FURTHER OPINION OF MR ADVOCATE GENERAL REISCHL

DELIVERED ON 11 JANUARY 1983 ( 1 )

Mr President,

Members of the Court,

In my Opinion of 16 November 1982 I concluded that the Commission was not competent to adopt its decision of 29 October 1981 relating to a proceeding under Article 86 of the EEC Treaty (TV/29.839 — GVL, Official Journal, L 370 of 28 December 1981, p. 49), the main features of which I explained at length, and that therefore there were already formal grounds for declaring the decision void. I am still of that opinion but as the Court has requested me to consider the merits of the applicant's other complaints as well I will now give my views.

I — The other procedural complaints

1. Infringement of Articles 2 (1) and 4 of Regulation No 99/63/EEC (Official Journal, English Special Edition 1963-1964, p. 47).

The applicant claims that the Commission went beyond the complaint formulated in the notice of objections of 4 September 1980. In its view it did not follow from that notice that the complainants might have been nationals of nonmember countries who were resident within the Community. Since the decision also related to the applicant's conduct towards such persons the applicant's rights of defence under Articles 2 (1) and 4 of Regulation No 99/63 had been restricted.

According to Article 2 (1) of the regulation the Commission “shall inform undertakings and associations of undertakings in writing of the objections raised against them.” According to Article 4 thereof the Commission “shall in its decisions dealing only with those objections raised against undertakings and associations of undertakings in respect of which they have been afforded the opportunity of making known their views.” It is clear from those provisions that, as the Court pointed out in the Fedetab case, ( 2 ) the Commission may take into consideration in its decision only objections of which the undertakings and associations concerned have been given written notice and may do so only after they have been given the opportunity of making known their views on those objections.

However, as the Commission rightly points out, the applicant had this opportunity, since it is stated in very general terms by the Commission in the notice of objections that the Commission was proposing to make a finding that GVL's conduct in refusing to enter into management contracts with foreign artists not resident in the Federal Republic of Germany constituted an infringement of Article 86. Apart from that, reference is consistently made, and only in very general terms, to “foreign artists” (see, for example, paragraphs 27, 30, 49, 51 to 56, 59, 61, 78 and 81 of the notice of objections). Furthermore, paragraph 50 of the notice of objections states that measures “which lead to distinctions on the basis of the Member States and nationality which have the effect of placing operators of other Member States at a disadvantage” (emphasis added) are directed against the creation of a common market. These examples already show that the objections notified to GVL include the conduct on its part which is criticized in the decision. As the applicant was able to express its views on the complaint that it discriminated against foreign artists resident in another Member State but not in Germany, to the advantage of German artists, there was no infringement of the provisions concerning the grant of an appropriate opportunity to be heard.

2. The complaint that the applicant's arguments in reply were not taken into consideration

The applicant also claims that the defendant took no account in its decision of the factors emerging from the preceding administrative procedure and thus infringed the provisions of Regulation No 99/63 on the subject of hearings.

In this respect it should be said, as the Court emphasized, inter alia, in theFEDETAB case that the Commission must, as a matter of principle, take into account the factors emerging from the administrative procedure in order either to abandon such objections as have been shown to be unfounded or to supplement or redraft its arguments both in fact and in law in support of the objections which it maintains. However, as was also stated in the judgment in that case, this does not mean that the Commission is required to discuss all the issues of fact and law which have been raised by every party during the administrative proceedings (see also the Court's judgment in the Continental Can case ( 3 )and in the Consten and Grundig case ( 4 )). A fortiori it can be under no obligation to accept the applicant's arguments as correct. Accordingly this complaint, too, must be rejected.

3. Errors in the finding of the facts

The applicant also criticizes the Commission on the ground that its account of the facts as set out in the decision is either incomplete or incorrect in a number of particulars and thus led to an incorrect legal assessment.

Whether the statement of facts which is challenged, should it in fact be defective, is such as to vitiate the decision, can be decided only in the context of the substantive objection which I propose to examine in the following section.

II — Incorrect application of Article 86 of the EEC Treaty

The applicant requests that the decision be declared void on the ground that the Commission applied Article 86 of the EEC Treaty incorrectly in several respects.

Before I consider this submission in detail I would like to remind the Court once more of the scope of the decision in dispute. It limits itself to a finding that the applicant's refusal, prior to 21 November 1980, to manage the performers' rights of foreign artists who were not resident in Germany was an abuse of a dominant position within the meaning of Article 86 of the EEC Treaty to the extent to which the refusal related to artists who were nationals of a Member State or were resident in such a State. According to the decision the applicant's conduct therefore constituted an abuse within the meaning of Article 86 of the EEC Treaty because those artists, in order to have their secondary exploitation rights managed, were subject to a requirement, which was not imposed on German artists, that they be resident in Germany. It is therefore of little importance whether such artists enjoy such rights either in the Federal Republic of Germany or in their home country, what their general financial situation is or whether reciprocity is guaranteed. To that extent it is also possible to leave open the question whether the statement of facts in the decision relating to those matters is erroneous or inexact, as the applicant thinks, since in the final analysis the decision is not, if my understanding is correct, based on those findings of fact.

1. The applicability of Article 90 (2) of the EEC Treaty

Article 90 (2) of the EEC Treaty provides that undertakings entrusted with the operation of services of general economic interest are only to be subject to the rules contained in that treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The applicant takes the view that it should be regarded as an undertaking to which that provision relates because the German Management Law makes its activities dependent on obtaining official authorization, on the one hand, and subjects them, on the other, to a number of management duties of a public law nature, in particular an obligation to enter into contracts and an obligation to manage the rights in question.

In this connection I am in agreement with the Commission that this reasoning cannot be accepted. In the first place it should be recalled that, as the Court made clear in the BRT II case, ( 5 ) there must be a strict definition of those undertakings which can take advantage of Article 90 (2) because that provision permits derogation from the rules of the Treaty in certain circumstances. The Court did recognize in that case that even private undertakings (and the applicant is such an undertaking) may come under that provision but only if they are “entrusted with the operation of services of general economic interest by an act of the public authority”. The Court found that the Belgian copyright exploitation and management company SABAM did not comply with that condition. Notwithstanding the German Management Law the same must apply, however, on a proper view of the matter, in the applicant's case because the German Law only regulates the authorization to carry on business, the rights and duties of such companies and the question of their official supervision, but does not assign to the exploitation and management companies, which have to be formed in accordance with the provisions of private law, their tasks by an act of a public authority. In addition, and this is not unimportant, the Commission is also right to point out that the applicant is solely concerned with the management of the private interests of the artists and not with the operation of services of general economic interest.

However, even if one were disposed, in the final analysis, to regard this requirement as fulfilled, the competition rules would be inapplicable by virtue of that provision only in so far as the application of those rules would not obstruct the performance, in law or in fact, of the particular tasks assigned to the undertakings in question. In this regard the applicant points out that if the obligation to manage were extended to the artists mentioned in the decision then the performance of the tasks assigned to it would in fact be obstructed because it would be forced to inflate its administrative organization considerably in order, on the one hand, to be able to investigate in each case whether there were in fact any rights capable of exploitation and, on the other hand, when it came to the distribution of royalties, in order to ascertain in each particular case whether the foreign artists were entitled to such rights or not. Since, however, what is involved in this respect is at most an increased administrative burden, it is not possible to say that the company would be obstructed in the performance, in law or in fact, of the tasks assigned to it, by virtue of the application of the rules on competition.

2. The question whether the applicant's articles of association should have been examined in the context of Article 85 of the EEC Treaty before the complaint of abuse pursuant to Article 86 of the Treaty was formulated

At the hearing the applicant expressed doubts whether conduct by its responsible officers in conformity with its articles of association was not a priori prevented from being the subject of the complaint relating to an abuse under Article 86 because the articles of association, which must be regarded as a decision by an association of undertakings, had not been examined in the context of Article 85 of the EEC Treaty.

In my opinion, however, this preliminary question must also be answered in the negative since the Commission, in the final analysis, must be free to take punitive action against an undertaking's abusive market conduct on the basis of Article 86 quite independently of the question, which it has yet to examine in detail, whether such conduct is to be ascribed to a decision of an association of undertakings which is incompatible with Article 85 of the EEC Treaty.

3. The question whether the applicant, as an undertaking within the meaning of Article 86 of the EEC Treaty, has a dominant position

In the final analysis the applicant does not dispute that, in the light of the Court's case-law (see the judgment in the BRT II case ( 6 ) and the judgment of 25 October 1979 in Case 22/79 ( 7 )), it is an undertaking within the meaning of Article 86. On the other hand opinions differ as to whether it has a dominant position. That question depends in its turn on the way in which the specific relevant market is defined.

The applicant would like this market to be defined in a broad sense as extending to transactions between artists and the users of their works, the applicant's activity on the market being only in a “quasi-representative” capacity on behalf of artists. If the market is defined in such broad terms the applicant cannot be said to have a dominant position since the transactions between artists and the users, of their works may be effected in other ways without the need for a management undertaking. Furthermore there can be no question of a dominant position on the market if only because, in general, the artists receive relatively little income from secondary exploitation, in contrast to the position where rights of primary exploitation are managed.

The Commission on the other hand takes the view that the specific relevant market is solely that of the management, for reward, of artists' secondary exploitation rights and not that of transactions between artists and the users of their works. However, within this market for the provision of services, as thus narrowly defined, the applicant is the sole undertaking engaged in the management of rights and therefore occupies a dominant position within that market.

I, too, agree with the Commission that the specific relevant market is solely that of the management for reward of performers' secondary exploitation rights and not that of transactions between artists and the users of their works. In this connection it must however be recognized that the applicant's activity does not consist of the supplying of artists' performances recorded on soundrecording equipment to persons using their works, as was erroneously stated in the decision and that its predominant activity is simply the service it provides the artists in managing their rights of secondary exploitation and enforcing the claims arising therefrom against the users of their works. This error is however of no significance in so far as the Commission also bases its decision in the final analysis on the fact that the relevant market is that of the management of the artists' rights in return for financial reward. But if artists wish to have their rights of secondary exploitation managed in Germany in this manner, they are referred to the services of the applicant because there is no other undertaking in the Federal Republic of Germany concerned with the management of secondary exploitation rights. To that extent the applicant occupies a dominant position in that market. In this connection, contrary to the applicant's view, the amount of the royalties received by the artists by means of the management of their performers' rights is irrelevant when considering the market position of the exploitation and management company.

4. The complaint relating to the abuse of a dominant position in the market

In the Commission's view the applicant was in breach of the prohibition of abuse of a dominant position laid down in the first paragraph of Article 86 of the Treaty by refusing to give foreigners not resident in Germany the opportunity to establish their secondary exploitation rights in a given case and to have them managed. By imposing a condition of residence in Germany on foreigners but not on German nationals it discriminated against the former by reason of their nationality. To this the applicant objects that it did not treat foreigners differently on account of their nationality but simply made distinctions on the basis of the “status of a holder of rights”. While residence is not an absolutely binding criterion for the holding of performers' rights which can be managed in the Federal Republic of Germany, it is nevertheless, according to the applicant, an objective criterion for establishing such rights.

In reality residence in the Federal Republic of Germany is irrelevant to the question whether an artist in fact has rights of secondary exploitation in a given case. On the one hand the creation of such rights is not dependent on residence and on the other it is quite possible that despite residence in Germany the exploitable rights have been disposed of in another way. Thus as regards the management of secondary exploitation rights the only question is whether an artist really does hold the rights which he claims and the burden of proof in relation to this lies on the artist, regardless of his residence. To that extent the residence requirement imposed on foreigners alone constitutes a distinction which is objectively unjustifiable because it is not related to the provision of services and therefore, as correctly stated in the decision, amounts to discrimination on grounds of nationality prohibited by the Treaty.

As the Commission rightly states, discrimination on grounds of nationality as contemplated by the first paragraph of Article 86 is an abuse not only where citizens of the common market are affected by it; the concept of “abuse” contained in that provision in fact covers any conduct of an undertaking occupying a dominant position in the market towards all participants in the market, regardless of their nationality, which is contrary to the principles of the common market and operates to the detriment of the persons concerned inasmuch as it is not based on objective grounds relating to the service provided. The sole decisive factor is that there must be a Community connection inasmuch as the abusive conduct affects trade between Member States. It will be necessary to return to this criterion later.

5. The complaint relating to discrimination as contemplated by subparagraph (c) of the second paragraph of Article 86 of the EEC Treaty

On the basis of its argument that it is merely the artists' representative the applicant maintains that both national and foreign performing artists who are in competition with each other as regards the exercise of their secondary exploitation rights are not trading parties within the meaning of this provision. Since the mere pursuit of pecuniary claims cannot be classified as a trading activity the artists must be classified not as “entrepreneurs” in the economic process but as “consumers” who cannot rely on the protection given by subparagraph (c) of the second paragraph of Article 86 of the EEC Treaty.

In this connection, however, the Commission is, in my opinion, right when it states that for the purposes of the concept “trading parties” within the meaning of this provision the sole point is whether transactions with the dominant undertaking take place or can take place, irrespective of whether or not the trading partners are in competition inter se with regard to such business relations. For the purposes of that provision the transaction between artists and the applicant consists in the fact that the applicant's service, namely the management of rights seen as the provision of services, is rendered only in return for payment in the form of a share, for its administrative services, of the royalties collected. The artists in question must therefore be regarded as the applicant's trading partners even if they are not in competition with each other for the applicant's service, namely the management of their secondary exploitation rights.

However the applicant rightly points out that the specific prohibition of discrimination laid down in subparagraph (c) of the second paragraph of Article 86 of the EEC Treaty comes into operation only where there is a disturbance of competition at the level of the trading partners of the dominant undertaking. But it is not possible to discern, according to the applicant, to what extent the question of the management of secondary exploitation rights can at all adversely affect competition between artists as the result of the exclusion of individual artists from such management. With regard to competition in the field of “artistic services” it is the artistic performance which is decisive and not financial power.

It is necessary, however, to raise against this argument the objection that the competition being referred to must be understood as competition in a very general sense where the trading partners of the dominant undertaking have adirect relationship with their consumers when rendering their service. But artists compete when “marketing” their artistic performance in so far as they must “sell” their performance to the “consumers” in the most remunerative way possible. Whilst it must be agreed in connection with this competition that, as the applicant states, the decisive factor for artistic services may be the performance, yet in the case of those artists who are not very well known financial power is at least not without some significance for their success in the market. An artist who has income derived from the realization of secondary exploitation rights is in principle in a position to offer his services at a more competitive price than the artist who does not have such income. He is as a result in a better competitive position, although it must not be overlooked on the one hand that fees in respect of secondary exploitation rights are in certain cases paid at the same time as those in respect of primary exploitation rights and on the other hand that the loss of income is not particularly great (according to the applicant the average amount of royalties obtained from secondary exploitation is approximately DM 3000).

On the equivalence of the transactions the applicant refers once again to the fact that on the basis of the law on copyright and performers' rights those transactions have different features according to whether the artists are national or foreign. It is therefore necessary to decide the preliminary question whether, and if so, to what extent, such claims exist.

However, as I have already explained, contrary to the applicant's opinion, the performers' rights of foreign artists, in so far as they exist in the Federal Republic of Germany, must be regarded as having a value which is qualitatively the same as those of their German colleagues regardless of the question of residence which is not a factor determining the actual existence of secondary exploitation rights. To that extent it is necessary to verify, in the case of both national and foreign artists without distinction, that they hold such rights.

6. Absence of grounds of justification

In this connection the applicant puts forward a number of alternative arguments which in its view show that there was objective justification for treating the artists in question differently because of the different conditions relating to the acquisition of secondary exploitation rights by national and foreign artists.

With regard to this contention I am able, once again, to restrict myself to the observation, without going into the individual arguments, that the decision, as has already been stated, does not aim to make the general situation of every artist the same as that of his fellow artists. The legal position of foreign artists in the Federal Republic of Germany does not depend on their position abroad, as the Commission has rightly stated. What is of decisive importance is that they should be treated in the same way as national artists with regard to such secondary exploitation rights as they may have — and can prove that they have — in Germany. Since in that respect the residence requirement does not relate to the provision of services that requirement amounts to a fundamental breach of the prohibition of discrimination laid down in Article 86 of the EEC Treaty. Nor, in that regard, can practical difficulties which the applicant undeniably encounters in giving effect to the secondary exploitation rights of foreign artists justify, in the final analysis, a general refusal to enter into management contracts with foreigners not resident in Germany. In particular the duty to manage rights laid down in Paragraph 6 of the Management Law cannot be used as a ground of justification since that obligation does not mean that the secondary exploitation rights of other artists may not be managed. In particular, if, as the applicant thinks, the effect of the inclusion of foreign artists really were to lead to the royalties available having to be distributed amongst a greater number of beneficiaries with the result that the national artists would be prejudiced, this could be avoided by the applicant's reaching agreement for the payment of higher royalties under general contracts concluded with the users of the works.

7. The effect on trade between Member States

As the applicant made clear in the oral procedure it is in agreement with the Commission that the assumption of management duties is the performance of a service and that such performance must also be regarded as “trade”, as defined by the Court in a series of decisions, especially in the Greenwich Film Production case (op.cit.). The applicant however considers that the Commission overlooks the crucial difference between copyright, which is “marketable”, and performers' rights arising from secondary exploitation which are not marketable. It therefore finds it difficult to see how its conduct could have affected the crossfrontier movement of services.

However the Court has already laid down its judgment in the Greenwich Film case the principle that the manner in which a management undertaking carries out its activities may be such as to affect the movement of services and trade between Member States for the purposes of Article 86 of the EEC Treaty. Because the applicant refused, up to 21 November 1980, to enter into management contracts with foreign artists resident in other Member States the possibility cannot be excluded that, as the Commission stated in its decision, artificial obstacles were thereby created in the movement of services between the applicant as the provider of services in Germany and the foreign artists as the recipients of the services in another Member State. In this respect it is immaterial that the applicant limited its activities to the territory of the Federal Republic of Germany since the trading partners in other Member States could not avail themselves of its services anyway.

The Commission considers that this conduct, too, was such as to affect trade to a significant extent since numerous foreign holders of rights thereby encountered an obstacle to the management of those rights.

Like the applicant, I have certain doubts, however, whether this condition of the prohibition of abuse is actually fulfilled. It seems to me that we do not have sufficient material to be able to decide this question. Thus it may certainly be asked, for example, whether the applicant's conduct was such as to affect the pattern of real competition within the common market. In this context it must also be remembered in particular that, according to the information given by the applicant, even after its publicized management practice was changed a total of only 133 artists with the nationality of another Member State sought to have their secondary exploitation rights managed, which corresponds to 0.6 % of the total number of artists on the applicant's books.

III —

Finally, by way of summary, my discussion leads to the conclusion that the Court should dismiss the application only if, contrary to my Opinion of 16 November 1982, it regards the Commission has having the competence to adopt the declaratory decision in question in the specific circumstances of this case and finds, in addition, that the applicant's conduct was capable of affecting trade between Member States to a significant extent.

( 1 ) Translated from the German.

( 2 ) Judgment of 29 October 1980 In Joined Cases 209 to 215 and 218/78 Heinu van Landewyck Sari and Others v Commission of the European Communities [1980] ECR3125.

( 3 ) Judgment of 21 February 1973 in Case 6/72 Europemballage Corporation and Continental Can Company Incorporated v Commission of the European Communities [1973] ECR 215.

( 4 ) Judgment of 13 July 1966. in Joined Cases 56 and 58/64 Établissements Consten Sari and Grundig-Verkaufs-GmbH v Commission oj the European Economic Community [1966] ECR 299.

( 5 ) Judgment of 21 March 1974 in Case 127/73 Beigische Radio en Televisie and Société Belge des Auteurs, Compositeurs et Éditeurs v SV SABAM and NV Fonior [1974] ECR 313.

( 6 ) Judgment of 21 March 1974 in Case 127/73 Belgische Radio en Televisie and Société Belge des Auteurs, Compositeurs et Éditeurs v SV SABAM and NV Fonior [1974] ECR 313.

( 7 ) Greenwich Film Production v Société des Auteurs, Compositeurs et Éditeurs de Musique (SACEM) and Société des Éditions Labrador [1979] ECR 3275.