Opinion of Mr Advocate General Lenz delivered on 6 February 1997. - Koninklijke Vereeniging ter Bevordering van de Belangen des Boekhandels v Free Record Shop BV and Free Record Shop Holding NV. - Reference for a preliminary ruling: Arrondissementsrechtbank Amsterdam - Netherlands. - Article 85 of the EC Treaty - Article 5 of Council Regulation No 17 of the Council - Provisional validity of agreements pre-dating Regulation No 17 and notified to the Commission - Provisional validity of agreements amended after notification. - Case C-39/96.



European Court reports 1997 Page I-02303



Opinion of the Advocate-General

A - The facts

1 The question raised in these proceedings concerns the validity of anti-competitive agreements already in existence on 13 March 1962, the date of entry into force of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (1) (hereinafter `old agreements').

2 Under Article 5(1) of that regulation, (2) agreements, decisions and concerted practices of the kind described in Article 85(1) of the Treaty existing at the date of entry into force of the regulation and in respect of which the parties sought application of Article 85(3) had to be notified to the Commission before 1 November 1962.

3 The applicant in the main proceedings, Koninklijke Vereeniging ter Bevordering van de Belangen des Boekhandels (hereinafter `KVB') is - as its name indicates - an association for the promotion of the interests of the book trade in the Netherlands. Its members consist of, in particular, publishers, booksellers and book importers established in the Netherlands. (3) In 1961 - when it was then called the Vereeniging ter Bevordering van de Belangen des Boekhandels - it adopted rules concerning the book trade in the Netherlands, the Reglement voor het Handelsverkeer van Boeken in Nederland (Rules governing commercial trade in books in the Netherlands, hereinafter `the Rules'). (4) The Rules oblige KVB members to maintain the vertical price-fixing system for which it provides, and to do so even with regard to non-members.

4 The Rules were notified to the Commission on 30 October 1962.

5 Since then, they have been modified several times. According to information provided by the national court, a significant amendment took place in 1978. According to that information, these proceedings concern the version of the Rules in force since 1 January 1993.

6 The two defendants in the main proceedings, Free Record Shop BV and Free Record Shop Holding NV (hereinafter `Free Record Shop'), form, according to their own statements, a chain of retailers having branches in the Netherlands, Belgium and Norway.

7 On 14 December 1995, Free Record Shop advertised in various Dutch newspapers, offering for sale a number of books at prices 25% lower than those chargeable under the Rules.

8 The KVB then sought an interim order from the Amsterdam District Court requiring Free Record Shop to observe the price-fixing rules laid down by the Rules. Free Record Shop contended in those proceedings that the Rules were contrary to Article 85 of the EC Treaty.

9 As the District Court points out, the question of the compatibility of the Rules with Article 85 of the Treaty has also been raised in another case pending before the Netherlands courts - the Reiber case. In that case, the task of replying to that question was given, by judgment of the Hoge Raad of 22 December 1995, (5) to the Gerechtshof, The Hague. In the proceedings before the Hoge Raad, Advocate General Koopmans had proposed referring certain questions to the Court of Justice for a preliminary ruling. The Hoge Raad did not follow him - for reasons which need not detain us here.

10 On 19 December 1995, the Amsterdam court upheld the KVB's claim for an interim order. It came to the conclusion, however, that in order to deal with the case further, it needed replies to various questions of Community law. In its view, those replies were not likely to be provided by the Reiber case. It consequently asked the Court, by decision of 1 February 1996, to give a preliminary ruling on the following questions: (6)

`1. If an agreement between undertakings or a decision by an association of undertakings to regulate competition came into existence prior to the entry into force of Regulation No 17/62 and was notified to the Commission in good time pursuant to the provisions of that regulation, does that agreement or decision continue to benefit from the "provisional validity" which notified restrictive agreements enjoy according to the case-law of the Court of Justice if the Commission has not reacted to that notification in any way at all?

2. If so, does that "provisional validity" continue to exist for an unlimited period? If not, on what circumstances does the expiry of the "provisional validity" then depend?

3. Does the "provisional validity" apply solely to the agreement or decision, as referred to in Question 1, in the form in which it was notified, or does it also apply to agreements or decisions which have since come into existence, and which prolong the same restrictive agreements in an amended form, in so far as they do not involve any extension or reinforcement of the restrictive agreements having regard to the functioning and realization of the Community market?'

B - Opinion

The first two questions

11 The first two questions are closely linked. Consequently, like the Commission I think that they can be dealt with together.

12 According to the case-law of the Court, old agreements notified to the Commission before 1 November 1962 are to be considered as provisionally valid. A brief summary of this doctrine is contained in the judgment given in 1991 in the Delimitis case:

`As the Court has consistently held, national courts may not, where the Commission has given no decision under Regulation No 17, declare automatically void under Article 85(2) agreements which were in existence prior to 13 March 1962, when that regulation came into force, and have been duly notified (judgment in Case 48/72 Brasserie De Haecht v Wilkin Jansen [1973] ECR 77; and judgment in Case 59/77 De Bloos v Bouyer [1977] ECR 2359). Those agreements in fact enjoy provisional validity until the Commission has given a decision (judgment in Case 99/79 Lancôme v Etos [1980] ECR 2511).' (7)

13 Article 9(1) of Regulation No 17 gives the Commission sole power to grant exemptions, under Article 85(3), in the field of application of that regulation. The Court has rightly pointed out that there is no `effective legal means enabling the persons concerned to accelerate the adoption of a decision under Article 85(3)'. (8) It has also drawn attention to the rule in Article 6(2) and 7 of Regulation No 17. Under the first provision, old agreements which were notified before 1 November 1962 may also be exempted - contrary to what is the case for other agreements - retroactively in respect of the period prior to their notification. (9) In view of those circumstances, the Court was prompted to conclude, that as far as such old agreements were concerned, `legal certainty in contractual matters' required that they were to be treated as being provisionally valid. (10)

14 According to the case-law cited, provisional validity of an agreement comes to an end when the Commission `takes a decision'. (11) That is certainly the case when the Commission adopts a decision rejecting an application for exemption of an old agreement. In 1980 in Lancôme, the Court held that the provisional validity also comes to an end when the Commission notifies the parties, by administrative letter, that it does not contemplate taking a decision (positive or negative) on the restrictive agreement notified. (12) In the case which led to that judgment, the Commission had explained in its letter that it considered that there was no reason for it to take further action under Article 85(1) with regard to the notified old agreement. According to the Court, the provisional validity of the old agreement was thus terminated.

15 In the case now before us, the Commission has not hitherto taken a decision, in the sense discussed above, on the application for the grant of exemption for the notified old agreement. The Commission explains in this regard that it has still not finished examining this old agreement.

16 Since notification of that agreement now goes back 34 years, Free Record Shop's argument that there can no longer be any question of it having `provisional validity' after such a long period does not, on the face of it, appear to be without merit. However, it must be remembered that the theory of provisional validity developed by the Court is meant to maintain legal certainty in contractual matters and thus to protect the interests of parties to old agreements. As KVB rightly explains, the weight to be attached to maintenance of legal certainty tends, if anything, to increase with time. In Portelange, the Court itself emphasized that the fact that it was not possible for the persons who had notified an agreement to the Commission to have any effective legal means enabling them to accelerate the adoption of a decision under Article 85(3) entailed `consequences ... all the more serious the longer such a decision is delayed ...'. (13) Consequently, it would not be fair for the delay in examining an old agreement for which the Community is responsible to work to the disadvantage of the parties which notified the agreement within good time. The fact that a fairly lengthy period of time has elapsed since notification without the Commission having taken a position on the notified old agreement cannot therefore end the agreement's provisional validity. Not only KVB, but also the French and Netherlands Governments, as well as the Commission support this view.

17 It is true that the French Government points out that limitation of the provisional validity of an old agreement to a `reasonable' period could seem desirable. However, it also points out that setting such a precise limit would present difficulties. KVB also points out that determination of such a period is necessarily a political decision, which could only be taken by the Community legislature. I share that view.

18 The fact that the doctrine of `provisional validity' is not to be regarded as outdated as the result of the passage of time is indeed clear from the fact that, as already mentioned, the Court confirmed it again in 1991 in Delimitis.

19 The doctrine does not unduly affect the legitimate interests of third parties. As the French and Netherlands Governments and the Commission explain, persons who consider that their rights are affected by the application of an anti-competitive agreement may complain to the Commission under Article 3 of Regulation No 17. (14) In this way, the Commission may be compelled - again by means of an action for failure to act brought under Article 175 of the EC Treaty following such a complaint, if necessary - to take a decision on the compatibility of the old agreement with the provisions of the EC Treaty on competition. Its taking of a position brings to an end - as already mentioned - the provisional validity of the old agreement.

20 Consequently, I propose that the answer to be given to the first two questions should be that the provisional validity of an old agreement which was notified to the Commission before 1 November 1962 expires only when the Commission takes a decision (positive or negative) on that agreement. Such a decision is also taken where the Commission states in an administrative letter that it has terminated the procedure without adopting any formal decision.

The third question

21 Does the provisional validity of an old agreement notified in good time to the Commission continue to exist when the terms of the agreement are subsequently amended? This is the substance of the third question.

22 However, it must be pointed out that the court which made this reference does not ask in general how amendments made to the old agreement affect its provisional validity. Rather, the question relates only to amendments not entailing any extension or reinforcement of restrictive agreements.

23 Free Record Shop takes the view that the doctrine of provisional validity developed by the Court is meant to provide a transitional rule: any amendment of a notified old agreement would consequently bring its provisional validity to an end. The French Government adopts a position which is in essence the same. In so far as the Rules were radically altered - as the Arrondissementsrechtbank stated - in 1978 as well as from 1 January 1993, the agreement becomes a `new' restrictive agreement.

24 The KVB and the Netherlands Government, on the other hand, take the view that provisional validity continues to exist, even in the event of subsequent amendments to the old agreement, if those amendments do not entail any extension or reinforcement of the anti-competitive restrictions.

25 The Commission considers that three cases must be distinguished. (15) The first case is where an amendment is made which goes to the substance of an agreement. In this case, there is in reality a new agreement. The old agreement ceases to exist and consequently there can be no question of provisional validity. If, on the other hand, an amendment does not go to the substance of an old agreement, the provisional validity of that agreement is maintained. The amendment itself is covered by the agreement's provisional validity only if the anti-competitive restrictions in the agreement are not `appreciably' increased in relation to the restrictions which existed at the time of notification of the old agreement. If, on the other hand, the amendment makes the agreement appreciably more restrictive, the old agreement retains its provisional validity but this does not cover the amendment.

26 Two judgments of the Court have particular significance for the reply to be given to the third question. The judgment given in 1970 in the Rochas case (16) concerned restrictive agreements concluded on the basis of a standard contract. The standard contract was (possibly) a duly notified old agreement. The national court referred the question whether the provisional validity of the standard contract also covered agreements concluded on the basis of it. The Court held that `agreements concluded after the entry into force of Regulation No 17/62, which are exact reproductions of a standard contract previously concluded and duly notified, qualify for the same system of provisional validity as the latter'. (17)

27 The judgment in Eldi Records (18) delivered in 1980 requires particular attention because it concerned the same Rules as those involved in these proceedings. According to the information provided by the national court, which was, as in this case, the Arrondissementsrechtbank, Amsterdam, the Rules notified in 1962 also covered strip-cartoon books. But, according to the information provided, such products had been temporarily excluded from application of the Rules. The Court held that this did not affect the provisional validity of the Rules:

`The effects of the notification extend to the scope of the agreement at the time of its notification. To restrict those effects in the case envisaged by the question would be tantamount to penalizing the parties to an agreement for having voluntarily limited its scope, which would be contrary to the spirit of competition law. It is therefore necessary to reply to the fourth question that the re-introduction of a category of goods which fell within the scope of an agreement at the time of its notification, but which was subsequently excluded voluntarily by the parties for a certain period, is covered by the effects of the original notification.' (19)

28 In my view, that conclusion may be transposed to this case. If an amendment of a notified agreement led to loss of provisional validity even where the amendment entails a relaxation of the restrictions, the persons concerned would no longer be encouraged to make such pro-competitive amendments. The `counter productive consequence would then be that they would decide not to make them'. (20) As the Court put it in Eldi Records, this would hardly be compatible with the `spirit of competition law' of the Community. However, the view which I take does meet the requirements of the common market, as the Netherlands Government has also explained.

29 The Netherlands Government also rightly points out that the distinction on which this view is based is clearly apparent in a number of block-exemption regulations. For example, Article 1(5) of Commission Regulation (EC) No 240/96 of 31 January 1996 on the application of Article 85(3) of the Treaty to certain categories of technology transfer agreements, (21) provides:

`The exemption provided for in paragraph 1 shall also apply where in a particular agreement the parties undertake obligations of the types referred to in that paragraph but with a more limited scope than is permitted by that paragraph.'

30 I am not convinced by the objections raised against this view. It is true that the French Government points out, quite rightly, that it is a question of taking account `of the need to ensure effective supervision and to simplify administration to the greatest possible extent'. (22) Notification of restrictive agreements should give the Commission the information it needs to determine whether the agreements are compatible with Article 85. But if the restrictions of competition provided for in such an agreement are changed and made less restrictive by a later amendment, this entails no consequence for the Commission's supervisory role since the restrictions of competition notified at the outset comprise those which are to apply in future. This was the argument of Advocate General Capotorti in his Opinion in Eldi Records. (23) As KVB also explains, requiring fresh notification of the agreement when any amendment of this type is made would certainly not simplify the administrative procedure.

31 Free Record Shop argues that the Commission still has sole power to check that an amendment of an old agreement has not sharpened the restrictions of competition which it contains. If the Commission finds time to carry out that examination, it may just as well assess the conformity of the entire notified old agreement with Article 85 of the Treaty. In my view, that objection is based on a false premiss. It is not the Commission, but the national court before which the question of provisional validity of an old agreement is raised, which is competent to settle the question. In order to do this, that court may, if necessary - in so far as domestic procedural law does not preclude this - turn to the Commission to obtain information on the state of the administrative procedure. (24) The national court also has the possibility of submitting questions of Community law to the Court for a preliminary ruling under Article 177 of the EC Treaty, as has been done in this case.

32 However, Free Record Shop is right in arguing that a mere statement that the amendment in question does not entail any increase in the restrictions of the old agreement cannot be sufficient for provisional validity to be maintained. The national court must, on the contrary, come to the firm conclusion that the amendment concerned does not in fact entail any such increase. In that respect, the burden of proof is on the party claiming provisional validity for the old agreement. In my view, strict criteria should apply in this regard.

The Netherlands Government states that it is clear from its order for reference that the Amsterdam court came to the conclusion in this case that the amendments of the Rules did not entail any `extension or reinforcement of the agreements'. Some evidence does indeed suggest this. KVB maintains that the Rules have been liberalized by the amendments. However, I must emphasize once again that the decision on this matter is for the national court. Consequently the Court need not address it in these proceedings.

33 Free Record Shop also argues that the view which it is opposing would lead to illegal discrimination since undertakings entering into a `new' agreement would not be able to claim provisional validity for it. As I have already mentioned, the provisional validity of notified old agreements within good time is necessary in order to safeguard the interests of legal certainty, having regard in particular to the specific rules applicable to those agreements. (25) That consideration does not concern restrictive agreements concluded after the entry into force of Regulation No 17. There is therefore no discrimination since the different treatment is objectively justified.

34 Finally, the view for which I am contending does not, contrary to what the French Government maintains, unduly blur the difference between old agreements and `new' agreements. On the contrary, the view for which I am contending - and I believe I have demonstrated this - is consistent with the spirit and aim of the relevant provisions in this case.

35 Although the preliminary question submitted by the Arrondissementsrechtbank can now be answered on the basis of the foregoing considerations, I consider it appropriate to briefly examine the view taken by the Commission. I, too, consider that the provisional validity of an old agreement comes to an end when its substance is altered. This result is also produced by the proposition for which I contend. But I cannot agree with the Commission when it states that other amendments do not affect the provisional validity of an old agreement. The argument that amendments which do not make an old agreement `appreciably' more restrictive are themselves covered by its provisional validity is, I believe, a dubious argument, in view of the interpretation which the Commission has given to this concept. (26)

36 In my view, strict criteria must, on the contrary, apply here. This is clear from Rochas, according to which the provisional validity of a standard contract does not cover individual agreements entered into on the basis of that standard contract unless the agreements are a replica of it. (27) The Court again confirmed this restrictive approach in Delimitis. (28) This approach also seems right to me. If the parties to an old agreement subsequently decide to alter its terms so as to make the agreement more restrictive, there is no reason to confer provisional validity on those amendments. But I would go a step further: in my view, such amendments destroy the provisional validity of the old agreement as a whole. No one is compelled to increase the restrictions contained in an old agreement. Whoever does this, however, does so at his own risk. Legal certainty does not, in my view, require that the old agreement should also be allowed to maintain its provisional validity in such a case.

37 The specific circumstances of this case illustrate this differentiated assessment. The Commission compared the version of the Rules in force in 1993 with the version notified in 1962. In its view, there is only one `appreciably' more restrictive change to be seen. Unlike what was the case before, the system of imposed prices for books from abroad no longer only applies to books for which the foreign publisher has fixed a retail price but also to books for which the publisher has only recommended a retail price. It is not my task here to examine whether that assessment is correct. On the basis of its assessment, the Commission has come to the conclusion that the Rules still have provisional validity but that this validity does not cover their application to foreign books for which the retail price is simply recommended. In my view, such a case entails an amendment of an old agreement, which extends the agreement's scope to other products and consequently reinforces the restrictive terms. According to the view which I take, that would mean that the provisional validity of the old agreement would expire entirely. Unless I am mistaken, that is the view taken by Advocate General Capotorti in Eldi Records. (29)

C - Conclusion

38 I accordingly propose that the Court should reply to the preliminary question submitted by the Arrondissementsrechtbank, Amsterdam, as follows:

(1) The provisional validity of an old agreement notified before 1 November 1962 to the Commission expires only when the Commission takes a decision (positive or negative) on that agreement. Such a decision is also taken when the Commission states in an administrative letter that it has terminated the procedure without adopting a formal decision.

(2) The provisional validity also covers amendments to the old agreement originally notified in so far as those amendments entail no extension or reinforcement of the anti-competitive restrictions.

(1) - OJ, English Special Edition 1959-1962, p. 87.

(2) - As amended by Council Regulation No 59 of 3 July 1962 (OJ, English Special Edition 1959-1962, p. 219).

(3) - Cf. the facts of Joined Cases 43/82 and 63/82 VBVB and VBBB [1984] ECR 19, p. 24.

(4) - The Rules appear to be a reworking of rules dating from 1923. I take this information from the judgment of the Hoge Raad der Nederlanden of 22 December 1995 in the case of Vierkant Beheer and Reiber/KVB. With its observations in this case KVB has lodged a copy of that judgment with the Court.

(5) - See footnote 4 above.

(6) - The Arrondissementsrechtbank points out that the wording of the preliminary questions is based on the wording proposed by Advocate General Koopmans in the Reiber case pending before the Hoge Raad.

(7) - Case C-234/89 Delimitis [1991] ECR I-935, paragraph 48.

(8) - Case 10/69 Portelange [1969] ECR 309, paragraph 15.

(9) - Article 7 of Regulation No 17 enacts a special rule for old agreements which were notified in time but do not satisfy the conditions for exemption under Article 85(3). If, for example, the parties concerned subsequently amend the agreement so that it fulfils the conditions for grant of an exemption, the prohibition in Article 85(1) applies only for the period determined by the Commission.

(10) - Case 99/79 Lancôme [1980] ECR 2511, paragraph 16.

(11) - Lancôme, paragraph 12, at the end.

(12) - Lancôme, paragraph 17.

(13) - Portelange, paragraph 15.

(14) - If the Commission, upon application (or on its own initiative), finds that there is an infringement of Article 85 or Article 86 of the EC Treaty, it may, under Article 3(1) of the regulation, order the infringement to be brought to an end. Under Article 3(2) of the regulation, such an application may be made not only by the Member States but also by natural or legal persons who claim a `legitimate interest'.

(15) - The Commission here refers to its observations in Case 106/79 Eldi Records [1980] ECR 1137. It did in fact adopt the same position in those proceedings (see, more particularly, p. 1143).

(16) - Case 1/70 Rochas [1970] ECR 515.

(17) - Rochas, paragraph 6.

(18) - Cited in footnote 15 above.

(19) - Eldi Records, paragraph 16.

(20) - This point is made, quite rightly, by Gleiss/Hirsch (Martin Hirsch and Thomas O.J. Burkert), Kommentar zum EG-Kartellrecht, Vol. 1, 4th Edition, Heidelberg 1993, paragraph 1741, on Article 85.

(21) - OJ 1996 L 31, p. 2.

(22) - The words of the second recital to the preamble of Regulation No 17.

(23) - Opinion of 28 February 1980 in Case 106/79 Eldi Records [1980] ECR 1151, at p. 1156. However, the German version of that Opinion contains an error in the passage concerned since the word `nicht' is missing.

(24) - See the notice on cooperation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty (OJ 1993 C 39, p. 6).

(25) - See paragraph 13 above.

(26) - The Commission considers that support for its argument is to be found in the rule in Article 15(5)(a) of Regulation No 17. According to that provision, the Commission cannot impose a fine in respect of acts taking place after notification to the Commission and before its decision in application of Article 85(3) of the Treaty `provided they fall within the limits of the activity described in the notification'. I do not see how that provision, which in any case concerns another problem - goes against the view I am taking.

(27) - See paragraph 26 above.

(28) - Cited above in footnote 7, paragraph 49.

(29) - Eldi Records, cited above in footnote 23, p. 1156.