EC, July 25, 1974, No 74-433

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community, and in particular Article 85 thereof; Having regard to Regulation N° 17 (1) of 6 February 1962, and in particular Article 3 thereof; Having regard to Regulation N° 26 (2) of 4 April 1962 applying certain rules of competition to production of the trade in agricultural products, and in particular Article 2 thereof; Having regard to the application submitted on 8 February 1968, pursuant to Article 3 (2) (b) of Regulation N° 17, by the undertaking Govers en Zonen of Amsterdam (Netherlands); Having regard to the application submitted on 2 January 1970, pursuant to Article 2 (3) of Regulation N° 26, by Nederlandse Vereniging voor de Fruiten Groentenimporthandel of the Hague (Netherlands) and by Nederlandse Bond van Grossiers in Zuidvruchten en ander geimporteerd fruit FRUBO of the Hague (Netherlands) in respect of the agreement concluded in 1952 between these two Associations and revised on 1 February 1961, 15 February 1965, 1 August 1968, 15 March 1972 and 21 February 1974; Having regard to the notification of this agreement submitted on 21 April 1972, pursuant to Article 4 (1) of Regulation N° 17, by the two abovementioned Associations; Having regard to the application submitted on 5 October 1973, pursuant to Article 3 (2) (b) of Regulation N° 17, by 22 Dutch undertakings belonging to Nederlandse Bond van Grossiers in Zuidvruchten en ander geimporteerd fruit "FRUBO"; Having heard the undertakings and associations of undertakings concerned pursuant to Article 19 (1) of Regulation N° 17 and in accordance with Regulation N° 99-63-EEC (3) of 25 July 1962; Having regard to the Opinion dated 26 April 1974 obtained of the Advisory Committee on Restrictive Practices and Monopolies pursuant to Article 10 of Regulation N° 17, Whereas:

I

1. In 1952 an Agreement concerning the sale by auction in the Netherlands of fresh citrus fruit and apples and pears of non-European origin (hereinafter referred to as "fruit") was concluded between Nederlandse Vereniging voor de Fruit - en Groentenimporthandel (hereinafter referred to as the "Importers' Association") and Nederlandse Bond van Grossiers in Zuidvruchten en ander geimporteerd fruit "FRUBO" (hereinafter referred to as the "Wholesalers' Association"). This Agreement was successively amended on 1 February 1961, 15 February 1965 and 1 August 1968.

Following an initial statement of objections addressed to them on 12 November 1969, the two abovementioned Associations amended on 15 March 1972 certain clauses of the Agreement, in particular as regards the conditions of admission to auctions, which in the statement of objections were considered to be incompatible with the provisions of Article 85 (1).

They then notified to the Commission on 21 April 1972 the Agreement thus amended; and after receiving a second statement of objections, which was addressed to them on 19 November 1973, the Associations concerned again amended, on 12 February 1974, the provisions of the Agreement relating to the obligation to market fruit solely by auction.

The main provisions of the Agreement as finally amended are as follows:

(a) Participation in the auctions held in Rotterdam is subject to prior authorization by the Commissie importveilingen (Committee for the sale by auction of imported goods), a committee responsible for ensuring compliance with the provisions of the Agreement and composed of three members of the Importers' Association and three members of the Wholesalers' Association (Articles 2 (3) and 54 of the Agreement). Importers authorized to take part in the auctions may however authorize foreign wholesalers to take part but only in respect of transit sales (Article 5).

(b) Authorization to take part in the auctions as a seller is granted on request to any importer established in the EEC who:

- If he is not a member of the Importers' Association, has given an undertaking in writing to that Association and to the Wholesalers' Association to comply with the provisions of the Agreement, and

- Has provided these two Associations, if this condition is laid down by the Commissie importveilingen, with a bank guarantee of 10 000 Guilders (Article 2).

(c) Authorization to take part in the auctions as a buyer is granted on request to any wholesaler in fruit and vegetables established in the Netherlands who: - if he is not a member of the Wholesalers' Association, has given an undertaking in writing to that Association and to the Importers' Association to comply with provisions of the Agreement, and

- During one year before submission of the application has carried on the activity of a wholesaler in citrus fruits and who in this capacity has regularly marketed these products during the said year (Article 3).

These conditions are not required in the case of wholesalers who are not established in the Netherlands and who do not therefore market citrus fruits regularly in that country.

(d) Importers and wholesalers authorized to take part in the Rotterdam auctions are "forbidden to market in the Netherlands otherwise than through import auctions fresh citrus fruit produced outside the territory of the EEC and apples and pears not originating in Europe which have not yet been sold at such auctions" (Article 9 (1)). "The preceding rule shall be waived where the fruit referred to in the first paragraph has been purchased from an importer established in another member country of the EEC who has previously imported the fruit, cleared it through customs and unloaded it" (Article 9 (2)) (1). "A purchaser who avails himself of the waiver provided for in paragraph 2 must be able to prove, upon being so required by the Commissie importveilingen, that the conditions laid down in that paragraph are satisfied" (Article 9 (3)).

(e) This obligation to buy and sell fruit only through import auctions does not apply to the following transactions: - sales and purchases in transit,

- Sales to processing plants,

- Sales of fruit, the condition of which is such that it cannot reasonably be put up for auction,

- Sales of soft fruit where the quantities are very small (Article 11).

(f) The Rotterdam auctions are held each week on Monday, Tuesday and Wednesday at 11 a.m. Fruit may not be offered for sale unless the quantities have been notified in advance in particulars of sale or by entry in a catalogue. The sale of larger quantities is authorized only if the excess over the quantities announced is not more than 20 % and if notification has been made before the start of the sale.

(g) As regards the organization of these auctions, the Agreement lays down in addition a whole series of technical provisions concerning, inter alia, the provision of samples of the fruit offered for sale (sampling and display), the inspectors responsible for checking the condition of the fruit and the quantities offered for sale and for supervising the taking of samples, so-called "blind" sales, where samples of the fruit could not be exhibited in time; the terms of delivery of the goods sold.

(h) The Commissie importveilingen may impose the following penalties on those who do not comply with the provisions of the Agreement: - a reprimand,

- communication of the infringement to the parties bound by the Agreement,

- A fine of up to 10 000 Guilders, (1)On 24 June 1974 the Associations concerned notified the Commission by telex that it was proposed at their next Annual General Meeting to delete the word "unloaded" and that, in the meantime, in anticipation of a formal Decision, the condition as to unloading would no longer be enforced.

- E prohibition on taking part in auctions for a certain period,

- Exclusion from auctions;

2. Until 21 February 1974, the original Articles 9 and 10 prohibited wholesalers taking part in the Rotterdam auctions from supplying the Dutch market with purchases made in other Member States of the Community, with the exception of citrus fruits purchased at the Antwerp auctions.

3. The fruit marketed through the Rotterdam auctions is mainly citrus fruit, since apples and pears of non-European origin are imported only in small quantities. About 80 % of citrus fruit consumed in the Netherlands passes through the Rotterdam auctions. Nine importers established in the Netherlands take part regularly in these auctions as sellers, while those from other Member States rarely take part. The number of wholesalers who obtain supplies at these auctions is about 350, which represents almost all wholesalers whose principal activity is the marketing of fruit in the Netherlands;

4. The large quantities of citrus fruit marketed at the Rotterdam auctions are sold not only in the Netherlands but also on the German market and to a lesser extent in the other Member States of the EEC. The origin and varieties of the citrus fruit offered for sale at these auctions are numerous and the prices recorded are generally lower than those found in other Community countries. It is, however, not certain that the citrus fruit sold at Rotterdam is, as regards all countries of origin, of the same quality or freshness as that sold on the other large EEC import markets. Quality and freshness are tending more and more to become the factors determining the choice of Dutch consumers and distributors, particularly on account of the increasing competition from Spanish citrus fruit, which can be delivered much more quickly to the Dutch market (by rail) than can citrus fruit from further away (which arrives by sea). The Commission has moreover found that a number of wholesalers authorized to take part in the auctions do not always comply with the provisions of the Agreement, in that they occasionally make purchases of citrus fruit in other Member States of the EEC which was either produced in those Member States or in third countries, passing through the Rotterdam auctions, something they would not do unless there was a sound economic reason therefor.

II

1. The provisions of the Agreement, which was concluded between two associations of undertakings bind directly and are effectively applied by the undertakings taking part in the Rotterdam auctions. This Agreement must therefore be considered to be an agreement between undertakings within the meaning of Article 85 (1) of the Treaty;

2. The present version of the Agreement contains certain provisions which have as their object and effect the restriction of competition within the common market. Article 9 (1) prohibits importers and wholesalers authorized to take part in the Rotterdam auctions from marketing, otherwise than through these auctions, citrus fruit produced in third countries and apples and pears produced outside Europe where this fruit is intended for consumption in the Netherlands and has not yet either been sold or purchased at another fruit import auction or sold after unloading (1) and clearance through customs from an importer or wholesaler established in another Member State.

This prohibition in effect basically restricts the freedom of supply of the wholesalers taking part in the Rotterdam auctions, and hence their ability to compete since it prevents them from becoming importers themselves and thus compels them to obtain at the Rotterdam auctions the bulk of their supplies of fruit from third countries intended for consumption in the Netherlands. Although Article 9 (1) does not prevent wholesalers from obtaining supplies at other EEC fruit import auctions, that is to say, the Antwerp and Hamburg auctions, only meagre supplies are available at these two other auction centres. Moreover, while Article 9 (2) allows Dutch wholesalers to purchase from undertakings established in other EEC Member States, it must be stated that the conditions governing such purchases are so restrictive as to be virtually prohibitive, the practical result of these conditions being that Dutch wholesalers may consign to the Netherlands fruit from third countries purchased by them in some other Member State only if it has been both unloaded (1) and cleared through customs in that other Member State. It is thus prohibited for a Dutch wholesaler to consign to the Netherlands fruit from third countries which he has himself imported into another Member State or which has not first been unloaded (1) and cleared through customs by an importer or wholesaler himself established in another (1)See note (1) on page 17.

Member State. Removal of the requirement that the fruit must have been unloaded in the other Member State makes no appreciable difference to these restrictive effects, since the ban on the marketing in the Netherlands of fruit from third countries imported by Dutch wholesalers themselves into another Member State remains unaffected thereby. It is therefore clear that Article 9 of the Agreement effectively restricts the freedom of supply of the wholesalers taking part in the Rotterdam auctions and that this restriction is particularly marked since those wholesalers are responsible for a major share of the distribution of citrus fruit intended for consumption in the Netherlands.

The abovementioned prohibition also has the effect of restricting the freedom of sale within the common market of importers established in other Member States of the Community. Thus, although the Agreement does not prohibit these importers from taking part as sellers in the Rotterdam auctions whenever they wish to sell in the Netherlands a quantity of fruit which, say, could not have been sold at remunerative prices on their domestic market, such importers may not sell directly, that is without passing through the auctions, to the Dutch wholesalers taking part in these auctions fruit which they themselves have imported but have not yet unloaded (1) or cleared through customs. In other words, the Agreement prevents an importer from another EEC Member State from forwarding to a Dutch wholesaler directly, that is without going through the Rotterdam auctions, part of an order of citrus fruit from a third country when he finds that he will be unable to sell the entire order on his own national market.

3. The obligation on the wholesalers parties to the Agreement to obtain the bulk of their supplies of fruit intended for consumption in the Netherlands only at the public import sales, and the resulting restriction on the freedom of sale of importers from the other Member States, are likely to affect trade between Member States. With the exception of citrus fruit produced in the Community (i.e. in Italy), fruit purchased at the Antwerp and Hamburg auctions and fruit produced in third countries and purchased in other EEC Member States from undertakings which have already cleared it through customs and unloaded (1) it, wholesalers bound by the Agreement may not import directly, that is without passing through the Rotterdam auctions, fruit intended for consumption in the Netherlands. This prohibition applies not only to fruit purchased by Dutch wholesalers in third countries and imported by them into the Netherlands but also to fruit from third countries which was either purchased by these Dutch wholesalers in other Member States before being unloaded and cleared through customs or which they themselves have imported into these other Member States. The fact that Dutch wholesalers taking part in the auctions are prevented from supplying the Dutch market with fruit which they themselves had either previously imported into other Member States or otherwise purchased freely from importers and wholesalers in other Member States of the Community is likely to affect trade between Member States.

Moreover, the overall effect of these restrictions on Dutch wholesalers in their freedom to carry on their business (including the prohibition on importing directly from third countries) is to damage the competitive structure of this sector of the common market by weakening the competitive position of these wholesalers in their dealings with the importers and with other wholesalers of the Community. This is capable of affecting the flow of trade between Member States in a manner likely to hinder the establishment of a single market among these States.

4. Before the last amendment of the Agreement, which only took place on 21 February 1974, the provision of the original Articles 9 and 10 were even more restrictive than those of the new Article 9. The original provisions of the Agreement as notified prohibited wholesalers taking part in the Rotterdam auctions from purchasing from undertakings established in the other Member States of the Community citrus fruit from third countries and apples or pears of non-European origin, with the exception of fruit purchased at the Antwerp auctions.

5. There is no other provision in the present version of the Agreement which seems likely to significantly restrict competition or to affect trade between Member States; the fact that only wholesalers established in the Netherlands who have been engaged for at least a year in the wholesale citrus fruit trade are authorized to take part in the Rotterdam auctions for the purpose of purchasing fruit intended for the Dutch market cannot be regarded as a significant restriction on competition or as being likely to affect trade between Member States. The obligation to have been engaged for at least a year in the wholesale trade is considered to have been fulfilled where such activity was carried out in an EEC Member State other than the Netherlands, while according to information obtained by the Commission, a wholesaler who applies for permission to take part in the auctions is regarded by the Associations concerned as being established in the Netherlands (1) See note (1) on page 17.

provided that he intends to and will in fact distribute citrus and other fruit on a regular basis in the Netherlands.

III

Although the products covered by the Agreement are listed in Annex II to the EEC Treaty, the agreement itself cannot, for the following reasons, be regarded as coming within Article 2 of Regulation N° 26:

1. This is not an agreement concluded by farmers, farmers' associations or associations of such associations and it therefore cannot come within the second sentence of Article 2 (1) of Regulation N° 26.

2. The agreement cannot be considered to form an integral part of a national market organization, since such a market organization does not exist in the Netherlands.

3. The agreement cannot be regarded as necessary to the attainment of the objectives set out in Article 39 of the Treaty, since, as is shown below, it is neither the only nor the best means of attaining them, and could not be regarded as necessary to their attainment. Moreover, in the sector in question the Council has defined (1) a number of means for attaining the objectives of the abovementioned Article and the Agreement in question does not form part of these means and is thus outside the framework of the objectives of the common policy pursued in the fruit and vegetables sector.

Two of the objectives laid down in Article 39 are to increase the agricultural productivity of the Community and thus to ensure a fair standard of living for its agricultural Community, and these cannot therefore be invoked as aims pursued by the Agreement since it concerns only imports of fruit produced outside the Community. It remains only to examine whether the Agreement is necessary to the attainment of the following objectives of Article 39: - to stabilize markets (A),

- To assure the availability of supplies (B),

- To ensure that supplies reach consumers at reasonable prices (C);

A. The Agreement cannot be regarded as necessary to market stabilization as referred to in Article 39 (c) because, as is shown by the other objectives set out in Article 39 and by the provisions of Articles 38 to 47 in general, the objective of market stabilization refers to the adjustment of supply to demand in order to ensure the marketing of Community production at remunerative prices which are not subject to excessive fluctuations. This objective therefore differs from the aims pursued by the Agreement, since the object and effect of the latter is to concentrate Dutch demand for fruit imported into the Community from third countries, to the exclusion of all other sources of supply upon those importers taking part in the Rotterdam auctions, and it is not concerned with the marketing of Community production;

B. Neither is the Agreement necessary to the attainment of the objective as referred to in Article 39 (d) of assuring the availability of supplies. This objective is intended mainly to ensure that the Community's requirements are covered to a certain extent by its own resources, so that the supply of the Community market does not depend solely on the importation of agricultural products from external markets. Moreover, even if the words of Article 39 (d) to be interpreted were as meaning to ensure a regular market supply, it is not necessary in order to achieve this result to debar some of the possible competitors (in this case wholesalers) from importing and to oblige others (sellers established in other EEC countries) to sell via the Rotterdam auctions.

C. Lastly, the Agreement is not necessary in order to ensure that supplies reach consumers at reasonable prices, as provided in Article 39 (e). It should in the first place be pointed out that this objective cannot be taken out of the agricultural context and pursued independently of the other objectives of Article 39, since it is intended mainly to prevent the scope of the other objectives laid down in Article 39 being extended too far in the development of the common agricultural policy, to the detriment of the (1) Council Regulation N° 1035-72, 18.5.1972. Regulation N° 2511-69.

Consumer. However, even if this objective could be isolated from its context, in order for an agreement to be regarded as necessary to its attainment, it would have to be established that it was only owing to the Agreement that consumers enjoyed reasonable prices. It cannot, however, be said that the Agreement enables consumers to enjoy reasonable prices, since in certain cases it may lead to higher prices than those which might be formed on a free market. In this connection it should be pointed out that the Agreement rules out - by reason of the obligation imposed on Dutch wholesalers taking part in the Rotterdam auctions - the possibility of substantial economies in distribution costs which might result from the abolition of an intermediate stage in the distribution network. Moreover, competition to the importers from wholesalers effecting direct imports could also contribute to the attainment of a more favourable price level for consumers. Lastly, the fact that foreign sellers cannot penetrate the Dutch market by selling direct to wholesalers bound by the agreement can also have unfavourable economic effects, for the resulting delivery network may entail substantial costs and make speedy deliveries of fresh products more difficult.

IV

1. In general a system of sales by auction may make it possible, because of the resulting concentration of supply and demand, to reduce to some extent transport and marketing costs in respect of the goods concerned. However, in the present case these advantages occur regularly and to a perceptible extent only in respect of citrus fruit imported by sea from distant countries. In respect of fruit from other countries and in particular citrus fruit from Spain, these advantages are practically cancelled out by the disadvantages resulting from the rigidity inherent in this system of distribution. Thus the fact that auctions are held only on certain days and that the goods must be accessible in advance in order for samples to be taken sometimes causes delays of several days in deliveries to retailers, and, since perishable goods are involved, the freshness of the fruit and sometimes even its quality suffer from these delays in delivery. Moreover, the obligation to pass through Rotterdam can cause additional transport costs in the case, for example, of citrus fruit for delivery to customers in the southern part of the Netherlands or in frontier regions. Furthermore, in order to appreciate the effects of an agreement such as the one under consideration, it is necessary to establish whether there might be better sources of supply than those provided under the agreement; that this may actually be the case is revealed by the fact that certain wholesalers party to the Agreement sometimes prefer to obtain supplies elsewhere than at Rotterdam in spite of the penalties they risk incurring. The Agreement is aimed precisely at preventing these supplies reaching those parties to it who might have a demand for them; whereas, nevertheless, notwithstanding these negative features, it cannot be ruled out that the Rotterdam auctions do produce positive effects, although only in respect of supplies of citrus and other fruit offered there on better terms than elsewhere.

2. In those cases where the Rotterdam auctions have the effect of improving the distribution of imported citrus fruit in the Netherlands, it is possible that this improvement may, in part at least, also benefit the customer, that is the wholesaler, and through him the retailers and the consumer.

3. In order to obtain the advantages resulting from the Rotterdam auctions, it is not essential to oblige the wholesalers and importers who are authorized to take part in those auctions to market citrus fruit produced outside the Community and intended for consumption in the Netherlands only through the medium of the auctions. In effect, the essential economic advantage of a system of auction sales lies in the economies that can be achieved by comparison with operation on an individual basis by the various traders concerned. In the present case this is primarily reflected in lower import prices in itself a sufficient incentive to the Dutch wholesalers to continue to obtain their supplies at the Rotterdam auctions.

Moreover, even without the obligation referred to above there are still other reasons why Dutch wholesalers would not be induced to import direct citrus fruit in such quantities as might, by progressively reducing the advantages obtained from the Rotterdam auctions, eventually lead to the disappearance of this system of marketing. It is, in effect, very unlikely that wholesalers would import citrus fruit by sea from distant countries because, first, they do not have the means and specialized experience necessary to effect this kind of import, and, secondly, the terms offered at the Rotterdam auctions are, generally speaking, more advantageous than those they could obtain themselves. On the other hand, it could happen that certain wholesalers would make purchases in, say, Spain or on other EEC import markets whenever prices were more favourable than those at Rotterdam, or, in the event of prices being equal, whenever they could obtain quicker deliveries or fresher fruit. Wholesalers would thus be encouraged to import direct only when the advantages offered by the Rotterdam auctions were less than those they could obtain on other markets. This is, moreover, the only kind of direct importation which certain wholesalers are at present attempting to engage in, without, however, having any apparent adverse effect on the Rotterdam auctions.

In conclusion then, it is clear, for all the reasons set out above, that the obligation imposed by Article 9 of the Agreement is not indispensable to the attainment of the advantages arising from that Agreement.

4. Since the third condition for the applicability of Article 85 (3) is not satisfied, it is unnecessary to examine whether the fourth condition is satisfied. It should nevertheless be pointed out that the Agreement, by causing a major concentration of the Dutch demand for citrus fruit at the Rotterdam auctions, eliminates or hinders direct competition on the Dutch market in respect of a substantial part of the supply of such fruits from sellers established in other EEC countries,

HAS ADOPTED THIS DECISION:

Article 1

The provisions of Article 9 of the Agreement concluded between Nederlandse Vereniging voor de Fruit en Groentenimporthandel of the Hague (Netherlands) and Nederlandse Bond van Grossiers in Zuidvruchten en ander geimporteerd fruit "FRUBO" of The Hague (Netherlands), relating to the sale by auction of citrus and other fruit imported into the Netherlands, and the application of those provisions, constitute infringements of Article 85 (1) of the Treaty establishing the European Economic Community.

Article 2

The declaration of non-applicability requested by the parties concerned under paragraph 3 of the said Article 85 is hereby refused.

Article 3

The associations of undertakings referred to in Article 1 and the undertakings listed in the Annex hereto shall forthwith bring the said infringements to an end.

Article 4

This Decision is addressed to Nederlandse Vereniging voor de Fruit- en Groentenimporthandel of The Hague (Netherlands), to Nederlandse Bond van Grossiers in Zuidvruchten en ander geimporteerd fruit "FRUBO" and to the undertakings participating in the Rotterdam auctions and listed in the Annex to this Decision.

(1) OJ N° 13, 21.2.1962, p 204/62.

(2) OJ N° 30, 20.4.1962, p. 993/62.

(3) OJ N° 127, 20.8.1963, p. 2268/63.

(4) OJ N° L 118, 20.5.1974.

(5) OJ N° L 318, 18.12.1969.