85/564/EEC: Commission Decision of 13 December 1985 relating to a proceeding under Article 85 of the EEC Treaty (IV/27.591 - London Cocoa Terminal Market Association Limited) (Only the English text is authentic)
Date: 1985-12-13
Institutions: European Commission
Subjects: cocoa, competition













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31985D0564

85/564/EEC: Commission Decision of 13 December 1985 relating to a proceeding under Article 85 of the EEC Treaty (IV/27.591 - London Cocoa Terminal Market Association Limited) (Only the English text is authentic)  


Official Journal L 369 , 31/12/1985 P. 0028 - 0030 





COMMISSION DECISIONof 13 December 1985relating to a  proceeding under Article 85 of the EEC Treaty(IV/27.591   London Cocoa Terminal Market Association  Limited)(Only the English text is authentic)(85/564/EEC)THE COMMISSION OF THE  EUROPEAN COMMUNITIES,Having 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 20 May 1985 by the London Cocoa Terminal Market  Association concerning the Rules and Regulations of the Association,Having regard to the summary of  the notification published (2) pursuant to Article 19 (3) of RegulationN° 17,After consulting the  Advisory Committee on Restrictive Practices and Dominant Positions,Whereas:I. FACTSThe London Cocoa  Terminal Market Association (LCTMA) 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 LCTMA is to set up and to administer a  terminal market in London for cocoa. 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 beendeveloped primarily to enable persons involved in  commodity trading to protect themselves from the risks of adverse price movements.The LCTMA  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'.The contract currently traded  on the Cocoa Market is for10 tonnes, or a multiple of 10 tonnes, of cocoa beans of a growth and  quality defined in detail in Section 4 of the Rules of the LCTMA, delivered at contract price  ex-warehouse approved by the LCTMA in the United Kingdom or delivered in approved warehouses in  Amsterdam, Antwerp, Hamburg or Rotterdam. Dealing is up to 15 months forward in the delivery  months: March, May, July, September and December.All contracts traded on the London Cocoa Terminal  Market must be registered with International Commodities Clearing House Limited ('ICCH'), an  independent service company which provides clearing and settlement facilities for the LCTMA. ICCH  has substantial capital and reserves and is wholly owned by six clearing banks. The principal  functions of ICCH are to maintain and organize a 'daily clearing' of all trades and provide a  guarantee for due fulfilment of contracts, in accordance with the rules of the LCTMA, to Clearing  Members in whose names such contracts are registered.There are four classes of membership of the  LCTMA. The first two classes of voting members are Broker Members and Home Members who are allowed  to trade on the floor of the market. The rules allow a maximum of 18 Broker Members and 36 Home  Members. The second two classes are (non-voting) Trade and Non-Trade Members. Their number is not  limited.The criteria specified in the Articles for Broker and Home Membership are broadly similar  and require an applicant for membership to meet certain financial requirements. A detailed  statement of the criteria in force at the time of application may be obtained from the Secretary.  The Broker Members are individuals whereas the Home Members are companies or firms. To become a  Broker Member, theapplicant must satisfy the Committee that he is carrying on business in the  cocoa trade in London. To become a Home Member the candidate must be a Trade Member (or satisfy the  criteria for trade membership currently in force).All Voting Members must be members of the ICCH  and must register their contracts with the ICCH which in return for its fee guarantees the  performance of the contracts. Voting membership may be transferred provided that the transferee  shall be elected in accordance with the Articles. Non-voting membership is not transferable. Trade  Members are required to be companies, firms or individuals who in the opinion of the Committee have  a bona fide and continuing interest in the production or manufacture of or trading in cocoa beans  or cocoa products. Non-Trade Members must be companies, firms or individuals who are not eligible  for Trade Membership but who are in the opinion of the Committee regular users of the London Cocoa  Terminal Market.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 Broker and Home 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 Broker and Home 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. Provision is made for an additional commission (equal to the original commission charged on  the sale) where cocoa is tendered in fulfilment of a contract by a deliverer who is not a clearing  member of ICCH in whose name the contract is registered. This extra commission is paid to the  clearing member in whose name the contract is registered with ICCH. In the case of contracts open  and closed on the same day, no commission is charged on the closing transaction. 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 andsmooth operation of world trade  and to world pricing mechanisms. They are also very large. As for cocoa, the figures below show the  relative size of the LCTMA compared with its two most important competitors, i.e. the futures  markets for cocoa in Paris and New York.Annual volumes of trade (lots traded)1979 1984 (1)>TABLE  POSITION>II. LEGAL ASSESSMENT1.The notified Rules and Regulations of the LCTMA 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 rules  specified rates of commission which varied according to who was paying and who was receiving the  commission, and whether or not the contract was registered in the client's own name. The rates were  cheaper if the contract was registered in the client's own name with ICCH, and where a Trade Member  or Non-Trade Member was the payer rather than a non-member. The rates were still lower if a Home  Member was the payer, and cheapest of all for Broker Members and a sub-class of Home Members called  'City Home Members'. Broker Members have the right to deal free of commission but when dealing for  Home, Trade, Non-Trade or non-members, they had in the past to charge the minimum rates of  commission specified. If the broker did not trade on the floor of the market but did business  through another Broker Member, he had to pay that Broker Member the stated minimum rates of  commission. Home Members may deal free of commission on the floor but cannot do business for each  other. These may nominate employees to act as their market representatives. If they do not operate  on the floor the business must go through a Broker and they had in the past to pay the Broker the  appropriate minimum rate of commission. Trade and Non-Trade Members could only deal with each other  at or above the stipulated minimum rate of commission. The rules provided that Trade andNon-Trade  Members could be registered as agents who could give orders on behalf of Trade and Non-Trade  Members to Broker and Home Members and the latter were permitted to return part of the commission  to the agent on certain conditions. The rules provided for a sub-class of Home Member called a City  Home Member who could deal through a Broker Member at a reduced 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 LCTMA 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 Broker and Home 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 note. It follows that complete freedom exists to negotiate the actual 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, seventh 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 action under Article 85 (1). Consequently,  the Commission is able to issue a negative clearance pursuant toArticle 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 Cocoa Terminal Market Association as last notified on 20 May  1985.Article 2This Decision is addressed to the London Cocoa Terminal Market Association 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. 7.