Brauerei A. Bilger Söhne GmbH v Heinrich Jehle and Marta Jehle (43/69)

A —Facts

The Bilger brewery maintains principally that the contract in dispute is only of limited importance from an economic point of view. The establishments run by Mr and Mrs Jehle only sold 135.13 and 135.56 hl. of beer during the years 1966-1967 and 1967-1968 respectively. This brewery is only one of 1908 German breweries and its share in the market is approximately 0.3 %.

B —The first question

The arguments put forward on this point by the Bilger brewery may be summarized as follows :The reply to this question must logically be as follows :“An agreement, to which only two undertakings in one Member State are parties and which obliges one of them to obtain its supplies exclusively from the other, does not relate either to imports or to exports between Member States and thus does not require notification to the Commission, in accordance with Article 4 (2) (1) of Regulation No 17 (in conjunction, where appropriate, with Article 5 (2) of this same Regulation).”According to Article 5 (2) of Regulation No 17, taken in conjunction with Article 4 (2) (1), the obligation to notify an agreement of the type concerned in the present case depends on whether such agreement “relates to imports or to exports between Member States”. However, in cases such as the present this condition is not satisfied for the following reasons :— the agreement in dispute does not concern imports or exports and does not seek to lay down detailed rules governing these matters. It deals with the supply of beer of excellent quality to an innkeeper and consumers and, like all such agreements, it is the result of technical and commercial considerations which are compelling for both parties. The Bilger brewery has put forward detailed observations on this point. As regards the fact that the agreement excludes supply, not only by all the other German breweries, but also by the breweries of the other Member States, this is merely an indirect consequence of the agreement.— In the same way, the Commission main tains in the “Practical Guide to Articles 85 and 86 of the Treaty establishing the EEC, and their implementing regulations” with reference to Article 4 (2) (1) of Regulation No 17 that “purely regional … exclusive dealing agreements within one Member State, which only indirectly concern imports or exports,” do not require notification.— The use of the verb ‘to relate’ in the above-mentioned provision means that the agreement must concern imports or exports between Member States. The authors of the regulation intentionally employed a term which is different from those used in Article 85 of the Treaty, that is: ‘to affect’, ‘to have as their object’ or ‘to have as their effect’.— If an indirect effect on imports or exports were sufficient to establish the obligation to give notification of the agreement, the provision in the above-mentioned Article 4 would be meaningless, since the criteria laid down therein would be a duplication of those in Article 85 (1) of the Treaty.— This interpretation is also supported by the principle of legal certainty. It is necessary for undertakings to have confidence in the ‘Practical Guide’ published by the Commission and, in addition, they must be in a position to determine with certainty whether their agreement requires notification. Generally speaking, they could never acquire such certainty if they were also required to assess the indirect effects of the agreements which they wished to conclude, a fortiori where these effects were solely the result of the parallel existence of several agreements of the same type. Moreover, such effects may be subject to continual change according to the fluctuations in competition.— The Commission has the power to initiate at any time a procedure which is also concerned with agreements which do not require notification. Thus, the limitation on the obligation to notify an agreement does not restrict the scope of Article 85 of the EEC Treaty.— The exemption from notification in respect of exclusive dealing agreements concluded within a Member State is perfectly reasonable, in view of the fact that such agreements are not generally capable of affecting trade between Member States (cf. to this effect the preamble to Regulation No 67/67/EEC of the Commission of 22 March 1967, OJ, Special Edition 1967, p. 10).Secondly, according to the Bilger brewery it must be noted that the Community legislature also used the verb ‘to concern’ in the wording of Article 1 (2) of Regulation No 67/67/EEC. If this provision were to be understood to refer also to indirect effects on imports or exports it would be ‘largely irrelevant’, since there would then be no exclusive dealing agreements ‘which concern (only) the resale of products within this Member State’. In this case, all the agreements containing an exclusive supply clause would be exempt from the prohibition in Article 85 (1) and, therefore, would not require notification.For their part, Mr and Mrs Jehle put forward the following arguments :Agreements which are concluded between two undertakings in the same Member State and which concern the exclusive right to supply beer are not governed by Articles 5 (2) and 4 (2) (1) of Regulation No 17 and, for this reason, do not require notification. If a different interpretation were to be given to this regulation it would be contrary to the principles and objectives of Articles 85 et seq. of the EEC Treaty and, for this reason, would have no basis in law.According to the judgment of the Court in the Bosch case, agreements which require notification but which are not notified are void as from the day of the entry into force of the above-mentioned Regulation No 17. It follows that the question whether or not a specific agreement requires notification is at the same time of decisive importance with regard to the nullity or the validity of the agreement. In these circumstances, it is not possible to dispense with notification for those agreements which are a danger to the Common Market.Contracts for the supply of beer such as that which is involved in the present case present such a danger. Mr and Mrs Jehle argue this point in detail. They maintain in particular that in the Federal Republic of Germany 80 % of innkeepers are bound by such contracts, which are also in frequent use in the other Member States. This generally results in a substantial obstacle to the supply of beer from one country of the Community to another such country.In the conclusion to its observations and also, to some extent, in the statement of reasons contained therein the Commission puts forward a view which is identical to that of the Bilger brewery. According to the Commission, agreements of the type concerned in the present case have only an indirect effect on imports and exports between Member States and thus do not ‘relate to’ them within the meaning of Article 4 (2) (1) of Regulation No 17. In this context it also maintains that Article 4 (1) and Article 5 (1) of Regulation No 17 are in any case only applicable to the agreements referred to in Article 85 (1) of the EEC Treaty.

C —The second question

The Bilger brewery maintains that this question must logically receive the following reply:‘An agreement within the meaning of Article 85 (1) of the EEC Treaty which does not require notification to the Commission and which therefore has not been notified is fully effective for as long as the Commission shall have made no decision on it under Article 85 (3) of the Treaty and the provisions of Regulation No 17.’In its judgment of 6 April 1962 in Case 13/61 (De Geus en Uitdenbogerd v Bosch and Van Rijn, [1962] E.C.R. 45 et seq.), hereinafter referred to as the ‘Bosch judgment’, the Court laid down that agreements which do not require notification and which were already in existence on the entry into force of Regulation No 17 are ‘valid’ and not merely ‘provisionally valid’. Such agreements are thus fully effective until the Commission has taken a decision on them in accordance with Article 85 (3) of the EEC Treaty.This view is confirmed by the judgment of the Court of 9 July 1969(Portelange v Smith Corona and Others, Case 10/69, Rec. 1969, p. 316 et seq.), hereinafter referred to as the ‘Portelange judgment’. If, as a result, even those agreements which require notification and which according to the Bosch judgment are only ‘provisionally valid’ must be regarded as fully valid until the Commission has taken a decision on them, the same must apply a fortiori to agreements which do not require notification and which the Bosch judgment describes as ‘valid’.As is apparent from the preamble to Regulation No 17, this view also derives from the fact that the Council considered that the agreements which did not require notification were ‘less dangerous’.Moreover, a contrary interpretation goes against the very purpose of Article 4 (2) of Regulation No 17, for if agreements which did not require notification were only provisionally valid on condition that they were notified, every conscientious undertaking would in practice be compelled to notify their existence. There would thus be no difference between those agreements which required notification and those which did not and the Commission would have to have to face an influx of notifications.Article 6 (2) of Regulation No 17 provides that agreements which do not require notification may be exempted retroactively from the prohibition in Article 85 (1). It is thus illogical to regard them, pending the Commission's decision on them, as void absolutely or conditionally.Finally, the Bilger brewery maintains that the requirement of legal certainty also supports this view. The agreements referred to in Article 4 (2) of Regulation No 17 are acknowledged and indispensable instruments of economic life. As, in general, a long period is required before an exempting decision is taken under Article 85 (3) of the EEC Treaty, they could not be regarded in the meantime as provisionally invalid.As the Court held in the Portelange judgment, agreements which do not require notification may give rise to an action to terminate the infringement and for damages. Otherwise they would be entirely valid in practice. This view does not form an obstacle to the proper application of the European law on cartels, since various means of review are open to the Commission. In particular, it may at any moment initiate a certain procedure, in which it takes a decision on the applicability of Article 85 (3).Mr and Mrs Jehle concur in the opinion of the Commission in the conclusions to their observations and, as regards the essential points, in the reasons for their conclusions. The Commission declares that a reply to this question must be based on the principles laid down by the Court in the Portelange judgment. This judgment is based above all on the following considerations :— ‘In view of the absence of any effective legal means enabling the persons concerned to accelerate the adoption of a decision under Article 85 (3) … it would be contrary to the general principle of legal certainty to conclude that, because agreements notified are not finally valid so long as the Commission has made no decision on them under Article 85 (3) of the Treaty, they are not completely efficacious.— On the other hand, notification enables the Commission to put an end to this situation by refusing to grant an exemption or by applying Article 15 (6) of Regulation No 17 since, if the persons concerned continued to implement their agreement in defiance of a decision taken on the basis of this provision, they would run the risk of being fined by the Commission under Article 15 (2) of the above-mentioned Regulation.’These considerations are not valid in the case of unnotified agreements since the undertakings which are parties to such agreements have the power to notify the Commission voluntarily and, therefore, to obtain the advantages which result from such notification. If they choose not to exercise this power they accept voluntarily the legal uncertainty inherent in such conduct. Moreover, normally in such a situation the Commission is never informed of the existence of the agreement, or it is only informed of it much later. Unlike the procedure in respect of notified agreements it is thus not in a poistion to undertake an immediate inquiry or to take action, if need be, against the persons concerned pursuant to the provisions of Regulation No 17. On these grounds alone there is no justification for granting to agreements which do not require notification and which have not been notified the benefit of the advantages which result from notification.The Commission maintains, furthermore, that the following factor also supports this solution. By notifying their agreement to the Commission the parties concerned obtain an advantage, in that until it has given a ruling on the application of Article 85 (3) of the EEC Treaty the Commission cannot impose a fine to penalize the activities described in the notification document (Article 15 (5) of Regulation No 17). On the other hand, the undertakings which take part in an unnotified restriction of competition risk the impost ion of fines under Article 15 (2) of Regulation No 17 if, intentionally or negligently, they have infringed the prohibition set out in Article 85 (1). If the legal consequences described in the Portelange judgment were attached to agreements exempt from notification and unnotified, which satisfy the conditions set out in Article 85 (1) of the EEC Treaty, an undertaking which is a party to such an agreement might require its performance by another undertaking which is also a party to that agreement, although in this way the latter undertaking risks the imposition of a fine. In the opinion of the Commission, therefore, the reply to the second question must be as follows :‘An agreement which is exempt from notification and which has not been notified of the type listed in Article 85 (1) of the EEC Treaty is provisionally valid until the Commission has made a decision thereon. However, the provisional validity of such agreement cannot authorize a contracting party to require another party to perform the agreement, nor to claim from such party damages for non-performance before the Commission has made a decision thereon.’

Costs