JUDGMENT OF 12. 12. 1967 — CASE 23/67 BRASSERIE DE HAECHT v WILKIN

In Case 23/67 Reference under Article 177 of the Treaty establishing the European Economic Community by the Tribunal de Commerce, Liège, for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt (Rapporteur), President, A. M. Donner and W. Strauß, Presidents of Chambers, A. Trabucchi, R. Monaco, J. Mertens de Wilmars and P. Pescatore, Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure

In 1963 Brasserie de Haecht, whose registered office is at Boortmeerbeek in Belgium, concluded three loan contracts with Oscar Wilkin and his wife Marie Wilkin (nee Janssen), the proprietors of a cafe in Esneux. The first contract related to the furniture for the cafe, the second to a loan of BF 6710 and the third to a loan of BF 40000, the total value of the three loans amounting to BF 52000.

Under the terms of these contracts, which were drawn up in standard form, the borrowers undertook to obtain supplies of (beer, liquors and soft drinks exclusively from the de Haecht brewery, both for their personal needs and for the purposes of their business.

The period of exclusive purchase in favour of the brewery was to extend at least for as long as the debt was not wholly paid off, plus an additional period of two years. A minimum period of exclusive purchase was stipulated, whatever the length of time taken to repay the debt.

In 1966 Brasserie de Haecht discovered that Mr and Mrs Wilkin had not complied with the exclusive purchase obligation contained in the contract with the brewery comprising the three agreements mentioned above. It brought an action before the Tribunal de Commerce, Liege, fox repayment of the loans, the return of the furniture and the payment of damages. In their defence, Mr and Mrs Wilkin did not dispute that they had obtained supplies of liquor from other undertakings but pleaded that the agreements in dispute were vod under Article 85 of the EEC Treaty. In its judgment of 8 May 1967, the Tribunal de Commerce, Liege, considered that the Community rules (Regulation No 67/67/EEC of 22 March 1967, Official Journal of 25 March 1967, p. 849) on the application of Article 85 (3) of the Treaty to certain categories of exclusive dealing agreements were not applicable to the dispute pending before it. However, the Tribunal de Commerce held that the exclusive dealing in question arose from an agreement between undertakings and that ‘Article 85 does not refer in so many words to a collection of agreements of the same type among the agreements or practices which are prohibited, but the list which it does contain is not exhaustive, and it is possible that the prohibition of certain agreements might be justified by the simultaneous existence of identical agreements which, considered as a whole, affect trade between the Member States of the Common Market’.

The Tribunal de Commerce therefore considered it desirable for the Court of Justice to give an interpretation of Article 85 within the framework of the procedure provided for by Article 177 of the Treaty. Consequently, it put the following preliminary question:

‘In order to judge whether the contracts in question are prohibited by Article 85 (1) of the Treaty of Rome, is it necessary to take into account the economic context and the whole of the market, that is to say, in this case, the simultaneous existence of a large number of contracts of the same “type imposed by a small number of Belgian breweries upon a very large proportion of liquor licensees or must consideration be limited to an examination of the effects on the market of the said agreements considered in isolation?”

The judgment in question was the subject of an appeal on 9 June 1967 ito the Cour d'Appel, Liege, but, having been sent from Registrar to Registrar, was received at the registry of the Court of Justice on 27 June 1967.

S.A. Brasserie de Haecht, Mr and Mrs Wilkin and the Commission submitted Observations under Article 20 of the Statute of the Court.

S.A. Brasserie de Haecht was represented by Lucien Simon and Félix Lainé, Advocates at the Cour d'Appel. Brussels, who annexed to their observations an opinion of Professor Foniers of the University of Brussels. In addition, Brasserie de Haecht submitted supplementary observations relating to a specific point arising out of the recent case-law of the Court.

Mr and Mrs Wilkin were represented by Jean Materne and Marcel Veroruysse of Liege, who annexed to their observations an opinion of Professor Walbroeck of the University of Brussels.

The Commission was represented by Mr Beuve-Méry

Those submitting statements of case produced at die hearing various documents annexed to their observations, in particular the text of the agreement concluded on 29 December 1966 between the brewers and the cafe, hotel and restaurant proprietors of Belgium, with a view to the harmonization of relations between the parties to the said agreement, together with Belgian parliamentary documents relating to certain clauses in so-called “brewery” contracts (1957 to 1958 session).

The oral observations of the parties to the main action and the Commission were delivered at the hearing on 7 November 1967.

The Advocate-General delivered bis reasoned, oral opinion at the hearing on 21 November 1967.

II — Observations submitted under Article 20 of the Statute

S.A. Brasserie de Haecht has outlined the circumstances which led in Belgium to the conclusion of the collective agreement of 28 November 1961, which was made compulsory by Royal Decree of the same date and prolonged to 25 September 1964(Moniteur Beige of 21 October 1964, p. 11127), and that of 29 December 1966, which is to be sanctioned by a fresh royal decree in the near future.

It has pointed out that this type of contract is not limited to the sphere of breweries. Comparable contracts exist in the fuel sector and in the shoe industry, which, as with brewery contracts, arise out of economic necessity. This practice is caused by the need to give small distributors credit and by the requirements of regular distribution. In the brewery trade this procedure is used in France, Federal Germany and the Netherlands, as well as in Belgium. It is alleged that, far from eliminating competition, this traditional feature of the sales policy of beer manufacturers constitutes a “weapon of war” between brewers, and that the contracts involve no territorial monopoly as the breweries remain free to deliver to anyone anywhere.

In addition, it is alleged that brewery contracts do not attempt to limit the number of sales outlets but, on the contrary, attempt to increase them and that they represent a tiny .body of agreements each of which has but minimal effect. Thus in Belgium such contracts are regularly concluded by the 282 Belgian breweries, tying approximately half .the liquor licensees, the number of whom at 31 December 1966 was 65426. In general, these contracts are alleged to affect only a small number of contracting parties and deliveries to untied cafe proprietors remain at a considerable level. At the level of national law, it is alleged that brewery contracts have -been regarded as not involving a restriction on competition (French and Belgian case-law), and that on the level of Community law it must be established whether a brewery contract fulfils the three conditions of Article 85 (1) of the Treaty.

It has been alleged that, although the first of these conditions (agreement between undertakings) appears to be satisfied, the other two (restriction of trade between Member States and the restriction of competition) are not. Article 85 (1) in fact requires that there shall be a partitioning of the market, as the Court has held in its judgments of 30 June 1966 (Case 56/65, Technique Minière v Maschinenbau Ulm) and of 13 July 1966 (Joined Cases 56 and 57/64, Établissements Consten SARL and Grundig-Verkaufs-GmbH v Commission of the EEC). The possibility of penetrating the market should allegedly only be judged by considering the agreement in question to the exception of all others (of. in particular the judgment in Joined Cases 8 to 11/66, Cimenteries Cementbedrijven N.V. and Others, Cementfabriek Ifmuiden N.V., Eerste Nederlandse Cement Industrie N.V. and Alsen'sche Portland-Cement-Fabriken K.G. and Others v Commission of the EEC, [1967] E.C.R.). It has been alleged that the criteria to be taken into account must be qualitative, such as the nature of the product in question, the distribution methods and the technical qualifications Of the distributors and the importance of the market “from the viewpoint of the consumption and the greater or lesser freedom of consumers”. The number of agreements’, here again, is irrelevant, since the undertakings of other Member States have the opportunity of penetrating the market in question, of establishing themselves there, of organizing distribution networks and of offering a real choice to the consumer in areas in which the product in question is not of too specific a character and does not require too much technical expertise in its distribution. Agreements like brewery contracts, therefore, can only by way of exception fall within the ambit of Article 85 (1) and in the normal way escape its application, as is confirmed by Regulation No 67/67. With regard to the market in beer, there is in fact neither a partitioning of the market, nor a limited number of distributors nor too great a technical expertise required of distributors. On the contrary, many cafes are not tied and the sales network is by no means limited to tied ones. Thus foreign beers are sold regularly in Belgium (6.24 % of total sales) and there is a consistent increase in imports. The market is therefore ‘one of the most penetrable and fluctuating that exists’, as there is ‘fierce’ competition therein between Belgian and foreign brewers. Consequently a fresh interpretation of Article 85 (1) of the Treaty arising out of this case appears to serve no purpose.

S.A. Brasserie de Haecht puts forward ‘in so far as is necessary’ some observations on the third condition of Article 85 (1), namely alteration of the conditions of competition. Here again the judgment in Société Technique Minière v Maschinenbau Ulm outlined an exhaustive method of examination. As the agreement should first be considered with regard to its object and its actual clauses, the analysis should be limited in the first place to the content alone of the agreement in dispute. It is then necessary to examine the contractual situation in which it is concluded, that is to say, where necessary, the number of parties to the agreement or to other agreements forming part of the same scheme, but not agreements setting up distribution networks which do not include the parties. Thus the judgment in Établissements Consten SARL and Grundig-Verkaufs-GmbH v Commission of the EEC puts the emphasis on the economic and legal context in which the parties entered into the contract. In that context it is necessary to examine whether the effect on competition is appreciable.

As Brasserie de Haecht represents only 4.6 % of Belgian production, and sales to its ‘tied licensees’ 30 % of its total sales, the brewery contracts which it might be necessary to take into consideration represent only 1.5 % of Belgian production.

At the hearing Brasserie de Haecht has emphasized that the obligations of brewery contracts affect both parties and that those undertaken by cafe propraetors are set a ‘ceiling’ by royal decree and confined to very precise limits. Such a contract is, therefore, above all a factor in favour of competition, as each obligation forms the consideration for new investment.

Mr and Mrs Wilkin point out that in order to judge the validity of the agreements in dispute it is necessary to take into acount a whole series of similar agreements. They allege that this solution conforms more to the wording of Article 85, to its aim, to the case-law of the Count and to prevailing legal theory.

First of all, it is claimed that the wording of Article 85 in no way requires examination of agreements in isolation in order to judge whether they fall within .the ambit of its provisions. In fact, this article, the wording of which has already been interpreted in the judgment in Societe Technique Minière v Maschinenbau Ulm, refers to agreements which have as their object or effect the distortion of competition. As interpreted, this condition is of an alternative, and not a cumulative, nature.

Therefore, if an analysis of the clauses of the agreement were not to reveal a sufficient degree of harmfulness in respect of completion, it would be possible for the agreement to be caught by reason of its effects alone which whether or not they were intended by the parties, would actually arise from the market situation in which the agreement is concluded. It is not permissible, therefore, to reject consideration of the existence and incidence of similar agreements concluded by other undertakings and relating to competing.products.

In the second place, it is alleged that the aim of Article 85 requires agreements to be considered in their economic context. The existence of numerous exclusive supply contracts between Belgian cafe proprietors and breweries constitutes a serious obstacle to the importation of foreign beer into Belgium. The system of brewery contracts' has been regarded by the Belgian legislature itself as being capable of protecting Belgian brewers from ‘too strong’ competition from German and Netherlands beers (cf. report made by Mr Rombaut on behalf of the Commission de Justice of the Chambre des Representants on a draft law relating to certain clauses in so-called ‘brewery’ contracts, parliamentary documents, Chambre session 1957 to 1958, No 221-4, p. 4). It is dear that this protectionist policy is not in conformity with the objectives of the Treaty.

An interpretation of Article 85 which, in order to judge the validity of individual agreements, takes into account the market as a whole, alone enables the objectives of the Treaty to be realized by placing the undertakings of the various Member States in competition with each other and by eliminating the obstacles to interpenetration of the markets.

According to Mr and Mrs Wilkin, Brasserie de Haecht itself recognizes that, in order to judge the legality of an agreement under Article 85, it is necessary to take into account objective factual situations in relation to the structure of the market, by partially ignoring the intentions of the parties.

In the third place, it is claimed that in its .previous case-law the Court has already indicated that it is necessary to consider the economic context in which the agreement is to be applied and not to consider that agreement solely in terms of its legal standing or of the clauses which it contains. In so doing, it is unnecessary to have misgivings, in such a case as this, .that the parties, and. especially the brewery, did not have any reason to suspect that their conduct was capable of falling within the ambit of the Treaty, having regard to the attempt of every brewery to seek an ‘aggregate result’.

In the fourth place, legal writers (Bernini, Walbroeck and Baardman) admit of the necessity not to consider agreements in isolation but to place them .in the context in which they are concluded in order to judge whether they are compatible with the Treaty. According to Baardman in particular, the unfavourable influence on trade exercised by a situation considered as a whole also vitiates the individual agreements which form part of it.

American anti-trust law allows the actions of competitors and the adoption of an identical sales policy by an association to be taken into account (judgment in the Standard Oil California case). German legal theory interprets the German Law against restrictions on competition in the same way (in particular, paragraph 18 as amended on 15 September 1965).

Finally it is alleged that brewery contracts may constitute one of the exceptional cases referred to in the preamble to Regulation No 67/67, as they are capable of affecting inter-state .trade, despite being performed individually within one State alone. In fact, the exceptional feature is created by the configuration of the market in beer and the great number of identical contracts. In conclusion, Mr and Mrs Wilkin consider that an affirmative reply should be given to the question put.

The Commission of the EEC, after describing the market in question and noting the existence of similar markets in various Member States, wonders generally whether the existence of other similar agreements can be relevant in judging an exclusive dealing agreement concerning the national distribution of a product under Article 85 of the Treaty.

The Commission points out hrst of all that ‘it is not without interest to note that the co-existence of multiple, national, exclusive dealing agreements concerning the distribution of one and the same product is a fact which might appear in the context of an investigation undertaken on the basis of Article 86 of the Treaty and, as that provision and Article 85 have a common criterion, that of the alteration of the conditions of tirade between Member States, the reply to the question put is capable mutatis mutandis of touching on the interpretation of Article 86’.

Basing its argument on the judgment in Case 56/65, Societe Technique Miniere v Maschinenbau Ulm, of which it quotes the operative part of the judgment and certain of .the grounds of judgment, the Commission emphasizes that ‘the existence of other agreements forming part of the same system as the agreement complained of may be one of the factors in the situation which causes the agreement to alter the conditions of competition and the system to constitute a sufficient relationship for judging an agreement with regard to others’. The reply to the question, it is claimed, is therefore to be sought in an analysis of the relationships which may exist between exclusive dealing agreements simultaneously in force.

It appears necessary, therefore, to examine three types of relationship.

The first is inferred from the very coexistence of the exclusive dealing agreements in question, namely the identity of .the product and national market concerned. The second appears when the suppliers are less numerous than the retailers. The distribution system of each supplier is therefore a link between the exclusive dealing agreements which form that system. Finally, the third relationship which may be added, but which is not necessarily deduced from the judgment referring the matter, is that co-existing exclusive dealing agreements are the means whereby an agreement between suppliers, or between suppliers and retailers, is implemented. The first relationship may be found in ‘the identity of the national market and product concerned’. Considered on this basis, it is well founded in law to assess the consequences of an agreement on trade between Member States and on competition in terms of other, similar agreements.

in fact, by reason or their nature, tne first agreement and the others have cumulative effects on such trade and competition. It is alleged that the case-law of the Court (Case 56/65, Rec. 1966, p. 337), in touching on the effects of an agreement under consideration, presumes that ‘the application of all exclusive dealing agreements which exist at the same time as the exclusive dealing agreement impugned is a relevant factor in assessing whether that agreement may affect trade between Member States and have the effect of interfering with competition within the Common Market’.

The second relationsihp to be considered is the distribution system. It also makes relevant the consideration of all exclusive dealing agreements forming part of the same system. The answer is provided by the observations which have .been submitted concerning the first relationship. The supplier's identity may cause the relationship which occurs between the exclusive dealing agreements to be such that Article 85 (1) may be applied to all of them as to a single, all-embracing agreement; however, there is no need in the present case to pursue this point, which was not envisaged by the court making the reference. One objection which might be raised is that these first two relationships would have consequences contrary to natural justice, to the accepted rules governing liability, wrongful activity and legal certainty in respect of undertakings which, individually, are not necessarily responsible for the situation considered as a whole. This objection fails, however, in view of the lack of reference in Article 85 (1) to any concept of wrongful activity; it does not in any case apply to the beneficiary of an exclusive dealing agreement who uses it as a weapon against his competitors. Lastly, concern to preserve legal certainty cannot prevail over the intentions of the authors of the Treaty.

The third relationship is to be found in the partitioning of the Belgian market which Mr and Mrs Wilkin claim was carried out by the Belgian breweries in such a way as to constitute a concerted practice, although this was not accepted by the court making the reference. Nevertheless, it is interesting to note that, in cases where there are similar and co-existing agreements which are the effect of an agreement itself caught by Article 85, the legality of any one of those agreements is to be judged in the light of the simultaneous existence of the other agreements similar to it and of the agreement which had produced them all. In such a case the competent authority — whether acting under Article 85 or under national civil law by reason of the illegal nature or cause of the agreement — is not bound to restrict itself to an examination of the disputed agreement in isolation. The reply to the question referred for a preliminary ruling by the Tribunal de Commerce, Liege, proposed by the Commission is as follows:

‘Contracts containing an exclusive purchase clause do not by their very nature necessarily include all the factors amounting to incompatibility with the Common Market provided for by Article 85 (1) of .the Treaty. Such a contract may, however, taken individually and in a particular set of circumstances, contain all those factors. In particular, one of the factors relevant to a consideration whether Article 85 (1) of the Treaty prohibits an agreement which contains an exclusive purchase clause whereby a retailer trading in a Member State undertakes for a certain period to purchase a product from a particular supplier operating in the same Member State is the simultaneous existence Of agreements including similar exclusive purchase clauses, that is to say, agreements made between undertakings in that State for the distribution of that product in their national territory.’

Grounds of judgment

By a judgment of 8 May 1967, received by the Court on 27 June, the Tribunal de Commerce, Liège, referred to the Court under Article 177 of the EEC Treaty for a preliminary ruling on the interpretation of Article 85 (1) of the said Treaty. The Court is asked whether, ‘in order to judge whether the contracts in question are prohibited by Article 85 (1) of the EEC Treaty, it is necessary to take into account the economic context and the whole of the market, that is to say, in this case, the simultaneous existence of a large number of contracts of the same type imposed by a small number of Belgian breweries upon a very large proportion of liquor licensees’, or whether ‘consideration must be limited to an examination of the effects on the market of the said agreements considered in isolation’. According to this judgment the question refers to agreements whereby a dealer undertakes for a certain period to obtain his supplies solely from a given supplier, to the exclusion of all others.

The prohibition in Article 85 (1) of the Treaty rests on three factors essential for a reply to the question referred. After stating the limits within which the prohibition is to apply, Article 85 (1) mentions agreements, decisions and practices. By referring in the same sentence to agreements between undertakings, decisions by associations of undertakings and concerted practices, which may involve many parties, Article 85 (1) implies that the constituent elements of those agreements, decisions and practices may be considered together as a whole.

Furthermore, by basing its application to agreements, decisions or practices not only on their subject-matter but also on their effects in relation to competition, Article 85 (1) implies that regard must be had to such effects in the context in which they occur, that is to say, in the economic and legal context of such agreements, decisions or practices and where they might combine with others to have a cumulative effect on competition. In fact, it would be pointless to consider an agreement, decision or practice by reason of its effects if those effects were to be taken distinct from the market in which they are seen to operate and could only be examined apart from the body of effects, whether convergent or not, surrounding their implementation. Thus in order to examine whether it is caught by Article 85 (1) an agreement cannot be examined in isolation from the above context, that is, from the factual or legal circumstances causing it to prevent, restrict or distort competition. The existence of similar contracts may be taken into consideration for this objective to the extent to which the general body of contracts of this type is capable of restricting the freedom of trade.

Lastly, it is only to the extent to which agreements, decisions or practices are capable of affecting trade between Member States that the alteration of competition comes under Community prohibitions. In order to satisfy this condition, it must be possible for the agreement, decision or practice, when viewed in the light of a combination of the objective, factual or legal circumstances, to appear to be capable of having some influence, direct or indirect, on trade between Member States, of being conducive to a partitioning of the market and of hampering the economic interpenetration sought by the Treaty. When this point is considered the agreement, decision or practice cannot therefore be isolated from all the others of which it is one.

The existence of similar contracts is a circumstance which, together with others, is capable of being a factor in the economic and legal context within which the contract must be judged. Accordingly, whilst such a situation must be taken into account it should not be considered as decisive by itself, but merely as one among others in judging whether trade between Member States is capable of being affected through any alteration in competition.

Costs

The costs incurred by the Commission of the EEC, which has submitted observations to the Court, are not recoverable, and as these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the Tribunal de Commerce, Liège, the decision on costs is a matter for that court.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the observations of the Commission of the European Communities and the parties to the main action; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the EEC, especially Articles 85, 86 and 177; Having regard to the Protocol on the Statute of the Court of Justice of the EEC, especially Article 20; Having regard to Regulations No 67/67/EEC of 22 March 1967; Having regard to the judgment of the Court of 30 June 1966 in Case 56/65; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT in answer to the question referred to it for a preliminary ruling by the Tribunal de Commerce, Liège, hereby rules: