CELEX: 61981CC0210
Language: en
Date: 1983-06-28 00:00:00
Title: Opinion of Mr Advocate General Rozès delivered on 28 June 1983. # Oswald Schmidt, trading as Demo-Studio Schmidt, v Commission of the European Communities. # Competition - Distribution of high-fidelity equipment. # Case 210/81.

OPINION OF MRS ADVOCATE GENERAL ROZÈS
      DELIVERED ON 28 JUNE 1983 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      Oswald Schmidt, acting in the name of the company Demo-Studio Schmidt, Wiesbaden, brought an action on 13 July 1981 under the second paragraph of Article 173 of the EEC Treaty for a declaration that the Commission's definitive rejection on 11 May 1981 of an application under Article 3 (2) (b) of Regulation No 17 (
            2
         ) for an order that Studer Revox GmbH (hereinafter referred to as “Revox”) should conclude an “EEC Dealership Agreement” with it is void.
      I —
      The facts may be summarized briefly as follows:
      Since 1975 Oswald Schmidt has, in addition to his work as an engineer in a machine factory, carried on a business in Wiesbaden dealing in electronic equipment for the leisure market. At first he sold only appliances made by Revox which were not subject to any selective distribution conditions. Subsequently his sales programme was extended to television sets and active loudspeakers (Aktivlautsprecher) of two other trade marks. His business premises, having an area of approximately 15 square metres, were or are open to the public daily from 3.45 or 4 p.m. to 6 p.m. and on Saturday mornings.
      With effect from 1 September 1977 Revox introduced a new “EEC Dealership Agreement” for dealers specializing in television sets, radios and record-players in the common market.
      Its terms were amended by the introduction of a revised version thereof with effect from 10 February 1978. The distribution system laid down covers second generation high technology products known as the “B Series” and its legal basis is a standard contract concluded by Revox with the specialized retail dealers selected by it. That selection is made on the basis of objective qualitative criteria which relate in particular to the technical qualifications of the dealers and their staff, to the technical facilities of the sales outlets and to adherence to normal opening hours. This selective distribution system prohibits contracting partners from selling the goods covered by the contract to non-recognized dealers (freie Händler).
      After the introduction of the “EEC Dealership Agreement” Revox decided that it would supply appliances of the B Series to Oswald Schmidt only if his business premises were open for the whole of the day. In order to comply with that requirement Oswald Schmidt engaged a salesman on condition that the goods which were the subject of the dealership agreement were delivered.
      Despite his efforts Revox informed Mr Schmidt orally on many occasions and finally apparently in writing on 27 December 1979 that he could not be approved as a specialist retail dealer or supplied since he did not meet the requirements laid down in the Revox Dealership Agreement.
      By letter of 7 June 1980 Mr Schmidt finally made an application to the Commission under Article 3 (2) (b) of Regulation No 17 in respect of the refusal to deliver Revox “B Series” products and requested the Commission to order Revox to supply him immediately.
      In accordance with Article 6 of Regulation No 99/63/EEC of the Commission of 25 July 1963 (
            3
         ) the Commission informed him by letter of 18 September 1980 that as a result of its inquiries it was unable to give a favourable reply to his application. It invited him to comment on that assessment of the situation within one month.
      Mr Schmidt submitted observations in support of his application and the Commission then informed him by a communication dated 11 May 1981 stating the reasons on which it was based that his complaint must be rejected. In particular it stated that, in the absence of factors leading to the conclusion that its refusal to supply him amounted to an abuse of a dominant position within the meaning of Article 86 of the EEC Treaty or that its distribution system infringed Article 85 (1) of the Treaty, there were no grounds for requiring Revox to deliver its products to him.
      Mr Schmidt claims that the Court should declare that that notice is void and order the Commission to reconsider his application in compliance with the judgment to be given by the Court.
      II —
      1. The first head of claim
      A — Admissibility
      The Commission does not dispute the admissibility of this application since its notification (Bescheid) constitutes a definitive measure to which was attached a detailed statement of the legal reasons upon which it was based.
      It points out, however, that the contested notice cannot affect Mr Schmidt adversely since he is neither empowered to require the Commission to act against a distortion of competition nor entitled to require that an application made under Article 3 (2) (b) of Regulation No 17 shall be made the subject of a decision against which action may be taken: in any case he has not suffered any legal injury.
      Revox, which has intervened in support of the Commission's contention that the action should be dismissed, considers that the whole of the application is inadmissible since Oswald Schmidt has no legal interest in bringing proceedings: the purpose of his application is to assert against the intervener and through the intermediary of the Commission his alleged right to receive supplies.
      In fact, the Commission contends, such a right may be invoked, at best, only before the courts of the Member States in pursuance of national law. Even if the Court were to declare the contested notice void and to grant the applicant's second head of claim, he would by no means achieve his aim of receiving supplies. From the point of view of substantive law the Commission's notice of 11 May 1981 therefore does not affect the applicant adversely. Moreover, the procedure relating to agreements, decisions and concerted practices does not give the complainant a right to require the Commission to act. On the contrary, it must be recognized that the Commission has the right, in the context of its discretionary powers, not to act on applications which are manifestly unfounded or which are made for purposes other than those stated.
      
               (a)
            
            
               I note first that the purpose of the present action is to be found solely in the submissions and claims made by Oswald Schmidt. According to the actual terms thereof his first claim is not that he should receive supplies but that the notice whereby the Commission notified him of its refusal to act on his formal complaint should be declared void. Although that application, made on 7 June 1980, was intended to force the intervener to supply the applicant immediately, it must in fact be interpreted as a request that the Commission should confirm the existence of an infringement of Articles 85 and 86 of the Treaty pursuant to Articles 3 (1) and 2 (b) of Regulation No 17 and should adopt a decision requiring Revox to bring such infringement to an end.
               The Commission's notice of 11 May 1981 in response to that application cannot therefore be construed as anything other than a refusal by the Commission to act on it.
               The first head of claim in the application submitted under the second paragraph of Article 173 of the EEC Treaty relates solely to that refusal.
               The second head of claim is not that the Commission should act against an infringement of Article 85 or 86 but only that it should issue a fresh notice to the applicant taking account of a correct legal assessment.
            
         
               (b)
            
            
               In view of the purpose of the proceedings the admissibility of the action does not therefore depend on whether the applicant has the right to require the Commission to act in respect of restrictions on competition or whether he has a right that his application should be made the subject of an actionable decision. According to the consistent case-law of the Court which was summarized in the IBM case (
                     4
                  ) the first head of claim is in any case admissible if the contested notification amounts to a “measure the legal effects of which are binding on, and capable of affecting the interests of, the applicant by bringing about a distinct change in his legal position”. As the Court also recalled in that case, the admissibility of an action does not depend in particular on the form in which such a measure is cast or its categorization in respect of Article 189 of the Treaty; the substance of the measure must be considered.
               According to those criteria it is therefore important not only that the letter sent to the applicant on 11 May 1981 amounts in the eyes of the Commission to a decision in respect of which proceedings may be instituted under the second paragraph of Article 173 of the Treaty but also that the person to whom it is addressed is capable of understanding from its content and form that it amounts to such a decision. It is clear, in particular from the wording of the letter that following the applicant's comments on the notice under Article 6 of Regulation No 99/63 the Commission was notifying him of its “definitive view”. It was therefore not simply an administrative letter from a directorate general as was the case in Joined Cases 235/78 and 1 to 3/79 Giry and Guerlain (
                     5
                  ) Thus, with regard to the question of admissiblity it is not essential to know whether the Commission had power to adopt such a measure, which is not expressly provided for by Regulation No 17, or whether, as in the GEMA case, (
                     6
                  ) an application under Article 3 (2) of Regulation No 17 founds a right to require from the Commission a decision in respect of which proceedings may be instituted.
            
         
               (c)
            
            
               Finally, contrary to the point of view expressed by both the Commission and the intervener, the notice rejecting the application does affect the applicant adversely and it would seem to be justified to declare his action admissible. The Commission has a wide discretion in deciding whether or not to commence procedures under Regulation No 17 but, as I emphasized in my opinion in the FEDIOL case, (
                     7
                  ) a completely discretionary power of assessment on the part of the administration is incompatible with the concept of law on which the Community legal order is based. The exercise of a discretion necessarily implies compliance with its purpose. Individuals therefore have the right to expect the discretion to be exercised properly since the provision conferring that power was also adopted in their interest. In this case Article 3 (2) (b) of Regulation No 17, which confers on natural or legal persons who claim a legitimate interest a right to submit an application, is itself sufficient to indicate that certain individual interests must be respected in exercising the power and that it is necessary, should an application be rejected, to allow the Court to verify that the said discretion has been properly exercised.
            
         
               (d)
            
            
               The fact that, as in emphasized in the penultimate recital in the preamble to Regulation No 17, “all decisions taken by the Commission under this regulation are subject to review by the Court of Justice under the conditions specified in the Treaty” also militates in favour of the admissibility of the present action.
            
         
               (e)
            
            
               The above considerations were clearly the basis of the Court's judgment in the Metro case (
                     8
                  ) when it stated that it is in the interests of a satisfactory administration of justice and of the proper application of Articles 85 and 86 that natural or legal persons who are entitled, pursuant to Article 3 (2) (b) of Regulation No 17, to submit an application should be able, if their application is not met either wholly or in part, to institute proceedings in order to protect their legitimate interests. The Court concluded from that that decisions addressed to another person may be of direct and individual concern to an applicant, within the meaning of the second paragraph of Article 173. The need for appropriate legal protection must in any case be recognized all the more when the applicant is himself the person to whom the decision rejecting the application is addressed.
               Consequently it is necessary to consider the action brought in respect of the Commission's letter of 11 May 1981 to be admissible.
            
         B — Substance
      In support of his action Mr Schmidt states that the Commission's refusal to act against Revox in respect of infringements of the rules of competition amounts on its part to an infringement of the Treaty or the rules of law relating to its application and to a misuse of powers. He considers that he has been excluded from the distribution system relating to goods bearing the Revox trade mark in a manner which restricts competition and that the Commission should have taken action against such an infringement and should, in particular, have required Revox to supply him.
      The contested decision may, however, be declared illegal and consequently declared void only if the Commission has improperly exercised the discretion conferred on it by Article 3 of Regulation No 17. But if that is to be the case it must be assumed that there has been an infringement of the provisions of Article 85 or Article 86 of the Treaty.
      
               (a)
            
            
               The applicant maintains that the fact that he was not approved as a specialist dealer or was not supplied on account of the selective distribution system operated by Revox constitutes an infringement of Article 85 (1) of the Treaty. He does not dispute the basic validity of such a distribution system which allows manufacturers to select on the basis of specific criteria those dealers who are to distribute their goods but he does reject the criterion based on the opening hours of a shop. It is necessary therefore first to decide whether the selective distribution system operated by Revox is, in that respect, compatible with Article 85 (1) of the Treaty.
               As the Court held in its judgment in the Metro case, cited above, it is particularly true in the sector covering the production of high quality and technically advanced consumer durables, such as electronic equipment for the leisure market, that selective distribution systems constitute, together with other distribution channels, an aspect of competition which accords with Article 85 (1) “provided that resellers are chosen on the basis of objective criteria of a qualitative nature relating to the technical qualifications of the reseller and his staff and the suitability of his trading premises and that such conditions are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion”.
               All the criteria relating to the selective distribution agreements in question are, as the Commission correctly states, objective criteria of a/qualitative and not a quantitative nature and therefore do not have a restrictive effect on the conditions of competition. That applies in particular to the criterion relating to the accessibility of the business premises during normal opening hours, which is essential for a retail shop. It is precisely in the case of expensive goods which involve giving advice to customers and an after-sales service, such as those which are the subject of the distribution agreements in question, that customers expect opening times covering the whole day, and that requirement does not unduly restrict access to the distribution system.
               In any case, as the Commission states, even if a different view is taken, trade between Member States is not capable of being affected appreciably by such a clause since it involves the exclusion of only a small number of skilled retailers.
               By opening his shop for only some two hours each day and on Saturday mornings Mr Schmidt does not comply completely with the objective and qualitative selection criteria and it cannot be argued that Revox has put its distribution system into effect in a discriminatory manner. It is irrelevant that the applicant, as he has stated, took steps in October 1977 to open his shop for the whole of the day or was ready to open it during the usual hours in the future. The only relevant factor is that he did not at any time actually comply with the criteria expected of specialist traders. A manufacturer does not have to supply his goods before the retailer complies with one of those criteria. If it were otherwise the risk of noncompliance would be borne by the manufacturer alone which is contrary to the spirit and purpose of a selective distribution contract.
               If approval were given to persons not satisfying the selection criteria or not yet satisfying them, this might lead to discrimination against specialized dealers who generally have higher expenses and it would therefore be necessary to consider whether such application of a selective distribution contract was contrary to the prohibition contained in Article 85 (1) of the Treaty.
               Contrary to the applicant's opinion, it is not possible to infer from the fact that he was approved as a specialist dealer in Sony products by the representative of Revox in the name of the Sony company that the criteria in question were applied in an inconsistent or discriminatory manner. Quite apart from the fact that the criterion relating to opening hours is not contained expressly in the distribution system operated by Sony, discrimination arises when one and the same person deals with comparable situations in a different manner without any objective justification, which is clearly not the case here.
               Furthermore, the discriminatory operation of a selective distribution system also assumes that the manufacturer fails to apply the selection criteria uniformly to distributors or fails to withdraw approval from distributors who no longer satisfy those criteria. Consequently the fact that another company which has not been approved as a specialist dealer by Revox allegedly distributes Revox goods does not lead to the conclusion that Article 85 (1) of the Treaty has been infringed.
               Even if it is admitted that an infringement of that provision existed at the time when the contested decision was adopted, the applicant cannot rely on that to claim a right to be approved as a specialist dealer or even to be supplied by the intervener. In fact the applicant fails to appreciate that the prohibition of agreements which restrict competition provides, as such, no legal basis for intervening in the contractual freedom of traders. Thus the fact that a selective distribution system is incompatible with Article 85 or that it is operated in a discriminatory manner does not entail an obligation on the part of Revox to approve the applicant as a specialized dealer, as he asks.
               For all those reasons it is not possible to criticize the Commission for taking no steps in respect of the prohibition contained in Article 85 (1) or to allege that it has therefore misused its power.
            
         
               (b)
            
            
               Article 86 of the Treaty allows the Commission to act in respect of an abuse of a dominant position. According to the application itself which, taking the figures from a simple notice in a private information broadsheet, estimates that approximately 13% of the market in specialist trade in radio and television sets in Germany, Austria and Switzerland belongs to Revox, it is not possible to regard that company and its products as having such a position on the market in question. According to information provided by the Commission and Revox the company's share of the market in question is only roughly 1% in respect of record-players, amplifiers, radios and loudspeakers.
               Moreover, as is also emphasized by Revox, even if it is accepted that there is a dominant position, it cannot be said that the position has been abused if the company in question operates, without discrimination, a distribution system which is justified from a technical point of view.
               Consequently the contested decision cannot be challenged even on the basis of Article 86 of the Treaty.
            
         2. The second head of claim
      
               (a)
            
            
               Since the application for a declaration of the nullity of the Commission's decision of 11 May 1981 is unfounded the claim that the Commission should be ordered to take a fresh decision taking into account such a declaration is devoid of purpose and is in need of no further comment.
            
         
               (b)
            
            
               If, however, the Court were nevertheless to allow the first head of claim and declare the contested decision void, it would be necessary, in the alternative, to agree with the Commission and the intervener that such an action of restraint or establishing an obligation is not provided for by the EEC Treaty; thus it is inadmissible. In that respect it is sufficient to point cut that a judgment given under Article 173 is limited to declaring the contested measure void; according to Article 176 an institution whose act has been declared void is therefore required to take the necessary measures to comply with the judgment. The spirit and purpose of these provisions is therefore opposed to an interpretation of the second paragraph of Article 173 in the sense desired by the applicant.
            
         I therefore recommend that the action should be dismissed and that the costs, including those of the intervener, should be borne by the applicant.
      (
            1
         )	Translated from the French.
      (
            2
         )	Official Journal, English Special Edition 1959-1962, p. 87.
      (
            3
         )	Official Journal, English Special Edition 1963-1964, p. 47.
      (
            4
         )	Judgment of 11 November 1981 in Case 60/81 International Business Machines Corporation v Commission of the European Communities [1981] ECR 2639.
      (
            5
         )	Judgment of 10 July 1980Procureur de la République and Others v Bruno dry and Guerlain SA and Others [1980] ECR 2327.
      (
            6
         )	Judgment of 18 October 1979 in Case 125/78 GEMA, Gesellschaft fur musikalische Aufführungs- und mechanische Vervielfältigungsrechte v Commission of the European Communities [1979] ECR 3173.
      (
            7
         )	Case 191/82 Fédération de l'Industrie de l'Huilerie de la CEE (FEDIOL) v Commission oj the European Communities [1983] ECR 2913.
      (
            8
         )	Judgment of 25 October 1977 in Case 26/76 Metro SBGroßmärkte GmbH and Co. KG v Commission of the European Communities [1977] ECR 1875.