NV Nederlandsche Banden Industrie Michelin v Commission of the European Communities.
Date: 1983-11-09
7 IN THIS REGARD IT SHOULD BE RECALLED THAT THE NECESSITY TO HAVE REGARD TO THE RIGHTS OF THE DEFENCE IS A FUNDAMENTAL PRINCIPLE OF COMMUNITY LAW WHICH THE COMMISSION MUST OBSERVE IN ADMINISTRATIVE PROCEDURES WHICH MAY LEAD TO THE IMPOSITION OF PENALTIES UNDER THE RULES OF COMPETITION LAID DOWN IN THE TREATY . ITS OBSERVANCE REQUIRES INTER ALIA THAT THE UNDERTAKING CONCERNED MUST HAVE BEEN ENABLED TO EXPRESS ITS VIEWS EFFECTIVELY ON THE DOCUMENTS USED BY THE COMMISSION TO SUPPORT ITS ALLEGATION OF AN INFRINGEMENT .
8 ONCE THE COMMISSION HAD DECIDED THAT THE INFORMATION OBTAINED DURING THE INVESTIGATION WAS COVERED BY THE PRINCIPLE OF THE NON-DISCLOSURE OF BUSINESS SECRETS , IT WAS UNDER THE DUTY , BY VIRTUE OF ARTICLE 20 OF REGULATION NO 17 , NOT TO DISCLOSE IT TO MICHELIN NV . CONSEQUENTLY IT COULD NOT USE THAT INFORMATION TO SUPPORT ITS DECISION IN THIS CASE IF THE REFUSAL TO DISCLOSE IT REDUCED MICHELIN NV ' S OPPORTUNITY TO EXPRESS ITS VIEWS ON THE ACCURACY OR SCOPE OF THE INFORMATION OR ON THE CONCLUSIONS DRAWN FROM IT BY THE COMMISSION .
9 HOWEVER , AT NO POINT IN THE STATEMENT OF THE REASONS ON WHICH THE DECISION AT ISSUE IS BASED IS EXPRESS REFERENCE MADE TO THE INVESTIGATION IN QUESTION . NOR DOES IT APPEAR THAT THE COMMISSION RELIED BY IMPLICATION ON THIS PART OF THE FILE . IN SO FAR AS THE COMMISSION DOES REFER IN ITS DECISION TO THE DISCOUNT POLICY OF MICHELIN NV ' S COMPETITORS , IT DOES SO IN GENERAL STATEMENTS WHICH MICHELIN NV HAS NOT CHALLENGED AT ANY STAGE AND WHICH MOREOVER ARE IRRELEVANT FOR THE PURPOSES OF ASSESSING MICHELIN NV ' S CONDUCT . THE INVESTIGATION IN QUESTION WAS NOT TAKEN INTO CONSIDERATION IN THE PROCEDURE BEFORE THE COURT EITHER .
19 IN THIS REGARD IT NEED ONLY BE RECALLED , AS THE COURT HELD IN ITS JUDGMENT OF 7 JUNE 1983 IN JOINED CASES 100 TO 103/80 MUSIQUE DIFFUSION FRANCAISE SA AND OTHERS V COMMISSION ( 1983 ) ECR 1825 , THAT TO GIVE INDICATIONS AS     REGARDS THE LEVEL OF THE FINES ENVISAGED , BEFORE THE UNDERTAKING HAS BEEN INVITED TO SUBMIT ITS OBSERVATIONS ON THE ALLEGATIONS AGAINST IT , WOULD BE TO ANTICIPATE THE COMMISSION ' S DECISION AND WOULD THUS BE INAPPROPRIATE .
20 IN THE STATEMENT OF ITS OBJECTIONS OF 5 MARCH 1980 THE COMMISSION EXPRESSLY INDICATED THAT IT INTENDED TO FINE MICHELIN NV AN AMOUNT TO BE FIXED BY TAKING INTO ACCOUNT THE DURATION AND GRAVITY OF THE INFRINGEMENT WHICH IT REGARDED AS SERIOUS . IN DOING SO THE COMMISSION GAVE MICHELIN NV THE OPPORTUNITY TO DEFEND ITSELF NOT ONLY AGAINST THE FINDING OF AN INFRINGEMENT BUT ALSO AGAINST THE IMPOSITION OF A FINE .
25 THE POINT TO BE MADE IN THIS REGARD IS THAT THE COMMISSION ADDRESSED ITS DECISION NOT TO THE MICHELIN GROUP AS A WHOLE BUT ONLY TO ITS NETHERLANDS SUBSIDIARY WHOSE ACTIVITIES ARE CONCENTRATED ON THE NETHERLANDS MARKET . IT HAS NOT BEEN DISPUTED THAT MICHELIN NV ' S MAIN COMPETITORS ALSO CARRY ON THEIR ACTIVITIES IN THE NETHERLANDS THROUGH NETHERLANDS SUBSIDIARIES OF THEIR RESPECTIVE GROUPS .
28 HENCE THE RELEVANT SUBSTANTIAL PART OF THE COMMON MARKET IN THIS CASE IS THE NETHERLANDS AND IT IS AT THE LEVEL OF THE NETHERLANDS MARKET THAT MICHELIN NV ' S POSITION MUST BE ASSESSED .

( 2 ) ASSESSMENT OF MICHELIN NV ' S POSITION IN RELATION TO ITS COMPETITORS
29 BEFORE THE SUBMISSIONS AND ARGUMENTS REGARDING THE ASSESSMENT OF MICHELIN NV ' S POSITION IN RELATION TO ITS COMPETITORS ARE EXAMINED MORE CLOSELY IT SHOULD BE RECALLED , AS THE COURT HAS REPEATEDLY HELD , MOST RECENTLY IN ITS JUDGMENT OF 13 FEBRUARY 1979 IN CASE 85/76 HOFFMANN-LA ROCHE V COMMISSION ( 1979 ) ECR 461 , THAT ARTICLE 86 OF THE TREATY IS AN APPLICATION OF THE GENERAL AIM OF THE ACTIVITIES OF THE COMMUNITY LAID DOWN BY ARTICLE 3 ( F ) OF THE TREATY , NAMELY THE INSTITUTION OF A SYSTEM ENSURING THAT COMPETITION IN THE COMMON MARKET IS NOT DISTORTED .
30 CONSEQUENTLY ARTICLE 86 PROHIBITS ANY ABUSE BY AN UNDERTAKING OF A DOMINANT POSITION ON THE COMMON MARKET OR A SUBSTANTIAL PART THEREOF IN SO FAR AS IT MAY AFFECT TRADE BETWEEN MEMBER STATES , THAT IS TO SAY IN SO FAR AS IT PROHIBITS ANY ABUSE OF 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 .
37 AS THE COURT HAS REPEATEDLY EMPHASIZED , MOST RECENTLY IN ITS JUDGMENT OF 11 DECEMBER 1980 IN CASE 31/80 NV L ' OREAL AND SA L ' OREAL V PVBA     DE NIEUWE AMCK ( 1980 ) ECR 3775 , FOR THE PURPOSES OF INVESTIGATING THE POSSIBLY DOMINANT POSITION OF AN UNDERTAKING ON A GIVEN MARKET , THE POSSIBILITIES OF COMPETITION MUST BE JUDGED IN THE CONTEXT OF THE MARKET COMPRISING THE TOTALITY OF THE PRODUCTS WHICH , WITH RESPECT TO THEIR CHARACTERISTICS , ARE PARTICULARLY SUITABLE FOR SATISFYING CONSTANT NEEDS AND ARE ONLY TO A LIMITED EXTENT INTERCHANGEABLE WITH OTHER PRODUCTS . HOWEVER , IT MUST BE NOTED THAT THE DETERMINATION OF THE RELEVANT MARKET IS USEFUL IN ASSESSING WHETHER THE UNDERTAKING CONCERNED IS IN A POSITION TO PREVENT EFFECTIVE COMPETITION FROM BEING MAINTAINED AND BEHAVE TO AN APPRECIABLE EXTENT INDEPENDENTLY OF ITS COMPETITORS AND CUSTOMERS AND CONSUMERS . FOR THIS PURPOSE , THEREFORE , AN EXAMINATION LIMITED TO THE OBJECTIVE CHARACTERISTICS ONLY OF THE RELEVANT PRODUCTS CANNOT BE SUFFICIENT : THE COMPETITIVE CONDITIONS AND THE STRUCTURE OF SUPPLY AND DEMAND ON THE MARKET MUST ALSO BE TAKEN INTO CONSIDERATION .
57 IT IS NOT POSSIBLE TO UPHOLD THE OBJECTIONS MADE AGAINST THOSE ARGUMENTS BY MICHELIN NV , SUPPORTED ON THIS POINT BY THE FRENCH GOVERNMENT , THAT MICHELIN NV IS THUS PENALIZED FOR THE QUALITY OF ITS PRODUCTS AND SERVICES . A FINDING THAT AN UNDERTAKING HAS A DOMINANT POSITION IS NOT IN ITSELF A RECRIMINATION BUT SIMPLY MEANS THAT , IRRESPECTIVE OF THE REASONS FOR WHICH IT HAS SUCH A DOMINANT POSITION , THE UNDERTAKING CONCERNED HAS A SPECIAL RESPONSIBILITY NOT TO ALLOW ITS CONDUCT TO IMPAIR GENUINE UNDISTORTED COMPETITION ON THE COMMON MARKET .
70 AS REGARDS THE APPLICATION OF ARTICLE 86 TO A SYSTEM OF DISCOUNTS CONDITIONAL UPON THE ATTAINMENT OF SALES TARGETS , SUCH AS DESCRIBED ABOVE , IT MUST BE STATED FIRST OF ALL THAT IN PROHIBITING ANY ABUSE OF A DOMINANT POSITION ON THE MARKET IN SO FAR AS IT MAY AFFECT TRADE BETWEEN MEMBER STATES ARTICLE 86 COVERS PRACTICES WHICH ARE LIKELY TO AFFECT THE STRUCTURE OF A MARKET WHERE , AS A DIRECT RESULT OF THE PRESENCE OF THE UNDERTAKING IN QUESTION , COMPETITION HAS ALREADY BEEN WEAKENED AND WHICH , THROUGH RECOURSE TO METHODS DIFFERENT FROM THOSE GOVERNING NORMAL COMPETITION IN PRODUCTS OR SERVICES BASED ON TRADERS '  PERFORMANCE , HAVE THE EFFECT OF HINDERING THE MAINTENANCE OR DEVELOPMENT OF THE LEVEL OF COMPETITION STILL EXISTING ON THE MARKET .
71 IN THE CASE MORE PARTICULARLY OF THE GRANT BY AN UNDERTAKING IN A DOMINANT POSITION OF DISCOUNTS TO ITS CUSTOMERS THE COURT HAS HELD IN ITS JUDGMENTS OF 16 DECEMBER 1975 IN JOINED CASES 40 TO 48 , 50 , 54 TO 56 , 111 , 113 AND     114/73 COOPERATIEVE VERENIGING ' ' SUIKER UNIE ' '  UA AND OTHERS V COMMISSION ( 1975 ) ECR 1663 AND OF 13 FEBRUARY 1979 IN CASE 85/76 HOFFMANN-LA ROCHE V COMMISSION ( 1979 ) ECR 461 THAT IN CONTRAST TO A QUANTITY DISCOUNT , WHICH IS LINKED SOLELY TO THE VOLUME OF PURCHASES FROM THE MANUFACTURER CONCERNED , A LOYALTY REBATE , WHICH BY OFFERING CUSTOMERS FINANCIAL ADVANTAGES TENDS TO PREVENT THEM FROM OBTAINING THEIR SUPPLIES FROM COMPETING MANUFACTURERS , AMOUNTS TO AN ABUSE WITHIN THE MEANING OF ARTICLE 86 OF THE TREATY .
73 IN DECIDING WHETHER MICHELIN NV ABUSED ITS DOMINANT POSITION IN APPLYING ITS DISCOUNT SYSTEM IT IS THEREFORE NECESSARY TO CONSIDER ALL THE CIRCUMSTANCES , PARTICULARLY THE CRITERIA AND RULES FOR THE GRANT OF THE DISCOUNT , AND TO INVESTIGATE WHETHER , IN PROVIDING AN ADVANTAGE NOT BASED ON ANY ECONOMIC SERVICE JUSTIFYING IT , THE DISCOUNT TENDS TO REMOVE OR RESTRICT THE BUYER ' S FREEDOM TO CHOOSE HIS SOURCES OF SUPPLY , TO BAR COMPETITORS FROM ACCESS TO THE MARKET , TO APPLY DISSIMILAR CONDITIONS TO EQUIVALENT TRANSACTIONS WITH OTHER TRADING PARTIES OR TO STRENGTHEN THE DOMINANT POSITION BY DISTORTING COMPETITION .
81 THE DISCOUNT SYSTEM IN QUESTION WAS BASED ON AN ANNUAL REFERENCE PERIOD . HOWEVER , ANY SYSTEM UNDER WHICH DISCOUNTS ARE GRANTED ACCORDING TO THE QUANTITIES SOLD DURING A RELATIVELY LONG REFERENCE PERIOD HAS THE INHERENT EFFECT , AT THE END OF THAT PERIOD , OF INCREASING PRESSURE ON THE BUYER TO REACH THE PURCHASE FIGURE NEEDED TO OBTAIN THE DISCOUNT OR TO AVOID SUFFERING THE EXPECTED LOSS FOR THE ENTIRE PERIOD . IN THIS CASE THE VARIATIONS IN THE RATE OF DISCOUNT OVER A YEAR AS A RESULT OF ONE LAST ORDER , EVEN A SMALL ONE , AFFECTED THE DEALER ' S MARGIN OF PROFIT ON THE WHOLE YEAR ' S SALES OF MICHELIN HEAVY-VEHICLE TYRES . IN SUCH CIRCUMSTANCES , EVEN QUITE SLIGHT VARIATIONS MIGHT PUT DEALERS UNDER APPRECIABLE PRESSURE .
86 IT MUST THEREFORE BE CONCLUDED THAT BY BINDING DEALERS IN THE NETHERLANDS TO ITSELF BY MEANS OF THE DISCOUNT SYSTEM DESCRIBED ABOVE MICHELIN NV COMMITTED AN ABUSE , WITHIN THE MEANING OF ARTICLE 86 OF THE TREATY , OF ITS DOMINANT POSITION IN THE MARKET FOR NEW REPLACEMENT TYRES FOR HEAVY     VEHICLES . THE SUBMISSION PUT FORWARD BY THE APPLICANT TO REFUTE THAT FINDING IN THE CONTESTED DECISION MUST THEREFORE BE REJECTED .

( D ) DISCRIMINATION AGAINST CERTAIN DEALERS
91 IT MUST THEREFORE BE CONCLUDED THAT THE COMMISSION HAS NOT SUCCEEDED IN DEMONSTRATING THAT THE DISCOUNT SYSTEM IN QUESTION INVOLVED THE APPLICATION OF DISCRIMINATORY DISCOUNTS TO DIFFERENT DEALERS AND THAT THE DECISION AT ISSUE MUST BE DECLARED VOID IN SO FAR AS IT DECLARES IN ARTICLE 1 ( A ) THAT MICHELIN NV INFRINGED ARTICLE 86 BY APPLYING TO ITS DEALERS DISSIMILAR CONDITIONS IN RESPECT OF EQUIVALENT TRANSACTIONS .

( 2 ) THE EXTRA BONUS IN 1977
104 IT HAS NOT BEEN DENIED IN THIS CASE THAT IMPORTANT PATTERNS OF TRADE EXIST AS A RESULT OF THE ESTABLISHMENT OF COMPETITORS OF SIGNIFICANT SIZE IN OTHER MEMBER     STATES . THE EFFECTS OF THE DISCOUNT SYSTEM ON THE CHANCES OF MICHELIN NV ' S COMPETITORS OF OBTAINING ACCESS TO THE NETHERLANDS MARKET HAVE ALREADY BEEN EXAMINED IN THE CONTEXT OF THE EXAMINATION OF THE ABUSIVE NATURE OF MICHELIN NV ' S CONDUCT . IT MUST ALSO BE REMEMBERED THAT ARTICLE 86 DOES NOT REQUIRE IT TO BE PROVED THAT THE ABUSIVE CONDUCT HAS IN FACT APPRECIABLY AFFECTED TRADE BETWEEN MEMBER STATES BUT THAT IT IS CAPABLE OF HAVING THAT EFFECT .
107 IN THAT RESPECT IT MUST BE EMPHASIZED THAT MICHELIN NV WAS AWARE OF THE FACTUAL ELEMENTS JUSTIFYING BOTH THE FINDING OF THE EXISTENCE OF A DOMINANT POSITION ON THE MARKET AND THE ASSESSMENT OF THE CONTESTED DISCOUNT SYSTEM AS AN ABUSE OF THAT POSITION . THE DISCOUNT SYSTEM WAS SET UP DELIBERATELY . THE FACT THAT HITHERTO NEITHER THE COMMISSION NOR THE COURT HAS HAD TO ADJUDICATE ON A DISCOUNT SYSTEM HAVING THE SAME FEATURES AS THE SYSTEM IN QUESTION DOES NOT EXONERATE MICHELIN NV . AT ALL EVENTS , IN VIEW OF THE PREVIOUS DECISIONS OF THE COMMISSION AND JUDGMENTS OF THE COURT MICHELIN NV OUGHT TO HAVE EXPECTED THAT SUCH A SYSTEM WOULD FALL WITHIN THE SPHERE OF APPLICATION OF ARTICLE 86 OF THE TREATY .
111 IN ASSESSING THE GRAVITY OF THE INFRINGEMENT REGARD MUST BE HAD , ACCORDING TO THE CIRCUMSTANCES , TO A LARGE NUMBER OF FACTORS WHICH MAY INCLUDE IN PARTICULAR THE SIZE AND ECONOMIC STRENGTH OF THE UNDERTAKING , WHICH MAY BE INDICATED BY THE TOTAL TURNOVER OF THE UNDERTAKING AND THE PROPORTION OF THAT TURNOVER ACCOUNTED FOR BY THE GOODS IN RESPECT OF WHICH THE INFRINGEMENT WAS COMMITTED . THEREFORE MICHELIN NV ' S ARGUMENTS CHALLENGING THE PERMISSIBILITY OF TAKING TURNOVER INTO ACCOUNT ARE IN ANY CASE UNFOUNDED . MOREOVER , IT IS FOR THE COURT , EXERCISING ITS POWERS OF UNLIMITED JURISDICTION ON THIS SUBJECT , TO ASSESS FOR ITSELF THE CIRCUMSTANCES OF THE CASE AND THE NATURE OF THE INFRINGEMENT IN QUESTION IN ORDER TO DETERMINE THE AMOUNT OF THE FINE .