CJEC, January 17, 1984, No 43-82

THE COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES

1. By applications lodged at the Court registry on 5 and 15 Vander Elst 1982 respectively the Vereniging ter Bevordering van het Vlaamse Boekwezen (VBVB) (hereinafter referred to as "the Flemish association") having its place of business in Antwerp, and the Vereeniging ter Bevordering van de Belangen des Boekhandels (VBBB) (hereinafter refered to as '' the Dutch association ''), having its place of business in Amsterdam, brought actions under the second Paragraph of Article 173 of the EEC treaty for a declaration that Commission decision 82-123-EEC of 25 November 1981 relating to a proceeding under Article 85 of the EEC treaty (Official Journal, L 54, p. 36) was void.

2. The contested decision relates to the agreement concluded on 21 January 1949 between the two associations, each of which represents the great majority of publishers and booksellers in flanders and the Netherlands respectively. The agreement, which was amended on 2 July 1958, was notified to the Commission in accordance with the provisions of Regulation N° 17 of 30 October 1962 by the Dutch association and on 3 November 1962 by the Flemish association. The notifications were accompanied by an application for exemption under Article 85 (3) in case the agreement should be considered contrary to Article 85 (1). It may be seen from the file that at the same time as their agreement was notified the applicants also notified the Commission of the agreements and rules in force within each of the two national associations (hereinafter referred to as "the National Agreements").

3. The proceeding was initiated by the Commission on 7 December 1977. The Statement of Objections was contained in two identical letters sent to the applicants on 19 December 1977 and 12 January 1978.

4. The first heraring of the parties took place on 15 and 16 March 1978, the second on 18 October 1979 and a supplementary meeting with the parties on 19 March 1981. Between those dates the applicants submitted to the Commission a number of alternative suggestions, none of which the Commission was however able to accept. The Commission confirmed its attitude by letter of 27 March 1981 and on 25 November 1981 it adopted the decision which is the subject of the proceedings. In that decision the Commission stated that the agreement constituted an infringement of Article 85 (1) and refused to grant an exemption under Article 85 (3).

5. The applications were lodged on 5 and 15 Vander Elst 1982. On the same dates the applicants lodged applications for the adoption of interim measures with a view to a suspension of the operation of the decision in question whilst the proceedings in the main actions were pending. By order of 31 March 1982 the President of the Court granted such a suspension within certain limits and subject to certain conditions.

6. The agreement, which is described in greater detail in Paragraph 9 of the decision at issue, is characterized by three closely linked groups of provisions:

(a) The publisher must fix for each of his publications a retail selling price and has a corresponding duty as against all the other members of the two national associations to ensure that that price is observed up to the stage of retail sale, the only exceptions being those exhaustively prescribed by the National Agreements. Those arrangements are hereinafter described as "the resale price maintenance system".

(b) There is a system for the recognition of publishers and booksellers with mutual recognition of affiliation to the national associations. Members are forbidden to engage in any trade with publishers and booksellers who are not recognized. Those arrangements are hereinafter referred to as "the exclusive dealing system".

(c) A Committee is set up to supervise the scrupulous observance of the agreement and to work in cooperation with similar Committees operating within the national associations ; it is to decide when the agreement has been infringed, to make the appropriate representations to those concerned and may where appropriate exclude them from trade. Those arrangements are hereinafter referred to as "the penalty system".

7. According to the applicants the Commission wrongly took the view that the agreement still involved the exclusive dealing system. They do not deny that the agreement still includes express provisions to that effect, but they maintain that for a long time past they have no longer been applied and should therefore be regarded as having lapsed. The fact that those provisions still form part of the agreement cannot therefore, they claim, be considered an infringement of Article 85.

8. If the applicants had intended definitively to abolish the exclusive dealing system, the only means of doing so effectively, regard being had to the rules on competition, would have been, as the Commission has pertinently observed in Paragraph 38 of its decision, to make a formal amendment to the agreement and to notify it in the manner required by Regulation N° 17. As there has been no such amendment the only course open to the Commission was to appraise the agreement in accordance with the terms notified to it in 1962. The Court also must therefore consider the agreement in the form in which it was notified in 1962, including the exclusive dealing system.

The application of Article 85 (1)

9. In Article 1 of its decision the Commission states that the agreement is incompatible with Article 85 (1). The objections to the agreement, mentioned in Paragraphs 34 to 46 of the decision, may be summarized as follows:

The agreement in dispute must be classified as an "agreement between associations of undertakings" within the meaning of Article 85 inasmuch as its effect is to bring together the members and affiliates of both associations including publishers, book clubs, importers, exclusive representatives, wholesalers and booksellers. It involved a restriction on competition within the common market by reason of both the collective exclusive dealing system and the collective resale price maintenance system for which it makes provision.

The exclusive dealing system involves a prohibition of purchasing, stocking or encouraging the sale of books published in the other State by a publisher who is not recognized. Those provisions have the effect of restricting the greater part of trade in books between Belgium and the Netherlands to recognized undertakings and therefore prevent recognized publishers and traders from dealing with non-recognized publishers and traders from the other State.

Under the resale price maintenance system publishers in both states are required to fix a single retail price for each of their publications and sellers are required not to sell a book in the other State at a retail price other than that fixed by the publisher. According to the Commission that system excludes all price competition for one and the same title between booksellers in the two states. Traders are forbidden any personal effort which might permit them to increase their market share by reselling books below the price fixed by the publisher or to provide consumers with a fair share of the benefit resulting from rationalization measures.

The majority of undertakings in the book trade in Flanders and the Netherlands are affiliated to the two associations or recognized by them so that the agreement involves a perceptible restriction on competition inasmuch as its aim is to subject trade in books to rules which prevent publishers of Dutch-language books and booksellers in either State from freely selecting their channels of supply and distribution in the other State and from determining their conditions of purchase and sale. The agreement, according to the Commission, is therefore such as to hinder freedom of trade between Member States. Its harmful effects are all the more significant inasmuch as the trade in books between the Netherlands and Belgium is very considerable.

10. The applicants put forward two groups of objections to that part of the decision, some formal and procedural and others involving the Commission's appraisals of the content of the agreement.

Formal and procedural objections

11. The Flemish association in particular has raised numerous objections as to form and procedure; two of its objections have been taken up and further developed by the Dutch association, as will appear below.

12. First the Flemish association complains that the official who signed the Statement of Objections was not empowered to do so by an authorization duly granted by the Commission.

13. In reply to that complaint, which does not appear in greater detail in the application, the Commission has given circumstantial information from which it appears that the signatory of the document containing the Statement of Objections had been duly provided with instructions and duly authorized by the Commission in accordance with a practice expressly approved by the Court.

14. In raising this objection the applicant is failing to have regard to the fact that delegation of power to sign, as the Court has recognized in its judgments of 14 July 1972 (Case 48-69 ici (1972) ECR 619, Paragraphs 10 to 14) and 17 October 1972 (Case 8-72 Cementhandelaren (1972) ECR 977, Paragraphs 10 to 14), is the normal method by which the Commission exercises its powers. The applicant has not supplied any evidence leading to the supposition that in this case the Community administration has failed to observe the rules applicable in the matter. This submission must therefore be dismissed.

15. Secondly the Flemish association claims that the hearing on 18 October 1979 was conducted illegally as not all the officials appointed by the Commission to conduct the hearing in pursuance of Article 9 of Regulation N° 99-63 were present.

16. Article 9 (1) of Regulation N° 99-63 provides that : "hearings shall be conducted by the persons appointed by the Commission for that purpose". Under that provision only persons duly appointed by the Commission may conduct hearings in the matter. On the other hand, in the event of several persons' having been appointed to follow a given case, that provision imposes no obligation as regards the simultaneous presence at hearings of all the persons appointed or certain of them. This submission also must therefore be rejected.

17. Thirdly the Flemish association complains that the Commission did not accept its proposal that at the hearing F. Van Vlierden, President of the Vereeniging Van Letterkundigen (literary association) should be heard in his capacity as a writer.

18. Article 7 (1) of Regulation N° 99-63 provides that: "the Commission shall afford to persons who have so requested in their written comments the opportunity to put forward their arguments orally, if those persons show a sufficient interest". Paragraph 2 provides that: "the Commission may likewise afford to any other person the opportunity of orally expressing his views".It appears from that Article that the Commission has a reasonable margin of discretion to decide how expedient it may be to hear persons whose evidence may be relevant to the inquiry. In fact it appears from the minutes of both hearings that the applicants were given the opportunity to express their views in the freest possible way and to put forward to speak on their behalf persons representing all aspects of the book trade. The applicant has not adduced any evidence to show that in the circumstances the Commission, in not hearing Mr Van Vlierden, unduly restricted the inquiry into the matter and thus limited the applicants ' opportunity to provide explanations of the various aspects of the problems raised by the Commission's objections. This submission also must therefore be dismissed.

19. Fourthly the applicant complains that the Statement of Objections was incomplete and that certain of the objections raised were inadequately or inaccurately explained. It takes the view that in those circumstances the Commission has infringed Article 4 of Regulation N° 99-63 under which the Commission may in its decisions deal only with those objections raised against the parties concerned in respect of which they have been afforded the opportunity of making known their views. The applicant does not give any more detailed indications as to the parts of the decision to which this criticism relates.

20. It may be seen from a comparison of the Statement of Objections and the contested decision that in the Statement of Objections the Commission expressly referred to the three matters finally established in making its declaration that the agreement was incompatible with Article 85 (1) and in its refusal to grant an exemption under Article 85 (3), namely: the system of resale price maintenance, the exclusive dealing system and the penalty system. The parties were therefore fully informed of the scope of the inquiry initiated against them and were in a position to defend themselves. This submission also must therefore be dismissed.

21. Fifthly the Flemish association complains that the Commission did not reply to certain of its arguments and claims that accordingly the decision at issue should be declared void on the ground of an inadequate statement of the reasons on which it is based. In this respect it mentions the fact that the Commission attached no importance to its arguments of a cultural nature or to those relating to Article 10 of the European Convention for the Protection of Human Rights and to Article 10 bis of the Paris Convention.

22. In this connection it must be recalled that although, under Article 190 of the treaty, the Commission is required to state the factual matters justifying the adoption of a decision, together with the legal considerations which have led to its adopting it, the Article does not require the Commission to discuss all the matters of fact and of law which may have been dealt with during the administrative proceedings (see, most recently on that subject, the judgment of 9 November 1983, case 322-81 Michelin (1983) ECR 3461. The statement of the reasons on which a decision adversely affecting a person is based must allow the Court to exercise its power of review as to the legality of the decision and must provide the person concerned with the information necessary to enable him to decide whether or not the decision is well founded. From that point of view it must be conceded that the Commission, in its statement of reasons, has sufficiently set out all the considerations of law and of fact on which it has relied in arriving at the operative part of its decision. This submission also must therefore be dismissed.

23. Sixthly the Flemish association claims that the Commission did not give it access to the administrative file and that it was therefore unable to take cognizance of certain documents or studies used by the Commission for the purposes of its decision.

24. It may be noted that the Flemish association was not in a position to identify any document which might have been used by the Commission as a basis for its decision but which is not accessible to the applicant. Its complaint therefore seems rather to relate to the fact that it has not had the opportunity to inspect the Commission's file with a view to determining whether it might possibly contain documents in which it might be interested.

25. In that connection it must be observed that although regard for the rights of the defence requires that the undertaking concerned shall have been enabled to make known effectively its point of view on the documents relied upon by the Commission in making the findings on which its decision is based, there are no provisions which require the Commission to divulge the contents of its files to the parties concerned. It does not appear in fact that the Commission has made use of any document which was not available to the parties and on which they have not had the opportunity to make their views known. This submission also must therefore be dismissed.

26. The seventh complaint is advanced by both the Flemish and the Dutch associations. Both applicants complain that the Commission has declared on several occasions its intention to hold an inquiry into the book trade in the Community as a whole before adopting any decision with regard thereto. They point on the one hand to a declaration made at the conclusion of the hearing on 15 and 16 March 1978 by the Commission's representative, Mr Ferry, and on the other hand to declarations made by Commissioner O ' Kennedy at the sitting of the European Parliament on 13 Vander Elst 1981 on the occasion of the discussion of the Beumer report on fixed prices for books (European Parliament debates, Official Journal 1981, Annex, N° 1-266, p. 335, and doc. 1-544-80 of 10 November 1980), and the Commission's answers to two Parliamentary questions, the first on 10 August 1981 to written question N° 514-81 by Mr Beyer de Ryke (Official Journal, c 240, p. 20), and the second to question N° 28 by Mr Van Miert (Official Journal 1981, Annex, N° 1-273, p. 185).

27. A study of the declaration in question shows that the Commission did not at any time give an undertaking of the kind which the applicants attribute to it. It did no more that state that it was carrying out investigations into the various markets in books within the Community and that it hoped to resolve the problems arising with regard to competition as a whole. Those declarations could not have the effect of preventing it from pursuing as a matter of priority any particular agreement as soon as it had completed its inquiries thereon. This submission also must therefore be dismissed.

28. Finally in an eighth complaint the applicants submit that the Commission's attitude has been inconsistent and that the rights of the defence have been infringed inasmuch as the Commission, after receiving simultaneously the notification of the National Agreements and of the agreement linking the two associations, and after allowing it to be understood at a preliminary stage that it was including all the agreements in its investigation, severed the so-called "Transnational"Agreement from the remainder so as to make it the subject of a separate decision. The applicants point out that, notwithstanding, the decision at issue contains numerous references to the National Agreements and they attribute to the Commission an intention to bring those agreements to an end by indirect means without calling them openly in question, by assailing the Transnational Agreement alone in view of the fact that the operation of that agreement is a necessary condition for the continued existence of the National Agreements.

29. The Commission concedes that the agreement at issue cannot actually be isolated from its context and that it has therefore necessarily had to refer to the National Agreements to the extent to which the Transnational Agreement refers to them. It denies, however, that it therefore wished to arrive at an appreciation as to whether the National Agreements come within the field of application of Community law and, if they do, whether they are compatible with the provisions of the treaty.

30. Although the relationship between the Transnational Agreement on the one hand and the National Agreements on the other is indisputable, the Commission cannot be criticized for concentrating its attention on the agreement between the two associations. Although the provisions of the Transnational Agreement refer to the National Agreements in respect of each of the three essential features referred to above, the position nevertheless remains that that agreement may be made the subject of an appraisal in terms of its own objectives and it is not necessary at the same time to effect an appreciation of the National Agreements.

31. Moreover, in Paragraph 1 of the recitals in the preamble to its decision the Commission has expressly excluded the National Agreements from its ambit. It follows from the procedure selected by the Commission that the judgment which the Court is called upon to make cannot be interpreted as prejudging matters which have not been the subject of the proceedings. In the absence of any injury in this respect it is therefore impossible to take the view that the procedure adopted by the Commission has adversely affected the rights of the defence. This submission also must therefore be dismissed.

The application of Article 85 (1)

Complaints of a substantive nature

32. From the substantive point of view the applicants advance five different submissions regarding interference with freedom of expression as guaranteed in particular by Article 10 of the European Convention for the Protection of Human Rights, infringement of Article 10 bis of the Paris convention, a divergence between the Commission's interpretation of Article 85 of the treaty in this matter and the consistent practice of the Member States, the Commission's failure to have regard to the special structure of the market in books and finally the complete absence of any injurious effect on competition within the common market, regard being had to the special features of the linguistic region in question.

1. Submission as to interference with freedom of expression

33. The applicants claim essentially that the effect of the resale price maintenance system, owing to the optimal organization of the distribution network, is to encourage a multiplicity of titles issued by publishers and thus to ensure the publication of less readily saleable works such as, for example, works of science and poetry. In those circumstances the abolition of the system of resale price maintenance, as is shown by the example of certain States (and in that regard the applicants mention Swedish and French experience), would result, they claim, in restricting freedom of expression and in making publishing dependent on State subsidies. The Commission's action therefore jeopardizes freedom of expression as defined in particular in Article 10 of the European Convention for the Protection of Human Rights.

34. Although it is true that certain economic provisions may not be without effect from the point of view of freedom of expression, the position nevertheless is that the applicants have not established in this case the existence of any real link between the Commission's decision and freedom of expression as guaranteed by the European Convention, even on the supposition that it might be possible to interpret it in such a way as to include guarantees regarding the possibility of publishing books in economically profitable conditions. To submit the production of and trade in books to rules whose sole purpose is to ensure freedom of trade between Member States in normal conditions of competition cannot be regarded as restricting freedom of publication which, it is not contested, remains entire at the level of both publishers and distributors. This submission must therefore be dismissed.

2. Submission as to infringement of Article 10 bis of the Paris Convention

35. The applicants claim that the system of resale price maintenance constitutes a guarantee against the so-called practice of "loss-leading", that is to say against the sale at abnormally low prices of certain books with the sole object of attracting customers. Their view is that such practices are contrary to Article 10 bis of the Paris Convention as amended by the Lisbon act, 31 October 1958, (Convention manual published by the United International Bureaux for the Protection of Intellectual Property, Geneva). The effect of the Convention, it is alleged, is to bind the Community also and consequently to take precedence over the rules on competition.

36. It would appear that in alluding to Article 10 bis of the Paris convention the applicants are referring to Paragraph 1 which states: "the countries of the union are bound to assure to persons entitled to the benefits of the union effective protection against unfair competition". They take the view that the so-called practice of "loss-leading"constitutes an act of unfair competition within the meaning of the provision cited. Since, according to them, the system of resale price maintenance constitutes a defence against such practices, the Commission is not entitled to require its abolition by the application of the competition rules of the treaty.

37. The fact that a system of resale price maintenance may have the incidental effect of preventing unfair competition of the kind described by the applicants is not, however, a sufficient reason for failing to apply Article 85 (1) to a whole sector of the market such as the book trade. It is open to undertakings which may have suffered injury as a result of unfair competition to have recourse to legislation on trade practices such as exists in one form or another in all the Member States, which provides remedies against abuses such as those mentioned by the applicants. On the other hand, the fact that such abuses exist cannot in any circumstances justify an infringement of the Community rules on competition. This submission must therefore be dismissed.

3. Submission as to a divergence between the Community's action and the policy pursued in that connection by various Member States

38. The applicants claim that as a result of legislation and concordant judicial practice the system of resale price maintenance for books is permitted in all the Member States and in any case in the Federal Republic of Germany, France and the United Kingdom. The Commission must therefore accept this convergent practice as a mandatory guideline in settling its own policy on the subject.

39. In this connection the Commission claims that the practices prevailing on the three markets referred to are not comparable to the system established by the agreement which forms the subject of the decision at issue. Furthermore it has made it clear that in any case it reserves the right to appraise the practices referred to by the applicants in the light of the requirements of the treaty.

40. In that connection it must be observed that national legislative or judicial practices, even on the supposition that they are common to all the Member States, cannot prevail in the application of the competition rules set out in the treaty. The same reasoning must apply with even greater force in relation to practices of private undertakings, even where they are tolerated or approved by the authorities of a member state. This submission also must therefore be dismissed.

4. Submission to the effect that the Commission has failed to have regard to the special structure of the market in books

41. The applicants, supported especially on this point by the booksellers ' and publishers ' federations, interveners, claim that the competition on which the treaty insists must be understood as "effective competition", adapted to the special conditions of the market in question. The Commission's error is not to have taken account of the specific nature of the book as a product or of the special nature or structure of the book market, having taken the view that price competition was the essential element in competition. However, each book constitutes a market in itself and price elasticity of books, as goods, is minimal, so that other facets of competition have a predominant interest in comparison with price. In this connection the applicants mention: the variety of supply, the diversity of stock held by bookshops, the speed with which orders are executed, and the services offered to consumers by way of information and advice.

42. The applicants also claim that the practice of resale price maintenance leaves freedom of competition unimpaired both at the level of publishers - who are free to determine the selection of titles which they publish and to determine prices with due regard to the state of the market - and in relationships between the various stages of the distribution network - wholesalers and retailers. The consumer derives only advantages from this system as he may buy the same book in all places at the same price and in return enjoys a wide spread of titles available and the best possible service.

43. In reply to that argument the Commission emphasizes that it is not overlooking the freedom of competition between publishers or the fact that the resale price maintenance machinery allows the continuance of a certain competition within the distribution system, between publishers, wholesalers and retailers, relating to the sharing of the margin existing between the publisher's sale price and the price compulsorily applied in sales to the consumer. But once these factors are accepted, the decision actually relates, according to the Commission, to the applicant associations' policy with regard to profit margins and the structure of distribution channels which are its consequence. The Commission considers that the resale price maintenance system totally eliminates price competition at retail level and thus removes all incentive for attempts to rationalize distribution in such conditions that the benefit comes to the consumer. The Commission casts doubt on the applicants' analysis according to which, in the consumer's eyes, the price of a book is a negligible factor in comparison with other ancillary matters such as diversity of stocks and service. It takes the view that the introduction of price competition at the level of final distribution might be advantageous for a better dissemination of books in more economical conditions.

44. In coming to its decision on the arguments of the parties based on the special structure of the book market, which forms the central issue of the proceedings, the Court reminds the parties that, as mentioned above, the sole question before it is the conformity of the Transnational Agreement with Article 85 (1) and that its judgment can therefore relate only to the restrictive effects of that agreement on trade between the markets in Dutch-language books in the Netherlands and Belgium.

45. Its view is however that the special features of that market do not permit the two associations to set up, in their mutual relations, a restrictive system whose effect is to deprive distributors of all freedom of action as regards the fixing of the selling price up to the level of the final price to the consumer. Such an arrangement would indeed infringe Article 85 (1) (a), which expressly prohibits all agreements which "directly or indirectly fix purchase or selling prices". Furthermore the system of resale price maintenance laid down in the agreement allows each of the two associations to control outlets as far as the last stage in the other member state from the point of view of price-fixing and thus to make impossible the introduction of sales methods capable of allowing consumers to be supplied in economically more favourable conditions, which brings the applicant associations also into conflict with the contents of Article 85 (1) (b).

46. Thus, even on the supposition that the specific nature of books as an object of trade may justify certain special conditions in the matter of distribution and price, the conclusion must be drawn that in any case the very fact that the two large national associations of publishers and booksellers have extended to intra-Community trade the closely supervised rules which are in force within them constitutes a sufficiently marked restriction of competition to justify the appreciation effected by the Commission under Article 85 (1). The submission put forward by the applicants must therefore be dismissed.

5. Submission relating to the absence of any prejudicial effect on trade between Member States

47. The last submission made by the applicants as regards the application of Article 85 (1) is that the Commission was wrong to consider that the agreement had any prejudicial effect on competition in trade between Member States. On this subject they explain that, regard being had to the linguistic Community between the Netherlands and the Flemish part of Belgium, the geographical region to be taken into account is not the political territory of the two states in question but the Dutch-language territory inasmuch as it forms a single entity. When matters are considered from that point of view it may be seen that what is at issue is an effect purely internal to the region in question and that there is therefore no prejudicial effect on the common market. That state of affairs, they allege, was recently acknowledged by the Belgo-Netherlands treaty on the Dutch-language union concluded on 9 September 1980 (Moniteur Belge 1982, p. 1786, and Staatsblad Van Het Koninkrijk der Nederlanden 1981, p. 453).

48. That line of argument on the part of the applicants disregards the express wording of Article 85, which refers to "trade between Member States". In this case the agreement indisputably affects trade between two Member States, notwithstanding the linguistic links between them. This submission also must therefore be dismissed.

49. It follows from all the foregoing that the Commission was right to regard the agreement as falling within the prohibition contained in Article 85 (1).

The applicability of Article 85 (3)

50. At the time of notifying the agreement the applicants, in case it was considered incompatible with Article 85 (1), requested the Commission to make use of the power reserved to it by Article 85 (3) in order to declare the prohibition contained in Paragraph 1 inapplicable to their agreement. By Article 2 of its decision the Commission dismissed that application for exemption. In Paragraphs 47 to 63 of the preamble it set out its reasons for stating, in the light of the criteria laid down in Article 85 (3), that in its view the agreement did not constitute a contribution to improving the production or distribution of goods and did not allow consumers a fair share of the resulting benefit, that the restrictions imposed by the agreement did not appear to be indispensable and finally that the agreement eliminated competition in respect of a substantial part of the products in question.

1. The Commission's refusal to follow up the applicants' alternative proposals

51. As indicated above, the applicants submitted to the Commission certain alternative proposals set out in Paragraphs 24 to 31 of the preamble to the decision. They complain that those proposals, which might have mitigated the effect of the resale price maintenance system, were not accepted by the Commission which, for its part, did not put forward any specific proposals which might have made an exemption possible.

52. In this connection it must be stated first of all that the purpose of the preliminary administrative procedure is to prepare the way for the Commission's decision on the infringement of the rules of competition, but that the procedure also presents an opportunity for the undertakings concerned to adapt the practices at issue to the rules of the treaty. In the event of an exemption's being applied for under Article 85 (3) it is in the first place for the undertakings concerned to present to the Commission the evidence intended to establish the economic justification for an exemption and, if the Commission has objections to raise, to submit alternatives to it. Although it is true that the Commission, for its part, may give the undertakings indications as regards any possible solutions, it is not legally required to do so, still less is it bound to accept proposals which it deems incompatible with the conditions laid down in Article 85 (3).

53. This submission must therefore be dismissed.

2. The question of improving the production or distribution of books

54. The applicants, together with the booksellers' and publishers' federations, interveners, claim that the agreement is intended to improve the production and distribution of books as a result of the system of "cross-subsidization" made possible by the resale price maintenance system. They explain in this connection that the existence of the fixed price allows the publisher, as a result of the profit realized on his successful titles, which meet with a ready sale and a rapid turnover, to accept the responsibility and the risk of publishing more difficult and less profitable works. Distributors in their turn are in a position to maintain more extensive stocks and to serve their customers better by helping in this way to disseminate a greater number of varied works.

55. On the other hand, they allege, the abolition of resale price maintenance would have the effect of concentrating trade on works which sell readily with the result that more difficult titles will be abandoned. Although it is true that successful books would sell more readily, there would be multiple negative consequences: publishers would no longer be able to assume the risk of publishing less promising works and the existence of small-scale specialist publishers would be threatened as a result. The variety of titles published would be reduced in consequence, the number of bookshops holding an extensive stock of books and offering service to customers would diminish to the advantage of distributors interested solely in works with a rapid turnover which would make it possible for them to reduce their profit margin. As a consequence of that transformation of distribution structure it would be necessary to expect, as the counterpart of the reduction in price of the easy titles, a corresponding increase in the price of all other works.

56. The Commission disputes the applicants' deductions. Its view is that the applicants have not established any causal relationship between the abolition of resale price maintenance and the phenomena which they describe, such as a reduction in the number of titles published and in the number of bookshops holding a sufficiently varied stock. According to the Commission the "cross-subsidization" machinery depends essentially on the policy followed by publishers in fixing their selling prices and it could operate without any necessity to have recourse to a system of resale price maintenance, which concerns essentially the distribution and not the publishing of books. The reduction in the number of bookshops is already well advanced, in spite of the existence of the resale price maintenance system, which proves that it has other causes. The introduction of fresh methods of sale in the book sector, such as the setting up of book departments in department stores and newsagents, is having the effect of encouraging the dissemination of books amongst new classes of consumer. All things considered, it is perfectly possible, the Commission States, to conceive of the organization of an effective system of distribution without recourse to the strait-jacket of resale price maintenance.

57. The interveners supporting the Commission, NV Club, NV GB-Inno-BM and NV Sodal, state that diversity of supplies, maintenance of stocks, speed of execution of orders and other services performed for customers are perfectly compatible with a policy of price reduction, as experience in various Member States of the Community shows.

58. In dealing with these arguments it should be recalled once again that the Court's decision can relate only to the Transnational Agreement. It does not appear that the Commission has exceeded the limits of its discretion in refusing, in view of the characteristics of the agreement, to recognize that it is such as to improve production and distribution of books as far as concerns trade between the markets in Dutch-language books in the Netherlands and Belgium.

59. The applicants, for their part, have not succeeded in showing that the continued existence of the Transnational Agreement is a condition for improving the production and distribution of books by the extension to trade between the two markets concerned of the effects of the "cross-subsidization" system, whatever view may be taken in the last resort of the intrinsic merits of the system - which can be conclusively appraised only in terms of the National Agreements.

60. In the present of the proceedings the submission put forward by the applicants against the Commission's refusal to recognize that the agreement at issue is such as to contribute to improving the production or distribution of the goods in question must be dismissed.

61. As the conditions necessary for the grant of exemption under Articles 85 (3) are cumulative, it is unnecessary to consider the submissions relating to the other conditions for exemption.

62. It follows from all the foregoing that the applications must be dismissed.

Costs

63. In pursuance of Article 69 (2) of the rules of procedure the unsuccessful party is to be ordered to pay the costs.

64. Since the applicants and the parties intervening in their support have failed in their submissions, they must be ordered to pay the costs; however, as regards the costs of the application for the adoption of interim measures, account must be taken of the fact that the interveners were not parties thereto.

THE COURT

Hereby :

1. Dismisses the applications;

2. Orders the applicants and the parties who have intervened in their support to pay the costs of the main action and orders the applicants to pay in addition the costs of the application for the adoption of interim measures.