Opinion of Mr Advocate General Tesauro delivered on 6 February 1997. - French Republic and Société commerciale des potasses et de l'azote (SCPA) and Entreprise minière et chimique (EMC) v Commission of the European Communities. - Community control of concentrations between undertakings - Collective dominant position. - Joined cases C-68/94 and C-30/95.



European Court reports 1998 Page I-01375



Opinion of the Advocate-General

1 Is it possible to apply the provisions of Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (1) (hereinafter `the regulation') to oligopolies? And what, in the light of the provisions of the regulation, are the limits to which the Commission is subject in appraising the lawfulness of concentrations?

Cases C-68/94 and C-30/95 provide the Court with an opportunity to answer those questions, among others, which are undoubtedly relevant for the purposes of applying the regulation. Those actions (one brought by the French Government and the other by the Société Commerciale des Potasses et de l'Azote (hereinafter `SCPA') and the Entreprise Minière et Chimique (hereinafter `EMC')) raise the issue, although from partially different perspectives, of whether Commission Decision 94/449/EC of 14 December 1993 (2) (hereinafter `the decision') is lawful.

2 In that decision, the Commission authorised a joint venture between Kali und Salz AG (hereinafter `K+S') and the Treuhandanstalt (hereinafter `Treuhand') aimed at combining the potash and rock-salt activities of K+S and Mitteldeutsche Kali AG (hereinafter `MdK'). The declaration of compatibility was, however, subject to compliance by those undertakings with certain conditions which consisted essentially in discontinuing their commercial links with SCPA and EMC.

The action brought by SCPA and EMC (Case C-30/95) specifically seeks the annulment of that part of the decision in which it imposes those conditions; the action brought by the French Government (Case C-68/94), on the other hand, also deals with other aspects and therefore has wider implications. Nevertheless, since the objectives of the two actions are only partially different and a number of the pleas and arguments put forward are largely identical, I consider it possible and indeed preferable, subject to the necessary distinctions, to deal with them together.

3 However, before recalling the terms in which the decision is couched and thus examining a dispute which, because of the issues of principle which it raises, may represent an important stage in competition case-law, I consider it appropriate to recall the background to the regulation, its essential features and the procedural framework within which control of concentrations is achieved. It will thus be easier to focus on certain general aspects which will then be referred to when the various issues of admissibility and substance raised by the actions in question are examined.

The regulation: background and content

4 Unlike the ECSC Treaty (Article 66), the EC Treaty does not contain any specific provisions on the subject of concentrations between undertakings. That gap is the result of a specific political determination to encourage the strengthening, even through concentrations, of Community undertakings. The Commission itself, in a memorandum of 1 December 1965, stated that it was, in principle, in favour of concentrations since it considered them expedient for strengthening European industry which was still too weak to compete on the international markets. In the same memorandum, it also made clear its intention to apply Article 86 rather than Article 85 to concentrations. That approach was endorsed by the Court which, in its judgment in the `Continental Can' case, recognised the existence of an abuse within the meaning of Article 86 when an undertaking, already in a dominant position, reinforced that position, for example through a merger, `in such a way that the degree of dominance reached substantially fetters competition'. (3)

However, the application of Article 86 could not represent an entirely satisfactory solution, if only because that provision allows action to be taken only retrospectively, and therefore only in relation to pre-existing dominant positions, whereas a system for controlling concentrations should, above all, prevent any anticompetitive effects. The Commission, therefore, not long after the judgment in the `Continental Can' case, submitted to the Council a first proposal for a regulation to that effect. Moreover, its subsequent practice indicated a willingness to reconsider the application of Article 85 to concentrations, using the mechanism of `prior appraisal'. (4) That trend seemed to be confirmed by the judgment in the `Philip Morris' case, (5) in which the Court accepted that the acquisition by an undertaking of a minority holding in the capital of a competitor undertaking might, in certain circumstances, give rise to a restriction incompatible with Article 85.

5 That judgment fuelled the debate on the subject and gave renewed impetus to the Commission which submitted a further proposal in 1988. It was on the basis of that proposal that the Council adopted the regulation, the final wording of which does not conceal the at times profound disagreements which marked its drafting stage. (6)

Even with the adoption of the regulation, the favourable view of forms of merger which were designed to enable European industry to compete effectively on the international market was not abandoned. Indeed, the preamble to the regulation stresses that concentrations, which are bound to increase as a result of the dismantling of internal frontiers in order to achieve the single market, must be welcomed as being in line with the requirements of dynamic competition and capable of increasing the competitiveness of European industry, improving the conditions of growth and raising the standard of living in the Community. However, the favouring of mergers and industrial reorganisation must not result in lasting damage to competition, so that Community law must be able to act against `concentrations which may significantly impede effective competition in the common market or in a substantial part of it' (fifth recital).

6 The regulation is based primarily on Article 87 since it contains detailed rules for the application of Articles 85 and 86. However, since, as also stated in the sixth recital, `Articles 85 and 86 are not ... sufficient to control all operations which may prove to be incompatible with the system of undistorted competition envisaged in the Treaty', it also has Article 235 as a legal basis.

Concentrations are defined in Article 3(1) by recourse to a very broad concept which, in addition to mergers, also covers situations in which the parties concerned may retain their legal, and even economic, autonomy. (7) The primary characteristic of a concentration, apart from cases of merger in the technical sense, is the acquisition of control, defined by Article 3(3) as the `possibility of exercising decisive influence on an undertaking' by `ownership or the right to use all or part of the assets of an undertaking' or by `rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking'. Operations falling within the scope of Article 3 are covered by the regulation only if they have a `Community dimension'. (8) Other cases of concentration fall within the jurisdiction of the national authorities.

7 Article 2(1) requires the Commission to take into account, with a view to establishing whether the concentration in question is compatible with the common market, `the need to maintain and develop effective competition within the common market in view of, among other things, the structure of all the markets concerned and the actual or potential competition from undertakings located either within or outwith the Community'; and a series of factors used to ascertain the actual market power of the undertakings involved. (9) The list contained in the provision leaves a wide discretion to the Commission, partly because it does not place the various factors to be taken into consideration in any order of priority. It is also significant that the regulation raises no presumptions of unlawfulness connected with the market shares held by the undertakings and no mathematical criteria that can be used for the appraisal, in contrast to other antitrust legislation. (10)

Article 2(2) and (3) provide that the appraisal of compatibility carried out on the basis of the aforementioned criteria is to depend, in the final analysis, on whether the concentration in question creates or strengthens a dominant position `as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it'. (11)

8 The control procedure is divided into two stages. During the first stage, which begins with notification (12) and lasts one month, the Commission examines whether the concentration raises serious doubts as to its compatibility with the common market. (13) If that is not the case, or if the concentration does not fall within the scope of the regulation, the procedure ends at the first stage with the Commission's decision (Article 6(1)(a) and (b) of the regulation). In the absence of a decision, the concentration is deemed compatible with the common market (Article 10(6)).

Where, on the other hand, the concentration raises serious doubts and the Commission therefore decides to initiate formal proceedings (Article 6(1)(c) of the regulation), the decision must be taken within four months, otherwise the concentration is deemed compatible. The (final) decision may declare the concentration compatible with the common market, subject, if necessary, to compliance with certain conditions and obligations (Article 8(2)); or declare it incompatible. In the latter case, where the concentration has already been implemented, the Commission may require any action that may be appropriate in order to restore conditions of effective competition (Article 8(4)).

The procedure and the decision

9 On 14 July 1993, in accordance with Article 4(1) of the regulation, the Commission received notification of a proposed concentration between the German company K+S, a subsidiary of the chemicals group BASF, and MdK, a company in which all the potash and rock-salt extraction and processing activities of the former German Democratic Republic (GDR) are combined, whose sole shareholder is the Treuhand, an institution incorporated under public law whose task is to restructure the former GDR's State-owned enterprises.

It is appropriate at this point to make clear that, at the time of notifying the proposed concentration, K+S was by far the largest European producer of potash, with an output of more than 2 000 000 tonnes per year, followed by MdK with 1 430 000 tonnes per year. In total, therefore, German potash production in the year immediately preceding the concentration (1992) reached a level of 3 500 000 tonnes. In third place, with an output of around 1 000 000 tonnes per year, was Mines de Potasse d'Alsace (hereinafter `MPA'), owned by the French public corporation EMC which, moreover, holds 100% of the capital of SCPA, the company which markets the products in question. They were followed, with outputs below one million tonnes per year, by three Spanish undertakings, recently grouped together in a State-owned corporation known as INI, which market their own products through the same company, Coposa; and, finally, by the British company Cleveland Potash Limited (hereinafter `CPL').

10 Under the concentration plan, all the potash and rock-salt extraction and processing activities of K+S and MdK were to be transferred to Mitteldeutsche Kali AG GmbH (hereinafter `MdK GmbH'), a joint venture between K+S and the Treuhandt. K+S would have contributed to the joint venture all its own activities in the sector concerned, while the Treuhand would have contributed liquid capital of over DM 1 milliard. K+S was to hold 51% and the Treuhand 49% of the capital and voting rights.

After examining the proposal, the Commission decided, on 16 August 1993, in pursuance of Article 6(1)(c) of the regulation, to initiate formal proceedings since the concentration raised serious doubts as to its compatibility with the common market. The Commission therefore adopted, on 14 December 1993, the decision authorising the concentration, (14) making it subject, however, in pursuance of Article 8(2) of the regulation, to compliance with certain commitments.

11 The relevant product market, as identified in the decision, mainly concerns potash products for agricultural use. (15) Those products are mineral fertilisers which are either used on their own or applied to the soil together with other nutrients, particularly nitrogen and phosphate, in so-called compound fertilisers. In both uses, potash cannot be replaced by other nutrients. In the Commission's opinion, whatever their content (differing quantities of potash), form (standard or granulated) or intended use (agriculture or industry for the production of compound fertilisers), those products are, objectively, largely interchangeable as far as the customer is concerned, so that they can be considered together. (16)

The Commission also identified a second relevant market, distinct from that for potash products, which includes all magnesium products and, moreover, found that in that sector only K+S and MdK are really active on the Community market as a whole. (17) However, while reaching the conclusion that, following the merger, those companies would enjoy a monopoly in the Community as far as magnesium sulphate and kieserite were concerned, and that the merged company being formed would therefore have a dominant position on that special market, with a share of 92%, (18) the Commission did not draw any consequences from it.

12 With regard to potash products for agricultural use, on the other hand, on which the decision is focused almost entirely, the Commission drew a distinction between two relevant geographical markets: Germany and the rest of the Community. (19)

With regard to the German market, the Commission found that the concentration in question would have strengthened the dominant position of K+S, leading to a de facto monopoly. (20) Noting the insolvency of MdK which would be forced out of the market if it were not taken over by another undertaking soon, with the consequence that its share would in any case accrue to K+S, the Commission concluded that a dominant position would be created even in the event of the proposed concentration being prohibited. (21)

In those circumstances, the Commission found itself able to accept the parties' arguments based on application of the failing company theory under which the competent authorities cannot prohibit a concentration if one of the undertakings concerned is on the verge of bankruptcy. In the light of the situation which would arise in eastern Germany as a consequence of the closure of MdK, that conclusion must, according to the Commission, be regarded as consistent with the requirement of strengthening the Community's economic and social cohesion referred to in recital 13 in the preamble to the regulation. (22)

13 So far as the market consisting of all the Member States apart from Germany is concerned, the Commission pointed out that, as a result of the proposed concentration, two undertakings, K+S/MdK and SCPA, would be in a dominant position. (23)

The Commission's appraisal is based, on the one hand, on the consideration that supply outside the two main producers is fragmented and comes from operators who are not in a position to have any impact on the market shares held by the duopoly; (24) and, on the other, on the assumption that there will be no effective competition between K+S and SCPA because of the characteristics of the relevant market, the record of the past behaviour of the two companies and their close commercial links. (25) Those links consist essentially of: (a) cooperation in the export cartel Kali-Export GmbH, a company constituted under Austrian law and based in Vienna, which coordinates its members' sales of potash products in countries outside the Community (the members of that cartel, each with a 25% interest, are: K+S, MdK, SCPA and Coposa); (b) control of a joint venture in Canada, Potascan, of which K+S and EMC/SCPA each have 50% of the shares, and (c) long-established supply links by virtue of which SCPA distributes K+S products in France.

14 In the light of the above, the Commission took the view that the concentration would lead to the creation of a collective dominant position on the Community market apart from Germany, which could significantly affect competition. In order to avoid the negative consequences stemming from that conclusion, the parties agreed to enter into certain commitments which are set out in paragraph 63 of the decision and reproduced verbatim below:

`- Kali-Export GmbH, Vienna

K+S and the joint venture will withdraw without delay from Kali-Export GmbH in Vienna [...].

In the same way K+S and the joint venture will terminate the existing agency contract with Kali-Export GmbH in accordance with the termination arrangements provided for therein. After that date, the joint venture will enter into competition with Kali-Export GmbH via its own distribution organisation.

- Distribution

K+S and the joint venture will establish in the Community their own distribution organisation - where not already in existence - and will distribute their products through this distribution network in accordance with normal commercial practice. A distribution organisation will be established in France for potash products, including potash specialities. This will cover the whole of the French market and its nature and size will be commensurate with the importance of the French market. Its establishment will conform to the principle of economic efficiency.

The current cooperation with SCPA as distribution partner in the French market will be terminated. It will be possible, on the one hand, for SCPA to fulfil contracts already agreed with its own customers and, on the other hand, for the joint venture to build up its own distribution organisation. The sale to SCPA on normal market conditions is allowed.'

15 Noting the Commission's concerns about the negative effects of the concentration on the conditions of competition within the Community, K+S also undertook, as stated in paragraph 65 of the decision, `to adapt until 30 June 1994 the structure of Potacan in such a way as to enable each partner to market the potash obtained from Potacan independently of each other on the Community market'.

In that connection, however, it is made clear in paragraph 67 that `the Commission has decided not to impose a formal obligation based on the commitment regarding Potacan. It has taken note of this commitment and it will proceed on the assumption that K+S will use its best efforts to reach, in agreement with EMC/SCPA, an arrangement which will meet the abovementioned requirements'. Taking account of the fact that EMC/SCPA is not a party to the merger proceedings and that, moreover, K+S and EMC have notified the Potacan joint venture to the Commission under the provisions of Council Regulation No 17/62, the Commission adds that, in the event that `K+S is not able to reach an agreement with EMC, despite K+S's best efforts, an appropriate solution of the competition problems arising from the current form of the Potacan joint venture is to be found in the proceedings under Regulation No 17/62'.

16 Taking the view that the commitments in question would result in the severing of the existing links between K+S and SCPA/EMC, the Commission therefore adopted a decision declaring the concentration compatible, which provides in Article 1 that: `Subject to full compliance with the conditions and obligations contained in the parties' commitments vis-à-vis the Commission, set out in paragraph 63 of this decision, the proposed concentration between Kali und Salz AG, Mitteldeutsche Kali AG and Treuhandanstalt is declared compatible with the common market'.

The two actions: terms of the problem and level of submissions

17 As stated earlier, the decision has been challenged both by the French Government (Case C-68/94 (26)) and by SCPA and EMC (Case C-30/95 (27)). The latter parties seek the partial annulment of Article 1 in so far as it makes the declaration of the concentration's compatibility subject to the conditions and obligations set out in paragraph 63. Those companies also seek the annulment of that part of the decision in which it accepts the commitment (referred to in paragraph 65) entered into by K+S to modify the structure of Potacan by 30 June 1994.

Those companies have put forward six pleas in support of their action: by the first two, they claim that the conditions referred to in paragraph 63 have no connection with the maintenance of effective competition on the Community market; by the third, they complain that the Commission accepted the commitment concerning Potacan in breach of their rights; by the fourth and fifth, they claim that the Commission committed errors of fact and law, both in defining a geographical market comprising the Member States apart from Germany and in its assessment that an alleged collective dominant position existed on that market; finally, they allege that the provisions of the regulation do not apply to a collective dominant position.

18 It is important here to recall that, when the case was still pending before the Court of First Instance, (28) SCPA and EMC lodged an application for suspension of the operation of the contested decision in that it required K+S to sell its shares and/or to withdraw from Kali-Export and to terminate the contractual distribution relations binding it to SCPA, as well as an application for an order suspending the proceedings initiated by the Commission under Regulation No 17 in relation to the Potacan case.

After first making a provisional order, (29) the President of the Court of First Instance, by an order of 15 June, (30) upheld the companies' application in part, suspending the operation of Article 1 of the decision, in so far as it requires K+S and the joint venture to withdraw from Kali-Export.

19 Unlike SCPA and EMC, the French Government seeks the annulment of the whole of the decision (Case C-68/94). It asserts that the Commission failed to respect the principle of close and constant liaison with the authorities of the Member States, as laid down by the regulation; that it made errors in its appraisal of the effects of the concentration on the German market, in particular as regards the application of the failing company theory to this case, and that it also made an incorrect appraisal of the concentration on the Community market apart from Germany.

By this latter plea, which is in turn subdivided into several limbs, the French Government contests: (a) the definition of the relevant geographical market comprising the Member States apart from Germany; (b) the applicability of the merger regulation to collective dominant positions; (c) the misapplication in this case of the concept of collective dominant position; (d) the imposition of conditions and obligations on persons who are not parties to the concentration.

20 Clearly, with regard to the alleged errors in the appraisal of the concentration on the Community market apart from Germany, the arguments of SCPA and EMC are almost completely coterminous with those put forward by the French Government. As I have already stated, that makes it possible to consider the substance of the two actions together, drawing attention, where necessary, to the different arguments submitted.

Before examining the pleas put forward by the parties in detail, however, I consider it appropriate to make a few brief observations of a general nature with the intention of bringing to light, beyond the considerable interests at stake, the implications of these proceedings in principle.

21 I shall begin by noting that, in principle, given the nature of competition, the rules thereon leave a large degree of autonomy to the administrative authority, which is responsible for assessing the specific aspects of any particular case in order to reach the most appropriate decisions. Similarly, it is common ground that the task of the Community judicature in this field requires some latitude in assessing the economic value of the rules. (31)

Those remarks are all the more valid with regard to concentrations, the control of which, being necessarily preventive in character, requires an inherently discretionary appraisal on the part of the authority whose task it is to interpret and apply the regulation. Indeed, in all antitrust systems, even those endowed with forms of control based on structural data (market share held by the undertakings concerned and presumptions raised by it), there is a tendency to formulate judgments based also on qualitative factors and which take account of the specific features of each individual case. (32) However, the application of `qualitative' criteria must not become an unpredictable practice which would undeniably have the direct consequence of considerably reducing the scope for a review of legality. (33) Such review, moreover, appears all the more necessary if it is borne in mind that the twofold nature of the Commission's functions - a power of inquiry and investigation, coupled with a decision-making power - should impose on it an even stricter obligation to respect the right to a fair hearing. (34)

22 I make those observations precisely because the specific issues arising in these proceedings raise for the Court's consideration a general question concerning the limits of the Commission's discretion (35) and the consequential powers of the judicial authorities to act.

The Court should therefore assess extremely carefully what might be described as the `systematic' consequences which its decision may have, first and foremost as regards legal certainty, equal treatment and guarantees for the rights of third parties, but then also as regards its implications for future practice in the control of concentrations. I consider it appropriate to point out that judicial review is essential when laying down rules on concentrations, even in systems where, unlike ours, there is already a predetermined assessment criterion to guide the administrative authorities in their task, rendering their practice clear and predictable. (36)

23 In my Opinion I shall examine the objections of inadmissibility raised by the Commission with regard to the actions brought by the French companies (Case C-30/95) and relating to: (A) the possibility of partially annulling the decision, as sought by those companies; (B) their right to bring proceedings; (C) the possibility of contesting that part of the decision containing the commitment entered into by K+S to adapt the structure of Potacan (paragraph 65); and finally (D) the applicants' legal interest in bringing proceedings.

I shall then examine the substance of both cases. I shall deal first with the two pleas put forward by the French Government alone, namely, failure to observe the principle of close and constant liaison with the authorities of the Member States, which is required of the Commission pursuant to Article 19 of the regulation (A), and the justification for the Commission's appraisal of the effects of the concentration on the German market (B). Next, I shall examine the pleas put forward in both actions with regard to the appraisal of the effects of the concentration on the Community market apart from Germany (C). In this context, I shall deal first with the aspects inherent in the definition of the relevant geographical market (1), then with the possibility of using the provisions of the regulation in order to take action in relation to collective dominant positions (2), and with their applicability to this case (3), also in the light of the criteria developed by the Commission in its previous decisions. Finally, I shall consider the question whether it is lawful to impose conditions on persons who are not parties to the concentration (D).

I - Admissibility (Case C-30/95)

24 It is necessary first to establish the basis of the objections of inadmissibility raised by the Commission with regard to the French companies' action.

A - Partial annulment

25 The first objection concerns the application for partial annulment of the decision. The Commission maintains that, by removing the prerequisites for declaring the concentration compatible with the common market, the annulment of one or all of the conditions would inevitably oblige it to revoke the whole of the contested decision.

The applicants, on the contrary, assert that the conditions at issue could be separated from the rest of the decision and that their annulment would have no effect other than to render the decision unconditional. Moreover, since Article 8(5) of the regulation, which authorises the Commission to revoke its decision in the event of failure to comply with a commitment entered into by the parties, (37) is not applicable in this case, the situation feared by the Commission could in no way arise.

26 I am of the opinion that that objection must be examined together with the substance of the action. Only in that way will it be possible to establish whether annulment of the conditions could indeed affect the rest of the decision, rendering its complete annulment necessary.

In theory, moreover, it would certainly be possible to `split' the decision, as the applicants argue, also in the light of Article 10(5) of the regulation, which expressly contemplates the possibility of partial annulment. To that end, it should be established whether the conditions to which Community case-law makes exercise of the power of partial annulment subject are met. As the Court stated in its judgment in the `Flat Glass' case, (38) it is necessary `to determine whether the scope of the operative part of the decision, read in the light of the grounds of the decision, can be limited ratione materiae, ratione personae or ratione temporis in such a way that its effects are restricted but its substance remains unaltered'. In the course of that examination, it should be ascertained whether, as the Court has stated, `a partial annulment is therefore possible and is justified by the fact that, taken as whole, the decision is favourable to the interests of the undertakings concerned'. (39)

27 As already noted, the imposition of conditions to which compatibility of the concentration is made subject depends on whether, in the Commission's view, the concentration would lead, on the Community market outside Germany, to the creation of a duopoly that could impede competition, which only compliance with such conditions would prevent. In order to annul the decision in part, therefore, it would be necessary to show that that view was unfounded, that is to say, since the concentration would not have the effect which the Commission supposed, that there was no need, in order to declare the concentration compatible, to impose such conditions.

That confirms that the objection can only be examined together with the substance. It should, however, be emphasised at this point that a possible partial annulment could, at most, involve the application of Article 10(5) of the regulation, (40) that is, reopening of the time-limits and a new examination by the Commission.

B - Right to bring proceedings

28 The Commission further maintains that the contested decision is not of direct and individual concern to the applicants. Similar arguments have been put forward by K+S and MdK, who consider themselves to be the sole addressees of the conditions imposed by the decision.

This objection seems to me to be manifestly unfounded. Since the French companies are contesting a decision which is not formally addressed to them, it should be ascertained whether the decision is of direct and individual concern to them, as required by Article 173 of the Treaty. I would point out that the contested decision is undoubtedly of direct concern to the applicants, since the harm allegedly suffered by the French companies is attributable to that decision.

29 With regard to the requirement that the decision must be of individual concern, it should be pointed out that, as the Court has consistently held, `persons other than those to whom a decision is addressed may claim to be individually concerned within the meaning of the second paragraph of Article 173 only if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of these factors distinguishes them individually just as in the case of the person addressed'. (41) In this case, it is obvious that the applicants' circumstances distinguish them clearly from all other persons.

First, it is significant that the applicants were heard during the pre-litigation procedure. It is clear from the consistent case-law of both the Court of Justice and the Court of First Instance on the right of third parties to bring proceedings in the matter of competition, anti-dumping and aid that persons on whom a regulation or the Treaty itself confers the right to take part in administrative procedures are entitled to institute proceedings `in order to protect their legitimate interests'. (42)

30 Secondly, in assessing the competitive situation on one of the two markets identified as relevant and the effects of the concentration, the Commission mainly and specifically took into account the position of EMC/SCPA as part of a duopoly with K+S. (43)

31 Thirdly, all the conditions imposed on the undertakings involved in the concentration in order for it to be declared compatible affect directly and almost exclusively the interests of the applicants and could seriously jeopardise their position on the market. (44) It is obvious that, in making the adoption of a decision concerning one person conditional upon the modification or even discontinuance of contractual relations or a partnership with a third person, the activities of both persons and not only those of the former are significantly affected.

32 Here also, the Commission's arguments cannot prevail. SCPA cannot properly be denied the right to bring proceedings on the ground that the decision was also of concern to the other company in the Kali-Export export cartel, the Spanish company Coposa.

First, SCPA is also directly and specifically concerned by the other conditions laid down in the decision, which, however, do not affect anyone else; and that is sufficient to differentiate its position from that of any other person, by the same token identifying it as that of an addressee of the measure. Secondly, it would not be possible to prevent a person who was indisputably (and individually) affected by a decision from bringing proceedings in order to protect his interests, merely because another person was in a similar position.

33 To accept the argument criticised here would be to risk undermining the right to judicial protection. Moreover, that argument does not seem to me to be supported by a correct interpretation of the case-law on the fourth paragraph of Article 173 of the Treaty. There is in fact no basis, except that of an excessively restrictive reading, (45) for assuming that the condition of being `directly and individually concerned' must be peculiar to only one person and that it may not apply to several persons who can be precisely and specifically identified as being immediately concerned by the measure. Indeed, in order for the right to bring an action to arise, that condition, namely, that the position of the person concerned must be specifically and distinctively differentiated from that of any other person, must be met, and in this case that differentiation cannot seriously be called into question.

34 I note, moreover, that there is again a causal link in this case, inasmuch as the position of the applicants was specifically taken into account, to the extent of having had a decisive influence on the institution's decision and having constituted the fundamental reason for the contested part of the measure. (46) In other words, the facts of the case show that the position of the applicant companies is differentiated, and not by coincidence.

35 Finally, the Commission's reference to the judgment in the Zunis Holding case (47) does not appear to be relevant. According to the defendant institution, from the point of view of the right to bring proceedings, the mere fact of being a shareholder in a company involved in a concentration is not sufficient to differentiate a person's circumstances in the same way as those of the addressee of a decision are differentiated.

I note first that the principles set forth in the judgment in the Zunis Holding case were applicable to the applicant undertakings which were shareholders in the companies directly involved in the concentration, and therefore in a completely different position from that of EMC and SCPA in this case. Moreover, in the aforementioned judgment, the Court did not by any means state that ownership of a parcel of shares is insufficient to differentiate the position of a person within the meaning of Article 173, as the Commission maintains, but merely pointed out that, for that purpose, the possible effect of a measure on the relations existing between a company's shareholders is not sufficient, but that, on the contrary, there must be specific circumstances present enabling the position of one of them to be regarded as `directly and individually concerned'. And among those circumstances, even on the basis of a reading between the lines of the judgment cited above, it would not be unreasonable to include the specific size of the holding. (48)

36 Those observations are applicable both to SCPA and to EMC. Moreover, the latter is also identified by the Commission as the addressee of the condition relating to Kali-Export. Indeed, despite the fact that only SCPA has an interest in the company in question, the decision concerns EMC and SCPA jointly, and they are therefore treated, rightly or wrongly, as a single business entity. (49) Consequently, the Commission's attempt to separate the position of EMC from that of SCPA in order to debar the former from bringing proceedings appears arbitrary at the very least, even apart from the fact that EMC has complained that it suffered damage `independently' of SCPA, particularly as a consequence of the dissolution of the export cartel. That dissolution deprives it of its sales network for non-Community countries, thus preventing it from achieving `major' exports.

It is hardly necessary to add that all the foregoing considerations dealing with the objection of inadmissibility relating to the conditions under which a person is entitled to bring proceedings against a measure also serve to refute the arguments of the intervening companies, which are based primarily on the applicants' lack of entitlement to bring proceedings.

C - Possibility of contesting the paragraph relating to Potacan

37 In its final objection, the Commission takes the view that the part of the decision concerning the structure of Potacan is not the proper subject of an action for annulment since it is not capable of producing binding legal effects of such a kind as to affect the applicants' interests.

I would point out first of all that, under the Court's case-law, in order to establish whether proceedings may be instituted against a measure under Article 173 of the Treaty, it is necessary to take account of its substance and to determine whether it is intended to produce binding legal effects of such a kind as to affect the applicant's interests by clearly altering its legal position. (50)

38 However, it is certainly unusual that the Commission, having initiated a procedure specifically for the purpose of ascertaining the compatibility of Potacan with the common market on the basis of Article 85 of the Treaty, should already contemplate, or rather suggest, a solution in the present context, encouraging one of the undertakings involved in the concentration to `use its best efforts to reach, in agreement with EMC/SCPA, an arrangement which will meet the abovementioned requirements', namely, the requirements specified by the Commission itself with regard to the adaptation of Potacan's structure. That can only raise serious doubts about the correctness of such an approach which obviously leads to a confusion of procedures that, although different in terms of their subject-matter and the parties, ultimately influence each other.

That said, it must nevertheless be acknowledged that the part of the measure at issue here does not seem to meet the requirements laid down by Article 173 for a measure to form the subject of an action against it; more specifically, it is not of such a kind as to produce binding legal effects vis-à-vis the applicant companies.

39 In the part of the decision at issue here, the Commission has merely `taken note' of a commitment entered into by K+S, albeit one expressly suggested by the Commission, to resolve the Potacan question in agreement with EMC. Moreover, no obligation is placed on the latter to initiate negotiations, still less to agree to the proposals put forward by K+S. As noted above, the part of the decision in question could, at most, produce an effect of some kind, albeit indirect, on the proceedings initiated pursuant to Regulation No 17; (51) however, even if they actually arose, those consequences would not have any relevance for the purpose of assessing whether or not the measure which is the subject-matter of these proceedings may be the subject of an action.

Nor, it seems to me, is it relevant in this case to cite the solution adopted in the `Woodpulp' case, (52) in which the Court held that, for the purpose of assessing whether it could be the subject of an action, an undertaking given by the applicants must be treated in the same way as directions requiring an infringement to be brought to an end, as provided for by Article 3 of Regulation No 17. Even disregarding the differences between the two cases, I note that the assumption on which that solution was based, namely, that the applicants merely assented to a decision which the Commission could have adopted unilaterally, does not apply in this case.

40 Consequently, I suggest that the objection raised by the Commission and the intervening companies should be upheld and that, as regards the point which I have just examined, the action brought by the French companies should be declared inadmissible.

D - No legal interest in bringing proceedings

41 Finally, the intervening companies have objected that the French companies' action is also inadmissible on the ground that there is no legal interest in bringing proceedings since they have already complied fully with the commitments to which the conditions in the decision relate.

I note first of all that, from a procedural point of view, the objection is inadmissible since there is no reference to it in the arguments raised by the Commission. That objection has, in any event, been overcome by the principle laid down by the Court, under which, in accordance with Article 176, even if it proves impossible to comply with the obligation imposed by that provision, `the application for annulment still constitutes an interest as the basis for possible proceedings for damages'. (53)

II - Substance

42 With regard to the substance of the case, I shall first examine the pleas put forward only by the French Government, which therefore relate to Case C-68/94. More specifically, I shall begin by assessing the merits of the argument alleging breach of the obligation to act in liaison with the national authorities (A), then turn to the complaints concerning the appraisal of the concentration on the German market (B). Finally, I shall consider the aspects connected with the alleged errors in the appraisal of the concentration on the Community market apart from Germany (C), including the question of the lawfulness of imposing conditions and obligations which affect third parties not involved in the concentration (D), aspects raised in both actions and therefore to be dealt with together as regards the arguments common to both.

A - Failure to comply with the obligation to act in liaison with the national authorities (Case C-68/94)

43 By this plea, the French Government complains that the Commission failed, in several respects, to observe the principle, enshrined in Article 19 of the regulation, of close and constant liaison with the national authorities of the Member States. In particular, it asserts that the data relating to the breakdown of the sales of the various operators in each Member State and, in the case of SCPA, to the distinction between the sales of its own products and those of products of other undertakings, data which it regards as essential for the purpose of assessing in full knowledge of the facts both the objections raised by the Commission against the notifying parties and the draft decision, were transmitted to the Member States only at the meeting of the Advisory Committee on 3 December 1993. Indeed, the French Government's repeated requests to that effect received only a partial response, by telephone, on 5 November 1993. Finally, it asserts that the inaccuracy of the data relating to SCPA's sales in Belgium and Luxembourg, as transmitted by the Commission to the Advisory Committee, prevented the representatives of the Member States from properly appraising the concentration. (54)

The Commission points out, first of all, that the principle of close and constant liaison with the Member States, laid down in Article 19(1) and (2) of the regulation, does not constitute a general and absolute principle, but must be reconciled both with compliance with the particularly short time-limits prescribed for initiating proceedings (Article 10 of the regulation) and with respect for the confidentiality of business information, relied on in this case specifically in connection with the sales effected in individual countries. Second, it is for the Commission, in application of the regulation, to decide which documents are the most important for transmission to the authorities of the Member States. At all events, in this case, both the authorities of the Member States and the Advisory Committee were, according to the Commission, in possession of all the information necessary in order to make a balanced appraisal of the impact on competition of the proposed concentration. Finally, the incorrect figure to which the French Government has drawn attention and which is manifestly no more than a serious typing error could not in any event be regarded as capable of invalidating the Advisory Committee's analysis.

44 It is appropriate to point out in the first place that Article 19 of the regulation requires the Commission to transmit `to the competent authorities of the Member States copies of notifications within three working days and, as soon as possible, copies of the most important documents lodged with or issued by the Commission pursuant to this regulation' (Article 19(1)). In addition, it requires the Commission to carry out the procedures set out `in close and constant liaison with the competent authorities of the Member States, which may express their views upon those procedures' (Article 19(2)). That article also provides, as far as is relevant here, for representatives of the national authorities to participate in a special advisory committee set up to deliver an opinion on the basis of `a summary of the case, together with an indication of the most important documents and a preliminary draft of the decision' (Article 19(5)).

However, it is common ground in this case that the Commission transmitted to the parties concerned, in sufficient time, as required by Article 19(1), both the objections addressed to the notifying parties (14 October 1993) and the draft decision relating to the concentration (26 November 1993), which, among other things, contained the data relating to the shares held by the operators of the sector on the Community market; in addition, on 5 November 1993, certain data relating to the sales volumes of individual operators in each Member State were transmitted to the French Government at its request, albeit by telephone. It is also common ground that the data requested by the French Government were transmitted to all the Member States only during the Advisory Committee meeting on 3 December 1993 and that one of the details, that relating to SCPA's sales in Belgium and Luxembourg, was incorrect.

45 Accordingly, it must be established whether, as the applicant government maintains, the belated transmission of the data relating to the volume of potash sales, combined with the inaccuracy of one of the details, constitutes a breach of the Commission's obligation to act in liaison with the national authorities.

Let me begin by pointing out that the belated transmission of those data cannot be justified in this case, either in the interests of confidentiality said to have been relied on by the undertakings involved in the concentration, since in that case those data should not have been transmitted, even belatedly, (55) or by a general reference to the discretion which the Commission enjoys in deciding which are the most important documents within the meaning of Article 19(1) of the regulation. It is true that transmission within the time-limit is not an end in itself, but is necessary in order to ensure the proper conduct of the procedure. From this point of view, the important thing is to determine whether the data in question were essential for the purpose of appraising the anticompetitive effects of the concentration and whether their belated transmission was such as to distort the procedure.

46 I admit to harbouring some doubts as to the fact that the data relating to the volume and breakdown of sales of the various operators in the sector, while admittedly important in order to obtain a complete picture of the effects of the concentration, are to be included among the most important documents within the meaning of Article 19(1) of the regulation. I am of the opinion that there is some basis for arguing, as the Commission does, that the data relating to the market shares held by each operator, which were contained in the draft decision, were sufficient in order to appraise the proposed concentration in full knowledge of the facts.

In any event, in view of the particularly short time-limit within which the Commission's decision must be adopted, as well as of the fact that those data were transmitted to the French Government by telephone as early as 5 November, I am of the opinion that the Commission cannot be accused of having failed, with regard to the French Government, to comply with its obligations under Article 19(1) and (2) of the regulation. Furthermore, the belated transmission of the information in question cannot in itself be considered such as to cast doubt on the validity of the decision since it is, on the contrary, necessary to that end for the alleged irregularity to involve an infringement of essential procedural requirements. I would point out in this connection that, as the Court has consistently held, `for ... an infringement of the right to be heard to result in an annulment it must ... be established that, had it not been for that irregularity, the outcome of the procedure might have been different'. (56) However, in this case, the applicant government has not by any means shown that the Commission's decision would have been different had it not been for the alleged breach of the obligation to act in constant liaison with the national authorities; it merely states that such a possibility could not be ruled out.

47 There remains to consider the fact, as the French Government also points out, that the Advisory Committee only received all the relevant data, including the incorrect figure, during the meeting on 5 December, that is, on the day when it was required to deliver its opinion. However, Article 19(5) of the regulation requires the draft decision and all the most important documents to be sent to the Advisory Committee at the time when it is convened, that is, at least 14 days before the meeting at which the opinion is delivered. (57)

The complaint in question, which, as the Commission has pointed out, really concerns the procedures for convening and consulting the Advisory Committee, does not seem capable of having substantial effects on the contested decision. First, the fact that the Advisory Committee, which was composed of experts from the sector, did not raise any objection in this regard should not be underestimated. Second, the applicant government has by no means shown that transmission of the data in question within the time-limit and absence of error in respect of a particular detail would have led the Advisory Committee to adopt a different opinion, still less that the Commission's final decision would have been different. (58) On the contrary, the arguments put forward by the Commission in this regard, and which have remained undisputed, would seem to rule out that possibility.

B - Effects of the concentration on the German market (Case C-68/94)

48 The French Government puts forward two pleas relating to the appraisal of the concentration on the German market: on the one hand, it accuses the Commission of, in this case, misapplying the so-called failing company theory, according to which the acquisition of an undertaking which is bankrupt (or verging on bankruptcy) must, subject to certain conditions, be authorised since it would not give rise to competition problems; on the other hand, it complains that the Commission did not make authorisation of the concentration subject to any conditions relating to the market in question, even though this led to the creation of an outright monopoly (98%) for the joint venture on that market.

49 With regard to the first complaint, I would first point out that American antitrust legislation allows the possibility, although within strict limits in order to prevent abuses, of authorising the acquisition of an undertaking which is insolvent, provided that the undertakings which are parties to the concentration can show, in the same way as in a test of proportionality, that: (a) the undertaking acquired will fail to meet its financial obligations in the near future; (b) it is unable to reorganise successfully under Chapter 11 of the Bankruptcy Act; (c) there are no alternative solutions to concentration which are less anticompetitive; and (d) the `failing' undertaking would withdraw from the market if the concentration were not implemented. (59)

As the Commission expressly points out in its decision, it did not apply the theory in question unreservedly, but made its own appraisal. In particular, while basing itself on that theory, it relied on the following three criteria: (1) MdK would have withdrawn from the market had it not been taken over by another company; (2) K+S would in any case have absorbed MdK's share after the latter's withdrawal from the market; (3) no alternatives were available that were less anticompetitive.

50 In substance, the French Government disputes the Commission's decision to apply a theory developed in and for another system, modifying some of its criteria. In particular, it asserts that the Commission took no account whatsoever of criteria (a) and (b) of the American theory; that it arbitrarily introduced the criterion of the absorption of market shares; and finally, that it has not sufficiently shown that MdK would in any case have been forced to withdraw from the market or that no other alternatives were available.

While acknowledging, moreover, that it is appropriate, in the appraisal of a concentration, to take into consideration the objective of economic and social cohesion referred to in Articles J.2 and J.3 of the Treaty, and also recalled in recital 13 in the preamble to the regulation, (60) the French Government maintains that that should not in any event result in the negation of the primary purpose of the control of concentrations, which is to protect competition.

51 However, the criteria, as laid down by the regulation and in the light of which the compatibility of concentrations with the common market must be appraised, are undoubtedly characterised by a rigorously economic approach which is therefore based mainly on considerations relating to the protection of competition. (61) Nevertheless, as the French Government has acknowledged, recital 13 also undoubtedly reveals the significant attention paid to the requirements of economic and social cohesion, so justifying the account taken of objectives regarded as equally fundamental by the Treaty, provided of course that the protection of competition is not jeopardised.

It is clear, moreover, that the fact the Commission was guided by a theory developed in another system, although partly modifying the criteria for its application, cannot be regarded as a ground for annulment of the decision. What is important here is that the theory in question should not be contrary to the regulation, that the analysis relating to it in the decision should not be flawed and that, in short, the criteria adopted should have been properly applied.

52 As is clear from the decision, the Commission took the view that a line of argument based on the failing company theory can in fact be taken into account `pursuant to Article 2(2) of the merger regulation, as far as the causality of a concentration for the creation or strengthening of a dominant position is concerned'. (62)

On that view, the contested introduction of the criterion by which it must be ascertained whether the acquiring undertaking would in any case obtain the market share of the undertaking acquired is specifically intended to show that the strengthening of the dominant position would be inevitable in that it would take place even if the concentration were prohibited.

53 I note first of all that the impermeability of the German market, which has been established, and the fact, also pointed out in the decision, that K+S was in a position to increase its production without any increase in costs and to become the sole supplier on the German market, lead inevitably to the conclusion that MdK's market share would, in the event of its withdrawal from the market, have accrued to K+S; that, moreover, is not seriously contested even by the French Government.

What the French Government contests is, rather, the application of that criterion, on the ground that an undertaking which was already in a dominant position would thus be enabled to strengthen its position, solely by reason of the probability that it would in any case, in the near future, ultimately acquire the market share of the other undertaking operating on the market, which would be taking things too far and would be contrary to the objective of protecting competition. That assertion, while irrefutable in itself, nevertheless overlooks the fact that the criterion in question assumes the fulfilment of two other criteria: that the undertaking in question is in any event bound to withdraw from the market and that there are no alternative, less anticompetitive methods of acquisition.

54 With regard to the latter two criteria, however, the French Government maintains, as I have stated, that they were not correctly applied in this case. In particular, as far as the probable withdrawal of MdK from the market is concerned, it asserts that the Commission has by no means shown that it would be impossible to keep MdK alive as a public undertaking by, for example, granting aid compatible with Articles 92 and 93 of the Treaty.

That argument cannot be accepted. It is true that the Treuhand, the public institution whose task is to privatise the former GDR's enterprises and the owner of MdK, holds 49% of the share capital in the undertaking created as a result of the concentration and that, as a consequence, the Treuhand (and therefore the State) has given and will be giving that undertaking substantial aid. It is also true, however, that the Commission's analysis is based on the following circumstances: (a) MdK's considerable losses cannot be permanently subsidised by the Treuhand from public funds, in so far as such a solution would in any event be incompatible with the provisions of the Treaty relating to State aid; (b) the costs of any restructuring would in any case be greater than the aid provided for by the concentration; (c) the statement by the Treuhand, in the context of privatisations already embarked upon, that it will close down all MdK's operations if it cannot find a private undertaking prepared to take them over. It was therefore in the light of the particular circumstances of this case (privatisation of a State-owned enterprise which cannot be regarded as viable according to the normal criteria for valuing companies) that the Commission considered that it had sufficient evidence to show that MdK was bound to withdraw from the market in the medium term.

55 Finally, I am of the opinion that the Commission's analysis must also be endorsed from the point of view of the absence of other, less anticompetitive solutions. It is common ground, as the privatisation procedure documents forwarded by the Treuhand to the Commission clearly show, that all the undertakings which had expressed an interest in acquiring MdK had subsequently abandoned their interest. Moreover, the Commission conducted a further investigation and, in particular, informed the undertakings concerned of the exact amount of aid from which the concentration would have benefited and which would therefore also have been granted in the event of purchase by a private undertaking. Despite that, no undertaking declared itself willing to purchase MdK.

Under those circumstances, it seems to me that the conclusion which the Commission reached can be endorsed. However, the fact that the Commission did not consider as a possible alternative the offer submitted by the Peine group, after the conclusion of the agreement on the merger contract, to purchase the Bischofferode mine, that is to say, one of MdK's four operational mines, remains to be examined. This was because Bischofferode apparently does not constitute a significant part of MdK, and also for reasons connected with the employment factor.

56 The latter aspect, which, moreover, eventually assumed considerable importance in the application of the `failing company defence' theory in the United States as well, (63) is in my view decisive, particularly in the light of the requirements of economic and social cohesion to which I have referred on a number of occasions.

The specific nature of the framework within which concentrations must be viewed, which inevitably includes issues of industrial policy, as well as the objectives of strengthening economic and social cohesion referred to in Articles 2 and 130b of the Treaty, may very well justify appropriate account being taken of employment and, in general, social aspects in the appraisal of concentrations. That is true at least in cases such as this, where there are considerable differences, specifically in terms of potential employment, between the various solutions. (64)

57 I would point out, moreover, that, in two recent judgments, even though their context and purpose were different in that they were more specifically concerned with the right to bring proceedings granted to the trade union representatives of the employees of the undertakings involved in the concentration, the Court of First Instance itself has held that, in applying the regulation, the attention given to the protection of competition may certainly be reconciled, in the context of the assessment of a concentration's compatibility, with appropriate consideration of its social consequences from the point of view of Article 2 of the Treaty. To that end, the Commission may, according to the Court, ascertain whether the concentration is liable to affect the position of the employees of the undertakings in question, `such as to affect the level or conditions of employment in the Community or a substantial part of it'. (65) The Court did not fail to refer, in those judgments, to recital 13 in the preamble to the regulation, cited above.

Finally, it is significant that in this case the protection of employment is set in a wider context characterised by the need to overcome the structural deficiencies of eastern Germany, where MdK is established. Even from that point of view, therefore, the decision is certainly consistent with the objective of economic and social cohesion referred to in recital 13.

58 The French Government's second complaint, which is closely connected with that just considered, relates, as I have stated, to the fact that the Commission did not attach any conditions and/or obligations to authorisation of the concentration as far as the German market is concerned, despite the fact that it gives rise to a monopoly on that market (98% of the market). In particular, the Commission should, in the French Government's opinion, have made the compatibility assessment conditional upon a specific commitment by the undertakings to leave the German market open to competition, on the model of the Nestlé/Perrier decision. (66)

In reply, the Commission states that the Nestlé/Perrier decision is not at all relevant, since in this case the opening up of the market to competition does not depend on the structure of that market, as it did in that case, but on buyer behaviour, and therefore on demand and not on supply. It notes, moreover, that the French Government has not specified what commitments might be imposed on K+S and MdK in order to `open up the market to competition'.

59 However, it is undoubtedly true that, as the French Government claims, it is not its task to propose solutions in this connection, since that is a matter for the Commission as the institution responsible for applying the antitrust rules. Nevertheless, the absence of suggestions on its part merely indicates the difficulty of finding conditions to attach to the concentration on the German market, which could open it up to competition.

It is sufficient to observe in this connection that, even assuming that, in order to open up the German market to competition, despite the special features noted by the Commission, it was still necessary to influence its structure, the fact remains that a solution such as that adopted in the Nestlé/Perrier case was not practicable. Indeed, as I have stated, no alternative methods of acquisition were available in this case. Accordingly, I do not consider that the Commission's appraisals can be refuted by the applicant government's objections.

60 In conclusion, even taking account of the foregoing considerations concerning the particular socio-economic features of this case, I suggest that the Court should dismiss the plea in question and that the Commission's appraisal of the effects of the concentration on the German market should be approved as a whole.

C - Effects of the concentration on the Community market apart from Germany (Cases C-68/94 and C-30/95)

61 Both the French Government (Case C-68/94) and SCPA and EMC (Case C-30/95) challenge the decision's appraisal of the concentration in relation to the second relevant geographical market, namely that comprising all the Member States apart from Germany. Indeed, the applicants' complaints concern the very definition of that market, the possibility of applying the regulation to collective dominant positions, the misuse, in this case, of the concept of collective dominant position and, finally, the imposition of conditions and obligations on persons who are not parties to the concentration.

It is appropriate to make clear that, since the arguments put forward by SCPA and EMC are for the most part included among those relied on by the French Government (which has, moreover, presented them more fully and in greater detail), I shall refer below, in particular, to the latter's arguments. Of course, I shall not omit to draw attention to the specific features of each of the actions in question.

1. Definition of the relevant geographical market

62 The applicant government and undertakings argue that insufficient reasons are given for identifying the Community (apart from Germany) as the second geographical market relevant for the purpose of appraising the concentration and that such identification is based on an incorrect and, in any case, partial analysis of the factors to be taken into consideration. In particular, the French Government observes that the criteria used by the Commission for defining the geographical market at issue here should, if they were consistent with those usually employed when applying the regulation, have led it to deny the existence of a single market consisting of the other Member States of the Community. That market, it maintains, is a very heterogeneous one, for several reasons.

In reply, the Commission asserts that it legitimately and correctly defined the Community as a whole, apart from Germany, as a distinct geographical market, a definition which it adopted by reference to this specific case, and in particular to the nature and characteristics of the product in question. That is why, according to the Commission, it is hardly relevant to refer to the criteria used in other cases.

63 I shall begin by noting that the definition of the relevant geographical market, a necessary and prior condition for any analysis of allegedly anticompetitive conduct, assumes even greater importance where, as in this case, it is sought to demonstrate the existence of a dominant position. (67)

Although the Commission undeniably enjoys a wide discretion on this question, it is clear that it is in any event for the Community judicature to verify the accuracy and validity of the analysis made in the decision and on which the finding of a collective dominant position on the Community market apart from Germany is based. (68)

64 It should be pointed out that the regulation does not give any clear guidance on the definition of the relevant geographical market, and only Article 9(7) deals with the criteria necessary for assessing whether there is a distinct market within a Member State and therefore whether the conditions are fulfilled for the Commission to refer the examination of the notified concentration to the competent authorities of that State. Those criteria are repeated in Section 5 of form CO: (69) `The relevant geographic market comprises the area in which the undertakings concerned are involved in the supply of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because, in particular, conditions of competition are appreciably different in those areas. Factors relevant to the assessment of the relevant geographic market include the nature and characteristics of the products or services concerned, the existence of entry barriers or consumer preferences, appreciable differences of the undertakings' market shares between neighbouring areas or substantial price differences.'

Among the factors to be taken into consideration, according to the requirements of form CO, there is therefore no order of importance which would allow any one of them to be regarded as predominant or at any rate more significant than the others. Consequently, while the Commission's claim that the criteria applied in earlier decisions are to be regarded as irrelevant in this case cannot be accepted, they must be regarded as constituting only one frame of reference, since the validity and consistency of the Commission's decisions must be assessed by reference to the particular context within which each specific case is set.

65 That being so, I now turn to the various arguments put forward. First, in the applicants' opinion, the Commission regarded as homogeneous a market comprising countries with no domestic production (Belgium, the Netherlands, Denmark and Greece), producer countries in which production is structurally higher than consumption (Spain and the United Kingdom) and others in which consumption is structurally higher than production (France). Furthermore, the purchasing strategies of the importing Member States are substantially different, so that almost all intra-Community trade consists of flows in one direction only and not of reciprocal movements which normally characterise a genuinely homogeneous market.

According to the French Government, the Commission therefore lumped together totally different situations, whereas it could have established some degree of homogeneity only with regard to the non-producer countries. In its view, further proof of the lack of homogeneity of the market in question derives from the examination of the market shares held by the suppliers, which vary considerably from one country to another, as well as from the concentration of supply. Even the analysis of the characteristics of demand confirms, according to the applicant government, the non-existence in this case of a geographical market comprising all the Member States apart from Germany. In its view, the Commission's assessment concerning the interchangeability of the products is incorrect since the choice of potash products depends on the geological nature of the soil, the size of the agricultural area, consumer habits and agricultural policies, as well as on the presence of potash industries within the country. (70)

66 The Commission counters this by stating that the inclusion of producer and non-producer countries in the same market in no way implies an incorrect definition of the relevant geographical market, just as the presence of only one producer in a Member State is by no means decisive. Moreover, the existence of trade flows in only one direction does not preclude homogeneity of the market concerned, with which, according to economic theory, it is perfectly compatible. According to the Commission, it is not possible to come to a different conclusion on the basis of the different purchasing strategies employed by the importing Member States, still less on the basis of the different market shares held in the individual countries by the main operators, which is not a decisive factor in the definition of the relevant market since it may be due, for example, to pre-existing trade barriers or firmly established consumer habits.

With regard to the characteristics of demand for the products in question, the Commission considers that it took them sufficiently into account and found, on the one hand, a high degree of interchangeability, since in no country except Germany do users have a clear preference for local products and, on the other, that all Community potash producers had the capacity to produce the different types of potash. Consequently, unlike other cases in which it had found consumer preferences for well-known brands (71) or for domestic products (72) or extremely weak demand in a newly developing market, (73) in this case there is no evidence that the structure of demand points to the existence of distinct national markets.

67 Second, according to the applicants, the analysis of transport costs and prices within the reference market, as carried out by the Commission, is not at all reliable. As far as transport costs are concerned, the Commission did not actually conduct an analysis but merely stated apodictically that transport costs are not an obstacle to trade flows.

The survey of potash prices within the Community, is equally inadequate: the Commission failed to undertake, as it should have done, a comparative analysis of the prices charged by the various operators in each Member State. In order to demonstrate the absence of substantial differences in price levels between the various countries concerned, it supplied statistics which were five years old and therefore unreliable.

68 The Commission rejects the criticisms levelled at its analysis, objecting that the absence of trade flows between producer countries and importing countries is not always and not necessarily caused by transport costs. On the other hand, the existence of trade between some non-adjacent countries (Germany and Portugal, Spain and Belgium, Germany and Ireland) and, by contrast, its absence between neighbouring States (the United Kingdom and the Netherlands) show, in its view, that transport costs are by no means prohibitive. The Commission draws attention to the considerations set out in the contested decision (paragraph 42) which, it maintains, show that the level of those costs is not capable of preventing trade flows within the geographical market in question.

With regard to the prices charged in the Member States apart from Germany, the Commission points out that they are not markedly different. In fact, the maximum price difference within the Community is 10%, whereas in Germany it is as high as 20%.

69 Finally, according to the applicant government and undertakings, the Commission should at least have isolated, in its appraisal of the proposed concentration, the French and Spanish markets in which, because of their particular characteristics, the conditions of competition are unlike those of the other Community partners. In particular, according to the French Government, the Spanish market displays characteristics similar to those of the German market, whereas French market conditions are very unusual, determined by a production level below that of consumption and by the presence of a single large operator.

The very fact of not separating the markets of the two States in question from that of the remainder of the Community eventually results, in the applicants' opinion, in a wholly distorted analysis of the conditions of competition before and after the concentration, by giving a false picture of the balance of power between K+S and SCPA.

70 The Commission points out that the presence of significant trade flows, albeit in only one direction, the absence of marked differences between prices and the interchangeability of the various potash products could only lead to the inclusion of Spain and France in the Community market apart from Germany, all the more so as the distribution methods used in those two countries are identical to those employed in the rest of the Community (apart from Germany).

As far as France is concerned, the Commission also disputes that the conditions of competition on that country's market are different from the rest of the Community and points out that no importance can be attached, for this purpose, to the fact that K+S and SCPA/EMC have artificially kept the French market separate from the Community market. That does not in any way alter the fundamental homogeneity of the two markets, which stems from objective factors.

71 That being so, I shall begin by noting that the unilateral nature of the trade flows, which is also acknowledged by the Commission, is unquestionably an important factor in defining the relevant geographical market since it could be inferred from it that there are barriers to the entry of individual countries, which could prevent the marketing of products and thereby demonstrate the existence of national markets. (74) This question should therefore have been examined in more detail by the Commission, which instead merely noted the presence of significant trade flows between the Member States in question.

Likewise, the Commission's disregard of the fact that the largest importers in the sector had and have substantial market shares in their own countries and significantly different market shares in the other countries seems less than wholly convincing, as does the minor importance it attaches to the degree of concentration of supply.

72 The deficiencies to which I have just drawn attention are not, however, such as to invalidate the Commission's appraisal, which seems to be founded on objective factors that are essentially undisputed.

First, the conditions do not seem to have been met in this case for considering that the structure of demand indicates the existence of distinct national markets, particularly since there is, throughout the Community apart from Germany, a high degree of interchangeability between potash products and there are no particular consumer preferences for speciality products which are only available from local producers.

73 With regard to the analysis of transport costs, a factor commonly considered to be among the most significant in defining the concept of relevant market, as the Court stated in the `sugar' case, (75) it is certainly true that the Commission has often confined itself to general assertions. (76) However, it does not seem to me that, in its objections, the applicant government has succeeded in showing that the differences in costs are such as to constitute `barriers to entry': it is well known, as the Court has held, that different transport costs are not relevant for this purpose if they are `not discriminatory'. (77)

A similar observation may apply to the analysis of prices of the products in question, which are another important factor to be taken into account, according to the opinion expressed by the Commission in previous cases. (78) While it is true that the only information supplied by the institution as evidence of the absence of significant differences in price levels between States consists of a few statistical data provided by the FAO for the period from 1987 to 1989 and of the reference to the 1992 prices charged by K+S in Belgium, the Netherlands and Germany, it is also true that neither the French Government nor the applicant undertakings have countered the Commission's analysis with any evidence to the contrary. Indeed, they have actually affirmed that there is no substantial difference between prices, while attributing this to the transparency of the market and not to its homogeneity.

74 If one adds to the foregoing considerations the fact that the applicants have not disputed the substantial uniformity of the distribution methods adopted in the different States, which is such as to preclude the existence of barriers to entry similar to those existing in Germany, the Commission's analysis can only be regarded as essentially correct and sufficiently reasoned.

Nor would it be possible to come to a different conclusion on the basis of the arguments put forward by the French Government in order to show that France and Spain are independent markets which cannot be lumped together with the other Community countries, although the Commission's position is not entirely free from contradictions.

75 It must be acknowledged in this connection that, in the analysis of so-called `barriers to entry', (79) the existence of SCPA's statutory monopoly (even though limited to the transit of imports from countries outside the Community), which is regarded by the Commission as a major barrier to entry to French territory, (80) is not taken into consideration in any way thereafter in order to establish whether or not France may constitute a distinct market. Nor can such inconsistency be explained, as the Commission claims, by the distinction between barriers which prevent intra-Community trade and those which hinder trade with non-Community countries. Indeed it seems doubtful, to say the least, whether SCPA's distribution monopoly has any effect on the entry of products from non-Community countries into the market of the other Member States, since certain data supplied by the French Government, and not disputed by the Commission, show that the contrary is the case. (81)

The contradictions to which I have just drawn attention do not, however, appear sufficient to justify acceptance of the French Government's argument; according to the Commission's assessments, which have not been disputed, both France and Spain display, as regards competition, similar characteristics to the rest of the Community market from the point of view of product interchangeability, opening up of markets (confirmed by the large volumes of imports), price levels and distribution systems. Even in respect of those two countries, therefore, there is sufficient evidence for regarding the Commission's decision to include them in the market comprising all the Member States apart from Germany as justified.

76 In the light of the foregoing considerations, I am of the opinion that the definition of the geographical market given in the decision must essentially be endorsed, above all in its conclusions.

The Commission could, and perhaps should, have justified its assessments more fully; on closer examination they prove not to be without a few approximations. However, it does not seem to me that some degree of homogeneity in the conditions of competition on the market comprising all the Member States apart from Germany can plausibly be denied or, more particularly, that the French Government's objections can lend weight to the opposite conclusion. It should be borne in mind, moreover, that, as the Court has held, `homogeneity' of conditions of competition for the purposes of this case does not mean perfect equality of conditions in the different parts of the territory regarded as the relevant market. Rather, what is required is that the conditions of competition should be sufficiently homogeneous to appear non-discriminatory, (82) that is, such as to enable traders to engage in competition on an equal footing.

77 In this case, it does not seem to me that the applicant government's arguments make it possible to regard as not homogeneous, in the sense used here, the conditions of competition within the market defined as relevant by the Commission. Accordingly, I propose the Court should reject the plea put forward by the French Government.

(2) Possibility of using the regulation as the basis for action in relation to collective dominant positions

78 It will be recalled that the conditions to which authorisation of the concentration in question was made subject were specifically intended, on the basis of the analysis made by the Commission, to remove any basis for creating a situation of oligopolistic dominance by K+S and SCPA on the relevant market.

Both the French Government and SCPA and EMC, which in any event dispute the existence of a collective dominant position in the present case, assert that the regulation does not even apply to circumstances of this type.

79 The applicants maintain that it is not possible, even from a theoretical and general perspective, to rely on the concept of collective dominant position in the context of applying the rules on the control of concentrations. There are several reasons for this:

- first, it is precluded by the wording: Article 2 of the regulation, unlike Article 86 of the Treaty (`... one or more undertakings ...'), does not expressly provide for the case of a collective dominant position;

- second, neither the legal bases of the regulation (Articles 235 and 87 of the Treaty) nor the legislature's intention allow application of the provisions on concentrations to situations of oligopolistic dominance;

- finally, further confirmation is to be found in the procedural guarantees accorded to third parties by the regulation; in particular, the undertakings forming part of a collective dominant position, but not of the concentration, would have insufficient means of protection.

80 The Commission counters those arguments with the following:

- The wording of the regulation, and in particular the fact that it does not provide expressly for the case of a dominant position held by several undertakings, in no way precludes its application to cases involving the formation or strengthening of collective dominant positions. It is significant that Article 2(3) links the dominant position to the concentration, and not to the undertakings concerned, by taking into consideration its implications for effective competition.

- The legal bases of the regulation show that its objective is to fill a gap left in the rules on competition by Articles 85 and 86 with regard to the control of oligopolistic dominant positions. Nothing in the preparatory work or in the declarations cited by the French Government supports the conclusion that the Council intended to exclude application of the regulation for the purpose of declaring unlawful or eliminating collective dominant positions.

- A decision authorising a concentration is binding only and exclusively on the notifying undertakings. Since the act closing proceedings initiated pursuant to the regulation cannot cause any harm to third parties, even where they form part of the collective dominant position in question, it is inappropriate to speak of a lack or inadequacy of guarantees for third parties. In any case, the detailed procedural rules for implementing the regulation afford ample protection for the rights and interests of third parties.

- The possibility of prohibiting a concentration which would strengthen the oligopolistic framework of the market arises from the economic theory which holds that competition is at all events affected, provided that certain conditions are fulfilled, within an oligopolistic market. The use of the regulation as a basis for action in relation to a collective dominant position is therefore vital in order to ensure effective competition.

- The wording

81 I shall begin by observing that the applicants' view is difficult to dispute: the regulation, and in particular Article 2 thereof, contains no reference, even indirectly, to the concept of oligopolistic dominant position. That is all the more significant if it is borne in mind, as the applicants point out, that Article 86 of the Treaty provides, on the contrary, and expressly, that any abuse of a dominant position by `one or more undertakings' is incompatible with the common market.

Clearly, Article 2(3), which, as the Commission maintains, does indeed link the dominant position to the concentration and not to the undertakings concerned, refers to the dominant position of the concentration and not to the dominant position involving undertakings which are not parties to the concentration. In those circumstances, it would be too easy to evoke the well-known adage ubi lex voluit, dixit, ubi noluit tacuit.

82 However, while it is true that the wording can only lead to the conclusion that the regulation is aimed solely at discouraging concentrations which create or strengthen a dominant position held by a single undertaking, and does not cover those which result in dominance by several undertakings, (83) it is also true that the wording of Article 2 of the regulation cannot be considered decisive, since that provision must be read in the light of the regulation in its entirety and of its underlying objective.

This brings me to the other arguments relied on by the applicants and relating to the legal bases, to the legislature's intention (as it appears from the preparatory work and is reflected in the wording of the regulation) and to the procedural guarantees, as well as to the economic considerations put forward by the Commission, which are closely linked to the objectives of the rules on competition.

- Legal bases and intention of the legislature

83 Let it be said immediately that I do not share the applicants' view that the choice of legal bases is in itself a ground for concluding that the regulation does not apply to collective dominant positions. In principle, Articles 87 and 235 can indeed be used for that purpose. On the other hand, it seems to me that neither the fact that the regulation is based mainly on Article 235, rather than on Article 87, nor the declaration by the Council and the Commission on Article 22 of the regulation, in so far as it precludes the applicability of Articles 85 and 86 to concentrations, (84) can be relied on.

It is hardly necessary to add that it is difficult to see any other possible basis for preventive action against collective dominant positions created or strengthened as a result of concentrations, unless the view were taken, albeit unreasonably, that the Treaty itself precludes such a possibility.

84 Unlike the Commission, however, I am unable to infer from such a conclusion that the regulation in its present version actually authorises action against collective dominant positions. I shall merely observe that the fact that the legal basis chosen is undoubtedly capable of conferring specific powers does not in itself mean that those powers have in fact been conferred. The fact remains that, being founded on that legal basis, certain powers have been provided for and not others.

In the end, the point is whether the wording of the regulation confirms, either expressly or even implicitly, that the power to take action against collective dominant positions has been conferred on the Commission. However, it seems to me that the text as a whole tends to support a restrictive interpretation of Article 2.

85 That conclusion is supported, for example, as the applicant undertakings have asserted, by the wording of recital 15 in the preamble to the regulation, on the basis of which `concentrations which, by reason of the limited market share of the undertakings concerned, are not liable to impede effective competition may be presumed to be compatible with the common market' and `an indication to this effect exists, in particular, where the market share of the undertakings concerned does not exceed 25%'. In their view, the choice of that percentage would be inappropriate if the regulation also applied to collective dominant positions. (85)

However, it is quite true that the presumption of incompatibility of a dominant position on the basis of a total market share in excess of 25%, as contained in the recital, is not repeated in the operative part of the regulation. (86) It is also true that, in the decisions adopted pursuant to the regulation, market shares are only the starting point for appraising the effects of the concentration since many other factors must be taken into consideration. (87) However, if any significance is to be attached to recital 15, it would not be unreasonable to regard it as evidence of the legislature's intention not to include cases of collective dominance within the scope of the regulation, since the 25% share is certainly rather low for an oligopoly. (88)

86 Furthermore, the preparatory work would seem rather to confirm the legislature's intention not to apply the regulation to collective dominant positions. Although it is well known that the Commission's intention, as indicated during the process of drafting the act and expressed on several occasions, was to apply the rules in question to oligopolies, (89) it is also true, as the Commission has pointed out, that the present wording of Article 2(3) is the result of a difficult compromise reached specifically on the question of collective dominant positions. (90)

It is worth noting at this juncture that a comparison between the final amended proposal submitted by the Commission (91) and the definitive text shows that the reference to obstacles to the maintenance and development of effective competition, as set out in the former, was subsequently replaced by the concept of `dominant position', which undeniably refers to the wording of Article 86. Accordingly, it must be accepted that the final text is the result of a conscious choice determined, as the Commission has acknowledged, by the difficulty of reaching agreement on this point.

87 However, regrettable though it may be that the Council took its decision in accordance with the wishes of some of its members and against those of others, no-one except the legislature itself can do anything about it. I am not swayed by the Commission's argument that, as a result, in the absence of a provision expressly precluding the applicability of the regulation to collective dominant positions, that question has been left open. In any event, I do not believe that the Commission can take the view, as it claims, that it has the power to resolve issues deliberately left unresolved by the Member States.

To put it more clearly, to believe otherwise would amount to supporting a sui generis criterion of subsidiarity, according to which, whenever it deemed it appropriate or necessary, the Commission could deputise for other institutions and, in particular, for the legislature. It would certainly be more in keeping with the rules, from this point of view, if the Commission were to take the initiative in proposing an amendment to the regulation along the aforementioned lines. Failing that, I would be very hesitant to state that the Commission and the Court may, when applying and/or interpreting rules, fill any lacunae deliberately left by the legislature. (92)

88 In conclusion, even the preparatory work would seem to confirm that the legislature's intention, as reflected in the wording of the regulation, is that the latter should not apply to collective dominant positions. That finding is not, however, decisive for the purposes of this case. The fact remains that the preparatory work can, at most, provide guidance but is not conclusive since, in order to establish the correct interpretation of a provision, it is necessary to refer to its wording and purpose.

- Procedural guarantees

89 I now turn to an aspect which is unquestionably of fundamental importance in this context. Both the French Government and the applicant undertakings maintain, as I have already stated, that the fact that the regulation must not and cannot be applied to collective dominant positions is decisively confirmed by the absence from its provisions of procedural guarantees capable of protecting the rights of undertakings which, even though they are not involved in the concentration, are part of a collective dominant position.

I have already drawn attention, in examining the admissibility of the applicant undertakings' action, to the lack of justification for the Commission's view that the act closing proceedings initiated pursuant to the regulation is binding only on the parties to the concentration, with the result that it could under no circumstances cause damage to third parties. Without citing other examples, it is precisely this case which, in an extremely significant way, indicates the contrary. (93)

90 That being so, it is necessary at this juncture to establish whether the procedural guarantees provided for by the regulation in order to protect third parties can be considered appropriate even where the `third parties' are part of the oligopoly to which the Commission's decision relates.

Let me say at once that the participation of third parties in the proceedings, as provided for by the regulation, does not seem capable, in this case, of ensuring appropriate protection for the right to a fair hearing. First, the undertakings which are presumed to be members of the oligopoly but are not parties to the concentration are not given any specific information. Secondly, under Article 18(4), third parties are heard only in so far as the Commission or the competent authorities of the Member States deem it