Cassella Farbwerke Mainkur AG v Commission of the European Communities (55/69)

1. Complaints concerning the commencement of the administrative procedure

The applicant observes that it was the decision of the Commission of 31 May 1967 to commence proceedings on its own initiative against various manufacturers of dyestuffs in application of Article 3 of Article 3 of Regulation No 17 which led to the contested decision. That provision only grants the Commission the power to require undertakings by decision to bring an end to the infringements which it has established or to address recommendations to them for that purpose. Therefore the decision imposing fines was not covered by the abovementioned decision of 31 May 1967, for no subsequent decision had been taken by the Commission. Furthermore, the applicant stresses that the notice of objections, containing a reference to Article 15(2) of Regulation No 17, is signed only by the Director-General for Competition.Moreover, the question arises whether it is, in principle, permissible to combine a procedure under Article 3 with a procedure under Article 15, for in doing so it is possible, in the applicant's view, to evade the provisions of Article 21(1) of Regulation No 17, which exempts decisions imposing fines from the rule that decisions must be published.The defendant objects that the decision of 31 May 1967 whereby the administrative procedure was commenced was taken in application of Regulation No 17 as a whole, not solely on the basis of Articles 3 and 9. The fact that that decision referred ‘especially’ to Article 3 of Regulation No 17 was intended to forestall the future application of the concurrent juristiction of the national authorities to apply Article 85(1).Moreover, in the relationship between undertakings and the Commission, it is the notice of objections which determines the character of the procedure.As for the validity of the signature of the Director-General for Competition, the defendant observes that the latter was empowered to sign the notice of objections by the Commissioner responsible for competition problems, who had himself been empowered by the Commission to determine the content of the objections.The publication of the decision in the Journal Officiel, for which no provision was made in the operative part of that decision, constitutes a measure subsequent to the adoption of the measure in question, cannot as such entail its annulment. As a subsidiary point, the defendant observes that although Article 21 of Regulation No 17 does not require publication, it does not contain any provision to the contrary. It is alleged that in cases not covered by that provision, the Commission has a general power to decide, under its discretionary powers, whether it is appropriate to publish a measure.

2. Complaints concerning the course of the administrative procedure

(a) The applicant argues that the Commission infringed Article 19(1) of Regulation No 17 and Regulation No 99/63 in that it continued its inquiries concerning the price increases of 1964 and 1965 after sending the notice of objections, and only commenced its inquiries on the increase of 1967 after sending that notice.The defendant replies that the sole purpose of the inquiries in question was to check the accuracy of certain statements made by those concerned, either orally in the presence of officials of the Commission, or in written statements in reply to the notice of objections. Some of the undertakings claimed that every time there was a general increase prices slid quickly downwards as a result of discounts given to certain customers. It was on this particular point that the checks in question were made.Secondly, the defendant argues that there was no infringement of Article 19 of Regulation No 17 or of Regulation No 99, because the inquiries to which the applicant refers (those of 13.12.1967, 25.1.1968 and 6.2.1968) all took place before the meeting of 10 December 1968, organized for the very purpose of enabling the undertakings concerned to submit their observations orally on the objections as a whole.In its reply, the applicant requests the Court to order the Commission to supply fully information on the inquiries carried out following notification of the objections, and in particular to produce all the instructions given for the investigations carried out under Article 13 and 14 of Regulation No 17, so as to render it possible to establish the precise purpose of the inquiries carried out subsequent to that notice of objections.In its rejoinder, the defendant states that it is willing to supply the Court of Justice with all the supplementary information requested concerning its inquiries.(b) The applicant complains that the defendant infringed Article 19(1) of Regulation No 17 and Regulation No 99/63 in that in the notice of objections the Commission confined itself to stating the deductions which it had itself made from certain allegedly established facts, without giving those concerned the opportunity of acquainting themselves more closely with those facts, and thus of discussing them. This applies in particular to the dates on which the various undertakings against which proceedings were taken allegedly sent instructions to their subsidiaries, and to the supposedly comparable wording of those instructions.Furthermore, it is argued that the contested decision has an entirely new factual basis compared with the notice of objections as regards the circumstances which accompanied the price increases, such that there was an infringement of Article 4 of Regulation No 99, which provides that the Commission shall deal only with those objections in respect of which undertakings have been afforded the opportunity of making known their views.The new factors in the decision consisted in particular, it is said, in precise information concerning the moment when some of the producers, not including the applicant, have instructions to their Italian subsidiaries concerning the increase of 1964, and in the assertion that the concertation at issue took place between 10 named undertakings, chosen from nearly 50 undertakings which had been referred to in the notice of objections, although the contested decision did not make it possible to understand the reasons for that choice.The defendant replies that according to the judgment in Grundig-Consten it is sufficient for the Commission to inform the interested parties of the elements knowledge of which is necessary to ascertain which objections were taken into consideration, as was done in the present case in Section II of the notice of objections. Furthermore, it would have been wrong, because of the risk of betraying business secrets, to send those concerned the full text of the circulars sent by them to their subsidiaries or representatives. In any event, the contested decision was not based on objections other than those set out in the notice of 11 December 1967.The applicant replies that in accordance with the case-law of the Court in Joined Cases 42 and 49/59, the reference to commercial secrets cannot justify the failure to supply the parties with elements of fact necessary for the defence. The Commission did not even ask for the opinion of the undertakings concerned on the necessity of maintaining secrecy over the content and tenor of the letters in which it has found supposed similarities, thereby deducing the existence of a concerted practice. Moreover, the Commission has contradicted itself because it has produced some of the letters as an annex to its statement of defence.The defendant takes the view that in requiring the Commission to put forward evidence at the time of notification of the objections, the applicant is confusing the obligations which Article 19(1) of Regulation No 17 imposed on the Commission for the purposes of the administrative procedure with the obligations which are incumbent upon it as a defendant before the Court of Justice.(c) The applicant argues that in giving unjustifiably short notice of the hearing (12 days) and in rejecting, without sufficient reasons, a reasoned request for postponement of the date fixed, the Commission infringed the rights of the defence in that it was not given the opportunity and the possibility of developing its point of view orally, taking into account the absence of the sales director responsible and of the applicant's advocate at the time of the hearing.Since seven months passed between the date of the hearing on 10 December 1968 and the consultation with the Advisory Committee on 8 and 9 July 1969, the Commission could have given the applicant the opportunity of submitting its observations at a later date, without thereby delaying the adoption of the decision.The defendant replies that in reality the applicant had almost three weeks' notice from the date of the summons. In view of the large number of people having an interest in taking part in the hearing, it was not possible to take into consideration all the wishes expressed concerning the fixing of the date. Furthermore, the undertakings were informed that they were free to bring any relevant argument to the attention of the Commission even after the hearing.In so far as the Commission refers to a summons by Telex sent some days earlier, the applicant objects that this process constitutes a clear infringement of the formal provisions of Article 10 of Regulation No 99.As for the undertakings' opportunity of bringing their observations to the attention of the Commission even after the hearing, the applicant observes that it was informed of the minutes of the hearing for the first time by letter of 19 December 1969 sent by the Commission's authorized agents ad litem, following the submission of the statement of defence.The defendant observes that in its application the applicant declared that it was summoned on 28 November 1968 in accordance with the formalities required.(d) Finally, the applicant argues that the Commission further infringed the rights of the defence in that the contested decision mentions the decision of the Bundeskartellmat of 28 November 1967. Yet on the one hand this was not mentioned in the notice of objections, and on the other hand the Commission did not have the right to take note of the results of investigations which it had not carried out itself. Finally, the Commission should have known that an appeal had been lodged against that decision of the Bundeskartellamt and that therefore there could be no question of attributing any conclusive value to it. It is argued that the fact that the said decision was annulled by the Kameergericht Berlin confirms the soundness of the complaint thus made.The defendant replies that the reference to the decision of the Bundeskartellamt were superfluous in the context of the contested decision. In any event there was no reason why it should not have been referred to in that decision, particularly since it seems undeniable that Geigy announced an increase, as the Kammergericht Berlin also held in its decision of 28 August 1969, which overruled the abovementioned decistion of the Bundeskartellamt for reasons relating to German law alone.The applicant replies that the decision of the Kammergericht, annulling the decision of the Bundeskartellamt to which the Commission refers, held that no concerted action existed of any kind whatsoever.The defendant objects that the Kammergericht certainly did not exclude the possibility that Geigy may have recommended the adoption of uniform conduct. The Kammergericht based itself on the first article of the German Law on competition, which merely defines the concept of an agreement, and not on Article 38(2) of the same Law, which provides for the imposition of fines in cases of arrangements in restraint of competition which are not legally binding. Accordingly, so it is argued, the decision of the Kammergericht does not in any way resolve the question whether the conduct of the undertakings concerned constitutes a concerted practice within the meaning of Article 85.

3. Complaints concerning the reasons stated for the decision

The applicant complains that the reasons stated for the contested decision are wholly inadequate, particularly in that the decision does not specify the facts which are imputed to each of the undertakings proceeded against. As regards the applicant in particular, it is unable to glean from the context of the decision the facts on which the Commission is relying so as to deduce its participation in the alleged concerted practice. The only statement which the exposition of the facts contains on this subject is the finding that the applicant increased its prices in the same way as the other undertakings. However, this is a finding which the Commission also reaches as regards other undertakings which have not been fined. The fact that the contested decision repeatedly resorts to very general statements has the effect of making it wholly impossible for those concerned to investigate them.Finally, there is, it is argued, a fundamental omission in the statement of reasons, because it only sets out the factors alleged against the undertaking concerned and fails to mention certain facts which tell in its favour. Yet in a procedure pursuant to which fines may be imposed, particularly where the evidence is circumstantial, the Commission has a duty to take favourable facts and elements into consideration as well.The defendant, in its statement of defence, observes that the fact that the undertakings did not all announce the increases of 1965 and 1967 at the same moment does not mean that they had abandoned the concerted practice which was at the basis of the increase of 1964. They merely took care to act with circumspection.The applicant replies that by referring, in its statement of defence, and for the first time, to the idea of a continuous infringement allegedly constituted by the three price increases, the defendant has given an entirely new basis to the contested decision. Since there is a glaring contradiction between the text of the decision and the justification for it which is now given by the Commission, the decision ought to be annulled for infringement of Articles 190, 173 and 174 of the Treaty.The defendant, in its rejoinder, refers to the considerations set out at pages 4 to 6 of the contested decision concerning the evidence substantiating the conclusion that a concerted practice existed. It cites several passages from the preamble to the decision, from which it appears that the Commission constantly referred to a single concerted practice, and it observes that in any event this legal description is only of importance to the question as to when the limitation period commenced.

4. The period of limitation

The applicant observes that for want of an express provision of Community law, it is necessary to refer to the principles in force in the national laws on the subject of the limitation of actions. It is for the Court, by means of interpretation, to fill the silence of the law by setting a period of limitation falling between the two extremes represented by the three year period for which German anti-trust law provides and the 18 month period laid down by Italian criminal law in respect of fines. Whatever period is thus set, the adoption of these criteria has the result, it is said, that proceedings regarding the price increase of January 1964 are out of time. A further reason for holding that proceedings relating to facts occurring so long ago are out of time is the unavoidable uncertainty regarding a complete reconstruction of facts of this kind.The defendant objects that the three uniform increases of January 1964, January 1965 and October 1967 are the result of a continuous concerted practice which extended over the whole period from January 1964 to October 1967. Therefore the problem of limitation does not arise in the present case.Secondly, the defendant observes that in the absence of provisions governing time-limits in the law in force, the Commission retains complete authority as part of its duties and in exercise of its discretionary power to determine more precisely, subject to review by the Court of Justice, the limitation periods which appear appropriate as regards proceedings against infringements. To apply national law to a fact pertaining to Community law in cases the Community legislation is silent would render it impossible to apply Community law on a uniform basis.The laws of the Member States have in common only the principle that there should be a limitation period. However, as regards putting that principle into practice there are important differences. In view of this disparity the Commission reaches the conclusion that it is impossible to discern any precise criteria and that therefore as regards limitation periods for infringements of the provisions of Article 85 of the Treaty it is the needs of Community law alone which should be taken into consideration.Even if it were accepted that each of the three successive price increases occurred by reason of a new concerted practice, this would not mean that the limitation period had expired because it has been suspended on several occasions since 1964 by written requests for information made under Article 11 of Regulation No 17 and by investigations carried out by officials of the Commission under Article 14 of Regulation No 17 at the registered place of business of several undertakings, including that of the applicant.The defendant is of the opinion that, taking into account the legal and practical difficulties of the question, a limitation period of even three years cannot be considered as appropriate in cases of infringement of the Community's rules on competition.The applicant replies that the proposition that the Commission has a discretionary power concerning periods of limitation is in contradiction with the purposes for which limitation periods have been created, and in particular with the requirements of legal certainty. The proposition that the activity was continuous is not, it is said, substantiated in the contested decision, and is, moreover, incorrect in fact. Furthermore, where there is a chain of continuity the question whether time runs for each action constituting a link in the chain or whether it only starts to run when the last component action has been performed is currently the subject of controversy.It is asserted that the Commission did not effect the slightest inquiry at the applicant's premises. The investigations carried out at the premises of SASEA, a commercial agent which is legally and financially independent of the applicant, cannot possibly constitute a measure interrupting the limitation period as against the applicant.The defendant objects that since all the undertakings in question had been affected by the constant fall in prices, they had a continuous and collective interest in changing from a relatively low level of prices to a higher level. Although the operative part of the contested decision speaks of ‘concerted practices’ this is because the decision was addressed to ten different undertakings. The defendant also asserts that according to the predominant view amongst academic writers, a practice may be considered to be continuous if that practice simply displays certain external characteristics and if there is negligence.The investigations carried out in Italy at the premises of SASEA were directly concerned with the infringement for which the Commission presumed the applicant to be responsible. Quite apart from the legal ties existing between that undertaking and the applicant, it is undeniable that SASEA represented the applicant in Italy, which suffices, it is alleged, to interrupt the period of limitation.

1. The concept of a concerted practice

The applicant takes the view that the interpretation which the Commission puts upon this concept would appear to be the correct one, since it starts from the idea that conscious parallelism is not sufficient to establish the existence of a concerted practice. No such practice exists unless the interested parties have previously reached a common understanding as to the conduct which they will adopt on the market. Moreover, any narrower interpretation is, it is argued, legally indefensible and unacceptable in the reality of business life.The defendant objects that although parallel conduct alone does not amount to concertation, at the other end of the scale the parties concerned need not necessarily have drawn up a common plan with a view to adopting a given course of behaviour. It is enough that they let each other known beforehand what attitude they intended to adopt, so that each of them could regulate his conduct, safe in the knowledge that his competitors would act in a similar fashion.The application is of the opinion that this concept of a concerted practice, which the Commission put forward for the first time in its statement of defence, has an extremely wide scope, and that there is no precedent for it in legal doctrine or in previous practice. The traditional concept of a concerted practice, which was the one defended by the German delegation represented by the Bundeskartellamt and by the Federal Minister of Economics at the conference of experts from the Member States cartels, requires a common will relating to the future business conduct of those concerned, acting in accordance with a common plan. The applicant cannot now be blamed for having placed reliance on this concept.Furthermore, the commission has not even attempted to apply to the facts of the case the factors substantiating the existence of a concerted practice, as contained in the definition which it gives of them. There is no means of telling whether, in the Commission's way of thinking, the important factor from the point of view of competition is the announcement of a price increase or the implementation of the increase.The applicant points out that in the case of a general increase announcements are sent to all customers, including, therefore, manufacturers of dyestuffs who maintain a reciprocal supplier-customer relationship.Such announcements are even published in the daily press. Furthermore, customers insist on being informed in advance of imminent price increases. Yet according to the Commission, when this information results in identical conduct, it is not only evidence of prior concertation, but is also the decisive criterion of substance, the very essence of the concerted practice. However, such a concept is in contradiction with reality because in the case of price increases conscious parallelism necessarily presupposes publication and prior knowledge of an imminent increase. Therefore in reality, it is argued, the concept of a concerted practice put forward by the Commission coincides with conscious parallelism. Thus, in the thinking of the Commission, any increase in prices which is general and therefore necessarily public, and which is followed by the producers constituting the oligopoly, is ipso facto a concerted practice. This, it is asserted, is tantamount to saying that in an oligopoly in which reactions are interdependent any general increase in prices is prohibited.Therefore the Commission's definition of a concerted practice is incompatible with Article 85, which treats concerted practices in an almost identical way to agreements and decisions as regards their constituent elements.It is argued that even if one were to reason on the basis of the Commission's definition of a concerted practice, the requirements for its application are not met in the applicant's case. For not only did the applicant publish its own price increases without informing its competitors in advance, but it also decided to put these increases into effect only after other undertakings had already announced them publicly.Finally, the applicant asserts that publication of intended competitive measures and the opportunity thus given to competitors to adapt themselves are perfectly compatible with competition, and are often even inevitable. Therefore, it is argued, it is a mistake to regard these matters as the factor constituting the infringement.The defendant argues that the concept of a concerted practice is not equivalent to the American concept of ‘concerted actions’. A concerted practice under Article 85(1) of the EEC Treaty is one of the constituent elements of the infringement listed in the provision, whereas ‘concerted action’ constitutes a particular case, elaborated by American case-law, of ‘conspiracy’ as forbidden by the Sherman Act, which presupposes that the undertakings concerned are acting with a common will. This notion of ‘concerted action’ has decided advantages as regards proof, and it is not based on a substantive definition of an ‘agreement’, that is to say, the common will necessary for ‘concerted actions’.According to the defendant, in order for there to be this agreement for the purposes of the ‘concerted action’, it is enough that there exists conscious and purposeful cooperation between several undertakings, without its being necessary that there be a common plan consisting in prior consultation.The citations from American case-law are said to prove that the question whether a given business action is taken pursuant to a common will is a question of evidence, and that a uniform action constitutes a sufficient indication of evidence, and that a uniform action constitutes a sufficient indication of the existence of such a common will when that conduct is not the necessary consequence of the structure of the market. On the concept of a concerted practice, the defendant also refers to an article by Tolksdorf, annexed to the rejoinder.Even in an oligopoly, in so far as the sellers have differing interests, the fact of several decisions being taken independently by the various undertakings does not necessarily lead to similar conduct on the market. This is why in an oligopoly where sellers are acting in parallel there is also a presumption of fact as to the existence of a concerted practice, unless the particular structure of the market is such as to create economic constraints causing the various undertakings to behave in a uniform way. That is the position in American case-law.As for community law on competition, the constituent elements of a cartel prohibited by Article 85 are not derived from the legal concept of ‘conspiracy’. Nor, moreover, is the concept of an ‘agreement’ the right concept for describing cooperation between several undertakings by way of concerted practices. A concerted practice within the meaning of that article exists every time that the conduct of several undertakings on the market proceeds from a common will on the part of the interested parties, whether that common will is the offspring of reciprocal action or of the action of a third party. There is a common will not only when the undertakings come to an understanding as to their conduct on the market but also when they deliberately ensure that there can be no lack of knowledge about their future conduct by keeping each other informed, and, in so doing, they coordinate their conduct. The element of cooperation consists in the fact that, by reason of the common will, each of the participants can rest assured that the others will adopt either a uniform or a different course of conduct according to an allocation of roles worked out in advance. Therefore it is not necessary to show that the participants have collaborated or drawn up a common plan in order for there to exist a concerted practice for the purposes of Article 85. In the present case the Commission has proved that as regards prices the dyestuffs manufacturers in question behaved in a uniform way. This means that it has adduced sufficient proof that concerted practices existed. Furthermore, it has shown that the structure of the market for the products in question was such that there is no explanation of this uniform conduct other than that alleging concerted practices. Moreover, the Commission has even pointed out a series of facts constituting indications of concertation.

2. The competitive situation on the dye-stuffs market

The applicant stresses that prices of dyestuffs have not risen during recent years as the contested decision implies, but that on the contrary prices have fallen in comparison both with the level of 1964 and with that of earlier years. The index of the applicant's prices, calculated from a base of 100, fell to 85 for the first half of 1967. It is said that this unfavourable evolution of prices is confirmed by an OECD report. On the other hand, costs are said to have increased. Expenditure on staff represents more than 25 % in the applicant's case. In Germany, expenditure on salaries has increased from 100 in 1958 to 213 for the first half of 1967, and investment costs have increased from 100 to more than 140 during the same period.In addition to this unfavourable evolution of prices and costs, the market in dyestuffs, it is said, is characterized by very intense competition relating to the quality of products, technical assistance and prices, whereby the producers attempt to appropriate to themselves areas of the market supplied by their competitors. For this purpose, discounts of a general nature would not yield any results because they would immediately call forth counter-measures from competitors already in very strong positions on this oligopolistic market. Price competition takes place mainly through individual arrangements made by the producer with certain customers for given products. Prices are negotiated in each case with each customer, under pressure from competitors, and they are set with reference to the quantities ordered, the other services provided to the customer and the prices which competitors may have quoted. These individual arrangements do not immediately result in a general price war. Competitors react by making similar individual arrangements with other customers. In each case it is necessary to weigh up the risk that an individual arrangement will come to the notice of other customers and thus release general pressure on the level of all prices. There is no way of arriving at general rules for deciding the moment from which a producer should no longer be content with individual arrangements.The applicant asserts that in its order of 28 August 1969 the Kammergericht Berlin acknowledged the existence of intense individual price competition on the market in question. That court also accepted the proposition that there is a certain interdependence between producers of dyestuffs when general price alterations are announced.It is this way of proceedings, it is argued, which differs from competition existing on other markets. It is usually the case in the market at present under consideration that the result of competition is not general falls in prices, but individual exceptions which, as they become more numerous, bring about a progressive erosion of the prices.Having thus explained its view of the evolution of prices and costs, together with the competitive situation on the dyestuffs market, the applicant states the reasons for its decisions to raise prices.It observes that costs had risen considerably and a continuation of this strong upward trend was foreseeable, whilst receipts from sales had gone down considerably and a number of factors suggested that they would continue to do so. Therefore, the applicant says, it became apparent that it was necessary to increase selling prices substantially in order to guarantee the quality of the products, to ensure continuity of research operations and to provide an effective technical assistance service. The applicant's knowledge of the market and the statistics in its possession led it to the view that its principal European competitors were in a similar position. Therefore, when certain of its competitors announced increases the applicant had no reason not to follow them. From the point of view of commercial policy any other conduct on its part would have been irrational. If it had announced its increase only at a later date it would still not have been able to profit from the short period during which its prices would have been more competitive, because it did not have large extra stocks available and increases in production only produce their effect after several months. Furthermore, the advantages of a certain increase in sales over a short period would have been out of proportion with the disadvantages which would thereafter follow from the absence or inadequacy of any increase in profitability. There was no question of introducing a price increase greater than that already announced by a competitor, because it would then have been highly likely that the applicant would have found itself alone in its venture.If the Commission had asked itself why the applicant should not have increased its prices or why it should have chosen a different time or a different rate or different products, it would have found that in the actual situation on the market there was no convincing reason for adopting a course other than that of parallel conduct.From its examination of the competitive situation and of the market the applicant draws the conclusion that the so-called proof by circumstantial evidence, such as the Commission seeks to adduce in the contested decision, is not of a conclusive nature. It points out that nowhere in the decision are reasons given for the Commission's fundamental proposition, which is that the price increases in question cannot be explained by the oligopolistic structure of the market.The defendant maintains that the price increases in question cannot be explained by the oligopolistic structure of the market. In referring to what is expected to happen in such a market in theory, the applicant has failed to consider the postulates of price theory employed in the analysis of parallel conduct. These factors are not applicable in the case of the dyestuffs industry.The defendant observes that the modern theory of oligopolies starts from the principle that in the oligopoly situation there are many ways of arriving at prices, and that it would certainly not be right to equate the oligopoly situation with consciously parallel conduct by participants. The theorists accept that undertakings knowingly adopt parallel conduct only in respect of oligopolies involving a very high degree of interdependence between undertakings, such that one undertaking cannot take a measure without its competitors being immediately and considerably affected and reacting in consequence. In this latter situation an undertaking only increases its prices when it expects that the others will also do so. It is mainly with reference to their marginal costs, taking into account their demand curve, that undertakings decide whether and to what extent they will follow a price increase. Therefore, even when the degree of interdependence is very high, the uncertainty in which an undertaking increasing its prices is placed as to whether the others will follow does not automatically disappear. In order for there to be conscious parallelism it is necessary for a certain number of factors to be present. These include: a limited number of sellers, high costs, high mobility of demand, homogeneity and transparency of prices, lack of ability to adapt capacity at short notice, little elasticity of demand compared with supply from all competing undertakings, technical obstacles to announcements of alterations to prices and customer resistence to frequent variations in prices. Another condition should also be added: it is that the market should be in a period of stagnation such that the interdependence of the sellers is not affected by notable increases in demand.In America both the textbook writers and the case-law attribute a leading role to homogeneity of products in deciding if conduct is consciously parallel. According to several writers, when the products are diversified the effects of changes in prices are much slower and much less foreseeable. Furthermore, even if the case of homogeneous products, where the prices actually charged usually differ from the prices publicly quoted, conduct can no longer automatically be absolutely parallel.The High Authority of the ECSC also adopted the principle that homogeneity of products is not of itself a bar to supposing that a uniform increase in prices made by several undertakings constitutes a concerted practice within the meaning of Article 65(1) of the ECSC Treaty, as appears from the fines which it imposed on certain steel works by a decision of 4 February 1959, which was not contested by the parties concerned.If the criteria elaborated by the textbook writers concerning conscious parallelism are applied to the dyestuffs industry it will be seen that no such parallelism is possible. Competition between undertakings on the dyestuffs market cannot in any way be considered as covering similar products; this is clear from Report No 100 of the National Board for Prices and Incomes on the dyestuffs industry, dated 21 January 1969 annexed to the statement of defence, from the opinion of Professors Bombach and Hill annexed to the statement of defence, from documents produced during the preparatory inquiries by the undertakings ICI, Geigy and Sandoz and from various statistical data produced by the Commission (tables annexed to the statement of defence).The market for the products in question covers about six thousand different products. Each of the undertakings concerned manufactures from 1500 to 3500 products and these, at least in part, display various qualities, mixtures and physical forms. The differences in strength, shade, fastness and solubility are such that when the products of various manufacturers are compared it is rare to find two dyes which are perfectly identical. The degree of similarity varies considerably: it runs from a fairly high degree of comparability in standard dyestuffs to the existence of near monopolies, often protected by patents, for products having special characteristics. Furthermore, the competitive position of the various dyes and the extent to which one can be substituted for another are constantly undergoing rapid change because of technical progress. A notable feature of the market for the products in question is a low level of transparency mainly owing to the large number of products involved, the differences between them and the variety of users (textile, leather, paper, food, rubber and synthetic materials industries and manufacturers of paints, ink, cosmetics and so on). A further reason is the fact that technical services are provided for purchasers, which differ in degree according to the customer. It follows that there is no single, standard price for each dye since prices are negotiated individually with each customer, with considerable differences between one purchaser and another. The result of this practice is that the prices calculated for each product by each undertaking are not known, in most cases, to the other undertakings, nor even amongst the purchasers themselves, as ICI has agreed. Therefore changes in prices introduced by one manufacturer are only imperfectly known on the market or only become known long after the event.As for the rate of expansion of the market, which constitutes another test for deciding whether conscious parallelism can exist, it appears that on the whole the dyestuffs industry is expanding at a fast rate, approximately corresponding to that of expansion in the chemicals industry as a whole.As for mobility of demand, according to Professors Bombach and Hill price competition on the market in question is particularly intense and purchasers are inclined to change supplier if more favourable terms are offered to them.This tendency seems to have increased during the course of the last few years, according to the abovementioned Report of the National Board for Prices and Incomes, at p. 5. This mobility is rendered easier by the fact that normally purchasers only maintain low stocks and only buy in small quantities.Since purchasers carry low stocks, manufacturers must themselves maintain large stocks as this makes it easy for them to adapt themselves to change in demand. Because competition between manufacturers is intense and undertakings are constantly trying to increase their share of the market, they find it necessary to build up their stocks in such a way as to be able to take advantage of all chances of selling their products. It is relatively easy for them to adapt themselves in the medium term by changes in the production programme because the production plant can be used for many different purposes.In view of the particular conditions on the market, the situation of manufacturers differs from one undertaking to another. It follows that some undertakings have much more success than others in obtaining the prices at which they aim to sell their products.The respective rates of expansion and the fluctuations in these rates are different for undertakings in the various Member States. Thus German manufacturers are benefiting from the constant increase in the value of goods produced, according to information supplied by Cassella and Hoechst, whereas, for example, ACNA is going through a crisis (declining work force between 1964 and 1967, closure of one of its factories).This disparity between undertakings means that there are important differences as regards costs.This necessarily results in differences in profits. The widest profit margins are obtained with speciality products, so long as they remain so. Profits vary in relation to the level of prices for the different products on the market. The volume of sales has an influence on profits: thus for example, ACNA can only begin to make a profit on its production of special dyestuffs if the quantity produced reaches a volume higher than that of present demand in Italy.Taking into account these characteristics of the market in dyestuffs and the criteria drawn from the theory of oligopolies, one is forced to conclude that it is inconceivable for undertakings on the dyestuffs market to behave with conscious parallelism.Since several of the products in question are not interchangeable or only to a small extent, an undertaking putting up its prices cannot assume that its competitors will follow suit, at least for the products in question. The price increases at issue were introduced indiscriminately for all products and this cannot possibly be explained by the pressures of the market or the logic of the oligopoly situation.Moreover, the defendant argues that an analysis of conditions on the dyestuffs market shows that on that market, which is characterized by a high rate of expansion and rapid technical progress, a general alignment of price increases, announced without prior concertation, would not be possible for interchangeable products. The defendant refers to the example of ACNA, which for the most part manufactures standard types and which, after eight of the ten undertakings in question had announced a general increase in prices of pigments and had begun to apply this increase as from 1 January 1965, did not fall in line with this increase in prices, so that thereafter the other undertakings withdrew their increases. This shows, in the Commission's view, that even in the case of products towards which sellers react in a sensitive way, interests are so varied on the dyestuffs market that parallel action does not take place automatically.In these circumstances it is inconceivable that one undertaking would decide unilaterally on a large general increase in prices without first consulting its competitors. Supposing that there were unilateral, independent increases on the part of certain undertakings, each of the other undertakings would have been able, by setting different prices and by taking account of the position occupied on the market by the various products being manufactured by it, to attempt to obtain the best results. In order to prevent competitors from immediately withdrawing their increase, each undertaking would at the most have had to tell purchasers of totally interchangeable products that it was falling in line with this increase as regards these products, but this would not have been necessary for all the other products since, because of the lack of transparency of the market for those products, the various purchasers would not immediately have been able to react to the new prices.The applicant objects first of all to the drafting of the statement of defence which does not comply with the requirements of the decision by which the Court rejected the first version of that statement. That decision was based on the finding that by reason of references to the contents of the files on other cases, it was difficult for the applicant to answer certain arguments put forward by the Commission with complete understanding of those arguments. Yet in the new version the Commission has simply removed the names of the other parties while leaving its exposition unchanged, and has even partly retained quotations from the pleadings of other parties, without citing their names. Furthermore, the Court cannot accept production of Report No 100 of the British National Board for Prices and Incomes, annexed to the statement of defence, because that document has been produced in English. Finally, the statistical tables appearing in Annexes VII, VIII and IX to the statement of defence are inadmissible as evidence, because they do not comply with the conditions required for a judicial review capable of guaranteeing the rights of the defence. Indeed, the data necessary for checking the statistical calculations are not furnished by the defendant.As to the substance, the applicant replies that if, in accordance with the Commission's argument, the oligopolistic nature of the market in the products in question were to be denied, the most that that would entail would be that the applicant had taken an erroneous decision based on a faulty assessment of the situation on the market. But that would not justify the conclusion that concertation existed.Where the defendant denies that the products in question are homogeneous it flatly contradicts itself, because it admits that ‘lively and intense’ competition exists as regards the prices of dyes, which necessarily presupposes that those products are comparable or interchangeable. The applicant also stresses that speciality dyes account for less than 5 % of its total production, and therefore not a third, as the Commission claims.As for the lack of transparency on the market, the applicant does not deny that transparency is guaranteed with regard to an increase where there is a general increase in prices, since the latter is necessarily known universally. As regards the size of stocks, the Commission has misunderstood the information supplied to it on this subject. The figure of 95 % of products to which it refers can only relate to the fact that the undertaking concerned stocks 95 % of the different kinds of product in its production range, but in minimal quantities. However, this statement cannot have any relevance to the question whether and how far a manufacturer can satisfy the extra demand which arises when he does not follow or only partially follows a price increase introduced by other undertakings. The applicant is of the opinion that no manufacturer would be able to satisfy a considerably increased demand from stock for more than a week if most of his competitors had introduced a price increase. Furthermore, the fact that eight of the ten undertakings involved which had announced a general price increase in Italy in 1965 had to withdraw those increases because ACNA did not follow the increase shows that the reactions of producers are interdependent. The Commission does not justify in any way the proposition that that interdependence, found on the Italian market, does not exist in the other Member States.As to the way in which it has drafted its defence, the defendant observes that since the infringement at issue was not committed individually by each of the interested parties, but was the result of collective action and of reciprocal collaboration, the Commission has the right to deliver a global judgment on the factual and legal aspects of the case. In particular, the Commission may not be prohibited from referring to the files concerning parallel cases and to produce evidence from them in support of its arguments.As for the fact that the report of the British National Board for Prices and Incomes is in English, the defendant observes that the Court acceded to its request to exempt it from having this document translated into one of the procedural languages.According to the defendant, although in a limited oligopoly the undertakings will practise parallel pricing policies if they allow themselves to be guided by rational economic criteria, nevertheless such market forces do not exist for producers of dyestuffs because the structure of the market is looser and the interests of the undertakings differ.In these circumstances, the purely theoretical possibility of parallel conduct on the dyestuffs market does not offer sufficient explanation of the three price increases at issue, since those instances of parallelism represent irrational conduct in economic terms. The defendant argues that the objectives and interests of the undertakings in question called for the adoption of different measures, as indeed they have done in other cases, as appears from Tables VIII and IX of Annex I to the statement of defence. As proof of the accuracy of the content of those tables, the defendant states that it is willing to produce the original documents and copies of the invoices on the basis of which the tables were prepared.In answer to the applicant's criticism that instead of furnishing proof, the Commission has put forward a theoretical conception substituting abstract economic theories for a search for the facts, the defendant asserts that it has analysed the markets in great details and that with the aid of empirical data it has proved in particular that when the undertakings act without concertation their conduct corresponds exactly with the conduct which the Commission believes to be appropriate to the situation existing on the market. Moreover, the applicant has not disputed the Commission's point of view concerning the occurrence of parallel conduct, or the accuracy of its account of the circumstances which must be fulfilled in this connexion, as set out in its statement of defence.As for the structural factors characterizing this market, the defendant observes that the small number of sellers and the existence of fixed costs and high costs of entering or leaving the market are of little importance. What matters is the existence of divergent interests and a measure of autonomy for each undertaking as regards prices.As for the amount of fixed costs, alleged by the applicant to be high, the defendant argues that it is difficult to give precise indications and that in any event the role played by fixed costs in parallel conduct is variable.The defendant declares that it does not have any information concerning the level of costs of entering or leaving the market, but says that this question is of hardly any importance in the present case, taking into account the financial strength of the big manufacturers of dyestuffs.The cross-elasticity 01 prices to which the applicant refers is simply an instrument for measuring the intensity of competition. In the present case the right question to ask is what are the factors on the market which determine the degree of elasticity. According to Shubik, these are, amongst others, the degree of homogeneity of the products, the transparency of the market and the mobility of demand.In answer to the proposition, on which the applicant relies, that there is a correlation between price competition and homogeneity of products, the defendant says that although the coefficient of comparability is relatively high for standard products, those products are nevertheless constantly subject to modifications, and it is this which constitutes the characteristic trait of their heterogeneity on the market. Contrary to the applicant's supposition, heterogeneity of dyes does not result in the disappearance of competition. Competitors react to a producer's price alterations, but only after some time has passed, and this enables the undertakings to practice an individual pricing policy, which would not be possible in a restrictive oligopolistic situation.As tor tne percentage which specialities represent as a proportion of all dyes, the defendant observes that such percentages depend on the definition of specialities, since this concept would appear to be fairly loose. The proportion of one third which it has cited was taken from the English report annexed to the statement of defence. The defendant observes that the arguments which the applicant puts forward on this point would have the effect of eliminating any examination of the situation on the market once parallel conduct has occurred, without its being necessary to consider circumstances such as the homogeneous or heterogeneous nature of the products, the existence of rapid technical progress, phases of expansion or stagnation on the market, transparency of prices and so on.As for the ability to adapt to changes in demand, the importance of stocks follows, first, from the fact that for reasons of costs the products are manufactured only between once and four times a year, and secondly, from the fact that users of dyes maintain only very low stocks (except as regards standard dyes), and this forces the supplier to stock considerable quantities near the various centres of demand.The defendant recalls that in its statement of defence it has drawn attention to the difference between the Italian market and the other markets. It has observed that in Italy demand for special dyestuffs is relatively low, as ACNA stated on 28 February 1968 in reply to the objections and as appears from a table produced as an annex. However, despite its special situation, no pressure is exerted on the Italian market, as is shown by the example of the price increase of January 1965 in Italy. This also shows that interdependence is not the only criterion which determines the conduct of producers on the dyestuffs market. The numerous differences existing between producers of dyes as regards the rate of growth, the extent to which plant is used, the proportion of the various products in the production programme, the relationship between producers and purchasers, costs and cost structures, prices and changes in demand on each of the markets, exclude the possibility of conscious parallelism in this case.Despite the interdependence which is to be found on the dyestuffs market, an undertaking's price alterations come to the knowledge of competitors only after a fairly considerable delay because of the lack of transparency of the market. This fact, together with the strong position held by certain undertakings on markets in different products, gives them a certain latitude in their pricing policy. Therefore, taking into account the relatively large number of producers, the mutual interdependence is, it is argued, sufficiently loose to permit normal competition.In the countries of the EEC and for the years 1965 to 1967, the average prices of an undertaking for the principal products showed variations of up to 40 % from country to country as a result of competition. Accordingly, if the three price increases are regarded as having taken place in a competitive situation functioning normally and if one takes into account the very different position occupied by each undertaking, the conclusion (confirmed by Professor Kantzenbach's report) must be drawn that such conduct can only be explained by the pursuit of entirely new objectives.On the problems concerning the structure of the dyestuffs market and the relationship which exists between a heterogeneous oligopoly, the intensity of real competition and parallel conduct, the defendant states that it is willing to produce proof of the soundness of its arguments and names Professor Kantzenbach as expert for this purpose.

3. The factual evidence

The applicant argues that the circumstances in which the price increases were brought about and to which the decision refers do not constitute grounds for the conclusion that there was a concerted practice.As regards the uniformity of the rates applied when the increases took place and of the products to which they were applied, the applicant observes in particular that the Commission contradicts itself on this subject and is inconsistent because it did not complain of this same conduct in respect of other producers of dyestuffs which aligned their prices on those of the producers against which it has brought proceedings.As regards the allegedly simultaneous timing of the announcements of the increases, the applicant points out, first, that the Commission only supplies precise evidence on this point as regards the increase of 1964, which does not justify drawing conclusions concerning later increases. As for the increase of 1964, the decision is silent in the applicant's case. The almost simultaneous sending of Telex messages by a certain number of undertakings on the afternoon of 9 January proves one thing, namely, that those undertakings learned of the announcement of the increase at the same time as the applicant, and that since Ciba had announced its increase on 7 January with immediate effect, it was urgently necessary for the other producers to carry out their decision to adhere to that increase. They did so as soon as they learned of Ciba's decision, which had been made public on the market. As for the selling price current in Belgium, the applicant decided to increase that price on 13 January, having learned on 10 January that several undertakings had already announced an increase. It is clear from the course of events that the applicant decided to follow the increase only by reason of that which its competitors had already announced some days previously and which had become public knowledge on the market.The increase intended for 1 January 1965 was announced by the applicant on 5 November 1964, after it had been alerted by its customers several weeks previously, and more particularly on 14 October, that its competitors had the intention of taking similar measures. The forthcoming increase had even been announced in the press. The fact that the increase was introduced on the same date was determined by the oligopolistic nature of the market. The same is true of the increase of 1967. The applicant also points out on this subject that the Commission admits that in the latter case the dates on which the increase was introduced differed from producer to producer.As regards the alleged similarity of content of the announcements of the increases, the applicant observes that the contested decision does not specify which increase was, in the Commission's opinion, announced in a similar way. It is asserted that the interested parties were not supplied, even during the procedure before the Commission, with the texts in which the Commission sees the alleged similarities. Therefore, in the absence of any substantiating reasons, the applicant can only plead an infringement of the rights of the defence.The applicant disputes the Commission's assertion to the effect that the parties stated that they had aligned their conduct for the sake of convenience. The applicant also denies the accuracy of the statement contained in the decision according to which it increased its ex-works prices by a percentage lower than that by which it increased its resale prices to users. It also asserts that it did not require its Italian representative to refuse to issue antedated bills and to cancel all current offers.Finally, as regards the meetings tor the exchange of information between producers of dyestuffs, mentioned by the Commission in the statement of the facts in its decision, the applicant observes that there is a legitimate need for the exchange of information and of experience gained on problems of business policy of a general interest, as was indeed confirmed in the order, already mentioned, of the Kammergericht Berlin.The announcement of an increase made by an undertaking during such a meeting is no ground for the conclusion that there was concertation, particularly if it is noted that the applicant did not, during that meeting, take up a position on the increase announced, and that it did not decide to increase its prices within a short time thereafter. In fact, it was only one month later, at its board meeting of 16 September 1967, that the applicant took the decision to increase its prices.The defendant produces the texts of the instructions to increase prices sent to Italy and Belgium in 1964 by the undertakings covered by the contested decision. It points out that certain passages are identical almost word for word.As for the increases of 1965 and 1967, the defendant asserts that the undertakings were careful to avoid obvious similarities. Furthermore, the defendant refers to its observations set out under (1), from which it appears that taking into account the structure and the conditions of the market, the common price increases can only be explained by the fact of prior concertation. The applicant replies that the Commission's proof by circumstantial evidence is incompatible with the fact that it has not alleged infringements against several other undertakings whose conduct was found in the contested decision to have been identical and of which some even followed the increases announced sooner than the applicant. Since the contested decision is based on the idea that the uniform conduct of the producers of dyestuffs was inconceivable without prior concertation, the question arises, it is said, as to why the Commission treated differently undertakings whose conduct was the same.The defendant replies, as regards the similarity of the orders to increase prices sent by the producers to their subsidiaries or representatives in 1964, that the instruction to put the increase into force immediately appears in 13 of the 14 orders, the instruction to cancel current offers appears in 12 of those 14 letters and the prohibition on making out antedated bills appears in 8 of these 14 orders, this number being explained by the fact that the prohibition in question was already implicit in the order to make an immediate and eeneral increase.The defendant also cites examples showing that the tenor of these letters was similar. Finally, it points out that in many cases these letters only constituted confirmation of instructions already given by telephone or that in other cases oral explanations were given as well. On this point, the defendant makes reference to the testimony of an employee of the Geigy undertaking in Basel.

4. The fine

The applicant complains that the contested decision did not take into account the fines imposed on it by the Bundeskartellamt by decision of 28 November 1967.The defendant objects that the danger of concurrent penalties, which would justify taking into account fines already imposed, did not exist in this case because the decision of the Bundeskartellamt was subject to appeal when the administrative decision was adopted, and has since been annulled.

(a)The complaint relating to the signing of the notice of objections by an official of the Commission

(b)The complaint relating to the disparities between the notice of objections and the decision to commence administrative proceedings

(c)The complaint relating to a continuation of inquiries following notification of the objections

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

(e)Complaints relating to other infringements of the rights of the defence

The concept of a concerted practice

The characteristic features of the market in dyestuffs

The increases of 1964, 1965 and 1967

The fine

Costs