CJEC, 4th chamber, October 22, 1986, No 75-84

THE COURT,

1. By an application lodged at the Court registry on 19 march 1984, the undertaking metro SB-Grossmärkte Gmbh & co. KG (hereinafter referred to as 'metro'), of leverkusen, Federal Republic of Germany, brought an action under the second paragraph of Article 173 of the EEC treaty for a declaration that decision No 83-672-EEC of the Commission of the European Communities of 21 December 1983 concerning a proceeding under Article 85 of the EEC treaty (IV/29.598 - Saba's selective distribution system in the EEC, Official Journal 1983, L 376, p. 41) is void.

2. By that decision the Commission granted an exemption from the prohibition laid down in Article 85 (1), pursuant to Article 85 (3) of the treaty, in favour of certain agreements forming part of the selective distribution system established by the undertaking Saba Gmbh for distributing its consumer electronics equipment in the common market.

3. The applicant is a 'self-service' wholesale trading undertaking which operates throughout the Community. It has some 40 establishments in the Federal Republic of Germany and a number of outlets in the other Member States. Its activities consist in selling a wide range of products, including consumer electronics equipment, which it obtains directly from producers, both to retailers, who themselves re-sell the products, and to commercial or industrial undertakings or small businesses which wish to use the goods purchased for commercial purposes. Metro also sells to private customers termed 'institutional consumers ', such as hospitals and hotels.

4. Metro's 'cash and carry 'distribution system enables purchasers to serve themselves in sales areas where the goods are stored in such a way that they may be removed easily by the customers themselves, are displayed simply and are paid for in cash. This system results in lower costs and makes it possible for metro to operate satisfactorily on lower profit margins than those of the traditional wholesale trade.

5. Saba, whose registered office is in Villingen-Schwenningen, Federal Republic of Germany, manufactures consumer electronics equipment such as radios and television sets, video and hi-fi equipment and tape recorders. It distributes such equipment through a network of contracts and agreements with sole distributors, wholesalers and appointed retailers, all of which constitutes a selective distribution system (hereinafter referred to as the 'Saba distribution system ').

6. Since 1980 Saba has been a wholly-owned subsidiary of the undertaking Thomson-Brandt, which is based in France and has shares in other German undertakings in the consumer electronics sector, including dual, nordmende and telefunken fernseh und rundfunk GmbH.

The subject-matter of the dispute

7. The Saba system constitutes a uniform distribution system for the whole of the territory of the Community. It comprises, in the Federal Republic of Germany, including west Berlin, a network of specialized wholesalers and retailers, both categories being appointed by Saba, and, in the other Member States (except Ireland), sole distributors and specialized retailers. The sole distributors appointed in Italy and the United Kingdom are subsidiaries of Saba.

8. The system consists of a set of contracts and agreements between Saba and the various distributors in its network which take the following forms :

(a) The Saba EEC dealership agreement with specialist wholesalers (Saba - eg - vertriebsbindungsvertrag Saba - fachgrosshandler) (hereinafter referred to as the 'wholesaler agreement ');

(b) The Saba cooperation agreement (Saba - Kooperationsvertrag) (hereinafter referred to as the 'cooperation agreement'), which contains in particular obligations pertaining to the promotion of sales to be fulfilled by Saba dealers in Germany who are supplied directly by Saba ;

(c) The Saba EEC dealership agreement with specialist retailers (Saba - EG - Vertriebsverbindungsvertrag Saba - Facheinzelhandler) (hereinafter referred to as 'the retailer agreement'); and

(d) The Saba fair service agreement between Saba and its retailers, which specifies the repair services to be undertaken under guarantee for Saba products.

9. So far as the abovementioned obligations pertaining to the promotion of sales are concerned, the cooperation agreement requires specialist wholesalers in Germany who are supplied directly by Saba to carry the whole Saba range and also to agree an annual sales contract with Saba at the beginning of every year containing binding sales targets by product and number of units.

10. The operation of the Saba distribution system has been contested by Metro ever since, following its application to Saba for recognition as a wholesaler for the distribution of consumer electronics equipment, it was refused supplies on the ground that it did not fulfil the conditions for admission as a Saba wholesaler.

11. In a decision of 15 December 1975 (Official Journal 1975, l 28, p. 19), the Commission adopted a position on an earlier version of the contracts which make up the Saba system. By that decision, it recognized that certain terms of the contracts did not fall within the prohibition laid down in Article 85 (1) of the treaty, whereas other provisions thereof were entitled to exemption under Article 85 (3). The action brought by metro challenging that decision was dismissed by the court in its judgment of 25 October 1977 in Case 26-76 (Metro V Commission (1977) ECR 1875, hereinafter referred to as 'Metro I').

12. The terms of the various agreements which constitute the present Saba system are essentially the same as those of the old Saba system, apart from certain changes concerning in particular the procedure for the admission of specialist distributors. Whereas under the procedure laid down under the old system Saba was entitled to decide whether or not a retailer fulfilled the criteria for admission, the new admission system empowers any Saba wholesaler to admit to the Saba dealer network any retailer who satisfies the selection criteria and to supply him with goods. In addition, even if wholesalers do not sign the cooperation agreement and are therefore not supplied directly by Saba, they may obtain supplies from other Saba wholesalers provided that they satisfy the criteria set out in the wholesaler agreement.

13. By letter of 2 July 1979 Saba applied to the Commission for the agreements comprising Saba's distribution system to be exempted from the application of Article 85 (1) of the treaty by means of an extension of the exemption which was granted by the decision of 1975 and which expired on 21 July 1980. Following two Statements of Objections, as a result of which Saba made the abovementioned amendments to the Saba agreements, the Commission adopted the contested decision on 21 December 1983.

14. By that decision, the Commission declared the provisions of Article 85 (1) inapplicable, pursuant to Article 85 (3), to the wholesaler agreement, the cooperation agreement and the retailer agreement, and decided that there were no grounds under Article 85 (1) for action in respect of the fair service agreement. In addition, it required Saba to submit to it annual reports, the first of them by 31 December 1984, setting out all the cases in which it had refused or withdrawn a wholesaler's or a retailer's admission as a 'Saba dealer 'or had cut off supplies to a wholesaler or a retailer, or had exercised its right to inspect a dealer's records of serial numbers.

15. Metro has applied to the Court under Article 173 of the treaty for a declaration that the contested decision is void in so far as it grants an exemption under Article 85 (3) to the agreements which make up the Saba system.

16. The United Kingdom has intervened in this case in support of Metro, whilst Saba and the Government of the Federal Republic of Germany have intervened in support of the Commission.

17. Reference is made to the report for the hearing for the details of the Saba system and of the contested Commission decision, the facts of the case and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

Admissibility

18. Saba alone contends that the application is inadmissible. It considers that Metro is not directly and individually concerned by the decision which it contests, since the decision was not adopted on an application made by Metro under Article 3 (2) (b) of Regulation No 17.

19. According to the second Paragraph of Article 173 of the treaty, any natural or legal person may institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former. Since the contested decision is not addressed to Metro, it is necessary to examine whether it is of direct and individual concern to Metro.

20. The Court has consistently held that persons other than those to whom a decision is addressed may claim to be concerned within the meaning of the second Paragraph of Article 173 only if that decision affects them by reason of certain attributes which are peculiar to them, or by reason of circumstances in which they are differentiated from all other persons, and by virtue of these factors distinguishes them individually just as in the case of the person addressed (judgment of 28 January 1986 in Case 169-84 Cofaz and others V Commission (1986) ECR 391).

21. In that regard it should be noted in the first place that Metro's applications for admission to the Saba system as a wholesaler have been refused.

22. It should be pointed out furthermore that Metro raised objections, in several letters of February 1983 and also later, following the publication of the Commission's notice, pursuant to Article 19 (3) of Regulation No 17, concerning its intention to grant Saba an exemption (Official Journal 1983, C 140, p. 3). The Commission recognized that Metro had a legitimate interest in submitting its observations, in accordance with Article 19 (3) of Regulation No 17, and stated that the objections of Metro were precisely those which were rejected in parti C of the contested decision. In spite of certain amendments to the original version of the Saba agreements, the decision maintains the special features of the distribution system which were criticized by Metro during the administrative procedure.

23. In those circumstances, the contested decision must be considered to be of direct and individual concern to Metro within the meaning of the second Paragraph of Article 173. The application is therefore admissible.

Substance

24. In support of its application Metro puts forward six submissions. The first five submissions allege a misuse of powers by the Commission inasmuch as it :

(a) Failed to take into account the conditions laid down by the court in its judgment in Metro I ;

(b) Failed to respect the conditions laid down in Article 85 (3) for the grant of an exemption ;

(c) Failed to take account of the way in which the Saba agreements are implemented in practice ;

(d) Took into account limited, incomplete and outdated information in granting the exemption ;

(e) Authorized an abuse, by Saba and the group of companies to which it belongs, of a dominant position in the electronics market.

25. The sixth submission, which should be examined first of all, is based on the alleged lack of competence of the Commission to grant an exemption under Article 85 (3) in the absence of the notification required by the applicable rules.

1. Absence of notification (sixth submission)

26. Metro claims that in view of the important amendments made by Saba to its original system the contested decision does not simply renew the original exemption but grants a new exemption. In its submission, in the absence of formal notification of the amended system pursuant to Article 4 (1) of Regulation No 17, the Commission had no power to grant Saba an exemption under Article 85 (3) of the treaty. In any event, Metro considers that the way in which the Saba system is actually implemented differs significantly from the terms of the document originally notified and from the terms of the new standard-form agreements.

27. The Commission denies that any fresh notification was necessary in this case, since what was involved was not a new exemption but solely the renewal, with certain amendments and modifications, of an exemption which had lapsed. That being so, it considers that the original notification of the Saba system covered the subsequent modification and amendments which were communicated to it informally.

28. Article 4 (1) of Regulation No 17 provides as follows :

'agreements, decisions and concerted practices of the kind described in Article 85 (1) of the treaty which come into existence after the entry into force of this Regulation and in respect of which the parties seek application of Article 85 (3) must be notified to the Commission. Until they have been notified, no decision in application of Article 85 (3) may be taken. '

29. By contrast, Article 8 (2) provides that :

'a decision may on application be renewed if the requirements of Article 85 (3) of the treaty continue to be satisfied. '

In that case, the communication of subsequent amendments and a mere request for renewal are sufficient.

30 Therefore it is necessary to examine whether Saba's application for exemption of 2 July 1979, which was made simply by letter, concerns a totally new exemption or merely the renewal of the exemption which was granted to it by Decision No 76-159 of 15 December 1975.

31. As has been stated above, the new version of the Saba agreements does not differ in principle from the earlier version, which was duly notified in 1972 and 1974, with the exception of certain modifications which resulted in particular in a less stringent procedure for the admission of Saba specialist distributors than that laid down in the original version. That being so, it must be held that a mere application coupled with the communication of the amendments envisaged by Saba was sufficient to enable the Commission to adopt a decision on the extension of the exemption of the Saba system under Article 8 (2) of Regulation No 17.

32. Metro's complaint that the way in which the Saba system is actually implemented differs significantly from the conditions originally notified and from the terms of the new standard-form agreements is not pertinent. If Metro's allegations proved to be correct, they could justify the refusal or withdrawal of an exemption ; they could not, however, be used to justify the requirement of fresh notification.

33. In those circumstances, the submission must be rejected.

2. The conditions laid down by the judgment in Metro I (first submission)

34. The considerations of the court upon which Metro relies are the following. First, in finding that the original exemption of the Saba network was properly granted, the Court explained :

'The outcome could be different if, in particular as a result of an increase in selective distribution networks of a nature similar to Saba's, self-service wholesale traders were in fact eliminated as distributors on the market in electronic equipment for leisure purposes' (Paragraph 50).

In addition, the Court expressly stated :

'Nevertheless, the Commission must ensure that this structural rigidity (in the case of prices) is not reinforced, as might happen if there were an increase in the number of selective distribution networks for marketing the same product'(Paragraph 22).

35. According to Metro, there have been fundamental changes in the structure of competition on the market in consumer electronics equipment since 1975. In particular, there has been a significant increase in the number of selective distribution systems operated by the major producers both on the German market and throughout the Community. Metro claims that, in addition to the systems of which the Commission has been notified and those for which an application has been made to the Commission for exemption under Article 85 (3), there is now a large number of other similar selective distribution systems which have not been notified and which also prevent self-service wholesale traders such as Metro from obtaining direct supplies.

36. Metro alleges that by granting a new exemption by the contested decision, the Commission failed to take those changes into account even though it was required to do so by the judgment in Metro I. It claims that the Commission ought in particular to have taken into account all the selective distribution systems, even the 'simple' systems, the sole purpose of which is to ensure that goods are supplied only to the specialized trade or to dealers with specialized departments.

37. The Commission points out first that, according to the judgment in Metro i, selective distribution systems constitute 'together with others, an aspect of competition which accords with Article 85 (1), provided that resellers are chosen on the basis of objective criteria of a qualitative nature relating to the technical qualifications of the reseller and his staff and the suitability of his trading premises and that such conditions are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion '. Consequently, the Commission has no authority to take action against the operation of such simple selective distribution systems. An increase in the number of such systems is therefore irrelevant in the context of Article 85 (1). However, the existence of such systems should be taken into account in assessing whether Article 85 (3) is applicable.

38. In that regard, the Commission contends that when it granted a renewal of the exemption to the Saba system, it was certain that no other selective distribution networks similar to the Saba network were operated on the relevant market ; in particular, the cooperation agreement requiring wholesalers to sign supply estimates is a unique feature of the Saba system. Of a total number of 13 selective distribution systems operated in this sector on the territory of the Community and notified to the Commission, four involve simple obligations to supply only through specialized outlets which do not fall within the scope of Article 85 (1). The remaining nine systems required exemption under Article 85 (3), but none of them contained obligations pertaining to the promotion of distribution or to cooperation comparable with those in the Saba system.

39. It should be stated that, as Metro alleges and the Commission recognizes, the Commission was obliged, when it examined Saba's application for a renewal of the exemption granted in 1975, to verify whether the competitive situation on the relevant market had changed to such an extent that the preconditions for the grant of an exemption were no longer fulfilled.

40. It must be borne in mind that, although the Court has held in previous decisions that 'simple 'selective distribution systems are capable of constituting an aspect of competition compatible with Article 85 (1) of the treaty, there may nevertheless be a restriction or elimination of competition where the existence of a certain number of such systems does not leave any room for other forms of distribution based on a different type of competition policy or results in a rigidity in price structure which is not counterbalanced by other aspects of competition between products of the same brand and by the existence of effective competition between different brands.

41. Consequently, the existence of a large number of selective distribution systems for a particular product does not in itself permit the conclusion that competition is restricted or distorted. Nor is the existence of such systems decisive as regards the granting or refusal of an exemption under Article 85 (3), since the only factor to be taken into consideration in that regard is the effect which such systems actually have on the competitive situation. Therefore the coverage ratio of selective distribution systems for colour television sets, to which Metro refers, cannot in itself be regarded as a factor preventing an exemption from being granted.

42. It follows that an increase in the number of 'simple 'selective distribution systems after an exemption has been granted must be taken into consideration, when an application for renewal of that exemption is being considered, only in the special situation in which the relevant market was already so rigid and structured that the element of competition inherent in 'simple 'systems is not sufficient to maintain workable competition. Metro has not been able to show that a special situation of that kind exists in the present case.

43. As regards the effect on the market of the existence of selective distribution systems other than 'simple 'systems, the Commission in renewing the exemption based itself on the relatively small market share covered by the Saba system and on the fact that that system is distinguished from 'simple 'systems only by the existence of obligations pertaining to the promotion of sales. By so doing, it did not misdirect itself in exercising its discretion to assess, within the framework of Article 85 (3), the economic context in which the Saba system is situated.

44. It is true that Metro also alleges that, following the proliferation of selective distribution systems, there has been a marked decrease in price competition since 1975, but no support for that allegation is to be found in the papers before the court. Indeed, it is clear from the studies and information provided by the Commission and Saba that considerable differences may be discerned in prices on the German market, not only between the brands of different manufacturers but also within the same brand. It follows from that, in any event, that for the moment no increase in the rigidity of the price structure can be identified.

45. Furthermore, the Court recognized in that connection in its judgment in Metro I that some limitation in price competition was to be regarded as inherent in any selective distribution system, because the prices applied by specialist dealers necessarily remained within a much narrower margin than would be expected if there were competition between specialist dealers and non-specialist dealers. It stated that that limitation was counterbalanced by competition as regards the quality of the services supplied to customers, which was not normally possible in the absence of an adequate profit margin covering the higher costs entailed by such services.

46. Therefore Metro's submission based on the growth of selective distribution systems in the consumer electronics sector must be rejected.

47. The complaint based on the disappearance of other distribution networks will be examined in connection with the second submission.

3. The conditions of application of Article 85 (3) (second submission)

48. The complaints raised by Metro relate to the following points in particular :

(a) The Saba system is not indispensable, in view of the nature of the products in question ;

(b) The consumer derives no benefit from the Saba system ;

(c) The system provides Saba with an opportunity of eliminating competition for a substantial part of the products in question.

49. The Commission contends that those aspects of the Saba system which fall within Article 85 (1), namely the obligations on dealers to promote the sale of Saba products, fulfil in all respects the conditions for exemption laid down in Article 85 (3), since the advantages of the system for competition outweigh the disadvantages.

50. Saba points out that the various aspects of its distribution system are justified by the technological development on the market in consumer electronics equipment and serve the interests of consumers. It submits that there is in any event fairly keen competition among European producers and between European and japanese producers. It claims that it is therefore unable to pursue a policy of high prices or deliberately to prevent parallel imports.

51. The Government of the Federal Republic of Germany considers that it should not be possible for a distributor to impose his marketing strategy on the manufacturer. In its view, the manufacturer should instead choose channels of distribution which suit the consumer. It claims that, at present, the freedom of choice of the consumer is guaranteed by the multiplicity of European and Japanese suppliers operating different distribution systems. In the Federal Republic of Germany, self-service wholesalers are not in general excluded from the distribution of the products in question.

52. It should be noted in the first place that the Saba system to which this application relates is identical in all essential respects to the system which was the subject of the judgment in Metro I, except as regards certain modifications which rendered the system less restrictive than it had previously been. The Commission was therefore justified in proceeding on the basis that, prima facie and subject to evidence to the contrary, the present Saba system was just as entitled as the old system to benefit from an exemption.

53. As regards the nature of the products in question, Metro alleges that although some consumers may require information in relation to certain sophisticated products such as hi-fi systems, the opinion of specialists is scarcely needed for the purchase of television sets, in view of their high degree of quality, reliability and standardization. Metro states that television sets represent more than two-thirds of the total production of consumer electronics equipment in the Community.

54. As the Court stated in its judgment in Metro I, the existence of a variety of channels of distribution adapted to the individual characteristics of the various producers and to the requirements of the various categories of consumers is in particular justified in the sector covering high-quality and technically advanced consumer durables, where a relatively small number of large and medium-scale producers offer a varied range of items which are readily interchangeable. Such products may indeed require a sales service and after-sales service specially adapted to their characteristics and linked to their distribution.

55. As regards colour television sets, the Commission, Saba and the Federal Republic of Germany have convincingly argued that the relevant technology is now so complex that it is capable of justifying a distribution network involving specialized wholesalers and retailers. They have rightly pointed out that as a result of technical innovations television sets may be used in different ways, in combination with other complementary or accessory equipment.

56. Consequently, Metro's complaint that the restrictions contained in the Saba system have no purpose in view of the nature of the products in question must be rejected.

57. Metro then alleges that, contrary to the requirements laid down in Article 85 (3), consumers cannot derive any advantage or benefit from the operation of the Saba system. That system has, on the contrary, the effect of limiting the choice available to the consumer. It is a feature of the market in consumer electronics equipment that the consumer demand for such products is turning towards cash-and-carry outlets such as Metro and away from traditional stockists who sell at uniformly high prices and carry only a limited range of products.

58. Metro states that the tendency of consumers to deal with cash-and-carry outlets cannot, however, continue to manifest itself on the market in question owing to the combined effect of the selective distribution systems operated by the leading producers of electronic products, such effect being reinforced by the concentration on the market in those products which has increased substantially since 1975.

59. It is appropriate to consider this complaint, which is based essentially on the existence of a concentration on the relevant market, when the fifth submission, concerning the abuse of a dominant position, is examined.

60. Metro also claims that the contested decision tends to eliminate competition entirely in respect of a substantial part of the products in question. Self-service wholesalers are unable to obtain supplies of the leading brands of high-quality consumer electronics equipment, in particular video recorders and television sets, because the leading producers refuse to supply them on the pretext that they do not fulfil the requirements of the distribution system operated by the manufacturer in question.

61. Metro admits that in theory it could adapt itself to meet the requirements of the selective distribution systems which are operated. However, in its case such adaptation would require it to abandon its commercial strategy and become an entirely different kind of chain store.

62. The Commission points out that it has no power to take action in relation to 'simple 'distribution systems which comply with the criteria laid down in the judgments of the court. In view of the wide variety of forms of distribution on the market in question, the continued existence or even proliferation of distribution systems similar to the Saba system could not result in the elimination of self-service wholesalers from competition on that market.

63. So far as the facts are concerned, the Commission further points out that Metro is excluded only from three 'simple 'distribution systems and four systems entailing other obligations. By contrast, some leading manufacturers distribute their products without resorting to any selection.

64. It must be stated in the first place that the fact that Metro cannot obtain supplies of Saba products directly does not constitute an elimination of competition within the meaning of Article 85 (3), when it is possible for Metro or other self-service wholesalers to market consumer electronics equipment, and colour television sets in particular, obtained from other producers.

65. As the Court pointed out in its judgment in Metro I, the powers conferred upon the Commission under Article 85 (3) show that the requirements for the maintenance of workable competition may be reconciled with the safeguarding of objectives of a different nature and that to this end certain restrictions on competition are permissible, provided that they are essential to the attainment of those objectives and that they do not result in the elimination of competition for a substantial part of the common market. Competition could not be eliminated if the channel of distribution in question continues to exist in conjunction with methods of distribution based on a different type of competition policy.

66. Metro has not, however, proved that other methods of distribution of a different kind, such as the self-service wholesale trade, no longer exist on the relevant market. That being so, the complaint concerning the elimination of competition cannot be upheld.

67. Therefore the submission to the effect that the Commission misused its powers in applying Article 85 (3) of the treaty must be rejected in so far as it is based on the nature of the products in question and on the elimination of competition.

4. The implementation of the Saba agreements in practice (third submission)

68. Metro claims that Saba abused the exemption granted to it in 1975. In its submission, the way in which the system is implemented in practice is substantially different from the terms of the Saba agreements, so that the system has thus become entirely fictitious and the criteria on which it is based have been applied in a discriminatory manner. Moreover, it claims that the Commission has not provided any indication as to the complaints which it has received about the operation of the Saba system or as to the investigation which it carried out on the way in which the Saba system had been applied.

69. The United Kingdom, which shares Metro's opinion in this regard, considers that, in order to avoid the risk of abuse of the procedure for admission into the Saba network, the right to admit dealers should be conferred not only on wholesalers but also on Saba retailers.

70. Saba disputes Metro's assertions on this point, but admits that the obligation under the Saba agreements to keep in stock the whole range is limited by the extent to which specialized dealers are able to stock and display Saba products.

71. The Commission denies that the Saba criteria for admission are not applied correctly. It states that it conducted a number of investigations both into Saba's practice and on the practices of certain Saba wholesalers and retailers. Although the investigations revealed certain isolated cases in which the notified system was not in practice being applied correctly, there was no evidence to indicate that the system had been systematically applied in a discriminatory manner.

72. It should be borne in mind firstly that, as the Court stated in its judgment of 25 October 1983 in Case 107-82 (AEG V Commission (1983) ECR 3151) a manufacturer's refusal to approve distributors who satisfy the qualitative criteria of the selective distribution system must be considered unlawful. Such a practice therefore supplies proof of an unlawful application of that system if the number of unlawful refusals is sufficient to preclude the possibility that they are isolated cases not forming part of systematic conduct.

73. In this case, the information provided by the Commission on the result of its investigations has not been contradicted with sufficient precision to establish that distributors fulfilling the criteria of the Saba system have been refused admission in any save certain isolated cases. The existence of such cases is therefore not sufficient to compel the Commission to withdraw an exemption which has already been granted or to refuse to renew such an exemption.

74. Accordingly, it must be concluded that Metro's allegations in this regard are unfounded and that this submission must therefore be rejected.

5. The use of limited, incomplete and outdated information (fourth submission)

75. In support of this submission, Metro claims that the Commission did not take account of the actual economic effects of the operation of the Saba distribution system throughout the common market. In particular, it failed to conduct a proper inquiry into the facts. In Metro's submission, the mackintosh report to which the Commission referred during the proceedings before the Court cannot constitute an appropriate basis for the contested decision, since the decision was adopted before that report had been submitted.

76. The United Kingdom also considers that the Commission did not make an adequate examination of the situation on the relevant market. Consequently, it could not have taken into account changes in the general structure of distribution of the relevant products, which are apparent inter alia from a report on the existence and application of selective distribution systems in the United Kingdom which was submitted to the Court by the United Kingdom.

77. In that regard it should be noted that the contested decision is based on precise data relating to Saba's position on the relevant market and to the distribution structure in general. Furthermore, the Commission has convincingly argued that at the material time it had at its disposal an adequate factual basis for appraising the economic context of the Saba system, in particular as a result of an investigation which it had conducted into restrictive practices on the relevant market.

78. In view of those circumstances, the Commission was entitled to refer in the course of the proceedings to the findings of the mackintosh report, submitted in February 1984, on competition in the consumer electronics industry in the EEC. In that regard it should be pointed out that in its submission Metro alleges not that the contested decision is based on an inadequate statement of reasons but that it is founded on an inadequate factual basis. However, the examination by the Court of the facts put forward by the parties and the reports submitted by them has revealed no grounds for concluding that this is the case. The submission must therefore be rejected.

6. The abuse of a dominant position by a group of undertakings (fifth submission)

79. In support of this submission, Metro alleges that the undertakings in the Thomson-Brandt group, of which Saba is a member, constitute a single economic unit which has a dominant position on the market in consumer electronics in general, and colour television sets and video recorders in particular, in a substantial part of the common market. It claims that in setting up its distribution system and in refusing to supply Metro, Saba has abused that position.

80. In connection with this submission, it is also necessary to examine Metro's complaint to the effect that there has been a substantial increase in concentration on the relevant market since 1975. It claims that that increased degree of concentration has been caused in particular by the growth of the Thomson-Brandt group on the German market. The German undertakings within the group, namely Saba, telefunken, nordmende and dual, can in its contention no longer be regarded as competitors inter se, in view of their collaboration at the level of production and the centralization of their management and administration. Metro claims that as a result of its acquisitions Thomson-Brandt is now the market leader on the German market in colour television sets (with a market share of about 27% in 1983) and also on the French and Italian markets in that sector (with market shares of 34% and 27% respectively). The trend towards concentration in this sector has thus resulted in the domination of two big groups, Thomson-Brandt and Philips-Grundig.

81. The United Kingdom supports that line of argument. It states that the effects of the operation of the Saba system on the structure of competition are not the same as they were in 1975, owing to the growth of the Thomson-Brandt group.

82. The Commission contends that the various undertakings in the Thomson-Brandt group have separate networks for the distribution of their products and are independent so far as their commercial strategy is concerned. Consequently, it is only Saba's position on the market that should be taken into account in order to examine whether a dominant position exists. So far as colour television sets are concerned, Saba's share of the Community market is only 3% and of the German market only 7.5%. Thus it does not, in the Commission's view, have a dominant position.

83. While the Commission recognizes that horizontal concentration in the relevant market has increased recently, it denies that this has affected the structure of competition. It claims that the relationship between the individual undertakings in the Thomson-Brandt group has remained a competitive one, at least as regards the distribution of their products. In its submission, neither Saba nor the Thomson-Brandt group holds a position on any of the markets in consumer electronics which enables it to eliminate competition.

84. In the first place, it must be remarked that, as against the clear and precise information supplied to the Court by the Commission, Metro has not adduced any evidence which would enable the Court to find that the undertakings in the Thomson-Brandt group are not only linked at the level of capital but also pursue a coordinated marketing strategy in accordance with the directions of their parent company or with a plan agreed between themselves. In the absence of such evidence, the Court must proceed on the basis that so far as the distribution of its products are concerned Saba is independent of the parent company and of the other undertakings in the group.

85. As regards Saba's position on the German market, it should firstly be noted, on the basis of the information supplied by the parties in the course of the proceedings, that there are at least 18 producers on the market in colour television sets, which is the principal product concerned in this case, and that Saba's share of the market is below 10%. Therefore even if it is accepted that Saba has the largest market share, that is to say on the assumption that the relevant market is the German market in colour television sets, that market share is too small to be regarded as evidence of a dominant position on the market.

86. The Court has already held in its judgment in Metro I that, whilst the share of the market held by an undertaking does not necessarily constitute the sole criterion for the existence of a dominant position, it is, however, proper to conclude that in a market in highly technical products which nevertheless appear to the majority of consumers to be readily interchangeable, shares of the market as insignificant as that held by Saba preclude the existence of a dominant position save in exceptional circumstances. However, in the present case no such exceptional circumstances have been shown to exist.

87. It remains to examine whether, as Metro and the United Kingdom maintain, the growth of the Thomson-Brandt group has resulted in such a high degree of concentration on the market in consumer electronics that the conditions for the grant of an exemption under Article 85 (3) to one of the undertakings in the group, namely Saba, are not fulfilled.

88. In that regard, it must be stated in the first place that the increase in the degree of concentration on the market is a factor to be taken into consideration in examining an application for the renewal of an exemption under Article 85 (3) of the treaty, if such an increase affects the structure of competition on the relevant market. Such an effect does not always occur where, as in the present case, the trend towards concentration is at the level of production and the agreements to be examined by the Commission concern the distribution of products. However, such an effect may arise, in particular if the trend towards concentration helps to eliminate price competition or to oust other channels of distribution.

89. It was for Metro to adduce facts capable of establishing the existence of such a situation. It must, however, be stated that, in the light of the information supplied by the Commission and Saba, from which it is clear that the distribution systems of the individual undertakings in the Thomson-Brandt group operate separately and that there are substantial differences between the essential features of those systems, Metro has not succeeded in establishing the existence of parallel conduct in the operation of those systems which has an impact on the structure of competition on the market.

90. Furthermore, the Commission was entitled to take into consideration the fact that on the market in consumer electronics the undertakings in the Thomson-Brandt group must face competition not only from the Philips-Grundig group but also from other manufacturers such as ITT, Blaupunkt, Loewe, Opta, Sony and others.

91. Therefore Metro has not succeeded in showing that the increase in concentration since 1975 to which it refers has affected competition at the level of the distribution of consumer electronics equipment.

92. It follows from all the foregoing considerations that the application must be dismissed in its entirety.

Costs

93. Under Article 69 (2) of the rules of procedure, the unsuccessful party is to be ordered to pay the costs. Since Metro has failed in its submissions, it must be ordered to pay the costs, including those of Saba and the Federal Republic of Germany which intervened in support of the Commission ; the United Kingdom, which intervened in support of Metro, must bear the costs occasioned by its intervention.

On those grounds,

THE COURT (fourth chamber)

Hereby :

(1) Dismisses the application ;

(2) Orders the United Kingdom to bear the costs occasioned by its intervention ;

(3) Orders Metro to bear the remaining costs.