JUDGMENT OF 30. 6. 1970 — CASE 1/70 ROCHAS v BITSCH

In Case 1/70 Reference to the Court under Article 177 of the EEC Treaty by the Oberlandesgericht Karlsruhe for a preliminary ruling in the action pending before that court between

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

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure

Under a contract of 14 March 1963, amended by, inter alia, a supplementary agreement of 31 July 1967, Parfums Marcel Rochas of Paris, a company incorporated under French law, granted Parfums Marcel Rochas Vertriebs-GmbH of Munich, a company incorporated under German law, the exclusive right to sell perfume products bearing the Rochas mark in the Federal Republic of Germany and West Berlin.

The French company also sells its products in France direct to perfume retailers under a planned system of distribution, known as the ‘deposit’ system.

Under that system, only selected retailers who have undertaken to use their best efforts to sell and stock the whole range of the company's products in their shops are supplied. These retailers must also undertake on no account to dispose of their products to other ‘deposit’ sellers or wholesalers, or to export them. The German sole distributor is similarly bound in respect of retailers in the area in which he has the exclusive right of sale.

On 30 January 1963, that is to say, one day before the final date for notification of existing agreements to which not more than two undertakings are parties, the French company, pursuant to the last sentence of Article 5 (1) of Regulation No 17, as amended by Article 1 (2) of Regulation No 59, notified the Commission, on Form B, of a ‘deposit contract previously concluded on the basis of a standard contract between the Rochas company and each of its authorized dealers in France’. Form B states that, in the case of a standard contract, ‘it is sufficient to attach the text of a standard contract to the notification’.

On 24 June 1964, the same company concluded with the Parfumerie Saint-Roch undertaking, described as a retailer, a contract giving it the right of retail sale under a standard contract previously notified and which, inter alia, provided as follows :

‘The authorized dealer undertakes to sell products in respect of which the Rochas company has granted it the right of sale only on a retail basis and to direct consumers. It expressly undertakes on no account to dispose of the products, in whatever form, to other traders, authorized dealers or wholesalers, or to export them. It also undertakes on no account to sell the products concerned other than in their original packing and not to sell them by weight, bulk or in any other manner. The Rochas company for its part binds itself not to supply products bearing its mark to persons other than its authorized dealers.’

The 1964 contract was not the subject of separate notification.

Parfums Marcel Rochas-Vertriebs GmbH ascertained that a Mr Bitsch of Breisach am Rhein, who did not come under the Rochas retail distribution system, was placing on sale toilet articles bearing the Rochas mark, with which it had been supplied by the Saint-Roch perfumery. Rochas moved for an injunction against the latter on the ground, inter alia, that Bitsch had obtained these products as a result of the infringement by a third party (Parfumerie Saint-Roch) of its contractual obligations.

Bitsch contended that the application should be dismissed on the ground that the prohibition of exports contained in the ‘deposit’ contract which he was accused of infringing was null and void under Article 85 (1) of the Treaty but the Landesgericht (Regional Court) Freiburg upheld the application.

In a judgment announced by its President on 10 December 1969 the Oberlandesgericht (Higher Regional Court) Karlsruhe, dealing with Bitsch's appeal to that court, decided on 27 November 1969 to stay proceedings and to refer the following questions to the Court of Justice under the first and third paragraphs of Article 177 of the EEC Treaty:

1) Notwithstanding that it contains a prohibition on exports and that it has not been notified pursuant to the provisions of Regulation No 17/62, is a contract concluded on 29 June 1964 provisionally valid if a standard contract in precisely the same terms has been duly notified to the Commission of the EEC within the period laid down in the regulation?

2) If the answer is in the affirmative, did the standard contract which has been and will be used for a large number of individual contracts between the said undertaking and various other undertakings have to be notified to the Commission of the EEC before 1 November 1962 or before 31 January 1963?

The decision referring the matter was received at the Court Registry on 2 January 1970. Parfums Marcel Rochas Vertriebs-GmbH and the Commission of the European Communities submitted written observations under Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities.

Having heard the report of the Judge-Rapporteur and the views of the Advocate-General, the Court decided to proceed without any preparatory inquiry.

Parfums Marcel Rochas Vertriebs-GmbH and the Commission of the European Communities submitted their oral observations at the hearing on 6 May 1970.

The Advocate-General delivered his opinion on 27 May 1970.

II — Submissions of the parties

1 — First question

(a) Observations of the Commission of the European Communities

i) The Commission points out that Section II 1 (b) of the Annex to Regulation No 27 describes a standard contract as one ‘which the undertaking submitting the notification regularly concludes with particular persons or groups of persons (for example a contract restricting the freedom of action of one of the contracting parties in respect of resale prices or terms of business for goods supplied by the other contracting party)’ and states that only the text of the standard contract need be notified. The object of this provision is, in the interests of the administration and of the undertakings, to avoid the latter having to give a fresh notification of agreements subsequently concluded in the standard form already notified to the Commission. These legislative arrangements accord with the provisions of Article 87 of the EEC Treaty whereby, while there is need to ensure effective supervision of agreements, it is also necessary to simplify administration to the greatest possible extent.

ii) The fact that, in its judgment of 12 December 1967(Brasserie de Haecht, Case 23/67 [1967] E.C.R. 407), the Court held that, in applying Article 85 of the EEC Treaty, all the contracts concluded by the person making the declaration must be looked at does not conflict with this contention: the aforementioned provision of Regulation No 27 is concerned with procedure and does not prevent the Commission from paying regard to the fact that the declarant has concluded or will conclude other contracts, concerning which the Commission can, acting under Article 11 of Regulation No 17, put questions at a later date. Notification of a standard contract is therefore sufficient and acts as notification of all the agreements which the undertaking concludes or will conclude after notification on the basis of the standard contract.

iii) The Commission states that the national court is also asking whether a notified contract which contains a clause prohibiting exports is nevertheless provisionally valid; this question refers to previous decisions of the Court, in particular in the judgment of 6 April 1962 in Bosch,Case 13/61 ([1962] E.C.R. 45) and the judgment of 9 July 1969 in Portelange,Case 10/69 (Rec. 1969 p. 309). In this connexion the Commission makes the following observations :

a) Although the judgment in Portelange is concerned only with the provisional validity of an old agreement, it must nevertheless be recognized that, although concluded after 13 March 1962, the date when Regulation No 17 came into force, the disputed agreement, for which a standard contract prior to that date was used, must for this reason be treated as an old agreement; in the present case, this requires a decision to be based on the principles laid down by the Court in Case 10/69, especially as regards the principle of legal certainty.

b) But, the Commission adds, the court making the reference also emphasizes that the standard contract which was notified contains a clause prohibiting exports.

The Commission states that in a number of judgments the Court has held that exclusive dealing agreements in any case fall under the prohibition contained in Article 85 (1) of the EEC Treaty if they impede the re-exportation or parallel importation of the products concerned (Judgment of 30 June 1966 in Case 56/65, Société Technique Minière v Maschinenbau Ulm GmbH [1966] E.C.R. 235). Agreements of this nature help to maintain national divisions in trade (Judgment of 13 July 1966 in Joined Cases 56 and 58/64, Consten and Grundig v Commission [1966] E.C.R. 299) and, therefore, because they enable undertakings to restore the trade barriers which the Treaty aims to remove, they conflict with the fundamental aims of the Community (Judgment of 13 July 1966 in Case 32/65, Government of the Italian Republic v Council of the EEC and Commission of the EEC [1966] E.C.R. 408). Exclusive dealing agreements under which sole distributors are prohibited from exporting goods to another Member State are, in principle, caught by Article 85 and can only in exceptional circumstances benefit from the exemption under Article 85 (3). Regulation No 67/67 concerning the exemption of certain categories adopts the same principle because it witholds the benefit of exemption by category from contracts which contain clauses prohibiting exports. According to the Commission, the principles which emerge from both the regulation and the above-quoted decisions of the Court must apply to clauses prohibiting exports in contracts concluded between undertakings established in the same Member State. Contracts like those which are the subject of the present dispute prevent retailers who form part of the distribution network in a country from supplying even consumers or selected retailers in other Member States. The practical outcome is complete walling off of the territory concerned and complete territorial protection for the exclusive dealer. It is consequently clear that exclusive dealing agreements which contain a clause prohibiting exports so infringe Article 85 that there has never been any doubt about the legal effect of such contracts even when notified. Moreover, there has never been the slightest doubt in the minds of those involved about the attitude which should be adopted on the prohibition of exports because both the case-law of the Court and Regulation No 67/67 are widely known.

To allow that the clauses prohibiting exports are valid would mean that those concerned could wall off a national market pending a decision of the Commission which, in view of the procedural safeguards laid down in Regulations Nos 17 and 99/63, might take considerable time. If notification made it possible for undertakings to avoid the rule that clauses prohibiting exports are null and void, this would produce an avalanche of notifications and create a new ‘mass problem’. Article 15 (6) of Regulation No 17 scarcely offers any solution to the problem as the implementation of that article also requires time and its only effect is to remove immunity from fines.

Nevertheless, it is not inconceivable that clauses prohibiting exports may be held to be valid within the meaning of Article 85 (3) in cases where, for example, an exclusive dealer has to incur abnormally high expenditure to bring a product on to the market. The Commission believes that in such a situation a notified clause prohibiting exports ought to be regarded as provisionally valid between the parties without, however, its being possible for consequential rights to arise in respect of third parties. Provisional validity of this special kind only applies to the clause prohibiting exports and extends to the rest of the agreement only if the prohibition on exports is inseparable from the rest of the agreement (Judgment of 30 June 1966 in Case 56/65, Société Technique Minière v Maschinenbau Ulm GmbH[1966] E.C.R. 235). On the basis of the judgment of the Court of 9 July 1969 in Portelange v Smith-Corona, (Case 10/69, Rec. 1969, p. 309), it must be concluded that the standard contract notified, including the clauses governing sales, is wholly valid except in so far as it prohibits exports.

(b) Observations of the Parfums Marcel Rochas company

i) Parfums Marcel Rochas Vertriebs-GmbH points out that the object of Regulation No 27 in providing that notification of the standard contract is sufficient is to prevent a vast number of similar notifications reaching the Commission of the European Communities and to spare undertakings the administrative work of filling in, on each occasion, seven copies of thousands of forms giving detailed information which, in any case, is absolutely identical. Contrary to what the national court appears to believe, the decision of the Court of Justice in the de Haecht case does not prevent notification of a standard contract from enabling subsequent contracts to be provisionally valid. Moreover, before taking a decision pursuant to Article 85 (3), the Commission, by virtue both of Article 87 of the EEC Treaty and of Articles 12 to 14 of Regulation No 17, can and must ask a declarant undertaking to supply all necessary information. Again, the number of parallel contracts based on the standard contract can never of itself constitute a factor of material significance when a decision is taken on the question whether the conditions required under Article 85 (3) have been fulfilled; this is because the deciding factor is the effect of the totality of the agreement on trade between Member States. The way in which Community law has developed on the subject of the formalities of notification also supports the conclusion that the question submitted to the Court should be answered in the affirmative. Moreover, Regulation No 153, amending Regulation No 27, provides, in Form B/1, that on production of the standard contract it shall suffice, as regards the remainder, to give a clear indication of the number of identical contracts signed up to the date of notification, itself a clear indication that it is not necessary to notify all the contracts. Of greater importance is that Regulation No 1133/68 of 28 July 1968, in which fresh provision is made for notification of a standard contract in Section II 1 (b) of Form A/B, does not even mention this latter requirement.

ii) In its oral observations, Parfums Marcel Rochas Vertriebs-GmbH submits the view that, contrary to that put forward by the Commission, the court making the reference did not submit questions having any particular reference to the provisional validity of the export clauses. The company states that, on any view, the system contended for by the Commission does not make for the legal certainty which the Portelange judgment demands. Moreover, clauses prohibiting exports, such as those contained in the contract between Parfum Rochas and Parfumerie Saint-Roch, can in no circumstances cause a partitioning between the various States because the exclusive dealers in each of the different Member Countries can deliver to selected retailers in other countries. The disputed clauses in the deposit contracts constitute, therefore, not so much a prohibition on exports as a prohibition on selling to others than consumers, and the practical outcome of this is that there are no exports. According to the Rochas company, the Commission recognizes that a system of sale under which it is prohibited to supply other than direct consumers is consistent with the Treaty.

2 — Second question

(a) Observations of the Commission of the European Communities

The Commission states that the standard contract ought to be regarded as a contract concluded between two undertakings within the meaning of the last sentence of Article 5 (1) of Regulation No 17 and that it was, consequently, sufficient to notify it before 31 January 1963.

(b) Observations of Parfums Marcel Rochas Vertriebs-GmbH

The Parfums Marcel Rochas company points out that Regulation No 59 of 3 July 1962 extended to 31 January 1963 the timelimit for notification of existing agreements to which not more than two undertakings are parties.

In the company's view, exclusive dealing agreements to which not more than two undertakings are parties but which have been used as the prototype for contracts concluded on several occasions between the undertaking making the declaration and a large number of other undertakings should be regarded, by definition, as agreements to which not more than two undertakings are parties.

This is the outcome, first, of the interpretation placed on this concept in Regulation No 153, which refers exclusively to agreements to which not more than two undertakings are parties and, on the form headed A, makes provision for standard contracts which the declarant undertaking regularly concludes with other undertakings.

This is the same interpretation as that adopted by the Commission in its practical guide (Chapter 5, C, D).

Secondly, the relevant rules of Community law lead to the same conclusion. The extension of the time-limit provided for under Article 1 of Regulation No 59 was designed to postpone notification of the large number of two-party agreements which seem to be of comparatively less importance than cartel agreements regularly concluded between a far greater number of parties.

Grounds of judgment

1. By order of 10 December 1969, received at the Court Registry on 2 January 1970, the Oberlandesgericht Karlsruhe referred to the Court, pursuant to Article 177 of the Treaty establishing the EEC, two questions concerning the interpretation of Article 85 of the Treaty and certain provisions of Regulation No 17 of the Council of 6 February 1962.

First question

2. In the first question the Court is asked to rule whether supply contracts which contain a clause prohibiting exports, were concluded after entry into force on 13 March 1962 of Regulation No 17/62 and have not been the subject of notification within the meaning of the said regulation are provisionally valid in cases where a standard contract in identical terms, concluded prior to the entry into force of the said regulation, has been notified to the Commission in the form and within the period prescribed under Article 5 of the regulation.

3. Under Article 87 (2) (b) of the Treaty, it is for the Council to lay down, in regulations or directives, detailed rules for the application of the principles embodied in Articles 85 and 86, taking into account the need to ensure effective supervision on the one hand and to simplify administration to the greatest possible extent on the other. Articles 4 and 5 of Regulation No 17, which implemented this provision, provide that, in order to obtain the benefit of Article 85 (3), an agreement must have been the subject of prior notification to the Commission, and Article 24 of the regulation empowers the Commission to determine the form, content and other details of such notifications.

4. In implementation of the said Article 24, the Commission laid down in Regulation No 27/62 of 3 May 1962 (OJ, Special Edition 1959 — 1962, p. 132) as amended by Regulations No 153/62 of 21 December 1962 (Journal Officiel 1962, p. 2918) and No 1133/68 of 26 July 1968 (OJ Special Edition 1968 [II] p. 400) prescribed the details which must be contained in the notification forms. Under the heading Information regarding contents of agreement, decision or concerted practice, Form B, annexed to Regulation No 27/62, and Form A/B, which replaced it in 1968, lay down that in the case of a standard contract ‘that is, a contract which the undertaking submitting the notification regularly concludes with particular persons or groups of persons (for example, a contract restricting the freedom of action of one of the contracting parties in respect of resale prices or terms of business for goods supplied by the other contracting party)’, only the text of the standard contract need be attached. Under the heading Information regarding parties, these forms specify that information regarding the name and address of the undertakings which are parties to the agreement is not necessary in respect of standard contracts. Moreover, the details in respect of the notification of standard contracts are, under the said forms, also valid for applications for a negative clearance within the meaning of Article 2 of Regulation No 17.

5. The Commission believed therefore that, while this represented a relaxation of administrative control, mainly in the interests of undertakings, notification of a standard contract was adequate for the purpose of effective supervision of agreements likely to contravene Article 85. Because of its very nature, a standard contract, on being notified, draws the Commission's attention to the economic and legal context in which an agreement of this kind subsists. Moreover, Article 11 of Regulation No 17/62 enables it, when it wishes, to obtain more detailed information where it believes this to be necessary. As regards contracts in identical terms concluded by one and the same undertaking, the objects of notification are achieved solely by notification of the standard contract. Such contracts are, accordingly, entitled to enjoy the advantages arising from notification.

6. This conclusion cannot be any less valid when the contract notified on the basis of a standard contract was concluded prior to the entry into force of Regulation No 17, whereas other contracts were concluded afterwards. As, under Regulation No 27/62, no distinction is drawn in this respect and that fact is not such as to impair the effectiveness of a notification of a standard contract, it is unnecessary to draw a distinction where the regulation draws none. Agreements concluded after the entry into force of Regulation No 17/62, which are exact reproductions of a standard contract previously concluded and duly notified, qualify for the same system of provisional validity as the latter.

7. The Commission has contended that, in view of the fact that the reference concerns contracts containing a clause prohibiting exports, regard must be paid to this particular factor which, in its view, is capable of affecting the provisional validity which this type of contract is entitled to enjoy.

8. It is clear from the judgment referring the question that, in this case, the clause prohibiting exports is imposed on retailers who are already prohibited from selling to persons other than direct consumers. Subject to the Commission's use of the powers which it holds under Article 85 of the Treaty and Regulation No 17/62, a clause prohibiting exports in this way is not capable of affecting the full effect of the provisional validity of an agreement regarded as having been duly notified.

Second question

9. If the answer to the first question is in the affirmative, the Oberlandesgericht Karlsruhe asks whether standard contracts which have been or will be used as a basis for a large number of individual contracts had to be notified before 1 November 1962 or before 31 January 1963.

10. Article 5 of Regulation No 17/62, as amended by Article 1 of Regulation No 59/62, lays down detailed rules for notification of agreements existing when Regulation No 17 came into force, and provides that such agreements must be notified before 1 November 1962 with the exception of those to which not more than two undertakings are parties, in which case the time-limit for notification was extended until 1 February 1963. The question is whether, in applying the said Article 5, a standard contract which has been notified may or may not be regarded as a contract to which not more than two undertakings are parties.

11. The sole object of the three months' extension provided for in the case of agreements concluded between two undertakings is administrative convenience. Consequently, for the purposes of applying Article 5 of Regulation No 17/62, an exclusive supply or dealing agreement concluded between two undertakings must, even if it forms part of a system of parallel contracts, be treated as an agreement to which not more than two undertakings are parties.

12. This interpretation is, moreover, confirmed by the fact that Regulation No 153/62, which introduced a simplified notification procedure for certain exclusive dealing agreements to which only two undertakings are parties, provides that standard contracts required to be duly concluded by an undertaking with a certain number of other undertakings may be notified in this form.

Costs

13. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable; As these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the Oberlandesgericht Karlsruhe, costs are a matter for that court.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the plaintiff in the main action and the Commission of the European Communities; Upon hearing the opinion of the Advocate-General ; Having regard to the Treaty establishing the European Economic Community, especially Articles 85, 87 and 177; Having regard to Regulations Nos 17/62 and 59/62 of the Council of the European Economic Community ; Having regard to Regulations Nos 27/62 and 153/62 of the Commission of the European Economic Community ; Having regard to Regulation No 1133/68 of the Commission of the European Communities ; 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 in answer to the question referred to it by the Oberlandesgericht Karlsruhe, by order of that court of 10 December 1969, hereby rules:

1 Agreements referred to in Article 85 (1) of the Treaty and concluded after entry into force of Regulation No 17/62, which are an exact reproduction of a standard contract previously concluded and duly notified as such, are entitled to benefit from the same system of provisional validity as the latter;

2 For the purposes of Article 5 of Regulation No 17/62, as amended by Article 1 of Regulation No 59/62, contracts which existed when Regulation No 17/62 entered into force, were concluded between two undertakings and were notified as standard contracts within the meaning of Section II of Form B annexed to Regulation No 27/62 must be treated as agreements to which not more than two undertakings are parties, even if they form part of a system of parallel contracts.