OPINION OF MR ADVOCATE-GENERAL MAYRAS

DELIVERED ON 2 MAY 1972 ( 1 )

Summary

Introduction — A — The facts B — The procedure C — The context of the problems Part I — Existence of concerted practices within the meaning of Article 85(1) of the Treaty of Rome and of secondary Community Law Section I — The concept of a concerted practice A — The distinction between agreements and concerted practices B — The concerted practice in American anti-trust legislation. C — The laws of the Member States of the Community D — The criteria for a concerted practice in Community law Section II — The arguments put forward Section III — The concertation between the applicant undertakings A — Existence of parallel conduct B — Origin of and reasons for the parallel conduct 1. The characteristics of the dyestuffs market 2. The opinion of the experts 3. Conclusions to be drawn from the experts' reports 4. Arguments drawn from the economic theory of oligopolies C — The factual circumstances in which the increases were introduced 1. The increases of 1965 and 1967 — their common mechanism — objections based on the possible description of the situation as an abuse of a dominant position — the data on the file 2. The increase of 1964 3. Evidence of concertation Section IV — The adverse effect on competition A — The circumstances in which Article 85(1) applies, as regards concerted practices B — The consequences of the concerted practice with respect to competition C — The particular case of the ACNA company Section V — The effects of the concerted practice on trade between Member States Part II — The jurisdiction of the Commission to impose fines on companies whose registered offices are outside the Common Market Section I — National legislation and national case-law — Community Law Section II — International law 1. The conditions for the application of the criterion of territorial effect 2. The limits to the extra-territorial application of competition law Part III — Submissions as to form and procedure Section I — The commencement of the procedure Section II — The notice of objections Section III — The hearing of the representatives of the undertakings concerned Section IV — The minutes of the hearing Section V — The formal statement of reasons for the contested decision Section VI — Publication of the contested decision Part IV — The fine Section I — Limitation of actions Section II — On whether the fine imposed by the national authorities should be taken into consideration Section III — The amount of the fine

Mr President,

Members of the Court,

Introduction

A — The facts

Pursuant to information supplied by various trade associations of the industries using dyestuffs, and after having made inquiries of the producers and their subsidiaries, the Commission of the European Communities found that in the period between January 1964 and October 1967 three general and uniform price increases in those products had been put into effect in the Common Market:

— Between 7 and 20 January 1964 an increase of 15 % in the price of most aniline dyes took place in Italy, the Netherlands, Belgium and Luxembourg and in certain third countries;

— On 1 January 1965 this first increase was extended to Germany; on that same date almost all the producers introduced a new uniform increase of 10 % on the price of dyes and pigments excluded from the first increase into Germany and into the countries already affected by the 1964 increase; however, since the ACNA company refused to introduce this increase on the Italian market, the other undertakings withdrew their price increase on that market;

— Finally, in mid-October 1967, an increase of 8 % for all dyestuffs was introduced by most producers in Germany, the Netherlands, Belgium and Luxembourg.

In France, where the increases of 1964 and 1965 had not been introduced, the rate of this increase in prices was 12 %. However, there was no increase in Italy because of the conduct of ACNA.

On 31 May 1967 the Commission commenced the procedure under Regulation No 17/62 of the Council for presumed infringement of Article 85 of the Treaty of Rome against the undertakings which took part in these price increases. On the following 11 December it informed those of the undertakings which it considered guilty of a concerted practice involving price-fixing of the objections laid against them. After certain written observations had been made by these companies in response to the notice of objections and after some of their representatives had been heard on 10 December 1968, the Commission took, on 24 July 1969, a decision in application of Article 15 of Regulation No 17/62.

The Commission took the view that the price increases introduced between 1964 and 1967 were attributable to concerted practices under Article 85(1) of the Treaty between the following undertakings. Badische Anilin- und Soda-Fabrik (BASF), Ludwigshafen, Cassella Farbwerke Mainkur AG, Frankfurt am Main, Farbenfabriken Bayer AG, Leverkusen, Farbwerke Hoechst AG, Frankfurt am Main, Française des Matières Colorantes SA, Paris (Francolor), Azienda Colori Nazionali Affini S.p.A. (ACNA), Milan, Ciba

SA, Basel, J. R. Geigy SA, Basel, Sandoz SA, Basel and Imperial Chemical Industries Ltd. (ICI), London. It therefore imposed a fine of 50000 u.a. on each of these companies, with the exception of ACNA for which the amount of the fine was limited to 40000 u.a.

The undertakings mentioned, except for Ciba, have brought nine separate applications before you against this decision.

B — The procedure

Two experts' reports having already been produced, the first by Professors Bombach and Hill, at the request of the applicant undertakings, the second by Professor Kantzenbach, at the request of the Commission, the Court itself, at the unanimous suggestion of the parties, asked Professors Kloten and Albach to undertake a third experts' report dealing more particularly with questions laid down in its Order of 8 July 1970. On the same day the Court joined the cases for the purpose of this experts' report.

Following the exchange of very voluminous written pleadings and oral arguments of unusual length, the information gathered in these cases has been as complete and as detailed as possible, with the collaboration of international experts of unequalled authority and unrivalled intellectual ability and integrity. Thus at the moment when I appear on the scene you already have such a thorough knowledge of the dispute that it appears to be superfluous to go into a detailed analysis of the papers which my predecessor, Advocate-General Alain Dutheillet de Lamothe, had studied with the conscientiousness and clarity of mind which you knew in him.

Permit me at the moment of delivering, on these cases, my first opinion before the Court, to pay respectful tribute to his memory.

C — The context of the problems

The applications before you call for a judgment on four questions or categories of question.

The first is fundamental, in the sense that it is on the answer that you give to it that the other questions will either turn or become devoid of object.

This question is: Are the linear price increases, of uniform percentages, which were introduced on the dyestuffs market inside the Common Market between January 1964 and October 1967, attributable to one or more concerted practices prohibited by Article 85 of the Treaty of Rome and by secondary Community law?

If your answer to the first question is yes, then:

1. You will have to decide, for the first time so far as I know, the important question whether undertakings whose registered offices are outside the Community (in these cases, Imperial Chemical Industries in the United Kingdom, Geigy and Sandoz in Switzerland) can be fined in application of Regulation No. 17/62 for their participation in concerted practices detrimental to competition put into effect inside the common Market;

2. You will have to examine whether formalities or essential procedural requirements were disregarded during the administrative procedure, thereby vitiating that procedure, and whether such irregularities mean that the fines resulting from the procedure are void;

3. Finally, you will have to pass judgment on the fines imposed and in particular you will have to say whether, even though no limitation period has yet been written into Community law, the lapse of a given period between the time when the facts occurred and the time when the Commission commenced the procedure with a view to putting a stop to them is not a bar to any possibility of penalizing the practices at issue.

I ought to say that as regards these two letter points, some indications for a solution are to be found in your previous case-law.

Part 1

Existence of concerted practices within the meaning of Article 85(1) of the Treaty of Rome and of secondary Community law

Section I

The concept of a concerted practice

A — One of the basic objectives of the Treaty of Rome is to create one market, common to the Member States, in which producers must be able to exercise and develop their activity freely and consumers, for their part, must be able to seek out products and services freely and to make their choice with reference to the prices proposed to them and to the quality offered to them. In order to guarantee this freedom, the action of the Community authorities is directed in particular at ‘the institution of a system ensuring that competition in the Common Market is not distored’ (Article 3(f) of the Treaty). In this context Article 85 of the Treaty declares that: ‘The following shall be prohibited as incompatible with the Common Market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the Common Market, and in particular those which: (a) directly or indirectly fix purchase or selling prices…’ Thus Article 85 is directed at actions or behaviour which restrict competition and which, in the terminology usually followed, are described by the generic name “cartels”, and it distinguishes three form or three aspects of these cartels: agreements, decisions by associations of undertakings, and concerted practices, the common factor being that there is more than one participant. I shall leave decisions by associations of undertakings out of the discussion for they do not come into the dispute, and I shall concentrate in the first place on trying to distinguish between concerted practice and agreements. Up till now, the Court has only had to consider the application or interpretation of Article 85 in relation to agreements between undertakings, that is to say, contracts made between producers or between producers and sellers, whatever the form or legal structure of those agreements, since evidence for such agreements cannot, a priori, reside in any specific factor. lo cite only a few examples, such agreements can be exclusive dealing agreements: 12 December 1967, Case 23/67, Brasserie de Haecht, [1967] ECR 407; 30 June 1966, Technique Minière v MBU,Case 56/65, [1966] ECR 235; 16 July 1966, Grundig, Joined Cases 56 and 58/64, [1966] ECR 299; or agreements fixing prices or partitioning the market: 15 July 1970, Chemie-farma, Buckler and Böhringer, Joined Cases 41, 44 and 45/69 [1970] ECR 661. The Court bordered on the concept of a concerted practice on this latter occasion. As regards the international quinine cartel, Mr Advocate-General Gand asked in effect whether evidence of a concerted practice ought to be seen in an unsigned document headed ‘gentlemen's agreement’ the intention of which was to extend to the Common Market an agreement on price fixing, delivery quotas and export restrictions, concluded for use in third countries, between the principal producers of quinine and of quinidine in the Community. He had to give a negative answer to this question, but only because this gentlemen's agreement was too closely modelled on the properly drafted agreement made with a view to exports to third countries to be dissociated from it. The Court accepted that that document ‘amounted to the faithful expression of the joint intention of the parties to the agreement with regard to their conduct in the Common Market’. This means that the dividing line between an agreement and a concerted practice cannot easily be determined, the reason being that cooperation between undertakings comes in a multitude of guises and degrees. This also means that as regards the concept of a concerted practice your case-law must be built up from first principles. It would certainly be out of character in relation to your approach to legal questions for you to tie yourselves down for the future by a general and abstract definition. Rather it is progressively and by dint of examination of the cases brought before you that your case-law can be both built up and given various shades of meaning.

B — Although in constructing this case-law, it cannot be claimed that any directly applicable knowledge can be drawn from it, there is doubtless some interest in looking at how, within or even outside the Common Market, national laws and national case-law have attempted to delineate the concept of a concerted practice. The historical origin is evidently to be found in the ‘concerted action’ of American anti-trust law. The concept of ‘conspiracy’ covered by the Sherman Act has been applied to the case where there is proof of a concerted action between several undertakings pursuing a common aim which is contrary to the law. Thus in US v Hamilton Watch Co., and US v Elgin National Watch Co. (DC NY 1942) 47 F. Supp. 524 it was held: ‘No formal agreement is necessary for the formation of a conspiracy. It may be shown by concerted action among the conspirators, all working together for a common purpose’. Similarly, in the decision in Wisconsin Liquor Co. v Park and Tilford Distillers Corp. (CA-7; 1959) 1959 Trade Cases/69 363, it was held that ‘to establish the existence of a prohibited agreement, no proof of a formal or specific agreement is necessary …’. But althougt this American case-law does not give a definition of a concerted action, it insists on the necessity of the existence of a common plan. The said case-law also states that although conscious parallelism is not enough of itself for it to be said that there has been an infringement of the Sherman Act, such conduct can constitute a presumption of fact on the basis of which the court, taking into account other circumstances of the case, can conclude that a conspiracy exsist. Such was the case in Morton Salt Co. v US(CA-10; 1956) 1956 Trade Cases/68412, in which the court held that ‘the existence of parallel behaviour does not conclusively establish the existence of an agreement or of a Sherman Act offence, but such behaviour is an item to be weighed heavily in the determination’. Certain decisions also stress that uniform conduct on the part of different undertakings as regards prices is generally a more or less decisive element of proof. On this point let me quote the judgment in Pittsburgh Plate Glass Co. v US (CA-4; 1958) 1958 Trade Cases/69157: ‘A manufacturer of plateglass mirrors participates in a conspiracy to fix prices when the manufacturer's “conscious parallelism” in announcing a price-increase identical with that announced almost simultaneously by its competitors in the light of the manufacturer's apparent close connexion with the climax of the conspiracy reasonably permits one to infer that the manufacturer's action was taken pursuant to an agreement with some or all of the conspirators’. Similarly in the Morton Salt case already quoted the court expressed itself as follows ‘… the presence of only a few friendly sellers and the stable demand for the product present a great opportunity and temptation to combine to maintain prices at an artificially high level profitable to all’. Finally one can note a similar meaning in the decision in Safeway Stores v F.T.C. (366 F 2 d 795 -1966, Trade Cases 71/891), in which it is said: ‘Evidence that bakers met on an association basis and discussed, among other subjects, prices, together with identical price increases, was sufficient to support a Federal Trade Commission finding that the bakers conspired to fix prices’. But it would be rash to make a systematic rapprochement between American law and Community law. The anti-trust law of the United States, enacted since the end of the last century, is mainly of a criminal nature. The criminal courts have jurisdiction, and the rules of American criminal procedure apply as regards the burden of proof. American anti-trust law is also very rigid in that it has laid down as a principle, at least originally, that any cartel is harmful and therefore prohibited. The case-law has, to be sure, softened this rigid position somewhat, and has attempted, in view of economic developments, to introduce a certain flexibility into the application of the law, particularly by the judicial creation of the concept of workable competition, but it remains a fact that the American system proceeds from a conception which is in many ways different from that adopted by Community law. The latter, which is essentially preventive, is enforced by the Commission. Even when it involves the application of certain pecuniary sanctions it is administrative and not criminal in type. Furthermore, it is much more flexible in that it accepts that certain cartels may be excluded from prohibition. In spite of these differences however, American case-law displays points of comparison and offers food for thought, particularly when it is concerned with assessing the circumstances in which a concerted practice may be found in an oligopolistic market.

C — Amongst the national laws of the Member States of the Community, only French law, up till now, has expressly included the concept of a concerted practice. But the decisions of the courts, still few in number, seem to have been mainly concerned with agreements. The German Law of 1957 does not contain this concept. It is doubtless in part to fill this gap that the Federal Government has recently introduced a bill, certain provisions of which are intended to strengthen control over the abuse of dominant positions for which Article 22 of the Law makes provision, and draw upon the concept of a contested practice. In particular, this bill provides that it is to be presumed that there is no competition between a number of undertakings when they behave in a uniform manner in their pricing policy over a long period. Thus the repetition of parallel conduct as regards prices would constitute an infringement on the ground of abuse of a dominant position, a concept which is contained in Article 86 of the Treaty of Rome. In this respect none of the decisions of the competent German administrative bodies or courts concerning proceedings brought against the German producers involved in the dispute before this Court can be of much assistance to you. Attempts were made at the hearing to turn these decisions to advantage in one way or another. In my opinion this is not possible, more especially because the German courts, knowing that proceedings were pending before you on the basis of Article 85 of the Treaty, wisely refrained, in giving the reasons for their decisions, from making any statement which have given the impression of prejudging the question before you.

D — While the information which it is thus possible to extract from the national legal systems is not without pertinence to the study of the present case, it is obvious that it cannot override the text itself of Article 85 of the Treaty, the meaning of which has been clarified by our case-law and with the help of commentators. I shall first of all point to the consequence of the express distinction which Article 85 makes between agreements and concerted practices. To give this latter concept so limited and so narrow a meaning that it would be reduced to nothing more than a particular application of the concept of an agreement would, quite undoubtedly, be in conflict with a general principle of interpretation which you have often adopted. According to this principle, full effect is to be given to each of the provisions of the Treaty and they are all to be given full scope. Even if it is accepted that a concerted practice in fact conceals an agreement and at the same time reveals it through the appearance of some coordinated conduct, there is to my mind no doubt that in making a separate ‘category’ for concerted practices, the authors of the Treaty intended to forestall the possibility of undertakings' evading the prohibitions of Article 85 on activities inimical to competition by so conducting their affairs as not to leave any written document which might be called an agreement, even while conducting a common policy in accordance with an established plan. Such an interpretation, which takes practical account of the distinction made in Article 85, is of obvious interest as regards evidence for the existence of a concerted practice which, even though it implies that the will of the participating undertakings is somehow apparent, nevertheless cannot be sought using the same methods as for proof of an express agreement. However, an objective criterion, which is basic to the concept of a concerted practice, must also be met. This is that the participating undertakings must in fact have acted in the same way. This is the first difference of principle from the concept of an agreement in that, according to your case-law, an agreement, provided that its existence is established and that it has as its object an adverse effect on competition within the Common Market, is prohibited under Article 85 without its being necessary to consider the real effect of the said agreement on competition. Thus it seems to me that one cannot dissociate the idea of a certed practice from the real effect that it has on the competitive situation within the Common Market. However, one obviously cannot say that there is a concerted practice within the meaning of Article 85(1) merely because common, parallel or similar conduct between undertakings is occurring on the Market. One must be able to go further and say that this conduct is not the consequence or at least not the principal consequence of the structure and of the economic conditions on the market. There must also be, as I have said, the will on the part of those concerned to act in common, and accordingly it must be possible to establish some link of cause and effect between this common will and the conduct which has in fact occurred. However, this common will can be deduced, and this is not so for agreements, from all the elements of facts gathered together on the conduct of the undertakings, depending on the case; for example, instructions given to representatives, relationships with buyers, alterations to conditions of sale, decisions taken more or less simultaneously, contacts between managing bodies and so on.

Section II

The arguments put forward

After these preliminary observations, what are the opposing arguments regarding the existence of a concerted practice in this case?

In its decision of 24 July 1969 the Commission concluded that the price increases of 1964, 1965 and 1967 were the result of some kind of concerted practice because of the uniformity of the rates of increase introduced by the producers concerned in each country, because with very rare exceptions the increases applied to precisely the same dyestuffs, and because the increases were put into effect on approximately or even precisely the same date. It took the view that, taking these findings into account as a whole, the price increases in question could not be explained by the structure of the dyestuffs market alone, and declared, in perhaps rather fortright language, that ‘it is beyond the bounds of possibility that without detailed preparation in advance the principal producers supplying the Common Market should on several occasions have increased by identical percentages the price of the same large range of products practically at the same moment in several countries where the market conditions are different’. However, this assertion is supported by a detailed description of the factual circumstances in which the price increases were decided upon, announced and introduced. It is also supported by a reference to the precise text of the instructions sent by the producers to their subsidiaries or representatives on the different markets; as regards the increase of January 1964, in the Commission's opinion the similarity of wording of these instructions is striking. Finally, the Commission also mentions the meeting held at Basel on 18 August 1967 at which all the producers concerned were represented except ACNA. During this meeting the representative of Geigy announced the intention of that undertaking to increase its selling prices to customers before the end of 1967.

The contested decision adds that these increases affected selling prices to all users since the distribution of dyestuffs is carried out through the sales divisions of the producers themselves where deliveries on their own national market are involved, and through the intermediary of their exclusive retailers, who are strictly tied to the producers' instructions, in the case of sales on foreign markets. The Commission deduces that these practices restricted the forces of competition, which thus became limited to quality or to after-sales service. Finally, it finds that these concerted practices, the effects of which extended to several countries of the Common Market, are capable of affecting trade between Member States.

Thus the contested decision deduces the existence of concerted practices as prohibited by Article 85 both from the circumstances in which the price increases were decided upon and introduced, and from the fact that these increases could not be explained by the structure of the dyestuffs market alone. The representatives of the Commission have maintained this dual line of reasoning before the Court, while going into more detail in answer to the applicant's case..

The applicants, on the contrary, base their case mainly on an analysis of the oligopolistic structure of the dyestuffs market, arguing that producers have merely behaved in the same way, and that this is explicable by market conditions alone. They say that such behaviour cannot be treated as a concerted practice. They take the view that the price increases are the result of independent decisions taken by each of the undertakings, determined by business needs, particularly the need to increase the insufficient return on production. The fact that the price increases were the same is the result, they say, of the fact that the producer who takes the initiative as regards prices, the ‘price-leader’, is necessarily followed in his decision by the other members of the oligopoly.

Such, in outline, are the arguments between which you must choose.

Section III

Concertation

I now propose to go back over the argument of the parties and examine the two following points in succession:

— was there parallel conduct?

— is that conduct explicable by the economic conditions on the market alone or is it the consequence of a concerted policy on prices?

A — Existence of parallel conduct

As I have already said, the first objective factor characterizing a concerted practice consists necessarily in the appearance that the undertakings concerned have behaved in a similar, parallel, or comparable way. In this respect, the facts set out in the contested decision are sufficient to establish the existence of such conduct in this case, and furthermore the applicant companies do not dispute this, at least in principle. It is established that both in 1964 and in 1965, and then again in 1967, the undertakings decided upon and then introduced, on dates which were very close to each other and sometimes .identical, linear basic-price increases applicable to the dyestuffs sold by them or their subsidiaries for the same very wide range of products and at identical rates of increase. On this, the applicants only dispute the statements in the contested decision on secondary matters, or let us say as to detail: that the list of dyestuffs affected by the increases does not absolutely reflect the reality, that the Commission did not explain with perfect accuracy how orders already given were dealt with. But apart from these divergences, to which I shall come back in due course because they contribute to the refutation of the whole idea of concertation, one really must admit that the parallel nature of the conduct of several producers on the same market is clearly shown by the facts themselves; that this did not happen by chance, but perfectly consciously, is not denied. Therefore the first element of a concerted practice exists. It is a necessary one without being sufficient.

B — Origin of and reasons for the parallel conduct

The second element is to be found, a point which I have already made, in the existence of a certain common will. In order to establish this element it is not necessary to show express and precise evidence that there was a meeting of minds amounting to a veritable agreement, that is to say to a binding legal instrument having the force of law, but I think that it is necessary at the least to show:

— first, that the conscious parallel behaviour is not exclusively or even mainly due to economic conditions or to the structure of the market;

— secondly, that, where there is no express meeting of minds, sufficiently clear, unequivocal presumptions lead to the conviction that the parallel conduct was the result of concertation, of a coordinated policy.

Such concertation can exist even if some of the undertakings have taken a preponderant part as regards initiating this policy and putting it into effect, while all that others have done, their means of action being doubtless not so great, is to take part in the concertation. We must therefore look into whether such indications or presumptions are present in this case. Taking into account the unlimited jurisdiction that Article 17 of Regulation No 17/62 of the Council gives you in this matter, as Mr Advocate-General Gand said in his opinion on the quinine cases ([1970] ECR 704), the dispute as a whole is brought before the Court, which has full power to consider the facts and is empowered to form its own judgment as to the existence and character of any infringement of Article 85(1). As is to be seen from your case-law, you do not judge the facts in abstracto but in relation to information pertaining to the market in question.

Thus the question whether there was concertation can only be decided by a consideration first of the characteristics of the dyestuffs market and secondly of all the evidence noted in the contested decision and confirmed by an examination of the file.

1. The characteristics of the dyestuffs market

(a) The applicants seek to explain and justify their behaviour concerning prices exclusively with reference to the structures and mechanisms of the dyestuffs market. Truth to tell, their representatives have emphasized this point to such an extent that they have perhaps even gone so far as to give the impression that the characteristics of this market, in which supply is controlled by a small number of producers, are such that Article 85 of the Treaty is in some way inapplicable to it. such a conclusion would obviously be wrong. Article 85 applies just as much to oligopolistic markets as to ‘atomized’ markets. However, it must be recognized that the Treaty does not prohibit oligopolies as such and that Article 85 cannot mean that undertakings whose activity covers markets of this kind are under obligations such as would prohibit that activity or lead to a complete transformation of the structures of the trade.

(b) Having made this observation, what objective findings may be made, particularly on the basis of the descriptive survey of the market given by Professors Kloten and Albach? Un the world market, more than 300 undertakings sell dyestuffs and pigments, but this market is dominated by less than a dozen of them. In the period which is of interest to us, 80 % of the European market was held by ten producers. These, with the exception of Francolor, do not only make dyestuffs, but also produce synthetic materials, pharmaceutical and phytopharmaceutical products, and chemical products. This is particularly true of Bayer, Hoechst and BASF. Others, such as ACNA or Cassella obtain their supplies of intermediate products from the big chemical groups. Production structures therefore display important differences and consequently production costs are also very different. The number of dyestuffs produced is considerable: 6000 are sold on the market; each undertaking manufactures from 1500 to 3500 and often buys others from other producers in order to supplement the range offered for sale. Between 1956 and 1966, more than two thousand new dyestuffs appeared on the market, replacing discontinued products. These products are more or less interchangeable. Although on this subject, it is possible to make a distinction between standard dyestuffs for which the degree of interchangeability can be considered as fairly high, and speciality dyestuffs for which it is very low and sometimes nonexistent, nevertheless the dividing line between these two categories seems difficult to determine with precision. Production techniques are such that in general at least ten different chemical changes are necessary in order to manufacture dyestuffs from the raw materials, and therefore the production chain stretches over three to twelve months. Furthermore, the size of the production batches varies from 500 to 5000 kg but the average size of orders does not exceed 50 kg. It should be said that demand has been expanding rapidly and vigorously. From 1958 to 1968, the sale of dyestuffs practically doubled (indexed at 100 in 1958 it rose to 198 in 1968). This demand is very varied both as regards products and national markets and as regards categories of buyers. Demand as a whole is largely determined by the expansion of the textiles industry and, to a lesser extent, by the expansion of the polish and paint industries and that of the processing of synthetic materials. The producers supply both their national markets and certain foreign markets, but their situations in this respect display marked differences. Some, such as the Swiss or the Germans, export 75 to 90 % of their production, whereas the French and the Italians sell but little abroad. It should be noted that according to the export statistics, the producers supply dyestuffs to their subsidiaries or agents abroad, and it is these who give technical assistance to local customers. These customers, particularly in the textile and tanning industries, set great store, because of changes in fashion, by rapidity and certainty of supplies and also by technical assistance given to them, even more than by the level of prices. This fact is less definite for other categories of buyers, such as makers of paints and polishes. Because of the very slight incidence of the prices of dyestuffs on the finished products, especially for textiles, the elasticity of general demand is minimal. But this fact does not prevent lively competition existing between suppliers. This individual competition is facilitated by the fact that no official price lists are published for the market as a whole, only internal lists sent by each producer to his distributors in each country. Price concessions, in the form of discounts, are granted individually, particularly to customers giving the largest orders, for sellers try to attract these interesting customers by offering them the most advantageous terms. The variations in pricing policy are also to be explained by the very varied services that each seller offers to his customers. All this means that there is a lack of transparency on the market regard-in the real prices of dyestuffs, this lack of transparency being a necessary condition for the practice of price erosion on the part of the sellers. This policy can only bring about important commercial advantages if competitors do not realize that concessions have been made or decide not to take retaliatory measures themselves. Still on the subject of prices, the experts whom you appointed have stressed that the real prices of dyestuffs differ to a great extent, not only from one year to another but also from one country to another (see Tables 5 and 6). Finally, from the point of view of the general trend in the business, one can note that there is a general tendency for the prices of dyestuffs to be eroded and there is no doubt that towards 1963/1964, this situation was of lively concern to all producers, and played a decisive part in the decisions to make a general increase in prices. The experts appointed by the parties have not in any way contradicted the findings thus made by Professors Kloten and Al-bach, which can be summarized as follows: — There is an oligopoly situation on the dyestuffs market; it is controlled by a small number of producers. — It is an imperfect, heterogeneous market, particularly because of the wide variety of products sold. — It is a market which is walled off; Professor Kantzenbach even describes it as ‘cemented’. — It is a market on which the customer is only in direct contact with the producer when the latter is a national producer; he is never in direct contact with a foreign producer, only with its subsidiaries, representatives or agents. — Finally, it is a market on which in practice there is no transparency with regard to prices.

2. The opinion of the experts

(a) Given these facts, the experts nevertheless come to diametrically opposed conclusions. Professors Bombach and Hill take the view that the fact that the price rises were simultaneous is to be explained by the particular structure of the market and add that in this imperfect market prices are not a decisive factor because support services to the customer and delivery terms are of particular importance. Therefore, they say, the price structure remains flexible, even after uniform increases, thanks to the competition which has not ceased to exist on the market. Professor Katzenbach, on the contrary, approves the conclusion of the Commission according to which the increases are only explicable by concertation between the undertakings and concludes his report as follows: ‘Inside the European Comimunity, sellers of dyestuffs compete in an oligopoly situation on several quite distinct markets. Since these markets are imperfect, no constraint imposes uniform conduct as regards prices’. The conclusions of the experts whom you appointed will lead me, for my part, to suggest that you should rule that the price increases at issue cannot be explained by the structures and mechanisms of the market.

(b) You asked Professors Kloten and Albach three questions. You first asked them whether, taking into account the characteristics of the dyestuffs market in the European Economic Community, especially during the period 1964 to 1967, it would have been possible, according to normal commercial criteria, for a producer acting independently who wished to raise his prices to proceed otherwise than by a general uniform and public increase, by fixing different rates of increase depending on his particular relationships with different customers and depending on each product.

The experts have answered this question in the affirmative, saying that a producer acting independently, according to normal commercial criteria, would, in principle, have had the possibility of increasing his prices on a variable basis depending on each customer and product. But what is important to my mind is that they have also said that in practice it would have been possible for such a producer to increase his prices on a variable basis, the only proviso to this reply being that the average increase in prices that a producer acting in this way could have obtained ‘would probably have been lower than the average increase in prices achieved by a general and uniform increase’.

You men asked the experts what advantages and what disadvantages there are in proceeding to a general and linear price increase compared with a variable one. To this second question they replied that while a general and linear increase involves opportunities and risks, both for the producer who takes the initiative on this increase and for those who must fall in line with it, on balance the advantages to be gained from a general and uniform increase outweigh the disadvantages.

This answer seems 10 me even more significant than the first.

Of less interest is the third question, relating to how far dyestuffs other than speciality products are interchangeable. I agree with the experts that this distinction is of no great importance in assessing the facts at issue. The extent to which dyestuffs are interchangeable appears to me to be a secondary factor in a market where demand is highly differentiated and which is, above all, divided up on a territorial basis by the producers, which even makes it difficult for users in one country to turn to sellers in another country in order to obtain a better price, even on products which are interchangeable.

3. Conclusions to be drawn from the experts' reports

What is to be thought of these opinions, which contain some subtle shades of meaning? For my part they leave me with the impression that one cannot explain the uniform price increases introduced during the period at issue by reference to the characteristics of the dyestuffs market alone.

Without going so far as to consider, as does the Commission, that these increases can therefore only be the result of concertation, I think that the following conclusions should be drawn:

— that the structure of the market certainly did not render such uniform increases necessary, but that on the contrary the demands of competition between sellers, if such competition had been free, would have led them to make, individually, differentiated price increases;

— that on the other hand the interests of the producers explain why they decided and applied increases of an identical percentage for all products sold, thus forcing their subsidiaries and representatives to pass on these increases to the customers. The principal feature of these interests was, and I shall come back to this, that having regard to the partitioning of the national markets in Europe, and especially in the Community, in the eyes of the producers uniform increases presented the advantage of not upsetting a balance, and indeed the allocation of geographical areas, which ought to have been swept away by the establishment of the Common Market.

4. Arguments drawn from the economic theory of oligopolies

However, before leaving economic matters and in order to do justice on this point to the applicants, I must also devote some thought to the arguments which they claim to draw from a close and as it were necessary relationship between the oligopolistic nature of the market and the similarity of their conduct. The applicants say that such similarity of conduct is natural and even typical of an oligopoly. The Commission rightly answers them that this line of reasoning fails to take into account the particular characteristics of the market in question.

Most economists agree that the functioning of an oligopoly implies deliberate parallelism. Such a market is one in which the producers are closely interdependent so that none can take a decision concerning competition, particularly as regards prices, without the others' being immediately affected, being aware that this is case and being bound to do something about it.

In such a situation the price leader will only decide upon an increase if he is reasonably convinced that his competitors will be induced to fall in line with that increase. However, according to economic theory, no such interdependence is to be found unless, quite apart from the ordinary tests applied to oligopolies, two decisive elements are present on the market: the products must be homogeneous, and the market must be transparent as regards prices. Such is not the case on the dyestuffs market on which there is a large variety of products which are in fact only marginally interchangeable and on which there is in practice no transparency of prices.

Moreover, turning from theory to the case-law, one finds that apart from exceptions explicable by very particular considerations, the concept of conscious parallel conduct has only been accepted where the goods produced or sold on the market are homogeneous, such as oil, wood, salt, cement, tobacco and so on:

American Column and Lumber, ref. 257 US 377 (1921)

Socony Vacuum, ref. 310 US 178 (1940)

American Tobacco, ref. 328 US 781 (1946)

Cement Institute, ref. 333 US 683 (1948)

Morton Salt, ref. 235 F. 2 d 573 (10th Cir. 1956)

Gulf Oil, ref. 164 A. 2 d 656 (1960)

Admittedly, these are decisions delivered by American courts and I refer to them only for the sake of comparison in the examination of the present case; even so, as regards the point that I am at present considering, these decisions take on a certain prominence.

To these considerations I should like to add one remark:

The argument to the effect that a change in prices by all the participants can be explained by the pressure exerted on an oligopolistic market is an argument which can seem convincing when the price change is downwards. But in the case of an increase the pressures of the market are less forceful. The experts have agreed that a differentiated increase would have been possible. The applicant BASF has by implication accepted this in its letter of 13 October 1967 to the Bundeskartellamt: ‘From the point of view of calculating the cost price a higher increase (than that of 8 %) was necessary in October 1967’.

Likewise, the logic of the system of pressures in the oligopoly situation described by the experts, whereby on a given market the producer who takes the initiative always has the largest share of that market, leads to the conclusion that it is always the strongest undertaking on the market, that is to say the one which is on its own national market, that takes the initiative in making the increase. Yet, at least in one case, in 1964, it was not the undertaking which was on its own national market, ACNA, which took the initiative in making the increase in Italy, but Ciba. ACNA only fell in line a little later. This shows that while a common alignment downwards can usually be explained on an oligopolistic market by parallel behaviour without concertation, it is on the other hand extremely doubtful whether a parallel alignment upwards can be explained without the idea of concertation between the undertakings concerned, particularly when a large increase is involved.

C — The factual circumstances in which the price increases were introduced

I do not think therefore, in the final analysis, that the characteristics proper to the dyestuffs market can furnish a rational and satisfactory explanation. On the contrary, I think that the existence of a concerted practice is confirmed by an examination of the factual circumstances in which the increases at issue were introduced.

1. I shall begin with the last two increases. They reveal the existence of a mechanism which is common to them. In both cases the course adopted was the same: (a) To start with, one producer lets it be known that he intends to proceed to a linear increase on one or several national markets at a given rate for a stated and very wide range of products. This was the case with BASF in 1965, and with Geigy in 1967. Whether the date on which the proposed increase is to take effect is specified, incorporating a certain period for implementation (two months in 1967), or is not specified, everything happens as if the price leader intended to give the other producers a period for reflection. (b) Then the other undertakings are informed of the intention, be it in their capacity as subsidiaries or as customers, or by some other means. The mere fact that they were informed does not seem to have been disputed. (c) Finally, in most countries of the Common Market the producers give the necessary instructions to put the increase into effect, and the said increase thus takes effect on the same date; this happened both in 1965 and in 1967. If however on a given market one of the producers refuses to fall in line—which was what happened with ACNA on the Italian market in 1965 and in 1967—the others decide not to proceed to the implementation stage on that market. Thus we have an initial decision by a price leader, announced in advance, followed, depending on the case, by agreement or by total or partial refusal by the other undertakings, this refusal being accepted by other competitors who take the requisite action. without its boeing necessary to consider how to describe this operation in relation to the law of contract, for we are not dealing with an ‘agreement’, it seems to me that it in fact implies convergence of wills. There is the will of the price-leader, which is not the manifestation of a purely unilateral will because his decision can only be put into effect if it is accepted by the other producers. Then there is the will of each of the latter who adhere, at least tacitly, to the price-leader's initial decision, or who oppose it and prevent its being followed through, or at least limit its scope. These facts appear to me to be sufficient to establish the element of concertation required by Article 85(1). To require a more obvious, more explicit manifestation of the common will would lead to disregarding the distinction which that provision of the Treaty makes between an agreement and a concerted practice. It would therefore mean not giving the concept of concertation the realistic meaning which, in my opinion, should be given to it. Concertation does not amount to an agreement. It is not set out in a document which has the purpose of determining the respective obligations of the parties. Nor is it necessarily a ‘conspiracy’ methodically organized in meetings at which differences of opinion may be expressed or interests confronted. It can consist, and it consisted in the present case, in common but coordinated conduct starting from apparently unilateral decisions which can only be carried out if the participants cooperate. There is certainly an objection to this way of thinking, and at the oral hearing some of the representatives of the applicants, and in particular Professor Von Simson, did not fail to advance it brilliantly. The objection is that if one only looks at the relationships between the price-leader on the one hand and each of the other producers on the other, one is labelling as concertation bilateral relationships which, in an oligopolistic market, have a natural explanation in the self-interest of each undertaking, subjected to the pressures of such a market and to the pre-eminent power of the price-leader. The operation could therefore perhaps be regarded, so we are told, as an abuse of a dominant position on the part of the price-leader, within the meaning of Article 86 of the Treaty, but not as a concerted practice falling under Article 85; for that article requires not only agreement with the decision of one of the producers, but real concertation amongst all producers. It seems to me that Professor Von Simson's objection is unfounded. For if a real agreement had been concluded between the price-leader and each of the other producers, such as to give expression to the adherence of that other producer to the decision, there is no doubt that such a bilateral agreement, even if it had remained isolated, would have been of a kind such as to justify the application of Article 85(1) without its being necessary to consider whether other identical agreements had been concluded or whether links had been made between the parties to those different agreements. Yet can more be required in respect of a concerted practice than of an agreement? In the second place the objection made against this line of reasoning would only apply—as is made clear by the general trend of the applicants' arguments—if the market was a typical oligopoly, which presupposes close interdependence between producers of homogeneous products. But, as I have said, an analysis of the dyestuffs market leads to the view that the specific characteristics of that market differ from the typical kind of oligopoly on more than one point. Is it not striking to note that for the increases of 1965 and 1967 the price-leader is different in each case: BASF for the first, Geigy for the second? May it not therefore be supposed that the initiative concerning a decision on prices was so arranged that first one and then another of the producers precipitated the increase in turn? Such a way of proceeding, if it were established, would without doubt of itself constitute concertation; but the evidence does not show that. Or alternatively, should one not rather seek the explanation of these changes in leadership on prices in the fact that since the national markets were partitioned off it was natural for the price-leader to be one of the undertakings exporting a large part of its production to neighbouring markets, which is the case both with BASF and with Geigy? Admittedly, the documents on the Court file do not incontrovertibly support this second proposition any more than the first. But I think it is the more likely one, taking into account the general context of the case. In any event, you will not have to adopt it if I have been able to convince you that the very machinery of the increases of 1965 and 1967 reveals, of itself, the existence of concertation. If you still have any doubt on this point, the particular factual circumstances in which the increases were applied also provide telling evidence. The most numerous indications and those which most agree amongst themselves are those relating to the increase introduced in 1967. Let me remind you of them: on 18 August 1967, a meeting took place at Basel at the registered office of Sandoz. Representatives of all the applicant undertakings except ACNA were present at this meeting. We clearly do not have the verbatim report of that meeting, but one thing is certain: Geigy's representative announced the intention of that undertaking to increase the prices of soluble dyestuffs based on aniline before the end of the year, and it appears from the documents on the Court file that this intention was stated in precise terms: there was to be an increase of 8 % with effect from 16 October 1967. The representatives of Bayer and of Fran-color announced that their undertakings were also considering an increase. To be sure, there is nothing that formally establishes that these declarations were followed by a discussion during which reciprocal commitments were entered into. However, it seems hard to imagine that there was not at least some discussion on this point, since at the time the problem of the price of dyestuffs and of the profitability of undertakings was seriously worrying all producers. Immediately after the Basel meeting there began for each of the companies a period a view of intense activity with to putting the proposed increase into effect. The representatives of the undertakings present at the Basel meeting reported to their respective directors on the situation. Two particular cases were disposed of during this period: the case of France, where Francolor, which was not able to take advantage of the increases of 1964 and 1965 because of the price controls in force, decided to catch up by making a further 4 % increase over the general 8 % increase; and the case of Italy, where, taking into account the recession on the internal market, ACNA opposed the increase but nevertheless declared itself prepared to apply it to other markets, particularly the Belgian and French markets. Thus the increase, initially envisaged as a uniform 8 % on all the markets of the Community, was adapted to the special cases of France and Italy. It also seems that BASF, which apparently wanted a larger increase, finally agreed to the rate of 8 %. At all events, on 19 September 1967 all the undertakings which had been represented at Basel one month earlier announced an increase of 8 % with effect from 16 October 1967. This increase was raised to 12 % by Francolor. Finally, in almost all cases, this increase was put into effect, except of course in Italy, on the date which had been announced at Basel and confirmed on 19 September, namely on 16 October. Could such perfect synchronization in the unfolding of the operation be explained by a simple mutual exchange of information which, moreover, the undertakings concerned do not deny? For my part I think that the operation could not have taken place in such circumstances without real concertation. Thus these circumstances contain sufficient indications, in my opinion, to establish the existence of such concertation not only as between Geigy and each of the other undertakings concerned but also as between those undertakings themselves, both as regards the decision which they took in respect of the intention announced by the price-leader and as regards the manner in which they rallied to his decision. The case of Italy is, in this respect, significant. ACNA having refused to join the arrangement, the Italian market was spared the increases and the other undertakings acted in pursuance of this refusal. However, ACNA agreed to increase its prices on the French and Belgian markets. Turning to the increase of 1965 which, I would remind you, consisted of extending the increase of 1964 to Germany and increasing by 10 % the price of products not affected by the increase of 1964, which basically meant non-soluble pigments, the way in which it was brought into effect is comparable in many ways with what happened as regards the increase of 1967. It was announced long in advance by BASF, as early as 14 October 1967. Bayer made known the same intention on 30 October, and Casella on 5 November. The increase was only finally decided upon and was only put into effect after the expiry of a period comparable to the period which, in 1967, ran from the meeting at Basel to the date when the increase was put into effect. In fact all those companies took the decision only on 28 December and it came into effect on 1 January 1965. During November and December two special cases were settled: first, the opposition of ACNA had the consequence that the Italian market was, for the first time, excluded from the increases envisaged for the other markets; secondly, as we know, the price freeze in France prevented the application of any increase in that country. Finally, as for the 1967 increase, the synchronization was perfect; there was not the slightest disparity or difference in the way the increase was introduced. Therefore, for reasons similar to those which I have already put forward, I think that the increase of 1965 came about through concertation similar to that of 1967.

2. The increase of 1964

The reason why I have not followed the chronological order of the successive increases is that the Court file does not contain so much information on the first of these, which took place in January 1964, as it does on those which followed it.

Our information relates only to the circumstances in which this increase was put into effect between 13 and 20 January. We also know that it was started by Ciba which, probably at the end of 1963 or during the first days of 1964, gave its Italian subsidiary an order to increase by 15 % the price of most dyestuffs based on aniline, except for certain products, particularly pigments.

On the other hand we do not know when and in what circumstances the price-leader announced this increase, nor do we know what the reactions of the other producers were. We only know that they followed the movement except on the German and French markets.

So it is not possible to confirm that the mechanism which we have already seen working in the latter cases was already set in motion for this first operation.

But this lack of information will not lead me to reject the complaint that there was concertation as regards the 1964 increase. Let it be noted in passing that the gap in the file results clearly from the fact that at that time the Commission had not been alerted, and therefore obviously it was not in a position to obtain information. When inquiries were later made, it would no doubt have been difficult to conduct a successful search for evidence of concertation which must presumably have taken place during the last months of 1963.

It is theretore solely on the basis of the facts shown by the documents in the file that I shall attempt to convince you.

What are these facts?

As regards the dates when the increase was put into effect, it is established that on 7 January Ciba-Italy put into effect as from that day an increase of 15 % for dyestuffs based on aniline, other than pigments, food colouring and cosmetic colourings. The other producers took two or three days to react. On 9 January ICI-Holland announced the increase and put it into effect. On the evening of the 9th all the other producers gave instructions for the increase to their representatives in Italy. On that same day Bayer ordered its Belgian subsidiary to increase the price of the same products by the same amount and it did so on 10 January. It was also on 10 January that ACNA decided on the increase for Italy; on 13 January it applied it to Belgium. Finally, it was on 13 January that Sandoz-Switzerland gave to Sandoz-Italy the instructions necessary for applying the increase, having notified it on 9 January of the possibility.

As to the details: the same percentage increase was applied; it covered almost exactly the same categories of products. Although, as has indeed been pointed out by two of the applicants, Bayer and Geigy, differences have been found both as regards the products which were to be affected by the increase and as regards the details of its application to customers, these differences are minor and cannot seriously cast doubt on the clear and in many places striking similarities to be found in the instructions sent by certain parent companies to their subsidiaries or representatives. The Commission sees in these one of the proofs of concertation. Without completely sharing this opinion, it must certainly be admitted that the almost word for word similarity of some of those Telex messages, not only as to dates, rates of increase and categories of products covered, but also as to the conduct to be followed in relations with customers, constitutes considerable additional evidence. It is inconceivable, says the defendant, that the parties could so rapidly have put a uniform increase into effect if they had not come to an arrangement beforehand. This argument is not without substance, but it may be objected that the very rapidity with which the undertakings reacted could support the contrary argument that there was no concertation, which necessarily calls for a certain amount of time.

However, there is nothing to exclude the idea that the instructions to the subsidiaries and to the representatives were merely the culmination of an operation which, there are good reasons for thinking, began several weeks earlier. Whereas for the increases of 1965 and 1967 all the stages of concertation stand revealed, for the increase of 1964 all that is to be seen is the tip of the iceberg. This can also be explained by the fact that the method of concertation was, so to speak, ‘run in’ with time, and only reached its perfect form with the last increase in 1967.

3. Evidence of concertation

But I shall not spend any more time on these points, which are certainly secondary ones. It is another consideration which I regard as proof of the existence of concertation effected before the 1964 increase took place. For I think that this increase cannot be dissociated from those which followed it and that they are all elements of a general strategy in which the producers participated in full knowledge of the consequences. Is it not an undeniable fact that in 1965 it was the 15 % increase of 1964 which was extended to Germany, spared a year earlier? Is it not established that again in 1965 the increase of 10 % was applied to those dyestuffs and pigments which had been excluded from the first price increase, such that it consisted in widening the scope of the increase? That in 1967 it was a second rise in prices of all dyestuffs that was decided upon, including on this occasion the French market which had been excluded from the increases because of the price-stabilization plan?

This continuity in the process convinces me that the concertation proceeded from an overall plan. Consequently, the divergent elements, which at any rate are minor ones, detected in the method of operating do not put in question the unity and continuity of this plan.

Furthermore, is it not in the nature of things that when increasing prices producers proceed by successive and graduated steps, if only to avoid the brutal application of an excessive rate of increase all at once, so as to attempt to lessen the reactions of customers, and also to make sure that before proceeding with the execution of the plan the first stage of the increase has indeed achieved the objectives anticipated and has not given rise to any undesirable consequences?

I therefore advise in the strongest terms that you hold that one and the same concerted practice existed for the three increases of 1964, 1965 and 1967.

It remains for me to examine two other questions so as to show that this concerted conduct was of such a kind as to justify the contested decision.

Section IV

The adverse effect on competition

A — The application of Article 85(1) of the Treaty to a concerted practice

For Article 85(1) of the Treaty to apply it is also necessary that agreements between undertakings or concerted practices should ‘have as their object or effect the prevention, restriction or distortion of competition within the Common Market’.

As regards agreements, you have interpreted the expression ‘object or effect’ as meaning that the condition is fulfilled if they merely have this object, without its being necessary to go into the real effects which an agreement may have had on the competitive situation (judgment of 13 July 1966, Joined Cases 56 to 58/64, Consten and Grundig, [1966] ECR 299).

However there are some academic writers who say, attaching particular importance to objective factors in defining the concept of a concerted practice, that to fall under Article 85 such a practice must actually and concretely have had the effect of altering the conditions of competition.

In his opinion on the Chemiefarma case, Mr Advocate-General Gand seemed to take the same view. He said that although ‘for the purposes of the application of Article 85 there is no need to take account of the concrete effects of an agreement… it is no doubt otherwise in the case of a concerted practice which, according to the prevailing view, presupposes that the agreement is actually carried out so that it is necessary to establish the actual conduct of the undertakings concerned and the existence of a link between such conduct and a prearranged plan’ ([1970] ECR 714). I have already given you to understand that my opinion is not very far removed from that expressed in those words.

Would it be possible to go further and to take into consideration not the result, the actual effect of the practice, but also its potential effect! There can be no doubt that it would seem curious for a concerted practice which has not had any material effect on the competitive situation, despite the intention of the participants and because of circumstances beyond their control, to escape the application of Article 85. I should be tempted to say that in such a case merely to attempt or to initiate execution would be enough to justify the application of Article 85(1).

B — The consequences of the concerted practice with respect to competition

However, if you share my point of view; you will not have to give a ruling on this question for, in the present case, the concerted practice at issue has had both as its objects and as its concrete effect the restriction or distortion of competition within the Common Market.

What in tact were the consequences of the increases in the prices of dyestuffs?

If one accepts the applicants' evidence, there were no consequences at all because of the very structure of the dyestuffs market and because of the practices current concerning sales to users. This assertion follows naturally from the general line of reasoning which we have already met as regards the explanation of the parallel conduct of the undertakings. Yet it may seem surprising here because at the same time most of the applicants are saying that there was lively competition between sellers on the market. Even so, this contradiction is only apparent. Drawing upon the experts' reports, the applicants argue that the level of prices is not the only—not even the main—factor in competition between distributors. This statement is not inaccurate; Professors Kloten and Albach have themselves made the point. Capacity and delivery times, the quality of products, after-sales technical assistance and guarantees given to customers, even extending to insurance against any damage caused by the use of dyes the quality of which turns out to the inadequate, all constitute factors which the buyers, the user industries, seriously take into consideration. This factor is not denied by Professor Kantzenbach. But may I be permitted to point out that these competitive factors continue to exist whatever the general level of prices, at least when the variations between prices are of general application and at uniform rates. These factors concerning competition would only play a decisive role in the event of varying increases.

This is indeed what the applicants seek to show in arguing that since no basic price lists are published, competition involving selling prices takes place by means of discounts granted individually to certain buyers. They say that therefore a price increase by an identical percentage cannot affect this form of competition because in reality prices remain different. It is argued that linear increases therefore have no effect on real prices, and that this is shown by the tendency towards erosion of real prices which is found on the global market in dyestuffs, despite the fact that linear increases took place during the period from 1964 to 1967. Faced with this line of argument, one might ask why the producers made the increases if real selling prices are, as they claim, determined in most if not all cases by discounts granted by distributors in order to keep or gain a customer.

However, it seems to me that this argument does not stand up:

First of all, is the practice of discount selling as widespread as we are told? There is nothing in the documents on the Court file to confirm this. On the contrary, it seems that in most cases a subsidiary, which is of course a distributor, cannot grant a discount without permission from the parent company. At least this appears to be the position from certain instructions sent by Telex. It is hard to see how such a system can be applied to all or nearly all sales.

Furthermore, figures are available for certain undertakings: this is so with Bayer, and it has been calculated that the number of individual discounts granted annually by that undertaking is 1500 (report of Professors Kloten and Albach, p. 29, No 50). As for ICI, 689 requests for discounts were received in 1967 and only 429 were granted (ICI's memorandum on the dyestuffs industry in Europe, p. 14). These figures seem very low compared with the global volume of sales made by these very companies. Bayer has about 5000 customers in the Common Market (Kloten and Albach, p. 30, No 52). Making allowance for the fact that certain customers are habitually given discounts, the number of customers receiving discounts is less than a third of the total. As for ICI, one can see the minimal importance of the discounts granted when one considers the size of that company.

In any event, whatever the relative importance of discount sales, the fact remains that discounts can only be granted on the basis of a reference price, a basic price. It follows therefore that price increases, even uniform as to percentage, cannot fail to have an influence on real prices on a non-transparent market on which it is impossible to determine discounts by considering those that a competitor might grant. Let me add that as regards the buyer, a uniform increase cannot fail to have a dissuasive effect, in that it discourages him from demanding the discount that had previously been granted to him; nor can it fail to persuade, in that it prepares him psychologically for accepting a reduction in that discount.

Finally, although the linear increases, uniform as to percentage, did not have the effect of eliminating all competition, it is undeniable both that it was their object and that it has been their effect to contain competition within its previous limits. The producers have obtained a sort of insurance against the risk that this competition might develop, and more especially that positions acquired and balance achieved on the partitioned-off national markets might be upset.

Thus this analysis leads me to the view that the linear increases have had a concrete effect on competition, which varied price increases introduced without concertation would not have had. I think, furthermore, that a confirmation of this view can be found in the special situation prevailing on certain markets.

C — The particular case of the ACNA company

A small exchange which took place during the oral hearing between one of the agents of the Commission and one of the representatives of the applicant companies led to important clarifications on this point. The representative of the Commission stated that the turnover of ACNA on the German market increased considerably during the months which followed the increase of 1 January 1965 in which that company had refused to take part. Its turnover on that market amounted to Lit 64 million for the year 1964. Yet for the first four months of 1965 it came to Lit 97 million, and the Commission estimates that for the whole of the year 1965 ACNA's trade with Germany came to almost Lit 300 million. It was found that the same thing happened after the increase of 1967. The applicants did not reply to this line of argument. They did no more than say that the Commission was not entitled to draw upon an argument during the oral hearing without having mentioned it in the pleadings. This plea that the argument is inadmissible cannot be accepted.

It was not the Commission but one of the applicants which raised an argument during the oral hearing which had not been mentioned in • its written pleadings and which was intended to show that ACNA did not obtain any advantage from not taking part in the increase of 1965 as regards the volume of its sales. And it was in answer to this new argument that the representative of the Commission produced the factual data that I have just mentioned. The Commission, the defendant in the proceedings, was certainly entitled to put forward any point which seemed to it relevant so as to counter a new argument from the applicants.

The material accuracy of the facts thus put forward has not been formally denied. As regards the increase of 1965, the Commission observed that the statement which it had made appeared in the shorthand note of the declarations made by the commerical director of ACNA in July 1965 to one of the Commission's investigators. For the increase of 1967, the Commission offered to submit evidence to the same effect. It seems to me that the information thus supplied should be taken as correct. Now in my opinion this information has great importance in an assessment of the effects of the concerted practices on competition. If the only undertaking which did not introduce certain increases was able to increase its sales on a market on which the other companies had raised their prices in a uniform way, this is because the conduct of those other companies tended to contain competition within certain limits and they did not intend to go beyond them. ACNA's conduct and the advantage that it obtained from it are particularly significant and confirm my opinion as to the real effect of the concerted practice.

Section V

The effects on trade between Member States

I must now consider whether this concerted policy was capable of affecting trade between Member States as required by Article 85(1). This question should receive an affirmative answer.

first 0f all, it is established that the concerted practice covered the markets of several Member States, in fact every Member State of the Community with the exception of France until 1967, of Germany for the increase of 1964 and of Italy for that of 1967. Is this state of affairs of itself enough to show that the concerted practice was capable of affecting trade between Member States? The Commission thinks so, thus adopting the view that the word ‘affect’, which is a neutral word, has no other purpose than to set a boundary on the scope of Community competition law in relation to national competition law. However, it seems to me to follow from your decision in the Grundig case that your interpretation is more subtle. Certainly, the fact that an agreement is capable of having effects or that, mutatis mutandis, a concerted practice has effects in several Member States is a necessary condition for it to be regarded as affecting trade between those States. But is this condition sufficient? To quote the words of your Grundig judgment it is also necessary to examine whether the agreement ‘is capable of constituting a threat, either direct or indirect, actual or potential, to freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market between States’. As regards this, the applicants argue that no common market in dyestuffs existed, but only national markets, clearly delimited and separated, between which goods moved along ‘cemented channels of distribution’ (Kantzenbach's report, p. 14, No 18). Users obtain their supplies exclusively from national retailers who are subsidiaries or representatives of the producers. Therefore, since the dyestuffs market was already strictly partitioned off before the price increases of 1964, the fact that these increases took place, and consequently the fact of the concerted practice, which I take as proven, could not have had the effect of affecting trade between the Member States.

My reply to this argument is of the same order as that which I gave about the effects on competition: while it may well be admitted that the partitioning of the market in dyestuffs was not created by the concerted policy of the producers, nevertheless it remains a fact that the concerted price increases maintained this state of affairs, which a non-concerted approach might have upset. The practice at issue thus fulfilled, on this point also, the role of an insurance policy intended to cover the producers against the risk of the creation of new intra-Community trade patterns and the disturbance of an artificial equilibrium. Again, the special case of ACNA confirms this: by refusing to take part in the general increase of 1 January 1965, this company was able to increase the volume of its deliveries in Germany. Thus the general and uniform increase in prices did affect trade between Member States because the very fact that one of the producers did not take part in it had the result of increasing, in this particular instance, trade in dyestuffs between Italy and Germany, thereby threatening the wide disparity in prices which existed between those two countries.

The concerted practice resulted in preventing the creation of a single market in dyestuffs in the Community.

The conclusion to be drawn from the above is that all the requirements set out in Article 85(1) of the Treaty are met in this case.

I might well call a halt here to my remarks on the concept of a concerted practice, but I feel that I should make two more observations:

1. As I have already said, I think that there was in fact one and the same concerted practice and that the various price increases through which this practice was apparent cannot be dissociated from a general plan. On this point you may think that in saying that there was one concerted practice I am straying somewhat from the reasons given for the contested decision, because the Commission took three distinct increases into account. But I think that the unlimited jurisdiction vested in the Court is such that you are entitled to adopt this reasoning and that if the facts can be interpreted in the way in which I have attempted to interpret them there is nothing to prevent you from adopting this approach.

2. Since I am wholly persuaded that as a matter of law the Commission was quite right to apply Article 85, taking it as established that there existed a concerted practice prohibited by that article, I shall give a short answer to some of the objections of a general nature that the applicant companies put forward against the dangerous consequences which such a solution would have for their business and even for their survival.

They say that any economically rational prices policy would become impossible:

— How could a price-leader prevent other undertakings from following his decision to increase prices?

— How could those other undertakings be compelled not to do so?

— Would they have to choose to limit their own price increases to a lower level?

I do not think that these questions are relevant, and these fears strike me as ill-founded.

Let me point out that the applicant's objections brush aside the conclusions of Professors Kloten and Albach who, as I have reminded you, think that in practice varying price increases, decided upon independently by each undertaking, are possible.

Without going back over this matter, I would point out that if the producers had doubts as to whether price increases envisaged by them were legal under the Treaty would stop them in practice from seeking the benefit of Article 85(3), thereby entering into a dialogue with the Commission, as a preventive measure, which might lead to a solution which was both acceptable to them and compatible with the rules on competition. For you have already had occasion to point out how economic conditions on an oligopolistic market can coincide with the provisions of the Treaty. The principles set out in your judgments of 18 May 1962, Geitling and Others, and 15 May 1964, Government of the Netherlands, on price agreements on the coal and steel market could doubtless be transposed or adapted to other markets in due course.

Finally, I was not shaken by the efforts made at the oral hearing to convince you that to accept the application of Article 85 in this case would mean sanctioning a degree of economic planning contrary to the principles of the Treaty. I am certainly not saying that the existence of oligopolistic markets and the mechanisms whereby they function are condemned either by way of Article 85 or by the general rules of the Treaty. Even so, let me say frankly that it is in these economic sectors that certain abusive practices are capable of working seriously against the interests of consumers in the Common Market. Yet is it not the case that one of the fundamental objectives of the Community consists in ‘the constant improvement of the living … conditions’, and does not this objective necessarily include the protection of consumers?

It is therefore absolutely right for the Community authorities to take a particular interest in markets the structure and working of which can facilitate the materialization of such a risk, and to keep those markets under close scrutiny.

In this context, the complaint put forward by BASF that there was a misuse of powers, in that the Commission wanted to ‘influence pricing policy’ by using the provisions concerning the suppression of unlawful cartels or concerted practices whereas the Treaty does not confer on it any power to pursue a pricing policy, seems to me, after the discussion which I have devoted to the existence of such a practice in this case, to be utterly misconceived.

If the applicant is merely expressing the opinion that the Commission's decision (supposing that you hold it to be in conformity with Article 85) is capable of preventing future price rises decided upon and implemented in similar circumstances, it must be admitted that the fines imposed have achieved their purpose as regards both prevention and cure.

If the applicant is imputing to the Commission a disguised motive which is in fact to force prices down on the dyestuffs market, I would merely observe that no misuse of powers appears from any of the documents on the Court file and that the truth is that this allegation is nothing other than a very free interpretation of the thinking of the Commission, responsibility for which must lie with the applicant.

Part II

The jurisdiction of the Commission to impose fines on companies whose registered offices are outside the Common Market

Amongst the undertakings producing dye-stuffs which have, as I have made every effort to make clear, taken part in a concerted practice prohibited by Community law, three—and by no means the smallest—are companies established outside the Common Market:

— the first, Imperial Chemical Industries (Case 48/69) is a British company whose registered office is in London;

— the other two: Geigy (Case 52/69) and Sandoz (Case 53/69) have their registered offices in Basel and were incorporated under Swiss law.

On the subject of the Commission's jurisdiction regarding them the reason given in the contested decision is as follows:

‘Whereas this decision is applicable to all the undertakings which have participated in the concerted practices, whether established within the Common Market or outside it’.

The Commission then draws from the very wording of Article 85(1) of the Treaty the conclusion that the rules on competition set out therein are applicable to all restrictions which produce, within the Common Market, the effects prohibited by Article 85 and concludes that ‘it is unnecessary to examine whether the undertakings which have caused these restrictions on competition have their registered offices inside or outside the Community’.

Using somewhat similar arguments, although not identical in every respect, Imperial Chemical Industries on the one hand and Geigy and Sandoz on the other formally deny that the Commission has any jurisdiction over them. They maintain that the contested decision is contrary both to the national laws of the Member States of the Community, to the Treaty of Rome itself and to commonly accepted principles of public international law.

According to the applicants, who say that infringements of the rules of competition are criminal in character, there is no support for the assertion that in order to justify the application of Article 85(1) to undertakings outside the Common Market it is enough that their conduct produces effects inside that market. They argue that the ‘effects’ doctrine, invoked as justification for an enforcement juristiction, has been repudiated by the internal laws of the States, and that furthermore several of them have adopted legislative measures for the purpose of protecting themselves and their nationals against the extraterritorial application of coercive measures, injunctions and even mere orders to submit evidence emanating from foreign authorities on matters of competition.

They say that the Treaty of Rome did not confer and could not have conferred power on the Community authorities to take preventive and repressive decisions against undertakings outside its territorial scope, at least when those undertakings are not carrying on any activity within the Common Market. The contested decision wrongly applies or at least oversteps the mark in applying the ‘effects’ doctrine, in violation of international law.

Drawing on the opinions given by two eminent specialists in public international law, Professor R. Y. Jennings of the University of Cambridge and Professor Hans Huber, a member of the Swiss Constitutional Commission, the British and Swiss companies have put forward arguments which reach the same conclusions although they proceed somewhat differently.

The argument put forward by Imperial Chemical Industries is that in the letter sent to it on 22 January 1968 by the Director-General for Competition, that high-ranking official attempted to justify the application of Article 85(1) by the conduct of the applicant within the Common Market. ICI's answer to this is that its activity in fact consisted in supplying dyestuffs to its subsidiaries in the Common Market under cif contracts. These contracts are governed by English law and the activity resulting from the conclusion of them takes place in the United Kingdom. Furthermore, in its decision the Commission does not impugn anything more than the mere effects within the Common Market of the conduct of Imperial Chemical Industries. The latter maintains that jurisdiction over acts committed abroad but producing effects within a given territory, in this case the Common Market, cannot be exercised purely on the basis of the area in which effects have been produced, unless the activity complained of and its effects are generally recognized as the constituent elements of a criminal offence according to the law of States with reasonably developed legal systems. It appears from the textbooks that competition law is not unanimously considered capable of giving rise to the application of this system, and the contemporary practice of States is against attempts to give extra-territorial application to legislation on cartels. Furthermore, the Community does not enjoy ‘inherent jurisdiction’ but only the jurisdiction granted to it. No provision in the Treaty allows it to exercise extra-territorial jurisdiction. On the contrary, Article 85 only applies to trade between Member States.

Geigy and Sandoz adduce the same arguments in the field of international law, but add that even supposing that the ‘effects’ theory could be used as an alternative justification of the Commission's jurisdiction over them, it would at least be necessary to show that there has been a substantial effect and that the facts of the case show that there exists a reasonable linking factor between the conduct of the companies and the disturbances caused to competition within the Common Market.

Section I

National legislation and national case-law

Community law

I shall first examine whether there is to be found in the substantive law of States both within the Common Market and outside it a criterion for the applicability of laws on competition such as to justify the jurisdiction of national authorities to forbid or suppress interference with competition, the effects of which arise in their territory, irrespective of the nationality or place of residence of those committing infringements.

A — (a) The German Law of 1957 contains, in Article 98(2), a very clear provision as to its field of application. It applies ‘to all restrictions on competition which have an effect (sich auswirken) in the territory where it is applicable (namely the territory of the Federal Republic of Germany) even if such restrictions result from acts committed outside that territory’. Even though one must, it seems, interpret this rule as applying only to effects directly affecting competition on the German market, the principle is none the less there. (b) In France, the Order of 30 June 1945 on prices and the Order of 25 September 1962 on the maintenance of fair competition make a distinction between a dominant position characterized by a monopoly situation or by an obvious concentration of economic power, which must exist on the internal market, and the prohibition on cartels for which no limitation of this nature is laid down. The Technical Commission on cartels, which the Minister of Economic and Financial Affairs must consult before commencing legal proceedings, has often applied the law to foreign undertakings : — opinion of 26 May 1956, cartel involving manufacturers of electric light bulbs; — opinion of 5 November 1960, Franco-Belgian cartel involving road construction material, relating to an agreement partitioning the market; — opinion of 17 December 1960, cartel involving importers of timber from the north; this concerned a reciprocal exclusive dealership agreement between the French Import Federation, which controls four-fifths of the internal market, and the Union of Exporters of timber from the North and America, a Swedish body; — opinion of 20 March 1965, cartel involving manufacturers of ceramic facing tiles; this concerned an agreement between all the French producers of this product and a foreign producer. Thus, the applicability of French law depends on the localization on the French market of the effect inhibiting competition or economic freedom. furthermore, the Technical Commission on cartels is careful never to state the place where the agreement is made, and this implies that it does not consider this to be a determining factor. On this point I should also mention the second opinion of the Commission dated 22 April 1966 on the cartel in the electric light bulb industry, which held that the conduct of the Netherlands company Philips on the French market was an abuse of a dominant position, although in the main the decisions giving rise to this conduct necessarily took place in the Netherlands. (c) Both as regards cartels and abuse of dominant positions comparable provisions are found in the laws of other Member States. The criterion of territorial effect is applied by the Belgian Law of 27 May 1960 against the abuse of economic power. Article 1 of that law is based on the exercise of economic power “within the territory of the Kingdom”, an expression which is interpreted by Van Reepinghen and Waelbroeck as follows: “It is the exercise, in Belgium, of a preponderant influence which serves as the linking factor with Belgian legislation. The nationality of the persons holding the economic power, the place where the cartel is agreed upon or the seat of the central instruments of the cartel are irrelevant in this respect”. Article 1 of the Netherlands Law on economic competition of 16 July 1958 seems less clear. It reads as follows: “For the purposes of this law a dominant position shall mean an economic situation in fact or in law which gives one or more proprietors of undertakings a dominant influence on a market in goods or services in the Netherlands”. However, this provision has been interpreted, in the light of the preparatory stages of the law, as follows: “To avoid all doubt, it should be pointed out that the nationality of the members of a cartel operating in the Netherlands or of those who hold a dominant position on the Netherlands market is irrelevant” (Mulder and Mok, Kartellrecht, 1962).

B — Outside the Common Market, other States have also laid down the scope of the territorial application of their legislation on competition. (a) In Great Britain, for example, various laws adopted between 1948 and 1965 define the extent of their application very widely; in particular, the Resale Prices Act of 1964, which applies to agreements or other practices whose purpose is to set a minimum resale price on goods in the United Kingdom, regardless of where the producer undertakings carry on business, is indisputably based on the criterion of the effect on the British market. Similarly, the Monopolies and Restrictive Practices Act of 1948 applies, as appears from Article 3, to goods supplied in the United Kingdom or in a substantial part of the territory thereof in any way as to prevent or restrict competition. Article 4 applies the same criterion to the application of any process to goods. Admittedly, the 1956 Act applies to agreements made between undertakings carrying on business in the United Kingdom in the production, processing or supply of goods. But it remains the case that neither the nationality of those undertakings nor the location of their registered offices is taken into consideration, but only the carrying on of “business” in Great Britain, the principal evidence for which is the fact that the commercial agreements are made in the United Kingdom. (b) The Swiss Federal Law of 20 December 1962 on cartels has been applied in the same way to a contract dividing up the market accompanied by an exclusive dealership contract concluded between French and Swiss undertakings to regulate the distribution of newspapers in the Confederation. The Federal Court took the view that: “Although the Law of 20 December 1962 does not contain any express provision as to its scope in international matters, it applies equally to restrictions on competition occurring abroad which produce their effects in Switzerland”. Article 7(2)(b) of that law permits an action to be brought in Switzerland against foreign companies involved in cartels producing unlawful results in Switzerland under Article 4 of the law, wherever those agreements were made. Clearly this provision is intended to suppress restrictions on competition from whatever source as soon as they have a direct effect on the forces of competition within Swiss territory. Thus the Federal Court uses a criterion for jurisdiction based solely on the economic effects produced on Swiss territory by practices or acts committed abroad. (c) Naturally it is in American anti-trust law and especially in the case-law summarized in the “Restatement of Foreign Relations Law” that one finds the clearest and most fully elaborated material concerning the criterion of the territorial application of competition law. The Sherman Act of 1890 applies indisputably to international cartels, even though the law does not define the criterion for such application. The Clayton Act undeniably applies the “territorial effects” doctrine for it says that price discrimination shall be unlawful “where the commodities are sold for use, consumption or resale within the United States … or any other place under the jurisdiction of the United States” (Article 2), and this wording also appears in Article 3 on exclusive dealership agreements. Furthermore, the Webb-Pomerene Act of 10 April 1918 exempts from the prohibition on cartels agreements made for the purposes of export trade, but on condition that such agreements are not in restraint of trade within the United States, and provided that they do not contribute to artificially enhancing or depressing prices within the United States. The place where the agreements are made is not relevant, but only the place where their effects are felt. The case-law reaches the same conclusion. The judgment delivered in the Alcoa case (US v Aluminium Company of America, 148 f 2416, 1945), abundantly commentated on both by the applicants and by the defendant, illustrates the approach clearly. By declaring in this case, on proceedi