85/563/EEC: Commission Decision of 13 December 1985 relating to a proceeding under Article 85 of the EEC Treaty (IV/27.590 - London Sugar Futures Market Limited) (Only the English text is authentic)
Date: 1985-12-13
Institutions: European Commission
Subjects: competition, sugar industry













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31985D0563

85/563/EEC: Commission Decision of 13 December 1985 relating to a proceeding under Article 85 of the EEC Treaty (IV/27.590 - London Sugar Futures Market Limited) (Only the English text is authentic)  


Official Journal L 369 , 31/12/1985 P. 0025 - 0027 





COMMISSION DECISIONof 13 December 1985relating to a  proceeding under Article 85 of the EEC Treaty(IV/27.590   London Sugar Futures Market  Limited)(Only the English text is authentic)(85/563/EEC)THE COMMISSION OF THE  EUROPEAN COMMUNITIESHaving regard to the Treaty establishing the European Economic Community,Having  regard to Council Regulation N° 17 of 6 February 1962, first Regulation implementing Articles 85  and 86 of the Treaty (1), as last amended by the Act of Accession of Greece, and in particular  Article 2 thereof,Having regard to the notification and application for negative clearance  submitted on 29 June 1973 and on 20 May 1985 by the London Sugar Futures Market concerning the  Rules and Regulations of the Association,Having regard to the summary of the notification published  (2) pursuant to Article 19 (3) of Regulation N° 17,After consulting the Advisory Committee on  Restrictive Practices and Dominant Positions,I. FACTSThe London Sugar Futures Market (LSFM) is one  of many commodity markets established in London. The commodity markets are self-regulatory  organizations run by Committees of Management selected by members from amongst themselves, aided by  secretariats, and using powers given to them by their members in market rule books. Although the  markets are self-regulating, there is an element of supervision by the Bank of England.The object  of the LSFM is to set up and to administer a futures market in London for sugar. A terminal market  or a futures market provides organized facilities for concluding contracts for the purchase and  sale of a commodity to be delivered at named future dates. Futures markets have been developed  primarily to enable persons involved in commodity trading to protect themselves from the risks of  adverse price movements. The LSFM provides a market floor for trading and price-making, determines various technical  questions such as allowable delivery months and the standard contract terms and procures the  provision of clearing and settlement facilities. Trading is done on the floor of the market where  dealers face each other with bids and offers being made by the system known as 'open outcry'.There  are two basic contracts currently traded under the rules of the LSFM:(aThe first contract is for a  white beet or cane crystal sugar or refined sugar of any origin, of the crop or season current at  the time of delivery, of a quality defined in detail in the contract rules. The contract price is  free on board and stowed in hold at one ofthe following ports: Antwerp, Bremen, Calais,  Copenhagen, Dunkirk, Dublin, Elmshaven, Hamburg, Hull, Immingham, Le Havre, Rotterdam, Rouen or  Vlissingen.(bThe second contract is for raw cane sugar of a quality defined in detail in the rules  and originating in certain specified countries. The contract price is free on board and stowed in  hold at a United Kingdom port.Both contracts are for lots of 50 tonnes (or any multiple of 50  tonnes). Trading is up to 15 months forward in the delivery months: March, May, August, October and  December.All contracts traded on the London Sugar Futures Market must be registered with  International Commodities Clearing House Limited ('ICCH'), an independent service company which  provides clearing and settlement facilities for the LSFM. ICCH has a substantial capital and  reserves and is wholly owned by six clearing banks. The principal functions of ICCH are to maintain  and organize 'daily clearing' of all trades and provide a guarantee for due fulfilment  ofcontracts, in accordance with the rules of the LSFM, to clearing members in whose names such  contracts are registered.There are two main classes of membership, Full Membership and non-voting  Membership. The first class is limited to 35 Full Members. The non-voting Membership is sub-divided  into two classes: Overseas Affiliated Members and AssociateMembers. There is no limit to the  number in the class of Associate Members. The number of Overseas Affiliated Members is limited to  10 but may be increased.Applicants for membership may be of any nationality but must satisfy  certain minimum capital requirements laid down from time to time by the Committee of Management.  They must furthermore be carrying on business in the sugar trade and must have done so prior to  membership for a period of time also to be laid down from time to time by the Committee. Applicants  for full membership must trade from an office in London established for that purpose. A detailed  statement of the criteria for membership in force at any time may be obtained from the Association  upon application. Membership may be transferred to another firm or company provided that other also  meets the criteria for membership.All Full Members must be members ('clearing members') of the ICCH  and must register their contracts with the ICCH which, in return for its fee, guarantees the  performance of the contracts.An appeal procedure applies if the Committee of Management refuses an  application for membership, refuses to grant permission for a transfer of a member's membership or  refuses a change in the control or nature of the member's firm or company. The procedure also  applies if a member is expelled or suspended and the member is dissatisfied with the Committee's  decision. The candidate or member can ask the Committee to reconsider its decision, making such  representations and supplying such information as it considers relevant.Business concluded on the  floor of the market between Full Members may be transacted free of commission. Commission must be  charged on all other transactions between members or between members and non-members but rates of  commission are freely negotiable. The exemption from the obligation for Full Members to charge 'a'  commission is explained by their ownership of the Market. This causes a variety of extra costs that  the other categories of members do not bear because they have no ownership in the Market.For  administrative purposes and on behalf of its members, ICCH may collect a sum on account of any  commission payable on any contract registrable with it. For this purpose, ICCH may, from time to  time, notify its members of the rates of commission to be applied by ICCH to contracts which are  registrable with it.The international futures markets in London are the principal markets used in  international commodity merchandising and they contribute to the stability and smooth operation of  world trade and to world pricing mechanisms. They are also very large. As for sugar the figures  below show the relative size of the LSFM compared with its two most important competitors, i.e. the  futures markets for sugar in Paris and New York. Annual volumes of trade (lots traded)1979 1984 (1)>TABLE>II. LEGAL ASSESSMENT1.The  notified Rules and Regulations of the LSFM are to be considered as agreements within the meaning of  Article 85 of the EEC Treaty.2.The Rules and Regulations as originally notified specified the  minimum net rates of commission which could be charged by a member. The Committee had powers to  suspend or expel offending members. The minimum commission rates varied according to who was paying  and who was receiving the commission. The rates were cheaper for clearing clients, where the  contract was registered in the client's own name with ICCH, than in the case of non-clearing  clients, and where a member was the payer rather than a non-member. Full Members have the right to  deal free of commission with other Full Members but when dealing for Overseas, Affiliated or  Associate Members or for non-members, they had in the past to charge the minimum rates of  commission specified. Associate Members, who may not deal directly with each other but must pass  business through a Full Member or Affiliated Member, had in the past to pay the appropriate minimum  rate of commission to the Full or Affiliated Member. Where an Associate Member dealt for his own  account with a non-member he had in the past to charge the non-member at least the specified rate  of commission. The Commission considered the above described system of specified minimum commission  rates as a form of price-fixing that violated Article 85 (1) of the EEC Treaty. The LSFM was  requested to abandon the system of fixed minimum rates. The system has now been abolished as such.  References to the system in the Rules and Regulations have been deleted. The rules now provide that  business concluded on the floor of the market between Full Members may be transacted free of  commission. Commission must be charged on all other transactions between members or between members  and non-members. The Commission believes that this obligation is not appreciably restrictive of  competition because it only entails the obligation to charge 'a' commission without any reference  to the rate. It follows that complete freedom exists to negotiate the commission rates. 3.Furthermore, as a result of the representations by the Commission, other amendments were also  made to the rules concerning membership so that it is now made clear on the face of the Articles  that membership is open and the criteria by which applications for membership are judged are  objective (see Facts, eighth paragraph, above). The Committee of Management is now required to give  reasons when it takes decisions affecting the members' rights of membership. To protect the rights  of actual or potential members an appeal procedure has been introduced. As an ultimate resort an  appellant would have recourse to the ordinary courts under English law.4.The publication in the  Official Journal of the European Communities pursuant to Article 19 (3) of Regulation N° 17 did not  bring in any representations.5.The notified Articles of Association and Rules and Regulations, in  their amended form, no longer contain any clauses which constitute appreciable restrictions on  competition within the common market. Therefore, the Commission, on the basis of the facts in its  possession, has no grounds for actionunder Article 85 (1). Consequently, the Commission is able to  issue a negative clearance pursuant to Article 2 of Regulation 17.HAS ADOPTED THIS  DECISION:Article 1On the basis of the facts in its possession the Commission  has no grounds for action under Article 85 (1) of the EEC Treaty in respect of the Rules and  Regulations of the London Sugar Futures Market as last notified on 20 May 1985.Article 2This  Decision is addressed to the London Sugar Futures Market Limited whose registered office is at  Cereal House, 58 Mark Lane, London EC3, United Kingdom.Done at Brussels, 13  December 1985.For the CommissionPeter SUTHERLANDMember of the Commission(1)  OJ N° 13, 21. 2. 1962, p. 204/62. (2) OJ N° C 204, 13. 8. 1985, p. 5.