CELEX: 31985D0404
Language: en
Date: 1985-07-10 00:00:00
Title: 85/404/EEC: Commission Decision of 10 July 1985 relating to a proceeding under Article 85 of the EEC Treaty (IV/29.420 - Grundig' s EEC distribution system)

30 . 8 . 85                                      Official Journal of the European Communities                                     No L 233 / 1
                                                                             II
                                                     (Acts whose publication is not obligatory)
                                                             COMMISSION
                                                             COMMISSION DECISION
                                                                   of 10 July 1985
                                         relating to a proceeding under Article 85 of the EEC Treaty
                                               (IV / 29. 420 - Grundig's EEC distribution system)
                                                           (Only the German text is authentic )
                                                                    ( 85 / 404 / EEC )
THE COMMISSION OF THE EUROPEAN COMMUNITIES ,                                      Grundig distributes its television sets, video recorders, hi-fi
                                                                                  equipment and related accessories in the Federal Republic of
Having regard to the Treaty establishing the European                             Germany through a network of specialist wholesalers and
Economic Community ,                                                              retailers and in the other Member States through sole
                                                                                  distributors ( some of them subsidiaries of Grundig)
                                                                                  supplying specialist wholesalers and retailers. Altogether ,
Having regard to Council Regulation No 17 of 6 February                           some 28 000 dealers belong to the Grundig sales network in
1962 , first Regulation implementing Articles 85 and 86 of                        the Community . Grundig does not issue recommended prices
the Treaty 0 ), as last amended by the Act of Accession of                        for its products .
Greece , and in particular Articles 6 and 8 thereof,
Having regard to the notification filed by Grundig AG on                          Grundig is one of Europe's largest manufacturers of
29 March 1977 of its EEC dealership agreements with                               consumer electronics equipment with a turnover in 1983 / 84
specialist wholesalers and retailers ,                                            of approximately DM 2,8 billion . For its top-selling lines ,
                                                                                  colour televisions and video recorders , it has EEC market
Having published a summary of the agreements in                                   shares of 10,6 % and 6 % respectively. In some Member
accordance with Article 19 ( 3 ) of Regulation No 17 ( 2 ),                       States its shares are higher . For colour televisions it has a
                                                                                  share of 19,5 % in the Federal Republic of Germany , 12,4 %
Having consulted the Advisory Committee on Restrictive                            in Italy and 9,6 % in France . For video recorders its market
                                                                                  share in the same countries is 16,5 % , 5,5 % and 3,3 % .
Practices and Dominant Positions ,
                                                                                  Since 1 April 1984 Grundig has been controlled by Philips
Whereas :                                                                         (Philips-Gloeilampenfabrieken , Eindhoven , the Nether­
                                                                                  lands ), which had had a 24,5 % stake in the company since
                               I. FACTS                                           1979 .
     A. Grundig's distribution system and market position
                                                                                                 B. Grundig's distribution system
On 29 March 1977, Grundig AG , Fiirth , Federal Republic of
Germany ( hereinafter 'Grundig'), notified to the Commission
the dealership agreements forming the basis of a selective                        The dealership agreements forming the basis of the selective
distribution system for its consumer electronics products in                      distribution system which Grundig introduced on 1 April
the common market . It introduced the system on 1 April                           1977 were framed in the light of the principles which the
1977 .
                                                                                  Commission had established in its Decision 76 / 159 / EEC ( 3 )
0 ) OJ No 13 , 21 . 2 . 1962 , p . 204 / 62 .
( 2 ) OJ No C 276 , 16 . 10 . 1984 , p . 2 .                                      ( 3 ) OJ No L 28 , 3 . 2 . 1979 , p. 19 .
 ---pagebreak---  No L 233 / 2                                Official Journal of the European Communities                                      30 . 8 . 85
 on SABA's distribution system . Following the modifications                          necessary with the trustee appointed by Grundig
 in the Commission's policy towards selective distribution in                         whether he is authorized by Grundig to sell its
 the consumer electronics sector signalled in its second                              products;
 Decision on the SABA system , Decision 83 / 672 / EEC
 (hereinefter 'SABA II') (*), Grundig amended its dealership                      — to sell Grundig products to consumers only
 agreements to meet the new requirements .                                            where they carry on a business, purchase the
                                                                                      goods for use in that business and furnish
                                                                                      objectively verifiable evidence to that effect by
                                                                                      signing a special declaration ;
Grundig's distribution of its products in the EEC is now
based on :                                                                        — to keep records of all Grundig products sold so
                                                                                      that they can , if necessary, be traced by their
                                                                                      serial numbers , and to preserve such records for
— the Grundig EEC dealership agreement with wholesalers                               at least three years ;
      and
                                                                                  — to assist Grundig in keeping the selective
                                                                                      distribution system intact and in proceeding
— the Grundig EEC dealership agreement with retailers .                               against breaches of the dealership agreement .
The main terms of these agreements are as follows :                         ( c) Grundig specialist wholesalers are entitled to admit
                                                                                 to the Grundig specialist dealer network any
                                                                                 specialist retailer who satisfies the selection criteria
1 . ( a ) Under the Grundig EEC dealership agreement with                        laid down in the Grundig EEC dealership agreement
           wholesalers , Grundig admits to its network as a                      with retailers .
           wholesaler any wholesaler who , inter alia:
                                                                            ( d) Grundig specialist wholesalers are free to supply or
                                                                                  take supplies from any Grundig dealer anywhere in
           — carries on a wholesale business specializing in                      the common market and to set their own resale
               the sale of consumer electronics equipment , or                    prices .
               has within his business a department specializing
                                                                            (e ) Grundig undertakes , inter alia , to guarantee the
               in the sale of such equipment which is equivalent
                                                                                 integrity of its EEC selective distribution system and
               to such a specialist wholesale business ,
                                                                                 to maintain an up-to-date list of all authorized
                                                                                 Grundig dealers with a trustee , who is responsible
           — employs a technically trained staff and a                           for answering inquiries as to whether particular
               professional sales force capable of providing                     dealers are members of the network .
               expert advice to customers ,                                 (f) Where a Grundig specialist wholesaler is found not ,
                                                                                 or no longer, to satisfy the admission criteria
           — has the necessary facilities and resources to carry                 Grundig may terminate the wholesaler's dealership
               and stock as far as possible the whole Grundig                    forthwith , specifying in writing its reasons for
               range and ensure prompt delivery to his                           so doing. Where a wholesaler is found to have
               customers , and                                                   breached the terms of the dealership in a manner
                                                                                 which endangers the distribution system , Grundig
                                                                                 may temporarily or, in the case of repeated breaches ,
           — signs the Grundig EEC dealership agreement.                         indefinitely withhold supplies from the wholesaler
                                                                                 and terminate his dealership forthwith . Where the
                                                                                 breach involves an infringement of national law
                                                                                 against unfair competition , Grundig may apply this
           If Grundig fails to process a wholesaler's application                sanction only if the infringement is not denied or has
           for admission to the network within four weeks , the
                                                                                 been proved in a court of law . A power of ordinary
           wholesaler is deemed admitted and Grundig                             termination is enjoyed by Grundig only in the event
           undertakes to sign a dealership agreement with him                    of its abandoning its EEC distribution system .
           immediately and to place him on the list of
           authorized Grundig dealers .
                                                                        2 . ( a) Under the Grundig EEC dealership agreement with
                                                                                  retailers , a retailer must satisfy , inter alia , the
                                                                                  following criteria to be admitted to the Grundig
      (b ) Grundig specialist wholesalers undertake the                           network as a specialist retailer . He must:
           following obligations , inter alia:
                                                                                  — carry on a retail business specializing in the
                                                                                      sale of consumer electronics equipment , or
           — to supply Grundig products for resale in the                             alternatively ;
               common market only to authorized Grundig
               dealers and before supplying a dealer to check if                  — have within his business a department
                                                                                      specializing in the sale of consumer electronics
                                                                                      equipment which is comparable to a specialist
( x ) OJ No L 376 , 31 . 12 . 1983 , p. 41 .                                          consumer electronics business ;
 ---pagebreak--- 30 . 8 . 85                                    Official Journal of the European Communities                                   No L 233 / 3
               demonstrate Grundig products and display a                           However , it insists on the requirements that retailers
               representative selection of them in sales premises                   be specialists , run a shop with unrestricted access to
               whose appearance is in keeping with the prestige                     any member of the public, display Grundig products
               of the Grundig brand . Specialist departments in                     attractively , employ trained sales staff and provide
               stores must be separate from the store's other                       after-sales and warranty services .
               departments ;
                                                                               (c) Grundig specialist retailers undertake the following
               employ trained sales staff possessing the                            obligations , inter alia:
               requisite technical knowledge to advise
               customers in a competent manner ;                                    — to supply Grundig products for resale in the
                                                                                        common market only to authorized Grundig
                                                                                        dealers and before supplying a dealer to check if
               present as. full a range of Grundig products                             necessary with the trustee that he is a member ot
               as is reasonable for a specialist business or                            the Grundig network;
               department of that size ;
                                                                                    — to keep records of all Grundig products sold to
                                                                                        dealers so that the products can if necessary be
               keep adequate stocks of a representative                                 traced by their serial numbers , to preserve such
               selection of the relevant Grundig range ,                                records for at least three years and to let Grundig
               commensurate with the size , local importance                            know should there appear to be a need to check
               and turnover of the business , and order                                 distribution channels either for technical reasons
               immediately any Grundig products demanded                                or in cases of reasonable suspicion of a breach of
               by customers which he does not have in                                   the EEC dealership agreement.
               stock;
                                                                                    The Grundig EEC dealership agreement with
                                                                                    retailers expressly provides that the retailers are free
               provide competent and prompt after-sales                             to supply or to take supplies from any approved
               service and all repairs and servicing under                          Grundig dealer anywhere in the common market
               warranty, either in his own workshop or in a                         and to set their own resale prices .
               workshop under permanent contract to him ;
                                                                               ( d) Grundig's obligation to guarantee the integrity of
               sign the Grundig EEC dealership agreement                            the distribution system and to appoint a trustee , and
               with retailers .                                                     the rules governing ordinary termination and
                                                                                    termination for breach of contract , correspond
                                                                                    to those for wholesalers ( see I.B.I , ( e) and ( f)
           The retailer is prohibited from advertising or                            above).
           conducting his business in such a way as to put his
           exclusive capacity as a retailer in doubt , from
           making misleading references in notices or
           advertising , in connection with the sale of Grundig
           products, to sell at cash-and-carry, self-service or
           take-away prices and from selling Grundig products                 C. The extent of selective distribution for consumer
           by mail order.                                                                        electronics products
                                                                          The extent of selective distribution in the consumer
                                                                          electronics industry varies in different Member States . In
     ( b ) Grundig will admit to its network any retailer                 the Federal Republic of Germany , in particular, it has
           fulfilling the selection criteria . Grundig wholesalers        traditionally been a common method of distributing
           are also entitled to admit retailers , as stated above .       consumer electronics products . In other Member States , it is
           Applications to Grundig will be deemed to have                 much less widespread . At all events , in all Member States
           been accepted if Grundig fails to process them                 there are a large number of manufacturers selling their
           within four weeks , in which case Grundig                      products without dealer selection and in most cases these
           undertakes to sign the dealership agreement with               account for the bulk of sales of the products in the Member
           the retailer immediately and to put him on the                 State concerned . The distribution systems of the
           Grundig dealer list.                                           manufacturers who do require their dealers to meet selection
                                                                          criteria also vary widely . Some of the systems notified to the
                                                                          Commission are purely national and so do not cover the
           In view of the fact that the dealership agreement is           whole Community . Some only lay down requirements
           standard throughout the common market, Grundig                 pertaining to the dealer's professional , specialist status ,
           has reserved the right to waive individual admission           which do not fall under Article 85 ( 1 ). Finally , several of the
           conditions in the light of national circumstances .            manufacturers practising dealer selection do not sell a full
 ---pagebreak---  No L 233 / 4                                  Official Journal of the European Communities                                      30 . 8 . 85
 range of consumer electronics products but are only                               and the character of sales premises are no more
 represented in particular segments of the market . All in all ,                   onerous than is necessary in a selective distribution
 the number of selective distribution systems notified to the                      system based on qualitative criteria for such
 Commission has not increased since the judgment of                               technically sophisticated goods as consumer
 the Court of Justice of 24 October 1977 in Case 26 / 76 ,                        electronics products . The fast pace of innovation
 Metro ( l ).                                                                     that is characteristic of the industry not only means
                                                                                  that completely new products are being developed
                                                                                  all the time but also that the uses of established
                                                                                  products are constantly being extended. Another
                                                                                  feature of the present-day industry is the increasing
                    D. Comments by third parties                                  interpenetration between consumer electronics and
                                                                                  data transmission and processing , which means , for
In response to publication of a summary of the Grundig                            instance , that domestic television sets are now used
dealership agreements the Commission received four                                as terminals for connecting up many types of
submissions from interested parties . Their principal                             peripheral equipment as well as for their original
arguments were that the Grundig distribution system , in                          purpose . Requirements as to the dealer's technical
combination with the similar systems operated by other                            competence to provide advice and warranty services
manufacturers , led to the de facto exclusion of the                              are therefore still necessary. This is true even though
non-specialist trade from this sector and to a restriction of                     modern consumer electronics products are less
competition between Grundig dealers , especially on prices ,                      likely to need repair than they used to . Apart from
and to price rigidity . Doubt was expressed as to whether in                      the fact that warranty and repair work is only one of
practice the approved dealers actually provided the advice                        the comprehensive range of services provided by
and after-sales service required under the dealership                             specialist dealers , a competent repair service still
agreements . After-sales service was , it was suggested , in any                  needs to be provided to rectify such faults as do
case no longer essential for a proper distribution of modern                      occur, even if they are not as frequent as in the
consumer electronics products since they were less likely to                      past .
need repair than was. the case in the past . One submission
also criticized one of the selection criteria for retailers ,
concerning the'character of sales premises and the attractive
display of the products , as being too vague.
                                                                             (b ) The requirement that dealers should demonstrate
                                                                                  Grundig products in suitable sales premises and
                                                                                  display them attractively must also be regarded as
                                                                                  necessary . Grundig has a legitimate interest in
                     II . LEGAL ASSESSMENT                                        ensuring that its high-quality products are presented
                                                                                  to the consumer in appropriate surroundings , and
                                                                                  an obligation of this nature is bound to be couched
                                                                                  in general terms which leave some room for
                           A. Article 85 ( 1 )                                    discretion . Furthermore , there is little danger of
                                                                                  Grundig's being able to apply this condition in a
                                                                                  discriminatory fashion , since the power to admit
1 . The majority of the obligations contained in the standard                     retailers , and hence the power to check that this
       dealership agreements with wholesalers and retailers                       condition is fulfilled , is also delegated to
       which form the basis of Grundig's EEC distribution                         wholesalers and any retailer refused admission by
       system are purely qualitative and , as such , do not fall                  Grundig is free to challenge the decision in court .
       under Article 85 (1 ). The agreements contain few clauses
      which have as their object and effect a restriction of
       competition within the common market and which are
       liable to affect trade between Member States , and which
       therefore require exemption under Article 85 ( 3 ).                   (c) The prohibition on dealers advertising Grundig
                                                                                  products at 'cash-and-carry , self-service or
2 . In so far as the Grundig EEC dealership agreements                            take-away prices' is justified because all dealers are
       merely lay down professional criteria for dealers , which                  obliged under the dealership agreement to provide
       are applied in a non-discriminatory fashion and which                      certain types of advisory and after-sales services .
       determine the procedure for admission to the network                       This means that dealers are not allowed to pursue a
       and impose ancillary policing obligations , they do not                    marketing policy which does not in general include
       bring the agreements within the scope of Article 85 ( 1 ).                 these services . Yet if a dealer advertises or offers for
       This applies , in particular, to the following provisions of               sale Grundig products at 'take-away prices' or the
      the agreements :                                                            like , he is encouraging the consumer to waive such
                                                                                  services . The contractual prohibition of such
       ( a ) The requirements regarding the professional                          marketing practices can thus be subsumed under the
             qualifications of dealers, the specialist knowledge of               qualitative selection criteria . There is no ground to
             their sales staff, the provision of after-sales service              fear that a dealer is consistently abandoning a policy
                                                                                  of providing after-sales services, however , where he
f 1 ) ECR 1875 ( 1977 .                                                           does not provide such services to a customer at the
 ---pagebreak--- 30 . 8 . 85                                     Official Journal of the European Communities                                    No L 233 / 5
           customer's own request . In such cases there is                           ( aa ) Grundig must decide on applications to join
           nothing in the dealership agreement to prevent the                               the network within four weeks .
           dealer from granting the customer a discount for the
           resultant cost savings .                                                  ( bb ) Approved wholesalers , too , can admit
                                                                                            qualified retailers to the network .
                                                                                     (cc) Dealerships cannot be terminated , other than
           The ban on selling Grundig products by mail order                                for breaches of the terms of the dealership ,
           can also be subsumed under the obligation to                                     except in the event of Grundig's abandoning
                                                                                            the entire selective distribution network .
           provide customers with advice and to display the
           products . A dealer is not prohibited from mailing                        ( dd ) Termination of a dealership and / or
           equipment to a customer at the customer's own                                    withdrawal of the dealer's supplies on the
           request , however.                                                               ground of a breach of the law against unfair
                                                                                            competition is only possible if the allegations
                                                                                            are not denied or, if denied , have been proved
                                                                                            in court .
     (d ) The qualitative selection criteria applied by Grundig
            are a legitimate means of ensuring that its products
            are distributed by suitably qualified dealers . The
            vetting of dealers before they are admitted to the             3 . A different view must be taken , however , of selective
           network, and the checks made on them afterwards                     distribution systems which impose obligations on the
           where necessary , are intended to ensure that all                   undertakings concerned or contain selection criteria
            dealers actually meet the selection criteria . With                which go beyond the limits indicated above . They then
            such a large number of dealers in the Grundig                      fall under Article 85 ( 1 ), but can in appropriate cases be
           network , there is bound to . be a possibility that                 exempted under Article 85 ( 3 ).
           individual dealers will fail to discharge their
           obligations properly . However , this possibility does              In its dealership agreements with wholesalers and
           not take away Grundig's right to continue to select                 retailers Grundig undertakes not to supply dealers who
           its dealers on the basis of qualitative criteria .                  do not belong to its distribution network . Grundig
                                                                               dealers , for their part , are forbidden to supply dealers
                                                                               who have not been admitted to the network by Grundig
                                                                               itself or by a Grundig wholesaler .
     (e ) The policing obligations laid upon dealers when
           selling to other dealers and the obligation on
           wholesalers to assist Grundig in keeping the selective              In the present case these obligations constitute a
           distribution system intact do not have an                           restriction of competition because in order to be
           independent anti-competitive character . Grundig's                  admitted to the network dealers must not only satisfy
           exercise of its right to inspect a dealer's records is              certain general technical and professional criteria but
           expressly limited to cases of reasonable suspicion of               must also be prepared to make specific commitments in
           a breach of contract by the dealer or by another                    terms of sales effort and to provide particular services .
           customer. The obligatory check on whether a
          prospective trade customer is ( still ) on the approved              Grundig retailers must display as full a range of Grundig
           Grundig dealer list can be made either with Grundig                 products as is reasonable for a specialist business or
           or with a trustee . Thus , any possibility of these
                                                                               department of that size and must keep stocks of a
          clauses being applied in an anti-competitive manner                  representative selection of the current Grundig range .
           can be ruled out .
                                                                               Grundig wholesalers must have the necessary facilities
                                                                               and resources to carry and stock as far as possible the
     ( f) The      ban   on     wholesalers      supplying   private           whole Grundig range .
          consumers does not fall within Article 85(1 ) because
          it is meant to underpin the division of functions
          between wholesaling and retailing and prevent                        These obligations go beyond what is necessary for a
          distortions of competition ( cf. judgment of the Court               competent distribution of the products and do constitute
          of Justice in Case 26 / 76 , Metro/1977/ ECR 1875                    restrictions of competition , since they create
          at 1908 , ground 28 ).                                               impediments to the commercial independence of the
                                                                               authorized dealers .
    (g) Nor are the rules of the procedure for admitting                  4 . Grundig's EEC-wide distribution system , which
           dealers to and excluding them from the network                      contains the restrictions of competition described above
          liable to cause any significant restriction of                       at point 2 , is inherently likely to affect trade between
          competition , since here Grundig has followed the                    Member States . There can be no doubt that this effect is
          principles established in the Commission's SABA II                   appreciable , in view of the market shares held by
          Decision ( at II . A. 6 ( b ) and (c) thereof):                      Grundig in individual Member States .
 ---pagebreak--- No L 233 / 6                                Official Journal of the European Communities                                       30 . 8 . 85
                        B. Article 85 ( 3 )                            3 . The restrictions of competition contained in the Grundig
                                                                           selective distribution system are indispensable for the
                                                                           attainment of the above advantages . This applies both to
                                                                           the ban on supplying Grundig products to dealers not in
The agreements making up Grundig's EEC distribution                        the network and to the sales commitment required of
system fulfil the conditions of Article 85 ( 3 ).                          dealers who are. Without these clauses in the dealership
                                                                           agreement, the advantage in terms of the distribution of
                                                                           the products and the resulting benefits for the consumer
                                                                           could not be attained .         It should be noted that
1 . The qualitative selection criteria and the special                     indispensability does not mean that there must be no
    commitments which wholesalers and retailers must make                  other feasible way of distributing the products , but only
                                                                           that the restrictions of competition are necessary for the
    in terms of sales effort together contribute to improving
    the distribution of Grundig products , because they                    particular marketing strategy adopted by the
                                                                           manufacturer , which is judged to have the beneficial
    ensure that the products are distributed only by dealers
                                                                           effects referred to in Article 85 ( 3 ). Another relevant
    who will give customers competent advice and provide                   consideration is the fact that since the Commission's
    after-sales service to install , run in and maintain the
    equipment and are also prepared to make a particular                   SABA II Decision , Grundig has made changes to the
    effort to sell the manufacturer's products . In this way ,             procedure for granting and terminating dealerships
                                                                           which make such decisions more objective and offer no
    Grundig can rely on a network of professionally qualified
                                                                           scope for the manufacturer to misuse the selective
    dealers to present a suitably broad selection- of its
                                                                           distribution system for anticompetitive ends .
    products to the consumer and have them in stock so they
    are readily available to intending purchasers . These
    arrangement are likely to make the distribution of its
    products more efficient . They will therefore tend to
    increase competition between Grundig and other brands              4 . Finally , the agreements making up the Grundig selective
                                                                           distribution system do not afford the undertakings
    without lessening competition between individual
                                                                           concerned the possibility of eliminating competition in
    Grundig dealers .
                                                                           respect of a substantial part of the products in
                                                                           question .
2 . The resulting advantages , particularly the efficient                  ( a ) The restrictions contained in the dealership
    after-sales service and the availability of a wider range                    agreements affect only the relations between
    and faster delivery from wholesalers and retailers , are of                  Grundig and its dealers . They have no appreciable
    immediate benefit to the consumer .
                                                                                 effect on competition between Grundig and other
                                                                                 consumer electronics manufacturers . In particular,
                                                                                 dealers are in no way prevented by the dealership
    With their professional expertise , Grundig dealers are                      agreement from selling or promoting competing
    able both to advise consumers on general technical                           brands .
    developments in consumer electronics , explaining how
    new products work and established products can be
    used in new ways , and to give them an indication of                   ( b ) Nor does Grundig's selective distribution system
    the specific characteristics of different brands .                           eliminate competition between dealers .
    Manufacturers' sales brochures and even reports in
    technical journals and consumer magazines are only a
    partial substitute for a person-to-person talk between the                   This is guaranteed by the terms of the dealership
    specialist dealer and the consumer , and then only for the                   agreement itself:
    relatively small section of the population that is
    technically interested . From Grundig dealers , consumers
    can also gain a good idea of at least the main items in the                  The admission procedure in its present form ensures
    Grundig range and can be sure of immediate , or at least                     that any dealer fulfilling the selection conditions can
    very quick , delivery should they decide to buy a Grundig                    be admitted to the network . Within the network
    product. Finally, having decided to buy, the consumer                        dealers throughout the common market, at both
    can be sure that the dealer will give him expert advice on                   wholesale and retail levels , can compete with one
    how to operate the equipment and if necessary will install                   another, are free to set their own prices and can take
    and set it up for him in his home and provide after-sales                    advantage of the most favourable source of supply
    service and carry out repairs of the product both during                     in the particular circumstances since there are no
    and after the guaranteee period .                                            restrictions at all on dealers within the network
                                                                                 supplying one another .
    These benefits will accrue to the consumer without his
    having to pay significantly higher prices as a result, given                 Also, Grundig does not have a strong enough
    the continuing fierce price competition that exists in the                   position either in the common market as a whole or
    sector, especially between specialist dealers ( see 4                        in a substantial part of it to eliminate competition
    below ).                                                                     between dealers .
 ---pagebreak---  30 . 8 . 85                                   Official Journal of the European Communities                                     No L 233 / 7
            Even in the geographical and product market where                              prices soon after being launched on the market
            Grundig is strongest, the German colour television                             because of the pressure of competition . The
            market , where it has a share of 19,5 % , Grundig                              prices of consumer electronics products have
            faces effective competition from firms in the                                  in general , despite technical improvements ,
            Thomson-Brandt group ( Telefunken , SABA,                                      risen much less than the rate of inflation .
           Nordmende), which have a market share of around                                 Colour television sets , for example , are in real
            23 % , and other large firms , and so cannot exert a                           terms only half as expensive as in 1968 despite
            decisive influence on competition between dealers                              their improved performance .
           through its selective distribution system . In the
           prevailing competitive conditions this still holds                       ( bb ) Nor has the Commission found that because
           true even if the share of this market segment held by                           of selective distribution systems certain types
           Philips , which controls Grundig , is added to                                  of     outlet     such   as    discount    stores,
           Grundig's own , making a combined share of                                      cash-and-carry wholesalers and retail
           33,5 % . This does not put Grundig and Philips                                  supermarkets are systematically excluded
           together in a position to eliminate competition in the                          from selling such products . Self-service stores ,
           distribution of colour televisions in Germany . In                              like any other outlet , are naturally excluded
            any case , a danger of a reduction in competition at                           from selling Grundig products by the selective
           the distribution stage would only arise if Grundig                              distribution system if they are not prepared to
           and Philips had a uniform or at least very similar                              fulfil the selection conditions, most of which
           policy for distributing their products . This is not the                        are qualitative and so do not fall within
           case . Philips does not operate a selective distribution                        Article 85 ( 1 ), provided they are not applied in
           system in any Member State .                                                    a discriminatory fashion . If such outlets do
                                                                                           meet the conditions for a dealership , however ,
                                                                                           they can sell Grundig products and several
                                                                                           stores that sell mainly by self-service but have
                                                                                           set up specialized consumer electronics
                                                                                           departments with specialist staff are in fact in
           Finally , this conclusion is not upset by a                                     the Grundig network .
           consideration of the similar selective distribution
           systems operated by other manufacturers - an                                    Apart from the fact that it is open to any
           aspect which only requires examination in the case                              interested dealer to take the necessary steps
           of the Federal Republic of Germany . Apart from the                             himself to gain admission to the network of
           fact that these systems show considerable                                       a manufacturer operating a selective
           differences from one another ( EEC-wide or purely                               distribution system , only a minority of
           national , open to any specialist dealer or subject to                          manufacturers in the Community , and even in
           additional sales commitments , and covering one or                              the Federal Republic of Germany not all the
           two levels of distribution ), they have not led to price                        major ones , have such a system . Furthermore ,
           rigidity or to the de facto exclusion of certain types                          in the case of the manufacturers who only
           of sales outlet .                                                               operate a national selective distribution
                                                                                           system , self-service stores can bypass the
                                                                                           system by obtaining the manufacturer's
           ( aa ) Although the Court of Justice in its leading                             products for example through parallel imports
                  judgments in Case 26 / 76 , Metro, ground 21 ,                           and cannot legally be prevented from selling
                  and in Case 107 / 82 , AEG-Telefunken,                                   those goods in Germany .
                  ground 42 ( x ), assumed that in selective
                  distribution systems the emphasis will be on                             Therefore, there is no de facto exclusion of the
                  service rather than price competition and                                above types of outlet from the sale of consumer
                  accepted this reduced price competition in                               electronics products either in the Community
                  return for the stimulation of competition in                             as a whole or in a substantial part of it.
                  other areas , the Commission's experience over
                  many years of monitoring the situation in the
                  Member State where selective distribution in
                  this sector is most widespread has been that
                  there is in fact fierce price competition in the
                  retail trade generally , and between Grundig
                  dealers in particular. This is also true of
                  different product lines , with even completely                    C. Articles 6 and 8 of Regulation No 17
                  new products showing substantial falls in
                                                                          Grundig notified its EEC dealership agreements with
                                                                         wholesalers and retailers to the Commission on 29 March
                                                                          1977 . At that time the agreements conformed in all essential
(M ECR ( 1983 ) 3151 , pp . 3196-97 .                                    respects to the standards set for such agreements in the
 ---pagebreak---  No L 233 / 8                                Official Journal of the European Communities                                      30 . 8 . 85
 Commission's       practice   and     the   Court's   case law.        excluding wholesalers or retailers from the network .
 Subsequently , in the light of numerous investigations of the          Grundig must therefore be required to send the Commission
 consumer electronics business the Commission modified its              every year a report of every case in which it has refused to
 policy on certain common provisions of selective distribution          grant a wholesaler or retailer a dealership or has terminated a
 systems governing the procedure for admitting dealers to and           dealership or withdrawn a dealer's supplies or has demanded
 excluding them from the network, although not on the                   to inspect a dealer's records of the serial numbers of
 qualitative selection criteria and sales commitments which             equipment passing through his hands . This part of the
 form the substantive core of such systems .                            Decision is based on Article 8 ( 1 ) of Regulation No 17 ,
                                                                        HAS ADOPTED THIS DECISION :
 After the Commission had informed Grundig of its modified
 approach towards admission and exclusion procedures ,
 Grundig brought its agreements into line with the new                                              Article 1
 standards . It is therefore appropriate to set the date for the
 exemption pursuant to Article 85 ( 3 ) of the EEC Treaty to
 take effect under Article 6 of Regulation No 17 at 29 March            Pursuant to Article 85 ( 3 ) of the EEC Treaty , the provisions
 1977 . Up to the time the Commission informed Grundig of               of Article 85 ( 1 ) are hereby declared inapplicable to :
 the change in its approach and gave it an opportunity to bring
 its agreements into line with the new standards , the                  — the Grundig EEC dealership agreement with wholesalers ,
 agreements can be judged against the old standards . It is                 and
 found that Grundig's EEC selective distribution system in its
 old form fulfilled the exemption conditions set by the                 — the Grundig EEC dealership agreement with retailers .
 Commission and confirmed by the Court of Justice at the
 time . Furthermore , the Commission's investigations into              This exemption shall apply from 29 March 1977 until
 price competition and Grundig's operation of the selective             28 March 1989 .
 distribution system did not reveal any factors liable to render
 the selective distribution system ineligible for exemption .
 The Commission's aim in setting the new standards for
                                                                                                    Article 2
 admission and exclusion is to provide stronger safeguards
 against potential discriminatory application of selective
 distribution systems in the future. There are no grounds for           Grundig AG shall submit annual reports to the Commission ,
 applying the new standards to past practice , since how                the first of them by 3 1 December 1 985 , setting out all cases in
 selective distribution systems were operated in practice in the        which it has:
 past can be investigated , as it has been in Grundig's case . The
 new standards should therefore be applicable only from the             — refused to grant a wholesaler or retailer a dealership or
 time Grundig was informed of them .                                        has terminated a dealership or withdrawn a dealer's
                                                                            supplies ;
                                                                        — exercised its right to inspect a dealer's records of serial
 The Grundig selective distribution system , the substantive                numbers .
 core   of which      conformed      from   the  outset   to    the
 Commission's standards , which have not changed, has
 therefore been eligible for exemption in its amended and its
                                                                                                    Article 3
 original form since the date of notification .
                                                                        This Decision is addressed to :
In view of the time that has elapsed since the notification , it is
desirable to fix the period of exemption under Article 8 ( 1 ) of          Grundig AG ,
Regulation No 17 as extending until 28 March 1989 . The                     KurgartenstralSe 37 ,
                                                                            D-8510 Furth .
Commission will then be able to look again at the effects on
competition of Grundig's distribution system after a
relatively short time .                                                 Done at Brussels , 10 July 1985 .
                                                                                                            For the Commission
 Certain obligations must be attached to the Decision to
                                                                                                             Peter SUTHERLAND
 enable the Commission to check that Grundig does not act in
 a discriminatory fashion in refusing admission to or                                                   Member of the Commission