85/562/EEC: Commission Decision of 13 December 1985 relating to a proceeding under Article 85 of the EEC Treaty (IV/30.570 etc. - Sole distribution agreements for whisky and gin) (Only the English text is authentic)
Date: 1985-12-13
Institutions: European Commission
Subjects: competition, exclusive distribution agreement, spirits













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31985D0562

85/562/EEC: Commission Decision of 13 December 1985 relating to a proceeding under Article 85 of the EEC Treaty (IV/30.570 etc. - Sole distribution agreements for whisky and gin) (Only the English text is authentic)  


Official Journal L 369 , 31/12/1985 P. 0019 - 0024 





COMMISSION DECISIONof 13 December 1985relating to a  proceeding under Article 85 of the EEC Treaty(IV/30.570 etc.   Sole distribution agreements for  whisky and gin)(Only the English text is authentic)(85/562/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 Articles 4, 6 and 8 thereof,Having regard to the notification made by The  Distillers Company plc, Edinburgh, United Kingdom, seeking exemption of several sole distribution  agreements,Having published a summary of the notification pursuant to Article 19 (3) of Regulation  N° 17 (2), After consulting the Advisory Committee on Restrictive Practices and Dominant Positions,I.  FACTSA. The undertakings and the agreements1.The Distillers Company plc, Edinburgh, the leading  producer of spirits in the EEC, has notified on behalf of several subsidiaries 21 sole distribution  agreements concluded between those subsidiaries and various companies in several Member States.The  product concerned is either whisky or gin.2.The following agreements have been notified: No. ManufacturerSole DistributorTerritoryProductDate ofNotificationN° of file 1James Buchanan &  Company LimitedFrans Verbunt &  Co. BVNetherlandswhisky15. 2. 1982IV/30.571 2James Buchanan  & Company LimitedHenkell &  Co. Germanywhisky15. 2. 1982IV/30.572 3Bulloch Lade & Company LimitedSarma Penney  LimitedBelgiumwhisky15. 2. 1982IV/30.574 4John Dewar &  Sons LimitedBV Im- en  Export-maatschappij v/hWilmerink &  MullerNetherlandswhisky15. 2. 1982IV/30.575 5John Haig  &  Company LimitedSA Cinzano et Co. Belgium andLuxembourgwhisky15. 2. 19826. 12. 1982IV/30.576 6John Haig &  Company LimitedDe  Danske Sprit-fabrikkerDenmarkwhisky15. 2. 1982IV/30.577 7John Haig &  Company LimitedPierre  Rivière SAFrancewhisky15. 2. 1982IV/30.578 8W. P. Lowrie & Company LimitedJ. A. Verbunt  BVNetherlandswhisky15. 2. 1982IV/30.579 9Wm. Sanderson & Son LimitedEts. Fourcroy  SABelgium andLuxembourgwhisky15. 2. 1982IV/30.58010White Horse Distillers LtdSoehnlein  Rheingold KGGermanywhisky22. 3. 1982IV/30.612No. ManufacturerSole DistributorTerritoryProductDate ofNotificationN° of file11Wm. Sanderson &  Son LimitedTorben Anthon A/SDenmarkwhisky 6. 5. 1982IV/30.64612The Distillers  AgencyLimitedHans JustDenmarkwhisky 5. 5. 1982IV/30.65113The Distillers  AgencyLimitedTaittinger SAFrancewhisky 5. 5. 1982IV/30.65214John Haig &  Company  LimitedFratelli Averna SpAItalywhisky22. 6. 1982IV/30.69215J. &  W. HardieLimitedFratelli  Rinaldi SpAItalywhisky27. 2. 1985IV/31.48916Wm. Sanderson &  Son LimitedGio Buton &  Co.  SpAItalywhisky11. 4. 1982IV/30.93317Tanqueray, Gordon &  Company LimitedEts Fourcroy  SABelgium andLuxembourggin15. 2. 1982IV/30.58118Booth's DistilleriesLimitedMartini &   Rossi AGGermanygin15. 2. 1982IV/30.57019Tanqueray, Gordon &  Company LtdFrans Verbunt &  Co.  BVNetherlandsgin15. 2. 1982IV/30.58220White Horse Distillers LtdCorima SAFrancewhisky15.  2. 1982IV/30.58521White Horse Distillers LtdGilbeys of IrelandIrelandwhisky15. 2.  1982IV/30.5863.All agreements are non-reciprocal and similar as to the restrictions  they impose on both parties. The brand-owning company invests the respective sole distributor with  the exclusive right to market the product concerned in the allocated area and undertakes not to  sell the goods for resale to other persons in that territory. The sole distributors are obliged not  to act as agent or distributor for other companies as to the product in question and must not  solicit orders, advertise the goods or hold stocks of the goods outside the territory.4.The  agreements listed above were in force before 1 July 1983. They have been notified by the Distillers  Company in view of Articles 3 and 4 of Commission Regulation (EEC) N° 1983/83 of 22 June 1983 on  the application of Article 85 (3) of the Treaty to categories of exclusive distribution agreements  (1), since it fears that the provisions contained in these Articles are likely to disentitle the  parties to the benefit of the block exemption after 31 December 1986. B. The products and the market5.The spirit industry is characterized by a large number of  different product categories. The most important categories are (2):   (i)Whisk(e)y, made from  barley or rye or a mash of cereals and aged for three years or more, contains at least 40 %  alcohol.  (ii)Wine spirits and brandies, distilled from grape wine and aged from two eight years,  contain at least 38 % alcohol; this category includes also grape marc or marc spirits (3).  (iii)Liqueurs (or cordials), made by flavouring brandy and other spirits with fruits and  leaves, have alcoholic strengths from 20 to 60 %. (iv)Grain spirit, corn-brandy ('Korn'), made  from grain, not aged and with no colour or particular flavour, contains at least 32 % alcohol. To  this category also akvavit and vodka can be added (1).  (v)Juniper-flavoured spirituous beverages  such as gin and genever contain at least 30 % alcohol. (vi)Rum, made from the juice of sugar cane  or molasses, contains at least 38 % alcohol.(vii)Fruit spirits distilled from cherry, plum,  mirabelle etc. (2)6.Within each product category there is a large number of competing brands. This  is particularly true for whisk(e)y, the most important category, where numerous leading spirit  firms are actively competing on the market (3). Overall concentration in the spirit industry at the  Community level can be classified as moderate, the top 10 companies accounting for 58 % of total  net sales (4). C. Facts related to Articles 3 and 4 of Regulation (EEC)N° 1983/837.As to the application of  these Articles, the following facts are of importance:(a)Each party to the respective sole  distribution agreements or the group (in the sense of Article 4 of Regulation (EEC) N° 1983/83) to  which it belongs attains a total annual turnover of more than 100 million ECU.(b)In agreements 1  to 17 listed above the sole distributor or a member of the group to which it belongs produces  spirituous beverages, but notof the same category (either whisk(e)y or juniper-flavoured spirits)  as the product covered by the sole distribution agreement.(c)In agreements 18 to 21 the sole  distributor or a member of the group to which it belongs does produce a spirit of the category to  which the sole distribution agreement refers, i.e. either whisk(e)y or a juniper-flavoured  spirit.8.As regards the agreements mentioned under (c) above, the aggregated market shares in the  respective territories for the brands which are the subject ofthe exclusive agreements ('A') and  the brands manufactured by the sole distributors or their groups ('B') (see the table below) are  all lower than 5 %. >TABLE>D. Comments from third parties9.N° comments were received from third parties in  response to publication of a summary of the notified agreements in accordance with Article 19 (3)  of Regulation N° 17.II. LEGAL ASSESSMENTA. Article 85 (1)10.The agreements to which this Decision  refers have the object and effect of restricting competition in the common market. The manufacturer  undertakes to supply the product for resale in the territory only to the sole distributor. The  latter undertakes not to distribute goods which compete with the contract goods, to obtain the  contract goods for resale only from the other party and to refrain outside the contract territory  and in relation to the contract goods from seeking customers, from establishing any branch, and  from maintaining any distribution depot. Since the parties to each agreement are located in  different Member States, the agreements are likely to affect inter-state trade.B. Regulation N°  67/67/EEC11.However, Article 85 (1) of the Treaty does not apply to the agreements until 31  December 1986, since they are still covered by Regulation N° 67/67/EEC of the Commission of 22  March 1967 on the application of Article 85 (3) of the Treaty to certain categories of exclusive  dealing agreement (1) until that date. Although that Regulation has been replaced by Regulation  (EEC) N° 1983/83 and (EEC) N° 1984/83 (2) with effect from 1 July 1983, Article 7 and 15 (1)  respectively of the new Regulations provide that from 1 July 1983 to 31 December 1986, Article 85  (1) of the Treaty shall not apply to agreements which were in force on 1 July 1983 and which  satisfy the exemption conditions of Regulation N° 67/67/EEC.12.All the agreements listed above were  already in force on 1 July 1983 and none contains any restrictionwhich exceeds the limits set by  Regulation N° 67/67/EEC.13.Notwithstanding this transition period, the parties have shown a  legitimate legal interest in learning now whether the agreements will also be covered by the new  Regulation or can be individually exempted from the application of Article 85 (1) after 31 December  1986. C. Regulation (EEC) N° 1983/8314.According to Article 3 (b) of Regulation (EEC) N° 1983/83, the  benefit of block exemption does not apply where 'manufacturers of identical goods or of goods which  are considered by users as equivalent in view of their characteristics, price and intended use  enter into a non-reciprocal exclusive distribution agreement between themselves in respect of such  goods unless at least one of them has a total annual turnover of no more than 100 million  ECU'.15.Article 4 (1) of that Regulation extends this provision to agreements where the goods in  question are manufactured by an undertaking 'connected' (as defined in paragraph 2) with a party to  the agreement. Finally, Article 5 (3) provides that for the purpose of calculating total turnover  within the meaning of Article 3 (b), there shall be added together the turnovers achieved during  the last financial year by the party to the agreement and connected undertakings in respect of all  goods and services, excluding all taxes and other duties.16.All parties to the agreements listed  above achieve   alone or together with the undertakings connected with them   an annual turnover  which exceeds 100 million ECU.Agreements Nos 1 to 1717.In agreements 1 to 17 Regulation (EEC) N°  1983/83 applies, since the parties to the agreements are not to be considered as manufacturers of  equivalent goods in the sense of Article 3 (b).18.Article 3 (b) indicates that the question of  equivalence between certain goods has to be judged from the point of view of the user and of their  characteristics, price and intended use. In certain cases differences as to only one of those  features can lead to the formation of separate product markets, especially where consumer  preferences have developed (3).19.Moreover, when defining the relevant market in application of  Article 3 (b), account must be taken of the purpose of that provision in the context of the aim of  the whole Regulation (4). It follows in particular that the definition of the relevant market under  thisprovision need not be the same as that used in other areas of Community law where different  goals are to be achieved. 20.It is the purpose of Article 3 (b) to refuse the benefit of group exemption to agreements under  which a manufacturer entrusts the distribution of his goods to another manufacturer of competing  goods, because the requirements of Article 85 (3) of the Treaty might not then be fulfilled (1). It  may be doubted whether a sole distributor would be sufficiently prepared to promote the sale of a  certain product if he produces a competing product the market position of which might be weakened  by such an effort. This conflict of interests could impede the stimulation of competition between  products of different manufacturers which Regulation (EEC) N° 1983/83 assumes normally to result  from exclusive distributorship (see recital 6 of the preamble). It may also be imagined that such  an agreement could involve an arrangement between the two manufacturers to maintain their  respective market shares and not to intensify competition between them.21.As has been shown above  (see point 6), the overall market of spirituous beverages comprises a multitude of different  product categories. The beverages in these categories differ as to their primary products,  distillation and manufacturing process as well as in their typical flavour and intended use  (aperitif, digestif, long drink basis, etc.), although certain categories might overlap to some  extent in one or other of the above features.22.As regards in particular the two sorts of spirits  the above agreements refer to, one can define the relevant market in the sense of Article 3 (b) as  follows:23.Gin is derived from maize and flavoured with certain aromatics and spices, in particular  with juniper. It usually serves as a basis for cocktails and long drinks. Gin belongs to the  category of juniper-flavoured spirits which also includes 'Genever', 'Wacholder' and the like.  Although spirits from that category and in particular gin might have some similarities with other  'clear spirits' like corn, akvavit and vodka, such as the clear colour and the degree of alcohol,  the latter can not be regarded as interchangeable with the juniper-flavoured spirits, since they do  not have such a typical and distinct flavour as gin and other juniper-flavoured spirits.  Consequently, for the purpose of Article 3 (b) of Regulation (EEC) N° 1983/83 the juniper-flavoured  spirits form a separate sub-market within the overall spirit market.24.Whisk(e)y is usually  distilled from maize, barley or rye. The most important types of whisk(e)y, Scotch, Irish, Bourbon and Canadian, vary in certain respects but they have in common a cereal as primary  product and the very typical flavour, irrespective of all differences arising from the type,  specialities of the brands and the age of the whisk(e)y. These characteristics distinguish  whisk(e)y from all other spirit categories, in particular from all kinds of wine spirits or  brandies such as Cognac, Armagnac, Weinbrand etc., most of which are derived from wine and have  themselves a very typical trend of flavour which can be clearly distinguished from the whisk(e)y  flavour. As a result, for the purpose of Article 3 (b) of Regulation (EEC) N° 1983/83 whisk(e)y, in  all its varieties, forms a market of its own.25.For these reasons, a consumer looking for whisk(e)y  or gin will not readily buy a spirit from another category, if no product belonging to the desired  category is available. Furthermore it is in particular in view of the above-described purpose of  Article 3 (b) of Regulation (EEC) N° 1983/83 that the definition of separate sub-markets within the  overall spirits market in the EEC is justified, since the latter has avery fragmented character  with a multitude of manufacturers competing on it. Individual brands have only minimal shares of  this overall market. Therefore, it is not likely that a sole distributor which manufactures only  spirits belonging to other categories would on that account lessen its endeavours to promote the  product in question, nor is there any danger of market-sharing arrangements. Finally, the  prohibition clause concerning the resale of competing products in each of the agreements in  question only refers to the respective product, i.e. whisky or gin. This demonstrates that in the  view of the parties themselves there is no competitive relationship to other categories of  spirit.26.It follows that the parties to the agreements listed under Nos 1 to 17 above are not to  be considered as manufacturers of equivalent goods under Article 3 (b) of Regulation (EEC) N°  1983/83. The Commission can therefore declare that this Regulation applies to those agreements  after 31 December 1986. In view of the importance which, it is believed, the industry concerned  will attach to the interpretation of Article 3 (b) of the said Regulation, the Commission has found  it appropriate to make this declaration in Article 1 of the operative part hereunder in spite of  the absence of any legal obligation to do so.Agreements Nos 18 to 2127.In cases 18 to 21 listed  above, the parties to each sole distribution agreement are mutual competitors, since both  manufacture alcoholic beverages in the category to which the sole distribution agreement refers. According to Article 3 (b), read together with Article 4, Regulation (EEC) N° 1983/83 therefore  does not apply.D. Article 85 (3)28.However, the sole distribution agreements listed above in Nos 18  to 21 can benefit from individual exemptions pursuant to Article 85 (3), since the requirements of  that provision are fulfilled.29.In view of the competitive situation on the markets for whisk(e)y  and gin, a case-by-case examination as provided for in recital 10 of Regulation (EEC) N° 1983/83  permits the conclusion that the sole distribution agreements in question will lead to adequate  improvements in distribution, even taking into account the fact that a competing spirit is being  produced by the sole distributor or another company of the group to which it belongs. The  respective manufacturers are able to concentrate their sales efforts on one dealer, who is familiar  with the economic and legal situation in his territory. This leads to a more intensive marketing of  the products and to a rationalization in distribution, since the manufacturers are not compelled to  maintain business relations with a large number of dealers. It can also be expected that the  consumers in the territories concerned obtain a fair share of the resulting benefit in that their  supply position is improved, as they can obtain products manufactured in other countries more  quickly and more easily. As the restrictions do not exceed the limits set up by Regulation (EEC) N°  1983/83 they can be regarded as indispensable to the attainment of the above improvements of  distribution as explained in detail in recital 8 of that Regulation. Finally there is no risk of  'eliminating competition . . .', given the small size of the aggregated market shares of the  undertakings in question, so that all the requirements of Article 85 (3) are fulfilled.30.The  Commission can therefore grant individual exemptions for the sole distribution agreements listed  above under Nos 18 to 21.E. Duration of the exemption31.Pursuant to Article 8 (1) of Regulation N°  17, a Commission Decision in application of Article 85 (3) of the Treaty shall be issued for a  specified period. Since the agreements in question were in force on1 July 1983 and satisfy the  conditions of exemptionof Regulation N° 67/67/EEC, Article 85 (1) of theTreaty shall not apply to  them until 31 December1986 (Article 7 of Regulation (EEC) N° 1983/83). Consequently, the  individual exemptions granted by this Decision shall come into force only upon expiryof that  period, namely on 1 January 1987. The restrictions contained in the agreements in question are not  far-reaching. Furthermore, a significant change in the structure of the markets concerned is  unlikely to occur in the near future. It therefore appears justified to grant individual exemptions  for a period of 10 years, beginning on 1 January 1987,HAS ADOPTED THIS DECISION:Article  1It is hereby declared that the agreements listed under Nos 1 to 17 above comply with Regulation  (EEC) N° 1983/83.Article 2Pursuant to Article 85 (3) the provisions of Article 85 (1) of the EEC  Treaty are hereby declared inapplicable for the period 1 January 1987 to 31 December 1996 to the  following sole distribution agreements (name of the parties, territory, date of agreement, product  concerned):1Booth's Distilleries Ltd and Martini &  Rossi AG, Germany, 19 August 1980, 'High &   Dry' gin.2Tanqueray, Gordon &  Company Ltd and Frans Verbunt &  Co. BV, The Netherlands, 27 October  1981, six versions of 'Gordon's, gin.3White Horse Distillers Ltd and Corima SA, France, 3 March 1970, 'White Horse' and 'Logan' whiskies.4White Horse Distillers Ltd and Gilbeys of  Ireland, Ireland, 29 April 1980, 'White Horse', 'Logan de Luxe', 'Glen Elgin' and 'Lagavulin'  whiskies.Article 3This Decision is addressed to the following undertaking:The Distillers Company  plc12, Torphichen StreetUK-Edinburgh EH3 84TScotlandDone 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 190, 30. 7. 1985, p. 8. (1) OJ N° L 173, 30. 6. 1983, p. 1. (2) The following product classification is primarily based on the study 'Concentration,  Competition and Competitiveness in the Beverages Industries of the European Community' submitted in  1984 by Christian Marfels on behalf of the Commission, p. 45. It also takes account of the  classification submitted by the Commission in its proposal for a Council Regulation laying down  general rules on the definitive description and preparation of spirituous beverages and of  vermouths and other wines of fresh grapes flavoured with plants or other aromatic substances, OJ N°  C 189, 23. 7. 1982, p. 7. (3) This category includes the spirituous beverages defined in Article 1 (2) (i), (j), (k), (l), of  the proposed Council Regulation. (1) See Article 1 (2) (c), (d), (f) and (h) of the proposed Council Regulation. (2) Other categories exist for aniseed-flavoured spirits, cider or perry spirits, gentian spirits  and advocaat, see Article 1 (2) (g), (n), (o) and (q) of the proposed Council Regulation. (3) Marfels, op. cit., p. 54. (4) Data from 1980, Marfels, op. cit., p. 54. (1) OJ N° 57, 25. 3. 1967, p. 849/67. (2) OJ N° L 173, 30. 6. 1983, p. 5. (3) Commission notice concerning Commission Regulations (EEC) N° 1983/83 and (EEC) N° 1984/83 of 22  June 1983 on the application of Article 85 (3) of the Treaty to categories of exclusive  distribution agreements and exclusive purchasing agreements of 13 April 1984, OJ N° C 101, p. 4,  point 21. (4) See point 2 of the Commission notice referred to above. (1) See recital 10 of the Regulation.