JUDGMENT OF 20. 3. 1957 — CASE 2/56 GEITLING v HIGH AUTHORITY
In Case 2/56
THE COURT composed of: Massimo Pilotti, President, Ch. L. Hammes and P.J.S. Serrarens, Presidents of Chambers, L. Delvaux and J. Rueff, Judges, Advocate-General: K. Roemer Registrar: A Van Houtte
gives the following
JUDGMENT
Facts
I — Procedure and conclusions of the parties
The successive stages of the procedure were as follows:
1) By application lodged at the Court Registry on 25 March 1956 through their Advocate, Werner von Simson, the 19 mining undertakings of the Ruhr basin being members of the Geitling selling agency for Ruhr coal, a limited liability company, and the Geitling selling agency for Ruhr coal, a limited liability company, with an address for service at the Chambers of their Advocate at Luxembourg-Capellen, asked for the annulment of Article 8 of Decision No 5/56 of the High Authority of 15 February 1956, published in the Journal Officiel, No 6, of 13 March 1956, p. 29et seq., and claimed that the Court should: annul Article 8 of Decision No 5/56 of the High Authority of 15 February 1956. The following annexes were joined to the application:
a) The issue of the Journal Officiel in which the contested decision was published;
b) The agreement made on 6 February 1956 between the mining undertakings, being members of the Geitling agency, establishing trading rules for the Common Market from 1 April 1956, and an annex to those rules.
2) The High Authority, with an address for service in Luxembourg at its seat, 2 Place de Metz, and with the support of an order made upon its request extending the time-limit for sending in its defence, lodged its defence on 26 May 1956 within the time allowed, and contended that the Court should: reject as unfounded the application lodged by the 19 mining undertakings of the Ruhr basin, being members of the Geitling selling agency for Ruhr coal, and by the Geitling selling agency for Ruhr coal, a limited liability company, with all consequences at law, and order the applicants to bear the costs. By an authority to act signed by Rene Mayer, President of the High Authority, and lodged at the Registry on 20 April 1956, Robert Krawielicki was named the defendant's agent, and by an authority to act also signed by Rene Mayer, President of the High Authority, and lodged at the Registry on 16 May 1956, Philipp Möhring, Advocate at the Bundesgerichtshof, Karlsruhe, was named an assistant to the aforesaid agent of the High Authority.
3) On 29 September 1956, the applicants lodged their reply within the time allowed by order of the President of the Court and reaffirmed the conclusions in their application.
4) The rejoinder was lodged on 15 November 1956, within the time allowed to the defendant by order of the President. The defendant reasserted its earlier conclusions.
5) After the case had been assigned to the First Chamber, the Judge-Rapporteur, Ch. L. Hammes, designated as such by the President of the Court by letter of 3 October 1956, lodged the preliminary report, pursuant to Article 34 (2) of the Rules of Procedure of the Court.
6) In his report, the Judge-Rapporteur concluded that there was no need for any preparatory enquiry in the case. In accordance with the last paragraph of Article 34 of the Rules of Procedure of the Court, the Court, upon hearing the views of the Advocate-General, decided to commence the oral procedure without any preparatory enquiry. In accordance with Article 45 (2) of the Rules of Procedure of the Court, the acting President of the Court set down the hearing of the oral procedure for 28 January 1957, and if necessary, on the days following.
7) At the opening of the hearing, the Judge-Rapporteur, in accordance with Article 21 of the Protocol on the Statute of the Court, read his report. The oral arguments of the parties were heard through their Advocates.
8) At the hearing on 11 February 1957, pursuant to the procedure laid down by Article 11 and by the last paragraph of Article 21 of the Protocol on the Statute of the Court, the Advocate-General delivered his opinion in which he advised that the application should be dismissed and that the applicants should be ordered to bear the costs.
9) In accordance with Article 50 (2) of the Rules of Procedure of the Court, the President of the Court declared the oral procedure at an end, and the case was reserved for deliberation.
10) Judges O. Riese and A. van Kleffens being prevented from attending, the judgment was delivered by the Court composed of five judges, in accordance with Article 18 of the Protocol on the Statute of the Court.
II — Summary of the facts
The application is based on the following facts, which are not contested by the parties:
1) The application contests Article 8 of Decision No 5/56 of 15 February 1956. The contested measure was adopted in connexion with the reorganization, by the producer undertakings, of the sale of Ruhr coal and its essential provisions were approved by the High Authority in Decisions Nos 5/56 and 8/56 of 15 February 1956, after it had considered whether they were in conformity with the requirements laid down by the Treaty concerning cartels. That reorganization divides the sales cartel of the mining undertakings of the Ruhr basin into three independent selling agencies. Until that time the said undertakings were part of a single organization, the Gemeinschafts-Organisation Ruhrkohle GmbH. The said agencies consist of applicant No 2 and the two other agencies of which about the same number of undertakings are members.
2) In accordance with the provisions of Article 65 of the Treaty, that reorganization and also an agreement made on 6 February 1956 in identical terms by each of the three selling agencies on trading rules, were submitted to the High Authority for authorization.
3) The abovementioned Decision No 5/56 approved for the most part the applicants' requests, in so far as in the opinion of the High Authority joint selling would make for an improvement in the distribution of fuels and was necessary in order to ensure that the sales would be profitable, that the employment would be stable, and that supplies would be regular.
In so far as the High Authority took the view that some of the agreement went beyond that purpose, it refused to authorize them. Furthermore certain agreements were granted authorization subject to limitations and to conditions guaranteeing, in particular the independence of the selling agencies.
More particularly, by virtue of Articles 7 and 8 of the decision, the conditions laid down by the common trading rules for acceptance were authorized, whilst another — the clause at issue — was rejected. tions, only three ot the conditions for such acceptance were authorized, whilst another — the clause at issue — was rejected.
By virtue of those articles, a wholesale trader may be accepted and given the right to obtain direct supplies provided that:
a) the trader sells within the Common Market a minimum of 75000 metric tons of fuel from the producer basins of the Community;
b) of that total, 40000 metric tons at least are sold within the trader's sales area;
c) of which at least 12500 metric tons come from the Geitling selling agency.
The condition contained in the trading rules and rejected by the High Authority provided in addition that in his sales area the wholesaler had to sell 12500 metric tons from one of the three selling agencies for Ruhr coal in addition to the 12500 metric tons from Geitling.
The application concerns the refusal to authorize that condition, contained in Article 8 of Decision No 5/56, and claims that the said article should be annulled.
III — Admissibility
No objection was raised against the admissibility of the applications during the written procedure.
However, during the oral procedure, the defendant argued that in the case of an application against one isolated article of a decision, the annulment of that article would in practice be tantamount to a new decision which the Court has no jurisdiction to adopt, even indirectly, since Article 34 only makes provision for referring the matter back to the High Authority, and that therefore the admissibility was doubtful.
IV — Summary of the submissions made by the parties
The arguments of the parties may be summarized as follows:
1) The applicants claim that Article 8 of Decision No 5/56 of the High Authority of 15 February 1956 should be annulled. They claim that it was wrong not to authorize the criterion at issue. They base their arguments on the ground of infringement of essential procedural requirements, and of manifest disregard of the provisions of the Treaty.
2) The defendant contends that the application should be dismissed and that the applicants should be ordered to bear the costs. It is of the opinion that an adequate statement of reasons for the contested decision is given and that it is a just decision both on the facts and on the law. It denies that it has infringed the Treaty or has manifestly disregarded its provisions. It argues that its decision is based on a general economic assessment, which is not subject to review by the Court in the absence of any such disregard of the Treaty. In support of these submissions, the parties put forward the following considerations:
A — Infringement of essential procedural requirements
1. According to the applicants, the contested decision infringes Articles 5 and 15 of the Treaty, since the High Authority has not indicated the reasons for which the criterion requiring the sale of 25000 metric tons of Ruhr coal, which it has rejected, is illegal. The fact that the limit of 25000 metric tons may not be necessary for establishing a standard for a certain volume of business cannot be put forward as a reason, for otherwise two of the three other approved criteria should also have been rejected, because each of those criteria also constitutes such a standard.
2. The applicants also argue that in the reasons for its decision the High Authority is required, according to the case-law of the Court on Articles 5 and 15 of the Treaty (Judgment in Case 6/54), to mention the essential elements of the findings of fact on which the legal justification for the measure depends. Those findings are wanting as regards both (a) the finding as a fact that the rejected clause was of a nature restrictive of competition, and (b) the incompatibility of that clause with Article 65 (2)(a) and (b) of the Treaty and, accordingly, the absence of the conditions required for authorization. As to (a): In stating the factual reasons for its decision, the High Authority ought to have mentioned the objective finding, described in Article 4(b), resulting, in its view, in the possibility of altering the system of competition on the market: in particular it ought to have indicated where, in its view, a restriction on competition lay. It does not suffice to state that the authorization of the criterion would result in sharing the market and the customers. In addition, mention should have been made of the precise consequences liable to restrict competition, for example the effect on the number of wholesalers approved if the rejected clause was or was not applied. As to (b): There is no indication of the reasons for which the clause at issue could not, unlike the other clauses, be authorized under Article 65 (2). In its defence, for the first time, the defendant does not content itself with asserting that the clause is more restrictive than is necessary for the purpose of the agreement, but argues why such is the case: that the clause would enable the undertakings to determine the prices of a large part of the Community's coal production, to control extraction and sales and thus to restrict competition. Those reasons are not stated in the decision itself.
b — The High Authority replies to these arguments as follows:
1. The applicants have failed to understand the scope of Articles 5 and 15 of the Treaty; In the statement of the reasons for Decision No 5/56, the High Authority did not limit itself to the essential elements of fact, which would have been sufficient; it set out, in addition, all the legal aspects.
2. In examining the procedural requirements, the only possible starting point is the legal assessment made by the High Authority; in this respect sufficient reasons are given in the contested decision. The only thing that matters is whether sufficient legal reasons are given for the decision according to the conception of the High Authority, not whether that conception is contrary to the Treaty. In Decision No 5/56, the High Authority has expressly indicated the guiding principles and considerations which, under Articles 4 and 65 of the Treaty, were decisive in deciding whether to authorize the agreements submitted.
3. It is an obvious fact that the establishing of sales areas and the setting of limits as to tonnage involve a sharing of the market and of customers. The applicants have themselves accepted the fact that an authoriza tion under Article 65 (1)(c) was necessary since they submitted a request for authorization. Since joint selling falls in its entirety under Article 65 (1), it was not necessary to prove this afresh in respect of each particular clause. On the contrary, it was necessary to refuse to authorize any clause which permitted discrimination or which contained a restriction which was not necessary in order to achieve the purpose intended.
4. It was for that reason that in its decision the High Authority stated that the clause not authorized more particularly (a) permitted discrimination and (b) was of a more restrictive nature than was required by the purpose of the trading rules. As to (a): In particular there is discrimination in respect of producers from other basins of the Community, since the required condition encourages traders towards a preference, up to 25000 metric tons, for fuel from the other selling agencies for Ruhr coal and, therefore, to defer the purchases of fuel from producers from other basins until that figure is reached. A single instance of discrimination of that kind is sufficient to bring the prohibition into action. As to (b): In addition, the rejected clause is of a more restrictive nature than is required by the legitimate purpose of the trading rules, namely the establishment of a standard for a certain volume of business. Reference should also be made to the main line of thought running throughout Decision No 5/56, namely the principle that the three selling agencies should be independent and the possibility of pursuing an autonomous policy as regards sales. Since the decision contains these findings, the complaint as to infringement of essential procedural requirements is unfounded.
B — Infringement of the Treaty
a — Preliminary question: Jurisdiction of the Court to undertake a review
The defendant has objected to the complaint of infringement of the Treaty on the general ground that the Court's examination can only go into the legality of the decision.
According to the second sentence of the first paragraph of Article 33 of the Treaty, the Court may not examine the High Authority's evaluation of the situation resulting from economic facts in the absence of evidence allowing of the conclusion that there exists a manifest failure to observe the provisions of the Treaty.
With this reservation, which it puts forward in the rejoinder in respect of the arguments of the applicants, the High Authority only adopts a position on the complaint of infringement of the Treaty as an alternative.
1. (a) The application states first that there is a manifest failure to observe the provisions of the Treaty in the illogicality, on the part of the High Authority, of accepting discrimination in respect of other producers as legally possible. (b) Next the applicants say that there is a manifest failure to observe the Treaty in that a concept not specified in the Treaty has been applied to a situation to which it manifestly does not relate. The High Authority's conception regarding the qualifications required for approval as a wholesaler is erroneous and is foreign to the purposes of the Treaty. (c) Furthermore, there can be no question of assessing a situation arising from a set of economic facts. The assessing of the clause at issue is only concerned with one matter, namely the conditions necessary in order to qualify as a wholesaler. (d) The finding that the clause as to 25000 metric tons prevents, restricts or distorts normal competition within the meaning of Article 65 is also manifestly erroneous first because it is inconceivable that such consequences can arise having regard to the very large number of wholesalers all of whom are treated on the same basis, and secondly because there would no longer be any competition between the three selling agencies for Ruhr coal if the clause were struck out, for it is that very clause that renders competition possible. (e) Moreover the general finding contained in Decision No 5/56, that the clause at issue enables the applicants to determine prices or to control the extraction and sale of a substantial part of the coal production of the Community is obviously irrelevant as regards Article 8 of the decision. The High Authority has authorized the other provisions of the new rules as being in accordance with the Treaty, and yet, looked at in isolation, the clause at issue cannot put the applicants in a monopoly situation.
2. As regards the Court's power of review, the defendant denies that there exists any evidence of manifest disregard for the Treaty. It states in detail in the rejoinder the reasons for which the complaints put forward by the applicants are not subject to any review: (a) From the point of view of discrimination, a study of the economic justification for a distinction between two groups of traders involves examining the repercussions of that distinction on the coal market as a whole, and thus undertaking a general assessment. Now, the considerations taken into account by the High Authority and contested by the applicants do not prove a manifest disregard for the concept of discrimination, nor, therefore, of the Treaty, such that the second sentence of the first paragraph of Article 33 can apply, but only an economic assessment different from the applicants' assessment. (b) As regards restriction on competition, it is essential for the decision to be based on a manifestly incorrect interpretation of a rule of law. Therefore should the High Authority make an incorrect assessment of an economic situation, this is a matter of little importance provided, however, that the error does not consist in a manifest disregard for a rule of law. Since the agreement made by the three selling agencies was caught by Article 65 (1), it was necessary, pursuant to Article 65 (2), to examine its various provisions with regard to the repercussions in respect of the third criterion, in so far as traders were to be excluded for reasons other than an improvement in distribution. That, again, involves an economic finding.
b — Restriction on competition within the meaning of Article 65 (I)
1. The application starts on the basis that a restriction on competition exists and at first it only examines the possibility of authorizing the proposed criterion. During the oral hearing, the applicants' Advocate also accepted that the trading rules as a whole needed authorization. In the reply, however, it was denied that the clause as such was of such a nature as to restrict competition and thus fell under the prohibition in Article 65 (1). (a) The sharing of the market does not restrict competition, having regard to the large number of wholesalers approved notwithstanding the clause. Furthermore, the corrective clause included in the decision requires that any reduction in the number of wholesalers that might perhaps arise by reason of the application of the provision at issue shall be corrected. (b) On the contrary, the clause is a factor which stimulates competition in favour of Ruhr coal because it encourages the purchase of that coal in particular, in which wholesalers would otherwise have shown a less keen interest. (c) It does not constitute a measure having repercussions on the market because its economic purpose is otherwise, namely to ensure that wholesalers shall have adequate qualifications.
2. The defence sets out in detail the reasons for which the defendant is of the opinion that there is a restriction on competition. (a) First, there is a restriction as regards relationship between producers and traders, in the form of a sharing of the market and of customers. That sharing is an element of the agreement and requires authorization. (b) Furthermore the clause restricts competition between the agencies. Since all three apply the same rules, they mutually have regard in respect of their wholesalers to the tonnages which the latter have bought from the two other agencies. The effect of that is up to the amount in question (12500 metric tons), the interest that traders might have had in purchasing coal from other basins is eliminated. (c) In the rejoinder, the defendant states that the whole of the agreement falls within Article 65 (1) and so also, therefore, do each of its clauses, which could be prohibited if they were neither essential nor necessary for its purpose. (d) The number of traders is not relevant. What is decisive is that those traders who do not meet the requirements of the clause are set at a grave disadvantage compared with the others for a reason foreign to the principle of competition. The clause also has the effect ot restricting the competitiveness of other producers, which in fact constitutes national discrimination from the point of view of the Community. (e) Finally the High Authority is of the opinion that the rejected criterion leads to a mutual sales guarantee between the three selling agencies for Ruhr coal, and thus to a considerable extent they abandon the pursuit of an autonomous sales policy.
c — The possibility of authorization under Article 65 (2)
1. The applicants complain first that the High Authority did not consider whether the clause at issue could be authorized under Article 65 (2). They are also of the opinion that if a restriction on competition does exist it is within what is permitted by the provisions of the Treaty because it is not more restrictive than is required by the purpose of the trading rules. The reply asserts that the alleged reason, to the effect that the clause at issue is incompatible with Article 65 (2)(a) and (b), does not appear in the decision and in addition is not correct in fact. There is no limit on the competition between the three selling agencies. The requirement of purchases of 25000 metric tons of Ruhr coal is justified in fact, because it was necessary to require that the means of transport and methods of insurance be identical and that interchangeable stocks be accumulated. The defendant's objections are in reality directed at the fact that the coal offered by the three agencies is comparable and that the advantages resulting from this are extended to the two other agencies. Now the fact that the coal is comparable is attributable to natural conditions. To make a distinction between the applicants' coal and coal from the two other selling agencies would be unreal.
2. (a) The High Authority rejects the complaint that it did not examine the possibilities of granting an authorization under Article 65 (2). (b) It also states that the disputed part of the trading rules: (1) as regards the relationship between Geitling and the traders of the Community, is more restrictive than is required by the purpose of the agreement; (2) as regards the relationship between Geitling and the two other selling agencies for Ruhr coal, results in restricting competition excessively. The additional requirement is not justified by Geitling's interest in an improved distribution of the fuel which it sells. Nor can it contribute in any way to an improvement in the sale of coal. It is therefore of a more restrictive nature than is required by its purpose.
d — The problem of discrimination
In the first place, the parties disagree on the question whether, in the procedure for authorization, Article 4 (b) of the Treaty has any significance independently of Article 65 (2).
1. On this subject, the applicants argue that agreements intended to create discrimination may not be authorized simply by virtue of the first subparagraph of Article 65 (2). For such discrimination is always, in effect, of a more restrictive nature than is required by their legitimate purpose (the improvement of distribution or of production). The prohibition in Article 4 (b) on discriminatory measures reappears in the conditions for authorization set out at (b) in the first subparagraph of Article 65 (2). In that respect, Article 65 constitutes the lex specialis in relation to Article 4. Of itself, Article 4 (b) does not suffice as a reason in support of a decision to refuse to authorize the creation of a cartel. Rules which meet conditions set out in Article 65 (2) cannot infringe Article 4. Article 4 (b) and the first subparagraph ot Article 65 (2) at (a) and (b) complement each other perfectly in proceedings for the authorization of a cartel, it is the first paragraph of Article 65 (2) at (a) and (b) alone that can be applied as the rule involving the prohibition of the discrimination in Article 4 (b). In order that section II (1) (c) of the trading rules may be authorized, it is therefore sufficient for it to meet the conditions for authorization in the first paragraph of Article 65 (2), which is the lex specialis. In so far as it applies a particular kind of practice tending to restrict competition, the prohibition in Article 4 (b) is included in the general provisions of Article 65 (1) and it is not excluded by those which are enumerated ‘in particular’.
2. (a) The defendant argues this is quarrelling over words: A cartel between producers which results in discrimination between traders and between producers is not essential in order to obtain an improvement in distribution. Moreover it is always of a more restrictive nature than is required by its purpose. The case-law of the Court has given to Articles 2 to 4 of the Treaty the status of principles. The High Authority must therefore take those provisions into account in all its decisions. Therefore, when it examines whether and to what extent an agreement meets the conditions set out in Article 65 (2) (a), the High Authority must always consider whether that agreement involves discrimination. In effect, it matters little whether the defendant expressly refers to Article 4 (b) in the procedure for authorization and uses the concept of ‘discrimination’ or whether it relies only on Article 65 (2). When the conditions set out in paragraph 2 (a) and (b) are met, it is always necessary directly or indirectly to consider whether the agreement involves discrimination. (b) In its rejoinder, the High Authority says that its refusal to grant the authorization is based both on an infringement of Article 4 (b) and on the fact that the provisions set out in Article 65 (2) are not met. Therefore the relationship between Article 4 and Article 65 matters but little. Secondly, the parties are not in agreement as to whether discrimination exists.
(I) Discrimination as regards traders
1. (a) The applicants argue that the concept of discrimination involves a difference in treatment between producers or customers bound by an agreement within the market. Now, under the rejected clause, the sellers do not discriminate between the purchasers, who are the only possible contracting parties. (b) In addition the applicants doubt whether Article 4 (b) is intended to ensure the independent protection of each trader. They are of the opinion that a measure affecting a trader can only be judged incompatible with the Common Market if it affects the position of the user or of the producer on the market. (c) Moreover, the prohibited clause only constitutes a condition of sale which does not differ fundamentally from other such conditions. If the defendant's point of view be adopted, all the conditions are of a discriminatory nature, because they establish a distinction between purchasers who satisfy them and those who do not. (d) The applicants have a legitimate interest in requiring not only that a wholesaler shall have proper experience of carriage, insurance and storage, but also that his business shall involve a sufficiently high tonnage of coal from the same source to enable him, should supplies from one of the selling agencies be temporarily inadequate, to turn to supplies from another agency instead. It is only with a sales figure of 25000 metric tons that there can be certainty that the business of a trader really runs to a sufficient tonnage.
2. (a) The defendant on the contrary asserts that the criterion at issue involves an unequal treatment of wholesalers, and thus of purchasers, in support of which the applicants cannot adduce any objective reason. It thus constitutes discrimination. The supplementary requirement that 12500 metric tons from the Ruhr must be purchased has no bearing on the definition of wholesalers. It thus constitutes excessive restriction (Article 65 (2)) and discrimination (Article 4 (b)). (b) In its rejoinder, the High Authority refutes the applicants' conception that the Treaty does not prohibit discrimination between traders. It appears necessary to protect traders against discrimination, since almost half the sales take place through traders. (c) In assessing the nature of the condition at issue, what is decisive is not whether an objective reason exists for establishing a distinction, but whether there exists an objective reason of such a nature as to justify that differentiation, taking into account its object and its effects, in accordance with the principles on which the Treaty is based. (d) Whereas until the opening of the Common Market it was necessary to sell a minimum of 6000 metric tons in order to be accepted as a first-hand trader, the applicants have not proved that the situation has changed so fundamentally that the figure of 12500 metric tons from one selling agency is now no longer sufficient. (e) In practice, a wholesaler is not concerned with storage. In the case of carriage by rail no problem arises. As regards carriage by water, the question of storage comes up only at the unloading stage, and here the agent for the selling agency uses the premises existing in the wholesale trade which are available for unloading. No insurance is necessary as regards carriage by rail. As gards carriage by water, it is usually the agent who insures. The general conditions of insurance apply to contracts of carriage. (f) The ostensible purpose of the clause can only be achieved if the trader purchases 12500 metric tons from each of the three selling agencies. Otherwise, he is a trader at second hand in the eyes of each of the other two selling agencies, and he must, for his part, obtain supplies from a trader approved by them, that is to say on terms different from those which are applied by the agency by which he is approved as a first-hand trader.
(II) Discrimination as regards producers
1. (a) The applicants see another infringement of the Treaty in the fact that the High Authority considers it as also legally possible for a producer to discriminate in respect of other producers. (b) The High Authority's conception that the sellers encourage the purchasers to discriminate, amounts to treating any competitive measures as prohibited discrimination. It is in the nature of competition for a seller to encourage the purchaser to discriminate between that seller and other sellers. The applicants' conception is based on the example of discount for quantity. (c) Moreover the clause at issue does not encourage the customers to distinguish between the different producers, but between one particular kind of coal, Ruhr coal, and other kinds. The advantages obtained from that distinction arise from natural conditions and failure to use them would amount to discrimination to the detriment of the other two selling agencies for Ruhr coal.
2. (a) The High Authority replies that the criterion of the purchase of 25000 metric tons from the Ruhr encourages wholesalers to defer, up to that quantity, the purchase of fuels from producers of other basins and that it involves unequal treatment of the other producers which is objectively unjustified. Thus the Geitling selling agency does not establish discrimination between itself and other producers, but between several other producers, that is to say on the one hand the other two selling agencies for Ruhr coal and, on the other hand, the remaining basins of the Community. (b) The defendant also argues that conditions encouraging the purchaser to make a distinction between the products of certain other producers cannot be considered as legitimate or fair competition. Moreover what matters as regards the existence of discrimination is not the subjective intention of the person who adopts a given measure, but the practical effect of that measure on the Common Market. (c) The example, mentioned by the applicants, of discount for quantity, legitimate in itself, clearly shows the boundary between the practice of legally acceptable competition and discrimination. The rejected criterion is tantamount in practice to a fidelity discount on a collective basis, a discount which is prohibited.
Law
A — Admissibility of the application
1. The application has been properly lodged in due form and within the prescribed time-limit. Its admissibility has not been contested by the defendant in the written procedure and the Court has no occasion to raise any objection of its own motion.
2. During the oral procedure it has been argued than an application cannot be admissible if it contests an isolated provision of a decision as a whole, since a partial annulment automatically transforms the remainder of the decision into a new decision, and that this is contrary to Article 34 of the Treaty, which provides that where a decision is annulled, the matter shall be referred back to the High Authority. This objection is unfounded because under Article 34 the judgment cannot anticipate the measures which the High Authority may be required to adopt in order to amend its decision, having regard to the annulment.
3. The contested decision individually concerns each of the 19 mining undertakings, the applicants at 1, being coal producing undertakings with a right to institute proceedings before the Court. The applicant at 2 must be considered as an undertaking regularly engaged in distribution within the meaning of Article 80 of the Treaty. Therefore the said article, together with Article 65 of the Treaty, gives it the right to institute proceedings before the Court.
4. The application is therefore admissible. The applicants may raise all the grounds set out in the first paragraph of Article 33.
B — Substance
(I) Infringement of essential procedural requirements
1. The applicants see an infringement of essential procedural requirements in the inadequacy of the reasons in support of Article 8 of the decision; according to them, an error as to reasons is equivalent to an absence of reasons. According to the general provisions of Article 5 and 15 of the Treaty, the High Authority is required to state the reasons for its decisions, mentioning those facts on which the legal justification for the measure depends, and the considerations which have led it to adopt its decision. The reasons on which the decision is based must be stated in order that review by the Court shall be possible. However, the High Authority is not required to discuss all the possible objections which might be raised against the decision.
2. In general terms, it was not necessary in the present case to state independent and exhaustive reasons for the contested article, as an element of a complex decision. Sufficient reasons can be deduced from the context of all the findings stated in support of the decision as a whole. Such is the case as regards the decision at issue. The High Authority found first that the provisions of the trading rules — the clause at issue appears among them — which determine which traders may receive direct supplies, involve a ‘sharing of customers and of the market’ within the meaning if Article 4 (d) and of Article 65 (1) of the Treaty (JO No 6 of 13.3.1956, p. 33). It went on to state that such rules can be authorized subject to certain conditions. It then explained that the parts of the commercial rules authorized met those conditions and why that was the position (JO No 6 of 13.3.1956, p. 34). At the same time, the High Authority indicated the reasons for which it was of the opinion that the clause at issue did not satisfy the said conditions. The effect of the said clause was that up to a quantity of 25000 metric tons, the dealer would ‘defer the purchase of fuels from producers of other basins’. It (thus) leads ‘to a discrimination’ and is, moreover, ‘more restrictive than is necessary in order to achieve the purpose of this delimitation’, which is to define which wholesale traders can be accepted for direct purchases (JO No 6 of 13.3.1956, p. 34). Those reasons must be considered as sufficient, since they clearly and completely set out the considerations of fact and of law on which the rejection of the clause is based. Moreover, the Court cannot share the opinion of the applicants, that the arguments of the High Authority do not constitute legally acceptable reasons, because they are also applicable to the criteria which the High Authority did not criticize. That opinion is incorrect, if only because the said criteria merely require the purchase of a certain tonnage from the whole of the Community or from the applicants, but not from certain other selling agencies. In order to judge whether there has been an infringement of essential procedural requirements, it is not necessary to examine whether the conception of the High Authority is correct in law. What matters is that it must be logically compatible with the decision adopted.
(II) Infringement of the Treaty
a — In general
Two complaints have been made in support of the submission that the Treaty has been infringed, namely failure to understand the prohibition on discrimination in Article 4 (b) and failure to understand the nprohibition on cartels in Article 65.
The examination of the submissions of the applicants must start from the request for authorization which they submitted, the partial rejection of which by the High Authority constitutes the subject-matter of the dispute.
That request manifestly acknowledged the fact that the agreement concluded by the applicants at 1, relating to ‘the sale of fuels from installations within the Common Market during the period from 1 April 1956 to 31 March 1959’ undeniably came within Article 65 (1) of the Treaty.
In its general assessment of the situation, the High Authority starts from the existence of an agreement restricting competition which must be examined in the light of the grounds for authorization. It refers both to the prohibition on discrimination and the grounds for authorization set out in Article 65 (2), the provision being perfectly complementary.
That point clearly appears from the considerations put forward in the reasons for Decision No 5/56 or arising from the Treaty, namely that the decision is based in particular on Articles 4 and 65 the Treaty (JO No 6 of 13.3.1956, p. 29);
the decision is based in particular on Articles 4 and 65 the Treaty (JO No 6 of 13.3.1956, p. 29);
the trading rules contained in the agreement concluded on 6 February 1956 by the applicants at 1 is considered as part of a joint-selling agreement on fuels (JO No 6 of 13.3.1956, p. 29 and p. 32 et seq.);
Article 65 (2) provides that joint-selling agreements may be authorized. The result is, as is shown by the remainder of the general considerations, that in the first instance they are caught by the prohibition in Article 65 (1) and that they are then subject to authorization.
Therefore the application puts forward a complaint based on an incorrect application of Article 65 of the Treaty. The structure of that provision requires that one must first examine whether there exists a restriction on competition subject to authorization (Article 65 (1)), and then examine whether there are grounds for authorizing that restriction (Article 65 (2)).
b — Infringement of Article 65 of the Treaty
1. Is there a restriction on competition within the meaning of Article 65 (1)? (a) The applicants did not at first deny that the trading rules contained in their agreement constituted a restriction on competition which was subject to authorization. In their reply, they argued for the first time that the clause at issue, as such, did not contain a restriction, and that therefore it was not subject to authorization. That argument can have its place as a development of the submission of infringement of Article 65, put forward in the application, and it must not be considered as an independent complaint, which could be rejected as out of time under Article 22 of the Statute of the Court. (b) It is not denied that the whole of the applicant's joint-selling agreement, including the trading rules, was subject to authorization. It shares the customers and the market and is such as to restrict or distort competition between the different member undertakings in Geitling. Given that the joint-selling agreement, as such, is subject to authorization, the same applies, in principle, to the detailed methods of implementation, and thus, in the present case, to the clause at issue. Moreover any limitation on the number of wholesale traders accepted as firsthand customers restricts or distorts competition between traders, whatever the number of interested parties. In order to reach this finding, it is not necessary to examine the practical effects of the trading rules in the present case. The finding emerged in abstracto from Article 65 (1). (c) Other special considerations are also relevant in the present case. The clause at issue and the reciprocal taking into account of purchases of Ruhr coal which it involves improve the competitive position of all the selling agencies for Ruhr coal vis-à-vis the remainder of the producers of the Community, and thus distort normal competition in the Common Market between each of those agencies and its competitors. The fact that the clause at issue distorts and restricts competition results primarily from the limitation on competition which it involves in respect of the sales of the products of each selling agency for Ruhr coal in favour of the two others. A wholesale trader who has already purchased 12500 metric tons from the applicant at 2 must, in order to satisfy the criterion at issue, purchase 12500 extra metric tons of Ruhr coal from one of the other two selling agencies for Ruhr coal assuming he does not purchase them from the said applicant — and that obligation distorts or restricts competition between the three agencies. The agreements previously submitted by the President and Mausegatt agencies to the High Authority for authorization contained corresponding clauses (cf. Decisions Nos 6/56 and 7/56, JO No 6 of 13.3.1956, p. 47 and p. 60). If the High Authority had authorized the clause at issue and the similar clauses of the other two agencies, it would have practically approved, on that point, of a sort of market-sharing arrangement between all the producers of coal from the Ruhr basin. The High Authority intended to prevent competition from being distorted and to prevent such a concentration from being created. Its aim was ‘to ensure by appropriate limitations and conditions in this authorization that the independence of the three selling agencies for Ruhr coal shall be preserved, and that in particular it shall remain possible for each selling agency to develop its own policy as regards production and sales’ (JO No 6 of 13.3.1956, p. 32). The finding that the clause at issue distorts and restricts competition arises from a purely legal assessment of the trading rules, without its being necessary to consider and to assess the economic circumstances. Thus the question whether the Court has jurisdiction to verify the finding does not arise in the present case. It follows from the foregoing considerations that the clause at issue was subject to authorization, not only as an element of the whole of the agreement concluded by the applicants, but also of itself.
2. Is there a restriction on competition which may be authorized under Article 65 (2)? (a) The High Authority justifies its refusal to authorize the clause at issue under Article 65 (2), on the ground that the criterion required of a wholesale trader in order that he shall qualify is of a more restrictive nature than is required for the purpose of defining the category (JO No 6 of 13.3.1956, p. 34). Moreover, it appears from the statement, looked at as a whole, of the reasons for the decision, that the clause, being an element of the trading rules and thus of the joint-selling agreement submitted for authorization, was examined and assessed in particular from the aspect of its possible contribution to an improvement in the distribution of fuels (JO No 6 of 13.3.1956, p. 30) and of the need for it, taking into account in particular the conditions applying to the coal industry (JO No 6 of 13.3.1956, p. 31). In this regard, the applicants say that the clause was necessary as part of the trading rules for determining the requirement for acceptance as wholesale traders with the right to make direct purchases, that requirement only being met if the trader sells a large tonnage of fuels of the same sort, for present purposes 25000 metric tons of Ruhr coal, upon identical conditions as to freight, carriage and storage. They argue that a trader is all the more suitable if he is given the possibility of qualifying as a wholesaler with other agencies distributing the same products by means of the provisions for set-off laid down in the rules. They claim that this sensible choice of traders is essential for an appreciable improvement in the distribution of the products of the applicants, and that it thus accords with the purpose of Article 65 (2). The clause at issue, and in particular the reciprocal set-off of quantities purchased from certain other selling agencies for Ruhr coal for which it provides, leads in any case to an improvement in the distribution of Ruhr coal as a whole. Under the terms of the trading rules, that task is entrusted to certain organizations common to the three selling agencies. In authorizing certain common organizations and arrangements, the High Authority has in fact taken into account, to the extent permitted by the Treaty, in particular by Article 65, of the natural conditions, mentioned by the applicants, common to all the mining undertakings of the Ruhr. To a large extent, those organizations ensure that the interests which the applicants purport to protect by the application of the clause at issue are upheld, namely publicity in favour of Ruhr coal (Ruhrkohlenberatungsgesellschaft — JO No 6 of 13.3.1956, p. 31) and maintenance of a balance in case of scarcity (Common Bureau— JO No 6 of 13.3.1956, p. 71). However, according to Decision No 5/56 of the High Authority, each of the newly created selling agencies must develop an independent distribution policy. Their trading rules can only be authorized under Article 65 (2) if they make for improvement in the distribution of the product of each of the agencies. The clause at issue does not fulfil that condition, because in determining who are wholesale traders, it provides for taking into account the quantities bought from the other two joint-selling agencies. As has been explained above, that is unnecessary as regards the improvement of the distribution of the product of each of the agencies. It is thus more restrictive than is required by its purpose. This finding arises directly from the text of the clause at issue and not from an assessment of the economic situation, which would not be liable to review by the Court. (b) The Court need not decide whether the clause could have been authorized if it had only required that 25000 metric tons be purchased from Geitling and if it had not gone beyond what was necessary for a substantial improvement in the distribution of its products. In any event the High Authority was not required to alter the contents of an agreement which was submitted to it in order for it to qualify for authorization. (c) Therefore, in refusing to authorize the clause at issue, the defendant did not infringe Article 65 of the Treaty.
c — Discrimination
In giving reasons for its refusal to authorize the disputed part of the trading rules, the High Authority also argues that the said clause establishes discrimination between the producers of the Community as well as between certain groups or traders.
The applicants see an infringement of the Treaty in the fact that first the High Authority manifestly failed to understand the relationship existing between Article 4 (b) and Article 65 (2) and that secondly it also applied Article 4 wrongly.
1. In support of a failure to understand the relationship existing between Article 4 (b) and Article 65, the applicants claim that the provisions of Article 65, since they rank as a lex specialis, exclude the fundamental provisions of Article 4 (b). However, such is not the case. Articles 4 (b) and 65 of the Treaty govern the different aspects of economic life in their respective fields of application. Those two articles do not exclude neither do they annul each other; they serve to bring about the objectives of the Community. They are thus complimentary in this respect. In certain cases their provisions can cover facts justifying a simultaneous and concurrent application of the said articles. That is particularly true where, as in the present case, the clause at issue is more restrictive than is necessary for the purpose of the rules, so that it not only fails to qualify for authorization under Article 65, but also can bring about discrimination within the meaning of Article 4 (b). Therefore in mentioning Article 4 (b) in support of its decision, the High Authority did not infringe the Treaty.
2. The High Authority was right in stating that the clause at issue could bring about discrimination. (a) Discrimination between producers is conceivable and possible as the High Authority has rightly assumed. The effect of the clause issue is that the applicants take into account purchases made by wholesalers from two other given agencies, whereas the same competition should exist between the said agencies and the applicants as exists between the latter and the other producers of the Community, whose sales the said applicants do not take into account. That method of proceeding constitutes indirect discrimination in that it encourages the purchasers towards a preference for obtaining supplies from the producers of Ruhr coal, to the detriment of the remaining producers of the Community. (b) In addition, the facts of the case show the existence of discrimination between traders. According to the clause, traders — who are purchasers within the meaning of Article 4 (b)—ordering the same quantity, 12500 metric tons, from Geitling, are treated unequally, for inadequate reasons, according to whether they also purchase 12500 metric tons from President or from Mausegatt. The possibility exists of these traders being placed at a disadvantage, and that constitutes discrimination. Accordingly the submission as to infringement of the provisions concerning discrimination is unfounded. Therefore the application must be rejected.
C — Costs
Under Article 60 of the Rules of Procedure of the Court, the unsuccessful party shall be ordered to pay the costs; the applicants must accordingly be ordered to bear the costs of the proceedings.
Upon reading the pleadings; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 4, 5, 15, 33, 34, 65 and 80 of the Treaty; Having regard to the Protocol on the Statute of the Court of Justice; Having regard to the Rules of Procedure of the Court of Justice and to the Rules of the Court on costs THE COURT hereby: