Judgment of the Court of First Instance (First Chamber) of 21 February 1995. - Vereniging van Samenwerkende Prijsregelende Organisaties in de Bouwnijverheid and others v Commission of the European Communities. - Competition - Non-existence of measures - Decisions of associations of undertakings - Complex rules - Infringement - Effect on trade between States - Exemption - Fines. - Case T-29/92.



European Court reports 1995 Page II-00289



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

1. Acts of the institutions ° Inalterability ° Alleged infringement ° Recourse by the Community judicature to measures of inquiry ° Conditions

2. Competition ° Agreements, decisions and concerted practices ° Undermining of competition ° Concertation between undertakings as to how to respond to an invitation to tender ° Exchange of information

(EEC Treaty, Art. 85(1))

3. Competition ° Agreements, decisions and concerted practices ° Undermining of competition ° Joint determination by the undertakings participating in a tendering procedure of the calculation costs to be incorporated in their respective tenders

(EEC Treaty, Art. 85(1))

4. Competition ° Agreements, decisions and concerted practices ° Undermining of competition ° System of rules operating within a trade organization, intended to assure protection in a tendering procedure for the undertaking which, after concertation between the competitors, is found to have submitted the lowest tender

(EEC Treaty, Art. 85(1))

5. Competition ° Agreements, decisions and concerted practices ° Undermining of competition ° System of rules operating within a trade organization, which, in tendering procedures, places the participating undertakings in a more advantageous position than the others

(EEC Treaty, Art. 85(1))

6. Competition ° Agreements, decisions and concerted practices ° Effect on trade between Member States ° Criteria ° Agreement covering the entire territory of a Member State

(EEC Treaty, Art. 85(1))

7. Competition ° Agreements, decisions and concerted practices ° Prohibition ° Effect on trade between Member States ° Potential effect ° Appreciable effect

(EEC Treaty, Art. 85(1))

8. Competition ° Agreements, decisions and concerted practices ° Prohibition ° Exemption ° Commission' s obligation to take account of the specific characteristics of the field of activity of the applicant undertakings

(EEC Treaty, Art. 85(3))

9. Competition ° Agreements, decisions and concerted practices ° Prohibition ° Exemption ° Undertaking' s obligation to prove that its application is well founded

(EEC Treaty, Art. 85(3))

10. Acts of the institutions ° Statement of reasons ° Obligation ° Scope ° Decision rejecting an application for exemption under the competition rules

(EEC Treaty, Art. 190)

11. Actions for annulment ° Commission decision based on Article 85(3) of the Treaty ° Complex economic evaluation ° Review by the Court ° Limits

(EEC Treaty, Arts 85(3) and 173)

12. Community law ° Principles ° Principle of subsidiarity ° Not one of the general legal principles applicable before the entry into force of Article 3b of the EC Treaty

(EC Treaty, Art. 3b)

13. Competition ° Fines ° Prohibition of the imposition of fines for action taken under a notified agreement ° Agreement enjoying an exemption from notification and not notified ° Inapplicable

(Council Regulation No 17, Arts 4(2) and 15(5)(a))

14. Competition ° Community rules ° Infringements ° Committed intentionally ° Meaning

(Council Regulation No 17, Art. 15)

15. Competition ° Fines ° Amount ° Determination ° Turnover taken into account ° Turnover of all the undertakings making up an association of undertakings ° Permissible

(Council Regulation No 17, Art. 15(2))

Summary

1. Only where a measure is challenged on the basis of serious and convincing evidence of breach of the principle of inalterability of Community measures can the Court accede to a request that it order production of a decision, in the language or languages in which it is binding, authenticated by the signatures of the President and the Executive Secretary, in order to verify that the texts notified conform exactly with the text adopted by the college of Commissioners.

2. Where there is concertation by undertakings regarding the manner in which they intend responding to an invitation to tender, involving the exchange of information regarding, inter alia, the costs of the product concerned, its specific characteristics and a breakdown of the price tenders, having in particular the object and effect of revealing to his competitors the course of conduct which each contractor has decided to adopt or contemplates adopting on the market and being capable of leading to the fixing of certain conditions for the transaction, practical cooperation between contractors is deliberately substituted for the risks of competition and an infringement of Article 85(1) of the Treaty is thereby committed.

3. The joint fixing of the price increases which all the undertakings participating in a tendering procedure will include in their price tenders, and which will be received by the successful undertaking but passed on to a trade organization entrusted with sharing them among all the undertakings that submitted tenders, making it possible to ensure that the contract awarder bears, on a flat-rate basis, the calculation costs incurred by all the participants in the tendering procedure, is caught by the prohibitions laid down in Article 85(1)(a) of the Treaty. First, it constitutes fixing of part of the price and, secondly, it restricts competition between undertakings as regards their calculation costs and, lastly, it leads to a general increase in prices.

4. The prohibitions laid down by Article 85(1) of the Treaty apply to a system of rules operating within a trade organization which, in relation to contracts in tendering procedures, makes it possible, through agreements between the undertakings concerned, after comparison of the prices that they intend proposing, to designate the undertaking offering the lowest price, which will enjoy protection against the risk of submission by its competitors of price tenders adjusted downwards, and will be the only one authorized to negotiate the content of its tender with the contract awarder.

Even if such protection is in fact accorded to the undertaking submitting the best tender from the tenderers' point of view, it is for the party awarding the contract to reach its own conclusion, which may involve subjective preferences on matters such as the reputation of the contractor, his availability and his proximity.

5. A system of rules operating within a trade organization which, as between the undertakings interested in a tendering procedure, organizes the exchange of information and excludes certain forms of competition is caught by the prohibitions contained in Article 85(1) of the Treaty, since its very existence undermines the freedom of contractors to join or not join it, inasmuch as non-membership deprives them of certain advantages afforded by the system and brings them into competition, not with a number of contractors acting independently from each other, but with a number of contractors which have common interests and information and therefore behave in the same way.

6. An agreement which extends over the whole territory of one of the Member States has, by its very nature, the effect of reinforcing compartmentalization of national markets, thereby holding up the economic interpenetration which the Treaty is intended to bring about.

7. For restrictive arrangements to be prohibited by Article 85(1) of the Treaty, it is not necessary for them appreciably to affect trade between Member States but merely to be capable of having that effect. Since a potential effect is sufficient, future development of trade may be taken into account in assessing the effect of the restrictive arrangements on trade between Member States, whether or not it was foreseeable. As regards the appreciable nature of that effect, the more limited the trade the greater is the likelihood that it will be affected by the restrictive arrangements.

8. It is for the Commission, exercising its power under Article 85(3) of the Treaty, to grant exemption from the prohibitions contained in Article 85(1) and to take account of the particular nature of different branches of the economy and the problems peculiar to them.

9. It is for undertakings seeking an exemption under Article 85(3) to establish, on the basis of documentary evidence, that an exemption is justified.

Accordingly, they have no reason to criticize the Commission for failing to put forward alternative solutions or to indicate in what respects it would regard the grant of an exemption as justified.

10. In applying the competition rules, all that is incumbent upon the Commission, by virtue of its obligation to state reasons, is to mention the matters of fact and of law and the considerations which prompted it to take a decision rejecting an application for exemption, and the applicants may not require it to discuss all the matters of fact and law raised by them in the administrative procedure.

11. The review carried out by the Community judicature of the complex economic assessments undertaken by the Commission in the exercise of the discretion conferred on it by Article 85(3) of the Treaty in relation to each of the four conditions laid down therein must be limited to ascertaining whether the procedural rules have been complied with, whether proper reasons have been provided, whether the facts have been accurately stated and whether there has been any manifest error of appraisal or misuse of powers.

12. The principle of subsidiarity did not, before the entry into force of the Treaty on European Union, constitute a general principle of law by reference to which the legality of Community acts should be reviewed. No measure adopted before the entry into force of the second paragraph of Article 3b of the EC Treaty may be reviewed by reference to that provision, since the latter would thereby be endowed with retroactive effect.

13. The prohibition of imposing fines laid down in Article 15(5)(a) of Regulation No 17 applies only in relation to agreements which have actually been notified and not to agreements of which notification is unnecessary by virtue of Article 4(2)(1) of that regulation. Consequently, even if an agreement is covered by Article 4(2) of Council Regulation No 17, the Commission is entitled to impose fines on the undertakings which applied it, since the agreement had not been notified.

14. In order for an infringement of the competition rules to be regarded as having been committed intentionally, it is not necessary for the undertaking to have been aware that it was transgressing the prohibition laid down by those provisions; it is sufficient that it could not have been unaware that the conduct concerned had the object or effect of restricting competition in the Common Market.

15. The general term "infringement" used in Article 15(2) of Regulation No 17 covers, without distinction, agreements, concerted practices and decisions of associations of undertakings and its use indicates that the upper limits for fines laid down in that provision apply in the same way to agreements and concerted practices as to decisions of associations of undertakings. It follows that the upper limit of 10% of the turnover must be calculated by reference to the turnover achieved by each of the undertakings that are parties to the agreements and concerted practices concerned or by all the members of the associations of undertakings, at least where the internal rules of the association empower it to bind its members. The correctness of this analysis is confirmed by the fact that, in determining the amount of the fines, account may be taken inter alia of such influence as the undertaking may have been able to exercise in the market, in particular by reason of its size and economic power, of which its turnover may give an indication. The influence which an association of undertakings may have had on the market depends not on its own "turnover", which reveals neither its size nor its economic power, but rather on the turnover of its members, which gives an indication of its size and economic power.

Parties

In Case T-29/92,

Vereniging van Samenwerkende Prijsregelende Organisaties in de Bouwnijverheid, an association governed by Netherlands law, established in Amersfoort, Netherlands,

Amsterdamse Aannemers Vereniging, an association governed by Netherlands law, established in Amsterdam, Netherlands,

Algemene Aannemersvereniging voor Waterbouwkundige Werken, an association governed by Netherlands law, established in Utrecht, Netherlands,

Aannemersvereniging van Boorondernemers en Buizenleggers, an association governed by Netherlands law, established in Soest, Netherlands,

Aannemersvereniging Velsen, Beverwijk en Omstreken, an association governed by Netherlands law, established in Velsen, Netherlands,

Aannemers Vereniging Haarlem-Bollenstreek, an association governed by Netherlands law, established in Heemstede, Netherlands,

Aannemersvereniging Veluwe en Zuidelijke Ijsselmeerpolders, an association governed by Netherlands law, established in Apeldoorn, Netherlands,

Combinatie van Aannemers in het Noorden, an association governed by Netherlands law, established in Leeuwarden, Netherlands,

Vereniging Centrale Prijsregeling Kabelwerken, an association governed by Netherlands law, established in Leeuwarden, Netherlands,

Delftse Aannemers Vereniging, an association governed by Netherlands law, established in Rotterdam, Netherlands,

Economisch Nationaal Verbond van Aannemers van Sloopwerken, an association governed by Netherlands law, established in Utrecht, Netherlands,

Aannemersvereniging "Gouda en Omstreken", an association governed by Netherlands law, established in Rotterdam, Netherlands,

Gelderse Aannemers Vereniging inzake Aanbestedingen, an association governed by Netherlands law, established in Arnhem, Netherlands,

Gooise Aannemers Vereniging, an association governed by Netherlands law, established in Huizen, Netherlands,

' s-Gravenhaagse Aannemers Vereniging, an association governed by Netherlands law, established in The Hague, Netherlands,

Leidse Aannemersvereniging, an association governed by Netherlands law, established in Leiden, Netherlands,

Vereniging Markeer Aannemers Combinatie, an association governed by Netherlands law, established in Tilburg, Netherlands,

Nederlandse Aannemers- en Patroonsbond voor de Bouwbedrijven, an association governed by Netherlands law, established in Dordrecht, Netherlands,

Noordhollandse Aannemers Vereniging voor Waterbouwkundige Werken, an association governed by Netherlands law, established in Amsterdam, Netherlands,

Oostnederlandse-Vereniging-Aanbestedings-Regeling, an association governed by Netherlands law, established in Delden, Netherlands,

Provinciale Vereniging van Bouwbedrijven in Groningen en Drenthe, an association governed by Netherlands law, established in Groningen, Netherlands,

Rotterdamse Aannemersvereniging, an association governed by Netherlands law, established in Rotterdam, Netherlands,

Aannemersvereniging "de Rijnstreek", an association governed by Netherlands law, established in Rotterdam, Netherlands,

Stichting Aanbestedingsregeling van de Samenwerkende Bouwbedrijven in Friesland, a foundation governed by Netherlands law, established in Leeuwarden, Netherlands,

Samenwerkende Prijsregelend Vereniging Nijmegen en Omstreken, an association governed by Netherlands law, established in Nijmegen, Netherlands,

Samenwerkende Patroons Verenigingen in de Boouwbedrijven Noor-Holland-Noord, an association governed by Netherlands law, established in Alkmaar, Netherlands,

Utrechtse Aannemers Vereniging, an association governed by Netherlands law, established in Utrecht, Netherlands,

Vereniging Wegenbouw Aannemers Combinatie Nederland, an association governed by Netherlands law, established in Zeist, Netherlands, and

Zuid Nederlandse Aannemers Vereniging, an association governed by Netherlands law, established in Heeze, Netherlands,

represented by Louis H. van Lennep, of the Hague Bar, and Erik H. Pijnacker Hordijk, of the Amsterdam Bar, with an address for service in Luxembourg at the Chambers of Luc Frieden, 6, Avenue Guillaume,

applicants,

v

Commission of the European Communities, represented by Berend J. Drijber, of the Commission' s Legal Service, acting as Agent, assisted by P. Glazener, of the Rotterdam Bar, with an address for service in Luxembourg at the office of Georgios Kremlis, of the Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for a declaration that Commission Decision 92/204/EEC of 5 February 1992 relating to a proceeding pursuant to Article 85 of the EEC Treaty (IV/31.572 and 32.571 ° Building and Construction Industry in the Netherlands (OJ 1992 L 92, p. 1) is non-existent or, alternatively, for a declaration that it is void,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (First Chamber),

composed of: R. Schintgen, President of the Chamber, H. Kirschner, B. Vesterdorf, K. Lenaerts and C.W. Bellamy, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 11 July 1994

gives the following

Judgment

Grounds

The facts

1 As from 1952, a number of associations of contractors came into being in the Netherlands building market, grouped according to sector or region. They drew up rules for their members with a view to organizing competition.

2 In 1963, those associations set up the Vereniging van Samenwerkende Prijsregelende Organisaties in de Bouwnijverheid (hereinafter "the SPO") whose object, according to Article 3 of its statutes, is "to promote and administer orderly competition, to prevent improper conduct in price tendering and to promote the formation of economically justified prices". To that end, the SPO draws up rules and regulations (hereinafter "the rules" or "the rules and regulations") providing for "institutionalized regulation of prices and competition" and is empowered to impose penalties on contractors affiliated to its member organizations if they breach their obligations under those rules. Implementation of the rules is entrusted to eight executive offices, whose operations are controlled by the SPO. The member associations of the SPO at present number 28 and their total membership exceeds 4 000 building undertakings established in the Netherlands.

3 In 1969, most of the sectoral or regional associations acceded to the SPO.

4 In the period from 1973 to 1979, the various associations undertook standardization of their rules (hereinafter "the previous rules").

5 On 3 June 1980, the Erecode voor Ondernemers in het Bouwbedrijf (Code of honour for contractors in the building industry, hereinafter "Code of Honour") was adopted by the General Assembly of the SPO and made binding on all the contractors belonging to the member associations of the SPO. The Code of Honour provides for a uniform system of penalties for infringements of the rules standardized between 1973 and 1979 and certain material provisions necessary for the application of those rules. The Code of Honour entered into force on 1 October 1980.

6 On 16 August 1985 the Commission sent to the SPO under Article 11 of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition, 1959-62, p. 87, hereinafter "Regulation No 17") a request for information concerning the participation of foreign undertakings in the SPO.

7 By Ministerial Decree of 2 June 1986, the Netherlands authorities adopted the Uniform Aanbestedingsreglement (uniform rules on tendering, hereinafter "the UAR") laying down the rules for the award of public contracts, which entered into force on 1 November 1986.

8 On 9 October 1986, the General Assembly of the SPO adopted two (Uniforme Prijsregelende Reglementen (Uniform Price-Regulating Rules, hereinafter "UPR rules") laying down the procedural framework for competition between contractors tendering for building works. The first set of UPR rules concerns invitations to tender under the restricted procedure (hereinafter "the UPRR rules") and the second set concerns invitations to tender under the open procedure (hereinafter "the UPRO rules"). The two sets of rules have the same structure and contain precise and detailed provisions concerning the obligations incumbent on undertakings belonging to the SPO and the operating conditions thereof. The UPR rules are themselves supplemented by four regulations and three annexes. All those rules and regulations entered into force on 1 April 1987.

9 By Royal Decree of 29 December 1986 the Netherlands Government declared those rules non-binding, with the exception of those which fulfilled certain conditions. That decree entered into force on 1 April 1987. The UPR rules fulfilled the conditions laid down by the royal decree.

10 On 15 June 1987 the Commission carried out inspections at the SPO under Article 14 of Regulation No 17. In July and November of the same year it did likewise at the Zuid Nederlandse Aannemers Vereniging (hereinafter "the ZNAV"). The purpose of those inspections was to establish whether the SPO rules were liable to affect trade between Member States.

11 On 13 January 1988 the SPO notified the UPR rules and the Code of Honour to the Commission with a view to obtaining a negative clearance or, in the alternative, an exemption under Article 85(3) of the EEC Treaty (hereinafter "the Treaty").

12 On 23 June 1988 the UPR rules were amended. The amendment entered into force on 1 July 1988.

13 On 13 July 1989, the SPO supplemented its notification of 13 January 1988.

14 On 26 July 1989 the municipality of Rotterdam (Netherlands) complained to the Commission concerning certain parts of the SPO' s rules and regulations.

15 On 7 November 1989 the Commission decided to initiate a procedure against the SPO and sent a statement of objections to it on 5 December 1989.

16 The SPO responded to the statement of objections on 5 April 1990.

17 The administrative hearing provided for by Article 19 of Regulation No 17 was held on 12 June 1990.

18 On 15 March 1991 the SPO entered into discussions with the Commission to examine whether the rules and regulations notified might qualify for an exemption if they were amended. The SPO and the Commission exchanged letters on this matter between 12 April 1991 and 15 January 1992.

19 On 5 February 1992 the Commission adopted the contested decision.

20 On 12 February 1992 a decision dated 5 February 1992 bearing reference number C(92) 66 def. was sent to the applicants. It was notified on 17 February 1992. A passage from that decision was missing and the addresses of various associations of undertakings mentioned in the operative part of the decision were incorrect.

21 On 26 February 1992 a decision dated 5 February 1992 bearing reference number C(92) 66 def. rev. was sent to the applicants (and reached the SPO on 2 March 1992). The text of that decision included the passage missing from the text notified on 17 February 1992 and subsequently added. The errors in the addresses of certain associations of undertakings had also been rectified.

22 In Article 1 of the decision the Commission finds that the statutes of the SPO of 10 December 1963, as subsequently amended, the two sets of UPR rules of 9 October 1986 and the regulations and annexes forming part of them, the previous and similar UPR rules which replaced them and the Code of Honour, except for Article 10 thereof, constituted infringements of Article 85(1) of the Treaty.

23 In Article 2 of its decision, the Commission rejects the application made on 13 January 1988 for an exemption under Article 85(3) of the Treaty in respect of the UPR rules of 9 October 1986 and the Code of Honour.

24 In Article 3(1) and (2) of the decision the Commission requires the SPO and its member organizations to bring to an end immediately the infringements found and to inform the undertakings concerned in writing of the content of the decision and the fact that the infringements have been brought to an end, indicating the practical consequences thereof, such as the freedom of each of such undertakings to withdraw at any time from the said rules and regulations. The SPO and its member organizations were also required to communicate to the Commission, within two months following notification of the decision, the information transmitted to the undertakings in accordance with Article 3(2).

25 In Article 4 of the decision the Commission imposed fines totalling ECU

22 498 000 on the 28 associations concerned.

Procedure

26 By application lodged at the Registry of the Court of First Instance on 13 April 1992 the SPO and 28 member associations of it brought an action under the second paragraph of Article 173 of the Treaty seeking a declaration from the Court that Commission Decision 92/204/EEC of 5 February 1992 relating to a proceeding pursuant to Article 85 of the Treaty (IV/31.572 and IV/31.571 ° Building and Construction Industry in the Netherlands OJ 1992 L 92, p. 1) was non-existent or, alternatively, a declaration that it was void.

27 By a separate document received at the Registry of the Court of First Instance on the same day the applicants also applied under Articles 185 and 186 of the Treaty and Article 105(2) of the Rules of Procedure of the Court of First Instance for interim measures suspending the operation of the contested decision.

28 The parties presented oral argument on 18 June 1992.

29 On 16 July 1992, the President of the Court of First Instance made an order, the operative part of which is as follows:

1. Operation of Article 3 of the Commission decision relating to a proceeding pursuant to Article 85 of the EEC Treaty (IV/31.572 and IV/ 31.571 ° Building and Construction Industry in the Netherlands) is suspended in so far as it concerns elements of the contested rules and regulations that are not linked to the existence of a concerted practice and an exchange of information between contractors, to the granting of preference or the direct passing on to contract awarders of amounts relating to reimbursements for calculation costs and contributions to trade organizations.

2. The applicants shall communicate to the Commission and the Court of First Instance, not later than 1 October 1992, the measures they have taken to make the system function in conformity with this order.

3. For the rest, the application for suspension of operation is dismissed.

4. Costs are reserved.

30 By letter received at the Registry of the Court of First Instance on 14 August 1992 the applicants forwarded to the President of the Court the provisional instructions, applicable since 20 July 1992, which the first applicant had sent to the other applicants in compliance with the order of the President of the Court of First Instance of 16 July 1992.

31 On 27 August 1992 the Netherlands company Dennendael BV sought leave to intervene in support of the defendant pursuant to Article 37 of the Protocol on the Statute (EEC) of the Court of Justice.

32 By order of 12 January 1993 the Court of First Instance granted leave for that company to intervene in support of the defendant.

33 On 21 January 1993 the intervener lodged its statement in intervention.

34 By letter of 17 November 1993 the intervener informed the Court of First Instance that it wished to withdraw its intervention, and the Court took formal note thereof by order of 4 May 1994.

35 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (First Chamber) decided to open the oral procedure without any preparatory inquiry. However, the Court invited the parties to answer certain questions in writing before the hearing.

36 Following the judgment delivered by the Court of Justice on 15 June 1994 in Case 137/92 P Commission v BASF and Others [1994] ECR I-2555, the Court of First Instance, by order of 27 June 1994, called on the Commission to "produce the decision adopted by the Commission at its sitting of 5 February 1992 relating to a procedure pursuant to Article 85 of the EEC Treaty (IV/31.572 and IV/32.571 ° Building and Construction Industry in the Netherlands) authenticated at that time in the language in which it is binding by the signatures of the President and the Executive Secretary pursuant to the first paragraph of Article 12 of the Commission' s Rules of Procedure as in force at that time" and to forward that document to the Court of First Instance "no later than 6 July 1994".

37 Following that order, by letter of 4 July 1994 the Commission lodged a copy of the Commission decision of 5 February 1992 bearing reference number C(92) 66 def. rev. and the signature of the President of the Commission and of its Secretary General, preceded by the words "the present decision was adopted by the Commission at its 1092nd meeting held in Brussels on 5 February 1992. It comprises 92 pages plus annexes". It also lodged certain other documents.

38 The first of those documents is a letter which counsel for one of the applicants sent to the relevant official of the Directorate-General for Competition (DG IV) on 19 February 1992 indicating that in the decision which had been notified to him something was missing between pages 86 and 87. He asked that official to undertake the necessary checks and take the necessary rectifying measures.

39 The second document is a fax, also dated 19 February 1992, which the official in question sent to an official of the Secretariat General of the Commission, asking him to establish "whether the version of the decision adopted by the Commission and notified to its addressees conforms perfectly with the draft and, if necessary, to take the action needed to ensure that the addressees of the decision are formally apprised of the full text thereof".

40 The third document is a letter of 21 February 1992 sent to the relevant official of DG IV by one of the lawyers for the applicants in which he asks the Commission to notify only to SPO the copies of the rectified version of the decision since the addresses of some of its member organizations were incorrect.

41 The fourth document is a letter from the relevant official of DG IV, also dated 21 February 1992, to counsel for the applicants in which he states that, following a telephone conversation with one of them, the Secretary General was considering different methods of (re-)notification with respect to all the organizations to which the decision was addressed (at their rectified addresses, where appropriate).

42 The parties presented oral argument and answered questions put to them by the Court at the hearing on 11 July 1994. During the hearing, a film concerning the rules and regulations at issue in this case was shown at the request of the applicants and their expert was heard.

Forms of order sought

43 The applicants claim that the Court should:

(i) declare that the Commission' s measure entitled "Commission decision of 5 February 1992 relating to a proceeding pursuant to Article 85 of the EEC Treaty (IV/31.572 and IV/32.571 ° Building and Construction Industry in the Netherlands)" is non-existent;

(ii) in the alternative, annul the Commission decision of 5 February 1992 relating to a proceeding pursuant to Article 85 of the EEC Treaty (IV/31.572 and IV/32.571 ° Building and Construction Industry in the Netherlands);

(iii) take any other measures considered necessary by the Court;

(iv) order the Commission to pay the costs, including those relating to the application for interim measures lodged under Articles 185 and 186 of the EEC Treaty.

The Commission contends that the Court should:

(i) dismiss the applicants' claims;

(ii) order the applicants to pay the costs, including those of the application for interim measures.

Pleas in law and arguments of the parties

44 The applicants seek two orders: primarily, they seek a finding that the contested decision is non-existent or, at least, void for infringement of essential procedural requirements; in the alternative, they seek annulment of that decision.

The principal claim

Arguments of the parties

45 The applicants claim, primarily, that by virtue of the case-law of the Court of First Instance the contested decision is non-existent (judgment in Case T-79/89 and others BASF and Others v Commission [1992] ECR II-315) for breach of the principle of inalterability of measures and lack of competence ° a page having been added thereto without the approval of the college of the Commissioners ° and infringement of the rules on languages, since the college of Commissioners did not adopt the decision only in the language in which it was binding. A passage was missing from Decision No C(92) 66 def. of 5 February 1992 which was sent to the applicants on 12 February 1992 and notified to them on 17 February 1992 and the addresses of various associations of undertakings mentioned in the operative part of the decision were incorrect.

46 On 26 February 1992, a decision dated 5 February 1992 bearing reference number C(92) 66 def. rev. was sent to the applicants (and reached the SPO on 2 March 1992). It included the passage missing from the text notified on 17 February 1992 and subsequently added. The errors in the addresses of various associations of undertakings had also been rectified.

47 The applicants also state that the document bearing reference number C(92) 66 def. was first sent to each of the applicants by letter of 12 February 1992 signed by the Secretary General of the Commission and that it had not been notified until about 17 February. The fact that the text of the contested decision was not available on the day after 5 February 1992 confirms, in their view, that the text notified to the applicants was not the same as that which had been submitted to the college of Commissioners. The fact that the revised document was given a new reference (C(92) 66 def. rev.) supports the same conclusion. Moreover, they maintain, the Commission does not deny that document C(92) 66 def. rev. was never submitted as such to the college of Commissioners.

48 Consequently, the applicants call on the Commission to prove, by means of a certified extract from the minutes of the Commission meeting of 5 February 1992, that it in fact met to consider the Dutch version of the contested decision and that it was that text which it adopted.

49 The Commission replies that the applicants have produced no evidence to show that the principle of the inalterability of measures was infringed after the adoption of the decision. In the absence of such evidence, the decision should be regarded as lawful (see the judgment of the Court of First Instance in Case T-10/89 Hoechst v Commission [1992] ECR II-629, paragraph 375).

50 It contends that the decision was sent to the applicants a second time because a page was missing from the text sent on 12 February 1992 and that, in the case of certain applicants, it had been sent to an address which was no longer correct. The disappearance of one page was attributable to a technical defect in the Commission' s internal electronic mail system which arose after adoption of the decision.

51 The Commission also states that the college of Commissioners did have before it, on 5 February 1992, the text of the draft decision in all the Community languages, including Dutch. That draft was adopted at that meeting.

Findings of the Court

52 The Court finds, first, that it follows from paragraph 52 of the judgment of the Court of Justice in Case C-137/92P, Commission v BASF, cited above, that the gravity of the irregularities complained of by the applicants, which concern the procedure for adoption of the Commission decision, is not so clear that the decision must be regarded as legally non-existent.

53 It follows that the applicants' main claim must be rejected in so far as it seeks a finding that the contested decision is non-existent.

54 However, it is necessary to consider, secondly, whether the irregularities complained of by the applicants might, as they claim in the alternative, be such that the contested decision should be annulled for infringement of the principle of inalterability of measures and of the rules on the use of languages.

55 As regards the inalterability of measures, the Court considers that it is apparent from paragraph 59 of the judgment of the Court in Case C-137/92P that only where a measure is challenged on the basis of serious and convincing evidence of breach of the principle of inalterability of Community measures can the Court accede to a request that it order production of a decision, in the language or languages in which it is binding, authenticated by the signatures of the President and the Executive Secretary, in order to verify that the texts notified conform exactly with the text adopted by the college of Commissioners.

56 In the present case, the Court considered, on the basis of the information available to it at that time, that the fact that the text of the decision notified on 17 February 1992 did not correspond to the text notified on 26 February 1992 constituted, at first sight, serious and convincing evidence that the changes made to the first text had not been adopted by the college of Commissioners. It was for that reason that, on 27 June 1994, it ordered production of the decision adopted by the Commission at its meeting of 5 February 1992, authenticated at that time, in the language in which it is binding, by the signatures of the President and the Executive Secretary pursuant to the first paragraph of Article 12 of the Commission' s Rules of Procedure in force at that time.

57 However, the Court finds that the documents produced by the Commission in response to its order of 27 June 1994 confirm that the difference between the first text notified and the second was attributable to a technical defect in the operation of its electronic mail system which caused the loss of a page and that, consequently, the text notified on 26 February 1992 conformed perfectly with the text adopted by the college of Commissioners at its meeting of 5 February 1992. Indeed, counsel for the applicants informed the Commission on 19 February 1992 that "in the SPO decision, there is something missing between pages 86 and 87. I should be grateful if you would look into this and take the measures necessary to rectify matters. If it is discovered that an error found its way into the text, I should be grateful if you would send an amendment to all the addressees". The addressee of that letter, the relevant official of DG IV, sent a memorandum on the same date to the Secretariat General of the Commission asking that the necessary checks be carried out. According to that memorandum, "I have received from your department the text of the abovementioned decision in the Dutch language. In that document, a passage is missing which was definitely included in the draft submitted to the Commission. May I ask you to check whether the text adopted by the Commission and notified to the addressees of the decision conforms exactly with the draft and, if necessary, to take the action needed to ensure that the addressees are formally apprised of the full text of the decision? Please find enclosed as annex I hereto: the cover page of document C(92) 66 def.[...] pages 86 and 87 of that document. Please find enclosed as annex II hereto: pages 85, 86 and 87 of the draft decision in question (version in the Dutch language, as submitted to the Commission): the passage missing from that document, C(92) 66 def., is clearly indicated".

58 In view of that information, of which the Commission' s interpretation has not been challenged by the applicants, the evidence produced by the applicants can no longer be regarded as serious and convincing.

59 It has thus been established that the text of the decision notified to the applicants on 26 February 1992 is in perfect conformity with the text adopted by the college of Commissioners on 5 February 1992.

60 As regards compliance with the rules on the use of languages, the Court considers that it is clear from the letter sent by the DG IV official to the Secretariat General that the draft decision was submitted to the Commission in its Dutch language version, which is also borne out by the fact that, on 5 February 1992, the operative part of the decision was notified by fax to the applicants in the Dutch language.

61 It follows that there can be no question of any infringement of the rules on the use of languages in this case.

62 The Court also notes that, in response to its order of 27 June 1994, the Commission produced the text of the Commission decision of 5 February 1992 bearing reference number C(92) 66. def. rev. and the signatures of the President of the Commission and its Secretary General preceded by the words "the present decision was adopted by the Commission at its 1092nd meeting held in Brussels on 5 February 1992. It comprises 92 pages plus annexes". At the hearing, the applicants objected to the fact that that document does not give the date on which the signatures of the President and the Secretary General were appended. In his covering letter of 4 July 1994 and at the hearing the Agent for the Commission stated that that document was the text of the decision as adopted by the college of Commissioners on 5 February 1992 and as authenticated at that time. In response to a question from the Court, the Agent for the Commission explained that his statement on that point is borne out by the fact that, when the decision was adopted the Commission had already been alerted to the inferences which the Court might draw from the absence of authentication of its measures since, at that time, the hearing had already been held in Joined Cases T-79/89 and others BASF and Others v Commission, and the Court had already ordered production of the text of the decision at issue in that case, authenticated by the signatures of the President and the Executive Secretary pursuant to the first paragraph of Article 12 of the Commission' s Rules of Procedure in force at that time. The Court notes that the applicants did not object to the explanation given by the Agent for the Commission.

63 On the basis of the aforementioned documents and the information supplied by the Agent for the Commission, the Court finds that the document bearing reference number C(92) 66 def. rev. produced by the Commission is the text of the decision as adopted by the college of Commissioners on 5 February 1992 and as authenticated at that time.

64 It follows that the applicants' main claim must be dismissed.

The alternative claim

65 The applicants base their alternative claim on nine grounds of challenge which may be condensed into five pleas in law. The first plea is that Article 85(1) of the Treaty was infringed by the Commission' s having incorrectly defined the relevant market, misapprehended the scope of the rules and regulations at issue and wrongly considered that they appreciably affected trade between Member States. The second plea alleges infringement of Article 85(3) of the Treaty; the Commission (i) failed to take account of the particular characteristics of the building industry in the Netherlands and reversed the burden of proof; (ii) misunderstood the scope of the rules and regulations at issue in relation to the four preconditions for the grant of an exemption, in particular by refusing to take account of the amendments made by the applicants "in the context of the notification"; and (iii) breached the principles of proportionality and subsidiarity by refusing to grant the requested exemption. The third plea alleges infringement of Articles 4(2)(1) and 15(2) of Regulation No 17 in that the Commission imposed a fine even though the infringement had not been established or, at least, was covered by immunity, and wrongly considered that the infringement had been committed deliberately or negligently and imposed an excessive fine. The fourth plea alleges infringement of Article 190 of the Treaty in that the Commission did not give an adequate statement of reasons regarding either infringement of Article 85(1) of the Treaty or rejection of the application for an exemption under Article 85(3) of the Treaty. The fifth plea alleges breach of the applicants' rights of defence.

First plea: infringement of Article 85(1) of the Treaty

First limb: incorrect definition of the relevant market

Arguments of the parties

66 The applicants state that the Court of First Instance has held that appropriate definition of the relevant market is a necessary precondition for any judgment concerning allegedly anti-competitive behaviour (judgment of the Court of First Instance in Joined Cases T-68, 77 and 78/89 SIV and Others v Commission [1992] ECR II-1403). In the present case, they maintain, the Commission failed to define the relevant product market and geographical market.

67 As regards the product market, they state that the eight sectors of the building industry covered by the rules and regulations at issue do not come within a single product market but constitute at least as many ° if not more ° distinct product markets, in so far as the activities covered by them are not interchangeable from the point of view of either supply or demand.

68 The applicants add that, although they took the view in their notification that the Netherlands building market constitutes a sole and single product market, that was in the context of an application for a negative clearance or exemption for the UPR rules which were introduced in 1987 and were for the first time applicable without distinction to the eight product markets concerned. The context of the contested decision is entirely different since it is directed not only against the 1987 UPR rules but also against the previous rules, which differ for each of the sectors of the building industry. Consequently, the Commission should have drawn a distinction according to the product markets concerned, at least to the extent to which it sought to incriminate the rules applicable before 1 April 1987.

69 As regards the geographical market, they observe that the Commission found in paragraph 23 of the decision that there were various relevant geographical markets within the market to which the rules apply. It thus conceded that the scope of the relevant geographical market may vary according to the sector and the nature of the activities concerned. Since the geographical market for smaller-scale works is more limited, the Commission should have found that all the rules fall outside the scope of Article 85 of the Treaty in so far as they relate to such works since they cannot affect trade between Member States (see below, third limb of the plea).

70 As regards the product market, the Commission replies, first, that the relevant market should not be defined by reference to the substitutability of the products concerned but rather on the basis of the activities actually undertaken by the contractors and the scope of the rules. The UPR rules and the Code of Honour apply without distinction to the various sectors mentioned by the applicants, regardless of the nature, extent or location of the works. That approach is fully in conformity with the views put forward by the applicants in the course of the administrative procedure.

71 The Commission also contends that it is inappropriate to distinguish between the rules prior to 1987 and the UPR rules as regards definition of the relevant product market since the previous rules applicable to the various sectors were standardized between 1973 and 1979 under the aegis of the SPO.

72 As regards the geographical market, the Commission replies that the regular fluctuations in demand, the breadth of activities of large and medium-sized undertakings and the fact that even some small undertakings submit tenders on occasion for works to be undertaken outside the region where they are established show that there are no distinct geographical markets within the construction market to which the incriminated regulations apply. It also states that the applicants did not at any stage of the administrative procedure refer to the existence of different geographical markets or supply information enabling their extent to be defined.

Findings of the Court

73 The Court considers that it is necessary, at the outset, to determine the scope of the Commission' s obligation to define the relevant market before finding an infringement of Articles 85 and 86 of the Treaty.

74 The approach to defining the relevant market differs according to whether Article 85 or Article 86 of the Treaty is to be applied. For the purposes of Article 86, the proper definition of the relevant market is a necessary precondition for any judgment as to allegedly anti-competitive behaviour (judgment of the Court of First Instance in Joined Cases T-68/69, T-77/89 and T-78/89 SIV and Others v Commission, cited above, paragraph 159), since, before an abuse of a dominant position is ascertained, it is necessary to establish the existence of a dominant position in a given market, which presupposes that such a market has already been defined. For the purposes of applying Article 85, the reason for defining the relevant market is to determine whether the agreement, the decision by an association of undertakings or the concerted practice at issue is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the Common Market.

75 That is why, for the purposes of Article 85, the applicants' objections to the definition of the market adopted by the Commission cannot be seen in isolation from those concerning the impact on trade between Member States and the impairing of competition. The merits of this approach are confirmed by the fact that, in their application for negative clearance or an exemption, the applicants dealt with the issue of definition of the market only in the part concerning effects on trade between Member States.

76 It is important to note that, in treating the building market in the Netherlands as a whole as the relevant market, the Commission merely followed the approach adopted by the applicants in their notification of the UPR rules with a view to obtaining a negative clearance or an exemption and in their reply to the statement of objections. In the administrative procedure, the applicants never claimed that the eight sectors of the construction industry constituted separate markets for the purposes of the Community competition rules or that distinct geographical markets existed. On the contrary, they stated in their notification (p. 19, paragraph 2.2.1.) that

Naar het oordeel van de SPO dient als de relevante produktmarkt vanuit een macro-perspectief te worden aangemerkt de markt voor het aannemen van bouwwerken. Slechts die produktmarkt lijkt vanuit kartelrechtelijk oogpunt relevant. Dit is een omvangrijke markt. Weliswaar is het in beginsel (wellicht) mogelijk binnen deze markt talloze marktsegmenten te onderscheiden naar gelang de aard en de omvang van de aan te nemen bouwwerken, doch het is twijfelachtig of dergelijke segmenten zouden kunnen worden aangemerkt als afzonderlijke produktmarkten in het licht van het Europees mededingingsrecht. Zowel de aanbodzijde als de vraagzijde van de betrokken markt heeft een dermate diverse samenstelling, dat het in beginsel onmogelijk lijkt bepaalde submarkten te isoleren, waarop bepaalde categorieën aanbesteders en aannemers bij uitsluiting opereren. Een - noodgedwongen - kunstmatige indeling van de bouwmarkt in submarkten is bovendien niet dienstig voor de beoordeling van de onderhavige mededingingsregelingen, aangezien enerzijds de Erecode van toepassing is op bouwwerken van alle categorieën, terwijl het UPR betrekking heeft op alle werken van de categorieën, genoemd onder nr. 2.1.1. .

["According to the SPO, the relevant product market from the macroeconomic point of view is the construction market. Only that product market appears relevant from the point of view of competition law. It is an extensive market. Whilst it may be possible, in principle, to identify within that market innumerable market segments reflecting the nature and size of the constructions to be erected, it is nevertheless doubtful that such segments could be described as separate product markets for the purpose of European competition law. Both supply and demand are so diversified in that market that it would appear, in principle, impossible to isolate submarkets in which only certain categories of contract awarders and contractors operate. A necessarily artificial division of the construction market into submarkets would, moreover, be unhelpful in assessing the competition rules in question, since, first, the Code of Honour applies to all building work and, secondly, the UPR rules cover all works in the categories mentioned in paragraph 2.1.1." (that is to say, all those to which the Commission claims that the UPR rules apply).

77 The Commission properly adopted that definition of the market, since the rules introduced in 1987 apply without distinction to all the eight sectors concerned. In their reply, moreover, the applicants subscribed to that approach regarding the assessment of the UPR rules introduced in 1987.

78 However, they maintain their criticism of the definition of the market as regards the previous rules, asserting that the view adopted by them in the administrative procedure was dictated by the fact that their application for a negative clearance or exemption related to the rules introduced in 1987 whereas the decision also incriminates the previous rules, which were different for each sector.

79 In that connection, it is important to note that, whilst it is true that the considerations set out in the notification related only to the rules introduced in 1987, the statement of objections was directed also against the previous rules. Consequently, the applicants' reply to that statement [see pages 23 to 71 and in particular Title 3: "De relevante markt: de bouwmarkt in Nederland" ("The relevant market: the building market in the Netherlands")], in which they maintained the same view regarding definition of the market, also related to the previous rules.

80 It follows that, in the administrative procedure, the applicants did not consider that a different approach was called for regarding definition of the market in the case of the previous rules.

81 Similarly, the Court considers that the Commission was also right to adopt that definition of the market in relation to the previous rules as well. First, the applicants have not been able to indicate any substantial differences between the previous rules and the rules introduced in 1987 or as between the various sets of previous rules themselves. It must be concluded that the various sets of previous rules applied in the same way to each of the sectors and each of the geographical areas covered by them. Furthermore, the applicants stated at the hearing that all building products were covered throughout the Netherlands by the various sets of previous rules, being covered either by regional rules covering several products, or by rules specific to certain products but extending throughout the territory of the Netherlands.

82 It follows that the Commission was right to adopt the Netherlands building market as the relevant market as regards both the previous rules and the rules introduced in 1987 in order to consider whether they affected trade between the Member States or undermined competition.

83 This limb of the plea must therefore be rejected in so far as it does not overlap with the other two limbs of the plea and must be considered with the latter in all other respects.

Second limb: misapprehension of the content and scope of the contested rules

I ° Overview

Arguments of the parties

84 According to the applicants, it is essential to keep in mind the end purpose of the contested rules when considering their compatibility with Community competition law: to prevent haggling by setting up a binding system under which contractors compete on only one occasion and to improve the transactional structure of the market by attributing to each construction project awarded the design costs to which it gave rise.

85 They claim that the Commission misapplied Article 85(1) of the Treaty by taking the view that the rules seriously infringed that provision. That misapplication derived from the Commission' s purely theoretical and abstract approach to the manner in which competition must be upheld by that provision, a view which is a priori inimical to any regulation of the market.

86 The Commission replies that, for the purposes of Article 85(1) of the Treaty, all that is important is to establish that there is a restriction of competition ° not whether or not a restriction of competition is acceptable. In answering that question, the Commission analysed the economic and legal context of the infringement. It therefore focused its appraisal on the building market and not on a "standardized market operating ideally". It nevertheless refused to concede that restrictive agreements are inevitable in the building market and considers that undistorted competition provides a specific means of attaining the objectives of the Treaty.

Findings of the Court

87 The Court notes that, according to the decision, the system established by the rules introduced in 1987 may be described as follows. Those rules seek to establish a procedure to be observed by the applicants' members where they intend submitting a price tender for a particular project. According to the applicants, that procedure has a twofold purpose: to combat the haggling in which contracting authorities tend to engage and correct imbalances between supply and demand resulting from a lack of openness on the supply side of the market and the high transaction costs incurred in respect of tenders.

88 To that end, the applicants established physical and human infrastructures in order to apply the procedure introduced by the rules. That procedure, which differs somewhat according to whether invitations to tender are open or restricted or whether or not they are simultaneous, comprises several stages between notification to the appropriate SPO office of the intention to submit a price tender for a particular project and conclusion of the contract between the contract awarder and the successful tenderer.

89 Those stages may be summarized as follows: any contractor who is a member of the applicants must notify the relevant SPO office if he intends submitting a price tender for a particular project, so that that office can apply the rules (decision, paragraph 24).

90 If there are several notifications, the office summons the notifying undertakings to a meeting. They must attend, failing which they are penalized. At the meeting, chaired by an official from the office, certain decisions will be taken either by a majority or unanimously (decision, paragraph 25). The first decision is whether to designate an entitled undertaking, which will be one of the contractors participating in the meeting, who will alone be entitled to have dealings with the contract awarder in order to negotiate the content and price of his tender (decision, paragraphs 26 and 39 to 41). If it is decided that an entitled undertaking will be designated, the meeting goes on to determine the data on the basis of which the various price tenders will be compared. Thus, according to the applicants, the meeting decides whether the invitations for price tenders are or can be rendered comparable and, according to the Commission, whether the price tenders of the various contractors are or can be rendered comparable (decision, paragraph 27). If the answer is affirmative, an entitled undertaking may be designated by the meeting. Before designating the entitled undertaking, the meeting decides on which basis price increases will be defined. Those increases, to be borne by the client, are essentially of two kinds: reimbursements for calculation costs and contributions to the operating costs of the trade organizations, including SPO and its offices (decision, paragraphs 31 to 33). Once that decision has been taken, each contractor indicates his tender figure (referred to as a blank figure) and hands it to the chairman (decision, paragraph 28). That figure does not yet include the price increases. At that time, a contractor may ask the meeting to grant him preference, that is to say to designate him as an entitled undertaking provided that he submits a price tender equal to the lowest blank figure (decision, paragraph 30). The chairman then examines the figures and may disclose them to the participants if the meeting so decides (decision, paragraph 28). After examining the others' figures, each contractor may decide to withdraw his tender, subject to the loss of certain rights (decision, paragraph 29). In principle, the contractor who submitted the lowest blank figure is designated as the entitled undertaking (decision, paragraph 39). Each contractor thereupon adds to his blank figure price increases calculated on the basis previously determined by the meeting. Those increases are the same for each contractor and are intended in particular to cover all the calculation costs of all the participants in the meeting. They will be borne by the client if the latter awards the contract to one of the members of the SPO (decision, paragraphs 31 to 33). The successful tenderer to which they are paid will have to transfer them to the office, which will for the most part repay them to the contractors in respect of calculation costs and to the trade organizations in respect of the contributions payable to them (decision, paragraphs 42 to 46). Finally, the differences between the tender prices of the various contractors may be increased or decreased by the meeting (decision, paragraph 38).

91 If the office receives only one notification for a contract, the latter will be regarded as a private contract and only the notifying undertaking will have the status of entitled undertaking, which means that any member undertakings of the applicants consulted subsequently will be able to submit a tender only with its consent or, in the event of a dispute, that of an arbitration committee (decision, paragraphs 41, 52 and 53). However, it is possible that between the notification from the first contractor and award of the contract to him, the client may consult other contractors who are members of the applicants and whose notifications are received after the contract is awarded. In such cases, the successful tenderer is required to pay the office an amount equal to 3% of the price in respect of price increases (decision, paragraph 60).

92 There are also rules laying down a procedure applicable to tenders by subcontractors which essentially incorporate the provisions applicable to other price tenders, adjusting them to the specific requirements of subcontracting (decision, paragraphs 55 to 59).

93 The Court notes that the decision raises essentially four types of objections against the rules drawn up by the applicants. The first concerns the fact that they establish concertation between contractors involving the exchange of information on the cost components of the contract, the characteristics of the tenders and the prices proposed by each contractor. The second group of objections is directed against the fact that, during such concertation, parts of prices are fixed, the prices proposed are sometimes changed and partial prices are also fixed. The third group of objections relates to the fact that following such concertation, one of the contractors ° the entitled undertaking ° enjoys protection from the other participants in the concertation since the latter lose the right to negotiate their tender with the client. The entitled undertaking also enjoys protection from the other members of the applicants in that, if they are subsequently approached, they will be able to submit a tender only with its consent or that of a committee of contractors, and only then if that tender is lower by a specified percentage than that of the entitled undertaking. The fourth group of objections concerns the fact that the rules confer on the members of the applicants advantages in their competition with third parties.

94 The applicants look at those groups of objections from various angles: they either draw attention to the beneficial effects which the rules have on competition and therefore for consumers, or they challenge the factual basis of the objections, or else they reject the legal characterization of the facts as constituting an infringement of Article 85(1) of the Treaty.

95 The Court finds, first, that the Commission was right to consider the applicants' rules as forming a single whole from which the various components cannot be artifically isolated.

96 The beneficial effects of the rules described by the applicants cannot be taken into consideration for the purposes of Article 85(1) of the Treaty but are pertienent only to the application of the criteria laid down by Article 85(3) of the Treaty. It follows that those various arguments must be examined in the context of the second plea in law.

97 Accordingly, as far as the present plea in law is concerned, it is appropriate only to examine the applicants' arguments concerning the correctness of the facts and the assessment of them under Article 85(1) of the Treaty. The Court will therefore consider in turn the arguments relating to concertation between contractors intending to submit a price tender, concerted fixing of prices or parts of prices, limitation of contractors' freedom to negotiate, and the conduct of the SPO towards non-member contractors.

II ° Concertation between contractors intending to submit a price tender

Arguments of the parties

(1) The obligation to notify the intention to submit a price tender (decision, paragraphs 24 and 79)

98 The applicants, which do not challenge the description of this aspect of the regulations contained in paragraph 24 of the decision, claim that the obligation to notify, and the notification itself, do not, as such, have any significance in competition law. They consider, in particular, that the third subparagraph of paragraph 79 of the decision is misconceived in that it criticizes the fact that the office may, on request, disclose to a notifying undertaking the number of undertakings which have lodged a notification.

99 The Commission replies that the obligation to notify must not be examined per se but as an integral part of the rules. It adds that the information obtained from the notifications enables the notifying undertakings to anticipate the intensity of competition and therefore, indirectly, the foreseeable level of the final tender.

(2) The meetings held in accordance with the UPR rules (decision, paragraphs 25 to 58 and 80 to 92).

(a) Agreement on the principle of designating an entitled undertaking (decision, paragraphs 26 and 80).

100 The applicants contest the statement in paragraph 80 of the decision that the number of cases in which the meeting decides to forgo designation of an entitled undertaking is small and contend that their research shows that an entitled undertaking is appointed only in 39% of cases.

101 The Commission replies that paragraph 80 refers to the number of cases in which the meeting forgoes designation of an entitled undertaking a priori, that is to say before ruling on the comparability of the information concerning the tendering procedure, and not to the number of cases in which, without waiving designation in advance, the meeting does not designate an entitled undertaking, in most cases because it has found that the information relating to the tendering procedure is not comparable.

(b) Comparison of the cost elements of the contract (decision, paragraphs 27 and 81). GROUNDS CONTINUED UNDER DOC.NUM : 692A0029.1

102 The applicants maintain that the decision misstates the nature of the information exchanged at the meeting. That information relates solely to particulars provided by the client awarding the contract. It is necessary to exchange such information to check that the invitations to which the participants in the meeting are responding are comparable and thereby to ensure that there is no comparison of blank figures relating to different invitations to tender. As a result, that exchange of information enhances competition, to the greater satisfaction of contract awarders.

103 They also claim that the information must cover certain tendering conditions where the latter are unreasonable, in order to ensure that the contract awarders do not make contractors bear unforeseeable risks. Without such concertation, contractors would individually be confronted with the following dilemma: either to accept unreasonable conditions ° and therefore experience problems in carrying out the works ° or to make their price tender subject to other conditions ° and therefore leave the way open for a competitor to be chosen. Thus, concertation regarding performance times is possible only if the time-limits set by the contract awarder are unrealistic.

104 The applicants add that the exchange of information prompts contractors to formulate price tenders calculated within narrower limits because the risks are more foreseeable, and ultimately the contract awarders benefit from this.

105 They consider that the criticism of the exchange of information concerning the contract awarder' s requirements is not only incorrect as regards the context of such information but also displays confusion between tendering arrangements and an oligopolistic situation, as a result of which the Commission regards any exchange of information concerning a tendering procedure as contrary to the Treaty.

106 In short, the applicants criticize the Commission for considering that any exchange of information between competitors which is liable to reduce uncertainties in an entirely opaque market in itself constitutes a restriction of competition.

107 The Commission replies that the applicants have given a false impression of the content of the information exchanged. It is impossible to check whether the tenders called for are comparable or may be rendered comparable without knowing how the participants in the meeting intend to react to the invitation to tender. Exchange of information thus relates to particular aspects of the works known only to one or other of the participants, who is thus deprived of a competitive advantage. As a result, competition is not enhanced but curtailed. The Commission has produced a number of reports of contractors' meetings in support of its statements.

108 It adds that it is not for contractors to decide together whether certain conditions in invitations to tender, such as completion times or the dimension of foundations, are unreasonable, still less to lay down their own conditions in concertation where they consider it appropriate to do so.

109 The Commission states that the exchange of information occurring at the meeting is just as damaging to competition as that which takes place between competitors in an oligopolistic market.

(c) Handing over of blank figures (decision, paragraphs 28 and 82)

110 The applicants maintain that the handing over of unalterable blank figures to the chairman of the office does not restrict competition but merely brings forward the time at which competition takes place. Delivery of tender prices to the contract awarder is replaced by delivery of blank figures to the independent chairman of the SPO office concerned. The fact that the blank figures may not be altered after they have been delivered ensures that competition is not distorted but is merely brought forward in order to avoid the practice of successive bargaining.

111 For the Commission, it is not the delivery of unalterable blank figures itself which constitutes an infringement but rather the fact that they have been fixed on the basis of information exchanged at the meeting. It adds that the delivery of blank figures forms an integral part of a procedure which substitutes practical cooperation between contractors for the risks of competition, and must be regarded as such.

(d) Possibility of withdrawal after comparison of prices (decision, paragraphs 29, 83 and 84)

112 The applicants maintain that the possibility of withdrawing after prices have been compared not only involves no restriction of competition but in fact reinforces competition in that it enables contractors to calculate their tenders within narrower limits, since they know that, if they make an error which might lead to economically unjustified prices, they will be able to withdraw their tender. That possibility is, moreover, used only where one of the contractors who handed in a blank figure made an error in calculating his tender.

113 They also state that the comparison of prices carried out after the blank figures have been handed in cannot have an anti-competitive effect since the blank figures can no longer be changed. Moreover, the information obtained from that comparison, such as the price variance between the tender of the entitled undertaking and those of its competitors, cannot be exploited by the entitled undertaking in its negotiations with the contract awarder since the blank figures are definitive.

114 The Commission replies that even if ° and that is not the case ° withdrawal is resorted to only in the event of an error leading to an economically unjustified price, it is not for contractors unilaterally to judge whether a price is economically justified and deprive the contract awarder of an advantageous price tender, particularly where those competing contractors make that judgment after exchanging price information.

115 It adds that the entitled undertaking may use the information available to it regarding the prices quoted by other tenderers in its negotiations with the contract awarder since the difference between its price and those of the others represents the margin within which it is protected, the latter being unable to tender a lower price (see below, in relation to protection of the entitled undertaking). In that context, the comparison of prices also restricts competition.

Findings of the Court

116 The Court finds that the concertation starts with the obligation of the applicants' members to notify the relevant SPO office of their intention to submit a price tender. The Court agrees with the Commission that the fact that the relevant office can disclose to those notifying undertakings which so request the number of undertakings which have lodged a notification may be liable to restrict competition since the notifying undertakings are thereby enabled to anticipate the intensity of competition between them and to modify their conduct accordingly, as well as to obtain information not yet available at that stage to undertakings which are not SPO members.

117 The concertation between contractors objected to in the decision starts only if the meeting does not from beginning waive designation of an entitled undertaking. Otherwise, the participants exchange information. There is thus concertation, even if it leads to the conclusion that the price tenders are not and cannot be rendered comparable, so that an entitled undertaking cannot be designated. In response to the applicants' statement that an entitled undertaking is designated in only 39% of cases, it must be observed, first, that at least in such cases the concertation between contractors condemned in the decision can operate fully and, secondly, that in the other cases the applicants have neither claimed nor proved that the meeting decides from the beginning not to designate an entitled undertaking, thereby rendering any further concertation pointless. The applicants have not therefore succeeded in rebutting the statement contained in paragraph 80 of the decision that "the number of cases in which the meeting of firms decides to forgo such designation, thus allowing undistorted competition to operate, is small". That statement relates to the number of cases in which the meeting decides from the start to forgo designation of an entitled undertaking, whereas the applicants' statement relates to the number of cases in which it has not been possible to designate an entitled undertaking, either because such designation has been decided against from the start or because the price tenders were not comparable and could not be rendered comparable.

118 Where the meeting does not forgo designation of an entitled undertaking from the start, it is in the participants' interest to decide on the basis of what technical and economic data they will compare prices, since an entitled undertaking can be designated only on the basis of comparable price tenders. In that connection, the parties differ as to the nature of the information exchanged in order to assess the comparability of price tenders: the applicants maintain that such information relates exclusively to the contract awarder' s invitation to tender and is exchanged solely in order to establish whether all the participants are relying on the same data. They concede, however, that the information exchanged may also concern the stance which should be taken regarding certain conditions imposed by the contract awarder where those conditions are unreasonable. The Commission contends that the exchange of information goes much further and relates to the manner in which the various contractors intend responding to the invitation to tender.

119 The Court finds, first, that concertation by contractors regarding the manner in which they intend responding to an invitation to tender is incompatible with Article 85(1) of the Treaty, even where the invitation sets unreasonable conditions. It is for each contractor to determine independently what he regards as reasonable or unreasonable and to conduct himself accordingly.

120 It must next be observed that, contrary to the applicants' assertions, the information exchanged does not relate solely to the invitation to tender. It is apparent from Articles 1(b) and 6.2 of the UPRO rules and 6.3 of the UPRR rules, read in conjunction, that that information concerns matters other than the invitation to tender. Indeed, Articles 6.2 and 6.3 of the UPR rules provide:

"Before the forms containing the PEs (proposed evaluations for execution of the works) are completed, the meeting shall determine, on the basis of the information relating to the invitation to tender supplied by the contract awarding party and all other information relevant to a comparative and objective examination of prices, the data which must be relied on in entering the PE on the form provided for that purpose. It shall also determine, in accordance with the provisions of the present article, the figures and details to be mentioned in the note containing the PE.",

whilst Article 1(b) provides that the "information relating to the invitation to tender" are to contain

"all documents, including the specifications, drawings, invitation to tender, the form for recording the intention to bid, all similar documents and all instructions or notifications relevant to submission of the tender".

This shows that, the "other information relevant to a comparative and objective examination of prices" includes items which do not appear in the information relating to the invitation to tender. Furthermore, the reports of certain meetings of contractors clearly show that at such meetings they discuss the manner in which they intend formulating their tenders, comparing the characteristics of the works which they intend proposing and therefore matters taken into account in the determination of prices. Thus, at a meeting of 14 March 1988, the participants concluded that the tenders were not comparable because one of the contractors had proposed a round silo and the other a square silo (annex 1 to the rejoinder). Apart from the fact that the contractors compare the technical characteristics of the tenders which they propose submitting, they sometimes compare the various components of each of the price tenders. Thus, the report of meeting 040388 concerning a project at Tilburg (Netherlands) shows that one of the contractors participating in the meeting "wil blanken maar geen inzicht geven in samenstelling prijsaanbieding. Prijsvergelijking daarom niet mogelijk. VH stapt kwaad op. Verliest rechten" ["wishes to submit a blank figure but refuses to disclose the composition of his price tender. Comparison of prices is therefore impossible. VH leaves in great anger. Forfeits his rights"]. The statement that "comparison of prices is therefore impossible" indicates that what the applicants call an examination of the comparability of the data relating to a tendering procedure in fact presupposes that the participants in the meeting are prepared to disclose the breakdown of their price tenders to each other.

121 It follows that the Commission has sufficiently established that, at the meetings held by them under their rules, the contractors exchange information relating in particular to the costs of the product concerned, its specific characteristics and a breakdown of the price tenders, although that is information which an independent operator would keep strictly secret as confidential business information (judgment of the Court of First Instance in Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711, paragraph 217).

122 It should also be noted that at those meetings the participants exchange price information. Articles 6.4 and 7 of the UPR rules allow disclosure of blank figures to all those present at the meeting. Whilst it is true, as pointed out by the applicants, that in principle such exchange of information occurs at a time when those figures can no longer be altered (but see below, paragraph 157), the applicants cannot justify this by stating that the rules merely change the moment at which competition takes place from the time of submission of tenders to the awarding party to the time of delivery of the blank figures to the chairman of the office and that, consequently, the exchange of information on prices occurs after competition has already taken place. As the applicants indicated at the hearing, the delivery of blank figures does not end competition because negotiations remain possible between the client and the entitled undertaking and between the client and undertakings which did not attend the meeting. However, in the context of such negotiations, the entitled undertaking will possess information relating in particular to the specific characteristics of the product and the price at which the participants in the meeting are authorized to submit a tender or are not prepared to submit a tender where they have withdrawn under Article 10 of the UPR rules, thus depriving the client of an advantageous tender of which he might have been able to secure the performance by court order if it had been submitted to him without any concertation between the contractors.

123 It follows that the Commission was right to consider in its decision (paragraph 81) that such concertation between contractors, having in particular the object and effect of revealing to his competitors the course of conduct which each contractor has decided to adopt or contemplates adopting on the market (judgment of the Court of Justice in Case 40/73 Suiker Unie v Commission [1975] ECR 1663, paragraphs 173 and 174; see also the judgment of the Court of First Instance in the judgment of the Court of First Instance of 17 December 1991, cited above, paragraph 260) and may lead to the fixing of certain conditions for the transaction, means that practical cooperation between contractors is deliberately substituted for the risks of competition (judgment in Case 40/73, cited above, paragraph 191), and therefore constitutes an infringement of Article 85(1) of the Treaty.

III ° The concerted fixing of prices or parts of prices

Arguments of the parties

(1) Price increases in cases of simultaneous tenders (decision, paragraphs 31 to 34, 42 to 46, 86, 87 and 96).

124 The applicants maintain, first, that the system of reimbursement of calculation costs has no adverse effect on competition between contractors since when they deliver their blank figures, each of them is in a position to anticipate the amount of the reimbursement which he will receive, because the latter is, in principle, based on the average of the blank figures presented by the undertakings and that average may be anticipated because the blank figures submitted do not differ greatly. The reimbursement could also be anticipated if it were calculated on another basis. In the context of the UPRR rules, each tenderer can do this by applying the reimbursement tables in force (for smaller-scale works), anticipating the tender put in by each contractor whose reimbursement constitutes a percentage (where a blank figure is not given), or by assuming that he himself will bid lowest (where the amount of the reimbursement is fixed by the person who gave the lowest blank figure). The applicants add that the fact that, in the context of the UPRO rules, reimbursements are paid over annually through the calculation fund does not preclude anticipation of the amount of the payments, since each contractor can anticipate the number of points which he may earn if he bids lowest and the value of such points, which hardly varies from one year to the next. Finally, reliance on the value of supplies provided or works done by the contract awarding party or by third parties, for calculation of the reimbursement, likewise does not preclude anticipation of the amounts payable, since that value is known or can be estimated approximately.

125 The applicants state, secondly, that the system of reimbursing calculation costs has the purpose and effect of improving the transactional structure of the market by allowing the transaction costs arising from each project to be allocated to that project.

126 The Commission replies, first, that the system of reimbursing calculation costs is detrimental to competition for the reasons set out in the decision. Contrary to the applicants' assertions, the amount to be reimbursed cannot be anticipated with such precision that the system is neutralized because it depends in all cases on factors which cannot be known with sufficient certainty when the blank figures are handed in. Consequently, all contractors tend simply to include the payments in respect of calculation expenses in their price tender without adjusting the tender. That is why the Netherlands authorities describe the reimbursements as "increases". In any event, even if the payments are regularly anticipated, the system nevertheless continues to constitute direct fixing of part of selling prices within the meaning of Article 85(1) of the Treaty.

127 Secondly, the Commission rejects the view that the system of reimbursing calculation costs enhances the efficiency of the market by limiting transaction costs because contract awarders have no right to obtain disclosure of the reimbursements in respect of calculation expenses applied to them.

(2) Price increases in respect of private contracts (decision, paragraphs 60, 61 and 100)

128 The applicants contest paragraph 61 of the decision, according to which the rules give rise to a general increase of 3% in the prices of private contracts because, if the contract awarder contacts other contractors after receiving the tender from the first tenderer and nevertheless awards the contract to the latter after receiving the tenders asked for subsequently, the first tenderer is required to pay a sum equal to a maximum of 3% of the contract value in respect of the price increases provided for by the rules.

129 They maintain that the Commission has confused an obligation to transfer 3% of the price to the SPO office with the obligation to take that 3% into account in the price tender. Moreover, 3% is a maximum figure which is rarely applied. The Commission also failed to take account of the fact that if contractors exercise their right to waive a priori the rights deriving from the status of entitled undertaking, the 3% does not have to be paid in any circumstances and if the contract awarder actually intends concluding the contract with the first contractor consulted and negotiates on an open-budget or team basis, he will be able to establish whether a provision for risk is included in the price and have it cancelled if he awards the contract without approaching other contractors.

130 The applicants also claim that there are two ways for the contractor first approached to make provision for risk in his price tender without the contract price thereby being increased if it is concluded on a private basis. First, he could reserve the right to increase his price tender by a maximum of 3% in the event of the client seeking other tenders subsequently. Secondly, he could, when submitting his tender, inform the contract awarder that it contains a risk provision which could be removed if the contract awarder did not seek other tenders subsequently. In most cases, they maintain, the contractor does not include any risk provision.

131 They state, finally, that the keen competition between contractors and the position of strength on the demand side means, beyond doubt, that the 3% would ultimately be refunded to contract awarders in the event that the risk was provided against but did not subsequently materialize.

132 The Commission replies, first, that it established that contractors are regularly called on to make payments to the office under the 3% rule.

133 It doubts whether contractors have recourse to the possibilities described by the applicants, so as to take account of the risk deriving from the 3% rule, because contractors may, without exposing themselves to any risk, merely include in their price tender a provision covering that 3%.

134 According to the Commission, a contractor who includes such a provision in his tender suffers no competitive disadvantage because the other contractors approached subsequently must do the same, unless outsiders have been invited to bid, which occurs fairly infrequently.

135 What is important, it concludes, is that in the absence of the 3% rule contractors would not have to account in their price tenders for the risk of ultimately having to pay the 3%.

(3) Increases in subcontract prices (decision, paragraphs 55 to 59 and the third subparagraph of paragraph 100)

136 The applicants state that the fact that the main contractor can be made to bear only the tendering costs incurred by the subcontractors who have submitted a price tender to him ° to the exclusion therefore of the costs incurred by the subcontractors who have submitted price tenders to other main contractors ° in no way conflicts with the general philosophy underlying the rules on tendering costs, in that it results in the allocation to each contract-awarding party of the transaction costs arising in connection with the latter' s invitation to tender. A main contractor cannot be answerable for tendering costs for which he is in no way responsible. Moreover, this system of specific allocation makes it possible to ensure that subcontractors who, in connection with the same contract, have submitted tenders to several main contractors cannot receive double, or even triple, reimbursements.

137 They claim, finally, that the Commission has no grounds for saying that the rules on subcontracting lead to a systematic increase of 3% in price tenders in cases where the main contractor seeks to negotiate a price privately. They refer in that connection to their submissions regarding private contracts.

138 The Commission contends that the system established by the rules on subcontracting is incompatible with the general philosophy of the system of reimbursing tendering costs as described by the applicants. Where subcontracting is resorted to, not all the tendering costs arising in connection with a project are attributed to it since the subcontractors of a main contractor who are unsuccessful receive no reimbursement and are therefore forced to include their tendering costs in their general costs. Consequently, in subsequent tendering procedures, the client has to bear not only the payments in respect of calculation costs but also the general costs arising from non-reimbursement of tendering costs incurred in respect of previous contracts.

139 The Commission adds that the system does in fact lead to an increase of 3% in price tenders, as in the case of private contracts.

Findings of the Court

140 First of all, the Court must again point out that the applicants' arguments concerning improvement of the transactional structure of the market are irrelevant in the context of a plea in law relating to infringement of Article 85(1) of the Treaty: those arguments will be considered in connection with the plea concerning infringement of Article 85(3) of the Treaty.

141 The rules provide for two types of price increases to be added uniformly to the price tenders of the various contractors taking part in the meeting, which will therefore be borne by the party awarding the contract. They are, first, the reimbursement of calculation expenses (decision, paragraphs 32, 33, 86 and 87) and, secondly, the contributions to the operating costs of the trade organizations (decision, paragraphs 34 to 37).

142 The applicants' objections relate essentially to the way in which the Commission analysed the former. The price tenders of the various contractors are increased by the same amount, which is deemed to represent the sum of the calculation costs incurred by all the contractors taking part in the meeting. Those price increases are calculated by reference to the scales for the various sectors annexed to the UPR rules. Those scales, which fix the maximum reimbursements, are applied to the average of the blank figures or the estimated value of the project, as the case may be (for further details, see paragraphs 32 and 33 of the decision, which are not objected to by the applicants). The result of that system is that the contract awarder bears, at a standard rate, all the calculation costs to which his invitation to tender has given rise, including therefore the costs of unsuccessful tenderers. Its aim is to induce contract awarders to consider the benefits and disadvantages of inviting a greater or lesser number of contractors to tender. Those price increases, which are included in the price tender, are received by the successful tenderer, which must repay the bulk of them to the office, which then shares them amongst the various contractors and itself. That repayment occurs contract by contract in the case of the UPRR rules and by calendar year in the case of the UPRO rules. Moreover, this price-increase system has its counterpart in the case of private contracts and subcontract arrangements. In such cases, the contractor approached must forearm himself against the risk that the party awarding the contract or the main contractor may approach other contractors and the risk of having in such circumstances to repay a sum representing 3% of the contract to the office in order to cover the calculation costs of the contractors who are approached subsequently but who are unsuccessful (for further details, see paragraphs 55 to 59 of the decision).

143 The applicants, without challenging the decision' s description of the price-increase system, maintain that it does not restrict competition since contractors participating in a tendering procedure can anticipate the amount of the reimbursement which they will receive in respect of their calculation costs. Thus, because of its flat-rate basis, the system is neutral for competition purposes since, knowing that they will receive a reimbursement exceeding the costs incurred, contractors who carry out their calculations most efficiently can reduce their price tender correspondingly. The Commission replies that the possibilities of anticipating the amounts involved are insufficient to neutralize the system and that, in any event, the joint fixing of such reimbursement constitutes fixing of part of the price.

144 The Court notes that the decision essentially criticizes the system of price increases in three respects. It involves, first, fixing of part of the price; secondly, a non-competition clause regarding calculation costs (decision, third subparagraph of paragraph 86); and, thirdly, the system leads to an increase in price levels for contract awarders which invite a large number of contractors to tender and in respect of private contracts and subcontracts (decision, paragraphs 57, 87 and 100).

145 First, it must be pointed out that the applicants have advanced no argument to show that the joint fixing of price increases uniformly applied to the price tenders of the various contractors does not constitute fixing of a part of the price within the meaning of Article 85(1)(a) of the Treaty. The applicants' arguments concerning the possibility of anticipating the amount of price increases are entirely irrelevant in that respect and relate solely to the question whether the price-increase system has the effect of eliminating competition between contractors regarding their calculation costs, which is a separate issue.

146 It follows that the Commission was right to consider that the joint fixing of price increases constitutes fixing of a part of the price prohibited by Article 85(1)(a) of the Treaty.

147 Secondly, as regards the question whether such fixing of a part of the price results in the elimination of competition between contractors in relation to calculation costs, thereby favouring the least efficient contractors in that respect at the expense of the most efficient, it is ncessary to consider whether, as the applicants claim, the contractors are in a position to anticipate correctly the amount of the reimbursement they will receive in respect of calculation costs and, if so, whether, because of its flat-rate basis, the system is entirely neutral in so far as each contractor can reduce his price tender by an amount equal to the difference between the calculation costs actually incurred and the reimbursement due.

148 On that point it suffices to observe that there is no absolute certainty of being able correctly to anticipate the amount of the reimbursement. Indeed, it is impossible to anticipate the amount with absolute accuracy since the price tender must be calculated at a time when certain parameters essential for such a forecast are still unknown (average of the blank figures, estimated value of the works, lowest price tender).

149 Under the UPRO rules, even minimally accurate forecasts are impossible by reason of the system of paying over compensation annually and the difficulty of predicting the number of points and the value thereof.

150 The case in which the best forecast seems possible is where, under the UPRR rules, the meeting leaves to the contractor who submitted the lowest blank figure the task of defining the price increases. In such cases, each contractor presumes that he will be the lowest bidder and will be able to determine the reimbursement himself. However, in such circumstances, the contractor will have to take account of th