JUDGMENT OF 15. 7. 1970 — CASE 44/69 BUCHLER v COMMISSION
In Case 44/69
THE COURT composed of: R. Lecourt, President, R. Monaco and P. Pescatore, Presidents of Chambers, A. M. Donner, A. Trabucchi (Rapporteur), W. Strauß and J. Mertens de Wilmars, Judges, Advocate-General: J. Gand Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Statement of facts and procedure
The facts which form the basis of the dispute and the procedure may be summarized as follows:
The dispute originated in the activity carried on by certain undertakings in the Community within the framework of an international cartel relating to the production and sale of quinine and quinidine and of their salts and compounds. These products are used in particular in the manufacture of medicines for the treatment of malaria and certain cardiac illnesses. The case relates only to the sale of quinine and quniidine and of their salts and does not concern the marketing of pharmaceutical products under trade-mark.
From 1958 the Buchler undertaking, which manufactures chemical and pharmaceutical products, in particular quinine and quinidine, was a party to a series of agreements with other European manufacturers of those products. On 30 May and 11 to 13 June 1958, it concluded an initial agreement relating to the division of national markets (Germany and the Netherlands) as well as fixing the prices and quotas for the export of quinine and quinidine to all other countries with the following undertakings:
a) C. F. Boehringer & Söhne, Mannheim, and its subsidiary, Vereinigte Chininfabriken Zimmer & Co., GmbH, Mannheim.
b) NV Amsterdamsche Chininefabriek, Amsterdam, NV Nederlandse Kininefabriek, Maarsen, Bandoengsche Kininefabriek Holland NV, Amsterdam, NV Pharmaceutische Groothandel van de Amsterdamsche Chininefabriek, Amsterdam, NV Bureau voor de Kinineverkoop Buramic, Amsterdam, NV Nederlandse Combinatie voor Chemische Industrie, Amsterdam (hereinafter referred to as ‘Nedchem’).
On 28 February 1959 Buchler withdrew from this agreement.
Pursuant to the provisions of Article 85 of the EEC Treaty, the Bundeskartellamt, to which the agreement was notified on 24 January 1959 in accordance with Article 6(1) of the German Law against restriction of competition, requested the parties to the agreement for information on its territorial scope. Following this request Boehringer and Nedchem concluded a new agreement on 14 July 1959 excluding supplies to other States of the EEC.
Negotiations entered into in 1959 between Buchler, Boehringer, Nedchem, the group of French quinine producers (Nogentaise, Pointet-Girard, Taillandier and Pharmacie Centrale) together with Carnegies of Welwyn Ltd and Lake & Cruickshank Ltd of the United Kingdom resulted in an agreement between all those undertakings. First of all on 10, 24 and 31 March 1960 Boehringer (acting also in the name of its abovementioned subsidiary), Buchler and Nedchem (acting also in the name of all the abovementioned Netherlands undertakings) concluded an agreement providing for :
the fixing by agreement of prices and rebates applicable to exports of quinine and quinidine;
the allocation of export quotas and the reservation of certain markets outside the Community;
the retention of the clause making the agreement inapplicable to exports in the States of the EEC;
a system of compensatory quantities in the event of export quotas being exceeded or unfulfilled;
the prohibition of collaboration outside the Common Market with undertakings which were not parties to the agreement with regard to the production or sale of quinine or quinidine;
application to be made, in case of dispute, at the option of the parties, to arbitration or to the ordinary courts of law.
It was agreed that this export agreement would terminate on 31 March 1965 but that it might be renewed every five years. Rules drawn up to ensure the strict cooperation of the parties in order to facilitate the implementation of the agreement provided in particular that every month each of the parties to the agreement should supply the other with certain information on the basis of which Nedchem would, for the purposes of quantitative compensation, make periodic calculations of the deliveries in excess of or below the quota of each of the undertakings.
Apart from this agreement, which governed the problem of Buchler's adherence to the agreement concluded on 8 and 14 July 1959 between Boehringer and Nedchem, another agreement was concluded on 7 April 1960 between Boehringer, Buchler, Nedchem, the abovementioned French group and the two British undertakings, Carnegies and Lake & Cruickshank, in order to settle the conditions for the adherence of the French and British undertakings to the above-mentioned agreement of 10, 24 and 31 March 1960, in so far as it related to quinine.
Parallel with the export agreement two gentlemen's agreements containing substantially identical provisions were concluded on 9 April 1960 and recorded in writing although they were not signed; one was between the French group, Boehringer, Buchler, Nedchem and Carnegies and the other was between the French group, Boehringer, Buchler, Nedchem and Lake & Cruickshank. Those two gentlemen's agreements extended the provisions laid down in the export agreement with regard to price, quotas and compensation for quantities, for both quinine and quinidine, to all sales on domestic markets and abroad, and in particular to all sales within the Common Market. Furthermore, they laid down the principle of protection of domestic markets for each of the producers. The two British undertakings agreed not to manufacture quinidine without the approval of the German and Netherlands parties and to purchase this product exclusively from the German and Netherlands parties and to maintain the agreed price on resale. The French undertakings entered into the same obligation with regard to synthetic quinidine. Derogations from the gentlemen's agreements could take place only with the agreement of all the parties and disputes were to be settled exclusively by arbitration. It was further decided that failure to comply with or termination of the gentlemen's agreements wouldautomatically beregarded as failure to comply with or termination of the formal export agreements relating to quinine and quinidine, and vice versa.
The gentlemen's agreements were kept secret.
The said agreements were supplemented during 1961 and 1962 by an association relating to the joint purchase of raw materials which, in accordance with the decision taken during a meeting on 26 January 1961, was drafted in conformity with the arrangements laid down in a draft agreement instituting a pool of stocks purchased (‘bark pool’) but which was never signed. The association relating to the joint purchase of raw materials terminated on 31 October 1962.
During a meeting on 2 May 1962 a general increase in prices was decided upon.
Agreements were also concluded for the purchase of reserves from the American stockpile which the General Service Administration had decided to sell. In this connexion, it was decided during the meeting on 20 and 21 April 1962 that the quantities purchased by Nedchem would be divided amongst the members in a specific ratio and that in return Nedchem would receive a commission of 2 %; this commission would be increased to 7 % if the other agreements (the export agreement and the gentlemen's agreements) were terminated in advance. On 4 September 1964 the American General Service Administration gave a definite refusal to make any further deliveries to Nedchem alleging that military requirements had arisen. Following each delivery Nedchem divided it amongst the other members.
The commission was always fixed on the basis of the rate of 2 %. When on 13 March 1962 the first regulation in implementation of Articles 85 and 86 of the EEC Treaty came into force the abovementioned undertakings decided provisionally to continue to implement the gentlemen's agreements.
In the course of a meeting on 29 October 1962 difficulties arose between the parties on the question of the ‘bark-pool’. As a preliminary condition to concluding an agreement on bark, Nedchem requested the abolition of the prohibition on exporting bark which was in force in the Congo although Pharmakina, Boehringer's Congolese subsidiary, was in favour of this prohibition. As a result of this Lake & Cruickshank and Boehringer requested revision of the quotas. The scope of the decisions taken at this meeting with regard to the gentlemen's agreements gave rise to a dispute between the parties to the present proceedings.
On 2 November 1962 Nedchem notified the other members that the export agreement and the gentlemen's agreement should no longer be regarded as binding; it alleged that the proposals made by Boehringer and Lake & Cruickshank with regard to the ‘bark-pool’ and the fixing of the new sales quotas were contrary to the spirit of the said agreements.
The other members did not accept those reasons and at the meeting on 14 October 1963, at which all the parties to the agreement were present except Carnegies (which ceased producing quinine in the same month and intimated its withdrawal by letter of 28 October 1963), the parties concerned reached a compromise the purpose and scope of which are disputed by the parties to the present proceedings.
In the course of 1964 the abovementioned undertakings twice made joint decisions to raise the price of quinine, first by 15 % at the meeting on 12 March and subsequently by 25 % at the meeting on 28 October, whilst the prices of quinidine were raised by 20 %.
An agreement modifying the length of the validity of the export agreement (which was in the meantime extended for 12 months only instead of the five years initially provided for) was concluded in December 1964 and January 1965 between Boehringer, Buchler, Nedchem, the French group and Lake & Cruickshank. At the beginning of 1967 the Commission's departments obtained more detailed information on the activities of the international quinine cartel through inquiries carried out in the United States of America in connexion with Nedchem's purchase of large 'quantities from the stockpile. In particular the Commission became acquainted with the report of the American Senate Anti-Trust Sub-Committee. In addition to recording the hearings held by the sub-committee, this document has annexed to it a large number of minutes of the meetings of the cartel, the correspondence exchanged by the parties concerned, the agreements drawn up between them and reports from the director of a British company which was a party to the agreements. These documents date from 1960 to 1963. Consideration of those documents led the Commission to take the view that the implementation of the above-mentioned agreements (the export agree ment and the gentlemen's agreements) had been continued after October 1963. Communications were exchanged in May and June 1967 with the competent authorities with regard to cartels in the Federal Republic of Germany, France and the Netherlands in connexion with the investigations to be undertaken on the undertakings concerned. In May 1967 the Bundeskartellamt had already undertaken investigations with regard to Boehringer and Buchler and the Netherlands authorities had investigated Nedchem.
On 17 July 1967 the Commission's Director-General for Competition signed the authorizations to carry out investigations the object of which was expressed thus: “… to establish whether or not the activities of the international cartel in the quinine industry have infringed the provisions of Article 85 of the Treaty establishing the European Economic Community”. On the basis of those authorizations investigations were carried out on the six undertakings and as a result the decision of the Commission of 16 July 1969 was sent to the said undertakings on the dates indicated at No 17 of that decision. Thereafter investigations were carried out on the two Belgian undertakings and on the five Italian undertakings who were purchasers of quinine, in order to establish the prices maintained in those countries by the members of the cartel.
On 29 July 1960 the Commission decided on the basis of Article 3 of Regulation No 17 to take proceedings upon its own initiative against the six abovementioned undertakings. This decision was notified to the undertakings concerned by letter of 30 July 1968 together with the complaints made by the Commission on the basis of the investigations.
The undertakings concerned were given a period of two months within which to define their positions with regard to the objection made against them.
At the request of tour of those undertakings, including the applicant, the Commission subsequently extended that period to 15 December 1968.
On 11 and 12 February 1969 the undertakings concerned were given the opportunity of submitting their oral observations. In addition to representatives of the undertakings and of the Commission, officials of the State directly concerned in the international quinine cartel, such as Belgium, the Federal Republic of Germany, France and the Netherlands, were also present at the hearing. Following discussions with the parties concerned, the Commission withdrew its objections concerning the “bark-pool” and the stockpile agreement and also with regard to the infringements for the period from February 1965 to August 1966 during which period the termination of the export cartel had been notified to the Bundeskartellamt.
During its meeting on 16 July 1969 the Commission adopted a decision imposing on the Buchler undertaking a fine of 65000 units of account for infringement of the provisions of Article 85(1) of the Treaty which this undertaking committed until the beginning of February 1965, “by concluding and implementing the agreement on exports of 8 and 14 July 1959, the additional agreements of 10 and 31 March 1960 and of 7 April 1960 (the period of validity of which was extended by the agreement of 14 December 1964 and 19 January 1965), the gentlemen's agreements of 9 April 1960 and the agreements implementing or supplementing those agreements, in particular the agreements with regard to the fixing of prices and of export rebates for quinine and quinidine, the division of domestic markets, the system of quotas and of quantity compensation and the limitation of the production of quinidine”.
For the same reasons this decision imposed :
1) on Nedchem, a fine of 210000 units of account,
2) on Boehringer Mannheim GmbH, a fine of 190000 units of account,
3) on the Société Chimique Pointet-Girard SA, a fine of 12500 units of account,
4) on the Sociéte Nogentaise de Produits Chimiques, a fine of 12500 units of account.
5) on the Pharmacie Centrale de France, a fine of 10000 units of account.
On 25 September 1969 the Buchler undertaking lodged an application at the Court Registry for the annulment of this decision.
At its meeting on 18 March 1970 the Court, on the proposal of the Judge-Rapporteur and after hearing the Advocate-General, decided to join Cases 41/69,44/69 and 45/69 for the purposes of the oral procedure.
At the request of the Court the defendant replied to various questions by written statements lodged at the Court Registry on 4 April and 13 May 1970.
By a written statement lodged on 22 May 1970 the applicant submitted its observations on the defendant's statement of 13 May 1970.
The parties presented oral argument at the hearing on 15 and 16 April 1970.
In the course of that hearing the defendant lodged documents on which the applicant submitted its observations by a written statement lodged on 27 April 1970.
The Advocate-General delivered his opinion at the hearing on 10 June 1970.
II — Conclusions of the parties
In its application, the applicant claimed that the Court should:
1) Annul the decision of the Commission of the European Communities of 16 July 1969 (File No IV/26623) in so far as it refers to the applicant;
2) Order the defendant to pay the costs;
Alternatively :
1) Amend the decision of the Commission of the European Communities of 16 July 1969 by making a considerable reduction in the fine imposed on the applicant ;
2) Order the defendant to pay the costs.
In its statement of defence, the defendant contended that the Court should:
dismiss the application as unfounded;
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 :
1 — The procedure followed by the Commission
(a) General considerations
In support of the objections which will be set out below, the applicant puts forward several times its view that the procedure for imposing a fine must be governed by stricter rules than the ordinary administrative procedure under Article 85. This difference must be shown primarily in the rules concerning the protection of the rights of the defence.
The defendant puts forward the general objection that, even where it is taking steps to impose a fine, the Commission is an administrative authority and not a court, as is shown in particular by Regulations Nos 17/62 and 99/63 which concern the proceedings before it. It is thus the subsequent proceedings which may take place before the Court of Justice which ensure the full and comprehensive protection of the undertakings.
(b) Investigations carried out in Italy and Belgium
The applicant maintains that the notice of complaints did not inform it of the nature, scope, content and result of the investigations carried out on the Italian and Belgian purchasers of quinine, on which the Commission bases its decision. It was thus unable to defend itself on this point.
The defendant replies that the outcome of these investigations was clearly shown on page 37 of the notice of complaints : “The prices fixed in common have been uniformly applied within the Common Market by the members of the cartel … for exports to countries without any domestic production of quinine, that is, Belgium, Luxembourg and Italy”. The applicant has thus been able to submit its observations on this point but did not contest that finding. Secondly, the Commission was not obliged to list the particular points of evidence, as within the meaning of Article 4 of Regulation No 99 the objections constitute the facts.
The applicant puts forward the objection that by failing to provide it with certain information, such as the name of the purchasers and the figures involved, the Commission did not allow it to verify the accuracy of the above-mentioned statement. In the opinion of the applicant the details of the allegations against it constitute the “facts” within the meaning of Article 4 of Regulation No 99.
The defendant replies that it is unable to see what the applicant expected it to do. By requiring the production of evidence on receiving notification of the statement of complaints the applicant is confusing the Commission's obligations as an administrative authority with its obligations as the defendant in the present case.
(c) Failure to provide the applicant with documents
The applicant complains that it was not allowed access to the documents on which the decision is based.
In this respect the defendant states that, at the applicant's request, it allowed it to consult all the documents referred to in the statement of complaints, with the exception of the four documents which specifically concern the French undertakings; consultation of these was refused on the ground that the undertakings concerned had still to submit their observations on three of them. The fourth document concerning the quotations submitted by the members of the cartel could not be made available to the applicant having regard to the other undertakings concerned.
In its reply the applicant maintains that it does not recall being informed by the Commission of the content of certain documents referred to by that institution in its statement of defence. Moreover, it complains that it was not aware of the written statements which the other undertakings concerned made as a result of the Commission's statement of complaints and on which the contested decision is based. The principle of respect for the rights of the defence prevents the Commission from using to the detriment of the applicant the statements made by the other undertakings if it is unable to provide the defence with the information contained therein.
The defendant replies that not only is it under no obligation in this respect, but also that it is not entitled to inform the applicant of the observations made by the other parties.
Moreover, the observations submitted by. the French undertakings during the investigations referred to in the statement of complaints were read at the beginning of the hearing on 11 February 1969 and the text had been handed to them.
(d) Objections concerning the minutes of the undertakings concerned
The applicant maintains that the Commission has not properly taken into account the full minutes of the hearing of the applicant on 11 and 12 February 1969. Only on 11 August 1969, almost one month after the decision was taken, did the applicant receive a final version of the minutes which took into account the amendments which it had suggested to the Commission in its letter of 4 July 1969. As a result of the period of 14 days provided for between its convening and the formulation of its opinion, the Advisory Committee on Restrictive Practices and Monopolies was unable to act on the basis of the final version of the minutes of the hearing of the undertakings concerned. If the Commission convened the Committee before receiving the applicant's reply and before a definitive version of the minutes was finally prepared, it committed a fundamental infringement of the law, since the Committee had submitted its opinion on the Commission's draft decision on the basis of wrong information. Furthermore, the applicant considers it doubtful whether the Members of the Commission were aware of the final wording of the minutes and requests the Commission to produce evidence of this. It alleges that it is incompatible with the principles of the rule of law for this body to have imposed fines without having heard the undertakings concerned, or at least having read the final version of the minutes of the hearing.
The defendant observes that the drawing up of the final version of the minutes of the hearing, during which the undertakings concerned used three official languages, gave rise to a considerable amount of work. The minutes, which were drawn up in a complete form in both German and French, were sent on 10 June 1969 to the undertakings concerned, who had three weeks in which to submit their observations to the Commission. The amendments requested by the applicant in its letter dated 4 July 1969, concerning “specific questions without fundamental importance”, were given full consideration by the Commission, and, on this ground, the applicant was regarded as having approved the minutes.
It alleges that the objections concerning the consultation of the Advisory Committee and the proceedings of the Commission are neither admissible nor justified. That Committee had been properly invited to a meeting to be held on 23 June 1969. Most of the Committee members had been present when the undertaking was heard. Moreover, it cannot be the business of the undertakings to defend the interests of that Committee.
As regards the course taken by the Commission's proceedings, both the Members of that body and their colleagues were able to study the content of the file at the Directorate-General for Competition. The Member of the Commission empowered to act in this matter, Mr Sassen, was kept up to date with the proceedings.
The applicant acknowledges that it approved the minutes of the hearing. However, it observes that the manner in which the Commission refers to the points involved in the amendments to the minutes which were suggested by the undertakings concerned might conceal the importance of each of the questions dealt with during the hearing. The fact that most of the members of the Advisory Committee were present at the hearing does not eliminate the procedural defects resulting from the fact that that Committee only received draft minutes. As a result, the information received by some of the members of that body was incomplete. Mr Sassen was never present at the hearing, a fact which is incompatible with the Commission's view that it is at least necessary for the member empowered to act in the matter in question to be fully informed. Moreover, there was no sense in having a question settled by a collegiate body of fourteen members if only one of them was in possession of detailed information.
The defendant claims that the minutes which were sent to the undertakings concerned on 10 June 1969 did not record the “essential content of the statements” made by each person heard, in accordance with the provision in Article 9(4) of Regulation No 99/63/EEC.
Secondly, the Advisory Committee was set up in order to ensure a link between the Commission and the authorities of the Member States and was not intended to protect the individual rights of undertakings, as is shown by the fact that its opinion is not made public. The Committee was informed of the case by means of a statement, accompanied by a list of the principal documents for its members to study.
As regards the criticisms concerning the Commission's method of proceeding, the defendant considers that they are too general in nature and appear to be manifestly unfounded.
2 — The period of limitation
The applicant maintains that the possible infringements of Article 85 of the Treaty are time-barred, since the applicant's alleged infringements ceased by October 1964 at the latest and the period of limitation had been interrupted at the earliest by the Commission's decision of 29 July 1968. Since Community law does not govern the period of limitation it is necessary, as regards the applicant, to have recourse in this instance to German law, in accordance with the criteria followed by the Court of Justice in Case 18/57 regarding the capacity of the applicant. In the case of fines imposed by the administration, German law lays down a period of limitation of two years. It is precisely by reason of this period of limitation that, by letter of 4 June 1969, the Bundeskartellamt suspended the proceedings to impose a fine, which were under way in Germany. The Commission's decision to take proceedings against the applicant in accordance with Article 3 of Regulation No 17 was adopted on 29 July 1968, more than three and a half years after the alleged infringement came to an end The investigations carried out by the Commission's inspectors in 1967 cannot interrupt the period of limitation, as the nature of the proceedings and the number of parties involved was not then finally established and the commission had not decided to take proceedings for infringement of Article 85. To accept that administrative measures, such as an investigation, are sufficient to interrupt the period of limitation is not in accordance with either the requirements of the rule of law or the general principles common to the laws of the Member States. In the Member States the period of limitation applying to the consequences of the infringement of administrative regulations comes to an end after a certain length of time which varies from six months to six years, the latter being applicables only in the case of serious infringement, punishable by a sentence of imprisonment. In the case of infringements comparable to those in question at present, legal proceedings cannot be brought more than three years after such infringements occurred. There is no reason to accept the existence of a more severe system in Community law. Referring to the Court's judgment in Joined Cases 7/56 and 3 to 7/57 regarding the common legal principles concerning time-limits for the revocation of illegal administrative measures which create individual rights, the applicant emphasizes that the Court did not follow the Italian regulations which were unfavourable to the parties concerned, but favoured the legal systems which restricted revocability. The applicant considers that in this instance a period of limitation of two years enables the interests of the Community and of those whom it administers to be reconciled.
The defendant observes that the fact that no provision has been laid down in Regulation No 17 with regard to time-limits means that in practice the Commission is competent, within the framework of its power of appraisal and subject to review by the Court, to fix the limits to be set for actions with regard to proceedings for infringement.
The applicant's view in connexion with the application of national law has no foundation in Community law. The judgment of the Court in Case 18/57 cannot support this argument, as the capacity to institute proceedings referred to in that decision in no way relates to Community law. The consequence of the applicant's argument would be that the uniform application of Community law would be hampered in the sphere of competition law.
On the other hand, the defendant concedes that the question is admissible whether, with regard to time-limits, there is a principle common to the legal systems of the Member States. In the four Member States with legislation on cartels, infringements of such provisions are given varying legal status: in German law (as in Community law) such infringements are of an administrative nature; on the other hand under French, Belgian and Netherlands law such infringements take on a criminal aspect.
With regard to interruption of the limitation period the rules applicable in the Member States are likewise extremely diverse.
Taking into account the extreme diversity in the various Member States of the nature of infringements, of sanctions, of the periods of limitation and of the acts interrupting them, the defendant concludes that no criterion can be derived common to the law of the Member States with regard to the detailed rules of application of the general principle of limitation. In those circumstances, in order to establish a period of limitation for infringements of Articles 85 and 86 of the EEC Treaty only the requirements of Community law may be taken as a basis, taking account also of the importance and the function of the rules on competition under the EEC Treaty. Nor should the fact be ignored that the Commission is obliged to rely on the cooperation of the Member States in investigating infringements.
Applying those considerations to the present case, the defendant maintains that the period of limitation which began to run from February 1965 was interrupted by the investigations which it made on the applicant in October 1967. The official entrusted with the investigations in question produced an authorization signed by the Director-General for Competition indicating in detail the object and the aim of the check to be made in connexion with specific infringements. If the applicant had refused, as it was entitled to do, to submit to the investigation on the basis of that authorization, the Commission would immediately have ordered the investigation by a decision. Consequently, with regard to the interruption of the period of limitation different effects cannot be attributed to investigations made by the Commission depending on whether they were carried out on the basis of an authorization or a decision.
Between the point when the infringements were discounted and the investigations by the Commission a period of less than three years elapsed which is insufficient to constitute a bar to an action in respect of such infringements since, according to the legal systems of the majority of the Member States, the period of limitation for infringements intentionally committed against provisions relating to cartels is three years.
Even if it is conceded that the period of limitation was only interrupted when the Commission initiated the administrative procedure on 29 July 1968, the period of three and a half years which had thus elapsed is insufficient to establish a bar under Community law since, within the framework of the EEC, the rules on competition assume a greater importance than under national law, as is clear from the fact that “the institution of a system ensuring that competition in the Common Market is not distorted” constitutes one of the objectives of the EEC Treaty.
The applicant replies that the objections based on the principle of the uniform application of Community law disappear if the period of limitation under German law is applied to all the parties concerned, in accordance with the general principle that the solution to be applied is that which is the most favourable to the party concerned. The applicant regards as indefensible the Commission's view that it is entitled to specify the length of the period of limitation.
As regards the interruption of the period of limitation, the applicant observes that it is not correct to maintain that the official who was responsible for the investigation in December 1966 gave evidence of his status by showing a written authority to carry it out. The applicant was thus unable to understand that this procedure could result in a fine. Moreover, the decision of 29 July 1968 shows that only then did the Commission resolve to take official action which could result in a fine.
The defendant considers that the uniform application of the German law on limitation periods is impossible, since in relation to comparable facts the laws of the other Member States provide for periods of limitation which are generally much longer.
As regards the question of the interruption of the period of limitation, the defendant refers to the text of the authority to carry out the investigation, which clearly relates to the activities of the international cartel in the quinine industry and to their compatibility with Articles 85 and 86 of the EEC Treaty.
3 — As regards other infringements of the law to which the applicant refers in the alternative
(a) Prohibition on the export agreement
The applicant questions whether the export agreement formed one “indissoluble entity” with the gentlemen's agreement. This agreement was already in existence in 1959 and only nine months later, in April 1960, was the gentlemen's agreement concluded. The provisions of the agreement do not concern the territory of the EEC and thus do not fall within the context of Article 85(1). The subjective element is also absent as, after the Bundeskartellamt approved the agreement, the undertakings concerned had no reason to consider that this aspect of their cooperation was illegal.
The defendant replies that the system provided for in the export agreement cannot be considered in isolation, since the origin and application of the agreements on exports to third countries show them to be indissolubly linked to the gentlemen's agreement. As is shown by the minutes of the meeting held on 2 December 1959, the idea of concluding such a gentlemen's agreement in relation to the Common Market had been put forward for the first time at that meeting by Nedchem's representative.
During the meeting of 7 April 1960, written memoranda concerning the gentlemen's agreement were circulated and approved. At the end of the meeting the export agreement wás signed by all those present, including the applicant. As a result of the gentlemen's agreement, the content of the export agreement concerning the joint fixing of prices, the fixing of quotas and compensatory payments was extended to deliveries within the Common Market. Any breach of the gentlemen's agreement was to be equivalent to a breach of the export agreement and the termination of the gentlemen's agreement was to result in èhe termination of the export agreement. As is shown by the minutes of the meeting held on 2 March 1960, the gentlemen's agreement also applied to the sharing out, of the national markets. The “Note about the equalization” from Nedchem dated 19 February 1960, according to which “the agreement prevails over the contract”, confirms that the export agreement was dependent on the gentlemen's agreement.
The applicant replies that the origin of the export agreement concluded approximately nine months before the gentlemen's agreement demonstrated its independence of the latter. Although the parties considered that the non-observance of the gentlemen's agreement would constitute a breach of the export agreement, it in no way follows that an indissoluble link existed between the two agreements. The fact that for most of the time the parties only notified each other of the figures for the quantities delivered concerning the third countries referred to in the export agreement shows that it was possible for the export agreement and the gentlemen's agreement to be applied separately. Taking into account the fact that the prohibition provided for in Article 85 of the Treaty requires competition to be generally and appreciably restricted, it must bé concluded that, in accordance with the opinion of the Bundeskartellamt, the export agreement is not covered by that prohibition.
The defendant maintains that the system constituted by the export agreement and the gentlemen's; agreement formed one indissoluble entity. The fixing in common of prices and the allocation of quotas within the context of the export cartel fundamentally restricted compétition between the undertakings concerned. Deliveries to the countries óf the Common Market which did not produce quinine or quinidine were regarded ás deliveries to third countries. The protection of the national markets of the members of the cartel enabled the French and German producers to charge excessive prices on their national market. The existence in law of the export agreement was subject to the condition that the undertakings concerned respect thé obligations which arose for them out of the gentlemen's agreement, which confirms that these two measures form one entity.
The separate communication of the quantity of the deliveries to the EEC was only intended to keep secret the fact that the system of quantitative compensation had been extended to the territory of the Common Market. As an example, the defendant refers to two statements sent by Nedchem on 20 July 1962, one concerning the deliveries made under the export agreement and the other, which was described as “private and confidential”, concerning all deliveries of quinine.
As regards the intervention of the Bundeskartellamt, the defendant observes that that agency only considered the amended agreement of 14 July 1959 in the light of German law.
(b) Duration of the cooperation
The applicant criticizes the Commission for having given a false discription of the facts concerning the years 1962 and 1963 by maintaining that the undertakings involved in the agreement had cooperated without interruption from 13 March 1962 until the beginning of February 1965. In fact, according to the applicant, cooperation was interrupted after Nedchem's withdrawal on 2 November 1962 and had only been resumed sporadically in 1964. The figures concerning exports to third countries had alone continued to be exchanged “for formal reasons”.
The applicant maintains that the minutes of the meeting held on 14 October 1963 show that at that time the parties had considered all these agreements as void, including the agreement concerning the protection of national markets. There was no longer any concerted practice in existence since the parties no longer “knowing and deliberately” directed their activities in the market on the basis of a common plan.
The letter of 4 January 1965 sent by the Buchler company to its sole distributor in Italy shows that at least as regards this company, cooperation finally came to an end in October 1964 after a short resumption.
The decision of the United States Government to 'cease to perform the “stockpile” contract with Nedchem and to buy large quantities of quinine led in 1964 to a desperate struggle between the manufacturers to obtain raw materials. In particular, in the middle of 1964 bitter rivalry developed between Buchler and Boehringer to obtain the raw materials in the Congo, which made all cooperation impossible.
The fact that in 1964 Boehringer had sold Lake & Cruickshank a process for converting quinine into quinidine, contrary to the gentlemen's agreement of 9 April 1960, shows that that company considered that the cartel had finally come to an end.
The applicant questions the statement contained in the contested decision to the effect that common prices had been uniformly applied until the beginning of February 1965. The letter from Lake & Cruickshank to Boehringer dated 13 October 1964 shows the prices charged by the British company to have been up to 22 % higher than those charged by the applicant have also differed from those of the other members of the cartel, as it considered itself no longer bound by the export agreement.
The defendant emphasizes that during the meeting in Brussels on 14 October 1963 the members of the cartel found that the export agreement was still to be regarded as in force and that its “abeyance” for approximately one year had not resulted in increasing from 2 % to 7 % the commission payable to Nedchem for deliveries from the American stockpile, as was provided if the members of the cartel failed to cooperate. Although the “abeyance” of the agreement may be interpreted as a suspension of its binding force, the defendant observes that the undertakings concerned voluntarily agreed to respect its provisions. The prices in force continued to be applied on a temporary basis without any change. The reserved national markets were still to be respected. The quantitative compensation was paid voluntarily by the undertakings concerned.
The fact that the undertakings willingly observed the provisions of an agreement “in abeyance” might justify the conclusion that the parties continued to act on the basis of the above-mentioned agreements. At all events, the mutual consent agreement necessary to the voluntary application of agreements “in abeyance” justifies the view that what is involved is at the least a concerted practice.
The defendant contests the argument that, in dealing with a concerted practice, the actual repercussions of such practice on the market must be examined on each occasion. If it is shown that the purpose of the concerted practice is to restrict competition, no such examination is required, as the Court confirmed in its judgment in Joined Cases 56 and 58/64 in relation to the agreements concerned in that case.
In addition, the defendant recalls that cooperation between the undertakings concerned took place during 1964 in the form of two joint decisions concerning price increases.
According to the defendant, these two price increases do not amount to a sporadic resumption of interrupted cooperation, but represent the execution of a joint plan which the undertakings concerned had drawn up in 1960, and had only abandoned at the beginning of 1965. It is very revealing that on 1 January 1965 Buchler's Italian representative was still able to believe that an agreement was still in operation. It would be difficult to hold this belief if no agreement had been in 'force for a long period. The price difference between Lake & Cruickshank and the other members of the cartel to which the applicant refers was explained by the exploitation of the national market which the undertakings concerned had guaranteed and which was an integral part of the system established by the cartel.
As regards the conduct which was at variance with the cartel, the defendant maintains that the voluntary renunciation, in an isolated case, of the right to compel a contracting party to observe the agreement does not necessarily signify that such agreement has come to an end.
Only in February 1965 did the various members of the cartel act individually to raise their prices without previously discussing the matter together. Thus, cooperation on the fixing of prices only came to an end on that date, as is also shown by the letter from Boehringer to the Bundeskartellamt of 15 August 1966.
The possibility of quantitative compensation being paid if the quota was exceeded continued to exist until the end of 1965, but it was only applicable to deliveries covered by the system laid down in the export agreement, to the consequent exclusion of deliveries within the Common Market.
The applicant replies that the suspension of the agreement did not signify that prices were to remain fixed, as the parties were not prohibited from acting individually to alter them. The Commission's argument that the mere fact that the undertakings had worked in concert might be sufficient to constitute an infringement of Article 85 is incompatible with the wording of that provision.
As regards the scope of the abovementioned letter which the applicant sent on 4 January 1965 to its sole representative in Italy, the applicant observes that it had no reason to hide any information from him. If the Commission considers the content of this letter to be untrue it is for that body to prove it.
The applicant refers to another letter which it sent to the same representative on 30 November 1964. It maintained therein that no official quotations existed at that time for quinine or quinidine, which showed that cooperation had ceased much earlier than the Commission believes. The decision to increase prices, taken on 28 October 1964, only existed on paper. The applicant had only taken part in the meeting because of its position of inferiority and dependence, which prevented it from taking an open stand against the large producers.
The Commission's allegations concerning the prices in force in the United Kingdom were mistaken, as non-British undertakings were at liberty to sell their products in that country. Thus, the difference in price referred to in the letter sent by Lake & Cruickshank to Boehringer on 13 October 1964 cannot be explained by the desire to protect the national market.
In its rejoinder, the defendant emphasizes that during the meeting on 14 October 1963 Mr Buchler had raised the question whether the prices could henceforward be fixed freely, to which Nedchem replied “During the suspension of the agreement the prices will not be changed”. Within the context of the discussion which had just taken place, this reply signified that none of the undertakings had any freedom of action and that the prices fixed in common continued to apply until new prices were fixed by common agreement, which they were in May and October 1964.
The statements made by those present at this meeting, concerning the territories protected under the export agreement and the protection of the national markets, are also significant as regards the concerted action between the undertakings concerned at the time of the “suspension” of that agreement. The protection of the national markets was confirmed in an exchange of letters in October and November 1963. This corresponds to the intention “to act in accordance with the gentlemen's agreement” which'was expressed at the meeting on 29 October 1962.
The evidential value of the letter sent by the applicant to Mr Budel on 30 November 1964 is minimal. That letter is not clear. In addition, it shows that the price indicated for delivery in Italy corresponds almost exactly to the common export proce.
As regards the possibility of selling on the British market, the defendant observes that the non-British members were bound to observe the prices applied on that market by the British members of the cartel. This shows that the applicant's objection in this respect is without foundation.
As regards the gentlemen's agreement in particular, the defendant maintains that it was through this agreement that the undertakings concerned were able to charge the prices which they regarded as reasonable on the national markets, as is shown by the fact that the internal prices ruling on the German, French and British markets were higher than those fixed in common and that, moreover, until the beginning of 1965 they applied the export prices fixed in common in the Community countries which were not producers of quinine or quinidine.
(c) Objections concerning the agricultural nature and special position with regard to raw materials
The applicant claims that the Commission did not take sufficiently into account the technical and political difficulties affecting the raw materials in question. Almost seven years were required to gather quinquina bark of a sufficient quality for processing. the fact that the activities of the parties to the cartel depend on an agricultural product, with all the uncertainties and risks involved therein, is a decisive factor in understanding the conduct of such industries. Added to this is the political insecurity of the countries of cultivation, for example, the Congo. In the field of agriculture, the Community legislature considered it necessary to provide for restrictions on free competition, for example, in the sugar sector, where production shows certain analogies with the production of quinine. The applicant emphasizes that after the war the stocks of quinquina bark became so enormous that the quinine market entered a difficult period. The planters were also in difficulties, which led certain governments, in particular in the Congo and Guatemala, to encourage the grubbing-up of quinquina and its replacement by other crops.
In this chaotic situation a planned production of quinine was necessary in order to avoid a shortage of raw materials a few years later. In order to encourage planters to cultivate quinquina, the quinine manufacturers agreed to restrict their competition, by increasing the prices which had fallen well below the pre-war world market prices and thus giving the quinquina planters the necessary confidence to replant. The attitude of the American Government after 1964, as shown by its refusal to sell the stockpile to the quinine manufacturers and by its massive purchases of quinquina, led to a fresh disturbance in the market which was then becoming more stable, by causing enormous price rises which finally resulted in the crisis of cooperation among the quinine manufacturers.
The applicant maintains that it is only after this cooperation had come to an end that there was an uncontrolled rise in prices. In this connexion it refers to the table showing the trend in quinine prices from 1939 to 1969, which is attached to its application. The Commission has wrongly failed to appreciate the constructive activities of the members of the cartel.
As regards the agricultural nature of the raw materials, the defendant refers to paragraph No 38 of its decision, in which it takes note of the difficulties concerning supply in this area. However, in that recital the Commission observed that the agreements in question went substantially further than such joint organization of raw material supply and that in particular after the end of the “pool” during 1962, those agreements were not an adequate means of making up for the lack of a common policy for the purchase of bark among the members of the cartel whose interests were opposed in this respect.
The undertakings participating in the cartel clearly followed a common policy in the fixing Of selling prices, but practised totally different purchasing policies.
These factors make it impossible to accept the applicant's statement that the existence of stable selling prices constituted the appropriate means of stabilizing the situation on the market in quinquina bark. Also in this recital of its decision, the Commission refers to the example of Nedchem, which in 1964 only increased its prices, which it wished to maintain at a low level, on pressure from the other members of the cartel. The Commission concludes from this that the trend of prices would have been quite different during the period in question if the agreements in dispute had not existed.
The applicant makes a comparison between the trend of prices for quinine and for other products, which shows that the price rises which took place in the quinine sector were restrained and modest. Had the Commission taken into consideration the trend of prices in the sector in question, it would either have concluded that the public interest did not require the agreement to be condemned or at the least it would have been led to impose a smaller fine.
The defendant objects that it has not claimed that the prices applied by the members of the cartel were too high and that as a result this comparison is irrelevant.
4 — Objections regarding the fine
The applicant maintains that the Commission should have taken into account the fact that this case constituted the first imposition of a fine by virtue of the EEC Treaty. The Commission's comprehensive statement that the undertakings concerned had done everything to destroy compromising documents is wholly incorrect, at least as regards the Buchler company which, on the contrary, had greatly contributed to the elucidation of the facts of this case. Moreover, the applicant criticizes the Commission for having failed to take into account the fact that the parties to the cartel had voluntarily ceased their cooperation several years before;
The defendant objects that the undertakings concerned only ceased their cooperation as a result of the situation on the market, as is shown by their conduct during the previous period.
According to the applicant the Commission is only entitled to impose a fine after verifying that the undertaking concerned has continued with its unlawful action, even though the infringement was formally established by way of decision.
The applicant also observes that it is much smaller in size than Boehringer and that, compared with the fine imposed on that undertaking, the amount of the fine which it was ordered to pay is not in proportion to the respective sizes of these two firms. Moreover, unlike all the other manufacturers, the applicant has always supported moderate prices. It would have been crushed between the two giant undertakings, Nedchem and Boehringer, if it had refused to cooperate with them.
The Commission has thus infringed the applicant's rights by making a wrong finding as to the facts and by failing to take into account circumstances which justified its action. This represents not only an infringement of the EEC Treaty and of the rules of law concerning its application but also misuse of powers, as in so acting the Commission has wrongly exercised its discretionary power.
Finally, the applicant maintains that if the alleged infringements are not time-barred, the Court must still consider the fact that there is no longer any sufficient public interest to justify the imposition of fines by the administration in proceedings implemented three and a half years after the voluntary termination of the infringement.
The defendant refers to the considerations set out under No 40 of the contested decision, in which it acknowledges that by reason of its difficult position on the market in raw materials, Buchler acted in the shadow of the two principal members of the cartel. It was this consideration which led the Commission to fine the applicant less than Nedchem and Boehringer, despite the important position of the applicant in relation to the other members of the cartel.
The defendant also emphasizes that the same objection was also put forward by Nechem and Boehringer, each of which considers that the fine imposed upon it is too high in relation to that imposed on the other undertakings in the cartel.
The applicant replies that in fixing the amount of the fine the Commission lost sight not only of the ratio of economic power between Buchler and the other undertakings fined (it observes that even the French undertakings and their parent companies are more powerful than it is), but also of the fact that a fine of an identical amount in absolute figures affects a company established in Germany to a greater extent than if it had been established in the Netherlands, as, contrary to the rules accepted in the latter country, in Germany fines and expenses incurred in the defence of an offender are not deducted from the amount assessable to tax.
Finally, the fixing of the amount of the fine must also take into account the fact that in the United States the applicant is at present involved in criminal proceedings on the basis of the same facts, and'that it is forced to seek a settlement in order to escape, through the payment of a fine, its difficulties in defending itself in legal proceedings in that country. If the Court decides that the applicant must pay a fine, it must be reduced on the basis of the sum which will be payable in the United States.
The defendant observes that, in the light of the sales quota attributed to it under the terms of the agreement, the applicant should have paid a fine of 83500 units of account. The Commission fixed it at 65000 units of account because Buchler carried on business in the shadow of the two principal members of the cartel, Nedchem and Boehringer. Buchler's turnover in the quinine and quinidine sector is not quite one third that of Nedchem.
The defendant acknowledges that in the case-law of the Hooge Raad fines must be regarded as a trading loss. However, as a result of the rather short time available for the preparation of its rejoinder, the Commission was unable to consider the conclusions to be drawn from this decision and to check whether it had not been amended by subsequent case-law. Moreover, this question is irrelevant, in the light both of the Commission's obligation to apply Community law uniformly and the Court's judgment in Joined Cases 7 and 9/54, which laid down that: “The persistence of differences in conditions of competition is a necessary and inevitable consequence of the partial nature of the integration brought about by the Treaty and does not involve discrimination forbidden by the Treaty”.
As regards the existence of criminal proceedings in the United States, the defendant maintains that, as no final decision has been taken with regard to the applicant, these proceedings cannot be taken into account.
Grounds of judgment
1. In 1958 the applicant concluded an agreement with NV Nederlandse Combinatie voor Chemische Industrie, Amsterdam, (hereinafter referred to as “Nedchem”) together with five other Netherlands undertakings which were subsequently represented by it, and with C. F. Boehringer & Söhne, Mannheim, and Vereinigte Chininefabriken Zimmer & Co., GmbH, Mannheim (hereinafter together referred to as “Boehringer”), whereby those undertakings retained their respective domestic markets and provided for the fixing of prices and quotas for the export of quinine and quinidine to other countries. The applicant withdrew from this agreement on 28 February 1959. In July 1959 following the intervention of the Bundeskartellamt to which the agreement had been notified, Boehringer and Nedchem amended that agreement in such a way as to exclude from it deliveries to the Member State of the EEC.
2. In 1960 a new cartel was established between Buchler and the two abovementioned undertakings and shortly afterwards it was extended to certain French and British undertakings. This cartel was based in the first place on an agreement relating to trade with third countries (hereinafter referred to as the “export agreement”) and providing inter alia for the fixing by agreement of prices and rebates relating to exports of quinine and quinidine and the allocation of export quotas supported by a system of compensation depending on whether the export quotas were exceeded or not fulfilled. Furthermore, a gentlemen's agreement between the same parties extended the abovementioned provisions to all sales within the Common Market. This agreement also established the principle of the protection of domestic markets in favour of each of the producers and bound the French members of the cartel to refrain from manufacturing synthetic quinidine.
3. Since the Commission considered that the restrictions on competition therein provided for were capable of affecting trade between Member States, it imposed on the applicant a fine of 65000 units of account by a decision of 16 July 1969 (OJ L 192, pp. 5 et seq.).
4. By an application lodged at the Court Registry on 25 September 1969 the Buchler undertaking initiated proceedings against this decision.
A — The submission relating to the limitation period
5. The applicant complains that the Commission did not take into account the fact that proceedings in respect of the alleged infringement are barred having regard to the period which elapsed between the date of the acts and the initiation of the administrative procedure by the Commission.
6. The provisions governing the Commission's power to impose fines for infringement of the rules on competition do not lay down any period of limitation. In order to fulfil their function of ensuring legal certainty limitation periods must be fixed in advance. The fixing of their duration and the detailed rules for their application come within the powers of the Community legislature.
7. Consequently the submission is unfounded.
B — Submissions relating to procedure and form
I — Submissions relating to the notice of complaints
8. The applicant claims that in the notice of complaints communicated to it on 30 May 1968 the Commission failed to specify the nature, scope, content and results of certain investigations on which the decision at issue was based. This omission is said to have adversely affected the applicant's rights of defence.
9. Article 19 (1) of Regulation No 17/62 obliges the Commission, before taking a decision in connexion with fines, to give the persons concerned the opportunity of putting forward their point of view with regard to the complaints made against them. Article 4 of Regulation No 99/63 provides that the Commission shall in its decisions deal only with those objections raised against undertakings and associations of undertakings in respect of which they have been afforded the opportunity of making known their views. The notice of complaints fulfils this requirement since it sets forth clearly, albeit succinctly, the essential facts on which the Commission relies. The requirement imposed on the Commission by Article 19 is met when in the course of the administrative procedure it supplies the details necessary to the defence.
10. In the present case the Commission has clearly set out the essential factors on which it based the complaints listed, referring expressly to statements contained in the minutes of certain meetings of the undertakings concerned and to correspondence relating to the protection of domestic markets which was exchanged between those undertakings in October and November 1963. Furthermore, maintaining on the basis of its investigations that the undertakings concerned had continued to exchange information on their sales with a view to possible quantitative compensation and that up to the end of 1964 they had maintained a policy of uniform prices, the Commission thereby deduced that after 1962 they had continued to apply the gentlemen's agreement on production and sale in the Common Market.
11. Consequently the objections raised with regard to the notice of complaints are unfounded.
II — The objection relating to consultation of the administrative file
12. The applicant maintains that the Commission infringed the rights of the defence by refusing in the course of the administrative procedure to allow it to consult essential documents on which the contested decision was based. The defendant replies that it had enabled the applicant to consult the documents which were of importance for the appraisal of the complaints.
13. The notice of complaints alleges that the applicant together with other producers of quinine had until 1966 adopted a policy of common prices, particularly with regard to sales in Italy, Belgium and Luxembourg. According to this statement this concerted conduct is clear in particular from the uniformity of prices maintained by the undertakings for their sales in the said countries. In support of this statement the notice of complaints (last subparagraph of paragraph 11) refers to the outcome of investigations carried out by the Commission's staff in those countries. In the course of the administrative procedure the applicant requested the Commission to acquaint it with the results of the said investigations. The Commission rejected this request on the ground that it must protect the business secrets of the other undertakings.
14. Nevertheless the Commission itself alleged that those undertakings regularly exchanged information on the amounts sold in the States in question. Furthermore in case of doubt the Commission could have requested the opinion of the other undertakings concerned with regard to the applicant's request for the communication of the documents relating to them. It does not appear that the Commission consulted the said undertakings in this way.
15. Nevertheless, throughout the administrative procedure the applicant did not dispute that it had carried out a concerted policy with regard to prices until the end of October 1964. Consequently the failure to communicate the documents does not appear capable of affecting the applicant's opportunities of defence in respect of the abovementioned complaint within the framework of the administrative procedure, except for the period from November 1964 to January 1965. Consequently this matter must be considered in conjunction with the substance of the case.
III — Complaints relating to the drawing up of the minutes of the hearing
16. The applicant maintains that both the Advisory Committee on Restrictive Practices and Monopolies and the Commission acted on the basis of a preliminary version of the minutes of the hearing, which did not take into account the amendments which it had suggested. Such action is incompatible with the principles of the rule of law governing the guarantee of the fundamental rights of an undertaking threatened with sanctions.
17. The preliminary nature of the minutes of the hearing submitted to these two bodies could only amount to a defect in the administrative procedure capable of vitiating the decision which results therefrom on the grounds of illegality if the document in question was drawn up in such a way as to be misleading in a material respect. A consideration of the amendments to the draft minutes suggested by the applicant shows that the alterations requested did not concern essential factors, with the result that the final text of the minutes containing all the applicant's suggested amendments differs in no material respect from the draft submitted to the Members of the Commission. Thus, this draft was not capable of changing the statements of the undertakings concerned, with the result that it was able to provide the Advisory Committee and the Commission with complete information on the essential content of the statements made at the hearing.
18. This complaint is therefore unfounded.
IV — The complaint that the Members of the Commission did not take sufficient part in the administrative procedure
19. The applicant maintains that the preliminary inquiry is vitiated by illegality on the ground that the Members of the Commission who were to decide on the fine had not been present at its hearing.
20. As the purpose of the procedure before the Commission is to apply Article 85 of the Treaty, even where it may lead to the imposition of fines, it is an administrative procedure. Within the context of such a procedure there is nothing to prevent the Members of the Commission who are responsible for taking a decision imposing fines from being informed of the outcome of the hearing by such persons as the Commission has appointed to conduct it, in accordance with Article 9 (1) of Regulation No 99/63. Thus, the fact that the applicant was not heard personally by the Members of the Commission at its hearing cannot amount to a defect in the contested decision.
21. The applicant maintains in addition that the administrative procedure is vitiated by the fact that the file of the case was not sent in its entirety to each Member of the Commission.
22. However, the Members of the Commission received complete and detailed information regarding the essential points of the case and had access to the entire file;
23. Therefore, the applicant's complaint is unfounded.
C — Substance
I — The status and duration of the gentlemen's agreement
24. The applicant complains that the Commission considered that the export agreement relating to trade with third countries and the gentlemen's agreement governing the conduct of its members in the Common Market constituted an indivisible entity as far as Article 85 was concerned. The applicant states that the gentlemen's agreement, unlike the export agreement, did not constitute an agreement within the meaning of Article 85 (1) and in any event it definitively ceased to exist from the end of October 1962. The conduct of the parties to the export agreement does not in the applicant's view indicate that they continued the restrictions on competition which were originally provided for in the gentlemen's agreement. The opposite conclusions reached by the contested decision are therefore alleged to be vitiated because they are based on incorrect findings.
25. The gentlemen's agreement, which the applicant admits existed until the end of October 1962, had as its object the restriction of competition within the Common Market. The parties to the export agreement mutually declared themselves willing to abide by the gentlemen's agreement and concede that they did so until the end of October 1962. This document thus amounted to the faithful expression of the joint intention of the parties to the agreement with regard to their conduct in the Common Market. Furthermore it contained a provision to the effect that infringement of the gentlemen's agreement would ipso facto constitute an infringement of the export agreement. In those circumstances account must be taken of this connexion in assessing the effects of the gentlemen's agreement with regard to the categories of acts prohibited by Article 85 (1).
26. The defendant bases its view that the gentlemen's agreement was continued until February 1965 on documents and declarations emanating from the parties to the agreement the tenor of which is indistinct and indeed contradictory so that it is impossible to conclude whether those undertakings intended to terminate the gentlemen's agreement at their meeting on 29 October 1962. The conduct of the undertakings in the Common Market after 29 October 1962 must therefore be considered in relation to the following four points: sharing out of domestic markets, fixing of common proces, determination of sales quotas and prohibition against manufacturing synthetic quinidine.
II — Protection of the producers' domestic markets
27. The gentlemen's agreement guaranteed protection of each domestic market for the producers in the various Member States. After October 1962 when significant supplies were delivered on one of those markets by producers who were not nationals, as for example in the case of sales of quinine and quinidine in France, there was a substantial alignment of prices conforming to French domestic prices which were higher than the export prices to third countries. It does not appear that there were alterations in the insignificant volume of trade between the other Member States referred to by the clause relating to domestic protection in spite of considerable differences in the prices prevailing in each of those States. The divergences between the domestic legislation of those States cannot by itself explain those differences in price or the substantial absence of trade.
28. The correspondence exchanged in October and November 1963 between the parties to the export agreement with regard to the protection of domestic markets merely confirmed the intention of those undertakings to allow this state of affairs to remain unchanged. This intention was subsequently confirmed by Nedchem during the meeting of the undertakings concerned in Brussels on 14 March 1964.
29. From those circumstances it is clear that with regard to the restriction on competition arising from the protection of the producers' domestic markets the producers continued after the meeting on 29 October 1962 to abide by the gentlemen's agreement of 1960 and confirmed their common intention to do so.
30. The sharing out of domestic markets has as its object the restriction of competition and trade within the Common Market. The fact that, if there were a threatened shortage of raw materials, such an agreement might in practice have had less influence on competition and on international trade than in a normal period in no way alters the fact that the parties nevertheless did not terminate their activities. Furthermore the applicant has furnished no conclusive evidence capable of proving that it had ceased to act in accordance with the agreement before the date of expiry of the export agreement.
31. Consequently, the submissions concerning the part of the decision relating to the continuation of the agreement on the protection of the producers' domestic markets until the beginning of February 1965 are unfounded.
III — The joint fixing of sales prices
32. With regard to the joint fixing of sales prices for the markets which were not shared out, that is to say, the Belgo-Luxembourg Economic Union and Italy, the gentlemen's agreement provided for the application to such sales of the current prices for exports ot third countries fixed by mutual agreement, in accordance with the export agreement. The joint fixing of sales prices by the producers of virtually all the quinine and quinidine distributed within the Common Market is capable of affecting trade between Member States and seriously restricts competition within the Common Market. If, as the defendant maintains, the parties to the •export agreement continued until February 1965 to apply their current export prices to supplies to the abovementioned Member States, it would follow that they continued to abide by that part of the gentlemen's agreement relating to the joint fixing of sales prices.
33. With regard to the period from November 1962 to April 1964, the figures supplied by the defendant show a substantial and constant identity between the current prices fixed for export within the framework of the agreement and the prices maintained by the undertakings concerned, including the applicant, for their sales in unprotected domestic markets in the Community.: Where such prices deviate from the scale of export prices they do so in terms of rebates or increases corresponding generally to those agreed on under the gentlemen's agreement. The applicant has neither supplied nor offered to supply any evidence relating to the abovementioned period capable of proving that this argument of the Commission is unfounded, although it has done so in respect of a part of the year 1964. Moreover the increase in prices of 15 %, which was jointly decided upon on 12 March 1964 under the export agreement which led Nedchem to withdraw its opposition, was uniformly applied — although that undertaking would have preferred to continue to fix lower prices — with regard to supplies to Italy, Belgium and Luxembourg also.
34. These circumstances show that with regard to sales prices the parties to the export agreement continued after October 1962 to act in the Common Market as if the gentlemen's agreement of 1960 were still in force.
35. The action taken by the parties to the agreement with regard to prices from May 1964 was only discussed in depth as a result of the questions put by the Court to the defendant during the oral procedure. It is clear from the oral procedure, taking into account the information supplied by the parties, that during 1964 and in particular from May onwards, a party to the agreement applied prices which in an increasing number of cases deviated from the current export prices, and that the defendant has been unable to give a convincing explanation as to how this might be reconciled with the continuation in force of the agreement in question. The failure to communicate to the undertakings concerned the results of the investigations carried out in Italy and Belgium, which excluded any possibility of clarification and discussion at the stage of the administrative procedure, may have contributed to leaving unexplained facts which ought to have been clarified.
36. In these circumstances proof has not been sufficiently established in law that the applicant by mutual agreement with the other producers, maintained uniform prices for its sales in the Belgo-Luxembourg Economic Union and Italy after May 1964. Consequently the period from May 1964 to February 1965 must be omitted from the infringement.
IV — The sales quotas
37. With regard to the fixing of sales quotas for the Common Market, which was linked to a system of compensation and which constituted a supplementary guarantee of the sharing out of domestic markets, the applicant maintains that the necessary condition for the functioning of such a system, namely the reciprocal notification of all sales including those effected within the Community, was no longer fulfilled subsequent to October 1962.
38. It is not clear that the communications of the undertakings concerned relating to sales, which the defendant has produced in support of its opposing statement, also relate to supplies within the Common Market. On the contrary, such documents in general refer expressly to ‘export sales’, an expression habitually employed by the members of the cartel to indicate sales to third countries. Furthermore, it is clear from an exchange of letters in January 1964 between two members of the cartel that even such export sales figures were no longer communicated regularly. The defendant itself admits in the statement of reasons for the contested decision that during 1963 and 1964 the compensation arrangements which were intended to ensure that the quotas were observed were not applied because of the scarcity of raw materials and because of the increase in demand, so that the members of the cartel had no further interest in effecting compensatory deliveries between themselves.
39. At the hearing the defendant produced a table of the amounts of quinine disposed of by Nedchem, Boehringer and Buchler from 1962 to 1964 with the object of proving that those quantities, viewed as a percentage of the total of the quotas, did not deviate perceptibly for that period from the quota assigned to each of the undertakings within the framework of the agreement and thus that the quota arrangement continued to operate after 1962.
40. Nevertheless, this table, which moreover does not include sales of quinidine, shows that, even taking as a basis an average recorded over the previous two years, there are considerable deviations in the case of each of the three undertakings in relation to its own quota. Furthermore, the Commission has supplied comprehensive figures covering all the sales of quinine by the undertakings concerned and it is thus impossible to discern from them the course of conduct of those undertakings in the Common Market. Since there is insufficient proof that the system of quotas for sales within the Common Market was continued after October 1962, it must be concluded that the applicant's complaints with regard to this part of the contested decision are well founded.
V — Restrictions on the manufacture of synthetic quinidine
41. The gentlemen's agreement prohibited the group of French undertakings from manufacturing synthetic quinidine. Owing to the stringency of the restrictions imposed on undertakings from one Member State for the benefit of undertakings in other Member States and taking into account the importance of such undertakings on the market in question, these prohibitions clearly have as their object the restriction of competition within the Common Market and are capable of affecting trade between Member States. The fact relied upon that, when the gentlemen's agreement was concluded, the French undertakings were not in a position to manufacture synthetic quinidine does not render lawful such a restriction which entirely precluded them from taking up this activity.
42. That the French undertakings should accede to this restriction of their freedom is explicable in terms of their interest — owing to the particularly high prices which they maintained for their products in France — in preserving the territorial protection which they enjoyed on their domestic market. Taking into account the connexion thus existing between those two restrictions on competition, it may reasonably be concluded that the prohibition on production lasted as long as the territorial protection. Although it is true that in March 1964 Boehringer granted a licence to manufacture quinidine to the remaining British member of the cartel, on whom the gentlemen's agreement imposed prohibitions similar to those imposed on the French undertakings, this has no effect on the finding which has already been made with regard to the relationship between the French undertakings and the German and Netherlands members of the cartel. Although it is possible that, owing to the scarcity of raw materials which was established by the contested decision (No 29, last paragraph), in its ultimate period protection of the domestic markets did not have important effects on competition and trade between Member States, this cartel nevertheless lasted until February 1965. In the absence of any indication to the contrary and having regard to the abovementioned connexions between the two aspects of the cartel, it must be considered that the agreement restricting the French undertakings' freedom to manufacture was of the same duration.
43. Consequently the applicant's complaints in this respect are unfounded.
VI — General appraisal of the agreement within the Common Market
44. It is clear from the foregoing that the applicant participated with other producers of quinine and quinidine in an agreement prohibited by Article 85 of the EEC Treaty. This agreement continued in most of its forms even after the meeting on 29 October 1962. Serious doubts as to the continuation of the agreement after 1962 exist only with regard to the application of sales quotas. Nevertheless, the fact that the undertakings did not continue to apply the system of quotas does not seem perceptibly to have improved the conditions of competition, since they continued jointly to fix prices, to apply uniformly to their deliveries in the Common Market joint price increases arranged in March and October 1964 and decided within the framework of the export agreement and finally to maintain protection of their respective domestic markets and the prohibition on the French undertakings' production of synthetic quinidine. However, the application of uniform prices for deliveries to Italy, Belgium and Luxembourg has only been proved to exist up to April 1964.
45. Finally, even if it must be conceded that the export agreement could have operated independently of the agreement relating to the Common Market, it must be found that in fact the members of the cartel attributed great importance to the joint application of both agreements. Although from October 1963 the export agreement was declared to be ‘in abeyance’, it is clear from the declarations made by the undertakings concerned at their subsequent meetings together with their subsequent conduct ás a whole that they continued to have an interest in upholding that agreement, in particular with regard to its possible employment within the Common Market.
46. However, whilst acknowledging that the authors of the Treaty did not include either quinquina bark or quinine among the products to which the special rules laid down in agricultural matters apply, the applicant complains that the Commission did not take into account the difficulties experienced by it, in particular with regard to the supply of raw materials, as a result of the agricultural nature of those products.
47. Such difficulties can never result in the prohibition in Article 85 (1) becoming inapplicable, save where the exemption procedure referred to in Article 88 (3) applies.
VII — Complaints relating to the fine
48. The applicant complains that the Commission imposed on it a fine for an infringement which had come to an end. It alleges that the Commission may only impose a fine if the party concerned has persisted in its unlawful conduct after the infringement has been formally established by way of a decision.
49. The penalties provided for in Article 15 of Regulation No 17 are not in the nature of periodic penalty payments. Their object is to suppress illegal activities and to prevent any recurrence. This object could not be adequately attained if the imposition of a penalty were to be restricted to current infringements alone. The Commission's power to impose penalties is in no way affected by the fact that the conduct constituting the infringement has ceased and that it can no longer have detrimental effects. For the purpose of fixing the amount of the fine the gravity of the infringement is to be appraised by taking into account in particular the nature of the restrictions on competition, the number and size of the undertakings takings concerned, the respective proportions of the market controlled by them within the Community and the situation of the market when the infringement was committed.
50. The applicant complains that the Commission did not take into account the actual economic effect of the fine imposed upon it in relation to that imposed on Nedchem, as, contrary to the practice followed in the Netherlands, the fines and expenses incurred in the defence of an offender in Germany are not deductible from the amount under the national revenue laws from the amount assessable to tax.
51. In fixing the fines provided for under Article 15 of Regulation No 17, the Commission is not required to take into account the differences existing between the national revenue laws. Therefore, this complaint is unfounded.
52. The applicant maintains that the fine ought to be reduced in relation to the sum which it will be required to pay as a result of proceedings in which it is at present involved on the basis of the same facts in the United States of America.
53. Those proceedings concern restrictions on competition which have taken place outside the Community. There is, therefore, no reason to take them into account in these proceedings.
54. The applicant maintains that the amount of the fine imposed upon it is excessive as compared to the fine imposed on Boehringer, taking into account the respective sizes of the two undertakings and the applicant's dependent position as regards Boehringer and Nedchem.
55. The contested decision in the sixth paragraph of recital No 40, took into account the applicant's weaker position as regards supplies of raw materials, as compared to the other two undertakings. In view of the applicant's actual influence within the cartel the fine imposed upon it is proportionately lower than its quota when compared with the total fines imposed on the members of the cartel.
56. The first indent of the second paragraph of Recital No 5 of the contested decision appears to accept that, unlike the other members of the cartel, the applicant had not based its sales policy on the protection of the domestic markets, but the Commission does not seem to have taken account of this factor in fixing the amount of the fine.
57. The findings of the contested decision relating to the infringements alleged against the applicant are thus well founded in their essentials. Excluding the fixing of sales quotas for the period from November 1962 to February 1965 and of the sales prices for the period from May 1964 to February 1965 did not appreciably diminish the gravity of the restrictions on competition arising from the agreement.
58. Taking into account also the respective importance of the undertakings in the cartel, it is appropriate to reduce the fine to 55000 units of account.
Costs
59. Under the first subparagraph of Article 69 (2) of the Rules of Procedure of the Court of Justice, the unsuccessful party shall be ordered to pay the costs if they have been asked for in the successful party's pleading. Since the applicant has failed in the essential part of its conclusions, it must be ordered to pay 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 the Treaty establishing the European Economic Community, especially Article 85; Having regard to Regulations Nos 17/62 of the Council and 99/63 of the Commission of the European Economic Community; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, THE COURT hereby:
1 Dismisses the application for annulment;
2 Annuls so much of Article 1 of the decision of the Commission of the European Communities of 16 July 1969 (OJ L 192, p. 5 et seq.) as records that the aplicant applied the clauses of the gentlemen's agreement of 9 April 1960 on the system of quotas and compensation during the period from November 1962 to February 1965, and the fixing of prices and rebates for the export of quinine and quinidine during the period from May 1964 to February 1965;
3 Reduces the fine imposed on the applicant by the abovementioned decision to 55000 units of account;
4 Orders the applicant to pay the costs of the proceedings.