2003/675/EC: Commission decision of 30 October 2002 relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA Agreement (COMP/35.587 PO Video Games, COMP/35.706 PO Nintendo Distribution and COMP/36.321 Omega — Nintendo) (Text with EEA relevance.)(notified under document number C(2002) 4072)
Date: 2002-10-30
Institutions: European Commission
Subjects: automatic game, competition law, infringement of EU law, inter-company agreement

8.10.2003

EN

Official Journal of the European Union

L 255/33

COMMISSION DECISION

of 30 October 2002

relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA
Agreement

(COMP/35.587 PO Video Games, COMP/35.706 PO Nintendo Distribution and COMP/36.321
Omega — Nintendo)
(notified under document number C(2002) 4072)

(Only the English, Portuguese, Greek, German, Italian, and Swedish texts are authentic)

(Text with EEA relevance)

(2003/675/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

1. THE FACTS

Having regard to the Treaty establishing the European Commu-
nity,

1.1. The parties to the proceeding

Having regard to the Agreement on the European Economic
Area,

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 1/2003 (2)
and in particular Articles 3 and 15(2) thereof,

Having regard to the complaint lodged by Omega Electro BV
on 28 November 1996, alleging infringement of Articles 81
and 82 of
the Treaty by Nintendo Netherlands BV and
Nintendo UK Ltd and requesting the Commission to put an
end to that infringement and to impose a fine,

Having regard to the Commission Decision of 25 April 2000
to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission in accordance with Article 19(1) of Regulation
No 17 and with 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),

Having regard to the final report of the Hearing Officer in this
case (4),

After consulting the Advisory Committee on Restrictive Prac-
tices and Dominant Positions,

WHEREAS:

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ L 1, 4.1.2003, p. 1.
(3) OJ L 354, 30.12.1998, p. 18.
(4) OJ C 241, 8.10.2003.

(1)

(2)

The parties will be referred to as follows in the present
decision: in the factual part the authors of the infringe-
ment will be mentioned. In the legal assessment, refer-
ence will be made to the actual addressees of
this
Decision.

1.1.1. The Nintendo group of companies

The ultimate parent company of the Nintendo group of
companies is Nintendo Corporation Ltd (NCL), a listed
company established in Kyoto,
Japan. Nintendo's busi-
ness in the EEA is conducted by the following wholly-
owned (5) subsidiaries:

— Nintendo of Europe GmbH (NOE). NOE is Ninten-
do's main EEA-based subsidiary.
coordinated
certain business practices of Nintendo in Europe
and was the exclusive distributor for Germany, at
least from January 1991 (6) until 31 December 1997,

It

— Nintendo of America Inc (NOA), although not itself
distributing Nintendo's products in the EEA, was also
responsible
certain of
Nintendo's business practices in Europe during the
period relevant for this Decision,

coordination of

the

for

— Nintendo Netherlands BV (NN). NN was the exclu-
sive distributor for the Netherlands, at
from
1 January 1993 (7) until 31 December 1997. This
company is currently called Nintendo Benelux BV,

least

— Nintendo France SARL (NF). NF was the exclusive
from 31 December

distributor for France, at least
1992 (8) until 31 December 1997,

(5) See column 1(b) on pages 132 to 136 of the Commission's file.
(6) Page 415.
(7) Page 2667.
(8) Page 2216.

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Official Journal of the European Union

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— Nintendo España SA (NE). NE was the exclusive
from 1 January
at

distributor
least
for Spain,
1994 (9) until 31 December 1997,

Hellas EPE is, ultimately, a wholly-owned subsidiary of
Itochu Corporation (hereafter referred to Itochu). Itochu
Corporation is headquartered in Tokyo, Japan.

— Nintendo Belgium SPRL (NB) was

distributor for Belgium and Luxembourg,
least 1 January 1994 until April 1997 (10),

the exclusive
from at

— Nintendo UK Ltd (NUK) was the exclusive distributor
for the United Kingdom and Ireland from at least
March 1993 until 4 August 1995 (11).

(3)

The term ‘Nintendo’ may refer to any or all of those
companies in the Nintendo group.

(4)

(5)

(6)

(7)

(8)

(9)

1.1.2. The independent Nintendo distributors

In other territories, Nintendo had appointed indepen-
dent exclusive distributors.

John Menzies
THE Games Ltd, a trading division of
Limited, which
a wholly-owned
is
Distribution
subsidiary of
John Menzies plc, was appointed in
August 1995 as independent exclusive distributor for
the United Kingdom and Ireland, after NUK ceased
performing this function (together referred to hereafter
as THE). THE remained Nintendo's exclusive distributor
for this territory until at least 31 December 1997.

Chaves Feist & Cia LDA, later called Soc. Rep. Concentra
LDA and, since September 2001, Concentra — Produtos
para crianças SA (hereafter referred to as Concentra) was
least
Nintendo's exclusive distributor
from 14 May 1991 until 31 December 1997 (12);

for Portugal, at

referred to as Linea) was
Linea GIG SpA (hereafter
Nintendo's exclusive distributor for Italy, at least from
1 October 1992 (13) until 31 December 1997.

Bergsala AB (hereafter referred to as Bergsala) has been
Nintendo's exclusive distributor for Sweden since 1981
and, since 1986, also for Denmark, Norway, Finland and
Iceland (14).

for Greece at

Itochu Hellas EPE (in correspondence often referred to
as Itochu Hellas Ltd) was Nintendo's exclusive distri-
butor
from 14 May 1991 until
February 1997. All shares in Itochu Hellas EPE were
always held by Itochu Corporation or wholly-owned
subsidiaries of
Itochu

Itochu Corporation (15). Thus,

least

(10) Nortec AE (hereafter referred as to Nortec) was Ninten-
do's exclusive distributor
to
Itochu from at least 4 April 1997 until 31 December
1997 (16);

for Greece subsequent

(11)

CD-Contact Data GmbH was Nintendo's exclusive distri-
butor
least
for Belgium and Luxembourg from at
April 1997 until 31 December 1997. For this purpose,
founded a wholly-owned subsidiary, Contact Data
it
Belgium NV, for distributing the products in this terri-
tory (17) (referred to hereafter as Contact).

(12) On 29 September 1998, Activision Inc, a company
established under the laws of
the Stare of Delaware
(USA), gained control over CD-Contact Data GmbH by
purchasing all its shares.

(13)

Subsequently, on 9 June 1999, CD-Contact Data GmbH
founded a wholly-owned subsidiary, CD Contact data BV
established in the Netherlands. All shares in Contact
Data Belgium NV, previously held by CD-Contact Data
GmbH, were then transferred to this newly founded
company. CD-Contact Data GmbH continues to exist as
a holding company (18).

1.1.3. Omega

and

import

sale
it

electronic

(14) Omega Electro BV (hereafter referred to as ‘Omega’) is a
company established in the Netherlands that is active in
of
the
games. On
26 November 1996,
lodged a complaint under
Article 3(2)(b) of Regulation No 17 that primarily
concerned the distribution of Nintendo game cartridges
and consoles and contained a variety of allegations, inter
alia, the hindrance by Nintendo of parallel trade and its
operation of a resale price maintenance policy in the
Netherlands.

1.2. Relevant product markets

(15)

This case relates to game consoles and video games or
game cartridges, which allow users
to play games
displayed on a screen.

(9) Page 136.
(10) Page 132.
(11) Pages 426, 313 and 279A.
(12) Page 244, letter of Concentra dated 17 September 2002.
(13) Page 200.
(14) See Bergsala's reply to the statement of objections.
(15)

Itochu's reply to the statement of objections, paragraph 10. See also
Itochu submission of 26 November 2001.

(16) Page 2595, 1622 to 1624.
(17) Pages 138 to 153. CD-Contact GmbH is 100 % owned by Contact
Vermögensverwaltung GmbH The latter company and Contact
Belgium NV had identical owners and board of directors. Contact
Data Belgium was created by CD-Contact Data GmbH on 27 March
1997. (pages 2531 to 2535 and 2618). That Contact Data Belgium
BV was a wholly-owned subsidiary of CD-Contact Data GmbH also
appears from Contact's submission of 19 November 2001.

(18) Contact's submission of 19 November 2001.

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Official Journal of the European Union

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(16)

In the correspondence of the parties the term ‘hardware’
is often used as a synonym for ‘game console’. In this
Decision, the term ‘game console’ is used systematically,
except for direct quotations. Similarly, in the correspon-
dence of the parties the term ‘software’ is often used as
a synonym for ‘game cartridge’.
In this Decision, the
term ‘game cartridge’
is used systematically, except for
direct quotations.

(17) During the period of

infringement, Nintendo
the
produced various types of game consoles (see table 1
below) and game cartridges for use with these game
consoles. Collectively, they are referred to hereinafter as
‘the products’ (19).

1.2.1. The game consoles

(18)

Game consoles are electronic devices dedicated to and
specifically designed for playing video games. The user
interface is a simple pad or a control, such as a ‘joy
stick’, which allows the user to control the movements
of the characters on the screen. Game consoles can be
divided into static and hand-held game consoles. The
generations of static consoles during the period of the
infringement were called 8-bit, 16-bit, 32-bit and 64-bit
consoles,
in ascending order of performance. The
various consoles on the market during the period rele-
vant
this Decision and their manufacturers are
indicated in Table 1.

for

TABLE 1

Consoles produced by the major game console producers
during the period relevant for this Decision

Nintendo

Sega

Sony

Hand-held

Game Boy

Game Gear None

Static 8-bit console NES

Master
System

None

Static 16-bit
console

SNES

Mega Drive None

Static 32-bit
console

None

Sega
Saturn

Sony Play-
station

Nintendo

Sega

Sony

Static 64-bit
console

Nintendo
64

None

None

1.2.1.1. Pe r so n al co mpu te rs and game co nsole s

ar e n o t su b st it uta bl e p rod u ct s

Demand side

(19)

Like game consoles, personal computers (PCs) allow
games to be played. However, a PC cannot be regarded
as a substitute for either a static or a hand-held game
console for the following reasons.

(20)

PCs and game consoles are intended to fulfil different
consumer needs:

— whereas PCs are, by definition, multitask devices,
intended to satisfy a wide range of needs, including,
but not necessarily, game-playing (20); game consoles
are designed solely, or at least optimised, to satisfy
only the gaming needs, in particular of the younger
generations,

— in addition,
the technical
it
is uncontested that
performance
game
static
and characteristics of
consoles for game-playing are substantially better
than those of PCs. This can be illustrated by state-
ments to this effect by THE and Nintendo's presi-
dents (21),

— furthermore,

in contrast with static game consoles,
PCs have only a short life span as a game-playing
platform capable of playing the latest released games
unless expensive upgrades are made (22),

— the need to upgrade a PC makes it,

in addition, a
more complex game-playing device than a game
console and reduces its attractiveness for consumers
seeking only a gaming platform.

(21)

In addition, the average PC is five times more expensive
than a game console (23).

(19) Trade in the second-hand products is ignored. The products (in
particular game cartridges) have a very short life cycle, meaning
that they quickly lose their appeal to consumers (see recital 76).
Indeed, a consumer survey conducted in the United Kingdom
showed that very few consumers had bought second-hand games.
(Monopoly of Mergers Commission report, page 196 (page 2591)).
Consequently, as the volume of second-hand products is low when
compared to newly sold products, they make no significant differ-
ence to the market share of new Nintendo products sold by the
parties. This has not been contested by any of the parties.

(20) See THE's 1997/1998 business plan (page 542). See also Mr Cean,
founder of Titus Interactive, a game developing company,
in La
tribune of 9 April 1998 (p. 4, IV/35.7.706, page 116).

(21) From THE's 1997/1998 business plan (pages 541 and 542). For
report over 1995

Nintendo's president, see Nintendo's annual
(page 2341).

(22) See THE's 1997/1998 business plan (page 541). See also Financial
Times of 2 December 1998 (IV/35.706 pages 115 and 116), where a
spokesman of GT Interactive (a game publisher) is quoted.

(23) See THE's 1997/1998 business plan (page 541).

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Official Journal of the European Union

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(22)

In view of the above elements, it is unlikely that users
looking for a gaming device will switch to buying a PC
as a result of a small but permanent increase in the
price of game consoles. The reverse is also true: users
looking for more than just a gaming device are unlikely
to switch to buying a game console as a result of a
small but permanent increase in the price of PCs.

(23)

This conclusion is supported by the results of consumer
research: of the consumers who already owned a static
game console and were planning to buy another, fewer
than 15 % had considered purchasing a PC for this
purpose (24).

and laptops belong to different markets (26). The fact
that PCs and laptops belong to a different product
market
from static and hand-held game consoles has
not been contested by any party.

gam e
1.2.1.2. S tat ic
ga me
co nsole s
p rod u ct m a rke ts

c on s ol es

be lo ng

a n d ha n d- he ld
d if fer en t

to

(26) A distinction can be made between static game consoles
and portable, hand-held game consoles. The following
arguments support the conclusion that relevant distinct
markets for hand-held and for static consoles have to be
defined.

Supply side

Demand side

(24)

term without

The relevant criteria to assess supply side substitutability
is whether alternative suppliers are able to switch
production to the relevant products and market them
in the short
incurring significant addi-
tional costs or risks in response to small and permanent
changes in relative prices. In the present case, evidence
shows that no PC manufacturer has ever tried to enter
the market for game consoles. In-roads in the market
have been made by a consumer electronics manufacturer
(Sony) and by a software producer (Microsoft). It has to
be added that this entry affected only the static game
consoles market and that
entry by Microsoft
occurred after the period of the infringement. Hence,
supply side substitutability is not relevant
for market
definition (25).

the

(25) As

regards hand-held consoles,

the same arguments
developed above in recital 20 are relevant to show that
they are neither substitutable to PCs, nor to laptops. In
terms of needs served, on top of playing games, hand-
held consoles (contrary to PCs) are portable devices.
They are not at all designed to perform any other task
In addition, PCs are between 10
than playing games.
and 15 times more expensive than hand-held consoles.
The comparison with laptops will not change the
conclusion that hand-held consoles are no substitute
for PCs. Laptops are portable PCs and, hence, multitask
devices
intended to satisfy a wide range of needs.
Furthermore, laptop computers are, for a given perform-
ance level, significantly more expensive than PCs. This is
mainly due to the cost of certain components, notably
In
the LCD screen and the energy-saving processor.
addition, laptops require the use of miniaturised compo-
nents which also tend to be more expensive. In conclu-
sion, PCs and laptops are not a substitute for static or
both PCs
hand-held

and, hence,

consoles

game

(24) Consumer research conducted by Sega mentioned in the MMC

report on page 58, (page 2591).

(25) See Commission Notice on the definition of the relevant market for
the purposes of Community competition law (OJ C 372, 9.12.1997,
p. 5), point 23.

(27)

(28)

(29)

Both types of consoles are intended to fulfil different
user needs, in particular as regards the requirement for
portability. Static consoles are designed to be used in a
fixed location with a normal TV set. Hand-held consoles
are designed to be used anywhere. Hand-held consoles
only need a game cartridge for use, while static consoles
must be connected to a TV set.

Both types of consoles have substantially different tech-
nical capabilities. Static consoles offer greater picture
resolution, more
computing power
colours, more
(allowing users to play more sophisticated games) and,
often, multi-player capabilities. The games that can be
played on hand-held consoles are very unsophisticated
in comparison with those that can be played on static
consoles.

In addition,
there are substantial price differentials
between hand-held and static game consoles. The price
than a static
of a portable console is much lower
console. For instance,
for 1997/1998 THE planned a
recommended retail price for N64, SNES (with one
game)
and Game Boy Classic of GBP 249,99,
GBP 79,99 and GBP 39,99 respectively. Another Game
line (Game Boy Pocket) had a recom-
Boy product
mended retail price of GBP 49,99 (27). Nintendo's most
popular static game console at the time, the N64, was
therefore at least five times more expensive than Ninten-
do's hand-held console.

(30) As a result,

it is unlikely that a significant number of
existing or new users of one or the other type of game
console will switch to the other type as a result of a
small, permanent increase in the price of any of them.

(26) Further substantiated by THE on page 542 where it states:

console's position is assured as the choice of gamers’.

‘The

(27) Page 573.

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Supply side

(31)

less

advanced static

Competition among suppliers of static consoles is char-
acterised by the fact that every three to four years, a
new generation of static consoles with more advanced
technology is introduced onto the market. With the
introduction of a new generation of static consoles, sales
consoles decline (28). This
of
phenomenon has not been visible in respect of hand-
held game consoles (29). During the period of the infrin-
gement and after it, only Nintendo introduced a new
product, but it was just a new version of its existing
innovation was primarily
hand-held console. Product
limited to reducing the size of the device and increasing
the colours in which it was available.

(32)

Contrary to what occurred in respect of static consoles,
entry by new producers did not take place in the hand-
held game consoles market either during the period of
the infringement or from that moment to date.

console

cannot be used with any other
specific
console (30) and, once a particular game console is
chosen, only game
compatible with the
cartridges
chosen console can be used.

(37) As a result, in the event of a small, permanent increase
in the price of a particular game cartridge, a user of a
given game console is unlikely to switch to a game
cartridge compatible with a different console. This is
due to the fact that the user has to bear the cost not
only of the new cartridge, but also that of buying a new
console able to interoperate with that cartridge.
is
the number of game cartridges that
uncontested that
need to be purchased to make switching worthwhile is
far in excess of the average number of game cartridges
owned by the average game console owner. Switching
cost may be less important if interoperability between
consoles had existed but no interoperability
game
existed between consoles of different brands or between
different generations of Nintendo manufactured game
consoles (31).

It

It is even more significant that the only competitor to
Nintendo, Sega, had already ceased to be a viable
competitor by 1995 (see Table 4 and recital 75). Since
then no new product has been introduced in the market
by a company other than Nintendo itself.

(38)

it

In conclusion, available facts point to the existence of
separate markets of game cartridges per game console
is not necessary to
and manufacturer. However,
precisely delineate markets any further as Nintendo has
accepted: (a) the Commission's factual and legal findings
as set out in the Statement of Objections; and (b) that
the
the
Commission in the Statement of Objections had an
appreciable
sense of
effect on competition in the
Article 81(1) of the Treaty (32).

competition identified by

restrictions of

(33)

(34)

substitute products,

Consequently, as static consoles and hand held consoles
they are concluded to
are not
belong to different product markets. The fact that static
and hand-held game
consoles belong to different
markets has not been contested by the parties.

1.2.2. The games

(35)

The purchase of a game console does not in itself allow
to start playing games. The software which
a user
provides the gaming functionality is contained on game
cartridges, which make the games directly usable on the
game consoles. These game cartridges are distributed
and sold to the end-users.

(36)

The technical specifications for the media and the soft-
ware itself differ from brand to brand, and also between
the various consoles produced by the same manufac-
turer. As a result, a cartridge with a game designed for a

(28) See for instance Screen Digest, July 1998 page 159 (page 2577).
(29) Nintendo's annual report for 1999.

1.2.3. Nintendo's arguments concerning product market def-

inition

(39) Although it did not contest the facts outlined in the
Statement of Objections, Nintendo has argued for a
broader definition of
It
maintains that competition takes place between ‘systems’
(i.e. the console and cartridges as a whole). As a result,
the relevant product market should be defined as one
comprising all game consoles and compatible game
cartridges. Nintendo's argument is twofold.

the relevant product markets.

(30) This does not preclude that the same game is available for different
consoles. However, these must then be sold on different media,
each compatible with a specific game console and incompatible
with any other dedicated game consoles.

(31) Game cartridges designed to work with a game console of a
particular generation, can sometimes be played on a different
game console of the same make if a suitable adapter is used. An
adapter, the ‘Super Game Boy’, allowed Game Boy cartridges to be
used on a SNES console (Annual Report Nintendo 1995, page 15)
(page 2341). These adapters do not exist between consoles of
different brands, or even between most consoles of the same brand.
(32) See Nintendo's reply to the Statement of Objections at points 2.1 to

2.3.

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Official Journal of the European Union

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(40)

it maintains that a manufacturer is discouraged
First,
from raising its prices for consoles, not only by the
predictable loss in console sales, but also, since consoles
and games are complementary products, by the related
loss of sales in compatible game cartridges (33). Since it
the relevant product
follows from the definition of
market
the price elasticity between
for consoles that
consoles of different manufacturers must be consider-
able, it also follows that the related loss in sales of game
cartridges as a result of increasing console prices would
still
be high. The loss of profits would be higher
because of the high margins on game cartridges.

(41) Nintendo's second argument is that, since an increase in
the price of the game console stimulates demand for
competing consoles, hence for game cartridges compa-
tible with those competing consoles, game consoles and
compatible game cartridges
share the same market.
Nintendo furthermore argues that the Commission has
recognised that changes in the price of game cartridges
influence the demand for game consoles (34).

(42)

The Commission notes first, that market definition in
the present case is not decisive for the establishment of
the infringement. Second, Nintendo has used the substi-
tutability test in an incorrect manner. The relevant test
for determining whether a product constitutes a separate
market is whether users will switch to readily available
substitutes
to a small but permanent
increase in prices of that product. However, in order to
determine whether game cartridges compatible with a
particular game console belong to the same market as
game cartridges for different consoles, Nintendo uses a
test based on a hypothetical
increase in the price of
game consoles, not of game cartridges.

in response

The notion of complementarity between two products is
not relevant
for product market definition because it
means by definition that demand for the two products
is positively correlated, so that a price increase in one of
them will result in a decrease of demand for both of
them. Although this effect may well be taken into
account by firms when designing their pricing policies
for their products, it is not relevant for the purposes of
product market definition.

(45)

The Commission considers that for a correct analysis of
the demand for game cartridges and its interaction with
the demand for game consoles, a distinction must be
made between current game console owners at the one
hand and new buyers of game consoles and consumers
who are looking to replace an obsolete one at the other.

(46) As indicated above in recital 37, current owners of a
game console would face substantial switching costs if
they switched to different game cartridges, and are
generally ‘locked in’ for a period of at least three to
four years, usually until
their current game console
becomes obsolete. For them, competition took place at
the time of deciding what console to buy. Their reaction
to a small, permanent price increase in game cartridges
compatible with their console would be limited because
buying an incompatible game only makes sense if the
console associated with that new game is bought at the
same time.

(47) What happens in practice is that, according to NOE,
‘When a customer has bought the hardware, for what-
ever reason, he will buy (…) the software anyhow’ (35).
Thus, Nintendo recognises that current console owners
are not expected to switch.

(43)

Furthermore, as regards Nintendo's first argument, the
Commission takes note that Nintendo accepts that game
consoles and cartridges are complementary products.
The Commission considers that the first argument by
Nintendo just implies that static game consoles belong
to a single product market, a view that also the
Commission takes. If Nintendo's argument is true, then
the conclusion may just be that market power by
console manufacturers may not be very substantial.

(48)

(44) As

the

regards

the Commission
second argument,
considers that Nintendo is confusing the notions of
substitutability between products,
for
product market definition, and that of complementarity.

is relevant

that

(33) Namely, the sales of game cartridges for the extra game consoles
that it would have sold if it had not raised its game console prices.
(34) Annex A to Nintendo's reply to the Statement of Objections,

paragraph 5.

For consumers who do not yet own a console, or who
own one that has become obsolete and are considering
buying a new one, prices for game cartridges may be
one of the competitive variables used by console manu-
facturers to compete in that market. However, there are
no indications in the file to support
that prices of
games are more or less important than other elements
such as the price of
its technical
capabilities, the time between generations, the interoper-
ability between successive generations of consoles by the
same manufacturer,
and types of
the
games (36) (*) and the timing of new game releases.

the console itself,

availability

(35) Pages 1527 and 1528.
(36) Page 566. See also the Frankfurter Zeitung of 2 February 1999, based
on an interview with […]* NOE, in which the relative success of
Sony's Playstation is primarily attributed to the number of games
available for this console (page 2590).
[…]* representing text of a confidential nature.

(*)

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(49) No precise calculation of price elasticities have been
made by Nintendo. However, available evidence appears
to show that demand for both game consoles and game
cartridges is relatively inelastic (37). Low price elasticities
for game cartridges and game consoles indicate that
consumers do not consider price the most important
factor in their purchasing decisions.

findings as set out in the Statement of Objections and,
secondly, that the restrictions of competition identified
by the Commission in the Statement of Objections had
an appreciable effect on competition for the purposes of
Article 81(1) of the Treaty (39).

(50)

(51)

1.3. Geographical scope of the markets

Indeed, although N64 compatible game cartridges were
sold at slightly higher prices than, for instance, games
compatible with Sony's Playstation, this did not prevent
the N64 from achieving the fastest sales rate in game
history after its launch (38),
indicating that the relative
higher price level for N64 game cartridges had little, if
any, influence on consumers' willingness to purchase the
N64 console.

1.3.1. Technical compatibility

(53)

If current owners of a game console will not switch to
substitutes in response to a small, permanent price
increase of game cartridges, and if such a price increase
in game cartridges will not or will insufficiently induce
consumers that do not yet own a game console or seek
to replace an obsolete one to buy a different one, it has
to be concluded that, contrary to Nintendo's argument
about system's competition, game cartridges compatible
with a particular game console belong to a different
market than those compatible with another.

SECAM standard

The fact that static consoles must be used in conjunc-
tion with a TV set means that they may require adjust-
ments to different standards of TV sets. The PAL stan-
dard is used in all EEA countries except France, where
the
to
is
Nintendo (40), static consoles made to operate with the
SECAM standard will not operate correctly in a PAL
country (and vice versa). Different
television systems
therefore represent something of a technical barrier to
trade
the
in
as
static consoles, a distinction
geographic market
must be made between France and the rest of the EEA.

consoles. Consequently,

use. According

regards

for

in

(52)

In any event, the issue whether competition takes place
between systems or whether the price of games has a
significant influence in the decision of buying a new
game console can be left open because Nintendo has
factual and legal
the Commission's
accepted,

firstly,

(37) A price-elasticity of demand is a measure for the responsiveness of
the demand for a product if its price changes. The smaller the price
elasticity of demand, the smaller the changes in consumer demand
in response to a price change of the product and vice versa. When
it is less than 1, the responsiveness of consumer demand is so small
that a supplier that increases its prices will still
increase its net
revenues because the decline of
its revenues as a result of the
decrease of unit sales is outweighed by the increase of revenues as
a result of the higher prices on its remaining unit sales.
That the price elasticity for consoles is smaller than one can be
derived from pages 1527 and 1558. Here NOE estimates the
impact of a price increase for the N64 console from […]* if any.
This, still according to NOE, would substantially improve NF's
gross margin. If consumers are price-insensitive when purchasing
a console, they will be at least equally insensitive to the price of
complementary products that may be purchased later.
That the price elasticity of game cartridges is smaller than one can
be derived from page 1527. Here it appears that increasing prices
for N64 game cartridges will increase NF's gross margin, which is
consistent with an inelastic demand for game cartridges.

(38) Nintendo's 1997 annual report, page 2249.

(54) Within the PAL area, it appears that N64 consoles can
operate anywhere within the EEA with few technical
modifications (41). As to other static consoles produced
by Nintendo,
too, can function
anywhere within the PAL area with only minor, if any,
modifications (42). Consequently,
it is not necessary, at
least for compatibility reasons, to make a further subdi-
vision of the geographic scope of the market within the
PAL area in the EEA.

it appears that

they,

(39) See Nintendo's reply to the statement of objections at points 2.1 to

2.3 as well as annex A.

(40) Nintendo's submissions of 1 September 1998, page 24 (page 2329).
(41) See faxes from Nortec to NOE (page 1559), Bergsala to NOE
(page 1574) and Linea to NOE (page 1579 and 1580). From this
correspondence it appears that NOE consoles imported from the
United Kingdom require at most the addition of a different SCART
cable, a different power plug and a simple instruction booklet in
the local
language. This operation involves insignificant costs in
comparison to the value of the console. Similarly, no technical
barriers exist for imports into the United Kingdom (page 775).

in its

(42) See Tribunal de Commerce of Brussels,

judgment of
27 September 1995 in the case Nintendo Belgium — Horelec
concerning parallel
imported games from the United Kingdom.
From this judgment it appears that the technical modifications to
adapt consoles destined for the United Kingdom to Belgian TV
standards, are both feasible and legal. The judgment, in view of its
concerned NES and/or SNES consoles
date, can only have
(pages 2220 to 2228).

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(55)

interaction between game
Since there is no direct
cartridges and the TV screen (both connect via the
game console), there are no similar technical compat-
ibility problems with respect to game cartridges. Indeed,
games for SNES consoles operate properly, whatever TV
standard the consoles have been designed to meet (43).
Game cartridges for N64 consoles were parallel-traded
from Belgium to France (44) and those for
the NES
console from Spain to France (45). In Spain and Belgium,
the PAL standard is used and in France SECAM. Since
game-cartridges for static consoles functioned regardless
whether the consoles on which they were used were
created for use with the SECAM or PAL standard,
technical barriers to trade for these products did not
exist.

(56)

Finally, hand-held consoles
technically identical
worldwide. The game cartridges marketed to operate
with these consoles are also technically identical world-
wide.

are

1.3.2. Other considerations relevant for the geographic market

definition

implying that,

(57) As part of an overall remedy to avoid parallel trade,
NOE deemed it necessary to ‘shoot for prices within
10 % difference to trade within Europe after max.
terms’ (46),
in order to prevent retailers
established in one territory to switch to suppliers estab-
territory, price differentials of not
lished in another
more than 10 % were needed. This means that suppliers
in different areas do constitute an actual alternative
source of supply for
the products. Already on this
it can be concluded that an EEA wide
ground alone,
technically identical products. The
for
market exists
above statement
is consistent with the finding that
demand conditions within the EEA were very homoge-
neous.

(58)

it could be noted that the
To substantiate this further,
composition of the supply of products on each relevant
product market
the EEA
because game consoles manufactured by Nintendo, Sega
and Sony are sold in every EEA country and the vast
majority of available game cartridges for such consoles

is very similar

throughout

(43) See submission of Nintendo of 5 October 1998 (page 2493).
(44) See pages 1229, 1566 and 1575.
(45) See page 1255.
(46) Page 1010.

are offered for sale everywhere in the EEA (47). New
products are often launched throughout
the EEA on
the same day (48). Nintendo, Sony and Sega's market
shares were broadly similar in different areas of
the
EEA and Sony's entry in the market for static consoles
had a very similar impact on the Parties' market shares
the EEA (49). Consequently, as far as the
throughout
supply side is concerned, no substantial differences in
competitive conditions existed either within the EEA.

impediment

(59) Moreover, transportation costs or other barriers to trade
are not a significant
to trade in the
products either, as game cartridges and consoles were
parallel-traded on many occasions between different
Member States. Any barriers to trade as regards the
products would be even lower for game cartridges and
hand-held consoles than for static consoles,
in view of
the very small volume and weight of game cartridges
and hand-held consoles as well as the lack of any
apparent need to adapt these products to local condi-
tions.

(60)

the existence in certain
It can be noted further that
countries of companies that actively offered parallel-
traded products for sale to retailers confirms the fact
that parallel
trade and the reselling of parallel-traded
products to final consumers was an activity with busi-
ness potential, not requiring significant modifications to
the product's technical characteristics or
their packa-
ging (50). Also, the existence of parallel traders rendered
the dealing in parallel-traded goods more transparent
and more cost-effective for potential purchasers (51),
further
lowering any impediments that may prevent
dealers from switching to suppliers located in different
areas.

(61) Nonetheless, substantial price differences existed between
various EEA countries. Eventually, Nintendo did not
align its prices to within limits that would prevent
parallel
In
view of the above considerations, those price differen-
tials do not suggest separate geographic markets, but
simply emphasise the fact that the infringements had the
actual effect of partitioning the single market.

instead, restricted parallel

trade but,

trade.

(47) According to a survey commissioned by the MMC (see page 216
and 217 of the report (page 2591) of prices in the United Kingdom,
Germany and France, the investigated game console bundles and
game cartridges were widely available in the retail chain in all
investigated countries and generally available from stock. Occasion-
the documents on the file allow a comparison between
ally,
products
instance
pages 1272, 1306, 1307 and 1327 to 1333). From such compar-
isons it appears that all consoles and at least most game cartridges
are available from the local official distributor as well as parallel
indicating that product offers are very similar between
traders,
different EEA countries.

in different

countries

available

(see

for

(48) Pages 1010 and 1229.
(49) See tables 2, 3 and 4 after recitals 73, 74 and 75.
(50) Pages 1120 and 1126. See again faxes from Nortec to NOE
(page 1559) Bergsala to NOE (page 1574) and Linea to NOE
(pages 1579 and 1580) regarding the limited need and the insignif-
icant cost to adapt products to local market conditions.

(51) For instance, parallel traders were apparently providing the service
of adapting the parallel traded products to local sales conditions,
such as providing the necessary scart cables and adapted plugs if
the parallel trade concerned static consoles.

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1.3.3. Intellectual property rights

with the value of
prevent parallel trade.

the console and, clearly, did not

(62)

The Commission has
considered the possibility of
geographic markets wider then the EEA. However, this
is not the case because Nintendo has a policy of actively
prosecuting traders who parallel import Nintendo game
consoles or game cartridges from outside the EEA, on
the ground that this infringes intellectual property rights
owned by Nintendo in the EEA (52).

1.3.4. The geographical scope of

the markets according to

Concentra

(63)

analysis

Concentra argues that the Portuguese market should be
considered as a separate market (53). Concentra has not
contested the Commission's
the
geographical scope of the relevant product markets or
the facts underlying this analysis.
its
the existence of
situation stands out only because of
Portuguese laws under which consumers have a right to
information in the Portuguese language and companies
operating in Portugal are required to provide informa-
tion in Portuguese (54).

It argues that

above of

(64) However, the absence of parallel trade does not necessa-
rily mean that distinct national markets exist. It can very
well be consistent with an area where conditions of
competition are sufficiently homogeneous to constitute
a single geographic market.

(65)

the

Trading consoles within the EEA may require various
operations but these are limited to any or all of the
following:
static
switching the power plug of
console, adding a so-called Scart cable to connect the
game console to a TV set as used in the country of
destination and providing a simple booklet with instruc-
tions
file
from the
contains
Parties (55) that estimate the costs of these operations.
These facts were not contested by Concentra, nor did it
submit any additional facts. From these documents it is
clear that these costs are insignificant by comparison

language. The Commission's

in the local
several

documents

emanating

(66)

(67)

(68)

(69)

(70)

Thus, whilst
trading in the EEA may involve certain
costs, these costs are not such as to justify the existence
of separate geographical markets in the present case.

for
The existence of a separate geographical market
Portugal
is also contradicted by the fact that, contrary
to Concentra's assertion, at least at certain times, parallel
trade of game
into
consoles and game
Portugal was substantial and no less in comparison
with other territories (56).

cartridges

for

In conclusion,
two geographical
static consoles,
markets would have to be distinguished: France, on the
one hand, and the rest of the EEA on the other. The
geographical market for hand-held consoles is as wide as
the EEA. The geographic scope of all the markets for
the game
compatible with the different
cartridges
Nintendo consoles is also EEA-wide.

1.4. The state of competition on the relevant

markets

1.4.1. The markets for game consoles

limited number of

significant
There were only a
suppliers of game consoles during the period of
the
infringement, namely, Nintendo, Sony and Sega. They
are all Japanese-based companies. Other game platforms,
such as 3DO, Commodore CD32, Philips CD-i and the
Atari
in the
market (57).

Jaguar, were not

significant

forces

In the year ending 31 March 1997, Nintendo had a
JPY 417,6 billion (58), Sony's
worldwide turnover of
JPY
segment had a
games business
419 billion (59) and Sega's consumer equipment division
JPY 114,5 billion (60). Those turnover figures are equiva-
lent,
million,
EUR 3 001 million and EUR 820 million.

turnover of

respectively,

2 990

EUR

to

(52) Omega's complaint arose from court actions of Nintendo against
Omega to this effect (page 3). NF threatened all its customers that it
would actively prosecute any dealers, which illegally parallel
imported the products, meaning from outside the EEA, without
the consent of Nintendo. NF acted on explicit instructions from
NCL (pages 1221 and 1222). NB also went to court in order to
stop Horelec from importing from the USA (page 1303).

(53) See Concentra's reply to the statement of objections paragraphs 20

to 24.

(54) Law 24/96 of 31 July 1996, Decree-law No 238/86 of 19 August

1986 (as amended by Decree-law No 42/88 of 6 February 1988).

(55) See paragraph 25 and footnote 17 of the Statement of Objections,
based on facts to be found on pages 1559, 1574, 1579, 1580 and
pages 2220 to 2228. Page 1559 relates to the situation in Greece
that, in terms of market size and relative location, is comparable
with Portugal.

(56) Pages 1427, 1428, 1441 and 1442.
(57) The Commission asked Nintendo to provide figures on the EEA
turnover regarding dedicated game consoles for Nintendo itself and
Sony and Sega and any other supplier of such products. Nintendo
did not provide any turnover figures for other suppliers of dedi-
cated game consoles or even mention one (pages 2250 to 2268).
See also CTW, ‘A modern map of Europe’ in Nintendo's submission
of 1 September 1998 (page 2289).

(58) Annual report Nintendo for 1997. Nintendo realises over 90 % of
its sales and income from operations in the same business segment
Its overall
(see annual report 1997 on page 58)
turnover can therefore be compared with the turnover of
the
relevant business segments of Sega and Sony.

(page 2249).

(59) See extract of Sony's Website as provided in Nintendo's submission

of 1 September 1998 (page 2276).

(60) See Agence France Presse 22 May 1998 (page 2334).

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(71)

In 1994, Nintendo held substantial market shares in all
types of consoles then on the market, in France as well
as in other EEA countries (see Tables 2 and 4 below). In
fact, before September 1995, Sega and Nintendo sold
virtually 100 % of all game consoles in the EEA (61). At
the end of September 1995, Sony entered the EEA
market(s) for game consoles with its 32-bit Sony Plays-
tation and obtained a significant market share. Sega in
turn launched a 32-bit console (Saturn), which was less
successful. Nintendo's response to this challenge,
the
introduced in the EEA until
N64 console, was not
March 1997. However, according to Nintendo's annual
reports for 1995 and 1996, Nintendo remained the
single largest producer of home video products in the
world (62). In 1997, Nintendo's overall worldwide turn-
over fell only just short of that of Sony's games busi-
ness segment.

(72) According to Datamonitor (63), Sony's 1997 European
sales of static consoles were worth USD 673 million or
EUR 530 million at retail prices. Nintendo's EEA turn-
over in consoles was about Eur […]* at wholesale prices
in the year ending March 1998 (64). Sega's European-
wide turnover for consoles only is not known. However,
sales of Sega's consoles are widely believed to be signifi-
cantly lower than those of Sony and Nintendo. In fact,
Sega's European turnover for consoles and games, for
the financial year 1996/1997, was GBP 173 million or
EUR 250 million (65), that is, Sega's overall EEA turnover
was less than Nintendo's EEA sales for consoles alone.
Therefore, Nintendo's share of
for
the EEA market(s)
game consoles was still at least […]* % in 1997 (66).

1.4.1.1. T he m a rke t for s t ati c ga me c on s ol es

(73)

The figures in Table 2 demonstrate that Nintendo held
substantial market shares for all types of static game
consoles on the market in 1994, both in the French
market and in the market comprising other EEA coun-
tries (except the United Kingdom).

TABLE 2

Market shares in volume terms of Nintendo and Sega by
type of static console and country in 1994

Nintendo static 8-bit consoles
(NES)

UK

35

D

55

E

67

F

73

UK

D

E

F

Nintendo static 16-bit consoles
(SNES)

37

69

37

53

Sega static 16-bit consoles
(Mega drive)

63

31

63

47

Source: GFK, Nielsen (67).

(74)

According to figures obtained from Screen Digest,
Nintendo's market share in 1997, if measured in volume
terms and over advanced static consoles alone, excluding
Nintendo's sales of the 16-bit SNES console, was 31 %
in the French market for static game consoles and 37 %
in the market for static game consoles comprising all
other EEA countries (see Table 3). Itochu has confirmed
the competitive situation of Nintendo as regards
that
static consoles in Greece was similar to that in other
EEA countries (68). Consequently, although Nintendo's
importance as a supplier of static game consoles may
have decreased since Sony's entry into the market, it can
still be concluded that Nintendo has remained a signifi-
cant supplier of static game consoles in France as well
as elsewhere in the EEA.

TABLE 3

Market share in volume terms for sales of advanced (32
and 64-bit) static consoles in 1997 (69)

B, L,
NL

D IRL

I

Scandi-
navia

E, P

GR,
A

UK

Eur-
ope
(excl-
uding
Fran-
ce)

F

Sega static 8-bit consoles
(Master system)

65

45

33

27

N64

38 48 31 32

43

28 66 32

37

31

(61) According to Durlacher & Co. ‘A survey of the video and computer
games industry’, page 36, in 1994, 4 % of console sales worldwide
were attributed to companies other
than Sega and Nintendo
(page 2378).

(62) See pages 1 and 24 of Nintendo's 1995 annual report and page 8

of Nintendo's 1996 annual report (pages 2341 and 2248).

‘Datamonitor's five year

(63) CTW 22 September 1997,

review’
Nintendo's submission of 1 September 1998 p. 3 (page 2253).
(64) Submission of Nintendo of 1 September 1998 p. 16 (page 2266).
(65) Submission of Nintendo of 1 September 1998 p. 4 (page 2254).
(66)

‘At least’ as, if Sony's and Sega's turnover would be measured at
wholesale prices and Sega's sales of consoles only would be taken
into account, Nintendo's market share would necessarily be higher.

in

(67) See Case 35.587 volume VIII pages 2143 to 2169.
(68) See Itochu's reply to the statement of objections paragraph 19.
(69) See pages 2575 and 2576. By 1997, sales of less advanced 16-bit
static consoles did not represent a significant share of the sale of
static consoles any more. From the table contained in CTW ‘UK
market soars to £890m’ (page 2293)
it is possible to deduce a
Nintendo UK market share for advanced consoles only of 31,7 %.
This figure is very close to the figure mentioned for the United
Kingdom in Table 2, but derived from a different source, which
strengthens the credibility of the figures presented in Table 2. From
the same table it appears that 16-bit console sales constituted about
6 % of the UK sales of dedicated game consoles.

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B, L,
NL

D IRL

I

Scandi-
navia

E, P

GR,
A

UK

Eur-
ope
(excl-
uding
Fran-
ce)

F

UK

D

E

F

Sega hand-held consoles (Game
Gear)

27

13

37

27

Source: GFK, Nielsen (73).

Saturn

3

1

2

3

2

4

2

7

4

3

Playsta-
tion

60 51 66 65

55

68 32 62

59

66

(76)

Source: Derived from figures provided by Screen Digest. Due to rounding-

up, not all columns add up to 100 %.

1.4.2. The markets for game cartridges

For each console, a wide range of game cartridges is
available. In fact, the availability of a significant number
of games is one of the main factors contributing to the
success of any game console. The game cartridges are
developed/marketed either by the console producer itself
or by third parties, normally under licence from the
console manufacturers. Third party game publishers may
use distribution channels for their game cartridges inde-
pendent of the Nintendo channels (74).

1.4.1.2. T he m a rke t
c o n s o l e s

for

han d -h el d

gam e

the worldwide installed base at

(77) Game cartridges are sold for use on the installed base of
game consoles. According to Nintendo's 1997 annual
report,
the end of
April 1997 of Game Boy consoles was 55 million units
whereas 235 million units
game
figures for
cartridges had been sold. The equivalent
SNES consoles and compatible game cartridges were
46 million and 359 million units respectively (75).

compatible

of

(78)

(75)

In 1994 Nintendo held (see Table 4) an important share
of the EEA market for hand-held consoles. Since then,
its market share has increased considerably. By 1995,
Nintendo Game Boy held […]* % of
the hand-held
market in Germany, […]* % in Spain and […]* % in
France (70). In the United Kingdom, according to THE's
1997/1998 business plan, ‘the demise of the Game Gear
leaves Game Boy dominating the portable market with a
share of […]* %’ (71). Therefore, it can also be concluded
that Nintendo is by far the most important supplier in
the EEA market
for hand-held game consoles. Again,
Itochu has confirmed that the competitive situation of
Nintendo as regards handheld consoles in Greece was
similar to that in other EEA countries (72).

TABLE 4

Market shares in volume terms of Nintendo and Sega for
hand-held consoles by country in 1994

(79)

Nintendo hand-held consoles
(Game Boy)

UK

73

D

87

E

63

F

73

(70) Pages 2449 and 2450.
(71) Page 531.
(72) See Itochu's reply to the Statement of Objections paragraph 19.

the quality of graphics,

Competition in the different separate markets for game
cartridges is primarily driven by quality in terms of the
use of popular characters (such as Nintendo's ‘Mario’
character),
the uniqueness of
each game in its genre (76) and its price by comparison
with other games available for the console in question.
The demand for a particular game is usually relatively
short-lived and limited to three to 12 months only.
Whereas a large number of games compatible with a
in
certain console may exist at any particular point
time, sales of game cartridges are often concentrated
on a very few recently released games. According to
THE (77), […]* % of game sales concern the 10 most
popular games at the time. Only the most successful
games may be in demand for several years. Once the
demand for a particular game has subsided, remaining
lower prices, creating a
stocks are cleared out at
structure for game cartridges.
premium and budget
Recommended retail prices
are
for budget games
approximately half of those of premium items (78).

It is not possible to provide exact market share figures
for Nintendo products
for
cartridges compatible with its consoles for each and

the markets

in each of

(73) See Case 35.587 volume VIII pages 2143 to 2169.
(74) For instance, Omega and Itochu distributed cartridges of third party
developers (page 2 and Itochu's reply to the statement of objections
paragraph 20).

(75) Page 2249.
(76) Page 567.
(77) Page 532 as well as 554 where it is stated that […]* % of the sales

are made with […]* of the titles.

(78) Pages 575 and 576.

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that
than that of

every year (79). However, Nintendo's importance as a
publisher of games is reflected by the fact that it is
listed as
second in the United Kingdom Top 20
publishers for 1997 by Charttrack (80). If measured over
the combined sales of game cartridges for all types of
is, over a turnover significantly
games consoles,
larger
the
the combined turnover of
relevant markets for games compatible with Nintendo-
produced consoles (81), Nintendo's market share amounts
to 18,5 %. Its market shares in the relevant markets for
games compatible with Nintendo consoles must there-
fore be significantly larger, because Nintendo manufac-
tures only cartridges compatible with its own consoles.
In Germany, Nintendo's market share, if measured over
all games media for game consoles, is 54 % (82).

(80) Nintendo's importance as a game-publisher can also be
illustrated by the facts outlined in sections 1.4.2.1 to
1.4.2.3. These facts demonstrate that Nintendo was the
largest supplier
for game cartridges
compatible with the Nintendo-produced SNES, N64
and Game Boy consoles.

in each market

the
widely defined market. Second,
market as a whole are in retail prices whereas the ‘share
of Nintendo’ is calculated in terms of Nintendo's turn-
over at prices to trade; no account is taken of margins
of retailers and independent distributors.

the figures

for

(82) According to Gallup, in the United Kingdom, Nintendo
had a market share in volume terms in the market for
games cartridges compatible with the SNES console of
43,0 % in the quarter ending 31 December 1994.
During the same period, Nintendo's most
important
competitors in this market were Virgin, Acclaim, Ocean
and Sony with market shares of, respectively, 9,5, 9,1,
7,9 and 4,2 %. Nintendo's market share in volume terms
during the quarter ending 31 March 1995 was 29,4 %.
During that same period, the market shares of Virgin,
Acclaim, Ocean and Sony were 11,4, 9,5, 8,5 and 8,9 %
respectively (84). Nintendo's market share in the United
Kingdom stayed fairly stable during the period of the
infringement (85).

1.4.2.1. T he m a rket

for SN ES c ompa ti bl e gam e

c a r tr i dge s

1.4.2.2. T he m ar ke t

fo r N 6 4 c omp ati bl e gam e

ca r t r id ges

(81)

sales

for 16-bit

consoles, Nintendo's

If measured against the total European sales of game
in
cartridges
1995 and 1996 would appear at first sight to indicate
[…]* and […]* % respectively (83).
market shares of
These figures, however, still underestimate the market
share of Nintendo on the relevant market
for game
cartridges compatible with the SNES consoles within
the EEA. First, Nintendo produces only game cartridges
compatible with its own consoles, whereas these percen-
tages relate to the aggregate of
the market for SNES
compatible game cartridges and the one for game
cartridges compatible with Sega's 16-bit console. There-
fore, Nintendo's share of
is relevant
here, the market for SNES compatible game cartridges,
must necessarily be higher than its share of a more

the market

that

(79) The Commission had requested Nintendo to provide figures
allowing to do so (page 2249), but Nintendo was also unable to
provide such figures (pages 2260 to 2266.).

(80) CTW 9 February 1998, page 8 of Nintendo's submission to the

Commission dated 1 September 1998 (page 2258).

(81) The denominator that Charttrack uses to calculate the percentage
figure also includes turnover of games compatible with Sega's and
Sony's dedicated game consoles, that is not part of the relevant
markets.
(82) Page 2590.
(83) These figures are calculated by taking, for the relevant years, the
figures for dedicated 16-bit consoles from Table 2 from Nintendo's
submission of 1 September 1998 (page 6) and Nintendo's EEA
turnover in games for the SNES console from tables 16 and 18 of
the same submission (pages 14 and 15) (pages 2256, 2264 and
2265).

(83)

In the United Kingdom, sales of cartridges compatible
with Nintendo's N64 console were GBP 63 million or
EUR 91 million at retail prices in 1997 (86). Nintendo's
United Kingdom 1997 turnover at wholesale prices was
EUR […]* in the financial year ending March 1998 (87).
That means that Nintendo's 1997 market share in the
market of cartridges compatible with the N64 console
was at least […]* % (88). For the second half of 1998,
17 third party game publishers were expected to have
published a total of 33 games for the N64 platform
other
than those marketed by Nintendo. The most
important of these were Acclaim and Infogames with
five and six games respectively (89). These figures relate
to the United Kingdom only. However, it is uncontested
that that the market share in the EEA market for N64
cartridges cannot be lower.

(84)

IV/35.587 pages 305 and 321. At the time Sony had not yet
introduced its own console but acted as a game publisher. Not too
much importance should be attached to differences in quarterly
market shares. Sales of game cartridges are rather volatile and may
vary substantially in the short run, depending on whether in a
particular quarter a successful game was released or not (see also
recital 76). However, market shares remain fairly stable when a
longer term perspective is taken.

(85) Page 881.
(86) CTW,

‘Record year right on track’

1 September 1998 (page 2296).

in Nintendo's submission of

(87) Table 18 of Nintendo's

submission of 1 September 1998

(page 2265).

(88) Yet again ‘at least’ as the sales figures of Nintendo are expressed in
prices to trade whereas the denominator is expressed in retail
prices.

(89) Screen Digest, July 1998 (page 2574A).

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1.4.2.3. T h e m ar ke t

fo r G am e B oy c omp ati b le

ga m e c a r tr id ge s

(84) According to Gallup, in the United Kingdom, Nintendo
had a market share in volume terms in the market for
games compatible with the Game Boy console of 57,0 %
in the quarter ending 31 December 1994 and 53,6 % in
the quarter ending 31 March 1995. Its most important
competitors in this market were Ocean and Acclaim.
The average market shares of
these two companies
during those two quarters were 8 % and 6,3 % respec-
tively (90).

1.5. The procedure

(85)

In September 1995, as a result of

In March 1995, the Commission opened an investiga-
tion into the video games industry (Case IV/35.587 PO
its
Video Games).
preliminary findings, the Commission opened an addi-
tional
investigation into the distribution system of
Nintendo specifically (Case No IV/35.706 PO Nintendo
Distribution). Case No IV/36.321 Omega — Nintendo
arose from a formal complaint under Article 3(2)(b) of
Regulation No 17 lodged in November 1996 by Omega.

1.5.1. Contacts between Nintendo
during the investigation

and

the Commission

(86)

In June 1995 (91),
the Commission sent Nintendo a
request for information pursuant to Article 11 of Regu-
lation No 17 asking, inter alia, for information regarding
Nintendo's distributors and subsidiaries within the EEA
as well as for copies of its formal distribution agree-
ments with those undertakings
in France,
Germany, Italy and the United Kingdom. In its reply of
31 July 1995 (92), NOE provided the names of Ninten-
do's main distributors and subsidiaries within the EEA
and a copy of the formal distribution agreement with
the Italian distributor, Linea. NOE stated that no agree-
ments existed in relation to the other territories speci-
fied as the undertakings active on those markets were
wholly-owned subsidiaries of Nintendo.

active

(87) On 19 September 1995, the Commission also requested
terms and conditions of
a copy of NOE's general
sale (93).
these terms were in the
It was stated that
process of being reviewed and that copies of the new
terms would be forwarded to the Commission as soon

(90)
IV/35.587 pages 305 and 321.
(91) Case 35.587 Vol. X Page 2737.
(92) Case 35.587 Vol. X, page 2747.
(93) Case 35.587 Vol. XI, page 2908.

as they became available. In a supplementary response
to the Article 11 request of 26 June 1995, copies of the
formal distribution agreements with the Greek and
Portuguese distributors were sent
to the Commission
on 26 September 1995 (94). On 9 October 1995 (95),
information
a
the Commission sent
for
agreements. On
regarding
1995 (96), Nintendo
20 November
the
Commission that it was currently reviewing its distribu-
tion agreements and would forward specific proposals
on any modifications to the Commission.

request
in those

certain terms

informed

(88)

Subsequently, on 19 January 1996 (97), a meeting was
held between the Commission and Nintendo representa-
tives. The Commission requested a description of
Nintendo's distribution policy. Nintendo stated that the
agreements were under review and that a final draft of
the agreements would be forwarded to the Commission
when completed. Nintendo indicated that this version
would become the standard agreement and would be
used by all distributors. It assured the Commission that
all concerns relating to distributors' obligations would
be addressed in the new draft of the distribution agree-
ment.

that meeting,

(89) On 19 April 1996 (98), Nintendo submitted its new draft
agreement for independent distributors, as discussed in
the meeting of 19 January 1996. A meeting between the
Commission and Nintendo representatives was held on
24 April 1996 (99). At
the Commission
requested clarification of a number of points, such as
the terms relating to ‘authorised dealers’ and the status
of the old agreements. Nintendo informed the Commis-
sion that the agreement with the Italian distributor had
expired and that the others were still in force. Nintendo
also explained on this occasion that an ‘authorised
dealer’ was free to sell to anyone. Nintendo confirmed
that the new agreement was applicable to the EEA as a
whole.

(90)

The revised draft agreement for all EEA distributors was
to the Commission on 27 November 1996 (100).
sent
incorporated those elements that had
This agreement
been dealt with at
the meeting of 24 April 1996.
Agreements modelled on that version of the standard
agreement were eventually implemented at the begin-
ning of 1997.

(94) Case 35.587 Vol. XI, page 2926.
(95) Case 35.706, pages 1 to 3.
(96) Case 35.706, page 12.
(97) Case 35.706, pages 13 and 14.
(98) Case 35.706, page 20.
(99) Case 35.706, page 37.
(100) Case 35.706, pages 95 to 109.

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(91)

(92)

requested,

Subsequent to Omega's complaint in late 1996 (101), the
Commission extended its investigation. On 7 March
1997 (102) Nintendo was
to
Article 11 of Regulation No 17, to submit its distribu-
tion agreements with independent exclusive distributors,
as well as its general terms and conditions of sale and
its distribution agreements with customers for
those
countries where Nintendo subsidiaries acted as exclusive
distributors for the period 1994 to 1996.

pursuant

In its reply of 16 May 1997 (103) Nintendo admitted that
some of its distribution agreements and general terms
and conditions had contained certain restrictions on
parallel trade within the EEA.
In so far as the agree-
ments had not at that time expired, they were altered so
In particular, on 15 May
as to put an end to this.
1997 (104), NOA instructed NE to delete from its general
terms and conditions of sale any terms that prohibited
In addition, on 15 May
sales outside NE's territory.
subsidiaries
its
1997, NOA wrote
to
reminding them of
the requirements of Community
law regarding intra-EEA parallel trade (105).

EEA-based

(93) As indicated above (106), Omega's complaint contained
the allegation that Nintendo operated a policy of resale
price maintenance in the Netherlands (107). In Nintendo's
reply to Omega's complaint dated 11 April 1997,
‘Nintendo does not enforce its
Nintendo stated that
recommended
dated
In a
22 October 1997 from the Commission to NOE, the
Commission suggested sending a
to
Nintendo's Dutch dealers to clarify that they were able
resale prices freely (109). On 30 October
to set
1997, Nintendo agreed to send this circular letter (110).

retail price’ (108).

circular

letter

letter

their

(94) On 23 December 1997, Nintendo wrote to the Commis-
sion stating that it had become aware of ‘a serious issue
in relation to parallel trade within the Community’ (111).
It expressed the wish to cooperate voluntarily with the
Commission, to inform it about the way it had operated
certain aspects of its distribution policy in Europe and
relevant matters.
to provide a written account of

(101) Pages 1 to 66.
(102) Pages 88 to 90.
(103) Pages 105 to 108.
(104) Pages 116 and 118.
(105) Page 110 to 113.
(106) See recital 14 above.
(107) Pages 10 to 12.
(108) Page 639. The information provided in this letter corresponded to

explicit instructions of NOE (page 656).

(109) Page 757.
(110) Pages 758 and 759 and 760 to 764.
(111) Pages 1638 to 1641.

to the
Nintendo submitted hundreds of documents
Commission in submissions received on 21 January,
1 April and 15 May 1998 (112).

(95)

Subsequent to its admission, Nintendo also took what
seem to have been credible steps to ensure compliance
with Community law in the future. Those steps included
senior
presentations on 25 February 1998 to its
management, three seminars, in two of which not only
Nintendo's EEA subsidiaries participated, but also its
independent distributors, and instructions to its EEA
subsidiaries. Nintendo continues to organise such repre-
sentations (113).

(96)

(97)

(98)

1.5.2. Correspondence between THE and the Commission
during the investigation and THE's admission

The Commission sent THE a formal request for infor-
mation dated 7 March 1997, prompted by information
received indicating
that dealers might have been
prevented from purchasing in other Member States (114).
THE replied on 25 April 1997 that it did not restrict
parallel trade by its dealers and that it had never refused
a dealer supplies of Nintendo products on the ground
that the Products would be exported (115).

Subsequently, the Commission received new information
in
that parallel trade was nonetheless being hampered,
particular from the United Kingdom. As a result, the
Commission sent THE a new request for information,
received on 10 October 1997 (116). On
which it
reply (117)
1 December 1997, THE's
request
showed that THE, Nintendo and some other parties
were involved in hindering parallel trade illegally. On
13 January 1998 THE spontaneously provided further
evidence (118).

to that

Subsequently, THE took various steps to prevent any
more breaches of competition law. Those steps included
a formalised competition law compliance programme,
entailing compliance reports, presentations to the mana-
ging directors and financial directors of all John Menzies
subsidiaries, site visits and the introduction of standing
instructions for
the review of any arrangements or
practices that might give cause for concern in relation
to competition law.

(112) Pages 988, 1236 and 1668.
(113) See Nintendo's submission of 9 August 2001 and its reply to the

statement of objections paragraph 4.4.

(114) Page 437.
(115) Pages 446 and 447.
(116) Page 804.
(117) Pages 807 and following.
(118) Pages 956 to 987.

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1.5.3. Contacts between the Commission and other distribu-

1.6.1. The events concerning Nintendo UK Ltd

tors during the procedure

(99)

files.

Prior to the notification of the statement of objections,
the Commission had no contact with distributors other
than Nintendo and THE, except
for correspondence
concerning the confidentiality of certain documents in
the Commission's
correspondence,
exchanged with Soc. Rep. Concentra Lda (now called
Concentra — Produtos para crianças SA), Linea Gig
SpA, Nortec AE, Bergsala AB,
Itochu Hellas EPE and
CD-Contact Data GmbH and dated 9 June 1999, the
Commission also stated that it was considering opening
formal proceedings against those companies (as well as
against Nintendo and THE) (119).

that

In

(103) From at least March 1993 (120) until 4 August 1995 (121)
Nintendo's exclusive distributor for the United Kingdom
and Ireland was NUK.

(104) Prices to trade in the United Kingdom were low in
comparison with Germany and parallel-exportedproducts
were offered to German retailers at prices lower than
those offered by NOE (122). The existence of substantial
trade into Germany and other EEA countries
parallel
during 1994 and 1995 is also an indicator of price
differentials (123).

1.5.4. The administrative procedure

(105)

(100) On 25 April 2000 the Commission addressed a state-
ment of objections to Nintendo Corporation Ltd (copied
to Nintendo of Europe GmbH),
John Menzies plc
(copied to THE Games Ltd), Soc. Rep. Concentra Lda
(now called Concentra — Produtos para crianças SA),
Linea GIG Spa, Nortec AE, Bergsala AB, Itochu Corpora-
tion (copied to Itochu Hellas EPE) and CD-Contact Data
GmbH (copied to Contact-Data Belgium NV).

imports

subsidiaries

In several letters sent during April and May 1995, NOE
demanded […]* (124)
[…]* to give instructions to all
‘Grey
Nintendo
are
because:
becoming a real major problem (…) The following
(…) B. There
decisions are needed from your side:
should be a strict instruction to all subsidiaries (…) —
to clearly eliminate customers who are known or are
(…) The
likely to export products to other countries.
UK (…) is not giving that subject the necessary atten-
tion (…) we have to stop these grey export activities
with all measurements possible immediately’.

(101) None of the parties requested a formal hearing pursuant
to Regulation (EC) No 2842/98 and, consequently, no
formal hearing was organised.

1.6. Events in the United Kingdom and Ireland

(102) Starting with the United Kingdom and Ireland below,
the behaviour of Nintendo and its independent distribu-
tors will be described in detail. The facts are given for
each territory separately and, if relevant, for the different
parties that have been active in such a territory at
various times.

(119) Pages 2679 to 2682 (Itochu), 2683 to 2686 (Concentra), 2690 to
2692 (Bergsala) 2687 to 2692 (Contact), 2700 to 2703 (Linea)
and 2725 A-D (Nortec).

‘Dear […]*, I would appreciate if you could give instruc-
tions (…) to all subsidiaries (…) with the target to stop
any further grey exports and control bigger numbers
immediately with all customers’ (125).

(120) See page 426.
(121) Pages 313 and 297A.
(122) NOE was the Nintendo subsidiary responsible for distributing the
Products in Germany. Page 1000, point A.4 from which it can be
deduced that
the HW bundle (Gameboy with one game) was
offered to German retailers by parallel traders for […]*. See also
‘This means a price difference
page 1023 where NOE stated:
between UK merchandise and lowest offer from NOE of […]* %’.
Some important NOE customers were retailing parallel imported
Game Boy Games at less then half the price of those obtained
from NOE. The existence of price differentials can also be
confirmed by the fact that, according to a letter dated 11 April
1996 from THE to NOE, (pages 975 to 979 and 1135 to 1147) the
price differences in 1996 between the United Kingdom and the
rest of the EEA had already existed for some time.

(123) Pages 1441 to 1443. The table on these pages was drawn up on
the basis of the replies from Nintendo distributors. See also a letter
dated 22 May 1995 from NOA to NUK (page 1676).

(124) See letters dated 11 April 1995 (page 1000 to 1008), 19 April
1995 (page 1009 to 1019) and 4 May 1995 (pages 1022 to 1024).

(125) See pages 1000 to 1002.

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(106) The instructions that NOE sought were further clarified
in a letter form NOE to NOA dated 19 April 1995 (126).
Of the measures proposed in this letter, which included
not supplying exporting clients, buying parallel-imported
stock from retailers, and the coordination of prices to
trade, the most successful were the measures to stamp
out parallel
these were standard
its source;
business practice throughout the EEA. More specifically,
the requested instructions were:

trade at

‘I. Strict order to all subsidiaries to take all measure-

ments to stop grey exports.

This means:

1. Do not supply customers and especially distributors

who are not 100 % safe and clean.

2. Check out regular customer orders before shipment
to make sure quantities are in line with customers
potential.

II. Right to subsidiaries to buy out grey imports and
send back to supplying countries
in Europe at
purchasing price to be paid to importer/customer
provided minimum quantity exceeds 500 respectively
1 000 pieces.

III. Advance info between subsidiaries on:

— product

lowest price and quantities available at

reduced prices,

— new items planned for sale at reduced prices to

regular customers. (…)

D. Price and availability coordination on Europe

As per your
target (…)

(i.e. NOA's) suggestion/plan we should

(126)

II. Pricing

1. Shoot

for prices within 10 % difference to trade

within Europe after maximum terms (…)

2. Product

in actual

line we should try to narrow
differences beyond 10 % at least to maximum 15 %
where unavoidable due to current commitments.

3. Price comparison to the made for all key products

(…).

All this however will only work, if one company/person
carries the ball and coordinates’ (sic).

the
(107) On 22 May 1995, soon after the conception of
‘During our
plan, NOA stated in a letter to NUK that,
meetings with other European distributors, we learned
that the grey market problem has increased significantly
over this past year and made it almost impossible for
our distributors and subsidiaries to sell their inventories
in their respective markets’ (127). From this quote,
it is
clear that the ‘problem’ of parallel trade was discussed
not only within the Nintendo group, but also with
Nintendo's
In
particular, during a meeting between Bergsala and NOA
that took place during the E3 exhibition approximately
a week before 22 May 1995, Bergsala discussed with
NOA the problems that Bergsala had as a result of the
large amounts of grey imports being supplied by a UK-
based parallel exporter, […]*, into Sweden. As a result,
NOA instructed NUK by the same letter dated 20 May
to ‘determine whether
1995 already quoted above
Nintendo sells its products to […]* or to a customer
who does business with them’(sic) (128).

independent distributors at

the time.

See pages 1009 to 1012.

(127) See page 1676.

(128) See page 1676.

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1.6.2. The events concerning THE

seeking export sales. The facts show that de facto this
right had no meaning, as Nintendo forced THE to take
measures to prevent any exports from its territory. (See
in more detail in recitals 162 to 169).

(108) On 4 August 1995 THE (129) acquired from Nintendo
the exclusive distributorship for Ireland and the United
Kingdom. THE remained Nintendo's exclusive distributor
for
least until 31 December 1997.
Nintendo remained present in the United Kingdom via
its wholly-owned subsidiary Nintendo Services Ltd. This
subsidiary had, however, no direct responsibility for the
distribution of the products in the United Kingdom.

territory at

this

1.6.2.1. T he

fo r m a l

di s tr ib u tio n
between N in te ndo and THE

ag re e m en t s

(109) Up to 1 January 1998, THE had three successive agree-
ments with Nintendo (130). Under each of these agree-
ments, THE undertook to buy the products exclusively
from Nintendo, and Nintendo in turn was to sell the
products only to THE within the United Kingdom and
Ireland. The products covered were Nintendo-manufac-
tured game consoles and the game cartridges
that
Nintendo manufactured for these consoles.

in particular

(110) Until 1 January 1997, the agreements contained provi-
sions to the effect that THE could sell only to certain
categories of customers,
retailers which
specialise in retail to consumers (131). Parallel trade was
severely restricted as a result of these provisions because
resale of
the products by THE's customers to other
including those established outside the United
traders,
Kingdom, was prohibited. As will be shown below, this
provision was applied in practice to prevent parallel
exports by THE's customers.

(111) The various successive formal distribution agreements
between THE and Nintendo ostensibly gave THE the
right to export the Products to any country outside its
territory, although THE was prohibited from actively

(129) Page 297A.
(130) Up to 1 January 1998, THE had three successive agreements with
Nintendo. One valid from 4 August 1995 until 31 December
1996, one valid from 1 January 1996 until 31 December 1996
and one valid from 1 January 1997 until 31 December 1998.
(131) Clause 3.2. (pages 299 and 454) Nintendo ‘appoints distributor as
its exclusive independent and authorised distributor for the sale of
covered products to authorised dealers in the territory’ and, clause
2.2 (pages 298b and 453) ‘authorised dealers shall mean and be
limited to those persons which specialise in selling consumer
products at retail to consumers and which are competent and
possess sales facilities appropriate to the covered products and
employ staff trained in the covered products’. These provisions
read together imply that only sales to retailers are allowed. Clause
‘Distributor shall
4.3. (page 299a and 456) does also imply this:
sell covered products at wholesale to competent retailers posses-
facilities appropriate to the covered products and
sing sales
covered products’. See also
employing staff
page 814.

trained in the

1.6.2.2.

‘ T H E
c o m m e r c i a l
r e ga r d i n g a u t h or is e d c u s tom e r ’

ga me s

po l i c y

(112) With its letter of 1 December 1997, THE submitted to
‘THE games commercial
that contains

the Commission a copy of
policy regarding authorised customer’,
various policy statements (132). In particular:

(1) ‘THE Games are only prepared to sell products to
companies who will directly market the product to
the end-consumer (i.e. retailers, mail order compa-
nies and catalogue stores)’ (…);

(2) ‘THE Games will refer any approach from a retailer
outside of the United Kingdom and Ireland initially
to the local distributor, but will not refuse to supply
the retailer makes further requests’. The stated
if
‘The
commercial
practice of a UK product being sold to a retailer in
a territory outside the United Kingdom and Ireland
is not a desirable practice (…)’;

this policy is that

rationale for

(3) ‘THE Games will not sell products to other whole-
subdistributors’. The stated commercial
salers or
rationale for this policy is that ‘If we (THE) were to
supply Nintendo products to wholesalers they would
by definition, either sell these to UK retailers or to
retailers from outside our territory (…)’. THE recog-
nises in its rationale to the third policy statement
that sales to wholesalers and subdistributors would
also mean a violation of its first and also second
policy statements.

(132) See pages 861 to 863.

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(113) THE admits that its policy restricted parallel trade (133).
the rationale for these policies is
According to THE,
from the exchanges with […]* and […]*,
apparent
referred to in recitals 114, 135 and 158. As THE's
correspondence with […]* is dated 14 August 1995,
THE's policy must have been established before that
date (134).

1.6.2.3. T H E's ac ti on s agai n s t […]*

(114) One of the first actions THE took after acquiring the
the products concerned a company
distributorship of
called […]*. […]* was a UK-based wholesaler of
the
products and part of the […]* Group, a retail chain.
Apart from supplying […]* shops,
it also acted as an
In a letter dated 14 August
independent wholesaler.
1995, THE wrote to […]*,
‘THE Games has been
appointed the exclusive distributor of Nintendo first
in the UK to “authorised dealers” (i.e.
party product
qualifying Retailers). The terms of
this appointment
preclude us from supplying other intermediate distribu-
tors. Therefore, although we are more than happy to
supply […]* with Nintendo products on behalf of […]*
retail outlets, we are unable to supply […]* with
Nintendo products on any other basis’ (135). From a letter
from […]* to THE dated 25 August 1995,
it appears
that […]* had been made to understand that THE ‘was
no longer happy for […]* to act as distributor of this
product to any of our customers except […]*’ (136).

1.6.2.4. T h e

d e te r io rat in g

bu s in e s s

re la tio n s

b e t w e e n T HE a n d N i n te n d o

(115)

In February 1996, THE
launched a promotional
campaign in which THE offered its products at substan-
tially lower prices
than other Nintendo distributors.
Consequently, parallel exports from the United Kingdom
became an even more attractive option for suppliers.
THE's promotional prices were also advertised in a trade
journal called CTW on 19 February 1996, and were
referred to as ‘The Big Deal’. THE justified its price
reductions by reference to the competitiveness of
the
United Kingdom retail market, the unsatisfactory shelf

(133) See John Menzies's reply to the Statement of Objections, page 8 as

well as the policy statement itself (pages 861 to 863).

(134) Page 864, confirmed by John Menzies's reply to the Statement of

Objections paragraph 2.2.

(135) See page 864.
(136) Page 869.

position it occupied and the intention to extend the life
cycle of SNES and Game Boy products (137).

in

such

offered

EEA countries

(116) The prices THE offered were significantly lower than
those
as
other
Germany (138), Italy (139) the Netherlands (140), Greece (141)
France (142) and Spain (143). The price difference in rela-
tion to game consoles in Germany ranged from 20 to
31 % and for game cartridges from 4 to 65 % (144). In
comparison with the wholesale prices charged by Linea,
prices to trade for SNES consoles offered by parallel
importers were 18 % lower. The differences in wholesale
prices for SNES compatible games ranged from 3 to
30 % and for Game Boy compatible game cartridges
from 13 to 39 % (145). Consumer prices for SNES games
in the United Kingdom were 7 to 66 % lower than in
the Netherlands, 26 % lower for a Game Boy console
bundled with one game cartridge and about 35 % for
one bundled with two Game Boy compatible games (146).
United Kingdom parallel
traders offered Game Boy
consoles to Spanish retailers 18 % below the wholesale
price charged by NE (147). A Game Boy console bundled
with a compatible game was offered to trade at a price
that was even 35 % lower than the lowest price that NE
would charge its customers for the same bundle (148).
game
Differences
cartridges were 46 % and for SNES game cartridges
differences in retail prices ranged from 10 to 39 % (149).
Bergsala
imported
products sold at retail prices 10 to 30 % lower than
the products supplied to retailers by Bergsala itself (150).
According to NOE (151), substantial grey imports from
the United Kingdom had also taken place in Denmark,
Norway and Finland. It may be concluded that prices in

that, overall, parallel

in retail prices

for Game Boy

estimated

(137) See page 881, a letter dated 22 February 1996 from THE to […]*

of NOA.

(138) Letter from NOE to THE, dated 4 April 1996 (page 963) and letter

from NOE to NOA dated 1 January 1996 (page 1119).

(139) Pages 1097, 1104 and 1105 and 1124 and 1125.
(140) Pages 1049, 1050 and 1051.
(141) Pages 1387 to 1389.
(142) Pages 1255, 1257 and 1258. From page 1257 it appears that
parallel exporters offered products to NF's customers at prices
lower than those charged by NF.

(143) Letter dated 22 February 1996, pages 1040, 1042, 1156 and 1157.
(144) Pages 1106 and 1123. Console prices relate to Game Boy products.
NOE expressed the price differences in terms of consumer prices.
This is an indirect measure for differences in prices to trade.
However, also NOE also used these figures to draw conclusions as
regards to prices to trade practised by THE (page 1098).

(145) See pages 1104, 1105 and 1124 and 1125.
(146) See page 1050 and 1051. These comparisons are made between
the
from
April 1996 onwards and the RRP of THE in February 1996. The
calculated if NN's RRP in
prices differences
February 1996 would be used are substantially higher.

recommended resale prices

that NN planned as

can be

that

(147) See page 1040.
(148) See page 1042.
(149) See page 1157.
(150) See page 1425.
(151) See page 1097, a letter from NOE to NOA dated 1 April 1996.

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these countries where parallel imports took place were
also higher than in the United Kingdom (152). These price
differences had apparently existed for a considerable
length of time (153). As a result of the lower price levels
in the United Kingdom,
incentives for parallel trade in
the products from the United Kingdom to other EEA
territories existed.

(117)

In a letter from Nintendo's Greek distributor, Itochu, to
NOE dated 22 February 1996, Itochu estimated that the
prices THE was charging to United Kingdom retailers
were actually lower than the price Itochu itself paid for
supplies from Nintendo and that, as a result, ‘any Greek
retailer can purchase from the United Kingdom and
“compete” with Nintendo local distributor; all
these
with the blessings of Nintendo’ (154).

(118) Two days after the launch of the ‘Big Deal’ campaign,
on 21 February 1996, […]* of NOA became directly
‘it is
involved in the matter. THE reassured NOA that:
not our intention to supply Europe’ (155). Similarly, THE
reassured its colleagues in other EEA countries. THE
‘I can give you the following information about
stated:
prices that we are offering to retailers in the United
Kingdom, and for UK sale only’ (emphasis added) and
‘we will try at all costs, to prevent product arriving in
Europe’ (156).

1.6.2.5. N i n te n d o's b oyc ot t of T H E

(119) THE

not

could

because

convince Nintendo,

on
27 February 1996, […]* NOA and […]* NCL, gave the
following instructions to […]* of Nintendo Services Ltd:
‘NCL is very concerned that THE Games Limited is
currently aggressively marketing Super NES and Game
Boy hardware and software contrary to various terms of
its Distributorship Agreement. (…) Please do not accept
any orders for product from THE until the results of
THE's current marketing efforts are evaluated and the
issue is resolved to NCL's satisfaction’ (157). […]* subse-
and
quently

informed THE of

instructions

these

(152)

In Greece, wholesale prices were indeed substantially higher than
in the United Kingdom. See pages 1272 and 1273.

(153) As stated by THE in a letter of 11 April 1996 from THE to NOE,

pages 975 to 979 and 1135 to 1147.

(154) See page 1272 and 1273.
(155) See page 881, a letter dated 22 February 1996 from THE to […]*

of NOA.

‘that these orders would be put on
explained to THE:
hold until such times as he […]* fully understood
whether any stock from the United Kingdom had found
its way into any other European country’ (158). At least at
that
its written
agreement with THE implied that THE was to prevent
exports from its territory. NOA has also admitted this to
the Commission (159).

time, NOA apparently thought

that

(120) This action on the part of Nintendo had a considerable
impact on THE's business. The five orders put on hold
involved […]* units of game consoles and […]* game
cartridges with a total purchase value of about GBP
[…]* (160). These volumes represented about
[…]* %
the expected sales volumes of THE in
respectively of
the year 1996/1997 (161). A further purchase THE was
about to make, of approximately GBP […]*, was also
affected. According to THE, these orders were essential
to meet customer demand, which was exceeding its
available stock. A stock shortage risked jeopardising
THE's relations with important and influential custo-
mers. In fact, at the time THE considered that it was in
danger of losing its distribution agreement (162).

(121) Unsurprisingly, THE wrote on 5 March 1996 to […]* of
NOA that ‘it will not happen again,
(…) because we
have taken every possible precaution to ensure that no
product whatsoever reaches any country outwith our
authorised territory’ (163).

(122)

In order to verify whether THE was really taking action,
NOA made a survey of its European distributors. When
the results of this survey were known, on 20 March
1996, a meeting was held between […]* of NOA,
in
particular […]*; representatives of NOE,
in particular
[…]*; and THE. The measures which THE took were
apparently to the (initial) satisfaction of Nintendo. As a
result, Nintendo's suspension of THE's purchase orders
was lifted. Nintendo's boycott lasted from 26 February
1996 until 21 March 1996 (164).

(158) Letter dated 5 March 1996 from THE to […]* of NOA, pages 883
and 884. See also a letter from NOA to THE dated 7 March 1996,
page 1750.
(159) See page 1640.
(160) Letter dated 8 March 1996 from THE to NOA, pages 886 and 887.
(161) Comparison with the year end sales forecasts (April 1996 to
May 1997) contained in THE business plan presented to Nintendo
(page 539).

(162) Page 816 as well as THE's reply to the Statement of Objections

(156) See pages 1062 and 1063, a letter dated 26 February 1996 from
THE to NB, which was forwarded to NN and by NN to NF.

(157) See page 1275.

paragraphs 4.1 and 4.2.

(163) Pages 883 and 884.
(164) Page 1293, 1750, 1759, and 1762.

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1.6.2.6. F ur th er pre s s u re o n TH E

(123) With the acquisition of

the distributorship for

the
United Kingdom and Ireland, THE also acquired the
right to ‘supply to […]* for the purposes of distribution
in South Africa only until such time as an NCL distri-
butor has been appointed in such country’ (165). No NCL
distributor was
South Africa until
April 1996. THE intended to acquire these rights on a
permanent basis and to extend them to other African
countries.

appointed for

from your own offers with respect

(124) Soon after 21 March 1996, when Nintendo's supply
boycott of THE ended, NOE checked whether the level
of parallel exports from the United Kingdom had been
reduced. On 1 April 1996, NOE sent an identical
questionnaire to ‘Nintendo distributors and subsidiaries’
[concerning] ‘actual grey market offers, especially from
the United Kingdom and the United States of America’,
[intended] ‘to improve coordination of Nintendo's busi-
ness’ (166). The questionnaire requested information on
‘offers which are in your markets which are very
different
to:
A. Product [with] (…) special attention to products as
per CTW report enclosed. B. Prices — price compar-
ison: 1. With your own price to trade 2. Retail prices in
comparison’ (167). The CTW report mentioned as well as
THE's advertisements that were also attached to this
the price reductions
questionnaire describe in detail
that were offered to United Kingdom retailers on certain
Nintendo products and clearly identify THE as
the
distributor directly responsible for
this price policy.
Thus, the questionnaire clearly linked the existence of
in the United Kingdom with parallel
lower prices
exports from the United Kingdom to other EEA terri-
tories and identified THE as the distributor responsible
for this. The reply was required on the same day. Apart
from Nintendo's own subsidiaries, Nintendo's indepen-
dent distributors Linea, Concentra, and Itochu also
replied (168). Linea also added to its reply a copy of an
offer that […]* had made to one of its customers.

(125) This survey had direct consequences. In a letter dated
1 April 1996, NOE wrote to […]* of NOA on the

(165) See page 300, concerning the period from the acquisition of the
distributorship in August 1995 until 1 January 1996, and
page 320, for the subsequent period.

(166) Pages 1296 to 1302.
(167) Pages 1296 to 1302.
(168) Pages 1326 to 1333 (Linea, fax dated 1 April 1996), page 1386
(Concentra, fax dated 1 April 1996), pages 1387 to 1389 (Itochu,
fax dated 2 April 1996).

‘Grey Exports from the United Kingdom —
subject,
non-effective Control by THE — requested rights by
THE to export
to South Africa (and maybe other
countries).[…] I have checked out the situation in the
meantime with almost every European country and
came to the following results: A. Grey exports are
happening in general and especially based on the special
new offers from THE as per enclosed CTW report of
(…) D. Strong
issue No 3 from February 19, 1996.
recommendation: (…) 6. They definitely should not get
to any country […]’ (169). NOE
clearance to export
believed that THE's behaviour should lead to short-term
consequences and asked NOA for immediate action.

(126) Apparently, THE perceived that the acquisition of the
distribution rights for (South) Africa was dependent on
satisfying the concerns of NOE. THE wrote to NOE on
‘we are keen to acquire the
11 April 1996 saying:
Nintendo distribution rights in Africa (…). I was plan-
ning to put a formal request and application for the
distributorship licence through to […]*. However, I have
decided to leave this submission until after you and I
have met (…)’ (170).

1.6.2.7. N in ten d o 's
t i o n s

c on c e r n s

a n d T H E's

r e ac -

lack of

control over

(127) Nintendo's concerns covered various aspects of THE's
inter alia, THE's pricing policy and
business behaviour,
customers.
exporting
THE's
Complaints about
in letters from
this were set out
NOE to THE of 4 April 1996 (171) and from NOE to
NOA dated 1 April 1996 (172). The letter from NOE to
THE dated 4 April 1996 starts off by stating ‘As we
to cooperate to maximise out
agreed we both want
mutual benefit and in the interest of the total European
market place for Nintendo’ (173), indicating that THE and
NOE had agreed to resolve their conflict and that NOE
was representing the interests of all the other European

(169) Page 1097 to 1109, in particular pages 1100 and 1109.
(170) Pages 975 to 979 and 1135 to 1147.
(171) Pages 963 and 1119.
(172) Pages 1097 to 1109.
(173) Pages 963 and 1119.

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distributors. That NOE was representing other parties'
interests can also be deduced from the fact that this
letter to THE contained a flowchart (174) depicting flows
of parallel trade that NOE considered to exist and the
names and place of establishment of numerous parallel
traders. The parallel traders were established in Belgium,
the Netherlands, the United Kingdom, Germany, Sweden,
Italy, France, Austria and Switzerland. This means that
THE must have known that NOE was not only seeking
a solution to stop parallel imports into its own territory
including
(Germany) but also for the rest of the EEA,
territories of other independent exclusive distributors.

they (…) put

the whole European market

‘undermining European coordination: — product, —
price’ (179). According to NOE ‘It cannot be allowed (…)
that
in
jeopardy due to products floating out to other European
countries at prices nobody else can understand or
afford’ (180). NOE also insisted that:
‘THE must control
their market and their customers, what they obviously
do not at the time being.’ (181). However, THE did not
raise its prices (182).

(128)

In the same letter, NOE used information that it had
collected by means of the questionnaire it had sent out
on 1 April 1996 to EEA subsidiaries and independent
distributors to underpin its criticisms of THE. This
included the information provided by Linea in its reply
to NOE dated 1 April 1996 (175).

1.6.2.8. T H E's pr i ci n g b eh av i our

(129) With regard to THE's pricing policy, NOE complained to
[…]* of NOA in a letter dated 1 April 1996 (176) that
THE had ‘lower prices released than everybody else’ (177)
as ‘Low prices in the United Kingdom and for grey
exports force reduction of margins (…) in other coun-
tries’ (178). In addition, THE's low prices would result in

(174) Page 967 and 1126.
(175) Compare pages 1331 and 1332 with 1124 and 1125. See also
page 1119 where NOE states that it used information provided by
Linea.

(176) Pages 1097 to 1110.
(177) Page 1098.
(178) Page 1107.

1.6.2.9. T HE's

co n tro l of e xpo r t s by its

cu s -

to me r s

(130) Regarding NOE's criticism of THE's pricing policy, THE
explained on 11 April 1996 to NOE: ‘I fully understand
this differential pricing creates for
the difficulty that
other mainland European countries where the market
can clearly stand a much higher price than that which
the market can stand here in the United Kingdom. (…) I
am sure that we can, by working closely together, better
control the situation on grey imports and find a much
better way of isolating our products and our prices to
within the shores of the United Kingdom, thus reducing
the impact that this differential pricing has upon main-
land Europe’ (183). Clearly, THE undertook to collaborate
closely with NOE to control exports from its territory. ‘I
(THE) am determined that we will do everything we can
to stamp out/limit grey imports into mainland Europe
from the UK (…)’ (184).

(179) Page 1108.
(180) Page 1099.
(181) See letter dated 1 April 1996 from NOE to NOA, page 1098.
(182)
John Menzies' reply to the statement of objections, Annex A.
(183) See pages 975 to 979 and 1135 to 1147.
(184) Page 1136. Similar statements were also made in other correspon-
dence. A letter dated 19 April 1996 from THE to NOE reads: ‘You
can rest assured in the fact that we have taken what I believe to be
all the necessary actions to stem the supply of grey imports from
the United Kingdom into mainland Europe’ (page 1410). A letter
dated 25 May 1996 from THE to NOA stated: ‘we (THE) have to
compete on price to sustain the Nintendo brand market share and
as a consequence grey importing into continental Europe from the
United Kingdom is an attractive one. However, we have taken all
the action so far that we possibly can to put a stop to this practice.
(…) (page 890)’. A fax from THE to […]* dated 28 June 1996
stated: ‘Let me assure you that we are doing everything we possibly
can to confine our product to our territory and any help we can
get from our European partners/colleagues would be very much
appreciated. I am sure we can work together in regard to this
matter and between us, minimise the level of grey import’,
(page 1198).

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traders.

(131) NOE listed in its letter of 1 April 1996 to THE (185) a
number of specific inquiries about supplies to certain
known parallel
reply to NOE dated
In its
11 April 1996, THE reported on the measures it had
already taken to control the situation, in particular the
actions it had taken against four of its customers ([…]*,
[…]*, […]* and […]*) and promised a progress report
during a meeting between NOE and THE in the near
future (186). At NOE's request, THE had also investigated
whether it or its customers could have supplied […]*,
[…]* and […]*,
traders. THE
reassured NOE (187)
it had never supplied these
traders. THE presumed that these companies had been
supplied by […]*, […]*, […]* and […]* and that, there-
fore, as it had taken action against these companies, the
problem had already been addressed. Therefore, on
11 April 1996, THE had started an extensive collabora-
tion with NOE to tighten the control of parallel exports
from THE's territory.

three known parallel

that

and as result of this we have closed their accounts’ (189).
During this period THE also ceased trading with a
company called […]*‘whom we suspected of shipping
outside the United Kingdom’ (190).

(133) These actions amounted to a systematic business policy.
As can be seen from later correspondence, THE actively
pursued this business policy throughout the whole of
1996. In a fax dated 20 January 1997 THE wrote to
‘We have over the last 12 months actively sought
NN:
to ensure that we only supply bona fide UK retai-
lers (191). We also review all orders from our retailers to
check that the quantities are appropriate in regard to the
number of retail outlets that they operate’ (192).

1.6.2.10. T he

ac ti on s
TH E
ex po r t ing c u s tome rs

too k

a ga in s t

(134) The Commission possesses

correspondence between
THE and […]*, […]* and […]*, three of the companies
to which THE referred in recital 132 (193). This corre-
spondence confirms that THE did indeed take measures
against those companies, either during, or immediately
after, the boycott of THE by Nintendo. In particular, it is
clear from the two examples below, regarding […]* and
[…]*, that (i) THE actively tried to trace parallel expor-
ters,
it did so by comparing the orders placed by
particular customers with their potential for retail sales
in the United Kingdom, (iii) THE invoked its agreement
with Nintendo to justify the steps
took against
exporting customers, (iv) the obligation on its customers
level within the United Kingdom
to sell only at retail
was effectively an export ban; and (v)
the ban was
enforced by a supply boycott.

(ii)

it

(132) The actions which THE undertook against exporting
customers were well summarised by THE itself
in a
letter to […]* of NOA dated 24 May 1996:
‘I can tell
you that a significant amount of activity has been
undertaken by THE since January/February this year
with a view to stopping the grey exporting of products
from the United Kingdom into the continental European
market. Our major activities in this regard have been to
either shut off supplies completely or to really control/
restrict the supply of product into the UK market place,
to certain questionable retailers. We are no longer
selling to anyone who cannot prove that they operate a
bona fide UK retail/mail order business. (…) The compa-
involved and in which we have curtailed our
nies
[…]* and […]* along
business are:
with a handful of others.
these
companies have been supplying products into conti-
nental Europe via such companies as […]* and […]*,

I have proved that

[…]* (188),

[…]*,

(185) Pages 963 and 1119.
(186) Page 1136.
(187) Pages 976 and 1136.
(188) This must mean […]*.

(135) The correspondence between THE and […]* (194), a
parallel trader, also shows that THE maintained effective
control over parallel
traders during 1996 and in
1997 (195). For instance, on 30 April 1996 […]* wrote
‘you mentioned that your concern was
to THE saying:
that stock was being sold and that SEGA of America
[meaning NOA,
letter] had
come down on you quite hard. For your information
any stock purchased from you will be sold by us in the
United Kingdom’ (sic) (196). Similar incidents took place
during 1997 (see recital 158).

in view of the context of

(189) Pages 1150 and 1151.
(190) From material presented by THE to NOE dated 25 June 1996.

Page 1170.

(191) From the context of this and other correspondence it is clear that
bona fide retailers are retailers which sell their stock solely to final
consumers, that is, not to foreign-based traders. See for instance
also pages 1150 and 1151, 1114, 1112 and 918.

(192) Page 1510.
(193) Pages 773, 1112 and 1114.
(194) For example page 908.
(195) Pages 913 and 917.
(196) Page 906.

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[…]*

(136) The events concerning […]* are summarised by THE in
a letter to […]* of NOA dated 4 April 1996 (197).

‘1. […]* placed large orders for certain products, quan-
tities of which seemed excessive for his three retail
outlets.

is for

retail purposes.

delighted to supply […]* if we can be satisfied that all
product
I am sure that you
appreciate that we must comply with out distributor
agreement. I hope that your client can satisfy us of this
fact and that we can re-establish our trading relation-
(emphasis added). From the reply of […]*'s
ship’ (200)
lawyers, dated 19 April 1996 (201) it appears that […]*
was prepared to enter into an undertaking to that effect.
Eventually, THE asked […]* on 23 April 1996 to give a
written undertaking (202) that the Products would only
be offered for sale to consumers from outlets to be
agreed with THE and not be offered for sale to […]* or
to any other person whom […]* knew or suspected
might be buying the products for resale purposes. […]*
had to undertake not to buy the products from […]* in
the future. These undertakings were given and THE re-
established supplies at the latest by 28 June 1996 (203).

2. These orders were reduced to appropriate levels for

his three retail outlets

3. […]* spoke to […]* (of THE) regarding our reduction
in his order, and […]* intimated that this was due to
his export activities. (…)

[…]*

4. […]* (of THE) (…) finally gained evidence that […]*
was linked to […]* who were exporting product (198).

5. […]* was told that he could only place orders to
levels appropriate for his retail activities since we are
only able to supply to bona fide retailers.

6. […]* placed daily orders up to his maximum order
this we ceased

level and upon identification of
trading with him. (…)’ (199).

(137)

In order to justify its supply boycott, THE invoked its
formal distribution agreement with Nintendo. In a letter
dated 28 March 1996 from THE to the lawyers of […]*,
‘THE Games have a distributorship
THE explained that:
agreement with Nintendo. However, we are only allowed
to supply bonafide retailers in the UK. (…) Whilst […]*
has three retail outlets the level of orders that we have
all products
received suggests
are not going
that
(…) THE Games would be
through these outlets.

[…]* holds a 50 % interest in […]* (page 918).

(197) Page 1132.
(198)
(199) Pages 1132 and 1133. These events are confirmed by correspon-
dence between THE and representatives of […]*. Pages 918 to 924
inclusive.

(138) On 26 March 1996, […]* wrote to THE that, because
of: ‘The recent troubles that you (THE) have experienced
with certain accounts,
those companies who you
know export into Europe (…)[…]* will guarantee THE
Games that no stock shall be wholesaled across Europe
(…)
to trade with
immediate effect (…)’ (204) (emphasis added).

trust we can once again start

i.e.

I

(139) Yet again THE invoked its formal distribution agreement
in order to justify the measures it took. THE explained
to […]* on 1 April 1996 that:
‘Our Nintendo distribu-
torship agreement is extremely clear and very precise in
that we are only allowed to sell our products
to
multiple retailers and bona fide independent computer
games shops within the UK market. In addition, we are
able to supply products to known mail order compa-
nies, and catalogue retailers (…). We do not have the

(200) See pages 1112 and 918. This letter was written in reply to a letter
dated 14 March 1996 from the legal representatives of […]*. THE's
actions against this company therefore commenced during the
boycott of THE by Nintendo. THE used similar explanations in its
[…]* on 23 April 1996
letter to the legal representatives of
page 923.

(201) Pages 920 and 921.
(202) See the letter of 23 April 1996 from THE to the legal representa-

tive of […]*, pages 923 and 924.

(203) That these signed undertakings were provided is apparent from a
letter of the legal representatives of […]* to THE dated 17 July
1996 (page 926) and a letter from THE to […]* dated 28 June
1996, (page 925). It can be inferred from the same letters that
supplies had been re-established at a date before 28 June 1996.

(204) Pages 1115 and 1116.

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to sell our products

to either wholesalers or
right
distributors within the UK market place (…). I read the
contents of your letter to me with interest and perhaps
you would let me have full details of your multiple
retail stores group and mail order companies that you
would like to supply with our product’ (205).

1.6.2.11. T he e ffe c ts of T H E's m e as u re s on t he

m a r ke t

for

review,

(140) On 29 May 1996, NOE wrote again to ‘All EEA-based
Nintendo distributors and subsidiaries’ [on the] ‘Subject:
Volumes of “grey” imports into your country (…) We
info on
top management
urgently need,
intercountry trans-shipments (grey) outside Nintendo's
control and influence’ (206). In this letter, all subsidiaries
and independent distributors were asked to provide
traded
detailed figures on the volume of parallel
Products for the years 1994, 1995 and 1996, the precise
product items involved while specifying the volume and
countries of origin separately for each parallel
traded
product item as well as the price differences at retail
level between those parallel traded product items and
the same product
item when sold by the distributor
itself. Attached to the same letter of 29 May 1996 from
NOE was a detailed standardised questionnaire also
requesting information about
the volume of grey
imports, the product items involved and the country of
origin, the retail prices of grey imported products, and
price differences between grey imports and products
supplied by the subsidiary or distributor in the territory
of the addressees over the period 1994 to 1996. All
Nintendo subsidiaries as well as Nintendo's independent
distributors
and Itochu
Linea, Bergsala, Concentra
replied to this standardised questionnaire (207).

(205) Page 1114.
(206) Pages 1431 to 1434 and also 1152 to 1154. Page 1434 is a fax
machine print confirming that the questionnaire had successfully
been faxed to all distributors (subsidiaries and independent distri-
butors). THE was not among the addressees of this fax.

(207) See pages 1420 to 1422 (Linea), 1423 to 1425 (Bergsala), 1426
(NF), 1427 to 1428 (Concentra), 1435 to 1437 (NB), 1155 to 1157
(NE), 1429 and 1430 (Itochu) and 1158 to 1160 (NN). From the
tables dated 30 and 31 May 1996 (pages 1438 to 1440 and
1441 to 1444),
it appears that NOE also received information
concerning the United Kingdom, but the source cannot be estab-
lished.

(141) Nintendo has provided the Commission with a synoptic
‘Volume of grey imports’ (208), apparently
table entitled:
drawn up on the basis of the replies to NOE's ques-
tionnaire. From this table and the replies to the ques-
tionnaires, it appears that in nearly all countries and for
every Nintendo product line at the time, SNES consoles
and SNES compatible game cartridges and Game Boy
consoles and compatible game cartridges (209), parallel
imports were significantly reduced during 1996 (210).
THE,
reply to the Statement of Objections,
provided statistics showing that indeed, sales by THE to
parallel traders as identified by the Commission tailed
off markedly from March 1996 onwards (211).

in its

(142) This fact was also recognised by NOE, as on 20 June
1996 it wrote to THE stating ‘I would like to compli-
ment you for dramatically reducing parallel exports
which everybody around Europe has
realised and
compliments’ (212). Later, on 26 June 1996 NOE wrote
‘Thanks for your fine cooperation and keeping
to THE:
your promise on the grey market exports control, which
like everybody feels around Europe, makes you finally a
member of the family’ (213).

1.6.2.12. T H E's c oll ab or ati on

(143)

to continue to monitor

It was now clear to THE that ‘What we must all do now
the situation and (…)
is
communicate to our other European partners, both
subsidiaries and distributors, of
the action we have
taken, and to ask them to communicate with me
directly if they find any grey imports believed to have
come from the United Kingdom in the future’ (214).

(208) Pages 1441 to 1443.
(209) The N64 console had not yet been introduced in 1996.
(210) For instance, the volume of parallel imported Game Boy consoles
and Game Boy compatible game cartridges into the Netherlands
decreased from approximately […]* to […]* and from […]* to
[…]* respectively. Parallel
imported SNES consoles and SNES
compatible game cartridges into Italy decreased from about […]*
to […]* and that of SNES compatible game cartridges from about
[…]* to […]*.
John Menzies' reply to the Statement of Objections, paragraph 3.1
and annex D.

(211)

(212) Page 1456.
(213) Page 1195.
(214) Page 1410, a letter dated 19 April 1996 from THE to NOE. See
also letter from THE to NOE re CD Contact Data, dated 14 August
1996 (page 1490).

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The boycott of […]*

we can continue in our diligent efforts to overcome this
problem’ (220).

the

outside

products

advertised

(144) As already explained in recitals 136 and 137 above,
[…]* Director of both […]* and […]*, had given written
undertakings to the effect that all Product supplied by
THE would be resold in the United Kingdom. However,
on 27 June 1996, THE received information that […]*
had
United
Kingdom (215). The next day, THE took decisive action.
It wrote to […]* stating that, as it had breached the
undertaking […]* had given,
its account with THE
would be closed with immediate effect. THE explained
‘any stock supplied to […]* was only for retail
that
stores in the United Kingdom. This latest advertisement
(…)
in Continental Europe is a breach of that agree-
ment’ (216). THE investigated this matter thoroughly as, in
its reply to a fax from […]* dated 27 June 1996,
it
stated ‘we suspect they […]* may have received some
(…) We are
stock from a company called […]*.
currently looking to undertake further
investigations
into […]* but if our suspicions are confirmed, we will
stop supplying them with product also […]’ (217). In the
same letter it wrote ‘if you come across any grey import
product which you suspect has come from the United
Kingdom, then I would ask you to purchase samples,
together with any details you can gather so that we can
trace the ultimate source of supply to […]*’ (218).

THE's collaboration with Linea

(145) On 10 July 1996, after an inquiry by Linea concerning
parallel imports into Italy that requested ‘prompt actions
to stop this phenomenon’ (219), THE stated that:
‘We
have no record of ever having dealt with […]*, but if
you can give me further details we may be able to trace
it back to see whether we supplied any dubious dealers
who may have done a deal with […]*. (…) in order that

(215) See page 1197. This is implied by a letter from THE of 28 June
1996. This letter also contains a detailed account of measures THE
took against […]*, and reassurances that it would take the neces-
sary steps to limit the sale of THE products to the UK market.
(216) Page 925. The information on which THE acted was provided by
Nintendo's Swiss distributor, so related to exports to a non-EEA
country. However, THE did not merely criticise […]* for having
exported outside the EEA but for having exported to Continental
Europe (that is, outside THE's territory). Thus, the fact that THE
acted on exports to a non-EEA country is irrelevant.

(217) Pages 1197 and 1198.
(218) Pages 1197 and 1198.
(219) Pages 1201 and 1202.

(146) A further letter dated 3 December 1996, from THE to
Linea stated: ‘We are certainly not supplying any of the
three people mentioned in your letter, so it must be
coming from some alternative route.
If you can do
anything at your end to place this source then that
would be most useful, in the meantime we will continue
with our investigations at this end. (…) I am sorry that
you are having trouble with grey imports, particularly as
we are working very hard over here to stop this from
happening, so anything more you can do to help us in
our endeavours would be appreciated’ (221). This colla-
boration continued into 1997 (222).

NN and […]*

(147) Apparently, offers of parallel traded products from the
United Kingdom continued. NOE suspected a United
Kingdom-based company called […]* of exporting the
products. THE reassured […]* of NOE on 20 November
‘we are not dealing with […]*’ [but] ‘having
1996 that:
done so much work in trying to eliminate grey imports
from the United Kingdom I very much want now to try
to find out where he is getting this stock. Can we try
and arrange for someone to purchase some stock and
see if we can trace it back (…)?’ (223).

(148) NOE followed this suggestion and instructed NN to buy
some parallel traded product.
In a letter from NN to
THE dated 6 December 1996, NN wrote: ‘Regarding the
discussion with […]* (from NOE) concerning parallel
trade you requested some examples. Therefore we have
checked some game shops and found Super Metroid
including Giant Players guide. (…) we also found Winter

(220) Pages 1471 and 1472.
(221) Page 1505.
(222) See letter of NOE to THE re Linea dated 7 November 1997,

page 1591.

(223) Page 1504. See also page 819.

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[I] will keep you informed of

Gold (…),
further
finding’ (224). In a letter dated 10 December 1996, NN
supplied further details to THE concerning offers of
traded products of United Kingdom origin,
parallel
important customers, […]*
made to two of
and […]* (225).

its most

concierto”

sophisticated measures were

these matters may
fax
thereafter,

(149) Apparently, these measures were deemed insufficient and
required. On
more
10 December 1996, NN wrote to THE to let
them
know that ‘Your input will be appreciated as working
“in
avoid
on
problems’ (226).
dated
in a
Shortly
‘we are now
20 January 1997, THE wrote to NN that:
individually marking the security film that covers the
boxes for a number of customers in order to try and
identify if any of these are the source of your problem.
(…) please send any new offending packages to me.
Once we know the source of the problem, we can take
any necessary action. (…) Please be assured that we are
doing all that we can to assist you in this matter and let
me reiterate we only wish to supply customers for UK
retailing activities’ (227).

(150)

In February of 1997, THE again worked closely with NN
[…]* would not be supplied with
to ensure that
Nintendo products (228). In March of 1997, NN requested
THE to investigate matters and provided information
based on the above tagging system in order to assist
THE in this regard. On 26 March 1997 it wrote to THE
stating ‘A quick tour
through some major cities to
appreciate N64 presentation lead to finding substantial
quantities of THE material
the
products were still
in the original packaging and we
found reference number 02 06 01 97. Hopefully this

(…). At one address,

(224) Page 1506.
(225) Page 1509.
(226) Page 1509.
(227) Page 1510.
(228) Page 1511.

reference gives you a
concerned’ (229).

clue who is

the

customer

(151) According to THE's reply to a Commission request for
information, no action was taken against any customer
as a result of the tagging system it had introduced. The
tagging system was introduced on 2 January 1997 (230)
and discontinued in April 1997 (231).

(152) The continuing efforts of THE were recognised by NOE,
as the latter wrote to Linea on 6 November 1997 that:
‘since January of this year, hardly any offers of merchan-
dise were coming out of the United Kingdom which I
do hope will also finally be the case with N64 hard-
ware’ (232). NOE expected this collaboration to continue
and expected THE to address any remaining parallel
trade problems.

Renewed parallel trade in N64 Products

(153) The possibility of parallel

trade

from the United
Kingdom again became an issue on 22 October 1997
as a result of THE's latest pricing policy regarding N64
products, both N64 consoles and compatible games (233).
On that date NOE informed all European Distributors
and sister companies that: ‘THE, our UK distributor, will
reduce recommended retail prices’
‘the United
Kingdom is an isolated situation, definitely no price
changes planned or even considered for continental
Europe.’ (234). NOE justified this step by referring to the
fact that N64s were ‘overpriced’ in comparison with the
price of Sony's Play Station and other recently improved
Sony product offerings in the United Kingdom (235). The
recommended retail price for the N64 console decreased
from GBP […]* (approximately EUR […]* at that time)
to GBP […]* (approximately EUR […]*), about 33 %.

[and]

(229) Page 1218.
(230) Page 1218.
(231) Page 819.
(232) Page 1582.
(233) See for instance pages 1588, 1589, 1607 and 1619.
(234) Pages 1556, 1557 and 1558.
(235) Pages 1557 and 1558.

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(154) As a result, parallel importers in Greece, Italy, Denmark,
Norway and Portugal (236) offered local retailers prices
that were lower than those the local exclusive distribu-
tors obtained from Nintendo. The only reasonable
explanation for
that Nintendo
such differences
charged substantially lower prices to THE than to its
other independent distributors (237). Evidently, important
price differentials between the United Kingdom and
other EEA countries would create incentives for parallel
trade and/or make it more difficult to sustain an effi-
cient control of parallel exporters.

is

(155) The

for Greece (238),

exclusive distributors

Italy (239),
Norway (240), Sweden (241) and Denmark (242) all reported,
within two weeks, to NOE about the problems which
the United Kingdom price reductions had caused on
their markets due to the consequent surge in parallel
imports from the United Kingdom in the expectation
that Nintendo would address these problems. Apparently
it could rely on the
NOE was of
continuing collaboration of THE.
it
wrote (243), in response to the complaint from Linea (244)
trade had come from the United
that no parallel
Kingdom that year and that it expected this to continue.

the opinion that

respect,

In this

traded products

It received such proof as,

(156) NOE requested Linea to provide detailed proof of
parallel
into Italy from the United
Kingdom, including indications as to the source of the
parallel trade (245).
in a fax
dated 7 November 1997 from NOE to THE it is stated:
‘please find enclosed fax dated November 7, 1997 from
our Italian distributor, Linea GIG, with copy of adver-
“action” ’ (246).
tisement
Annexed was an offer of Nintendo products which
[…]* made to clients of Linea that had been sent to
NOE by Linea that same day.

information and

your

for

(157) Nortec also provided NOE with detailed information
about parallel
imported Products in Greece, did a test
purchase to establish the origin of the parallel trade (247)
and requested NOE's assistance (248). Subsequently, NOE
apparently transmitted this information to THE with the
instruction to deal with these instances of parallel
exports from its territory. A fax dated 3 November
I
1997 from the Greek distributor to NOE stated:
must admit
to
supply any customer who would export to “[…]*, the
importer” has worked and has delayed
Greek Parallel
(…) They were told to wait for a
things for a while.
while until things will settle down’ (249). The letter also
names four United Kingdom-based companies that were
about to supply […]*. ‘The situation is crucial, so kindly
keep a close eye on it and advise us how to cope with
it’ (250). NOE also requested and obtained proof
from
Bergsala's Norwegian subdistributor which also under-
took to make a test purchase (251).

instructions to “THE” not

that your

‘1.

(158) On 24 June 1997 THE wrote to […]*

saying that

structure’ (252)

regarding
‘Nintendo 64 Discount
it
would only be prepared to supply […]*'s mail order
operations in accordance with its policy to supply bona
fide retailers and direct to consumer mail order opera-
tors only and not to secondary distributors (see also
recitals 112 and 113). THE requested information on the
likely turnover of […]*'s mail-order operation. Not long
before 8 July 1997, THE apparently reduced substantially
its supplies to […]* (253).
to […]* dated
7 November 1997 (254), THE reiterated its position that
it would not supply distributors and required from […]*
a written undertaking that any stock it would be
its Console Plus mail order
supplied would be for
operation. THE reserved the right
to cease supplies
should […]* not be able provide this reassurance.

In a letter

(236) Page 1580 (Italy), pages 1560,1561, 1569 (Greece), page 1597,

(Norway), page 1601 (Portugal), page 1576 (Denmark).

(237) The view that, at least in 1997, parallel

imports resulted from
Nintendo's own pricing policy was also shared by Nortec
(pages 1600 and 1622), Bergsala's Norwegian subdistributor,
Unsaco (page 1603) and NE (as NE expected that changing
Nintendo's pricing policy would avoid grey imports from the
Community) (page 1516).

(238) Pages 1559 to 1561 (dated 23 October 1997) and 1568 and 1569

(dated 26 October 1997).

(239) Pages 1578 (dated 3 November 1997), 1582 (dated 3 November

1997), and 1579 (dated 3 November 1997).

(240) Pages 1567 (dated 24 October 1997) and 1583 (dated 6 November

1997).

(241) Page 1574 (dated 27 October 1997).
(242) Page 1576 (dated 28 October 1997).
(243) Page 1582.
(244) Page 1579.
(245) Pages 1578 and 1582.
(246) Page 1591.

(159) Despite Nortec's assertion to the contrary (recital 157)
and the incidents regarding […]*, THE has denied taking
any action against parallel exports when parallel exports
in N64 consoles surged in October 1997 (255).

(247) Page 1604.
(248) Pages 1568 and 1569.
(249) Page 1577.
(250) Page 1577.
(251) Page 1583.
(252) Page 913.
(253) Page 914 and THE's reply to the statement of objections, Annex D.
(254) Page 917.
(255) See THE's

reply to the statement of objections, Annex A,

comments to paragraphs 124 and 125.

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1.6.2.13. Pa ra ll el

I mp or ts

in to

the

Un i te d

K i n g d o m

that, in hind sight, [were] necessary to ensure compati-
bility between our written agreements and practices in
the market’ (259).

(160) After Nintendo's boycott, THE started to collaborate and
control exports from its territory (recital 130). THE also
saw advantages for itself in doing so. In a letter dated
11 April 1996 to NOE, it wrote, while providing infor-
mation to NOE about parallel imported products in the
United Kingdom, that ‘by working close together in the
future, (with NOE) we can limit both our market places
being damaged by grey imports’ (256) (emphasis added).
In a letter to […]*, dated 5 June 1996, THE stated ‘(…)
we have learnt over the past few days that one of our
key retailers has been illicitely offered supply of Killer
Instinct on SNES at a price of £[…]* […] we are
assured that
the correct UK
version. This was offered by […]* who in addition
offered a variety of French and Portuguese SNES and
I hope these points provide
Game Boy products.
investigations’ (257). Appar-
some assistance with your
ently, THE felt that NOE would be able to give assis-
tance in the matter and put an end to these imports,
just as it had done for the distributors in other terri-
tories when the product originated in the United
Kingdom.

the stock available is

(…)

(161) According to THE, these letters were written to divert
some of the criticism of THE, and it did not expect any
action to be taken (258).

1.6.2.14. Pas s iv e e x por t s al es by T H E

(162) The various successive formal distribution agreements
between THE and Nintendo ostensibly gave THE the
right to export the Products to any country outside its
territory, although THE was not allowed to actively seek
export sales.

(166)

(163) However, de facto,

the underlying premise of THE's
business relation with Nintendo was that THE would
not exercise its supposed right
to supply companies
outside its territory in response to unsolicited requests
expressly admitted this.
for
According to Nintendo, during the conflict early in
1996 with THE,
it had focused on the distinction
between active and passive selling, but it admitted that
these considerations ‘were not accorded the follow-up

exports. Nintendo has

(256) Pages 1398 and 1137. From the context of this phrase it is clear
that THE meant that NOE would prevent parallel imports into the
United Kingdom.

(257) Page 1444.
(258) THE's reply to the statement of objections, Annex A point 126.

(164)

Indeed, it would not have made sense for Nintendo to
force THE to exercise a strict control over its customers
to prevent them from exporting if THE itself was still
permitted to export, albeit passively. Nintendo's concern
was that any product from the United Kingdom was
exported to other EEA countries, not that such exports
resulted from THE actively acquiring customers abroad.
THE repeatedly had to reassure Nintendo and different
distributors that it had not supplied companies outside
its territory (260). No consideration was given to whether
such exports might have been the result of passive
export sales.

(165) Thus, when […]*, a Belgium-based parallel

[…]*

territory (261).

importer,
approached THE for supplies of product it was told by
THE that the latter was not allowed to supply products
to companies outside
its
then
proposed obtaining supplies through […]*, a United
the
Kingdom-based trader, which would purchase
products on […]*'s account. Several
important orders
were delivered in this way. THE was aware that
this
proposal was actually being implemented. This may be
deduced from the fact that on 28 February 1996, only
one day after Nintendo had started its boycott of THE,
[…]* was told by THE that
the
Products to countries within the EEC (262). When […]*
tried to reorder products, THE required […]* to furnish
proof of the destination of the products as a condition
for supply (263). This demonstrates that THE must have
been aware that it was not allowed to respond positively
to unsolicited requests
from companies
outside its territory as, otherwise, the arrangement into
which THE and […]* entered would be inexplicable.

it could not export

supplies

for

it should also be noted that, until
In this context
31 December 1996, THE was required, under the terms
of its agreement, to submit ‘a current customer list’ to
Nintendo as part of its semi-annual marketing plan. This
type of information could be used to control whether
THE was exporting. In its reply to a letter sent pursuant
to Article 11 of Regulation No 17 THE stated that the
requirement to submit ‘a current customer list’ had not
been enforced as it had not supplied nor been asked to
supply such a customer list (264).

(259) Page 1640.
(260) See for instance pages 1119 to 1122, 1135 to 1139, 1504, 1471 to

1472, and 1505.

(261) Page 743.
(262) Page 773.
(263) Page 743.
(264) Letter dated 25 April 1997, page 444. Nintendo, in a letter dated
30 October 1995, said that this is also the case for the other
independent distributors that had similar clauses in their agree-
ments (see below).

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the

(167) While it might, strictly speaking, be correct that THE
never supplied a list as part of a semi-annual marketing
plan,
relationship between Nintendo and THE
implied that Nintendo could require THE to explain at
any time whether it was supplying specific customers,
either inside or outside the United Kingdom (265). During
late February until March 1996, when Nintendo exer-
cised pressure on THE because, according to Nintendo,
THE was not controlling exports from its territory, NOE
based its allegation that products were being exported
from the United Kingdom specifically on information
obtained from THE regarding its sales to customers (266).
THE was confronted with this information and required
to justify its conduct (267).

(168) The above is not contradicted by the fact

that THE
provided the Commission with a list of 10 companies,
established outside its territory but within the EEA, to
which it had sold Products during the period from
1 January 1996 to 30 November 1997 (268). Nine of
these companies are either Nintendo subsidiaries or
exclusive distributors appointed by Nintendo (269). The
10th company, […]*, is a sister company of THE, active
in Switzerland and Austria (270). No other company
outside THE's territory had been supplied with products
by THE. Sales to these companies cannot be considered
regular passive export sales. In fact, the example of […]*
shows that passive export sales were not allowed as
THE was criticised by Nintendo for having supplied
this company (271) and refrained from supplying it there-
after (272).

(169) According to THE, during the course of the boycott and
subsequent events in 1996,
it had been accused of
actively seeking export sales. This was because the ‘Big
Deal’ promotion had been advertised in CTW, a trade
the United
magazine
Kingdom.
in CTW in fact
advertisement
amounted to THE actively seeking export sales (273), the
situation would have been remedied by THE once it had
its advertising would not reach traders
ensured that
in
outside the United Kingdom and Ireland. THE did,
it
immediately after
fact,

stop such advertisements

that was
the
If

also read outside

(265) Pages 301 and 458.
(266) Pages 1097 to 1100. NOE's allegation was based on the large share
of sales to what THE classified as ‘other customers’ and which NOE
suspected included sales by THE to parallel traders.

(267) Page 1762.
(268) Page 829.
(269) Compare page 829 with pages 132 to 136. See also page 817. It is
‘Chaves Portugal’
noted that THE's list,
is in fact Concentra (see
page 136) whereas […]* is an employee of Unsaco, Bergsala's
subdistributor for Norway (see page 1696).

(270) See the two invoices dated 9 January 1996 and 23 February 1996

on pages 830, 831 and 832.

(271) Page 891.
(272) Page 820.
(273) Page 810. THE denies this assertion on the basis that the adver-

tisement was not directed at non-UK dealers.

became aware of Nintendo's criticism (274).
It did not
export to any companies as a consequence of the CTW
publicity
to the
Nintendo subsidiary or independent exclusive distributor
in the territory where the potential customer was estab-
lished (275).

referred inquiries

campaign, but

1.7. Events in Spain

1.7.1. Nintendo España, barriers

to parallel

exports

from

Spain

(170)

From at least 1 January 1994 (276) to 31 December 1997,
Nintendo España SA (NE), a 100 % subsidiary of
Nintendo, acted as exclusive distributor in Spain for
SNES, Gameboy and, after they were introduced, N64
products.

(171) The general terms and conditions of sale between NE
and its customers, that constituted an integral part of
the contractual relations between NE and its custom-
ers (277), contained an obligation on the part of custom-
ers to sell Nintendo products only within Spain (278).
Nintendo has not contested that these terms and condi-
tions existed from January 1993 until April 1997.

specific instructions (279)

(172) An internal memo of NE, dated 14 November 1995,
contains
from NE regarding
exporting customers. From this memo it can be deduced
that NE had installed measures to enforce its export ban
‘In any
in particular to prevent further exports to Italy.
case, in order to avoid the possibility that Italian impor-
ters might be able to get
[SN + SMAS products]
through other clients, this letter forbids you to bill any
client other
for quantities above
100 units of this configuration, without your authorised
signature on the above request. I ask that any time that
the accounts department send you an order for SN +
SMAS for
reasonably
assured that the said product is for national consump-
tion’ (280).

authorisation, you are

than supermarkets,

your

it

(274) Page 882.
(275) See page 1752 and 817, five companies had made inquiries (see
page 1752).
In the absence of non-exempted restrictions THE
could have supplied these companies under Commission Regula-
tion (EEC) No 1983/83 (OJ L 173, 30.6.1983, p. 1). A prohibition
on active sales relates only to the acquisition of customers.

(276) Page 136.
(277) See Article 1 of these general conditions of sale.
(278) Pages 107 and 108. The general conditions of sale read:

‘Los
clientes pueden vender los productos de Nintendo, solo en el
territorio Español’ (page 420A).
(279) For similar instructions, see page 1251.
(280) Page 1028 Original text: ‘En cualquier caso, y para evitar que los
importadores italianos se puedan surtir [SN + SMAS products] a
través de otros clientes, por la presente se prohíbe la facturación a
cualquier cliente, que no sea una gran superficie, de cantidades
superiores a 100 uds. de esta configuración, sin la autorización
firmada por tu parte de dicho pedido. Tu ruego que cada vez que
te pase el departamento de facturación un pedido de SN+SMAS
para tu autorización, tengas la seguridad razonable de que dicho
producto sea para consumo nacional.’

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(173)

it

suspected

certain customers of

It can be understood from the same internal memo that
the reason NE instituted these measures was that, on the
basis of analyses of the purchases made by its custom-
ers,
exporting
products. NE had apparently confronted two of these
they had denied
customers with this allegation, but
‘A detailed analysis
exporting the products. Nonetheless,
of the sales of this configuration to our clients leads us
to the inevitable conclusion that there is a high degree
of probability that those responsible for these exports
are one or both of these clients. Consequently sales of
SN + SMAS to […]* and […]* are prohibited except
when expressly authorised and signed by me’ (281). NE's
employees were furthermore instructed to pay special
attention to two other customers which NE, also on the
their purchases, suspected of
basis of an analysis of
exporting products.

(174) An undated fax addressed to NE by […]*, one of the
four customers which NE suspected of exporting, states:
‘Clarification note: According to the conversation that
we had with you yesterday. I bring to your attention the
fact that the video consoles that I am requesting by the
present letter, are to be sold in Spain. I trust that with
this clarification, you will be fully satisfied as regards the
referred to’ (282).
destination of
the consoles
In the
‘I don't
margin a handwritten comment was added:
believe they are not going to export at least part of it.
Send only 500, telling the client that we are awaiting
more stock’ (283). This letter confirms that NE asked for
assurances from its customers that the Products supplied
by NE would not be exported. If in doubt, it would not
sell the requested quantities.

(175)

In a memo dated 10 June 1996, NOE instructed NE to
‘As I mentioned already
reinforce its controls, because:
there are pretty clear
times before,
to you several
indications that one or several of your customers are
involved in grey exports, especially Super Nintendo
(…) Clear indication: A. Software/hardware
hardware.
ratio is out of balance with these customers. B. Your
orders between Super Nintendo software and hardware,

(281) Page 1028. Original text:

‘Un detallado análisis de las ventas de
esta configuración a nuestros clientes nos lleva irremediablemente
a la conclusión que, con un alto grado de probabilidad,
los
responsables de esta exportación son uno ó ambos de estos
clientes. En consecuencia, queda prohibida la venta a […]* de
SN+SMAS, salvo autorización expresa y firmada por mi’

(282) Page 1027: Original text: ‘Nota Aclaratoria: Según la conversación
mantenida con Vd. en el día de ayer, pongo en su conocimiento
que las Vídeo Consolas que les estoy pidiendo en la presente, son
para venderlas aquí en España. (…) Confío que con esta aclaración,
quede totalmente satisfecho en lo que al destino que voy a dar a
las consolas se refiere.’

(283) Page 1027: Original text: ‘No me creo que no vengan a exportar,
por lo menos una parte. Servir únicamente 500, diciendo al cliente
que estamos a la espera de recibir mas stock.’

especially in the last time, are in total and with specific
customers completely out of
line. C. You make, right-
fully so, a lot of noise on grey imports which from to
time come from the outside and expect
respective
support. Obviously you must give the same support to
other countries in the same way. May I kindly ask you
to have this subject again checked out thoroughly and
take the necessary precautions and control instruments
to avoid these obvious problems’ (284).

(176)

In a letter dated 15 May 1997, NOA instructed NE to
remove the obligation on the part of its customers to
sell the products only in Spain from its general terms
and conditions and to provide a copy of the amend-
ments to all customers that had received the previous
terms (285). Also on 15 May 1997, NOA issued instruc-
tions to NN, NF, NOE and NE (286) to the effect that
Community law does not allow suppliers to oblige their
customers to resell the products only within a given
geographical territory.

(177) Nonetheless,

in a letter from NOE to NE dated 3 July
1997 concerning N64 exports from Spain into France it
‘Received yesterday an invoice copy as per
is stated:
enclosure showing items, prices and quantities having
been shipped, as […]* (of NF) claims, into France. Could
you investigate and inform 1. who that company is,
2. whether it is your customer, 3. what kind of business
they have, 4. to whom they sell and, 5. whether the
indication from France is correct’ (287). The attached
invoice was from a company called […]*.

(178) NE apparently acted on the instructions and information
received from NOE. On 7 July 1997 NE wrote to […]*
‘Exports of products, (…) I am addressing
concerning:
[…]* has been
you because we have detected that
sending product from Nintendo Spain to some distribu-
the
tors of video games in France. As you know,
product that Nintendo Spain supplies to you is intended
to be sold exclusively on the national market and
exporting this product
to any other
country is a practice of which we do not approve of
in any case. I am requesting you to stop any kind of

to France or

(284) Page 1161.
(285) Pages 116 and 118.
(286) See pages 110, 118, 119 and 120.
(287) Pages 1224 and 1225.

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dealings with clients which do not belong to the
national market or else we will be obliged to take
measures
that, we believe your company does not
deserve in any event’ (288).

(179) On 29 October 1997, NE also provided information to
NF in order to enable NF to identify grey exports from
Spain into France (289). Apparently, NF had found parallel
imported Products in its territory and investigated the
origin of these products. The information supplied by
NE would have allowed NF to establish whether Spain
was the origin of the Product that was parallel imported
into France.

1.7.2. NE, parallel imports into Spain

(180) At least during the period between January 1996 and
April 1997, NE provided NOE with information
regarding the incidence and origin of parallel trade on
a regular basis (290). In particular, on 17 January 1996
NE wrote to NOE concerning a company called […]*. It
‘We have detected (and bought)
informed NOE that
(SNES) and Yoshi's Island (SNES) origi-
Killer Instinct
nating
located
throughout the country. We believe that this product is
being imported and sold by […]*. Could you please talk
to Bergsala and ask them to control the situation’ (291).
This was
taken seriously, as, on 26 January 1996
Bergsala reported back to NOE ‘Ref your fax of today
about Spain (…)[…]*: We have received faxes from this
company offering us various software but we have done
no business whatsoever with them’ (292).

from Bergsala

in stores

(Sweden),

(181)

From the above, and in particular a letter dated 10 June
1996 from NOE to NE (293), it appears that NE regularly
requested NOE to take measures to prevent parallel
imports which originated in the territories of other
exclusive distributors. Other letters in the possession of
the Commission also confirm that NE provided infor-
mation regarding parallel trade to NOE. It did this to
protect the interests of the Nintendo group as parallel
imported products and the prices at which such goods

(288) Page 1226:

‘Exportación de producto (…) Me dirijo a ti, ya que
hemos detectado que […]* SL ha estado enviando producto de
Nintendo España s.a. a algun distribuidor de videojuegos en
Francia. Como tu ya sabes, el producto que Nintendo España s.a.
te suministra, es exclusivamente para vender en el mercado
nacional y el hecho de exportar este producto a Francia o a
cualquier otro pais, no es una practica que nosotros aprobemos
en ningun caso. Te ruego dejes de efectuar cualquier tipo de
operación con clientes que no pertenecen al territorio nacional, o
nos veremos en la obligación de tomar medidas que en ningun
caso creemos que tu empresa se merezca.’

(289) Page 1230.
(290) See letters on pages 1040 and 1041 (dated 17 January 1996), 1042
(undated), 1044 and 1045 (dated 22 January 1996), 1155 (dated
30 May 1996), 1161 and 1162 (dated 10 June 1996), 1266 (dated
28 January 1996) 1280 and 1281 (dated 28 February 1996), 1336
and 1337 (dated 1 April 1996), 1492 (dated 5 September 1996),
1498 (dated 21 October 1996), 1515 and 1516 (dated 1 April
1997) and 1554 (dated 21 October 1997). The quotes and example
come from pages 1042, 1044 and 1281.

[…]* is a parallel

trader established in Sweden

(291) Page 1041.
(page 1126).

(292) Page 1267.
(293) Page 1161.

risk from parallel

were sold ‘COMPLETELY DESTROYS THE SPANISH
MARKET’ (294) At one point, NE estimated its maximum
trade to be as large as
financial
ESP 220,6 million (about EUR 1,4 million at
the
time) (295). NE, referring to parallel trade from the United
Kingdom, stated the opinion that ‘We absolutely can not
allow this kind of thing’ (296).

1.8. Events in the Netherlands

1.8.1. NN, parallel exports from the Netherlands

(182) The Commission is not aware of restrictions in formal
written agreements between NN and its customers that
hampered exports by NN's customers from the Nether-
lands (297). However,
letter of NN to NF dated
‘Regarding export please note
13 February 1996, reads:
that this represents no serious problem. Our customers
will as usual keep small stocks and will concentrate on
retailing’ (298). From this letter it can be deduced that NN
had a practice, which had at
effect of
the
preventing parallel exports by its customers.

least

a

(183) The existence of such a practise can also be deduced
from a statement by […]* regarding events that took
place during the period 1992 until 1995. […]* was a
customer of NN whom NN suspected was reselling the
products to Omega, a parallel trader of the products:
‘Several times, Nintendo has made remarks that […]*
was reselling to Omega. This could be seen statistically
according to Nintendo. Several times Nintendo delayed
and blocked deliveries. Several
required an
[…]*’ (299). From
inspection of
this statement it can be deduced that NN supplied this
customer on the condition that the products would not
be resold to parallel exporters. It is also apparent from
that NN enforced this condition with
this statement
supply blockages and restraints and that it used, at least
several
times between 1992 and 1995, a statistical
method to trace suspected parallel traders.

the administration of

times

it

(294) Page 1042.
(295) Page 1045.
(296) Page 1281.
(297) The formal contractual relationship between NN and its customers
consists of general terms and conditions of sale (pages 417 and
418).
(298) Page 1049.
(299) Page 632. Original text:

‘Meerdere malen heeft Nintendo opmer-
kingen gemaakt dat […]* doorleverde aan Omega. Dit was statis-
tisch te zien, volgens Nintendo. Verschillende keren heeft Nintendo
de levering opgeschort, alsmede geblokkeerd. Meerdere malen heeft
men inzage gevorderd in de administratie van […]*.’

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(184) Furthermore, if products that might have come from the
Netherlands were found in another territory, NN would
be asked to assist in tracing the exporting company and
take appropriate measures. Thus, in an instruction from
NOE to NN dated 28 October 1994 concerning the sale
of parallel imported products into Germany, it is stated:
‘I would appreciate if you could thoroughly check out
whether and which of your customers might be behind
this offer and interfere immediately to stop delivery of
the merchandise if still possible’ (300).

1.8.2. NN, parallel imports into the Netherlands

(185) On numerous occasions during

the period from
October 1994 until December 1996, NN provided infor-
mation regarding parallel
imports into its territory to
NOE, NOA and independent distributors to assist the
exclusive distributor
in the territory of origin with
stopping parallel trade which was causing price erosion
in the Netherlands and threatening NN's relations with
its customers. Various letters in the possession of the
Commission are evidence of this (301).

1.9. Events in France

1.9.1. NF, parallel imports into France

(186) Nintendo France SARL (NF) was the exclusive distributor
for France at least from 31 December 1992 (302) until
31 December 1997.

(187) At

least during the period from October 1994 until
October 1997, NF collected information on the inci-
dence and origin of parallel
imports and provided this
information to NOE. Various letters in the possession of
the Commission are evidence of this (303). For instance,
on the basis of information regarding parallel exports by
[…]* of Spain, acquired by NF and transmitted via NOE
with the appropriate instructions, NE took measures
against
that company (see recitals 177 and 178). NF
also urged NOE to check whether clients of Contact
exported N64 game cartridges into France from Belgium

(300) Page 998. From NB's reply to NOE to the same letter it becomes
clear that the products in question originated from the United
Kingdom. NB at the time then took up this matter with NUK.
(301) See pages 998 (dated 28 October 1994) 1020 and 1021 (dated
27 April 1995), 1049 (dated 13 February 1996), 1050 and 1051
(dated 21 February 1996), 1058 and 1059 (dated 26 February
1996), 1061 (dated 26 February 1996), 1078 (dated 18 March
1996), 1088 (dated 27 March 1996), 1158 (dated 30 May 1996),
1216 (dated 28 October 1996), 1218 (dated 26 March 1997), 1220
(dated 25 April 1996), 1334 (dated 1 April 1996), 1412 (dated
23 May 1996), 1445 (dated 5 June 1996), 1500 (dated 28 October
1996), 1506 (dated 6 December 1996)
and 1509 (dated
10 December 1996). That NN feared price erosion can for instance
be deduced from pages 1021, 1049, 1051, 1058. Customer rela-
tions are mentioned on pages 1051 and 1058.

(302) Page 2216.
(303) See pages 998 (dated 28 October 1994) 1031 (dated 27 December
1995), 1049 (dated 13 February 1996), 1052 (dated 23 February
1996), 1060 (26 February 1996), 1219 (14 April 1997), 1221
(dated 29 April 1997), 1224 and 1225 (dated 3 July 1997),
1227 to 1229 (dated 24 October 1997), 1255 (undated), 1257
(dated 29 December 1995), 1258 (dated 8 January 1996) and
1259 (dated 9 January 1996). NF did also control by statistical
imported products
means whether its customers carried parallel
(see below).

or Luxembourg. NOE subsequently sought reassurances
from Contact
it had taken appropriate steps to
prevent exports (see also below recital 195).

that

1.9.2. NF, exports from France

(188)

In September 1997 (304), Contact reported that consoles
from France were offered to Contact's customers below
the price that Contact had to pay to Nintendo for its
own supplies, implying that significant price differentials
existed between France and Belgium. Despite these price
differences, no large scale exports from France appear to
have occurred except for this incident. This is explained
by the existence of the technical barriers to trade as a
result of different TV standards. Adapting static consoles
from SECAM to PAL standard is too difficult or expen-
sive.

(189) However, technical barriers to trade exist only for static
consoles and not
for hand-held consoles or game
cartridges. Parallel exports from France to other EEA
In a
countries were nonetheless hampered as well.
memo from NF to NOE to dated 24 October 1997, NF
‘considering our sales terms there is no risk of
stated:
export from France’ (305). In its agreements with retailers
and wholesalers NF used a rebate structure based on
retroactive rebates as a function of the customers' turn-
over with NF over the contractual period on software
only (306). As a result of
the greater part of a
retailer's overall gross profit on the sale of Nintendo
products was realised only after the sales period (307). It
was therefore unavoidable that NF's sales terms prevent
parallel exports, as exporting customers would run into
liquidity problems. Exporters would get an end-of-year
rebate from NF, but would have to offer an immediate
cash-rebate to foreign based companies in order to be
given on
competitive. The
purchases of game cartridges only, that is, they were
concentrated on a category of products where parallel
trade from France was not hampered by technical
barriers to trade.

rebate was

retroactive

this,

(304) See letter

from Contact

to NOE dated 4 September 1997

(pages 1536 to 1538).

(305) Page 1566.
(306) Page 1228.
(307) Prior to 1998, these retroactive rebates were paid by NF after the
annual duration of the agreement and per 1998 partly retroactively
every semester and partly after the end of the annual term of the
agreement. See the 1995 and 1996 versions of these standard
agreements (pages 361 to 413), page 2234 for 1997 versions and
page 1546 regarding 1998.

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1.10. Events in Belgium and Luxembourg

(193)

during

the period October 1994 until
In fact,
November 1996, NB corresponded with NOE on various
occasions regarding the incidence and origin of parallel
trade, apparently in the expectation that this ‘problem’
would be addressed. This is substantiated by various
letters in the possession of the Commission (315).

1.10.1. NB, contractual barriers to export from Belgium and

Luxembourg

(190) At

least

from 1 January 1994 until April 1997,
Nintendo of Belgium (NB), held exclusive distribution
rights for Nintendo products for Belgium and Luxem-
bourg (308).

(191) According to Nintendo, NB imposed obligations on
certain dealers to the effect
that Nintendo products
should be supplied by those dealers only to end custo-
mers (309). Nintendo has not contested that these obliga-
tions were imposed from January 1994 until April 1997.
This provision was implemented. By letter of 28 October
1994 from NOE to NN, NB and NF concerning the sale
of parallel imported products into Germany, NOE wrote:
‘I would appreciate if you could thoroughly check out
whether and which of your customers might be behind
this offer and interfere immediately to stop delivery of
the merchandise if still possible’ (310). From a reply dated
31 October 1994 from NB to NOE (311) it appears that
NB investigated the matter (312).

1.10.2. NB, parallel imports into Belgium and Luxembourg

(192) Equally, NB requested similar support from NOE. On
‘Our customers in
24 June 1996 it wrote to NOE:
Luxemburg are complaining about the enclosed adver-
(…).
tisement of grey Game Boy (German packaging)
The goods are coming from the […]* chain. (…). Could
you please investigate this matter further […]?’ (313). In
its reply of 24 June 1996 NOE informed NB (314) about
the results of its investigations.

(308) Page 132.
(309) The standard agreements for retailers read:

‘De produkten van
Nintendo Belgium zijn uitsluitend bestemd voor verkoop aan
particulieren’ (page 355) and ‘Les produits Nintendo sont unique-
ment destinés à la vente au particuliers’ (page 351) (The products
of Nintendo (Belgium) are destined solely for sale to final consu-
mers).
(310) Page 998.
(311) Page 1245.
(312) NB did not take action because the outcome of its investigation
was that the products were imported from the United Kingdom,
and not from Belgium. Subsequently, NB took the matter up with
NUK.
(313) Page 1460.
(314) Page 1462.

1.10.3. Contact, parallel exports from Belgium and Luxem-

bourg

(194)

In March 1997, NB went into liquidation. In April 1997,
CD-Contact Data GmbH was appointed as an indepen-
dent exclusive distributor of Nintendo's products for
Belgium and Luxembourg and entered into a distribu-
tion agreement with Nintendo to this effect (316). CD-
Contact Data GmbH entrusted at least part of the task
of distributing the products to Contact Data Belgium
NV.

(195)

It was clear to Contact that it was bound to ensure that
its customers did not parallel export. Following sugges-
tions made by NF (317), NOE asked Contact whether one
of its customers, […]*, might have sold game cartridges
to customers of NF. Contact's response on 28 October
‘1. […]*'s received untill now in
1997 to NOE stated:
different deliveries 960 pieces of Lylat Wars. This is just
enough to deliver his approximatively 100 customers in
the French part of Belgium. 2. Following the fact that in
the start of Contact Data Belgium, he delivered some
hardware in France, we are very cautious with this
customer and would never deliver him this big quanti-
ties. (…) As we discussed last week with you, we are
very cautious in our deliveries as we do not want to
have any export […]’ (318).

(196) The text of the distributor agreement between Contact
and Nintendo allowed Contact to export passively (319).
However, Contact reassured Nintendo that
it did not
want any (thus including passive) exports (320).

(315) See pages 998 (dated 28 October 1994) 1245 (dated 2 February
1996), 1303 (dated 1 April 1996), 1435 (dated 30 May 1996)
1460 (dated 24 June 1996), 1462 (dated 24 June 1996), 1482
(dated 24 July 1996), 1501 (dated 6 November 1996).

(316) Pages 138 to 153.
(317) Pages 1229 and 1566 and in particular hand written notes on

page 1564. See also recital 131.

(318) Page 1575.
(319) Page 141 paragraph 4.6.
(320) Page 1575.

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1.10.4. Contact, parallel imports into Belgium

(197)

From September 1997 until December 1997, Contact
corresponded on various occasions with NOE about
parallel imports into its territory in the expectation that
this ‘problem’ would be addressed (321).

— On 3 November 1997 it wrote to NOE stating that
is now on the Belgian
[…]* with

‘The following proposal
market: 1 420 pieces of N64 HW at
German manual.’ (322).

— On another occasion Contact,

in a letter dated
4 December 1997 (323),
informed NOE of parallel
from Germany (324)
imported Nintendo products
sold by […]*, a Luxembourg-based retailer. NOE
replied promptly, and on the same day requested
further
imported
goods from Contact (325).
In the same letter NOE
inquired whether Contact had registered any parallel
imports from France into Luxembourg in general
and by […]* (a Luxembourgish retailer) in particular.

information about

the parallel

— Similarly, Contact complained to NOE about parallel
imports into its territory from France. Contact expli-
‘(…) Our customers are
citly asked NOE for help:
cancelling their orders for the N64 console because
they apparently can get
in France.
From the 8 000 backorders we received, 6 000 have
been cancelled. This is definitely the main priority
for our discussion in Monaco. Immediate action in
this context is no doubt mandatory’ (326). This issue
was subsequently discussed in a telephone confer-
ence with NF (327) on 5 September 1997, the next
day.

them cheaper

— Contact also contacted NF on 12 November 1997 in
imported

connection with some suspected ‘grey’
game cartridges (328).

1.11. Events in Germany

1.11.1. NOE, parallel exports from Germany

(198) Nintendo of Europe GmbH (NOE) was the subsidiary of
Nintendo with the exclusive distribution rights for the
products within Germany.

(321) Pages 1536 (dated 4 September 1997), 1575 (dated 28 October
1997), 1581 (dated 3 November 1997), 1595 (dated 12 November
1997), 1605 (dated 4 December 1997), 1608 (dated 4 December
1997).
(322) Page 1581.
(323) Pages 1605, 1606 and 1607.
(324) Page 1610.
(325) Page 1608.
(326) Page 1536 to 1538.
(327) Pages 1539 to 1542.
(328) Page 1595.

‘the general

(199) According to Nintendo, the general terms and condi-
tions of sale between NOE and its customers contained
‘Contract area (…) Customers
the following obligation:
may only sell Nintendo products within the German
Federal Republic to end-users’ (329). Nintendo interprets
terms and
this section as meaning that
conditions of sale between NOE and its customers,
which were in place until August 1995, contained an
obligation on NOE's customers not to supply Nintendo
products outside Germany’ (330). These general terms and
conditions of sale were effective from January 1991
until August 1995 and, according to Article 1, would
be part of all agreements between the parties. This
obligation was enforced by means such as the analysis
of customer orders, as becomes clear from a letter from
NOE to NOA of 11 April 1995 in which NOE states
that ‘we can control our customers well enough that
any bigger number
that would show up for any
product, which is not within the normal framework of
shipments
the
stopped’ (331).

could be

customer,

localised

and

(200) At least from 1 January 1996 until 31 December 1997,
NOE also used an agent called […]* (332) to distribute
the products on its behalf. Parallel exports via this agent
[…]* was contacted by a
were equally controlled.
company called […]* established in Aachen (Germany)
for supplies. A report of a conversation between […]*,
‘The
with this company dated 14 March 1997 stated:
contact with […]* made clear that
the products are
destined for
I have subsequently
refused the matter’ (333).

foreign countries.

1.11.2. NOE, parallel imports into Germany

(201) NOE took an active role in preventing parallel imports
into Germany when these occurred. For example, by
letters dated 28 October 1994, NOE sent to NF, NB and
NN (334) an offer made to several of NOE's customers
their
and gave instructions
customers might have been behind this offer and to
intervene immediately to stop the delivery of
these
products (see also recitals 184 and 191).

to investigate which of

(329) Page 415 ‘Vertragsgebiet

(…) Die Kunden dürfen Nintendo-
Produkte nur in der Bundesrepublik Deutschland an Endverbrau-
cher verkaufen’.

(330) Page 107.
(331) Pages 1001 and 1002.
(332) See submission of Nintendo dated 1 September 1998, page 22

(page 2302).

(333) Pages 1512, 1513 and 1514.

ergab, daß die Ware fürs Ausland vorgesehen ist.
daraufhin die Angelegenheit abgelehnt.’

(334) Page 998.

‘Die Kontaktaufnahme mit

[…]*
Ich habe

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(202) NOE also played an important role in ensuring that
NUK would take appropriate measures to stop parallel
exports from the United Kingdom. It took the initiative
in April/May 1995 to draw up a detailed plan to stop
parallel
trade that ultimately lead to the instructions
given to NUK to determine the source of supply to
[…]* From April/May 1995 onwards, NOE played an
increasingly important and active role in coordinating
Nintendo's day-to-day efforts
trade
leading to the boycott of THE and the measures to
trade,
monitor and enforce measures to stop parallel
both from the United Kingdom and from other coun-
tries. NOE's
in
recitals 228 to 238.

is described in more detail

to stop parallel

role

(203) NOE's efforts to stop parallel trade within the EEA also
served the more limited purpose of stopping parallel
trade into its own territory, Germany. Thus, NOE's
actions to ensure that parallel trade did not occur in
the EEA must be interpreted as efforts to stop parallel
trade into its own territory (see also recital 127).

covered products from Nintendo for importation into
Greece and for distribution and sale therein’ (338).

(…) The distributor may not sell

‘3.3.
products through subdistributors’ (339).

the covered

(…) The Distributor shall not sell any covered
‘4.3.
products to any person who is not an authorised dealer,
the
nor sell any covered products to any person if
distributor has
such person
reason to believe that
intends to or will export such covered products to any
country outside of the European Community or sell or
transfer such covered products to anyone other than a
retail customer purchasing such products in the ordinary
course of business’ (340).

‘2.2.
(…) The term “authorised dealers” shall mean
and be limited to those persons who specialise in selling
consumer products at retail to consumers and who have
been authorised by Nintendo to deal
in the covered
products, (…) At least annually during the term, of the
distributor's distributorship Nintendo and the distributor
shall mutually agree on a list of authorised dealers in
the territory’ (341).

1.12. Events in Greece

Clause 4.5 required Itochu to provide, twice a year, a list
of current customers to Nintendo (342).

1.12.1. Itochu and parallel exports from Greece

‘8.2.
(…) Nintendo (…) shall have the right at any
the distributorship to make
time during the term of
such examination of such books, records, and corre-
spondence as Nintendo may deem appropriate’ (343).

(204) From at

least 14 May 1991 (335)

to 28 February
1997 (336), Itochu Hellas EPE, a wholly-owned subsidiary
of a group of companies of which the ultimate parent is
a Japanese company trading under the name of Itochu
Shoji KK (337) (together referred to here as ‘Itochu’), was
exclusive distributor of Nintendo
the
in Greece. The distributor agreement valid
products
during that period contained the following provisions:

independent

‘3.2.
(…) Nintendo appoints a distributor as its exclu-
sive independent and authorised distributor for the sale
of covered products to authorised dealers in the terri-
tory […] and authorised an distributor
to purchase

(335) Page 157.
(336) Page 154.
(337) Pages 2501, 2502 and 2506.

(205) The Commission's

is that

reading of

Itochu could only sell

these provisions, not
contested by Itochu in its reply to the statement of
objections,
to dealers
established in Greece and approved by Nintendo, thus
excluding passive sales to companies established else-
where in the EEA. Itochu was also explicitly prohibited
from reselling the products to customers other than
those which specialised in reselling the products at retail
the
to consumers and to anyone intending to resell
products to anyone other than a retail customer. Conse-
quently, also intra-EEA parallel exports by Itochu's
customers were severely restricted as Itochu could not
resell to customers that would resell
the products to
including traders that were established
other
outside Greece. Exports by customers of
Itochu to
countries which were EEA countries but not EC Member
States were expressly prohibited.

traders,

(338) Page 157.
(339) Page 157.
(340) Page 159.
(341) Page 156.
(342) Page 160.
(343) Page 171.

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imports

interests

performed

of Nortec. Nortec

informed NOE of the latest developments in its terri-
tory (350). It did so at least after THE had significantly
reduced its prices for N64 consoles in October 1997
and, as a result, parallel
from the United
Kingdom into Greece had become a serious threat to
test
the
purchases (351) and made efforts to trace the sources of
supply of parallel traders in the hope that NOE would
address the problem. In various letters to NOE, Nortec
imports ‘completely destroy what
stressed that parallel
we tried to build’ (352) and ‘jeopardise our efforts to
control and clean the local market’ (353). Parallel imports
‘will be a disaster for Nintendo products in Greece (…).
I urge you to realise this situation and assist our efforts
in this country’ (354). ‘This situation is killing us […]’ (355).
Nortec stressed that NOE's ‘immediate reaction (…)
is
absolutely indispensable for us to survive’ (356).

1.12.2. Itochu, parallel imports into Greece

(206)

that

address

expectation

that NOE would

‘As you are aware,

Itochu provided NOE or NOA with information
regarding the incidence and origin of parallel trade in
this
the
‘for
problem (344). According to Itochu, this was crucial
the survival of Nintendo business in Greece’ (345) and ‘to
protect our market’ (346). On at least one occasion, this
resulted in the distributor in the territory of origin,
namely THE, cutting off supplies to a parallel trader.
On 8 March 1996, THE wrote to […]* of NOA to
inform it
the distributor in
Greece contacted me by fax about an issue (…) We
have traced the source of
this problem to a long
established NUK/THE games customer. I do not believe
that this problem should reoccur since his recent order
has not been fulfilled. I have notified this to […]* (from
Itochu) and we have agreed that he will keep me
directly in touch with the situation on an ongoing
basis’ (347). The day before (348), THE had informed Itochu
that
the company that
parallel exported Products from the United Kingdom
into Greece, and had given details about its efforts to
find the source of supply to […]*.

it had never supplied […]*,

1.12.3. Nortec, parallel imports into Greece

(207) Nortec AE (Nortec) was established in April 1997 and
started trading as Nintendo's exclusive distributor for
Greece in September 1997 and entered into a distribu-
tion agreement with Nintendo to this effect. Nortec
remained Nintendo's distributor for Greece at least until
1 January 1998 (349).

(208) From October 1997 until January 1998, Nortec provided
NOE with information regarding the incidence and
imports into its territory, continued
origin of parallel
imports and regularly
to monitor any cases of parallel

(344) Pages 1066 (dated 6 March 1996), 1272 (dated 22 February 1996),
1387 (dated 2 April 1996), 1290 (dated 1 April 1996), 1429
(dated 30 May 1996), 1674 (dated 2 August 1993), 1675 (dated
27 March 1993) and 1749 (7 March 1996).

(345) Page 1066.
(346) Page 1675.
(347) Page 886.
(348) Page 1749.
(349) Page 2595 to 2610, 1622 to 1624, Nortec's reply to the Statement

of Objections paragraph 1.

to […]*,

(209) On at least one occasion this resulted in THE, upon
instructions from NOE, cutting off supplies to a parallel
exporting customer. Nortec was well aware of this. On
3 November 1997, Nortec wrote to NOE regarding ‘N64
import from the United Kingdom (…) I must
parallel
admit that your instructions to THE not to supply any
(the parallel
customer who would export
importer) has worked and has delayed things for a while
(…) The company which was about to supply products
to […]* is […]*. It is impossible for us to get a written
proof for this, but the man who gave us the informa-
tion was well paid by us, so I believe him. Nevertheless
[…]* is negotiating with other UK sources at present
(…) Kindly check it out’ (357). This passage demonstrates
the efforts Nortec made to obtain information regarding
the origin of parallel imports. In a letter dated 5 January
to NOE that now
1998, Nortec could finally report
‘having solved the headaches of the parallel
importers,
(…), 1998 will be a bright year for N64 in Greece (358)’

(350) Pages 1559 (dated 23 October 1997), 1560 (dated 23 October
1997), 1561 (dated 23 October 1997), 1568 and 1569 (dated
26 October 1997), 1577 (dated 3 November 1997), 1587 (dated
7 November 1997), 1596 (dated 17 November 1997), 1600 (dated
20 November 1997), 1604 (dated 3 December 1997), 1612 (dated
11 December 1997), 1614 (dated 16 December 1997), 1622 (dated
5 January 1998) and 1789 (dated 7 November 1997). In order to
appreciate the efforts Nortec made to trace the parallel exporters,
see in particular page 1577.

(351) Page 1604.
(352) Page 1561.
(353) Page 1560.
(354) Page 1569.
(355) Page 1596.
(356) Page 1600.
(357) Page 1577.
(358) Page 1622.

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1.13. Events in Portugal

1.13.1. Concentra, parallel exports from Portugal

(210)

From 14 May 1991 (359) until at least the end of 1997,
later called Sociedade de
Chaves Feist & Cia LDA,
Representacoes
since
September 2001, Concentra, Produtos Para Crianças
SA (360),
(Concentra) was the exclusive distributor of
Nintendo products in Portugal.

Concentra

LDA

and,

— On 21 November 1997 Concentra reported to NOE
offers made to its customers by […]*, stating ‘Unfor-
tunately we are sure that some retailers will not
resist
to this opportunity of making additional
margin on N64 [and asked NOE for help as] We
hope Nintendo can find a solution for this situation,
in the very near future’ (366).

(211) The formal distribution agreement between Nintendo
and Concentra that was in force from 14 May 1991 to
28 February 1997 (361) contained identical provisions to
those in the agreement between Nintendo and Itochu,
described in recitals 204 and 205 above (362). Conse-
quently, for the same reasons and to the same extent as
the agreement between Nintendo and Itochu, the agree-
ment between Concentra
and Nintendo restricted
passive export sales by Concentra and parallel exports
by Concentra's customers from Portugal.

1.14. Events in Italy

1.14.1. Linea, parallel exports from Italy

(212) There is no evidence that Concentra has itself actively
prevented or tried to prevent third parties established in
Portugal from parallel exporting from Portugal.

(214)

From 1 October 1992 (367) until the end of 1997, Linea
GiG SpA (Linea) was
exclusive distributor of
the
Nintendo products for Italy.

1.13.2. Concentra, parallel imports into Portugal

(213) No evidence exists that Concentra prevented or tried to
importing the
there is evidence that Concentra
to NOE and

prevent its own customers from parallel
products. However,
reported parallel
also asked NOE for help in this matter. Indeed:

imports into Portugal

— Concentra, in a letter to NOA dated 4 January 1996
with which Concentra replied to a questionnaire of
NOA […]*, also reported that there was still ‘(…) an
important market share of parallel products (around
[…]* %) coming mainly from European Community
Countries (…)’ (363),

in time,

— Concentra also replied to the questionnaires sent out
by NOE already mentioned above in recitals 124 and
140. On 1 April 1996, Concentra reported in
response to NOE's first questionnaire, that, at that
moment
it was not affected by parallel
imports from the United Kingdom (364). However,
this situation must subsequently have changed as its
reply on 30 May 1996 to NOE's second question-
imports
naire mentions that during 1996, parallel
had occurred from the United Kingdom, Spain and
the Netherlands (365),

the

‘The

distributor

(215) During the period between 1 October 1992 and
29 February 1996 (368)
agreement
contained identical provisions to those in the agree-
ments with Itochu and Concentra, with one difference,
namely, that Linea was allowed to sell through certain
term “authorised
approved subdistributors (369).
distributors” shall mean and be limited to those persons,
companies or other entities which specialise in selling
consumer products at
the wholesale level and which
have been authorised by Nintendo to resell the covered
products to authorised dealers’ (370).
is
stipulated at ‘3.3 Subdistributors. Distributor intends to
sell part of the covered products through subdistributors
but may do so only if Nintendo has given prior written
for each and every of such subdistributors.
approval
in Nintendo's full
Such granting of an approval
discretion and any approval may be
revoked by
Nintendo at
reason without
notice’ (371). Prior to appointment, subdistributors had
to undertake to respect the same obligations as Linea
regarding,
inter alia, authorised sales and authorised
dealers (372). Linea and the subdistributors whom Linea
was allowed to supply were allowed to sell only to
customers, also to be agreed upon with Nintendo, who
were able to,
the products only to
resell
consumers.

In addition it

in turn,

time

and

any

any

is

(359) Page 244.
(360) Page 136. Letter from Concentra dated 17 September 2002.
(361) Page 241.
(362) Pages 243, 244 and 245.
(363) Page 1746.
(364) Page 1386.
(365) Page 1428.

(366) Page 1601.
(367) Page 200.
(368) Page 196.
(369) Page 200.
(370) Page 199.
(371) Pages 200, 201 and 202.
(372) Pages 240 and 201.

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(216) Linea has submitted (373) that it never actually took steps
to prevent parallel trade from Italy because, in view of
the fact that Italy was a high-price territory, there was
little or no demand for parallel exports from Italy.

We rely on your prompt actions to stop this phenom-
enon which is massively impeding the regular spreading
of our business. We strongly hope you undertake as
soon as possible the significant step to interrupt it’ (375)
(sic).

1.14.2. Linea, parallel imports into Italy

(217) Linea provided NOE and, occasionally, THE with infor-
mation on the incidence and origin of parallel imports
into its territory in the expectation that the recipient
would address this problem which was resulting in
order cancellations and causing it to lose face with its
customers (374).

(218)

In particular, on 8 July 1996, it wrote to NOE, NB, NE
and THE to inform them of developments concerning
an Italian parallel importer. In this letter it stated:

‘We got proofs
the well-known
parallel importers of Nintendo in Italy, sourced products
from the following suppliers/countries:

[…]*, one of

that

1. Germany

[…]* (…)

2. UK

[…]* (…)

[…]* (…)

[…]* (…)

[…]* (…)

[…]* (…)

[…]* (…)

3. Belgium

[…]* (…)

4. Spain

[…]*(…)

[…]*(…)

(373) See Linea's reply the Statement of Objections paragraph 4.1.
(374) Pages 1201 (dated 8 July 1996), 1326 to 1333 (dated 1 April
1996), 1420 to 1422 (dated 29 May 1996), 1471 (dated 10 July
1996), 1505 (dated 3 December 1996), 1578 (dated 3 November
(dated 3 November 1997) 1582 (dated
1997), 1579 and 1580,
6 November 1997) and 1592 (dated 7 November 1997).

(219)

(220)

In its reply of 10 July 1996, THE reassured Linea that
THE itself had never dealt with this company ‘but if you
can give me further details we may be able to trace it
back to see whether we supplied any dubious dealers
who may have done a deal with […]*’ (376). According to
Linea,
it provided no further information that might
have identified the origin of the exports to THE or any
other
in
December 1996 (378).

party (377).

occurred

Similar

events

regarding the

It was also on the basis of information received from
Linea
and
from the United Kingdom that NOE
cartridges
instructed THE on 7 November 1997 to take action
(see recital 156 above).

export of N64 consoles

(221) Linea admits that, in this way, it attempted to keep Italy
free from parallel imports but argues that these attempts
had no success as the products nevertheless arrived in
Italy (379).

1.15. Events in Denmark, Norway, Sweden, Finland

and Iceland

1.15.1. Bergsala, parallel exports

(222) Since 1981, Bergsala was Nintendo's exclusive distributor
for Sweden and, since 1986 also for Denmark, Norway,
Finland and Iceland (380). No written agreement existed
between Bergsala and Nintendo until May 1997 (381). For
the distribution of
the products within its territory,
Bergsala uses a subsidiary in Finland, Bergsala Fun Oy
and independent
and
subdistributors
Norway. These were Electronic Fun I/S and Unsaco
AS (382) respectively.

in Denmark

(375) Page 1201.
(376) Page 1471.
(377) Linea's reply to the Statement of Objections paragraph 4.1.
(378) Page 1505.
(379) Linea's reply to the Statement of Objections paragraph 4.2.
(380) Bergsala's reply to the Statement of Objections.
(381) Page 2300.
(382) Bergsala's reply to the Statement of Objections.

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(223) Bergsala also cooperated with Nintendo in order

subsidiary in Spain,

to
trade. NCL stated in a letter dated
control parallel
‘We received a letter
25 January 1996 to Bergsala:
in which they are
from our
complaining that
Instinct
(SNES) and Yoshi's Island (SNES) originating from you.
They believe that these products are being imported and
sold by […]* (383). Is it possible for you to control this
situation? Please let us have your comments about this
matter’ (384). In its reply dated 25 January 1996, Bergsala
denied that it had done any business with […]* (385).

they have detected Killer

(224)

export of Scandinavian N64 hardware

In a letter to […]* of NOE dated 30 April 1997 entitled:
‘Parallel
to
Greece’ Bergsala reassured NOE:
‘I have checked with
our agents in every country and all of them can swear
that they have sold nothing to Greece or outside the
territory. (…) Of course I can guarantee for Bergsala in
Sweden. If you find some more info like some shipping
docks please let me know and I will of course fully
cooperate with you to keep Europe clean from parallel
goods’ (386). From this quote it is clear that not only did
to prevent exports from
Bergsala take it upon itself
Sweden,
its territory for which it was
directly responsible for the distribution of the Products,
but also from the other countries within its territory.
However, no direct evidence exists as to whether Berg-
sala actually prevented parallel exports from Sweden or,
directly or indirectly by giving instructions to its subdis-
tributors, from other countries within its territory.

the part of

(226) Subsequently, from January 1996 until November 1997,
Bergsala (388) and its independent subdistributors Unsaco
AS (389) and Electronic Fun I/S (390) respectively, provided
information to NOE on the incidence and origin of
parallel trade into Bergsala's territory, Sweden, Denmark,
Norway, Finland and Iceland.

(227) Bergsala transmitted this information in the expectation
that NOE would take the appropriate steps to prevent
parallel imports into its territory. For instance, in a letter
‘We are
dated 8 October 1996, Bergsala wrote to NOE.
facing a problem with grey import from England! The
company is […]* and I'll fax their fax to you. Is there
any thing we can do to prevent this problem?’ (sic) (391).

1.16. The leading role of Nintendo

(228) The efforts to control parallel trade were coordinated
and enforced by the Nintendo group (comprised of NCL
and its wholly-owned subsidiaries NOE, NOA, NF, NE,
NN and, up to certain dates, NB and NUK (recital 2),
the members of which are distinguished for the purpose
of describing the facts only.

(229) Being the manufacturer of the products as well as the
distributor thereof in France, the Netherlands, Germany,
Spain, until August 1995 in the United Kingdom and
until April 1997 in Belgium and Luxembourg, the group
was in a unique position. It could effectively monitor
trade, enforce the measures
the existence of parallel
required to prevent it and directly benefit from their
implementation.

1.15.2. Bergsala, parallel imports

1.16.1. Monitoring

1.16.1.1. Me t h o d s us e d for m o n i to r i n g pa r a l l el

t r a d e

(225) As a direct result of a complaint from Bergsala to NOA
that parallel imports threatened its market and its rela-
tions with retailers, NOA instructed NUK in May 1995
to investigate whether it or one of its customers had
supplied […]*, which had,
in turn, supplied customers
of Bergsala in Sweden (387).

[…]* is a parallel trader established in Sweden. (page 1126).
(383)
(384) Page 1264. This letter was sent by NE to NOE, who then

forwarded it to NCL (page 1266).

(385) Page 1265.
(386) Page 1518.
(387) Page 1676.

(230) Nintendo implemented procedures to monitor parallel

trade within the Nintendo group.

(388) Pages 1264 (dated 25 January 1996), 1266 (dated 25 January
1996), 1423 (dated 30 May 1996), 1497 (dated 8 October 1996),
1517 and 1518 (dated 30 April 1997), 1574 (dated 27 October
and 1795 (dated
1997), 1576 (dated 28 October 1997)
17 November 1997).

(389) Pages 1567 (dated 24 October 1997), 1583 (dated 6 November
1997), 1597 (dated 17 November 1997), and 1603 dated
(28 November 1997).

(390) Page 1576 (dated 28 October 1997).
(391) Page 1497.

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(231) The measures included statistical methods. These relied
on the fact that if a trader resold the products only to
the product mix purchased by that
final consumers,
trader would satisfy certain ratios. Most
the
incentive for parallel trade did not exist for the whole
of Nintendo's product range. If a trader resold products
imported Products
to a parallel
himself,
the
the ratio of
products purchased by that trader compared with other
deals would change. One ratio that was monitored
systematically was the ratio of console to cartridge sales,
referred to in the relevant correspondence as the ‘hard-
ware/software ratio’.

this could be traced, as

trader or parallel

times,

(232) The overall plan proposed by NOE and discussed with
NOA during early 1995 (392) already envisaged that the
purchases made by customers were to be monitored in
order to trace parallel traders (recitals 105 and 106).
Examples of the implementation of monitoring devices
are:

— NE put

in place administrative procedures (393)

trace suspected parallel
on the basis of the pattern of their purchases,

traders, which it

to
identified

— in 1997, NE was instructed by NOE to reinforce its
controls (394) by increasing its use of hardware/soft-
ware ratios,

— NOE itself used these procedures to trace potential
parallel traders in its territory. NOE monitored the
amount of purchases made by its customers, and, if
an order was outside the normal range, NOE would
stop that shipment (395),

Indeed, NF requested
also parallel exported products.
NOE to verify the ratios of Contact for certain game
cartridge purchases in order to see whether Contact or
one of
exporting the products
Belgium to France (398). NOE also used these methods
to control other Nintendo subsidiaries, as is shown by
the example of NE (recital 175).

customers was

its

(234)

statistical measures, Nintendo
In addition to these
collected information regarding parallel
imports from
all subsidiaries and independent distributors within the
EEA, systematically and on Nintendo's own initiative, on
several occasions. For instance:

— on 1 April 1996, NOE sent a questionnaire to all
EEA-based Nintendo distributors and subsidiaries.
The questionnaire referred to ‘(…) our effort
to
improve coordination of Nintendo's business’ (399),
and concerned parallel trade and prices. On the basis
of the information received, NOE accused THE of
not controlling parallel exports by its customers,
which threatened THE's efforts to expand its export
rights to the whole of Africa (recitals 124 to 126),

distributors,

— on 29 May 1996 (400), NOE again sent an extensive
questionnaire to all EEA-based subsidiaries and inde-
top management
pendent
review’ (401) requesting information regarding parallel
trade into their territories. It was on the basis of the
responses to this questionnaire that NOE concluded
that THE had taken appropriate action against
its
exporting customers (recitals 140 and 141).

‘for

— NN used statistical methods on several occasions
during the period 1992 to 1995 to trace the
customer that sold products to Omega (396),

In addition,

— NF used an analysis of the ratio of game console
purchases to purchases of game cartridges to trace
parallel importers in its own territory with a view to
taking measures against such parallel
importers, as
can be deduced from its memo dated 13 October
1997 (397).

(233) Nintendo also used similar statistical methods to find
out whether independent distributors or their customers

(392) Pages 1009 to 1012.
(393) Pages 1028 and 1251.
(394) Page 1161.
(395) Pages 1001 and 1002.
(396) Page 632.
(397) Page 1544.

‘Certain shops must import given their ratios. Recall
them that the cooperation agreements will be broken if this is the
case’. From the letter it is clear that NF meant the ratio of game
console sales to compatible game cartridges sales.

— during early 1995, NOA discussed the issue of
parallel exports from the United Kingdom with its
European distributors before it issued its instructions
to NUK (402) (recital 107),

— during the boycott of THE, NOA made a survey of
its distributors in Europe to see whether THE had
to stop parallel exports
taken effective measures
from the United Kingdom (recital 122). NOA was
not prepared to lift Nintendo's boycott of THE
before the results were known (403),

(398) Pages 1229 and 1566.
(399) Pages 1296 to 1302.
(400) Pages 1431 to 1434 and 1152 to 1154.
(401) Page 1431.
(402) Page 1676.
(403) Page 1750.

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— in late 1997, when parallel

trade reappeared and
several distributors had complained about
this,
several distributors provided evidence, also at NOE's
request,
the products which were parallel
imported into their territories originated from the
United Kingdom (404) (recitals 155 to 157).

that

any incidences of parallel trade that had occurred. It is
useful to recall here that:

— in May 1995 NOA intervened on behalf of,

in
particular, Bergsala to stop parallel trade from the
United Kingdom into Sweden (recital 107) (405),

(235) On numerous other occasions, Nintendo subsidiaries
and independent distributors spontaneously communi-
cated information to NOE about parallel
imports into
their territories. Whereas, occasionally, such information
to NOA and NCL, NOE was clearly
was also sent
perceived by other subsidiaries and independent distri-
butors as the entity for coordinating the efforts to
prevent parallel trade in the products. This is illustrated
the above-
by the fact
described correspondence between NOE, other Nintendo
subsidiaries
regarding
parallel trade did not concern exports from or imports
into Germany but, in fact, concerned parallel trade from
or into other territories.

the great majority of

and independent

distributors

that

(236) NCL was well informed about the details of the system
In January 1996, NOE,
in
to restrict parallel
trade.
from NE regarding parallel
response to a complaint
imports into Spain from Scandinavia,
forwarded the
complaint to NCL which, in turn, verified that Bergsa-
lawas not responsible for those imports (recital 223).

1.16.2. Implementation

(237) Nintendo's coordinating role was not

limited to the
collection of
trade but
extended to the implementation of measures to stop

information regarding parallel

(404) On 3 November 1997 NOE asked Linea (page 1578):

later

three days

these products?’ A letter

‘(…) Is it
possible that you research about the importer of Italy and exporter
of UK of
stated:
(page 1582) ‘we would need from you: A. names and addresses
of main “grey importers” in the past, B. same for companies who
might be offering N64 from UK, C. quantities, price and delivery
dates of offers in the market place right now or in the future,
D. any indication of the source of course would be perfect.’ A fax
dated 6 November 1997 from […]* to NOE (page 1583) stated: ‘As
promised I give you all
the information I have regarding the
import from the UK’. In a letter from Nortec to NOE
parallel
‘As I
dated 20 November 1997 (page 1600) it is stated inter alia:
have promised to […]*, I am sending you by courier today, all
evidence we have from various exporters regarding N64 hardware
(…)’. Nortec also sent detailed information on the origin of parallel
trade in its
territory in a letter dated 7 November 1997,
pages 1587 and 1592 and in a letter dated 17 November 1997,
page 1596).

— in June of 1996, THE turned to NOE in order to
territory

imports

into

its

parallel

stop
(recital 160) (406),

— it was NOE that,

in November/December 1996,
instructed NN to make test purchases in order to
traded goods into the
trace the origin of parallel
Netherlands (recitals 147 and 148),

— after a complaint by NOE (407), THE introduced a
tagging system to trace the parallel exporter(s) that
were active during the period from November 1996
to March 1997 (recitals 149 to 151),

— NOE intervened on behalf of NF and instructed NE
to control its customers selling products into France
(recitals 177, 178 and 187),

— after having received information from NF, NOE
asked Contact about possible exports from Belgium
to France (recitals 187 and 195),

— when parallel imports reappeared towards the end of
1997, it was NOE that told THE to take ‘action’ on
the basis of information received by NOE concerning
Italy (recital 156),

— in September 1997, NOE discussed with NF the
situation as regards parallel trade from France into
Belgium following
Contact
(recital 197),

complaint

by

a

— NOE issued instructions to THE regarding parallel
1997

November

Greece

in

exports
(recital 209) (408).

to

(405) Page 1676.
(406) Page 1444.
(407) Page 1218.
(408)

In order to access NOE role, the following pages may also be
relevant: 996, 1000, 1022, 1071, 1081, 1085, 1097, 1112, 1119,
1132, 1135, 1152, 1158, 1163, 1188, 1203, 1209, 1216, 1220,
1247, 1249, 1296, 1390, 1396, 1409, 1444, 1455, 1504,1506,
1511, 1526, 1529, 1539 and 1556.

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1.16.3. Compliance

(238)

If NOE concluded that measures were needed in order
to ensure (continuing) compliance, it did not take such
independently but had to turn to other
measures
Nintendo companies,
in particular NOA and NCL.
Indeed:

and independent distributors and wholesalers and retai-
lers of
the Products had an appreciable effect on
competition and trade between Member States. Conse-
quently, according to Article 56(1)(c) and (3) of the EEA
Agreement, the Commission is competent in the present
the Treaty and
case to apply both Article 81(1) of
Article 53(1) of the EEA Agreement.

— whereas NOE conceived in April/May 1995 the
overall plan regarding parallel trade, it discussed this
plan on at least three occasions with, and requested
the necessary instructions
implementation
from, […]*. […]* NOA and […]* NCL […]*. NOA
then gave instructions following this plan to NUK
(recitals 105 and 106);

for

its

— when in early 1996 the conflict between Nintendo
and THE arose, NOE was the prime critic of THE's
[…]* who
business behaviour. However,
subsequently ensured compliance by launching the
boycott of THE (recital 119) (409);

it was

— it was NCL that assessed the impact of THE's CTW
[…]* participated personally in
advertisement (410).
the meeting on 20 March 1996 between THE and
Nintendo that led to the resolution of their conflict
[…]* issued the instructions
(recital 122). NCL's
lifting the boycott of supplies to THE only after
[…]* had decided to do so after having met with
THE (411).

2. LEGAL ASSESSMENT

2.1. Jurisdiction

(239) The agreements and concerted practices applied to all
Member States together with Norway and Iceland for
which Bergsala was the exclusive independent distri-
butor.

(240)

In so far as the practices affected competition and trade
the Treaty is
between Member States, Article 81 of
applicable. As regards the effects on competition in
Norway and Iceland and the effects on trade between
the Community and these countries as well as between
these two countries, Article 53 of the EEA Agreement
applies.

(241) Nintendo Corporation Ltd/Nintendo of Europe GmbH's
distribution policy as expressed by practices involving
Nintendo Corporation Ltd/Nintendo of Europe GmbH

(412)

(409) Page 1275.
(410) Page 1750.
(411) Page 1760.

2.2. Application of Article 81 of

the Treaty and
Article 53 of the Agreement on the European
Economic Area (EEA Agreement)

2.2.1. Article 81(1) of the Treaty and Article 53(1) of the

EEA Agreement

(242) Under Article 81(1) of the Treaty and Article 53(1) of
the EEA Agreement, all agreements between undertak-
ings, decisions by associations of undertakings and
concerted practices which may affect
trade between
Member States or between contracting parties and
the prevention,
which have as their object or effect
restriction or distortion of
competition within the
common market or within the territory covered by the
EEA agreement, respectively, shall be prohibited.

2.2.2. Undertakings

of

and

concerted

associations

the Treaty (412) applies to agreements,
(243) Article 81(1) of
practices
decisions
between undertakings. The term ‘undertaking’
is not
defined in the Treaty. The Court of First Instance of
the European Communities has found that ‘Article 81(1)
of the Treaty is aimed at economic units which consist
of a unitary organisation of personal,
tangible and
intangible elements, which pursues a specific economic
aim on a long-term basis and can contribute to the
commission of an infringement of the kind referred to
in that provision’ (413)

(244) For the purposes of Article 81(1) of

the Treaty the
of
following
Article 81(1) of the Treaty can be identified in this case:

undertakings within

the meaning

— Nintendo Corporation Ltd, Nintendo of Europe
GmbH, Nintendo of America Inc, Nintendo Nether-
lands BV (now called Nintendo Benelux BV),
Nintendo France
SA,
SARL, Nintendo España
Nintendo Belgium SPRL, and Nintendo UK Ltd,

In order
Article 81 of
Agreement.

to prevent unnecessary repetition, any references to
the EEA

the Treaty also refer to Article 53 of

(413) Case T-352/94 Mo Och Domsjö AB v Commission [1998] ECR II-

1989, at paragraph 87.

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— John Menzies plc and THE Games Ltd,

— Concentra — Produtos para crianças SA,

— Linea GIG SpA,

— Nortec AE,

— Bergsala AB,

(245)

— Itochu Hellas EPE and Itochu Corporation, and

— CD-Contact Data GmbH and Contact Data Belgium

NV.

The customers of
retailers and
wholesalers are also undertakings for the purposes of
Article 81(1) of the Treaty.

these undertakings,

In accordance with the case-law of the Court of Justice
of the European Communities (414), Article 81(1) of the
Treaty does not apply to relationships within a single
economic unit or undertaking, such as those between a
parent company and its dependent subsidiaries. In the
present case, Article 81(1) does not apply to relation-
the parent,
ships between Nintendo Corporation Ltd,
and its wholly-owned subsidiaries (Nintendo España SA,
Nintendo Netherlands BV, Nintendo France SARL,
Nintendo of Europe GmbH, Nintendo of America Inc
and, at some stage, Nintendo UK Ltd (recital 103) and
Nintendo Belgium SPRL (recital 190). The same applies
to relationships between CD-Contact Data GmbH and
Contact Data Belgium NV,
to relationships between
Itochu Corporation and its (ultimately) wholly-owned
and to relationships
subsidiary Itochu Hellas EPE,
between John Menzies plc
and its wholly-owned
subsidiary THE Games Ltd.

2.2.3. Agreements and/or concerted practices

(246) Article 81(1) of the Treaty prohibits agreements, deci-

sions of associations and concerted practices.

their

(247) An agreement can be said to exist when the parties
adhere to a common plan which limits or is likely to
individual commercial conduct by deter-
limit
mining the lines of their mutual action or abstention
from action in the market. The agreement need not be
made in writing, no formalities are necessary, and no
contractual penalties or
are
required. The fact of agreement may be express or
implicit in the behaviour of the parties.

enforcement measures

(248)

It is well established in the case-law that ‘in order for
there to be an agreement within the meaning of
Article 81 of the Treaty it is sufficient that the under-
takings in question should have expressed their joint

(414) See Judgment of the Court of Justice in Case C-73/95 P Viho v

Commission, [1996] ECR I-5457.

intention to conduct
specific way’ (415).

themselves on the market

in a

(249) According to established case-law, a decision on the part
of an undertaking which constitutes unilateral conduct
the prohibition provided by
caught under
is not
Article 81(1) of the Treaty (416).

(250) However, the Court of Justice has made clear that,

in
certain circumstances, measures adopted or imposed in
an apparently unilateral manner by a manufacturer in
the context of its continuing relations with its distribu-
tors can be regarded as constituting an agreement
within the meaning of Article 81(1) of the Treaty (417).

(251)

In this respect the Court of First Instance clarified in
that a ‘distinction should be
Adalat, paragraph 71,
in which an undertaking has
drawn between cases
adopted a genuinely unilateral measure,
and thus
without the express or implied participation of another
undertaking, and those in which the unilateral character
of the measure is merely apparent. Whilst the former do
the latter
not fall within Article 85(1) of
must be regarded as revealing an agreement between
undertakings and may therefore fall within the scope of
that article. That is the case, in particular, with practices
and measures in restraint of competition which, though
apparently adopted unilaterally by the manufacturer in
the context of its contractual relations with its dealers,
nevertheless receive at
the tacit acquiescence of
those dealers’.

the Treaty,

least

(252) Article 81(1) of

the Treaty (418)

‘draws a distinction
between the concept of “concerted practices” and that
of “agreements between undertakings” or of “decisions
by associations of undertakings”; the object is to bring
within the prohibition of that article a form of coordi-
nation between undertakings which, without having
reached the stage where an agreement properly so-called
has been concluded, knowingly substitutes practical
cooperation between them for the risks of competi-
tion.’ (419)

(415) Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661,
paragraph 112 and Joined cases 209/78 to 215/78 and 218/78
[1980] ECR 3125,
Van Landewyckand
paragraph 86 and the Judgment of the Court of First Instance in
Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711,
paragraph 256 and Judgment of the Court of First Instance in case
T-41/96 Bayer AG v Commission (Adalat), paragraph 67.

v Commission

others

(417)

(416) Case 107/82 AEG v Commission [1983] ECR 3151, paragraph 38;
Joined cases 25/84 and 26/84 Ford and Ford Europe v Commission
[1985] ECR 2725, paragraph 21; Case T-43/92 Dunlop Slazenger v
Commission [1994] ECR II-441, paragraph 56.
Joined Cases 32/78, 36/78 to 82/78 BMW Belgium and Others v
Commission [1979] ECR 2435, paragraph 28 to 30; AEG,
paragraph 38; Ford and Ford Europe, paragraph 21; Case 75/84
Metro v Commission (Metro II) [1986] ECR 3021, paragraphs 72
and 73; Case C-277/87 Sandoz v Commission [1990] ECR I-45,
paragraphs 7 to 12; Case C-70/93 BMW v ALD [1995] ECR I-
3439, paragraphs 16 and 17; Adalat, paragraph 72.

(418) The case-law of the Court of Justice and Court of First Instance in
relation to the interpretation of Article 81 of the EC Treaty also
applies to Article 53 of
the EEA Agreement. References to
Article 81 of the EC Treaty therefore apply also to Article 53 of
the EEA Agreement.
(Judgment in Case 48/69, ICI v Commission [1972] ECR 619 at
paragraph 64).

(419)

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the Court,

(253) The criteria of coordination and cooperation laid down
by the case-law of
far from requiring the
elaboration of an actual plan, must be understood in the
light of the concept inherent in the provisions of the
Treaty relating to competition, according to which each
economic operator must determine independently the
commercial policy which it
in the
common market. Although that requirement of indepen-
dence does not deprive undertakings of
to
adapt themselves intelligently to the existing or antici-
pated conduct of their competitors, it strictly precludes
any direct or indirect contact between such operators,
the object or effect of which is either to influence the
conduct on the market of an actual or potential compe-
titor or to disclose to such a competitor the course of
conduct which they themselves have decided to adopt or
contemplate adopting on the market (420).

intends to adopt

the right

is clearly a continuing
analytically to subdivide what
common enterprise having one and the same overall
objective into several discrete forms of
infringement.
Such a common enterprise might therefore be an agree-
ment and a concerted practice at the same time (423).

(257)

the
In Limburgse Vinyl Maatschappij, paragraph 696,
Court of First Instance has stated that ‘[i]n the context
of a complex infringement which involves many produ-
cers seeking over a number of years to regulate the
market between them the Commission cannot be
expected to classify the infringement precisely, for each
undertaking and for any given moment, as in any event
both those forms of
infringement are covered by
Article 81 of the Treaty’.

(254) Thus conduct may fall under Article 81(1) of the Treaty
as a ‘concerted practice’ even where the parties do not
explicitly subscribe to a common plan defining their
action in the market but knowingly adopt or adhere to
collusive devices which facilitate the coordination of
their commercial behaviour (421).

(258)

judgment

in Case C-49/92 P Commission v
In its
Anic (424), the Court of Justice, upheld the judgment of
the Court of First
it
follows from the express terms of Article 81(1) of the
Treaty that an agreement may consist not only in an
isolated act but also in a series of acts or a course of
conduct.

Instance and pointed out

that

(255) Although,

in terms of Article 81(1) of the Treaty, the
concept of a concerted practice requires not only
concertationbut also conduct on the market resulting
from the concertation and having a causal connection
it may be presumed, subject to proof to the
with it,
contrary, that undertakings taking part in such a concer-
tation and remaining active in the market will
take
account of the information exchanged with competitors
in determining their own conduct on the market, all the
more so when the concertation occurs on a regular
basis and over a long period (422).

(256)

It is not necessary, particularly in the case of a complex
infringement of
long duration, for the Commission to
characterise it as exclusively one or other of those forms
of
illegal behaviour. The concepts of agreement and
concerted practice are fluid and may overlap. Indeed, it
may not even be possible realistically to make any such
distinction, as an infringement may present simulta-
neously the characteristics of each form of prohibited
conduct, while, considered in isolation, some of
its
manifestations could accurately be described as one
It would indeed be artificial
rather

than the other.

(420)

Joined Cases 40-48/73, etc. Suiker Unie and others v Commission
[1975] ECR 1663.

(421) See judgment of the Court of First Instance in Case T-7/89 Hercules
Chemicals v Commission [1991] ECR II-1711, paragraph 256.
Judgment
page I-4287 paragraph 158-166.

in Case C-199/92P Hüls v Commission,

[1991] ECR

(422)

(259) A complex agreement may properly be viewed as a
single continuing infringement
for the time frame in
which it existed. The term ‘agreement’ can properly be
applied not only to any overall plan or to the terms
expressly agreed but also to the implementation of what
has been agreed on the basis of the same mechanisms
and in pursuance of the same common purpose. The
agreement may well be varied from time to time, or its
mechanisms adapted or strengthened to take account of
new developments.

(260) Although an agreement is a joint enterprise, each parti-
in the agreement may play its own particular
cipant
role. One or more participants may exercise a dominant
role as ringleader(s). Internal conflicts and rivalries, or
even cheating may occur. The precision and scope of
the arrangements may vary over time and among parti-
cipants; they may be progressively expanded to cover
more markets or their mechanisms may be adapted or
strengthened. However,
the
arrangement from constituting an agreement/concerted
practice for the purposes of Article 81(1) of the Treaty
where there is a single common and continuing objec-
tive.

this will not prevent

(423) See Hercules, paragraph 264.
(424)

[1999] ECR I-4125, paragraph 81.

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2.2.4. The nature of the alleged infringement in the present

case

result because resale of the products by John Menzies
plc's customers to other traders,
including those estab-
lished outside the United Kingdom, was prohibited
(recitals 110, 114, 137 and 139) (425).

(261) The alleged infringement consisted of a combination of
agreements and concerted practises, different means
employed over a considerable lapse of time to achieve
the
trade.
Together, they form a single and continuous infringe-
ment that comprised the three categories of agreements
and/or concerted practices distinguished hereafter.

common objective of

restricting parallel

2.2.4.1. T h e a gre e m en ts an d /o r c on c er ted pr ac -
t ices
betw een N in te ndo C or po ratio n
L t d / N i n te n d o o f E ur o p e G m b H a n d i t s
i n dependent d ist r ibutors

(262) Agreements existed between Nintendo Corporation Ltd/
Nintendo of Europe GmbH and John Menzies plc
(recitals 109 to 111), Concentra — Produtos para
crianças SA (recital 211), Linea GIG SpA (recital 215),
Nortec AE (recital 207), Bergsala AB (recital 222), Itochu
Corporation (recital 204) and CD-Contact Data GmbH
(recital 194). By virtue of all the distribution agreements
with all of these distributors, Nintendo Corporation Ltd/
Nintendo of Europe GmbH agreed on exclusive distri-
butorship in the contract territories.

(263) Each

exclusive

distributor

a Nintendo
subsidiary or independent distributor) was supposed to
prevent parallel exports, whether directly, or indirectly
via their customers, from its territory.

(whether

(264) Those restrictions were initially incorporated in formal
distribution agreements. The formal distribution agree-
ments between Nintendo Corporation Ltd/Nintendo of
Europe GmbH and Concentra — Produtos para crianças
SA (in force from May 1991 until February 1997,
recital 210), Nintendo Corporation Ltd/Nintendo of
Europe GmbH and Linea GIG SpA (in force between
recital 215) and
October 1992 until February 1997,
Nintendo Corporation Ltd/Nintendo of Europe GmbH
and Itochu Corporation (in force from May 1991 until
February 1997, recitals 204 and 205) expressly restricted
the ability of the parties and their customers to parallel
export the Products.

(265) The two formal distribution agreements between John
Menzies plc and Nintendo Corporation Ltd/Nintendo of
Europe GmbH which were in force from 4 August 1995
until 1 January 1997 restricted John Menzies plc to
selling only to retailers who sold the products to final
trade was severely restricted as a
consumers. Parallel

(266)

In addition, whereas the formal distribution agreements
to supply
ostensibly allowed John Menzies plc itself
(EEA-based companies) outside its territory in response
to unsolicited requests for export sales (recital 111),
in
practice John Menzies plc was barred from engaging in
passive export sales (recitals 162 to 169).

(267)

the infringement also meant

Indeed,
that distributors
would not sell products themselves to foreign-based
companies, even in those cases where the contractual
terms in the formal distribution agreements between
Nintendo Corporation Ltd/Nintendo of Europe GmbH
and the exclusive distributor provided for such a right.

(268) Controlling parallel

trade became a priority for

the
parties when, during early 1995, parallel trade from the
In response,
United Kingdom increased substantially.
Nintendo Corporation Ltd/Nintendo of Europe GmbH
conceived a detailed plan to implement the infringement
including the active enforcement of the related restric-
tions on parallel trade (recitals 104 to 106). The concep-
tion of the plan by Nintendo Corporation Ltd/Nintendo
of Europe GmbH did not constitute a change in the
object of restricting parallel trade; it merely provided for
the
the
measures
trade already in place.
Therefore, as events in 1995 are part of the same pre-
existing single continuous infringement, Itochu Corpor-
ation's argument (426) that the infringement only started
in 1995 must be rejected.

enforcement
restricting parallel

and reinforcement of

stricter

(269) The detailed plan conceived by Nintendo Corporation
Ltd/Nintendo of Europe GmbH to combat parallel trade
was discussed with Nintendo Corporation Ltd/Nintendo
of Europe GmbH's (then existing) independent distribu-
tors. Only in Bergsala AB's case can participation in
those discussions be established for certain, namely at a
meeting around 15 May 1995. This meeting resulted in
Nintendo Corporation Ltd/Nintendo of Europe GmbH
instructing NUK, its United Kingdom subsidiary, to cut
off supplies to a parallel trader (recitals 105 to 107).

(425)

(426)

In this sense, John Menzies' agreement was very similar the those
of Concentra, Itochu and Linea Compare recitals 110, 114, 137,
138 (John Menzies) with recitals 204 and 205 (Itochu) recital 211
(Concentra) and recital 215 (Linea).
Itochu's reply to the Statement of Objections paragraph 33.

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(270)

exports

further parallel

and Nintendo Corporation Ltd/
John Menzies plc
Nintendo of Europe GmbH agreed by April 1996 on
an intensified and more extensive collaboration to
prevent
from the United
Kingdom. This collaboration complemented the already
existing provisions restricting parallel exports in the
formal distribution agreement between John Menzies
plc and Nintendo Corporation Ltd/Nintendo of Europe
GmbH (recital 265). As a result,
the control over
parallel trade was strengthened to a substantial degree
(recitals 118, 121, 127 to 131 and 143).

(271) The aim of preventing parallel trade from John Menzies
plc's territory was an essential element of the relation-
ship between Nintendo Corporation Ltd/Nintendo of
Europe GmbH and John Menzies plc as can be demon-
strated most clearly by pointing to the consequences of
non-compliance. Nintendo Corporation Ltd/Nintendo of
Europe GmbH did not hesitate to use its leverage as a
to enforce
supplier
(continuing) compliance with the plan such as, if need
be, by withholding supplies (recitals 119 to 126).

independent distributors

to its

(272) When the formal distribution agreements that hindered
parallel
trade between Nintendo Corporation Ltd/
Nintendo of Europe GmbH, on the one hand, and John
Menzies plc, Linea GIG SpA and Concentra — Produtos
para crianças SA, on the other, were replaced by
different
formal distribution agreements that did not
contain restrictions on parallel trade (recitals 109 and
110, 214 and 215, 210 and 211),
the infringement
nonetheless persisted, characterised by the shared under-
standing that exclusive distributors had to prevent
parallel
trade from their territories. Their practice on
the market did not change and the practical collabora-
tion and information exchange with the object of
Indeed,
restricting parallel exports went on as before.
Europe
Ltd/Nintendo
Corporation
Nintendo
GmbH (427),
John Menzies plc (428), Bergsala AB (429),
Concentra — Produtos para crianças SA (430) and Linea
GIG SpA (431) (that is, all parties for which this consid-
eration is
their
participation in the infringement lasted until the end of
December 1997 and, thus, accepted that they continued
the infringement after
the formal distribution agree-
ments restricting parallel exports to which they were a
party expired.

relevant (432)) have all admitted that

of

(273) When Nintendo Corporation Ltd/Nintendo of Europe
GmbH devised the detailed plan to combat parallel
trade, also a system of practical collaboration and infor-

(427) See Nintendo's reply to the Statement of Objections paragraph 6.2.
(428) See John Menzies' reply to the Statement of Objections, cover letter

point 4 and paragraph 9.2.

(429) See Bergsala's reply to the Statement of Objections paragraph 1.3
together with paragraph 358 of the statement of objections.
(430) See Concentra's reply to the Statement of Objections paragraph 3
together with paragraph 358 of the statement of objections.
(431) See Linea's reply to the statement of objections paragraph 2
together with paragraph 358 of the Statement of Objections.

(432) This consideration is irrelevant

for Itochu (as it stop being a
exclusive distributor for Nintendo when it
formal distribution
agreement expired) and for Nortec and Contact (as their participa-
tion to the infringement commenced after February 1997, when
the last formal distribution agreement restricting parallel trade had
expired).

on

trade

parallel

exchange

developed,
mation
comprising Nintendo Corporation Ltd/Nintendo of
John Menzies plc, Concentra —
Europe GmbH,
Produtos para crianças SA, Linea GIG SpA, Bergsala
AB, Itochu Corporation and, later, Nortec AE and CD-
Contact Data GmbH. This system complemented the
already existing provisions restricting parallel exports in
formal distribution agreements (recitals 264 and 265).
The complementary system of collaboration and infor-
mation exchange was fully developed when Nintendo of
Europe GmbH did its first systematic investigation by
questionnaire on 1 April 1996 on the incidence of
parallel trade with the EEA (recital 234).

if

(274) The information exchange and practical collaboration
territories were affected by parallel
entailed that,
in the territory where they
imports,
the distributor
occurred would report
to Nintendo Corporation Ltd/
Nintendo of Europe GmbH (or, occasionally, directly to
in the territory of origin). Nintendo
the distributor
Corporation Ltd/Nintendo of Europe GmbH would
forward the information to the distributor in the terri-
tory where the parallel exports were supposed to have
originated, who would then investigate whether one of
the parallel exports.
its customers was the source of
Often the necessary information would be collected
through close collaboration between distributors, using
various methods,
test purchases, dedicated
tagging systems, statistical methods, special question-
naires and surveys among distributors.

such as

(275) The distributor

reporting the presence of parallel
imports in its territory would and could expect
that
appropriate measures would be taken and such imports
stopped. A distributor that found that its territory was
the source of parallel exports would take appropriate
measures
exports. A variety of
those
measures were used to stop parallel exports such as
export bans, the imposition of general terms and condi-
tions of sale, formal distribution agreements,
informal
‘undertakings’,
supply blockages and restrictions and
threats to the same end.

to prevent

(276) By means of that system, all parties collaborated to trace
sources of parallel exports and reported on such inci-
dents to Nintendo Corporation Ltd/Nintendo of Europe
GmbH or directly to the distributor in the territory
where the parallel trade was suspected to have origi-
nated (433).

(433) Recitals 107, 124, 127, 131, 140, 142, 143, 145, 146, 147 to 150,
155 to 157, 160, 180, 181, 184, 185, 187, 191, 192, 193, 195, 197,
200, 201, 206, 208, 209, 213, 217 to 221, 223, 224, 225 to 227.

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(277) The practical collaboration and information exchange
greatly facilitated the tracing of the sources of parallel
trade, thereby turning the plan into an efficient tool for
the restriction of such trade. The fact that the practical
collaboration and information exchange
served the
trade and traders can be
object of
demonstrated most clearly by the role played by surveys
and questionnaires
in verifying John Menzies plc's
compliance (recitals 122, 124, 140 and 234).

tracing parallel

the

trade.

parallel

restricting

(278) The original formal distribution agreements also estab-
lished a mechanism enabling Nintendo Corporation Ltd/
Nintendo of Europe GmbH to monitor compliance with
the
Until
provisions
formal distribution agreements
February 1997,
between Nintendo Corporation Ltd/Nintendo of Europe
GmbH and Linea GIG SpA (recital 215) and Itochu
Corporation (recitals 204 and 205) and Concentra —
Produtos para crianças SA (recital 211) stipulated that
those distributors had to agree with Nintendo Corpora-
tion Ltd/Nintendo of Europe GmbH on a list of custo-
mers in their territory that could be supplied. Concentra
— Produtos para crianças SA, Linea GIG SpA and
Itochu Corporation were contractually obliged to submit
a list of current customers to Nintendo Corporation Ltd/
John
Nintendo of Europe GmbH at regular intervals.
Menzies plc was also required to do so at
regular
intervals until 31 December 1996 (recitals 166 and
167). Even if
these contractual provisions were not
applied in practice, as John Menzies plc (recital 167)
and Itochu Corporation (434) have argued, this does not
modify the conclusion that John Menzies plc and Itochu
Corporation have participated in an agreement having as
an object the restriction of competition. In addition, for
an agreement/concerted practice to exist it is not neces-
sary for
to have been implemented or given
effect (435).

it

(279) The practical collaboration and information exchange
between distributors
and
for
traders also made it easier to verify that all participants
were complying with the plan,
included effective
measures to restrict parallel trade from their territories.

tracing parallel

trade

i.e.

(280) Nintendo Corporation Ltd/Nintendo of Europe GmbH
also carried out dedicated surveys and used statistical
methods for the same purpose of monitoring compli-
including compliance within the Nintendo group
ance,
itself (recitals 230 to 235).

Itochu's reply to the statement of objections, footnote 12.

(434)
(435) Case C-49/92 Commission v Anic Partecipazioni [1999] ECR I-4125,

paragraph 122.

did

not

become

distributors

(281) Newly appointed distributors were simply integrated
into the pre-existing plan. This is what happened with
John Menzies plc, CD-Contact Data GmbH and Nortec
AE, which
until
August 1995, April 1997 and April 1997 respectively.
In this respect, John Menzies plc (436) and Nortec AE (437)
have not contested that that they entered into an agree-
ment/concerted practise with Nintendo Corporation Ltd/
Nintendo of Europe GmbH restricting parallel
trade
from their respective territories (recitals 110, 207 to
209). CD-Contact Data GmbH also entered into an
agreement/concerted practise with Nintendo Corporation
Ltd/Nintendo of Europe GmbH with the object of
restricting parallel trade from its territory, Belgium and
Luxembourg (recital 195).

(282) Export bans only need to be enforced in low-price
territories and not
in high price territories. However,
even if certain distributors did not have to take steps to
prevent exports from their territories they were funda-
mental to the infringement's efficient operation, as they
regularly warned Nintendo Corporation Ltd/Nintendo of
Europe GmbH that parallel
imports were taking place
into their respective territories (recitals 274 to 276).

2.2.4.2. A gr e em e n ts an d / or c on c e r te d pr ac ti ce s
i t s

J o h n Me n z i e s

an d

p l c

b et w e en
r e s p e c t i v e cu s to me r s

(283)

required from certain customers
John Menzies plc
written undertakings that supplies from John Menzies
plc would be resold only to final consumers in the
United Kingdom and various other conditions such as
a condition that the products would not be exported,
would not be resold to exporters and/or would be
resold only to final consumers (recitals 114, 132 to
139, 143 and 158).

(284) The relationship between John Menzies plc and its
customers must be seen together with the agreements
and/or concerted practices between Nintendo Corpora-
tion Ltd/Nintendo of Europe GmbH, Itochu Corporation,
Concentra — Produtos para crianças SA, Linea GIG
SpA, Bergsala AB,
John Menzies, Nortec AE and CD-
Contact Data GmbH as part of the same overall plan of
trade. By imposing export bans or
restricting parallel
conditions with equivalent effect on their customers
John Menzies plc gave effect to these agreements and/
or concerted practices.

(436) Cover letter to John Menzies' reply to the Statement of Objections
together with paragraphs 81 and 268 of the Statement of Objec-
tions.

(437) Nortec's reply to the Statement of Objections paragraph 3 together
with paragraphs 81 and 189 and 190 of the statement of objec-
tions.

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2.2.4.3. A gr ee m e n t a n d /o r c on c e r te d pra c tic e s
Ltd/
betw een N inte ndo C or po ratio n
Nintendo
it s
reta il a n d w hol esa le custo m er s

Eur ope GmbH and

of

(285)

In Germany (from January 1991 until August 1995,
recitals 199 and 200), Belgium (from January 1994 until
April 1997, recital 191) and Spain (from January 1993
until April 1997,
recitals 171 to 179), Nintendo
Corporation Ltd/Nintendo of Europe GmbH imposed
explicit export bans or equivalent conditions on its
customers, retailers and wholesalers, by means of formal
distribution agreements or general terms and conditions
for sale. In Germany and Spain, after the deletion from
their written terms and conditions of the export ban
imposed on their customers, Nintendo of Europe GmbH
and Nintendo España SA continued trying to make
respective customers
supplies conditional upon their
not
In the Netherlands
products.
(recitals 182 and 183) Nintendo Netherlands BV tried
to make supplies dependent upon customers not resel-
ling the products to parallel traders. By these means,
customers of the Nintendo group were prevented from
exporting the products or
reselling the products to
parallel exporters. Furthermore, Nintendo's subsidiaries
acting as exclusive distributors on numerous occasions
trade into their
provided information to stop parallel
respective territories (recitals 107, 124, 140, 175 to 177,
179, 180 and 181, 184, 185, 187, 192, 193).

exporting

the

(286) By imposing export bans or equivalent conditions or
trying to do so Nintendo Corporation Ltd/Nintendo of
Europe GmbH gave effect to the infringement in which
Itochu
it participated together with Bergsala AB,
Corporation, Nortec AE, Linea GIG SpA, Concentra —
Produtos para crianças SA, John Menzies plc and CD-
Contact Data GmbH. Exports to the territories of the
other participants were prevented. By the same means,
trade between the
parallel
assigned to
different
subsidiaries of Nintendo Corporation Ltd/
Nintendo of Europe GmbH was prevented.

territories

2.2.5. The parties awareness of the unlawful conduct of the

other participants

(287) As the Court of First Instance held in its recent judg-
‘It is settled
ment in the case Sigma v Commission (438):
case-law that an undertaking which has participated in a
multiform infringement of the competition rules by its
own conduct, which met the definition of an agreement
or concerted practice having an anti-competitive object
within the meaning of Article 85(1) of the Treaty and
was intended to help bring about the infringement as a

(438) Case T-28/99 Sigma v Commission, Judgment of 20 March 2002,

not yet reported, paragraph 40. Anic, paragraph 203).

whole, may also be responsible for the conduct of other
undertakings followed in the context of the same infrin-
gement throughout the period of its participation in the
infringement, where it is proved that the undertaking in
question was aware of
the
other participants, or could reasonably foresee such
conduct, and was prepared to accept the risk’.

the unlawful conduct of

(288) For Nintendo Corporation Ltd/Nintendo of Europe
GmbH (439), Itochu Corporation (recital 206), Linea GIG
SpA (recitals 145 and 146, 217), Nortec AE (recitals 208
and 209) and John Menzies plc (recital 160) direct
evidence exists that when each transmitted information
it knew that
imports into its territory,
about parallel
that information would be or had already been used by
other distributors to control parallel exports from their
territory.

(289) Restricting parallel exports would only be rational if the
distributor knew or at
should
parallel trade into his own territory occur, other distri-
butors would act likewise and protect his territory in
turn (440).

least expected that,

(290) Bergsala AB (recitals 223 and 224), CD-Contact Data
GmbH (recital 195), John Menzies plc (recitals 131, 132,
133, 134, 143 to 150, 156) and Nintendo Corporation
Ltd/Nintendo of Europe GmbH (recitals 172 to 179,
information
184, 191, 199 and 200) upon receipt of
trade,
territory was the source of parallel
their
that
they were to trace the source of parallel
knew that
export and take appropriate measures.
is therefore
reasonable to say that when they were to report on
parallel trade into their territories, they expected that the
same meaning would be attached to that information by
other distributors, but
risk. Bergsala AB
(recitals 225 to 227), CD-Contact Data GmbH
(recital 197),
and
Nintendo Corporation Ltd/Nintendo of Europe GmbH
(recitals 127, 128, 131, 147 to 150, 156, 157, 175, 177,
178, 180, 184, 187, 191, 195, 206, 209, 223, 224) did
all report parallel trade to other parties.

John Menzies plc

(recital 160)

took that

It

(291) Similarly,

John Menzies plc

(recitals 109 to 111),
Concentra — Produtos para crianças SA (recitals 211
and 213),
Itochu Corporation (recitals 204 and 205)
and Linea GIG SpA (recital 215) had agreed to a formal
distribution agreement
trade
from their territories had to be restricted. Consequently,
when they reported on parallel trade into their terri-
tories, they could foresee that that information would be
used to stop that parallel trade, but took that risk.

that parallel

that meant

(439) See for instance the instances referred to in recital 237, the conflict
between John Menzies and Nintendo, its resolution and the colla-
boration that developed subsequently (recitals 130 and 131, 147 to
150, 155 to 158), Nintendo's contacts with Contact (recitals 195
and 197) and Bergsala (recitals 223 and 224).

(440) The existence of a mutual

interest among distributors was even
recognised by John Menzies (recitals 160 and 161), despite the fact
that, in view of the low prices to trade in the United Kingdom, it
was unlikely to gain in the short run from the infringement.

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(292)

In early 1995, when Nintendo Corporation Ltd/
Nintendo of Europe GmbH conceived the detailed plan
to stop parallel trade, the problem of parallel trade had
been with Bergsala AB (recitals 107 and 225).
It can
therefore be reasonably argued that Bergsala AB was
privy to the infringement (441).
Indeed, Bergsala AB
knew that the object of its collaboration with Nintendo
Corporation Ltd/Nintendo of Europe GmbH was to keep
Europe clean from parallel trade (recitals 222 to 224).

(293) Despite the fact that, on account of its central position,
it was obliged to display particular vigilance in order to
prevent practises contrary to the competition rules (442),
Nintendo Corporation Ltd/Nintendo of Europe GmbH
played a central role in the infringement. It coordinated
the efforts
trade, monitored the
compliance of
the participants with the infringement
and, when necessary, would take disciplinary action to
ensure
compliance by the participants
(recitals 228 to 238). Also as a result of this leading
role, Nintendo Corporation Ltd/Nintendo of Europe
GmbH was privy to all manifestations of the infringe-
ment.

to control parallel

(continuing)

(297)

Concentra — Produtos para crianças SA are discussed
below.

2.2.6. Arguments by

the parties about
agreements and about the scope of the infringement

existence of

the

John Menzies pl c

John Menzies plc has admitted that its conduct infringed
Article 81(1) of
the Treaty from February 1996 and
throughout 1997. With regard to the period before
February 1996,
its
John Menzies plc
commercial policies that hindered parallel trade (refer-
ence was made to THE Games commercial policy regarding
authorised customer, referred to in recitals 112 and 113
above) formed no part of any arrangement to restrict
parallel trade but unilateral conduct not falling within
the scope of Article 81(1) of the Treaty.

argues

that

(294) Direct evidence that all undertakings were aware or
could reasonably have known of the illegal behaviour
of other
that
Nintendo of Europe GmbH sent on 1 April 1996
(recitals 124 and 213) and 29 May 1996 (recitals 140
and 213) to its independent distributors.

questionnaires

distributors

the

are

(295) The addressees of the questionnaires knew or, at least,
could have known that their conduct contributed to the
implementation of a coordinated effort having as the
object
traded products
the
throughout the EEA.

elimination of parallel

(296) Finally Nintendo Corporation Ltd/Nintendo of Europe
GmbH (443), John Menzies plc (444), Linea GIG SpA (445),
Nortec AE (446), Bergsala AB (447), and Itochu Corpora-
tion (448) have not disputed in their replies to the State-
ment of Objections that the infringement in which they
participated is one single and continuous infringement.
However, some of the more detailed arguments of these
undertakings, as well as CD-Contact Data GmbH and

(441) Anic, paragraphs 95 and 96.
(442)

Judgment in Joined Cases 100 and 103/80 SA Musique Diffusion
Française v Commission [1983] ECR 1825, paragraph 75.

(443) Nintendo's reply to the statement of objections paragraphs 2.1 and

(444)

2.2.
John Menzies reply to the statement of objections, cover letter,
point 4 on page 2, and paragraph 4.4.

(445) Linea's reply to the statement of objections paragraphs 2 and 4.2.
(446) Nortec's reply to the statement of objections paragraphs 2 and 3.
(447) Bergsala's reply to the statement of objections paragraphs 1, 2 and

4.1.
Itochu's reply to the Statement of Objections, section C.

(448)

(298)

that

this policy restricted
John Menzies plc admits
trade (449). The issue therefore is not whether
parallel
John Menzies plc had, prior to February 1996, a policy
of restricting parallel exports but whether this policy
was, as John Menzies plc claims, purely unilateral.

(299)

John Menzies plc's behaviour prior to February 1996
cannot be characterised as purely unilateral.

(300) First,

it

should be recalled that

John Menzies plc's
various formal distribution agreements with Nintendo
Corporation Ltd/Nintendo of Europe GmbH, valid from
4 August 1995 until 1 January 1997 (450), contained
provisions to the effect
John Menzies plc could
that
only sell to retailers specialising in sales to consumers.
This contractual obligation upon John Menzies plc is
identical
in THE Games
customer
regarding
commercial
(recital 112). Those provisions severely restricted parallel
exports because they implied that resale of the Products
by John Menzies plc's customers
traders,
including those established outside the United Kingdom,
was prohibited. They were identical
to John Menzies
plc's third policy statement (recitals 112 and 113).

to the first policy statement

authorised

to other

policy

(449) See John Menzies' reply to the Statement of Objections, page 8 as

well as the policy statement itself (pages 861 to 863).

(450) Up to 1 January 1998, John Menzies had three successive agree-
ments with Nintendo of which the first two, the one valid from
4 August 1995 until 31 December 1995 and the one valid from
1 January 1996 until 31 December 1996, contained the provisions
(The former agreement was, due to a clerical
referred to here.
error, onerously dated in footnote 88 of the Statement of Objec-
tions. However,
the
Commission's assertion that John Menzies participated in the plan
from August 1995 onwards (see recital 358(b)). The dates are also
correctly referred to in paragraph 259 of the Statement of Objec-
tions).

it was clearly referred to as the basis of

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(301) Thus,

John Menzies plc's policy restricting parallel
exports was not unilaterally adopted and planned but
represented the implementation of contractual provi-
sions restricting parallel exports. Those provisions are
an integral part of formal distribution agreements which
of
constitute
Article 81(1) of the Treaty. The existence of a ‘concur-
rence of wills’ between John Menzies plc and Nintendo
Corporation Ltd/Nintendo of Europe GmbH flows from
John Menzies plc's signing of
its formal distribution
agreement with Nintendo Corporation Ltd/Nintendo of
Europe GmbH on 4 August 1995 (451).

agreements within

the meaning

(302) Secondly,

John Menzies plc's refusal

the correspondence dated 14 August 1995
(recital 114), between […]* and John Menzies plc
expressly mentions that
to
supply for wholesale purposes is a direct consequence of
John Menzies plc's formal distribution agreement with
Nintendo Corporation Ltd/Nintendo of Europe GmbH.
The same letter shows that John Menzies plc interpreted
the term ‘authorised retailers’
(a term used in John
distribution agreement with
Menzies plc's
Nintendo Corporation Ltd/Nintendo of Europe GmbH)
as meaning that it was only entitled to supply retailers,
and not for wholesale purposes. Thus, a direct causal
link
provisions
restricting parallel exports in John Menzies plc's agree-
ment with Nintendo Corporation Ltd/Nintendo of
Europe GmbH, THE Games
commercial policy regarding
authorised customer and John Menzies plc's conduct vis-
à-vis its customers (452).

established

between

formal

can

the

be

(303) Thirdly,

is

the

also

inconsistent with

John Menzies plc's assertion that, prior

to
February 1996, the THE Games commercial policy regarding
authorised customer restricting parallel trade was imposed
unilaterally
events
concerning […]* (recital 165). Even prior to the boycott
by Nintendo Corporation Ltd/Nintendo of Europe
GmbH in February 1996,
John Menzies plc was not
prepared to enter into a direct business relationship with
[…]* but was ready to do so via an intermediary
established within the United Kingdom, namely […]*.
This way of proceeding rendered John Menzies plc's
involvement with export sales more opaque and, hence,
less visible to Nintendo Corporation Ltd/Nintendo of
Europe GmbH.

(451) See page 297A, 313 and also 298A.
(452) A direct causal

link between John Menzies' agreement and its
behaviour towards its customers can also be deduced from the
correspondence between John Menzies and […]* and John Menzies
and […]*,
to February 1996.
(recitals 137, 138 and 144).

took place

subsequent

that

(304) Consequently, John Menzies plc's assertions (453) that its
relations with […]* had nothing to do with a policy of
restricting parallel
the THE Games
commercial policy regarding authorised customer was unilat-
erally imposed must be rejected (454).

and that

trade

(305) Despite John Menzies plc's claims that its formal distri-
bution agreement with Nintendo Corporation Ltd/
took effect on
Nintendo of Europe GmbH only
15 September 1996, the date of 4 August is retained
as this date is clearly mentioned in John Menzies plc's
first
formal distribution agreement with Nintendo
Corporation Ltd/Nintendo of Europe GmbH restricting
parallel trade as the effective date of this agreement as
well as the date at which the agreement was signed (455).

(306)

the

agreements

independent of

John Menzies plc further argues that it is not appro-
priate to characterise the relationship between itself and
the independent distributors as an agreement and/or
concerted practice for the purposes of Article 81(1) of
and/or
the Treaty,
concerted practices with Nintendo Corporation Ltd/
Nintendo of Europe GmbH. It argues that, if an agree-
ment/concerted practice existed that could be viewed in
isolation from the one with Nintendo Corporation Ltd/
Nintendo of Europe GmbH, the question must be asked
why it was with Nintendo Corporation Ltd/Nintendo of
Europe GmbH that the independent distributors raised
their concerns with respect to parallel trade from the
United Kingdom, rather than with John Menzies plc
direct. Essentially, John Menzies plc argues that it only
entered into an agreement with Nintendo Corporation
Ltd/Nintendo of Europe GmbH.

(307)

John Menzies plc has not contested that it participated
in one single and continuous infringement.

(308) For a finding that a party participated in a wider
infringement, it is sufficient to establish that it knew or
should have known about its broader scope;
it is not
necessary to establish that the undertaking has entered
into agreement with all participants to the infringement.
John Menzies plc knew or could have known that the
infringement had an EEA-wide dimension, as is clear
from:

— John Menzies plc's letter to Nintendo of America Inc
dated 21 February 1996, which referred to Europe
(recital 118),

(453)

John Menzies' reply to the statement of objections, section 2 and
Annex A, reference to paragraph 83.

(454) As it was not unilateral set, THE Games commercial policy regarding
authorised customer does not bear resemblance, as John Menzies
argued (John Menzies'
reply to the statement of objections,
Section 1),
to the conduct of Bandai UK against which John
Menzies had previously complained about to the Monopoly and
Mergers Commission.

(455) See page 297A, 313 and also 298A.

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— Nintendo of Europe's GmbH's letter of 1 April 1996,
which referred to parallel traders throughout the EEA
(recital 127),

(311)

— John Menzies plc's reply of 4 April 1996 in which
John Menzies plc expressed its willingness to colla-
borate in the interest of the ‘total European Market
place’ (recital 127),

— John Menzies plc's letter of 11 April 1996, in which
John Menzies plc recognised the impact that parallel
trade would have on mainland Europe and expressed
its intention to stop parallel
trade into mainland
Europe (recital 130),

— John Menzies plc's letter of 24 May 1996 in which
continental

to the

again reference was made
European market (recital 132),

Itochu Corporation (458) and Nortec AE (459) have argued
that the motive underlying the correspondence in which
they reported to Nintendo Corporation Ltd/Nintendo of
Europe GmbH the existence of parallel trade was not to
restrict parallel
to improve their purchase
from Nintendo Corporation Ltd/Nintendo of
price
Europe GmbH.

trade, but

(312)

It has already been established that these three under-
takings knew or could reasonably have known about
the overall infringement. Thus, they merely explain the
reasons why they committed it. This is of course irrele-
vant for the purpose of applying Article 81(1) of the
Treaty.

CD -Co n ta ct D at a GmbH

— Nintendo of Europe's letter to John Menzies plc in
which John Menzies plc was complimented for its
efforts to stop parallel trade on behalf of ‘everybody
around Europe’ (recital 142),

(313) CD-Contact Data GmbH (460) has also argued that

it
tried to get a better purchase price from Nintendo
Corporation Ltd/Nintendo of Europe GmbH. The same
consideration as in recital 312 also applies in this case.

— John Menzies plc's letter

to Nintendo of Europe
GmbH dated 19 April 1996 that referred to their
other European partners, meaning both other subsi-
diaries of
the Nintendo group and independent
distributors (recital 143).

(314) CD-Contact Data GmbH has further contested that it
entered into an agreement with Nintendo Corporation
Ltd/Nintendo of Europe GmbH that exports from its
territory were to be prevented.

L in e a G I G SpA

(309) Linea GIG SpA has submitted that it never took direct
steps to monitor the incidence of parallel trade within
its territory (456). This argument has to be rejected: Linea
GIG SpA regularly provided information to NOE and
John Menzies plc regarding parallel
imports into Italy
(recitals 124, 128, 145 and 146, 155, 156, 217 to 221).

C o n c e n t r a — Pro du tos
Itochu Co r p ora ti on and Nor tec AE

p ara

cr i an ç as ,

SA ,

(310) Concentra — Produtos para

crianças, SA (457) has
admitted that
its formal distribution agreement with
Nintendo Corporation Ltd/Nintendo of Europe GmbH
infringed Article 81(1) of the Treaty. However, it denies
that it had intention to restrict parallel imports into its
territory when it communicated information regarding
to Nintendo Corporation Ltd/
such parallel
Nintendo
in
Europe GmbH. As
of
recitals 291 and 294 above, there is direct and indirect
evidence which shows that this company participated in
a single and continuous infringement.

indicated

imports

(315) CD-Contact Data GmbH considers that, in view of the
Court of First Instance's judgment in Adalat, no agree-
ment for the purposes of Article 81(1) existed between
CD-Contact Data GmbH and Nintendo Corporation Ltd/
Nintendo of Europe GmbH.

(316)

In Adalat, the Court of First Instance investigated the
conditions that have to be met for finding an agreement
for the purposes of Article 81 of the Treaty in cases
where there is no direct documentary evidence of the
(Adalat paragraph 71).
conclusion of an agreement
However,
in this instance, CD-Contact Data GmbH's
explicitly acquiesced to Nintendo Corporation Ltd/
Nintendo of Europe GmbH's expectations as laid out in
dated
CD-Contact Data GmbH's
28 October 1997.

to NOE

letter

(317) This letter shows that CD-Contact Data GmbH and
Nintendo Corporation Ltd/Nintendo of Europe GmbH
had arrived at a ‘concurrence of wills’ no exports from
CD-Contact Data GmbH's territory were to occur and
that CD-Contact Data GmbH would monitor supplies to
customers, such as […]*, from whom exports could be
expected (recital 195).

(456) Linea's reply to the Statement of Objections paragraph 3.
(457) Concentra's reply to the Statement of Objections paragraph 4.

(458)
Itochu's reply to the Statement of Objections paragraph 30.
(459) Nortec's reply to the Statement of Objections, paragraph 3.
(460) Contact's reply to the Statement of Objections paragraph 30.

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(318)

In support of its argument that no agreement for the
purposes of Article 81(1) of
the Treaty existed, CD-
Contact Data GmbH submits that it had no interest in
entering into an agreement to restrict parallel trade from
its territory. However, this argument must be rejected
because by agreeing to do so, CD-Contact Data GmbH
ensured that other parties would continue to restrict
parallel trade, thereby preventing parallel
imports into
its own territory.

(319) CD-Contact Data GmbH has further submitted evidence
that it did not adhere to the agreement that parallel
trade was to be restricted (461). According to CD-Contact
Data GmbH, it exported the products itself and/or sold
products to companies that it knew would export the
same products.

(320)

It is established case-law that there is no need to take
account of the concrete effects of an agreement when it
has as its object the prevention, restriction or distortion
of competition within the common market (462).

(321) CD-Contact Data GmbH has nevertheless accepted that
the Court of First Instance's decisions in Case T-7/89
Hercules v Commission (463) and Case T-9/89 Hüls v
Commission (464) imply that a party to an agreement that
infringes Article 81 of the Treaty does not cease to be a
party to that agreement merely because its subsequent
actual behaviour is not in all respects in line with the
anti-competitive agreement. Likewise, CD-Contact Data
GmbH accepts that it follows from this case-law that a
mere inner reservation does not suffice to show that an
undertaking that takes part in an anti-competitive hori-
zontal agreement was not party to that agreement (465).

(322) CD-Contact Data GmbH argues that

the Commission
cannot rely in the present case on the above case-law
on the ground that the cases referred to concern hori-
zontal agreements whereas the present case concerns a
vertical agreement.

(323) When assessing the concept of ‘agreement’, the Commu-
nity judicature does not make a distinction between
infringements. In paragraph 67
horizontal and vertical
of the judgment in Adalat, a case which concerned the
concept of agreements in the context of vertical rela-
tionships, the Court of First Instance used an identical
definition of the concept of agreement and relies on the
same case-law as the Commission has cited here.

(324)

It is well established case-law that Article 81(1) refers in
a general way to all agreements that distort competition

(462)

(461) Contact's reply to the Statement of Objections paragraph 12 and
annexes 1 and 2 as well as Contact's submission of 6 November
2000 under ‘question 1’ and ‘question 2’ and annexes 1 to 4.
Judgment in Case T-148/89 Tréfilunion SA v Commission [1995]
ECR 1995 page II-1063 paragraph 79, referred to in Judgment in
Case T-308/94 Cascades SA v Commission,
[2002] ECR II-813,
paragraph 106.
[1991] ECR II-1711.
[1992] ECR II-499.

(463)
(464)
(465) Contact's submission of 6 November 2000, under ‘question 5’.

within the single market and does not distinguish
between agreements between competitors operating on
in the economic process and those
the same level
between non-competing
at
different levels (466).

undertakings operating

(325) CD-Contact Data GmbH further argues that there is a
and vertical
material difference between horizontal
infringements.
In a horizontal anti-competitive agree-
ment, all parties stand to gain from the arrangement,
even, or perhaps especially, those undertakings that do
not ultimately act in accordance with the anti-competi-
in a price-
tive arrangement and decide, for instance,
fixing cartel, to sell at a lower price than agreed. By
contrast, CD-Contact Data GmbH argues, parties to a
vertical infringement have no possibility of ‘cheating’.

(326) However, the fact that CD-Contact Data GmbH allowed
parallel exports to occur shows that it ‘cheated’
itself.
An undertaking which, despite its concertation with
other parties, pursues a independent policy on the
market may simply be trying to use the agreement for
its own benefit (467).

(327) CD-Contact Data GmbH also claims that the judgment
of the Court of First Instance in Case T-9/89 Hüls v
Commission (468),
in particular paragraphs 125 to 127,
supports the view that undertakings can exculpate them-
selves merely by providing a plausible explanation that
their presence at a meeting where anti-competitive
agreements were concluded was without anti-competi-
tive intent. CD-Contact Data GmbH argues that the fact
that it had no commercial interest in restricting parallel
trade and, indeed, the fact that it allowed parallel trade
from its territory to occur constitutes in itself evidence
that there was no ‘will’ on its part to participate in the
anti-competitive arrangement and constitutes exculpa-
tory evidence in this context.

(328)

In fact, also in Hüls, at paragraphs 126 and 127, the
Court of First Instance expressly rejected the argument
that actual conduct in the market constitutes exculpa-
instance held in
tory evidence. The Court of First
‘even assuming that
Sarrio (469)
the applicant's
conduct on the market was not in conformity with the
conduct agreed, that in no way affects its liability for an
the Treaty’. Conse-
infringement of Article 85(1) of
quently, CD-Contact Data GmbH cannot rely on the
fact that, in reality, it allowed parallel exports to occur.

that

(466)

(467)
(468)
(469)

Judgment in Joined Cases 56 and 58/64 Consten and Grundig v
Commission, [1966] ECR English Special Edition p. 299.
Judgment in Case T-308/94 Cascades v Commission, paragraph 230.
[1992] ECR II-499.
Judgment in Case T-334/94 Sarrió SA v Commission [1998] ECR II-
1439.

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(329) CD-Contact Data GmbH finally argues that, since it was
economically dependent on Nintendo Corporation Ltd/
Nintendo of Europe GmbH (470), it had no option but to
leave them under
it would not
export or would make sales that could lead to exports.
Nintendo products accounted for more than 50 % of
CD-Contact Data GmbH's
in the relevant
period.

the impression that

turnover

to conclude that Article 81(1) of
Article 53(1) of the EEA Agreement apply.

the Treaty and

(333)

In any event,
the following elements show that
restriction had an appreciable effect on competition:

the

(330) CD-Contact Data GmbH has submitted no concrete
evidence that Nintendo Corporation Ltd/Nintendo of
Europe GmbH actually exerted effective pressure on
CD-Contact Data GmbH to comply with its instructions
regarding parallel exports.
In any event, even if CD-
Contact Data GmbH were able to show that Nintendo
Corporation Ltd/Nintendo of Europe GmbH exerted
effective pressure, it would not be able to rely on that
circumstance to justify having committed an infringe-
ment of Article 81(1) of the Treaty. Instead of partici-
pating in the anti-competitive conduct,
it could always
have complained to the competent authorities about the
pressure brought to bear on it and lodged a complaint
with the Commission under Article 3 of Regulation
No 17 (471). Therefore CD-Contact Data GmbH's argu-
ments have to be rejected.

2.2.7. Restriction of competition

(331) The infringement had the object of restricting all passive
sales, regardless of whether these were the result of
unsolicited requests from EEA-based companies outside
the exclusive territory or the result of exports by whole-
saler/retailers established within such a territory (472).
Contrary to the Commission's policy in respect of
exclusive distribution that passive sales are always to be
allowed, the territorial protection awarded to exclusive
distributors was thereby enhanced to a state of absolute
territorial protection and in each territory all competi-
tion facing the distributor of
in that
territory was eliminated. As a result, intra-brand compe-
tition was severely restricted and the single market was
partitioned.

the products

(332) On the basis of

it

the above,

is concluded that

the
agreements and/or concerted practices that formed the
infringement constitute together a restriction of compe-
tition within the meaning of Article 81(1) of the Treaty
and Article 53(1) of the EEA Agreement. Because their
it is not necessary to
object is to restrict competition,
consider their actual effects upon competition in order

(470) Contact's reply to the Statement of Objections, paragraphs 16, 17,

29 and 35.

(471) See Hüls, paragraph 128, and Tréfilunion, paragraph 58.
(472) However, to the extent that this behaviour concerned a Nintendo
subsidiary that would not supply customers established in a
territory in which another Nintendo subsidiary had been made
it does not fall
responsible for the distribution of the products,
within the scope of Article 81(1) (see VIHO).

— the

of

the

enforcement

active
infringement
the Community and the EEA. There
throughout
have been many examples where parallel exports
from a territory were hindered (recitals 114, 132 to
142, 144, 157, 158, 165, 172, 174, 178, 183, 191,
199, 200, 206 and 209),

— the practical arrangements to trace parallel exports
and exporters that
took place between Nintendo
Corporation Ltd/Nintendo of Europe GmbH and all
its independent distributors (recitals 107, 124, 127,
131, 140, 142, 143, 144 to 146, 147 to 150, 155 to
157, 160, 180 and 181, 184, 185, 187, 191, 192, 193,
195, 197, 200, 201, 206, 208 and 209, 213, 217 to
221, 223, 224 and 225 to 227), reinforced by the
ongoing controls with a permanent character intro-
duced by John Menzies plc (recitals 133 and 149)
and Nintendo Corporation Ltd/Nintendo of Europe
GmbH (recitals 230 and 232) in order to monitor
whether their customers were exporting products,

— the high value of sales of

the products and the
significant position of Nintendo Corporation Ltd/
Nintendo of Europe GmbH in that trade.

2.2.8. Effect on trade between Member States and between

EEA Contracting Parties

(334) The infringement had an effect upon trade between
Member States and between Contracting Parties of the
EEA.

(335) Article 81(1) of the Treaty is aimed at agreements with,
like the present one, might harm the attainment of a
single market between the Member States, whether by
partitioning national markets or by affecting the struc-
ture of competition within the common market. Equally,
Article 53(1) of
is directed at
agreements that undermine the realisation of a homo-
geneous European Economic Area.

the EEA Agreement

(336) The infringement, by its nature, had the object of
partitioning the internal market because limited cross-
border sales of the products. Thus it had an effect on
trade between Member States (473).

(473) See Judgment, in Joined Cases C-89/85, C-104/85, C-114/85, C-
116/85, C-117/85 and C-125/85 to C-129/85 Ahlström and others v
Commission (Woodpulp), [1993] ECR I-1307, paragraph 176 or
Judgment in Case 19/77 Miller v Commission [1978] ECR 131.

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2.2.9. Inapplicability of Regulation (EEC) No 1983/83

Member States. Absolute territorial protection is not
indispensable to a distribution system based on exclu-
sive territories either.

(337) Each EEA-based subsidiary of the Nintendo group and
each independent Nintendo distributor was awarded an
exclusive territory. It is generally accepted that exclusive
distribution agreements can contribute to technical and
economic progress by improving the distribution of
goods. Exclusive distribution systems in force during
the period relevant for this Decision could therefore, in
principle, have benefited from the block exemption
provided for in Regulation (EEC) No 1983/83, as last
amended by Regulation (EC) No 1582/97 (474) then in
force.

2.2.11. The duration of the infringement

(342) By letter dated 23 December 1997, Nintendo Corpora-
tion Ltd/Nintendo of Europe GmbH informed the
Commission that it was willing to collaborate with the
Commission's proceedings (recital 94). A mere expres-
sion of intent to collaborate is insufficient to conclude
that the infringement has come to an end.

(338) However,

it is well established in the case-law of the
Court of Justice, starting with the judgment of 13 July
in Joined Cases 56 and 58/64, Grundig-
1966,
Consten (475)
that enhancing the exclusivity granted by
virtue of distribution agreements, to a state of absolute
territorial protection, by completely prohibiting distribu-
tors
from making any sales outside the territories
assigned to them or from selling to customers who
intend to export,
indispensable to realise the
potential benefits of an exclusive distribution system.
in regard to the goods in question territories
Instead,
are hermetically sealed off, making interpenetrating of
national markets impossible, thereby, bringing to nought
economic integration.

is not

(343) One of the prime reasons why intra-EEA parallel trade
in the products occurred, was Nintendo Corporation
Ltd/Nintendo of Europe GmbH's policy of price compe-
tition in the United Kingdom alone (476), where the
Products met substantially more competition than else-
in the EEA (477). Nintendo Corporation Ltd/
where
Nintendo of Europe GmbH charged substantial
lower
prices for supplies to John Menzies plc than to other
exclusive distributors; resulting in parallel exports from
the United
EEA territories
(recitals 117, 129, 130, 154 and 155). However, by the
latest on 5 January 1998 (478), Nintendo Corporation
Ltd/Nintendo of Europe GmbH aligned its prices for
supplies to exclusive distributors in the EEA, eliminating
one of the prime causes of intra-EEA parallel trade.

Kingdom to

other

(339) The agreements which are the subject of

the present
proceedings constitute however a restriction of parallel
trade by object and thus cannot be covered by Regula-
tion (EEC) No 1983/83.

2.2.10. No individual exemption under Article 81(3) of the

Treaty possible

(340) The Commission may, pursuant to Article 81(3) of the
Treaty, under certain conditions grant an individual
exemption from the prohibition set out in Article 81(1).

(341) No such exemption has been requested in the present
case, as the agreement was not notified. The agreements
would not, in any case, have qualified for an exemption.
Exclusive territorial protection constitutes a hardcore
restriction that did not result in any improvement of
the distribution of the products. Nor did consumers get
any benefit. Exclusive territorial protection impeded
consumers from taking advantage of the single market
and from benefiting from the price differences between

(474) OJ L 214, 6.8.1997, p. 27.
(475)

[1966] ECR 429.

(344)

It is therefore concluded that Nintendo Corporation Ltd/
Nintendo of Europe GmbH had terminated the infringe-
ment by January 1998. This does not indicate that other
parties to the infringement also terminated the infringe-
ment.

2.2.11.1. N in te n d o C or por ati on L td /N i n te n d o of

E u r o p e G m b H

(345)

In January 1991, NOE introduced general
terms and
conditions that restricted parallel exports from Germany
(recital 199). Nintendo Corporation Ltd/Nintendo of
Europe GmbH has not contested that
they infringed
Article 81(1) of the Treaty from January 1991 until the
end of December 1997 (479).

(476) Nintendo initially contended that the prices at which the products
were supplied from Japan to subsidiaries and independent distri-
butors in Europe were similar. Nintendo attributed the price
differentials and the parallel trade that developed to (undefined)
local market conditions and exchange rate fluctuations within
Europe (pages 1640 and 1641). However, Nintendo has not
contested the Commission's rebuttal of
in the
this argument
Statement of Objections (see recitals 324 to 337 thereof).

(477) Pages 881 and 882 (letter from John Menzies to NOA dated
22 February 1996), 890 (letter from John Menzies to NOA dated
24 May 1996) pages 975 to 979 and 1135 to 1147. See also John
Menzies' business plan (pages 1163 to 1187) as presented to NOE
which contains various references to strong price competition in
the United Kingdom.

(478) Page 1622.
(479) Nintendo's reply to the Statement of Objections paragraph 6.2.

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2.2.11.2. J o hn Me n z ie s p lc

(346)

recognised that

its conduct
John Menzies plc has
infringed Article 81(1) of
the Treaty already from
February 1996 and continued to do so until the end of
December 1997 (480). For the time period from 4 August
1995 until February 1996, the Commission has demon-
strated that John Menzies plc had participated in the
infringement.

2.2.11.3. C on c e n tra — P rodutos pa ra cr ian ça s ,

SA

(347) Concentra — Produtos para crianças, SA has recog-
nised (481) that its participation to the infringement lasted
the end of
from 14 May 1991 (recital 211) until
December 1997 (recital 213).

2.2.11.4. L in e a G I G S pA

(348) Linea GIG SpA has recognised (482) that its participation
in the infringement lasted from 1 October 1992, until
the end of December 1997.

2.2.11.5. N or tec A E

(349) Nortec AE participated in the

from
the end of December 1997

infringement

23 October 1997 until
(recitals 207 to 209).

2.2.11.6. B e rg s ala A B

(350) Bergsala AB's participated in the infringement

from
15 May 1995 until December 1997 (recitals 105 to
107, 225 and 269).

2.2.11.7. I tochu Co r p ora ti on

tion lasted from 16 December 1991 until 28 February
1997, when Itochu Corporation's distributorship came to
an end (recital 204).

2.2.11.8. C D -Co n ta ct D at a G m bH

(352) CD-Contact Data GmbH participated in the infringement
from 28 October until December 1997 (recitals 194 to
197).

2.3. Addressees of the Decision

(353)

It must be established what legal entity or entities are
the appropriate addressee(s) of this Decision within each
of the undertakings in the sense of Article 81(1) of the
Treaty defined in recital 244. In the case of Concentra
— Produtos para crianças, SA, Linea GIG SpA, Nortec
AE and Bergsala AB,
they themselves must be the
addressees of this Decision, as they constitute in them-
selves the ‘undertaking’ for the purposes of Article 81(1)
the Treaty. For the other undertakings defined in
of
recital 244, a choice has to be made between the
various legal entities that constitute these undertakings.

(354) As regards the attribution of liability within an under-
taking consisting of several
legal entities, the Court of
Justice has established that ‘the fact that a subsidiary has
separate legal personality is not sufficient to exclude the
possibility of its conduct being imputed to the parent
company, especially where the subsidiary does not inde-
pendently decide its own conduct on the market, but
carries out,
the instructions
in all material
respects,
given to it by the parent company’ (485).

(355)

In the case of wholly-owned subsidiaries, the decision is
addressed to the parent company given that the parent
exerts a decisive influence over the subsidiary's commer-
cial policy (486).

(351) The effective date of Itochu Corporation's formal agree-
ment restricting parallel trade with Nintendo Corpora-
tion Ltd/Nintendo of Europe GmbH (recitals 204 and
205) is 14 May 1991 (483). However, Itochu Corporation
it only signed this agreement on
has argued that
16 December 1991 (484) and that, consequently,
there
was no agreement for most of 1991. As there is no
evidence to establish participation of Itochu Corporation
Itochu Corporation's participa-
before December 1991,

(356) Nintendo Corporation Ltd,

John Menzies plc and CD-
Contact Data GmbH have not contested that they exert
decisive influence over their wholly-owned subsidiaries
Nintendo of Europe GmbH, Nintendo Netherlands BV
Nintendo France SARL, Nintendo España SA, Nintendo
Belgium SPRL, Nintendo UK Ltd and Nintendo of
America Inc., respectively THE Games Ltd and Contact
Data Belgium NV.

John Menzies' reply to the Statement of Objections, paragraph 4.

(480)
(481) Concentra's reply to the Statement of Objections paragraph 3.
(482) Linea's rely to the Statement of Objections paragraphs 2 and 5.
(483) Page 157.
(484) Page 181.

(485)

(486)

Judgment in Case C-286/98 P Stora Kopparbergs Bergslags AB v
Commission, [2000] ECR I-9925, paragraph 26.
Judgment in AEG paragraph 50, judgment in Stora paragraphs 22
to 30; see also the opinion of Advocate General Mischo in Stora,
paragraph 48.

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(357) Nintendo of Europe GmbH submitted the reply to the
Statement of Objections for and on behalf of itself and
of Nintendo Corporation, Nintendo of America Inc.,
Nintendo France SARL, Nintendo Benelux BV (formerly
called Nintendo Netherlands BV) and Nintendo España
SA. The Statement of Objections was only addressed to
Nintendo Corporation Ltd, Nintendo of Europe GmbH
merely receiving a copy. Nintendo Corporation Ltd/
Nintendo of Europe GmbH has not contested that the
Commission could address this Decision to Nintendo
Corporation Ltd. It has, however, requested the Commis-
sion to address the Decision not to Nintendo Corpora-
tion Ltd, but to Nintendo of Europe GmbH. Alterna-
tively, it requested that the Decision be sent to Nintendo
of Europe GmbH and possibly other EEA subsidiaries of
the Nintendo group, Nintendo of America Inc as well as
this would
Nintendo Corporation Ltd.
better
the
various companies within the Nintendo group.

responsibilities of

It argued that

respective

reflect

the

addressed

of Objections,

(358) Given that Nintendo of Europe GmbH replied to the
to Nintendo
Statement
Corporation Ltd, also in the name of Nintendo Corpora-
tion Ltd, the Commission considers that both Nintendo
Corporation Ltd and Nintendo of Europe GmbH had
the opportunity to make their views known on the facts
and legal assessment provided in the Statement of
Objections. The same does not apply for
the other
Nintendo subsidiaries. This Decision should therefore be
addressed to Nintendo Corporation Ltd and Nintendo of
Europe GmbH.

(359) With regard to CD-Contact Data GmbH, although Acti-
vision Inc. acquired control over it in 1998, CD-Contact
Data GmbH has existed for the entire duration of the
infringement and still exists today as a separately identi-
fiable legal entity (487) Therefore the Decision should be
addressed to CD-Contact Data GmbH.

(1)

EPE

Itochu Hellas

the Commission may not

(360) The reply to the Statement of Objections was submitted
by Itochu Corporation on behalf of Itochu Corporation
and Itochu Hellas EPE. In its reply, Itochu Corporation
maintains that
impute the
Itochu Hellas EPE to Itochu Corporation,
conduct of
since
acted autonomously. To
substantiate that contention Itochu refer to the facts
that
Itochu Corporation was only indirectly the
parent company of Itochu Hellas EPE, (2) Itochu Hellas
EPE's direct parent company,
Itochu Europe plc only
supervised its activities and financial performance but
did not intervene in its day-to-day operations, (3) it was
Itochu Hellas EPE that signed the distribution agreement
with Nintendo Corporation Ltd/Nintendo of Europe
GmbH, (4) Itochu Hellas EPE employed autonomously a
relatively high number of
Itochu
Hellas EPE created a network dedicated to the sale of

local staff and (5)

the products by investing in a Nintendo fan club and in
merchandising in retail outlets, an activity distinct of the
core business of the Itochu group of companies (488).

(361) First, the reply to the Statement of Objections was given
in the name of Itochu Corporation as well as of Itochu
Hellas EPE. Second, during the administrative procedure,
the
Itochu Corporation was the sole interlocutor of
the
Commission (Stora paragraphs 27 to 29). Finally,
fact that Itochu Hellas EPE signed the distribution agree-
ment with Nintendo Corporation Ltd/Nintendo of
Europe GmbH, that Itochu Europe plc ‘only’ supervised
Itochu Hellas EPE's (marketing) activities and financial
performance without interfering in its day-to-day activ-
ities and that
it employed substantial numbers of
personnel, by themselves, does not constitute evidence
of
Itochu Hellas EPE's autonomous behaviour on the
market. Consequently, Itochu Corporation should be the
addressee of the Decision.

2.4. Remedies

2.4.1. Article 3(1) of Regulation No 17 and Article 3(1) of

EEA Act No 362 R 17

(362) Pursuant

to Article 3(1) of Regulation No 17 and
the Commission
Article 3(1) of EEA Act No R 17,
may,
if an infringement has been established, require
the undertakings concerned to bring the infringement to
an end.

(363) As indicated in recital 343 above, Nintendo Corpora-
tion/Nintendo Europe GmbH terminated the infringe-
ment in January 1998.

(364) However, the infringement also affected the customers
of Nintendo Corporation Ltd/Europe GmbH and those
independent distributors, on whom various restric-
of
tions hindering parallel
and exports were
imports
imposed. Even if Nintendo Corporation Ltd/Nintendo of
Europe GmbH and its distributors no longer apply such
restrictions, customers who have not been so informed
could still consider themselves bound by the restrictions
on parallel exports and imports of the products.

(365) Nintendo Corporation Ltd/Nintendo of Europe GmbH,
John Menzies plc and Bergsala AB have sent letters to
all their customers informing them in writing of their
rights to parallel export and import the products and to
and resell parallel-traded products. Only
purchase
Concentra — Produtos para crianças, SA and Nortec
AE have not done so.

(487) See Contact's submission of 16 November 2001.

(488)

Itochu's reply to the Statement of Objections, paragraphs 23 and
24 as well as its submission of 26 November 2001.

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2.4.2. Article 15(2) of Regulation No 17 and Article 15(2)

2.4.2.2. T he ba si c a m ou n t of f in e s

of EEA Act No 362 R 17

2.4.2.1. G e n e ra l c on s id e ra tio n s

(372) The basic amount of the fine is determined, according
to the gravity and duration of the infringement.

(366) Under Article 15(2) of Regulation No 17 and
the Commission
Article 15(2) of EEA Act No 362,
may, by decision, impose upon undertakings fines from
EUR 1 000 to EUR 1 000 000 or a sum in excess
thereof, but not exceeding 10 % of the turnover in the
preceding business year of each of
the undertakings
participating in the infringement where, either intention-
ally or negligently,
the
they infringe Article 81(1) of
Treaty and/or Article 53(1) of the EEA Agreement.

Gravity

(373)

In its assessment of gravity,
the Commission takes
account of the nature of the infringement, the actual
impact on the market (where this can be measured) and
the size of the geographical market.

(367)

In fixing the amount of the fine, the Commission must
have regard to the gravity and duration of the infringe-
ment.

Nature of the infringement

(368) The role played by each undertaking party to the
infringement should be assessed on an individual basis.
In particular, the fine imposed should reflect any aggra-
vating or attenuating circumstances.

(369) Fines

should be

imposed not only on Nintendo
Corporation Ltd/Nintendo of Europe GmbH but also
on Nintendo's independent distributors John Menzies
plc, Concentra — Produtos para crianças, SA, Linea
GIG SpA, Nortec AE, Bergsala AB, Itochu Corporation
and CD-Contact Data GmbH.

(370) CD-Contact Data GmbH contends that,

in its case, the
Commission should not
impose a fine because CD-
Contact Data GmbH did not actively collaborate with
Nintendo Corporation Ltd/Nintendo of Europe GmbH,
upon which it was economically dependent. Contact
refers to previous Commission Decisions (489) in which,
it submits, the Commission did not impose fines on
undertakings in similar circumstances.

(371) However,

the Commission has wide discretionary
powers when determining the amount of fines to be
imposed,
including the power not to impose a fine at
all or merely a symbolic fine or, on the contrary, to
fines (490). Consequently, as
raise the general
level of
sufficient evidence exists
to hold CD-Contact Data
GmbH responsible for an infringement of Article 81(1)
of the Treaty, a fine should be imposed on CD-Contact
Data GmbH.

(489)

In particular, Tipp-ex (Commission Decision 87/406/EEC in Cases
IV/31.192 and IV/31.507 (OJ L 222, 10.8.1987 p. 1)), Tretorn and
others (Commission Decision 94/987/EC in Cases IV/32.948 —
IV/34.590 (OJ L 378, 31.12.1994 p. 45)) and Volkswagen I
(Commission Decision 98/273/EC in Case IV/35.733 (OJ L 124 of
25.4.1998 p. 60)).

(490) SA Musique Diffusion Française, [1983] ECR, paragraph 109.

(374)

It follows from the facts that the infringement had the
object of enhancing the territorial protection awarded to
exclusive distributors to a state of absolute territorial
protection and eliminating in each territory all competi-
tion with the distributor of the products in that terri-
tory. It also had the object of artificially partitioning the
single market, thereby jeopardising a fundamental prin-
ciple of the Treaty (491). Restrictions of this kind are by
their nature very serious violations of Article 81(1) of
the Treaty and 53(1) of the EEA Agreement.

(375) Events described in the present case constitute a single
continuous and deliberate infringement of Articles 81(1)
of the Treaty and 53(1) of the EEA Agreement.

(376) Nintendo Corporation Ltd/Nintendo of Europe GmbH,
Itochu Corporation, Concentra —
Linea GIG SpA,
Produtos para crianças, SA, CD-Contact Data GmbH
and Nortec AE (492) infringed Article 81(1) of the Treaty
and Article 53 of the EEA Agreement intentionally.

(377)

it

that

in Miller),

in its judgment

it merely infringed Article 81 of

John Menzies plc has argued that by participating in the
infringement,
the
Treaty negligently as it was unaware of the illegal nature
of its behaviour. However, the Court of Justice has held
(inter alia,
is not
necessary for an undertaking to have been aware that
it was infringing Article 81 of the Treaty for an infrin-
gement to be regarded as having been committed inten-
tionally. It is sufficient that the undertaking was aware
that the contested conduct had as its object the restric-
tion of competition. As it has been demonstrated that
John Menzies plc was aware that its behaviour had the
object of restricting competition (recitals 118, 130, 131,
145, 146, 147 to 149 and 206), it infringed Article 81
of the Treaty intentionally.

(491) SA Musique Diffusion Française, [1983], ECR 1825, paragraph 107.
(492) See Nortec's reply to the Statement of Objections, page 3.

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contains

and unauthorised Products

a number of questionnaires

(378) Bergsala AB (493) has argued that it had confused legal
intra-EEA parallel trade with unlawful trade in counter-
feit Products
(Products
imported into the EEA without Nintendo Corporation
Ltd/Nintendo of Europe GmbH's consent). However, the
sent by
file
Nintendo of America Inc. and the replies from Nintendo
subsidiaries and independent distributors regarding the
legal proceedings in which the latter were involved (494).
Bergsala AB's Finnish subsidiary, Bergsala OY, in replies
to Nintendo of America dated 15 November 1995 and
2 December 1997 (495) also clearly distinguishes counter-
feit and grey trade. Consequently, Bergsala AB's conten-
tion that it had confused the relevant legal concepts is
not tenable. In any event, Bergsala AB cannot maintain
that it was unaware that its behaviour had the object of
restricting competition (recitals 223, 224 and 227).
Thus,
concluded that Bergsala AB infringed
Article 81 of the Treaty intentionally.

is

it

(379) Nintendo

of

products

unauthorised

Ltd/Nintendo

intra-EEA parallel

trade with unlawful
and

Europe
Corporation
GmbH (496) also argued initially that
it had confused
trade in
legal
products
counterfeit
(products
imported into the EEA without Nintendo
Corporation Ltd/Nintendo of Europe GmbH's consent).
However, Nintendo Corporation Ltd/Nintendo of Europe
GmbH has not contested the Commission's rebuttal that,
on the contrary, the documents on the file support the
view that Nintendo Corporation Ltd/Nintendo of Europe
GmbH was perfectly aware of
these legal distinctions
(which ultimately it has expressly admitted (497)) that, in
any event, what matters is that a party has the delib-
erate aim of restricting competition, not that it knows
which specific legal provision is being infringed (498).

other manufacturers than Nintendo Corporation Ltd/
Nintendo of Europe GmbH reduced the impact of the
infringement.

(382) The infringement had the object of restricting parallel
trade within the EEA. Events described in the factual
part show that parties took steps to carefully implement
it. On that basis,
the infringement had a significant
impact on the market.

The size of the relevant geographical market

(383) The infringement restricted parallel trade throughout the
entire EEA (recitals 333 and 118, 126, 127, 130, 132,
142 and 143).

Conclusion on gravity

(384) After taking account of the nature of the infringement
its impact on the market and the fact that it restricted
parallel trade throughout the EEA, it must be concluded
that the undertakings concerned have committed a very
serious infringement of Article 81(1) of the Treaty and
Article 53(1) of
for which the
the EEA Agreement,
likely fine is above EUR 20 million.

(380) The present

infringement constituted by its nature a
very serious infringement of Article 81(1) of the Treaty
and Article 53(1) of the EEA Agreement.

Differential treatment

The actual impact of the infringement

(381) According to Itochu Corporation,

the fact

that game
cartridges compatible with Nintendo game consoles are
not only available from Nintendo Corporation Ltd/
Nintendo of Europe GmbH but also from independent
game publishers should be taken into account when
assessing the effects of the infringement, as this would
mitigate the effects of the restriction of parallel trade in
the products (499). However, there is no evidence in the
file supporting that the availability of game cartridges of

(385) Where a single and continuous infringement involves
several undertakings,
it might be necessary in some
cases to apply weightings to the amounts determined
within each of the categories of gravity in order to take
account of the specific weight of each undertaking and,
accordingly, the real impact of its offending conduct on
competition, particularly when there is considerable
disparity between the sizes of the undertakings commit-
ting infringements of the same type.

(386)

(493) See

Bergsala's
paragraph 4.1.3.

reply

to

the

Statement

of Objections

(494) See pages 1686 to 1694, 1699 to 1702, 1705 and 1706, 1714 to
1716, 1720 and 1721, 1727 to 1734, 1737 to 1739, 1743,
1746 and 1806.

(495) See pages 1720 and 1806.
(496) Argument made in letter of NOA to the Commission dated

16 April 1998, page 1633.

(497) Pages 1638 to 1641.
(498) See Judgment in Case, T-66/92 Herlitz v Commission [1994] ECR

p. II-531, paragraph 45.

(499) See Itochu's reply to Statement of Objections, paragraph 20.

treatment. For

In this case, the considerable disparity in the size of the
undertakings participating in the infringement justifies
differential
this purpose, undertakings
concerned can in principle be divided into three groups
established according to the relative importance of each
firm with regard to Nintendo Corporation Ltd/Nintendo
of Europe GmbH as a distributor of the products (and
those products only) in the EEA measured on the basis
of each Party's share in the total volume of Nintendo
game consoles and cartridges purchased for distribution
the
in the EEA in the year 1997,
existence of the infringement.

the last year of

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the fact
cartridges

(387) By using figures relating only to Nintendo Corporation
Ltd/Nintendo of Europe GmbH manufactured products
when assessing the parties' disparity in size, account is
that certain parties also distributed
taken of
game
than
from manufacturers
Nintendo Corporation Ltd/Nintendo of Europe GmbH.
As all Parties were involved in the trade of both
cartridges and consoles, the average of their respective
market share in each product is taken as the basis for
the calculation.

other

(388) Nintendo Corporation Ltd/Nintendo of Europe GmbH
had an EEA-wide average share of sales of the Products
of […]* %. It should then be placed alone in the first
group.

(389)

John Menzies plc had an EEA-wide average share of
sales of
It should then be
the Products of
placed alone in the second group.

[…]* %.

(390) Concentra — Produtos para crianças, SA, Linea GIG
SpA, Nortec AE, Bergsala AB, Itochu Corporation and
CD-Contact Data GmbH had EEA-wide average share of
sales of the Products ranging from […]* % to […]* %.
Consequently,
they all should be placed in the third
group.

(391) On that basis, the preliminary starting amount of the

fines determined for gravity is set as follows:

— Nintendo Corporation
GmbH: EUR 23 million,

Ltd/Nintendo

of

Europe

— John Menzies plc: EUR 8 million,

— Concentra — Produtos para crianças, SA, Linea GIG
Itochu Corporation

SpA, Nortec AE, Bergsala AB,
and CD-Contact Data GmbH: EUR 1 million.

The need to ensure a sufficient deterrent effect

(392) When calculating the starting amount of

the fine,
account should be taken of the necessity of setting the
it has a sufficiently
fine at a level
it is necessary to
deterrent effect.
determine whether
starting
amount is needed for any addressee.

that ensures that
In order to do so,

any adjustment of

the

(393)

(394)

In the present case, in the cases of Nintendo Corpora-
tion Ltd/Nintendo of Europe GmbH, John Menzies plc
and Itochu Corporation, the appropriate starting point
of the fine requires further upwards adjustment to take
account of their size and overall resources.

Itochu Corporation has argued that, as it has meanwhile
ceased to be a distributor of the products, there would
be no grounds to increase its fine on the ground of
deterrence (500). However, deterrence has to be ensured
whether or not the undertaking, after the end of the
infringement, maintained or not bilateral relations with
other participants to the infringement.

(395)

It is particularly necessary to ensure sufficient deterrence
as
regards Nintendo Corporation Ltd/Nintendo of
Europe GmbH as, apart from its size (which is signifi-
cantly smaller than Itochu Corporation's), also account
must be taken of the fact that it is the manufacturer of
the products subject of the infringement (501).

(396) On the basis of the above, the starting amount of the
fine to be imposed on Nintendo Corporation Ltd/
Nintendo of Europe GmbH should be increased by a
factor of 3 to EUR 69 million, the starting amount of
the fine to be imposed on John Menzies plc should be
increased by a factor of 1,25 to EUR 10 million and the
starting amount of the fine to be imposed on Itochu
Corporation should be increased by a factor of 3 to
EUR 3 million.

Duration of the infringement

(397) Nintendo Corporation Ltd/Nintendo of Europe GmbH
participated in the infringement from January 1991 until
the end of December 1997 (recital 345), that is to say,
for six years and 11 months. Consequently the starting
amount for its fine should be increased by 65 %.

(398)

John Menzies plc participated in the infringement from
the end of December 1997
4 August 1995 until
two years and four
(recitals 297 to 304, 346), or
months. Consequently the staring amount of
its fine
will be increased by 20 %.

(399) Concentra — Produtos para crianças SA participated in
the infringement from 14 May 1991 until the end of
December 1997 (recital 347) or six years and seven
months. Consequently the starting amount of
its fine
should be increased by 65 %.

(400) Linea GIG SpA participated in the infringement from
1 October 1992 until
the end of December 1997
(recital 348) or five years and three months. Conse-
quently the starting amount of
fine should be
increased by 50 %.

its

(401) Nortec AE participated in the

from
23 October 1997 until
the end of December 1997
(recital 349) or for slightly more than two months.
Consequently,
its fine should
the starting amount of
not be increased.

infringement

(402) Bergsala AB participated in the infringement

from
15 May 1995 until
end of December 1997
(recital 350), or two years and seven months. Conse-
fine should be
quently the starting amount of
increased by 25 %.

the

its

(403)

Itochu Corporation participated in the infringement
from 16 December 1991 until 28 February 1997
(recital 351), or five years and two months. Conse-
quently the starting amount of
fine should be
increased by 50 %.

its

(500)

Itochu's reply to the Statement of Objections paragraph 47.

(501) SA Musique Diffusion Française, [1983] ECR 1825, paragraph 75.

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(404) CD-Contact Data GmbH participated in the infringement
from 28 October 1997 until the end of December 1997
(recital 352) or slightly more than two months. Conse-
quently, the starting amount of its fine should not be
increased.

Conclusion with regard to basic amounts

(405) All factors regarding gravity and duration for all infrin-
gements considered together, the basic amounts of the
fines to be imposed on each party are:

— Nintendo Corporation

Ltd/Nintendo

of

Europe

GmbH, EUR 113,85 million,

— John Menzies plc, EUR 12 million,

— Concentra — Produtos

para

crianças,

SA,

EUR 1,65 million,

— Linea GIG SpA, EUR 1,5 million,

— Nortec AE, EUR 1 million,

— Bergsala AB, EUR 1,25 million,

— Itochu Corporation, EUR 4,5 million,

— CD-Contact Data GmbH, EUR 1 million.

2.4.2.3. A gg rav ati n g c ir cu m s ta n ce s

Nintendo Corporation Ltd/Nintendo of Europe
GmbH

Role of leader

the leader and instigator of

(406) Nintendo Corporation Ltd/Nintendo of Europe GmbH
the infringement
was
this (502).
(recitals 228 to 238) and did not contest
With regard to this aggravating factor, it is appropriate
to increase the basic amount of the fine by 50 % for
Nintendo Corporation Ltd/Nintendo of Europe GmbH.

Continuation of infringement

(407)

In addition, Nintendo Corporation Ltd/Nintendo of
Europe GmbH continued the infringement after
the
Commission had started the investigations in June 1995.

(408) The Commission can take account, as an aggravating
factor, of the fact that Parties deliberately continued a
manifest infringement after the Commission made inves-
the participants in an
tigation into the conduct of
infringement,
the
showed that
such conduct
Parties to the infringement were particularly determined
to continue their infringement in spite of the risk of
fines (503). It is not required that the parties had been

since

(502) Nintendo's reply to the Statement of Objections paragraph 6.16.
(503)

Judgment of the Court of First Instance of 20 March 2002 in Case
T-31/99 Asea Brown Boveri Ltd v Commission (ABB) [2002] ECR II-
1881, paragraph 211.

expressly warned by the Commission that their conduct
was illegal (504). The fact that the basic amount of the
fine takes into account the companies' knowledge that
their behaviour was illegal, does not mean that the fine
cannot be further increased to take account of the fact
they continued the infringement once they were
that
aware of the Commission's investigation (505).

(409) Nintendo Corporation Ltd/Nintendo of Europe GmbH
continued its illegal conduct after it had become aware
of the Commission's investigation. In this context, it is
that Nintendo Corporation Ltd/Nintendo of
relevant
Europe GmbH became aware of
the Commission's
investigation into its distribution system at the latest by
June 1995 (recital 86).

(410) Moreover Nintendo Corporation Ltd/Nintendo of Europe
GmbH's particular determination in continuing the
infringement after it had become aware of the Commis-
sion's investigation is shown by the following elements:

— during March and April 1996, Nintendo Corporation
Ltd/Nintendo of Europe GmbH exercised pressure on
John Menzies plc in order to ensure John Menzies
plc's compliance with the infringement (recitals 119
to 126). As a result, parallel exports from the United
Kingdom were
after
substantially
February 1996 (recitals 140 to 142),

reduced

Ltd/Nintendo
system of

— Nintendo Corporation
of
Europe
information
the
GmbH developed
exchange and practical collaboration, which was
only fully in place by April 1996, resulting in a
significant reinforcement of the policy to effectively
monitor parallel trade and traders (recitals 273 to
280),

— as Nintendo Corporation Ltd/Nintendo of Europe
GmbH has also admitted (506), from the early part of
1995, there were more actions to limit parallel trade
in Europe than in the earlier period of the infringe-
ment,

— Nintendo Corporation

Ltd/Nintendo

Europe
its senior management
GmbH has admitted that
and EEA subsidiaries were well
informed about the
implications under Community law of hindering
parallel trade at least since the Commission started
its investigation in 1995 (507),

of

(504) ABB, paragraph 214 and judgment of 20 March 2002 in Case T-
[2002] ECR II-1681,

21/99, Dansk Rørindustri v Commission,
paragraph 153.
(505) ABB paragraph 212.
(506) Nintendo's reply to the Statement of Objections paragraph 6.4.
(507) Pages 1639 and 1640 and Nintendo's reply to the Statement of

Objections paragraph 4.2.

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— Nintendo Corporation

of

Ltd/Nintendo

Europe
GmbH claims to have explained to its subsidiaries
in Europe the relevant legal principles regarding the
limitations on the protection afforded to exclusive
distributors and passive and active export sales in
the context of its conflict with John Menzies plc in
early 1996 (508),

to

all

France

— indeed, during June 1996, a circular was sent by
customers
SARL
Nintendo
explaining in detail what it considered to be illegal
parallel imports (509). This definition did not include
the importation of products from other EEA coun-
tries, which were first placed on the market in those
countries by or with the consent of Nintendo
Corporation Ltd/Nintendo of Europe GmbH (510),

its

that

— moreover, Nintendo Corporation Ltd/Nintendo of
Europe GmbH has admitted (511)
the explicit
instructions that Nintendo Corporation Ltd/Nintendo
of Europe GmbH issued on 15 May 1997 to its EEA-
the require-
based subsidiaries reminding them of
ments of Community
intra-EEA
parallel trade (recital 92) were ignored by Nintendo
of Europe GmbH, Nintendo France SARL and
Nintendo España SA. Indeed, these Nintendo subsi-
diaries
trade after
15 May 1997 (recitals 153 to 157 and 176 to 179).

continued to restrict parallel

law regarding

John Menzies plc's
Article 11 of Regulation No 17.
submission of 25 April 1997 was its reply to that
request (recital 96).

(414) The Commission considers that John Menzies plc's reply
dated 25 April 1997 gave the Commission false infor-
mation, thereby misleading it with respect to the exact
John Menzies plc has
scope of
contested this (513).

infringement.

the

(415)

the
In its request
for information of 7 March 1997,
‘Are
Commission explicitly asked John Menzies plc:
Dealers
to final
restricted to reselling the products
consumers and/or other authorised dealers only? If so,
can the authorised dealer in the United Kingdom and
to companies (…) outside the sales
Ireland also sell
territory of THE? (514)’.
the
It was also specified that
questions were prompted by information received by
the Commission and indicating that dealers might have
been prevented from purchasing in other Member
States (515).

(411) With regard to this aggravating factor, the basic amount
of the fine should be increased by 25 % for Nintendo
Corporation Ltd/Nintendo of Europe GmbH.

(416)

John Menzies plc

Continuation of infringement

(412)

John Menzies plc continued the infringement after the
Commission had started the investigation.
It became
aware of the Commission's investigation at the latest by
7 March 1997, when the Commission addressed to it a
formal request for information (recital 96). John Menzies
plc has admitted that its participation in the infringe-
ment had started before this date and it continued its
participation until December 1997 (512). On that basis,
the fine for John Menzies plc
the basic amount of
should be increased by 10 %.

Refusal to cooperate with the Commission

(413) On 7 March 1997, the Commission sent John Menzies
to

information pursuant

plc a formal

request

for

to rental’ (516).

In John Menzies plc's reply dated 25 April 1997, it was
‘there are no restrictions imposed upon
stated that,
dealers by THE Games' terms and conditions for sale
with respect to how that dealer may deal with Products
supplied other
than with respect
It
mentioned […]* as an example where it allowed a
company to act as a subdistributor. It also stated that,
‘there are no examples of credit-worthy retailers or mail
order sellers being refused supply of product by THE
Games (save in circumstances of
limited availability of
product
John Menzies plc nonetheless also
stated that, as a result of what it considered a unilateral
it did not sell to subdistri-
established business policy,
butors.
this policy (referred to
herein as THE Games commercial policy regarding authorised
customer and described in recitals 112 and 113 above)
with its letter of 25 April 1997.

It provided a copy of

(…)’) (517).

(417) Contrary to John Menzies plc's reply of 25 April 1997,
the conflict with […]*
in August 1995 concerned
precisely the opposite, namely,
John
fact
Menzies plc wanted to restrict […]* to selling only to
retail outlets (thus, to final consumers) that were part of
the same group of companies as […]*, namely, the […]*
group and not as a subdistributor to third companies
(recital 114).

that

the

(508) Page 1640.
(509) Page 1464.
(510) Similar conclusions can be drawn from page 1546.
(511) Page 1640.
(512)

John Menzies' reply to the Statement of Objections paragraph 9.2.

(513)

John Menzies' reply to the Statement of Objections, Annex A
point 214.

(514) Page 439, question 3.
(515) Page 437.
(516) Page 447.
(517) Page 446.

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(418)

In addition, contrary to John Menzies plc's reply of
25 April 1997, John Menzies plc had refused supplies
to companies on the ground that they had exported the
products or intended to do so and, thus, John Menzies
plc did in fact impose restrictions that meant that its
customers could not sell to companies outside its sales
territory (recitals 132 to 139).

(419) On the basis of the above,

it is concluded that John
Menzies plc's behaviour has to be considered as a
refusal to cooperate with the Commission that
lasted
until it decided to start cooperating at the beginning of
January 1998. With regard to this aggravating factor, it
is appropriate to increase the basic amount of the fine
by a further 10 % for John Menzies plc.

(420)

In conclusion, the basic amount of the fine should be
increased by 20 % for John Menzies plc.

2.4.2.4. Atte n ua tin g ci rc u ms t an c e s

An exclusively passive role in the infringement

(421) On the basis of the facts set out in recitals 212 and
213, Concentra — Produtos para crianças, SA's role
must be considered as purely passive for most of the
period. Consequently,
it is justified to reduce the basic
the fine for Concentra — Produtos para
amount of
crianças, SA by 50 %.

(427)

(422) Bergsala AB, Linea GIG SpA, Itochu Corporation, CD-
Contact Data GmbH and John Menzies plc (518) have
they had an exclusively passive or
submitted that
‘follow-my-leader’ role in the infringement. More speci-
fically, the following arguments were made in support
of this claim.

(423) Bergsala AB refers to the leading role of Nintendo
Corporation Ltd/Nintendo of Europe GmbH,
the fact
that when it communicated information on parallel
imports into its territory,
it did so in response to
demands set by the Nintendo group and the fact that
it was economically dependent on Nintendo Corpora-
tion Ltd/Nintendo of Europe GmbH and, thus, had little
choice than to participate with infringement (519).

(428)

it

(424) However, Bergsala AB's argument must be rejected
because
spontaneously submitted information to
Nintendo Corporation Ltd/Nintendo of Europe GmbH
on parallel
imports into its territory while requesting
Nintendo Corporation Ltd/Nintendo of Europe GmbH to
put an end to this (recital 227).

(425) Linea GIG SpA (520) submits that it had no room for
autonomous decision making as it had to pay more for
supplies from Nintendo Corporation Ltd/Nintendo of

Europe GmbH than other distributors, as it never parti-
cipated in a meeting (unlike Bergsala AB) with the
object to restrict parallel trade and as it never took any
direct step to monitor parallel trade, to determine the
price of the products or to prevent parallel export from
or to Italy.

(426) The arguments made by Linea GIG SpA must be

rejected because:

— Linea GIG SpA's argument as regards its ability for
contradicted by
autonomous decision-making
Linea's own statement that it attempted to keep Italy
free from parallel imports (recitals 217 to 221),

is

— the mere fact

that Bergsala AB participated at a
meeting with the object of restricting parallel trade
cannot, by itself, be relevant
for concluding that
Linea GIG SpA's conduct in relation to the infringe-
ment was passive. On the contrary evidence shows
that Linea GIG SpA actively participated in the
infringement (recitals 217 to 221).

Itochu Corporation (521) refers to the vertical nature of
the infringement and to the resulting unequal position
between the different parties and Nintendo Corporation
Itochu
Ltd/Nintendo of Europe GmbH's leading role.
Corporation claims
relative passive role is
its
that
proven by the fact that (i) its agreement with Nintendo
Corporation Ltd/Nintendo of Europe GmbH restricting
parallel trade was imposed on a ‘take it or leave it’ basis
(considering the fact that other independent distributors
had identical distribution agreements as evidence for
this), (ii) the ‘less emotional’ tone in its communications
regarding parallel trade and the lower frequency of these
in comparison with
communications,
Nortec AE and (iii) the continuous presence of parallel
imported goods in Greece as evidence of
its relative
inactivity in the infringement.

in particular

than other

it was more
Itochu Corporation further argues that
distant (522)
independent distributors from
the infringement. In support of this contention, it refers
to the fact that it performed less well as a distributor of
the products, that the legality of restricting parallel trade
and its marketing policies had been the subject of a
conflict internal to Itochu Corporation and that it was
involved itself in parallel export and imports. Moreover,
it submits that its motive was not to restrict parallel
trade but to improve its purchase price from Nintendo
Corporation Ltd/Nintendo of Europe GmbH that maxi-
mised its profits by increasing its prices artificially in a
number of territories at the expense of the independent
distributors.

(518)
John Menzies' reply to the Statement Objections paragraph 9.4.
(519) Bergsala's reply to the Statement of Objections paragraph 4.1.1.
(520) Linea's reply to the Statement of Objections paragraph 3.

(521)

(522)

Itochu's reply to the Statement of Objections paragraphs 36 to 38
and paragraph 42.
Itochu's reply to the Statement of Objections, paragraph 37.

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(429) The arguments made by Itochu Corporation to support
their role was merely passive must be

its view that
rejected because:

be trying to exploit
benefit (524),

the infringement for its own

— the vertical nature of the infringement is a general
feature of the infringement that has no relevance for
assessing the actual behaviour of Itochu Corporation
in relation to the infringement. Itochu Corporation's
general conduct as a distributor of the products or
the existence of conflict internal to the undertaking
have no bearing on its actual conduct in relation to
the infringement,

identical

— finally, the fact that Itochu Corporation had a formal
to those of other
distribution agreement
distributors
considered
independent
evidence that
its position was passive or different
from that of other independent distributors as, by
itself, the fact that an agreement contains provisions
with the object of restriction parallel
trade is no
indication as to the actual conduct shown in pursuit
of that object.

cannot

be

— the frequency of

their

trade or

Itochu Corporation's communica-
‘emotional’
tions regarding parallel
tone does not have any bearing on the fact
that
Itochu Corporation spontaneously communicated
information regarding parallel trade into its territory
while knowing that
this served to restrict parallel
trade from other territories (recital 206). The fact
imports into Greece were a recurring
that parallel
the illegal conduct of
problem only proves that
Itochu might have been unsuccessful and not that it
did not participate in the infringement,

— it is clear from the documents indicated by Itochu
Corporation (523)
that NOE intervened to prevent
Itochu from purchasing products from John Menzies
plc. However, the letter dated 1 April 1996 suggests
that NOE convinced Itochu Corporation not
to
purchase from John Menzies plc simply by arguing
that,
in
it would have
persuading John Menzies plc to continue restricting
parallel exports from the United Kingdom. Therefore,
by not purchasing products from John Menzies plc,
Itochu Corporation supported Nintendo Corporation
Ltd/Nintendo of Europe GmbH's efforts to make
John Menzies plc comply with the infringement,

otherwise,

difficulties

— the fact

that

Itochu Corporation (and CD-Contact
Data GmbH) itself exported, is no evidence of exclu-
sively passive participation. The fact that an under-
taking which has been proven to have participated in
an infringement with the object of restricting parallel
trade, does not behave on the market in the manner
agreed is not necessarily a matter which must be
taken into account as a mitigating circumstance
the fine to be
when determining the amount of
imposed. An undertaking which, despite entering
into a common infringement,
follows a more or
less independent policy on the market may simply

(523) See Itochu's reply to the Statement of Objections, paragraph 31.

(430) CD-Contact Data GmbH refers

that

to the fact

it
supplied the products to companies established abroad
and companies based in its territory while knowing that
to
the products would be exported.
Commission Decisions (525)
that
were economically dependent on their suppliers but did
not actively participate in the infringement were not
fined.

in which companies

It also refers

(431) As was already said above in recital 429, exports are
not in themselves sufficient to show a passive role. An
undertaking which despite entering into a common
infringement follows a more or less independent policy
on the market may simply be trying to exploit
the
infringement for its own benefit. As CD-Contact Data
GmbH spontaneously communicated information to
NOE on parallel imports into its territory (recital 197),
its participation must be considered as active.

(432) As regards John Menzies plc, it prevented parallel trade
from the United Kingdom as part of a systematic busi-
ness policy applied proactively and without the need for
continuous monitoring and prompting by Nintendo
Corporation Ltd/Nintendo of Europe GmbH or other
independent distributors (recital 133). John Menzies plc's
absence of purely passive conduct is proven by the fact
it reinforced its control by
that, on its own initiative,
introducing a tagging system to trace parallel
traders
(recital 149) and requested additional information from
other participants in order to facilitate its efforts to
prevent parallel exports
from the United Kingdom
(recitals 144, 145, 146 and 147).

(433) Consequently, it is concluded that there is no justifica-
tion for reducing any fine, other than to be imposed on
Concentra — Produtos para
crianças, SA on the
grounds of passivity of role.

(524) Case T-308/94 Cascades SA v Commission,

[1998] ECR II-925,

(525)

paragraph 230.
In particular, Commission Decision 87/406/EEC in Cases IV/31.192
and IV/31.507 Tipp-ex (OJ L 222 of 10.8.1987, p. 1) and the
Commission Decision 94/987/EC (OJ L 378, 31.12.1994, p. 45) in
cases IV/32.284 — 34.590 Tretorn and others (with particular
reference to the case of Tenimport) (OJ L 378, 31.12.1994, p. 45)
and Commission Decision 98/273/EC in Case IV/35.733 Volks-
wagen (OJ L 124, 25.4.1998, p. 60).

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Non-implementation in practice of the offending agree-
ments or practices

they did not

(434) Concentra — Produtos para crianças, SA, Linea GIG
SpA, Itochu Corporation and CD-Contact Data GmbH
contend that
the offending
practices. Linea GIG SpA (526) and Bergsala AB (527)
further argue that no direct actions against third parties
aiming at preventing legal parallel trade were identified
in the Statement of Objections as a result of their own
participation in the infringement.

implement

(435) Ample evidence exists that parallel trade was restricted
by parties to the same infringement in which the above
undertakings participated. Consequently,
these parties
cannot claim that the infringement in which they parti-
cipated was not implemented in practice. The fact that
third parties aimed at preventing
no actions against
parallel
the
conduct of a particular Party, cannot change this conclu-
sion.

trade were taken as a direct

result of

(436) Linea GIG SpA (528) and Itochu Corporation (529) further
submit that parallel trade into their territories continued
to take place. However, the mere fact that the Parties
were not entirely successful in achieving the objective of
the infringement is not evidence that the agreement was
not implemented.

the more applicable given that

it had ceased all
all
illegal activity before the Commission took any action
against Linea GIG SpA (530). However, in order to benefit
from this attenuating circumstance the undertaking has
its voluntary action to terminate the
to show that
is directly linked to the Commission's
infringement
action. As Linea GIG SpA could not prove this there
are no grounds to reduce its fine in this respect.

Nintendo Corporation Ltd/Nintendo of Europe GmbH's
compensation of third parties

(440) Subsequent

to its decision to collaborate and at

the
instigation of
the Commission, Nintendo Corporation
Ltd/Nintendo of Europe GmbH offered substantial finan-
cial compensation to third parties
identified in the
Statement of Objections as having suffered financial
harm as a result of Nintendo Corporation Ltd/Nintendo
of Europe GmbH's activities. Offers were made to […]*,
[…]*, […]*, […]*, […]*, […]*, […]*, […]*, […]*, […]*
and […]* (531) (recitals 123, 131, 132, 136 to 138, 147
to 150, 157, 165 and 209). Offers were accepted by all
these companies, except […]* and […]* (532).

(441)

In recognition of
this element, Nintendo Corporation
Ltd/Nintendo of Europe GmbH should be granted a
reduction of EUR 300 000.

(437) Consequently, it is concluded that there is no justifica-
tion for granting any reduction of fines in application of
this attenuating circumstance.

Acting under pressure

Termination of
Commission intervenes

the

infringement

as

soon as

the

(442)

in its request

(438) Before John Menzies plc's admission of 1 December
for information
1997, the Commission,
dated 7 March 1997, had already asked John Menzies
plc about its distribution practices and possible obstruc-
tion of parallel trade (recitals 96 to 98) and as indicated
in recital 412 et seq. John Menzies plc did not terminate
the infringement when the Commission intervened.
Consequently, there is no justification for reducing John
Menzies plc's fine on the ground that
it ended the
infringement as soon as the Commission intervened.

(439) Linea GIG SpA has argued that, as the infringement was
ended during the course of the Commission's adminis-
trative proceedings, this should be taken as an attenu-
ating factor. Linea GIG SpA considered this circumstance

that

John Menzies plc (533) has contended that the Commis-
sion should take into consideration as an attenuating
John Menzies plc was adhering to the
factor
infringement and that
failure to do so would have
resulted in damaging consequences for John Menzies
plc.

(443) Even if Nintendo Corporation Ltd/Nintendo of Europe
GmbH had to exercise real pressure to ensure that John
Menzies plc's conduct complied with the infringement
(recitals 119 to 126) and even if not submitting to
Nintendo Corporation Ltd/Nintendo of Europe GmbH's
policy of restricting parallel trade would very likely have
resulted in real and serious harm to John Menzies plc's
business (recital 120),
John Menzies plc should have
come
to the Commission and complained about
Nintendo Corporation Ltd/Nintendo of Europe GmbH's
behaviour, instead of committing the infringement. The
fine can therefore not be reduced on these grounds.

(526) Linea's reply to the Statement of Objections, paragraph 4.2.
(527) Bergsala's reply to the Statement of Objections, paragraph 4.1.4.
(528) Linea's reply to the Statement of Objections paragraph 4.2.
(529)
Itochu's reply to the Statement of Objections paragraph 43.

(530) Linea's reply to the Statement of Objections, paragraph 5.
(531) See Nintendo's reply to the Statement of Objections, Annex B.
(532) Nintendo's submission of 21 December 2001.
(533)

John Menzies' reply to the Statement of Objections, paragraph 9.4.

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Europe GmbH's

(444) Linea GIG SpA and Itochu Corporation's contention that
they had to accept Nintendo Corporation Ltd/Nintendo
of
formal distribution agreement
restricting parallel exports on a ‘take it or leave it’ basis
is no ground for reducing their fines. The fact that the
terms were not negotiable does not mean that they did
not freely choose to accept them and that they did not
commit the infringement. Therefore, no reduction of the
fine can be granted.

nothing in Commission Decision 94/985/EC in the Far
Eastern Freight Conference case (537) contradicts
this
conclusion.

(449) Consequently, there are no reasons to reduce fines on

these grounds

Nintendo Corporation Ltd/Nintendo of Europe GmbH
and John Menzies plc compliance programmes

(445) Nortec AE argues that it had no other option but to
infringe Article 81(1) to ensure its survival.
It claims
that the products parallel imported into Greece from the
United Kingdom, which exploited the difference between
Nortec AE's high purchase price
from Nintendo
Corporation Ltd/Nintendo of Europe GmbH and the
price that parallel importers were able to obtain in the
United Kingdom, posed a serious threat to the company.

(446) According to Nortec AE,

its situation was exacerbated
[…]*, which was the exclusive
by the behaviour of
distributor of Sony Playstation and compatible games
in Greece and also the main Greek parallel trader in
Nintendo products. As Nortec AE's agreement with
Nintendo Corporation Ltd/Nintendo of Europe GmbH
prohibited it
from distributing competing products,
whereas […]* apparently could, Nortec AE was at a
disadvantage. As evidence of […]*'s allegedly unfair and
unlawful behaviour, Nortec AE submitted copies of two
injunctions where the Single Member Athens Court of
First Instance decided against […]* and in Nortec AE's
favour.

(447) Nortec AE could have insisted that Nintendo Corpora-
tion Ltd/Nintendo of Europe GmbH reduce its prices for
the products or that it relax the terms of its distribution
agreement. Instead, it chose to participate in the infrin-
gement. Consequently, no reduction of the fine can be
granted to Nortec AE in this respect.

Financial benefits from the infringement

(450) Subsequent

to their decision to collaborate, Nintendo
Corporation Ltd/Nintendo of Europe GmbH and John
in
Menzies plc
order to ensure that their business would be conducted
in accordance with the law.

introduced compliance programmes

(451) While the Commission does indeed welcome all steps
taken by undertakings to raise awareness amongst their
employees of existing competition rules, these initiatives
cannot relieve the Commission of its duty to penalise
their very serious infringement of competition rules.

Non application of the Leniency Notice

(452) Nintendo

Corporation
Europe
Ltd/Nintendo
John Menzies plc (539) Linea GIG SpA (540),
GmbH (538),
Bergsala AB (541)
and CD-Contact Data GmbH (542),
requested the application of the Commission Notice on
in cartel
the non-imposition or
cases (543) (Leniency Notice).

reduction of

fines

of

the Leniency Notice limits its
(453) The first paragraph of
cartels’ between undertakings
application to ‘secret
sales quotas,
aimed at
fixing prices, production or
sharing markets or banning imports or exports.
Its
application is limited to a subcategory of agreements
falling under Article 81(1) of the Treaty, namely those
(as cartels are). Conse-
that are secret and horizontal
quently, as the present infringement is vertical in nature,
the parties cannot benefit from the application of the
Leniency Notice.

Effective
proceeding outside the scope of the Leniency Notice

the undertakings

cooperation by

in the

(448)

Itochu Corporation (534), John Menzies plc (535) and CD-
Contact Data GmbH (536) have argued that they may not
have benefited financially to the same extent as other
participants, or even at all, from the infringement.
In
principle, neither non-benefit from an infringement nor
any economic disadvantage suffered due to participation
attenuating circum-
constitutes
in an infringement,
stances. Despite CD-Contact Data GmbH's assertion,

Itochu's reply to the Statement of Objections, paragraph 40.
John Menzies' reply to the Statement of Objections, paragraph 5.

(534)
(535)
(536) Contact's reply to Statement of Objections, paragraph 37.

(454) Effective cooperation of companies in the Commission's
proceedings can be taken into account as an attenuating
circumstance outside the framework of
the Leniency
In this respect, some firms involved in the
Notice.
infringement effectively cooperated with the
present
Commission.

(537) OJ L 378, 31.12.1994, p. 17.
(538) Nintendo's reply to the Statement of Objections paragraphs 6.9 to

6.14.
John Menzies' reply to the Statement of Objections, paragraph 10.

(539)
(540) Linea's reply to the Statement of Objections, paragraph 2.
(541) Bergsala's reply to the Statement of Objections, paragraph 3.
(542) Contact's reply to the Statement of Objections, paragraph 37.
(543) OJ C 207, 18.7.1996, p. 4.

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John Menzies plc

(455)

John Menzies plc's submission of 13 January 1998 was
spontaneously made.

(456)

John Menzies plc's submission of 13 January 1998
contained the letters dated 4 April 1996 from NOE to
John Menzies plc and John Menzies plc's reply to NOE
of 11 of April 1996, referred to in recitals 127 to 131
above, that contributed significantly to establishing the
extensive collaboration between John Menzies plc with
Nintendo Corporation Ltd/Nintendo of Europe GmbH to
from John
tighten the
Menzies plc's
submission also
supplied further information on approaches made to
John Menzies plc for passive export sales. The Commis-
sion considers that the submission of 13 January went
beyond John Menzies plc's obligation to reply to
previous formal requests for information and thus, can
be
collaboration with the
Commission's proceedings.

control of parallel
territory. The

considered as

effective

exports

same

(457)

In view of the above, a reduction for effective coopera-
tion of 40 % of the basic amount of the fine for John
Menzies plc is justified.

Nintendo Corporation Ltd/Nintendo of Europe GmbH

(458) Subsequent

to Nintendo Corporation Ltd/Nintendo of
Europe GmbH's admission on 23 December 1997
(recital 94),
the company spontaneously provided the
Commission, after John Menzies plc, with numerous
documents
received on 21 January,
1 April and 15 May 1998 (544).

in submissions

(459) These documents contributed to substantiating the exis-
tence of the infringement, improving the Commission's
knowledge of the facts based on its own investigations
and on documents provided by John Menzies plc. The
documents also helped in establishing the participation
of several parties and the geographical scope of
the
these
infringement. The Commission considers
submissions went beyond Nintendo Corporation Ltd/
Nintendo of Europe GmbH's obligation to reply to
previous formal requests for information and, thus, can
collaboration with the
be
Commission's proceedings.

considered as

effective

that

(460) Therefore in consideration of

the above the effective
cooperation by Nintendo Corporation Ltd/Nintendo of
Europe GmbH justifies a reduction of 25 % of the basic
amount of its fine.

(544) Pages 988, 1236 and 1668.

(461) Nintendo Corporation Ltd/Nintendo of Europe GmbH
has requested the Commission to exercise its discretion
such that any credit that it may receive for its voluntary
cooperation should also benefit its independent distribu-
tors. This is in view of its role as instigator and leader
and its wish not to seek advantage at its distributors'
expense by approaching the Commission.

(462) A reduction in the fine on grounds of cooperation
during the administrative procedure is justified only if
the conduct of the undertaking in question enabled the
Commission to establish the existence of an infringe-
ment more easily and, where relevant, to bring it to an
end (545). Consequently, the Commission cannot accept
Nintendo Corporation Ltd/Nintendo of Europe GmbH's
request.
In any event, nothing prevents Nintendo
Corporation Ltd/Nintendo of Europe GmbH from
compensating its independent distributors following this
decision if it so wishes.

(463) Apart from John Menzies plc and Nintendo Corporation
Ltd/Nintendo of Europe GmbH, no other party has
provided additional evidence for the case.

(464)

In summary, the basic amounts for each of the under-
takings should be reduced as follows:

— Nintendo Corporation

Ltd/Nintendo

of

Europe

GmbH: 25 % plus an additional EUR 300 000,

— John Menzies plc: 40 %,

— Concentra — Produtos para crianças, SA: 50 %,

— Linea GIG SpA: 0 %,

— Nortec AE: 0 %,

— Bergsala AB: 0 %,

— Itochu Corporation: 0 %,

— CD-Contact Data GmbH: 0 %.

2.4.2.5. A b ili ty to p ay

(465)

Itochu Corporation has argued that
the Commission
should take account of the fact that Itochu Hellas EPE
made losses over the period during which it acted as a
distributor of the products, with the exception of the
period 1995 to 1996.

(466) Taking account of the adverse financial situation of an
undertaking when establishing fines would be tanta-
mount to conferring an unjustified competitive advan-
tage on those undertakings least well adapted to market
conditions (546). In any event, Itochu Corporation did not
even provide any evidence that these losses of Itochu
Hellas EPE impaired its financial situation.

(545) See judgment

in Case C-297/98 P, SCA Holding v Commission

(546)

[2000] ECR I-10101, paragraph 36.
Judgment in Joined Cases 96 to 102, 104, 108 and 110/82 NV
IAZ International Belgium and others v Commission (Navewa) [1983]
ECR 3369, paragraphs 54-55.

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(467) Linea GIG SpA submits that the company was put into
liquidation on 8 January 1999 and has applied for
protection from its creditors (547), offering to cede all
the company' assets to its creditors. This request was
admitted and, subsequently, ratified on 17 November
1999 by the national court in Florence. However, taking
account of the adverse financial situation of an under-
taking when establishing fines would be tantamount to
conferring an unjustified competitive advantage on those
undertakings least well adapted to market conditions.

(468) Bergsala AB deduces,

from Commission Decision 85/
206/EEC (548) that the Commission may decide not to
impose fines where there are special circumstances.
Bergsala AB has claimed that its financial situation at
the time when it replied to the Statement of Objections
may be taken as such a special circumstance, justifying
the imposition of a zero fine, or only a token fine.

(469)

It
is the Commission's view that only exceptionally,
could fines be adjusted to take account of real inability
to pay in a specific social context.

(470)

[…]* (549) (550)

(471) Bergsala AB nonetheless continued to claim that

financial position meant
jeopardise the company's existence (551).

that substantial

its
fines could

(472)

In order to consider this argument, on September 2002,
the Commission requested detailed information on the
the
company's
company's reply, it is concluded that there is no justifi-
cation for adjusting the amount of
the fine in the
present case.

financial position. After

examining

— Concentra — Produtos

para

crianças,

SA,

EUR 0,825 million,

— Linea GIG SpA, EUR 1,5 million,

— Nortec AE, EUR 1 million,

— Bergsala AB, EUR 1,25 million,

— Itochu Corporation, EUR 4,5 million,

— CD-Contact Data GmbH, EUR 1 million,

HAS ADOPTED THIS DECISION:

Article 1

The following undertakings have infringed Article 81(1) of the
Treaty and Article 53(1) of
the EEA Agreement by partici-
pating, for the periods indicated, in a complex of agreements
and concerted practices in the markets for game consoles and
game cartridges compatible with Nintendo manufactured game
consoles with the object and effect of
restricting parallel
exports in Nintendo game consoles and cartridges:

— Nintendo Corporation Ltd/Nintendo of Europe GmbH,

from January 1991 to the end of December 1997,

— John Menzies plc,
December 1997,

from 4 August 1995 to the end of

— Concentra — Produtos para crianças, SA,
1991 until the end of December 1997,

from 14 May

(473) Bergsala AB has therefore not even shown its inability

to pay, far less in a specific social context.

— Linea GIG SpA,
December 1997,

from 1 October 1992 until the end of

(474) Consequently, no reduction of fines to be imposed on
Bergsala AB, Itochu Corporation and Linea GIG SpA can
be justified on these grounds.

— Nortec AE from 23 October 1997 to the

end of

December 1997,

— Bergsala AB,

from 15 May 1995 until

the

end of

2.4.2.6. T he a m ou n t of

f in e s

imp os e d i n t he

p r e s e n t pr o c ee d i n g s

December 1997,

— Itochu Corporation,
28 February 1997,

from 16 December

1991

to

(475)

In view of the above considerations, the final amount of
the fine to be imposed on each undertaking should be
as follows:

— CD-Contact Data GmbH, from 28 October 1997 to the end

of December 1997.

— Nintendo Corporation

Ltd/Nintendo

of

Europe

GmbH, EUR 149,128 million,

— John Menzies plc, EUR 8,64 million,

(547) Pursuant

to Articles 160 et seq. of Royal Decree No 267 of

16 March 1942.
IV/26.870, Aluminium imports from Eastern Europe.

(548)
(549) Bergsala's reply to the Statement of Objections, paragraphs 2.6, 2.7
and section 4.2, substantiated further by Bergsala's submission of
17 November 2000.

(550) Bergsala's submission of 10 May 2001.
(551) Bergsala's submission of 10 May 2001.

Article 2

The undertakings listed in Article 1 shall

1.
immediately
bring to an end the infringement referred to therein, in so far
as they have not already done so.

They shall refrain from any agreement or concerted practices
in relation to their activities in the markets for game consoles
and game cartridges compatible with Nintendo manufactured
game consoles which may have the same or similar object or
effect as the infringement.

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8.10.2003

Concentra — Produtos para crianças, SA and Nortec AE
2.
shall, within three months of the date of notification of this
Decision, inform all their customers in writing of the rights of
those
parallel-import
parallel-export
Nintendo products and to purchase and resell parallel-traded
Nintendo products.

customers

and

to

Article 3

The following fines are imposed on the undertakings listed in
Article 1 in respect of the infringement referred to therein:

— Nintendo Corporation Ltd/Nintendo of Europe GmbH,
jointly and severally liable, a fine of EUR 149,128 million,

— John Menzies plc, a fine of EUR 8,64 million,

— Concentra — Produtos para crianças, SA, a fine of

EUR 0,825 million,

— Linea GIG SpA, a fine of EUR 1,5 million,

— Nortec AE, a fine of EUR 1 million,

— Bergsala AB, a fine of EUR 1,25 million,

— Itochu Corporation, a fine of EUR 4,5 million,

— CD-Contact Data GmbH, a fine of EUR 1 million.

Article 4

the date of notification of

this
Within three months of
Decision, the fines shall be paid into Bank account No 642-
0029000-95 (IBAN Code: BE76 6420 0290 0095; SWIFT
Code: BBVABEBB) of the European Commission with Banco
Bilbao Vizcaya Argentaria BBVA, Avenue des Arts, 43, B-1040
Brussels.

After the expiry of that period, interest shall automatically be
payable at the interest rate applied by the European Central
Bank to its main refinancing operations on the first day of the
month in which this Decision was adopted, plus 3,5 percentage
points, namely 6,78 %.

Article 5

This Decision is addressed to:
— Nintendo Corporation Ltd
60, Kamitakamatsu-cho
Higashiyama-Ku
Kyoto 605, Japan

— Nintendo of Europe GmbH

Nintendo Center
D-;63760 Großostheim

— John Menzies plc
108 Princes Street
Edinburgh EH2 3AA, United Kingdom
— Concentra — Produtos para Crianças, SA

Rua Prof. Henrique Barros, 9
P-2685-339 Prior Velho

— Linea GIG SpA

Via Volturno, 3/12
I-50019 Osmannoro
Sesto Fiorentino, Firenze

— Nortec AE

8, Alexandroupoleos str.
GR-44 51 Metamorfosi, Athens

— Bergsala AB

Marios Gata 21
S-434 37 Kungsbacka

— Itochu Corporation

5-1, Kita-Aoyama, 2-chome
Minato-ku,
Tokyo 107-8077, Japan
— CD-Contact Data GmbH

Brunnfeld 2-6
D-93133 Burglengenfeld.

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

Done at Brussels, 30 October 2002.

For the Commission

Mario MONTI

Member of the Commission