1 BY APPLICATIONS FILED AT THE COURT ON 11 AND 12 MARCH 1974, THE COMPANIES KALI - AND -SALZ AND KALI CHEMIE ( HEREINAFTER CALLED 'K AND S' AND 'K ') BROUGHT AN ACTION FOR ANNULMENT OF THE DECISION OF THE COMMISSION OF 21 DECEMBER 1973 ( OJ L 19/22 OF 23 . 1 . 1974 ) HOLDING THAT AN AGREEMENT OF 6 JULY 1970, CONCLUDED BETWEEN THE APPLICANTS ON THE MARKETING BY K AND S OF PART OF KC'S PRODUCTION OF POTASH, CONSTITUTED AN INFRINGEMENT OF ARTICLE 85 ( 1 ) OF THE EEC TREATY AND ORDERING THEM TO BRING THE INFRINGEMENT TO AN END .
2 SINCE THE TWO APPLICATIONS SEEK THE SAME RELIEF, IT IS FITTING TO JOIN THEM FOR THE PURPOSE OF THE JUDGMENT .
3 THE APPLICANTS ARE THE ONLY TWO PRODUCERS OF POTASH IN THE FEDERAL REPUBLIC OF GERMANY, K AND S HAVING PRODUCED MORE THAN 2 250 000 METRIC TONNES IN 1973 WHILE KC PRODUCED SOME 280 000 TONNES . POTASH IS DELIVERED AS FERTILIZER, EITHER DIRECTLY WITH A VIEW TO ITS USE AS STRAIGHT POTASH OR TO THE PRODUCERS OF COMPOUND FERTILIZER FOR THE PURPOSE OF PROCESSING . UNDER THE TERMS OF THE AGREEMENT IN QUESTION KC SUPPLIES K AND S WITH THAT PART OF KC'S PRODUCTION WHICH KC DOES NOT MARKET ITSELF OR WHICH IS NOT REQUIRED FOR THE MANUFACTURE OF ITS COMPOUND FERTILIZER RHE-KA-PHOS, WHILE K AND S FOR ITS PART UNDERTAKES TO PURCHASE THE SURPLUS, THE PARTIES AGREEING MOREOVER TO DRAW UP, ON EACH OCCASION FOR A PERIOD OF TWO YEARS, A PROVISIONAL PROGRAMME OF ALLOCATION OF THIS PRODUCTION .
4 ACCORDING TO THE DECISION CHALLENGED, THIS AGREEMENT HAS THE EFFECT OF CONCENTRATING PRACTICALLY THE WHOLE SUPPLY OF STRAIGHT POTASH FERTILIZER IN THE FEDERAL REPUBLIC OF GERMANY AND THUS RESTRICTING COMPETITION IN THE MARKET OF THIS PRODUCT AND AFFECTING TRADE BETWEEN MEMBER STATES .
5 IN ORDER TO FIND A RESTRICTION ON COMPETITION THE DECISION CHALLENGED STATES 'THAT THE RELEVANT MARKET TO TAKE AS THE BASIS FOR THE DECISION IN THESE PROCEEDINGS IS THAT OF STRAIGHT POTASH FERTILIZER '. THE APPLICANTS ALLEGE ON THE OTHER HAND THAT THE MARKET IN POTASH PRODUCTS CONSTITUTES AN ENTITY AND CANNOT BE DIVIDED INTO TWO SEPARATE MARKETS, NAMELY STRAIGHT POTASH AND COMPOUND POTASH FERTILIZERS, SINCE THESE TWO PRODUCTS COMPETE WITH ONE ANOTHER AND ARE TO A LARGE EXTENT INTERCHANGEABLE .
6 THE ARGUMENTS ON WHICH THE COMMISSION HAS, IN THE LAST RECITALS OF ITS DECISION, BASED ITS CASE, SHOW THAT THERE IS COMPETITION BETWEEN THE TWO PRODUCTS WHICH IS EFFECTED BY THEIR PRICES AND THEIR INTRINSIC ADVANTAGES FOR THE CONSUMER . THE FIGURES MENTIONED IN THE DECISION SHOW A CONSIDERABLE INCREASE IN CONSUMPTION OF COMPOUND POTASH FERTILIZERS WHICH HOWEVER HAS NOT ELIMINATED STRAIGHT POTASH . THE DECISION CHALLENGED STATED, IT IS TRUE, THAT SUCH CONSIDERATIONS AS THE STATE OF THE SOIL, THE AVAILABILITY OF LABOUR AND THE WEATHER, POINT IN CERTAIN CASES TO THE DESIRABILITY OF USING STRAIGHT POTASH, BUT IT IS NOT SHOWN THAT THE TWO TYPES OF FERTILIZERS CONSTITUTE DIFFERENT MARKETS . THE DECISION ITSELF MAKES A POINT OF THE FACT THAT A SMALL NUMBER OF FARMERS MAY IN SOME YEARS BUY STRAIGHT FERTILIZER AND IN OTHERS COMPOUND FERTILIZER .
7 IN THESE CIRCUMSTANCES THE CONCLUSION OF THE DECISION THAT 'THE DECLARATION OF INAPPLICABILITY OF ARTICLE 85 ( 1 ) MUST IN ANY CASE BE REFUSED BECAUSE THE AGREEMENT AFFORDS THE UNDERTAKINGS THE POSSIBILITY OF ELIMINATING COMPETITION IN RESPECT OF A SUBSTANTIAL PART OF THE PRODUCTS IN QUESTION' IS NOT VALID .
8 THE APPLICANTS CONTEST MOREOVER THE FINDING IN THE DECISION CHALLENGED THAT THE AGREEMENT INFRINGES ARTICLE 85 ( 1 ) IN THAT, ALTHOUGH IT DOES NOT EXPRESSLY REQUIRE KC TO DELIVER THE WHOLE OF ITS PRODUCTION OF POTASH TO K AND S, ITS SPIRIT AND THE PRACTICE FOLLOWED BY THE TWO COMPANIES ACHIEVE THE SAME RESULT . ACCORDING TO THE APPLICANTS KC REMAINS FREE TO SUPPLY K AND S WITH WHATEVER QUANTITIES KC ITSELF DECIDES . THIS IS MOREOVER AMPLY SHOWN BY THE FACT THAT THE PART OF KC'S PRODUCTION SUPPLIED TO K AND S IS DIMINISHING AND HAS GONE DOWN FROM 173 500 METRIC TONNES IN 1971 TO 129 400 METRIC TONNES IN 1973, WHEREAS THAT USED IN THE PROCESSING OF ITS COMPOUND FERTILIZER RHE-KA-PHOS HAS INCREASED FROM 119 700 METRIC TONNES IN 1971 TO 150 800 METRIC TONNES IN 1973 .
9 THE FACT THAT KC DELIVERS ITS SURPLUS PRODUCTION OF STRAIGHT POTASH TO K AND S IS DUE TO KC NOT POSSESSING ANY SALES ORGANIZATION MAKING IT POSSIBLE TO MARKET IT . BEFORE 1970 IT SOLD THIS PRODUCTION VIA THE SALES AGENCY WHICH THEN OPERATED BETWEEN ALL THE GERMAN PRODUCERS OF POTASH FOR THE SUPPLY OF STRAIGHT POTASH FERTILIZERS . THE AGREEMENT IN QUESTION IS INTENDED TO ALLOW KC TO CONCENTRATE ITS EFFORTS ON THE MANUFACTURE AND SALE OF THE COMPOUND PRODUCT RHE-KA-PHOS AND LEAVES KC TO DECIDE WHAT PART OF ITS TOTAL PRODUCTION SHOULD BE SOLD IN THIS FORM AND CONSEQUENTLY THE AMOUNT OF THE SURPLUS AVAILABLE FOR SALE TO K AND S .
10 ACCORDING TO THE DECISION CHALLENGED, THE AGREEMENT COVERS THE ENTIRE PRODUCTION OF A MEMBER STATE AND BY ITS VERY NATURE AFFECTS TRADE BETWEEN MEMBER STATES .
11 THE APPLICANTS ALLEGE THAT THE DEFENDANT HAS NOT GIVEN REASONS FOR ITS DECISION ON THIS POINT, AS IS REQUIRED BY ARTICLE 190 OF THE EEC TREATY . IN THIS RESPECT ( THEY CLAIM ) NEITHER DURING THE ADMINISTRATIVE STAGE NOR DURING THE COURSE OF THE PROCEEDINGS HAS IT SUFFICIENTLY TAKEN INTO ACCOUNT KC'S ACTUAL POSITION ON THE MARKET .
12 FIRST, THE QUANTITIES OF STRAIGHT POTASH SOLD BY KC TO K AND S ARE CONSTANTLY DIMINISHING . ACCORDING TO THE DECISION CHALLENGED, KC WAS IN A POSITION TO SET UP AN INDEPENDENT SALES ORGANIZATION . THE APPLICANTS HAVE CLAIMED THAT THE COST OF SUCH AN ORGANIZATION WOULD BE PROHIBITIVE FOR KC HAVING REGARD TO ITS TURNOVER IN STRAIGHT POTASH . THE EXAMPLES WHICH THE DEFENDANT QUOTES OF A POSSIBLE JOINT MARKETING OF STRAIGHT POTASH AND COMPOUND FERTILIZER CANNOT BE RELATED TO THE POSITION OF KC, WHOSE SURPLUS PRODUCTION OF STRAIGHT POTASH IS CONSTANTLY DIMINISHING .
13 IT HAS THEREFORE NOT BEEN SHOWN THAT STRAIGHT POTASH CAN BE DISTRIBUTED BY AN ORGANIZATION WHICH MARKETS THE COMPOUND PRODUCT RHE-KA-PHOS WHICH COMPETES WITH IT .
14 IT FOLLOWS FROM THE COMBINATION OF THESE CIRCUMSTANCES THAT THE CONTINUAL REDUCTION IN THE QUANTITIES OF STRAIGHT POTASH WHICH KC HAS AVAILABLE AFTER MANUFACTURING RHE-KA-PHOS, AND FURTHER THE CONCOMITANT DECLINE IN THE REQUIREMENT OF STRAIGHT POTASH FERTILIZER IN FAVOUR OF COMPOUND FERTILIZERS COULD PREVENT KC FROM SETTING UP AN ONEROUS MARKETING APPARATUS FOR THE SALE SIMPLY OF ITS SURPLUS PRODUCTION WHICH DECREASES EACH YEAR . THIS POSITION COULD LEAD TO ALLOWING EXCEPTIONAL MEASURES TO BE TAKEN FOR THE SALE OF THIS SURPLUS PRODUCTION WITHIN THE CONTEXT OF AN AGREEMENT WHICH, IF ANALYSED, AMOUNTS FOR KC NOT TO AN OBLIGATION BUT TO AN OPTION TO SELL TO K AND S .
15 ACCORDINGLY, INSUFFICIENT REASONS APPEAR TO HAVE BEEN GIVEN FOR THE DECISION CHALLENGED, AT LEAST AS REGARDS THE REJECTION OF THE APPLICATION FOR EXEMPTION .