CJEC, November 11, 1981, No 60-81

THE COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES,

1. By application lodged at the Court registry on 18 March 1981 the international business machines corporation (hereinafter referred to as "IBM"), whose headquarters are in Armonk, New York, United States of America, brought an action under the second paragraph of Article 173 of the EEC treaty for a declaration that the measure or measures of the Commission of which IBM was notified in a letter dated 19 December 1980, initiating a procedure against IBM pursuant to Article 3 of Regulation No 17 of the Council of 6 February 1962, the first Regulation implementing Articles 85 and 86 of the treaty (Official Journal, English special edition 1959-62, p. 87) and notifying IBM of a statement of objections, or the Statement of objections itself, are void.

2. The letter, signed by the Commission's Director-general for competition, was sent to IBM after an inquiry lasting several years by the Officers of the Commission in connection with some of the marketing practices of IBM and its subsidiaries in order to determine whether or not such practices constitute an abuse of a dominant position on the market in question within the meaning of Article 86 of the EEC treaty. The letter informed IBM that the Commission had initiated against the company a procedure under Article 3 of Regulation No 17 of the Council and that it was about to take a decision concerning infringements of Article 86. Together with the letter IBM received a Statement of objections under Article 2 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 Council Regulation No 17 (Official Journal, English special edition 1963-64, p. 47). The Director-general for competition requested the company to reply in writing within a specified period and stated that it would be given on opportunity later to explain its point of view orally in the course of a hearing.

3. IBM took the view that the measures of which it had been notified in the letter of 19 December 1980 were vitiated by a number of defects and requested the Commission to withdraw the Statement of objections and terminate the procedure. The Commission refused to do so and IBM then brought the present action for a declaration that the measures in question were void.

4. IBM's action is based on the submission that the measures which it challenges do not meet the minimum legal criteria which have been laid down for such measures, and that defects in the content of the Statement of objections, the inadequacy of the time-limits laid down and the Commission's reservation of the right to raise further objections at a later date have made it impossible for IBM to raise a defence. In addition, IBM considers that the measures impugned amount to an unlawful exercise of its powers by the Commission in as much as they have not been the subject of a collegiate decision adopted by all the members of the Commission together although there has been No corresponding delegation of power and, in law, there could not be one, at least without due publication or notification. Finally, IBM maintains that the measures in question offend against the international legal principles of comity between nations and non-interference in internal affairs, principles which ought to have been taken into consideration by the Commission before it adopted the measures in question because the conduct of IBM which is the subject of complaint occurred in the main outside the Community, in particular in the United States of America where it is also the subject of legal proceedings.

5. The Commission, supported by Memorex SA, intervening, lodged an objection of inadmissibility under Article 91 (1) of the rules of procedure. The Court decided to adjudicate on the objection of inadmissibility without going into the substance of the case.

6. In support of the objection the Commission and the intervener Memorex submit that the measures in question are procedural steps whereby the Commission expresses an opinion which it may later change, and as those steps are preparatory to the final decision to be adopted by the Commission on the conclusion of the procedure they do not constitute decisions capable of being challenged under Article 173 of the EEC treaty.

7. IBM maintains that the initiation of a procedure and notification of the objections amount to decisions within the meaning of Article 173 of the EEC treaty by reason of their legal nature and their consequences, and that such measures may therefore be the subject-matter of an action.

8. According to Article 173 of the treaty proceedings may be brought for a declaration that acts of the Council and the Commission other than recommendations or opinions are void. That remedy is available in order to ensure, as required by Article 164, that in the interpretation and application of the treaty the law is observed, and it would be inconsistent with that objective to interpret restrictively the conditions under which the action is admissible by limiting its scope merely to the categories of measures referred to in Article 189.

9. In order to ascertain whether the measures in question are acts within the meaning of Article 173 it is necessary, therefore, to look to their substance. According to the consistent case-law of the Court any measure the legal effects of which are binding on, and capable of affecting the interests of, the applicant by bringing about a distinct change in his legal position is an act or decision which may be the subject of an action under Article 173 for a declaration that it is void. However, the form in which such acts or decisions are cast is, in principle, immaterial as regards the question whether they are open to challenge under that Article.

10. In the case of acts or decisions adopted by a procedure involving several stages, in particular where they are the culmination of an internal procedure, it is clear from the case-law that in principle an act is open to review only if it is a measure definitively laying down the position of the Commission or the Council on the conclusion of that procedure, and not a provisional measure intended to pave the way for the final decision.

11. It would be otherwise only if acts or decisions adopted in the course of the preparatory proceedings not only bore all the legal characteristics referred to above but in addition were themselves the culmination of a special procedure distinct from that intended to permit the Commission or the Council to take a decision on the substance of the case.

12. Furthermore, it must be noted that whilst measures of a purely preparatory character may not themselves be the subject of an application for a declaration that they are void, any legal defects therein may be relied upon in an action directed against the definitive act for which they represent a preparatory step.

13. The effects and the legal character of the invitation of an administrative procedure pursuant to the provisions of Regulation No 17 and of the notification of objections as provided for in Article 2 of Regulation No 99-63 must be determined in the light of the purpose of such acts in the context of the Commission's administrative procedure in matters of competition, detailed rules for which have been laid down in the abovementioned Regulations.

14. The procedure was designed to enable the undertakings concerned to communicate their views and to provide the Commission with the fullest information possible before it adopted a decision affecting the interests of an undertaking. Its purpose is to create procedural guarantees for the benefit of the latter and, as may be seen in the eleventh recital in the preamble to Regulation No 17, to ensure that the undertakings have the right to be heard by the Commission.

15. That is why in accordance with Article 19 (1) of Regulation No 17 and in order to guarantee observance of the rights of the defence, it is necessary to ensure that the undertaking concerned has the right to submit its observations on conclusion of the inquiry on all the objections which the Commission intends to raise against it in its decision and, therefore, to inform it of those objections in the document which is provided for in Article 2 of Regulation No 99-63. That is why, too, in order to remove any doubt as to the procedural position of the undertaking in question, initiation of the procedure under the abovementioned provisions is clearly marked by an act manifesting the intention to take a decision.

16. In support of its submission that the application is admissible IBM relies on a number of effects arising from the initiation of a procedure and from communication of the Statement of objections.

17. Some of those effects amount to No more than the ordinary effects of any procedural step and, apart from the procedural aspect, do not affect the legal position of the undertaking concerned. That is so, in particular, of the interruption of the time-limit brought about both by the initiation of a procedure and by the communication of the Statement of objections by virtue of Regulation (EEC) No 2988-74 of the Council of 26 November 1974 concerning limitation periods in proceedings and the enforcement of sanctions under the rules of the European Economic Community relating to transport and competition (Official Journal 1974, l 319, p. 1). The same is true as regards the fact that the acts in question are necessary stages to be accomplished by the Commission pursuant to the provisions of Regulation No 17 before it is able to impose a fine or a periodic penalty payment on the undertaking concerned, and the fact that the acts oblige the undertaking concerned to put up a defence in administrative proceedings.

18. Other effects relied on by IBM do not adversely affect the interests of the undertaking concerned. One such is the fact that initiation of a procedure under Article 9 (3) of Regulation No 17 puts an end to the jurisdiction of the authorities in the Member States - a result which did not in fact occur in this instance as there were No national proceedings, and which essentially results in protecting the undertaking concerned from parallel proceedings brought by the authorities of the Member States. Another such effect is the fact that communication of the Statement of objections is recognized as crystallizing the Commission's position, which means in effect that the Commission is prevented, pursuant to Article 4 of Regulation No 99-63, from relying in its decision, in the absence of a fresh Statement of objections, on the existence of any objections other than those on which the undertaking has been given an opportunity to make known its views, though it does not prevent the Commission from withdrawing its objections and thereby altering its standpoint in favour of the undertaking.

19. A Statement of objections does not compel the undertaking concerned to alter or reconsider its marketing practices and it does not have the effect of depriving it of the protection hitherto available to it against the application of a fine, as is the case when the Commission informs an undertaking, pursuant to Article 15 (6) of Regulation No 17, of the results of the preliminary examination of an agreement which has been notified by the undertaking. Whilst a Statement of objections may have the effect of showing the undertaking in question it is incurring a real risk of being fined by the Commission that is merely a consequence of fact, and not a legal consequence which the Statement of objections is intended to produce.

20. An application for a declaration that the initiation of a procedure and a Statement of objections are void might make it necessary for the Court to arrive at a decision on questions on which the Commission has not yet had an opportunity to state its position and would as a result anticipate the arguments on the substance of the case, confusing different procedural stages both administrative and judicial. It would thus be incompatible with the system of the division of powers between the Commission and the Court and of the remedies laid down by the treaty, as well as the requirements of the sound Administration of justice and the proper course of the administrative procedure to be followed in the Commission.

21. It follows from the foregoing that neither the initiation of a procedure nor a Statement of objections may be considered, on the basis of their nature and the legal effects they produce, as being decisions within the meaning of Article 173 of the EEC treaty which may be challenged in an action for a declaration that they are void. In the context of the administrative procedure as laid down by Regulations No 17 and No 99-63, they are procedural measures adopted preparatory to the decision which represents their culmination.

22. In support of its submission that the application is admissible IBM relies further on the special circumstances of the case and on the nature and implications of the submission which it puts forward on the substance of its case, claiming that a judicial review ought to be made available at an early stage in this case both in accordance with the principles of international law in such matters and pursuant to general principles flowing from the laws of the Member States. The present application is intended to establish that the administrative procedure was wholly unlawful from the beginning under the rules of Community law and international law, particularly those concerning the power to initiate such procedures. Any continuation of that administrative procedure is unlawful, it claims, and the fact that IBM may subsequently have the final decision declared void is not sufficient to give it effective legal protection.

23. It is not necessary for the purposes of this case to decide whether, in exceptional circumstances, where the measures concerned lack even the appearance of legality, a judicial review at an early stage such as that envisaged by IBM may be considered compatible with the system of remedies provided for in the treaty, because the circumstances referred to by the applicant in this case are in any event not such as would make it possible to regard the action as admissible.

24. Moreover, in this instance adequate legal protection for IBM does not require that the measures in question be subject to immediate review. If, on the conclusion of the administrative procedure and after any observations which IBM may submit in the course of it have been examined, the Commission were to adopt a decision which affects IBM's interests, that decision will, in accordance with Article 173 of the EEC treaty, be subject to judicial review in the course of which it will be permissible for IBM to advance all the appropriate arguments. It will then be for the Court to decide whether anything unlawful has been done in the course of the administrative procedure and if so whether it is such as to affect the legality of the decision taken by the Commission on the conclusion of the administrative procedure.

25. The application must therefore be dismissed as inadmissible.

26. Article 69 (2) of the rules of procedure provides that the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party's pleading. Since IBM's application has failed it must be ordered to pay the costs including those of the intervener, Memorex SA. The order for costs must include, besides the costs in the main proceedings, those which were occasioned by IBM's application for the adoption of interim measures and which were reserved in the order made by the President of the Court on 7 July 1981, together with those occasioned by IBM's request for production of information and documents concerning the Commission's initiation of the procedure, a request which has now become nugatory in view of the dismissal of the main action.

THE COURT

Hereby:

1. Dismisses the application as inadmissible;

2. Orders the applicant to pay the costs including the costs of the intervener, Memorex SA, and the costs resulting from IBM's application for the adoption of interim measures and the production of information and documents concerning the Commission's initiation of the procedure.