CJEC, March 2, 1983, No 7-82

THE COURT,

1 By application lodged at the Court registry on 8 January 1982 the Gesellschaft zur Verwertung von Leistungsschutzrechten mbH, a limited company having its registered office in Hamburg (hereinafter referred to as "GVL") brought an action under the second Paragraph of Article 173 of the EEC treaty for a declaration that the Commission's decision of 29 October 1981 relating to a proceeding under Article 86 of the EEC treaty (IV/29.839 - GVL) which was communicated to the applicant on 9 November 1981 and was published in the Official Journal (Official Journal 1981, L 370, p. 49) was void.

2 The applicant is the only copyright management company in the Federal Republic of Germany which deals with the protection of copyright and of the rights, described as being related to copyright, namely performers ' rights. In particular it undertakes the collection and distribution of the royalties to which performing artists are entitled by virtue of the provisions of the German copyright law (Urheberrechtgesetz) where their performance, which has previously been recorded on visual or sound recordings with their consent, is broadcast or disseminated to the public in some other manner ("secondary exploitation").

3 Prior to 21 November 1980 the applicant refused to conclude management contracts with performing artists who were neither German nationals nor resident in the Federal Republic of Germany or to protect the rights of such artists in Germany in any other way. From that date it terminated that practice by amending its Articles of association and its standard management agreement in such a way that any performing artist established in the territory of one of the Member States of the European Community would be permitted to enter into a management contract and would receive his share of the income from royalties, even retroactively.

4 The contested decision declares that GVL's failure prior to 21 November 1980 to conclude management agreements with foreign artists where the latter were not resident in the Federal Republic of Germany, or otherwise to manage performers ' rights vested in such artists in Germany, constituted, in so far as such artists possessed the nationality of another Member State or were resident in a Member State, an abuse of a dominant position within the meaning of Article 86 of the treaty.

5 In the recitals (Paragraph 71) in the preamble to the decision it is explained that after 21 November 1980 GVL, by amending its Articles of association and its standard management agreement, ended its discrimination against artists not having German nationality in so far as it affected Member States ' nationals or artists resident in one of the Member States. It is stated that the present apportionment procedure applies equally to German artists and such foreign artists.

6 In support of its action the applicant makes the following five submissions :

First submission : in the course of the administrative procedure preceding the contested decision the Commission infringed essential procedural requirements ;

Second submission : the Commission did not have the power to take a decision the sole purpose of which was to "declare" that there had been an infringement, already terminated, of Article 86 of the treaty ;

Third submission : Article 86 does not apply to the applicant as the latter must be regarded as an undertaking entrusted with the operation of services of general economic interest within the meaning of Article 90 (2) of the treaty ;

Fourth submission : the conduct of the applicant to which the Commission objects is not capable of affecting trade between Member States ;

Fifth submission : that conduct cannot be considered to be an abuse of a dominant position within the meaning of Article 86 of the treaty ; in particular the applicant did not apply dissimilar conditions to equivalent transactions with its trading partners (Article 86, second Paragraph, Subparagraph (c)).

First submission : infringement of essential procedural requirements

7 The applicant claims in the first place that the Commission infringed Article 19 (1) of Regulation No 17 of the Council of 6 February 1962, first Regulation implementing Articles 85 and 86 of the treaty (Official Journal, English special edition 1959-1962, p. 87), and Article 4 of Regulation No 99-63-EEC of the Commission of 25 July 1963 on the hearings provided for in Article 19 (1) and (2) of Regulation No 17 of the Council (Official Journal, English special edition 1963-1964, p. 47) inasmuch as the Commission based its decision on complaints other than those in relation to which the applicant had had the opportunity to make its views known.

8 With regard to that allegation the applicant contends that the Commission did not make it sufficiently clear in its notice of objections that the objections related not only to the refusal to conclude management agreements with nationals of other Member States but also to cases where artists were resident in a Member State without being nationals of that state. This lack of clarity is said to be particularly unfortunate since the complaint which gave rise to the notice of objections, that is to say the complaint lodged in London by interpar, did not raise the question of the position of artists who were resident in a Member State without being nationals of that state.

9 This series of allegations is not supported by the facts. Before referring to the complaint lodged by interpar the notice of objections described the applicant's conduct in the following terms : "GVL refuses to conclude management agreements with foreign artists who are not resident in Germany, whether or not they have the nationality of one of the Member States of the Community, or to protect the rights of such artists in Germany in any other way" (Paragraph 27). The legal considerations contained in the same document refer in particular to GVL's discrimination between German artists or foreign artists resident in Germany on the one hand and "foreign artists not resident in Germany" on the other (Paragraphs 51, 52 and 55).

10 In more general terms the notice of objections contained nothing which might lead the applicant to think that the sole complaint made against it by the Commission concerned the position of artists having the nationality of one of the other Member States.

11 The next contention of the applicant is that the contested decision only repeats the considerations set out in the notice of objections and that therefore the Commission did not attach any importance to the arguments put forward by the applicant or contained in the legal opinions which it had sent to the Commission. In conducting itself in this way the Commission had infringed GVL's right to be heard ("rechtliches gehor") guaranteed by Regulation No 99-63.

12 Even if it is correct to say that the purpose of Regulation No 99-63 is to ensure that undertakings have the right, upon the conclusion of the inquiry, to submit their observations on all the objections which the Commission intends to raise against them, the Regulation does not require the Commission to discuss all those observations in the statement of the reasons on which its decision is based if those reasons are, of themselves, such as to justify the conclusions at which the Commission has arrived.

13 It must be added that the contested decision sets out and discusses in its recitals the essential features of the observations submitted on behalf of GVL during the hearing of that undertaking on 12 February 1981.

14 The applicant finally contends that the Commission's refusal to take into account the observations submitted resulted in various errors of fact being made in the decision. Those complaints can, however, be examined only in the context of the substantive submissions to which they relate.

15 Consequently the first submission must be rejected.

Second submission : lack of competence

16 In making this submission the applicant contends that the Commission lacks the power to declare, by means of a decision, that the rules of Community law on competition have been infringed when the infringement has been terminated by the undertaking in question. Such a power arises neither from the provisions of the treaty nor from those of Regulation No 17.

17 The applicant points out in that respect that both the notice of objections and the complaints made by interpar on which the notice was based concerned GVL's practice prior to 21 November 1980. As a result of the Commission's intervention GVL altered its practice so as to terminate the alleged infringement. Consequently the administrative proceedings instituted by the Commission had become devoid of purpose.

18 The applicant emphasizes that in adopting Regulation No 17 the Council laid down exhaustively the Commission's powers of decision in the matters governed by Articles 85 and 86 of the treaty. Those powers do not include the power to take a decision which is solely intended to record that an infringement has occurred in the past. In particular Article 3 of Regulation No 17 makes No reference to the recording of an infringement except in connection with a decision intended to bring that infringement to an end.

19 The defendant is of the opinion that its competence to take the contested decision is derived on the one hand from the interpretation of the provisions of the treaty and of Regulation No 17 and on the other hand from the fact that there are powerful practical reasons in favour of this view, on the basis of which the Commission has, furthermore, constantly acted.

20 According to the defendant the provisions of Regulation No 17 must be interpreted in the light of the powers, in the field of competition, which are conferred upon the Commission by the treaty and which are given specific form by the regulaton. That Regulation lays down a range of powers, of varying scope, especially in Articles 3 (1) and (3), 15 (2) and (6) and 16. The decision declaratory of an infringement which has already been terminated comes within this corpus of powers. It occupies a position between two decisions expressly provided for by the Regulation, that is to say, the decision imposing a fine in respect of an infringement which has been established but has already been terminated and the decision which finds, after a provisional examination, that the conditions for the application of Article 85 (1) are met.

21 From a practical point of view the defendant draws attention to the fact that if the Commission did not have the power to make a simple declaration it would always have to impose a fine in order to prevent the undertaking in question from subsequently resuming its infringement after it had brought it to an end a short time before a decision requiring it to terminate the infringement had been adopted.

22 It should be observed in the first place that, as the defendant has rightly pointed out, the provisions of Regulation No 17, and in particular those provisions which prescribe the measures to be adopted by the Commission in order to ensure that Articles 85 and 86 of the treaty are applied, must be interpreted within the framework of the rules on competition contained in the treaty. Those rules are based on the premise, which finds expression in particular in Articles 87 (2) (d) and 89, that it is for the Commission to ensure the rules on competition are applied by undertakings and to determine, where necessary, whether there has been an infringement of those rules.

23 As is clear from the recitals in the preamble to Regulation No 17 and from Article 87 (a) of the treaty, the purpose of Regulation No 17 is to ensure compliance with the rules on competition by undertakings and, to that end, to enable the Commission to require undertakings to bring to an end any infringement which it establishes and to impose fines and periodic penalty payments in respect of an infringement. The power to take decisions of such a type necessarily implies a power to make a finding that the infringement in question exists.

24 In reality, the question raised by the second submission is therefore not whether the Commission has the competence to take a decision establishing the existence of an infringement of the rules on competition but whether the Commission had, in this case, a legitimate interest in taking a decision declaring conduct which had already been terminated by the undertaking concerned to be an infringement.

25 In that connection the contested decision states that even after the amendment of its Articles of association and its standard agreement in November 1980 GVL considers itself justified, in view of the uncertain legal position, in excluding artists not having German nationality or not resident in the Federal Republic of Germany from availing themselves of its management services. A decision is therefore said to be needed to clarify the legal position both for the benefit of the complainants and in order to prevent identical or similar infringements in future (Paragraph 74).

26 Although GVL made it known in the course of these proceedings that it regarded the amendment of its Articles of association and its standard agreement in November 1980 as irrevocable, it also stated both during the administrative proceedings before the Court that it did not consider itself bound by that amendment as regards the conclusion of management contracts with artists who were nationals of a non-member country but resident in another Member State. Furthermore, in the course of the above-mentioned proceedings it stressed that it did not consider itself bound by Community law to make the amendment and that it was therefore quite free to resume its previous practice.

27 In those circumstances the Commission was entitled to take the view that there was a real danger of a resumption of that practice if GVL's obligation to terminate it were not expressly confirmed and that consequently it was necessary to clarify the legal position.

28 It follows from the foregoing that a legitimate interest on the part of the defendant to establish by means of the contested decision, an infringement of the rules on competition prior to the amendment of the applicant's Articles of association has been adequately demonstrated and that therefore the second submission must be rejected.

Third submission : application of Article 90 of the treaty

29 The third submission is to the effect that GVL is an undertaking entrusted with the operation of services of general economic interest within the meaning of Article 90 (2) of the treaty and that therefore it is subject to the rules on competition only in so far as the application of such rules does not obstruct the performance of the particular tasks assigned to it.

30 For the purposes of that submission the applicant relies on the German gesetz über die Wahrnehmung von urheberrechten und verwandten schutzrechten (law on the management of copyright and related rights) (Bundesgesetzblatt i, p. 1294) which provides, inter alia, that a management company such as GVL must be officially authorized, is subject to monitoring by the patentamt (patent office) and is under a duty to conclude certain management agreements.

31 An examination of the aforementioned law shows, however, that the German legislation does not confer the managment of copyright and related rights on specific undertakings but defines in a general manner the rules applying to the activities of companies which intend to undertake the collective exploitation of such rights.

32 Even if it is true that the monitoring of the activities of such companies as provided for by that law goes further than the public supervision of many other undertakings, that is however not sufficient for those companies to be included in the category of undertakings referred to in Article 90 (2) of the treaty.

33 Consequently the third submission cannot be accepted.

Fourth submission : the effect on trade between Member States

34 By means of this submission the applicant claims that the infringement of the rules on competition of which it is accused in the contested decision, even if it had existed, was not capable of affecting trade between Member States in the sense of the first Paragraph of Article 86 of the treaty.

35 In that connection the decision states (Paragraph 63) that GVL's refusal to assume responsibility for exploitation of the rights of foreign artists resident in a Member State other than the Federal Republic of Germany hindered the creation of a uniform market for services in the Community. Such foreigners could not avail themselves of GVL's services. The cross-frontier movement of services within the Community which would have developed had it not been for GVL's refusal was therefore hindered within the Community. This restriction of the movement of services was appreciable, moreover, since a multitude of foreign holders of rights were prevented from exploiting their rights in Germany.

36 The applicant denies that the effect on trade between Member States was appreciable. It argues that at the commencement of the administrative procedure there was but one complaint, and that came from interpar. Subsequently only one further case, which concerned a choir of Italian mountaineers, was drawn to the attention of the Commission. The nine artists referred to as complainants in the decision all belonged to the same group. The applicant itself had never previously received any request for the management of performers ' rights from foreign artists except in very special cases. Gvl's previous practice therefore had a negligible impact on trade between Member States.

37 It is necessary to recall that in order to determine whether trade between Member States is capable of being affected by an abuse of a dominant position in the relevant market for the puposes of Article 86 of the treaty, account must be taken of the consequences for the effective competitive structure in the common market (judgment of 6 march 1974 in joined Cases 6 and 7/73 Istituto chemioterapico italiano Spa and commercial solvents corporation v Commission of the European Communities (1974) ECR 223).

38 The Court has already adopted the view, in its judgment of 25 october 1979 in case 22/79 (Greenwich film production V Société des Auteurs, Compositeurs et Editeurs de Musique (SACEM) and société des éditions Labrador (1979) ECR 3275), that the activities of undertakings managing copyrights may be conducted in such a way that their effect is to partition the common market and thereby to restrict the freedom to provide services which constitutes one of the objectives of the treaty. The Court added that such activities are therefore capable of affecting trade between Member States within the meaning of Article 86 of the treaty.

39 The Commission's objection to the applicant's past activities relates precisely to the fact that they were conducted in such a way as to impede the free movement of services to the extent of partitioning the common market. The applicant's practice was such that it prevented the exploitation, on the German market, of the rights of non-German performers who were resident in other Member States.

40 Consequently the fourth submission must be rejected.

Fifth submission : abuse of a dominant position

41 This submission, which relates to the substantive conditions laid down by Article 86 of the treaty, is divided into various parts, in the first of which GVL's dominant position on the market is disputed.

42 The applicant acknowledges that the service it provides consists of the management of performers ' rights of secondary exploitation and that it is the only undertaking in the Federal Republic of Germany engaged in such management. Nevertheless, it maintains that it is not the only trading partner of performing artists since the latter may exploit their rights of primary exploitation and may therefore exchange services with, for example, promoters or sound recording manufacturers.

43 The defendant contends that the applicant's reasoning is based on a misunderstanding as to the relevant market to be taken into account. According to the defendant the relevant market is not that of the exchange of services in the field of the performance of artistic works but that of the management of the royalties due to performing artists as a result of the secondary exploitation of their performances. That is the market in which GVL has a dominant position.

44 In that connection the decision finds (Paragraph 45) that the market in which GVL is active is the market in services relating to the management of secondary exploitation rights vested in performing artists and manufacturers in Germany, which may be precisely differentiated from the activities of other undertakings engaged in the exploitation of rights. Gvl has a de facto monopoly in that market in Germany, that is to say in a substantial part of the common market.

45 The Court considers that these findings are correct and that therefore the first part of the submission cannot be upheld.

46 In the second part of the fifth submission it is denied that there has been an abuse of that dominant position as set out in the decision. In particular, the Commission is said to have wrongly accused the applicant of treating artists differently on grounds of nationality.

47 In the contested decision it is considered, first, (Paragraph 46), that any discriminatory treatment by a dominant undertaking on grounds of nationality must be regarded as an infringement of Article 86 and, secondly (Paragraph 47), that the refusal by GVL, as a de facto monopoly undertaking, to conclude management agreements with foreign artists having No residence in Germany constitutes discrimination on grounds of nationality.

48 The applicant objects strongly to the latter conclusion. It refers to the fact that throughout the proceedings brought against it maintained that the distinction it made between different artists was based solely on the nature of the rights vested in them. The real problem lies, according to the applicant, in the diSparity in the national laws regarding copyright and related rights. As a result of that diSparity the rights of artists established outside the Federal Republic of Germany are governed by laws which do not recognize royalties in respect of the secondary exploitation of copyright.

49 The applicant explains that it is able to manage rights only where it is in a position to verify their existence and scope. It is able to do that in the case of artists with German nationality who, by virtue of Paragraph 125 of the German copyright law, benefit from the legal protection granted by that law. The applicant has admitted that the same requirement was complied with in the case of foreign artists resident in the Federal Republic of Germany as such residence constitutes a sufficiently strong connecting factor for the law to apply in that case.

50 The applicant is of the opinion that that view of the law is confirmed by Paragraph 6 (1) of the German management law of 1965. According to that provision a company set up to exploit and manage performers ' rights is under a duty to manage the rights falling within its field of activity at the request of the holders of those rights "where the latter are German nationals within the meaning of the basic law or are resident in the areas in which the present statute is in force," that is to say in the Federal Republic of Germany.

51 The defendant concedes that diSparity exists between national laws and that the majority of the laws of the other Member States are less comprehensive than the German law as regards secondary exploitation rights. Nevertheless those facts cannot justify the refusal to conclude contracts with foreign artists who are not resident in the Federal Republic of Germany since that refusal deprives them of the opportunity of proving that they do in fact hold the rights in question.

52 The Court notes in the first place that Paragraph 6 of the management law, whilst requiring management companies to manage the rights of all artists of German nationality or resident in the Federal Republic of Germany, does not prevent such companies from pursuing their activities on behalf of other artists. This interpretation of the law was confirmed by implication by the patentamt (patent office) when it approved the amendment made to GVL's Articles of association on 21 November 1980.

53 It should next be observed that the freedom thus left to GVL by the law is limited by the provisions of the treaty, in particular those in the field of competition, especially as GVL occupied a dominant position in a substantial part of the common market.

54 In those circumstances it was not permissible for GVL to limit its services, even in the absence of harmonization of copyright laws, to artists whose rights it knew were governed by the German law. It could not exclude the possibility that certain foreign artists not resident in the Federal Republic of Germany might be able to assert rights of secondary exploitation. Furthermore, it knew that by refusing to manage such rights it was in fact preventing those artists from being paid the royalties to which they were entitled.

55 The applicant therefore conducted its activities in such a way that any foreign artist who was not resident in the Federal Republic of Germany was not in a position to benefit from rights of secondary exploitation, even if he could show that he held such rights either because German law was applicable or because the law of some other state recognized the same rights.

56 Such a refusal by an undertaking having a de facto monopoly to provide its services for all those who may be in need of them but who do not come within a certain category of persons defined by the undertaking on the basis of nationality or residence must be regarded as an abuse of a dominant position within the meaning of the first Paragraph of Article 86 of the treaty.

57 It therefore follows that the Commission rightly took the view that the first Paragraph of Article 86 applied in this case.

58 Thus the fifth submission cannot be accepted and it is not necessary to examine the other parts of that submission, in particular concerning the allegation of discrimination as contemplated by Subparagraph (c) of the second Paragraph of Article 86 of the treaty.

59 The application must therefore be dismissed.

Costs

60 pursuant to Article 69 (2) of the rules of procedure the unsuccessful party is to be ordered to pay the costs. Since the applicant has failed in its submissions, it must be ordered to pay the costs.

On those grounds,

The Court,

Hereby :

1. Dismisses the application ;

2. Orders the applicant to pay the costs.