CELEX: 31991D0299
Language: en
Date: 1990-12-19 00:00:00
Title: Commission Decision of 19 December 1990 relating to a proceeding under Article 86 of the EEC Treaty (IV/33.133-C: Soda-ash - Solvay) (Only the French text is authentic)

Avis juridique important

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31991D0299

91/299/EEC: Commission Decision of 19 December 1990 relating to a proceeding under Article 86 of the EEC Treaty (IV/33.133-C: Soda-ash - Solvay) (Only the French text is authentic)  

Official Journal L 152 , 15/06/1991 P. 0021 - 0039

COMMISSION DECISION of 19 December 1990 relating to a proceeding under Article 86 of the EEC  Treaty IV/33.133-C: Soda-ash - Solvay (Only the French text is authentic) (91/299/EEC) THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, 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 the Act of Accession of Spain and  Portugal, and in particular Articles 3 and 15 thereof, Having regard to the Commission Decision of 19 February 1990 to open a proceeding on its own  initiative pursuant to Article 3 of Regulation No 17, Having given the undertaking concerned the opportunity to make known its view on the objections  raised by the Commission, pursuant to Article 19 (1) of Regulation No 17 and Commission Regulation  No 99/63/EEC of 25 July 1963 on the hearings provided for in Article 19 (1) and (62) of Council  Regulation No 17 (2), After consulting the Advisory Committee on Restrictive Practices and Dominant Positions,  PART I THE FACTS A. Summary of the infringement (1) The present Decision arises out of investigations carried out by the Commission in March 1989  pursuant to Article 14 (3) of Regulation No 17 at the premises of Community producers of soda-ash.  By means of the said investigations and subsequent enquiries under Article 11 of Regulation No 17  the Commission discovered documentary evidence showing that an infringement of Article 86 had been  committed by Solvay et Cie SA, Brussels (Solvay). 2. The infringement can be summarized as follows: Infringement of Article 86 by Solvay From about 1983 until the present time Solvay has abused the dominant position which it holds in  the market for soda-ash in the Community (excluding the United Kingdom and Ireland) by applying to  its major customers a system of loyalty rebates and discounts by reference to marginal tonnage,  contractual arrangements tending to ensure an effective exclusivity of supply for Solvay and other  devices which have had the object and effect of tying the said customers to Solvay for the whole of  their requirements and of excluding competitors.  B. Background 1. Solvay's position in the EEC soda-ash market (2) Details of the product and the soda-ash market are set out in Part 1.B of Commission Decision  91/297/EEC (Solvay-ICI) (3). Solvay is by far the largest producer of soda-ash both worldwide and in the EEC. In the Community  it operates plant in Belgium, France, Germany, Italy, Spain, and Portugal and supplies the product  to consumers throughout the EEC with the exception of the United Kingdom and Ireland. (3) In the nine west European national markets in which Solvay has its own sales organization (the  nine 'Directions nationales` or 'DN` which include Austria and Switzerland) it has had a stable  market share of around 70 %. Its four EEC competitors together have only 26 %. In the EEC excluding  the British Isles (where ICI has a near-monopoly as a result of the 'home market` rule: see  Decision . . . (ICI)) Solvay's market share has also historically been around 70 %. With the sole  exception of the Netherlands (left largely to NSI and then AKZO as a result of a market-sharing  agreement made in 1955 which is not the subject of proceedings) Solvay is the largest, or in some  cases the exclusive, supplier of soda-ash in each of the Member States in which it sells. Solvay as the largest producer of salt in the EEC is very favourably placed as regards the supply  of the principal raw material for soda-ash. 2. Solvay's competitors (4) The only other producer in Europe comparable in strength to Solvay is ICI which does not  compete in any of Solvay's markets. With the possible exception of AKZO, which by virtue of its  location on the North Dutch coast claims as its 'natural backyard` not only the Netherlands but  also North Germany and Denmark, the other producers tend to concentrate their EEC sales on their  respective national markets. Thus Rhone-Poulenc conducts 95 % of its EEC soda-ash business in  France; Chemische Fabrik Kalk (CFK) and Matthes & Weber send some exports to the Netherlands,  France and Luxembourg but again their main effort is on their local market. Compared with Solvay's  70 %, the other producers' market shares in the continental EEC Member States range from 4 % to 11  %. The main danger seen by Solvay to its position in its European market comes not from other EEC  producers but from United States natural ash. The east European producers supply mainly light ash  which is not normally used by the glass industry. The anti-dumping measures which have been in  place since 1983 have provided Solvay with a substantial degree of protection against such imports:  see post, recital (10). 3. Solvay's customers (5) Solvay's principal customer base is in the glass sector which accounts for 66 to 68 % of  soda-ash consumption in western Europe. The glass sector itself is divided between container glass  and flat glass in the proportion 2:1. Solvay is the principal or the sole supplier of virtually all the glass producers in continental  western Europe. There are only very few customers where one of the other soda-ash producers is the  'first` supplier. Thus in 1988, Solvay had 82 % of the soda-ash business for flat glass in the  market formed by its nine 'DN`; in the container glass sector, it had 74 % of the total available  business. (6) Solvay's largest customer is the St Gobain Group with 'evergreen` contracts in the different  Member States terminable on 24 months' notice, covering an offtake in western Europe of over 500  000 tonnes per year. There is also a secret 'protocol` providing for a 'group rebate` of 1,5 % per  year on all sales in Europe. Prices and other contractual terms are however negotiated on a  national basis between the appropriate Solvay 'DN` and the St Gobain company in the Member State in  question. Many other customers also have an 'evergreen` contract providing for a 24-month notice  period. 4. Solvay's sales organization (7) Solvay's production and marketing operations for soda-ash in western Europe are organized on a  national basis with a separate 'DN` serving each of the different markets. There are considerable  price variations between the different Member States with ex-works prices in France some 10 % below  the levels in Belgium. In the glass sector in particular there has however in the last decade been  a marked tendency towards the formation of Europe-wide groups. While Solvay insists that price  negotiations take place at a national level (i.e. between the Solvay 'DN` and the local  glass-making subsidiary company of the group concerned), customers are increasingly aware of the  price differences between the different Member States and have sought to minimize them. In some  cases customers have succeeded in negotiating a formula with Solvay which reduces the price  variation (e.g. the Belgian glassmakers St Roch and Glaverbel). 5. Solvay's total requirements contracts up to 1981 (8) Up to 1980, Solvay's supply agreements for soda-ash in the different Member States were of long  duration and generally required the customer to obtain its total requirements from Solvay. After Solvay's supply agreements had been brought to the attention of the Commission, extensive  discussions took place and Solvay eventually agreed to modify its contractual arrangements by  replacing the 'total requirements` clause with a clause which stipulated for a particular tonnage  and reducing the period of notice for terminating the agreement (in many cases five years) to two  years. The Commission however informed Solvay by letter that the tonnages which the customer was required  to purchase each year should not correspond with or be close to the customer's total requirements  of soda-ash. Further, while confirming that it was permissible for Solvay to grant rebates and  discounts off list price, the Commission insisted that any rebates adopted by Solvay should  constitute neither a disguised method of ensuring the continuance of the abandoned 'total  requirements` contracts nor operate as loyalty rebates. (9) Solvay informed the Commission at the end of 1980 that it was instructing its various 'DN` to  amend their supply agreements and attached a copy of a draft circular letter to be sent to its  various national sales offices in which it stressed - in two places - that under no circumstances  should any price arrangement constitute an inducement to ensure the 'loyalty` of the customer. The  customer was also to be free to choose the tonnages it wished to purchase, and the sales offices  were expressly prohibited from attempting to discover from the customer the proportion of its total  requirements which the nominated tonnage represented. On the basis of Solvay's letter, the file was closed in 1982 and no further action was taken by the  Commission until the investigations in the present proceedings. 6. Anti-dumping protection (10) A major plank of Solvay's commercial policy in the soda-ash sector is to ensure the  maintenance of the anti-dumping measures in place against the United States producers of heavy ash  as well as the east European light ash suppliers. With the changes in exchange parities since 1984,  Solvay is well aware that the United States producers can sell in Europe at prices substantially  below the average EEC prices without being guilty of dumping: i.e. their ex-works price for exports  is not below their domestic price. A number of glass producers have been taking advantage of a provision in the anti-dumping  legislation which permits the glassmakers to avoid anti-dumping duties on imported soda-ash which  is used in producing glass for export outside the EEC (inward-processing). (11) The anti-dumping duties on United States imports were under review at the time of the present  proceedings and Solvay was pressing hard for their renewal, as well as the extension of  anti-dumping duties to material imported under inward-processing arrangements. [. . .] (1). It is significant that in the anti-dumping procedure Solvay was arguing for a new minimum price  cleared at EEC border of ECU 163 per tonne to be imposed on dense ash from the East and the United  States (= ± ECU 170 - ECU 180 delivered) while (as it well knew) in several countries its own  average delivered price was under DM 300 (= ECU 150). C. Exclusionary conduct 1. Solvay's commercial strategy since 1982 (12) In spite of the express terms of the Commission's letter and of Solvay's internal circular,  Solvay has since 1983 made increasing use both of progressive rebates and of supply contracts which  effectively tie the major customers to Solvay for the whole or virtually the whole of their  soda-ash requirements. In the face of a fall-off in demand (up to 1987), the main concern of Solvay  appears to have been to preserve its dominant position in the European market against 'unrest` from  smaller producers, as well as the perceived threat of imports from eastern Europe and the United  States. The main measures taken by Solvay included: 'improving relations with major customers (glassmakers, chemicals industry) by bringing into  general use and strengthening our contracts policy, with the aim of "tying in" customers  (especially Saint-Gobain which gets a group super-rebate of 1,5 % under a "master" contract) . . .  but these contracts are still relatively "open" owing to EEC rules (maximum two years' notice,  contract tonnage limited to around 85 % of customer's needs to allow customer the possibility of a  second supplier)'. (13) A strategy presentation (undated but probably originating in about April 1988) sets out  Solvay's commercial and pricing policy: 'Solvay`s primary concern - to defend its major commercial position particularly in Europe (it is  this market which pays well and is profitable). This entails: - a policy of being present for every customer + good market coverage . . . - a policy favouring customers prepared to agree to long-term commitments = contracts which provide  for significant discounts.' Another strategy paper dated April 1988 sets out Solvay's policy alternatives: 'Defensive strategy consists, and will continue to consist, in: - continuing to "tie in" customers with bigger and bigger contractual discounts.' 2. Solvay's rebate system in Germany (14) Solvay's declared policy on the important German market was to preserve its overall market  share at over 50 % by: - excluding all imports from the United States and preventing any further growth in imports from  AKZO and Eastern European producers, - maintaining its 'dominant position` as soda-ash supplier to the flat glass and container glass  industry. Besides the usual quantity rebates on basic tonnage for major customers, Solvay has since 1982  granted two additional forms of rebate in Germany: - a rebate on marginal tonnage (called 'Spitzenrabatt`), almost invariably of 20 % off list price, - a special annual payment by cheque (up to DM 3,4 million in one case) dependent upon the  customer's obtaining most or all of its requirement from Solvay. (15) The cheque refund was already being given in late 1982 and the percentage 'top-slice` was  introduced in early 1983. The system has been extended and refined since 1983 and now forms the  basis of Solvay's price structure in Germany. At the time of the Commission's investigations in  march 1989 virtually all the major customers of Solvay in Germany were receiving both forms of  inducement. The customers in question were enjoined by Solvay to keep the rebates strictly secret  from third parties. Under the rebate system as applied to major customers, the 'core` tonnage, usually corresponding to  about 80 % of the customer's total annual requirement, was invoiced at list price with the usual  quantity rebate (say 10 %). For the marginal tonnage over and above the customer's basic  requirement, a rebate of 20 % was given, and in addition, a substantial cheque payment was made. (16) Thus for Vegla, a member of the St Gobain group, and Solvay's largest customer in Germany, the  rebate system operated as follows for 1989: 1) on the basic contractual tonnage of [. . .] tonnes, a rebate of 10 %; 2) for the 'marginal` tonnage of [. . .] tonnes, a rebate of 20 %; 3) a cheque attributable to the marginal tonnage of DM 3 349 000. Solvay's ex-works price for Germany was DM 403 per tonne. The average net price per tonne paid by  large customers in Germany over the last few years has been around DM 340 to DM 360 per tonne. What  is not apparent is that on the marginal tonnage the price per tonne may go down to DM 250 per tonne  or even lower. To take again the example of Vegla in 1989: - List price ex-works     DM 403 - Basic tonnage (rebate 10 %)     [. . .] - Marginal tonnage (rebate 20 %)     [. . .] - Discount price of last tranche (list price  20 %)     DM 322,40 - Special cheque payment DM 3 349 000 = DM [. . .] tonne - Net price per tonne for marginal tonnage     DM 245,24  (17) In each case where the special top-slice/cheque rebates are given, Solvay is the sole or the  principal supplier of the customer. It is apparent from the documents that in each case Solvay has  an accurate idea of each customer's total requirements and can calculate its price offer  accordingly. The marginal tonnage to which the financial inducements are referable corresponds with  the tonnage which the customer might otherwise consider obtaining from a competing supplier. The effect of the rebate system is that a competitor attempting to enter as second supplier by  obtaining from Solvay a part of the customer's business (i.e. the marginal tonnage) has to offer  the customer a price for that tonnage which is at least equal to, if not better than, Solvay's: in  the example given above, DM 245. While the competitor has to offer this unprofitably low price on  all the tonnage offered, Solvay only has to do so on the last tranche. Thus although the marginal  quantity is being supplied at only DM 245 per tonne, the average price per tonne for Solvay across  the whole tonnage supplied is DM 320. To put it another way, if the competing supplier is to hope to obtain marginal business from  Solvay, he will have to compensate the customer for the loss of the financial advantage which is  foregone by not purchasing it from Solvay. In the example given the value of this benefit is some  DM 6 850 000. The second supplier would have to absorb the cost of granting this rebate on just  over [. . .] tonnes while Solvay can average the rebate over three times that quantity. The customer thus has little incentive to seek a second supplier given the favourable price offered  by Solvay for marginal tonnage, and the second supplier has no incentive to quote for the  customer's marginal requirements given the unprofitable price at which he will have to offer. (18) In most cases, such as that of Vegla, the rebate system ensures that Solvay is secure in the  position of exclusive supplier. The rebate system also operates however to ensure that where  customers do have a policy of splitting their business between two suppliers the dominant share of  Solvay is maintained. Flachglas, Solvay's second largest customer in Germany, divides its business  roughly 70:30 between Solvay and Matthes & Weber. Since 1983, Solvay's pricing conditions to  Flachglas involve an 8,5 % quantity rebate for tonnage up to [. . .] Kt, 20 % on any marginal  tonnage, and a cheque for DM 500 000 to DM 750 000. The additional 'cheque rebate` meant that the  real price for any marginal tonnage taken over [. . .] Kt was (depending on the quantity) as low as  DM 250 or DM 260 per tonne. It is extremely difficult for the second supplier to break into  Solvay's 'core` share of the business which (as Solvay's own documents show) is protected by the  rebate 'barrier`. While the second supplier might be able to match the invoiced price of DM 322,40  (list price - 20 %) it is highly unlikely that the customer would risk losing the substantial  cheque payment which is clearly dependent upon its purchasing an appropriate tonnage from Solvay in  addition to the basic contractual tonnage. Documentation obtained from Matthes & Weber confirms  that it was impossible for that company to make any inroads on Solvay's share of the Flachglas  business. (19) Internal Solvay documents make it abundantly clear that the objective of the rebate system in  Germany was to secure the loyalty of the customers to Solvay. The particular case of Vegla is again instructive in this connection. Vegla had an understanding of  long duration with Deutsche Solvay Werke (DSW) to purchase its total requirements from Solvay. In  late 1987, however, apparently under pressure from the St Gobain headquarters in Paris, Vegla  requested Solvay to agree to its purchasing 15 Kt from the United States. DSW strongly opposed the  suggestion and made it clear to Solvay in Brussels that the rebate system was intended to reinforce  DSW's position as sole supplier to Vegla. If Vegla were permitted to buy from the United States  this would constitute an 'unnecessary abandonment of our strong defensive position (Vegla`s total  requirements), secured by a "watertight" rebate system'. Other DSW documents dating from early 1988 emphasize that Vegla must be made aware that the  'preferential treatment` accorded it by Solvay depended upon its taking the whole of its  requirements from DSW. In the event that Vegla did not do so, the cheque rebate would be withdrawn.  The documents also stress the fact that Solvay's two-step price system involves a significant  subsidy for marginal tonnages in order to exclude competition. One note of 1 February 1988 makes  the point particularly clear: '2. That the price policy to date, which was based on the principle of a two-tier pricing  structure, gave a special subsidy to marginal tonnage and thereby provided protection against  competitors` taking a corresponding part of the customer's requirements. 3. That in consequence DSW must during the further price negotiations for 1988 concentrate all its  efforts on securing the marginal tonnage (perhaps by increasing the amount of the cheque), and in  any case to be fully prepared to cut off completely the benefits they currently enjoy in the form  of cheques if they do not buy the marginal tonnage from us.' In the event it was agreed that DSW would supply Vegla with its total requirements for 1988 and  1989 (except for minor tonnages at one factory) with a rebate of 20 % on purchases over [. . .]  tonnes and a cheque including an express 'fidelity` element of DM 1 500 000 as well as other  discounts. 3. Solvay's rebate system in France (20) In France Solvay applies a system of rebates on marginal tonnage similar to that operated in  Germany. The BSN group is Solvay's largest customer in France with an annual consumption of around [. . .]  tonnes per annum. Solvay is to all intents and purposes the sole supplier of BSN in France. As with  St Gobain, Solvay was particularly anxious to prevent BSN from finding a second source of supply  from among the United States natural-ash producers. At the end of 1987 an arrangement was made with BSN for 1988 under which Solvay gave not only the  normal tonnage rebate of 8,5 % but also an extra rebate on marginal tonnage. A case rebate of FF  135 per tonne was to be paid quarterly on offtake over [. . .] tonnes. The arrangement with BSN was  extended for one year on 11 January 1989. (21) Durand (Cristalleries d'Arques) has an annual offtake of [. . .] tonnes. Up to 1987, Durand  received a rebate of 5 % for tonnage over [. . .] tonnes. For 1988, the arrangement included not  only the 5 % rebate but also a supplementary rebate of FF 100 per tonne on purchases over [. . .]  tonnes. For 1989 having ascertained that Durand's total requirements of soda-ash would be [. . .]  tonnes, Solvay increased the rebate on tonnages from [. . .] to FF 140 per tonne with FF 175 on the  last tranche, i.e. anything over [. . .]. (22) Perrier consumes around [. . .] tonnes of soda-ash per year, all purchased from Solvay. Under  its 'evergreen` supply contract dating from 1981, it is required to take [. . .] tonnes ± 10 % from  Solvay. From 1987 onwards, Perrier received a basic 4 % tonnage rebate but if its offtake exceeded  [. . .] tonnes, the rebate was increased to 4,75 % on the whole of the tonnage purchased. Thus if  Perrier goes to another supplier for marginal tonnage i.e. anything over [. . .] tonnes, the second  supplier would have to compensate it for the loss of the additional 0,75 % rebate on the whole of  the [. . .] tonnes already purchased from Solvay. The Perrier arrangement is the only example found of a fidelity rebate where the customer actually  loses a benefit referable to the basic tonnage unless it also takes the marginal tonnage. The other  top-slice rebates however have a similar exclusionary effect as can be demonstrated by the case of  Durand. (23) In the face of Solvay's additional rebate of FF 175 per tonne for tonnage above [. . .], any  second supplier aiming to obtain the last [. . .] tonnes of the Durand business would have to equal  or better the inducements offered by Solvay, i.e. the 5 % contractual discount plus the extra FF  175 rebate. The effective price per tonne of the last [. . .] tonne tranche from Solvay is as follows: The effective price per tonne of the last [. . .] tonne tranche from Solvay is as follows:   - Ex-works list price per tonne FF 1 125 - Delivered price per tonne FF 1 223 - Less: 5 % FF 56,25  - Additional rebate FF 175,00 FF  231,25 - Net delivered price per tonne FF  991,75 (= FF 893,75 ex-works)  Solvay's average delivered price per tonne if it supplies the whole [. . .] tonnes is much higher:  FF 1 136. A competitor wishing to supply the marginal [. . .] tonnes would however have to offer a  delivered price of FF 991,75 or better. The second supplier would have to compensate the customer  for moving its business by offering an inducement of FF [. . .] ([. . .] × FF 231,25). On the  assumption that its ex-works list price is the same as Solvay's (FF 1 125), it would have to absorb  the whole FF [. . .] million on business worth only FF [. . .] at list price, i.e. give an  effective discount of over 20 %. 4. St Gobain (24) The St Gobain group, which operates almost 30 glassworks across Europe - in France, Germany,  Italy, Spain, Belgium and Portugal - is Solvay's largest customer with purchases of over [. . .]  tonnes of soda-ash in 1988. St Gobain produces both flat and container glass. Out of its total consumption of soda-ash in  western Europe of [. . .] tonnes (1988) Solvay supplied [. . .] % (1987: [. . .] %). Solvay supplies 100 % of St Gobain's requirements in all important national markets outside France  where it is in the position of second supplier, 75 % of St Gobain's requirement in that Member  State having traditionally been supplied by Rhone-Poulenc. Prices and other conditions are  negotiated at a national level between the local St Gobain subsidiary and the Solvay 'DN` in that  country. In most cases the supply agreement is to run indefinitely (so-called 'evergreen`  contracts) with a notice period of two years. (In Italy however there is no formal contract and for  France, St Gobain terminated the agreement by giving 24 months' notice on 10 March 1987: new  conditions were being negotiated at the date of the Commission's investigations.) There are substantial price variations between the different Member States but St Gobain (to  Solvay's apparent dissatisfaction) uses its presence in several countries to exercise downward  pressure on Solvay's differential pricing. (25) A secret Protocol was concluded in November 1982 (effective 1 January 1983) to give expression  to the special relationship between Solvay and the St Gobain group based on a reciprocated  'most-favoured partner` status. By Clause 2 of the Protocol: 'On European markets other than France St Gobain will continue to give priority to Solvay for  supplies of soda-ash, for quantities of at least [. . .] tonnes per annum, based on St Gobain`s  glass production in 1981; in France St Gobain will progressively increase purchases from Solvay to  bring them to the level of [. . .] to [. . .] tonnes per annum.' In addition to provisions under which St Gobain is to receive the lowest prices offered by Solvay  in each country for comparable glass-making usages, Clause 4 provides for a special group rebate on  St Gobain's total purchases from Solvay: 'Under this Protocol Solvay further grants St Gobain an additional rebate of 1,5 % calculated on St  Gobain`s total soda-ash purchases from Solvay in Europe.' The Protocol also contains a 'competition clause` under which: 'Competing offers received by St Gobain at prices below Solvay`s for long-term deliveries will be  examined by the parties together in their mutual interest. If a solution acceptable to both parties  cannot be agreed, this Protocol will cease to be valid. N° account shall be taken of "spot" offers  or offers at "dumping" prices.' (26) The 'super group rebate` granted to St Gobain amounts to some BFrs [. . .] million annually. The internal documentation of Solvay leaves little doubt about the purpose of this special  arrangement with St Gobain: '- It should be noted that the SG "super group rebate" of 1,5 %, which helps to "tie in" the SG  group, is not an "absolute" weapon (it being difficult to increase the amount owing to EEC rules).  In particular it requires SG to "come clean" if it buys significant quantities from competitors.' DSW frankly informed a representative of St Gobain's German subsidiary Vegla on two occasions that  the protocol concluded between St Gobain and Solvay in Brussels was to all intents and purposes an  exclusivity agreement even if for obvious reasons the parties could not actually say so in writing.  The object of the agreement was said to be to maintain the status quo, clearly a reference to  Solvay's position as exclusive supplier. The only difference of opinion between DSW and the Solvay  headquarters as to the interpretation of the agreement was that Solvay in Brussels seems to have  taken the view that St Gobain was not precluded in principle from making spot purchases. 5. Exclusivity arrangements in Germany (27) Quite apart from the secret 'Protocol` with the St Gobain group, DSW also has a long-standing,  if unofficial, arrangement (referred to as a 'gentleman`s agreement') with Vegla, the German St  Gobain subsidiary, by which it is understood that this customer takes all its requirements of  soda-ash from Solvay. With an eye presumably on the letter of EEC competition rules, the Vegla  agreement had however been formally expressed as a 'tonnage` contract. Vegla, in common with most  of Solvay's large customers in Germany, has an 'evergreen` contract dating from 1981, i.e. one of  undetermined duration subject to termination on 24 months' notice. The exact quantities are the  subject of annual negotiation. When a Vegla representative reminded DSW that the Commission had in 1981 required Solvay to amend  its exclusive supply agreements, DSW's reaction was: 'But we - Vegla and DSW - have always worked on the understanding that the agreement related to the  total requirements of the factories (except Bergisch-Gladbach).` (28) The exclusivity arrangements seem to date back to the time when the Protocol was concluded  with St Gobain and when Vegla (according to one DSW document) gave a promise of 'loyalty`. It is  apparent from the documents discovered at DSW that the top-slice rebates and other benefits were  dependent upon Vegla obtaining all its requirements from Solvay. There are also strong indications that DSW had told Vegla at one time that unless it purchased its  total consumption from Solvay, all supplies would be cut off: a Solvay note of a meeting in Paris  with senior officials of St Gobain reads: 'He [. . .] points out that, according to SG/D [St Gobain/Germany] DSW has imposed an unacceptable  condition: SG/D to buy 100 % of requirements from DSW or DSW will not supply SG/D at all!` In the margin of the note is written 'so plump wurde das nicht gesagt` ('It was not put as bluntly  as that`): the implication, however, is that, whatever was said, the meaning was the same. In at least one other case a major customer in Germany (Oberlandglas) was told in unambiguous terms  by DSW that the 'special conditions` (20 % top-slice rebate, cheque for DM 1 million) depended upon  its taking 100 % of its requirements from Solvay from 1987 onwards. Oberlandglas has always taken  its total requirements from Solvay. 6. Exclusivity arrangements in France (29) In addition to the fidelity rebates given to several major customers in France, the tie of  exclusivity with Solvay was reinforced by the device of concluding long-term delivery agreements  which, although formulated as 'tonnage` contracts, in fact stipulate for a tonnage which  corresponds closely with the customer's total requirements. The Commission had warned Solvay  against such a practice in December 1980. The 'evergreen` supply contract with BSN which dates from 18 June 1981 requires BSN to purchase  from Solvay annually a quantity of [. . .] tonnes ± 15 % for its glass factories in France. BSN's  total soda-ash requirement from 1982 to 1984 was in reality some [. . .] tonnes falling from 1985  onwards to around [. . .] tonnes annually. The minimum tonnage which BSN is obliged to purchase  from Solvay under the terms of the 1981 agreement is [. . .] tonnes, a tonnage which is not far  short of its total requirements. The contract is of indeterminate duration and continues for a  period of two years after notice of termination either side. Solvay has been the virtually  exclusive supplier of soda-ash to BS since 1982, supplying each year some 98 % of its  requirements. (30) The supply contracts with a number of other major glassmaking customers in France - for  example Perrier, Verrerie d'Albi - also require the customer to take a tonnage close to its actual  requirements: Perrier: contractual tonnage [. . .] tonnes ± 10 %; annual requirements since 1982, ± [. . .]  tonnes, all supplied by Solvay. Verrerie d'Albi: contractual tonnage [. . .] tonnes ± 5 000 tonnes; annual requirement since 1982,  [. . .] tonnes, all supplied by Solvay. Again both these contracts require two years' notice of termination. 7. The Belgian glassmaker contracts (31) Another example of 'tonnage` contracts for what is close to the customer's estimated total  requirement is provided by the contracts concluded between Solvay and the three major Belgian glass  producers St Roch (St Gobain group), Glaverbel and Verlipack. As Solvay states in an internal note  of 11 February 1986 the Belgian price is effectively determined by the price to these three  customers. Up to 1978 these customers had always purchased almost all of their requirements from  Solvay. In January of that year the Belgian Government intervened to prevent the three glass  producers from entering into a contract with FMC to purchase substantial quantities of soda-ash  from the United States. On 7 February 1978 agreements were signed between the Belgian glassmakers and Solvay under which  they were required to purchase the totality of their requirements from Solvay for a period of five  years. The Commission insisted in the course of the discussions with Solvay between 1980 and 1981  that these contracts would also have to be modified. (32) New agreements were concluded with the three glassmakers, effective from 1 January 1983,  providing for the customer to take a specified tonnage ± 15 %. The tonnages stipulated were: St Roch :[. . .] ± 15 % Glaverbel :[. . .] ± 15 % Verlipack :[. . .] ± 15 %. (Since the failure of Verlipack and its restructuring in 1985 its annual consumption has halved and  it now purchases under an annual contract.) The agreements were to be of an unspecified duration subject to termination at 24 months' notice. Before 1 November of each year, the customer has to inform Solvay of the tonnages which it intends  to take during the following year: there are also special provisions dealing with the eventuality  of the customer taking more or less than the contractual tonnage. (33) In practice, the basic contractual tonnages were a reasonably close approximation of the total  annual consumption of the customers at the time. Since 1983 the three customers have in fact taken  virtually all of their requirements from Solvay (1). An exception was the [. . .] tonnes imported  by St Roch in early 1988 under inward-processing arrangements. This business was the subject of  intensive negotiations between Solvay and St Gobain and has now been regained by Solvay for 1989. It is clear that - whatever the formal instructions given by Solvay in its letter of 19 February  1981 to the 'DN` - there was, in the case of St Roch at least, detailed discussion with the  customer regarding the exact tonnage of its total requirements, followed by a successful atempt to  secure the customer's express agreement (a) to limit to 8 000 tonnes the volume which would be  acquired in 1988 from the competing supplier and (b) to revert to Solvay completely for 1989. 8. Other exclusivity arrangements in Belgium (34) A number of contracts with smaller customers also contain clauses designed to secure the  customer's tie to Solvay. Durobur of Soignies has since 1983 had a series of annual or biennial delivery contracts with  Solvay with an annual offtake of some [. . .] tonnes. The contracts made on each occasion contained a clause which effectively ensured that Durobur does  not change to another supplier at the end of the contractual period. The agreements provide that  Solvay and Durobur will meet at the end of the period to negotiate the conditions of the next  contract, and then stipulate: 'Before these negotiations take place Durobur will not make any purchase commitment for soda-ash  supplies for (the following year).` Similar provisions appear in the Solvay contract with Pittsburg Corning (approximately [. . .]  tonnes per year). There is also one example at least where the agreements provide for a total requirements clause and  a special fidelity rebate. From mid-1986 the agreements with Owens Corning ([. . .] tonnes per  year) have provided expressly for an 'exceptional` rebate based on a total requirements contract: 'In the context of a deal covering your total requirements, estimated at around [. . .] tonnes in  the second half of the year, we grant you an exceptional rebate of Bfrs 150 per tonne on the  tonnage supplied.` 9. 'Competition` clauses (35) A number of the supply agreements contain particular forms of 'competition clause` which  reinforce the tie of the customer with Solvay and make it difficult or impossible for a competitor  to obtain business from Solvay. (a) Competition Clauses A considerable number of Solvay's 'evergreen` contracts with major customers contain variants of  the 'competition clause` or 'English clause` (see Case 85/76, Hoffmann-La Roche v. Commission (1),  points 102 to 108. These clauses provide for a machinery by which competing offers received during  the contract term are to be notified to Solvay so that it can - if it wishes - adjust its prices  accordingly. The competition clauses are found in a number of different forms. In Germany the supply agreements (most of which require 24 months' notice of termination) stipulate  that the customer take a minimum tonnage from Solvay, the exact quantities having to be specified  at the beginning of each year. The customer is thus contractually bound to Solvay for a specified  minimum tonnage over a long period: this tonnage may in fact correspond with the customer' total  requirements (see, for example, Vegla, Oberlandglas). The majority of the supply contracts contain a competition clause in the following (or similar)  terms: Competition clause 'If X is able to prove through a certified accountant that it received an offer for soda from  another supplier during the term of this contract at a better price and on compatible terms, the  product originating in a country with a free market economy, and DSW does not match that price  within four weeks, X shall be free to purchase soda from that supplier. DSW may in such a case  cancel the contract with immediate effect.` While in theory this clause may allow the customer to obtain part of its annual requirements from  another (cheaper) source, it gives Solvay the option in such a case of terminating the agreement  forthwith and refusing all further supplies. In only a very few cases (for example, Granus) does  the agreement allow the customer to set off purchases from the competitor against its contractual  obligations vis-à-vis Solvay. (36) The utility of this form of 'competition clause` is that it informs Solvay of the exact price  of any competing material and to decide for itself whether or not it will meet the offer. On the  other hand it is highly unlikely that the customer will risk its security of supply by purchasing  even a limited quantity from the competitor since this will give Solvay the opportunity to cancel  the evergreen agreement and refuse all further supplies. In the case of Vegla the standard provision giving Solvay the right to cancel the whole agreement  in the event of purchases from a competitor was deleted from the 'competition clause`. In practice  the understanding between DSW and Vegla is that the customer takes all its requirements from  Solvay. Thus in 1983 when Vegla informed Solvay of a competing offer and asked whether it could purchase  Solvay refused. The real purpose of the 'competition clause` is made apparent by DSW's noting, with  some satisfaction, that it had been informed by this large customer of the details of the  competitive offer. (37) A draconian form of 'competition clause` is found in the contract with Verrerie d'Albi. As  drafted, the competition clause in the Albi contract (Article 4) allows Solvay the option of  terminating the contract on receiving notice of a competing offer even if the customer does not  actually commit itself to buying from the competitor. The St Gobain 'Protocol` provides for a joint examination by Solvay and St Gobain of any competing  offer in order to arrive at a solution acceptable to both. In this case, there is not even the  limited concession to 'anonymity` which is contained in the German agreements. The provision allows  Solvay to be completely informed of the details of the commercial conduct of its competitors and  potential competitors so that it may, if it considers it necessary, negotiate with St Gobain  changes in prices and conditions which would maintain the relationship of reciprocal exclusivity. As Solvay itself observed, the main purpose of the whole arrangement is to oblige St Gobain to  reveal itself in the case of any significant purchases from a competitor. The concrete examples of the proposed purchase by Vegla of [. . .] Kt of American soda and by St  Roch of [. . .] Kt in 1988 show exactly how Solvay was able either to prevent the competitors  entering at all or to restrict the quantity purchased. The amendments of 30 December 1983 to the BSN supply agreement require the customer to advise  Solvay of competing offers (although the identity of the competitor is not to be disclosed) so that  the parties can 'concert` in order to find a solution ('Les parties se concerteraient alors dans  les meilleurs délais (trois mois maximum) pour trouver une solution.`). Like the St Gobain clause,  this mechanism gives Solvay the option of adapting its price and conditions with perfect knowledge  of the competing offer (apart from the identity of the supplier). It is extremely likely in  practice that the operation of the clause will permit Solvay to maintain its effective exclusivity  with the customer. (b) Safeguard clauses (38) A number of supply contracts which clearly envisage the maintenance of long-term relations  between Solvay and the customer (e.g. Glaverbel, Perrier) provide for a concertation procedure in  case of a change in economic circumstances, in particular if competing offers are more advantageous  than those of Solvay. While such provisions may not be objectionable per se, in the context of the  present case it is clear that Solvay is particularly concerned to prevent any competing supplier  from entering the market. While the safeguard clauses allow the customer the opportunity to use  competing offers to bring down Solvay's price, it is unlikely that the competitor will ever  actually succeed in obtaining (or if he does, retaining) a share of the business.  PART II LEGAL ASSESSMENT A. Article 86 of the EEC Treaty 1. The terms of Article 86 (39) Under Article 86, any abuse by one or more undertakings of a dominant position within the  common market or in a substantial part thereof is prohibited as incompatible with the common market  in so far as it may affect trade between Member States. Special rebates or other financial  inducements granted to customers by dominant undertakings in order to secure the whole or a  substantial part of their business may be prohibited by Article 86 as an exclusionary practice. In the present case, the essential questions to be decided are: - whether Solvay holds a dominant position within the meaning of Article 86, - whether the conduct alleged constitutes an abuse of such a dominant position, - whether there is an appreciable effect upon trade between Member States. 2. Dominant position (a) Definition (40) The term 'dominant position` is not defined in Article 86. The Court of Justice has however  described a dominant position under that Article as 'a position of economic strength enjoyed by an  undertaking which enables it to hinder the maintenance of effective competition on the relevant  market by allowing it to behave to an appreciable extent independently of its competitors and  customers and ultimately of consumers. Such a position does not preclude some competition but  enables the undertaking which profits by it, if not to determine, at least to have an appreciable  influence on the conditions under which competition will develop, and in any case to act largely in  disregard of it so long as such conduct does not act to its detriment.` (Judgment in Case 85/76,  Hoffmann-La Roche v. Commission, paragraphs 38-39.) (41) 'Dominance` is therefore the power to hinder effective competition. Such power may involve the  ability to eliminate or seriously weaken existing competition or to prevent potential competitors  from entering the market. As the Court stated, the existence of a dominant position does not  however require the producer enjoying it to have eliminated all possibility of competition (see  also Case 27/76, United Brands v. Commission (1), paragraph 113). The existence of a dominant position may depend upon a combination of factors, where no single one  is necessarily decisive. (b) Relevant market (42) In order to determine whether an undertaking holds a dominant position, it is necessary first  of all to identify the area of business in which conditions of competition and the market power of  the allegedly dominant undertaking fall to be assessed. This examination enables the Commission to  identify the actual and potential competitors of the undertaking in question and other constraints  which may exist on the exercise of its supposed market power. Account has to be taken of the nature  of the abuse which is being alleged and of the particular manner in which competition is impaired  in the case in question: see Judgment in Case 22/78, Hugin v. Commission (2). In the present case, the particular abuses which are suspected concern the foreclosure by Solvay of  actual and potential competition from other suppliers of soda-ash. Solvay produces both light and dense soda-ash. Glassmakers almost all consume dense ash, while for  chemical and metallurgical applications light ash is the preferred form. Although the competition  which Solvay was aiming to exclude related principally to dense ash, it would be artificial to draw  a strict boundary line between light and dense ash. (43) In Germany a number of Solvay's glassmaking customers purchased both dense and light ash  (Schott, Ruhrglass) while others purchased entirely or almost entirely light ash (Gerresheimer,  Woellner). The fidelity rebate system was applied to both forms. From the geographic standpoint, it  is true that the Community market is still to a large extent divided along national lines. However,  while there are price differences between the different national markets, the Community can be  divided for purposes of competitive analysis into two broad zones or 'spheres of influence`, one  dominated by Solvay, the other by ICI. Solvay's traditional market area covers the whole of the  Community with the exception of the United Kingdom and Ireland where because of their  anti-competitive arrangements entirely different competitive conditions prevail. While there is no other producer which like Solvay sells in all the countries of continental  western Europe, CFK, M & W and AKZO have all increased their export operations since 1982 and there  is no overwhelming reason why they should not make their product available throughout the  Community. Similarly the United States producers of natural ash, which Solvay regards as probably  the major competitive threat, are aiming to market the product throughout continental western  Europe. It is also significant that Solvay itself supplies a particular market as occasion demands from a  plant in a different Member State and a large proportion of reported inter-State trade thus  consists of 'Solvay balancing`. From the demand side, the larger customers operate in several Member States and - as Solvay itself  observes - their spread of operations has tended to increase the pressure for price equalization. The appropriate product and geographical area in which Solvay's economic power falls to be assessed  is thus the market for soda-ash in the Community (excluding the United Kingdom and Ireland). (c) Market power (44) Solvay's own documentation recognizes that it holds a dominant position in western Europe. Its  historic market share of some 70 % in continental western Europe over the whole of the period under  consideration is in itself indicative of a significant degree of market power. Market share, while  important, is only one of the indicators from which the existence of a dominant position may be  inferred. Its significance may vary from case to case according to the characteristics of the  market in question. (45) To assess market power for the purposes of the present case, the Commission takes into account  all the relevant economic evidence, including the following elements: (i) Solvay's position as the only soda-ash producer operating throughout the Community (with the  exception of the United Kingdom and Ireland); (ii) Solvay's manufacturing strength with plant in Belgium, France, Germany, Italy, Spain and  Portugal; (iii) Solvay's 'upstream` integration in raw materials as the largest producer of salt in the  Community; (iv) The absence of any competition from ICI, the only other Community producer of comparable  market strenght to Solvay; (v) Solvay's high market share in the Benelux countries, France and Germany and its monopoly or  near-monopoly position in Italy, Spain and Portugal; (vi) Solvay's excellent 'market coverage` as the exclusive or near-exclusive supplier to almost all  the major customers in the Community; (vii) The improbability of any new producer of synthetic ash entering the market and setting up  manufacturing facilities in the Community; (viii) The protection against non-Community producers afforded by the anti-dumping duties; (ix) Solvay's traditional role of price leader; (x) The perception of Solvay by other Community producers as the dominant producer and their  reluctance to compete aggressively for Solvay's traditional customers. (46) In assessing the extent of Solvay's market power, the Commission takes account of the possible  substitutability of caustic soda for soda-ash. Caustic soda (sodium hydroxide) is largely used for  the production of paper and aluminium and may also in theory replace soda-ash for certain  manufacturing applications as a source of alkali, particularly in the manufacture of detergents and  in metallurgical processes. (The reverse is also true: soda-ash is in theory also an alternative  for caustic soda in some processes.) In practice however the possible availability of caustic soda  does not constitute a substantial limitation on Solvay's market power in the Community which is  principally based on supply to glass manufacturers, few if any of which are prepared to substitute  caustic soda for soda-ash. Caustic soda is a co-product in the production of chlorine, a basic raw material in the manufacture  of PVC. Since long-term storage is not feasible, production of chlorine is tailored to current PVC  demand. The supply of caustic soda inevitably fluctuates in line with that of chlorine. Demand for  caustic soda on the other hand depends largely on the requirements of its main customer, the paper  industry. The price of caustic soda - unlike that of soda-ash - is therefore subject to  considerable fluctuation. At the present time caustic soda is 'short`, i.e. the growth in demand for caustic soda exceeds  that for chlorine: the product is in short supply and is likely to remain so for the foreseeable  future. It is also considerably more expensive than the equivalent in soda-ash. There is thus no  incentive for soda-ash users to switch to caustic soda. Further, conversion from soda-ash to  caustic soda requires a capital investment. Even if caustic soda is 'long` at a particular time the  cyclical nature of the alkali market and uncertainty as to future pricing acts as a deterrent to  switching. (47) In the glass sector, the main consumer of soda-ash, accounting for two-thirds of Solvay's  sales, caustic-soda substitution is even less likely than in metallurgical and detergent  applications. In theory up to 15 % of the alkali requirement of glassmakers may be provided by  caustic soda. Again, capital investment in plant modification is required. In practice, only one of  the glassmakers has ever converted to caustic soda. It is significant that Solvay itself in its  meetings with ICI invariably discounted the potential threat from caustic soda. It should also be noted that the major soda-ash producers (Solvay, ICI, AKZO) between them also  make some one-third of the caustic soda produced in the Community. (48) Solvay has also argued that the availability of 'cullet` (recycled broken glass) excludes its  having a dominant position. A customer's requirements of soda-ash in glass container manufacture  can be reduced by up to 15 % by using cullet and with appropriate technology the proportion may be  higher. It may well be that the use of cullet reduces the dependence of customers upon soda-ash  suppliers generally. It does not, however, reduce the ability of a powerful soda-ash producer to  exclude smaller producers of that product. The possibilities of substitution do not therefore act as a significant constraint on the exercise  of Solvay's market power vis-à-vis the other producers of soda-ash. (49) The Commission has assessed Solvay's market power in relation to the whole of the geographic  area within which it operates, which for present purposes consists of those Member States in which  it has production facilities. Solvay's own internal documentation shows that it tends to consider  the nine 'Directions nationales` as forming a homogeneous market. (This market delineation includes  two non-member countries, namely Switzerland and Austria, and excludes the United Kingdom and  Ireland which are traditional 'ICI` markets and Denmark and Greece which are 'non-producer`  markets.) However, even if each of the national markets particularly concerned by Solvay's exclusionary  conduct is considered as a separate market, Solvay is still dominant in each one, and most of the  considerations set out above apply equally. On the basis of the above considerations the Commission concludes that at all material times Solvay  occupied a dominant position within the meaning of Article 86. 3. Abuse of dominant position (a) Exclusionary practices and fidelity rebates (50) As the Court of Justice has observed in several cases, conduct by a dominant undertaking which  undermines the objectives of Article 3 (f) of the EEC Treaty by endangering the structure of  competition may constitute an infringement of Article 86. Exclusionary behaviour which hinders  existing competition or the development of new competition has been condemned by the Court.  Practices designed to block the access of competitors to customers by tying the latter to the  dominant supplier have been particularly identified as abusive in leading cases: Case 40/73, Suiker  Unie v. Commission (1); Case 85/76, Hoffmann-La Roche v. Commission; Case 322/81, Nederlandsche  Banden Industrie - Michelin v. Commission (2). (See also Commission Decision 89/22/EEC British  Gypsum/BPB Industries (3).) The present case primarily concerns the tying of customers to Solvay by means of a number of  devices which all serve the same exclusionary purpose. (i) Rebates on marginal tonnage (51) The assessment under this heading relates to the following: - the 20 % 'Spitzenrabatt` system in Germany, - the giving of 'fidelity` cheques in Germany, - rebates on marginal tonnage in France (BSN, Durand, Perrier, etc.). In contrast to a quantity discount, which is linked solely to the volume of purchases from the  manufacturer concerned, a fidelity rebate involves offering customers financial advantages in order  to prevent them from obtaining their supplies from competing producers and when practised by a  dominant undertaking may fall under Article 86. There is no need, in order for fidelity rebates to fall under Article 86, for a contractual  obligation or express stipulation that the customer obtain its supplies exclusively from the  dominant undertaking. What is important is that the terms of sale of the dominant supplier make it  financially attractive for the customer to take its supplies exclusively or mainly from it. The  precise means by which this result is achieved are immaterial. (52) Solvay has since 1982 adopted a system of progressive rebates which according to its own  internal documentation is specifically intended to ensure the loyalty of the customer and exclude  or limit competition: - granting customers substantial financial inducements to obtain from Solvay all or the major part  of the marginal tonnage which might otherwise have been obtained from a competitor, - making it difficult or impossible for an existing or potential supplier to enter as second  supplier for the marginal tonnage, since in order to match the substantial pecuniary advantages  offered by Solvay and obtain the order for the top 'tranche` of business, they would have to sell  at unprofitable or at 'dumping` prices, - tying the customer to Solvay for an indefinite period and thereby contributing to the rigidity of  the market, - removing any interest on the part of the customer to canvass Solvay's competitors for some of its  requirements. (53) As an example, any supplier attempting to obtain a share of the business of Vegla in Germany  would have had to match an effective 'ex-works` price/tonne for the top [. . .] Kt of DM 245 per  tonne, compared with a 'list price` of DM 403 per tonne and an 'average` price in Germany of DM 360  per tonne. The price of DM 245 is far below any economic price which the other Community producers could have  offered. Any natural-ash producer selling at that price would have been in breach of the  anti-dumping minimum price undertakings. The ability of a second supplier to displace Solvay for a part of the business of a major customer  is rendered even more difficult by the obligation of secrecy with regard to the percentage rebate  and the cheque payment. (54) The Commission's objections to the rebate system apply not only to cases where Solvay has  complete exclusivity but also to those where it is the principal, but not the sole, supplier. In  such cases the progressive rebates contribute to the maintenance of Solvay's overall dominant  position by securing its share of the customer's business. The rigidity of the market is preserved  since it is extremely difficult for any second supplier to break into Solvay's 'core` business. Solvay claimed in its written observations in reply to the statement of objections that the rebates  were not intended as an inducement to loyalty but simply represented a form of volume rebate which  depended upon the customers reaching an objective and predetermined tonnage threshold. Such an  argument wholly ignores the character attributed to the rebates in Solvay's own documents. It is also clear that the various rebates and financial advantages which they confer are not  related to any cost savings associated with the quantities delivered. There are substantial  differences from country to country in the amount of the rebates, and inside each Member State the  'trigger` tonnage at which the top-slice rebate is activated varies from customer to customer  according to its total offtake. For instance, in Germany the 20 % rebate was activated for PLM at  [. . .] tonnes and for Vegla at [. . .] tonnes.(ii) The St Gobain group rebate (55) The secret St Gobain 'Protocol` was intended to confirm Solvay in the position of St Gobain's  exclusive or near-exclusive supplier in western Europe apart from France. As DSW itself said, it  was designed to maintain the status quo but the parties were reluctant to say so in writing. The provision by which St Gobain benefits from Solvay's 'best conditions` in each country for  comparable usages is not necessarily anti-competitive on its own. However in addition to this  stipulation St Gobain receives a 'group rebate` of 1,5 % on the whole of its purchases across  Europe. It is implicit in the agreement that payment is dependent upon St Gobain continuing to give  Solvay 'priority` as its supplier. Solvay in its own documentation recognizes that this rebate,  although not an 'absolute weapon`, contributes to ensuring the loyalty of the group. The remark  that 'it requires SG to "come clean" if it buys significant quantitites from competitors'  demonstrates also that Solvay has to be satisfied that it has been given 'priority`. Solvay claimed that the St Gobain rebate did no more than reflect the cost savings attributable to  St Gobain's position as the largest customer in Europe. The argument overlooks the fact that at  Solvay's insistence the individual St Gobain subsidiaries are supplied by the national Solvay  subsidiaries in each Member State and not on any global basis. It is also clear from the documents that the whole purpose of the St Gobain rebate was to secure  the loyalty of the group in Member States other than France and thus exclude competitors. The assessment of the 'competition` clause in the St Gobain protocol in the light of Article 86 is  made under (iv) below. (iii) Exclusivity agreements (56) This part of the assessment applies in particular to: - Vegla - Oberland - Owens Corning - BSN - St Roch - Verreries d'Albi - Perrier - Glaverbel - Verlipack. Solvay had been informed by the Commission in 1981 that it should abandon the system of total  requirements contracts. It was also informed that any new tonnage contracts should not in fact  stipulate for a quantity which corresponded to the customer's total requirements. In a number of cases however it is apparent that: - even if the supply agreement was expressed in the form of a 'tonnage` contract the clear  understanding was that the customer obtained all or substantially the whole of its requirement from  Solvay, or - the stipulated tonnage corresponded to the customer's total requirements, or - the customer was informed that the payment of any rebate was dependent upon its taking 100 % from  Solvay. (57) In the case of Vegla, apart from the various financial inducements (20 % 'Spitzenrabatt`,  fidelity cheque) there was a clear - if unofficial - understanding that the customer would take its  total requirement from Solvay. Similarly, Oberlandglas was informed that the 'special conditions`  depended upon its taking its total requirements from DSW. In the case of Owens Corning in Belgium  the agreement makes the Bfrs 150 rebate dependent upon its committing its total requirements to  Solvay. In some cases (Vegla, Oberlandglas, Owens Corning), the express understanding was that the customer  would obtain all its requirements from Solvay. Any such arrangement is clearly intended to bind the  customer to Solvay for its total requirement and is exclusionary under Article 86. (58) In the other cases, the contractual tonnage stipulated in the main 'evergreen` contract (which  required two years' notice of termination) corresponded to the customer's total anticipated  requirements but allowed for a margin (usually 15 %) up or down. The customer indicated to Solvay  at the beginning of each year what its exact requirements would be within that range. The Commission does not consider that the exclusionary effect of these agreements, based as they  were on the maintenance of a long-term commercial relationship, was alleviated by the tolerance  margin. In the first place, even if the customer did consider a second source, it was still contractually  bound to Solvay for a very large proportion of its requirements so long as the 'evergreen` contract  was in operation. In the case of the Belgian glassmakers there is even a clause providing that if  the forecast offtake in one year exceeds the maximum provided in the basic contract of 1 January  1983 (i.e. X tonnes + 15 %), the basic contract tonnage shall be revised upward. The purpose of the clause is to ensure that Solvay remains the preponderant supplier. Secondly, it is clear that Solvay makes it its business to obtain full details of any competitive  offers and any intention on the part of the customer to look for other sources of supply (e.g. St  Gobain's United States imports in 1988). In many cases it is also shown that Solvay was informed as  to the customer's total annual requirements. It can thus, with full knowledge of the relevant  details of the offer (price, tonnage, etc.) and the customer's intentions and total requirements,  arrange that the competitive effect is limited or even removed. (59) It may well be that in some cases a customer is content - for the time being at least - to  purchase all its requirements from Solvay. The Commission fully recognizes the freedom of customers  to obtain all their requirements from one supplier if they wish to do so. They should not however  be obliged to do so. If a customer contracts for a tonnage which is in fact equivalent or close to its total  requirements, such arrangements may still be exclusionary and fall under Article 86 particularly if  they are of long duration. In the case of 'evergreen` contracts the 24-month notice period imposed  by Solvay is excessively long. It prevents the customer from reacting in an informed or competitive  manner to changes in market conditions. Since it is impossible to predict with any certainty what  conditions will prevail in two years' time, the long period of notice acts as a strong deterrent  against terminating the link with Solvay. Some customers at least considered the length of the  notice period oppressive. (iv) Competition clauses and other exclusionary clauses in agreements (60) The various forms of 'competition clause` and other similar mechanisms set out in recitals  (35) to (38) all reinforce the tie with Solvay, limit the opportunities for the customer to change  suppliers and make entry for competitors at established Solvay customers more difficult. The purpose of these various clauses is to give Solvay as the established supplier a built-in  advantage over any other supplier attempting to compete for all or even a part of the business of  the customer in question. Far from mitigating the anti-competitive effect of the long-term supply agreements with Solvay  (with their fidelity rebates and de facto exclusivity), the competition clauses in fact strengthen  the tie between Solvay and the customer and are exclusionary in object and effect. They allow  Solvay to be fully informed of the details of competitors' activity while effectively excluding the  possibility of the competitor actually obtaining any business. 'Competition clauses` which give the  dominant supplier the option of terminating the whole agreement if the customer obtains even a  small part of its supplies from a competitor are already a deterrent to competition: the customer  is extremely unlikely to jeopardize its security of supply in such circumstances. (61) All the above measures as set out in recitals (50) to (60) are designed to remove or restrict  the opportunity of other producers or suppliers of soda-ash to compete effectively with Solvay.  They also consolidate the dominant position of Solvay in a manner which is incompatible with the  concept of competition inherent in Article 86. Even considered on their own, each of the arrangements described would tend to bind the customer to  Solvay in such a way as to exclude competitors. The combined effect of the various devices is such  as to ensure that Solvay's dominant position is almost wholly protected from competition. (b) Discrimination (62) In addition to its exclusionary object and effect, the rebate system applied by Solvay also  falls under the express prohibition in Article 86 (c) against the application of dissimilar  conditions to equivalent transactions. The rebates and other financial inducements did not reflect  possible differences in costs based on the quantities supplied but were referable to securing the  whole or the largest possible percentage of the customer's requirements. Within a particular Member State there were considerable differences both as to the size of the  rebate and other inducements and the 'trigger` tonnage at which it was activated. The amount of the  special 'cheque rebate` also seems to have varied in a wholly arbitrary way. The result of the rebate system in Germany was not only in theory to disadvantage customers who  might not take their full or the major part of their requirement from Solvay (only a few did not do  so) but also to discriminate as between customers who did. Thus a large customer might well pay  substantially more per tonne than a smaller producer even though both were buying their total  requirement from Solvay. (63) The special 1,5 % group rebate given to the St Gobain companies was also discriminatory in  nature. It is true that the St Gobain group as a whole was by far the largest customer but under  the agreements with Solvay the group's purchases were fragmented on a national basis. The group  rebate does not in fact reflect any cost advantage attributable to the quantities delivered but is  (as Solvay itself stated in its own documents) intended to secure the loyalty of the group. The  result is that the St Gobain subsidiary in one Member State may receive a substantially better  price from Solvay than a competitor which actually takes a similar or even larger volume from the  local Solvay factory. (64) The price discrimination has a considerable effect upon the costs of the undertakings  affected. In the glass sector (which accounts for the majority of soda-ash consumption) soda-ash  is, after fuel costs, the most expensive single item in the manufacturing process. Although it is  only 13 % by weight of the finished product, it accounts for up to 70 % of the raw material batch  cost. The cost of soda-ash thus affects the profitability and competitive position of glass  manufacturers. 4. Effect on trade between Member States (65) Article 86 covers not only abuse which may directly prejudice consumers but also abuse which  indirectly prejudices them by impairing the effective competitive structure in the common market as  envisaged by Article 3 (f) of the EEC Treaty. The fidelity rebates and other inducements to exclusivity applied by Solvay affect trade between  Member States by reinforcing the links between the customers and the dominant supplier. The  opportunities for competing suppliers to enter new markets or obtain new customers are effectively  removed since the customer's marginal tonnage requirements for which they would be competing are  currently being supplied by Solvay at prices which they would be unable to meet. The various  devices employed by Solvay to tie customers had the result of reinforcing the structural rigidity  and the division of the soda-ash market on national lines, and thus harmed or threatened to harm  the attainment of the objective of a single market between Member States. (66) The fact that Solvay's measures were aimed principally at imports from the United States does  not affect the application of Article 86. Imports of natural ash from the United States were seen  as the main threat to Solvay's domination of the soda-ash market in continental western Europe. The  arrival in substantial quantities of natural ash would also have had a considerable effect upon the  agreed division of the market between ICI and Solvay. The activities therefore affected the basic  competitive structure of the soda-ash industry within the Community. It should also be noted that were the major glass producers to import soda-ash from the United  States in substantial quantities, they would probably do so in order to supply their works in  several Member States. Furthermore, Solvay's exclusionary measures were aimed not only at the  United States producers but also at smaller producers of synthetic ash located inside the  Community. All of these producers have since 1982 made deliveries from their own national market to  other Community Member States although their opportunities were severely constrained by Solvay's  pricing policies.  B. Remedies and sanctions 1. Article 3 of Regulation No 17 (67) Where the Commission finds that there is an infringement of Article 86 of the Treaty it may  require the undertaking concerned to bring such infringement to an end in accordance with Article 3  of Regulation No 17. In the present case the infringements of Article 86 were effected in conditions of considerable  secrecy and were still continuing at the date these proceedings were commenced. The Commission therefore considers that it is appropriate in the case of the infringement of  Article 86 by Solvay to issue a termination order. Besides requiring the undertakings to bring the  infringement to an end, the Commission may also specify particular measures to ensure that the  infringements are not repeated or continued. It was established by the Court of Justice in Joined  Cases 6 and 7/73 - Commercial Solvents v. Commission (1), that the Commission has a discretionary  power to order measures ensuring that its decision is effective. The power to order such measures  is not confined to acts directly affecting trade between Member States particularly where the  objective is the maintenance or the establishment of an effective competitive structure in the  Common Market. (68) Solvay will be required to abandon its system of fidelity rebates and will have to notify to  the Commission the details of any new system of discounts or rebates in order to ensure its  conformity with Community competition rules. Any new system of rebates applied by Solvay will have  to be confined to reflecting in a fair and objective manner the cost savings involved in large  tonnage orders. A period of three months should be accorded to Solvay to complete the necessary arrangements.  Solvay will also be required within the same period to renegotiate all its supply agreements for  soda-ash in the Community so as to conform with the requirements of this Decision and shall notify  the Commission of the measures it has taken in that regard. In particular, all clauses in agreements, and any unofficial understanding or arrangement tending  to tie the customer to Solvay for the whole or substantially the whole of its requirements must be  deleted or terminated. 'Competition clauses` or other devices which operate in an anti-competitive  manner must be deleted or amended so as not to deter or prevent the customer from ever purchasing  from a competitor whose offer matches that of Solvay. The practice of 'evergreen contracts` for the major part of the customer's requirement and with a  long notice period must also be abandoned. Customers should be free to decide for themselves the  tonnage they wish to commit to Solvay under 'evergreen` contracts. They should also be able to  change to another supplier for the whole or a part of their business on giving no more than six  months' notice. Fixed-term supply contracts should not exceed one year. 2. Article 15 (2) of Regulation No 17 (69) Under Article 15 (2) of Regulation No 17, the Commission may by decision impose on  undertakings fines of from ECU 1 000 to ECU 1 million, 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 intentionally or negligently, they infringe Article 86. In fixing  the amount of the fine, regard is to be had to both the gravity and the duration of the  infringement. (a) Gravity (70) In the present case the Commission considers that the infringements were of extreme gravity. Solvay is the major producer of soda-ash in the Community and the infringements enabled it to  consolidate its hold over the market by excluding effective competition in a large part of the  Common Market. By foreclosing for a long time sales opportunities for all competitors, Solvay has caused lasting  damage to the structure of the market concerned, to the detriment of consumers. This infringement  is under the specific circumstances of the case more serious than the infringements of Article 85  in which Solvay was also involved. Solvay was well aware from its extensive negotiations with the Commission between 1980 and 1982 of  the requirements of Article 86 in relation to exclusivity. It was also clearly cognisant of the  prohibition of fidelity rebates. The documentation obtained from Solvay shows that company  officials at a high level knew the risk involved but nevertheless persisted in the abusive  conduct. (71) In assessing the amount of the fine the Commission will take account of the fact that in the  negotiations with Solvay between 1980 and 1982 it accepted a notice period of two years in the case  of evergreen contracts and did not object to the competition clauses in the form in which they were  drafted. It is also possible that Solvay was led to believe that long-term tonnage contracts could  be concluded which limited purchases from other sources to 15 % of the customer's requirements. From its investigations in the present case the Commission has ascertained that in practice these  provisions tend to reinforce Solvay's exclusivity, particularly when combined with other abusive  devices such as the secret fidelity rebates and unofficial 'undertakings` that the customer would  obtain all its requirements from Solvay. It will therefore require Solvay to abandon those  provisions but in the circumstances will impose a fine only in respect of the fidelity rebates and  the 'unofficial` exclusivity agreements. Solvay has been the subject on several previous occasions of substantial fines imposed by the  Commission for collusion in the chemicals industry: Peroxides; Polypropylene; PVC. (b) Duration The infringements began in about 1983 - very shortly after the negotiations with the Commission and  the closure of the Commission's file - and have continued up until the present time, HAS ADOPTED THIS DECISION: Article 1 Solvay et Cie SA ('Solvay`) has infringed Article 86 of the EEC Treaty from about 1983 to the  present time by a course of conduct aimed at excluding or severely limiting competition and  consisting of: (a) the conclusion of agreements with customers which require them to purchase the whole or a very  large proportion of their requirements of soda-ash from Solvay for an indefinite or excessively  long period; (b) the granting of substantial rebates and other financial inducements referable to marginal  tonnage over and above the customer's basic contracted tonnage in order to ensure that they buy all  or most of their requirements from Solvay; (c) making the granting of rebates dependent upon the customer agreeing to buy the whole of its  requirements from Solvay. Article 2 Solvay shall (if it has not already done so) forthwith take the steps necessary to bring the  infringement to an end in the manner set out in recital (68) of this Decision and shall, within a  period of three months of the notification of this Decision, inform the Commission of the measures  which it has taken to this end and the details of any new system of rebates. Article 3 A fine of ECU 20 million is imposed on Solvay in respect of the infringement of Article 86  specified in Article 1 (b) and (c). Article 4 The fine imposed by Article 3 shall be paid within three months of the date of notification of this  Decision to the following bank account: N° 310-0933000-43, Banque Bruxelles Lambert, Agence Européenne, Rond Point Schuman 5, B-1040 Brussels. On expiry of that period, interest shall automatically be payable at the rate charged by the  European Monetary Cooperation Fund on its ecu operations on the first working day of the month in  which this Decision was adopted plus 3,5 percentage points, i.e. 14 %. Should payment be made in the national currency of the Member State in which the bank nominated for  payment is situated, the exchange rate applicable shall be that prevailing on the day preceding  payment. Article 5 This Decision is addressed to Solvay et Cie SA, Rue du Prince Albert 33, B-1050 Brussels.This Decision is enforceable pursuant to Article 192 of the EEC Treaty. Done at Brussels, 19 December 1990. For the Commission Leon BRITTAN Vice-President (1) OJ No 13, 21. 2, 1962, p. 204/62. (2) OJ No 127, 20. 8. 1963, p. 2268/63. (3) See page 1 of this Official Journal. (1) In the published version of the Decision, some information has hereinafter been omitted,  pursuant to the provisions of Article 21 of Regulation No 17 concerning non-disclosure of business  secrets. (1) Glaverbel (to Solvay's knowledge) has to purchase some [. . .] tonnes per annum from East  Germany to offset its exports of glass to that country. Apart from this tonnage it is supplied only  by Solvay. (1) [1979] ECR 461. (1) [1978] ECR 207. (2) [1979] ECR 1869. (1) [1975] ECR 1663. (2) [1983] ECR 3465. (3) OJ N° L 10, 13. 1. 1989, p. 50. (1) [1974] ECR 223.