifices with regard to prices and conditions of supply in order to fight competition, in particular from Pure-Pak (see recital (52) above). Subsequent reports give details of such sacrifices as regards machines. The 1981, 1983 and 1985 reports refer to the application of special prices and/or payment terms which would considerably strengthen the company's position as a creditor with its clients. The 1985 report also explains that, where existing machines are replaced by machines of a new design, part of the costs are borne by the container manufacturer.

In the same year, the report by the board of directors of Tetra Pak Carta mentioned, moreover, that this sister company of Tetra Pak Italiana, a carton producer, had agreed to accept losses of Lit 728 million suffered by Tetra Pak Italiana with regard to the marketing of machines: 'Such an acceptance reflects the benefits we draw from the installation of Tetra Pak machines', the report explains.

The reports for 1986 from the boards of directors of these two companies contain similar remarks.

5. Other practices affecting competitors

(70) During the inspection visit on 27 and 28 January 1987, the Commission collected a number of documents(44) regarding the various activities carried out or contemplated by this group to fight its rivals. These are described below for each of the competitors concerned.

5.1. Elopak/Pure-Pak

(71) In a letter dated 17 January 1976, the Tetra Pak group congratulated Tetra Pak Italiana on its activities relating to the Resolvo, aseptic Pure-Pak, pasteurized Pure-Pak and Combiblok machines. This letter refers to a telex dated 7 January 1976 which, apparently, described these activities. The Tetra Pak representatives present during the inspection visit claimed that they were no longer in possession of this telex. With regard to Resolvo aseptic machines (developed by Buitoni), it will be seen below (recitals (76) to (83)) that Tetra Pak took various steps to prevent their distribution in Italy. As regards the Pure-Pak aseptic machines, it is only known that attempts made at the time to develop such machines were unsuccesful.

(72) In a report dated 4 November 1978, an employee of Tetra Pak Italiana explained that he had been instructed by the General Manager to 'carry out a survey amongst Pure-Pak's best customers' in order to 'examine specifically what the cost of taking over these customers would be'.

(73) A report by a Tetra Pak Italiana salesman dated 11 December 1981 advised of the withdrawal, as part of a sale, of four Selfpak/Resolvo machines, two Zupak machines and two Tetra Pak machines; of the undertaking obtained to stop using an Elopak machine and to return or at least refrain from using a Resolvo machine outside the premises (see also recital (79) below and Annex 10 of the statement of objections, dairy E).

(74) In a telex dated 30 November 1984, Tetra Pak informed Tetra Pak Italiana of the receipt by Elopak-Europe of four aseptic machines and asked for its help in identifying their final destination. It will be seen below (recitals (76) to (83)) that this kind of inquiry has in some cases been the first stage of a process aimed at eliminating these machines, generally by buying them up.

(75) On of the points of Elopak's complaint of 27 September 1983 concerned Tetra Pak's appropriation of an advertising medium, the journal Il Mondo del Latte, by entering into an exclusive rights agreement. From correspondence exchanged on this subject at the time between Elopak representatives and the association which edited this journal, as well as from the replies given by this association to the Commission's requests for information, it emerges that Tetra Pak did indeed obtain, if not a written, at least an oral exclusive rights agreement covering a long period (at least for 1982) with regard to the journal il Mondo del Latte. During this period it was impossible for Elopak to advertise in that publication.

5.2. Poligrafico Buitoni/Resolvo

(76) At the beginning of the 1970s, the company Poligrafico Buitoni developed an aseptic packaging process called the Resolvo System. Subsequent research, carried out in collaboration with other companies, led to the Systempak system, the patent for which was bought from Buitoni by the International Paper Group in 1981. It emerges from what follows that Tetra Pak attempted by various means to prevent the distribution of this system in Italy and indeed managed to purchase all or virtually all the Resolvo machines installed in dairies.

(77) A report dated 30 October 1975 refers to the possibility of the sale at a reduced price of a Tetra Pak aseptic machine in order to persuade La Centrale Latte di Perugia not to purchase a Resolvo machine.

(78) See recital (71) above: letter of congratulations dated 17 January 1976 from Tetra Pak to Tetra Pak Italiana on its activities relating to the Resolvo aseptic machines.

(79) See recital (73) above: purchase of four Systempak/Resolvo machines and undertaking to return or no longer use another Resolvo machine outside the premises (report of 11 December 1981).

(80) In a telex dated 7 October 1981, Tetra Pak advised Tetra Pak Italiana of the supposed intention of International Paper to market the Resolvo process, which the latter had just bought from Buitoni, aggressively throughout the world. It therefore considered it strategically important to 'throw out all Resolvo machines in Italy' so as to deny International Paper any trade references in its respect. It consequently asked Tetra Pak Italiana to 'try to buy out the machine to prevent Resolvo from placing them in other dairies'.

(81) In a letter dated 4 December 1981, Tetra Pak Italiana informed Tetra Pak that it was doing its best to 'throw out Resolvo machines in Italy' but that it was experiencing major difficulties. It asked Tetra Pak to exert pressure on Kornas Marma, the supplier of paper to both Tetra Pak and Buitoni, to stop supplying Buitoni. It suggested that Tetra Pak could, for example, buy up the quantities normally supplied by Kornas Marma to Buitoni. The letter concluded that an intelligent approach could greatly contribute to placing Buitoni in great difficulties.

(82) In a letter dated 28 October 1982, Tetra Pak advised Tetra Pak Italiana that the commercial development of the Systempak/Resolvo process was not very 'flattering'. Since Portugal and Italy might in fact be the only references, it considered it 'vital' that Tetra Pak Italiana do its utmost to stop the development of these machines in Italy and 'substitute' them in order to give International Paper a 'crushing negative reference'.

(83) In a letter dated 19 September 1983, Tetra Pak Italiana announced to Tetra Pak that the Centrale Latte di Perugia had withdrawn its new Resolvo machine and purchased a Tetra Pak machine. This contract had 'cost a certain financial sacrifice' but it considered that this had been 'really worthwhile' since Buitoni had lost its only point of reference for the possible continuation of tests. The aim of removing all Resolvo machines from the Italian market, as defined in the telex from Tetra Pak dated 7 October 1981 (see recital (80)), appeared therefore to have been achieved.

5.3. PKL

(84) Many documents confirm that PKL's development is closely monitored probably because it is now Tetra Pak's only real competitor in the field of aseptic packaging. But in view of PKL's low level of penetration in Italy, Tetra Pak's Italian subsidiaries have apparently experienced very few cases of direct or concrete competition from PKL.

(85) Reference should however be made to the letter from Tetra Pak to Tetra Pak Italiana congratulating it on its activities concerning in particular the Combiblok (PKL's cartons): see recital (71) above.

(86) On 7 November 1978, a Tetra Pak Italiana salesman reported on the offers submitted as part of an invitation to tender for the purchase of a machine by a public dairy where Tetra Pak had found itself in competition with PKL and IBP. Tetra Pak was prepared to reduce its price, but only within fairly tight limits (from Lit [...] to [...] million). However, the document shows that this salesman attempted to influence the committee responsible for awarding the contract.

5.4. ICA

(87) In a telex dated 23 April 1982, Tetra Pak informed Tetra Pak Italiana that the company ICA of Bologna was attempting to develop a machine similar to Tetra Pak's aseptic machines and that it appeard to be seeking cooperation. The group concluded that it could not imagine that it would be 'in Tetra Pak's interests to seek collaboration', but that it would be of benefit 'to hinder resolutely any competition'.

5.5. Burgopak

(88) In a letter dated 10 January 1983, Tetra Pak asked Tetra Pak Italiana to approach Burgopak to request that it increase its export prices to the Middle East in order to relieve the pressure on Tetra Pak, whose prices were 40 % higher than those of Burgopak. It concluded that it would be 'ridiculous to have some kind of price war, if neither party - except the customer! - gets an advantage'.

6. Takeover of rival companies

(89) In 1970, Tetra Pak took over Selfpack, an Austrian manufacturer of packaging equipment. Selfpack had also developed, in collaboration with Buitoni, a brick-type carton and an aseptic packaging system. Buitoni would later find inspiration in this system when developing its Resolvo system. Tetra Pak, having bought Selfpack, used the company's technology to improve its own sterilization technology. The group subsequently withdrew Selfpack products from the market. Selfpack's turnover at the time it was taken over by Tetra Pak was OES 1,4 billion (ECU 64,1 million).

(90) In 1982, Tetra Pak took over Zupack, a German competitor, which also produced a carton similar to Tetra Pak's brick carton and had also developed or was developing an aseptic packaging process. After its takeover by Tetra Pak, Zupack ceased its operations in this field and its machines disappeared from the market. Zupack's turnover, according to Tetra Pak, was DM 2,6 million in 1981 (ECU 1,03 million).

(91) In 1986, Tetra Pak took control of Liquipak, one of the main suppliers of its rival Elopak. Liquipak held a patent and exclusive know-how licence for a new aseptic packaging technique intended for gable-top cartons. This technology had been developed in collaboration with Elopak. By taking control in this way, Tetra Pak took over the licence and also became the supplier of its main competitor. At the time of its takeover by Tetra Pak, Liquipak's turnover was US$ 9,9 million (ECU 10,1 million) (1986).

B. LEGAL ASSESSMENT

I. Article 86 of the Treaty

1. Relevant markets

1.1. Product market

(92) Tetra Pak operates on the four markets of aseptic and non-aseptic machines and cartons, as described in paragraph (II) of this Decision.

(93) The reasons which have led the Commission to adopt this definition of the relevant markets were explained in detail at points 29 to 39 of the abovementioned Tetra Pak I (BTG) Decision, to which reference should be made(45) . It emerges from these explanations that, although types of packaging as diverse as glass bottles, plastic bottles, plastic bags, metal tins, aseptic cartons, non-aseptic cartons, etc., form part of what is commonly known in the broad sense of the term as the packaging market for the liquid foods, this is not the 'relevant market' within the meaning of Article 86, since these different types of packaging compete with each other only in the long term(46) . In the short, and probably even the medium term, the conditions of supply and demand are such that the elasticity of substitution for products in relation to prices is almost zero.

At the level of demand, this low elasticity of substitution can be explained by the marginal share accounted for by packaging in the retail price of liquid foods(47) and by the fairly high stability of consumer preferences over a short period. At the level of supply, it can be traced essentially to the financial cost to the producer/packager of the investment involved in changing over from one type of packaging to another, the acquisition of technological know-how needed and the repercussions for marketing(48) , particularly, for all these factors, in view of the very low substitution elasticity of demand.

In a given situation of technology and consumer preferences, therefore, it must be considered that the various types of packaging and associated equipment, often requiring their own technology, form distinct markets responding to their respective conditions of supply and demand.

(94) The reason why the Commission considers that the analysis used to define a market should cover only a short period is that over a long period, during which techological progress may occur and consumer habits evolve, structures will change and the very boundaries between the various markets shift. A short period corresponds more to the economic operative time during which a given company exercises its power on the market(49) and, consequently, on which one must concentrate in order to assess that power.

(95) It is confusion about such operative times which has led Tetra Pak to take the view that there is one vast market taking in all existing forms of packaging for liquid foods, irrespective of the material from which they are made (glass, plastic, cardboard, etc.)(50) . However, the replacement on the market of one type of packaging material by another is essentially the result of changes in consumer habits which, as Tetra Pak moreover acknowledges in its reply to the statement of objections, is clearly a long-term process. During a short period, however, it has been explained above that the possibility of substituting the various types of liquid-foods packaging for each other, given the nature of supply and demand for such products, is not non-existent but rather very small, which tallies well with the concepts enshrined in the case law of the Court, which in no case requires the total absence of substitutability for separate markets to exist(51) .

(96) The Commission does not deny that producers can to a certain extent hasten or delay the evolvement of consumer habits through measures aimed at influencing the consumer in his choice of packaging but, as Tetra Pak again acknowledges(52) , this is a 'costly' and 'long-term' process, 'which may extend over many years' and of which the outcome remains uncertain.

(97) It does not therefore matter whether the packaging is one of the few costs that the producer/packager of the liquid can influence: in view of the inelasticity of final demand, the latter is not going to change his type of packaging because of variations in relative costs but rather according to the acceptability af his packaging to the consumer. Packaging does not constitute substitutable goods or factors of production whose more or less intensive use would be neutral in the eyes of the end consumer. Packaging is intended to end up in the hands of the consumer and in part determines his choice of the main product. There can be no elasticity of intermediate demand if there is no elsaticity of final demand. It is final demand which governs the attitude of the producer/packager of liquids, and it is therefore at that level that the analysis should be carried out.

1.2. Geographical market

(98) It was made clear in the Tetra Pak I (BTG) Decision that even though, for various reasons and in view particularly of the marginal nature of transport costs, demand conditions may differ from one Member State to another, the relevant geographical market covered the entire Community(53) .

2. Dominant position

(99) The data supplied by Tetra Pak relating to market shares in 1985, given in Annexes I.1 and I.2, illustrate not only Tetra Pak's dominant and indeed almost monopolistic position on the aseptic markets, but also show that it is likewise in the leading position on the non-aseptic markets, with a market share which could be considered even on its own as demonstrating the existence of a dominant position (see recital (104)).

(100) In 1985, Tetra Pak held 92 % of the Community Marked for aseptic packing machines (Annex I.2) and 89 % of that for cartons (Annex I.1). In no Member State was its market share less than 57 % for machines or cartons (except perhaps in Ireland). Its share was 100 % in four countries as regards machines and in three countries as regards cartons. An analysis of the chronological data (for 1976, 1980, 1985 to 1987) shows, that Tetra Pak's dominant position, indeed virtual monopoly, on these markets already existed in 1976 (87 % of the carton market) and was subsequently strengthened slightly (with market shares fluctuating around 90 to 95 %). It should also be remembered that Tetra Pak has only one competitor on these markets, PKL, with market shares of 5 to 10 %(54) , and that the technological and other entry barriers are extremely high (at least, in the case of technological barriers, as far as machines are concerned)(55) .

(101) With regard to the non-aseptic markets, Tetra Pak held market shares of 48 % for cartons and 52 % for machines in 1985. In no country was its market share for machines less than 35 % or for cartons less than 30 % (except perhaps in Greece). The chronological data show that Tetra Pak held 43 % of the non-aseptic carton market in 1976, and 42 % of that market in 1980, the corresponding share for the non-aseptic machine market in 1980 being 37 %. The group therefore seems to have gained an extra 10 % of these markets in the first half of the 1980s and this advance seems to have continued (±55 % of the market in 1987). It should also be borne in mind that Tetra Pak has only two main competitors on those markets, Elopak and PKL, with market shares of some 27 and 11 % respectively. Not only does Tetra Pak therefore occupy half or more of the non-aseptic market, but it also is 10 to 15 percentage points ahead of its two main rivals combined, the largest of which has about half Tetra Pak's market share and the other a share five times smaller.

Other factors further increase Tetra Pak's strength compared to its competitors on the non-aseptic market, in particular:

- Tetra Pak's virtual monopoly in the aseptic sector, which makes it almost the inevitable supplier for those companies - the large majority - producing both long-life, aseptically packaged, and fresh liquid foods(56) ,

- Tetra Pak's long experience in these two sectors, the fact that it was (besides PKL until the recent takeover of Ex-Cell-O by Elopak) the only integrated producer/distributor of machines and cartons,

- the diversity of its products and geographical locations, which makes it less dependent on various fluctuations and allows it, if necessary, to make financial sacrifices on one or other of its products without affecting the overall profitability of its operations,

- on the same lines, Tetra Pak's ability to concentrate all its competitive efforts on the non-aseptic markets without fearing repercussions on the markets where it is practically the only producer and where very high entry barriers virtually prevent the emergence of potential competitors.

Even though it cannot therefore be considered that Tetra Pak enjoys a position on the non-aseptic markets which allows it to behave as independently as on the aseptic markets, it is certain that it is far less affected by market forces than any of its competitors. For the reasons outlined below (paragraph (104)), it is not however necessary to establish in the context of this proceeding whether the power on the market which gives Tetra Pak its position of leader on the non-aseptic markets should be considered equivalent to its directly occupying a dominant position within the meaning of Article 86.

(102) It is also worth noting that if consideration is given to the entire market for the packaging in cartons of liquid foods, comprising the separate but neighbouring and associated(57) markets for aseptic and non-aseptic packaging, Tetra Pak's 'market share' was 73 % in 1985 for both cartons and machines. A chronological analysis reveals a constant increase since, starting at some 60 to 65 % in 1976, its share rose to 65 to 70 % in 1980, 70 to 75 % in 1985 and to more than 75 % in 1987 (78 % for cartons).

(103) Tetra Pak disputes that it holds any kind of dominant position, basing its defence of that assertion on its definition of the relevant market, i.e. all types of packaging (cartons, glass, plastic, etc.) for all liquid foods, a definition which obviously gives it a small market share of only 14 %.

It should first be noted that this definition leads to the inclusion in the same market of a whole range of forms of packaging which, simply from a technical point of view, are not substitutable. Tetra Pak includes, for example, all packages used for carbonated liquids, a sector in which the market share of cartons is clearly zero since they are technically not suited to containing such liquids.

In any case, it has been demonstrated that the various types of packaging, even where they are technically substitutable, are not adequately substitutable from an economic point of view for them to be considered to form part of one and the same market(58) .

The degree of interchangeability is perhaps greater within the carton packaging sector taken in isolation. But even if it is considered great enough to justify taking the large single market constituted by aseptic and non-aseptic cartons combined as the basis for assessing market shares, taking account too of the identity of the firms concerned, Tetra Pak would unquestionably still hold a dominant position since, as we have seen, its overall market share for cartons would be some 78 %, against some 10 to 11 % for Elopak, some 8 % for PKL and some 4 % for all other producers combined. Moreover, this dominant position would not exist solely for the packaging of milk - a product on which, in Tetra Pak's view, the Commission has placed too much emphasis in its analysis - but indeed for the three groups of liquids and semi-liquids for which virtually all (95 %) cartons are used: on the basis of figures supplied by Tetra Pak itself(59) , it can be estimated that this group holds 80 % of the market for the packaging of milk in cartons (accounting on its own for 72 % of cartons used), 76 % as regards fruit juice (16 % of cartons used) and 56 % as regards dairy products other than milk (7 % of cartons used).

3. Abuses

Markets on which abuses have been committed and summary of the policy pursued by Tetra Pak in that context

(A) Markets

(104) The Commission takes the view that Tetra Pak has committed abuses of its dominant position, within the meaning of Article 86 of the EEC Treaty, on both the aseptic markets and the non-aseptic machine and carton markets. Its position in each of these markets in 1985 may be summarized as follows:

- On the aseptic markets, Tetra Pak occupies a dominant position throughout the Community as regards both cartons and machines, accounting as it does for some 90 % or more of Community sales of both these products(60) . The abuses described in this decision, where they are or have been committed on the aseptic markets, are consequently caught by the prohibition laid down by Article 86 of the EEC Treaty,

- On the non-aseptic markets, on which the shares held by Tetra Pak are much smaller than those seen on the aseptic markets, i.e. 48 % for cartons and 52 % for machines in all Member States combined(61) , the existence of a dominant position is less clear-cut if these markets are considered in isolation.

It should in any case be remembered that the Court of Justice has recognized market shares smaller than those in the case in hand as constituting a dominant position(62) , and Tetra Pak's market shares on the non-aseptic markets in some Member States are such that there can be no doubt as to whether a dominant position exists even if these markets are considered in isolation.

However, the Commission takes the view that such an approach would be too restrictive in the case in hand because it is impossible to disregard the links which exist between the non-aseptic and the aseptic markets. This is because, far from being completely separate from each other, the four markets identified by the Commission, although remaining distinct, are adjacent to and indeed associated with each other. Unlike the link created by Tetra Pak between the machine and carton markets - a link which the Commission considers to be artificial and unjustified because it is formed by the contractual obligation to use on the machines supplied by Tetra Pak only the cartons manufactured by the group(63) - the association between the two aseptic markets, on the one hand, and the two non-aseptic markets, on the other, is real for the following reasons:

1. the key products which the cartons are used to package are the same on both the aseptic and non-aseptic markets, i.e. liquid milk products and fruit juices(64) ;

2. at the level of demand, the large majority of users(65) of the products offered by Tetra Pak in non-aseptic market are active also in the aseptic market;

3. at the level of supply, the conduct of the main carton producers confirms the link which exists between the two aseptic and two non-aseptic markets in that two of them are already present (albeit to quite different extents) on all four markets, i.e. Tetra Pak itself and PKL, whilst the third, Elopak, has been trying for a number of years to become established on them(66) (67) . Moreover, some of the cartons on offer, e.g. the brick, may be used, and indeed are used, for both types of packaging (subject to adaptation of the materials of which they are made).

Under these circumstances, the Commission considers that the four markets, i.e. the two aseptic and two non-aseptic markets, are not only neighbouring but also associated to an extent that the abuses described in this decision are caught by Article 86 of the EEC Treaty even where they are or have been committed by Tetra Pak on the non-aseptic markets. This is the consequence of Tetra Pak's dominant position on the aseptic markets, combined with the association which exists between all four markets. There is therefore no need to demonstrate seperately the existence of a dominant position held by Tetra Pak on the non-aseptic markets taken in isolation since the links between the four markets described above show that such a compartmentalized approach is unjustified(68) .

The Commission would refer in this respect to the Judgments of the Court of Justice in Joined Cases 6 and 7/73 Instituto Chemioterapico Italiano and Commercial Solvents Corporation v. Commission(69) and in Case 311/84 CBEM v. CLT(70) , and in particular to points 23 and 25 of the latter, in which, in the Commission's view, the Court recognized that the existence of a dominant position on a market may create the possibility of controlling the activities of competitors on a neighbouring market. Likewise, in the case in hand Tetra Pak has used the association which exists between the four markets in question to commit abuses on the non-aseptic markets, abuses which it could not have committed in the absence of its dominant position on the aseptic markets, whether they involve practices aimed at eliminating competitors or their products, predatory or discriminatory prices, or indeed the imposition on Tetra Pak product users of unfair contractual terms (see section (B), 'Summary', below).

It is therefore of little importance whether these abuses were committed on the market on which the undertaking holds a dominant position, on the neighbouring (and, in the case in hand, associated) market, or on both: as the Court has acknowledged.

Article 86

of the EEC Treaty applies to cases in which the situation of dominance on the market allows abuses to be committed on the other. In the Commission's view, this analysis is confirmed by the judgment of the Court of Justice in Case C-62/86 Akzo (above), in particular at grounds 43 to 45, thus demonstrating the existence of the abuse (even assuming that Tetra Pak's dominant position on the non-aseptic markets were not established independently of its position on the aseptic markets); those grounds of the judgment dealt with the same problem as is found here, namely the commission of an abuse on a market other than that on which the undertaking undoubtedly had a dominant position.

(B) Summary

(105) On the basis, therefore, of its dominant position, indeed virtual monopoly, in the aseptic markets, which, combined with its position of leader in the non-aseptic markets, makes it the inevitable supplier for a majority of users, Tetra Pak managed to impose on those users certain contractual obligations aimed essentially at binding them to the group and preventing any trade in its products (see point 3.1). Using these contractual obligations to limit as far as possible any possibilities of inter-brand competition, and avoiding any intra-brand competition whatsoever by means of these contractual obligations and by its completely autonomous production and distribution policy (see point 3.4), the group succeeded in imposing a compartmentalization of national markets for its products within the Community which allowed it to practise a differentiated and discriminatory pricing policy for both cartons (see point 3.2) and machines (see point 3.3). All the conditions for an artifical restriction of competition are met, permitting it, in these sectors where its virtual monopoly is established (in the aseptic markets)(71) , to pursue a policy of profit maximization (e.g. with regard to aseptic brick cartons) to the detriment of consumers: this enables it in turn to subsidize, in those sectors where competition still persists (essentially in the non-aseptic markets), an aggressive and indeed predatory price policy (e.g. Rex cartons, mainly in Italy)(72) .

In order to protect or strengthen this position, it will be shown how Tetra Pak has taken care to develop, in support of its contractual policy of autonomous development, a policy of a wide defence of its intellectual property rights (see point 3.4). To the same end or in order to strengthen its position, it continues to use a wide variety of specific methods (see point 3.5), including, where applicable, taking over competitors (see point 3.6)(73) .

3.1 Contractual conditions governing the sale and leasing of Tetra Pak equipment and cartons (recitals (23) to (45))

(106) The abuses referred to below flowing from the conditions governing the sale and leasing of Tetra Pak equipment and the sale of its cartons concern both the aseptic and non-aseptic markets. They have been committed either in all the Member States or in only some of them, depending on the contractual clauses applicable (see recitals (23) to (45) above). As stated above (see recital (104)), most of these clauses are intended to bind the customer to the group to the maximum extent possible and to eliminate any possibility of trade in the goods which have been supplied to it. For this purpose, a number of obligations are imposed on the customer which have no link with the purpose of the contracts, and that some of these obligations distort the very nature of those contracts, be they for the purchase or leasing of machines(74) .

3.1.1. Conditions governing the sale of Tetra Pak equipment (recitals (24) to (30))

1. Equipment configuration

(i) Prohibition from adding accessory equipment to the machine

(ii) Prohibition from modifying the machine, from adding or removing parts

(iii) Prohibition from moving the machine

(107) These clauses could certainly have the effect of limiting production or technical development to the detriment of the consumer.

Moreover, they constitute additional obligations which have no connection with the purpose of the contract and which deprive the purchaser of certain aspects of his property rights.

Combined with the many other contractual obligations aimed at binding the purchaser to the seller, they have the effect of making the customer totally dependent on Tetra Pak's equipment and services.

2. Equipment operation and maintenance

(iv) Exclusive maintenance and repair services

(108) This clause applies beyond the guarantee period for the entire life of equipment(75) and is therefore not justified by the contractual responsibility which the guarantee imposes on Tetra Pak.

Such a requirement that the customer obtain maintenance and repair services exclusively from Tetra Pak closes the door to any competitor on the maintenance and repair services market.

It also binds the customer completely to Tetra Pak, not allowing him any freedom to make his own choice - whatever it may be - and not even giving him, except in certain limited cases of small-scale maintenance specifically referred to, any possibility of having maintenance and repair services provided by his own technical staff.

Finally, it gives Tetra Pak an indirect means of control over the customer to ensure than he complies with various other contractual obligations (such as those relating to equipment configuration analysed in recital (107)).

(v) Exclusive supply of spare parts

(109) The above assessment concerning clause (iv) also applies to the clause guaranteeing Tetra Pak (or a supplier designated by Tetra Pak) the exclusive right to supply spare parts, which increases still further the customer's dependence on the group

(vi) The right to provide, free of charge, assistance, training, maintenance and technical updating services not requested by the client

(110) The fact that these services are free of charge cannot conceal the real purpose of the clause, which is again intended to create a close, permanent bond between Tetra Pak and the customer. If this were not the case, the clause would at least be of an optional nature, allowing the client to accept or refuse such services. Like clauses (iv), (xii), (xiii) and (xiv), it in fact gives Tetra Pak a further means of control by which to check that the purchaser is complying with his contractual obligations. This too must be considered an abuse since the client has no right to refuse the services offered by Tetra Pak even though he owns the machine.

(vii) The sliding scale of charges for assistance, maintenance and technical updating services depending on the number of cartons used

(111) In its contracts, Tetra Pak presents this sliding scale of monthly fees as being a contribution to meeting the fixed costs associated with maintenance and assistance services, etc. If this is the case, there is no reason why this contribution has to be paid as a monthly fee rather than being included in the hourly service charge, as is usual practice, or collected in the form of a standard charge for each call-out. It must therefore be considered that the monthly payment of this charge is a means of persuading the customer to use Tetra Pak's maintenance services.

(112) There is barely any more economic justification for making the scale of charges a sliding one depending on the number of cartons used. This must in fact be perceived as a means of encouraging the client to comply with his obligation to use and obtain supplies of packaging exclusively from Tetra Pak (clauses (ix) and (x))(76) . This involves a system of reductions equivalent to the loyalty rebates denounced on several occasions in respect of undertakings in a dominant position by the Commission and the Court of Justice(77) .

(113) If the charging of monthly sums is intended to ensure compliance with Tetra Pak's exclusive rights in the area of equipment maintenance, and the sliding scale to ensure compliance with its exclusive rights in the area of the supply of cartons, the possibility offered to the user of adding together the quantities of containers prepared on all the machines of the same type in its possession for the purpose of calculating the discount applicable is intended to encourage the customer to obtain his equipment exclusively from Tetra Pak.

(114) Finally, the system provides Tetra Pak with information on the customer's production operations, which places it in a privileged position towards the customer compared to its competitors who are unable to impose a similar system.

(viii) The obligation to advise Tetra Pak of any technical improvements or modifications made to equipment and to grant Tetra Pak ownership of the intellectual property rights to such improvements or modifications

(115) This clause limits the purchaser's potential use of goods of which Tetra Pak has supposedly granted him full ownership. Not only does it have no connection with the purpose of the purchase contract, but also distorts its very nature. It also limits outlets and technical development by granting Tetra Pak sole ownership of the rights to any improvements made by the client. The fact that the purchaser is deprived of the right to use his invention as he wishes must also be considered unfair, even if compensation - the terms of which are undefined - is theoretically provided for.

3. Cartons

(ix) The obligation that only Tetra Pak cartons be used on machines

and

(x) the obligation to obtain supplies exclusively from Tetra Pak

(116) These two clauses are complementary and make the system airtight: not only is it not possible for the purchaser of a machine to use packaging other than that bearing the Tetra Pak mark, but moreover he may not obtain supplies of packaging from any source other than Tetra Pak itself (or a company designated by Tetra Pak)(78) . Once the equipment has been acquired, not only is inter-brand competition ruled out, but intra-brand competition too. These restrictions on intra-brand competition are particularly serious on the aseptic markets, where Tetra Pak has a virtual monopoly.

(117) Such a system of tied sales, which again limits outlets and makes contracts subject to acceptance of conditions (the purchase of cartons) which have no connection with their purpose (the sale of machines), constitutes a serious infringement of

Article 86

and a practice which has been denounced on many occasions by the Commission and the Court of Justice(79) . In the case in hand, the restrictions on competition which it entails are further strengthened by Tetra Pak's integrated distribution system and patents policity (i.e. the patenting of the various minor technical characteristics of products or the slightest modification made to them)(80) . It makes the carton market completely dependent on the equipment market and favours the charging of discriminatory prices or indeed loss-making operations on the latter market(81) . On the one hand, the fact that the sale of machines inevitably involves the sale of cartons as well will quite normally encourage the seller, where necessary, to make major concessions which will vary considerably depending on the weight of the partner in negotiations. On the other hand, the prospect of a guaranteed income from future carton sales - one which, as we have seen in the case of the brick carton, is particularly remunerative - will enable him readily to consider selling equipment at a loss, within the profitability threshold for machine sales and carton sales combined. The reverse, i.e. the subsidizing of carton sales by profits made on machine sales, is clearly possible too. Although constituting abuses in their own right, clauses (ix) and (x) may therefore potentially generate further abuses. They place competitors, and chiefly those which market only one or other of the products which are tied by Tetra Pak, and who cannot therefore, unlike Tetra Pak itself, subsidize possible losses on a given product through profits made on another product, in an extremely uncomfortable position.

(118) The arguments put forward by Tetra Pak in defence of its system of tied sales have shifted in the course of the proceeding in the sense that emphasis has been switched in turn from one aspect to another. However, Tetra Pak's position may be summarized more or less as follows(82) .

Tetra Pak does not consider itsef to be a supplier of packaging equipment and containers but rather of 'integrated distribution systems for liquid and semi-liquid foods intended for human consumption'. These systems comprise know-how, equipment, containers, servicing and training.

In addition to the economies of scale and cost savings at the level of raw materials and distribution which may result from stable relations with customers over a long period, the exclusive purchasing obligation is, in Tetra Pak's view, justified for technical reasons, considerations of product liability and health, and by the need to protect its reputation(83) .

At a technical level, Tetra Pak considers that the high technology of its machines demands the use of cartons specifically designed for them, which in turn requires a thorough knowledge of the machines and their peculiarities, of the products to be packaged, and of the possible interactions between those machines and products. The obligation to obtain supplies exclusively from Tetra Pak, by means of the link it establishes between the equipment and type of packaging, leads to synergistic effects at the level of research and development and after-sales service. There is therefore a 'natural link' between the machine and the type of packaging it uses, which justifies the exclusive supply obligation - a principle recognized in Article 3 (c) of Commission Regulation (EEC) No 1984/83(84) - and excludes - according to Tetra Pak - the possibility of an infringement of Article 86 of Treaty.

Tetra Pak takes the view that the system of tied sales also benefits the user if products are defective, since it enables Tetra Pak to offer the consumer a comprehensive performance guarantee and eliminates the difficult question of dividing responsibility between the supplier of machines and the supplier of containers (single source of responsibilities).

On the question of health, Tetra Pak considers that, in view of the specific interactions between the machines and the packaging intended for them, only the use of Tetra Pak cartons can prevent the emergence of public health problems which might prove extremely detrimental to the consumer, above all in the aseptic sector.

Finally, Tetra Pak believes that it has a legitimate interest, for the defence of its reputation and in view of the technical and public-health aspects referred to above, in seeking to ensure that only packaging coming from its own sources is used on its machines.

Tetra Pak also refers to 'commercial usage' and the absence of effective competition for the cartons which may be used on Tetra Pak machines.

(119) It is a priori very difficult to conceive of the existence between products having totally distinct physical characteristics and resulting from completely different production processes of 'natural links' which justify, directly or by analogy, an exemption based on Article 3 (c) of Regulation (EEC) No 1984/83 and rule out any possibility of an infringement of Article 86. There therefore remains only the hypothesis of functional, reciprocal and exclusive links relating to the use of machines and cartons in the packaging process. The Commission wonders why, if the claim that only Tetra Pak cartons may, for technical reasons, be used on Tetra Pak machines is true, this group sees the need to make such use the subject of a contractual obligation. If there is genuinely no technical alternative, such an obligation is unnecessary. However, if such an alternative does exist, the choice should be left to the user, and any obligation to purchase solely from an undertaking which is in a position such as that occupied by Tetra Pak should be prohibited.

Moreover, there is a degree of competition in the non-aseptic market, where there are, and always have been, manufacturers or distributors of cartons usable on different makes of machine; this fact alone contradicts Tetra Pak's thesis and invalidates its arguments. If such competition has not existed for cartons used on Tetra Pak's machines (aseptic or non-aseptic), the reason is to be found precisely in the tied-sales system and the patent policy pursued by Tetra Pak which, by denying all prospects of an outlet, discourage any potential producer or distributor.

But, by its very conduct, Tetra Pak itself contradicts its assertion that the technical and other reasons invoked imply that only cartons manufactured by the manufacturer of a given machine may be correctly used on that machine. This is because Tetra Pak sells, and indeed imposes on its clients, its own cartons for machines of other manufacturers - Cherry Burrel and Nimco - which have perhaps been adapted slightly but were certainly not designed for Tetra Pak cartons. Furthermore, since Tetra Pak is not - as it has itself stated - an agent for these manufacturers but merely an occasional intermediary, it can only have a passive and superficial knowledge of this equipment, which moreover rules out in this case the synergistic effects referred to above.

In any case, if the 'synergies' which, according to Tetra Pak, result at an economic and technical level from the combination within one and the same undertaking of equipment and container sales operations are of benefit solely to the producer, and if real advantages exist for the user in an integrated supply system, they will be apparent without it being necessary to make recourse to contractual obligations: it is up to the user, and not the producer, to compare such advantages with those offered by open systems, and to make his choice freely(85) .

Moreover, the Commission is well aware of the technical and, perhaps, public-health problems which might result from packaging not meeting the particular specifications of Tetra Pak machines and the related problems of determining reciprocal responsibilities and protecting the good name of the undertakings in question. However, these are problems which arise with any production process which uses equipment and accessories of various origins, and which have repercussions for public health whenever products intended for human consumption or, more generally, products which may directly or indirectly affect public health are involved. For such problems, which are commonplace and familiar to users, there are adequate technical solutions (publication of standards and specifications to be complied with) and a legal framework (general legal liability) intended specifically to solve the problems which arise from the failure on the part of the parties concerned to implement these technical solutions. The proportionality rule excludes the use of restrictive practices where these are not indispensable. This rule is all the more vital in the case in hand since the restrictions of competition involved are particularly serious and are brought to bear on markets on which - even without them - competition is already extremely limited.

Finally, it is difficult to invoke commercial usage when, in the non-aseptic sector, this tied products clause is not the general rule and when, in the aseptic sector, there are only two producers. It is also odd to mention the absence of effective competition for cartons usable on Tetra Pak machines when operating a system of tied sales