Judgment of the Court of First Instance (Fourth Chamber) of 6 July 2000. - Volkswagen AG v Commission of the European Communities. - Competition - Distribution of motor vehicles - Partitioning of the market - Article 85 of the EC Treaty (now Article 81 EC) - Regulation (EEC) No 123/85 - Disclosure to the press - Business secrets - Good administration - Fines - Gravity of the infringement. - Case T-62/98.



European Court reports 2000 Page II-02707



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

1. Competition - Administrative procedure - Commission decision finding an infringement - Evidence which has to be gathered - Degree of evidential value necessary

(EC Treaty, Art. 85(1) (now Art. 81(1) EC))

2. Competition - Agreements, decisions and concerted practices - Agreements between undertakings - Effect on trade between Member States - Criteria - Restrictive practices extending over the whole territory of a Member State

(EC Treaty, Art. 85(1) (now Art. 81(1) EC))

3. Competition - Agreements, decisions and concerted practices - Agreements between undertakings - Onus on the Commission to prove the duration of the infringement

4. Competition - Agreements, decisions and concerted practices - Definition of the market - Purpose - Determining the effect on trade between Member States

(EC Treaty Arts 85 and 86 (now Arts 81 and 82 EC))

5. Competition - Agreements, decisions and concerted practices - Agreements between undertakings - Selective distribution system for motor vehicles - Manufacturer's call to its authorised dealers forming part of a set of business relations

(EC Treaty Art. 85(1) (now Art. 81(1) EC))

6. Competition - Agreements, decisions and concerted practices - Prohibition - Category exemptions - Regulation No 123/85 - Scope

(EC Treaty, Art. 85(1) and (3) (now Art. 81(1) and (3) EC; Commission Regulation No 123/85, Art. 3(10) and (11))

7. Competition - Administrative procedure - Examination of complaints - Commission decision finding an infringement - Principle of sound administration - Commission's premature display of its belief as to the existence of an infringement - Lack of impartiality in assessing the evidence - Consequences

8. Competition - Administrative procedure - Access to the file - Request made after adoption and notification of the Commission's final decision - Refusal - Effect on the legality of the decision - None

9. Competition - Administrative procedure - Professional secrecy - Disclosure to the press of information on the penalty envisaged before the adoption of the decision - Breach of professional secrecy, the principle of sound administration and the presumption of innocence - Effect on the legality of the decision - Conditions

(EC Treaty, Art. 214 (now Art. 287 EC))

10. Acts of the institutions - Statement of reasons - Obligation - Scope - Decision applying the competition rules - Reference in the endnotes to documents held by the undertakings - Obligation of the Commission to reproduce those documents - None

(EC Treaty, Art. 190 (now Art. 253 EC))

Summary

1. In order to examine whether the Commission incorrectly assessed the facts in finding that the applicant infringed Article 85(1) of the Treaty (now Article 81(1) EC), it is necessary to ascertain whether the Commission gathered sufficiently precise and consistent evidence to give grounds for a firm conviction that the alleged infringement took place.

( see para. 43 )

2. To be capable of affecting trade between Member States within the meaning of Article 85(1) of the Treaty (now Article 81(1) EC), a decision, an agreement or a concerted practice must make it possible to foresee with a sufficient degree of probability, on the basis of a set of objective elements of law or fact, that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States. In that regard it is necessary to consider in particular whether the restrictive measures in question are capable of bringing about a partitioning of the market in certain products between Member States and thus rendering more difficult the interpenetration of trade which the Treaty is intended to create. That is clearly the case where the measures bind all the dealers of the makes of cars concerned in a substantial part of the common market. Practices restricting competition and extending over the whole territory of a Member State are by their very nature capable of reinforcing the compartmentalisation of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is intended to bring about.

( see para. 179 )

3. The requirement of legal certainty, on which economic operators are entitled to rely, entails that when there is a dispute concerning the existence of an infringement of competition law the Commission should adduce at least evidence of facts sufficiently proximate in time for it to be reasonable to accept that infringement continued uninterruptedly between two specific dates.

( see para. 188 )

4. The approach to defining the relevant market differs according to whether Article 85 of the Treaty (now Article 81 EC) or Article 86 of the Treaty (now Article 82 EC) is to be applied. For the purposes of Article 86, the proper definition of the relevant market is a necessary precondition for any judgment on the part of the Commission as to allegedly anti-competitive behaviour, since, before an abuse of a dominant position is ascertained, it is necessary to establish the existence of a dominant position in a given market, which presupposes that such a market has already been defined. On the other hand, for the purposes of applying Article 85, the reason for defining the relevant market, if at all, is to determine whether the agreement, the decision by an association of undertakings or the concerted practice at issue is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market.

Consequently, there is an obligation on the Commission to define the market in a decision applying Article 85 of the Treaty where it is impossible, without such a definition, to determine whether the agreement, decision by an association of undertakings or concerted practice at issue is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market.

( see para. 230 )

5. A call by a motor vehicle manufacturer to its authorised dealers is not a unilateral act which falls outside the scope of Article 85(1) of the Treaty (now Article 81(1) EC) but is an agreement within the meaning of that provision if it forms part of a set of continuous business relations governed by a general agreement drawn up in advance.

( see para. 236 )

6. Article 85(1) of the Treaty (now Article 81(1) EC) may not be declared inapplicable where the parties to a selective distribution contract conduct themselves in such a way as to restrict parallel imports. The very spirit of a regulation granting block exemption for distribution agreements is to make the exemption available under it subject to the condition that users will, through the possibility of parallel imports, be allowed a fair share of the benefits resulting from the exclusive distribution.

In that connection, although Regulation No 123/85 provides motor vehicle manufacturers with substantial means of protecting their distribution systems, it does not authorise them to partition their markets. That regulation does indeed exempt agreements whereby a supplier entrusts an approved reseller with promoting, in a particular territory, the distribution and sales and after-sales service of motor vehicles and undertakes to deliver the contract goods within that territory only to that reseller. It thus exempts in particular the obligation on the authorised distributor not to sell to independent dealers (Article 3(10)) unless they are intermediaries, that is to say traders who act for final consumers and are given written authority for that purpose (Article 3(11)). However, the fact remains that under Article 10 of Regulation No 123/85 the Commission may withdraw the benefits of the application of that regulation where it finds that an agreement exempted under the regulation nevertheless has effects which are incompatible with the conditions laid down by Article 85(3) of the Treaty, and in particular where the manufacturer or an undertaking within the distribution system continuously or systematically, or by means not exempted by this regulation, makes it difficult for final consumers or other undertakings within the distribution system to obtain contract goods or corresponding goods within the common market.

( see paras 241-242 )

7. The material nature of an infringement of the competition rules which has actually been proved at the end of an administrative procedure cannot be called in question by evidence of the Commission's premature display, during that procedure, of its belief as to the existence of that infringement. Moreover to the extent that the facts which the Commission took into account in the contested decision are, in all essential respects, proven to the requisite legal standard, it is of no avail to the applicant to submit that the Commission made a biased assessment of the documents seized or drew conclusions on the basis of unwarranted assumptions.

( see paras 270-271 )

8. The legality of a decision finding an infringement of the competition rules cannot in any circumstances be affected by the Commission's refusal to grant the applicant's request for access to the file sent to the Commission after the adoption and notification of the decision.

( see para. 277 )

9. Article 214 of the Treaty (now Article 287 EC) lays down an obligation on the members, officials and servants of the institutions of the Community not to disclose information of the kind covered by the obligation of professional secrecy, in particular information about undertakings, their business relations or their cost components. Although that provision primarily refers to information gathered from undertakings, the expression in particular shows that the principle in question is a general one which applies also to other confidential information.

In that regard, in inter partes procedures which are liable to result in the imposition of a penalty, the nature and amount of the penalty proposed are by their very nature covered by business secrecy until the penalty has been finally approved and announced.

That principle ensues, in particular, from the need to have due regard for the reputation and standing of the person concerned during a period in which no penalty has been imposed on that person.

The Commission's duty not to disclose to the press information on the specific penalty envisaged is not merely coterminous with its duty to respect business secrecy, but also with its duty of good administration.

Finally, the principle of the presumption of innocence which applies to the procedures relating to infringements of the competition rules by undertakings that may result in the imposition of fines or periodic penalty payments, is clearly not respected by the Commission where, prior to formally imposing a penalty on the undertaking charged, it informs the press of the proposed finding which has been submitted to the Advisory Committee and the College of Commissioners for deliberation.

An irregularity of that type may lead to annulment of the decision in question if it is established that the content of that decision would have differed if that irregularity had not occurred.

( see paras 279, 281, 283 )

10. The Commission is not required to reproduce the documents to which it referred in the endnotes to the decision finding an infringement of the competition rules where the applicant or its subsidiaries have those documents at their disposal.

( see para. 302 )

Parties

In Case T-62/98,

Volkswagen AG, established in Wolfsburg (Germany), represented by R. Bechtold, Rechtsanwalt, Stuttgart, with an address for service in Luxembourg at the Chambers of Loesch and Wolter, 11 Rue Goethe,

applicant,

v

Commission of the European Communities, represented by K. Wiedner, of its Legal Service, acting as agent, assisted by H.J. Freund, of the Brussels Bar, with an address for service in Luxembourg at the Chambers of C. Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for annulment of Commission Decision 98/273/EC of 28 January 1998 relating to a proceeding under Article 85 of the EC Treaty (Case IV/35.733 - VW) (OJ 1998 L 124, p. 60) or, in the alternative, for reduction of the fine imposed on the applicant in that decision,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fourth Chamber),

composed of: R.M. Moura Ramos, President, V. Tiili and P. Mengozzi, Judges,

Registrar: B. Pastor, Principal Administrator,

having regard to the written procedure and further to the hearing on 7 October 1999

gives the following

Judgment

Grounds

Facts and legal background

1 The applicant is the holding company of the Volkswagen group. The group's business activities include the manufacture of motor vehicles of the Volkswagen, Audi, Seat and Skoda makes, and the manufacture of components and spare parts. The group also has industrial motors, financial services and insurance operations. The applicant has a 98.99% holding in Audi AG (Audi). Audi's main business, which is established at Ingolstadt (Germany), is the manufacture and distribution of vehicles of the Audi make, and the manufacture of components and engines.

2 Motor vehicles of the Volkswagen and Audi makes are sold in the Community through selective distribution networks. The import into Italy of those vehicles, their spare parts and accessories, is carried out exclusively by Autogerma SpA (Autogerma), a company incorporated under Italian law, established in Verona (Italy), which is a wholly owned subsidiary of the applicant and which accordingly constitutes, with the applicant and Audi, one economic unit. Distribution in Italy takes place through legally and economically independent dealers, who are nevertheless contractually bound to Autogerma.

3 Dealership contracts are, subject to certain conditions, exempted from Article 85(1) of the EC Treaty (now Article 81(1) EC) by Commission Regulation (EEC) No 123/85 of 12 December 1984 on the application of Article 85(3) of the EEC Treaty to certain categories of motor vehicle distribution and servicing agreements (OJ 1985 L 15, p. 16), replaced, with effect from 1 October 1995, by Commission Regulation (EC) No 1475/95 of 28 June 1995 (OJ 1995 L 145, p. 25). According to Article 7 of Regulation No 1475/95, the prohibition laid down in Article 85(1) of the Treaty was not to apply during the period from 1 October 1995 to 30 September 1996 to agreements already in force on 1 October 1995 which satisfied the conditions for exemption provided for in Commission Regulation (EEC) No 123/85.

4 Article 1 of Regulation No 123/85 provides as follows:

Pursuant to Article 85(3) of the Treaty it is hereby declared that subject to the conditions laid down in this Regulation Article 85(1) shall not apply to agreements to which only two undertakings are party and in which one contracting party agrees to supply within a defined territory of the common market

- only to the other party, or

- only to the other party and to a specified number of other undertakings within the distribution system,

for the purpose of resale certain motor vehicles intended for use on public roads and having three or more road wheels ...

5 Article 2 of Regulation No 123/85 states that the exemption also applies where the obligation referred to in Article 1 is combined with an obligation on the supplier [not] to sell contract goods to final consumers ... in the contract territory.

6 Article 3 of Regulation No 123/85 provides as follows:

The exemption ... shall also apply where [the selective distribution agreement] is combined with an obligation on the dealer:

...

8. outside the contract territory

(a) not to maintain branches or depots for the distribution of contract goods or corresponding goods,

(b) not to seek customers for contract goods or corresponding goods;

9. not to entrust third parties with the distribution or servicing of contract goods or corresponding goods outside the contract territory;

10. to supply to a reseller:

(a) contract goods or corresponding goods only where the reseller is an undertaking within the distribution system,

...

11. to sell motor vehicles ... to final consumers using the services of an intermediary only if that intermediary has prior written authority to purchase a specified motor vehicle and, as the case may be, to accept delivery thereof on their behalf.

7 The wording of Articles 1, 2 and 3 of Regulation No 1475/95 is almost identical to that of the corresponding provisions of Regulation No 123/85. Article 6(1) of Regulation No 1475/95 provides as follows:

The exemption shall not apply where:

...

(3) ... the parties agree restrictions of competition that are not expressly exempted by this Regulation;

(7) the manufacturer, the supplier or another undertaking within the network directly or indirectly restricts the freedom of final consumers, authorised intermediaries or dealers to obtain from an undertaking belonging to the network of their choice within the common market contract goods or corresponding goods ... or the freedom of final consumers to resell the contract goods or corresponding goods, when the sale is not effected for commercial purposes; or

(8) the supplier, without any objective reason, grants dealers remunerations calculated on the basis of the place of destination of the motor vehicles resold or the place of residence of the purchaser ...

8 From September 1992 and during 1993 the value of the Italian lira declined greatly in comparison with the German mark. However, the applicant did not make a proportionate increase in its sales prices in Italy. The price differences which resulted from that situation made it economically advantageous to re-export vehicles of the Volkswagen and Audi makes from Italy.

9 During 1994 and 1995 the Commission received letters from German and Austrian consumers complaining of obstacles to the purchase in Italy of new motor vehicles of the Volkswagen and Audi makes for immediate re-export to Germany or Austria.

10 By letter of 24 February 1995 the Commission informed the applicant that, on the basis of complaints from German consumers, it had concluded that the applicant or Autogerma had forced Italian dealers for Volkswagen and Audi makes to sell vehicles solely to Italian customers by threatening to terminate their dealer contracts. In the same letter the Commission gave formal notice to the applicant to put an end to that barrier to re-exportation and to inform it, within three weeks of the date of receipt of that letter, of the measures adopted in that regard.

11 In its letter of 30 March 1995 the applicant replied that the difficulties encountered by some consumers might have been caused by a problem of communication, in particular between Autogerma and the Italian dealers. It annexed to its letter a copy of a circular which had been sent on 16 March 1995 to the Italian dealers in order to eliminate any possibility of misunderstanding.

12 By letter of 2 May 1995 the Commission replied that the circular of 16 March 1995 had not put an end to the barriers to re-exportation. It referred to new complaints from several German and Austrian consumers.

13 On 17 October 1995 the Commission adopted a decision ordering investigations under Article 14(3) of Council Regulation No 17 of 6 February 1962: First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition 1959-1962, p. 87). The investigations took place on 23 and 24 October 1995 at the premises of the applicant and Audi and, in Italy, at those of Autogerma, Auto Brenner Spa in Bolzano, Auto Pedross Herbert & Co. in Silandro, Dorigoni SpA in Trento, Eurocar SpA in Udine, IOB Silvano & C. SRL in Germona, Adriano Mansutti in Tricesimo, Günther Rabanser in Pontegardena, Mutschlechner SAS in Brunico and Franz Nitz in Vipiteno. Through those investigations the Commission sought to establish whether the applicant and Audi had entered into agreements or implemented concerted practices with Autogerma and their dealers in Italy by which new motor vehicles were not to be sold to final consumers resident in Member States other than Italy.

14 On the basis of the documents found during those investigations the Commission reached the conclusion that the applicant, Audi and Autogerma had put in place, with their Italian dealers, a market-partitioning policy. On 25 October 1996 the Commission served a statement of objections to that effect on the applicant and Audi.

15 By letter of 18 November 1996 the applicant and Audi requested access to the file. They inspected the file on 5 December 1996.

16 On 19 December 1996 Autogerma, at the express request of the applicant, sent a circular to the Italian dealers stating that exports to final users (including those through intermediaries) and to dealers belonging to the distribution network were lawful and would therefore not be penalised. The circular also indicated that the discount granted to dealers on the sale price of vehicles ordered, known as the margin, and payment of their bonus did not depend in any way on whether the vehicles had been sold within or outside their contract territory.

17 Observations on the statement of objections were sent by the applicant and Audi to the Commission by letter of 12 January 1997.

18 They also put forward their views to the competent department of the Commission at a hearing on 7 April 1997.

19 On 7 October 1997 the applicant's lawyer had, at his request, a further meeting with the director of the competent department concerning, inter alia, the question whether the Commission was of the view that the infringements found had ceased or were continuing.

20 On 28 January 1998 the Commission adopted Decision 98/273/EC relating to a proceeding under Article 85 of the EC Treaty (Case IV/35.733 - VW) (OJ 1998 L 124, p. 60, hereinafter the decision or the contested decision). The decision is addressed solely to the applicant. The Commission states that the applicant is responsible for the infringement found because Audi and Autogerma are its subsidiaries and their activities were known to it. As regards the Italian dealers, the Commission states that they did not participate actively in the barriers to re-export but, as victims of the restrictive policy introduced by the manufacturers and Autogerma, were forced to consent to that policy.

21 As regards the matters alleged against the applicant, the Commission lists a series of documents by which it seeks to prove, first, that the applicant and Audi, by targeted measures and a task force with its own human and material resources, prevented the re-exportation of vehicles from Italy to Germany and other Member States and, secondly, that, acting on instructions from the applicant and Audi, Autogerma carried out rigorous investigations at Italian dealers in order to curb the practice of some of them by which they sold motor vehicles to foreign purchasers, and imposed heavy penalties on some of those dealers.

22 As regards the measures taken by the applicant and Audi, the Commission cites the introduction by the applicant of a split-margin system applicable to sales of the new Volkswagen Polo in Italy. Under that system, the dealer, instead of receiving an overall discount of 13% on the amount invoiced for each vehicle ordered, was awarded a discount of only 8% on invoice and a further 5% to be paid later, solely upon registration of the vehicle in the contract territory. According to the decision, Audi established a similar system for the sale of the Audi A4 vehicle in Italy. The Commission also mentions the reduction by the applicant and Audi of dealers' stocks. That measure, accompanied by a policy of restricted supply, caused a considerable increase in delivery times and led some customers to cancel their orders. It also allowed Autogerma to refuse supplies requested by German dealers (cross-deliveries inside the Volkswagen distribution network). The Commission also refers to the conditions laid down by Audi and Autogerma for calculating the quarterly 3% bonus paid to dealers on the basis of the number of vehicles they had sold.

23 Amongst the penalties imposed by Autogerma on the dealers, the Commission refers to the termination of certain dealership contracts and the cancellation of the quarterly 3% bonus for sales outside the contract territory.

24 The decision states that the measures adopted by the applicant, Audi and Autogerma to restrict sales of motor vehicles by Italian dealers related to deliveries both to dealers who were not part of the network (independent dealers) and to final users and Volkswagen and Audi dealers residing or established in Member States other than Italy.

25 The Commission also cites documents to show that the above measures in fact restricted trade between Italy, on the one hand, and Germany and Austria, on the other, in that orders by numerous customers residing in the latter two States were refused by the Italian dealers.

26 The Commission concludes that those measures, which all form part of the contractual relations which the manufacturers maintain, through Autogerma, with the dealers in their selective distribution network, are the result of an agreement or concerted practice and constitute an infringement of Article 85(1) of the Treaty since they represent the implementation of a market-partitioning policy. It explains that those measures are not covered by Regulation No 123/85 and Regulation No 1475/95, since no provision of those regulations exempts an agreement which aims to prevent parallel exports by final consumers, by intermediaries acting on their behalf or by other dealers in the dealer network. It also states that an individual exemption cannot be granted in the present case, since the applicant, Audi and Autogerma did not notify any aspect of their agreement with the dealers, and that in any event the barriers to re-exportation are at variance with the objective of consumer protection set out in Article 85(3) of the Treaty.

27 In answer to the submission by the applicant and Audi, in their comments on the statement of objections, that some of the documents on which the Commission relies are merely internal reports of the Volkswagen group which represent only an internal discussion and occasionally conflicts of interests within the group, the Commission states that the conflicts within the group are irrelevant, since they do not alter the fact that the applicant and its subsidiaries, Audi and Autogerma, entered into an agreement with their dealers which is incompatible with the Community competition rules. In answer to the line of argument also set out in the comments on the statement of objections to the effect that, first, the largest proportion of re-exports from Italy to Germany and Austria was accounted for by clearly inadmissible supplies to independent dealers and that sales to private individuals (including those through intermediaries) and to other Volkswagen and Audi dealers were negligible, the Commission states that even if only a tiny number of sales to final consumers, their intermediaries or other dealers in those makes is prevented, trade between Member States is nevertheless appreciably affected and there is therefore an infringement of the Community competition rules.

28 In Article 1 of the decision the Commission finds that the applicant and its subsidiaries Audi and Autogerma have infringed Article 85(1) of the EC Treaty by entering into agreements with the Italian dealers in their distribution network in order to prohibit or restrict sales to final consumers coming from another Member State, whether in person or represented by intermediaries acting on their behalf, and to other authorised dealers in the distribution network who are established in other Member States. In Article 2 of the decision it orders the applicant to bring an end to the infringements and requires it to take, inter alia, the measures set out there.

29 In Article 3 of the decision the Commission imposes a fine of ECU 102 million on the applicant in view of the gravity of the infringement found. The Commission contends that the obstruction of parallel imports of vehicles by final consumers and of cross deliveries within the dealer network hampers the objective of creating the common market, which is one of the fundamental principles of the European Community, and the infringement found is therefore particularly serious. Moreover, it points to the fact that the relevant rules have been settled for many years and the fact that the Volkswagen group has the highest market share of any motor vehicle manufacturer in the Community. The Commission also refers to documents as proof that the applicant was fully aware that its behaviour infringed Article 85 of the Treaty. It states, moreover, that the infringement lasted for more than 10 years. Lastly, the Commission took into account, as aggravating circumstances, the fact that the applicant, first, did not put an end to the measures in question even though it had received two letters from the Commission in 1995 pointing out that preventing or restricting parallel imports from Italy was an infringement of the competition rules and, second, had used the dependence of dealers on a motor vehicle manufacturer, and so caused, in this case, quite substantial turnover losses for a number of dealers. The decision explains that the applicant, Audi and Autogerma threatened more than 50 dealers that their contracts would be terminated if they continued to sell vehicles to foreign customers and that 12 dealership contracts were in fact terminated, endangering the existence of the businesses concerned.

30 The decision was sent to the applicant by letter dated 5 February 1998 and received by it on 6 February 1998.

31 By letter of 2 March 1998 the applicant informed the Commission of the measures taken to implement Article 2 of the decision and asked whether they were in fact in line with those required by that article. By letter of 27 March 1998 the Commission replied that the measures were, in essence, in conformity with those required by the decision.

Procedure and forms of order sought

32 By application lodged at the Court Registry on 8 April 1998 the applicant brought the present action.

33 The written procedure terminated on 11 January 1999.

34 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Fourth Chamber) decided to open the oral procedure and, by way of measures of organisation of the procedure, requested the parties to reply to written questions and to produce certain documents. The parties complied with those requests.

35 The parties presented oral argument and answered questions put to them by the Court at the hearing in open court on 7 October 1999.

36 The applicant claims that the Court should:

- annul the decision;

- order the defendant to pay the costs.

37 The defendant contends that the Court should:

- dismiss the application;

- order the applicant to pay the costs.

Substance

38 The applicant relies essentially on five pleas in law. The first and second pleas allege errors of fact and of law in applying Article 85 of the Treaty. The third, fourth and fifth pleas allege infringement of the principle of good administration, the obligation to state reasons for the decision, and the right to be heard.

39 Moreover, in the alternative, the applicant pleads that the fine imposed by the decision should be reduced on the ground that it is excessive.

A - First plea: errors of fact in applying Article 85 of the Treaty

Barriers to re-exportation

Preliminary findings

40 The applicant submits, in the context of its first plea, that it complied with the principles for selective distribution laid down by Regulations No 123/85 and No 1475/95. It always acknowledged that sales by its Italian dealers to final consumers in other Member States and to other dealers in its distribution network were lawful. It claims that all the measures which the Commission classified, in the contested decision, as incompatible with the Community competition rules had in fact the sole aim of preventing unlawful sales, that is to say, sales to independent dealers. The applicant's argument is based on the assertion that all persons concerned knew that sales by Italian dealers to final consumers in other Member States and to other dealers in the distribution network were lawful and were not to be hindered and therefore seeks to show that the alleged barriers did not exist (paragraphs 13 and 78 of the application). More specifically, the applicant asserts that all the dealers of the group were entitled, throughout the period referred to by the Commission, to sell new vehicles to final consumers both within and outside their contract territory and to make cross deliveries to other dealers of the Volkswagen and Audi makes (paragraph 56 of the application).

41 The applicant does not dispute that if it had prevented re-exportation from Italy in the circumstances indicated by the Commission, such conduct would have been contrary to the dealership contracts and the Community rules. It would have exposed itself to proceedings by the Commission and would have incurred contractual liability towards the dealers in its distribution network for failure to comply with Regulations Nos 123/85 and 1475/95 (paragraph 4 of the reply).

42 The defendant does not dispute that the prohibition of re-exportation by independent dealers and the provisions adopted for that purpose are compatible with the Community competition rules. However, it submits that the measures adopted by the applicant, Audi and Autogerma in fact concerned all re-exportation of motor vehicles from Italy.

43 In those circumstances, the Court must examine whether the Commission incorrectly assessed the facts in finding in Article 1 of the decision that the applicant and its subsidiaries, Audi and Autogerma infringed Article 85(1) of the EC Treaty, by entering into agreements with the Italian dealers in their distribution network in order to prohibit or restrict sales to final consumers coming from another Member State, whether in person or represented by intermediaries acting on their behalf, and to other authorised dealers in the distribution network who are established in other Member States. In order to do so, it is necessary to ascertain whether the Commission gathered sufficiently precise and consistent evidence to give grounds for a firm conviction that the alleged infringement took place (Joined Cases T-185/96, T-189/96 and T-190/96 Riviera Auto Service and Others v Commission [1999] ECR II-93, paragraph 47).

The barrier resulting from the bonus system

- Arguments of the parties

44 As regards the specific measures adopted by Autogerma in regard to dealers who had made sales outside their contract territory, the applicant objects, first, to the findings made by the Commission regarding the method of calculating the quarterly 3% bonus. It explains that Autogerma usually awarded dealers a bonus, defined in Convenzione B (which was annexed to the dealership contract), the amount and conditions of which varied over the years and which is intended to reward them for the results achieved in the course of carrying out their contractual obligations. Given that, amongst those obligations, the obligation to promote to the utmost sales of new vehicles in the contract territory and to offer a quality after-sales service to customers in that territory is important, the award of the bonus logically depended on the proper performance of that obligation. According to the applicant, from 1 January 1988 until 31 December 1990 this 3% bonus was awarded at a rate of 2% and 0.5% for achieving four-monthly and yearly sales targets respectively, and at a rate of 0.5% for compliance with other standards. That split was later altered (from 1 January 1991 until 30 April 1994: 1.5% for the four-monthly sales target and 1.5% for the annual sales target; from 1 May 1994 until 31 December 1994: 1.4% for the four-monthly sales target, 1% for the annual target and 0.6% for the degree of customer satisfaction). Convenzione B contained an express rule that when calculating the bonus all sales were to be taken into account, but those made outside the contract territory would be taken into account only up to a maximum of 15% of total sales made by the dealer (the 15% rule). In practice, however, the 15% rule, in force until 30 September 1996, was not applied. From 1 October 1996 all sales of new vehicles were taken into account when calculating the bonus. Initially the quantity of vehicles sold was determined on the basis of deliveries. However, from 1 January 1995 until 30 September 1996 the bonus for achieving the four-monthly sales target depended on registrations.

45 The applicant states that the documents cited by the Commission to show that sanctions were imposed through that bonus are either irrelevant to that question or of no evidential value. Sanctions were imposed only on distributors who had breached their dealership contract by supplying motor vehicles to independent dealers. It is clear from the wording and context of all the documents cited by the Commission that only sales to independent dealers were concerned. Furthermore, there is no evidence to justify the conclusion drawn by the Commission that the bonus system at issue induced a number of dealers to cease generally from sales outside their contract territories. Moreover, contrary to the Commission's assertion, Unione Concessionari Audi Volkswagen (Union of Audi and Volkswagen dealers, UCAV) never expressed disagreement with that system. Furthermore, the Commission had long been informed of the subject-matter of that system, as it had received a copy of Convenzione B in 1988. It had not expressed any objection to that system because, according to the applicant, the entire system and in particular the 15% rule, was compatible with Regulation No 123/85.

46 The defendant states, first, that, in the case of the Audi A4 vehicle, the financial loss suffered by the dealer in the event of his exceeding the ceiling fixed by the 15% rule in the event of a sale followed by registration of a vehicle outside the contract territory amounted to 8% of the invoice price of the vehicle, which corresponded to a loss of bonus of 3% and of a split margin of 5%.

47 The defendant states, second, that in none of the documents cited in the decision is a distinction drawn, as regards payment of the bonus, according to whether the sales outside the contract territory were agreed with independent dealers or with final consumers or other authorised dealers. The defendant refers to one document in which it is stated that the bonus was blocked with respect to all sales outside the contract territory. It also cites documents to show that the bonus was a means of exercising pressure so as to discourage sales outside the contract territory and that the Italian dealers felt that their freedom of action was thereby restricted. Lastly, the defendant submits that the system applicable since 1988 was reinforced with effect from autumn 1993 by making the payment of the 3% bonus subject to the registration of the vehicles in the dealers' contract territory.

- Findings of the Court

48 As a preliminary point, the Court observes that the applicant does not dispute that from 1 January 1988 until 30 September 1996 calculation of the bonus awarded by Autogerma to Italian dealers to reward proper performance by them of their contractual obligations was subject to the 15% rule stipulated in Convenzione B. According to that rule, both sales within and outside the contract territory were taken into account for the purpose of payment of the bonus, but the latter sales only up to a maximum of 15% of total sales (see paragraph 44 above).

49 That rule was liable to induce Italian authorised dealers to sell at least 85% of available vehicles within their contract territory. It restricted opportunities for final users and authorised dealers in other Member States to acquire vehicles in Italy, in particular during periods in which such purchases were of major interest to them and the number of vehicles available for sale in that State was limited (see, in that regard, paragraph 79 et seq. below). The Commission could therefore rightly conclude, in particular in point 181 of the decision, that the 15% rule fell outside the exemption granted by Regulation No 123/85. Although Regulation No 123/85 provides manufacturers with substantial means of protecting their distribution systems, it does not authorise them to adopt measures which contribute to a partitioning of the markets (judgment in Case C-70/93 Bayerische Motorenwerke [1995] ECR I-3439, paragraph 37).

50 Moreover, the applicant's argument that the 15% rule was not applied in practice and was not therefore used as a means of restricting exports from Italy lacks credibility in the light of a number of documents before the Court.

51 Thus, in an internal note of 28 June 1994 (endnote No 97 to the decision), entitled Non-payment/withholding of the extra bonus for outside-areas sales (including parallel exports), Mr Schlesinger, Chairman of Autogerma, states as follows:

I am writing to confirm what I have already told you verbally, namely that I want every single case of subsequent payment of an extra discount that has been suspended or withheld for out-of-area sales/parallel exports to be submitted to me for approval.

...

I would remind you once again that our network must sell our vehicles in Italy (above all in order to "survive") and must not carry on "distribution" activities outside our area.

As you are aware, Autogerma has for a long time been constantly asking its own parent companies for special terms for supplies, prices, special equipment, etc.; we cannot "return the favour" by selling our vehicles abroad.

52 In a note of 4 July 1994 (endnote No 97 to the decision) Mr Schlesinger states:

I would point out in that regard, for the umpteenth time, that ... our dealers must wholly cease to sell outside their territory (save as regards the 15% of vehicles provided for in the dealer contract which must, however, be "registered"); the bonus will not be paid for [sales] "outside the contract territory" and, henceforth, that bonus and any other bonuses/promotional campaigns of any nature will be paid on the basis of "registered" vehicles (and not delivered vehicles).

53 Next, the minutes of the meeting of 27 July 1994 between UCAV and Autogerma (endnote No 67 to the decision) refers to the following discussion:

Scarabel:

said that special rebates for sales outside the contract territory had been withheld in the case of some dealers who would be legally entitled to demand payment, at least in theory. He stressed the need for a fresh discussion of the 15% quota for tolerated sales outside the contract territory.

Dr Schlesinger:

... the special rebate was just a supplementary rebate, something over and above what was customary. It had been operated very generously, and if now about 20 dealers out of about 234 had not received this special rebate, the reason was that it was not intended as a reward for wholesalers or exporters. In the past we turned a blind eye, but now we are inclined to refuse the special rebate for sales outside the contract territory, as it is given on the basis of registrations rather than deliveries.

...

Dr Schlesinger:

asked the UCAV to sensitise the base to a good launch for the new Polo (restricted grant of rebates, no exports) ...

54 A report by Audi on a visit to Autogerma on 12 October 1994 (endnote No 101 to the decision) confirms:

sales outside one's own territory are allowed up to a maximum of 15% (subsidiaries, etc); the 3% bonus is not awarded beyond that amount.

55 The circular of 20 October 1994 sent by Autogerma to authorised dealers concerning invoicing for the new Volkswagen Polo (endnote No 85 to the decision) also gives it to be understood that the 15% rule was applied, since it states:

It remains to be decided whether it is advisable, that is to say whether it is in the interests of all of us, to alter the present 15% authorisation for out-of-territory sales, either upward or downward.

56 Next, in an internal note of 22 November 1994 (endnote No 91 to the decision) it is stated that the quarterly bonus will be paid on the basis of vehicle registrations in the contract territory, not generally according to sales. According to a circular from Audi on 8 December 1994 that measure was linked to the planned split margin system and was intended to ensure that a margin or bonus is paid only in the event that it is evidently the result of working the dealer's own contract territory ... (endnote No 92 to the decision).

57 Lastly, in an internal note of the applicant of 24 March 1995 (endnote No 91 to the decision), it is confirmed:

The dealer is authorised to supply up to 15% in other contract territories. The bonus is paid when 80-85% of the target has been achieved. The bonus is currently based on deliveries, but will be paid in future only for registrations.

58 Those documents show that the 15% rule was applied with the express intention of discouraging sales abroad by the Italian dealers. It is also clear from the above statements by Mr Schlesinger on 4 July 1994 and by Mr Scarabel on 27 July 1994, and from the circular of 20 October 1994, the report by Audi on the meeting with Autogerma on 12 October 1994 and the note of 24 March 1995, all mentioned above, that the 15% rule was not only applied as a criterion for refusing payment of the bonus for sales made outside the contract territory where the ceiling of 15% of total sales was exceeded, but was also interpreted as prohibiting such sales.

59 It follows from all the foregoing that the Court must reject the argument that the Commission wrongly concluded that the applicant sought, jointly with its subsidiaries Audi and Autogerma, to hinder re-exportation from Italy by using the bonus system provided for in Convenzione B.

60 The argument that, as Convenzione B was notified in 1988, the Commission could not impose a fine on the applicant for having applied the 15% rule stipulated in that agreement will be examined in the context of the alternative plea for reduction of the fine.

Introduction of a split margin system

- Arguments of the parties

61 The applicant submits that although the idea of a split margin system was discussed in 1994 in particular in regard to the new Volkswagen Polo and Audi A4 vehicles, and was motivated by the desire to ensure that each dealer concentrated his activities on his own contract territory, such a system was never introduced, contrary to what the Commission alleges. The applicant observes also that an addendum to the dealership contract would have been required in order to introduce that system. The key document in regard to margins, namely the addendum to the contracts concluded with the Italian dealers, usually called allegato A contains no evidence of the introduction of a split margin. The applicant cites several circulars from Autogerma to the dealers. In the circular of 20 October 1994 Autogerma merely explained what had been discussed with UCAV. In those of 2 November 1994 and 9 May 1995 it announced that there was no question, as regards invoicing for the new Volkswagen Polo vehicle, of a split margin and that an overall discount of 13% would therefore be applied. The applicant also refers to a document of similar content with regard to the Audi A4 vehicle, and submits a statement to the same effect by the chairman of UCAV. It observes that the only person cited by the Commission who alleges that a split margin system was actually applied is Mr Mutschlechner, who was a sub-dealer of Beikircher, a dealer. The applicant observes that it cannot be ruled out that some dealers applied such a system to sub-dealers, but that is not the responsibility of the manufacturers or Autogerma. The applicant does not dispute that a split margin system, such as that envisaged at the material time, would have been incompatible with Community law.

62 The defendant contends, based on the documents cited in the decision, that a split margin system was introduced in October/November 1994. It submits that the fact that UCAV rejected a previous attempt by Autogerma to introduce such a system in May 1994 sheds no light on the question whether Autogerma nevertheless initiated it in autumn 1994. The Autogerma circular of 2 November 1994 shows, on the other hand, that a provisional split margin system was introduced until 30 April 1995 with regard to the new Volkswagen Polo. That system was actually applied. Likewise, as regards the Audi A4, the defendant observes that an internal Audi document of 25 November 1994 shows that UCAV accepted the proposed split margin system on 18 October 1994 and that the system was applied thereafter. The fact that several months later, in February 1995, UCAV no longer wished to approve such a system did not affect the application of that system. Furthermore, the defendant disputes that an amendment to the dealership contract was necessary in order to establish that system.

63 In its reply the applicant states that in its statement in defence the Commission accepts that the split margin system was not introduced by the circular of 20 October 1994 and alleges that it was introduced by the circular of 2 November 1994. The applicant submits, moreover, that contrary to what was stated in the decision, the Commission contends, before the Court of First Instance, that this system was applied only temporarily, namely until 30 April 1995. However, no split margin system was introduced. The applicant annexes to its reply a report from the accountants, Coopers & Lybrand, dated 30 October 1998 which states as follows: Our review of all the data relevant to the investigation with regard to the period from 1 July 1994 to 31 December 1995 has shown that in no case was a margin reduction applied by [Autogerma] - neither for the VW Polo nor the Audi A4. In each case the dealers received the full margin due to them of 13% (VW Polo) or 15% (Audi A4).

64 The defendant disputes that there is a conflict between the decision and the defence as regards the split margin system. The decision and the defence refer to the circular of 2 November 1994 relating to the implementation of that system and explain that initially it was to apply only until 30 April 1995. Moreover, the defendant observes that the Coopers & Lybrand report cannot call in question the evidential value of the circulars sent to the dealers by Autogerma on 20 October and 2 November 1994.

- Findings of the Court

65 The Commission's contention that a split margin system was established in October or November 1995 for the new Audi A4 and Volkswagen Polo vehicles (see paragraph 62 above) is not adequately substantiated by the documents before the Court.

66 In a note of 10 November 1994 (endnote No 87 to the decision), Autogerma states that there are still certain points to be decided with the dealers before that new system can in fact be established. It states:

Both parties, Autogerma and dealers, are first to agree a test phase for the new margin system until 30 April 1995.

67 Similarly, in a report of 10 February 1995 on a meeting with Autogerma (endnote No 42 to the decision) Audi states:

Autogerma indicates the measures introduced until now: - split margin for A4 - has not yet, however, been approved by the Italian dealers' association; not yet actually effective, probably in the coming months ....

68 As to the Volkswagen Polo, some documents suggest that a split margin system was proposed by the applicant and Autogerma. Internal notes of 22 November 1994 and 6 February 1995 (endnote No 91 to the decision; endnote No 49 to the decision) mention division of the dealer margin on Polo and, in other terms, split margins for the Polo A03 as a measure adopted by Autogerma. Furthermore, an internal note of the applicant dated 24 March 1995 (endnote No 91 to the decision) indicates that there was criticism of the splitting of the Polo margin. Lastly, when the Commission carried out its investigations, an Italian sub-dealer, Mr Mutschlechner, stated that with effect from November 1994, when marketing of the new Polo began, there was an agreement between Autogerma and its dealers ("the UCAV agreement") according to which the 9% margin [granted] to the [sub-dealer] was not paid in full when the vehicle was sold but part (4%) was retained and payment thereof was subject to evidence that the vehicle had indeed been registered in the territory (endnote No 86 to the decision).

69 However, apart from that statement by Mr Mutschlechner, which concerns the specific case of sub-dealers, there is no evidence from which it can be clearly concluded that the introduction of the split margin with regard to the new Volkswagen Polo was the subject of an agreement between all the interested parties, including UCAV. An Autogerma note of 24 October 1994 (endnote No 79 to the decision) refers to a positive view by that body, but also indicates that its definite agreement had not yet been obtained:

The result of our discussions with UCAV, the dealers' association, is that we will split the margin in the case of the new Polo as follows:

- an immediate discount (in the vehicle invoice)

- a subsequent discount if the vehicle is registered in the dealer's contract territory.

The entire discount will be given immediately in the case of demonstration Polos. We plan to introduce the new system for normal invoicing: 8 + 5% or 10 + 3% after final agreement with UCAV in the next few days.

70 Moreover, it is clear from the documents before the Court that the proposed split margin system had been criticised within the Volkswagen group. In an internal note of 23 February 1995 (endnote No 80 to the decision), Mr Bothe, who was employed by the applicant, writes:

I have heard from BMW that Autogerma intends to introduce a split margin. For vehicles that are not registered in the dealer's contract territory the margin is to be only 2/3 of the margin they would usually obtain.

That rule, of which Mr Bertino had already informed me on 10 February, worries me. It is contrary to Article 6[(1)(8)] of the new draft [EC Regulation] and leads to loss of the exemption.

But even now the EC Commission is likely to regard a split margin as not covered by the current [EC Regulation] because it seeks to prevent the trans-border transactions desired by the Commission.

I told Mr Bertino that the proposed approach represents a difficult tight-rope walk and can be defended only if it is kept within the group. The information received from BMW shows, however, that the subject is already being discussed outside the group. What is more, Mr Breitgoff, a re-importer known to us in northern Germany is reported to have stated yesterday morning in an interview on Bayerische Rundfunk: "VW is shut up tight in Italy". As Mr Breitgoff has already complained about us on several occasions to the Commission, it is in my opinion only a question of time before the subject, already very likely to attract a fine, is taken up by the Commission.

We should therefore very quickly agree with Autogerma on a form of words and approach which can be justified to the Commission as well.

71 That document shows that towards the end of February 1995 Autogerma had not yet implemented a split margin system (Autogerma intends to introduce a split margin) and that the applicant itself was hesitant about approving the establishment of such a system.

72 It must therefore be concluded that, as regards the new Audi A4 and Volkswagen Polo vehicles, the documents before the Court are not consistent as to whether a split margin system was in fact agreed between the manufacturers, Autogerma and the dealers. In those circumstances, the Commission has not adduced sufficient precise and consistent evidence of the introduction, in the form of an agreement or concerted practice, of such a system. The contested decision therefore contains an error of assessment in that regard.

The barrier resulting from measures taken at supply level

- Arguments of the parties

73 According to the applicant, the Commission wrongly considered that the deliveries by Autogerma to the dealers were delayed and limited because of the increase in re-exports and that the measures adopted at the level of supply therefore also constituted a barrier to re-exportation.

74 The applicant states, first, that over a certain period and because of difficulties in starting production of models that were particularly in demand, such as the new Volkswagen Polo and Audi A4 vehicles, Autogerma was able to supply its Italian dealers only on a pro rata basis in order to ensure an equitable distribution of those models. Reductions in delivery are, moreover, immune from attack from a legal point of view. As to the measures proposed to it by Autogerma by letter of 26 September 1994 (which consisted, in particular, in checking distribution of the new Volkswagen Polo), the applicant explains that those measures were never implemented. The Volkswagen Polo had not yet been marketed at the time when that letter was written.

75 The applicant also submits a breakdown of figures to show that the Commission's claim that the Italian market was supplied restrictively is wholly without foundation. It cites figures to prove that towards the end of 1992 Autogerma and the Italian dealers had accumulated over-large stocks of Volkswagen and Audi vehicles because of a steep drop in demand in Italy. However, thereafter the fall in the value of the Italian lire caused high demand on the Italian market from German and Austrian purchasers. Consequently, during 1994 and 1995 needs and orders substantially exceeded production, which caused an increase in delivery periods. For that reason and because of the risk in exchange-rate variation, some customers decided to cancel their orders. The applicant explains that this problem is usually most acute when new models are launched, such as the Audi A4, since in that case production can be adapted only progressively to demand. The applicant states that in any event it has never applied in Italy a different distribution policy from that in force in the other Community countries. Distribution has always been determined by the needs in the Member States, on the one hand, and production possibilities, on the other. The delivery periods for the new models in Italy and in other Community countries were therefore similar.

76 According to the applicant, the fact that during 1993, 1994 and 1995 at least 20 000 vehicles per year were actually re-exported from Italy proves that more vehicles were delivered than was necessary to supply Italian final consumers.

77 Finally, the applicant states that the Commission has not adduced any evidence to show that the manufacturers and Autogerma prohibited Italian dealers from supplying other dealers in the network. The applicant acknowledges that a German dealer, Mr Senger, informed it by letter of 26 November 1993 that an Italian dealer had told him that supplies to German dealers had been prohibited. It states, however, that it immediately refuted that assertion and stated, in its letter of 7 December 1993, that there was no legal or contractual means of prohibiting cross deliveries. The applicant states in that context that if an Italian dealer refused to supply German dealers that is undoubtedly explained by the desire to service his habitual local customers first. Moreover, the applicant considers that the documents on which the Commission relied merely show that the widespread practice of supplying to independent dealers was felt by German authorised dealers to be harmful; that some of them requested the manufacturers to intervene; and that Autogerma considered that the German authorised dealers were disturbing the Italian dealers too much through their incessant requests for cross deliveries. It states, however, that Autogerma's request that the German dealers should cease that practice was never complied with and was not required.

78 The defendant contends, referring to documents cited in the decision, that the lengthy delivery periods to which Autogerma referred in its replies to some potential purchasers were the very consequence of the supply of the Italian market in accordance with its needs. Several documents show that there was a real quota for deliveries to Italian dealers, which was intended to reduce re-exportation from Italy. Such a quota was indeed introduced, in particular for the delivery of Audi A4 and Volkswagen Polo vehicles, even if it is true that the Volkswagen Polo was not yet available on the market when Autogerma's letter of 26 September 1994 was written.

- Findings of the Court

79 Several documents seized by the Commission prove that a strategy of imposing quotas was implemented in order to restrict all re-exports from Italy.

80 Thus, an internal document entitled State of measures to combat the grey market, 25.11.1994 states that, in so far as concerns the new Audi A4, supply will be managed in such a way that only Italian demand will be satisfied (endnote No 58 to the decision). It can be concluded from this that the aim pursued was to eliminate the delivery of vehicles to any purchaser resident outside Italy, including final consumers and Volkswagen and Audi dealers. It is stated in the same document that the measure would enter into force in January 1995. According to a letter from Autogerma to Audi dated 13 June 1994 (endnote No 62 to the decision), the fixing of quotas for Audi vehicles was already practised in 1994 for the old models. It states: although the delivery periods for the Audi 80 could be significantly reduced by up to eight months, quotas are still applied to the dealers.

81 Moreover, the minutes dated 30 August 1993 of a meeting between the applicant and Audi show that they already envisaged measures to reorganise supplies to their dealers in such a way that the number of vehicles available in Italy would be drastically reduced (endnote No 105 to the decision). It is stated:

Practical measures

1. Reduction of the pressure on stocks in Italy by diverting production volume from Italy to other markets ...

2. Vehicles in Autogerma's import store are to be repurchased through VW AG in order to place them in other markets in accordance with point No 1. Expense to be assessed by Controlling.

82 It appears that this reorganisation achieved its objectives with effect from 1993. In a letter to the applicant dated 26 November 1993 (endnote No 112 to the decision) an authorised German Volkswagen and Audi dealer complains of the following facts:

According to our Italian dealer, supplies to German VW/Audi dealers have been prohibited with immediate effect upon instruction by Volkswagen AG. No confirmed vehicles will be delivered.

83 In its letter of 7 December 1993 replying to that serious accusation of a barrier to cross deliveries (endnote No 113 to the decision), the applicant does not dispute that a supply strategy aiming to satisfy solely demand from Italian consumers was already in place and was having an effect. It states:

We would, however, like to take up a statement made in your letter to the effect that the Italian dealer concerned is said to have stated that "supplies to German VW/Audi dealers have been prohibited with immediate effect upon instruction by Volkswagen AG".

This is not correct, in particular since there would be no legal or contractual grounds for it. It seems, rather, that the measures adopted in Wolfsburg to ensure supply of the Italian market in accordance with need are gradually proving effective so that Italian dealers are first of all supplying their traditional customers with the available goods.

84 It is clear from an internal Audi note of 6 February 1995 that Audi decided to decline an order from Italian dealers for the supply of 8 000 vehicles. The reasons given for that refusal are as follows (endnote No 109 to the decision):

Agreement to an additional 8 000 vehicles would already put the Italian dealers in a position to re-export Audi A4 vehicles and reach agreement to that effect with independent importers and dealers ... In order to give a signal in Italy that the announced policy of restricted supply in line with real market conditions will be maintained, the importer should be immediately informed of the decision by the competent department that the 8 000 vehicles requested will not be delivered.

85 Even after the receipt by the applicant of the Commission's letter of 24 February 1995 (see paragraph 10 above), Audi, in a report of 15 May 1995, refers to the satisfaction of solely Italian domestic demand as a success (endnote No 104 to the decision).

86 An Autogerma document, probably of 31 January 1995, concerning measures to prohibit re-exports from Italy refers to adaptation of supplies to demand (endnote No 42 to the decision).

87 Furthermore, it is apparent from a fax sent by Autogerma to Audi on 6 October 1995 (endnote No 111 to the decision) that this policy of restricted supply as a means of partitioning the Italian market was maintained until the end of 1995. It is stated:

From the present point of view it is not realistic to expect to reach the desired 36 000 sales to customers. Increased activities in addition to the "strong year-end programme" we have already presented to you would inevitably lead to a situation where some of these additional vehicles delivered to customers would not actually be registered in Italy.

For this reason we shall keep to the total volume of 35 190 sales to customers.

88 It is clear from those documents taken as a whole that the Commission was entitled to conclude that the applicant, with the support of its subsidiaries Audi and Autogerma, implemented a policy of imposing supply quotas on Italian dealers with the express aim of hindering re-exportation from Italy and thus of partitioning the Italian market.

89 Since that policy openly aimed to hinder re-exportation, its characterisation as a measure intended to partition the Italian market cannot be called in question by the production difficulties to which the applicant refers. The imposition of those quotas, combined with the system for payment of the bonus (the 15% rule, see paragraphs 48 to 58 above), was of such a nature as to induce the Italian dealers to refuse to sell vehicles to purchasers in Member States other than Italy, thus including, contrary to the applicant's claims (see paragraph 77 above), authorised Audi and Volkswagen dealers.

90 Contrary to the applicant's claim that those dealers had of their own accord formed the view that it was of no interest to them to sell vehicles outside their contract territory, the documents cited above show that supply to them was restricted in order to influence them and, in particular, to discourage them from re-exporting vehicles from Italy.

91 The effectiveness of that strategy was reinforced by the information sent to the dealers, also referred to in the Autogerma document of 31 January 1995 (that neither bonus nor sales aid is granted for re-exported vehicles). Faced simultaneously with both restricted supply and the 15% rule and knowing that re-exports were looked upon with disfavour by Autogerma and the manufacturers, it was clearly fully in the interests of the Italian dealers to sell the limited number of vehicles available entirely or almost entirely to purchasers residing in Italy. Their business conduct was therefore influenced by the manufactures and Autogerma.

92 That analysis is also corroborated by a letter of 6 October 1994 to the firm Silemotori Negro in Conegliano (Italy), in which Autogerma writes:

We want to draw your attention to the fact that the new Audi A4 Avant will be launched approximately one year after the new Audi A4 Limousine (January 1995) and it is therefore all the more important to sell well the few vehicles which remain for such a long period of time. In so doing particular attention should be given to sales within one's own contract territory.

93 It follows from the whole of the above findings that the applicant's argument that there was no barrier at the level of supply cannot be upheld.

The barrier caused by business conduct vis-à-vis consumers

- Arguments of the parties

94 The applicant also complains that the Commission wrongly found that the business conduct of the manufacturers and of their distribution network in Italy vis-à-vis consumers from other Member States constituted a barrier to re-exportation.

95 The applicant observes, first, that the Commission relies on complaints made by certain customers to the manufacturers. In fact, the manufacturers drew up a standard letter in order to reply to potential purchasers who demanded to know why prices were different from one country to another. The applicant states that it did not supply false information to consumers but, to the contrary, it assisted potential customers in Member States other than Italy who wished to acquire a Volkswagen or Audi vehicle in Italy by ordering its personnel to supply them with a list of all Italian dealers.

96 Autogerma's practice of referring potential purchasers to the dealers was wholly legitimate as Autogerma does not sell vehicles directly to consumers. Although dealers are entitled to supply vehicles to final consumers without restriction, they are not obliged to do so. In one specific case, Autogerma did in fact ask a potential purchaser to confirm his intention of purchasing a vehicle in Italy but, contrary to the Commission's claim, it did not demand confirmation that the customer was acquiring it either directly or through a reliable intermediary. Furthermore, when customers requested the assistance of Autogerma where they were experiencing problems with a dealer, Autogerma was at pains to assist them. The manufacturers themselves also took pains to advise German customers who had experienced problems in obtaining a vehicle from an Italian dealer.

97 The applicant adds that while it is true that some letters from German or Austrian customers show that they had been refused solely on the grounds of nationality, it is wrong to conclude that those refusals were due to a prohibition from the manufacturers or Autogerma. It is clear that a dealer who, for one reason or another, does not wish to sell, prefers to claim that he cannot do so rather than to say that he does not wish to do so. In any event, the letters cited by the Commission do not solely prove that their authors had met with a refusal by Italian dealers. They also prove that the applicant, Audi and Autogerma immediately explained, on each occasion when customers contacted them, that supplies to final consumers should not be refused and assisted the customer to obtain a vehicle.

98 The applicant submits that dealers may have an interest in selling certain models which are particularly sought after, but available only in limited quantities, primarily to customers in their contract territory. In that way, they ensure the profitability of their after-sales service. They also avoid the difficulties associated with recovery of value added tax (VAT). Thus, the Italian dealers questioned by the Commission in the course of its investigations did not confirm that they had refused to sell to foreign final consumers under pressure from the manufacturers or Autogerma, but stated that such sales were, quite simply, of no interest to them. Some of them even firmly denied the existence of a prohibition on sales to other countries or stated that they had received an express order to sell to all final consumers, irrespective of their residence.

99 As regards the undertaking which, in a circular of 15 October 1993, Autogerma had recommended that its dealers should have signed by some purchasers, the applicant disputes that it was intended to prevent re-exports. That undertaking obliged the purchaser to refrain from selling the vehicle within a period of three months and before having driven it for 3 000 km and to pay a penalty of 10% of the purchase price if he failed to do so. Such a measure in no way hindered supplies to final consumers outside the contract territory. It merely protected the selective distribution system by allowing the dealer to obtain further assurance that the purchaser was not a man of straw acting on behalf of an independent dealer. Moreover, according to the letter of 26 September 1994 from Autogerma to the applicant, the undertaking at issue was to be required only of suspect foreign purchasers, namely customers whose status as final consumer was in doubt. Already in its circular of 15 October 1993 Autogerma advised dealers to adopt that measure only in those circumstances. The applicant adds that it was entitled to regard such a measure as lawful, at least until the entry into force of Regulation No 1475/95. That is clear from a Commission letter of 31 March 1995. It also states that since the beginning of 1996 the undertaking in question has no longer been required.

100 Lastly, in so far as the Commission concluded that Autogerma wished to hinder re-exports by invoicing all vehicles including VAT (point 42 of the decision), the applicant claims that it merely applied the legislation under which supplies such as those from Autogerma to its dealers are subject to VAT.

101 The defendant points, first, to the content of a handwritten note, referred to in point 34 of the decision, by which the applicant required its employees never to give the impression to final consumers or authorised intermediaries who had requested information that it had given instructions that no information should be disclosed. It states, next, that on numerous occasions potential purchasers complained of barriers to re-exports, to such an extent that the applicant drew up a standard letter of reply to them. German and Austrian consumers were made to run a real obstacle race, part of which was the delivery periods. The large number of letters of complaint from potential purchasers reveals that state of affairs.

102 As regards, more specifically, the measure whereby customers whose status as final consumer was doubtful, that measure, after having merely been recommended to dealers, subsequently became compulsory.

103 The defendant also submits that the written statements by dealers made on the occasion of the investigations in October 1995 are not of great evidential value, having regard to the fact that the dealers had received warnings from Autogerma and threats from it to terminate their dealership contract. Those threats explain, moreover, the differences between the written and oral statements of some dealers. In any event, several documents show unequivocally that potential foreign purchasers met with an express refusal to sell.

104 Lastly, the defendant cites a document which, it claims, unequivocally shows that the VAT inclusive invoicing was knowingly implemented in order to hinder re-exports.

- Findings of the Court

105 The applicant's argument is manifestly at variance with the considerable number of complaints which were sent, particularly during 1995, by consumers in Member States other than Italy and, for the most part, of German or Austrian nationality, either to the applicant, Audi or Autogerma, or to the Commission. Following a request by the Court to send to it all the letters received from consumers or obtained by it the Commission produced more than 60 letters or faxes all of which complain of the obstacles encountered by those consumers in acquiring a Volkswagen or Audi vehicle in Italy. It is sufficient to set out hereinafter some of the correspondence considered by the Commission in the contested decision.

106 In a fax of 15 February 1995 addressed to Audi (endnote No 33 to the decision) Mr Wieser writes:

I contacted an Audi dealer in South Tyrol in order to purchase an Audi A4 1.8 and import it into Austria.

I found out however that pursuant to an instruction from the Audi factory no sales may be made to Austrians ...

When I pointed out that these measures infringed Community law your dealer told me that he knew that they were unlawful but he was afraid that your firm would take reprisals.

107 In a fax of 27 April 1995 to the Commission (endnote No 36 to the decision) Mr Bernhard writes:

I hereby complain about the following VW firms ... : I wanted to order a VW Passat GL from Autohaus Lanz and was told that there was no problem in selling a vehicle to me as a German within the EC. Two days later, I knew what type of vehicle and accessories I wanted and placed an order. The next day the owner of the firm telephoned me and told me that he was not allowed to sell a car to me since I was German (a rule of Volkswagen AG).

I then tried to buy a vehicle from the Brenner-Garage SPA, Volkswagen dealer and service centre. That was also refused.

108 In a fax of 27 April 1995 sent to the applicant (endnote No 132 to the decision) Mr Lenz writes:

With reference to my telephone conversation with you, I would like once again to make clear the situation represented to me in Italy which is, not only in my view, a dreadful one.

As a serious customer for the above Golf (for my son) on the occasion of my Easter visit to South Tyrol, I was told at three VW dealerships that it was forbidden to export any vehicles whatsoever and that they had to comply strictly with this rule. Some dealers had already had their concessions withdrawn for failure to observe it.

I was further informed that interested purchasers were to be put off with spurious excuses such as: delivery period approximately one year, available vehicles have already been sold or reserved, etc.

Obviously no account was taken of the fact that there can be no prohibitions to that effect, as we live in the EU. That fact should be known by now even in the furthermost corner of the EU. Shouldn't it?

In the ARD programme "Auto und Verkehr" on 22 April 1995 German television dealt precisely with this subject and gave a full report of the inadmissibility of such a rule. You must surely also be aware of that! ...

109 In a letter of 18 May 1995 sent to Autogerma, with a copy to Audi and the Commission (endnote No 39 to the decision), Mr Baur writes:

Returning once again to my case: on 19 February 1995 I ordered, through an intermediary who has authority to act in my name, an Audi A6 from the firm Funari. This order was registered with you under No 95/0014. As there is a legally valid contract, I would like you to tell me immediately when my car will be delivered.

Present indications are that you are doing everything to keep customers away from Audi. I have contacted several Italian dealers who tell me that they could expect reprisals to be taken (of course the threats are made only by telephone) if even one Audi is delivered to Austria ...

110 In a letter of 8 June 1995 sent to the applicant (endnote No 36 to the decision), Mr Keppler writes:

Between 2 May and 4 May 1995 I was in Italy. In the vicinity of St Leonhardt the VW dealer there gave us the staggering news that in the whole of South Tyrol we would not find a VW dealer who would sell a VW to a foreigner. The reason he gave was that VW had prohibited sales. If that prohibition were ignored, VW had threatened to withdraw the dealership concession. And that was in fact the case. In the whole of South Tyrol (at least in Merano, Bolzano and Schlanders) no dealer would sell us a VW ...

This is what we were told by the Brenner-Garage in Bolzano and Merano: "Until December 1994 we sold cars to Germans like mad, but now Volkswagen has turned off the tap. We receive from VW just the number of vehicles with which, with considerable delivery periods, we can satisfy the domestic market. We would like to sell you a VW, but unfortunately Volkswagen has made this impossible."

111 In a letter of 23 June 1995 to Autogerma (endnote No 133 to the decision), Mr Schneider writes:

I would like to buy a Audi A4 1.8 in Italia and export it to Austria.

All dealers told me that it is not possible because they wouldn't become any car in the future if they order a car for an Austrian once more ...

112 In a fax of 19 July 1995 sent to the applicant (endnote No 134 to the decision) Mr Mosser writes:

As Austria is now also part of the EU I would like to ask a very important question.

On 8 June 1995 I was in Italy, our neighbour, in order to purchase an Audi A4 TDI. First of all I drove to Gemona and then to San Daniele.

However, I had an unpleasant surprise. The management of the business in Gemona and San Daniele told me that the general representative of Audi had prohibited each garage from selling vehicles to foreigners.

113 In a fax of 3 August 1995 to Audi (endnote No 135 to the decision) Mr Bilogan writes:

I intend to acquire [an Audi A4] in Italy. I have been told by several people that Italian dealers are not allowed to sell anything to persons from the Federal Republic of Germany and Austria, apparently because of an instruction from the vehicle manufacturer.

114 In a letter sent to the applicant (endnote No 136 to the decision) Mr Albrecht writes:

As a convinced European I too wanted once in a while to enjoy the advantages of the EU, as you do too in your firm, and so my wife and I went to Italy.

We stopped in Milan and looked for a VAG dealer. We were overjoyed when we saw in the showroom the vehicles we planned to purchase. It was to be a Polo for my wife and a new Audi A4 for me.

However, very quickly our joy turned to disappointment. Without beating about the bush we were told that, upon instruction from Wolfsburg, we as Germans could not obtain those models of vehicle.

What we retained from our nice two-day holiday are the costs of travel and accommodation and the realisation that your firm would like to benefit from the advantages of the EU but the little man, as usual, is left behind and should kindly make his purchases in Germany.

115 Those documents show in an adequately representative manner that during the period concerned a potential customer resident outside Italy faced the greatest difficulties in finding an Italian Volkswagen and Audi dealer prepared to sell him a vehicle. Consequently, the Commission could properly conclude that the business conduct of the manufacturers and their distribution network in Italy vis-à-vis consumers from other Member States also constituted a barrier to re-exports.

116 That conclusion is not undermined by the interpretation of each of those documents put forward by the applicant in its pleadings, nor by its explanations in regard to VAT, nor, lastly, by the practice of the manufacturers and Autogerma of replying systematically to the complainant that it was a misunderstanding and of taking the practical measures to enable him to purchase a vehicle from an Italian dealer. If the same refusal is systematically given, it cannot be regarded as a misunderstanding. Next, the fact that persons who complained were assisted to purchase a vehicle in Italy may be explained by the fear that they might bring an action before the courts; it does not alter the fact that it had become difficult for potential customers from another Member State to acquire a Volkswagen or Audi vehicle in Italy.

117 As to the applicant's criticisms of the assessments in the contested decision of the measure whereby undertakings were required from some purchasers, it must be observed that although that measure was not in itself of such a nature as to prevent re-exports by final consumers, this in no way undermines the above finding that the Italian dealers were directed to refuse in each case to sell vehicles to foreign purchasers. Consequently, it is unnecessary to examine the question as to how the measure at issue must be interpreted. Furthermore, the applicant's argument that it could infer from its correspondence with the Commission that the latter considered the measure in question to be lawful is at variance with a letter of 23 November 1994 which the Commission sent to it and which will be analysed below in the course of the Court's consideration of the alternative plea alleging that the fine imposed is excessive (see paragraphs 338 and 339 below).

118 It follows from all the foregoing considerations that the applicant's argument that the business conduct of the manufacturers and their distribution network in Italy vis-à-vis consumers did not constitute a barrier to re-exports cannot be accepted.

The applicant's argument that the measures adopted were solely designed to prevent sales to independent dealers

- Arguments of the parties

119 The applicant states that the finding reached in the contested decision that all re-exports were hindered is also due to the fact that the Commission misinterpreted the terminology used in correspondence within the Volkswagen group.

120 The Commission wrongly understood the expression grey market to refer not only to sales to independent dealers but also sales to authorised dealers and final consumers in Member States other than Italy. The applicant contests the Commission's assertion that the manufacturers and Autogerma knowingly treated the grey market as synonymous with re-exports from Italy and so failed to distinguish between lawful and unlawful re-exports (recitals 43 to 58 of the decision). It is evident that grey market refers to unlawful transactions and not to lawful sales.

121 The applicant does not dispute that in the correspondence within the group and between Autogerma and the dealers more general expressions such as re-exports, sales organised outside the contract territory, sales outside the contract territory and re-sellers are used, but in all those cases it argues that it is clear from the wording or the context of the correspondence in question, or from a subsequent document, that only unlawful re-exports, namely those not in conformity with the dealership contracts, were referred to.

122 The applicant cites certain circulars sent by Autogerma to the dealers which clearly show that Autogerma prohibited them solely from selling to independent dealers. It does not dispute that Autogerma recommended to the dealers, in particular in regard to the new Volkswagen Polo, to concentrate their sales activities on their own contract territory in Italy, but claims that is lawful.

123 In any event, the Commission has not proved that the use of general expressions in the correspondence and circulars left dealers in a state of uncertainty which made them avoid concluding contracts with final consumers or intermediaries acting on their behalf (recitals 60 and 61 of the decision). The applicant states that the dealers, as business men, are aware of the relevant Community legislation and that, moreover, their dealership contract points out the difference between authorised sales to final consumers and prohibited sales to independent dealers.

124 The applicant disputes the Commission's interpretation of certain documents on which the Commission relies in order to prove the existence of a general strategy to prevent lawful exports. The note of 21 September 1994 sent to the applicant by Autogerma (recital 21 of the decision) contains only general reflections on the type of possible measures. By that document Autogerma had attempted to show the applicant that it intended to take active steps against all re-exports, while in reality the only instruments at its disposal were those available under the dealership contracts.

125 The other documents refer only to sales to independent dealers. In the case of the note of 26 September 1994, also sent to the applicant by Autogerma (recital 22 to the decision), that is clear from its very wording and, in particular, from the reference made in it to Regulation No 123/85. That interpretation is, moreover, confirmed by another note from Autogerma to the applicant dated 24 October 1994.

126 The same is true of the applicant's internal note of 6 February 1995 regarding measures adopted by Autogerma to avoid re-exports (recital 23 of the decision) and from an internal Audi note of 12 December 1994 (recital 24 of the decision) which related only to a draft circular on the grey market; margin system in Italy. Furthermore, the circular which was ultimately sent to the German dealers entitled grey market asked them to gather information on independent dealers. The same was true of the reports, from the Autogerma department with responsibility for monitoring the Italian authorised dealers, of 17 December 1993 concerning the sales practices of two dealers; an Autogerma note of 15 March 1995; a fax from the applicant to Audi dated 24 March 1995; a letter from Audi to its German dealers on 16 March 1995; and a fax of 27 March 1995 from Porsche Austria, which is responsible for the import of Volkswagen, Audi and Porsche motor vehicles into Austria (recitals 25, 28, 31, 41 and 42 of the decision).

127 Lastly, the applicant complains that the Commission did not take into account either the conflicts of interest within the Volkswagen group, which sometimes led to exaggerations in the internal notes, nor the identity of the authors of the documents used as evidence, who were sometimes merely junior employees.

128 The defendant states that the applicant failed to make sure that the measures in question in fact related only to re-exports by independent dealers and that they did not also affect those made by final consumers, intermediaries acting on their behalf and other dealers of the same distribution network. The purpose of the measures went beyond the applicant's alleged aim, that is to say, solely to prevent sales to independent dealers. While it is possible, as the applicant asserts, that Autogerma and the Italian dealers knew that sales to final foreign consumers and other dealers in the distribution network were authorised and should not therefore be hindered, they did not in any event put that rule into practice.

129 The defendant claims that both in the correspondence between the applicant, Audi and Autogerma and in the correspondence between Autogerma and the dealers, no clear distinction is drawn between authorised re-exports and prohibited re-exports. Several documents show that the concept of grey market or grey re-import market included, for the persons concerned, exports to final consumers and to other dealers in the network. The defendant refers in that regard to a presentation intended for the Audi management board meeting on 13 February 1995 which refers to instructions that were intended to reduce by at least 50% the current volume of re-imports, while stating that those re-imports could be either cross-purchases abroad by German authorised dealers or supplies to dealers outside the organisation (= grey market dealers). It also refers to an internal Audi note of 12 December 1994 and to a letter written by the Audi customer service department to a potential Austrian purchaser.

130 As to the other terms used in correspondence within the Volkswagen group in order to indicate the transactions which were to be prevented, the defendant cites a report of 4 June 1994 on a check carried out at a dealer's premises. It is clear from that report that the expression sales activities organised abroad covers all re-exports from Italy. The defendant also observes that Autogerma sometimes omitted to add the adjective organised in its correspondence with the dealers.

131 In any event, it is absolutely clear from the Autogerma notes that certain measures were directed against exports in general. The defendant also refers to other documents cited in the decision which, it claims, prove that all re-exports were concerned.

132 As to the notes of 21 and 26 September and 24 October 1994 sent by Autogerma to the applicant, and to the Autogerma note of 15 March 1995, the defendant contends that they show the confusion which the applicant had created between authorised and prohibited re-exports. Furthermore, those notes clearly concern measures which had already been taken. Another Autogerma note to the applicant, dated 14 June 1994, covers the same matters and shows, moreover, that Autogerma wrongly used Regulation No 123/85 in order to restrict the dealers' activity. The Audi internal note of 12 December 1994 proves that a split margin system was implemented, which was intended to prevent authorised re-exports.

- Findings of the Court

133 In the light of all the evidence and documents referred to above, the Court cannot uphold the applicant's argument that the measures adopted by it, Audi and Autogerma were in fact solely concerned to prevent sales to independent dealers. As the Court has found, the ceiling provided for by the 15% rule was applied to re-exports as a whole (see paragraphs 48 to 58 above), supplies to Italian dealers were the subject of a quota with the express aim of reducing the number of re-exports (see paragraphs 80 to 89 above) and final consumers in Member States other than Italy were confronted with obstacles to the purchase of a vehicle in Italy (see paragraphs 105 to 115 above).

134 It follows that the applicant's argument that the expression grey market shows that only sales to independent dealers were concerned cannot be upheld. While it is true that this expression appears in a large number of documents obtained by the Commission and may convey the idea of unlawful transactions, namely sales to independent dealers, it is also the case that some correspondence within the Volkswagen group relates to re-exports from Italy in general (see, for example, the documents cited in paragraphs 51 and 87 above) and that the 15% rule and the complaints from potential customers clearly do not specifically concern sales to independent dealers.

135 Furthermore, several documents which, according to their title, relate to the grey market, the grey exports [from Italy] or the grey imports [coming from Italy] appear nevertheless, having regard to their content, to cover re-exports from Italy in general.

136 Thus, an internal Audi note of 12 December 1994 (endnote No 17 to the decision) is worded as follows:

Grey imports Italy

Enclosed, at your request, the draft of the letter to the German dealers' organisation.

This letter is critical. The reason for it is to be found in the currently applicable block exemption regulation. It is clearly stated there that manufacturers may not take measures to prevent lawful parallel imports. There is therefore a certain risk in associating the measures which we have adopted in Italy with the prevention of re-imports and to document this in a letter to the German dealers' association. This should be borne in mind in particular against the background of the contentious issue of the extension and alteration of the block exemption.

The measures in Italy should be communicated by word of mouth through the regions.

137 It is thus stated in that note that it would be better to give information by word of mouth concerning the measures which had been adopted in regard to Italy, since written communications on that subject might reveal the incompatibility of those measures with Regulation No 123/85. That note shows the ambiguity of the expression grey market used in internal correspondence within the Volkswagen group. Although the title of that note indicates that it concerns grey imports Italy, its content concerns parallel imports in general and not merely imports by independent dealers.

138 There is another example of that same ambiguity in the fax of 27 March 1995 from Porsche Austria to Audi (endnote No 31 to the decision). That fax is entitled grey imports but then states that, thanks to the measures adopted, all re-exports of Audi A4 vehicles from Italy to Austria have been eliminated. It states:

Re: Grey imports

At last some good news to report on this subject!

From recent discussions with dealers in the areas concerned, we have been able to establish that the issue of "grey imports" has settled down. Thus, until now not even a single A4 has been imported from Italy to Austria. The measures introduced by you jointly with the Italian importer therefore seem to be effective ...

139 Reference should also be made to the Marketing Plan Deutschland 1995 (endnote No 50 to the decision) in regard to that same issue. In that document the applicant sets out the following strategy in regard to re-imports into Germany:

Counter measures to bring re-imports under control by means of a continuous analysis of quotations and delivery flows as well as the exercise of influence on dealers.

Targeted measures against "grey importers".

140 In that document the expression grey importers could refer to independent dealers, but the previous paragraph shows that re-imports into Germany as a whole were also the subject of the counter measures whose object was to restrict those re-imports by adjusting prices and controlling deliveries or supplies, and through the exercise of influence on the dealers.

141 It must therefore be concluded that in the light of the internal correspondence of the Volkswagen group as a whole, the expression grey market, as used in that correspondence, can clearly not be interpreted as covering solely sales to independent dealers. That conclusion is not undermined by the fact that the circulars sent by Autogerma to the Italian dealers make a clear distinction, referring to Regulation No 123/85, between sales to final consumers (irrespective of their place of residence), which they describe as lawful, and sales to independent dealers, which they describe as unlawful. It is conceivable that when drawing up those formal notices to the dealers Autogerma complied with the Community rules whilst reserving the possibility of issuing instructions to them through more informal channels.

142 The conclusion that the applicant, Audi and Autogerma did not confine their actions to preventing sales to independent dealers is corroborated still further by the notes of 21 and 26 September 1994 sent by Autogerma to the applicant (endnotes Nos 14 and 15 to the decision). Those notes contain the majority of the evidence on which the Commission relies against the applicant.

143 The note of 21 September 1994 states that its object is parallel exports and is worded as follows:

Dear Sirs,

We refer to the issue raised at the meeting and already dealt with in detail in order to describe the current situation.

There is great concern throughout the whole Italian sales organisation with regard to the achievement of sales objectives and the need to maintain the sales successes of the past. This necessity has led some of our partners, under pressure from outside sales organisations, including a number of foreign Volkswagen and Audi dealers, to sell in places far from those designated in their contracts, and in some cases indeed outside the country.

The steps taken by Autogerma are therefore intended to warn the Volkswagen/Audi dealers to stay in the territo