COMMISSION DECISION
of 13 December 1985
relating to a  proceeding under Article 85 of the EEC Treaty (IV/27.593   London Rubber Terminal Market  Association Limited)
(Only the English text is authentic)
(89/566/EEC)
THE  COMMISSION OF THE EUROPEAN COMMUNITIES
,Having regard to the Treaty establishing the European  Economic Community,Having regard to Council Regulation N° 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  Greece, and in particular Article 2 thereof,Having regard to the notification and application for  negative clearance submitted on 29 June 1973 and 20 May 1985 by the London Rubber Terminal Market  Association concerning the Rules and Regulations of the Association,Having regard to the summary of  the notification published (2) pursuant to Article 19 (3) of Regulation
N° 17,After consulting the  Advisory Committee on Restrictive Practices and Dominant Positions,Whereas:I. FACTSThe London  Rubber Terminal Market Association (LRTMA) is one of many commodity markets established in London.  The commodity markets are self-regulatory organizations run by Committees of Management selected by  members from amongst themselves, aided by secretariats, and using powers given to them by their  members in market rule books. Although the markets are self-regulating, there is an element of  supervision by the Bank of England.The object of the LRTMA is to set up and to administer a  terminal market in London for rubber. A terminal market or a futures market provides organized  facilities for concluding contracts for the purchase and sale of a commodity to be delivered at  named future dates. Futures markets have been developed primarily to enable persons involved in  commodity trading to protect themselves from the risks of adverse price movements.
The LRTMA provides a market floor for trading and price-making, determines various technical  questions such as allowable delivery months and the standard contract terms and procures the  provision of clearing and settlement facilities. Trading is done on the floor of the market where  dealers face each other with bids and offers being made by the system know as 'open outcry'.The  contract currently traded on the Rubber Market is for 5-tonne lots (where delivery is in a single  month) or 15-tonne lots (where delivery is in a calendar quarter) (or multiples thereof) of Hevea  Braziliensis Plantation Rubber Rubbed Smoked Sheet. Rubber deliverable against the contract must be  of a certified quality and the contracts are for delivery at a warehouse approved by the Rubber  Trade Association of London in the United Kingdom, the Netherlands, or West Germany at the sellers'  option.All contracts traded on the London Rubber Terminal Market must be registered with  International Commodities Clearing House Limited ('ICCH'), an independent service company which  provides clearing and settlement facilities for the LRTMA. ICCH has substantial capital and  reserves and is wholly owned by six clearing banks. The principal functions of ICCH are to maintain  and organize a 'daily clearing' of all trades and provide a guarantee for due fulfilment of  contracts, in accordance with the rules of the LRTMA, to clearing members in whose names such  contracts are registered.There are four classes of membership. The first two classes are voting  members known as Floor Members and consist of Broker Members and Dealer Members. Their number is  limited by the Committee to the practical maximum for the orderly conduct of the business. The  present number is 10 Broker Members and 23 Dealer Members. The second two classes are non-voting  members: Trade Associate Members and several types of Associate Members. Their number is not  limited.Applicants for membership may be of any nationality but must satisfy certain minimum  capital requirements laid down from time to time by the Committee of Management. They must  furthermore be carrying on business in the rubber trade and must have done so prior to membership  for a period of time also to be laid down from time to time by the Committee. Applicants for Floor  Membership must trade from an office in London established for that purpose. A detailed statement  of the criteria for membership in force at any time may
be obtained from the Association upon  application. Membership may be transferred to another firm or company
provided that other also  meets the criteria for membership.All Floor Members must be members ('clearing members') of the  ICCH and must register their contracts with the ICCH which, in return for its fee, guarantees the  performance of the contracts.An appeal procedure applies if the Committee of Management refuses an  application for membership, refuses to grant permission for a transfer of member's membership or  refuses a change in the control or nature of the member's firm or company. The procedure also  applies if a member is expelled or suspended and the member is dissatisfied with the Committee's  decision. The candidate or member can ask the Committee to reconsider its decision, making such  representations and supplying such information as it considers relevant.Business concluded on the  floor of the market between Floor Members may be transacted free of commission. Commission must be  charged on all other transactions between members or between members and non-members but rates of  commission are freely negotiable. The exemption from the obligation for Floor Members to charge 'a'  commission is explained by their ownership of the Market. This causes a variety of extra costs that  the other categories of members do not bear because they have no ownership in the Market. Provision  is made for an additional commission (equal to the original commission charged on the sale) where  rubber is tendered in fulfilment of a contract by a deliverer who is not a clearing member of ICCH  in whose name the contract is registered. This extra commission is paid to the clearing member in  whose name the contract is registered with ICCH.For administrative purposes and on behalf of its  members, ICCH may collect a sum on account of any commission payable on any contract registrable  with it. For this purpose, ICCH may, from time to time, notify its members of the rates of  commission to be applied by ICCH to contracts which are registrable with it.The international  futures markets are the principal markets used in international commodity merchandising and they  contribute to the stability and smooth operation of world trade and to world pricing mechanisms.  They are also very large. However, as for rubber the volumes of trade are now very small. There is  a significant market in Malaysia for rubber. The figures below show the relative size of the LRTMA  compared with the futures market in Kuala Lumpur that opened in 1983.Annual volumes of trade 1980  to 1984
(in tonnes)
>TABLE>
II. LEGAL ASSESSMENT1.The notified Rules and Regulations of  the LRTMA are to be considered as agreements within the meaning of Article 85 of the EEC  Treaty.2.The Rules and Regulations as originally notified specified the minimum net rates of  commission which could be charged by a member. The Committee had powers to suspend or expel  offending members. The minimum commission rates varied according to who was paying and who was  receiving the commission. The rates were cheaper for clearing clients, where the contract was  registered in the client's own name with ICCH, than in the case of non-clearing clients, and where  a Trade Member was the payer rather than a non-member. The rates were cheapest for Broker Members.  Broker Members have the right to deal free of commission but when dealing on behalf of Broker,  Dealer or Associate Members, they had in the past to charge at least the minimum rates of  commission specified. Broker Members could not trade for their own account. Dealer Members may deal  free of commission on the floor but cannot do business for another Floor Member. When dealing on  behalf of Associate and non-members, Dealer Members had in the past to charge the relevant minimum  rate of Commission. Associate Members may deal direct with each other but must pass all contracts  through a Broker or Dealer Member and had in the past to pay the relevant minimum commission. They  also had to charge non-members the appropriate minimum commission. The minimum rate of commission  charged on all Terminal Contracts traded in a single month of the first delivery quarter was  one-third of the usual rate, charged per 5-tonne lot. Subject to certain conditions, a Floor Member  could return certain specified sums to any agent who gave orders on behalf of a client. The  Commission considered the above-described system of specified minimum commission rates as a form of  price-fixing that violated Article 85 (1) of the EEC Treaty. The LRTMA was requested to abandon the  system of fixed minimum rates. The system has now been abolished as such. References to the system  in the Rules and Regulations have been deleted. The rules now provide that business concluded on  the floor of the market between Floor Members may be transacted free of commission. Commission must  be charged on all other transactions between members or between members and non-members. The  Commission believes that this obligation is not appreciably restrictive of competition because it  only entails the obligation to charge 'a' commission without any reference to the rate. It follows  that complete freedom exists to negotiate the actual commission rates.3.Furthermore, as a result of  the representations by the Commission, other amendments were also made to the rules concerning  membership so that it is now made clear on the face of the Articles that membership is open and the  criteria by which applications for
membership are judged are objective (see Facts, seventh  paragraph, above). The Committee of Management is now required to give reasons when it takes  decisions affecting the members' rights of membership. To protect the rights of actual or potential  members an appeal procedure has been introduced. As an ultimate resort an appellant would have  recourse to the ordinary courts under English law.
4.The publication in the Official Journal of the European Communities pursuant to Article 19 (3) of  Regulation N° 17 did not bring in any representations.5.The notified Articles of Association and  Rules and Regulations, in their amended form, no longer contain any clauses which constitute  appreciable restrictions on competition within the common market. Therefore, the Commission, on the  basis of the facts in its possession, has no grounds for action under Article 85 (1). Consequently,  the Commission is able to issue a negative clearance pursuant to
Article 2 of Regulation 17.
On the basis of the facts in its possession  the Commission has no grounds for action under Article 85 (1) of the EEC Treaty in respect of the  Rules and Regulations of the London Rubber Terminal Market Association as last notified on 20 May  1985.
This Decision is addressed to The London Rubber Terminal Market Association Limited  whose registered office is at Cereal House, 58 Mark Lane, London EC3, United Kingdom.