JUDGMENT OF 10. 7. 1980 — CASE 37/79 MARTY v LAUDER
In Case 37/79 REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal de Commerce [Commercial Court], Paris, Third Chamber, for a preliminary ruling in the action pending before that court between
THE COURT composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait (Presidents of Chambers), J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart, G. Bosco, T. Koopmans and O. Due, Judges, Advocate General: G. Reischl Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts and Issues
I — Facts and procedure
1. Anne Marty S.A., the plaintiff in the main action, operates a retail outlet in Paris in which it sells perfumes. Estéé Lauder S.A., the defendant in the main action, was formed on 30 May 1967 and is the French subsidiary of the Canadian company Estéé Lauder Cosmetics Limited. Its objects include, in particular, the distribution, sale, import and export of cosmetics, toiletries, sanitary products and perfumery.
2. By writ of 20 April 1978, Anne Marty formally requested Estéé Lauder to open for it an account and a depot for Estéé Lauder products and consequently to enter up and fill its first order, details of which were set out in that writ, and to deliver that order, specifying that Anne Marty would pay the amount of that order upon receipt of the invoice. When Estéé Lauder refused to deliver, Anne Marty brought proceedings against it on 5 May 1978 before the Tribunal de Commerce, Paris, claiming that it be ordered, in particular, to deliver the goods requested and to pay Anne Marty a sum of FF 100000 as compensation for the damage caused. In its submissions of 4 October 1978 Estéé Lauder asked the Tribunal de Commerce, in particular, to dismiss Anne Marty's claims and, in the alternative, to “rule that since Community law is applicable to the contractual relationship between Estéé Lauder S.A. and its approved distributors and since the Community rules have made valid the distribution networks which are the outcome of a sales organization based not only on qualitative but also on quantitative criteria of selection, the refusal given by Estéé Lauder S.A., which markets luxury products whose brand image is important, was lawful and well founded”.
3. Before the national court Anne Marty claimed that Estéé Lauder's refusal to sell was contrary to the provisions of public policy laid down in the Regulation of 30 June 1945 and the Order of 24 June 1958 on the refusal to sell. That unlawful practice was said to confer territorial protection on Estéé Lauder distributors to the disadvantage of other sellers by eliminating competition in the sector and was contrary to improvement in the service given to customers. According to Anne Marty, Article 85 of the Treaty of Rome also laid down the principle of the prohibition on exclusive distribution contracts, except in the case of the derogation provided for in Article 85 (3). Estéé Lauder could not in any case rely on Article 85 (3). Finally, Anne Marty emphasized that it runs a prestige shop with an excellent reputation and qualifications. In answer to those arguments Estéé Lauder contended that the agreements through which its distribution system is organized are in accordance with the competition rules contained in the law of the European Economic Community, which prevail over internal law. The contracts between Estéé Lauder and its authorized distributors in France were notified to the Commission in order to benefit from the exemption under Article 85 (3). Estéé Lauder also claimed that those agreements had been recognized as valid under the Community rules and that they should consequently be regarded as valid in internal law. In addition, Estéé Lauder submitted that its contracts with authorized distributors are in accordance with internal French law in the field of competition, that they contain only terms complying with the conditions of the Fontanet Circular of 30 March 1960, since the contracting parties mutually restricted their contractual activity in order to improve the service provided for the consumer, but without imposing resale prices and without acting in the spirit of voluntary restraint on competition. Finally, Estéé Lauder pointed out that Anne Marty is not engaged principally in the sale of perfumery, because its shop sells various goods, in particular clothes.
4. In the judgment making the reference to the Court of Justice, the Tribunal de Commerce, Paris, considered that the rules laid down by Article 85 of the Treaty are applicable to the agreements between Estéé Lauder and its authorized distributors in France. The court reached that conclusion on the basis of the fact that the said agreements contain provisions affecting sales and supplies (the obligation on the distributors not to supply the products to persons other than authorized distributors; the obligation on the authorized distributor not to export new products to another authorized distributor in the common market within one year of their being launched without previously ascertaining that they have already been put on the market by Estéé Lauder in the country to which they are consigned; the obligation on Estéé Lauder not to deliver products of its brand to persons other than authorized distributors) and extending to the countries of the common market; as a result the Tribunal de Commerce took the view that the contracts between Estéé Lauder and its French distributors are capable of affecting trade between Member States. The court also relied upon the fact that Estéé Lauder's products are not manufactured in France, but in Belgium and Great Britain, and that the products delivered by the company in France to its authorized distributors are thus imported from another country of the Community, which also affects trade between Member States.
5. The Tribunal de Commerce observed, however, that the Commission informed Estéé Lauder by a registered letter of 23 March 1977 that its authorized distributorship agreement and its conditions of sale in France may be regarded “as not capable of being affected by the rules on competition contained in the EEC Treaty”. The full text of that letter, which is signed by R. Mussard, Acting Director, is as follows :
“Re: Case No IV/29.363 — The Estéé Lauder sales organization.
Dear Sirs,
With reference to the abovementioned case, I am pleased to inform you that the authorized distributorship agreement and the conditions of sale applied by your company in France may be considered, taking account of the economic context in which they operate, as not capable of being affected by the rules on competition contained in the EEC Treaty.
However, I should be grateful if you could inform me whether and in what way you have organized the sale of your products in the remaining eight countries of the EEC and send me, where appropriate, the texts of the agreements which establish your sales network in the said countries, or a detailed description of their contents if they have not been put into writing.
In anticipation of an early reply, I remain, etc.”
6. The Tribunal de Commerce, Paris, expressed doubts about the significance to be attributed to that letter in the following terms:
“The Commission's letter of 23 July 1977 seems to be akin to a negative clearance stating that there is no infringement of the provisions of Article 85 (1) of the Treaty of Rome (and not alun to a derogation from the prohibition on cartels in application of Article 85 (3)).
Under Article 9 (2) of Regulation No 17 of the Council of the European Communities, the Commission has power to enforce the provisions of Article 85 (1) of the Treaty of Rome.
However, according to Article 9 (3) of the same regulation, as long as the Commission has not initiated any action, the authorities of the Member States remain competent to enforce article 85 (1).
A negative clearance constitutes a Commission decision which the national courts must comply with because of the fact that Community law takes precedence over national legislation.
However the words ‘negative clearance’ do not appear anywhere either in the title or in the actual body of the letter of 23 July 1977 from the Commission.
It does not seem that such ä negative document was in any case published as required in the Official Journal of the European Communities in accordance with Articles 19 (3) and 21 (1) of Regulation No 17.
Initiation of a procedure within the meaning of Article 9 (3) of Regulation No 17 and the course or termination thereof are not clearly apparent.”
7. Considering that the matters reproduced above raise serious problems in the field of Community law, the Tribunal de Commerce, Paris, by a judgment of 28 February 1979, decided to stay proceedings and to submit to the Court of Justice the following preliminary questions: (1) Does the letter of 23 July 1977 of the Commission of the European Communities, which does not contain the words “negative clearance” and seems to have been issued without being published as laid down in Regulation No 17, constitute a negative clearance? (2) If the answer is in the affirmative, does the letter of 23 July 1977 constitute a Commission decision which may be invoked in relation to third parties and is binding upon the courts of the Member States of the Community? (3) If the answer to the first or the second question is in the negative, has a procedure been initiated within the meaning of Article 9 (3) of Regulation No 17 and which authorities are at present competent to enforce Article 85 (1) of the Treaty?
8. The judgment making the reference was received at the Court Registry on 2 March 1979. In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Estéé Lauder S.A., the defendant in the main action, represented by C. Lebel, Advocate at the Court of Appeal, Paris, by the French Republic, and by the Commission of the European Communities, represented by its Legal Adviser, J. Temple Lang and by J.-F. Verstrynge, a member of the Legal Department of the Commission, acting as Agents. On hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.
II — Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC
A — Observations of Estéé Lauder S.A.
1. The Estéé Lauder sales organization
Estéé Lauder submits that its sales organization is based on qualitative and quantitative criteria of selection.
The qualitative selection is based on the specific nature of luxury perfumery, the objective being to make available to customers interested in that class of products the environment in which they like to be, competent specialized staff to serve them, guide their choice of purchase and enable them to appreciate the high quality products which they seek.
The quantitative selection is based on the need to maintain the profitability of sales outlets, which must be substantial in order to maintain the prestige status demanded by customers, and to renew it in relation to changes in fashion. That quantitative selection also enables the authorized distributors' profitability to be ensured through the restriction in the sales outlets for such products, which interest only one class of customer. A wide distribution network would devalue the products and would have repercussions internationally.
The undertakings entered into by the authorized distributor under the standard agreement concluded by Estéé Lauder are as follows:
“An undertaking to market the products only in a certain place and solely at the retail level; The sales outlet, its presentation, and the other goods sold at the same time to comply with certain standards; An undertaking to offer for sale the manufacturer's entire range of products; An undertaking to maintain permanently the demonstration material and display cases, and to display dummies and other items of ‘point-of-sale’ advertising prominently in the windows inside and outside; An undertaking to stock a sufficient quantity of each item to be able to ensure a continuous service for customers : An undertaking to achieve a minimum sales figure; The option offered to each authorized distributor to obtain supplies from any subsidiary abroad; An undertaking to take care to maintain the freshness of products offered for sale.”
The terms of the agreement imposing obligations on the manufacturer require the latter:
“Not to deliver products of its brand to persons other than authorized distributors; To assist authorized distributors by providing them with the necessary documentation and advertising material; Effectively to ensure the continuous training of the retailers' staff.”
2. The applicability of Article 85 (3)
According to Estéé Lauder it is indisputable that the restrictions imposed by its sales organization should obtain the benefit of Article 85 (3).
Production is improved, in particular as a result of the proficiency of the authorized retailers, which enables the manufacturer to become better informed about the needs and tastes of the customer and about the state of the market.
Distribution is improved, again by reason of the proficiency of the authorized retailers and by the prestige which they offer to customers. The quantitative selection of retailers contributes to that improvement by ensuring the profitability of the sales points, which gives retailers full scope for making the investments necessary in order to carry on a luxury trade.
Consumers receive a fair share of the benefit accruing from that organization for two groups of reasons:
in the first place through having the desired environment together with constantly improved, original products and a guarantee that those products are absolutely fresh;
but also by avoiding having to bear the increased costs of distribution which would be the inevitable result of anarchic distribution.
In fact the agreements between the manufacturer and retailers are accompanied by genuine sales assistance granted by the manufacturer to the retailers; such assistance is costly and includes supplying the distributor with advertising panels, various materials and samples.
If the manufacturer was compelled to supply its products to every perfumeseller who asked for them, it would have — in order to maintain the prestige of the brand — to give all retailers the same benefits, and the costs of point-of-sale advertising material and taking back unsold goods would increase at rates which would reach considerable percentages in respect of accounts with an unimportant volume of business. Those new costs would not fail to be reflected in the retail prices.
Instead of such disorderly popularisation manufacturers take care, throughout the areas in which they are represented, to watch the development of what has traditionally become known as richesse vive [potential wealth].
The richesse vive of an area is the amount of money capable of being converted into purchases in an area, or, alternatively, the potential expenditure in the area.
That richesse vive is calculated on the basis of people's actual consumption of a certain number of goods. Beauty products, toiletry and perfumes constitute a distinct category among nonfood products, and, as regards that category, the richesse vive factor enables firms, as they develop, to open new sales outlets, taking account of the precise potential of the market for the articles in question (see in the annex an extract from “Proscop” on the calculation of richesse vive).
Only the manufacturer can determine, by taking account of the data with which he is provided both by the efforts of his competitors and by information from his representatives, what new sales outlets would be capable, in his opinion, of increasing his volume of business. For that reason he cannot be compelled to accept every request to open an account.
It follows from the explanations given above that the restrictions in question are essential.
Finally, competition is not eliminated as regards a substantial part of the products in question.
3. French rules on the refusal to sell
The existence of a criminal-law provision penalising the refusal to sell — such as Article 37 of the French Decree of 30 June 1945 — in one of the countries of the Community creates a distortion in competition to the detriment of undertakings based in that country. Unlike other countries which have chosen a more flexible legal attitude, France is the only Member State of the Community to have adopted a general prohibition of the refusal to sell. The effect of such a difference in legal provisions is to distort the role of competition within the common market: first, the cost of distribution depends on the internal legislation governing the refusal to sell; secondly, the development of a manufacturer's production could be seriously disturbed by requests to open accounts which would not lead to increased sales, thus weakening its competitve position.
4. Letters sent to Estéé Lauder by the Commission
Apart from the letter of 23 March 1977, mentioned by the court making the reference, Estéé Lauder points out that its sales organization was dealt with in another letter from the Commission, dated 8 June 1978, addressed to Clinique Laboratoires S. à r. 1., at the same address as Estéé Lauder. That letter signed by R. Mussard, Adviser, on behalf of the Director, who was absent, reads as follows:
“Re: Case No IV/29.357 — Sales organization for Clinique perfumery products Dear Sirs, With reference to the information which you supplied to me in your letters of 6 April 1977 and 28 March of this year concerning the sale of your products in the EEC, I am pleased to inform you that this case has been filed and that no further action is being taken. Yours etc.”
5. Scope and nature of the letters sent by the Commission
Referring to the judgment of the Court of 15 March 1967 in Cimenteries v Commission [1967] ECR 75, Estéé Lauder submits that the aforesaid letters constitute acts of the Commission whereby the Community institution gave an unambiguous ruling on the conditions for applying Estéé Lauder's selective distribution system in the common market. According to Estéé Lauder, those letters constitute a decision comparable to those received by the other undertakings in that sector of industry. On that particular point, Estéé Lauder refers to the letters which were sent by the Commission to the other manufacturers of perfumery products, in particular to the Rochas company, and which were mentioned in the context of Joined Cases 253/78 and 1 to 3/79. In those letters the Commission stated inter alia that it keeps a watch on agreements which it has authorized and that the companies which use them should not abuse the rights accorded them by the Community authority. That part of the said letters concerns Article 8 of Regulation No 19 dealing with Article 85 (3). Hence it must be inferred from that that the said letters constitute informal decisions to grant exemption. As Estéé Lauder must be regarded as being subject to the same discipline as the other undertakings in the sector which have received one of the said letters, the letters of 23 March 1977 and 8 June 1978 must likewise be interpreted as “informal decisions to grant exemption” under Article 85 (3).
Hence Estéé Lauder concludes that the reply to the questions submitted to the Court should be as follows:
“The Commission's letters dated 23 March 1977 and 8 June 1978, taken together, constitute an informal decision to grant exemption under Article 85 (3) of the EEC Treaty, applicable to all the agreements concerning the qualitative and quantitative aspects of the selective distribution system of Estéé Lauder S.A.”
B — Observations of the French Republic
In the first place the French Republic observes that the case, should be seen in the wider context of the distribution of perfumery products which is already the subject-matter of Joined Cases 253/78 and 1 to 3/79.
The first question
According to the French Republic, the reply to the first question is a difficult matter as regards Article 2 of Regulation No 17. In fact two replies are possible:
a) The letter sent by the Commission to Estéé Lauder may seem to come within the definition of negative clearance given in Article 2 of Regulation No 17. Indeed, in that letter, upon application by the undertaking, the Commission certifies that on the basis of the facts in its possession, there are no grounds under Article 85 (1) or Article 86 of the Treaty for action on its part in respect of the agreements notified to it. However, it is necessary to reflect upon the status of the “negative clearance” contained in the letter of 23 March 1977. In fact:
It would be an irregular clearance, the Commission not having followed the procedure laid down by Regulation No 17 (consultation of the Advisory Committee on Restrictive Practices and Monopolies, publication of the application in order to obtain the observations of interested third parties);
Such clearance could not be regarded as final vis-à-vis third parties, since it was not published as required by Article 21 (1).
b) In the French Republic's submission, the more logical view is that the letter of 23 March 1977 does not constitute a negative clearance. On the one hand, by the terms of Article 2 of Regulation No 17, the Commission may issue such a clearance when an application is submitted to it, but it is by no means obliged to do so. So one cannot rule out the possibility that the Commission might file a case without, however, issuing a formal negative clearance, which, moreover, it often does. Further, the Commission never put forward its letter as a negative clearance and did not subject it to any of the forms of procedure laid down in Regulation No 17. Even if one may not rely on the anomalies in the procedure followed by the Commission as against Estéé Lauder, it is pointless to say that one is dealing with a negative clearance unless that clearance vested definitive rights in the claimant. As has been said above, that could not be the case, since, not having been published, the clearance in question could be challenged by third parties.
The second question
This question has a purpose only in so far as the first question is answered in the affirmative. Although it proposes a negative answer to the first question, the French Republic considers it useful to submit certain arguments in case the Court should feel compelled to take a different view.
The reply to the second question requires a distinction to be drawn between the general problem and the case in point.
a) In the case in point, it is not possible to accept that the letter of 23 March 197 may be relied on absolutely as against third parties, since it was not published in any way. Consequently it must be recognized that Anne Marty may challenge the negative clearance in legal proceedings and it is for the Court of Justice, upon reference the Tribunal de Commerce, to pronounce that clearance irregular.
b) The general problem, concerning the question whether a negative clearance is binding upon national courts for the purpose of applying Articles 85 (1) and 86 of the Treaty of Rome, is problematical.
Although it is true that the courts must be regarded as “national authorities” within the meaning of Article 9 (3) of Regulation No 17 (see for example Case 43/69 Bilger v Jehk and /ehk [1970] 1 ECR 127) it must be recognized that it is more difficult to apply that description to the courts when the question is brought before them incidentally.
In view of that, and even though it is clear that the provisions of Article 85 (1) are directly applicable in the Member States, the French Republic emphasizes that it is necessary to take account of undertakings' need for legal certainty.
The third question
Article 9 of Regulation No 17 lays down rules allocating powers for. the application of Articles 85 and 86, and, in particular, Article 9 (3) provides that the authorities of the Member States shall remain competent to apply Article 85 (1) and Article 86 “as long as the Commission has not initiated any procedure under Articles 2, 3 or 6”.
In spite of the doctrinal controversies relating to the concept of initiating a procedure, it seems desirable on this question to adhere to the position of the Commission, confirmed by the Court of Justice in its judgment in Case 48/72 Haecht II [1973] 1 ECR 77, whereby a procedure is initiated when a specific legal act is performed for that purpose and notified to the persons concerned and to the national authorities. In the present case, no such act has been performed by the Commission.
In the present case, therefore, there is no doubt that the Tribunal de Commerce is competent to apply Article 85 (1) of the EEC Treaty to the dispute which has been submitted to it.
If the Court considers: that a procedure has been initiated within the meaning of Article 9 (3), the resulting legal situation would be identical to that which is raised by the second question and dealt with under the heading (b).
C — Observations of the Commission
The Commission begins by describing briefly the administrative procedure which it pursued with regard to the agreements concluded by Estéé Lauder. It emerges from that summary that Estéé Lauder notified the Commission on 11 January 1977 of its authorized distributorship agreement and of the general conditions of sale which it imposes on its retailers in France. As those agreements embrace the position adopted by the Commission on the'selective distribution systems used in the rperfumery industry, the Commission sent to Estéé Lauder the letter of 23 Marchi 1977, which forms the subject-matter of ‘ the preliminary questions. At the ’.‘request of the Commission, Estéé Lauder stated that in the other eight Member States of the EEC, its products are’ distributed by subsidiaries which deal with. their respective authorized distributors on the basis of agreements similar to those used by it in France. By a letter of 8 June 1978 the Commission then informed Estéé Lauder that it was filing the case. At no point in this case did the Commission initiate the procedure within the meaning of Article 9 (3) of Regulation No 17/62 concerning the agreements notified by Estéé Lauder.
The first question
According to the Commission, there are two aspects to the problem raised by the first preliminary question. The first aspect concerns the question of the legal nature of the letter, in particular in the present case the question whether that letter is or is not a decision within the meaning of the fourth paragraph of Article 189 of the EEC Treaty. The second aspect concerns the objective of that letter, and in the present case the question whether its objective was to issue a negative clearance within the meaning of Article 2 and the sixth recital of the preamble to Regulation No 17.
(1) The legal nature of the letter
Referring to the definition of the concept “decision” given by the Court in its judgments in Case 54/65 Forges de Châtillon v High Authority [1966] ECR 185 (see in particular p. 195), in Joined Cases 23, 24 and 52/63 Usines Henricot v High Authority [1963] ECR 217 (see in particular p. 224) and in Joined Cases 8 to 11/66 Cimenteries v Commission [1967] ECR 75 (see in particular p. 92), the Commission takes the view that the letter of 23 March 1977 does not satisfy several of the conditions necessary for it to be capable of being regarded as a decision within the meaning of the fourth paragraph of Article 189 of the EEC Treaty.
(a) Competence
The letter in question was signed by an official of Directorate-General IV, acting on behalf of the Director of Directorate IV/B. Such a person could not in any circumstances be considered competent to take decisions under Article 2 of Regulation No 17. Nor does the letter state that the official in question was engaging the liability of the Commission or that he had been delegated to do so, or even that he was expressing the opinion of the Commission.
The rules of procedure of the Commission, Article 27 of which deals with the delegation of powers, were published in the Official Journal L 199 of 30 July 1975, p. 43. As Community law stands at present the power to take decisions under Article 2 of Regulation No 17 has not in any case been delegated to officials, Directors or even Directors-General. Moreover the fact that Directors in DG IV are not empowered to enter into commitments on behalf of the Commission was emphasized by the Court in paragraph 20 of its judgment in Case 71/74 Frubo v Commission [1975] 1 ECR 563.
Thus the letter cannot in any way be regarded as an act issued by the competent body. Moreover, this case differs from the Cimenteries case, cited above, in that the letter was not preceded by any deliberation or act on the part of the Commissioners meeting as the Commission.
(b) Essential procedural requirements
Nor is the letter in question an act whereby a final ruling was made in aform allowing the nature thereof to be identified. Nowhere does the letter state that a “decision” is involved or indicate in any way that a ruling is being given. Nor does it include the words “negative clearance”, as the Tribunal de Commerce has pointed out. It does not use any of the normal forms adopted in all the numerous decisions of the Commission on negative clearance (citations, grounds on which expressly based, operative part, etc.). Moreover, as the Tribunal de Commerce pertinently observed, it was written without any of the publicity required by Regulation No 17. It was not published in the Official Journal as required by Article 21 (1) of that regulation and was not included in the list of decisions which the Commission publishes each year in an annex to the annual Report on Competition Policy. On the contrary, one of those reports (Fifth Report (1975) p. 51, No 59) states that the Commission's activity in that sector has not included any formal decisions, which suggests, moreover, that the Commission did not intend to take a decision in that sector.
Such a combination of factors is sufficient, in the Commission's opinion, to establish that the letter is not a decision by reason of the absence of a whole series of essential procedural requirements.
(c) Binding nature
At most that letter could be regarded as an administrative letter informing an undertaking that the competent department of the Commission considers that, on the basis of the facts in its possession, there are no grounds under Article 85 (1) of the Treaty of Rome for action on its part in respect of the agreements notified.
Apart from that effect the letter does not affect the interests of Estéé Lauder, since the company may at any time avail itself of the fact of its notification, the legal benefit of which it retains, even if the file is closed. Nor is the letter binding on Estéé Lauder.
Consequently, as it merely declared that there was no infringement of the rules on competition, if the letter was to produce effects of an administrative, if not a legal, nature, those effects could concern only the Commission which could no longer take action, in the absence of new factors, with regard to those agreements, in particular by imposing fines.
For all those reasons the Commission considers that the letter in question cannot be regarded as a decision within the meaning of the fourth paragraph of Article 189 of the EEC Treaty.
(2) The objective of the letter
Referring to the written observations which it submitted in Joined Cases 253/78 and 1 to 3/79, the Commission recalls that it decided not to take action in the perfumery sector on condition that all prohibitions, whether direct or indirect, on exports or imports, imposed in particular on authorized distributors, were abolished, together with the obligation imposed upon such distributors to observe the prices fixed for reimportation or re-exportation.
The reasoning followed by the Commission when so defining its position, which the letter was intended to bring to the knowledge of Estéé Lauder, is similar to that of the negative clearance provided for in Article 2 of Regulation No 17. Hence the Tribunal de Commerce was quite right to consider that the letter in question “seems to be akin to a negative clearance stating that there is no infringement of the provisions of Article 85 (1) of the Treaty of Rome (and not akin to a derogation from the prohibition on cartels in application of Article 85 (3))”
The text of the letter also points towards such a conclusion when it states that the agreements concerned “may be considered, taking account of the economic context in which they operate, as not capable of being affected by the rules on competition contained in the EEC Treaty”. Such wording can be interpreted only as meaning that the agreements concerned do not constitute an infringement of Article 85 (1) and hence fall outside that provision's field of application.
In the view of the Commission, therefore, it may properly be said that the reasoning followed in the letter sent to Estéé Lauder is similar to the reasoning followed by the Commission when it takes a decision to grant negative clearance.
The second question
Since it takes the view that the first question should not be answered in the affirmative, the Commission considers that the second question is not relevant. The Commission observes, none the less, that there are grounds for holding that the letter involved in this case may not be relied upon as against third parties and that it is, moreover, not binding on the courts of Member States, since it does not constitute a formal decision and in any case even a formal decision to grant negative clearance is, by its very nature, taken solely on the basis of the facts in the Commission's possession and is not normally binding on the judicial authorities of the Member States.
The third question
The Commission observes that, as it never initiated a procedure in this case within the meaning of Article 9 (3) of Regulation No 17, there is reason to reply to the Tribunal de Commerce that by virtue of that fact alone it is competent to apply the provisions of Article 85 (1).
Moreover, it is apparent from the judgment of the Court in Case 127/73 BRTv SABAM [1974] 1 ECR 51 that the fact that the expression “authorities of the Member States” used in Article 9 (3) of Regulation No 17 includes in certain Member States courts especially entrusted with the task of applying domestic legislation on competition or that of ensuring the legality of that application by the administrative authorities cannot discharge a court before which the direct effect of Articles 85 and 86 is pleaded from giving a ruling.
The power of such a court to refer a request for a preliminary ruling to the Court of Justice cannot be impaired by virtue of Article 9 of Regulation No 17. None the less, if the Commission initiates a procedure under Article 3 of Regulation No 17 that court may, if it considers it necessary for reasons of legal certainty, stay proceedings in order to await the outcome of the Commission's action.
Referring to paragraph 3 of the grounds of the judgment in Case 14/68 Wilhelm v Bundeskartellamt [1969] ECR 1, the Commission further emphasizes that Article 9 (3) of Regulation No 17 does not apply where the authorities of the Member States are acting in pursuance of their internal legal provisions.
The Commission concludes by proposing that the preliminary questions submitted by the Tribunal de Commerce, Paris, be answered as follows:
“Under Community law a letter such as that sent on 23 March 1977 to Estéé Lauder may not be regarded as a decision to grant negative clearance under Article 2 of Regulation No 17/62. The national courts are competent to declare in private law actions which come before them that certain agreements constitute infringements of the prohibition contained in Article 85 (1), in particular when the Commission has not initiated a procedure within the meaning of Article 9 (3) of Regulation No 17/62.”
III — Oral procedure
The defendant in the main action, represented by C. Lebel, Advocate, and the Commission of the European Communities, represented by J.-F. Verstrynge, presented oral argument at the hearing on 16 October 1979.
The Advocate General delivered his opinion at the sitting on 22 November 1979.
IV — Reopening of the oral procedure
By order of 16 January 1980 the Court decided to reopen the oral procedure in the present case as also in Joined Cases 253/78 and 1 to 3/79 and Case 99/79 and requested the parties to the main actions, the Member States, the Council and the Commission to state their views on three questions.
In reply to the question written observations were lodged by the defendant in the main action, represented by Mr Lebel, by the British, Danish, French, Belgian, German and Netherlands Governments and also by the Commission.
The defendant in the main action, represented by Mr Lebel, Advocate, the Government of the United Kingdom, represented by Mr Scott, and the Commission, represented by Mr Verstrynge, presented oral argument at the hearing on 28 April 1980.
The Advocate General delivered his supplementary opinion at the sitting on 24 June 1980.
Decision
1. By judgment of 28 February 1979, which was received at the Registry of the Court on 2 March 1979, the Tribunal de Commerce, Paris, (Third Chamber), submitted to the Court of Justice for a preliminary ruling under Article 177 of the Treaty questions on the interpretation of Article 85 of the Treaty and of certain provisions of Regulation No 17 of the Council of 6 February 1962(Official Journal, English Special Edition 1959-1962, p. 87).
2. Those questions are put in the context of a dispute between Estéé Lauder S.A. and a perfumery retailer which does not form part of the selective distribution network set up by Estéé Lauder. After Estéé Lauder refused to fulfil an order placed by that retailer the latter, on 5 May 1978, brought proceedings against Estéé Lauder before the Tribunal de Commerce, Paris, claiming that Estéé Lauder should be ordered to deliver the goods requested and to pay damages. That action is based upon the infringement of Article 37 (1) (a) of the French Order No 45-1483 of 30 June 1945 on prices which prohibits a refusal to sell. The plaintiff in the main action also submits that the selective distribution system relied upon by Estéé Lauder in order to justify the contested refusal to sell is contrary to Article 85 (1) of the Treaty.
3. In its defence Estéé Lauder argued that the agreements setting up its distribution system, which is based upon both quantitative and qualitative criteria of selection, have been acknowledged by the Commission of the European Communities to conform with Community competition rules and that that approval by the Commission prevented the application of the prohibitions provided for by national competition law. In that regard Estéé Lauder made reference to a letter of 23 March 1977 from the Commission's Directorate-General for Competition informing it that “the authorized distributorship agreement and the conditions of sale applied by your company in France may be considered, taking account of the economic context in which they operate, as not capable of being affected by the rules on competition contained in the EEC Treaty”.
4. The Tribunal de Commerce, Paris, decided to stay the proceedings and submitted to the Court of Justice the following questions for a preliminary ruling:
“(1) Does the letter of 23 March 1977 of the Commission of the European Communities, which does not contain the words ‘negative clearance’ and seems to have been issued without being published as laid down in Regulation No 17, constitute a negative clearance?
2) If the answer is in the affirmative, does the letter of 23 March 1977 constitute a Commission decision which may be invoked in relation to third parties and is binding upon the courts of the Member States of the Community?
3) If the answer to the first or the second question is in the negative, has a procedure been initiated within the meaning of Article 9 (3) of Regulation No 17 and which authorities are at present competent to enforce Article 85 (1) of the Treaty?”
The first and second questions
5. In the first question the Court is asked to specify the legal nature of letters such as that which was sent to the defendant in the main action by the Commission's Directorate-General for Competition. The second question seeks to ascertain the effects which such letters may produce as regards national courts. These two questions should be considered together.
6. Article 87 (1) of the Treaty authorized the Council to adopt any appropriate regulations or directives to give effect to the principles set out in Articles 85 and 86. In accordance with that authorization the Council has adopted regulations, in particular Regulation No 17 of 6 February 1962 (Official Journal, English Special Edition 1959-1962, p. 87), which gave the Commission power to adopt various categories of regulation, decision and recommendation.
7. The instruments thus placed at the Commission's disposal for the accomplishment of its task include decisions granting negative clearance and decisions applying Article 85 (3). So far as decisions granting negative clearance are concerned, Article 2 of Regulation No 17 of the Council provides that, upon application by the undertakings concerned, the Commission may certify that, on the basis of the facts in its possession, there are no grounds under Article 85 (1) or Article 86 of the Treaty for action on its part in respect of an agreement, decision or practice. So far as decisions applying Article 85 (3) are concerned, Article 6 et seq. of Regulation No 17 provide that the Commission may adopt decisions declaring the provisions of Article 85 (1) to be inapplicable to a given agreement provided that the latter has been notified to it or notification has been dispensed with by virtue of Article 4 (2) of the regulation.
8. Regulation No 17 and the regulations issued in implementation thereof lay down the rules which must be followed by the Commission in adopting the aforementioned decisions. Where the Commission intends to give negative clearance pursuant to Article 2 or take a decision in application of Article 85 (3) of the Treaty, it is bound, in particular, by virtue of Article 19 (3) of Regulation No 17 to publish a summary of the relevant application or notification and invite all interested third parties to submit their observations within a time-limit which it shall fix. Decisions granting negative clearance and exemptions must be published, as provided for by Article 21 (1) of that regulation.
9. It is plain that a letter such as that sent to the defendant in the main action by the Directorate-General for Competition, which was despatched without publication as laid down in Article 19 (3) of Regulation No 17 and which was not published pursuant to Article 21 (1) of that regulation, constitutes neither a decision granting negative clearance nor a decision applying Article 85 (3) within the meaning of Articles 2 and 6 of Regulation No 17. As is stressed by the Commission itself, it is merely an administrative letter informing the undertaking concerned of the Commission's opinion that there is no need for it to take action in respect of the contracts in question under the provisions of Article 85 (1) of the Treaty and that the file on the case may therefore be closed.
10. Such a letter, which is based only upon the facts in the Commission's possession, and which reflects the Commission's assessment and brings to an end the procedure of examination by the department of the Commission responsible for this, does not have the result of preventing national courts before which the agreements in question are alleged to be incompatible with Article 85 from reaching a different finding as regards the agreements in question on the basis of the information available to them. Whilst it does not bind the national courts, the opinion transmitted in such letters nevertheless constitutes a factor which the national courts may take into account in examining whether the agreements or conduct in question are in accordance with the provisions of Article 85.
11. The first two questions put by the national court should therefore be answered in the manner indicated above.
The third question
12. The third question seeks to ascertain the powers of national courts to apply Article 85 (1), regard being had to the provisions of Article 9 (3) of Regulation No 17 which is worded as follows :
“As long as the Commission has not initiated any procedure under Articles 2, 3 or 6, the authorities of the Member States shall remain competent to apply Article 85 (1) and Ariele 86 in accordance with Article 88 of the Treaty...”
13. As the Court held in its judgment of 30 January 1974 in Case 127/73, BRTv SABAM [1974] ECR 51, since the prohibitions contained in Articles 85 (1) and 86 tend by their very nature to produce direct effects in relations between individuals, those articles create direct rights in respect of the individuals concerned which the national courts must safeguard. To deny, by virtue of Article 9 of Regulation No 17, the national courts' jurisdiction to afford that safeguard would mean depriving the individuals of rights which they hold under the Treaty itself. It follows that the initiation by the Commission of a procedure under Articles 2, 3 or 6 of that regulation cannot exempt a national court before which the direct effect of Article 85 (1) is pleaded from giving judgment.
14. Nevertheless, in such a case it is open to the national court, if it considers it necessary for reasons of legal certainty, to stay the proceedings before it while awaiting the outcome of the Commission's action. On that matter, however, it should be noted that, as the Court has already held in its judgment of 6 February 1973 in Case 48/72, Brasserie de Haecht II [1973] ECR 77, “Article 9, when referring to the initiation of a procedure under Articles 2, 3 or 6, obviously concerns an authoritative act of the Commission, evidencing its intention of talong a decision under the said articles”.
15. An administrative letter such as that sent to the defendant in the main action, far from evidencing such an intention, indicates, on the contrary, that the file on the matter has been closed and that the adoption of a decision is not contemplated.
16. Accordingly, the answer to the third question should be that the jurdisdiction of national courts before which the direct effect of Article 85 (1) is relied upon is not restricted by Article 9 (3) of Regulation No 17. In any case an administrative letter informing the undertaking concerned that the file on its case has been closed does not amount to the initiation of a procedure pursuant to Articles 2, 3 or 6 of Regulation No 17.
Costs
17. The costs incurred by the Belgian Government, the Danish Government, the Netherlands Government, the French Government, the Government of the Federal Republic of Germany, the Government of the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.
On those grounds, THE COURT, in answer to the questions submitted to it by the Tribunal de Commerce, Paris, by order of 28 February 1979, hereby rules:
1 An administrative letter informing the undertaking concerned of the Commission's opinion that there is no need for it to take any action in respect of certain agreements under the provisions of Article 85 (1) does not have the effect of preventing national courts, before which the agreements in question are alleged to be incompatible with Article 85, from reaching a different finding as regards the agreements in question on the basis of information available to them. Whilst it does not bind the national courts, the opinion transmitted in such letters nevertheless constitutes a factor which the national courts may take into account in examining whether the agreements or conduct in question are in accordance with the provisions of Article 85.
2 The jurisdiction of national courts before which the direct effect of Article 85 (1) is relied upon is not restricted by Article 9 (3) of Regulation No 17. In any case an administrative letter informing the undertaking concerned that the file on its case has been closed does not amount to the initiation of a procedure pursuant to Articles 2, 3 or 6 of Regulation No 17.
1 Read 23 March 1977.
2 Read 23 March 1977.
3 The text of the order is reproduced in the judgment of the Court in Joined Cases 253/78 and 1 to 3/79.
4 The observations are summarized in the judgment of the Court in Joined Cases 253/78 and í to 3/79. The observations submitted by the defendant in the main action in the present case are identical to those put forward by the defendants in the main actions in the abovementioned joined cases.