OPINION OF ADVOCATE GENERAL

TESAURO

delivered on 8 June 1995 ( *1 )

1. The questions referred by the Bundesgerichtshof (Federal Court of Justice) are concerned with the interpretation of Article 85(1) of the EEC Treaty and a number of provisions of 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. ( 1 ) In particular, the national court asks whether it is incompatible with Community competition law for a manufacturer to prohibit dealers belonging to a selective distribution system for motor vehicles from supplying independent leasing companies where the vehicles in question are intended for customers residing or having their principal place of business outside the contract territory of the dealer from which they were purchased. In the event that that question is answered in the negative, the national court asks whether the conduct in question may nevertheless be prohibited under national competition rules.

Facts

2. ALD Auto-Leasing D GmbH (hereinafter ‘ALD’) is an independent leasing company which leases vehicles produced by a variety of manufacturers to private and commercial users. ALD has around 128000 vehicles (on the road). With an annual turnover of about DM 1 billion, it is the second-biggest German leasing company and the biggest leasing company not tied to any particular manufacturer. Apart from making a vehicle available for a determinate period, ALD also allows customers to opt for ‘full service’, which includes repairs, vehicle inspections, insurance, radio licence fees and the settlement of accident claims. ALD's leasing contracts do not contain purchase options in favour of lessees. ALD also leases BMW vehicles, manufactured by Bayerische Motorenwerke AG (‘BMW’), which it purchases throughout the contract territory from the BMW dealers or subsidiaries which offer it the most favourable terms. ALD also concludes leasing contracts with lessees residing or having their principal place of business outside the contract territory allocated by BMW to the distributor supplying the vehicles for subsequent leasing.

3. In Germany BMW sells the vehicles it manufactures through a system of subsidiaries and dealers. Abroad too, in particular in the other Member States of the Community, it has more or less the same distribution structure. In order to satisfy the growing demand for leased vehicles — an increasingly important sector in the vehicles market — BMW uses BMW Kredit Bank GmbH and BMWLeasing GmbH. The services of those companies are available (but not exclusively) through BMW dealers themselves. However, according to BMW itself, BMW vehicles are increasingly being leased out by independent companies.

4. On 12 February 1988, considering that those independent companies, which, being independent, are not bound by the contractual obligations underlying the BMW network, were causing an imbalance in its commercial organization, BMW sent out to its dealers a circular concerning the ‘supply of vehicles to independent leasing companies’. That circular first observes that ‘like every other end user, [independent leasing companies] rely on the BMW commercial organization for the purchase of new BMW motor vehicles’ ( 2 ) before pointing out that they carry on their business via one or a small number of dealers within the organization, taking no account of where the customers/lessees reside or have their principal place of business. In BMW's view, this gave rise to a parallel (interregional) distribution system which undermined the territorial protection enjoyed by dealers within their respective areas of responsibility and consequently was likely to jeopardize BMW's distribution structure.

5. In BMW's view, the sale of vehicles to independent leasing companies also resulted in circumventions of a number of clauses of the dealership contract and therefore meant that the dealers themselves were in breach of contract. With a view to bringing this situation to an end, the circular stated inter alia as follows: ‘Consequently, dealings with users whose place of residence or principal place of business is outside the contract territory which have been or are brought in by the independent company are unlawful. In such cases, the independent leasing company acts in practice as an intermediary. However, such intermediation, in conjunction with an ongoing business relationship outside the contract territory, generally constitutes a breach of Clause 2.4 of the BMW dealer contract. Such a breach will not be involved only where the order for vehicles comes from customers/lessees or where your company has a business relationship with a customer who attaches importance to the involvement of an independent leasing company. In such a case, the order does not go through the intermediary, but the leasing company merely concludes the actual leasing contract. This has the following consequences for the operation of your business: 1. Under the dealer contract, it is primarily your duty in the case of contracts with independent leasing companies to ascertain where the customer is resident or has its principal place of business. If that place is not within your contract territory, the independent leasing company should in principle be referred to a partner in the commercial organization who is responsible for the area in question. 2. ... 3. In the event of breaches as defined above, we are thereby entitled, after warning against such breach of contract, to revoke the contract in accordance with Clause 11.5. Please deal with this question carefully in future. It is only in this way that it will be possible to maintain in the long term the distribution structure created in the interests of the commercial organization and our customers.’ ( 3 )

6. ALD took the view that that circular constituted an illegal call to a boycott and an unfair restriction on the operation of its business within the meaning of Paragraph 26(1) of the Gesetz gegen Wettbewerbsbeschränkungen (Law against Restraints on Competition, ‘the GWB’) and, moreover, an infringement of Article 85 of the EEC Treaty. It therefore brought an action in the Landgericht (Regional Court) Frankfurt am Main for an injunction prohibiting BMW from inducing its dealers to refuse to supply vehicles in cases where those vehicles were intended, under a contract concluded by ALD, for lessees whose residence or principal place of business was outside the relevant dealer's contract territory. On the basis of national law, the Landgericht accepted ALD's submissions; its judgment was upheld by the Oberlandesgericht (Higher Regional Court).

7. The Bundesgerichtshof, before which BMW brought an appeal on a point of law (‘Revision’), took the view that the circular in question was indeed intended to be a supply embargo and that the call contained therein was not restricted to cases in which an independent leasing company was to be supplied in the course of regular commercial relations with one or more dealers; it was more generally intended to impose on independent leasing companies, operating on an interregional basis, restrictions in their leasing business with BMW vehicles at the regional level by limiting their business activity substantially to the contract territories defined in the dealer contracts. The court also considered that the circular at issue was directed, inter alia, against ALD, as it was the main independent leasing company. However, in the Bundesgerichtshofs view, the circular could not be regarded as a call to a boycott if BMW was not acting with the intention of unfairly affecting third parties. This would be the case if it were proved that, in issuing its call not to supply independent leasing companies, BMW had been pursuing interests contemplated and protected by Community law, in particular under Regulation No 123/85.

8. The Bundesgerichtshof considered that the decision on the dispute between BMW and ALD hinged on the interpretation of the Community competition rules and therefore referred the following questions to the Court of Justice for a preliminary ruling: ‘1. Is it contrary to Article 85(1) of the EEC Treaty (even in the light of Regulation (EEC) No 123/85) for a motor vehicle manufacturer, which disposes of its motor vehicles through a selective and binding distribution system, to agree with its authorized dealers that leasing firms which are not tied to a manufacturer should not be supplied with motor vehicles in cases where it is intended to make such vehicles available to lessees residing or having their principal place of business outside the contract territory of the authorized dealer in question, or for a motor vehicle manufacturer to call on its authorized dealers to act in such a way? 2. If Question 1 is answered in the negative, does Regulation (EEC) No 123/85 preclude national courts from ruling that a call by a motor vehicle manufacturer to its authorized dealers such as that described in Question 1 should be prohibited on the ground that it amounts to a call to a supply embargo which is unlawful under national legislation against restraints on competition?’

The first question

9. Before considering whether the circular in question qualifies for exemption under Regulation No 123/85, it is clearly necessary to determine whether it embodies an infringement of Article 85(1) of the Treaty, which, however, is not contested in these proceedings.

(a) Article 85(1)

10. Article 85(1) prohibits agreements which have as their object or effect the prevention, restriction or distortion of competition within the common market. Given that, as the Court has consistently held, ( 4 ) vertical agreements do not fall outside the competition rules, since it is quite possible for an agreement between traders operating in different stages of the production cycle to be caught by the prohibition laid down by Arucle 85(1), it is necessary first to consider whether the circular sent out by BMW to its dealers constitutes an agreement within the meaning of that provision.

11. In that connection, suffice it to say that, as the Court has already held, a call made by a car manufacturer to its dealers constitutes an agreement prohibited by Article 85(1) when it forms part of a set of continuous business relations governed by a general agreement drawn up in advance. ( 5 ) It is indeed incontestable that the call not to supply independent leasing companies set out in the circular at issue falls within the framework of the contractual relations between BMW and its dealers, whilst the circular itself refers expressly and repeatedly to the dealer contract. Instead of constituting a unilateral act, the call made in the circular of 12 February 1988 should therefore be regarded as being an agreement within the meaning of Article 85(1).

12. Furthermore, the anticompetitive effects of the application of the circular in question are obvious. On the one hand, dealers' freedom is restricted considerably in so far as they can no longer sell to independent leasing companies except on specific conditions; on the other, such companies' possibilities for obtaining supplies are restricted, with their leasing operations being channelled in accordance with the contract territories of the various dealers. All of this manifestly involves a reduction in intra-brand competition.

13. Lastly, as regards the requirement for trade between Member States to be affected, suffice it to say that such an agreement means that leasing companies in other Member States will be prevented from purchasing BMW vehicles in Germany unless — and this will certainly be a rare occurrence — the vehicles in question are intended for customers resident in the contract territory. In any case, they will be precluded from concluding leasing contracts with lessees in other Member States. On top of this, as the Court has repeatedly held, ‘an agreement or practice restricting competition and extending over the whole territory of a Member State by its very nature has the effect of reinforcing the compartmentalization of markets on a national basis, thereby holding up the economic interpénétration which the Treaty is intended to bring about’. ( 6 ) The conduct at issue in these proceedings therefore falls within the scope of the prohibition set out in Article 85(1) of the Treaty.

(b) Exemption under Regulation No 123/85

14. Regulation No 123/85 — which has been the subject of much discussion — exempts from the prohibition set out in Article 85(1) agreements by which the supplier entrusts an (authorized) dealer with promoting the distribution of contract goods within a defined territory and undertakes to supply in that territory only that dealer with motor vehicles and spare parts (Article 1). The block exemption is also applicable to the obligation on the dealer not to manufacture or sell vehicles or spare parts of competing makes (Article 3(2), (3) and (4)), not to carry on business outside the contract territory (Article 3(8) and (9)) and not to sell contract goods to resellers which do not belong to the distribution network (Article 3(10)). All those non-competition clauses are intended to ensure that dealers focus their activity on the sale of contract goods and the associated after-sales service in a specific, easily supervisable area so as to improve their knowledge of the market and consumers' needs, which should have the effect of stimulating both intra-brand and inter-brand competition, while at the same time yielding significant advantages for consumers. ( 7 )

15. However, dealers cannot be completely precluded from satisfying demand from persons outside the contract territory; this has the obvious aim of obviating compartmentalization of markets. ( 8 ) Indeed, demand for products in the range of contract goods ‘must remain flexible and should not be limited on a regional basis. Dealers must not be confined to satisfying the demand for contract goods within their contract territories, but must also be able to meet demand from persons and undertakings in other areas of the common market.’ ( 9 ) Consequently, dealers are free to sell to other authorized resellers or final consumers, not only within their territories, but anywhere in the common market; in addition, final consumers may also purchase through non-authorized resellers, provided that those resellers act merely as intermediaries, that is to say, traders acting in the name and on behalf of the final consumer who have prior written authority to do so (Article 3(11)).

16. This having been said, Regulation No 123/85 contains no provision which expressly covers and exempts conduct such as that in question in this case. Nothing is provided with regard to possible noncompetition clauses (open to exemption) which might apply, even if only indirectly, to independent leasing companies. ( 10 ) The absence of an express provision concerning the conduct in question, albeit not conclusive, is clearly significant, since the regulation in question contains very detailed provisions and derogates from the general prohibition of anticompetitive agreements. In that connection, I would point out that the Court of First Instance has held, precisely with regard to Regulation No 123/85, that ‘having regard to the general principle of the prohibition of anticompetitive agreements laid down by Article 85(1) of the Treaty, provisions which derogate from this in a block exemption regulation cannot be interpreted widely and cannot be interpreted so as to extend the effects of the regulation further than is necessary for the protection of the interests which it is intended to safeguard’. ( 11 ) I agree entirely with that statement, which I regard as uncontestable.

17. BMW argues, however, that the conduct in question falls entirely within the exempting regulation in view of its underlying logic. BMW stresses that if increasing numbers of vehicles purchased from authorized dealers are subsequendy leased outside the contract territory in which they were bought, another dealer will inevitably be responsible for the after-sales service, with a resultant reduction in its profit margin, since it itself did not sell the vehicles in question. That line of argument is, however, neither cogent nor conclusive. Indeed, I would observe that, whilst it is true that the regulation aims at protecting the distribution network, it is also true that the benefit of the exemption is dependent, inter alia, on the very condition that after-sales service should be provided — at authorized dealers — to all consumers everywhere in the common market, irrespective of the Member State in which the product was purchased. This is a necessary service in order to guarantee the free movement of goods. On top of this, the regulation itself provides that guarantees and free servicing must be honoured throughout the Community (Article 5(l)(l)(a)). Subsequently, however, other services are paid for by the customer.

18. Admittedly, by means of the circular in question, BMW seeks to ensure that independent leasing companies adjust their sphere of activity to suit the contract territory of its various dealers. In the final analysis, this would entail transferring to those companies the obligations to which BMW dealers are subject, in so far as the leasing companies would also have to accept the limits of dealers' contract territories, and hence conclude leasing contracts only with lessees who are resident or have their principal place of business within the contract territory in which they purchased the vehicles in question. This would further and inevitably cause demand to be fragmented and regionalized, which would certainly be uneconomic for the leasing companies and, in any event, at least prima facie at odds with that part of the preamble to the regulation which states that dealers must in any event satisfy demand from consumers outside the contract territory. ( 12 )

19. In the ultimate analysis, the problem is this: is refusal to supply independent leasing companies on the ground that at a subsequent stage the vehicles in question will ‘leave’ the contract territory tantamount to refusal to satisfy demand from outside that territory? In my view, that question can only be answered in the affirmative. The leasing companies are the purchasers of the vehicles and, from the legal point of view, are the consumers, irrespective of the end-use of the vehicles purchased, of which they are and remain the owners.

20. However, BMW argues — inter alia in view of the increasing demand for leased vehicles — that, from the manufacturer's point of view, in particular as regards its need to protect its distribution network, there is no difference between purchasing and leasing in economic terms. Instead, regard should be had to the fact that in practice there are two distinct legal forms of vehicle distribution, which are defined precisely by the manner of acquisition by the final consumer, namely purchase and leasing. Whether the vehicle is owned by the user or whether the user merely enters into a leasing contract is therefore completely irrelevant for the purposes of the application of the regulation. BMW considers that its argument is confirmed by Article 13(12) of Regulation No 123/85, according to which ‘distribute’ and ‘sell’ include other forms of supply such as leasing. BMW infers from that definition that exempted no-competition clauses applicable to selling also apply by analogy to leasing.

21. In that regard, it is observed in the first place that that definition (a) must be read in the light of the fact that Regulation No 123/85 is concerned with the relationship between the manufacturer and its dealers and (b) must be referred to a substantive provision, namely one of the no-competition clauses exempted by the regulation, if it is to assume its proper proportions. What I mean is that block exemption extends to cover leasing only in so far as a commitment is involved — covered by the regulation, of course — which binds the contracting parties, namely the manufacturer and the dealer. ( 13 ) In an appropriate case, it will therefore be the manufacturer who is debarred from leasing out (in that it is equivalent to selling) contract goods to final consumers (Article 2) and it will be the distributor who is debarred from leasing out new vehicles competing with the contract goods, in the same way as he is precluded from selling such vehicles (Article 3(3)); should the dealer himself undertake leasing business, he will have to respect the limits of his contract territory. In contrast, to accept BMW's argument would mean equating independent leasing companies, against their will and despite the provisions of the regulation, to dealers in so far as those companies would be subjected to the same territorial constraints as are imposed on dealers under the dealer contract.

22. Let us now turn to the individual provisions of the regulation which are relied upon in order to argue that the agreement in question is exempt, that is to say the provisions which are alleged to apply by analogy also to the conduct at issue in this case.

— Article 3(8) and (9)

23. Article 3(8) enables dealers to be put under an obligation 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’. Article 3(9) enables dealers to be put under an obligation ‘not to entrust third parties with the distribution or servicing of contract goods or corresponding goods outside the contract territory’. The justification for those obligations is set out in the ninth recital in the preamble, according to which ‘the restrictions imposed on the dealer's activities outside the allotted area lead to more intensive distribution and servicing efforts in an easily supervised contract territory, to knowledge of the market based on closer contact with consumers, and to more demand-orientated supply’. It is only too obvious therefore that the provisions in question relate solely to the dealers' activities outside the contract territory and not also to the activities of the dealers' customers, in this case the leasing companies. More particularly as regards Article 3(8), it is sufficient to observe that no evidence emerges from the order for reference to this effect, that is to say, such as to suggest that BMW dealers maintain branches or depots outside the contract territory or that they seek customers for ALD outside the contract territory. ( 14 )

24. As for Article 3(9), that provision is intended, quite simply, to prevent the dealer from being able to evade his obligations under Article 8 by entrusting the distribution or servicing of contract goods to third parties. Even if it is sought to give the expression ‘third parties’ a broad interpretation — as BMW does — so as to include leasing companies, the fact remains that the provision in question relates to the supply of contract products by dealers outside the contract territory through third parties and not to demand for contract products from outside that territory. In that connection, it is therefore sufficient to observe that the leasing companies do not distribute (or conclude leasing contracts) on behalf of or, in any event, in the interest of the dealer.

— Article 3(10)(a)

25. Under Article 3(10)(a), the dealer may be put under an obligation to supply to a reseller ‘contract goods or corresponding goods only where the reseller is an undertaking within the distribution system’. The parties' observations concentrate on this very provision — reaching opposite conclusions —, which is certainly essential for the very survival of a selective distribution system for vehicles, but, as I have already mentioned, cannot, however, entail absolute territorial protection. BMW takes the view that if Article 3(10) and Article 13(12), according to which ‘“distribute” and “sell” include other forms of supply such as leasing’, are read together, this leads to the conclusion that the conduct at issue is covered by the exemption. However, to read those provisions in conjunction goes beyond the definition in question inasmuch as it necessitates equating leasing companies to resellers not belonging to the distribution network.

26. Far from equating an independent leasing company to a reseller outside the distribution network, the definition set out in Article 13(12) merely equates selling and leasing, which means, as I have already pointed out, that the clauses relating to selling which are exempted also apply to leasing in so far as they relate to obligations on the dealer vis-à-vis the manufacturer and vice versa, and matters could not be otherwise. ( 15 ) In this case, however, it is not the dealer or the manufacturer who is carrying out leasing business, but an independent company. Vis-à-vis such a company, the dealer merely sells new vehicles, with the result that the equation leasing sales is not relevant or, better, has no raison d'être. In other words, to equate to selling a different legal phenomenon, such as leasing, on the basis of the provision in question, is of no help at all in this case for the simple reason that that which is imputable to the person of relevance for the purposes of the provision is a sale and nothing other than a sale.

27. The fact that the leasing company is a purchaser which uses the vehicles to carry out its own commercial activity is not capable of altering the terms of the problem: the company in question purchases from the dealer and is the owner of vehicles in question until the leasing contract comes to an end. In that sense, moreover, the situation of a leasing company is not much different from that of a rental company: both purchase new vehicles from authorized resellers, without, however, taking account of contract territory in which they will actually be used; both actually use them for trade purposes; both sell them, after a certain period, as secondhand vehicles. Nevertheless the fact that the leasing company has the status of a final consumer has never been called in question. In the final analysis, the leasing company is nothing other than a final consumer: the vehicles are purchased and used for the purposes of carrying on a commercial activity, without any further transfer of ownership. Consequently, such a company may in no case be equated to a reseller, since the element of selling to customers, which constitutes the characteristic feature of a reseller, is absent. ( 16 )

28. Moreover, to equate leasing to reselling would mean putting a complete bar on independent leasing companies' buying BMW vehicles. Indeed, were leasing companies to be equated to unauthorized resellers, the result would be that, under Article 3(10) of the regulation in question, independent leasing companies would be completely prevented from buying BMW vehicles, since it would be impossible for them to conclude leasing contracts even with customers whose place of residence or principal place of business was within the contract territory. ( 17 ) It is only too obvious that such an outcome is unacceptable (if not for BMW): to hold otherwise would be to concede that only leasing companies which are dependent or, in any event, linked with the parent company are authorized to conclude leasing contracts for BMW vehicles.

— Article 3(11)

29. Certainly, it could still be argued that the leasing companies should be equated to intermediaries within the meaning of Article 3(11), ( 18 ) with the result that they could purchase and lease out BMW vehicles if they acted in the name and on behalf of a particular end-user. In that connection, I would observe, however, that — by definition — the leasing company purchases in its own name and on its own behalf, since it retains ownership of the vehicles which it leases out, with the result that — by definition — it cannot be regarded as an intermediary between the dealer and the final consumer to whom it leases the purchased vehicle. That it is impossible to equate a leasing company to an intermediary in that way is confirmed, moreover, both by the Commission's interpretative notice on the very subject of intermediaries ( 19 ) and by the judgment in Peugeot v Commission, in which the Court of First Instance held that one of the factors which precludes a person from having the capacity of an intermediary is that he assumes the risks normally associated with ownership.20 Manifestly, however, these are risks which are borne normally and by definition by the leasing companies. On top of this, the very rationale of written authority as prescribed by Article 3(11) does not obtain in the case of a leasing company in the event that — as was argued at the hearing — it purchases a vehicle for the customer for whom it is intended. As a result, in order to apply to leasing companies the clause on intermediaries there would have to be an ad hoc provision or, in any event, modifications — for instance, it would be sufficient for there to be requirement that they should be in possession of the leasing contract already signed by the customer.

30. In any event, even if the objections set out above were overcome and the result was to regard the independent leasing companies as being on a par with intermediaries, the fact would remain that the obligation not to supply those companies, as laid down in the circular of 12 February 1988, cannot in any event qualify for exemption under Regulation No 123/85. Indeed, Article 3(11), the aim of which is precisely that of enabling demand for vehicles from outside the contract territory to be met, certainly does not limit intermediaries' activity to the contract territory in which the customer/lessee is based. Neither can it be regarded as sufficient, within the meaning and for the purposes of the provision in question, that, as laid down in the circular, dealers are allowed to supply independent leasing companies where ‘the order does not go through the intermediary, but the leasing company merely concludes the actual leasing contract’. The claim that it is the customer/lessee who turns to the dealer and asks a particular third company to act in buying the vehicle which he intends to lease involves a proposition very different from intermediation and, in any event, has no basis in Article 3(11) or in any other provision of Regulation No 123/85.

31. In the light of the foregoing, I therefore consider that the obligation imposed on dealers not to supply independent leasing companies in the circumstances repeatedly described above does not fall within the scope of Regulation No 123/85.

The second question

32. In view of the solution put forward it is unnecessary to reply to the second question. However, I consider that, for completeness' sake and in case the Court should not subscribe to the view which I have taken, it is worthwhile considering that question, by which the national court asks whether an agreement which is exempt under Regulation (EEC) No 123/85 can nevertheless be prohibited under national legislation on competition. This brings back before the Court the question of the relationship between Community law and national competition law, on which supporters of the so-called single barrier and those of the so-called double barrier have long been at odds. In this case, it is a question of deciding whether the primacy of Community law prevents the national authorities from prohibiting — under national legislation on competition — an agreement enjoying the protection of an exempting regulation, having regard to the fact that the regulation in question does not preclude — or at least not in particular circumstances — the application of more restrictive national rules.

33. The 29th recital in the preamble to the regulation states that it is ‘without prejudice to laws and administrative measures of the Member States by which the latter, having regard to particular circumstances, prohibit or declare unenforceable particular restrictive obligations contained in an agreement exempted under this Regulation; the foregoing cannot, however, affect the primacy of Community law’. I shall say forthwith that to reconcile the primacy of Community law with the possibility of prohibiting an agreement which has been exempted by and under Community law seems to me to be a desperate undertaking, even a diabolical one. However, I do not intend to shirk from it.

34. The starting point for this examination can only be the judgment in Walt Wilhelm, ( 20 ) in which the Court recognized the possibility of a parallel application of Community and national provisions concerning a single agreement, given that the Community provisions consider restrictive practices from the point of view of the barriers to which they may give rise for trade between Member States whilst national provisions are based on considerations peculiar to each State and consider the restrictive practices in that context alone. However, in that judgment the Court pointed out that such parallel application ‘can only be allowed in so far as it does not prejudice the uniform application throughout the Common Market of the Community rules on cartels and of the full effect of the measures adopted in implementation of those rules’. ( 21 )

35. That reservation should be regarded as being of fundamental importance since it indicates in the final analysis that the application of national law operates in parallel whenever the provisions of the Treaty so require; that is to say, not only in the sense — which moreover is uncontested — that the existence of an infringement of Article 85 or Article 86 of the Treaty precludes the applicability of less strict national law. Indeed, in the judgment in Walt Wilhelm, the Court held that the Treaty ‘also permits the Community authorities to carry out certain positive, although indirect, action with a view to promoting a harmonious development of economic activities within the whole Community’. ( 22 )

36. From the rulings of the Court which have been cited it is sufficiently clear that agreements which have been granted exemption are, for that reason alone, outside the jurisdiction of the national authorities, in the sense that those authorities are debarred from prohibiting them. Useful indications to that effect are also to be found in the judgment in Giry and Guerlain, in which, in order to find that mere ‘comfort letters’ were not such as to exclude the application of national law, the Court found in limine that the agreements in question did ‘benefit from any decision in application of Article 85(3)’ and did ‘not come within the scope of any regulation granting block exemption’. ( 23 )

37. Some writers, however, have continued to argue that an exempted agreement is not outside the jurisdiction of the national authorities, on the ground that the objectives of the Treaty are not invariably adversely affected by the application of stricter national rules. In particular, the argument has been put forward — and adopted, moreover, by the United Kingdom in these proceedings — that the exemption granted by Community law to an anticompetitive agreement precludes the application of stricter national law only where the exemption in question constitutes a measure of Community policy. ( 24 ) The Commission itself took the view shortly after the judgment in Walt Wilhelm that that judgment had not resolved the ‘problem as to whether the primacy of Community exemptions constitutes a rigid rule or whether it is a more flexible principle which enables account to be taken in its application of the respective interests of the Community and the Member States’. ( 25 )

38. Those arguments do not, however, appear acceptable. I take the view that, since the agreements in question are liable to affect trade between Member States and therefore fall in principle within the prohibition set out in Article 85(1), the exemption granted to them cannot but prevent the national authorities from ignoring the positive assessment put on them by the Community authorities. ( 26 ) Otherwise, not only would a given agreement be treated differently depending on the law of each Member State, thus detracting from the uniform application of Community law, but the full effectiveness of a Community measure — which an exemption under Article 85(3) undoubtedly is — would also be disregarded.

39. Neither does it appear to me that a different conclusion may be reached with regard to agreements protected, not under an individual exemption, but under an exempting regulation. In that connection, it is sufficient to observe that exempting regulations — in the same way as Articles 85(1) and 86 — ‘produce direct effects in relations between individuals and create rights directly in respect of the individuals concerned which the national courts must safeguard’. ( 27 ) A national court is therefore bound not to take decisions which are incompatible with the provisions of an exempting regulation by extending its scope to cover agreements not covered by it or by disregarding its scope in relation to agreements which are covered by the exemption; if need be, it should first make a reference to the Court of Justice for a preliminary ruling under Article 177 of the Treaty.

40. The considerations set forth above make it obvious that to allow the national authorities to prohibit an agreement which has been granted exemption — even on the ground of particular circumstances — necessarily calls in question the primacy of Community law, unless the view is taken that the particular circumstances involved are of such a kind as not to give rise to any conflict between national and Community law. However, it is not easy to identify such a special kind of ‘particular circumstances’. The explanation given by the Commission at the hearing with regard to the infelicitous wording of the 29th recital in the preamble to the regulation suggests that a particular circumstance might be, for example, the possibility for a dealer to sell products of several brands, provided that this is essential in order to ensure the dealer's own economic survival.

41. Since, however, express provision is made for that possibility in the regulation itself (Article 5(2)(2)(b)), the most that can be inferred is that possible anticompetitive agreements, which are in principle eligible for exemption under a provision of the regulation, may be prohibited by national law, but only on condition that this is expressly provided for by some other provision of the regulation. This, to my mind, is the only way of making sense of the statements contained in the 29th recital, which are still contradictory despite this interpretation.

42. In view of the foregoing, it must therefore be held that the statements contained in the unhappily-worded 29th recital of Regulation No 123/85 are irreconcilable: the principle of the primacy of Community law cannot tolerate a different assessment (and application) by national authorities of an agreement which has been granted exemption under an exempting regulation. Such an agreement cannot therefore be prohibited on the basis of national law.

43. In the light of the foregoing observations, I therefore propose that the Court should reply as follows to the questions referred by the Bundesgerichtshof: ‘A circular addressed by a manufacturer to its dealers in connection with a selective distribution system for motor vehicles which calls on them to refuse to sell to independent leasing companies where the vehicles purchased are intended for customers/lessees residing or having their principal place of business outside the contract territory of the dealer in question constitutes an agreement prohibited by Article 85(1) of the Treaty and does not qualify for exemption under the provisions of Regulation No 123/85.’ In the event that the Court should not take this view, I propose that the reply to the second question should be as follows: ‘As a consequence of the principle of the primacy of Community law, an agreement qualifying for the protection of an exempting regulation may not be prohibited by the national authorities on the basis of more restrictive national provisions.’

( *1 ) Original language: Italian.

( 1 ) OJ 1985 L 15, p. 16.

( 2 ) My emphasis.

( 3 ) By lener of 30 July 1990, BMW notified the Commission of its practice with regard to leasing contracts and asked for negative clearance or, in view or the circular in question, exemption for clause 2.4 of the dealer contract. The Commission has not yet ruled on this request.

( 4 ) See the judgment in Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [19661 ECR 299. in particular at 342.

( 5 ) Sec, to that effect, the judgment in Joined Cases 25/84 and 26/84 Ford v Commission [1985] ECR 2725, paragraph 21. See also the judgment in Case C-277/87 Sandoz v Commission [1990] ECR 1-45 (summary publication only).

( 6 ) Judgment in Case 42/84 Remia v Commission [1985] ECÎ 2545, paragraph 22.

( 7 ) The justification for exclusivity and quantitative selection is set out in the fourth recital in the preamble, according to which ‘The exclusive and selective distribution clauses can be regarded as indispensable measures of rationalization in the motor vehicle industry because motor vehicles are consumer durables which at both regular and irregular intervals require expert maintenance and repair, not always in the same place. Motor vehicle manufacturers cooperate with the selected dealers and repairers in order to provide specialized servicing for the product. On grounds of capacity and efficiency alone, such a form of cooperation cannot be extended to an unlimited number of dealers and repairers’.

( 8 ) This is the proper significance of the precautions incorporated in the regulation with a view to avoiding, for instance, guarantees and free servicing being restricted to purchasers resident in the dealer's territory (Article 5(l)(l)(a)).

( 9 ) Ninth recital in the preamble.

( 10 ) In this connection, it is noteworthy that not even the Commission's interpretative notice of 18 January 1985 concerning Regulation No 125/85 (OJ 1985 C 17, p. 4) contains any indication with regard to leasing.

( 11 ) Judgment in Case T-9/92 Peugeot v Commission [1993] ECR 11-493, paragraph 37.

( 12 ) See the ninth recital in the preamble.

( 13 ) See, to this effect, also the Commission notice of 13 April 1984 concerning Regulations Nos 1983/83 and 1984/83, in which the Commission, while conceding that ‘hiring out of goods in return for payment comes closer, economically speaking, to a resale of goods than to provision of services’, goes on to state that ‘exclusive agreements under which the purchasing party hires out or leases to others the goods supplied by him [are] covered by the Regulations’(OJ 1994 C 101, p. 2, paragraph 12). This means that distributors may have an obligation imposed on them by their supplier, which is exempted by the regulation, to carry out leasing business themselves on the same terms as sales, that is to say in that they must respect the contract territory, but not an obligation to refuse to sell to leasing companies.

( 14 ) In this connection, it should moreover be pointed out that the dealer cannot be debarred from havuig recourse to advertising addressed to users in the agreed territory which also has a supra-regional effect, since such advertising does not detract from the obligation essentially to promote sales in the contract area.

( 15 ) This point of view finds support in the draft Commission regulation published on 31 December 1994 designed to replace Regulation No 123/85 as from 1 July 1995 (OJ 1994 C 379, p. 16). And in fact the provision corresponding to Article 13(12) is not confined to sutine that the terms ‘distribute’ and ‘sell’ include other forms of supply such as leasing but expressly specifies that supply ‘by the dealer’ is meant {Article 10(13) of the draft). It follows that it will undoubtedly not be possible to prevent the dealer from supplying independent leasing companies or from engaging in leasing; in the latter case, of course, he will be required to comply with his contractual obligations as in the case of resale.

( 16 ) On that point, however, it should be made clear that in the draft regulation, cited above, resale includes ‘all leasing contracts which provide for a transfer of ownership or an option topurchase prior to the expiry of the contract’ (Art. 10(12)). This means that transfer by way of leasing may not be regarded in the light of a resale, save in those cases where the option to purchase is exercised and the transfer of ownership is effected before the expiry of the leasing contract, or provision is made for such a possibility.

( 17 ) However, BMW infers from that situation that, if it is possible for an absolute prohibition on supplying leasing companies to be exempted, a fortiori it should be regarded as lawful to prohibit sales to such companies only in cases in which the vehicles are intended for consumers whose principal place of business or place of residence is outside the contract territory.

( 18 ) That provision —1 recall —enables an obligation to be imposed on the dealer ‘to sell motor vehicles within the contract programme or corresponding goods 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’.

( 19 ) I refer to the notice of 18 December 1991 enü'ded ‘Clarification of the activities of motor vehicle intermediaries’, OJ 1991 C 329, p. 20. 20 — Judgment in Peugeot v Commission, cited in footnote 11, paragraph SO.

( 20 ) Judgment in Case 14/68 Walt Wilhelm and Others v Bundeskartellamt [1969] ECR 1.

( 21 ) Ibid., paragraph 4. To the same effect, see also the judgment in Joined Cases 253/78 and 1/79 to 3/79 Giry and Guerlain [1980] ECR 2327, paragraph 16.

( 22 ) This statement is all the more significant in view of the fact that the Advocate General argued that the grant of exemption under Article 85(3) simply reflected a waiver on the part of the Community authorities which, as such, permitted the Member States to apply — in the event, stricter — national provisions without threatening the objectives of the Treaty (see the Opinion of Advocate General Roemer [1969] ECR 17, in particular at 23).

( 23 ) Judgment quoted in footnote 20, paragraph 17.

( 24 ) See to that effect Market ‘Some Legal Administrative Problems of the Coexistence of Community and National Competition Law in the EEC’, CMLR 1974, p. 92.

( 25 ) Fourth Report on Competition Policy, p. 33.

( 26 ) Whilst it is true that an agreement hable to affect trade between Member States necessarily has effects in all those Member States where the undertakings in question carry on their business, it is abo true that, unless it is sought to posit an absolute dissociation of Community effects and national effects, the uniform application of Community law (including Community competition law) would be frustrated every time an exemption granted under Community law was made to depend on the relevant national rules.

( 27 ) Judgment in Case C-234/89 Delimitis [1991] ECR 1-935, paragraphs 45 and 46.