JUDGMENT OF 12. 7. 1962 — CASE 16/61 MODENA v HIGH AUTHORITY

In Case 16/61

THE COURT composed of: A. M. Donner, President, O. Riese (President of Chamber), L. Delvaux, Ch. L. Hammes (Rapporteur) and A. Trabucchi, Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts

The facts may be summarized as follows:

1) As the result of checks carried out between 14 and 31 January 1959 and 30 September and 14 October 1959 on the company ‘Acciaierie Ferriere e Fonderie di Modena’ (hereinafter called ‘Modena’), the High Authority found that the said company had committed certain infringements of Article 60 of the Treaty establishing the European Coal and Steel Community and of the Decisions of the High Authority Nos 30/53, 31/53, 1/54 and 2/54 relating to practices prohibited by Article 60(1) of the Treaty and to the conditions for publicizing price lists and conditions of sale applied by undertakings in the steel industry.

2) According to the contested Decision these infringements consist of the following:

a) According to Modena's accounts, there were paid to it the amounts invoiced in February and March 1959 to its customer Sidercomit namely 6338036 lire, whereas in effect Sidercomit paid only 5950 1 79 lire. In fact these reductions were illegal, even if the payments by Sidercomit were, as the applicant maintains, made up to the amounts invoiced by means of payments from shareholders in Modena made for the purpose of accommodating an important customer. Furthermore the contested Decision considers as an aggravating circumstance the fact that Modena deliberately concealed these reductions by means of inaccurate accounting.

b) For the months of June to August 1958 Modena credited the accounts of customers from whom it had accepted payments by bills of exchange payable at 60, 90 and even 120 days, by way of discount charges, for sums far in excess of similar charges which it paid itself to banks, thereby granting unjustified reductions in the amount of 302182 lire. In the course of the proceedings this charge was stated as meaning that the bills issued by Modena amounted to a smaller sum than that of the invoices and that the reductions were made up of this difference, from which bank discount charges must be deducted.

c) Modena made to its depositary Orsi an allowance amounting to 4258998 lire which was not justified under the conditions of its price list. The total extent of the under-quotations which the High Authority thus claims to have established amounts to 8163829 lire.

3) By a registered letter dated 20 July 1960 the High Authority notified Modena, pursuant to Article 36 of the Treaty, of the abovementioned irregularities and invited it to submit its comments within a period of 15 days from the receipt of the letter.

4) Having sought and obtained two extensions of the time which it had been allowed, Modena submitted its comments first by letter dated 15 October 1960 and then orally at a hearing granted to its representatives by the High Authority on 15 May 1961.

5) Being of the opinion that Modena had not disputed the substance of the matters alleged against it and that the explanations which it had provided did not constitute justification of the irregularities which had been found to exist, the High Authority, by a Decision of 21 June 1961 capable of enforcement under Article 92 of the Treaty, imposed upon the applicant company, pursuant to Article 64 of the Treaty, a fine of 8000000 lire payable within thirty days from the date of notification of the Decision. The Decision was notified to Modena by registered letter dated 30 June 1961 which was received on 2 July 1961.

b) On 2 August 1961 Modena lodged in the Registry of the Court an application for the annulment or variation of the said Decision.

II — Conclusions of the parties

The applicant claims that the contested Decision should be annulled or, alternatively, varied in so far as the Court does not consider that it should be annulled.

It puts torward no conclusions as to costs. The defendant contends that the Court should dismiss the application and order the applicant to pay the costs.

III — Submissions and arguments of the parties

The submissions and arguments of the parties may be summarized as follows:

A — As to the first charge (Reductions in favour of Sidercomit)

1. The applicant submits principally that the contested Decision infringes Article 60 of the Treaty, together with Article 80 and Decisions Nos 1/54, 2/54, 30/53 and 31/53, by incorrectly applying the concept of illegal reductions. According to the applicant the commercial transactions between itself and Sidercomit are perfectly in order: the sums shown in the accounts as receipts correspond exactly with the invoice prices which, in turn, comply with the prices shown in the price list. These sums were in fact paid. The only discrepancy which the inspectors of the High Authority were able to establish is that which exists between, on the one hand, the prices invoiced and entered in the accounts and, on the other hand, the total amount of the payments made by Sidercomit by means of a number of cheques made out to the order of Modena. There is nothing which prohibits payments being made in part only by cheque if the balance is paid in cash, as in the present case. Moreover, the fact that this balance was not paid directly by Sidercomit, but paid in cash on its behalf by a third party, in this case by one of the shareholders in Modena, does not render the transactions in question discriminatory within the meaning of Community law. In fact, although the holders of the majority of the shares in Modena are bound by family ties, the company has a separate legal personality and also assets which are quite distinct from those of the persons who have shares in them. Thus the relationship between Modena as a legal entity and its customer Sidercomit differs from that which could have arisen between the natural person of one of its shareholders ut singulus and Sidercomit. The latter relationship had no bearing upon the purchase and sale of products governed by the law of the ECSC. It was simply a financial relationship between a particular natural person and Sidercomit, or more precisely a payment made by that person on behalf of and for the benefit of that company. There can be no question in this case of preferential treatment being accorded by Modena to Sidercomit. Ihere is no rule which prevents a legal person, even if he holds shares in a steel company, from personally coming to the assistance of a customer of that company in certain circumstances by granting that customer credit or a subsidy which does not affect the assets of the company but merely those of the person in question. In answer to a question put by the Judge-Rapporteur in the oral procedure, the applicant stated that the payment of the difference between the list prices invoiced to Sidercomit and its actual payments was in the nature of a donation in its favour made by a shareholder in Modena, a piece of generosity inspired by Sidercomit's refusal to pay the list price. Proof is formally tendered that a donation was made and its acceptance by Sidercomit is to be inferred from the conduct of that company. The general mazim nullim crimen sine lege must therefore, according to the applicant, entail the annulment of the contested Decision. The defendant points out that the applicant does not dispute the facts. Sidercomit paid to Modena by cheque sums less than the prices invoiced for four purchases made during the period investigated; nevertheless in its books the applicant entered as receipts cash amounts equal to those invoiced, as if Sidercomit had paid the price in full. It is contended, but has not been proved, by the applicant that the difference between the prices due from Sidercomit and the payments made by it, which constitutes the reduction granted it was made to Modena by one of its principal shareholders in his own name. Furthermore, the defendant states that, even if the applicant's contentions were proved, the fact nonetheless remains that: reductions which were not authorized in its price list were granted to Sidercomit; these reductions did not appear in the applicant's books of account; tne irregularity ot the reductions and their concealment are thus established. What matters in the present case with regard to the prohibition of discrimination is the price paid by Sidercomit and not that which was received by Modena. The applicant itself acknowledges that Sidercomit paid a price which was lower than the list price and therefore lower than that paid by other buyers. This is enough to establish an infringement of the Treaty. Although the relationship between Modena as a legal entity and Sidercomit, on the one hand, and between a member of Modena and Sidercomit, on the other hand, are indeed distinct, the deliberate merging of the two kinds of relationship in the books of account cannot possibly be accepted as a lawful practice. It is, on the contrary, a deception aimed at preventing the discovery of the illegal reduction.

2. The applicant submits as a subsidiary point that the contested Decision takes no account of the concept of “non-comparability”. Even allowing that the relationship between certain shareholders in Modena and Sidercomit had a bearing on a commercial transaction within the framework of the ECSC, preferential treatment accorded to a buyer who cannot be compared with those to whom the applicant usually sells its products must nonetheless be regarded as lawful within the context of the Treaty. Sidercomit is not a buyer to be compared with other customers, consumers or private dealers since it is a commercial agency of the State steel industry and is the only one of its kind among the applicant's customers. The applicant goes on to state that, even if it is desired to apply an objective criterion to the concept of comparability, Sidercomit must still be regarded as an undertaking endowed with special features. It is an agency which does not normally buy steel products on the private market, so that a commercial transaction of this kind constitutes beyond any question a departure from normal procedures. Furthermore, according to the applicant, it is established that in practice Community rules on prices are not generally applied to States buying ECSC products. I he defendant replies that the argument that Sidercomit is not a comparable customer simply because it is a State agency is contrary to the fundamental principle of equality before the law. When engaging in competition in the industrial field, the State is subject to the same rules of law as every other undertaking. From the Community point of view all undertakings which are covered by the Treaty are subject to the same rules, the Treaty being based upon the fundamental principle of prohibition of discrimination. The applicant is therefore applying an incorrect interpretation to the concept of comparability.

3. As a further subsidiary point the applicant submits that the High Authority was guilty of a misuse of power and of contravening the law by failing to take account of an essential feature of the present case. This essential feature is that the prices paid directly by Sidercomit are within the limits of authorized alignment on the most favourable prices quoted in the price lists of competing undertakings. They do not exceed the extent laid down in Article 60(2) (b) of the Treaty “enabling the quotation to be aligned on the price list, based on another point which secures the buyer the most advantageous delivered terms”. In support of this argument the applicant produces the comparative figures of the amounts which were paid to it by Sidercomit and the minimum permissible invoice prices in respect of the same deliveries based on the price list of the company known as “Acciaierie, Ferriere, Trafilerie Cravetto”. In this connexion the defendant first raises the question whether the failure to take account of factors which were not adduced by the applicant at the proper time, namely before the application, can amount to a misuse of power. To compel the High Authority to supplement of its own motion the arguments advanced by the undertaking in question with all the other means of defence which that undertaking could have used would mean reversing the burden of proof and making it impossible for the High Authority to act. The applicant's answer to this objection is that in any event it is not possible to exclude an argument adduced before the Court on the grounds that it was not adduced in the purely administrative stage of the dispute. The defendant further maintains that the intention to make an alignment must be shown at the time the contract is concluded. The applicant, on the other hand, takes the view that neither the Treaty nor any legislative provision of the High Authority requires undertakings to make known their intention to make an alignment at the time the contract is concluded. The concept of alignment within the meaning of the Treaty is not one of form but of substance. It is the effect of alignment, and that alone, which must be taken into consideration. In any event the mere failure to declare a correct alignment, as in the present case, and the granting of discriminatory reductions ought not to be penalized in the same way. The defendant replies that an undertaking which has failed to comply with its price list by granting reductions cannot rely on alignments on its competitors' prices in order to justify its conduct once the reductions have been discovered. The applicant's argument would mean that the failure by an undertaking to comply with its price list by reason of the grant of reductions would be legal or illegal in eventum, that is to say according to whether or not the undertaking succeeds in discovering a hypothetical competitor who has charged a price equal to or lower than that charged by the undertaking itself. This would lead to the virtual abolition of the obligation to of Article 60 of the Treaty, the defendant points out that the alignment must be carried out on a specific price list and not on price lists of ‘competitors’, much less on the prices which they charge. On the other hand, the phrase ‘enabling the quotation to be aligned’ used in the Treaty proves that alignment on the price list of a competitor cannot be effected after a contract of sale has been concluded in order to justify a reduction ex post facto. It is the quotation which can be aligned, not the price stipulated in a contract which has already been concluded. Moreover, in order to obtain a correct alignment it is not sufficient to compare two prices. It is necessary to compare two proposals for entering into a contract; on the one hand, a concrete quotation given to a buyer by a particular seller and, on the other, an abstract quotation which can be taken from the price list of another seller. Both quotations include not only the price, but also the ‘conditions of sale’ and these must necessarily be known in advance in order that they may be applied in the case in point. Thus, parity of basic prices is not sufficient to ensure equality of treatment if the conditions of sale are different. Following this line of thought the defendant points out — and this applies equally to the documents produced by the applicant in connexion with the other infringements — that the invoices submitted to the Court by the applicant reveal a different point of parity from that laid down by the price list on which it purports to have been aligned. This implies that the buyer paid different transport charges from those shown in the competitor's price list. There are still further discrepancies and inaccuracies in the documents produced by the applicant. In the course of the proceedings, the defendant submitted to the Court detailed calculations of a correct alignment on the ‘Cravetto’ price list which contradicts the figures supplied by Modena. According to the High Authority there is therefore on any view of the matter no proper alignment. Finally, the defendant contends that the arguments which the applicant draws from the concept of alignment amount to an admission and contradict its first submission, since it thereby acknowledges that it has charged prices which did not comply with its price list. Reductions which constitute a gift made by a shareholder in his own name to a customer cannot have been granted by way of an alignment.

4. The applicant points out ad abundantiam that the allegation of concealment made against it cannot be sustained as it cannot be accused of any irregularity in its book-keeping. The fact that no distinction was drawn in its accounts between the part of the price paid by Sidercomit and that paid by another person on its behalf cannot be regarded as concealment, since no such distinction is required by any standards prescribed by law or by any rule of accounting technique or practice. Furthermore, there is no rule of Community law which specifies aggravating circumstances such as those quoted by the High Authority The applicant is not guilty of any infringement of Article 47 of the Treaty. It did not knowingly furnish any false information and accounting documents are not ‘information’ furnished to an investigator, the only case referred to in Article 47. In the present case there is no falsification of documents but at most something ‘unspecified’, which is quite different. Thus it has never acted with an animus dissimulandi and no charge of concealment may be made against it. Furthermore, the High Authority did not refer to Article 47 in the contested Decision and cannot invoke it a posteriori in support of the Decision. The defendant maintains that there is concealment by reason of the very comply with published price lists. Proceeding to a more detailed analysis fact that two legal relationships which should have remained separate were merged together in the accounts. This concealment could not have been discovered if the inspectors had not had the opportunity to examine Sidercomit's books of account. This is a typical instance of knowingly furnishing false information under Article 47 of the Treaty. It is in the circumstances an obvious case of deliberate falsification. The aggravating circumstance mentioned in the contested Decision consists of the entry in the accounts of the whole of the invoiced amounts, as having been paid by Sidercomit when Sidercomit only paid part. The contested Decision does not contravene the law as the applicant maintains. On the contrary, it correctly applies the rules of the Treaty.

5. The applicant submits as a further subsidiary point that the High Authority was guilty of a misuse of power ‘consisting of a failure to give reasons for its Decision, of an incomplete appreciation of the facts, and of acting in a patently unjust manner’ in that it did not take into account certain fundamental aspects of the case in point which, although not advanced by way of an excuse, nonetheless constitute mitigating circumstances, (a) These circumstances are, first of all, objective in nature. The actions for which one of its shareholders is blamed were necessary in order to enable Modena indirectly, upon concluding a certain number of contracts, to overcome the difficulties created at the time by the extremely serious short-term economic situation then existing in the steel market in general and in the Italian market in particular. In 1958 a ‘widespread and persistent’ state of disorder and indiscipline reigned in the steel sector, which was fostered especially by the unfair competitive practices of certain undertakings which escaped the surveillance of the organs of the Community. (b) Other mitigating circumstances are subjective in nature. The applicant had just come through a difficult period during which it had reorganized its structure and renewed its plant. At a time when its trading activities were once more fully under way, it would have been particularly damaging to the applicant not to satisfy the requirements of Sidercomit or to resort to reducing its prices to an excessive degree. These circumstances are such as to justify the indirect assistance which the applicant received from one of its shareholders at the cost of personal sacrifice on his part. The fact that the High Authority took account of only one factor, which it considered to be an aggravating one, and failed to take mitigating circumstances into consideration constitutes a patent misuse of power on its part. The defendant replies that the short-term economic difficulties referred to by the applicant could not justify prohibited discriminatory practices. In order to solve the difficulties in which it claims to have found itself, the applicant had no need to contravene the law. It could have resorted to legal measures consisting of a review and modification of its price lists in accordance with its needs and to the system of alignment. As regards tne objective factors, the High Authority observes first that the fact that not all the undertakings which committed infringements of the Treaty were proceeded against cannot be regarded as a mitigating circumstance and secondly that none of the undertakings in competition with the applicant were guilty of concealing matters in their accounts. There can be no question therefore of a misuse of power in the present case. The applicant replies that, at the time of the matters in dispute, it was engaged in legitimate self-protection against competing undertakings which were infringing the rules for publicizing prices and for aligning quotations. Furthermore, a reduction of the prices in its list would have caused it to suffer psychological damage in relation to its customers, particularly as this would have occurred in a critical period not only as regards its own situation but also the market situation in general, since the other undertakings themselves were not observing the rules of the game. The defendant points out that the applicant advances legitimate self-protection simply as a mitigating factor and not as grounds of justification. In so doing it concedes by implication that the preconditions for legitimate self-protection are absent in the present case. Moreover, the defendant denies that the undertaking could be discredited by adapting its price list and reducing its prices and maintains that the opposite is true. However that may be, the reasons relied on by the applicant in justification of the rebates in this case constitute neither engagement in legitimate self-protection nor a general mitigating factor.

B — As to the second charge (Reductions allowed on payments by bills of exchange)

1. The applicant maintains that the contested Decision infringes Article 60 of the ECSC Treaty and also Decision Nos 1/54, 2/54, 30/53 and 31/53 of the High Authority in that it wrongly applies the concept of illegal reductions. It observes that the commercial transactions complained of are perfectly lawful. The acceptance of payment by bills of exchange is both in accordance with commercial practice and is provided for by the conditions contained in its price list. The increased charges for deferred payment stipulated in its price list were correctly invoiced. In fact the applicant was obliged in certain cases for reasons of liquidity to draw bills before the invoicing procedures were complete. The amounts of these bills were estimated amounts. Certain customers did not pay the balance, despite repeated requests. Since recovery by legal proceedings seemed to be too expensive and ineffective, the applicant was obliged to accept the situation and to transfer these sums to its loss account. The prohibition against discrimination cannot compel undertakings to take legal action in order to recover sums which, despite their best efforts, have not been paid to them within the prescribed time. The defendant observes that the contested Decision does not so much criticize the applicant for not having done all it could to recover outstanding balances — a submission which, moreover, it does not support with any real proof — as for having systematically granted excessive periods of time for payment, even as much as 120 days, and above all for having allowed reductions on its list prices by taking upon itself discount charges which were higher than the listed increases for deferred payment. It takes the view that this is a second device employed by the applicant to grant illegal reductions, namely bills of exchange with reductions for customers who ask for time to pay. Like the first method (used with regard to Sidercomit), it is prohibited by the Treaty; but in the second case the existence of bills compelled the applicant to enter the reductions in its accounts. The defendant therefore maintains that it has applied Article 60 of the Treaty correctly.

2. The applicant submits as a further subsidiary point that the contested Decision wrongly applies the concept of alignment on the list prices of competing undertakings. In this connexion it maintains that, even if one only takes account of the amount recovered, quite apart from the balance outstanding, the price actually paid by means of the bills is not lower than the prices laid down in respect of the same products by the price lists of certain competing firms; this comes within the framework of the variations legally allowed in respect of alignment. The applicant supports this contention by producing as an example, in respect of one of the transactions in dispute, the prices as they would have been invoiced on the basis of the price list of ‘Lavora-zione Metalli Vari’ of Brescia, which are lower than those actually paid by one of its own customers. The defendant counters this by repeating its argument based on the irregularity, so far as the Treaty is concerned, of a posteriori alignments. It seeks to prove by means of detailed figures that in any event there has not been any real alignment in the case in point.

3. The applicant further maintains that in the preamble to the contested Decision the High Authority wrongly states that the alleged illegal reductions were entered in the accounts by way of discount charges. In fact they were entered under the heading ‘discount on invoice’, a generic term under which Italian accountancy terminology includes in particular outstanding balances in respect of which there is no point in taking legal action. According to the applicant the facts have thus been ‘misrepresented’ by the High Authority, and this ‘constitutes according to accepted doctrine a clear indication of abuse of power’. The defendant replies that the alleged ‘misinterpretation of the facts’ does not exist, ‘discount charge’ or ‘discount on invoice’ being terms which in reality cover one and the same illegality, namely discrimination which is not permitted by the Treaty, since it amounts to subjecting comparable transactions to dissimilar conditions. Furthermore, according to the defendant, Italian accountancy terminology, contrary to the assertions of the applicant, uses the expression ‘discount on invoice’ to indicate reductions granted, and not unpaid balances of prices.

4. The applicant further maintains that, supposing it were possible to show that an infringement did exist, the High Authority should at the very least have taken account, by way of mitigating circumstances, both of the serious state of the market, of which the company was a victim, and of the crisis of organization in which it was involved. The defendant rejects this argument for the reasons expounded in connexion with the first charge.

C — As to the third charge (Exemption from transport costs)

1. The applicant contends that the contested Decision infringes Article 60 of the Treaty and Decisions Nos 1/54, 2/54, 30/53 and 31/53 of the High Authority as a result of the failure to apply the concept of alignment on the list prices of competing undertakings. Although the applicant bore the transport costs in respect of a certain number of sales contrary to the provisions of its price list, the only effect this had was to bring into the prices which it charged an alignment which did not exceed the minimum limit for quotations made on the basis of certain price lists of competing undertakings. Consequently it did not contravene Article 60(2)(b) of the Treaty. The applicant supports its argument by producing figures from which it appears that, in respect of 27 invoices relating to the period in question, the prices which it actually applied are far in excess of those charged by various competing firms. The defendant answers this plea with the argument that an a posteriori alignment is barred by the Treaty and, quoting figures in support, contends that there was not a correct alignment in the case in point.

2. The applicant contends, as in the first two grounds of complaint, that the High Authority is at fault for having failed to take account in its Decision, even by way of mitigating circumstances, of the situation which it had described. The defendant refers to the reply which it gave to this argument of the applicant with regard to the first two charges.

D — As to the fourth charge (Allowance granted to Orsi)

1. The applicant submits, with regard to the allowance granted to its depositary Orsi, that the High Authority failed to take account of the special nature of the relations governing this contract. The firm Orsi is to some extent a buyer not comparable to other customers of the applicant, since it is connected with the latter by special commercial relations (Modena and Orsi derived their origin from a single undertaking as the result of the distribution of an estate). The dejendant claims that it does not understand the legal basis of the concept of ‘non-comparability’ as conceived by the applicant. If this interpretation were adopted, the majority of sales could lawfully be discriminatory in nature and the principle laid down by Article 60(1) of the Treaty would be confined to the realm of abstract and sterile ideas.

2. The applicant contends that this was not really a case of an allowance but of a waiver by force of circumstances of the recovery of the balance of various accounts outstanding between itself and the firm Orsi. The latter firm was at the time on the verge of bankruptcy. Legal proceedings for the recovery of the balances had no prospect of succeeding and would only have precipitated a crisis which could have had very serious financial repercussions extending beyond the company itself. The prohibition against discrimination cannot mean that undertakings must take legal proceedings against insolvent debtors. This is particularly true in the present case as it involves a debtor with which the applicant has a special relationship. The dejendant, while pointing out that the applicant never raised this argument during the administrative inquiry, contends that the protests of bills produced by the applicant do not constitute adequate proof of the impossibility of recovering the sums due to it from Orsi.

3. The applicant contends that the part of the price which Orsi paid is not lower than the list prices of other steelworks and that accordingly, as far as this charge is concerned, account should be taken of the mitigating factor constituted by the alignment authorized by Article 60 (2)(b) of the Treaty. It supports this argument with documents which are intended to show that the prices which it invoiced, net of transport costs, are considerably higher than those which could be invoiced on the basis of the price list of the Ilva company. The defendant replies that it could not take account of an argument which had not been raised. As to the relevance of that argument, it refers to its previous observations on the concept of alignment within the meaning of the Treaty.

4. The applicant repeats the arguments which it has already expounded and contends that the High Authority is at fault for having failed to take into account market conditions and the applicant's own situation, even by way of mitigating circumstances, especially as its relations with Orsi were particularly close. The dejendant denies that it failed to take the mitigating circumstances into consideration.

E — As to the amount of the fine

The applicant stresses the fact that the fine imposed on it by the contested Decision is very heavy, having regard to the circumstances and to the sanctions imposed in other cases.

In fixing the amount of the fine the High Authority should have taken account in particular of the fact that the applicant is a modest undertaking whose integrity and responsibility cannot be disputed. Besides, if there were an infringement, its actions could not have caused any appreciable disturbance of the market.

The dejendant replies that Article 64 ot the Treaty gives it the power to impose upon undertakings which infringe the provisions of Articles 60 et seq. fines not exceeding twice the total value of the sales effected in disregard thereof. It therefore kept well below the maximum limits which the Treaty placed on its discretion and did so precisely because it took account of all aspects of the case.

IV — Procedure

The procedure followed the normal course.

Grounds of judgment

As to the admissibility of the action, the defendant has not expressed any objection, and no grounds exist for the Court to raise the matter of its own motion.

The application seeks the annulment or, alternatively, the variation of a pecuniary sanction imposed by the High Authority upon S.A. Modena for having contravened the provisions of Article 60 of the Treaty together with the implementing Decisions Nos 30 and 31/53 and 1 and 2/54 by granting to certain of its customers reductions on its list prices and conditions of sale, thereby infringing the said provisions.

These infringements were set out in the contested Decision by charges under four separate heads relating to specific cases ascertained by the inspectors of the High Authority.

Before considering whether these charges are well founded, it should be noted that ever since the administrative proceedings during which the applicant submitted its comments and which, pursuant to Article 36 of the Treaty, preceded the contested Decision, the applicant has acknowledged the truth of the facts upon which these charges are based.

The minutes of the relevant discussion between the High Authority and the applicant were produced at the hearing and the Court is entitled to draw from them such conclusions as it sees fit.

On the basis of these findings it is in order to proceed to an examination of the charges against Modena.

I — The first charge (Reductions in favour of Sidercomit)

1. It is alleged, and moreover not disputed in the case at issue, that on the one hand the payment for goods supplied, for which the applicant invoiced Sidercomit, was entered in Modena's accounts at its list price and that the accounts show that price as having been paid in full by Sidercomit, and that on the other hand this was not the truth of the matter, since part of the price was paid, on behalf of Sidercomit, by a third party, a substantial shareholder and managing director of Modena, allegedly by way of a donation for the benefit of Sidercomit with the sole aim of enabling a contract to be concluded with such an important customer. According to the explanations furnished by the applicant it was Sidercomit which benefited from this generosity and tacitly accepted it. However it also follows from the same explanations that Sidercomit, while consenting to the list price being formally invoiced, had in fact only agreed to conclude the said contracts at prices below those shown in Modena's list, since it considered the latter prices to be higher than current market prices. In the case at issue it is established that the parties were agreed that it was not the amount appearing in the invoices and in Modena's accounts, but a lesser sum the payment of which would discharge the buyer and hence constitute the contract price. This sum, in fact and in law, constituted the ‘price charged’ within the meaning of Article 60 of the Treaty. An agreed diminution in price as against the list price, granted by a seller to a buyer, constitutes a reduction. A donation made by a person who is not a party to the contract of sale is independent of and extraneous to that agreement if, as in the present case, the alleged donor is in fact acting as an intermediary solely for the benefit of the seller. In any case, the fact that the applicant had little faith in the legality of its conduct is amply demonstrated by its attempt to conceal the scheme by means of an accounting device designed to deceive the inspectors by making it appear that there was one payment only and that this was made by Sidercomit. This submission is therefore unfounded.

2. As a subsidiary point Modena accuses the High Authority of failing to appreciate the fact that S.A. Sidercomit, the commercial agency of the State steel industry, is a buyer which is not comparable with its usual customers and that it was not illegal in its case to grant preferential treatment, since the prohibition on reductions applied only to comparable transactions. However, S.A. Sidercomit is formed as a company governed like any other by the general law applicable to companies and the Italian State, by demonstrating that it has a predominant influence over Sidercomit though the agency of Finsider, is in the event acting jure gestionis and this makes it subject to the general law of the Community. This submission is therefore unfounded.

3. As a further subsidiary point Modena contends that in any event the amount actually paid by Sidercomit falls within the limits of its list prices, when reduced to their equivalent at other points which secure the buyer the most advantageous delivered terms; that in fact the amounts paid by Sidercomit alone are still above the minimum price which could have been applied to it on the basis of the price list of the company known as ‘Acciaierie, Ferriere, Trafilerie Cravetto’ which it quotes as an example; and that by failing to take account of this possibility of alignment the High Authority has been guilty of a misuse of power and contravened the law. (a) This legal argument cannot be dismissed, as the High Authority suggests, on the grounds that it was not put forward at the time of the administrative proceedings. To exclude the argument on this basis, which is in any event incompatible with the purely preliminary nature of the procedure laid down by Article 36, would unduly restrict the applicant's rights of defence. (b) However this submission is unfounded in law. In the matter of prices the ECSC Treaty is in fact based on two essential principles: publicity and, arising out of this, non-discrimination. For this reason Article 60(2) (a), in particular, provides that price lists and conditions of sale must be made public. The right to align quotations constitutes an exception to the principle of list prices, but it must not divest that principle of all effect through the exclusion of publicity by means of alignments carried out a posteriori. Article 60(2) (b) of the Treaty provides that it is the quotation made to the customer which must be aligned on a price list based on another point, and thus constitute a quotation falling within the exception by taking into consideration a specific quotation given to a buyer by another seller. This quotation must specify, in accordance with a correct alignment on known and verifiable factors, the conditions which will apply upon the conclusion of a contract and make impossible any subsequent amendment of such a contract especially by way of a hidden price reduction at the time of performance. An alignment made solely for the purpose of justifying ex post facto a reduction of list prices, even though calculated in compliance with the strict rules laid down for this purpose (which in fact is not so in the present case), thus constitutes a contravention of the general scheme of the Treaty and of Article 60(2) (b) in particular. The applicant could not have been unaware of these principles to which, as long ago as 12 December 1956, the High Authority had drawn attention in its Circular No 2.

4. Lastly, the applicant submits that the Decision of the High Authority did not fully evaluate the facts and constituted a patent injustice tantamount to a misuse of power in the form of an unreasonable act, in that the High Authority did not take account in its Decision of the special circumstances of the case. These should have been taken into consideration either as grounds of justification or as mitigating factors. With regard to the objective features of the situation, the applicant quotes the short-term economic difficulties on the Italian market and claims that it could only have overcome these by contravening the provisions of the Treaty. It maintains that, as a result of unfair practices by certain of its competitors which succeeded in escaping the notice of the High Authority, it found itself in a situation where self-protection was justified in law. Legitimate self-protection presupposes an action taken by a person which is essential in order to ward off a danger threatening him. The threat must be immediate, the danger imminent, and there must be no other lawful means of avoiding it. None of these requirements is to be found in the present case. It has not been proved, and no attempt has been made to prove, that S.A. Modena was threatened by imminent danger or that only by contravening Community law could it have overcome the short-term economic difficulties which are inseparable from all industrial activity at one time or another. Accordingly it is not possible from the foregoing to find any grounds of justification.

II — The second charge (Reductions allowed on payments by bills of exchange)

1. According to the Decision, the applicant accepted payments by bills Of exchange with varying maturity dates and correctly applied the increases for deferred payment laid down in its price list. As regards the amounts of the bills, it credited its customers with ‘the net amount of the discounted bill’, the difference between this sum and the amount of the invoice being entered in its books as a balance due under the heading of discount charges.

2. With regard to this charge the applicant submits, as it had already done in the administrative proceedings, that liquidity problems caused it to issue, immediately upon the dispatch of the goods and before the prices were invoiced, bills for ‘estimated’ amounts which were less than they should have been in relation to the value of the consignments, so that the sums it actually received by means of these bills were less than the actual amounts due from the customers according to the correct invoices which were prepared after the issue of the bills. It proved to be impossible to recover the balances due to Modena, thus established ex post facto. The customers adhered to the original sums shown on the bills, and it was difficult to go back on these figures owing to the sensitivity of customer reaction. Furthermore, the issue of supplementary bills might have damaged its credit with the bank. In any event in view of the refusal by customers to pay the balances, the applicant would have had to incur legal expenses out of all proportion to the amounts to be recovered. It was this difference, according to Modena, which was entered in its books under the heading ‘discount on invoice’, an accounting procedure which, it maintains, follows an existing Italian business practice by bringing under one head debts which are beyond recovery. The applicant's argument however is contradicted by the facts. No proof has been given or tendered in support of the contention that supplementary bills would not have been duly honoured by customers who had been made fully aware of the extent of their liability by correct invoices issued on the basis of a price list with which they were familiar. Moreover, the applicant has not provided any proof that it issued any supplementary bills, served any formal requests for payment, or exercised any diligence whatever in order to recover the sums due to it. Lastly, the letter from an advocate stating that the legal expenses of recovering small sums bear no relation to the interests concerned amounts to no more than a general assertion and gives no detail relevant to the present case. Moreover, it would have been possible to record quite unambiguously, by books of account which corresponded with the facts, the precise reasons for remitting debts due from customers. The applicant's argument is therefore unfounded.

3. The applicant contends as a further subsidiary point that, quite apart from the unpaid sums alleged to have been written off as discounts on invoices, the amounts actually paid by its customers in respect of the consignments to which the present charge refers are still higher than prices correctly aligned on the price lists of competing firms, among which it cites ‘Lavorazione Metalli Vari’ of Brescia. For the reasons more fully set out above in relation to the first charge, the applicant must fail in this submission since the alignment was made after the quotations were issued for the contracts in question.

III — The third charge (Exemption from transport costs)

1. The applicant does not in fact dispute that, contrary to the provisions of its price list, it took over the transport costs relating to the contracts referred to in the contested Decision.

2. In this case too it relies a posteriori on a correct alignment on price lists of competing undertakings. On the basis of these lists its own prices were not below the minimum prices permitted by its alignments. This submission has no basis in law for the reasons set out in respect of the same submission made with regard to the first charge.

IV — The fourth charge (Allowance granted to Orsi)

1. Although it does not dispute the truth of the facts set out in the Decision and which the High Authority purposes to prohibit, on the grounds that they consist of reductions of list prices in contravention of Article 60 of the Treaty, the applicant contends that the substantial reductions which it granted to its depositary Orsi did not contravene these provisions and could not constitute illegal reductions.

2. In the first place it contends that its transactions with Orsi were concerned with a buyer which was not comparable with its other customers because of the personal connexions between the shareholders of the two firms which derived their origins from a single family business as the result of the distribution of an estate. This contention must be rejected. The concept of comparability referred to by the Treaty is objective in nature and does not permit purely subjective factors to be taken into consideration, such as family ties which may exist between the parties. The prohibition of discrimination would otherwise lose its effect.

3. Secondly, the applicant states that the present case is not concerned with real reductions, but rather with a release of debts which were in fact irrecoverable, since Orsi was in a very precarious financial position. Owing to the family relationships between the owners of the ordinary shares in Modena and the owners of Orsi, the only means of assisting the latter without undertaking personal liability with regard to other creditors was to write off the debts which Orsi owed to the applicant. Moreover, this was justified objectively by the remote prospects of recovering these debts and the futility of incurring irrecoverable costs of enforcement proceedings after establishing that Orsi was insolvent by protesting the bills drawn upon it. The notices of protest produced in the proceedings are sufficient proof that Orsi's credit was very precarious. Bills to the value of 8131580 lire, all drawn by Modena, had been protested for non-payment. The publicity given to Orsi's indebtedness as a result of the notices is enough to dispel the suspicion of connivance with the applicant. A balance of outstanding debts amounting to 4258998 lire, which may in the circumstances be regarded as irrecoverable, remained outstanding. It is clear from these considerations that this is not a genuine case of Modena's granting reductions but rather of a total waiver of Orsi's debit balance. This state of affairs constitutes a remission of debt and not a reduction, which presupposes an allowance granted on the occasion of and in respect of specific contracts. Accordingly this contravention has not been sufficiently proved.

V — The amount of the fine

1. There are no grounds for considering whether the aggravating circumstances envisaged by Article 47 of the Treaty existed in the present case. This High Authority made no reference in its Decision to this provision and moreover did not apply the increased penalties provided for therein. Although it declared that, as regards the first charge, false information had knowingly been entered in the applicant's books of account, the High Authority confined itself to describing this, quite rightly, as a device on the part of Modena but did not infer, to the further detriment of the applicant, that any aggravating effects had thereby resulted.

2. Modena's criticism of the High Authority for refusing to admit the existence of mitigating circumstances cannot be accepted. Neither the fact that other undertakings used similar devices to those noted in the case of the applicant nor the difficult situation in which it claims to have found itself owing to the generally unfavourable short-term economic circumstances, although it has furnished no proof on this point, can prevail over the strict obligation to comply with the rules laid down by the Treaty. Moreover, by making sufficient alterations to its price list, the applicant could have obtained the same results which it sought to achieve by granting illegal reductions. However, in view of the considerations previously stated, the applicant must be exonerated from the fourth charge against it, and consequently the total amount of the illegal reductions which it granted to its customers is reduced by approximately one half. The fine imposed on it should therefore be reduced proportionately.

VI — Costs

The applicant has failed in its submissions in respect of three of the four charges laid against it in the contested Decision. However, in view of the size of the amounts in dispute in each of the four charges, it is appropriate to apply Article 69(3) of the Rules of Procedure and to order the applicant to bear three-fifths of the defendant's cost.

The applicant has put forward no conclusions to the effect that the other party be ordered to pay the costs. Accordingly there are no grounds for ordering the High Authority to pay part of the costs.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 33, 36, 47, 60, 64, 80 and 92 of the Treaty establishing the European Coal and Steel Community; Having regard to the Protocol on the Statute of the Court of Justice of the European Coal and Steel Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT hereby:

1 Rules that the application against the individual Decision of the High Authority of 21 June 1961 is admissible; dismisses the application as regards the first three charges made against the applicant company and grants the application as regards the fourth charge;

2 Reduces to 4000000 lire the amount of the fine imposed on the applicant by the contested Decision;

3 Orders the applicant to pay three-fifths of the cost of the defendant.