2002/405/EC: Commission Decision of 20 June 2001 relating to a proceeding pursuant to Article 82 of the EC Treaty (COMP/E-2/36.041/PO — Michelin) (Text with EEA relevance.)(notified under document number C(2001) 1582)
Date: 2001-06-20
Institutions: European Commission
Subjects: fine, infringement of EU law, offence, pneumatic tyre, reduced price, restriction on competition

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 20 June 2001

relating to a proceeding pursuant to Article 82 of the EC Treaty

(COMP/E-2/36.041/PO — Michelin)

(notified under document number C(2001) 1582)

(Only the French text is authentic)

(Text with EEA relevance)

(2002/405/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

After having consulted the Advisory Committee on Restrictive
Practices and Dominant Positions,

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

Whereas:

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

I.

FACTS

A. THE UNDERTAKING

Having regard to Commission’s Decision of 28 June 1999 to
open proceedings in this case,

(1)

Having given the undertakings concerned the opportunity of
being heard on the matters to which the Commission has
taken objection, in accordance with Article 19(1) of Regulation
No 17 and Commission Regulation (EC) No 2842/98 of
22 December 1998 on the hearing of parties in certain
proceedings under Articles 85 and 86 of the EC Treaty (3),

turnover of EUR
The Michelin group, with a net
13,763 billion (FRF 90,28 billion) in 1999 and a world
market share (all tyre types combined) of more than
18 %, is in competition with the Japanese Bridgestone
group and the Goodyear/Sumitomo alliance for world
leadership in the tyre field. In the Community, Michelin
is by far the largest tyremaker, with a market share
(approximately 32 %) almost twice as large as that of its
closest competitor, Goodyear/Sumitomo. In France, it is
in a commanding position, with market shares which
can be estimated at [...] (*) of the total (all tyres com-
bined).

(1) OJ L 13, 21.2.1962, p. 204/62.
(2) OJ L 148, 15.6.1999, p. 5.
(3) OJ L 354, 30.12.1998, p. 18.

(*) Business secrets have been omitted from the text.

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B.

PROCEDURE

(2)

In May 1996 the Commission opened an own-initiative
proceeding against Michelin. It had evidence suggesting
that the firm was abusing its dominant position on the
French market for replacement tyres for heavy vehicles
by imposing on dealers unfair business conditions based
inter alia on a complex system of fidelity rebates aimed
at tying those dealers closely to it. A number of detailed
requests for information were sent to Michelin,
its
competitors and tyre dealers and importers. An investi-
gation under Article 14(3) of Regulation No 17 was
carried out at Michelin’s premises in France in June
1997. On 28 June 1999 the Commission sent a
statement of objections to Michelin. A hearing of the
parties (Michelin and the interested party Bandag Inc.)
took place on 20 December 1999.

the part of buyers of car tyres and that on the part of
buyers of truck tyres. A large and growing part of car
tyre distribution is effected through maintenance and
service centres, car centres and superstores, which cover
only a very small part of the truck tyre market. Truck
tyres are for their part distributed mainly by specialised
dealers.

(7)

These types of tyre also differ in terms of their unit price.
For the most common dimensions, truck and bus tyre
prices are more than five times higher than those of car
tyres. There is no substitutability of supply between
truck and bus tyres and the other types. According to
Michelin, ‘the resources employed to design and produce
truck and bus tyres are radically different from those
required to manufacture the other types of tyre’ (4) (types
of machine-tool,
rubber com-
pounds, requisite properties, standards to be met).

specific workshops,

C. THE PRODUCT

2. THE NEW TYRE

(3)

The tyre industry comprises the manufacture of inner
tubes and outer casings (or carcasses), and the renewal
of the tread on worn tyre casings. This Decision concerns
only the manufacture of outer casings and the renewal
of the tread on worn tyre casings.

(4)

To understand what a tyre is, three main distinctions
must be drawn:

1. THE DIFFERENT TYPES OF TYRE

(5)

First of all, a distinction must be made between different
sorts of tyre designed for different types of vehicle:

— light tyres for cars,

— tyres for delivery vans and light commercial

vehicles,

(8)

The tyre market can be divided into two sectors
depending on the type of consumer that
is being
targeted. A clear distinction must be drawn between the
two. On the one hand there is the original equipment
market, and on the other the replacement market.

(9) Original equipment tyres are sold by the tyre manufac-
turer direct to the vehicle producer, without passing
through an intermediary. Replacement tyres, on the
other hand, are sold to the final consumer primarily
through a large number of specialised commercial
outlets. Truck tyres are thus distributed mainly via
specialised tyre dealers. The presence of
these
middlemen, who obtain their supplies either from the
manufacturer or from wholesalers or official importers,
distinguishes the replacement tyre market clearly from
the original equipment tyre market.

— heavy tyres for trucks and buses,

3. THE RETREADED TYRE

— tyres for agricultural tractors, road-building and

earth-moving machinery, aircraft, etc.

(6)

Each type of tyre covers a wide range of different
qualities, treads and sizes. The type of tyre chosen
obviously depends first and foremost on the type of
vehicle to which it is to be fitted and the purpose for
which the vehicle is to be used. Car tyres and truck and
bus tyres are not interchangeable. There are, moreover,
major differences between the structure of demand on

(10) Truck and bus tyres need not necessarily be new.
Provided the casing is in a sound condition, used tyres
may be given a new tread. In some cases it is possible to
repeat the retreading process. Retreading is carried out
not only by the tyre manufacturers themselves (in

(4) Michelin’s reply to the Article 11 letter of 3.12.1996.

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France, for example, Michelin is the largest retreader of
commercial vehicle tyres), but also by many firms
specialising in the process.

the mould-cure/precure distinction is never mentioned
as it has no impact on prices and competition. In Europe
firms using the different systems compete with one
another.

(11) There are two retreading systems: mould-cure and

precure.

(12) Mould-cure retreading consists in applying new tread
rubber to the tyre casing, which is then hot-cured in a
dedicated facility. This system, by which it is possible
to replace the tread, calls for mastery of new-tyre
manufacturing techniques and tools and for that reason
is used only by industrial enterprises. It also calls for an
elaborate system for collecting casings, and involves
transport constraints due to their conveyance to a central
point and relatively long processing times. In 1995
mould-cure retreading accounted for 47 % of all
retreading operations in western Europe (5), but it is
gradually losing ground to precure retreading.

(13) Precure retreading consists in applying a precured tread
obtained from an outside supplier to the tyre casing
using a cold process. This system is used in small
workshops run by specialised traders or independent
retreaders. In 1995 precure retreading accounted for
53 % of all retreading operations in western Europe.

(14) Owing to the characteristics of the techniques employed
the two systems described above are generally aimed at
different bodies of customers. Mould-cure retreading is
aimed mainly at a body of customers made up of
specialised dealers or wholesalers (who act as intermedi-
ary vis-à-vis the final consumer), whereas precure
retreading is aimed mainly at a body of customers
consisting principally and directly of final consumers.

(15) Despite the differences between the two retreading
systems, the products obtained are perfectly substitutable
from the consumer’s point of view. A tyre dealer can
It should
therefore have recourse to either system.
be noted, moreover, that, although it requires more
expensive equipment than the precure system, mould-
cure retreading is not
the tyre
manufacturers and is practised by many medium-sized
independent businesses. In market studies on retreading

the prerogative of

(5) That is, the EEA countries plus Switzerland.

(16) Overall, transport firms in Europe and in France in
particular currently fit new tyres and retreaded tyres in
roughly equal proportions. The figures vary consider-
ably, however, from one country to another. In Finland,
for example, retreaded tyres account for 74,3 % of all
tyres sold, while in Spain the corresponding figure is a
mere 37,3 %.

(17)

From the point of view of the product’s characteristics
and the use to which it is put, in spite of the progress
made by retreaders in the 1980s and 1990s appreciable
differences remain between new tyres and retreads. In
the minds of most users and distributors, a tyre whose
tread has been renewed is associated with reduced
reliability, a factor that must be taken into account.
Many hauliers refuse to use such tyres on a tractor unit’s
steering axle and/or avoid using them for long-distance
transport or the carriage of highly perishable goods.
Some manufacturers,
including Michelin, and most
dealers still recommend, even nowadays, that some of
these precautions be observed. This is one of the reasons
why retreaded tyres are markedly cheaper than new
tyres.

(18) Despite yielding a comparable mileage if properly used,
a retreaded tyre costs as a rule 50 % less than a new one.
Only new tyres sold under ‘third line’ brand names stand
comparison price-wise, although they are still more
expensive. These are tyres of lower quality, imported for
the most part from Asia or central and eastern Europe
or sold under private brands (being manufactured for
so-called distributor brands). Such tyres, which are
generally not retreadable, enjoyed a certain amount of
growth in the early 1990s when the industry as a whole
was in crisis. They account for only a small proportion
of all new truck and bus tyres sold on the French market
([...] of total sales, according to documents found on
Michelin’s premises, [...] according to other manufac-
turers, [...] between 3 and 6 %).

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D. THE TYRE MARKET

(19) The main features of the tyre market will be analysed
one by one below, and then the peculiarities of the
retread market will be examined in detail. Particular
attention will be paid to the market for replacement
truck tyres in France because it is on that market that
the conduct objected to was identified.

(20) By and large the tyre industry is highly concentrated
both globally and at the European level. In 1997 six
groups (Michelin, Bridgestone, Goodyear, Continental,
Sumitomo and Pirelli) with a presence in numerous
countries controlled more than 72 % of world tyre sales
and over 86 % of European sales.

(21) At world level, two manufacturers, Michelin (France)
and Bridgestone (Japan), which in 1997 each accounted
for between 18 and 20 % of all
tyres sold, were
constantly vying for leadership. Goodyear (United States)
followed closely with 15 % of the market. Then, some
way behind, came Continental (Germany), Sumitomo/
Dunlop (Japan) and Pirelli (Italy) with 8 %, 6 % and 5 %
of the market respectively.

(22) The position changed in 1999 when Goodyear and
Sumitomo merged, propelling the new entity to the
head of the field with a combined market share in excess
of 21 %.

(23) The market shares are not spread evenly across the
world, each of the three main players, Michelin, Bridge-
stone and Goodyear, having a preponderant presence in
its ‘domestic’ market.

(24) Thus, in western Europe, the six world leaders rank in a
slightly different order. Table 1 shows that the level of
concentration in the European market is even higher
than at world level and that the Michelin group is the
clear European leader with a market share much bigger
than those of Continental and Goodyear, which were in
second and third places until the Goodyear/Sumitomo
alliance was announced. The latter operation resulted in
the new entity ranking second, still well behind Michelin,
though, its combined market share still being 10 percen-
tage points lower than Michelin’s.

eastern European producers who sell part of their output
in western Europe. The volume of these sales is, however,
not significant when compared with those of the six
majors. Sales by Yokohama or Toyo thus accounted for
at most 1 % of the market respectively.

Table 1: Market shares in Europe, all tyres combined
(%)

Manufacturer

1993

1995

Michelin

Continental

Goodyear

Pirelli

Bridgestone

Sumitomo

Others

31,9

13,9

13,1

9,2

9,3

9,3

31,4

17,1

13,3

8,6

7,7

7,7

Yokohama, Toyo,
Vredestein + 16 others

13,3

13,5

TOTAL

100,0

100,0

Source: The Economist Intelligence Unit (6).

Table 2: Central and eastern European producers

Producer

‘Tyre’ turnover
in 1993
(million ECU)

Matador (Slovakia)

Sava (Slovenia)

Barum (Czech Republic)

Stomil (Poland)

TC-Debica (Poland)

Victoria (Romania)

Taurus (Hungary)

110

110

105

94

90

59

50

‘L’industrie du caoutchouc dans l’Union européenne’, BLIC,

Source:
October 1995.

(25) Apart from a few small western European producers (e.g.
Vredestein (Netherlands), Nokian (Finland), Trelleborg
(Sweden), Marangoni
the other competitors
(Italy)),
include a number of south-east Asian and central and

(6) Study entitled ‘The World Tyre Industry, a new perspective to

2005’, the EIU, 1997.

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(26) The structure of supply in the Community is not
homogeneous but varies considerably from one Member
State to another. The Michelin group’s market shares
vary widely in Europe, [...] in Spain,
Italy and the
Netherlands, [...] in France and Finland, to around [...] in
Germany and the United Kingdom, for example. In
France, where the manufacturer has always enjoyed a
particularly high reputation, Michelin’s position in terms
of market share ([...] all types combined) is especially
strong, much more so in fact than in the rest of the
Community.

in Europe should be stressed.
In 1995 specialised
distributors accounted for 70 % of sales of replacement
tyres for motor vehicles. Car dealers and garages came
next with 18,9 % of sales, followed by supermarkets with
7,1 % and service stations with 4 %. This domination by
specialised distributors is even more marked in the case
of truck tyres. Sales to road hauliers are dominated
overwhelmingly by the specialist trade, which is able to
provide them with personalised service and advice. The
choice, fitting and management of truck tyres involve
numerous technical considerations.

In France,

(27) Across Europe there are some 120 tyre-manufacturing
plants. Michelin, which owns 30, has more than twice
as many as its nearest competitor.
five
companies own production plants. Out of a total of
19 plants Michelin controls 11, which in terms of French
production capacity represents more than 50 % of the
total. Pneumatiques Kléber, which is controlled by
Michelin, has another two. The remaining plants are
owned as follows: Bridgestone/Firestone and Goodyear
each have one plant, while Continental and Dunlop
(Sumitomo) each have two. Of these 19 plants, only five
produce truck tyres, four of them being Michelin-owned
and the fifth being owned by Dunlop.

(31)

Increasingly, manufacturers are becoming directly con-
cerned in the distribution of tyres, notably through
integrated networks and franchises. These distribution
channels have greater brand-promoting potential than
independent dealers. The fear that distribution will be
controlled more and more by competitors is having a
knock-on effect by inducing manufacturers to go further
down this road.

(32) While replacement tyre distribution is generally speaking
highly fragmented, there are major differences between
the markets for car tyres and truck tyres. ‘Car’ distri-
bution is highly diversified and is effected mainly via
auto service centres (31 %), car manufacturers’ networks
(26 %) and tyre specialists.

(28) This horizontal concentration is accompanied by strong
integration. The tyre manufacturers are con-
vertical
trolling the distribution channels more and more. This
trend, which began in the United Kingdom back in the
1970s, spread to France in the early 1990s.

(33)

(29) Over the last ten years or so cheap, low-quality new
tyres known as ‘third-line’ brands have started to come
on to the market. These tyres have nevertheless enjoyed
only limited growth and account for fewer than 10 % of
new replacement tyres. Originally, third-line tyres were
made only by south-east Asian and central and eastern
European companies.
In recent years, however, the
leading tyre manufacturers have also moved into this
segment, often by buying up some of companies
concerned. This is the case with Michelin (Taurus
and Stomil), and also with Continental (Barum) and
Goodyear (Debica). The aim is to satisfy demand from
customers for whom price is a decisive factor when
buying tyres.

(30)

From the demand point of view, the importance of the
part played by specialised dealers in tyre distribution

In the case of truck tyres, on the other hand, specialised
dealers, be they independent or part of a network,
distribute between 75 % and 85 % of tyres on the
new replacement tyre market, auto service centres and
supermarkets in particular being almost entirely absent
from this market. The remaining 15 to 25 % are
delivered either direct under public supply contracts, to
the owners of large fleets or through direct purchases by
truck garages and dealers. Some supplies take the form
of tyre maintenance or total tyre management service
(‘mileage’) contracts between manufacturers and inde-
in an internal document
pendent hauliers. Michelin,
dating from 1996, states that tyre specialists account for
[...] of replacement sales, the remainder being distributed
via direct sales to users [...], truck dealers [...] and
maintenance contracts [...].

(34) According to the Commission’s best estimates, French
specialised dealers control some 2 225 sales outlets,
approximately 500 of which belong to integrated net-
works controlled by tyre manufacturers. Michelin owns
by far the largest network. The French manufacturer has
created a European network called ‘Euromaster’, whose
holding company is located in the Netherlands and

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which has more than 1 200 outlets in eight countries.
Although the network is controlled by Michelin, it is not
exactly an in-house sales medium as Euromaster markets
competing brands as well as Michelin products. The
network has about 330 sales outlets in France, more
than 240 of which distribute truck tyres. For its part,
Sumitomo/Dunlop controls 120 sales outlets directly
(via ‘Vulco’, formerly ‘Pneu Holding’), while Bridgestone/
Firestone has 26 (under the ‘Gay’, ‘Métifiot’ and ‘Maxi-
pneu’ names). In terms of market share, the importance
of the manufacturers’ networks is even greater in that
they control more than 30 % of the market for new
truck tyres. The market shares can be
replacement
broken down as follows: [...] for Euromaster, [...] for
Vulco and [...] for Bridgestone/Firestone.

rainbow sign, controls [...] of the truck tyre market;
the buying association ‘Seda-Point S’, which, with [...]
members reportedly controls [...] of the market; and
PAP, whose [...] members are said to control about [...].
The last-mentioned entity is not really a group, but
rather a ‘trade association’. None of these groupings has
so far been recognised as such by Michelin, with the
result that their members cannot benefit, vis-à-vis the
market leader, from the more favourable joint purchas-
ing terms that are available. A number of regional
groups are also developing such as DK ([...] sales outlets),
Ayme ([...]) and Vaysse ([...]).

(35) Manufacturers, including Michelin, have tried in recent
years to maintain the closest possible contact with those
distributors who have remained independent. To this
end networks or ‘clubs’ have developed, formed by
independent dealers to whom a manufacturer grants
certain specific advantages in return for numerous
commitments consisting for the most part in promoting
the manufacturer’s brands. These networks are some-
times called ‘soft franchises’. In France, the most out-
standing example is the network formed by the signa-
tories to the ‘Convention bilatérale de coopération
professionnelle et d’assistance technique’ (bilateral busi-
ness cooperation and service assistance agreement),
better known as the ‘Club des amis Michelin’ (Michelin
Friends Club), which has 163 members and 375 sales
outlets and which, according to Michelin, accounts [...]
of the market for new replacement truck tyres and [...]
the retreaded tyres market. The other clubs or
of
networks belonging to manufacturers, which are of
much lesser importance, are the ‘Réseau BF Partner’,
which reportedly has between [...] and [...] members,
‘Vulcopneu +’, with approximately [...] members, ‘Sem-
périt’ ([...] members) and the recently set -up ‘Réseau
Pneu expert’, introduced into France in 1997 by Conti-
nental.

(37) The breakdown of the various forms of tyre distribution
(all types combined) on the French market was as follows
in 1996: integrated networks (manufacturers): 25,52 %;
independent networks: 17 %;
(independent) buying
independents: 23,48 %.
associations: 34 %; other
Approximately 75 % of all tyre distribution in France is
therefore still, formally at least, carried on independently
of the manufacturers.

(38) The structure of demand varies, however, considerably
from one Member State to another. While in some
countries (United Kingdom, Germany) tyre distribution
is highly concentrated, it is more fragmented elsewhere
(Italy, Spain, Portugal). In fact, although independent
specialised dealers predominate in those countries where
chains (integrated networks, ‘fast-fit’ oil change centres)
have hitherto been thin on the ground owing, among
other things, to the market being considered too small,
quick-service integrated chains are currently experienc-
ing strong growth. In point of fact, although the market
shares of specialised dealers and chains look set to grow
further after 2000, this growth should benefit mainly
the integrated chains, the independent specialised retailer
being threatened in the long term with gradual exclusion
from the market.

The truck tyre market in figures

(36) To counter this entry en masse by manufacturers into
the distribution market, a number of independent dealers
have tried to join forces. They have yet to manage,
however, to get their act together sufficiently to set
up truly standardised chains capable of competing
successfully with the manufacturers’ networks or their
various ‘clubs’. The investigation carried out by the
Commission in 1997 revealed that the major groupings
of independents are as follows: ‘Arc en Ciel’, which, with
[...] sales outlets in France grouped together under a

(39) Generally speaking, with regard to the Community an
analysis of the various statistical sources shows that
aggregate sales of truck tyres, all types combined (includ-
ing retreads) come to around 15,5 million units. The
table below, which was found on Michelin’s premises
and which concerns 1995, is fairly representative and
gives a good overview:

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Table 3:
Truck tyre market in the Community (7)

Table 4: Number of truck tyres sold in France between
1988 and 1996 (10)

Country

New
(OE+RT) (8)

Retreaded

Year

Original
equipment

New
replacement

Retreaded

Denmark

Finland

Sweden

Germany

United Kingdom

Austria

Belgium

Netherlands

France (9)

Spain

Italy

Greece

Portugal

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

TOTAL

(40) Of these 15,5 million units, original equipment tyres
account for about 14 % of the total, or 2,25 million. The
overall volume of the European replacement tyre market
is therefore approximately 13,3 million. Of these sales,
the retread market accounts for approximately 48 %.

(41) Given the features of the French replacement truck tyre

market, some figures may be given to illustrate trends.

(7) Source: Michelin,

taken from the document

‘Rapport sur le

rechapage transmis à M. Vasdeboncœur’.
(8) Original equipment (OE) — replacement (RT).
(9) The sales figures for France are not identical to figures to be found
in other tables in this Decision provided by third parties. The
Commission relies first and foremost on the Michelin data.

1988

1989

1990

1991

1992

1993

1994

437 325

1 139 065 1 085 080

456 862

1 195 076 1 135 311

367 238

1 192 229 1 075 392

358 507

1 123 982 1 035 331

295 555

1 095 589 1 036 158

243 117

1 043 130

945 582

314 474

1 147 306

967 740

1995 (11)

362 522

1 242 910

960 100

1996

372 807

1 068 495

911 217

Average

356 490

1 138 642 1 016 879

(42) Over the period in question, the total market for truck
tyres amounted on average to 2,5 million tyres, 14,2 %
of which were original equipment tyres, 45,3 % new
replacement tyres and 40,5 % retreaded tyres.

(43) On the replacement market, which totals on average
2,15 million tyres, sales break down into 1,14 million
new tyres and just over a million retreaded tyres. The
share of retreaded tyres may therefore be put at 47,2 %
on average.

Specific characteristics of the retreaded tyre market

(44) According to Michelin’s estimates, nearly [...] truck tyre
casings were retreaded in western Europe in 1995. The
precure retread segment is growing overall while the
mould-cure segment is shrinking. Thus in France in
1992 the mould-cure share came to 82 % compared
with only 75 % or so today.

(10) Tyres study, ‘Journal de l’Automobile’ No 544 of 20.9.1996.
(11) The truck tyre sales figures do not match those given in the table
provided by Michelin in paragraph 39 or in the Eurostat table in
paragraph 150. The differences are due to the different sources
relied upon and the different calculation methods used. This
Decision relies first and foremost on the Michelin data.

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(45) At Community level the structure of supply also varies
considerably from one Member State to another. The
two main players on the market are Bandag and
Michelin, which operate in most countries albeit in
different ways. Michelin uses mainly the mould-cure
system and has several large retreading plants in Europe,
including two in France (Clermont-Ferrand and Avalon).
Bandag on the other hand has set up a network of
franchisees who do precure retreading. With approxi-
mately 1 500 000 casings retreaded each year,
it is
estimated that Michelin holds nearly [...] of the European
market, while Bandag’s franchise network controls
approximately [...].

(46) However, the market shares of the two competitors
vary appreciably from country to country. In France
especially, where Michelin and its subsidiary Pneu Lau-
rent, which specialises in retreading, are firmly entren-
ched, the joint market shares of these two firms regularly
exceeds [...]. Bandag’s franchise network, which ranks
second on the market, holds only [...].

(47) A user can procure retreaded truck tyres in a number of
ways. Either he supplies his own casing to a tyre
specialist, a franchisee or an industrial retreader and
it once it has been retreaded (‘custom’
recovers
retreading), or he provides a casing and at the same
time buys a retreaded tyre made from another casing
(‘standard exchange’ retreading), or else he buys a
retreaded tyre outright without providing any casing at
all. In France, unlike in other Member States, custom
retreading is by far the most common practice (accord-
ing to manufacturers’ estimates it accounts for between
75 % and 90 % of all retreading operations).

(48)

For this reason the business of retreading is generally
considered in France to be not a sales activity but a
service, or after-sales service, activity. Most hauliers
calculate the cost of a truck tyre on the basis of the
purchase price, the mileage obtained and the residual
value of the casing should it be resold. In calculating the
cost of a truck or bus tyre, several phases in its life are
usually taken into account, i.e. an initial phase as a new
tyre,
followed by a second and sometimes a third
phase as a ‘reconditioned’ tyre. Since the price of a
reconditioned tyre is much lower than that of a new
tyre, retreading reduces the total cost per kilometre of
the tyre over its whole life. One practical consequence
of this is that each haulier wishes to be sure that the
casings used in the retreads he receives back are those of
in his
the tyres which he bought new and which,

opinion, he used competently during the first phase of
their life. He regards casings which are in good condition
as continuing to belong to him and will generally not
entrust them to a retreading firm unless specific note is
taken of the matrix number stamped on the sidewall of
the tyre. This enables him to check whether it is his own
tyres that he receives back in retread form and not other
tyres with possible unknown defects.

(49) Accordingly demand for retreaded tyres or for the
retreading service emanates in the final analysis from
hauliers. Having said that, specialised dealer-distributors
of truck tyres are in most cases charged with acting as
intermediaries between the retreader and the haulier.

E. MICHELIN’S COMMERCIAL POLICY

(50)

It is necessary to highlight the various aspects of the
commercial policy pursued by Michelin in France from
1980 until 1998 inclusive since after 31 December
1998 the commitments submitted by Michelin to the
Commission put an end to the abusive nature of that
policy. The analysis will focus on each of the three
aspects of which the policy consisted, namely:

1.

2.

3.

the general price conditions for France for pro-
fessional dealers (‘Conditions Générales de Prix
France aux Revendeurs Professionnels’), which are
the backbone of Michelin’s commercial policy. (For
convenience, this category will include individual
commercial cooperation agreements (‘conventions
de coopération commerciale’), which are simply an
extension of the general conditions);

the agreement for optimum use of Michelin truck
tyres (‘Convention pour le Rendement Optimum
des Pneumatiques Poids Lourd Michelin’ — ‘PRO
agreement’), which may be subscribed to under
certain conditions by truck tyre dealers wishing to
obtain rebates or other benefits;

the agreement on business cooperation and assist-
ance service (‘Convention de Coopération Pro-
fessionnelle et d’Assistance service’ known as the
‘Club des amis Michelin’, or Michelin Friends Club),
reserved for a limited number of dealers wishing to
cooperate more closely with Michelin.

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1. THE GENERAL PRICE CONDITIONS FOR FRANCE FOR

PROFESSIONAL DEALERS

The various rebates

(51) The general price conditions for France for professional
dealers laid down, for professional dealers, among other
things the conditions of sale and the prices for a large
part of Michelin tyres intended for the replacement
market, and in particular car, van, forklift, truck, earth-
mover, agricultural and light plant tyres, and retreads.

(52) The conditions provided for a pricing system which
comprised, firstly, a ‘list’ price known as the ‘invoicing
scale’ (net price invoiced, less any rebates) and, secondly,
a highly complex set of rebates which, until 1997, were
in most cases not paid until the last day of February of
the year following the financial year concerned.

(53)

It was not until 1997, after the entry into force of a
French law of 1 July 1996 prohibiting selling at a loss,
that Michelin decided to overhaul its commercial policy.
From that moment on, the bulk of the rebates and/or
payments made before the end of February of the year
following the reference period were shown on the
invoice. The system existing until 1996 inclusive and
that established as from 1997 will be examined in turn
below.

The system of rebates from 1980 to 1996

General

(54) Before 1997 Michelin’s general conditions provided for a
complex system of rebates which covered an accounting
year beginning on 1 January and ending on 31 December
and which for the most part were not paid until the last
day of February of the calendar year following the
financial year in question.

(55) The dealer paid for new or retreaded tyres bought from
the price quoted in Michelin’s official
Michelin at
‘invoicing scale’. In most cases this amount had to be
paid within ‘30 days of the end of the accounting
month’. On the other hand, the amount of the rebates
obtained was not received until the end of February of
the following year, i.e. up to 13 months after the date of
the relevant transaction.

(56) The rebates provided for in the general conditions were
divided into three categories, namely quantity rebates,
rebates for the quality of the dealer’s service to users
(‘service bonus’) and rebates dependent on increases in
new tyre sales (‘progress bonus’). In addition, dealers
exceeding for two financial years in a row a given
Michelin turnover threshold were allowed to negotiate
a ‘commercial cooperation agreement’ (known as an
‘individual agreement’) entitling them to further rebates.

Quantity rebates

(57) The size of

the quantity rebates depended on the
turnover achieved by the dealer with Michelin products
during the accounting year, all tyre types combined
apart from heavy plant tyres and retreads. The conditions
comprised a ‘grid’ showing the percentages deductible
from the list price for the entire turnover achieved. In
1995 for example, these rebate percentages ranged from
7,5 % on a turnover of FRF 9 000 to 13 % on a turnover
of over FRF 22 million.

(58) The ‘heavy plant tyre’ and ‘retreads’ categories each had
their own grid. In 1995 for example, the rebates ranged,
in the case of retreads, from 2 % on a turnover of
over FRF 7 000 to 6 % on purchases exceeding FRF
3,92 million.

(59)

the general
It was not until 1995 and 1996 that
conditions provided, under certain conditions, for three
advances on quantity rebates, payable in May, September
and December of the current financial year and corre-
sponding, provisionally, to 5 % of the ‘truck + earth-
mover + forklift + light plant’ turnover achieved in
respect of each of the corresponding periods.

Service bonus

(60) The service bonus was an additional incentive proposed
by Michelin to the specialised dealer ‘to improve his
equipment and after-sales service’. In reality the degree
of cooperation and the services offered to Michelin were
also taken fully into account when the rates were
fixed (12).

(12) Between the assessments ‘good’ and ‘excellent’, for example, twice

as many points may be awarded in some cases.

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(61) To qualify for such a bonus, a minimum annual turnover
had to be achieved with Michelin products in the course
of the year. The amount ranged from FRF 160 000 in
1980 to FRF 205 000
then became
FRF 50 000, falling to FRF 45 000 in 1995 and 1996.

in 1985.

It

(62) The size of the bonus, which was fixed at the beginning
of the year by annual agreement with the dealer in a
document entitled ‘Service bonus’, depended on com-
pliance with commitments entered into by the dealer in
a number of areas. Each commitment corresponded to a
number of points, and the exceeding of certain thresh-
olds of points gave entitlement to a bonus corresponding
to a percentage of the turnover achieved with Michelin
France, all tyre types combined. This percentage ranged
from 0 to 1,5 % between 1980 and 1991 and from 0 to
2,25 % between 1992 and 1996.

(63) Between 1980 and 1995 the commitments to be
complied with by dealers grew appreciably both in
number (to between 10 and 13 items for which points
could be awarded) and in terms of their content. Most
of the criteria concerned services rendered to customers
or knowledge about products. Thus the criteria enabling
the size of the bonus to be increased included staff
training, possession of certain machinery, vehicles and
know-how, quality of facilities, etc. Some of the criteria,
however, benefited mainly Michelin. Three of them may
be mentioned here.

(64) New products service: between 1980 and 1987 the com-
mitment consisted in ‘supplying customers with new
Michelin products’ and ‘obtaining supplies of new
products, giving the following entitlements depending
on the type and dimension concerned: less than 30 %:
0 points, between 30 and 50 %: 1 point, more than 50 %:
2 points’. Between 1987 and 1990 the commitment
changed. It now consisted in obtaining supplies of new
products as a proportion of the regional share laid down
for those products, giving the following entitlements:
less than the regional share (0 points), equal to that
share (1 point) or higher than that share (2 points). From
1990 onwards the commitment took the form of ‘a
positive contribution towards new Michelin products:
knowledge and promotion of the said products: 2 points.
Advertising at the point of sale: 1 point’.

Michelin also demanded under this heading ‘statistics on
sales broken down by product, knowledge of the local
market’. From 1992 onwards the dealer had to provide
relevant information concerning his statistics, his sales
forecasts broken down by product
(2 points) and
technical data on products such as performance data,
quoting stock numbers (2 points), or unquantifiable
information (1 point). Some of the dealers who were
consulted confirmed that they had been asked to provide
sales statistics showing how Michelin compared with its
competitors.

(66) Retreading: between 1980 and 1987 a dealer earned
points if he had a roadside assistance vehicle for
trucks (1 point) and knowledge of how to sort casings
(2 points). Between 1987 and 1992,
if he had the
necessary know-how and means of sorting Michelin
casings with a view to their being retreaded or regrooved,
he earned between 0 and 2 points. From 1992 onwards
he earned 1 point if he promoted regrooving and 1 point
if he systematically had Michelin casings retreaded by
Michelin. In 1996 only the systematic carrying-out of
the first retreading of Michelin tyres by Michelin was
insisted upon.

Rebates dependent on increases in new tyre sales (‘progress
bonus’)

(67) This category included two bonuses, i.e. the progress
bonus and the rate bonus. However, since the latter does
not apply to truck tyres, it will not be discussed here.

(68) The progress bonus was intended to reward dealers who
agreed at the beginning of the year to undertake in
writing to exceed a ‘minimum base, fixed by common
agreement, depending on past performance and future
prospects’ and who managed to exceed it. The base was
proposed each year and was negotiated with the dealer.

(69) To calculate the bonus Michelin used the following

formula:

(65) Market information: between 1980 and 1987 the commit-
ment consisted in providing Michelin (‘the supplier’), to
help it plan its production, either annually (1 point) or
quarterly (2 points) with the largest possible amount of
information on the behaviour of the different types of
product, mileage obtained, etc. Between 1987 and 1992

C

P (rebate) = T × ---- R-B

R

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(70)

In this formula ‘C’ is the truck tyre turnover,
‘R’ the
actual number of tyres sold in the course of the year and
‘B’ the ‘base’ (commitment to buy in terms of number of
tyres). ‘T’ is a rate which increased gradually depending
on dealers’ buying commitments in terms of number of
tyres. The bonuses obtainable and the mechanism for
calculating them have changed substantially in recent
years.

(71) Between 1980 and 1984 the bonus ranged from 2,5 %
for a commitment to buy between 30 and 1 499 tyres
to 15 % for a commitment to buy more than 8 500 tyres,
with six separate steps. In 1985 the minimum bonus
rate was increased to 5 %, while the number of steps
was reduced to five. Between 1986 and 1994 the
minimum rate was increased still further to 7,5 %, the
number of steps being reduced to four, as follows:
between 30 and 999 tyres: 7,5 % of the amount by
which the base was exceeded; between 1 000 and
2 699 tyres: 10 % of the amount by which the base was
exceeded; between 2 700 and 8 499 tyres: 12,5 % of the
amount by which the base was exceeded; 8 500 or
more: 15 % of the amount by which the base was
exceeded, such amounts being limited to 25 % of the
base.

(72)

In 1995 and 1996 the mechanism for calculating the
bonus changed substantially. There were now only two
steps, but more importantly, where the amount by
which the base was exceeded was equal to or greater
than 20 % of the base, a single bonus rate applied to the
entire turnover achieved. Thus:

— between 30 and 999 tyres: 12 % of the amount by
which the base was exceeded if the progress was
lower than 20 % of the base and 2 % of aggregate
turnover in respect of new truck tyres if
the
progress was equal to or greater than 20 % of the
base,

— over 1 000 tyres: 15 % of the amount by which the
base was exceeded if the progress was lower than
20 % of the base and 2,5 % of aggregate turnover
in respect of new truck tyres if the progress was
equal to or greater than 20 % of the base.

(73)

If a dealer managed only to achieve sales equal to the
‘base’, he nevertheless received a bonus worth 0,5 % of
all tyres bought.

(74) To understand fully how this bonus operated, two of its

aspects must be brought to the fore:

(a)

the key feature of the bonus and one of the key
elements in the discussion about annual commit-
ments was the fixing of the ‘base’, because it was
the amount by which this was exceeded that
determined the maximum amount of remuneration
payable. It was therefore in the dealer’s interest that
the base should be set at the lowest possible level
so that he might achieve it easily.
It was in
Michelin’s interest, on the other hand, that it should
be set at the highest possible level so as to maximise
its incentive effect;

(b) bonuses were agreed at the beginning of the year
in the light of the dealer’s situation, with the result
that, if the company changed hands during the year
(sale, take-over, merger, etc.), the commitments
became null and void and the bonuses had to be
renegotiated in the light of the new situation.
Moreover, towards the end of December, a down-
ward indexation of the base could take place. This
was decided unilaterally by Michelin and could vary
from one type of product to another. It was also
used to calculate the reduction factors to be applied
in working out
In
exceptional circumstances, a bonus might be paid
even where the base was not reached (e.g. where a
tyre was in short supply, resulting in supplies
drying up, or where the dealer was a member of
the Friends Club).

the following year’s bases.

The specific conditions granted to signatories to
‘Commercial Cooperation Agreements’

(75) Dealers who achieved, with Michelin France’s products
a turnover exceeding the maximum amount referred to
in Table I provided by Michelin concerning quantity
rebates (e.g. FRF 24 million between 1991 and 1994
and FRF 22 million between 1995 and 1996) could
sign a commercial cooperation agreement (commonly
known as an ‘individual agreement’) with Michelin. From
1993 onwards, if they purchased more than 1 000 truck,
earthmover and/or light plant tyres, they signed two
individual agreements, namely a ‘car and van’ agreement
and an ‘industrial products’ agreement. These agreements
did not replace the general conditions, but merely
supplemented them. According to Michelin, 16 to
18 major dealers signed this type of agreement between
1993 and 1996, 11 to 13 of which were industrial
products agreements.

(76) The main commitments entered into when signing such
agreements were: to provide technical information and
after-sales service for Michelin products; to help launch
new Michelin products; to submit monthly or quarterly
purchasing and sales forecasts to Michelin; and to obtain
regular supplies of Michelin products. The benefits
received in return were far from negligible:

— an extension of the tables corresponding to the
quantity rebates (potentially resulting in a difference
of up to 2 % of turnover);

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— a specific, favourable system for calculating the

progress bonus.

each of these categories, for dealers entitled, by virtue of
their volume of purchases (more than 2 500 tyres in the
truck/earthmover/plant category), to sign an individual
commercial agreement.

(77) A specific scale applied in which the bonus was sand-
wiched between a threshold and a ceiling. Dealers could
thus generally obtain a progress bonus of 1 % (threshold)
of annual turnover (truck/earthmover/light plant) simply
by achieving the base, up to a maximum of 3 % if they
exceeded the base by 15 % (ceiling).

(78) By way of example, in 1996 a commitment to purchase
between 1 000 and 8 999 tyres granted entitlement to a
bonus ranging from 1 % (minimum) if the base was
reached to 2,5 % (maximum) if it was exceeded by 15 %.
A commitment to purchase more than 9 000 tyres made
it possible to earn up to 3 % more in return for exceeding
the base by 15 %.

(79)

From 1993 onwards an additional bonus in support of
industrial products of 1 % of turnover achieved with
new Michelin truck, forklift, earthmover and light plant
tyres could be obtained if the truck base was reached, as
could:

— additional credit (a further 10, 20 or 30 days

worth),

— payment of part of the end-of-year bonus on the
first working day in January of the following year
instead of on the last day of February.

(a) General conditions

(82)

In the truck tyre sector, new and retreaded tyres were
treated differently.

(i) A s r e g a r d s n e w t r u c k t y r e s

(83) The main changes concerned the disappearance of
quantity rebates, the service bonus and the progress
bonus, and the appearance of new categories, namely
‘invoice rebates’, the ‘achieved-target bonus’, ‘end-of-year
rebates’ and a ‘multiproduct rebate’.

(84)

Invoice rebates: invoice rebates were granted on the basis
of the number of new truck/earthmover/light plant tyres
purchased the previous year, the average for the two
previous years or the average for the three previous
years, depending on which was most favourable to the
dealer, according to the following scale:

Table 5

The rebate system in 1997 and 1998

Tyres purchased

Rebates (%)

(80) As of 1997 Michelin made substantial changes to
its business conditions for dealers, eliminating certain
abusive practices which had hitherto characterised its
behaviour. Further changes were made in 1998. The
reasons behind these changes, which were in any case
not introduced until after the Commission had opened
its investigation,
lie partly in the amendment of the
French legislation prohibiting selling at a loss, and partly
in the extensive restructuring of the Michelin group at
the end of 1996.

The new rebate system

< 30

30 to 199

200 to 999

1 000-2 499

1997

15,00

16,00

16,50

17,00

1998

15,00

18,00

18,50

19,00

(85) Dealers wishing to obtain a larger invoice rebate than
that due to them under the above scale had to sign a
target contract drawn up in agreement with Michelin
which took account of ‘the dealer’s potential together
with forecast market trends’. The invoice rebate obtain-
able then corresponded to the tranche within which the
commitment entered into by the dealer fell.

(81) Different, separate business conditions were laid down
for each of the following five product categories: 1. car/
van, 2. truck/earthmover, 3. plant/forklift, 4. agricultural
tractor, 5. two-wheeler, with different conditions, within

(86)

Such ‘targets’ had to be realistic and not be over- or
underestimates. Michelin would therefore propose to
the dealer a choice between his previous year’s perform-
ance and the average of his previous two or three years’

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performances, factoring-in ‘forecast market growth’. In
1997 this growth was set at 1 % irrespective of the
region.

1998

(87)

Exceptionally, a different choice could be made if the
dealer’s buying capacity had been adversely affected
(arrival of a competitor in the same area, loss of a good
customer, etc.). Exceptionally also, the current year’s
target could be equal to the previous year’s performance.

(88) Dealers whose purchases during the course of a given
year entitled them to a larger rebate than that for which
they qualified that year benefited from an end-of-year
correction paid at the end of February of the following
year covering the difference.

(89)

Lastly, it should be pointed out that in the case of new
dealers the invoice rebate was set at 15 % of turnover
unless they had signed a target contract, in which case
the rebate was fixed by reference to the annual target.

(90) Achieved-target bonus: dealers who had signed a target
contract obtained in 1997 a bonus of 2 % of their net
annual invoiced turnover, paid at the end of February if
the target was reached. In 1998 the bonus was set at
1,5 %.

(91) End-of-year

rebate: depending on the invoice rebate
originally granted and the net invoiced turnover, a rebate
was paid at the end of February according to the
following scale:

Table 6

1997

Invoice rebate

Net invoiced turnover

End-of-year rebate

(%)

(thousand FRF)

< 150
> 150 and < 300
> 300

< 600
> 600 and < 1 200
> 1 200

< 2 500
> 2 500 and < 3 500
> 3 500

15

16

16,5

17

(%)

0,0

1,0
1,5
2,0

1,5
2,0
2,5

2,0
2,5
3,0

Invoice rebate

Turnover based on
the invoicing scale

End-of-year rebate

(%)

(thousand FRF)

15,00

18,00

18,50

19,00

< 120
> 120 and < 250
> 250

< 750
> 750 and < 1 200
> 1 200

< 3 000
> 3 000 and < 3 800
> 3 800

(%)

0,00

3,75
4,00
4,25

4,25
4,50
4,75

4,75
5,00
5,25

(92)

‘Multiproduct rebate’: dealers whose turnover achieved
through tyres, all types combined, accounted for more
than 50 % of their total turnover and who achieved
significant sales in at least two of the following categ-
ories: car/van, motorcycle/scooter, truck and agricultural
tractor, were entitled to an end-of-year rebate on their
invoiced turnover achieved through new products
(excepting heavy plant) and retreaded products accord-
ing to a scale ranging from 1 % to 2,20 % in 1997 and
from 1,5 % to 2,70 % in 1998.

(ii) A s r e g a r d s r e t r e a d e d t r u c k t y r e s

(93) The system was simple and comprised two rebates:

— a 5 % invoice rebate on all retreaded products,

— an end-of-year quantity rebate depending on total
net turnover achieved through retreads (van, truck,
light and heavy
earthmover, agricultural tractor,
plant), increasing progressively from 1 % (above
FRF 6 500) to 4 % (above FRF 2 500 000) of total
net turnover achieved through retreads, according
to a 16-step grid ranging from 1 % at the bottom
of the scale to 0,1 % at the top. This rebate was
abolished in 1998.

(b) Commercial agreements

(94) Dealers who had signed an individual agreement ben-
efited from similar conditions and from an extension of
the scales depending on the quantities purchased.

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(95)

For new truck tyres, invoice rebates and end-of-year
rebates were accordingly increased to:

Table 7

Invoice rebates

from Michelin France, the agreement for optimum use
of Michelin truck tyres, which was introduced in 1993,
enabled dealers to obtain further rebates. To this end a
dealer had to enter into a number of obligations:

Quantity

Rebate (%)

ment for the current year,

— sign with Michelin a truck progress bonus commit-

1997

1998

2 500-9 999

> 10 000

17,50

18,00

19,50

20,00

1997 end-of-year rebates

Invoice rebate

Net turnover

End-of-year rebate

(%)

(thousand FRF)

(%)

17,50

18,00

< 9 000
> 9 000 and < 18 000
> 18 000

< 40 000
> 40 000

2,50
3,00
3,50

4,00
4,50

1998 end-of-year rebates

Invoice rebate

Turnover based on
the invoicing scale

End-of-year rebate

(%)

(thousand FRF)

19,50

20,00

< 7 500
> 7 500 and < 10 000
> 10 000

< 48 000
> 48 000

(%)

5,25
5,50
5,75

5,75
6,00

(96) As regards retreaded tyres,

the invoice rebate was
increased to 6 % and the end-of-year rebate was
increased, in 1997, to 6 %. In addition, in 1998, dealers
who had signed an agreement were entitled to an end-
of-year rebate of 1 % (based on the invoicing scale) if
they sold between 2 500 and 10 000 retreaded tyres
and of 1,5 % if they sold more than 10 000.

2. THE PRO AGREEMENT (AGREEMENT FOR OPTIMUM

USE OF MICHELIN TRUCK TYRES)

(97)

Intended only for dealers purchasing new truck tyres

— present to Michelin for custom retreading and
standard exchange retreading Michelin truck tyres
which have reached the legal tread wear limit.

(98)

In return, for every truck casing considered retreadable
by Michelin, the dealer received FRF 45, 65 or 120
depending on the type of tyre concerned. If the casings
had been regrooved and then reused, the dealer received
an additional FRF 15, 25 or 40. A dealer could therefore
earn a maximum rebate of FRF 160, which in percentage
terms was considerable (15 % according to Bandag;
Michelin puts it at between [...] and [...], i.e. at a level
similar to that of the service bonus and the progress
bonus taken together in the light of the price invoiced
to the dealer by Michelin for a retreaded tyre). Finally,
the importance of this bonus is highlighted by the fact
that it accounted, in 1994, [...] of all truck tyre rebates
(source: Michelin).

(99)

It is the presence of certain supplementary conditions
that sets the agreement apart with respect to its scope:

— the maximum bonus that could be earned depend-
ed on how well the dealer performed in terms of
new Michelin tyres, i.e. the number of truck tyres
bought from Michelin in the course of the previous
year. Thus, the maximum number of PRO bonuses
was limited by the number of new truck tyres
bought the previous year. In 1997, however, the
amount of the bonuses granted was no longer
limited by the number of tyres bought the previous
year, but by the number of tyres which the dealer
had undertaken to buy in the course of the current
year in his 1997 target contract,

— the bonus was calculated by sales outlet (by dealer
as from 1997), a correction being made at the end
of the year,

— the bonus was paid in the form of a credit towards
the dealer’s purchases of Michelin truck tyres, being
deducted from the following month’s bill.

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(100) In 1998 the PRO agreement was abolished and replaced
by a clause in the general conditions entitled ‘Retreading
quality service’. On this basis a dealer could earn bonuses
for every casing sent to Michelin for retreading, without
any commitments or ceilings.

3. THE BILATERAL BUSINESS COOPERATION AND SER-
VICE ASSISTANCE AGREEMENT (THE MICHELIN
FRIENDS CLUB)

(101) In return for signing a bilateral business cooperation and
service assistance agreement and entering into numerous
commitments, some dealers can obtain additional finan-
cial benefits from Michelin. The body of signatories form
what is known in the trade as the Michelin Friends Club.

(102) The club, which was created in 1990, grouped together
more than 295 sales outlets as early as the end of
1991. In April 1997 more than 163 tyre specialists
representing 375 sales outlets and upwards of 20 % of
the new and retreaded truck tyre market were parties to
the agreement. The importance of the agreement to
Michelin France is due to the fact that the club members
distribute in France, by themselves, as many tyres as
the integrated networks taken as a whole, all brands
combined, and some 30 % of all Michelin truck tyres.

Features of the Club

Rationale

(103) Three factors make up the club’s backbone: 1. state of
mind/professionalism, 2. mutual trust between Michelin
and the club and 3. Michelin volumes and ‘temperature’.
Michelin is prepared to lend its support, including its
financial support, to club members to help them become
better-performing and more professional, but in return
members must ‘play the game’ and cooperate with
Michelin, which involves among other things guarantee-
ing the manufacturer a certain level in terms of Michelin
volumes and ‘temperature’ (market share).

Michelin’s Contribution

(104) Michelin participates in the dealer’s financial effort
notably by contributing towards investment and training
and by making a financial contribution amounting to
0,75 % of annual Michelin Service turnover. This
is
contribution,

is to service turnover,

linked as it

conditional on attainment of a specific target, which is
agreed with the customer at the beginning of the year.
One dealer asserts that the target was fixed in terms of
purchasing commitments. The sums involved are very
substantial. In 1993, for example, they accounted for
0,9 % of the total turnover of dealers belonging to the
club, that is to say 2,8 % of their gross profit margin
and/or 24,9 % of their current result before tax, i.e. a
quarter of the profits of dealers belonging to the club.

(105) Michelin also grants other benefits which are harder to

quantify but whose importance is far from negligible:

— transfer of know-how in many areas,

— priority access to training courses (in fact 50 % of
courses at Michelin’s training centre are provided
for club members),

— offering of contracts concerning new business
activities as a matter of priority to specialists
(subcontracting of fleet tyre business, breakdown
chain, for example),

— transmission of data on market trends,

— exclusive distribution of BF Goodrich car tyres.

(106) The package helps to ensure that dealers are more
comfortably off (club members had an average profita-
bility in 1995 of 3,9 %, which was higher than the
average profitability of specialised dealers).

Members’ Commitments

(107) The quid pro quos demanded by Michelin in return for
admission to the club are considerable. In particular,
Michelin has the right to oversee the specialist’s business
and to ask him:

1.

to communicate to it, each year, balance sheets and
profit and loss accounts (with a breakdown of
income and expenditure) and statistics on turnover
and services provided. Forward estimates and
spending and financing plans must also be trans-
mitted if necessary. The dealer must also let Miche-
lin know the identity of all direct or indirect
shareholders in the company and keep it informed
of any event likely to affect control by the company
owning the business premises and/or its strategic
plans. On the basis of this information Michelin
carries out individual financial analyses of club
members and holds meetings with them, proposing
solutions
to any problems encountered. This
enables Michelin to produce statistics and tables

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incorporating the consolidated balance sheets of
club members;

7.

to permit Michelin to carry out an analysis of
his sales outlet(s)
in a number of areas: staff
qualifications and competence; quality of service
and sales promotion; and sales facilities. This
analysis will make it possible to work out an annual
progress commitment in one or more of these
areas and any steps proposed and agreed jointly.
this commitment will
On the carrying-out of
depend the annual payment of a bonus proportion-
ate to the turnover in respect of services;

to have the first retreading of truck, earthmover
and van casings carried out by Michelin France.
This obligation was contained in an initial version
dating from 1991. In a subsequent version dating
from 1993 it was removed in respect of vans.
According to Michelin, failure to carry out this
commitment was never and would never have been
penalised. The clause was abolished with effect
from October 1995.

Mention should be made, however, of the case of
one dealer who wished to deal actively with
competing retreaders and who complained of
having been threatened with exclusion from the
club;

to promote the Michelin brand and its new prod-
ucts; display in his sales outlet(s) the advertising
material provided (including neon signs and/or
a pole with a flag) and the standard product
information; and take part in advertising cam-
paigns;

8.

to play an active part in programmes aimed at
enhancing sales outlets, increasing truck tyre sales
and improving knowledge of farming issues and in
vocational training schemes and, where appropri-
ate, play a part in the truck breakdown chain and
other services rendered to hauliers to the best of
his abilities.

‘not to divert customer demand away from Miche-
lin products; Michelin reserves the right to monitor
compliance with this clause’. This commitment
appeared word for word in the original agreements
and was not formally abolished until 1996. In fact,
this clause is the very core of the agreement and
amounts to an unwritten undertaking to remain
faithful to Michelin products in ‘temperature’ terms
as far as both the car tyre and the truck tyre range
are concerned.

Michelin makes access to the club conditional on
compliance by the dealer with a certain Michelin
‘temperature’: in an internal document concerning
the club (13) it is stated in connection with the
customer’s partnership or market share that: [...]
Michelin clearly uses this condition as a lever in its
business negotiations, as can be seen from numer-
ous documents found in the course of the investi-
gation;

(108) In the event of the specialist failing to fulfil his commit-
ments, Michelin may cancel the agreement without
compensation. In that event, the specialist must return
to Michelin any manuals, documents and copies entrust-
ed to him under the agreement. In an initial version of
the agreement dating from early 1990 the dealer was
also required to pay back to Michelin, over five years
and in equal instalments, all sums received by way of
financial assistance. From 1992 onwards this obligation
becomes more ambiguous, the dealer losing only ‘any
entitlement
in
Articles 1 to 7’.

to the consideration provided for

II. LEGAL ASSESSMENT

A. RELEVANT MARKETS

to carry a sufficient stock of Michelin products to
meet any customer demand immediately;

1.

PRODUCT MARKETS

2.

3.

4.

5.

6.

to communicate to Michelin his sales statistics and
forecasts, tyre type by tyre type and for all brands,
together with trends in Michelin market shares;

(13) Document [...].

(109) Producers and dealers, when consulted by way of
requests for information from the Commission, were
unanimous in confirming that the market in tyres for
trucks and buses is quite distinct from the market in
tyres for other types of vehicle. They also confirmed the
differences between the original equipment market and
the replacement market. These aspects will thus not be
analysed in detail (see above paragraphs 3 to 48).

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in itself

(110) However, the question arises as to whether the market
in new replacement tyres for trucks forms a relevant
(thus excluding retreaded tyres) or
market
whether retreads should be included with new tyres in a
single relevant market
In the
latter case, there would be a significant competitive
relationship between the two types of tyre.

in replacement

tyres.

results not only from their different features, but also,
since custom retreading is the most widespread practice,
from the from the fact that the value of the carcass is
not included in the invoice for the service, a fact which
highlights the very different ways in which the two
markets operate, as will be shown below.

(111) In its Decision 81/969/EEC (Case IV/29.491 Nederland-
sche Banden-Industrie Michelin, hereinafter
‘NBIM
decision’) (14),
the Commission defined the relevant
market as the market in new replacement tyres for
trucks and buses. The Court subsequently confirmed the
Commission’s conclusion that the new tyre market was
not subject to competition from retreads to an extent
sufficient significantly to alter competitive conditions
and Michelin’s dominant position on the market. This
analysis is still valid, as confirmed by Michelin during
the investigation (in reply to requests for information
from the Commission).

(114) Second, the respective structures of supply and demand
for the two products are far from identical. On the
supply side, producers of new tyres are generally quite
distinct from retreaders, Michelin being the only com-
pany to have a strong position on both market segments.
On the demand side, the customers of new tyre manufac-
turers are mainly specialised dealers, while the customers
of retreaders are mainly transport firms, which use
specialised dealers merely as intermediaries. In the vast
majority of cases, retreading prolongs the use of a new
tyre by its original owner. The retreader thus acts as a
skilled service provider, who does not necessarily have
any link with the tyre sales sector. The involvement of a
dealer is usual, but not essential.

(112) Since the NBIM decision was confined to the new tyre
market, neither the Commission nor the Court of Justice
had the opportunity to deliver an opinion on the
relevance or otherwise of the retread market, which is
necessary in this case. Following identical arguments to
those put forward in support of the definition of the
relevant market as the market for new tyres, it is clear
to
that
competition from new tyres to an extent likely to alter
the competitive conditions prevalent on it. The markets
in new tyres and retreads thus constitute two distinct
relevant markets. The main reasons for this conclusion
are:

is likewise not subject

the retread market

(113) First,

there is a marked difference in the price of
new and retreaded tyres, which reflects the significant
differences between the two products. The vast majority
of new tyres are marketed at a price well above that of
retreads, the average unit price of which is equivalent to
around 50 % of the price of a new casing. This difference

(115) Third, and most importantly, the retread market consti-
tutes a secondary ‘after-sales’ service market in relation
to the market for new tyres. New tyres do not therefore
constitute a valid substitute for retreads. Since retreading
is performed precisely in order to prolong the life of a
tyre so as to postpone the purchase of a new one, there
cannot be real competition between retreading and the
purchase of a new tyre. The fact that in France more
than 80 % of transport firms have recourse only to
custom retreading, rather than purchasing a retreaded
tyre which they had not previously owned, shows the
extent to which the retread market is complementary to
and thus distinct from the new tyre market. This is all
the more true given that one of the main features of the
truck tyre market is that, unlike purchasers in the
passenger car category, transport firms systematically
take account of the cost price per kilometre. Retreading
is part of a strategy for reducing the cost price of the
tyre, which in practice rules out
the possibility of
effective competition between retreading and the pur-
chase of a new tyre at the same stage in the life of the
casing.

(14) OJ L 353, 9.12.1981, p. 33.

(116) Lastly, analysis of their specific characteristics and their
uses by final consumers shows that new tyres and
retreads are not really substitutable. Hauliers systemati-
cally avoid fitting retreaded tyres to the front of their
tractor units (steer tyres) or to trucks carrying dangerous

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31.5.2002

goods. These practices arise less from strict security
considerations (while most specialised dealers recognise
that retreads are less reliable, they agree that high-quality
retreading reduces the risk virtually to zero) than from
the desire, given the spread of just-in-time approaches,
to avoid any incident on the journey that might delay
delivery. The situation that prevailed in 1981 has thus
not changed significantly.

(117) Likewise, retreaders and dealers in retreaded tyres do not
consider retreads to form a real alternative to new tyres,
but see them as complementary in that, first to carry out
their business activity, they depend on a regular supply
of new tyres that cannot, or at least can only inad-
equately, be replaced by a supply of retreads, and that
second, retreads are a secondary product compared with
original equipment tyres or used replacement tyres,
which constitute essential ‘raw material’ for retreading.

(118) This leads to the conclusion that the markets in new
replacement truck tyres and truck retreads are quite
distinct.
it will thus be examined
whether Michelin has a dominant position on both these
reference markets.

In this Decision,

market. Its assessment took account of the limited extent
of parallel imports, the organisation of sales subsidiaries
along national lines and the fact that Michelin took
account only of national purchases in calculating its
rebates. This analysis was deemed to be correct by
the Court of Justice in its judgment in Case 322/81
Nederlandsche Banden-Industrie Michelin v Commission
(hereinafter ‘NBIM judgment’) (15), in paragraph 26: ‘In
practice dealers established in the Netherlands obtain
their supplies only from suppliers operating in the
Netherlands. The Commission was therefore right to
take the view that the competition facing Michelin NV is
mainly on the Netherlands market and that it is at that
level that the objective conditions of competition are
alike for traders’.

(121) Michelin now asserts that

the market has become
international. In support of this argument, it cites the
fact that ‘the structure of competition on the replacement
tyre market is worldwide: the main players (…) compete
on a world scale’. Michelin also stresses that the group
was reorganised in 1996 into European product lines
(TOUs (16), that standard European legislation now exists
and that ‘the international nature of the tyre market
has been confirmed in recent years by the large-scale
importation of tyres from Asia and eastern Europe’.

2. GEOGRAPHIC MARKETS

(119) The relevant geographic market comprises the area in
which the undertaking concerned is involved in the
supply and demand of products or services, in which the
conditions of competition are sufficiently homogeneous
and which can be distinguished from neighbouring areas
because the conditions of competition are appreciably
different in those areas.

(122) The unquestionable intensification of trade over the
last decade certainly made a re-examination of the
geographic dimension of competition on the relevant
product market necessary. Following this re-examin-
ation, the Commission considers that, despite the argu-
ments put forward by Michelin, competition conditions
are not homogeneous at European level and that con-
ditions on the French market are appreciably different
from those that prevail on the other markets of the
Community.

The market in new replacement tyres

(123) The argument that the largest international tyre pro-
ducers compete in numerous countries and across the
it can be
European Union in no way means that

(120) In its NBIM decision, the Commission concluded that
the market in replacement tyres for trucks was a national

(15) [1983] ECR 3461.
(16) Tactical Operational Units.

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L 143/19

supposed that the relevant geographic market is the
world market. This situation is perfectly compatible with
the existence of conditions of competition that are
appreciably different in each of the relevant countries.
This was already the situation in the tyre industry at the
time, when the Court of Justice found that the Dutch
new replacement tyre market was a national market.

(127) The data collected also show that parallel imports are
extremely limited despite the major price differential
between the various national markets within the Com-
munity. One of the largest tyre importers (Vandenban)
also states, in a press article supplied by Michelin, ‘that
98 % of its business is in tyres for passenger cars, truck
tyres being covered by the manufacturers, with the
remaining 2 % accounted for by a breakdown service for
loyal customers’.

(124) What matters in this case is to assess the real capacity of
dealers to obtain supplies from outside their national
territory and the similarities or differences in the supply
structure.

(128) There are several reasons for this, which are:

Purchases from national subsidiaries and limited
extent of parallel imports

(125) During its enquiry, by way of requests for information,
the Commission found that in 1997 the large manufac-
turers all organised the distribution and sales of their
tyres along national lines. The situation has thus not
changed since the NBIM decision. Michelin itself
acknowledges that it ‘carries on its business on the
various national replacement markets via commercially
independent companies established in accordance with
the applicable national law. (…) [...]’. All the manufac-
turers also confirm that national dealers obtain supplies
almost exclusively from the national trading subsidiaries.
Michelin itself confirms that although they could obtain
supplies from sources other than the national subsidiary,
‘dealers, at least as regards their regular supplies, gener-
ally use the Michelin company established in their
country’.

(126) It should be noted that, in its NBIM judgment, the Court
found that the mere fact that dealers obtained supplies
almost systematically from the national subsidiary gave
rise to the conclusion that the market was national. On
the basis of the observation that ‘the commercial policy
of the various subsidiaries of the groups competing at
the European or even the world level is generally adapted
to the specific conditions existing on each national
market’, the Court concluded that ‘the Commission was
therefore right to take the view that the competition
facing Michelin NV (was) mainly on the Netherlands
market’. This situation has not changed and is valid for
France today.

1.

Economic:

even if dealers can theoretically obtain supplies
from a foreign Michelin subsidiary, they have no
economic interest in doing so since they would pay
the listed price and the purchases would not be
taken into account by Michelin for the calculation
of the rebates;

2. Historical:

in France, wholesaling (a distribution system which
is conducive to parallel
imports) is very under-
developed. It is virtually non-existent on the market
for truck tyres. There are marked differences as
regards supply to retailers (‘sell-in’) between the
countries where, owing to the absence of wholesal-
ing, the dealers are in direct contact with the
manufacturers (e.g. France, Italy) and the countries
where wholesale distribution is very strong (the
Netherlands, Germany);

3.

Technical:

the technical factor is probably the most decisive.
Dealers absolutely require regular and secure supply
across the range. These conditions cannot be
guaranteed by recourse to parallel importers. This
situation is all the less surprising in that reselling
tyres to hauliers is a very technical business that
requires the dealer not only to possess technical
knowledge, but also to follow closely a number of
guidelines issued by the manufacturer, especially
when the tyres, as is generally the case with
Michelin tyres, will be regrooved and retreaded. It

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31.5.2002

makes sense for dealers to obtain supplies exclus-
ively from national subsidiaries of the manufac-
the same time provide them
turers, which at
with documentation and advice on fitting and
monitoring the tyres.

(129) Furthermore, while it is true that dealers do make import
purchases, they do so sporadically and in very small
quantities: these purchases complement national supply,
but are not in any circumstances substitutable for it.
This point was a touchstone for the definition of the
geographic market in Commission Decision 88/518/
EEC (Case IV/30.178 Napier Brown/British Sugar (17).

(130) Thus, the limited extent of parallel

imports and the
large-scale purchasing from the national subsidiaries are
evidence that the geographic market is confined to
French territory within the meaning of
the NBIM
judgment.

(131) Moreover, differences in the structure of supply in the
various Member States and major price differences are
factors that also point to the existence of separate
national markets and in particular of a relevant market
confined to France.

Country

1993

1994

1995

France

Greece

Italy

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Norway

[...]

[...]

[...]

Netherlands

[...]

[...]

[...]

Portugal

[...]

[...]

[...]

United Kingdom

[...]

[...]

[...]

Sweden

[...]

[...]

[...]

Switzerland

[...]

[...]

[...]

Total EU

[...]

[...]

[...]

Total EEA

[...]

[...]

[...]

Differences in the structure of supply

Source: Michelin (18).

(132) It should be noted in this connection that the market
shares of each of the large manufacturers vary consider-
ably from country to country. Table 8 below gives
market shares for Michelin:

Table 8: Michelin’s shares of the markets in new replace-
ment truck tyres in western Europe (%)

Country

1993

1994

1995

Germany

Austria

Belgium

Denmark

Spain

Finland

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(133) Such national variations are hardly compatible with
the theory of a European market characterised by
homogeneous competition. While such differences may
depend on how long a firm has been established on the
market and/or on national
traditions still affecting
consumer behaviour, the existence of such phenomena,
if confirmed, would support the hypothesis that the
market in replacement tyres for trucks and buses in the
Community is still divided along national lines.

Appreciable price differences

(134) The major differences in tyre prices throughout the
reference period, according to the country where they

(17) OJ L 284, 19.10.1988, p. 41.

(18) Reply to request for information of 3.12.1996.

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are sold, supports the hypothesis that
the relevant
geographic market is a national one. Michelin provided
a series of tables that highlight the significant price
differences within the Community. Thus, if we compare

the price in six Member States of one of the tyres with
the highest sales in one of the most popular dimensions
(Michelin 315/80 R 22.5 XZA), we obtain the following
table:

Table 9

Listed invoice prices, France = 100 (%)

Year (19)

France

Spain

1993

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(FRF, at the exchange rate on the date in question)
Source: Michelin.

Italy

[...]

[...]

[...]

[...]

Germany

Netherlands

United Kingdom

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(135) The table shows that in 1993, compared with the French
market, listed invoice prices were lower [...] and [...],
but significantly higher [...] and especially [...]. It is
remarkable that, for the same product, the difference
can be as high as [...], as in the case of [...] and [...].
Although these differences have since narrowed, they
are still significant. Compared with the French market,
the listed prices in 1996 were lower [...] and [...]and

higher [...] and [...]. There is still a [...] difference between
the countries with the highest and lowest prices for the
tyre, in this case [...].

(136) If we use as a reference the listed prices after deduction
of the invoice rebates, we obtain the following table,
which shows that significant differences remain:

Table 10

Prices after deduction of the invoice rebates, France = 100 (%)

Year

France

Spain

1993

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(FRF, at the exchange rate on the date in question)
Source: Michelin.

Italy

[...]

[...]

[...]

[...]

Germany

Netherlands

United Kingdom

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(137) Lastly, a comparison of the net prices charged by Michelin after deduction of the maximum rebates gives

the following figures:

(19) The data relate to 1 January of each year considered (idem for

the following tables).

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Table 11

Net prices after deduction of the maximum rebates, (20) France = 100 (%)

Year

France

Spain

1993

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(FRF, at the exchange rate on the date in question)
Source: Michelin.

Italy

[...]

[...]

[...]

[...]

Germany

Netherlands

United Kingdom

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(138) We see that from 1994 in particular the price was
regularly and significantly higher [...] than in the other
reference countries. For example, in 1994 the price of
the tyre was some [...] lower [...].

(139) Significant variations are evident, even if these figures
should be treated with caution. It is extremely difficult
to draw precise comparisons. Apart from the fact that
currency fluctuations can blur interpretation, the price
lists almost never correspond to the price actually
paid and the rebates vary according to the specific
circumstances of each dealer. In this connection, it is
essential
the ‘post-invoice’ rebates are
proportionally much higher in France than in countries
such as the Netherlands, Germany or
the United
Kingdom. The fact that the above figures take account
of the maximum post-invoice rebates, which are largely
theoretical in the case of France, since few dealers can
benefit from them in full, clearly has the effect of
underestimating French prices in relation to these
countries.

to note that

(140) Although these factors are strong indications of the
existence of a national market in new replacement tyres
in France, a number of objections were raised by
Michelin.

(141) First,

the extent of

intra-Community tyre flows is

evidence that the market is Community-wide:

Michelin thus argues in its reply to the statement of
objections that ‘more than [...] of the total number of
new replacement truck tyres sold on the French market
are not manufactured in France’. However, the flows
described by Michelin reflect the organisation of pro-
duction on a European scale, which in no way rules out
the existence of national markets. It is the sales con-
ditions which in this case determine the size of the
market, and the flows described by Michelin are flows
between tyre manufacturing plants, including Michelin’s
own plants to a large degree, and they are thus outside
the market. Parallel imports, on the other hand, are
much more limited.

(142) Secondly, hauliers could very easily purchase their tyres

abroad:

according to Michelin, despite the fact that the manufac-
turer-distributor relationship is on a national scale, final
customers,
i.e. haulage fleets, could easily break free
of this compartmentalisation by buying directly from
specialised dealers in the countries with the lowest
prices. This scenario does not correspond to reality.
Given the logistical difficulties of such a strategy and the
time pressures on hauliers, it seems unlikely that truck
fleets would themselves obtain supplies
abroad,
especially since managing the tyres of a fleet requires
technical knowledge and strict monitoring such as
would rule out this kind of practice.

(20) It should be borne in mind that these prices take account of the
maximum rebates (which will be given only rarely) and that they
can in any event not be known until the end of a financial year.

(143) It must be borne in mind that for a transport firm,
especially when it has a large fleet, tyre management is a
involving assessment of the
highly technical matter,

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extent to which the tyre is worn and of the right time to
intervene, the practice of rotating tyres to even out wear
and tear and prolong their useful lives, etc. It follows
that for haulage professionals, the purchase of tyres is
difficult to dissociate from the service provided at the
same time by the dealer. Moreover, since action on the
tyres must be taken at specific times, it is difficult to see
how a haulier could seriously plan to obtain supplies
abroad and store the tyres purchased in this way.

(144) A number of factors argue against the hypothesis put

forward by Michelin:

(i)

(ii)

(iii)

technical monitoring: many facts contained in the file
reveal that constant technical monitoring of the
tyre fleet is vital [...]. While it is true that 20 to
25 % of journeys in Europe are made with empty
trailers, it is unrealistic (given the need for regular
technical monitoring of the tyres and for storage)
for hauliers to obtain supplies abroad item by item;

(see

below),

language problems: since most haulage firms are
micro-enterprises
linguistic
obstacles to intra-Community trade are not incon-
siderable, especially since tyre dealing would be
secondary to the transport business and thus
without a specific budget (e.g. training in foreign
languages and in negotiating in them);

the

targeted commercial policies:
fixed-mileage
hypothesis;

contracts

the development of
this

also undermines

(iv)

the structure of the road transport sector: this tends, in
France, to demonstrate that, in any event, only a
very small proportion of hauliers could afford to
adopt such an approach.

vehicles, 5,6 % had 6 to 10 vehicles and only 12,8 %
had 11 vehicles or more. The proportion of small
businesses had increased by comparison with 1985.

(146) The same report states that most road haulage business
is done on local markets. Even in the countries where
distances are the greatest (Italy), 50 % of freight is carried
for distances of less than 50 km, according to the report.

(147) An investigation by the Commission confirmed that
fleet policies with specific services and prices, targeting
firms with a large number of vehicles, are operated by
most of the large tyre manufacturers. The latter state
that this policy (and thus also the associated services) is
restricted to France. It is therefore clear that even if
certain haulage firms were tempted to make their
purchases abroad, this targeted marketing policy [...]
would prevent them from doing so. In fact, the possi-
bility of this sub-market forming a relevant market
cannot be ruled out, given the price and distribution
characteristics specific to it. However, for the purposes
of
the matter has no favourable or
unfavourable consequences for Michelin and will thus
not be considered further.

this Decision,

(148) Thirdly, Michelin states that the international nature of
the tyre market has established itself in recent years with
large-scale imports of
tyres from Asia and eastern
Europe.

(149) There are two main reasons for refuting this argument.

(150) First, the imports mentioned by Michelin almost exclus-
ively involve ‘third line’ tyres (21), which compete only
to a very limited extent with the products that make up
the core of Michelin’s business. Second, these products
account for significantly less than 20 % of replacement
casings sold in Europe. Figures obtained from Eurostat
indicate that imports from outside the EU in 1996
represented only 6,2 % of sales of new truck tyres on
the French market (broken down as follows: central and
eastern Europe: 2 %; South East Asia including Japan:
3,3 %).

(145) According to the report by the group of wise men on
road haulage in the single market (1994), in 1990, of
37 037 road haulage firms in France, 81,6 % had 1 to 5

(21) It should be noted that Michelin has taken control of certain
third line brands (Taurus and Stomil) to keep up with the
phenomenon.

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Table 12: Commercial flows of new truck tyres in 1996

Country

Sales

Imports SE Asia
and Japan

Imports central
and eastern Europe

Imports World
excluding the EU15

Import

% sales

Import

% sales

Import

% sales

France

2 806 000 (22)

92 881

Belgium-Luxemburg

434 000

32 914

3,3

7,6

57 120

5 427

2,0

1,3

Netherlands

341 000

206 406

60,5

42 748

12,5

311 731

174 395

6,2

58 191

549 568

310 175

13,4

91,4

13,4

13,2

381 211

14,3

186 744

?

62 182

178 722

46 036

187 742

28,9

68,2

15,1

13,9

96 456

28,5

19 809

9,4

2,8

6,2

3,6

3,1

4,7

8,5

1,9

2,1

2,2

2,4

Germany

4 095 000

350 563

Italy

2 342 000

48 567

United Kingdom

2 655 000

222 138

8,6

2,0

8,4

114 696

144 182

94 826

Ireland

171 000

70 862

41,4

5 324

Denmark

215 000

48 623

22,6

10 130

262 000

79 882

30,5

22 214

304 000

20 132

1 352 000

124 711

6,6

9,2

5 754

28 851

338 000

77 652

23,0

7 487

Greece

Portugal

Spain

Sweden

Finland

Austria

210 000

14 625

411 000

3 670

5 089

7,0

0,9

8,7

55 514

13,5

65 147

599 362

3,8

2 628 109

15,8

16,5

Total EU

15 936 000

1 393 626

Source: Eurostat.

(151) Secondly, it can be noted that the French market is by
far the least exposed to penetration by third line tyres
(taking as a reference a Community average of 16,5 %
and a Member State like the Netherlands with a pen-
etration rate of 91,4 %), a factor which further streng-
thens the particularly closed nature of the French market.

In the specific context of this case, it is still justified
to define the relevant geographic market
for new
replacement truck tyres as the French domestic market.

The market in retreaded tyres

(152) In conclusion, it is clear that none of the arguments put
forward by Michelin to support its theory are convincing.

(153) The retread market is manifestly a national market,

especially in the case of France.

(22) Eurostat’s figures are quite different from the data supplied by
Michelin. Doubtless, the customs data used here take account of
extra-market flows (importance of ports on the French market
and thus of transit).

(154) In the first place, most manufacturers consulted by the
Commission by way of requests for information stated
that the retreaded tyre market was national. Michelin

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L 143/25

itself confirmed in its reply to the Commission that the
retread market was national, since it was a market for
the provision of services, and thus a local market. Since
the retread market is a market for the provision of
services, and services by definition cannot be stocked, it
is a local market and therefore at most of national
dimension. Even in the case of mould-cure retreading,
where retreaders have mould-cure plants in only a few
countries, worn casings are managed on a national scale,
as indicated by Michelin.

(155) Other factors also support this observation.

(a) The structure of supply is heterogeneous within the

Community

(156) Marked differences, reflecting the very different market
shares of the manufacturers, are a feature of the Com-
munity landscape. The French market is distinguished in
particular by the clearly dominant presence of Michelin,
which in 1995 had a market share of almost [...], while
Bandag, its nearest competitor, had a share of less than
[...] of the same market. In the other countries of western
Europe, on the other hand, competitive relationships
with other market players are different, sometimes to
the detriment of Michelin, as illustrated by the following
table:

Table 13: Market shares of the two main players on the
market for retreading tyres in western Europe in 1995
(%)

Michelin
group

Franchised
Bandag dealers

Germany

Austria

Belgium

Denmark

Spain

Finland

France

Greece

Italy

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Michelin
group

Franchised
Bandag dealers

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Norway

Netherlands

Portugal

United Kingdom

Sweden

Switzerland

Source: Michelin.

(b) The differences affecting the structure of demand within
the Community help to set the French market apart

(157) The differences in the structure of demand on the
retreading markets within the Community are marked.
retreading and
The predominance of mould-cure
custom retreading in France help to set the French
market apart. The mould-cure method implies the use
of industrial retreading plants, constraints connected
to the transport of the carcasses, long processing times
and especially an elaborate system for collecting the
carcasses. In these circumstances, the presence of an
intermediary (usually the specialised dealer) between
the retreader and the transport
firm is virtually
indispensable. In countries where precure retreading is
widespread, on the other hand, the specialised dealer
or the retreader do the retreading themselves, so that
retreaders and transport firms are in direct contact
with one another.

(c) There are major price differences between the Member

States

(158) There are major differences in the prices charged in the
various countries, whether the Commission takes into
account the price lists provided by Michelin or the post-
rebate prices, a situation which reflects the lack of
homogeneity in competitive conditions in Europe. This
is illustrated by a comparison of the price of a very
popular retread (Michelin 385/65 R 22.5 XZA) sold to
dealers in six countries.

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Table 14

Listed invoice prices, France = 100 (%)

Year (23)

France

Spain

1993

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(FRF, at the exchange rate on the date given in the table)
Source: Michelin.

Italy

[...]

[...]

[...]

[...]

Germany

Netherlands

United Kingdom

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(159) Price differences by comparison with the French
market are considerable, both in 1993 and in 1996. In
1993 prices were lower [...], but much higher [...] and
especially [...]. There was a difference of almost [...] in
the price for the same tyre [...]. In 1996, the difference

in the price of a retread [...] was [...].

(160) If the Commission considers the price of the same tyre
after deduction of the invoice rebates, the table comes
out as follows:

Table 15

Prices after deduction of the invoice rebates, France = 100 (%)

Year

France

Spain

1993

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(FRF, at the exchange rate on the date given in the table)
Source: Michelin.

Italy

[...]

[...]

[...]

[...]

Germany

Netherlands

United Kingdom

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(161) Lastly, if account is taken of the final net price after the full rebate:

Table 16

Net prices after deduction of the maximum rebates, France = 100 (%)

Year

France

Spain

1993

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(FRF, at the exchange rate on the date given in the table)
Source: Michelin.

(23) On 1 January of the relevant year.

Italy

[...]

[...]

[...]

[...]

Germany

Netherlands

United Kingdom

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

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(162) Here too, the final cost price paid by dealers is certainly
lower depending on the rebates and/or benefits to which
they are entitled, which vary considerably from one
Member State to another, and on the commitments
which dealers decide they are prepared to make. For
example the ‘PRO’ premium (‘Agreement for optimum
use of Michelin truck tyres’) exists in France and Spain,
but not in Germany or the United Kingdom.

(163) Michelin itself

is aware of

the price differences at
European level since it considers that [...] (statement by
a Michelin working group on retreading made in a
document obtained during the inspection visits).

(164) A comparative analysis of repurchase prices for Michelin
carcasses per country also shows considerable price
variations. The following data were taken from tables
found on Michelin’s premises; they are for a type of tyre
that is commonly used for retreading:

Table 17: Variations in the repurchase price for carcasses
in Europe

(166) Two technical reasons:

— since retreading in France is mostly custom
retreading, time constraints mean that retreading
units close to the customers are used, so that
dealers will rarely send the carcasses abroad,

— since the price of a retread is lower than the price
of a new tyre, the cost of transporting carcasses
represents a higher proportion of the final cost of
a retread than of a new replacement tyre. This cost
could prove to be a major obstacle to intra-
Community trade.

(167) Two commercial reasons:

315/80 R 22.5
6.12.95

365/80 R 20
3.5.96

— carcass collection by mould-cure retreaders, includ-
ing Michelin, is essentially organised on a national
scale,

Average price:

France

Germany

Spain

Italy

United Kingdom

Belgium

Netherlands

Austria

Denmark

Greece

Sweden

Source: Michelin.

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

— commercial terms and the rebate system set in
place by Michelin are strong incentives to special-
ised dealers to send carcasses for retreading to the
national Michelin subsidiary. If dealers want to
maximise their rebates, it is in their interest not to
diversify their purchases and to have their carcasses
retreaded by the same retreader.

(168) The relevant geographic market for truck retreads will
therefore be considered to be the French market.

(169) Given the size of the French market in the products at
issue, it is a substantial part of the common market
within the meaning of Article 82 of the EC Treaty.

Limited purchases made outside France by special-
ised dealers

Conclusion on the relevant markets

(165) Despite these price differences, it is extremely rare for
specialised dealers to make purchases outside France for
two technical and two commercial reasons:

(170) The replacement tyre for trucks and buses comprises
two relevant product markets, one being the market in

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new replacement tyres and the other, the market in
retreads.

(171) For each of the two relevant product markets, the
relevant geographic market was found to be the French
market, in view of the absence of homogeneous competi-
tive and commercial conditions on the national markets
and the limited tyre purchases made outside France by
dealers.

B. MICHELIN’S DOMINANT POSITION

(172) In its judgment in Case 85/76 Hoffmann-La Roche v
Commission (24) the Court of Justice defined a dominant
position as a ‘position of economic strength enjoyed by
an undertaking which enables it to prevent effective
competition being maintained on the relevant market
by affording it the power to behave to an appreciable
extent independently of its competitors, its customers
and ultimately of the consumers’. According to the
Court, ‘the existence of a dominant position may derive
from several factors which, taken separately, are not
necessarily determinative but among these factors a
highly important one is the existence of very large
market shares’ (25).

(173) The successive analysis of three types of criterion leads
to the conclusion that Michelin has a dominant position
on the relevant markets. First, a number of structural
indications, the most important of which is Michelin’s
market share, point to this conclusion. Second, an
analysis of Michelin’s behaviour on the relevant markets
brings to light certain attitudes and practices which are
typical of a company in a dominant position. The
assessment
lastly, by the position of
economic dependence in which specialised dealers find
themselves vis-à-vis Michelin, a necessary trading
partner.

is confirmed,

1.

STRUCTURAL INDICATIONS OF THE DOMINANT POS-
ITION

(174) Since the Hoffmann-La Roche judgment, the Court

(24) [1979] ECR 461, at paragraph 38.
(25) Loc. cit., paragraph 39.

has considered that very large market shares are in
themselves evidence of a dominant position (26). In the
same judgment it found that if, for example, a firm had
a market share of 86 % (vitamin B 2) or even 75 %
(vitamin B 6 ‘95 % even when reduced by 20 %’), it
ranked as being in a dominant position. In 1991, in
its judgment in Case C-62/86 AKZO Chemie BV v
Commission (27), the Court ruled that a market share of
50 % was in itself, save in exceptional circumstances,
evidence of the existence of a dominant position. The
Court stated: ‘With regard to market shares the Court
has held that very large shares are in themselves, and
the
save in exceptional circumstances, evidence of
existence of a dominant position. That is the situation
where there is a market share of 50 % such as that found
to exist in this case’ (28).

(175) All the analyses combine to show that Michelin’s share
of the two relevant markets has exceeded this threshold
consistently for more than twenty years.

The market in new replacement tyres

(176) The SNCP (Syndicat National du Caoutchouc et des
Plastiques — National Rubber and Plastics Union) calcu-
lated that Michelin had a 58,9 % share of the market in
new replacement
tyres in 1995. Marketline Ltd, a
specialist in the sector, gave 55 % as Michelin’s market
share in one of its publications. Michelin argued that its
market share was no more than [...]. Its competitors
estimate its market share at somewhere between 51 %
and 65 %. Internal graphs and tables from Michelin’s
commercial policy division found during the 1997
inspection visits show a stable market share of between
[...]. Whatever the accuracy of each of these analyses,
they all show that Michelin had a market share of
more than [...] (29) throughout the reference period, and
knowing that Michelin itself acknowledges a market
share of [...] for the beginning of the 1980s, it can be
supposed that Michelin has held a dominant position on
the French market in new replacement tyres for the last
twenty years and that its market share has remained at a
high level since the beginning of the decade.

(26) Loc. cit., paragraph 56, for example.
(27) [1991] ECR I-3359.
(28) Loc. cit., paragraph 60.
(29) In its reply to the request for information of 3 December 1996,
in a table reproduced at paragraph 132 of this Decision, Michelin
considers that it had a market share of only [...] in 1993, but
this statement contradicts the documents found on Michelin’s
premises.

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Table 18: Estimated market shares of the manufacturers
on the French market in new replacement tyres for trucks
(%)

The market in retreads

Marketline estimates Michelin
estimates
(1995)

(1996)

(1995)

Michelin

Dunlop

Goodyear

Bridgesone/Firestone

Continental/Uniroyal

Pirelli

Others (including third line)

55,0

51,0

9,0

6,5

12,5

5,0

3,0

9,0

9,0

7,0

9,0

6,5

3,0

14,5

TOTAL

100,0

100,0

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(177) The following table contains data found in the manufac-
turer’s commercial policy division during the inspection
visit:

Table 19: Estimated market share held by Michelin on
the market in new replacement tyres for trucks in six
European countries (%)

France

Germany

Spain

United Kingdom
and Ireland

Italy

Belgium

Total 6 countries

Source: Michelin.

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(179) According to Michelin itself, Michelin and its subsidiary
Pneu Laurent held market shares above or equal [...]
without interruption from 1985 to 1996 [...]. Their
most serious competitors were the Bandag dealers
(present only on the precure retreading market) with at
most [...] of the market during the period (and consider-
ably less at the beginning of the period), followed by the
Dunlop-SEIA-Pneu Holding, with a combined share of
[...], then Goodyear at [...] and Continental at [...]. At the
beginning of the reference period, Michelin claims to
have even reached a market share of [...].

Table 20: Estimated market shares of the French market
in truck retreads (%)

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Michelin

Escoffier (Bandag dealer)

SOCAP (Bandag dealer)

Various (Bandag dealers)

Total Bandag

ABR

Soreval

Goodyear

Source: Michelin.

TOTAL

(180) There can therefore be scarcely any doubt that Michelin
is in a dominant position on the retread market, given
that very high market shares are in themselves, save in
exceptional circumstances, evidence of the existence of
a dominant position. Furthermore,
this position of
dominance is long-standing and is therefore incontest-
able.

1993

1994

1995

1996

Firestone France Pneus

(178) In any event, all the manufacturers and studies consulted
unanimously affirm that Michelin has a market share
five to six times greater than its closest competitor,
Dunlop, which controls barely [...] of the market.

2. OTHER EVIDENCE OF MICHELIN’S DOMINANT POS-

ITION

(181) A number of features of Michelin’s business actively

explain why it is so powerful on the relevant markets.

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Official Journal of the European Communities

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(182) Michelin’s technical lead is undeniable. It launched the
radial tyre in 1948 and is still the world’s leading
manufacturer of radial tyres today. Although the original
patents for the radial tyre expired some years ago and
licences have been granted to other manufacturers since
1956, Michelin still has particular expertise in the field.
In addition, it has been carrying out extensive research
for a number of years on the ‘green tyre’, which is being
marketed under the name ‘Energy’.

(185) Lastly, the spontaneous demand shown by large trans-
port firms is evidence that French transport firms still
have a preference for Michelin products. There are
several reasons for this: the considerable lead Michelin
had in the past, the brand’s position on the original
equipment market, the effectiveness of the sales force on
the ground and the retreadability rate of the carcasses,
which is often higher for Michelin tyres than for other
brands. Distributors consider the rate of spontaneous
demand to be high in France. Michelin estimates that it
represents [...].

(183) This indisputable technological lead is the result primar-
ily of the major investments Michelin has been able to
make out of its extensive financial resources. It has
consistently pursued an active policy of research and
innovation. Its research and technological development
(RTD) budget runs to [...] of its turnover, which is well
above those of its largest competitors. The RTD budgets
of Goodyear, Bridgestone/Firestone, Continental, Pirelli
and Dunlop are [...],[...],[...],[...] and [...] respectively (30).

Michelin’s strong presence on adjacent markets

(186) Michelin’s strong presence on adjacent markets acts to
its advantage on the replacement and retread markets.
The barrier to competitors’ entering the relevant markets
is far from being negligible.

(184) The Michelin brand is in a position to offer a wide range
of different tyre products such that an ever increasing
number of customer groups is reached. In France, the
range is wider than that offered by other manufacturers
and its quality and reputation are indisputable.

(187) On the market in new replacement tyres, Michelin has a
dual advantage over its competitors. First, its very strong
position on the market in original equipment truck tyres
cannot but be beneficial. It is the preferred supplier of
the French heavy vehicle manufacturer and market
leader, Renault.

Table 21: Shares of the European market in original equipment truck tyres (%)

1990

1991

1992

1993

1994

1995

1996

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Michelin

Continental

Goodyear

Bridgestone

Pirelli

Dunlop

Others

Source: Michelin.

(30) According to European Tyre Report 1996, European Rubber

Journal, September 1996.

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(188) Michelin has a [...] share of the European market, which
is four times that of its nearest competitor and nearly six
times that of the next in line. This undeniably puts
Michelin in a very advantageous position, since there is
no doubt that users tend, even if only to a limited extent,
to remain loyal to the brand of tyre originally fitted on
their vehicles.

(189) Second, Michelin has a strong presence on all the new
replacement tyre markets, which is not true of the other
manufacturers, as illustrated in the table below:

Table 22: Market shares held by Michelin and its main
competitors on various tyre markets in France in 1995

Market
Manufacturers

Passenger
car
(OE+RT)

Motorbike

Plant
(RT)

Agricultural
vehicles
(driven
wheels)

[...]

[...]

[...]

[...]

[...]

[...]

Michelin

Bridgestone

Continental

Goodyear

Dunlop

Pirelli

Source: Michelin.

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(190) On the retread market, Michelin has the major advantage
of being the only manufacturer to have a strong position
on this market and on the new tyre market. In France,
Michelin has a share of some [...] of the retread market,
well ahead of its nearest competitor, the network of
Bandag franchisees, which is itself independent of the
other manufacturers. Michelin is therefore the only
‘in-house’
to offer
manufacturer
able
retreading of
its own casings. This situation is of
considerable relevance when it comes to analysing the
manufacturer’s market power. Michelin bases its entire
communication on the fact that its tyres are designed
from the outset to have four lives. This means that,
although they cost more than competitors’ tyres at the
time of purchase, the cost price per kilometre of Michelin
tyres is very competitive. This sales argument, based
essentially on the promotion of retreading by the
manufacturer downstream, helps to increase Michelin’s
market power.

large-scale

Michelin’s omnipresent commercial and technical ser-
vice on the ground

(191) Michelin has close on fifty logistics platforms and local
centres in France, to which are attached several hundred
technico-commercial representatives that ensure who
Michelin is well represented among dealers.

(192) Although Michelin’s competitors also have sales forces,
they are far less numerous and significantly less struc-
tured. Michelin’s sales force in the heavy-vehicle sector
comprises more than [...] agents (31), whereas none of its
competing manufacturers has sales teams of more than
forty people. Michelin can therefore defend its market
position extremely well, knowing that its competitors
are not in a position to campaign so intensively among
final consumers. Furthermore, [...].

Michelin’s leading position in French distribution
channels

(193) In the highly fragmented truck tyre distribution sector,
Michelin has a very strong position, as was made evident
in the previous section. Via its integrated distribution
network Euromaster, Michelin directly controls some
[...] sales outlets of the 2 225 on French territory. This
figure represents [...] of sales outlets, but [...] of all
sales outlets that belong to manufacturers’ integrated
networks. While Dunlop controls [...] sales outlets, three
times less than Michelin, Bridgestone/Firestone controls
only [...], and the other manufacturers, none at all.

(194) The same situation applies to the ‘clubs’, arrangements
for closer partnerships with certain specialised dealers
set in place by the manufacturers. With a total of [...]
members covering [...] sales outlets, the ‘Michelin Friends
Club’ represents a very large majority of all sales outlets
belonging to a ‘club’. If the Euromaster sales outlets are
added to the Club members, this comes to roughly a
third of sales outlets in France.

(31) Michelin commercial strategy document.

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Official Journal of the European Communities

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(195) The market power Michelin derives from this more or
less direct control of distribution is illustrated by a
comparison of the manufacturers’ market shares of each
of the various distribution channels. This table was
found on Michelin’s premises and applies to all of
Europe; it can be deduced from two principal arguments
that the situation is at least the same,
if not more
advantageous, on the French market:

— Michelin’s position on all tyre markets is stronger

in France than in the other Member States,

— for historical reasons, Euromaster and the ‘Club’
are more developed on the French market than
elsewhere in Europe.

Table 23: Comparison of Michelin’s shares of the replace-
ment truck tyre market by distribution channel in Europe
in 1994 (%)

Distribution channel

Number of
sales outlets market share

Michelin’s

Euromaster

Continental network

Dunlop network

Goodyear network

Pirelli network

Bridgestone network

Other networks

Total for competitors’ networks

Total for controlled networks

Michelin Club

Total independent specialised
dealers

Total specialised dealers

Other channels

Direct consumer sales

TOTAL

Source: Michelin.

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

position. The possession of very large market shares and
significant comparative advantages, combined with the
weakness of its competitors, place Michelin in a position
of power which allow it to behave independently in a
manner typical of a firm in a dominant position.

Michelin’s behaviour is strong evidence of its domi-
nant position

(197) A detailed analysis of a number of aspects of Michelin’s
conduct provides further support in so far as necessary
for the conclusion, based on observation of the structural
aspects of the market, that a dominant position exists.

The practice of offering loyalty rebates and a net price
differential compared with competitors

(198) The business practice of granting a wide range of loyalty
rebates that are paid very late is also a clear indication of
Michelin’s dominant position. The fact that dealers until
at least 1997 were prepared to sell Michelin tyres at a
loss in the expectation of rebates that were finally paid
in February of the following year is evidence of the
manufacturer’s market power.

the dominant position.

(199) This practice will be examined in more detail later from
the point of view of its being such as to constitute an
abuse in itself. However, it is appropriate to mention it
here as evidence of
In its
judgment in Case 27/76 United Brands v Commission
in order to determine
the Court stressed the need,
whether a company is in a dominant position,
to
analyse the competitive situation on the relevant market,
specifying that ‘in doing so it may be advisable to take
account if need be of the facts put forward as acts
amounting to abuses without necessarily having to
acknowledge that they are abuses’ (32).

3. THE SPECIALISED DEALERS’ DEPENDENCE ON MICHE-
LIN MAKES THE LATTER AN UNAVOIDABLE PARTNER

(200) Lastly, a third important indication of Michelin’s domi-
nant position is the fact that the specialised dealers
manifestly appear to be placed despite themselves in
a situation of dependence that makes Michelin an
unavoidable partner.

(196) All these aspects of the structural analysis of the relevant
markets suffice to show that Michelin is in a dominant

(32) [1978] ECR 207, at paragraphs 67 and 68.

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(201) The resentment towards Euromaster expressed plainly
by independent specialised dealers (33), who nevertheless
is clear
would not consider doing without Michelin,
evidence of the fact that no dealer concerned about its
credibility can eliminate Michelin tyres from its sales
outlet. A dealer that did not sell new Michelin tyres or
did not send its carcasses for retreading to Michelin or
Pneu Laurent (Michelin’s subsidiary) would run the risk
of weakening its commercial credibility.

(202) The need for traders to include in their range a product
which is subject to heavy demand, as is the case here,
necessarily establishes a relationship of dependence
which makes the supplier in question an unavoidable
partner. It should be pointed out in this connection that
this situation was identified by the Court in its 1983
NBIM judgment as a fact that legitimately helped to
establish Michelin’s dominant position on the Nether-
lands market. The Court stated at the time that ‘a dealer
established in the Netherlands normally cannot afford
not to sell Michelin tyres’ (34).

(203) Most specialised dealers sell not only heavy-duty tyres
for trucks, but also a wide range of other types of tyre,
especially tyres for passenger cars and vans, as well as
offering ‘after-sales’ tyre services. However,
in recent
years the specialised dealers have lost a large proportion
of the passenger car tyre market to other distribution
channels (car centres, superstores, car manufacturers’
networks, etc.). This means that the truck tyre business
is taking up an increasing share of
their turnover
(according to the magazine Achat automobile actualité, it
represents around 60 % of
their turnover) and is
becoming crucial to their survival.

(204) It is clear that specialised dealers are placed despite
themselves in a situation of economic dependence that
makes Michelin an unavoidable partner.
is very
unlikely that dealers can ignore Michelin without
endangering their credibility and their business. Given
the brand’s market shares and the rate of spontaneous
demand (between 50 % and 70 % in France, according
to the requests for information sent by the Commission
to the specialised dealers), it is a fact that a dealer cannot

It

reasonably decide not to work with Michelin. This
evidence corresponds to the position taken by the Court
in the NBIM case.

(205) Added to this is the fact that, in general, following the
way opened by Michelin, manufacturers are involved
more and more directly in distribution, either via the
development of direct contacts with final users, or via
their vertical integration in dealers’ networks. If we add
to this the appearance of new distribution networks
(especially the networks of truck tyre manufacturers),
we find that independent specialised dealers are losing
their share of the market in distributing truck tyres,
which was their traditional ‘strong point’.

(206) These three facts make competition between dealers
very keen and margins small (in 1995, for example, the
average operating margin of French specialised dealers
was 3,7 % of their turnover). Under this pressure,
independent dealers are constrained to obtain the best
terms possible when purchasing Michelin products,
especially as regards truck tyres. In order to preserve the
competitive edge on which their survival probably
depends, dealers do not hesitate to take part in the
majority of ‘programmes’ and ‘agreements’ that they are
offered,
if as a result they can benefit from rebates
or other additional economic advantages. Very slight
variations in the rebate rates can prove to be essential to
the dealers, who will do their best to make the most of
them.

(207) In its reply to the statement of objections, Michelin
rejects the argument that it is a necessary partner on the
the dealers questioned
grounds that only 17 % of
supported that point of view and of [...] dealers on the
Michelin lists, [...] had not bought tyres from Michelin.
One can reply to this, first, that, given the fact that ‘Club’
dealers were in a majority of those questioned, the
spontaneous declaration rate of 17 % is very high, being
well over the ratio of independent dealers, and second,
that the spontaneous demand rate for Michelin products
of 50 % to 70 % is sufficiently convincing. Moreover,
Michelin seems to forget that only [...] dealers deal in
truck tyres and that it is not at all relevant to give figures
for the entire tyre sector (in this case [...] dealers,
including supermarkets) here.

(33) See, for example, a dealer’s reply, and the reply by dealers to

question 20 of the Article 11 letter of 27 October 1997.

(34) Loc. cit. (see footnote 15), at paragraph 56.

(208) All the evidence outlined above helps to establish beyond
doubt that Michelin is in a dominant position on the
French markets in new replacement and retreaded tyres
for heavy vehicles.

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C. THE ABUSIVE NATURE OF MICHELIN’S
COMMERCIAL POLICY

(209) An abuse of a dominant position was defined by the
Court of Justice in its Hoffmann-La Roche judgment as
‘an objective concept relating to the behaviour of an
undertaking in a dominant position which is such as to
influence the structure of a market where, as a result of
the very presence of the undertaking in question, the
degree of competition is weakened and which, through
recourse to methods different from those which con-
dition normal competition in products or services on
the basis of the transactions of commercial operators,
has the effect of hindering the maintenance of the degree
of competition still existing in the market or the growth
of that competition’ (35).

(210) Abuse of a dominant position may thus involve practices
which have as their object or which may have as their
effect
the elimination of competitors, or behaviour
which an undertaking could not adopt without com-
promising its own interest on a competitive market or
on a market where it did not have a dominant position.

(211) The Court of Justice has indicated the limits of this
concept, notably by stating in the United Brands judg-
ment (36) that ‘although it is true that the fact that an
undertaking is in a dominant position cannot disentitle
it from protecting its own commercial interests if they
are attacked, and that such an undertaking must be
conceded the right to take such reasonable steps as it
deems appropriate to protect its said interests, such
behaviour cannot be countenanced if its actual purpose
is to strengthen this dominant position and abuse it’.

(212) This is exactly what has occurred in the case in point.
Michelin, which has long held a dominant position in
France, sought to exercise its influence in such a way as
to ensure that it maintained its hold on the market. The
last few decades have seen the arrival of competitors to
Michelin which, having gradually caught up with it, are
now able to market products which are competitive in
terms of quality and price. In France,
its traditional
stronghold, Michelin has had to take action in order to
maintain its dominant position. The action it took was
not based on the methods which condition normal
competition.

(213) Since at least the beginning of the 1980s and up to and
including 1998, Michelin pursued a commercial and

(35) Loc cit. (see footnote 24), at paragraph 91.
(36) See footnote 32.

pricing policy in France with regard to resellers which
was based on a complex system of rebates, discounts
and/or various financial benefits whose main objective
was to tie resellers to it and to maintain its market
shares, which must be regarded as an abuse within the
meaning of Article 82.

(214) Michelin’s abusive commercial policy on the two rel-
evant product markets (i.e. on both the market for new
replacement tyres and the market for retreads) as regards
specialist dealers consisted of three components over
the relevant period: the ‘General price conditions for
France for professional dealers’ (for convenience, the
individual ‘Commercial cooperation agreements’ will be
included in this category, since they are merely an
extension of the general conditions), the ‘Agreement
for the optimum use of Michelin truck tyres’
(PRO
Agreement), and the ‘Business cooperation and service
assistance agreement’ (known as the Michelin Friends
Club).

1. GENERAL PRICE CONDITIONS FOR FRANCE FOR PRO-

FESSIONAL DEALERS

(215) These conditions allowed dealers to benefit from quan-
tity rebates, service bonuses and progress bonuses and,
possibly, to sign commercial agreements with Michelin.

(a) Quantity rebates

(216) Quantity rebates took the form of an annual rebate as a
percentage of total turnover (trucks, cars and vans)
achieved with Michelin France. To be eligible, the dealer
had to achieve the turnover thresholds provided for in
the rebate grids.
In the first Michelin case (NBIM
judgment, referred to above), and consistently in more
recent cases, the Court of Justice has ruled against the
granting of quantity rebates by an undertaking in a
dominant position where the rebates exceed a reasonable
period of three months (as is the case here) on the
grounds that such a practice is not in line with normal
competition based on prices. Merely buying a small
additional quantity of Michelin products made the dealer
eligible for a rebate on the whole of the turnover
achieved with Michelin and this was greater than the fair
marginal or linear return on the additional purchase,
which clearly creates a strong buying incentive effect. In

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the Court’s view, a rebate can only correspond to the
economies of scale achieved by the firm as a result of
the additional purchases which consumers are induced
to make.

him to base his choice on objective figures, since the
overall uncertainty as to the final price of Michelin tyres
made any serious comparison with competitors’ prices
impossible.

(217) In addition, since the rebates were not paid until
February in the year following that in which the tyre
purchases were made (Michelin is the only company
which applies this practice, since all its competitors pay
most of their rebates immediately), the following abuses
were evident:

Unfair practice

(218) Given the intensity of competition and the low level of
margins in the sector (about 3,7 % according to the
Commission’s investigation), dealers were obliged to
resell at a loss pending the payment of the rebates. The
price paid to Michelin was generally higher than the
price charged by the dealer to final consumers. The
dealer thus initially sold ‘at a loss’. It was only when he
was paid the various ‘bonuses’ and premiums that the
reseller recovered his costs and re-established his profit
margin.

(222) Secondly, as has just been noted, dealers were obliged,
up to 1995 at least (37), to resell Michelin tyres at a loss,
their profit margin on them being re-established only
when the rebates were paid. The precarious situation in
which this placed the dealers was clearly unfair and is a
measure of the extent to which Michelin abused its
position as a necessary business partner. If there were
undistorted competition between suppliers, it is difficult
to see how dealers would of their own accord have
opted to place themselves in such an unfavourable
position in business terms.

(223) Thirdly,

that

in view of

the rebates were
the fact
paid extremely late, dealers were forced to enter into
quantitative commitments to Michelin (in connection
with the progress bonus) before they had even received
the quantity rebates for the previous year. This was
unfair not only because the dealers were placed in a
weak psychological position during negotiations, but
also because, during the negotiations, they were not able
to base themselves on a reliable estimate of their cost
prices and thus to determine their business strategy
freely. Most of the competitors granted the bulk of their
rebates immediately.

(219) The unfairness of

the rebate system was thus the

cumulative result of several factors.

(224) Fourthly, the resellers had to accept cash flow losses
since they were reselling at a loss during the period
between their purchase of Michelin tyres and the pay-
ment of the rebates, which placed an undue financial
burden on them.

(220) Firstly, and contrary to what Michelin argues in its reply
to the statement of objections, the dealers could not
know with certainty the final purchasing price of
Michelin tyres. Since the rebates applied to all of the
Michelin turnover and were calculated only about one
year after the start of the first purchases, it was not
possible for the dealers to know, before the very last
orders had been placed, what the real unit purchase
price of the tyres would be, which placed them in a
situation of uncertainty and insecurity, prompting them
to minimise their risks by purchasing mainly from
Michelin.

(225) In its reply to the statement of objections, Michelin
rejects the third and fourth points, arguing that ‘except
in the case of a new dealer ... the system of annual
quantity rebates works as if the supplier were providing
the dealer at the start of the year with a large sum which
the reseller could use as he saw fit’. This argument
confirms the fact
the system produced effects
involving loss-making resales and cash flow losses, at
least in cases where the dealer was in his first year of
business, but especially (a fact which Michelin also
forgets) in cases where the dealer had stopped purchasing
Michelin products and then began to purchase them
again or in cases where sales in year n+1 did not exceed

that

(221) If nevertheless a dealer wished to diversify by purchasing
from other suppliers, it would have been difficult for

(37) As from 1996, Michelin offered to spread rebate payments.

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those in year n. The Commission cannot agree with
Michelin’s view that a sum paid with a time lag of up to
13 months can be regarded as ‘a large sum of money
made available to a dealer’.

extent at Michelin’s expense since this could have
jeopardised his ability to reach the rebate threshold and
could thus have had a major effect on the overall cost
price of the Michelin tyres purchased over the year. This
loyalty-inducing effect applied both to new tyres and to
retreads.

Loyalty-inducing effects

(226) In view of the long reference period (one year), resellers
were under increasing pressure to purchase from Miche-
lin. Once again, the low level of profit margins was a
strong incentive to earn an additional rebate, even if
small, since it would at all events directly boost the
firm’s profit margin.

(227) A detailed analysis of the quantity rebates introduced by
Michelin shows that this system of rebates, similar to
that ruled against by the Court of Justice in 1983, has as
its object and effect the tying of dealers to Michelin and
that
‘in providing an advantage not based on any
economic service justifying it, the discount tends to
remove or restrict the buyer’s freedom to choose his
sources of supply’ and thus ‘to bar competitors from
access to the market’ (38).

(230) As far as new tyres are concerned, in 1995, for example,
the rate of rebate varied each time the turnover threshold
was crossed, ranging from 1 % at the bottom of the scale
to 0,05 % at the top of the scale. Thus, for example, a
dealer achieving a turnover of FRF 9 000 with Michelin
received a rebate of 7,50 %, whereas if he achieved
FRF15 000, the rebate rose to 8,50 %. A factor which
considerably increased the pressure was that a final extra
order of truck tyres allowing the higher scale to be
reached affected the dealer’s profit margin on sales of
new Michelin tyres in all categories (except retreads and
tyres for heavy plant). Finally, here again, it was relatively
easy, particularly at the lower end of the scale, to move
up the steps of the scale, since there were a lot of them
(47 in 1995). It should also be noted that, at the top of
the scale, it was in the dealer’s interest to go beyond the
maximum figure stipulated, since this allowed him to
sign a ‘commercial agreement’ with Michelin, with all
the advantages which this involved.

(228) Up until the end 1996, most of the rebates or refunds
were established on the basis of the calendar year of
invoicing. Most of the bonuses (in particular, quantity
rebates and progress premiums) were granted on the
basis of the quantities sold during the previous year.
Any system under which rebates are granted according
to the quantities sold during a relatively long reference
period has the inherent effect, at the end of that period,
of increasing pressure on the buyer to reach the purchase
figure needed to obtain the discount or to avoid suffering
the foreseeable loss for the entire period.

(229) Since it was essential, for the dealer’s very survival in
certain cases, to receive as large as possible an amount
of quantity rebates (these being the only means of
restoring the dealer’s profit margin) and in view of the
extremely long period over which Michelin recorded
orders, a dealer could not take the risk at any given
moment of diversifying his range to any significant

(38) NBIM judgment, referred to above (see footnote 15), at para-

graph 73.

(231) In its reply to the statement of objections, Michelin
merely observes on this point that,
in the examples
mentioned above, ‘1 % of FRF 15 000 is only FRF 150,
[…] a very modest sum’. However, for a dealer earning
on average a margin of only 3,7 %, an additional 1 %
rebate on the whole of his Michelin purchases is clearly
quite substantial.

(232) The fact, with regard to new tyres, that the quantity
rebates are calculated by reference to the whole of the
turnover in all categories of Michelin tyre might suggest,
at first sight, that there was an escape route for avoiding
the loyalty-inducing effect on the truck tyre market. A
dealer wishing to achieve a given additional rebate level
without placing an additional truck-tyre order could
have opted to purchase instead more Michelin car tyres.
In fact, however, this assumption does not stand up to
closer analysis.

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(233) Firstly, given the unit cost differences between a car tyre
and a truck tyre, any such attempt to offset purchases
would have required the dealer to purchase a signifi-
cantly larger quantity of car tyres to achieve the same
turnover. Secondly, since car tyres are already included
in the calculation of quantity rebates, only an additional
purchase of car tyres (over and above the dealer’s ‘usual’
purchases) would have been sufficient, for the purpose
of obtaining a given rebate, to offset the lack of any
additional truck tyre order. However, each dealer has his
own customer base structure, and it would be unrealistic
to believe that a dealer could significantly (at least in the
term) alter the proportions of his tyre sales
short
accounted for by car tyres and by truck tyres. In other
words, a dealer could not suddenly decide to sell more
car tyres than truck tyres, since the markets are quite
distinct.

A rebate of 2 % was granted as from FRF 7 000, 3 % as
from FRF 7 400 and 3,5 % as from FRF 8 000. In
1995 and 1996, for example, there were 18 steps in the
scale, which made it fairly easy, particularly at the
bottom of the scale, to move up to higher steps. This
again was an incentive to achieve additional purchases.

(237) It should be noted in this respect that, in the earlier
Michelin case (NBIM judgment), the Court took the view
that a variation of 0,2 % to 0,4 % could place the dealer
under sufficient pressure to induce him to make all or a
substantial part of his purchases from the dominant
undertaking, especially at the end of the period.

(234) Consequently, turnover-offsetting by means of car tyre
sales was not a realistic means of escape for the reseller.
At all events, even if such a means of escape existed, it
would have only a very limited impact, and it would
certainly not allow the conclusion to be drawn that the
application of quantity rebates to the whole of the
turnover in Michelin products did not have a loyalty-
inducing effect on the market for truck tyres.

(238) In its reply to the statement of objections, Michelin also
argues that, in the earlier Michelin judgment, the Court
regarded the lack of transparency in the system of
rebates as a crucial factor in determining that Michelin
NV’s commercial policy constituted an abuse, and that
this meant that the French company’s commercial policy
did not constitute an abuse on the grounds that ‘the
rebates which had been challenged were not loyalty
rebates prohibited under Community case law’.

(235) It should be noted additionally that Michelin states in its
reply to the statement of objections (39) that ‘at the start
of the year, Michelin drew up with each dealer a table
giving an estimate, by product category, of the rebates
to which the dealer was entitled for the current year’. It
was thus evident that, although contractually the rebates
applied to the turnover in respect of all categories, this
was not the case in practice, as Michelin’s own comments
make clear.

(236) The loyalty-inducing effect made itself felt even more
clearly in the case of retreads, since this category had its
own table of rebates: the variations in the rate of the
rebate resulting from a final order for retreads during a
year affected the dealer’s profit margin in respect of the
total amount of retread sales for the whole of the year.
There was no escape route here: consequently, small
variations could put appreciable pressure on resellers,
and, in this instance, the variations were not inconsider-
able. In 1995, for example, the variations in the rate of
quantity rebates when turnover thresholds were crossed
ranged from 2 % at the bottom of the scale to 0,1% at
the top of the scale. Thus, a dealer achieving a turnover
of less than FRF 7 000 with Michelin received no rebate.

(239) The Commission believes that Michelin’s analysis is
mistaken, since the Court does not regard the lack of
transparency in rebates as an essential condition for an
It should also be
abuse to have been committed.
stressed that the lack of transparency is not one of the
Commission’s objections with regard to the system of
quantity rebates. What the Commission is challenging
in the system of quantity rebates is the uncertainty in
which the dealer is placed with regard to the reference
framework used (the final total amount of sales of
Michelin products over one year), which was an unfair
practice and created a loyalty-inducing effect.
is
the Commission
important
considers that the ‘General conditions of sale’ taken as a
whole do constitute a non-transparent system since, as
explained below, the service bonus and the progress
bonus involve the earning of points and the definition
of ‘bases’ which rest not on objective, but on subjective
factors.

to note, however,

that

It

Market-partitioning effect (and foreclosing effect)

(39) Statement of objections, p. 122. Note: the underlining of the
phrase ‘by product category’ has been added by the Commission.

(240) The rebates applied only to purchases made from
Michelin France and thus discouraged purchases made
abroad or from importers. Conversely, the high level of
prices in France, before rebates, discouraged purchases
in France from abroad.

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(241) The foreclosure effect was particularly noteworthy with
regard to competitors: thanks to its market shares,
Michelin was able to absorb the cost of these rebates,
while its competitors were unable to do likewise and
therefore had to either accept a lower level of profitability
or give up the idea of increasing their sales volume.

rebate system. Tyre exports were as a result clearly
limited. Secondly, dealers in other European countries
were not able to receive the rebates granted to the
French resellers.

(242) The market-partitioning effect brought about by the
method of calculating the rebates is clear. Since only
purchases made from Michelin France could be taken
into account, the dealer was obliged to purchase essen-
tially through this distribution channel, which seriously
restricted his scope for obtaining Michelin tyre supplies
from the group’s foreign subsidiaries and thus allowed
the manufacturer to exercise tight control over the
market.

(243) A dealer could in theory have chosen to make all his
purchases in another European country and thus to
benefit from the conditions in that country. However,
he would have had to bear the transport costs involved
in any such decision and in particular to forgo the
technical assistance provided by Michelin France, which
is crucial in such a trade-specific market as the truck tyre
market, where ongoing customer service and the ability
to provide technical advice are major factors in the
dealer’s appeal to customers.

(244) Dealers could also consider obtaining their supplies
from importers, as was indeed the case with a small part
of the market. However, there are limits to such supplies,
since importers are not always able to guarantee them,
particularly for the whole range of
tyres which a
dealer needs. Importers generally market only the most
common tyre sizes. For the other sizes, dealers necess-
arily had to obtain their supplies from Michelin. How-
ever, Michelin granted most of the bonuses on the whole
range of categories and, at all events, did not do so by
reference to the type of
In order to remain
competitive, the importer would have had to offset not
only the cost of transport, but also the dealer’s loss of
bonuses on the whole range of Michelin tyres, including
those not bought from the importer.

tyre.

(246) This policy made parallel imports difficult and parti-
tioned markets, and this explains, firstly, the relatively
low level of imports and, secondly, the maintenance of
a national market
tyres. This
isolated the French market, enabling Michelin to have a
dominant influence there, without any risk of external
influences.

for new replacement

(247) As regards retreads, the specific features of the French
market made it more difficult for the dealer to decide to
have customers’ casings retreaded in other Member
States. However, in cases where this would have been
possible (frontier areas, for example) and where the
desire to do so existed,
the system established by
Michelin prevented any such practice. The end-of-year
rebates were always calculated by reference to the
purchases made from Michelin’s French subsidiary, and
the purchases made there by dealers were also recorded
in order to check whether the dealer had achieved the
thresholds for access to certain programmes. As a result,
dealers also had a strong incentive not to diversify their
suppliers.

(b) The service bonus

(248) This bonus had the same features as the quantity rebates,
except that the minimum turnover thresholds were
imposed by Michelin. The amount of the bonus was
linked to the number of points obtained under an
assessment grid essentially regarding the quality of
service.

(249) The service bonus was unfair because of the way in
which it was fixed. It also had a loyalty-inducing effect
and was in the nature of a tied sale in view of some of
its clauses.

Unfairness

(245) Dealers in other European countries could obtain sup-
plies in France only with great difficulty, a factor which
in addition was discriminatory. In the first place, the
rebate system meant that the prices for sale to the public
and/or the prices less invoice rebates were higher than
those charged in the countries in which there is no

(250) The granting of the points was somewhat subjective and
gave Michelin a margin of discretion in its assessment.
In addition, some of
the points depended on the
provision of very precise strategic information on the
market (from 1980 to 1992), which was not in the
dealer’s interest (no return in the form of studies, for
example).

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(251) As noted in the previous section describing the operation
of the bonus, Michelin was able, through the bonus, to
make a subjective assessment that affected the amount of
the bonus to be granted. This allowed the manufacturer’s
representative to put strong pressure on the dealer
as regards future commitments and allowed him,
if
necessary, to use the arrangement in a discriminatory
manner.

(252) Some of the headings were by their very nature subjec-
tive in their assessment and/or the number of points
granted could vary ‘depending on the quality of the
service provided’ (40). However, the tally of the points
scored was calculated by Michelin’s representative, who
also set the targets and the corresponding points for the
current year. Michelin’s ability to unilaterally decrease
the bonus during the year if the targets were not met is
yet another factor which enabled Michelin to make the
conditions granted to dealers dependent on its subjective
assessment. Michelin’s argument that use was made of
this possibility only in exceptional cases does not alter
the fact that it was an abuse. In addition, a number of
replies given by dealers to the requests for information
make matters clear: ‘The assessment made is dependent
on Michelin’s goodwill’ or again: ‘Michelin can use this
bonus in whatever way it wants. We have had unilateral
changes imposed on us’. Another dealer explains that he
has been subject to retaliatory measures in the form
of the ‘drastic reduction of certain bonuses: service
bonus’ (41).

(253) Having regard to the particular responsibility of an
undertaking in a dominant position, this kind of subjec-
tivity and/or margin of discretion, being almost inevi-
tably a source of discrimination, must be regarded as an
abuse within the meaning of Article 82 of the EC Treaty.

Loyalty-inducing effect

(254) Up to 1992, points were granted if the dealer achieved a
minimum percentage of purchases of Michelin products.
Meeting this target set by Michelin as part of the service
bonus greatly strengthened the links between Michelin
and dealers by means of a loyalty-inducing effect which
must be regarded as a abuse. Up to 1992 at least, a
heading ‘service new products’ enabled the dealer to

(40) For example, twice as many points could, in certain cases, be
granted for the assessment ‘excellent’ as for the assessment ‘good’.

(41) Replies to the request for information of 17 December 1997.

obtain additional points if his purchase of new products
amounted to a specific percentage in relation to the
regional share of such products. However, since the
earning of points did not depend on quantities, but on
the achievement of a given percentage in relation to the
regional share of such products, this was a variant of a
loyalty bonus which must be regarded as an abuse where
it is required by an undertaking in a dominant position.
The heading constituted an improper incentive to pro-
mote new Michelin products at the expense of compet-
ing products. The dealer was unlikely to risk the loss of
two points that could result in a reduction in the total
amount of his annual bonus. He was thus forced in
most cases to comply with the regional market share
percentages set by Michelin.

(255) Michelin points out, in its reply to the statement of
objections, that, in order to obtain the maximum bonus,
it was sufficient to obtain 31 points out of the 35 listed
in the sheet and that a dealer could thus have coped
with the loss of the ‘abusive’ points in question. The
Commission would emphasise here that, even in 1996,
the abusive points ‘market information’ and ‘services
new products’ represented five points, and, as regards
retreads and the exclusive aspect linked to them, two
additional points. Thus, it would have been impossible
for a dealer to obtain the maximum points without an
infringement of the competition rules. Furthermore, it
was easier for the dealer to earn these points which,
though abusive, cost little, than to improve the quality
of the plant and equipment of the sales outlet, or the
service provided to customers, nor can Michelin defend
the abusive nature of a particular point by arguing that
others are not abusive.

A tying effect which is, by its nature, loyalty-inducing:

(256) One point was granted if the dealer committed himself
to systematically returning used Michelin tyres to Miche-
lin for retreading. The service bonus was thus also a
means of achieving tied sales, an abuse which enabled
Michelin to use its dominant position on the market for
new truck tyres to enhance its position on the adjacent
retread market.

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(257) As from 1992, the service bonus awarded the dealer an
additional point if he systematically had Michelin casings
retreaded by Michelin. As from 1996, it was awarded ‘if
he systematically has the first retreading of Michelin
casings done by Michelin’. The possible loss of that point
and the possible reduction in the total amount of the
annual bonus that could be earned meant a direct
increase in the unit cost of all the tyres purchased from
Michelin, since the dealer lost not only the bonus on
retreads, but also that linked to the whole of his turnover
with Michelin.

(258) The manufacturer thus used its position in the tyre trade
in general and in the market for new truck tyres in
particular as a means of ensuring that dealers had
retreads carried out by it. Dealers could not risk loosing
a rebate on the total annual turnover with Michelin by
having an independent retreader carry out retread work.
Dealers have to purchase new tyres, such purchases
account for a considerable proportion of their turnover,
and truck tyres, a market on which Michelin has a
dominant position, represent a large percentage of such
turnover. Consequently, any rebate lost on that market
is of vital importance to dealers, all the more so if, as in
this instance, the whole of the turnover with Michelin is
affected.

(259) The service bonus was abolished in 1997.

(c) The progress bonus

(260) This bonus,

like the ‘achieved-target bonus’ which
replaced it in 1997 and 1998, was particularly abusive
since, in order to obtain it, the dealer had to commit
himself to a minimum amount of purchases (called
the base) corresponding either to the previous year’s
purchases or to the average of the last two or three years
(with adjustments in coefficients).

(261) The spirit of the system is summed up in a circular to
the Michelin sales force issued in January 1995, which
states that ‘[...]’.

(262) However, the practice sometimes went further than
simply requiring the dealer to increase purchases: Miche-

lin’s representative exercised implicit control over the
fixing of the bases, by means of the following arrange-
ments (truck tyres):

— choice between the level achieved in the previous
year or the average for the last two or three years.
Sometimes, the base agreed the previous year was
taken as the reference,

— application (to the number of tyres) of a uniform
regional coefficient, established on the basis of
Michelin’s forecast on how the market would
develop. Michelin’s ambitions on a given market
were taken into account here, often in terms of
market shares. In 1994, for example, the coefficient
was in all cases negative, except in one of the seven
sectors making up the French market. In 1995 and
1996, it was positive in all the sectors, though with
appreciable variations by region (ranging from [...]
in 1995),

— at the end of some years, a reducing coefficient,
established by Michelin, was applied. In the case of
truck tyres, the reducing coefficient was 2 % in
1992, 8 % in 1994, 0 % in 1994 and 1995 and
8 % in 1996,

— exceptionally, correction of the figures obtained to
take account of any circumstances increasing or
decreasing the dealer’s purchasing capacity could
be applied (for example, the establishment of a
competing distributor in the area, the acquisition
or loss of a customer with strong potential, a
decision on the part of the retailer to stop purchas-
ing imports, etc.). Though requested to do so by
the Commission, Michelin did not provide a list of
the firms concerned and of the factors which led to
such corrections.

(263) This individualised bonus corresponds exactly to what
the Court ruled against in the abovementioned Michelin
judgment. An undertaking in a dominant position
cannot require dealers to exceed, each year, their figures
for the previous years and thus automatically increase
its market shares by taking advantage of its dominant
position.

(264) Here again,

the bonus was unfair, because of

the
requirement imposed by Michelin to increase purchases
and because of the insecurity brought about by the
individualised determination of the minimum base. The
bonus was also loyalty-inducing and market-partitioning
since it applied only to purchases made from Michelin
France.

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Unfairness

(265) The progress bonus was unfair since, though it appeared
to be based on an agreement, it amounted in fact to a
requirement unilaterally imposed by the manufacturer
to increase purchases of Michelin tyres on the market.

(266) The progress bonus made it possible to obtain annual
rebates, provided that an individual objective (the base)
established by reference to the specific situation of each
dealer (in particular, previous purchase figures) was
exceeded. As a result, two dealers who during the year
had purchased the same quantities in absolute terms
could obtain very different rebates depending on the
initial base, the method chosen by Michelin to calculate
the base and what was agreed in subsequent nego-
tiations. Since the criteria for establishing the bases were
neither applied uniformly nor known in advance by
dealers, and given Michelin’s clear influence on the
final determination of the base, the system involved a
manifest factor of insecurity and allowed discrimination
between dealers which must be regarded as unfair.

of the minimum established in the base. The incentive
to exceed the base by 20 % was even stronger, since the
dealer was then entitled to rebates ranging from 2 % to
2,5 % of his total annual turnover with Michelin.

(269) The end-of-year pressure on dealers whose purchase
volumes had enabled them to sign a commercial agree-
ment was also very marked during the period examined.
In addition to the steps in the quantity rebates, the
progress bonus enabled them to obtain large additional,
progressive rebates, merely as a result of achieving or
exceeding the base. Achieving the base meant obtaining
1 % of the ‘truck/earthmover/forklift/light plant’ turnover
by way of ‘support for industrial products’ (42). Exceeding
the base entitled the dealer to progressive rebates of up
to 3 % of the figure if the base was exceeded by 15 %.

(270) In its reply to the statement of objections, Michelin
argues that the loyalty-inducing effect did not arise in
practice since ‘in less than 5 % of cases was the base
agreed for a given year greater than the base and outturn
figures for the previous year’. The Commission notes
here that Michelin is including dealers for all types of
tyres combined, which distorts the calculation of any
ratio and clearly does not provide a basis for refuting the
abuse.

Loyalty-inducing effect

Market-partitioning effect

(267) The progress bonus also had a marked loyalty-inducing
effect. Once the purchase-increase target was set,
it
became crucial for the dealer to meet the target, which
in practice deprived him of the option of obtaining his
supplies to any significant extent from other suppliers.
Dealers who had committed themselves to exceeding a
‘minimum base’ (minimum purchase targets) at the end
of the year were bound by this in two respects. Firstly,
at the start of the year, since the minimum base included
a number of steps, with a commitment to purchase
greater quantities entitling the dealer to higher rebates.
Secondly, at the end of the year, to exceed the minimum
set and to exceed it by as large an amount as possible
(up to 25 %), since the size of the rebates that could be
obtained, while potentially certainly very large, depended
on the degree to which the base was exceeded.

(271) The progress bonus, like the quantity rebates, also had a
highly market-partitioning effect since only purchases
made from Michelin France were taken into account.

(d) The commercial agreements

(272) These agreements were an extension of the quantity
rebate and progress bonus scheme with additional
turnover). They reinforce the
rebates (several % of
abusive nature of the other bonuses with a clause
requiring FRF 24 million (between 1991 and 1994)
minimum turnover with Michelin, enabling Michelin to
be assured of cooperation on the part of the main
dealers.

(268) As from 1995, the end-of-year pressure increased con-
siderably. If he achieved the base, the dealer obtained
not only a rebate of 0,5 % on the total amount of truck/
earthmover tyres purchased, but also continued to
receive bonuses of 12 % to 15 % on purchases in excess

(42) As from 1993.

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(273) The individual commercial cooperation agreements
were, for the largest dealers signing them, merely an
extension of the steps in the scale associated with the
quantity rebates and progess bonus. In this respect, they
involve the same types of abuse, and the prospect of
being able to sign a commercial agreement increased the
pressure on the large dealers who had reached the top
of the rebate scales. These agreements must also there-
fore be regarded as abusive.

Additional impact of the overlapping of practices:
aggravated abusive nature of the ‘System’ formed
by the general conditions of sale.

(274) Over and above the fact that each of the elements
making up the general conditions of sale constituted in
its own right an abusive practice in several respects, it is
important to note the extent to which the combination
and interaction of the various conditions helped to
reinforce their impact and thus the abusive nature of the
‘system’ considered as a whole. Each of the objections
will be looked at below to demonstrate how each of
these conditions contributed to this and how their
respective abusive effects combined with one another
and reinforced the effectiveness of the relevant practices.

(275) In general, the mere fact that the combined effects of the
system forced specialist dealers in practice to ‘resell at a
loss’ Michelin tyres to final consumers, their profit
margin being re-established only when they receive
payments of the various rebates, premiums and bonuses,
sometimes up to thirteen months after the date of the
transaction, proves the abusive nature of the system
under Article 82 of the Treaty. The fact that Michelin
was able to impose such a practice reveals the extent to
which it was able to use its position as a necessary
partner and to distort competition between suppliers.

(276) This situation imposed cash-flow problems and losses
on dealers while Michelin made a not inconsiderable
cash-flow gain that was not justified by any economic
service performed in return. Placing dealers in this
precarious financial situation reinforced the unfair natu-
re of Michelin’s relations with dealers.

(277) Consequently, by making use of the fact that dealers had
become economically dependent on the rebates paid
after purchases had been made, Michelin was able, under
the cover of ‘agreements’, to impose certain requirements

regarding increased sales on the market which, given the
market’s maturity, in fact amounted to the establishment
of a relationship of virtual exclusivity.

(278) The unfairness of the system was also reinforced by the
margin of subjectivity in determining the level of the
progress bonus and the service bonus, enabling Michelin
to use these tools as a means of exerting pressure.
Dealers were placed in a precarious position in the
negotiations on the targets, which took place before
rebates had been paid. It must be borne in mind that
Michelin was theoretically able, for example, to change
the amount of some of the bonuses during the year
(‘service bonus’).

(279) Furthermore, through its overall operation, the system
resulted in uncertainty as to the final net price of the
product, a practice which is unacceptable when imposed
by an undertaking in a dominant position. Since most
of the rebates were conditional, the dealer did not know
the final unit price until the last day in February of the
year following that in which the purchase was made.

(280) Since market trends are by definition uncertain, the
dealer could not know in advance what quantities he
was likely to purchase during the year or whether or not
he would meet the targets he had committed himself to.
‘Overstocking’ was not a solution, since the storage of
tyres, which are bulky and costly in relation to the
specialist dealers’ financial capacities, represents a sub-
stantial proportion of the dealers’ financing requirement.
is therefore out of the question for a dealer to
It
‘overstock’ in the long term.

The abusive elements of the new system (1997 to
1998 inclusive)

New truck tyres

(281) The new system introduced by Michelin in 1997 was
based essentially on invoice rebates and on an achieved-
target bonus. Although the invoice rebates seemed to
differ quite distinctly from the practice of quantity
rebates and to put less pressure on dealers, they still, as
will be demonstrated, involved some abuse. The new
‘achieved-target bonus’ which was a sort of substitute
for the ‘progress bonus’, still tended to tie the dealer
closely to the manufacturer in an abusive manner.

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(i)

I n v o i c e r e b a t e s

(282) The invoice rebate system which replaced the former
quantity rebate system appeared to be less unfair and
less loyalty-inducing since it ‘automatically’ granted the
dealer a rebate which was dependent on his previous
performance, i.e. on the previous year, or on the average
of the two or even three previous years, whichever
was more favourable to the dealers. Nevertheless, this
practice must still be regarded as abusive, since it had a
loyalty-inducing effect in several respects.

(283) Firstly, since the amount of the rebates was proportional
to the figures for the previous years, there was always a
loyalty-inducing effect, since any additional purchase of
Michelin products could enable the dealer to obtain a
higher invoice rebate rate the following year.

(284) Secondly, if the dealer’s purchases for the current year
would have allowed him to claim a higher invoice rebate
rate than the rate applied during the year, the dealer
received an ‘end-of-year adjustment’ equivalent to the
rate differential. The loyalty-inducing effect thus also
applied within a given year.

(285) Thirdly, for a given level of invoice rebate (15 %, 16 %,
etc.), an ‘end-of-year rebate’ (not to be confused with the
‘end-of-year adjustment’) was paid, its rate ranging from
0 % to 3 % in line with the relevant rebate level and the
net turnover invoiced. Thus, within a given invoice
rebate rate, the end-of-year rebate depended on the level
of sales of Michelin products during the current year.
The loyalty-inducing effect was thus further reinforced.

(ii) T h e a c h i e v e d - t a r g e t b o n u s

(286) This new bonus made it possible to obtain an amount
corresponding to a percentage of net annual turnover
invoiced (2 % in 1997 and 1,5 % in 1998) if the target
was achieved. Achieving the target also entitled the
dealer to the PRO bonus (only for 1997).

small, during a given year could affect the dealer’s profit
margin on sales of Michelin truck tyres for the whole
year. This created substantial pressure to achieve Miche-
lin’s sales targets and was liable to prevent dealers from
selecting the most favourable source of supply and made
it more difficult for competitors to enter the market.

(288) This was all the more the case as almost all the factors
helping to increase the pressure on dealers under the
‘progress bonus’ were in evidence here too:

— the rebate percentages were always substantial (2 %

of invoiced net turnover in 1997, 1,5% in 1998),

— the difference between Michelin’s position and that
of its main competitors remained considerable,

— Michelin’s representatives were omnipresent.

(289) Furthermore, the dealer could not set his ‘target’ himself.
It iwas established on the basis of the ‘dealer’s potential’
(i.e. his performance in previous years) and the antici-
pated trend on the market. Michelin gave the dealer the
choice between his figures for the previous year and the
average for the last two or three years, adjusted to take
account of the anticipated growth trend on the market
(1 % in 1997). This already created a loyalty-inducing
effect, since, if he wished to obtain the bonus, the dealer
clearly could not go below his performance figures for
if he was a long-
the previous year or years. Thus,
established Michelin customer, he could not cut his
purchases in half if he wished, for example, to change
supplier or try out other products. He could perhaps
reduce his purchases slightly, but never significantly.

(290) In fact, even this last option was difficult to put into
practice. The system gave the dealer a strong incentive
to choose the highest target amongst the three options
offered to him, which considerably reinforced the loy-
alty-inducing effect.

(287) It is inherent in any system of rebates granted on the
basis of quantities sold during a relatively long reference
period that pressure increases on the purchaser, at the
end of the reference period, to achieve the level of
purchases necessary for obtaining the rebate. Variations
in the rate of rebate as a result of one last order, even if

(291) It must not be forgotten that, while the invoice rebate
rate was established on the basis of the three possible
ways of defining the reference base, it was also deter-
mined ‘on the basis of the solution which is most
favourable to the dealer’. The rebate was thus calculated
on the basis of the option which corresponded to the
highest number of tyres purchased. Thus, for example,

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if in 1996 a dealer had sold 1 084 tyres, his average for
1996/1995 being 945 and that for 1996/1995/1994
being 868, it was the first option (1996, 1 084 tyres)
which was automatically applied.

(292) If the dealer signed a more ambitious ‘target contract’
enabling him to move up to a higher section of the grid,
he could obtain a higher invoice rebate. However, this
worked both ways: if the dealer opted for a ‘target’ which
was lower than the figure set, he was liable to see a
reduction in his ‘invoice rebate’, since he ran the risk of
moving down the grid. Taking the previous example,
selecting a different option (the average for 1996/
1995 or 1996/1995/1994) would have meant a loss on
the invoice rebate, which would have fallen from 17 %
to 16,5 %, since the position on the grid would have
been lower.

(293) The dealer also risked obtaining a lower rate on the end-
of-year rebate. The invoice rebate rate was one of the
criteria included in calculation of the end-of-year rebate
rate. Thus, in 1997, a dealer in the 16,5 % section could
obtain an end-of-year ranging from 1,5 % to 2,5 %,
whereas a reseller in the 17 % section could obtain a rate
ranging from 2 % to 3 %.

(294) The result naturally was that the dealer was prompted
to choose a ‘target’ which would ‘if possible’, enable him
to obtain a higher invoice rebate, and one which would
not at all events cause him to loose the rebate to which
he was entitled on the basis of his previous purchase
figures. Consequently, the dealer’s choice was severely
limited, to Michelin’s advantage: the dealer rarely opted
for a ‘target’ which was lower than the figure used in
calculating the invoice rebate. However, such figure was
the one corresponding to the highest figure for purchases
from Michelin.

on dealers, particularly at the end of the period, in such
a way as to restrict their choice of sources of supply and
to impede other producers’ access to the market, without
this being based on any economically justified quid pro
quo. These rebates must therefore be regarded as an
abuse within the meaning of Article 82. In 1998, the
end-of-year quantity rebates were abolished from the
general conditions, but continued to apply under the
commercial agreements.

2. THE PRO AGREEMENT (‘AGREEMENT FOR OPTIMUM

USE OF MICHELIN TRUCK TYRES’)

(297) Introduced in 1993, this bonus was conditional upon
signature of a PRO agreement and upon having already
earned a progress bonus (or, as from 1997, an achieved-
target bonus). A requirement was that Michelin casings
had to be sent for retreading to Michelin exclusively. A
bonus was granted for each casing presented.

(298) This bonus clearly had a double tied-sales effect: in the
first place, Michelin was using its dominant position on
the market for new tyres to enhance its position on
the retread market. Secondly, Michelin was using its
dominant position on the retread market to strengthen
its position on the new tyre market:

— in order to obtain the bonus, it was necessary to

sign a progress bonus commitment,

— the number of PRO bonuses was limited by the

number of new tyres purchased.

(295) It may be concluded from all these considerations that
the achieved-target bonus was in itself abusive within
the meaning of Article 82 of the Treaty since it was
unfair and loyalty-inducing.

(299) In addition, this bonus was market-partitioning since it
was limited to purchases made in France and since the
retreading of casings outside France, even by a Michelin
subsidiary, meant the loss of the PRO bonus for the
relevant casings.

Retreads

Abusive character of the PRO agreement

(296) In 1997, Michelin maintained the practice of quantity
rebates, consisting of progressive rebates in line with
purchases made during the year. The practice was very
similar to that which had previously existed and, since
it must be
the circumstances were almost identical,
regarded in the same light. Any such practice imposed
by an undertaking in a dominant position puts pressure

Tied or conditional sales

(300) The PRO agreement adversely affected competition in
two ways. First (see paragraphs 301 to 303), Michelin

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was using its dominant position on the market in new
truck tyres as a lever to preserve or improve its position
on the neighbouring retreads market. The second effect
(see paragraphs 304 et seq.) was the converse of the first
one: Michelin was using the retreads market, where it
was also dominant, to strengthen its position on the
market in new truck tyres.

be retreaded. An exclusive dealing obligation can
therefore place a major obstacle in the way of
Michelin’s competitors on the retread market.

to Michelin for

tread wear limit’

(301) To qualify for the large rewards available under the
the dealer had to undertake
PRO bonus scheme,
among other things to ‘to present his customers’ truck
retreading when they have
tyres
(clause in PRO
reached the legal
this clause
agreement). The exclusive character of
appears to be confirmed when Michelin writes ‘given
that their first REMIX retread is the retread best able
to preserve Michelin truck casings, and to restore them
to new tyre performance’; but
in its reply to the
statement of objections Michelin says that there was
no exclusivity in practice, and that Michelin did not in
fact require it. It cannot be denied, however, that the
existence of such a clause was a natural inducement
to dealers to send all their tyre carcasses to Michelin,
even where it might not have been justified by the
economic circumstances. This reduced the supply of
Michelin carcasses to other undertakings, which in
some cases might be operating exclusively in the
In its reply to the statement of
retreads business.
objections Michelin estimates that
it succeeded in
collecting only ‘[...] of new tyres sold’, but adds ‘in
Europe’. Leaving aside the difficulty of measuring such
a figure with any precision, a rate as low as this would
be inconceivable in France, where Michelin sells [...] of
original equipment truck tyres and about [...] of new
replacements, and retreads about [...] of the market.
Clearly France is a very special market, because
Michelin retreads more tyres than it sells, so that it
must be able to collect and retread not only almost all
of its own new tyres but also a large number of its
competitors’ tyres. This special feature of the French
market may well be due to the abusive character of
the first retread clause just described.

(302) The repercussions were particularly serious, because
Michelin truck carcasses made up not only a large
percentage of heavy tyres in general, but an even
larger percentage of total retreadable carcasses. Bottom-
of-range tyres are very often not retreadable; Michelin
tyres differ from a large proportion of the competing
brands in that they are specially designed in order to

(303) The situation is aggravated by the fact that Michelin is
already very strong on the retread market, with shares
close to [...]; its competitors have shares several times
smaller, and generally operate on the retread market
only. Unlike Michelin, therefore, they could not use
their new tyre business to support or strengthen their
retread business.

(304) The other obligation entered into by a party to the
PRO agreement concerned a ‘truck progress bonus’ for
the current year. Bonuses were given on the basis of
the number of Michelin casings brought to Michelin
for retreading, but in order to qualify for them the
dealer had to undertake to buy Michelin new truck
tyres. Here the manufacturer was using retreading as a
lever to guarantee sales on the market in new tyres.

(305) As noted above, the progress bonus obliged the dealer
to achieve a level of purchases of new truck tyres
determined by reference to his specific circumstances,
‘depending on past performance and future prospects’;
it comprised a number of mechanisms that tended to
bind dealers to the manufacturer and to ensure their
loyalty.

(306) In addition, the rewards the dealer could obtain under
the PRO agreement were restricted by the number of
truck and earthmover tyres bought from Michelin in
the previous year. Dealers who had bought 1 000 new
tyres in the previous year would receive a bonus on
no more than 1 000 retreaded tyres, no matter what
If
quantity they actually sent
they
wanted to obtain these bonuses,
to their
advantage not just to buy new Michelin tyres, without
which they would not be entitled to the bonus, but to
buy as many new Michelin tyres as possible. The
reward could then be very big, because next year they
could obtain a substantial discount on every tyre sent
them even more deeply
for
committed to increasing sales of Michelin products
and ever-closer links with Michelin.

retreading.
it was

retreading. This

left

for

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(307) If in the course of a year a dealer wanted to promote a
different new replacement tyre, and hence to change
supplier, he had to be aware that the rewards under the
PRO scheme would fall dramatically the following year,
because the number of bonuses granted on carcasses
was in any event restricted to the number of new tyres
bought the previous year. The dealer was therefore under
strong pressure to continue buying new tyres from
Michelin. The effect was to rigidify the distribution of
new replacement tyres.

the number of new tyres bought during either the
previous year or the current year. Michelin was here
making the conclusion of the agreement subject to
acceptance by the dealers of supplementary obligations
which, by their nature and according to commercial
usage, had no connection with subject of the agreement.
This constitutes an abuse within the meaning of point (d)
of the second paragraph of Article 82 of the Treaty.

(308) Towards the end of 1994 an additional clause (avenant)
was added to the agreement which strengthened the
lever effect still further. Dealers whose purchases of
truck and earthmover tyres had increased by more than
25 % in 1994 by comparison with 1993, and who
had achieved the commercial target promised at the
beginning of the year, were now to be covered by an
‘exceptional PRO clause’. Under this arrangement the
quantity of retreadable casings sent in 1994 on which
they could qualify for the PRO bonus was equal to the
number of new truck and earthmover tyres bought from
Michelin in the same year. Thus additional bonuses
could now be obtained without regard to the number of
new tyres bought the previous year; but some conditions
did not change. The bonuses were still
linked to
purchases of new tyres, though now in the current year
rather than the previous year, and, more importantly,
the dealer had to increase purchases of truck tyres from
Michelin quite substantially, and to comply with the
commitments given. The overall effect, therefore, was to
strengthen the incentive, and in any event to assure
Michelin that the dealer was tied into the progress bonus
mechanism, on the basis of high volumes.

(309) There was a similar effect on new dealers, who in the
nature of things had not made any purchases the year
before. Up to 1996 they were not entitled to this
bonus. In 1996 Michelin amended the agreement, and
introduced an exception for new arrivals so that the
maximum sums to be obtained could be determined by
reference to the purchases provided for in the progress
bonus scheme. This did not change the abusive effect,
because, as has been shown, the progress bonus scheme
itself provided for a bonus which bound the dealers
closely to Michelin and rigidified Michelin’s position.

(311) The two clauses just described were removed in 1998,
and the PRO agreement was replaced by the carcass
quality service clause, which eliminated the abusive
components in the system.

Compartmentalising the market

(312) It has already been shown that Michelin’s commercial
policy, and especially the end-of-year rebates, isolated
the French market and gave dealers a strong incentive to
have all their retreading carried out by Michelin France.
The PRO bonus strengthened this partitioning effect,
contrary to Article 82 of
the Treaty. The bonuses
obtained under the PRO agreement were calculated in
proportion to the volume of new tyres bought from
Michelin France. To qualify for these bonuses, dealers
were required to buy new tyres from Michelin in France,
and to send the carcasses to Michelin for retreading. This
placed a barrier in the way of any purchase of new tyres
abroad, because a dealer who did buy any volume
abroad would have to forgo the retread bonus on that
volume. Sending Michelin casings abroad for retreading
would have had the same effect, because the bonus
would be lost even if they were sent to another Michelin
subsidiary. Thus it was also made impossible to send
tyres abroad.

(313) Bearing in mind that Michelin casings are by far the
most common on the market, and the casings which are
easiest
the
partitioning effect of this policy was appreciable.

to retread, there can be no doubt that

(310) The bonus was concerned with retreading, and was
based on the number of tyres sent to Michelin for
retreading during the current year, so that there would
not appear to be any justification for making it depen-
dent on the purchase of new tyres, or for limiting it to

(314) In its reply to the statement of objections Michelin says
only that ‘for tax purposes Michelin would not have
been able to justify the granting of a bonus under the
PRO to a dealer who sent a casing to a related company
located abroad’. Michelin here seeks to justify the
partitioning effect of the bonus by referring to its tax
obligations. The Commission has not sought to establish

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whether or not this statement is true in tax terms; the
Commission takes the view that an undertaking holding
a dominant position has a responsibility to ensure that
it does not create a system that partitions national
markets, even if that means putting an end to a bonus
available domestically.

3. THE BUSINESS COOPERATION AND SERVICE ASSIST-
ANCE AGREEMENT (THE MICHELIN FRIENDS CLUB)

but certainly at around [...] of sales on the new tyre
market. The effects are similar to those of a fidelity
clause: the dealer enjoys the many advantages of belong-
ing to the Club, but in return must remain faithful to
Michelin. A practice of this kind certainly bears no direct
relation to any real cost savings to the manufacturer,
and as Michelin has a dominant position on the market
it can only be a barrier to whatever competition still
exists there.

(315) The main purpose of the Club agreement was to attract
the largest dealers. The obligation to ensure that a certain
proportion of one’s sales was composed of Michelin
products, a proportion known as the ‘temperature’, was
not spelt out in the agreements themselves, but this
obligation was a real one, and is evidenced in the
papers assembled during the inspections carried out on
Michelin’s premises. An internal Club document, for
example, says that [...]. Other documents mention a
threshold of [...] Michelin products for trucks.

(316) Apart from the unfair foreclosure effect produced by
this threshold, mention should also be made of the
obligation not to divert spontaneous customer demand
away from Michelin products which was written into
the cooperation agreement until October 1995.

(319) There is considerable evidence to show that the tempera-
ture condition was central, and that the Michelin market
share considered necessary was around [...]. First, the
average share of Michelin tyres in sales by Club members
in Europe is [...]; the corresponding figure for indepen-
dent specialised dealers is only [...]; for the Euromaster
network, which is actually controlled by Michelin, it
is only [...]. Second, numerous documents found on
Michelin’s premises speak by implication of this market
share obligation as a condition of entry to the Club and
of continued membership thereafter (43). At the hearing
Michelin stated that more than 47 % of the Club dealers
did not meet these temperature conditions. This figure
is somewhat strange, to say the least, because if the
temperature does correspond to the average of sales,
then 53 % of dealers must have been exceeding their
temperature quite substantially in order to offset the
temperature shortfall of the 47 % referred to by Michelin.

Abusive aspects of the Club

(317) 1. The Club was used by Michelin as a tool for rigidifying
or indeed improving its position on the market in new
replacement truck tyres. One of the formal obligations
on the dealer was to promote the Michelin brand and
not to divert spontaneous customer demand away from
Michelin tyres.
In some Club agreements Michelin
expressly says that it reserves the right to monitor
compliance with this clause. Spontaneous demand for
Michelin products is very high, so that an obligation of
this kind must necessarily be considered abusive, as it is
aimed directly at eliminating competition on the part of
other manufacturers, guaranteeing the maintenance of
Michelin’s position, and limiting competition on the
market.

(318) In practice the situation is even worse, because this
clause became an obligation on the dealer to guarantee
a certain market share for Michelin products (the
Michelin ‘temperature’), probably at a level varying from
one dealer to another and from one region to another,

(320) This is aggravated by the fact that Michelin already had
an integrated network on the market which ensured it
very large market shares. Once the two networks were
added together, there was a ratchet effect that ensured
that Michelin’s market shares would hold steady and
even increase in a large proportion of the truck tyre
trade in France (more than [...] of the total trade in new
tyres, and more than [...] of the trade in retreaded tyres,
all brands together), while at the same time the truck
tyre trade was itself bound to Michelin for a large
proportion of its sales.

(43) In the minutes of a commercial meeting with a customer, the
Michelin representative writes: ‘[...]’ (inspection of 12 June 1997).
In other minutes, on the subject of entry to the Club, the Michelin
representative writes,
(inspection of 12 June 1997). A
manuscript paper of 30 January 1996 refers to the market share
thresholds needed for entry to the Club: [...] (inspection of
12 June 1997). Lastly, in view of the advantage of continued
relations with a strategic dealer, a representative proposes that
generosity should be shown: ‘[...]’.

‘[...]’

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(321) 2. That Michelin did indeed set out

to oblige the
members of its club to guarantee a Michelin ‘tempera-
is also shown by the clause in the agreement
ture’
requiring the dealer to ‘carry a sufficient stock of
Michelin products to meet any customer demand
immediately’. It is expressly stated there that an individu-
alised stock grid may be drawn up ‘which takes account
of the local, regional and national market segments’, and
which is to be expressed ‘in percentage form’. It would
seem, then, that this grid is to be drawn up on the basis
of Michelin market shares, or at the very least on the
basis of the shares Michelin would like to achieve. This
can only induce dealers to guarantee Michelin those
shares, and to limit access to the market by other
competitors. Dealers, after all, have no interest
in
keeping stocks which they cannot or do not want to sell.
They will not buy competing goods as long as they have
Michelin products in stock. But as a result of this clause
they always will have a stock of Michelin products ‘in a
volume that matches Michelin’s market share’, and not
in a volume that matches their own wishes. There is
consequently a barrier to entry by other manufacturers,
and Michelin’s own market shares are rigidified.

advantages will be withheld. The dealer must take part
in numerous promotion programmes, notably for truck
tyres, and use Michelin signs and advertising. The dealer’s
staff is to be trained at the Michelin training centre. All
aspects of the business, and investments in particular,
are inevitably influenced by Michelin’s wishes.

(325) From a commercial point of view, finally, the obligation
on the dealer to keep Michelin informed of the dealer’s
statistics and sales forecasts, category by category for all
brands, and of the development of Michelin’s market
share, entitles Michelin to monitor the dealer’s commer-
cial policy. As Michelin has a large sales force with
instructions to assemble this information, the dealer
can never decide to sell competing products without
Michelin being aware of the fact: and membership of the
Club requires a spirit of partnership and observance of
Michelin volumes and the Michelin ‘temperature’.

(322) 3. The Club agreement binds dealers by a series of
obligations which allow Michelin an exceptionally far-
reaching right to monitor the activities of the members,
and which do not appear to be in any way justified
otherwise than by Michelin’s desire to supervise distri-
bution in detail. Conduct on the part of an undertaking
holding a dominant position which has the object or
effect of binding dealers closely to it in organisational
and commercial terms can only increase their depen-
dence, which constitutes an abuse within the scope of
Article 82 of the Treaty.

(326) This leaves the dealer completely dependent on Michelin,
so that there is necessarily a loyalty-inducing effect. Any
change in the dealer’s commercial or strategic policy
would leave him open to reprisals on the part of
Michelin. Certainly the members of the Club all shared
the feeling that there could be no turning back. It would
be very difficult for members of the Club to give up not
just the financial contributions but also the know-how
they have obtained with the help of the dominant
manufacturer. Indeed when the first firms signed the
agreement it was quite impossible to leave, as they
would have been required to repay all the sums received
in financial contribution. The commitment they had
entered into could fairly be described as a lifetime one.

(323) This is true of the obligation to supply Michelin with
detailed financial information, or the obligation to keep
Michelin informed of the identities of all the partners or
shareholders in the business and of any circumstance
which might affect control of the company and its
strategic choices. Every aspect of the dealer’s financing
and strategy becomes an open book to Michelin, which
regularly holds meetings with dealers to discuss their
finances and to advise them on their financial affairs.

(327) The benefits to Michelin, on the other hand, were
considerable. In its dealings with the trade in general,
Michelin was being given reliable statistics on develop-
ments on the market. In its dealings with the individual
dealers, Michelin was fully informed at all times of the
financial position of its customers, so that it could adapt
its marketing pressure or the financial benefits it was
granting. It could also satisfy itself that dealers were
buying faithfully from Michelin and did not intend to
join another network.

(324) Michelin’s influence over the organisation of the dealer’s
business does not end there. The dealer must promise
Michelin to carry out a wide-ranging outlet audit, and
above all must accept a list of areas for progress
suggested by Michelin; otherwise the promised financial

(328) The dealer was therefore closely bound to the manufac-
turer in terms of finance, organisation and marketing, in
a manner that clearly constitutes abuse within the
meaning of Article 82 of the Treaty.

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(329) 4. Lastly, until October 1995 the Business Cooperation
and Service Assistance Agreement expressly required the
dealer to have the first retread of Michelin truck and
earthmover casings carried out by Michelin. Michelin
states that it did not formally require compliance with
this clause, but in fact the great majority of retreads for
Club dealers were carried out by Michelin, and this
continued after 1996. It has already been explained by
way of example that in one case Michelin threatened to
refuse entry to the Club to dealers who wished to
cooperate with competing retreaders.

93, T-26/93 and T-28/93 Compagnie Maritime Belge
Transports v Commission (44), that ‘where one or more
undertakings in a dominant position actually implement
a practice whose aim is to remove a competitor, the fact
that the result sought is not achieved is not enough to
avoid the practice being characterised as an abuse of a
dominant position within the meaning of Article 86 of
the Treaty’. If in the present case the intention of the
dominant undertaking was significantly to increase
market shares, and that result was not achieved, the
conduct at issue could constitute abuse nevertheless.
That conduct might still have helped to maintain or
stabilise Michelin’s market shares.

(330) These are forms of exclusive dealing with effects anal-
ogous to those of tied sales, and must therefore be
considered to constitute abuse within the meaning of
Article 82 of the Treaty.

(331) This is because dealers are under pressure to send their
carcasses to Michelin: they will be reluctant to endanger
their partnership with Michelin, with all the advantages
it brings for the whole of their business, over a question
of retreading, which is in any event a minor part of their
tyres business as a whole. Thus the dealer’s choice is
being restricted: the dealer will not be able to have
Michelin casings retreaded by other retreaders, and the
other retreaders are faced with an obstacle barring their
access to this market.

Further arguments put forward by Michelin

(332) In its reply to the statement of objections Michelin
puts forward two general arguments to counter the
Commission’s objections. It says that in the space of
20 years its shares of the market in new replacement
tyres have fallen from [...], and that it has seen a
substantial fall on the market in retreaded tyres too; and
it states that the prices of truck tyres have fallen by more
than [...] in ten years, after allowing for inflation. These
falls, Michelin argues, prove that Michelin does not hold
a dominant position and has not abused one.

(334) In the NBIM judgment

the Court of

Justice found
that ‘temporary unprofitability or even losses are not
inconsistent with the existence of a dominant position.
By the same token, the fact that the prices charged by
Michelin NV do not constitute an abuse and are not
even particularly high does not justify the conclusion
that a dominant position does not exist.’

(335) In addition, the question whether an undertaking holds
a dominant position within the meaning of Article 82
of the Treaty has to be considered in relation to the
period in which the conduct at
issue is observed.
Throughout the period in question, and in earlier years
too, Michelin always satisfied the market share test
developed by the Court of Justice.

(336) Lastly, Michelin’s statement of the facts is itself extremely
disputable. As regards the retread market, it is remark-
able that over so long a period, from 1980 to today,
Michelin should have maintained such high market
shares, falling by only [...] percentage points, from [...]
of the market. It did this at a time when its market shares
in other Member States were very much lower. Michelin
estimates that its shares of the market in new replace-
ment tyres have fallen from [...]. But according to
information supplied by Michelin itself the Michelin
group’s market shares oscillated between [...] between
1990 and 1997, beginning at [...] in 1990 and standing
at [...] in 1997. These figures alone would demonstrate
Michelin’s capacity to maintain its market shares, at least
during the 1990s. If Michelin did indeed see its market

(333) The Commission would point out first of all that the
Court of First Instance of the European Communities
has held, in its judgment in Joined Cases T-24/93, T-25/

(44) [1996] ECR II-1201.

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shares fall, the fall must have taken place essentially in
the 1980s, and was presumably the result of the ending
of Michelin’s exclusive rights in respect of radial tyres (45).

(337) Turning to the fall in prices, Michelin asserts, carefully,
that prices for truck tyres fell by [...] over the ten years,
without going into more detail regarding Michelin’s own
prices.

(338) The data obtained by the Commission from INSEE,
the French National Economic Studies and Statistical
Institute, confirm that there was a fall in prices for new
replacement tyres on the French market. From an index
figure of 104 in 1991 prices had fallen to a figure of
92 by 1998 before allowance for inflation.

(339) But INSEE attributes this fall to the drop in market prices
for hydrocarbons and rubber, which are important
tyre manufacture, and
components in the cost of
considers it similar to what happened on other markets
related to the motor industry.

(340) Despite what appears to have been an unpromising
market, Michelin succeeded in maintaining its prices, or
even increasing them fairly substantially for certain types
of truck tyre. The following table is based on data sent
by INSEE and Michelin (46); it shows quite clearly that
Michelin managed to maintain its prices even while the
market was collapsing.

Table 24

Year

Michelin

Market

Inflation

1991

1992

1993

1994

1995

1996

100

100

100

[...]

[...]

[...]

[...]

[...]

102,8971

102,3712

102,0682

104,4762

92,55605

106,315

91,67193

108,1122

92,4929

110,3253

(341) In its letter of 25 July 2000 Michelin contested the
validity of this analysis, saying that in the years 1991 to
1996 Michelin’s prices had been going through a phase
of catching up.

(342) According to the answer to a request for information
sent to Michelin, however, Michelin did suffer a fall in
prices, but over the period in question the fall, calculated
on the basis of the truck tyres range weighted by the
average discount allowed to dealers, was limited to [...]
before allowance for inflation, so that the best that can
be said is that the fall kept Michelin in line with the
market.

(343) The conclusion is that like the rest of

the market
Michelin incorporated the fall in raw material prices
into its own prices, while maintaining its initial price
differential.

D.

EFFECT ON TRADE BETWEEN MEMBER STATES

(344) In its judgment in Case 56/65 Société Technique Minière
v Maschinenbau Ulm (47) the Court of Justice held that
anticompetitive conduct affects trade between Member
States if
‘having regard to what can reasonably be
foreseen, it is to be feared that it might have an influence,
direct or indirect, actual or potential, on the pattern of
trade between Member States capable of preventing the
realization of a single market between the said States.’

(345) In the NBIM judgment the Court said that ‘when the
holder of a dominant position obstructs access to the
market by competitors it makes no difference whether
such conduct is confined to a single Member State as
long as it is capable of affecting patterns of trade and
competition on the common market’ (48).

(346) The discount system applied by Michelin may affect
trade between Member States, since, by establishing
strong links between the dominant supplier and the
dealers, it restricts the dealers’ scope in making their
purchases. Michelin’s entire system is aimed at improv-
ing the dealers’ performance in its own favour and
thus at preventing other manufacturers from obtaining
orders. Many of these manufacturers are established in
the common market and have large plants which
produce heavy tyres. Their chances of penetrating the
French market are diminished since, on account of the
links established between manufacturers and dealers by
terms, Michelin’s
Michelin’s

system of commercial

(45) As the inventor of the radial

tyre, Michelin held a patent
protecting it from competition from other manufacturers in the
1970s and early 1980s.

(46) Michelin’s catalogue prices for sales to specialised dealers.

(47) [1966] ECR 235.
(48) Loc. cit. (see footnote 15), at paragraph 103.

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market share is more or less fixed, and in consequence
other manufacturers’ penetration of the French market
cannot exceed a small percentage. The conduct on the
part of Michelin which is at issue, and its consequent
maintenance of its market share, is accordingly liable to
restrict freedom of trade between Member States in a
way that harms the achievement of the objective of
establishing a single market, in particular by changing
the structure of competition within the common market.

(347) The unfavourable effects of the abusive discount system
on trade between Member States are appreciable. The
evidence shows that even quite small rebates could be
considered significant by the dealers. The dealers were
faced with an invidious choice between making sales
efforts for the other manufacturers or for Michelin and
it was only natural for the dealers to try to increase their
Michelin sales — inevitably at the expense of the other
manufacturers because the uncertain and individualised
bonus could well turn out to be better than the (known)
rebate available from other manufacturers. In this way,
the task of those other manufacturers trying to sell into
France from other Community countries was made
noticeably more difficult by the action of the dominant
undertaking.

E. ARTICLE 3 OF REGULATION No 17

F. ARTICLE 15 OF REGULATION No 17

(351) Article 15(2) of Regulation No 17 states that

the
Commission may, by decision, impose on undertakings
or associations of undertakings fines not exceeding 10 %
of the turnover in the preceding business year of each of
the undertakings participating in the infringement
where, either intentionally or negligently, they infringe
Article 82 of the Treaty. In fixing the amount of the fine,
regard is to be had both to the gravity and to the
duration of the infringement.

(352) In the present case it is clear that Michelin committed
the infringement intentionally, because, as is explained
in paragraph 361, the Commission fined Michelin for
the same practices in 1981, and that decision was upheld
by the Court of Justice in 1983. Michelin has a very
large legal department, which could not be unaware that
these practices constituted an infringement, especially as
the Court had ruled against the same conduct on a
neighbouring geographic market.

(353) In the present case Michelin’s conduct should be penal-
ised by the imposition of a fine. In order to determine
the appropriate level of the fine the Commission has
to take account of the gravity and duration of the
infringement and of any aggravating or mitigating
circumstances.

(348) Article 3 of Regulation No 17 states that, where
the Commission, upon application or upon its own
initiative, finds that there is infringement of Article 81
or Article 82 of the Treaty, it may by decision require
the undertakings or associations of undertakings con-
cerned to bring such infringement to an end.

1. GRAVITY

(349) The Commission ought therefore to require Michelin to
bring the infringement described in Section C to an end,
to the extent that it has not already done so, and
henceforth to refrain from any agreement or behaviour
which might have the same or a similar object or effect.

(354) The conduct in question consists of a system of loyalty-
inducing discounts of a kind consistently condemned in
the past by the Commission and by the Community
judicature; it is a serious abuse of a dominant position,
aimed at eliminating or at the very least preventing the
growth of Michelin’s competitors on the French markets
in new replacement and retread truck tyres. Such
conduct must be considered a serious infringement of
Community competition law.

(350) It should be noted that in the course of 1998,

in
exchanges of correspondence and meetings with the
Commission departments, Michelin discussed commit-
ments it might enter into in order to bring the infringe-
ment to an end. At a meeting on 4 February 1999
Michelin submitted agreements which had been
amended with effect from 1 January 1999 in order to
take account of the Commission’s observations and to
put an end to the abuse.

(355) France is the only country in the Community where
Michelin holds a share of the market in retreaded tyres
which is greater than its share of the market in new
replacement
tyres. The tying of sales of new and
retreaded tyres which is the effect of the progress bonus
and the PRO agreement may be considered at least one
factor helping to explain this singular situation.

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(356) Michelin’s market shares are larger in France than they
are in any other Member State. The situation might
indeed be due to the history of the brand, but the
strength of the Michelin Friends Club on the French
market may also be a factor. The effect of the Club
policy certainly helps to maintain Michelin’s market
share among the Club dealers, where its share is not
surprisingly much higher than it is among independent
specialised dealers.

(357) The infringement took place in a substantial part of the
common market, and because of the partitioning of the
common market which it caused its effects extended
beyond the relevant market, which is the French market.

(358) For these reasons the amount of the fine imposed to
reflect the gravity of the infringement should be EUR
8 million, reflecting the serious nature, extent and
impact of the infringement.

2. DURATION

of setting fines imposed pursuant to Article 15(2) of
Regulation No 17 and Article 65(5) of
the ECSC
Treaty (50) expressly refer to repetition of the infringe-
ment as an aggravating circumstance justifying an
increase in the amount of the fine.

(362) Michelin argues that the fact that the Court’s earlier
judgment was concerned with an infringement on
another geographic market means that Michelin’s abus-
ive practices here do not constitute repetition of the
same infringement. The Commission takes the view,
however, that when a dominant undertaking has been
censured by the Commission it has a responsibility not
only to put an end to the abusive practices on the
relevant market but also to ensure that its commercial
policy throughout the Community conforms to the
individual Decision notified to it; Michelin did not do
this, quite the reverse.

(363) It must be concluded that the abuses committed by
Michelin on the defined relevant markets are aggravated
by the fact that this was a repeated infringement, which
justifies an increase of 50 % in the basic amount of the
fine, that is to say an increase of EUR 7,6 million.

4. MITIGATING CIRCUMSTANCES

(359) The infringement extended over a period of 19 years or
more, since the commercial policy at issue was in
operation at least from 1980 onward, and as indicated
in Section E Michelin agreed to amend its agreements
with effect from 1 January 1999. But the Commission
has concentrated its enquiries on the period 1990 to
1999, and accordingly it will take account here only of
the period from 1 January 1990 to 31 December 1998.
For purposes of this Decision, therefore, the duration of
the infringement is considered to be nine years.

(364) As indicated in Section E, Michelin submitted amend-
ments to its commercial policy in February 1999 which
took effect on 1 January 1999, and which were aimed
at bringing the infringement to an end. The undertaking
had therefore made these amendments even before the
Commission sent the statement of objections; this has
to be considered a mitigating circumstance, justifying a
reduction of 20 % in the basic amount of the fine, that
is to say a reduction of EUR 3,04 million.

(360) The amount of the fine to be imposed on the basis of
the gravity of the infringement should therefore be
increased by 90 % to take account of its duration. This
brings the basic amount of the fine to EUR 15,2 million.

5. AMOUNT OF THE FINE

(365) For these reasons the amount of the fine to be imposed
in respect of the infringement identified in this Decision
should be EUR 19,76 million,

3. AGGRAVATING CIRCUMSTANCES

HAS ADOPTED THIS DECISION:

(361) Michelin was fined by the Commission in 1981 in the
NBIM case, and that decision was upheld by the Court
in 1983 (49),
for abuse of a dominant position of
the same kind, namely a system of loyalty-inducing
discounts. The Commission guidelines on the method

Article 1

The Commission finds that, during a period extending from
1 January 1990 to 31 December 1998, Manufacture Française

(49) See footnote 15.

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

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de Pneumatiques Michelin infringed Article 82 of the EC
Treaty by applying a system of loyalty-inducing rebates to
dealers in new replacement tyres and retreaded tyres for trucks
and buses in France.

Article 3

Michelin shall refrain from repeating any conduct described in
Article 1, and from adopting any measure having equivalent
effect.

Article 2

Article 4

For the infringement referred to in Article 1, a fine of EUR
19,76 million is hereby imposed on Michelin.

This Decision is addressed to Manufacture Française de Pneu-
matiques Michelin, F-63040 Clermont Ferrand.

The fine shall be paid within three months of the date of
notification of this Decision into the following bank account:
Account No 642-0029000-95, Code SWIFT: BBVABEBB-
Code IBAN: BE76 6420 0290 0095, European Commission
Banco Bilbao Vizcaya Argentaria (BBVA), Avenue des Arts/
Kunstlaan 43, B-1040 Brussels. After the expiry of that period,
interest shall be automatically payable at the rate applied by
the European Central Bank to its main refinancing operations
on the first working day of the month in which this Decision
is adopted, plus 3,5 percentage points, giving a total of 8,05 %.

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

Done at Brussels, 20 June 2001.

For the Commission

Mario MONTI

Member of the Commission