JUDGMENT OF 2. 6. 1965 — CASE 36/64 SOREMA v HIGH AUTHORITY

In Case 36/64

THE COURT composed of: Ch. L. Hammes, President (Rapporteur), A. M. Donner and R. Lecourt, Presidents of Chambers, L. Delvaux, A. Trabucchi, W. Strauß and R. Monaco, Judges, Advocate General: M. Lagrange Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts

The facts may be summarized as follows:

1) In April 1956, the Oberrheinische Kohleunion, Bettag, Puton & Co. (hereinafter referred to as OKU), which was then a joint-selling organization of the mining companies of the Aachen, Ruhr, Saar and Lorraine basins selling on the South German market, was transformed by a decision of its members into a joint-buying organization to buy from the said companies fuel intended for re-sale in Southern Germany. Among the undertakings associated together in OKU were fifteen wholesalers established in France and affiliated to the Société Rhénane d'Exploitation et de Manutention (hereinafter referred to as SOREMA).

2) The High Authority by Decision No 19/57 of 26 July 1957 (Official Journal p. 352/57) pursuant to Article 65 of the Treaty authorized, subject to certain reservations and conditions, the above-mentioned joint-buying agreement of OKU. The validity of this Decision lasted until 31 March 1959, except with respect to the participation of the coal wholesalers grouped within SOREMA, who had not until then carried on any commercial activity on the market in Southern Germany. With respect to them Decision No 19/57 was to lapse on 31 March 1958, unless the High Authority by a new decision extended the period to a later date or unless those merchants could prove, either on 31 March 1958 of at any later date fixed by the High Authority, that they fulfilled the requirements set out in the association agreement of OKU for the admission of new members. This possibility was reserved in the said agreement of coal wholesalers who fulfilled the conditions required for direct purchase from the Aachen, Ruhr, Saar or Lorraine basins of fuel intended for sale in Southern Germany.

3) By Decision No 4/58 of 2 April 1958 (Official Journal p. 169/58), the High Authority, taking the view that the merchants grouped within SOREMA had had no opportunity, by reason of certain circumstances, of developing their own sales operations in Southern Germany, extended until 31 July 1958 the transitional period on the expiration of which Decision No 19/57 would lapse so far as concerned the participation of these companies in OKU, unless they proved by this date that they fulfilled the previously mentioned requirements of the association agreement of OKU for the admission of new companies.

4) By letter of 15 July 1958 (Official Journal p. 286/58), the High Authority informed SOREMA that there was no longer any justification for the retention within OKU of the undertakings represented by SOREMA, since for them to continue within it would be incompatible with the principles which had been decisive for the purposes of the conversion of OKU and for its authorization by Decision No 19/57. It pointed out that it was only as an exception and for the transitional period of one year that its participation in OKU had been authorized. SOREMA was therefore requested to take all the measures necessary to effect its withdrawal from OKU by 30 September 1958 at the latest.

5) After 30 September 1958, the participation in OKU of the French merchants grouped within SOREMA was not made the subject of any rules until the adoption of Decision No 23/59 of 25 March 1959 (Official Journal p. 420/59). By this Decision the High Authority, finding the evidence of withdrawal, particularly in respect of the French merchants grouped with SOREMA had not been supplied, prolonged for two months until 31 May 1959 the validity of Decision No 19/57 authorizing OKU's joint-buying agreement. Decision No 23/59 did not, however, in its operative part make any special reference to the participation within OKU of the merchants affiliated to SOREMA.

6) By Decision No 31/59 of 27 May 1959 (Official Journal p. 697/59), the High Authority again extended the validity of Decision No 19/57 concerning OKU, this time until 31 March 1962. This decision stated on the one hand that the merchants grouped within SOREMA, not having given proof of fulfilling the conditions for admission to OKU, must consequently be excluded from it, and declared on the other hand that the participation of SOREMA itself in OKU would be authorized temporarily until 31 March 1960.

7) By Decision No 12/60 of 18 May 1960 (Official Journal p. 813/60), the High Authority extended SOREMA's authority to participate in OKU until 31 March 1962.

8) On 28 March 1962 by Decision No 3/62 the High Authority extended OKU's joint-buying agreement until 31 December 1962, and specified that this authorization also extended SOREMA's participation, though for a transitional period the duration of which would be laid down in a later decision.

9) By Decision No 8/63 of 30 April 1963 (Official Journal p. 1441/63), the High Authority decided that SOREMA's authorization to participate in OKU would expire on 30 June 1963. This Decision, on application by SOREMA (Case No 67/63), was annulled by a judgment of the Court of 19 March 1964 (Rec. 1964, pp. 293 et seq.).

10) On 15 July 1964, the High Authority adopted Decision No 15/64 (Official Journal p. 1969/64), which is the subject of the present application. By this Decision, which was notified to the applicant on 21 July and entered into force on 30 September 1964, SOREMA's authorization to participate in agreements for the joint buying of fuels by wholesalers operating in Southern Germany through the agency of OKU was terminated.

II — Conclusions of the parties

The applicant claims that the Court should:

annul the contested decision;

order the High Authority to pay the costs.

The defendant contends that the Court should dismiss the application as unfounded and order the applicant to pay the costs of the proceedings.

III — Submissions and arguments of the parties

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

1. Misuse of powers

The applicant maintains that the contested Decision is vitiated by misuse of powers, in that it lays down a posteriori the time-limit and the conditions in which an agreement regularly authorized should come to an end.

According to the third subparagraph of Article 65(2) of the ECSC Treaty the duration and the conditions of an authorization of a joint-buying agreement must be laid down in the authorization decision itself. It follows from the fourth subparagraph of Article 65(2) that the revocation or amendment of the authorization may arise only from later circumstances.

However, the annulment of the participation of SOREMA in OKU took place in contravention of these provisions and in the exercise of a prerogative which the High Authority, illegally conferred upon itself by a previous decision, to the extent that it reserved to itself the right to settle the length of the validity of the first decision by a later decision.

The contested Decision is disguised under the appearance of a decision not to renew an authorization or of a decision to issue a revocation. In fact it is by its character, which does not conform to the Treaty, a decision to put into practice an arbitrarily created right.

The defendant points out that Decision No 3/62 was not made the subject of an application for annulment in good time. As it is an individual decision it cannot be disputed by way of an objection of illegality either.

The argument of the applicant is, furthermore, contradicted according to the High Authority by the judgment of the Court in Case 67/63 between the same parties.

The applicant during the procedure also disputed Decision No 31/59 which conferred upon the High Authority in abstract terms the right to decide the duration of validity of the authorization. It maintains that this Decision is not obligatory in nature and that it could not give it grounds for complaint since it fixed no time-limit.

Further, the essential conditions which governed the adoption of Decision No 31/59 were the subject of a change because of the judgment in Case 67/63 which necessitated the High Authority's reconsidering its position.

The defendant replies in this respect:

on the one hand, that the applicant is confusing Decisions Nos 31/59 and 3/62: the first certainly fixed the period of validity of the authorization (31 March 1960); it was the second which deferred the fixing of the date on which SOREMA should leave OKU to a later decision;

on the other hand that it must of course draw the relevant conclusions from the judgment in Case 67/63, but that this leads to conclusions different from those of the applicant; the conditions of Article 65 (2) not being fulfilled, it must bring to an end the authorization given to SOREMA to take part in the OKU agreements.

2. Mistaken finding of the existence of a prohibited discrimination

The applicant maintains that the contested Decision wrongly finds that its continuation within OKU would constitute a discrimination detrimental to the merchants or associations which, because they do not carry on activities in Southern Germany, cannot adhere to the agreement.

It states, on the contrary, that in the present case there is no discrimination because:

the participation of SOREMA is not contrary to Article 4 of Decision No 19/57; the latter in fact provides only for the membership of coal wholesalers and not that of associations of undertakings;

the fact that an undertaking or association participates in an expressly authorized agreement cannot amount to a discrimination;

any association of undertakings may take part in the joint-buying agreements of OKU, the carrying on of sales activities in Southern Germany not being a requirement for joining.

Further, according to the applicant Article 4 (b) of the Treaty prohibits only discrimination between producers, purchasers or consumers; it cannot therefore apply to SOREMA, an association of undertakings within the meaning of Article 48 and one which as such was expressly authorized to take part in OKU by Decision No 31/59.

Further, the applicant states that in any case Article 3 (b) of the Treaty prohibits only discrimination whose aim or whose effect is to deprive comparably placed consumers in the Common Market of equal access to the sources of production. Such is not the case here since the joint-buying agreement of OKU and the participation of SOREMA in this agreement, far from hindering competition, re-establish it and make it possible: equality of access to the sources of production which the High Authority must ensure is conditioned by the application of transport rates offering comparable price conditions to comparably placed consumers.

The failure of the High Authority to act in this sphere prevents it from asserting the existence of any discrimination as a result of the participation of SOREMA in OKU. It is in order to remedy this distortion which, contrary to the Treaty, was not eliminated by the High Authority, that SOREMA participates in OKU.

In any case, the High Authority could not take the contested Decision unless it had previously imposed the equality as required of it by the Treaty.

The defendant replies that what is in question is the discrimination which it is committing in leaving the applicant in a privileged position characterized by the fact that it is participating in an agreement which has as its object the purchase in certain coalfields of coal intended to be sold in Southern Germany although neither itself nor its members carry on sales activities.

Although this privileged position might have been justified for a limited period because of special circumstances, this justification has disappeared today. The applicant completely leaves out of account the real object of the authorized agreement.

On the other hand the fact of being an association of undertakings does not allow the applicant to escape the application of the rules of the Treaty or the decisions of the High Authority.

As to the argument based upon the alleged failure to act on the part of the High Authority in respect of transport policy, the defendant claims that it is doubly unfounded:

in the present case only the natural conditions of navigation on the upper Rhine are in question;

the idea that a failure to do something in the course of implementing certain provisions of the Treaty can justify the maintenance of irregular situations in other spheres is inadmissible and is contradicted by the case-law of the Court.

3. Defects in the statement of reasons for the finding of the existence of restrictions on competition

According to the applicant the High Authority has not sufficiently explained:

in what way the joint-buying agreement made by the coal wholesalers of Southern Germany falls under the prohibition of Article 65 (1) of the Treaty and applies because of this to the participation of SOREMA, an association of undertakings within the meaning of Article 48;

in what way the conditions provided for in Article 65 (2) (a) to (c) are not fulfilled and, in particular, how participation in the authorized agreement tends to prevent, restrict or distort normal competition within the Common Market.

The applicant maintains, further, that in order to decide whether the agreement in question falls under the prohibition of Article 65 (1) it is necessary to take into account the fact that it preceded the Treaty and amounts only to an adaptation to an existing situation. Thus one cannot ascribe the origin of this situation to it. Since normal competition was not in operation prior to the Treaty, the agreement cannot be declared contrary to the Treaty.

Further, according to the applicant, its participation in OKU does not affect free competition, because it holds the shares of its members in OKU exclusively as an agent. There is no obligation to belong to the applicant company and it does not interfere at all with the free competition of its members, the latter being quite free to obtain supplies outside.

The defendant counters this argument first of all by saying that:

the contested Decision clearly explains how the participation of SOREMA, an association of undertakings which are themselves subject to the provisions of Article 65, in an agreement which restrains competition between its participants in the purchase of their products, comes under Article 65; the fact that joint-buying agreements can be authorized only in the situations provided for in Article 65 (2) suffices furthermore to show that in principle they are prohibited by paragraph (1);

the idea that the prohibitions of Article 65 apply equally to the activities of SOREMA as an association of undertakings flows directly from the judgment in Case 67/63;

it follows from the combination of paragraphs (1) and (2) of Article 65 that a joint-buying agreement, although it tends to restrict competition and is thus in principle forbidden by the first paragraph, may be permitted if it fulfils the conditions required by paragraph (2).

On the other hand the agreements in question were not made prior to the entry into force of the Treaty, OKU having subsequently been converted into a buyers cartel. In any case, agreements made even before the Treaty which are intended to restrain competition fall under the provisions of Article 65.

As to other arguments put forward by the applicant to support this submission, the defendant cannot see that they have any relationship to the question whether the participation of SOREMA in the OKU joint-buying agreement falls within the ambit of the prohibition of Article 65 (1).

4. Defect in the statement of reasons for a refusal to renew the authorization

The applicant complains that the contested Decision evaluates both the improvement in the distribution of coal resulting from its participation in OKU and the essential character in this respect of the authorized agreement:

on the basis not or the agreement or of its effects but of the activity shown by the members of SOREMA in Southern Germany;

taking account not of the Common Market as a whole but of a particular geographical area.

It matters little that SOREMA does not operate in Southern Germany since the competition situation in the Common Market has not been changed.

According to the defendant the argument of the applicant rests upon a mistaken understanding of the requirements of Article 65.

To the very extent that it is intended to restrict competition, a joint-buying agreement cannot be authorized and renewed unless in respect of its particular objects and characteristics it fulfils all the conditions required by Article 65 (2).

Decision No 19/57 pointed out that, taking account of the special conditions of the Southern German market, the authorized agreement contributed notably to the improvement of distribution of fuel; the Decision provided for a geographical limitation to avoid its having a more restrictive character than its objects required.

5. Defect in the statement of reasons for a revocation of authorization

The applicant complains that the contested Decision states wrongly that the results of the authorized agreement or of its application are contrary to the requirements for its authorization.

The collective participation in OKU of merchants grouped within SOREMA contributed to improving the distribution of coal in the Common Market. Its authorization was never made subject to a condition that the members of SOREMA should carry on a sales activity in Southern Germany. The decisions authorizing the collective participation of SOREMA in OKU cannot be linked to decisions concerning individual participation by its members. They are founded on entirely different reasons, in particular on a rational use of available means of transport, of trans-shipment and of storage for the neighbouring markets of the upper Rhine.

The defendant replies that it is sufficient to consider the consequences of the decisions made in this case and in particular Decision No 3/62, with reference to which the contested Decision was made, to be convinced that their object has always been only to allow merchants affiliated to SOREMA to carry on a commercial activity in Southern Germany. However this is not what happened.

It considers itself therefore (perfectly entitled to think that the actual results of the participation of SOREMA in OKU are contrary to the requirements for its authorization.

IV — Procedure

The procedure followed the normal course.

A request by the applicant for suspension of the operation of the contested Decision was dismissed by order of the President of the Court dated 17 September 1964.

The Court, after hearing the Judge-Rapporteur and the Advocate-General, decided that it was not necessary to undertake a preparatory inquiry.

The parties presented their oral arguments at the hearing on 16 February 1965.

The Advocate-General delivered his opinion at the hearing on 11 March 1965.

Grounds of judgment

I — As to Admissibility

The defendant does not dispute the admissibility of the present application and no grounds exist for the Court to raise the matter of its own motion. The application is therefore admissible.

II — On the substance of the case

1. As to the first submission

The applicant maintains that the contested Decision is vitiated by misuse of powers and contravenes Article 65 (2) of the Treaty in that the High Authority, exercising a prerogative which it conferred illegally upon itself by a previous decision, decided within the contested Decision a posteriori the duration and the conditions of the authorization of the applicant's participation in OKU.

Article 2 (2) of Decision No 31/59 of 27 May 1959 laid down that the authorization for the participation of SOREMA in OKU should be valid until 31 March 1960. The applicant is thus wrong in maintaining that the High Authority reserved to itself in that Decision the right to decide by a later decision the date on which it should leave OKU.

On the other hand Decision No 3/62 of 28 March 1962 authorized the participation of SOREMA in OKU for a transitional period the time-limit for which was to be fixed by a later decision of the High Authority. However, Decision No 3/62 was not contested in good time and, as it is an individual decision, it cannot be disputed by means of an objection either.

Further, the Court in its judgment of 19 March 1964 in Case 67/63 between the same parties held that by Decision No 31/59 and by subsequent decisions the High Authority had pursuant to the third subparagraph of Article 65: (2) of the Treaty authorized the participation of SOREMA in OKU on specified conditions and for a limited period. The Decision contested in the present application amounts either to a decision under the third subparagraph of; Article 65 (2). to refuse to renew the authorization previously granted or to a decision under the fourth subparagraph to revoke it. It is not confined to exercising the power which the High Authority had reserved to itself by Decision No 3/62 to fix the end of the transitional period, but applies Article 65 (2) of the Treaty.

The first submission is unfounded.

2. As to the second submission

The applicant complains that the contested Decision wrongly assumes that its continuation in OKU would constitute a discrimination in respect of merchants or associations which, because of the fact that they are not carrying out sales activities in Southern Germany either, are excluded from it.

The agreement made in April 1956 by the members of OKU had as its object the joint buying, in the coalfields of Aachen, the Ruhr, the Saar and Lorraine or through their selling agencies, of fuel intended for resale in Southern Germany. It was with this object that the agreement was authorized by Decision No 19/57 and subsequent decisions of the High Authority.

Although by its Decision No 31/59 the High Authority as a transitional measure authorized participation in the said agreement by SOREMA itself as an association of undertakings, it did not however intend to exempt the merchants represented by the applicant from the fundamental condition which results from the very object of the agreement, namely that of carrying on. sales activities in Southern Germany. The applicant did not contest the legality of this condition in good time. It is not disputed that the applicant carries out no sales activity in Southern Germany. In this situation its continuance in OKU would have the consequence of favouring it as compared with merchants who, though not having any sales activity in Southern Germany, are in an identical situation and are however excluded from OKU.

The applicant maintains further that, even if its participation in OKU constitutes discrimination, the contested Decision wrongly assumed that in the present case it was a matter of discrimination prohibited by the Treaty, in particular by Article 4 (b).

An examination of the basis of these complaints appears unnecessary, since they are not capable of invalidating the contested Decision. In fact by the words ‘par ailleurs’ (‘furthermore’), the fourteenth recital of the said Decision, in respect of which these complaints are made, clearly indicates that it merely supplements the preceding recital. Further; there is nothing to show that the High Authority regarded the discrimination referred to as falling under the prohibition of Article 4 (b) of the Treaty and that it would have taken a different decision if such had hot been the case.

The second submission is thus unfounded.

3. As to the third submission

According to the applicant the contested Decision does not give sufficient reasons to explain how its participation in the OKU joint-buying agreement restricts or distorts normal competition.

The contested Decision in this respect contains the following reasons:

‘Whereas the agreements concerning joint buying, made by the wholesale coal merchants of Southern Germany belonging to OKU fall under the basic prohibition of Article 65 (1) as restricting competition between these wholesale merchants in the purchase of their products; and whereas this prohibition is equally valid in respect of SOREMA which in accordance with the findings of the Court of Justice groups together as an association within the meaning of Article 48 of the Treaty undertakings which, being wholesale coal merchants, come within the provisions of Article 65 (1)’.

Further, it is necessary in the present case to read this statement of reasons in the light of the statements of reasons, with which it is clearly connected, in previous decisions adopted in respect of OKU and in particular of the applicant. All of these reasons are sufficient on the one hand to enable the applicant to know the essential considerations of fact and of law on which the High Authority relies and on the other hand to enable the Court, on this point of the contested Decision, to exercise the judicial review entrusted to it by the Treaty.

The applicant maintains further that the OKU joint-buying agreement was made prior to the Treaty and cannot thus be contrary to it.

It is sufficient in this respect to say that in April 1956, by a decision of its members, OKU was converted from a selling organization into a joint-buying organization and was, as such, authorized by Decision No 19/57 of the High Authority. The joint-buying agreement in question in the present case was thus not made prior to the entry into force of the Treaty.

The third submission is thus unfounded.

4. As to the fourth and fifth submissions

The contested Decision by which the High Authority terminated the authorization for the applicant to participate in the OKU joint-buying agreement must be regarded either as a decision to refuse a renewal or as a decision of revocation. In either case the applicant complains that it contains an insufficient statement of reasons.

The High Authority may refuse to renew the authorization if it finds that the requirements of subparagraph (a) to (c) of Article 65 (2) are no longer met. The contested Decision, in its recitals, states in this respect that the object and aim of the agreement are the joint buying in certain coalfields of fuels intended for re-sale in Southern Germany and that the participation of the applicant, which is not capable of contributing noticeably to improving the distribution of these fuels, either by itself or by the wholesale coal merchants which belong to it, is thus not justified. It points out further that the participation of the applicant as a member of OKU in the discussions and decisions of the wholesale coal merchants of Southern Germany concerning the buying of fuels intended for the markets of Southern Germany is not esesntial for the improvement of distribution in this area and has more restrictive effects than the object of the agreement requires.

The High Authority must revoke the authorization in particular if it finds that the actual results of the agreement or of its application are contrary to the requirements for its authorization. Decision No 31/59 which authorized the collective participation of SOREMA as an association of undertakings in the joint-buying agreement of OKU did not alter the actual object of the authorized agreement. The contested Decision is therefore right in finding, by reference to Decision No 3/62, that the conditions mentioned in particular in favour of the French wholesale coal trade in respect of supplies from the Ruhr cod-selling agencies have had favourable effects on the French wholesale coal trade as a whole in the Common Market, but that the members of SOREMA have remained inactive in Southern Germany and that consequently the actual effects of the agreements are contrary to the requirements for their authorization.

The fourth and fifth submissions are thus unfounded.

III — Costs

Under Article 69 (2) of the Rules of Procedure of the Court, the unsuccessful party shall be ordered to pay the costs. In the present case the applicant, having failed in its submissions, must bear the costs of the proceedings.

The order of the President of the Court dated 17 September 1964 reserved the costs of the application for the adoption of an interim measure. The applicant having failed in that application must bear the costs of those proceedings.

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 15, 33, 48, 65 and 80 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:

I Dismisses the application;

2 Orders the Société Rhénane d'Exploitation et de Manutention (SOREMA) to bear the costs of the proceedings including those of the application for the adoption of an interim measure.