JUDGMENT OF 14.7.1972 — CASE 49/69 BASF v COMMISSION

In Case 49/69

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

gives the following

JUDGMENT

Issues of fact and of law

I — Statement of the facts

The facts may be summarized as follows:

On the basis of information supplied by trade associations of the various industries using dyestuffs, the Commission made inquiries as to whether increases in prices for these products which had occurred since the beginning of 1964 in the countries of the Community were made by mutual agreement between the undertakings concerned.

As a result of these inquiries the Commission found that three uniform price increases had taken place. An increase of 15 % affecting most aniline dyes took place between 7 and 20 January 1964 in Italy, the Netherlands, Belgium and Luxembourg and on 1 January 1965 it was extended to Germany. On that same day almost all producers introduced, in Germany and the other countries already affected by the increase of 1964, a uniform increase of 10 % on dyes and pigments not covered by the first increase. Finally, on 16 October 1967 an increase of 8 % on all dyes was introduced by almost all producers in Germany, the Netherlands, Belgium and Luxembourg. In France this increase amounted to 12 %; in Italy no such increase was introduced at all.

On 31 May 1967 the Commission decided upon its own initiative to commence proceedings under Article 3 of Regulation No 17/62 of the Council for presumed infringement of Article 85 of the Treaty against the undertakings, including in particular the undertaking Badische Anilin- und Soda-Fabrik AG, which had participated in a concerted practice for the purpose of fixing prices for dyestuffs.

By letter of 11 December 1967, the Commission informed the abovementioned undertaking of this decision. This letter was accompanied by a notice of objections made by the Commission against the undertakings which had participated in the above-mentioned increases. There were sixty recipients of the said letter and notice. They were producers of dyestuffs established both inside and outside the Community, and their subsidiaries and representatives established within the Common Market.

In the notice of objections the Commission declared that within the Common Market the price increases had been introduced by the following producers, and by their subsidiaries or representatives:

Azienda Colori Nazionali Affini S.p.A. (ACNA), Milan (Italy),

Industria Piemontese dei Colon di Anilina S.p.A. (IPCA), Milan (Italy),

Fabbrica Lombarda, Colori Anilina S.p.A. (FLCA), Milan (Italy),

Industria Electro-Chimica Bergamasca, Bergamo (Italy),

Farbenfabriken Bayer AG, Leverkusen (Federal Republic of Germany),

Farbwerke Hoechst AG, Frankfurt am Main (Federal Republic of Germany),

Badische Anilin- und Soda-Fabrik AG (BASF), Ludwigshafen (Federal Republic of Germany),

Cassella Farbwerke Mainkur AG, Frankfurt am Main (Federal Republic of Germany),

Société Française des Matières Colorantes SA (Francolor). Paris (France),

Fabriek van Chemische Produkten Vondelingenplaat NV, Rotterdam (Netherlands),

Ciba SA, Basel (Switzerland),

Sandoz SA, Basel (Switzerland),

J. R. Geigy SA, Basel (Switzerland),

Fabrique de Matières Colorantes Durand et Huguenin SA, Basel (Switzerland),

Imperial Chemical Industries Ltd. (ICI), Manchester (United Kingdom),

Yorkshire Deyware and Chemical, Leeds (United Kingdom),

E.I. Du Pont de Nemours Company Inc., Wilmington, Del. (United States of America).

At its meeting on 24 July 1969, the Commission adopted a decision ordering Badische Anilin- und Soda-Fabrik AG to pay a fine of 50000 u.a. for infringements of the provisions of Article 85(1) of the Treaty, which it had allegedly committed as a participant with other undertakings in concerted practices for the purpose of fixing the amount of price increases and the circumstances in which these increases were to be introduced in the dyestuffs industry in 1964, 1965 and 1967.

For the same reasons the decision ordered that fines of 50000 u.a. be paid by:

Cassella Farbwerke Mainkur AG,

Farbenfabriken Bayer AG,

Farbwerke Hoechst AG,

Société Française des Matières Colorantes SA,

Ciba SA,

J. R. Geigy SA,

Sandoz SA,

Imperial Chemical Industries Ltd.,

and that a fine of 40000 u.a. be paid by Azienda Colori Nazionali Affini S.p.A.

Badische Anilin- und Soda-Fabrik AG lodged an appeal against this decision at the Court Registry on 1 October 1969.

II — Conclusions of the parties

The applicant claims that the Court should:

a) Annul the decision taken;

b) Order the Commission to bear the costs.

The defendant contends that the Court should:

a) Dismiss the application as unfounded;

b) Order the applicant to bear the costs.

III — Submissions and arguments of the parties

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

A — Submissions as to form and procedure

1. Complaints concerning the commencement of the administrative procedure

The applicant observes that the measure whereby the administrative procedure was commenced on 31 May 1967 only refers to Article 3 of Regulation No 17 and does not mention Article 15. There was no later decision in which the Commission stated that it intended to commence proceedings with a view to imposing a fine. Therefore an infringement of an essential procedural requirement took place in the form of a disregard of the obligation to hear the interested party. Indeed the applicant, thinking that a procedure under Article 3 of Regulation No 17 was involved, never had the opportunity to put forward its opinion on the question of the fine.

The defendant replies that its decision of 31 May 1967 to commence the procedure refers ‘especially’ to Article 3 of Regulation No 17, which means that the decision was taken in application of Regulation No 17 as a whole. The purpose of the special reference to Article 3 was to forestall the future application of the concurrent jurisdiction of the national authorities to apply Article 85(1) of the Treaty.

Furthermore, Point V of the notice of objections expressly refers to Article 15(2) of Regulation No 17.

The applicant replies that it was in its statement of defence that the Commission for the first time made known the precise content of the above-mentioned decision.

Therefore the applicant is of the opinion that it is entitled to rely as against the Commission on the content of the decision in the form in which the Commission gave the applicant notice of it. This notice of the decision of 31 May 1967 was worded as follows: ‘On 31 May 1967 the Commission decided, in application of Article 3 of Regulation No 17 of the Council, to commence proceedings on its own initiative … for presumed infringement of Article 85’.

The defendant objects that Article 3(3) of Regulation No 17 does not exclude the application of the other provisions of that regulation. As between the undertakings and the Commission it is, the defendant asserts, the notice of objections which determines the scope arid context of the procedure.

2. Complaint concerning the failure to make information available

The applicant complains that the Commission failed to notify it of the new conclusions which it had reached after the inquiries carried out during the summer of 1968 on the increase in prices of dyestuffs. Therefore the applicant was not informed of the precise facts on which the Commission was to base its assessment. In particular the applicant cannot defend itself against the Commission's assertion concerning the identical nature of the content of the instructions given to the subsidiaries of the various parties concerned.

The defendant replies that the information given to the applicant in the notice of objections was sufficient to acquaint it with the facts necessary for determining the objections pur forward against it. Therefore it was not necessary to communicate the full text of every memorandum sent by the various undertakings to their subsidiaries. The essential point here is that the contested decision was based solely on facts dealt with during the procedure.

3. Complaints concerning the hearing of the undertaking concerned

The applicant complains that the officials of the Commission required to undertake the hearing refused to allow it to be represented at that hearing, as it had requested, by its present counsel. This refusal was illegal even if Article 9(2) of Regulation No 99/63 does not authorize a qualified representative to appear where those summoned do not themselves appear, because in such a case that provision is it self contrary to the Treaty. In a procedure which may lead to the imposition of a fine the administration ought not to have the right to exercise control over the undertakings' method of choosing their representative for the hearing.

The defendant replies that the provision of Article 9(2), which states that undertakings may be represented by a duly authorized agent appointed from their permanent staff or by legal representatives or representatives authorized by their constitution, is justified by the fact that as a general rule those persons are the best informed. Furthermore, the undertakings can, the defendant says, be assisted by counsel, or by university teachers entitled to plead before the Court of Justice or by other qualified persons.

The applicant replies that the distinction between duly authorized agents who are appointed from among the permanent staff and other representatives is arbitrary and is not justified by any objective consideration.

4. Complaint concerning the statement of reasons for the contested decision

The applicant asserts that certain findings contained in the contested decision (for example, the simultaneous announcement of one of the price increases) only apply to the first of the alleged infringements. However, the Commission implies that the reasons given in relation to the first infringement also apply to the two succeeding increases. Furthermore, as regards the third increase, the Commission makes use of a decision of the Bundeskartellamt as a reason for its own decision; this does not satisfy the conditions as to regularity of an administrative procedure.

The applicant also refers to other statements in the decision (especially page 7, second paragraph, second and third sentences, and page 12) which it considers obscure and even incomprehensible. Finally, the decision, at page 8, attributes to the applicant certain statements which it formally contests.

The defendant replies that the meaning of the sentences which the applicant finds obscure appears clearly from the context of the decision considered as a whole, and not from the text published in the Official Journal, which does not contain all the information concerning the extent of the turnover of the undertakings. Furthermore, the fact that the decision deals with arguments which were not put forward by all the undertakings concerned cannot be considered to be a fault rendering that measure illegal.

In its reply, the applicant observes that the contested decision accuses the applicant of having obtained information from other undertakings concerning the attitude which the latter proposed to adopt on the market and of having in turn told other undertakings of its own intentions. Yet the contested decision does not contain any indication showing by what method the applicant obtained information or told others about intended conduct concerning increases.

The defendant replies by referring to the considerations set out in the second part of the contested decision. It also refers to its remarks in relation to the submission con-concerning infringement of the Treaty, relating to the impossibility of explaining the increase in question other than by prior concertation amongst the undertakings concerned.

B — Substantive submissions

1. Infringement of the Treaty or of any rule concerning its application

The applicant claims that even if the facts set out by the Commision were accurate, the conclusions which it draws from them, and which are decisive in relation to the applicability of Article 85 of the Treaty, are untenable. It must be shown that the object or effect of the price increases was to prevent competition. The decision is based throughout, to the extent to which it deals with the price increases and not with the circumstances in which they took place, on the assertion that the increases cannot be explained solely by the oligopolistic structure of the market.

The applicant argues that on the contrary its conduct was the natural consequence of the structure of the market and that it consisted in exercising a right of choice of which it cannot be deprived. The danger that prices might be formed otherwise than by market forces would only exist if the undertakings which together make up the oligopolistic market excluded all price competition as between themselves or on the part of third parties. When faced with a price increase introduced by a competitor, and undertaking can, it is argued, either try to increase its share of the market, or take part in the attempt to increase average prices on the market while maintaining its share of the market. If there is no prospect of a satisfactory financial return from an increase of its share of the market, in particular because the former prices were too low, such an undertaking will prefer the second solution. Conduct of this sort is logical when the market is oligopolistic in character because of its very structure. This was the conclusion reached by the Kammergericht in its judgment of 28 August 1969, which accepted the proposition that the prices of all the participants could rise at the same time and by the same percentage without its being necessary to conclude that there was an agreement or a concerted practice. If oligopolistic markets display undesirable elements from the point of view of competition policy, the only means of countering this state of affairs is, in the applicant's view, to adopt a policy intended to prevent the formation of oligopolistic markets. But once oligopolies have been accepted, the structural consequences cannot be avoided. The applicant states that before each increase the level of prices on the market had dropped to the lowest point at which there was any return, and that therefore there was no need for an agreement between the producers for them to expect other competitors to fall into line with an increase in prices decided upon by a sizeable competitor. Acceptance of such a decision has to take place immediately because otherwise customers will continue for some months to obtain their supplies from the undertaking which is still charging the old prices, while its competitors will be satisfying the remaining demand at the higher prices. This means that it would be in the best interests of a manufacturer in the situation described above not to allow consumers to buy all his output available for sale in the immediate future at the old prices.

The applicant refers to the graph appearing in Annex II to the application, which shows the positions of various price and cost indexes and makes it clear that in executing the price increases of 1964 and 1965 the applicant did not even manage to regain its price-level of 1958. It emerges from the actual trend of the market that the price increases did not have as their object or effect the distortion of competition, but that, within a context of competition and because it was taking place, there was a rise in the level at which competition started.

Secondly, the applicant argues that the facts as presumed by the Commission are not proved and are in part set out in such an obscure manner that the applicant does not know precisely what conduct it is allegedly guilty of.

Thirdly, the applicant complains that the Commission did not sufficiently discuss the actual situation existing on the dyestuffs market, and that in particular it failed to take into consideration the structure of that market and the implications of that structure as regards competition, in accordance with what was stated by the Court in its judgment in Case 13/60. The Commission wholly neglected to specify the markets on which the supposed infringement took place and the necessary extent of competition. The absence of any discussion and consideration of these facts should be deemed a violation of the Treaty.

The defendant maintains that the price increases in question cannot be explained by the oligopolistic structure of the market. In referring to what is expected to happen in such a market in theory, the applicant has failed to consider the postulates of price theory employed in the analysis of parallel conduct. These factors are not applicable in the case of the dyestuffs industry.

The defendant observes that the modern theory of oligopolies starts from the principle that in the oligopoly situation there are many ways of arriving at prices, and that it would certainly not be right to equate the oligopoly situation with consciously parallel conduct by participants. The theorists accept that undertakings knowingly adopt parallel conduct only in respect of oligopolies involving a very high degree of interdependence between undertakings, such that one undertaking cannot take a measure without its competitors being immediately and considerably affected and reacting in consequence. In this latter situation an undertaking only increases its prices when it expects that the others will also do so. It is mainly with reference to their marginal costs, taking into account their demand curve, that undertakings decide whether and to what extent they will follow a price increase. Therefore, even when the degree of interdependence is very high, the uncertainty in which an undertaking increasing its prices is placed as to whether the others will follow does not automatically disappear. In order for there to be conscious parallelism it is necessary for a certain number of factors to be present. These include: a limited number of sellers, high fixed costs, high mobility of demand, homogeneity and transparency of prices, lack of ability to adapt capacity at short notice, little elasticity of demand compared with supply from all competing undertakings, technical obstacles to announcements of alterations to prices and customer resistance to frequent variations in prices. Another condition should also be added: it is that the market should be in a period of stagnation such that the interdependence of the sellers is not affected by notable increases in demand.

In America both the text-book writers and the case-law attribute a leading role to homogeneity of products in deciding if conduct is consciously parallel. According to several writers, when the products are diversified the effects of changes in prices are much slower and much less foreseeable. Furthermore, even in the case of homogeneous products, where the prices actually charged usually differ from the prices publicly quoted, conduct can no longer automatically be absolutely parallel.

The High Authority of the ECSC also adopted the principle that homogeneity of products is not of itself a bar to supposing that a uniform increase in prices made by several undertakings constitutes a concerted practice within the meaning of Article 65(1) of the ECSC Treaty, as appears from the fines which it imposed on certain steel-works by a decision of 4 February 1969, which has not been contested by the parties concerned.

If the criteria elaborated by the text-book writers concerning conscious parallelism are applied to the dyestuffs industry it will be seen that no such parallelism is possible. Competition between undertakings on the dyestuffs market cannot in any way be considered as covering similar products; this is clear from Report No 100 of the National Board for Prices and Incomes on the dyestuffs industry, dated 21 January 1969 (Annex V-1 to the statement of defence), from the opinion of Professors Bombach and Hill (Annex V-2 to the statement of defence), from the documents produced during the preparatory inquiries by the undertakings ICI, Geigy and Sandoz, and from various statistical data produced by the Commission (Tables I to VI of Annex I to the statement of defence).

The market for the products in question covers about six thousand different products. Each of the undertakings concerned manufactures from 1500 to 3500 products and these, at least in part, display various qualities, mixtures and physical forms. The differences in strength, shade, fastness and solubility are such that when the products of various manufacturers are compared it is rare to find two dyes that are perfectly identical. The degree of similarity varies considerably: it runs from a fairly high degree of comparability in standard dye-stuffs to the existence of near monopolies, often protected by patents, for products having special characteristics. Furthermore, the competitive position of the various dyes and the extent to which one can be substituted for another are constantly undergoing rapid change because of technical progress. A notable feature of the market for the products in question is a low level of transparency mainly owing to the large number of products involved, the differences between them and the variety of users (textile, leather, paper, food, rubber and synthetic materials industries, and manufacturers of prints, inks, cosmetics and so on). A further reason is the fact that technical services are provided for purchasers, which differ in degree according to the customer. It follows that there is no single, standard price for each dye since the prices are negotiated individually with each customer, with considerable differences between one purchaser and another. The result of this practice is that the prices calculated for each product by each undertaking are not known, in most cases, to the other undertakings, nor even amongst the purchasers themselves, as ICI has itself agreed. Therefore changes in prices introduced by one manufacturer are only imperfectly known on the market or only become known long after the event.

As for the rate of expansion of the market, which constitutes another test for deciding whether conscious parallelism can exist, it appears that on the whole the dyestuffs industry is expanding at a fast rate, approximately corresponding to that of expansion in the chemicals industry as a whole.

As for mobility of demand, according to Professors Bombach and Hill price competition on the market in question is particularly intense and purchasers are inclined to change supplier if more favourable terms are offered to them.

This tendency seems to have increased during the course of the last few years, according to the above-mentioned Report of the National Board for Prices and Incomes, at page 5. This mobility is rendered easier by the fact that normally purchasers only maintain low stocks and only buy in small quantities.

Since purchasers carry low stocks, manufacturers must themselves maintain large stocks as this makes it easy for them to adapt themselves to changes in demand. Because competition between manufacturers is intense and undertakings are constantly trying to increase their share of the market, they find it necessary to build up their stocks in such a way as to be able to take advantage of all chances of selling their products. It is relatively easy for them to adapt themselves in the medium term by changes in the production programme because the production plant can be used for many different purposes.

In view of the particular conditions on the market, the situation of manufacturers differs from one undertaking to another. It follows that some undertakings have much more success than others in obtaining the prices at which they aim to sell their products.

The respective rates of expansion and the fluctuations in these rates are different for undertakings in the various Member States. Thus the German manufacturers are benefiting from the constant increase in the value of goods produced, according to information supplied by Cassella and Hoechst, whereas, for example, the Italian undertaking ACNA is going through a crisis (declining work force between 1964 and 1967, closure of one of its factories).

This disparity between undertakings means that there are important differences as regards costs.

This necessarily results in differences in profits. The widest profit margins are obtained with speciality products, so long as they remain so. Profits vary in relation to the level of prices for the different products on the market. The volume of sales has an influence on profits: thus for example, ACNA can only begin to make a profit on its production of special dyestuffs if the quantity produced reaches a volume higher than that of present demand in Italy. Taking into account these characteristics of the market in dyestuffs and of the criteria drawn from the theory of oligopolies, one is forced to conclude that it is inconceivable for undertakings on the dyestuffs market to behave with conscious parallelism.

since several of the products in question are not interchangeable or only to a small extent, an undertaking putting up its prices cannot assume that its competitors will follow suit, at least for the products in question. The price increases at issue were introduced indiscriminately for all products and this cannot possibly be explained by the pressures of the market and by the logic of the oligopoly situation.

Moreover, the defendant argues that an analysis of conditions on the dyestuffs market shows that on that market, which is characterized by a high rate of expansion and rapid technical progress, a general alignment of price increases, announced without prior concertation, would not be possible for interchangeable products. The example of the ACNA company, which for the most part manufactures standard types and which, after eight of the ten undertakings in question had announced a general increase in prices of pigments and had begun to apply this increase as from 1 January 1965, did not fall in line with this increase in prices, so that thereafter the other undertakings withdraw their increases shows, in the Commission's view, that even in the case of products towards which sellers react in a sensitive way, interests are so varied on the dyestuffs market that parallel action does not take place automatically.

In these circumstances it is inconceivable that one undertaking would decide unilaterally on a large general increase in prices without first consulting its competitors. Supposing that there were unilateral, independent increases on the part of certain undertakings each of the other undertakings would have been able by setting different prices and by taking account of the position occupied on the market by the various products being manufactured by it, to attempt to obtain the best results. In order to prevent competitors from immediately withdrawing their increase, each undertaking would at the most have had to tell the purchasers of totally interchangeable products that it was falling in line with this increase as regards these products, but this would not have been necessary for all the other products since, because of the lack of transparency of the market for those products, the various purchasers would not immediately have been able to react to the new prices.

The defendant also refers to the statement contained in the contested decision to the effect that concertation is apparent, inter alia, from the fact that the price increases and the products affected were the same in all the countries, although the market conditions were different. The applicant's objection to this finding, namely that it could not take the risk of charging higher prices on ‘its own’ market than those which had been decided upon by the undertaking which initiated the increase in the Common Market, is very significant. In nearly all the States, a different undertaking was the first to announce the increase, and the applicant attributes this to the position of ‘price-leader’ that these undertakings occupied on the market in question. The applicant, it is said, played the role of price-leader in Germany for the increase of January 1965. This being so, there is, in the Commission's view, a contradiction in the reasoning put forward by the applicant, according to which each national price-leader felt, on the one hand, strong enough to be the first to increase prices on its own national market and, on the other hand, too weak to fix prices at a level corresponding to its own interests. Indeed, in a letter of 13 October 1967 addressed to the Bundeskartellamt, the applicant declared that it would have preferred a larger increase in prices in view of calculations of its cost prices. The conduct displayed by the applicant shows that it felt obliged to conform to the rate of increase applied by Ciba in Italy, even though a year had gone by since Ciba had introduced that increase in 1964. Such conduct can only be explained by prior concertation between the undertakings concerned.

The defendant also produces the text of the instructions to raise prices sent to Italy and Belgium in 1964 by the undertakings referred to in the contested decision (Annexes II and III to the statement of defence). It stresses the fact that certain passages are the same almost word for word. As for the rises of 1965 and 1967, the defendant asserts that the undertakings were careful not to make the instructions read too obviously alike.

It is argued that the requirement that there must be an adverse effect on trade between Member States is satisfied in this case because the concerted practice covered the territory of several Member States of the Community. Moreover, the adverse effect was particularly serious because the undertakings to which the contested decision was addressed carry out between them more than 80 % of deliveries of dyestuffs in the Community, and because they increased their prices in such a way that direct importations by consumers from other Member States were thereby prevented to the maximum possible extent.

As to the volume of trade in dyestuffs between Member States of the Community the defendant refers to statistics of the OECD, which it is in a position to produce before the Court of Justice on request.

The applicant in its reply observes that the Commission should have proved that but for the alleged concertation no increase would have occurred, because Article 85 is intended to prevent undertakings from avoiding, by way of concertation, competition which would exist but for that concertation, but does not forbid undertakings to exchange information which cannot have any influence on competition. The contested decision is based exclusively on the supposition that the price increase put into effect by the applicant can only be explained by the existence of prior concertation with other undertakings, The similarity regarding the dates and wording of the instructions sent to the representatives and subsidiaries only concern the first increase, and in any event this does not constitute a conclusive fact because the text of instructions of this kind is practically stereotyped. Further more, the Telex message sent by the applicant to its representative in Brussels is not so similar to comparable instructions sent by other undertakings as to prompt the belief that there was a deliberate agreement.

To the argument adduced by the defendant from the fact that the percentage increase was identical for all the products, the applicant replies that it had already taken into account existing differences for these various products before the increase. These differences were not as great as the Commission supposes. Furthermore, since more than 2000 products were involved it would have been inordinately difficult to put varying changes into effect rather than a linear change. What is more, if prices go up or down on the variable basis customers tend to think that they have been badly treated. Finally, manufacturers are wary of revealing externally changes occurring in the profitability of their products by altering the percentage increases in certain prices as compared with others.

The applicant observes that the Commission does not impute to it precise acts amounting to concertation and does not deny that it decided to increase its prices after the other undertakings had announced their increases Moreover, information given by an undertaking to other undertakings about an intended increase does not constitute an infringement of the rules on competition; so far as regards the goods covered by the ECSC Treaty, Article 60 of the said Treaty even requires that such information must be made available. In view of the argument which is at the basis of the Commission's decision, the applicant is of the opinion that there is sufficient exonerating evidence in its favour in the fact that its conduct on the market can be explained otherwise than on the ground that it participated in concertation with its competitors; the Kammergericht so held as regards the 1967 price increase.

As for the price increases of 1964, the Bundeskartellamt put an end to the proceedings before it because it had become convinced that no infringement of the law on restrictions on competition had been proved.

Economic theory also confirms the soundness of this position. The applicant refers to assertions by a writer cited by the defendant, Mr Shubik. These statements offer an explanation of the conduct at issue not on the basis of concertation between the interested parties, but simply in conjunction with the structural conditions of the market in dyestuffs. The applicant asserts that it is irrelevant whether or not all the characteristics of a stagnant market, on which there is no possibility of competition, are to be found in the present case. In order for it to be said that the conduct at issue can be explained simply by the structure of the market certain conditions set out by Shubik suffice: a small number of sellers, high fixed costs, high costs of entering and leaving the market, interchangeability of products.

The conduct of the ACNA company shows, in the applicant's view, that there was no prior concertation as regards the increase planned for 1 January 1965. In this case the impression of the way in which the other undertakings would react one against another proved to be inaccurate. This constitutes a practical refutation of the Commission's thinking on the characteristics and nature of the market in question.

The applicant observes that the Commission accepts the proposition that a price increase can only take place on the market in question if the increase effected by one undertaking is accompanied by a corresponding increase on the part of the other sellers. This being so it is impossible to accept the Commission's argument that an increase effected by a single undertaking can only succeed on such a market if that undertaking has previously concerted with the others, for if this were the case price increase would never be possible on that market without infringing the Treaty.

In reality, on a market such as that in question, which is marked by a high degree of interdependence as to conduct, each undertaking can calculate how its competitors are likely to act with a fairly high degree of accuracy. Therefore it is a mistake to say that it is impossible for the undertakings to act with a view to bringing in a general price increase without prior concertation.

The applicant states, finally, that it does not understand the meaning of the Commission's arguments concerning the lack of homogeneity of products sold on the dyestuffs market. A concerted practice relating to heterogeneous products would not have as its object or effect the restricting of competition because the products do not compete with each other. Such an argument could have some relevance as regards pricing policy, but the Commission has accepted that it has no power in this matter.

Should the Commission not agree with the applicant's opinion as to the structure of the dyestuffs market, and should the Court feel the need for further information, the applicant proposes the appointment of Friedrich A. von Hayek, Professor Emeritus at the Universities of Chicago and Freiburg im Breisgau, as expert.

The defendant, in its rejoinder, adds to its description of the conditions on the market and of the system of price-formation in the dyestuffs sector. It recognizes the existence of a certain interdependence of reaction between sellers. Ten manufacturers represent 80 % of the supply, and the remainder is provided by seven other manufacturers. Those ten manufacturers make many different products, have large amounts of capital at their disposal and have a precise knowledge of market conditions and competition.

The defendant asserts that the applicant's line of reasoning to the effect that the general, public and parallel price increases in question constitute the only possible prices policy on the dyestuffs market is refuted by the real course of events as regards price competition on that market.

Referring to the applicant's argument according to which the interdependence of the undertakings' reactions was such that they could predict competitors' reactions with sufficient certainty, the defendant observes that the applicant does not explain why the situation on the dyestuffs market could, in the years 1964, 1965 and 1967, have led it to accept that the interest of all the competitors coincided. The fact that undertakings are able to adapt themselves to the conduct of their competitors does not mean that in fact they do so in a manner which is agreeable to the others. On the contrary, in the defendant's opinion, taking into account conditions on the dyestuffs market, an undertaking publicly effecting a considerable increase in the prices of all its products could not have taken it for granted that the interests of its competitors would be the same. The conduct of ACNA, which in January 1965 did not fall in with the general increase announced by the other producers, shows that although the degree of interdependence of the reactions of the sellers is very high for the standard dyes produced by ACNA, this does not mean that there is a similarity of interests or that policies on prices are identical.

As regards the other matters, the defendant asserts that the applicant's line of reasoning concerning the economic theory of oligopolies is not very profound and displays ambiguities.

Finally, the defendant charges the applicant with having replaced the concept of elasticity of demand by the concept of interchangeability of products which, because it is very general, is valueless for the purposes of the concrete problem under examination. What the applicant calls the natural result of the working of oligopolistic markets in fact constitutes the exception.

The defendant proposes the appointment of Erhard Kantzenbach, Professor at the University of Frankfurt am Main, as an expert witness on the problems relating to the structure of the dyestuffs market, and on the relationship existing between a heterogeneous oligopoly, effectiveness of competition and parallel conduct.

2. The submission concerning misuse of powers

The applicant complains that the Commission wished to influence the pricing policy of the undertakings by means of provisions concerning competition policy, whereas the Treaty does not make provision for a policy on prices on the part of the Commission. The applicant cites the remark which was allegedly made on several occasions by officials of the Commission: ‘It is not the past which interests us, but a reduction in prices’.

The defendant objects that it did not complain, in the notice of objections, that the undertakings had increased their prices, but rather that they took part in a concerted action in a manner calculated to distort competition with a view to fixing prices. It denies having sought to control prices as such, as was made clear by Mr Jaune, a Director, at the hearing of 10 December 1968.

3. The complaint relating to the period of limitation

The applicant argues, in the alternative, that the conduct held against it which took place during 1964 and 1965 should no longer be taken into consideration by reason of the period of limitation.

The defendant objects that the three uniform increases of January 1964, January 1965 and October 1967 are the result of a continuous concerted practice which extended over the whole period from January 1964 to October 1967. Therefore the problem of limitation does not arise in the present case.

As a subsidiary point, the defendant observes that in the absence of provisions governing time-limits in the law in force, the Commission retains complete authority, as part of its duties and in exercise of its discretionary power to determine more precisely, subject to review by the Court of Justice, the limitation periods that appear appropriate as regards proceedings against infringements. To apply national law to a fact pertaining to Community law in cases where the Community legislation is silent would render it impossible to apply Community law on a uniform basis.

The laws of the Member States have in common only the principle that there should be a limitation period. However, as regards putting that principle into practice there are important differences. In view of this disparity the Commission reaches the conclusion that it is impossible to discern any precise criteria and that therefore as regards limitation periods for infringement of the provisions of Article 85 of the Treaty it is the needs of Community law alone that should be taken into consideration.

Even if it were accepted that each of the three successive price increases occurred by reason of a new concerted practice, this would not mean that the limitation period had expired because it has been suspended on several occasions since 1964 by written requests for information made under Article 11 of Regulation No 17 and by investigations carried out by officials of the Commission under Article 14 of Regulation No 17 at the registered place of business of several undertakings, including that of the applicant.

The defendant is of the opinion that, taking into account the legal and practical difficulties of the question, a limitation period of even three years cannot be considered as appropriate in cases of infringement of the Community's rules on competition.

4. The complaint concerning the fine

Even if the facts alleged by the Commission were accurate and even if they justified the conclusions which it draws from them, the applicant argues that the Commission could have achieved its objective by applying Article 3 of Regulation No 17, without its being necessary to impose fines. According to Article 15 (4) of that regulation, fines are not of a criminal law nature. Therefore the purpose of them ought not to be to punish acts which have already occurred, but to prevent those acts from recurring.

Finally, the applicant criticizes the reasons set out in the decision in order to justify the amount of the fine. It is of the opinion that for the purposes of Article 15(2) of Regulation No 17 ‘the gravity of the infringement’ must mean not so much the extent of the effects of the infringement as its degree of blameworthiness. Yet the decision does not contain any reasoning on this point.

Finally, the applicant complains that the Commission did not examine whether it would have been possible for the alleged conduct to have been authorized, and this, in the applicant's view, is important for determining whether the infringement is serious or of little consequence.

The defendant replies that it could only have examined this question on the basis of a notification made pursuant to Article 4(1) of Regulation No 17. Furthermore, it says, there is no indication that the requirements for the application of Article 85(3) were fulfilled in this case.

IV — Procedure

The procedure took the following course:

By order of 11 December 1969 the Court decided that the defendant should lodge separate statements of defence without reference to the other cases pending on the subject of dyestuffs.

By order of 8 July 1970, the Court, having regard to the report of the Judge-Rapporteur and the views of the Advocate-General, ordered as follows:

1) An expert's report shall be obtained in respect of the following questions:

a) Taking into account the characteristics of the dyestuffs market in the European Economic Community, especially during the period 1964 to 1967, would it have been a practical possibility, according to normal commercial criteria, for a producer acting independently who wished to increase his prices to do so otherwise than by a general uniform and public increase, by fixing different rates for each product in his individual relationships with each customer?

b) For a producer acting independently, what advantages and disadvantages result from effecting a general and linear increase in prices, as compared with an increase differing in respect of each customer, product and market? The answer to this question is to be given both on the hypothesis that the producer is taking the initiative in making an increase and on the hypothesis that the producer is faced with a general and uniform increase announced by a competitor.

c) Taking into account in particular the degree of transparency of the market, are dyestuffs other than speciality dyes practically interchangeable and, if so, to what extent? What is the approximate proportion of speciality dyes compared with the total production of dyes for each of the undertakings concerned?

2) The parties, by agreement between themselves, propose the name of an expert to the Court before 1 October 1970.

By order of the same date the Court joined Cases 48/69, 49/69, 51/69, 52/69, 53/69, 54/69, 55/69, 56/69 and 57/69 for the purposes of the expert's report.

By order dated 13 November 1970 the Court, having regard to the proposal made by common agreement between the parties on the names of two experts, instructed Horst Albach, Professor of Business Management at the University of Bonn, and Wilhelm Norbert Kloten, Professor of Political Economy at the University of Tübingen, to prepare the report jointly.

The experts’ joint report was lodged at the Court Registry on 23 April 1971. The experts summarized the results of their report in the following terms:

Question (a) should be answered in the affirmative; according to normal commercial criteria a producer of dyestuffs acting independently could in principle have increased his prices on a variable basis in relation to each customer and each product.

An affirmative answer may also be given to the question whether it would have been a practical possibility for such a producer to increase his prices on a variable basis in relation to each customer and product, subject to the following proviso: the average increase in prices that a producer acting independently could have achieved by means of a policy of differentiated prices in a given field would probably have been lower than the average increase in prices achieved by a general and uniform price increase.

A general and linear increase in prices involves opportunities and risks both for the producers who takes the initiative in putting prices up and for the producer of dyestuffs who has to fall in with a general and uniform increase announced by a competitor. Both as regards the producer who determines the price and as regards those who follow him, the conclusion to be drawn is that during the period in question the advantages to be obtained from a general and uniform increase in prices were greater than the disadvantages.

The appropriate answer to Question (c) is that the degree of interchangeability of dyestuffs varies: it ranges from products which are perfectly interchangeable to products for which to all intents and purposes there is no substitute. If, for the purposes of the question asked, speciality dyestuffs are those which are not interchangeable for practical purposes, it can be said that the proportion that they represent of the total production of dyestuffs in each of the undertakings concerned is very low. However, the results of the study show that the distinction is of but little use in assessing the facts envisaged.

Observations on the experts' report were lodged at the Court Registry on 3 July 1971 by the applicant and on 21 June 1971 by the defendant.

On 28 September 1971 the experts named by the Court took the oath in accordance with Article 49(b) of the Rules of Procedure.

The parties presented oral argument at the hearings on 28, 29 and 30 September 1971 and on 2 May 1972.

During the course of the procedure Mr Advocate-General Mayras replaced Mr Advocate-General Dutheillet de Lamothe, deceased. He delivered his opinion at the hearing on 2 May 1972.

Grounds of judgment

1. It is common ground that from January 1964 to October 1967 three general and uniform increases in the prices of dyestuffs took place in the Community. Between 7 and 20 January 1964, a uniform increase of 15 % in the prices of most dyes based on aniline, with the exception of certain categories, took place in Italy, the Netherlands, Belgium and Luxembourg and in certain third countries. On 1 January 1965 an identical increase took place in Germany. On the same day almost all producers in all the countries of the Common Market except France introduced a uniform increase of 10 % on the price of dyes and pigments excluded from the increase of 1964. Since the ACNA undertaking did not take part in the increase of 1965 on the Italian market, the other undertakings did not maintain the announced increase of their prices on that market. Towards mid-October 1967, an increase for all dyes was introduced, except in Italy, by almost all producers, amounting to 8 % in Germany, the Netherlands, Belgium and Luxembourg, and 12 % in France.

2. By a decision of 31 May 1967 the Commission commenced proceedings under Article 3 of Regulation No 17/62 on its own initiative concerning these increases for presumed infringement of Article 85(1) of the EEC Treaty against seventeen producers of dyestuffs established within and outside the Common Market, and against numerous subsidiaries and representatives of those undertakings. By a decision of 24 July 1969, the Commission found that the increases were the result of concerted practices, which infringed Article 85(1) of the Treaty, between the undertakings Badische Anilin- und Soda-Fabrik AG (BASF), Ludwigshafen, Cassella Farbwerke Mainkur AG. Frankfurt am Main. Farbenfabriken Bayer AG, Leverkusen, Farbwerke Hoechst AG, Frankfurt am Main, Société Française des Matières Colorantes SA, Paris, Azienda Colori Nazionali Affini S.p.A. (ACNA), Milan, Ciba SA, Basel, J. R. Geigy SA, Basel, Sandoz SA, Basel, and Imperial Chemical Industries Ltd., (ICI), Manchester. It therefore imposed a fine of 50000 u.a. on each of these undertakings, with the exception of ACNA, for which the fine was fixed at 40000 u.a.

3. By application lodged at the Court Registry on 1 October 1969 Badische Anilin- und Soda-Fabrik AG has brought an application against that decision.

Submissions relating to procedure and to form

The submissions concerning the administrative procedure

(a) The complaint relating to the commencement of the administrative procedure

4. The applicant puts forward a submission concerning infringement of essential procedural requirements in respect of the right of the interested parties to be heard, in that the decision of 31 May 1967 whereby the administrative procedure was commenced does not mention Article 15 of Regulation No 17/62 relating to fines. Moreover, the text of that decision, as communicated to the applicant, referred simply to Article 3(3) of Regulation No 17/62, and the adverb ‘especially’ does not appear in that text.

5. It is the notice of objections alone and not the decision to commence proceedings which is the measure stating the final attitude of the Commission concerning undertakings against which proceedings for infringement of the rules on competition have been commenced. The notice of objections sent to the applicant expressly referred to Article 15(2) of Regulation No 17 relating to fines.

6. This submission is therefore unfounded.

(b) The complaint relating to a failure to make information available

7. The applicant complains that the Commission infringed the rights of the defence in failing to inform the applicant of the fresh conclusions which it had reached after the inquiries carried out in 1968 into the price increases for dyestuffs, and into the text of the instructions sent to their subsidiaries by the various undertakings concerned.

8. During the course of the administrative procedure the undertakings concerned must be informed of the essential elements of fact on which the Commission bases its objections against them. However, it is not necessary for the contents of the file to be made available in their entirety. As regards the inquiries carried out in 1968, the rights of the defence of the undertakings were not infringed because the decision whereby the administrative procedure was brought to a close does not take into consideration as against those concerned any facts other than those set out in the notice of objections. The Commission's notice of objections, sent to the applicant by letter on 11 December 1967, sets out all the facts necessary for determining the objections taken into consideration.

9. This submission is therefore unfounded.

(c) The complaint concerning the hearing of the undertakings concerned

10. The applicant complains that the Commission refused to allow it to be represented at the hearing of the parties concerned by its lawyer. It is argued that if that refusal is in conformity with Article 9(2) of Regulation No 99/63, then that provision is contrary to the Treaty because the administration may not exercise control over the undertakings' method of choosing their representatives in a procedure which may lead to the imposition of a fine.

11. Article 9(2) of Regulation No 99/63, which provides that undertakings may be represented only by a duly authorized agent appointed from among their permanent staff or by legal representatives or representatives authorized by their constitution, is justified by the fact that as a general rule those persons are the best informed as to the facts and technical or economic aspects of their undertakings' actions which may be of decisive importance in applying the rules on competition. The hearing of the parties concerned cannot serve any useful purpose if those persons do not take part.

12. The complaint as to illegality put forward by the applicant is therefore unfounded.

The submission concerning the statement of reasons contained in the contested decision

13. The applicant argues that insufficient reasons are stated in the decision, particularly as regards the facts, for the finding of the existence of the infringement at issue, and that in certain places that statement of reasons is obscure and attributes to the undertaking concerned statements which the latter denies having made.

14. The decision considered as a whole sets out clearly and coherently the essential elements of fact and law on which it is based. The question whether the elements of fact and the considerations put forward in evidence of the infringements in dispute are sufficient to prove the existence of those infringements is a matter relating to the substance of the case. Finally, since the decision was one taken in respect of ten different undertakings, the fact that it adopted an attitude with regard to arguments put forward by only some of the addressees, without stating which, cannot be considered as a fault vitiating the legality of that measure.

15. This submission is therefore unfounded.

The submission as to the limitation period

16. The applicant argues that the contested decision is contrary to the Treaty and to the rules relating to its application because the Commission, in commencing on 31 May 1967 proceedings concerning the price increases of 1964 and 1965, exceeded any reasonable limitation period.

17. 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, limitation periods must be fixed in advance. The fixing of their duration and the detailed rules for their application comes within the powers of the Community legislature. Although, in the absence of any provisions on this matter, the fundamental requirement of legal certainty has the effect of preventing the Commission from indefinitely delaying the exercise of its power to impose fines, its conduct in the present case cannot be regarded as constituting a bar to the exercise of that power as regards participation in the concerted practices of 1964 and 1965.

18. Therefore the submission is unfounded.

Substantive submissions as to the existence of concerted practices

Arguments of the parties

19. The applicant complains that the Commission has not proved the existence of concerted practices within the meaning of Article 85(1) of the EEC Treaty in relation to any of the three increases mentioned in the contested decision.

20. That decision states that prima facie evidence that the increases of 1964, 1965 and 1967 took place as the result of concerted action is to be found in the facts that the rates introduced for each increase by the different producers in each country were the same, that with very rare exceptions the same dyestuffs were involved, and that the increases were put into effect over only a very short period, if not actually on the same date. It is contended that these increases cannot be explained simply by the oligopolistic character of the structure of the market. It is said to be unrealistic to suppose that without previous concertation the principal producers supplying the Common Market could have increased their prices on several occasions by identical percentages at practically the same moment for one and the same important range of products including speciality products for which there are few, if any, substitutes, and that they should have done so in a number of countries where conditions on the dyestuffs market are different. The Commission has argued before the Court that the interested parties need not necessarily have drawn up a common plan with a view to adopting a certain course of behaviour for it to be said that there has been concertation. It is argued that it is enough that they should previously have informed each other of the attitude which they intended to adopt so that each could regulate his conduct safe in the knowledge that his competitors would act in the same way.

21. The applicant argues that even if the facts set out by the Commission were accurate, the conclusions which it draws from them are inaccurate and are based on the idea that the increases in question cannot be explained solely by the fact that the market is oligopolistic in structure. On the contrary, it is argued, the conduct of the applicant was the natural consequence of the structure of the market and consisted in exercising a right of choice which cannot be denied to any undertaking. For in fact, so it is argued, before each increase the level of prices on the market had reached the lowest point at which there was any return, and therefore there was no need for an agreement between producers for them to fall in line immediately with a price increase decided upon by a sizeable competitor. An analysis of the way in which prices and costs were rising shows, it is alleged, that the increases in question did not distort competition, but that, within a context of continuous competition and because it was taking place, there was a rise in the level at which competition started. It is stated that the Commission did not sufficiently acquaint itself with the actual situation existing on the relevant market, with the structure of that market and with the implications of that structure as regards competition, in accordance with the judgment of the Court in Case 13/60.

The concept of a concerted practice

22. Article 85 draws a distinction between the concept of ‘concerted practices’ and that of ‘agreements between undertakings’ or of ‘decisions by associations of undertakings’; the object is to bring within the prohibition of that article a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition. By its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants. Although parallel behaviour may not by itself be identified with a concerted practice, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the size and number of the undertakings, and the volume of the said market. This is especially the case if the parallel conduct is such as to enable those concerned to attempt to stabilize prices at a level different from that to which competition would have led, and to consolidate established positions to the detriment of effective freedom of movement of the products in the Common Market and of the freedom of consumers to choose their suppliers.

23. Therefore the question whether there was a concerted action in this case can only be correctly determined if the evidence upon which the contested decision is based is considered, not in isolation, but as a whole, account being taken of the specific features of the market in the products in question.

The characteristic features of the market in dyestuffs

24. The market in dyestuffs is characterized by the fact that 80 % of the market is supplied by about ten producers, very large ones in the main, which often manufacture these products together with other chemical products or pharmaceutical specialities. The production patterns and therefore the cost structures of these manufacturers are very different, and this makes it difficult to ascertain competing manufacturers' costs. The total number of dyestuffs is very high, each undertaking producing more than a thousand. The average extent to which these products can be replaced by others is considered relatively good for standard dyes, but it can be very low or even non-existent for speciality dyes. As regards speciality products, the market tends in certain cases towards an oligopolistic situation. Since the price of dyestuffs forms a relatively small part of the price of the final product of the user undertaking, there is little elasticity of demand for dyestuffs on the market as a whole and this encourages price increases in the short term. Another factor is that the total demand for dyestuffs is constantly increasing, and this tends to induce producers to adopt a policy enabling them to take advantage of this increase.

25. In the territory of the Community, the market in dyestuffs in fact consists of five separate national markets with different price levels which cannot be explained by differences in costs and charges affecting producers in those countries. Thus the establishment of the Common Market would not appear to have had any effect on this situation, since the differences between national price levels have scarcely decreased. On the contrary, it is clear that each of the national markets has the characteristics of an oligopoly and that in most of them price levels are established under the influence of a ‘price-leader’, who in some cases is the largest producer in the country concerned, and in other cases is a producer in another Member State or a third State, acting through a subsidiary. According to the experts this dividing-up of the market is due to the need to supply local technical assistance to users and to ensure immediate delivery, generally in small quantities, since, apart from exceptional cases, producers supply their subsidiaries established in the different Member States and maintain a network of agents and depots to ensure that user undertakings receive specific assistance and supplies. It appears from the data produced during the course of the proceedings that even in cases where a producer establishes direct contact with an important user in another Member State, prices are usually fixed in relation to the place where the user is established and tend to follow the level of prices on the national market. Although the foremost reason why producers have acted in this way is in order to adapt themselves to the special features of the market in dyestuffs and to the needs of their customers, the fact remains that the dividing-up of the market which results tends, by fragmenting the effects of competition, to isolate users in their national market, and to prevent a general confrontation between producers throughout the Common Market. It is in this context, which is peculiar to the way in which the dyestuffs market works, that the facts of the case should be considered.

The increases of 1964, 1965 and 1967

26. The increases of 1964, 1965 and 1967 covered by the contested decision are interconnected. The increase of 15 % in the prices of most aniline dyes in Germany on 1 January 1965 was in reality nothing more than the extension to another national market of the increase applied in January 1964 in Italy, the Netherlands, Belgium and Luxembourg. The increase in the prices of certain dyes and pigments introduced on 1 January 1965 in all the Member States, except France, applied to all the products which had been excluded from the first increase. The reason why the price increase of 8 % introduced in the autumn of 1967 was raised to 12 % for France was that there was a wish to make up for the increases of 1964 and 1965 in which that market had not taken part because of the price control system. Therefore the three increases cannot be isolated one from another, even though they did not take place under identical conditions.

27. In 1964 all the undertakings in question announced their increases and immediately put them into effect, the initiative coming from Ciba-Italy which, on 7 January 1964, following instructions from Ciba-Switzerland, announced and immediately introduced an increase of 15 %. This initiative was followed by the other producers on the Italian market within two or three days. On 9 January ICI Holland took the initiative in introducing the same increase in the Netherlands, whilst on the same day Bayer took the same initiative on the Belgo-Luxembourg market. With minor differences, particularly between the price increases by the German undertakings on the one hand and the Swiss and United Kingdom undertakings on the other, these increases concerned the same range of products for the various producers and markets, namely, most aniline dyes other than pigments, food colourings and cosmetics.

28. As regards the increase of 1965 certain undertakings announced in advance price increases amounting, for the German market, to an increase of 15 % for products whose prices had already been similarly increased on the other markets, and to 10 % for products whose prices had not yet been increased. The announcements were spread over the period between 14 October and 28 December 1964. The first announcement was made by BASF, on 14 October 1964, followed by an announcement by Bayer on 30 October and by Cassella on 5 November. These increases were simultaneously applied on 1 January 1965 on all the markets except for the French market because of the price freeze in that State, and the Italian market where, as a result of the refusal by the principal Italian producer, ACNA, to increase its prices on the said market, the other producers also decided not to increase theirs. ACNA also refrained from putting its prices up by 10 % on the German market. Otherwise the increase was general, was simultaneously introduced by all the producers mentioned in the contested decision, and was applied without any differences concerning the range of products.

29. As regards the increase of 1967, during a meeting held at Basel on 19 August 1967, which was attended by all the producers mentioned in the contested decision except ACNA, the Geigy undertaking announced its intention to increase its selling prices by 8 % with effect from 16 October 1967. On that same occasion the representatives of Bayer and Francolor stated that their undertakings were also considering an increase. From mid-September all the undertakings mentioned in the contested decision announced a price increase of 8 %, raised to 12 % for France, to take effect on 16 October in all the countries except Italy, where ACNA again refused to increase its prices, although it was willing to follow the movement in prices on two other markets, albeit on dates other than 16 October.

30. Viewed as a whole, the three consecutive increases reveal progressive cooperation between the undertakings concerned. In fact, after the experience of 1964, when the announcement of the increases and their application coincided, although with minor differences as regards the range of products affected, the increases of 1965 and 1967 indicate a different mode of operation. Here, the undertakings taking the initiative, BASF and Geigy respectively, announced their intention of making an increase some time in advance, which allowed the undertakings to observe each other's reactions on the different markets, and to adapt themselves accordingly. By means of these advance announcements the various undertakings eliminated all uncertainty between them as to their future conduct and, in doing so, also eliminated a large part of the risk usually inherent in any independent change of conduct on one or several markets. This was all the more the case since these announcements, which led to the fixing of general and equal increases in prices for the markets in dyestuffs, rendered the market transparent as regards the percentage rates of increase. Therefore, by the way in which they acted, the undertakings in question temporarily eliminated with respect to prices some of the preconditions for competition on the market which stood in the way of the achievement of parallel uniformity of conduct.

31. The fact that this conduct was not spontaneous is corroborated by an examination of other aspects of the market. In fact, from the number of producers concerned it is not possible to say that the European market in dyestuffs is, in the strict sense, an oligopoly in which price competition could no longer play a substantial role. These producers are sufficiently powerful and numerous to create a considerable risk that in times of rising prices some of them might not follow the general movement but might instead try to increase their share of the market by behaving in an individual way. Furthermore, the dividing-up of the Common Market into five national markets with different price levels and structures makes it improbable that a spontaneous and equal price increase would occur on all the national markets. Although a general, spontaneous increase on each of the national markets is just conceivable, these increases might be expected to differ according to the particular characteristics of the different national markets. Therefore, although parallel conduct in respect of prices may well have been an attractive and risk-free objective for the undertakings concerned, it is hardly conceivable that the same action could be taken spontaneously at the same time, on the same national markets and for the same range of products.

32. Nor is it any more plausible that the increases of January 1964, introduced on the Italian market and copied on the Netherlands and Belgo-Luxembourg markets, which have little in common with each other either as regards the level of prices or the pattern of competition, could have been brought into effect within a period of two to three days without prior concertation. As regards the increases of 1965 and 1967 concertation took place openly, since all the announcements of the intention to increase prices with effect from a certain date and for a certain range of products made it possible for producers to decide on their conduct regarding the special case of France and Italy. In proceeding in this way, the undertakings mutually eliminated in advance any uncertainties concerning their reciprocal behaviour on the different markets and thereby also eliminated a large part of the risk inherent in any independent change of conduct on those markets. The general and uniform increase on those different markets can only be explained by a common intention on the part of those undertakings, first, to adjust the level of prices and the situation resulting from competition in the form of discounts, and secondly, to avoid the risk, which is inherent in any price increase, of changing the conditions of competition. The fact that the price increases announced were not introduced in Italy and that ACNA only partially adopted the 1967 increase in other markets, far from undermining the conclusions, tends to confirm it.

33. The function of price competition is to keep prices down to the lowest possible level and to encourage the movement of goods between the Member States, thereby permitting the most efficient possible distribution of activities in the matter of productivity and the capacity of undertakings to adapt themselves to change. Differences in rates encourage the pursuit of one of the basic objectives of the Treaty, namely the interpenetration of national markets and, as a result, direct access by consumers to the sources of production of the whole Community. By reason of the limited elasticity of the market in dyestuffs, resulting from factors such as the lack of transparency with regard to prices, the interdependence of the different dyestuffs of each producer for the purpose of building up the range of products used by each consumer, the relatively low porportion of the cost of the final product of the user undertaking represented by the prices of these products, the fact that it is useful for users to have a local supplier and the influence of transport costs, the need to avoid any action which might artificially reduce the opportunities for interpenetration of the various national markets at the consumer level becomes particularly important on the market in the products in question. Although every producer is free to change his prices, taking into account in so doing the present or foreseeable conduct of his competitors, nevertheless it is contrary to the rules on competition contained in the Treaty for a producer to cooperate with his competitors, in any way whatsoever, in order to determine a coordinated course of action relating to a price increase and to ensure its success by prior elimination of all uncertainty as to each other's conduct regarding the essential elements of that action, such as the amount, subject-matter, date and place of the increases. In these circumstances and taking into account the nature of the market in the products in question, the conduct of the applicant, in conjunction with other undertakings against which proceedings have been taken, was designed to replace the risks of competition and the hazards of competitors' spontaneous reactions by cooperation constituting a concerted practice prohibited by Article 85(1) of the Treaty.

The submission concerning misuçe of powers

34. The applicant complains that the Commission wished to influence the pricing policy of the undertakings by the expedient of the provisions concerning competition policy.

35. The contested decision does not criticize the price increases because of their level, but only because of their concerted character. The uniform nature of the percentage increases is treated as evidence of concertation.

36. Therefore, and without prejudice to the question whether and in what circumstances the Community may exercise control over prices when applying the rules on competition, the above-mentioned submission is unfounded.

The fine

37. The applicant puts forward the alternative argument that the Commission's objective could have been attained by the application of Article 3 of Regulation No 17/62, without its being necessary to impose fines. It is argued that since the fines authorized by Regulation No 17/62 are not of a criminal law nature, they should be imposed not in order to punish infringements which have already occurred, but in order to prevent their recurrence. Furthermore, it is said, the contested decision does not adequately justify the amount of the fine, and in particular it fails to examine the true gravity of the conduct complained of.

38. Article 15 of Regulation No 17/62 does not limit the imposition of fines exclusively to cases of recurrence of infringements already found to have taken place and forbidden by the Commission under Article 3. Such limitation of Article 15 would considerably reduce the deterrent effect of fines. It cannot therefore be presumed. In view of the frequency and extent of the applicant's participation in the prohibited practices, and taking into account the consequences thereof in relation to the creation of a common market in the products in question, the amount of the fine is appropriate to the gravity of the infringement of the Community rules on competition.

39. The submission is therefore unfounded.

Costs

40. Under Article 69(2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs. The applicant has failed in its submissions. Therefore it must be ordered to bear 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 and 173; Having regard to Regulation No 17/62 of the Council of 6 February 1962 Having regard to Regulation No 99/63 of the Commission of 25 July 1963; Having regard to the Protocol on the Statute of the Court of Justice of the European Communities; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, THE COURT hereby:

1 Dismisses the application;

2 Orders the applicant to bear the costs.