Béguelin Import Co. v S.A.G.L. Import Export (22/71)

2. Second question

According to the plaintiffs in the main action it must be borne in mind that the G.L. Import Export company effected the imports in dispute with the concurrence of the Gebrüder Marbach undertaking, which was the concessionnaire for Germany of the products concerned and acted solely as forwarding agent. Those concerned were therefore making use of a channel of distribution set up by the manufacturer himself but improperly extended by a transit operation. Such an operation must not be confused with re-exportation. Consequently, the German concessionnaire cannot plead the absence of a clause prohibiting re-exports of which he takes advantage, either because there is no reference to the subject in the dealing agreement or under the legislation of his own country, nor can he rely on the German legal concept of ‘exhaustion’ of the rights appertaining to a trademark. Nor, finally, is such conduct covered by Regulation No 67/67.Nor can the defendant in the main action avail itself of the principle laid down by the Court in its judgment of 18 February 1971 (Case 40/70 Sirena v Novimpex and Others [1971] ECR 69et seq.) That judgment declared Article 85 to be applicable ‘to the extent to which trade-mark rights are invoked so as to prevent imports of products which originate in different Member States …’; the importation in dispute was concerned with goods which could not be held to be of German origin.Despite the fact that the products brought into France by the G.L. Import Export company bore the same trademark as products distributed by Béguelin/France they were ‘pirated’ goods. This is clear even from the statements made before the French court by the defendants in the main action, according to which, ‘the dispute is not concerned with the use of forms of guarantee as the defendants have never made use of them and the plaintiffs have produced no evidence to the contrary’. On the assumption that this statement is correct, it reveals that the identity of the product was compromised because it thereby lost an essential and costly element of its make-up, namely the after-sales service to be rendered on presentation of the said forms. Such conduct distorts competition and is therefore contrary to the Treaty.The. defendants in the main action did not advance any argument with particular reference to the second question. The Commission believes that the question should be recast in the following terms:‘In the case or an agreement, concluded between a manufacturing company situate in a third country and an undertaking situate within the common market, whereby the undertaking situate in the third country agrees with the other undertaking to deliver certain products only to the latter for re-sale in a prescribed area of Common Market territory, does the agreement fall within the prohibition in Article 85(1) of the Treaty if the exclusive dealer objects to third parties importing the products concerned into the territory for which he has been granted the concession?’(a) It is first of all necessary to establish whether such an agreement is liable to affect trade between Member States. For this purpose reference must be made to the judgment delivered by the Court in Volk v Vervaecke, quoted above, and to its judgment of 6 May 1971 in Case 1/71, Cadillon v Hoss, Maschinenbau KG [1971] ECR 351.The fact that the undertaking which has granted the concession is outside the common market is of no importance (cf. Commission Decision of 1 June 1964 in Bendix-Mertens & Straet,JO No 92, p. 1426).(b) In accordance with the interpretation placed by the Court on Article 85(1) in its judgment in Technique Minière v Maschinenbau Ulm, quoted above, the next step must be to consider what conditions the agreements in question have as their object or effect the prevention, restriction or distortion ‘to an appreciable extent’ of competition within the common market. The Commission identifies the principles laid down for this purpose in the judgment in Völk v Vervaecke and Cadillon v Höss as the need to look at the actual context of the agreement and the possibility that, in view of the weak position of the parties on the market in the products in question, the prohibition may not apply.In addition, the Communication from the Commission of 27 May 1970 (JO C 64, p. 1) concerning agreements of minor importance and intended to give a precise indication of the extent to which, under the criterion laid down, competition is restricted, may provide some guidance. However, Article 85(1) may apply even in cases where the upper limits given in that communication (expressed in terms of turnover and share of the market in the case of the undertakings which are parties to the agreement) are not reached; in fact, in such cases, restriction of competition may be appreciable. In the present case, the following facts and circumstances must be taken into account:— The total annual turnover of the Oshawa firm and all its distributor undertakings is probably greater than the upper limit laid down in the notification referred to above.— a feature of the European market in cigarette lighters is its rather oligopolostic structure, in which a few European undertakings control a substantial proportion of the market concerned and in which competition from North American producers of cigarette lighters and, above all, from the Japanese is particularly marked. Competition from Japanese producers is especially strong in the German and Netherlands markets. Japanese producers export more cigarette lighters than those of any other country to all the countries of the common market amounting, in 1969, to approximately 741 metric tons.— A feature of the French market in cigarette lighters is its rather oligopolistic structure; here Japanese competition has so far had less impact. French producers have a remarkably high level of export trade with the other countries of the common market, which, in 1969, reached 202 metric tons.(c) Even if the agreements made between the Oshawa company and its concessionnaires did not have to contain the clauses prohibiting exports to countries outside the territory covered by them, the agreement concluded between Oshawa and Béguelin/France might come within the prohibition laid down in Article 85 because, if one of the exclusive dealers brings proceedings against other importers, this has the same effect as such a clause.(d) If, in the light of the foregoing considerations, there is justification for holding that Article 85(1) applies, it would then be for the French court to consider the extent to which an agreement of the type in question was affected by Regulation No 67/67 of the Commission. In reality, the agreement between Oshawa and Béguelin/France falls within the categories of agreement entitled to the exemption provided for under Article 1(1) of the regulation; the fact that the grantor of the concession is established outside the common market is, here again, of no moment.The effect or this provision is that Article 85(1) of the Treaty does not apply to the said agreement because it fulfils the conditions laid down under Articles 2 and 4 of the regulation. In this connexion, particular attention must be paid to Article 3(b) of the regulation, which states that the abovementioned exemption shall not apply where: ‘the contracting parties make it difficult for intermediaries or consumers to obtain the goods to which the contract relates from other dealers with the common market, in particular where the contracting parties:(1) exercise industrial property rights to prevent… ;(2) exercise other rights or take other measures to prevent dealers or consumers from obtaining from elsewhere goods to which the contract relates or from selling them in the territory covered by the contract.’The action brought by Béguelin/France is just such a measure and discloses conduct which those who drew up Regulation No 67/67 sought to counter when they referred in the ninth and tenth recitals in the preamble to the regulation the need to ensure, ‘the possibility of parallel imports’, and indicated that it was not possible to allow ‘industrial property rights and other rights to be exercised in an abusive manner in order to create absolute territorial protection’.The action brought by the plaintiffs in the main action is therefore incompatible with the very purpose of Regulation No 67/67. This conclusion is confirmed by the recent decisions of the Court in its judgments in Sirena v Novimpex and the judgment of 8 June 1971 in Case 78/70 Deutsche Grammophon Gesellschaft v Metro-SB-Groß märkte. In these decisions, the Court held that industrial and commercial property rights cannot be used to impair the free movement of goods within the common market; this applies with even greater force in a case, such as the present, where the national law on which the dealer replies does not give him any specific protection.It accordingly follows that the answer to be given to the national court is as follows:‘Article 85 (1) of the Treaty is applicable in cases where national law concerning unfair competition is used to prevent imports from being effected by persons reselling on the territory granted under the agreement, products covered by an exclusive dealing agreement concluded for resale of the products in a Member State between an undertaking manufacturing the product and situate in a third country and an undertaking situate inside the common market. The exemption provided for certain categories of exclusive dealing agreement under Regulation No 67/67 cannot be relied upon.Such an agreement is null and void and cannot be invoked against third parties.’