CJEC, February 21, 1984, No 86-82

THE COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES,

1. By application lodged at the court registry on 10 March 1982 Hasselblad (GB) ltd brought an action under the second paragraph of article 173 of the EEC treaty for a declaration that part of the Commission's decision of 2 December 1981 (no IV/25.757) relating to a proceeding under article 85 of the EEC treaty which was notified to the applicant on 4 January 1982 is void.

2. Victor Hasselblad ab (hereinafter referred to as "Victor Hasselblad''), whose registered office is in Gothenburg, Sweden, manufactures high-quality photographic equipment. It has concluded exclusive distributorship agreements with dealers in many countries. On 28 June 1965 it notified its standard sole distributorship agreement to the Commission. By letter of 23 December 1976 the Commission objected to two clauses of the agreement which, in its view, were incompatible with the principle of the free movement of goods and with the competition rules contained in the EEC treaty. By letter of 10 February 1977 victor Hasselblad agreed to comply with the Commission's recommendations. Accordingly, on 6 March 1978 a new version of the distributorship agreement was sent to the Commission, which informed victor Hasselblad by letter of 20 February 1979 that the agreement came within the scope of Commission regulation no 67-67-EEC of 22 March 1967 (Official Journal, English special edition 1967, p. 10).

3. Hasselblad (GB) ltd is a company incorporated in the united kingdom. It signed a sole distributorship agreement with victor Hasselblad on 1 January 1958. On 2 December 1975 a new agreement differing from the standard agreement notified to the Commission was concluded between the same parties. That agreement was amended on 20 November 1977. The agreement, as amended, was notified to the Commission on 25 January 1980.

4. The applicant made its own distribution arrangements in the united kingdom for Hasselblad cameras and equipment. In 1975 there were approximately 26 Hasselblad dealers in the united kingdom, but in 1982 the number had risen to over 100. The dealer agreement used by the applicant since 1 January 1976 was amended on 1 January 1979 and notified to the Commission in December 1979.

5. Camera care ltd is a company whose registered office is in Northern Ireland. Its business premises are in London. Camera care signed a dealer agreement with the applicant on 7 January 1976. That agreement was terminated by the applicant in may 1978.

6. Camera care submitted a complaint to the Commission concerning the practices of victor Hasselblad and its sole distributors in which it claimed that the latter had infringed article 85 (1) of the EEC treaty. The Commission investigated the complaint and initiated a proceeding under regulation no 17 of the council of 6 February 1962 (Official Journal, English special edition 1959-1962, p. 87).

7. On 2 December 1981 the Commission addressed a decision to victor Hasselblad and six of its sole distributors, namely the applicant, Ilford (Ireland) ltd, James Polack APS, Telos SA, Prolux SPRL and Nordic im-und export Handelsgesellschaft MBH, in which it stated that the concerted practice engaged in between those parties to prevent, limit or discourage exports of Hasselblad equipment between the member states of the European community constituted an infringement of article 85 (1) of the EEC treaty.

8. According to article 2 of the decision, the sole distributorship agreements between victor Hasselblad and the above-mentioned distributors constitute, in so far as they grant exclusive distribution rights for Hasselblad equipment, infringements of article 85 (1). Exemptions under article 85 (3) was refused.

9. According to article 3 of the decision, the selective distribution system applied by the applicant since 1974 infringes article 85 (1) of the treaty by clauses 6, 23 and 28 of the dealer agreement, the quantitative selection of dealers and the influence of that system on resale prices. The application for exemption of the selective distribution system under article 85 (3) of the treaty was refused.

10. Article 4 of the decision provides that the undertakings to which the decision is addressed are to bring to an end forthwith the infringements referred to in articles 1, 2 and 3 and are to refrain in future from taking any measures having the same object or effect.

11. Article 6 of the decision requires the applicant to inform within three months of the date of notification of the decision and in a form previously approved by the Commission,

(a) its dealers, that cross-supplies to other dealers and exports to other member states are not forbidden and must not be prevented or discouraged, whether by price maintenance or otherwise, and

(b) the public, that it will grant after-sales service under the manufacturer's guarantee to all Hasselblad products without discrimination.

12. Article 7 of the decision requires Victor Hasselblad and the applicant not to prevent or hinder access by camera care to Hasselblad products.

13. A fine of ecu 165 000, or ukl 93 642.12, was imposed on the applicant (article 8 of the decision).

14. The applicant seeks a declaration that article 1 of the decision, article 2, in so far as it concerns the distributorship agreement between victor Hasselblad and the applicant, article 3 and article 8, in so far as it concerns the applicant, are void.

15. A number of arguments are relied upon in support of the application :

(1) the Commission's decision infringes article 190 of the treaty. It does not contain an adequate statement of the reasons on which it is based, in so far as the various arguments and circumstances put forward by the applicant were not examined and the Commission failed to explain why it did not accept the arguments and evidence adduced by the applicant.

(2)the Commission did not properly appreciate the relevant market ; had it done so, it would have been obliged to conclude that the applicant's marked share was negligible, with the result that even if the alleged conduct on the part of the applicant were established, it could not affect trade between member states within the meaning of article 85 of the treaty.

(3)the applicant never engaged in a concerted practice aimed at preventing, limiting or discouraging exports of Hasselblad equipment between the member states of the community.

(4)the sole distributorship agreement between victor Hasselblad and the applicant does not constitute an infringement of article 85 (1) of the treaty.

(5)the selective distribution system operated by the applicant does not constitute an infringement of article 85 (1).

(6)in any event the Commission cannot impose a fine for conduct consistent with the selective distribution agreement notified to the Commission until exemption under article 85 (3) of the treaty has been expressly refused. Finally, the applicant claims that the amount of the fine is excessive.

1. The statement of the reasons on which the decision is based

16. The applicant considers that the decision does not contain an adequate statement of the reasons on which it is based, since the Commission did not explain on what grounds it rejected the arguments put forward by the applicant and, more particularly, since the decision makes no reference whatsoever to the abundant evidence adduced by the applicant during the administrative procedure. The decision is therefore inconsistent with article 190 of the treaty and should be declared void.

17. In that regard, it must be remembered that although article 190 of the treaty requires the Commission to mention the factual circumstances justifying the decision and the considerations which led to its adoption, it does not require the Commission to discuss all the issues of fact and law which were raised during the administrative procedure.

18. In its statement of the reasons on which the contested decision is based, the Commission set out the considerations of fact and law on which it relied. Accordingly, the submission that the statement of reasons was inadequate cannot be upheld.

2. The relevant market

19. The applicant contends that article 85 (1) of the treaty is inapplicable in the present case because its market share is negligible and therefore the conduct with which it is reproached by the Commission cannot appreciably affect trade between member states. In its view, the Commission based its decision on the finding that the market sector in which victor Hasselblad carries on business is that of medium format reflex cameras. That definition includes only certain medium format cameras and excludes all 35 mm cameras, however complex they might be. Some 35 mm cameras compete effectively with Hasselblad cameras. If the Commission had taken account of the cameras which compete effectively with Hasselblad cameras, it would have been compelled to conclude that the applicant's market share was so negligible that it could not affect trade between member states and that, accordingly, article 85 (1) was inapplicable.

20. That argument cannot be accepted. It is clear from the documents before the court that in 1978 victor Hasselblad itself stated that it was the world leader in the sector of medium format reflex cameras. In a letter to the Commission in December 1978 it estimated its share of that sector at between 20% and 25% in the federal republic of Germany, 25% in the United Kingdom, 25% in Belgium, 30% in France, 50% in Italy, 50% in Denmark, 50% in the Netherlands and 50% in Ireland. It is true that it also stated that Hasselblad cameras were competing with certain 35 mm cameras which it named, but that factor is not such as to invalidate its own definition of its business sector, namely that of medium format reflex cameras.

21. It must be remembered that, as the Commission rightly pointed out, the features which characterize Hasselblad cameras are (1) their format (film and photograph dimensions), (2) the quality of reproduction, (3) handiness (in view of their dimensions, bulk and basic design, since the image is viewed from above by means of a focusing screen placed at the top of the body, a Hasselblad camera is unsuitable for taking photographs in certain conditions, for example, where the subject is moving) and (4) the range of accessories. Moreover, the high price of a Hasselblad camera restricts its potential customers to professional photographers, trade users or specialists, keen amateur photographers or prestige buyers. The view must be taken that only cameras producing photographs and displaying characteristics which are broadly similar or comparable are reasonably substitutable for, and can therefore compete effectively with, a Hasselblad camera. Hasselblad cameras are virtually indispensable for a large number of users in the various member states of the community.

22. Furthermore, the applicant itself considers that the reputation enjoyed by Hasselblad cameras is greater that that of any other camera available in the world and they are much sought after by professional photographers and higly qualified amateurs. Even if the number of cameras manufactured each year, approximately 20 000, is not very great, their selling price is such that victor Hasselblad's turnover is considerable and even the applicant's turnover exceeds ukl... Per annum. In the circumstances, it is impossible to take the view that the restriction on trade in those cameras between member states has no appreciable effect on intra-community trade.

23. Accordingly, the submission that the applicant's market share was so negligible that article 85 (1) of the treaty is inapplicable has not been established and must be rejected.

3. The concerted practice

24. In support of the finding that the applicant has engaged in a concerted practice contrary to article 85 of the treaty, the Commission states in its decision that between June and October 1978 an undertaking known as "the amateur's nook" established in northern Ireland took delivery of a consignment of Hasselblad cameras from Ilford, the authorized distributor for Ireland. Part of that consignment was re-sold to camera care. The applicant established, by means of test purchases, that the goods in question had originally been supplied to Ilford. Victor Hasselblad therefore complained to Ilford. Ilford agreed by letter of 21 November 1978 to cease exports and to turn away foreign customers who visited its premises. Ilford complied with the export ban between November 1978 and august 1980. In December 1978 the applicant demanded compensation from Ilford in respect of expenses incurred by it as a result of the test purchases from camera care. Since Ilford assured the applicant that it would do its utmost to prevent "grey" (that is to say, parallel) exports, the applicant waived its demand for reimbursement.

25. According to the decision the proprietor of camera care ordered a large consignment of Hasselblad cameras from Telos, the authorized distributor for France, in May 1978. The applicant established by means of test purchases that the goods had originally been supplied to Telos. Following a complaint from the applicant, Telos refused to provide camera care with further supplies.

26. Similarly, the applicant contacted Prolux, the authorized distributor for Belgium, with a view to preventing exports of Hasselblad cameras from Belgium to the united kingdom which were intended for camera care.

27. The applicant does not dispute that after the termination of the dealer agreement with camera care in 1978 it sought to stop supplies of Hasselblad cameras to camera care and with that end in view approached victor Hasselblad, Ilford, Telos and Prolux. However, it maintains that once camera care ceased to be an authorized distributor, it was justified in considering that authorized distributors and dealers could no longer supply camera care. In September 1979, however, following consultations with its lawyer, the applicant ceased its efforts to block supplies of equipment to camera care.

28. The Commission rightly states, without being seriously challenged, that in December 1979 the applicant purchased cameras from camera care through one of its employees in order to determine their origin ; therefore the Commission may legitimately take the view that the applicant's participation in the concerted practice lasted until the end of 1979.

29. The applicant's participation in a concerted practice aimed at restricting parallel imports into the united kingdom between may 1978 and December 1979 has therefore been established.

4. The sole distributorship agreement between victor Hasselblad and the applicant

30. The first distributorship agreement between victor Hasselblad and the applicant was concluded in 1958. That agreement contained a clause prohibiting sales by the applicant outside the united kingdom. In 1975 that agreement was replaced by a new sole distributorship agreement not containing any prohibition on exports. The terms of the agreement were thus such that it could qualify for block exemption under regulation no 67- 67-EEC of the Commission. The Commission maintains in its decision, however, that the agreement does not qualify for such exemption on the ground that the contracting parties took steps to obstruct the provision of supplies of products referred to in the agreement to dealers elsewhere in the common market, which renders the exemption contained in article 1 inapplicable by virtue of article 3 of the same regulation.

31. In that connection the Commission relies, in particular, on the conduct of victor Hasselblad and of the applicant, considered above, as regards furnishing camera care with supplies.

32. The Commission also contends that the applicant introduced a guarantee, known as the "silver service guarantee", covering only Hasselblad cameras imported into the united kingdom through the applicant. Every Hasselblad camera is guaranteed by the manufacturer for a period of one year. The sole distributor is under an obligation to carry out the necessary repairs. The silver service guarantee extends the one-year period to 24 months for cameras imported through the applicant. The Commission claims that in its advertisements the applicant offered users covered by the silver service guarantee a 24 hour repair service and that it accords priority to such repairs.

33. According to the Commission's decision (paragraph 57), the fact that the applicant advertises or practices a more rapid repair service for "properly" imported cameras and thus places parallel imports of Hasselblad products at a disadvantage constitutes a measure in restraint of competition.

34. In that regard it must be remembered that in reply to a question put to it by the court, the Commission was unable to show that cameras which were the subject of parallel imports had to wait longer for repairs with the applicant than did the same cameras in other member states ; it was only able to show that the applicant reserved special advantages for its own customers (a 24 hour repair service and a two-year guarantee). In the circumstances, such conduct cannot be regarded as restricting the supply of parallel imports of cameras where such cameras are fully covered by the manufacturer's normal guarantee which the distributor is under an obligation to provide.

35. The view must therefore be taken that although the Commission's objection to the silver service guarantee is unfounded, the existence of a concerted practice aimed at restricting parallel imports intended for camera care has been established and is sufficient to exclude block exemption under regulation no 67-67-EEC.

36. The applicant also submits that the Commission did not provide it with an opportunity to express its views concerning the sole distributorship agreement concluded with victor Hasselblad and that article 2 of the decision should therefore be declared void. That argument cannot be accepted. It is clear from the statement of objections that the Commission informed the applicant that the alleged conduct had the effect of excluding the agreement from the exemption provided for by regulation no 67-67-EEC.

37. Accordingly, the application for a declaration that article 2 of the decision is void in relation to the applicant must be rejected.

5. The distribution system applied in the united kingdom

38. The Commission states in article 3 of its decision that the selective distribution system applied by the applicant since 1974 infringes article 85 (1) of the treaty by clauses 6, 23 and 28 of the dealer agreement, the quantitative selection of dealers and the influence of that system on resale prices.

39. According to the decision, the applicant decided in 1974 to introduce a distribution system for Hasselblad products. Only retailers who signed the standard dealer agreement were recognized as authorized Hasselblad dealers and supplied by the sole distributor. With effect from 1 January 1979 the applicant amended the existing dealer agreement in certain respects. The amended dealer agreement was notified to the Commission on 25 January 1980.

40. It must be pointed out in that regard that clause 6, to which the Commission refers, was not included in the agreements concluded before 1 January 1979. Accordingly, the objection concerning that clause cannot be upheld as regards the period between 1974 and 1 January 1979. Clauses 23 and 28, mentioned in the decision, correspond to clauses 22 and 27 in the agreements concluded before 1 January 1979. If in that respect a clerical error was made in the decision, that error cannot have had any material effect on the applicant's understanding of the Commission's objections. As regards the period between 1974 and 1 January 1979, the Commission's decision must be understood as referring to clauses 22 and 27 of the previous agreements. The distribution system must therefore be considered in the light of those observations.

41. The Commission objects in particular to the following clauses of the dealer agreement, as amended in 1979, on the ground that they infringe article 85 (1) of the treaty :

(a) clause 6 (a), which prohibits under any circumstances a dealer from supplying Hasselblad products to any other dealer in cameras, in the united kingdom or elsewhere, without the applicant's prior consent ;

(b)clause 23 (c), which requires, in particular, the dealer to withdraw and not to repeat any advertisements or announcements to which the applicant has notified its objections in writing to the dealer ; and

(c)clause 28, which enables the applicant to terminate the agreement without prior notification if the dealer fails to observe any of the terms or conditions of the agreement or if the dealer changes the geographical location of his premises without the applicant's prior approval in writing, the dealer being required to notify the applicant immediately if he transfers his business premises to another location.

42. In support of its objection the Commission contends that the restrictive effect on competition of provisions such as clause 6 of the agreement has been recognized in its own decisions and in the case-law of the court. The prohibition on cross-supplies restricts competition because it seriously impedes the economic freedom of authorized dealers and makes them wholly dependent.

43. The power conferred on the applicant by clause 23 of the dealer agreement to require a dealer to stop publishing announcements in the press, to cease other advertising activities and to refrain from repeating them is tantamount to a right of retroactive censorshop which enables the applicant to prohibit dealers who are particularly active in the field of competition and prices, and more particularly those who import otherwise than through victor Hasselblad's sole distributors, from advertising their activities.

44. As regards the admission of dealers to the distribution network, the Commission states in its decision that one of the characteristics of the applicant's marketing policy is not to give all qualified dealers access to Hasselblad products. The Commission considers that the purpose of clause 28 of the agreement is to permit the applicant to close its distribution network to some dealers who satisfy all the terms and conditions laid down in connection with the distribution system, thereby preventing potential competition within the area allotted to authorized dealers. Accordingly, dealers are selected not, or not only, by reference to objective criteria of a qualitative nature but on the basis of the applicant's quantitative assessment. In that regard, it is said in the decision (paragraph 35) that the applicant stated to the Commission in February 1980 that it could not appoint a dealer who effected parallel imports of Hasselblad goods because in such a case it would have no control at all over the products ordered.

45. The applicant maintains that the purpose of the prohibition of sales contained in clause 6 of the agreement was not to restrict exports. The words "or elsewhere" contained in that clause were inserted by the applicant's solicitor and the applicant never interpreted them in the manner alleged by the Commission. The applicant never took steps to impede exports by its dealers.

46. It should be observed that the agreement prohibits the sale of Hasselblad cameras to other dealers, including authorized dealers in the united kingdom or elsewhere. As the Commission rightly points out, a prohibition of sales between authorized dealers constitutes a restriction of their economic freedom and, consequently, a restriction of competition. Furthermore, the fact that the applicant never impeded exports by its dealers is not sufficient to preclude the existence of a clear prohibition of exports.

47. As regards clause 23 of the agreement, the applicant claims that the Commission ignored the evidence resulting from the dealer agreement itself and from other Hasselblad publications as to the importance which the applicant attaches to a common advertising programme of a high standard. In that connection, clause 22 (b) of the agreement provides that "the dealer shall at all times actively promote the sale of Hasselblad products... And foster in every way the reputation and the goodwill of the manufacturer, the company and the dealer". The sole purpose of clause 23 is to ensure a high standard in advertisements of Hasselblad products.

48. In reply to that argument the Commission states that the applicant's explanation is contrary to its conduct in practice. In a letter dated 25 January 1978 addressed to its solicitor (and submitted by the applicant itself to the Commission) the applicant stated that an advertisement by camera care was causing problems in view of the selling prices mentioned in it ("strictly on prices"). The advertisement in question contains the phrases "we will match any price", "match any price" and "unbeatable prices".

49. Although in the circumstances the applicant chose to terminate the agreement concluded with camera care, it is clear that it scrutinized the wording of advertisements as regards selling prices and that the contested clause was drafted in such a way as to permit the applicant to prohibit such advertisements. The Commission's decision was therefore well founded as far as clause 23 is concerned.

50. Furthermore, the applicant does not dispute that the number of authorized dealers is restricted. In the letter which accompanied the notification of the dealer agreement, it was stated that the applicant was prepared to grant dealerships to any qualified dealer subject, however, to the condition that if in a small area there were already a large number of dealers, it reserved the right not to appoint a new dealer in order to avoid a situation in which standards of quality could no longer be maintained by dealers. The applicant claims that the reason for that restriction is that a dealer is required to keep a given number of cameras in stock and that if a large number of dealers were appointed as authorized dealers, the sales prospects of some would be such that their business profits would not justify the maintenance of the required stock. It does not challenge the statement in the decision to the effect that it was not prepared to appoint a dealer who effected parallel imports.

51. The Commission was justified in concluding from this that the applicant's selection of dealers was based not only on qualitative but also on quantitative criteria, the more so as it is common ground that of the 2 000 dealers in photographic equipment in the united kingdom only approximately 100 are authorized dealers. Clause 28 of the dealer agreement allowed the applicant in fact to restrict the freedom of dealers, even authorized dealers, to establish their business in a location in which the applicant considers their presence capable of influencing competition between dealers.

52. The Commission was therefore right in finding that clauses 22 and 27 of the dealer agreement in force before 1 January 1979, clauses 6, 23 and 28 of the dealer agreement as amended on 1 January 1979 and the criteria for the selection of dealers constitute infringements of article 85 (1) of the treaty.

53. In so far as the decision states that clause 6 of the dealer agreement constitutes an infringement of article 85 (1) of the treaty in respect of the period between 1974 and 1 January 1979, it must be declared void.

The fine

54. The applicant maintains that even if it were established that it had engaged in the alleged concerted practice aimed at restricting trade between member states, the Commission cannot impose a fine upon it on that account. The 1958 agreement between victor Hasselblad and its other sole distributors in the other member states was notified to the Commission in 1965 and article 15 (5) of regulation no 17 prevents the Commission from imposing a fine for conduct which took place after that notification and prior to a decision by the Commission granting or refusing an exemption under article 85 (3) of the treaty, where such conduct remains within the limits of the activity described in the notification.

55. That argument cannot be accepted. At the time of the concerted practices at issue the applicant was no longer a party to the notified agreement but was bound by an agreement dating from 1975 which did not contain a clause restricting exports or imports. The applicant cannot therefore rely on the notification of an agreement to which it was no longer a party in order to escape the fine.

56. Finally, the applicant maintains that the amount of the fine is disproportionate to the infringements established by the Commission and, in particular, is excessive in view of the fine imposed on victor Hasselblad having regard to their respective turnovers.

57. In that regard, it must be pointed out that the amount of the fine is determined on the basis of a number of considerations, including the gravity of the infringement and its duration. An undertaking's turnover is only one of the factors which may be taken into account. The aim of the concerted practice established by the Commission was to prevent any imports into the united kingdom of Hasselblad cameras intended for camera care and as such the practice constituted a flagrant breach of the rules on competition contained in the treaty. However, it would appear that the Commission fixed the amount of the fine on the basis of various considerations, one of which was the fact that the applicant's practice in connection with the silver service guarantee was in breach of the rules on competition and the applicant had delayed repairs to cameras which were the subject of parallel imports, matters which the Commission failed to prove in the proceedings before the court. Furthermore, article 3 of the decision must be declared by the court to be void in one respect, and in relation to a specific period. Accordingly, the infringements found by the Commission have been established before the court only in part. A further consideration is that the applicant is not a large undertaking. In the circumstances, the court has decided to reduce the fine from ecu 165 000 to ecu 80 000.

Costs

58. Article 69 (2) of the rules of procedure provides that the unsuccessful party is to be ordered to pay the costs. However, the first paragraph of article 69 (3) provides that the court may order the parties to bear their own costs in whole or in part where each party succeeds on some and fails on other heads.

59 as each party has failed on some heads, each party must be ordered to pay its own costs.

On those grounds,

The court

Hereby :

1. Declares the Commission's decision void in so far as it finds that clause 6 of the dealer agreement constitutes an infringement of article 85 (1) of the treaty as regards the period between 1974 and 1 January 1979.

2.reduces the fine imposed on the applicant to ecu 80 000, or ukl 45 218.18.

3.dismisses the remainder of the application.

4.orders each party, including the intervener, to pay its own costs.