2001/135/EC: Commission decision of 5 July 2000 relating to a proceeding pursuant to Article 81 of the EC Treaty (Case COMP.F.1/36.516 — Nathan-Bricolux) (notified under document number C(2000) 1853)
Date: 2000-07-05
Institutions: European Commission
Subjects: distributive trades, exclusive distribution agreement, fixing of prices, publishing, restriction on competition, school textbook

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 5 July 2000

relating to a proceeding pursuant to Article 81 of the EC Treaty

(Case COMP.F.1/36.516 — Nathan-Bricolux)

(notified under document number C(2000) 1853)

(Only the French text is authentic)

(2001/135/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES

I. THE FACTS

Having regard to the Treaty establishing the European Com-
munity,

Having regard to Council Regulation No 17 of 6 February
1962, first Regulation implementing Articles 85 and 86 of the
Treaty (1),
(EC)
amended
No 1216/1999 (2), and in particular Articles 3 and 15(2)
thereof,

Regulation

last

by

as

Having regard to the Commission decision of 26 June 1998 to
initiate proceedings in this case,

Having given the parties concerned the opportunity to make
known their views on the objections raised by the Commission,
in accordance with Article 19(1) of Regulation No 17 and
Commission Regulation No 99/63/EEC of 25 July 1963 on
the hearings provided for in Article 19(1) and (2) of Regulation
No 17 (3),

After consulting the Advisory Committee on restrictive prac-
tices and dominant positions,

Whereas:

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ 148, 15.6.1999, p. 5.
(3) OJ 127, 20.8.1963, p. 2268/63.

A. INTRODUCTION

(1)

(2)

(3)

By letter of 21 April 1997,
the French authorities
informed the Commission that in the course of investi-
in France into the distribution
gations carried out
of educational material, they had come across anti-
competitive agreements concerning several Member
States. By letter of 7 July 1997 those authorities sent
the Commission the documents collected during their
investigations.

The Commission asked two competing French producers
of educational material and their distributors in several
Member States to provide information on their commer-
cial relations, pursuant to Article 11 of Regulation
No 17.

These proceedings concern the agreements concluded
between E´ ditions Nathan and its exclusive distributors,
Bricolux SA in the Walloon region of Belgium, Smartkids
in Sweden and Borgione Centro Didattico in Italy.

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B. THE PARTIES

1. The product

(4)

(5)

(6)

(7)

E´ ditions Nathan (‘Nathan’) is a subsidiary, incorporated
under French law, of Librairie Fernand Nathan —
Fernand Nathan et Compagnie, which at the material
time was itself a subsidiary of the CEP Communication
group. CEP Communication was taken over by Havas in
1998, and Havas in turn was taken over by Vivendi, so
that Nathan was eventually controlled by Vivendi.
Vivendi has diversified into a number of areas such as the
environment, construction, and, in its communications
branch, publishing and multimedia; it had a turnover of
EUR 41,5 billion in 1999. Nathan publishes, purchases,
sells and distributes books, other publications and
articles for educational and cultural purposes. Turnover
in 1996 was FRF [...] * (ECU [...] *).
Its educational
material business is carried out in a separate commercial
division that is different from the school textbooks
business.

Bricolux SA is a company incorporated under Belgian
law which specialises in the distribution of traditional
school supplies and educational material to schools in
the Walloon region of Belgium and, through a subsidi-
ary, in Luxembourg. In 1996, its turnover was BEF [...] *
(ECU [...] *).

Borgione Centro Didattico srl is a company incorporated
under Italian law which has distributed educational
material since 1977. Its turnover in 1996 was ITL [...] *
(ECU [...] *).

Set up in 1995, Smartkids AB is a company incorporated
under Swedish law which has distributed Nathan edu-
cational material in Sweden since 1996. In 1997 its
turnover was SEK [...] * (ECU [...] *).

(9)

The educational material
includes products that are
designed for and primarily intended to contribute to the
education and development of the cognitive, sensory,
motor and social abilities of children under the age of
nine (4), through teaching activities led by qualified staff
in establishments designed for that purpose.

(10) The products as a whole are intended to meet all the
teaching material needs of the establishments concerned.
They are marketed essentially through a single medium,
an annual catalogue which offers hundreds of items
within a very broad price range (5).

(11) The educational material can be divided into four
main segments corresponding to different stages of
development and meeting specific and separate edu-
cational needs (6):

— material to stimulate awareness and manipulation
abilities, including puzzles, card games, shape gam-
es and sensory stimulation material,

— basic learning material for language, drawing, tech-
nology, mathematics, creative activities, etc.,

— equipment for activity areas, e.g. painting, activity

corners, storage equipment, etc.,

— equipment

for

including outdoor
games, playground equipment, cycles and carriers
and beds and bunks adapted to the establishments.

living areas

C. THE RELEVANT MARKET

(8)

The agreements between Nathan and its exclusive dis-
tributors concern the market for educational material
intended for young children and define the conditions
under which the contract products are distributed in
several Member States.

* Parts of this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets.

(4) Clearly, the needs of two-year old children and the material to
meet those needs will not be the same as for eight-year olds,
except in the case of special education. Nine is regarded as the
threshold age over which the content of teaching material is
aimed more at the acquisition of knowledge than at developing
children’s abilities. For instance, Nathan considers that its products
are aimed at day nurseries and children aged two to six (statement
made by the head of Nathan’s educational material department to
the French authorities, sent to the Commission by Nathan).

(5) For example, wooden puzzles were sold for FRF 95 in the 1997
Nathan catalogue, i.e. 33 times less than plastic assembly kits
intended to improve motor ability.

(6) As the establishments work towards achieving a balanced develop-
ment of the children, the products intended as teaching material
for a particular area, for example, motor ability, cannot generally
be replaced by those used in a different area, e.g. basic math-
ematics.

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(12) On the supply side, the annual catalogues include both
Nathan’s own products and products bought in by
Nathan for resale. The market is also divided into two
levels: production and sale to distributors (first level) and
purchase for resale to the final consumer (second level).
For example, firms that are well-established on the
French market such as CAMIF or Celda, which are only
distributors, are in competition with other firms which
are both manufacturers and distributors, such as Asco,
Nathan and Wesco.

(13)

Firms which only distribute (such as CAMIF) purchase
products from several suppliers and incorporate them
into a single range in the annual catalogue. In the case
of manufacturing distributors (such as Wesco) the range
in the annual catalogue includes the manufacturer’s own
products and products bought in for resale. In both
cases, the aim is to cover an establishment’s complete
requirements. Nonetheless, a supplier may specialise in
one of the segments. Nathan is known and highly
regarded as a specialist in furniture for children and
educational toys on the French market. It also benefits
from the reputation earned through its strong presence
as a publisher of textbooks for primary and secondary
schools (some [between 10 % and 50 %] of total sales in
France). Sales of educational material thus benefit from
the reputation of the textbooks.

(14) Demand stems primarily from nursery and primary
schools, creches, hospitals, playgroups and specialised
education centres for small children. Sales to such
establishments are based on on-the-spot visits and
demonstration. Products, prices and distribution chan-
nels and methods do not differ substantially from one
category of establishment to another; these establish-
ments constitute a category of demand separate from
retail sales to the general public.

(15) The relative size of each segment of the product market
is dependent on the content of the curricula, in particular
as regards schools which account for the largest share of
demand. The curricula determine the relative amount of
sport, music, language acquisition or mathematics (7). In

(7) For example, six-year olds in Spain will have 70 hours a year of
artistic activities compared with 143 hours a year for Belgian
pupils. (Eurydice report ‘Pre-school and primary education in the
European Union’, 1994).

turn, the extent of each learning area determines what
each school purchases and in what quantities (8).

(16) The choices made by the authorities responsible for
equipping public-sector establishments and those made
instructors and heads of private-sector
by teachers,
establishments also directly influence the volume and
precise composition of their purchases of educational
material; this is not true of retail sales to the general
public.

(17) Unlike retail goods, educational material sold to estab-
lishments must be suitable for use in groups, which calls
for tough materials and forms suited to that purpose.
Furthermore, as the goods are not intended for sale to
the final consumer, packaging plays a less important
commercial role than for similar goods sold retail (toys,
games, drawing materials).

(18) Differences in packaging, in distribution channels and
methods (catalogue, sales promotion or targeted demon-
stration) and the specific needs of establishments also
distinguish educational materials from the neighbouring
markets for traditional school supplies (pencils, paper,
books, etc.),
textbooks and audiovisual or
informatics equipment, although the latter are also
purchased by establishments looking after young chil-
dren and form part of their budgetary decisions.

school

(19)

In short, these factors indicate that the manufacture and
distribution of educational materials in establishments
looking after young children is a separate market from
identifiable neighbouring markets.

(20) The market is in turn divided into segments of products
which meet specific educational needs or vary consider-
ably in price. Nathan has amended the view it had put
to the Commission that educational material covered
several separate product markets. Contrary to the initial
view communicated by Nathan to the Commission (9),
the segments are not separate educational material
markets. The relevant market in this case is therefore the
market in educational material.

(8) For example, the inclusion of musical activities in the curriculum
will encourage manufacturers, with the help of educational
research teams, to develop suitable products. In the words of a
competitor in the field, ‘Educational material is designed with a
view to the requirements of teachers and educators, sticking as
closely as possible to school curricula’. In its reply of 1 October
1997 to the Commission’s request for information, Nathan also
based its design of the material and segments on the official
Ministry programme.

(9) Nathan’s reply of 1 October 1997 to the Commission request for

information (see recital 116).

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2. The geographic market

sector and private-sector establishments (whether or not
subsidised) also varies considerably from one Member
State to another (12).

(21) Apart

from products with a predominant

language
component, material is designed by manufacturers and
importers with a plurality of cultures and customs in
mind. The production and sale of educational material
at the first level of distribution does not have a solely
national dimension. Purchases from other Member
States (including products resold as they are and com-
ponents) by the main firms on the French market
account for some 25 % of the total.

(25) The fact

that

local authorities have regulatory and
budgetary powers in the area of education in most
Member States can thus create markets narrower than
the national markets. For example, the allocation of
powers for education, differences in curricula and cul-
tural habits split the Belgian market between the French
and Flemish-speaking communities (see recital 34).

(22) Like other manufacturers, Nathan produces and distrib-
utes products that can be used without a knowledge of
a particular language. They thus can be distributed
outside France. Sales by French manufacturers via dis-
tributors in other Member States account for 12 % of
their sales in the Community. Similarly, the Belgian
market is very international from the standpoint of
distributors’ sources of supply, most products being
imported from other Member States.

(23) On the other hand, competition at the second distri-
bution level (sales to establishments) are not homo-
geneous in the common market. All
the Member
States have establishments looking after small children.
Nevertheless, policies adopted at national or local level
play a crucial part in defining the curricula of the
establishments (10). The type of educational material
purchased and the frequency with which it is replaced
can differ between Member States.

(24) The rules governing purchases made by establishments
looking after young children also differ from one
Member State to another. Their budgets and tendering
procedures have a decisive impact on their choices,
depending on whether they are in the public sector, in
the private sector but working under contract, or in the
free private sector (11). The ratio of children in public-

(26)

(27)

(28)

(10) The age at which children first attend school varies from two to
four, depending on the educational system, whilst the total
number of hours of teaching varies according to age bracket and
also within the age bracket. A six-year old in Italy would be
expected to attend school for 1 080 hours a year, compared with
773 hours a year in the United Kingdom (Eurydice report cited
above).

(11) In the first two instances, purchases are usually grouped together
by administrative region and then delivered to each establish-
ment. The last two groups have more autonomy. The extent to
which orders are grouped together can also modify purchasers’
buying power in their dealings with producers and distributors.

Furthermore, although the quality of
the products
and their educational value is a prerequisite for the
development of sales, they must be based on a local
commercial presence, in particular for the purposes of
on-the-spot demonstration. In addition, in view of the
size of the transaction costs compared with the value of
orders which would result from competitive tendering
by suppliers from several Member States or several
regions in certain Member States, the establishments,
for budgetary reasons, essentially obtain their supplies
locally, regionally or nationally.

For example, direct or indirect sales to the final consumer
in other Member States by distributors operating only
on the second level on the French market are insignifi-
cant (under 1 % of the total in the common market). By
comparison, the share of sales in the common market
excluding France held by French producers/distributors
operating at
(Nathan,
Edrasco/Asco, Wesco) is 12 times larger.

the two distribution levels

In view of the foregoing, the relevant geographic dimen-
sion of the market in the production and wholesale
distribution of educational material takes in several
Member States on the supply side, as evidenced by the
agreements concluded by Nathan which are the subject
of these proceedings. Retail selling and final demand
tend, however, to be confined more to a national or
regional dimension.

(12) From 13,6 % of French children to 39,5 % of Belgian children in
the private sector (subsidised or not), and from 86,4 % of French
children to 60,5 % of Belgian children in the public sector
(Eurydice report cited above).

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3. Position of the parties

(29) The value of the relevant market in the Member States
concerned has to be approached by estimating the order
of magnitude (13). As supply and demand are scattered
over a broad, heterogeneous area, public statistics do
not distinguish between purchases of educational
material and other operating expenditure by schools,
nor do they identify purchases by private educational
establishments and, especially, by other centres looking
after young children such as holiday camps and hospi-
tals.

(30)

In 1997, Nathan’s turnover in the Community market
for educational material was FRF [between 75 million
and 100 million] *, of which FRF [between 65 million
and 90 million] * was in France. Sales to Borgione,
Smartkids and Bricolux, totalling FRF [...] *, amounted
to [less than 10 %] * of Nathan’s total sales in the
Community and [less than 10 %] * of its sales in France.

ratio of expenditure on educational material per child is
FRF 89, taking all types of establishment together. This
gives Nathan a market share of [between 5 % and
15 %] *.

(33) There are very few reliable aggregate data concerning
the different segments of the product market. Within
the different categories of establishment, Nathan held
[between 5 % and 15 %] * of the market for educational
material for French State nursery schools in 1995. With
regard to the different product segments, Nathan held a
strong position in France in the learning and games
segments [between 10 % and 25 %] * and in the furniture
segment [between 25 % and 35 %] * (16).

(c) French-speaking Belgium

(a) The Community

(31) As a rough guide, a value of FRF 3 774 million for 1997
can be estimated for the entire Community market (14).
Nathan and Edrasco/Asco, the largest and second-largest
French manufacturers/distributors, appear to have held
some 5 % of the total in 1997, with Nathan holding
[less than 5 %] *.

(34) The distribution of powers for education, differences in
curricula and cultural habits split the Belgian market
between the French and the Flemish-speaking communi-
ties. The distributors questioned sell either in Flanders
and Brussels or in Wallonia and Brussels, but not in
Wallonia and Flanders. Nathan products are distributed
by different distributors in Flanders and Wallonia, as are
Asco products.

(b) France

(32) According to the estimates provided by the firms
questioned, the nine leading market participants hold
57,6 % of the French market, the value of which is
estimated at FRF 654 862 000 in 1997 (15). The resulting

(13) ‘Survey of the market for educational material’ sent to Nathan
and Bricolux by the Commission on 30 September 1999.
(14) Estimate based on a ratio of expenditure per child equivalent to
that for France, including all categories of schools, i.e. FRF 89
and a population of 42,4 million children under the age of nine
in the fifteen Member States in 1997. As the ratio differs
depending on the Member State, extrapolating the French ratio
to cover the entire Community amounts to using it as an average
between the Member States where expenditure per child is less
and those where it is more. The estimate for the Community is
provided as an order of magnitude; the market shares to be taken
into account are those for the various exclusive territories.
(15) This estimate is based on the total turnovers of the nine leading
participants, as communicated to the Commission, plus the
remaining 42,4 % which, taking an average of their estimates, is
held by the other smaller participants. (‘Survey of the market for
educational material’, cited above).

(35)

In French-speaking Belgium, for which Bricolux holds
the territorial exclusivity, the total value of the market is
in the region of FRF 42 542 000 (17). This means that

(16) Nielsen, ‘Ressources et dépenses des écoles maternelles publiques’,
July 1996, pp. 83 et seq. However, the market analysed in that
study is much larger than the relevant market in the present case.
The study includes books, audiovisual material etc., where a
language component is decisive. The figure of [between 5 % and
15 %]* for State schools alone is therefore an underestimate as
regards educational material only. The small gap of [less than
5 %]* compared with the market share of all establishments and
all educational material segments in 1997 is also due to the fact
that Nathan has a stronger presence than its competitors in other
segments such as nurseries, day-care centres, hospitals and
holiday camps, which account for 24,2 % of total demand.
(17) On the basis of 478 000 children reported by the French-
speaking Community authorities and an expenditure of FRF 89
per child (ratio for France). The French ratio is well above the
Bricolux estimates of the ratio per pupil
in French-speaking
Belgium (ratio per pupil BEF 75, letter of 26 September 1997)
and those given by Viroux, a Bricolux competitor (ratio per pupil
BEF 300, letter of 17 June 1999).

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Bricolux’s sales of Nathan products accounted for [5 %
to 15 %] * of the market in 1997 (18).

(d)

Italy

(36) The value of

the Italian market

in 1997 may be
estimated at FRF 491 003 000, taking all establishments
together (19), even if Borgione operates as a distributor of
school equipment only for the provincial centres of the
Italian Education Ministry (Direzioni Didattiche, 59 %),
municipalities (comuni, 31 %) and other resellers (10 %).
Nathan equipment accounts for [between 20 % and
30 %] * of Borgione’s turnover.

(37) Taking account of the sales of Nathan products, plus the
margin added by Borgione, Nathan’s share appears to be
[below 5 %] *. Like Borgione (20), the Italian distributors
contacted confirm that they do not sell educational
material outside Italy.

products are also sold to establishments or members of
the public by wholesalers [less than 5 %] * and retail
booksellers [less than 50 %] (21) *. Nathan is therefore
active on the upstream market in production and sales
to distributors and also, to a significant extent, on the
downstream market in direct distribution to establish-
ments in France. A potential competing source of
supplies of Nathan products for resale in France are
reimported products marketed through the network
outside France.

(40)

In the Community; Nathan products are distributed
in 11 Member States through a network of some
20 distributors. Sales to the latter account for [less than
20 %] * of Nathan’s turnover in educational material.
In Spain/Portugal, Italy, French-speaking and Flemish-
speaking Belgium, Sweden, Finland and,
for certain
products, the United Kingdom/Ireland, a local distributor
holds the exclusive territorial reselling rights (22).

(e) Sweden

2. Distribution agreements with certain sole dis-

tributors

(38) On the basis of
the size of

the population under the age of
nine,
the market may be estimated at
FRF 102 430 000 for 1997. Sales of Nathan products
are estimated at [less than 5 million] * for the same year,
so that Nathan’s market share was [less than 5 %] *.

(a)

Italy

D. NATHAN’S DISTRIBUTION NETWORK IN EUROPE
AND THE AGREEMENTS CONCLUDED
WITH ITS EXCLUSIVE DISTRIBUTORS

1. Nathan’s distribution network

(39) Nathan is directly responsible for distribution [between
50 % and 70 %] * of its products in France; this figure
comprises [less than 30 %] * through sales representa-
tives
(both independent and paid employees) and
[between 30 % and 40 %] * by mail order. Nathan

(18) Letter from Nathan of 28 October 1999 in response to the
‘Survey of the market for educational material’ sent to Nathan
and Bricolux on 30 September 1999 putting its sales to Bricolux
in 1997 at FRF [less than 5 million]* adjusted by the coefficient
of [...]* applied by Bricolux as its gross margin.

(19) In the absence of any compatible estimates provided by the
Italian firms questioned, the estimate is based on the ratio of
expenditure per child of FRF 89 calculated for France, which
includes all categories of establishment.

(20) Letter from Borgione of 2 October 1997, attached to the

statement of objections.

(41) The distribution contract concluded between Nathan
and Borgione on 1 April 1993 gives the latter the
exclusive rights in respect of the Nathan educational
material listed in its annual catalogue Matériel E´ ducatif
for Italy. Under the contract, Nathan charges Borgione a
supply price of [less than 55 %] * of the French catalogue
price inclusive of tax. The prices are guaranteed for one
year. The contract, initially concluded for two years, has
since been extended.

(21) In a statement forwarded by Nathan to the Commission, the
manager of Nathan’s educational material department explained
that, ‘We also work with booksellers (about 200). These act as
our letterboxes ... Our customers can use either the order form
in the catalogue, or go to their local bookseller. The latter enjoys
a discount of [15 % to 25 %]* on our catalogue price, depending
on the turnover achieved.’

(22) Abacus has been the de facto exclusive distributor since 1989 of
Nathan products in Spain and Portugal. The Nottingham Group
has held the exclusive distribution rights for certain products in
the Nathan catalogue for the United Kingdom and Ireland since
1993. Their commercial relations with Nathan are not, however,
formalised in a written contract. In its answer to the request for
information from the Commission, the Nottingham Group states
that it does not regard itself as an exclusive distributor for
Nathan.

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(42) Under Article 2 of the contract, the exclusivity covers
‘direct sales to all pre-primary and primary Italian-
speaking establishments, in particular schools, day-care
centres, nurseries and leisure centres in Italy’. Borgione
undertakes ‘not to market the products outside the
territory covered by the exclusivity’ and ‘not to market
products competing with products sold by Nathan’
(Article 3).

(43) Under Article 3 of the contract, Borgione also undertakes
‘to provide Nathan with a list of the prices at which
Borgione is selling Nathan products on its territory. The
prices, converted into French francs, shall not exceed the
price at which Nathan sells the same products in France
by more than 5 %’.

(44) The provision concerning the maximum price is sup-
plemented by Article 10 of the contract which stipulates
that, as regards the commercial conditions attached to
the sale of Nathan material
‘Borgione ... will refrain
from all commercial conduct (special offers, discounts,
rebates, clearance sales, etc.) liable to damage the Nathan
brand. Borgione may reduce the prices for end-of-line
articles in the Nathan catalogue’.

(45) According to the estimates given by Nathan, the differ-
ences between the sales prices charged by Borgione and
those in the 1997 French Nathan catalogue range from
[– 15 % to – 25 %] * to [+ 15 % to + 25 %] * (23).

territory covered by the exclusivity, not
to market
products competing with products sold by Nathan and
not to market any Asco products’, and ‘to agree with
Nathan on how competition from other products sold
by Smartkids is to be avoided’ (Article 3).

(49) Article 3 also requires Smartkids to undertake ‘to provide
Nathan with a list of prices for Nathan products sold by
Smartkids in Sweden. The prices, exclusive of tax and
converted into French francs, must be less than or equal
to Nathan prices exclusive of tax multiplied by a factor
of 1,6’.

(50) As in the case of Borgione, Nathan’s contract with
Smartkids stipulates, as regards the commercial con-
ditions applied to customers Smartkids ‘will refrain
from all commercial conduct (special offers, discounts,
rebates, clearance sales, etc.) liable to damage the Nathan
brand. Smartkids may reduce the prices for end-of-line
articles in the Nathan catalogue’.

(51) According to Nathan’s estimates, the differences between
the sales prices charged by Smartkids and those in the
1997 French Nathan catalogue range from [+ 40 % to
50 %] * to [+ 75 % to + 85 %] * (24).

(b) Sweden

3. French-speaking Belgium

(46) Smartkids has operated as a distributor in Sweden since
1995. About half its turnover in 1997 was accounted for
by Nathan products. Smartkids operates on a relatively
fragmented market and is the third largest distributor in
Sweden of educational material, excluding textbooks
and software.

(47) The distribution agreement concluded between Nathan
and Smartkids on 1 July 1996, gives the latter the
exclusive rights in respect of the Nathan educational
material listed in its annual catalogue Matériel E´ ducatif
for ‘sale to all Swedish pre-primary and primary estab-
lishments, in particular schools, day-care centres, nurser-
ies and leisure centres located in Sweden’ (Article 2).

(48) Under the contract, Nathan charges Smartkids a supply
price of [less than 55 %] * of the price before tax
(excluding VAT)
listed in the Nathan catalogue for
France. The prices are guaranteed for one year. Smartkids
undertakes ‘not to market the products outside the

(52) Bricolux has distributed Nathan products in Belgium
since 1986. Commercial relations between Nathan and
Bricolux are based on commercial usage and have not
been formalised by a written contract. The parties have
been negotiating such a contract since August 1992 but
have been unable to date to condense their commercial
relations into a single document. According to the
correspondence exchanged between the parties, Bricolux
has de facto exclusive territorial rights to distribute the
education material in Nathan’s annual catalogue Matériel
E´ ducatif in French-speaking Belgium.

(53) Article 3 of a draft contract drawn up by Nathan on
12 November 1992 (2 September 1993 according to
Bricolux) required Bricolux to give the undertaking ‘not
to market such [Nathan] products outside the territory
covered by the exclusivity’. The exclusivity also related
to pre-primary and primary establishments and required
Bricolux to meet all orders from dealers.

(23) Comments by Nathan of 27 October 1998, p. 13, Annex 6.

(24) Comments by Nathan of 27 October 1998, p. 13, Annex 6.

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(54) Under the draft contract of 2 September 1993, Bricolux
was also required to ‘provide Nathan with a list of prices
for Nathan products sold by Bricolux in its sector. The
prices, converted into French francs, are to be equivalent
to the prices set by Nathan for the same products in
France, with a possible variation of plus or minus 10 %’.

prices for certain products, in the following terms: ‘We
should in any event inform you that we have agreed to
apply the yellow points in 1994, i.e. resale prices that
are lower than or the same as in 1993’ (28). Bricolux
automatically changed the prices of those products to
reflect price reductions or price freezes on the same
articles in France, leaving its margin unchanged.

(55) Bricolux answered by letter of 5 November 1993 as
follows: ‘Whilst it is clear that the eventual aim is to sell
a Nathan product at the same price throughout Europe,
it is just as obvious that this will not be easy to
achieve’ (25).

(56) By letter dated 13 January 1994, Nathan (26), noting that
the abovementioned contract had not been signed, in
order to define the conditions governing its commercial
relations with Bricolux for 1994, accepted the proposal
to fix prices put forward by Bricolux, in the following
terms: ‘We accept for 1994 that the maximum selling
price for Nathan products in Belgium should be the
French selling price converted into Belgian francs + 15 %.
But wherever possible we should like you to apply the
same prices as in France’. The letter stipulates a supply
price for Bricolux of [less than 55 %] * of the 1994
French Nathan catalogue price, exclusive of taxes ([less
than 55 %] * inclusive of taxes).

(57) The effort to establish similar commercial conditions for
Nathan products throughout Europe is evident in a letter
to Bricolux where Nathan refers to their conversations:
‘We also raised the problem of discounts to dealers. I
feel that the discount of [...] * granted by Bricolux to its
distributors is too high. Nathan grants a discount of
[between 15 % and 25 %] * to booksellers, which gives
some control over the prices charged to schools’. When
Larousse, a subsidiary like Nathan of CEP Communi-
cation, occasionally sold Nathan material in Belgium in
1991, it gave the following undertaking to Bricolux: ‘If
the educational material is contained in the Nathan and
MDI catalogues, our role will be limited either to
forwarding the order to you, or to meeting it ourselves
as a stop-gap measure. We will align our prices on those
charged by Bricolux’ (27).

(58)

In a letter dated 24 January 1994 in which Bricolux
rejected several provisions of the draft contract and any
clause permanently fixing resale prices, Bricolux stated
that it followed Nathan’s instructions for fixing the resale

(25) Draft contract of 2 September 1993. Bricolux letter to Nathan of

5 November 1993.

(26) Letter from Nathan to Bricolux.
(27) Letter from Ms Marrot, of Nathan, to Mr Collard, of Bricolux,
25 February 1993. Letter from Mr Hublau, Director-General of
Larousse Belgium, to Mr Collard, of Bricolux, 9 December 1991.

(59) After receiving this information, in reply to a question
from the Commission on the existence and frequency of
promotional operations, Bricolux explained that,
‘We
can also grant discounts at trade fairs (maximum twice
a year). But,
in general, we do not mount one-off
promotions, educational material is not the sort of thing
that is sold at fairs’ (29).

(60) According to Nathan’s estimate, the differences between
the sales prices charged by Bricolux and those in
Nathan’s 1997 catalogue for France range from [– 60 %
to – 50 %] * to [+ 25 % to + 35 %] * (30).

(61) Amongst its retailers of Nathan material, Bricolux con-
cluded an exclusive contract with the bookshop La
Découverte in Brussels in 1990. When Bricolux termin-
in January 1993, La Découverte
ated the contract
obtained supplies of Nathan material
from another
distributor in France, the booksellers Vauban in Maubeu-
ge (31). Deliveries were made in France, at the initiative of
La Découverte,
for resale in Walloon Belgium and
Brussels. With a view to putting an end to this parallel
trade into its exclusive territory, Bricolux wrote to
Vauban as follows:
‘Further to our telephone conver-
sation and the letter sent to you by Mr Grimbert of
Nathan, we should like to clarify matters as follows ...
We therefore require a letter from you assuring us that
you will no longer deliver any supplies to La Découverte
... quite simply because for nearly two years now, we
have been tracking La Découverte in order to find out
its sources and it was only at the beginning of March

(28) Letter from Bricolux to Nathan of 24 January 1994. On a fax of
12 January 1994 from Nathan (Ms Marrot) to Bricolux (Mr Col-
lard), in which Nathan refers to ‘the agreement of Bricolux that
in the Belgian and Luxembourg catalogues we should keep the
yellow marks relating to price reductions or unchanged prices,
as you pass it on to your prices in BF’, there is a hand-written
note signed by Alain Collard reading,
‘Okay, no objection to
leaving the yellow marks’.

(29) Letter from Bricolux to the Commission of 2 December 1997
replying to a request for information dated 24 November 1997.

(30) Comments by Nathan of 27 October 1998, p. 14, Annex 6.
(31) Letter from Bricolux dated 26 September 1997.

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that we obtained proof that the bookseller concerned is
indeed Vauban’ (32).

(62) The Nathan letter to which Bricolux refers is dated
21 March 1995 and it informs Vauban: ‘Following our
telephone conversation of 20 March, I can confirm that
we have an exclusive distributor in Belgium with whom
we have been working for several years to develop our
presence on this market. We do not want our distributor
to be destabilised as a result of outside commercial
operations. The distributor can, for completely valid
reasons which are always fully explained to us before any
decision is taken, refuse to serve certain customers’ (33).

(63)

In reply to Vauban’s wish to continue to supply La
Découverte, Bricolux threatened as follows:
‘As your
letter (of 14 April 1995) appears to indicate that you
will continue to supply Belgium, we must inform you
that we shall
flood the town halls and schools of
northern France with Nathan and Bricolux catalogues at
prices which will without question ensure that your
customers consider your prices to be extortionate. It is
for you to decide whether the game is really worth the
candle and whether you want a trade war to the finish.
Check with Nathan, they will confirm that ... we have
powerful methods of getting our own way’ (34).

‘Clearly if a bookshop that

(64) The fact that Bricolux considered competing actively
outside its exclusive territory solely in response to
competition encountered on its own territory is attested
to by its letter of 20 November 1995 to the French
competition authorities, who then turned the case over
is
to the Commission:
well established in Brussels distributes French Nathan
catalogues that it receives from the booksellers Vauban,
increases the prices to current levels in Belgian francs
and sells to our customers, it naturally causes us serious
financial and moral damage as it destroys our credibility’.
Bricolux does not point out that, in general, such sales
to its customers must, if they are to compete with its
own, be backed by prices or services that are more
attractive than those it offers itself. The letter continues:
‘Whilst I can understand that they cannot refuse to sell
in their own shop, which would be contrary to the
Treaty of Rome, they are of course prohibited from
quoting prices and invoicing in Belgium for Nathan or

Asco goods which they know are protected by an
exclusive dealing contract ... whilst in Belgium we have
in France the market is
exclusive dealing contracts,
completely free. What is there to prevent us from
flooding northern France with our Bricolux, Nathan and
Asco catalogues at prices that would make Vauban look
like thoroughgoing scoundrels?’ (35).

(65)

If engaging in active competition was not to be con-
sidered, alternative solutions to the problem posed by
Vauban were also raised in parallel with Nathan.
Methods were studied as early as 1995 of preventing
Bricolux from being upset by Vauban, as explained to
Bricolux by Nathan:
‘Vauban: I and the commercial
manager for France are studying means of putting
on pressure to prevent Vauban from supplying La
Découverte and Belgian Schools. Here too I shall inform
the
you of what we decide to do. Unfortunately,
European directives prevent us from not supplying
them’ (36). It is clear that Vauban also supplied Belgian
schools direct, and that this too was to be prevented.

(66) Two years later, Bricolux informed Nathan that parallel
imports into Belgium from France were continuing:
‘Confirming our talks 95 and 96 concerning parallel
imports of Nathan products into Belgium, we confirm
that La Découverte is still distributing Nathan’s French
catalogue for 97 with Belgian prices like ourselves, and
is still being supplied by Vauban or another French
bookseller. I thought that abolishing discounts would
put an end to this sort of playing around’ (37).

(67) Nathan’s involvement in the coercive measures taken
with regard to Vauban is confirmed by Bricolux in
another letter more than two years after pressure was
first exerted on Vauban: ‘Mr Grimbert claimed that if the
discounts given to Vauban were abolished the problem

(32) Letter from Mr Collard, of Bricolux, to Ms Cagnon, Librairie
Vauban, 23 March 1995. Mr Grimbert was export manager of
Nathan’s educational material department.

(33) Letter sent by Nathan on 14 January 1999 with its comments to

clarify points raised at the hearing on 3 December 1998.

(34) Letter from Bricolux to Vauban of 4 May 1995, sent by Bricolux
with its comments on 11 December 1998 to clarify points raised
at the hearing on 3 December 1998.

(35) Letter from Bricolux to Mr Alvain, Department for Competition,
Lille, sent by Bricolux, with its comments, on 11 December 1998
to clarify points raised at the hearing on 3 December 1998.
(36) Fax from Ms Marrot, head of the export department at Nathan,
to Mr Collard at Bricolux, dated 25 October 1995; forwarded by
Bricolux, with its comments, on 11 December 1998, to clarify
points raised at the hearing on 3 December 1998, and sent for
comment to Nathan, which replied on 14 January 1999, to
clarify points raised at the hearing on 3 December 1998.

(37) Fax from Mr Collard of Bricolux to Nathan’s export department

dated 23 May 1997.

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would sort itself out. You will see from the attached
document that this has not happened and that La
Découverte continues to sell Nathan products, short-
circuiting our own agreements and causing us moral
and commercial damage’ (38)

II. LEGAL ASSESSMENT

A. ARTICLE 81(1) OF THE EC TREATY

(68) Article 81(1) of the EC Treaty prohibits as incompatible
with the common market
‘all agreements between
undertakings ... which may affect trade between Member
States and which have as their object or effect the
prevention, restriction or distortion of competition
within the common market, and in particular those
which ... directly or indirectly fix purchase or selling
prices or any other trading conditions ... [or] share
markets or sources of supply’.

1. Agreements between undertakings

(69) Nathan,

its exclusive distributors Bricolux, Borgione,
Smartkids and its other distributors in other Member
States are engaged in the economic activity of producing
or purchasing goods for resale and are therefore ‘under-
takings’ within the meaning of Article 81(1) of the EC
Treaty.

(70) Nathan concluded an exclusive distribution agreement
for Italy with Borgione which has governed their com-
mercial relations since 1993 and the terms of which are
described in recitals 41 to 45 of this Decision. Nathan
also concluded an exclusive distribution agreement
for Sweden with Smartkids which has governed their
commercial relations since 1995 and the terms of which
are described in recitals 46 to 51. Bricolux, in agreement
with Nathan, has since 1986 distributed Nathan edu-
cational material
in Walloon Belgium and French-
speaking Belgium on the terms described in recitals 52
to 67. Similarly, Nathan sells its products for resale to
independent producers without territorial exclusivity in
France and in other Member States of the Community
(recitals 39 and 40).

(71) The provisions of the exclusive contracts concluded
between Nathan and its distributors Borgione and Smart-
kids, and the terms on which Nathan and Bricolux jointly
interpret or implement the commercial exclusivity held
by Bricolux for the distribution of Nathan material
within the Nathan distribution network are agreements
between
of
Article 81(1) of the EC Treaty.

undertakings within

the meaning

(38) Fax from Mr Collard of Bricolux to Mr Langlois-Meurinne,

Director-General of Nathan, dated 30 May 1997.

2. The object or effect of restricting or distorting

competition

(72) The agreements concluded between Nathan, Borgione,
Smartkids and Bricolux have the object of restricting or
distorting competition within the common market
inasmuch as they are aimed at isolating territories by
preventing or restricting parallel sales within or outside
those territories and at fixing resale prices, as demon-
strated below.

(a) Restrictions on parallel sales inside and outside the

contract territories

(73) Under the agreements concluded with Borgione and
Smartkids, Nathan grants them, for Italy and Sweden
respectively, the exclusive right to sell to all pre-primary
and primary establishments, excluding those under the
aegis of the French Education Ministry. The exclusivity
is also part of the agreements between Nathan and
Bricolux
and French-speaking
Belgium. Nathan agrees to forward any orders from
those sources to its exclusive distributors, and hence not
to supply those territories direct.

covering Wallonia

(74) The agreements between Nathan, Borgione and Smart-
kids include the obligation not to market the products
outside the territory covered by the exclusivity.

(75) As far as agreements intended to apply within the
Community are concerned, the Court has already held
that ‘an agreement intended to deprive a reseller of
his commercial freedom to choose his customers by
requiring him to sell only to customers established in
the contractual territory is restrictive of competition
within the meaning of Article 85(1) of the EC Treaty’ (39).

(76) This obligation to respect the exclusive territory absol-
utely, also present in the agreements with Bricolux, is
confirmed by the way it is implemented by Nathan and
Bricolux. The latter refrains from selling outside its
exclusive territory and considers doing so only as a
means of commercial reprisal against another distribu-
tor, Vauban, which has stepped into its exclusive terri-
tory by selling Nathan products directly or indirectly to
Wallonia and French-speaking Belgium, as the Bricolux
letters indicate (see recitals 63 and 64). In this case, the
products in question were being sold and delivered in
France to La Découverte, a distributor which competes
with Bricolux and resells in Belgium.

(39) See most recently C-306/96 Javico v Yves Saint Laurent Parfums
[1998] ECR I-1983, paragraph 13, citing in particular Case
86/82 Hasselblad v Commission [1984] ECR 883, paragraph 46
and Case C-70/93 BMW v ALD [1995] ECR I-3439, para-
graphs 19 and 21.

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(77) Bricolux’s exclusivity is the reason given to Vauban by
Nathan when sales are made into the Bricolux territory
by a competing Belgian distributor in order to avoid
Bricolux being destabilised as a result of outside com-
mercial operations on the part of other distributors (see
recital 62). The exclusivity, as interpreted by Nathan,
thus legitimately prohibits such sales. When it con-
sidered ways of preventing Vauban from supplying, the
customers that Nathan was trying to retain were stated
to be the Belgian schools in the territory of Bricolux
(see recital 65). Bricolux invoked the same exclusivity
agreements between them and the assurances given by
Nathan when it complained to Nathan that they had
been infringed by sales to its Belgian competitor (see
recital 67).

(78) The Court has held that ‘an agreement which requires a
reseller not to resell contractual products outside the
contractual territory has as its object the exclusion of
parallel
imports within the Community and conse-
quently restriction of competition in the common
market. Such provisions, in contracts for the distribution
of products within the Community, therefore constitute
by their very nature a restriction of competition’ (40).

(79) The agreements between Nathan and its exclusive dis-
tributors which prevent sales outside the territory, as
illustrated by their implementation, are therefore aimed
at preventing or restricting sales to competing distribu-
tors who might sell within an exclusive territory or to
territory. They thus prevent
customers within that
parallel trade and confer absolute territorial protection
within the exclusive territories.

(80) Similarly, by preventing those exclusive distributors
from marketing Nathan products outside their territory,
the agreements are aimed at protecting Nathan’s distri-
bution network and the various territories of the Member
States outside French-speaking Belgium, Italy and Swed-
en from sales by Bricolux, Borgione and Smartkids. Such
territories include France in particular; what is protected
here is the 200 independent distributors for Nathan
(booksellers and wholesalers), and indeed sales by
Nathan itself.

25 %] * discount on the catalogue price (see recitals 39
and 57) and that paid by the exclusive distributors
outside France, [less than 55 %] * exclusive of tax or [less
than 65 %] * inclusive (see recitals 41, 48 and 56), the
latter are potentially able to compete against the French
distributors.

(82)

It would appear that the prices set for certain products
by Borgione and Bricolux, both located in areas close to
the French border, are lower by [...] * (see recitals 45 and
60) than the Nathan catalogue for France. Competing
French distributors would have had difficulty in offering
lower prices for the same products. Indeed, the ability to
cut prices in France is also referred to by Bricolux simply
as a warning in the event that its exclusive territory is
not respected (see recitals 63 and 64).

(83) The desire to restrict competition outside the exclusive
territory also explains Nathan’s request to Bricolux that
it charge the same prices as in France (recital 56) as does
it reprimand when Nathan considers that the [...] *
discounts Bricolux grants to its distributors are too high
compared with the [between 15 % and 25 %] * discounts
that Nathan grants its distributors in France. The same
desire to harmonise the price of Nathan products is
displayed by Larousse Belgique, a subsidiary like Nathan
of the CEP Communication group at the relevant time
(see recital 57).

(84)

In principle, the profits earned by Nathan on its total
sales should not be directly dependent on discounts or
prices subsequently applied by Bricolux within its own
exclusive territory. However, direct or indirect sales by a
distributor re-exporting from its exclusive territory may
compete against Nathan’s direct sales in France ([between
50 % and 70 %] * of the total) or those of its distributors
(the remaining [between 30 % and 50 %] *), sales which
can leave a larger trading margin for Nathan than the
margin allowed to Bricolux and Borgione.

(81)

It is a fact, in view of the difference between the price
paid by the French distributors, i.e. [between 15 % and

(85)

(40) Case C-306/96 Javico v Yves Saint Laurent Parfums [1998]
ECR I-1983, paragraph 14, which refers also to Case C-279/87
Tipp-Ex v Commission [1990] ECR I-261, paragraph 22, and
Case 19/77, Miller International Schallplatten v Commission
[1978] ECR 131, paragraph 7.

In this context, the obligation not to market contract
products outside the exclusive territory prevents poten-
tial customers,
in particular French customers, from
benefiting from such lower prices, and restricts compe-
tition with local booksellers and with Nathan itself in its
capacity as direct distributor to schools. The Belgian
schools also ultimately suffer from the restricted compe-
tition resulting from the limitation of sales by French
distributors either to customers in Bricolux’s territory or
to Belgian distributors competing with Bricolux that
obtain supplies in France for resale in Belgium.

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b) Fixing of retail price levels

(86) The restriction of the freedom to sell outside an exclusive
territory or into such a territory is supplemented and
reinforced, in the case of Borgione and Smartkids, by
the ban on all special offers, discounts, rebates or
clearance sales liable to damage the Nathan brand (see
recitals 44 and 50). Even though there is no explicit and
objective definition of the level at which special offers,
rebates or discounts harm the brand image, the freedom
of Borgione and Smartkids to grant discounts is limited,
a fact of which they must be aware, compared with what
it would be if they were totally free to fix their final
price, i.e. the catalogue price minus discounts, rebates or
special offers. Price competition is distorted or restricted
as a result, as the Commission has already noted in the
past in respect of this type of clause in its Decision
87/17/EEC (IV/30937 — Pronuptia) (41). The clause in
particular can be invoked if larger discounts are given
than those granted by Nathan to its distributors in
France, something which Nathan ordered Bricolux not
to do.

(87) On the other hand, the Commission no longer believes
that an obligation not to exceed a maximum resale price,
in this case a multiplier of the price charged in France
by Nathan for the same products (see recitals 43
and 49), in itself necessarily restricts competition (see
communication from the Commission on the appli-
cation of the Community competition rules to vertical
restraints) (42). However, the maximum price imposed
here serves as a ceiling for a range of resale prices, at the
bottom end of which is the ban on promotional
discounts. As a result, the agreements fix effectively a
resale price level (after discounts and rebates), although
the range is fairly broad.

(88)

Fixing a resale price level distorts price trends on the
market and has the object of restricting competition. On
the one hand, a distributor must comply with the
contractual commitments which restrict its freedom to
define its pricing policing. On the other hand, Nathan
is endeavouring artificially to harmonise prices and
discounts in relation to those applied in France. The
fixing of prices designed to distort the normal evolution
of prices on the markets is specifically referred to in
Article 81(1)(a) of the EC Treaty, as the Court of First
Instance of the European Communities has recalled (43).

(89) The evidence shows nevertheless that neither Borgione
nor Smartkids adhered to the maximum resale price
stipulated in their agreement with Nathan, though this
cannot be used to argue that the price provision did not

form part of the agreement or that
the obligation
could not be invoked by Nathan with a view to the
harmonisation of discounts sought by Nathan in the
Bricolux case. However, as regards Bricolux, there is no
evidence that the fixing of prices was either agreed or
implemented by Bricolux under its agreement with
Nathan, despite the latter’s repeated attempts.

(90)

In short, the agreements between Nathan and its distribu-
tors include restrictions of competition which, by pro-
hibiting sales outside the territory or in the case of
Borgione and Smartkids limiting the freedom to fix
prices and conditions of resale, reinforce each other.
Nathan thus aims to expand the sale of its products in
the Community provided that it does not compete
i.e. France. In
against sales on its principal market,
isolation or in combination,
the
agreements have the object of restricting competition
within the meaning of Article 81(1) of the EC Treaty.

the provisions of

3. Appreciable effect on trade between Member

States

(91) The agreements concerned here lay down the conditions
on which products which Nathan manufactures and
distributes in France are sold by Nathan to distributors
for resale in other Member States. The agreements
concluded between Nathan and its distributors in
French-speaking Belgium, Italy and Sweden lay down the
conditions on which Bricolux, Borgione and Smartkids
resell products acquired from Nathan, and restrict their
sales to other Member States. In the other Member
States, the products sold by Nathan are distributed by
some 20 independent distributors, whereas in France
they are distributed by some 200 independent distribu-
tors. The restriction aimed at preventing or putting an
end to sales by these distributors into the exclusive
territories are liable to affect trade between France,
Belgium, Italy and Sweden.

(92) However, agreements such as those concluded by
Nathan which concern cross-border sales are caught by
Article 81(1) of the EC Treaty only if they are likely to
affect trade between Member States to a significant
extent (44). The Court of Justice has held that this means
that ‘it must be possible to foresee with a sufficient

(41) OJ L 13, 15.1.1987, p. 39, paragraph 12(c).
(42) OJ C 365, 26.11.1998, p. 3.
(43) Case T-13/89, ICI v Commission [1992] ECR II-1021, para-

graphs 310 and 311.

(44) See judgment in Javico cited above, paragraphs 15 to 17,
which refers to Case 5/69 Völk v Vervaecke [1969] ECR 295,
paragraph 5.

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degree of probability, on the basis of a set of objective
factors of law or of fact, that [such agreements] may
have an influence, direct or indirect, actual or potential
on the pattern of trade between Member States in such
a way as to cause concern that they might hinder
the attainment of a single market between Member
States’ (45).

be compromised by the re-imports that its agreements
are aimed at restricting or preventing, chiefly from
Belgium and Italy, as they share its borders. It is not,
however, possible to estimate what the figure would
have been if Bricolux and Borgione had been able to sell
outside their territory without restrictions. In any event,
the incorporation of restrictions in the agreements
indicates that Nathan could have estimated that the
potential volume was far higher.

(93) The effect which the agreement between Nathan and its
distributors may have on trade between Member States
should be assessed in particular on the basis of the
position and importance of the parties on the market for
educational material (46). In a case involving agreements
aimed at partitioning the markets of Member States
through export bans, the Court of Justice held that it
was relevant that the Commission should examine both
the position of the producer on its national market
(between 5 % and 6,1 % in the present case) and the
extent of its production as well as the existence of
exports and the pricing policy adopted in order to
determine whether trade between the Member States
concerned might be significantly affected [see Com-
mission Decision 76/913/EEC (IV/29018 — Miller Inter-
national Schallplatten GmbH) (47) and the judgment of
the Court of Justice in that case (48)].

(94) Nathan’s share of the French market, which is the chief
market which its agreements with Bricolux, Borgione
and Smartkids are designed to protect from direct and
indirect sales by all three, totals [between 5 % and
15 %] * (see recital 33). On certain market segments, it
ranges [between 10 % and 35 %] *. Bricolux’s sales of
Nathan products amount to some [between 5 % and
15 %] * of the market on its own territory (see recital 35).
Furthermore, Nathan is potentially in competition with
its distributors in France (see recital 39).

(96)

the existence of an export price that

Furthermore, whether or not justified by the volume of
purchases,
is
considerably lower, by some [less than 55 %] * of the
price excluding tax in France, as compared with the
[between 15 % and 25 %] * applied by Nathan to its
distributors in France (see recitals 39, 41 and 57) and of
prices charged by Bricolux in Belgium and Borgione in
Italy that are significantly lower than French prices (from
[...] * to [...] * less) (see recitals 45 and 60) are facts that
would have made it economically feasible to reimport
into France if there had been no restrictions on selling
outside one’s exclusive territory.

(97)

Furthermore, Nathan itself purchases products as com-
ponents or for resale in France from firms in the different
Member States, and is in competition with firms which
do the same. Such purchases amount to some 20 % to
25 % of the costs or sales of the leading competitors on
the French market (see recital 21). As a result, the
restriction of competition aimed at protecting Nathan
on the French market is likely to affect the volume of
purchases of its competitors and hence the flow of trade
between the relevant Member States.

(95) Although they do not exceed the value of its sales in
France, where it is one of the three leading producers,
Nathan’s sales outside France within the common market
([less than 15 %] * of the total) and those on the
territories held by Bricolux, Borgione and Smartkids,
([less than 10 %] * of its sales in France) are sufficiently
large to allow its position in France, where it distributes
the educational material it produces to institutions, to

(98)

It can be concluded, on the basis of these considerations
of fact and of law, that the agreements between Nathan
and its distributors may have an influence, direct or
indirect, actual or potential, on the pattern of trade at
least between France, Belgium, Italy and Sweden, such
as might prejudice the achievement of a single market
between Member States.

(45) Judgment in Javico cited above, paragraph 16.
(46) Case 99/79, Lancôme and Cosparfrance Nederland [1980]

ECR 2511, paragraph 24.

(47) OJ L 357, 29.12.1976, p. 40, paragraphs 4, 15 and 16.
(48) Case 19/77, Miller International Schallplatten v Commission,

[1978] ECR 131, paragraphs 8, 9, 10 and 15.

(99) Accordingly, although the position of Nathan products
on the Italian and Swedish markets might be less strong
than in France and in French-speaking Belgium, the
agreements are likely to have an appreciable effect on
trade between Member States and competition, within
the meaning of Article 81(1) of the EC Treaty, on at least
the French and French-speaking Belgian markets.

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B. ARTICLE 81(3) OF THE EC TREATY

2.

Individual exemption under Article 81(3)

(100) Article 81(1) of the EC Treaty may be declared inappli-
cable to any agreement or category of agreements
between undertakings which contributes to improving
the production or distribution of goods or to promoting
technical progress, while allowing consumers fair share
of the resulting benefit, and which does not impose on
the undertakings concerned restrictions which are not
indispensable to the attainment of those objectives.

(105) The Commission may grant undertakings individual
exemption under Article 81(3) from the prohibition set
out in Article 81(1). Exemption may be granted only if
the undertakings have notified their agreement to the
Commission or if the agreement is exempt from notifi-
cation under Article 4(2) of Regulation No 17.

1. Block exemption: Commission Regulation (EEC)
No 1983/83 (Exclusive distribution agreements)
and (EC) No 2790/1999 (Vertical agreements)

(106) The exclusive distribution agreements between Nathan
and its distributors were not notified to the Commission
and do not
satisfy the cumulative conditions of
Article 81(3).

(101) The eighth recital of Commission Regulation (EEC)
No 1983/83 (49) states that ‘further restrictive obligations
and in particular those which limit the exclusive distribu-
tor’s freedom to determine his prices and conditions of
sale cannot be exempted under this Regulation’. The
Nathan, Borgione and Smartkids agreements do limit
the exclusive distributor’s freedom to determine prices
and commercial conditions of sale, and consequently
are not covered by Regulation (EEC) No 1983/83.

(107) Even if the territorial exclusivity agreements were to
improve the distribution of the contract products on the
markets in French-speaking Belgium, Italy and Sweden,
the absolute ban on marketing outside the territory is
not likely to improve the production or distribution of
educational material, or in any event is not indispensable
to the attainment of
that objective. The legitimate
objective of concentrating marketing within the licensed
territory is achieved sufficiently by a restriction on active
marketing.

(102) Furthermore, Article 3(d)(2) of the same Regulation
states that the block exemption does not apply where
one or both of the parties makes it difficult for intermedi-
aries to obtain the contract goods inside the common
market, in particular where one or both of them exercises
rights or
takes measures to prevent dealers from
obtaining contract goods outside the contract territory
or from selling those products in the contract territory.

(103) The ban on marketing Nathan products outside the
exclusive territory prevents passive sales by exclusive
distributors outside Walloon and French-speaking
Belgium, Italy and Sweden. Nathan and Bricolux threat-
ened Vauban in order to prevent it from selling Nathan
products into the exclusive territory held by Bricolux,
including products delivered in France, for resale in
Belgium.

(104) These provisions likewise prevent the application to
their agreements of Commission Regulation (EEC)
No 1983/83, in force at the material time and Regulation
(EC) No 2790/1999 (50), in accordance with Article 4
thereof.

(49) OJ L 173, 30.6.1983, p. 1.
(50) OJ L 336, 29.12.1999, p. 21.

(108) The restrictions on the freedom of exclusive distributors
to sell passively outside their territories cannot provide
establishments looking after young children, and more
especially those in France, with a fair share of any
resulting benefit. On the contrary it is clear that the
ban on marketing outside the territory deprives those
establishments of the favourable prices and terms which
Bricolux and Borgione could have offered, in compe-
tition with the French distributors, from over the borders
which the agreements with Nathan are designed to keep
watertight.

(109) There is very little mobility between geographic areas in
the final demand from establishments looking after
young children. In that market context, any dealing
between different areas is carried out essentially by retail
intermediaries. As a result, competition in the relevant
markets is based principally on the ability of retailers to
sell without geographic limitations. Consequently, any
restriction of that ability deprives the establishments of
a fair share of the potential benefits that might result
from a territorial exclusivity agreement if final con-
sumers were actually dealing between territories. Nathan,
however, in conjunction with Bricolux, sought to pre-
vent Belgian resellers in competition with Bricolux from
obtaining supplies, and at the same time to retain its
It can
Belgian schools’ clientele solely for Bricolux.
therefore be ruled out that the users (dealers or establish-
ments) derived any benefits.

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(110) The restriction on the freedom of Borgione and Smart-
kids to determine their prices and discounts is not
essential to improving the distribution of products. It
leads to an artificial level or range of prices by reference
to France, with the equivalent of a fixed minimum price
for sales to wholesalers, which does not reflect any local
market reality or give the establishments a share in any
of the benefits of the agreement. These establishments
are deprived of the possibility of paying lower prices
both in the dealer’s exclusive territory and in France,
where Nathan distributes a major proportion of its
products.

(111) Furthermore, as regards discounts and special offers,
while it may be legitimate to wish to maintain a brand
image, it must nevertheless be said that Nathan is free to
set the prices it charges its distributors at a level
it
regards as adequate in relation to objective costs and the
positioning it seeks for its products on the market. The
objective can thus be attained by means that are less
restrictive of the freedom of the parties concerned than
such a clause.

(112) It follows that all the conditions of Article 81(3) are not

satisfied.

C. PRINCIPAL COMMENTS MADE BY NATHAN
AND BRICOLUX IN RESPONSE TO THE STATEMENT
OF OBJECTIONS

(113) Some of the objections or assessments detailed in the
Commission’s statement of objections of 26 June 1998
have been dropped in this Decision, or have had their
scope reduced; only those comments which are relevant
to the grounds for the finding of infringement are set
out here.

1. The geographic dimension of the relevant mar-
ket, the position of the parties and the effect of
the agreements on trade between Member States

a) Nathan points out that demand tends to be directed
towards suppliers on the domestic market. This, together
with transport costs and language barriers, confirms the
national dimension of the market, from which Nathan
concludes that the practices objected to cannot affect trade
between Member States or competition to any significant
extent

(114) The Commission is aware that factors may explain that
there is, in fact, mobility of final demand within the
Community. Nonetheless, the agreements in question
concern sales to distributors in Member States other
than France, where Nathan manufactures and sells its

products to establishments and to bookshops. That these
are in fact cross-frontier sales by Nathan, and its
competitors in France to distributors, in other Member
States, whether exclusive or not, and that these are
significant, is very evident from the facts, unless it be
argued that Nathan is selling to a market that does not
exist.

(115) As regards the significant effect on trade between
Member States within the meaning of Article 81(1), and
on competition, the Commission refers to its analysis in
recitals 89 to 97.

b) As regards its position in the different territories concerned,
Nathan has pointed out that its products accounts for only
a fraction of sales by Bricolux, Borgione and Smartkids in
their territories. Nathan has recalculated the data in the
statement of objections, and estimates the share of its
products in their exclusive territories to be [less than
10 %] *. As regards France, it points to the existence of
other demand segments in addition to the nursery schools
which form the basis of the calculation of its total share of
the French market. Bricolux, for its part, considers that its
share of the education material market is 1,2 %.

(116) Nathan has amended the view it had put

to the
Commission that educational material covered several
separate product markets, a view which, together with a
description of Nathan’s shares of each of those markets
had been repeated in the statement of objections of
26 June 1998. The Commission has taken account of
Nathan’s comments by altering the assessment in the
statement of objections as to the existence of separate
product markets in some of which Nathan’s share
reached [between 25 % and 35 %] *, and here refers only
to the existence of different product segments.

(117) After receiving the comments from Nathan and Bricolux,
the Commission made inquiries of several
leading
French, Belgian and Italian producers and distributors.
The results were forwarded for comment to Nathan and
the
Bricolux. The comments having been received,
contents of
in
inquiry are essentially set out
recitals 31 to 38, in order to quantify the market share
of Nathan products on the markets concerned (51).

that

(51) With the exception of French-speaking Belgium, for which the
of
Commission
FRF 2 336 234 provided by Nathan as constituting its sales to
Bricolux in1997.

calculation

figure

based

the

on

its

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(118) The differences between the estimates in the statement
of objections and those made by Nathan on the basis of
those estimations are explained by the different bases
used for the calculation, both where the resulting market
share in below that estimated by Nathan (in Italy and
Sweden) and where it is larger (in France and French-
speaking Belgium).

— Nathan has not contested the low estimate of [less
than 10 %] * as its share of purchases by nursery
schools in France. It has, however, pointed to the
existence of demand segments other than nursery
schools, although it has not provided an objective
quantification of the total volume.

— For

French-speaking Belgium,

the difference
between the Commission estimate for 1997 and
Nathans’s for 1996 which is [less than 10 %] * (52)
or Bricolux’s, which is 1,2 %, can be explained by
the difference in turnover between 1997 and 1996,
by the different bases for calculation, and by the
fact that Bricolux excludes a number of articles
from its definition of the market.

— For Italy, the Commission estimate for 1997 [less
than 5 %] * is well below the estimate of [less than
5 %] for 1996 provided by Nathan (53). The disparity
is due in particular to the inclusion in the market
of establishments other than State schools, where
Borgione sells none or only a few of its products.

— For Sweden, the Commission estimate for 1997
[less than 5 %] * is well below that provided by
Nathan for 1996, [less than 5 %] * of the market,
based on the estimates provided by Smartkids (54).

2. As regards the barriers to parallel trade,

in
particular the barrier to sales by Vauban, Nathan
points to the resumption of sales by Vauban
between 1995 and 1997 and the fact that it did
not retaliate against Vauban during that period

(119) It is true that the Commission has no proof that Nathan
actually exerted the pressure planned or discussed with
Bricolux (blocking of supplies or cancelling of discounts),
or that it followed up the requests made by Bricolux to

that effect. Nathan nevertheless did draw Vauban’s
attention to the exclusivity held by Bricolux for French-
speaking Belgium in respect of Vauban’s sales in France
to Belgian customers. The references made in the letter
sent by Nathan to Vauban on 21 March 1995 and the
telephone calls made by its export manager (para-
graph 62)
the sales by Vauban were
regarded as contrary to that exclusivity, a view shared
by Bricolux (recital 67).

indicate that

(120) The Commission concludes from the foregoing that the
ban on passive sales into the exclusive territory is
part of the agreements between Nathan and Bricolux,
agreements which the Commission regards as restrictive.
Reprisals against other firms would simply have consti-
tuted an aggravating circumstance in the application of
the restrictions, as stated in the Commission guidelines
on the method of setting fines imposed pursuant to
Article 15(2) of Regulation No 17 and Article 65(5) of
the ECSC Treaty (‘the guideline on fines’) (55).

3. Regarding the existence of potential competition
between Nathan and its distributors, Nathan
argues that the Commission is complaining that
it has no distributor in France, which is tanta-
mount to deciding how Nathan must organise
the distribution of its products

(121) The Commission has found that there are competitors
with Nathan in France who distribute their products in
other Member States themselves. The Commission has
likewise found that in France Nathan itself accounts for
a preponderant share of sales to final customers of
products which it manufactures or purchases for resale
in its catalogues. It would also appear that the fact that
direct competitors with Nathan on the French market
for distribution to schools do not manufacture their
own products is not an obstacle to their active presence.
Similarly, sales to the final customer call for expertise,
business organisation and logistics which differ from
those required for manufacturing and sales to resellers
alone. Under such conditions, it is certainly true that a
distributor may be in competition with its supplier,
provided that
In its
assessment, the Commission must take account of the
real economic context of the agreements. This cannot
be regarded as interference in the degree of vertical
integration of Nathan.

its services are more efficient.

(52) Nathan’s comments of 27 October 1998 on the statement of
objections, Annex 5, and Bricolux’s comments of 30 October
1998, p. 9.

(53) Nathan’s comments of 27 October 1998, Annex 1.
(54) Nathan’s comments of 27 October 1998, Annex 5.

(55) OJ C 9, 14.1.1998, p. 3.

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D. ARTICLE 3(1) OF REGULATION No 17

(122) Pursuant to Article 3(1) of Regulation No 17, where the
Commission finds that
there is an infringement of
Article 81 of the EC Treaty, it may require the undertak-
ings concerned to bring such infringement to an end.

(123) According to the information contained in its reply to
the statement of objections, Nathan rejects the existence
of an infringement, but has amended the disputed
clauses in its agreements with Borgione, Smartkids and
Bricolux. However, Nathan has not informed its non-
exclusive distributors that they may carry out direct
passive sales, or sales to dealers, of goods for resale in
the exclusive territories within its distribution network
in the Community.

(124) The restriction on such passive sales is also part of the
infringement which forms the subject matter of this
Decision and which must be brought to an end.

E. ARTICLE 15 OF REGULATION No 17

(125) Under Article 15(2) of Regulation No 17, the Com-
mission may by decision impose fines, within the limits
laid down in that Article on undertakings where, either
intentionally or negligently, they infringe Article 81 of
the EC Treaty. In determining the amount of the fine,
the Commission must have regard to all the relevant
circumstances and particularly to the gravity and dur-
ation of the infringement. The Commission also takes
account of the existence of any aggravating and/or
mitigating circumstances.

(126) The infringement was committed intentionally. The
clauses restricting competition were specifically included
in the contracts between Nathan and Borgione and
Smartkids. Nathan and its exclusive distributors could
not have been unaware of the inclusion of provisions
prohibiting sales outside the exclusive territory in their
agreements, or of the anti-competitive object of those
provisions.

(127) With regard to Bricolux, the exchanges of correspon-
dence between Bricolux and Nathan show in particular
that the parties intentionally endeavoured to prevent a
competing distributor, Vauban, from continuing to sell
material to the bookshop La Découverte, which in
turn resold in Belgium in competition with Bricolux.
Although the action taken by Bricolux on the one hand
and Nathan on the other with regard to Vauban was not
accompanied by commercial reprisals, it was aimed at
dissuading Vauban from selling directly or indirectly to
Belgium in order to restrict competition for the benefit
of Bricolux, in turn, deliberately refrained from selling
outside its territory, and only threatened Vauban that it
might do so, in order to dissuade it from continuing its
sales.

(128) In clearly and repeatedly taking action either contrac-
tually or through correspondence to harmonise price
levels and the commercial conditions applied by its
distributors, Nathan also deliberately sought to restrict
competition.

(129) A fine should be imposed only in respect of the conduct
of Nathan and Bricolux. Even if Borgione and Smartkids
were also parties to the agreements which the Com-
mission considers to constitute an infringement, and
even if it is objectively in their interests to implement
the agreements, the fact is that those agreements were
concluded with several distributors and the restrictions
were imposed on third parties by a single operator, i.e.
Nathan. Bricolux, however, took the initiative of asking
Nathan to enforce the agreements and instigating retali-
atory measures against other resellers of Nathan prod-
ucts.

(130) Accordingly, the Commission proposes to impose a fine

on Nathan and on Bricolux.

— As Bricolux is a small undertaking, and cooperated
with the Commission during the investigation by
providing on request or spontaneously a number
of relevant documents without which it would not
have been possible to prove the infringement, and
as the request that the agreements be enforced,
according to the evidence in the Commission’s
possession, concerned only one competing dis-
tributor and in view of the discretionary nature of
decisions as regards symbolic fines as laid down
in the guidelines on fines, a symbolic fine of
EUR 1 000 should be imposed on Bricolux.

— As regards Nathan, the calculation of the fine takes
account of the factors considered in recitals 131 to
134.

1. Gravity of the infringement

(131) Fixing price levels and commercial resale conditions and
the partitioning of national markets are, in principle,
serious infringements and are, according to an extensive
body of precedent and case-law, contrary to the objec-
tives of the common market. However, in the present
case,
in the part of the common market where the
i.e. French-speaking
restrictions were implemented,
Belgium and France, the implementation was not sys-
tematic, according to the information in the possession
of the Commission. As a result, the infringement in the
present case may be considered minor. A fine of
EUR 84 000 would be in keeping with the gravity of the
infringement.

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2. Duration of the infringement

(132) The overall period in which the agreements were in
force until they were amended runs from 1993 to 1998.
However, evidence that they were implemented and
enforced goes back only to 1995. As a result, the
infringement was of medium duration, and it is appro-
priate to impose an increase of 20 % (i.e. EUR 16 000).

3. Basic amount of the fine

(133) The basic amount of

the fine must

therefore be

EUR 100 000.

4. Aggravating and mitigating circumstances

(134) Nathan expressed its willingness to put an end to the
infringement after receipt of the statement of objections.
Nathan also cooperated with the Commission during its
investigation by providing it on request with a number
of relevant documents without which the infringement
could not have been proven. In view of the foregoing,
the basic amount of the fine should be reduced by 40 %
(EUR 40 000).

Bricolux SA has infringed Article 81 of the EC Treaty,
in
agreement with E´ ditions Nathan, by restricting its sales outside
its exclusive territory and instigating E´ ditions Nathan to restrict
sales by other distributors within its exclusive territory.

Article 2

A fine of EUR 60 000 is hereby imposed on E´ ditions Nathan
and a fine of EUR 1 000 is imposed on Bricolux SA for the
infringements referred to in Article 1.

The fines shall be paid in euro, within three months of the date
of notification of this Decision, to the following account:
Account No 642-0029000-95 of the European Commission
at Banco Bilbao Vizcaya Argentaria BBVA, Avenue des Arts/
Kunstlaan 43, B-1040 Brussels.

After three months, interest shall automatically be payable at
the rate charged by the European Central Bank to its main
refinancing operations on the first working day of the month
in which this Decision was adopted, plus 3,5 percentage
points, i.e. 7,79 %.

Article 3

E´ ditions Nathan and Bricolux SA shall forthwith bring the
infringements referred to in Article 1 to an end, if they have
not already done so, in particular by informing the distributors
of E´ ditions Nathan that they may engage in passive selling to
the exclusive territories within the distribution network of
E´ ditions Nathan in the Community.

5. Amount of the fine imposed on Nathan

Article 4

This Decision is addressed to:

(135) A fine of EUR 60 000 should therefore be imposed on
Nathan in respect of the infringements which form the
subject matter of this Decision,

E´ ditions Nathan
9, rue Méchain
F-75676 Paris CEDEX 14

HAS ADOPTED THIS DECISION:

Bricolux SA
2, Rue Saint Isidore, Zone industriel
B-6900 Marloie.

Article 1

This Decision shall be enforceable pursuant to Article 256 of
the EC Treaty.

E´ ditions Nathan has infringed Article 81 of the EC Treaty by
including in its agreements with its distributors restrictions
concerning, on the one hand, passive sales by them outside
their exclusive territories and passive sales by other distributors
into those territories and, on the other hand, the freedom to
fix prices and commercial resale conditions.

Done at Brussels, 5 July 2000.

For the Commission

Mario MONTI

Member of the Commission