Court of Justice 06-07-2000 ECLI:EU:C:2000:372

The relevant case-law

In Brasserie de Haecht the factual context was the simultaneous existence of a large number of exclusive purchasing agreements imposed by a small number of Belgian breweries. The Court was asked whether it was the economic context of the whole market or the effects of the particular agreements in issue, considered in isolation, that had to be considered for the purposes of Article 81 EC. It ruled that the effects on competition of an exclusive purchasing agreement had to be assessed ‘in the context in which they occur, that is to say in the legal and economic context’ of the agreement.^(*) This is because ‘it would be pointless to consider an agreement ... by reason of its effects if those effects were to be taken distinct from the market in which they are seen to operate and could only be examined apart from the body of effects, whether convergent or not, surrounding their implementation’.^(*) For the purpose of determining whether an agreement actually falls within Article 81(1) EC, it then held that ‘[T]he existence of similar contracts may be taken into consideration... to the extent to which the general body of contracts of this type is capable of restricting the freedom of trade’ (emphasis added).^(*)

The Court has, therefore, not adopted a strict per se approach to the applicability of Article 81 EC to exclusive purchasing agreements. It has never formally held that such agreements have as their ‘object’ the restriction of competition, but, rather, has focused on whether, viewed in the totality of their economic and legal context, their effect is to restrict competition. The same approach is to be found in the seminal 1966 judgment in Société Technique Minière v Maschinenbau Ulm^(*) where the Court, conscious of the potential pro-competitive benefits, in terms of facilitating market penetration, of vertical restraints in supply contracts, held that, for ‘a clause granting an exclusive right of sale’ in a defined territorial area (in that case an entire Member State) ‘to be considered as prohibited by reason of its object or of its effect, it is appropriate to take into account in particular the nature and quantity, limited or otherwise, of the products covered by the agreement, the position and importance of the grantor and the concessionaire on the market for the products concerned, the isolated nature of the disputed agreement or, alternatively, its position in a series of agreements, the severity of the clauses intended to protect the exclusive dealership or, alternatively, the opportunities allowed for other commercial competitors in the same products by way of parallel re-exportation and importation’.^(*) The Court has thus stressed right from the earliest days of Community competition law the importance of a dynamic and contextual analysis. This approach was categorically confirmed and developed by it more recently in Delimitis, which concerned the German beer market.

In Delimitis, the Court first provided a far from unfavourable overall assessment, so far as their object is concerned, of the nature of exclusive purchasing agreements:^(*)

‘Under the terms of beer supply agreements, the supplier generally affords the reseller certain economic and financial benefits, such as the grant of loans on favourable terms, the letting of premises for the operation of a public house and the provision of technical installations, furniture and other equipment necessary for its operation. In consideration for those benefits, the reseller normally undertakes, for a predetermined period, to obtain supplies of the products covered by the contract only from the supplier. That exclusive purchasing obligation is generally backed by a prohibition on selling competing products in the public house let by the supplier.

Such contracts entail for the supplier the advantage of guaranteed outlets, since, as a result of his exclusive purchasing obligation and the prohibition on competition, the reseller concentrates his sales efforts on the distribution of the contract goods. The supply agreements, moreover, lead to cooperation with the reseller, allowing the supplier to plan his sales over the duration of the agreement and to organise production and distribution effectively.

Beer supply agreements also have advantages for the reseller, inasmuch as they enable him to gain access under favourable conditions and with the guarantee of supplies to the beer distribution market. The reseller's and supplier's shared interest in promoting sales of the contract goods likewise secures for the reseller the benefit of the supplier's assistance in guaranteeing product quality and customer service.

If such agreements do not have the object of restricting competition within the meaning of Article 85(1), it is nevertheless necessary to ascertain whether they have the effect of preventing, restricting or distorting competition.’

The same rationale applies, to my mind, to the exclusive supply and purchasing obligations imposed in service station agreements. Such agreements should not be viewed as falling within Article 81(1) EC unless, in the economic context in which they occur, they contain clauses whose effects on competition are ‘sufficiently deleterious’.^(*)

Since an individual agreement such as a service station agreement between a supplier of fuels and an operator of a local petrol station would be unlikely ever to engender the restrictive effects necessary to be considered as capable of falling within the scope of Article 81(1) EC, the Court has consistently followed the advice of Advocate General Roemer in Brasserie de Haecht and considered the effects of such agreements in their overall market context.^(*) However, to determine whether national courts may segregate a particular supplier's network of the exclusive purchasing agreements for the purpose of determining whether, viewed separately, the effects of certain agreements on competition are so negligible as to render Article 81 EC inapplicable, it is necessary to examine carefully the dynamic contextual approach formulated by the Court in Delimitis, with regard to the effect of such agreements.

In Delimitis the Court was concerned with whether the existence of several exclusive purchasing agreements ‘impedes access to the market’.^(*) To determine whether access was impeded, it held that it was first necessary to look at ‘the extent of those agreements in their totality, comprising all similar contracts tying a large number of points of sale ...’; i.e. at the cumulative effects on competition of the various parallel networks of agreements. However, even if the ‘bundle of similar contracts’ has ‘a considerable effect on the opportunities for gaining market access’, the market may not necessarily be foreclosed.^(*) On the contrary, before this limb of the test may be deemed to be satisfied, the ‘opportunities for access’ and the ‘competitive forces’ operating on the market must also be considered.^(*)

It is only if an examination of those factors reveals that ‘it is difficult to gain access to the relevant market’ that the various individual agreements in question potentially restrict competition.^(*) However, it is necessary to determine whether the particular supplier's contracts contribute to an appreciable extent to ‘the cumulative effect produced ... by the totality of the similar contracts found on the market’.^(*) This assessment requires that not only the market share held by that supplier but also the duration of its contracts be considered. As duration is central in the present case, it is worth fully quoting the relevant passage of the judgment:^(*)

‘If the duration is manifestly excessive in relation to the average duration of beer supply agreements generally entered into on the relevant market, the individual contract falls under the prohibition under Article 85(1). A brewery with a relatively small market share which ties its sales outlets for many years may make as significant a contribution to a sealing-off of the market as a brewery in a relatively strong market position which regularly releases sales outlets at shorter intervals.’

Application in the present case

The national court has not yet decided whether access to the Finnish market for the supply of petroleum fuels is impeded for the purpose of the first limb of the Delimitis test. Notwithstanding the very strong market position enjoyed by Neste (577 service stations of a total of 1 799 on 31 December 1997), if new and equally efficient competitors could still without difficulty enter the market, or if existing competitors could readily increase their market share, competition could not be regarded as adversely affected by the existence of the present parallel networks of exclusive distribution agreements. Neste has emphasised in both its written and oral observations that there are no restrictions affecting the importation of petroleum fuels into Finland, while the price, which is the most significant factor in competition on the retail market, is essentially fixed on the world market and is more precisely calculated for Nordic countries by reference to the prices charged at the ports of Antwerp, Rotterdam and Amsterdam. It has also pointed to new suppliers who have successfully entered the Finnish retail petroleum-fuels supply market in recent years, including the JET chain, which now has a 10% market share with just 25 service stations, which is less than 2% numerically of the total. Moreover, it appears that the average duration of service station agreements in Finland, including those of the claimant, is now three to five years.

It must be recalled, however, that the defendants have claimed before the national court that the Finnish retail petroleum-fuels supply market is already saturated. The mere fact that some new competitors have recently succeeded in gaining a foothold on that market, and that Neste's market share has lately been slipping, does not preclude a finding, which it is for the national court alone to make by applying the Delimitis criteria, that access to the market ‘is difficult’. To my mind, there must be more than a ‘real possibility’ of access, which must not, at least not exclusively, be based on acquiring or taking over existing suppliers.^(*) If the national court ultimately forms the view that competition is not restricted by the various networks of exclusive purchasing agreements, then the defence raised by the defendants to Neste's claim must fail, since the agreement at issue could not, on its own, restrict competition for the purposes of Article 81(1) EC.

If the national court, however, concludes that access to the Finnish retail petroleum-fuels supply market is impeded by the various networks of exclusive distribution agreements, it is noteworthy that it is explicitly stated in the order for reference — a finding which would seem reasonable given Neste's strong market position and its very large share of the total number of tied service stations — that the contribution of the claimant's network of agreements to the overall foreclosure of that market is significant. The novel aspect of this case is that the national court would appear to be satisfied that, apart from the 27 agreements in question, all of the claimant's agreements, which were in existence on 1 July 1998 when the defendants allegedly breached their contract, were covered by the block exemption contained in Article 10 of Regulation No 1984/83. Consequently, the question arises whether it is permissible to view separately the effects on competition, on that date, of those 27 agreements, in so faias they were terminable on giving one year's notice.

A persuasive and cogent argument based on legal certainty can be made in favour of requiring a global analysis for the purpose of determining whether a supplier's network of agreements is caught by Article 81(1) EC. The extensive economic analysis that the Delimitis approach already requires of national courts charged with the application of Article 81 EC is, by its very nature, complex and will, for all courts apart from those more specialised in competition law, almost invariably present-difficulties. This was recognised by the Court itself in Delimitis, where it drew attention to the Commission's duty to cooperate with national courts which, ‘within the limits of the applicable national procedural rules’, seek advice or information from the Commission ‘where the concrete application of Article 85(1) or of Article 86 raises particular difficulties [and] in order to obtain the economic and legal information which that institution can supply to [them]’.^(*) Moreover, since one of the important and sui generis objectives of Community — as distinct from national — competition policy is to promote the integration of Member State markets, and since most exclusive purchasing agreements, viewed in isolation, would never affect inter-State trade, it is clearly both appropriate and essential that a global and contextual assessment be made of each network of such agreements.

I consider that the judgments of the Court of First Instance in Langnese-Iglo and Schöller provide support for this view.^(*) One of the applicants' contentions in both cases was that their exclusive purchasing agreements with their ordinary (small) resale outlets could be distinguished from sales of ice-cream at service stations. This view was earlier accepted by the President of the Court of First Instance in the interim application brought in 1992^(*) for the suspension of a Commission decision that had been adopted in that case.^(*) In adopting ‘a temporary solution’ for the purpose of disposing of the interim application, the President of the Court of First Instance suspended the operation of the impugned decision with the exception of retail outlets in service stations.^(*) He thus sought to balance the competing economic interests of the applicants and the regulatory interests of the Commission by permitting their competitor, Mars, ‘the possibility of negotiating’ with the service station outlets ‘the conditions for the distribution of its four ice-cream products’.^(*) However, in the substantive actions challenging the definitive decision adopted in 1993 by the Commission, the Court of First Instance refused to consider any individual agreements separately.^(*) Referring to Delimitis, it held that, ‘where there is a network of similar agreements concluded by the same producer, the assessment of the effects of that network on competition applies to all the individual agreements making up the network’. It also agreed with the Commission's observation that ‘it might be arbitrary in the present case to divide the contested agreements into different hypothetical categories’.^(*)

Nevertheless, when considering the applicants' plea that the Commission had no power under Article 3 of Regulation No 17 of the Council of 6 February 1962 to prohibit them from concluding in the future any exclusive purchasing agreements similar to those declared to be contrary to Article 81(1) EC, the Court of First Instance held that, ‘where an examination of all similar agreements entered into on the relevant market and the other factors relevant to the economic and legal context shows that access to the market in question is difficult, the exclusive purchasing agreements of a supplier whose contribution to a cumulative effect is insignificant are not caught by the prohibition contained in Article 85(1)’ (emphasis added).^(*) It then observed that ‘Article 85(1) does not, as a general rule, preclude the conclusion of exclusive purchasing agreements, provided they do not contribute significantly to any partitioning of the market’.^(*) The Court of First Instance was thus of the view that the compatibility of such agreements should, in general, be assessed in their global context.

The case-law therefore requires national courts to consider all the ‘similar’ agreements operated by a particular supplier. Normally the various agreements comprised in a network of exclusive purchasing agreements operated by a particular supplier would be ‘similar’, if not almost identical. However, in my opinion, it does not follow that particular agreements containing specific clauses having clearly different economic effects should, for the purpose of applying the Delimitis test, necessarily be regarded as ‘similar’. I agree with Neste that this view is not inconsistent with Langnese-lglo and Schöller, because in those cases it was the type alone of certain reselling outlets (which were in fact service stations) that was advanced as justifying a separate treatment of their agreements from that applicable to agreements with other icecream resellers. For a distinction to be relevant, it must be significant and based on the substantive terms of the agreements at issue and their materially different economic effects.

The clearest support for this view can be derived from Delimitis itself. By recognising that a clause allowing a tied publican to purchase beer from other Member States could affect the assessment under Article 81(1) EC of an exclusive purchasing agreement, provided it genuinely permitted that publican to be supplied by other suppliers, the Court obviously accepted that the effects on competition of every agreement entered into by a supplier were not necessarily the same. It held that (emphasis added):^(*)

‘If the interpretation of the wording of the access clause or an examination of the specific effect of the contractual clauses as a whole in their economic and legal context shows that the limitation on the scope of the prohibition on competition is merely hypothetical or without economic significance, the agreement in question must be treated in the same way as a classic beer supply agreement. Accordingly, it must be assessed under Article 85(1) of the Treaty in the same way as beer supply agreements in general.

The position is different where the access clause gives a national or foreign supplier of beers from other Member States a real possibility of supplying the sales outlet in question. An agreement containing such a clause is not in principle capable of affecting trade between Member States within the meaning of Article 85(1), with the result that it escapes the prohibition laid down in that provision.’

Neste therefore correctly stresses the importance of ‘duration’ clauses in service station exclusive purchasing agreements. Clauses governing the duration of agreements comprised in a network of exclusive purchasing agreements are clearly material to their market effects and shorter periods are, by their nature, less restrictive. It is a question of degree. In Delimitis, the Court observed that the contribution of a brewery's individual contracts to market foreclosure depends on their duration: ‘If the duration is manifestly excessive in relation to the average duration of beer supply agreements generally entered into on the relevant market, the individual contract falls under the prohibition under Article 85(1)’.^(*) The converse also follows, in my opinion; namely that, if the duration of certain individual contracts, terminable at short notice, is so much less than that of a network of agreements, their effect on sealing-off the relevant market may be so slight that they fall outside the scope of Article 81(1) EC. The effects of contracts so differentiated must therefore be capable of individual assessment by national courts. I see no reason why a limited number of agreements concluded by a supplier of petroleum fuels which, overall, has many outlets, and by which the relevant outlets are not tied for any longer than may be regarded as wholly reasonable in the market at issue, both from the point of view of permitting those outlets to switch suppliers and that of affording the existing supplier a realistic opportunity of preparing for a changeover, should not be assessed separately.

I do not accept the Commission's argument that subdividing a network of exclusive purchasing agreements would always be arbitrary. On the contrary, it seems to me that the national court has correctly analysed the distinction to be made, saying that ‘it may be supposed in principle that agreements of several years'duration restrict access to the market significantly more than agreements which may end at any time with a short notice period’, and that ‘... it would not be arbitrary to apply a prohibition based on the overall effect of the network of agreements to agreements belonging only to the former and not to the latter group, if the former form the majority and the latter only a small part of the agreements concluded by one supplier of goods which significantly influence the overall effect’. The Commission has, itself, recognised that the principal problem posed by exclusive purchasing agreements in the retail-fuels sector, where intra-brand competition at sales outlets is not feasible, is that of market foreclosure, which, it accepts, can best ‘be remedied by limiting the effective duration of contracts’.^(*) At the oral hearing, in response to questions from the bench, the Commission, although reiterating its concern about the effects of tacitly renewable agreements, accepted that a clause importing a short notice period into a service station agreement could make a difference to a national court's assessment of whether the agreement of which that clause forms part makes any contribution to the overall effects on market access of the supplier in question's network of agreements.^(*)

I accept that a national court in an action for breach of contract, when faced with a ‘Community-law’ defence based on the alleged incompatibility of an exclusive purchasing agreement with Article 81(1) EC, need in most cases only look at the overall contribution of a particular supplier's network of agreements to hindering access to the market. However, where it-is clear that a small number of that supplier's agreements is easily distinguishable from the general body of agreements constituting its network, the national court concerned should not be precluded from considering the effects of that limited number of agreements separately.^(*) Concerns related to legal certainty should not impose an analytical strait-jacket on national courts when considering the effects of a network of exclusive purchasing agreements.

The mere fact that certain agreements may, because of their distinctiveness, occasionally merit separate assessment does not relieve the national court of its obligation to consider, by reference to their effects, whether they are capable of restricting competition and, thus, falling within the scope of Article 81(1) EC. A relatively short notice period in certain retail markets, like those for ice-cream and beer where there is far greater product differentiation than in the retail petroleum-fuels supply market, could still contribute to a not insignificant degree to an overall tyingin effect flowing from a major supplier's network of agreements. However, if, at the time a dispute arises, the agreements in question give resellers a virtually unrestricted opportunity, without being subject to penalties on existing loans or any other disguised termination disincentives, to switch suppliers, it is difficult to conceive of any adverse effect on competition on the relevant market flowing from them. This would a fortiori be the case if the national court were to accept Neste's assertion in the present case that there are no significant barriers to entry to the Finnish retail petroleum-fuels supply market.

In summary, I am satisfied, at least in respect of exclusive purchasing agreements in the service station sector, where it is common ground that competition is essentially limited to inter-brand price competition and where it is also clear, unlike, for example, in the beer and ice-cream markets, that there is little or only insignificant brand loyalty among consumers, that an agreement concluded by a supplier which may be terminated by the reseller at any time simply by giving one year's notice is not similar to other fixed-term agreements which tie the reseller to the supplier for significantly longer periods of time. Such agreements, where they constitute a small minority of that supplier's network of agreements and where they genuinely permit the reseller readily to switch suppliers, should be assessed separately by national courts.