(40) Under Article 86 any abuse by one or more undertakings of a dominant position within the common market or a substantial part of it is prohibited as incompatible with the common market in so far as it may affect trade between Member States.
A. The relevant market
(41) In order for the Commission to determine whether BS occupies a dominant position within the meaning of Article 86 it is necessary first to define the relevant market. This constitutes the area and product sector in which the economic power of the undertaking in question vis-à-vis its customers and competitors is to be judged.
The relevant product market
(42) The relevant product market is granulated sugar. This market may be subdivided into two sub-markets of sugar for sale to retail and industrial clients.
Speciality sugars, liquid sugars and syrups, being used for different purposes than granulated sugars, do not meet the same needs and are not therefore part of the relevant product market because they are not substitutable from the customer's point of view.
Industrially produced sugar substitutes such as saccharin, cyclamates or aspartame only compete with natural sugar in limited uses such as 'diet' products, and thus do not form part of the same relevant product market as granulated sugar (1).
The relevant geographical market
(43) In the Community (2), each Member State is given a basic quantity of beet-origin sugar, which it divides up into quotas between its beet processing companies. This sugar is known as A/B sugar. BS receives all the United Kingdom basic quantity (currently
1 144 000 tonnes per annum), being the only United Kingdom beet processing company. This 'quota' is the maximum amount of sugar produced by BS that it may sell in the Community, as an intervention price system operates for sugar sold in the Community. This quota of sugar may also be sold outside the Community with an export refund. Any sugar produced above this quota must be exported outside the Community without export refund (C sugar) or carried over to the next year's A/B quota. Certain companies dealing in sugar which store sugar qualify for a Community sugar storage rebate. Such a rebate is only granted on storage of beet-origin sugar.
The United Kingdom basic quantity covers approximately half the country's total sugar requirements. The balance is largely made good by the import of cane raws from ACP countries pursuant to a Lomé protocol (1). This is refined by Tate & Lyle plc (hereinafter 'T & L'). Taking account of the production of both BS and T & L, enough sugar is produced in the United Kingdom to cover domestic demand.
(44) During the previous few years, imports have made up approximately 5 to 10 % of total British sugar consumption. This amount appears to be to a large extent a structural limit to imports, which are unlikely to exceed this figure for the following reasons:
(i) Because of the natural barrier of the English Channel, which gives rise to additional transport costs, United Kingdom producers of sugar are able to charge a premium on the price of sugar compared with Continental prices. The United Kingdom price is generally set by BS at slightly under that at which sugar may be profitably imported and sold from the Continent. This was recognized by the House of Lords Select Committee Report on Sugar Policy (2) which states (paragraph 9) that:
'It is these (EEC) imports which set the level of market prices in the United Kingdom and mean that both beet and cane sugar are priced at just under these levels. There is a consequent lack of price competition, as Tate and Lyle's full refining margin is covered from the UK market premium, and it cannot afford to cut prices significantly, while BS cuts prices to the extent necessary to sell its increasing throughput, but no more. Faced with this situation, industrial sugar users have been willing to import from the continent as a third source of supply.'
This conclusion was supported by the MMC in paragraph 16.25 of its second report;
(ii) Importation of sugar for retail sale from other Member States is even more difficult than the importation of industrial sugar, because English-language bags must be specifically printed for the operation, and because transport is even more expensive as 'drop sizes' are generally smaller for retail compared to industrial sales. This was recognized by the MMC in both of its reports;
(iii) In addition to the cost of freight, a further relevant factor is the strength or weakness of sterling. If sterling is strong against other Community currencies imports will be cheaper. If sterling is weak, imports will be more expensive. Currency fluctuations can affect the price by up to £ 15 per tonne either way. Although the Community's system of monetary compensatory amounts is designed to minimize the effect of currency fluctuations it does not remove all distortions. For example, in the first three months of 1986 sterling weakened against the currencies of other Member States so that imports were expensive. Thus no company, taking account of the large variations in price of imported sugar, will rely to any large extent on imports for its supply of sugar. However, during certain periods, largely as a result of currency fluctuations, the importation of sugar becomes profitable, and during these periods merchants undertake such imports;
(iv) Many customers who require large, frequent and rapid deliveries upon order would have to be supplied from stocks of imported sugar stored in Great Britain; an additional cost would thereby be incurred;
(v) Furthermore, as the MMC pointed out in its second report, in order to secure a substantial amount of imports a considerably higher price in Britain than on the Continent would be necessary because potential exporters may require a large premium to persuade them to export large quantities of sugar to Britain for fear of retaliatory exports by the British producers.
(45) Because of these features, BS has a margin between which it may set British prices, between the Community intervention price for sugar, and the price at which imports would enter Britain in large quantities. It may set these prices just below the level at which imports from the Continent are (aside from periods where currency fluctuations make imports profitable) not competitive and, in fact, during the period under consideration, has done so.
(46) Imports do, however, enter the United Kingdom each year, varying between 5 and 10 % of total sales per annum. These enter because many major purchasers of sugar demand a third source of supply from outside the United Kingdom, to ensure continuity of supplies should a shortage of sugar develop as happened in the 1974/75 season, and to act as a competitive threat to British producers. Furthermore, merchants import sugar when conditions are favourable.
(47) Thus, as a result of these features, the role of imports on the British market has been as a complement to domestic sugar, rather than as a fully competitive alternative.
(48) The only part of the United Kingdom in which different conditions prevail is Northern Ireland, which does not form part of the relevant geographical market for the purposes of this case. No sugar is produced in Northern Ireland and, because of transport costs, most supplies are imported from Ireland.
This conclusion is supported by the second MMC report (see paragraph 16.27).
(49) The Commission therefore concludes that for the purposes of Article 86 the relevant market is that of retail and industrial granulated sugar in Great Britain, which is a significant part of the common market.
B. Dominant position
BS holds a dominant position on the British sugar market.
(50) The factors which must be taken into account in deciding whether or not BS has a dominant position on the British market for industrial and retail granulated sugar are as follows:
(i) M a r k e t s h a r e s o n t h e B r i t i s h s u g a r m a r k e t
According to figures supplied by NB, BS held, in the 1984/85 season, 58 % of the relevant market (granulated sugars in Great Britain), Tate & Lyle 37 %, and imports 5 %. This estimated market share conforms to BS's own estimation of its market share (contained in the notification of BS's compliance programme), which BS states to be approximately 58 % in the 1984/85 season.
In the second MMC report, it was estimated that BS enjoyed a market share of between 57 and 61 % of the total white granulated sugar section of the market (see paragraph 2.66 of the report).
(ii) A b i l i t y o f t h e o t h e r f o r c e s u p o n t h e r e l e v a n t m a r k e t t o c o m p e t e
Tate & Lyle
(51) T & L's position as a cane refiner places it at a considerable disadvantage compared to BS. Because of the Community pricing structure it has a cost disadvantage on refining cane sugar compared to the processing of beet sugar, resulting in T & L being a price follower. This was recognized by the House of Lords Select Committee on EEC Sugar Policy in 1980:
'There is already a lack of price competition in the UK market, as the Communities institutional pricing structure means that Tate & Lyle gets too small a margin to enable it to continue refining and selling cane sugar in the UK unless there is a substantial market premium above intervention price, whereas the same pricing structure allows the BSC a very handsome margin (£ 13 per tonne on the 1978-79 crop as against £ 2 per tonne for Tate & Lyle).
The Committee have noted the sugar users' complaint about the lack of price competition in the UK market as, despite claims of rigorous price competition within the market, it appears that UK market prices are dictated by the price at which Continental sugar can be landed. It also appears to them that one of the two principal sugar suppliers in the market is unable to compete effectively on cost grounds because of the inadequacy of the refining margin allowed to cane refineries in the EEC's institutional structure of support prices for sugar beet.'
(52) The Commission agrees with the opinions of the House of Lords and considers that the facts lying behind these opinions have not materially changed since 1981. The fact that BS is a price leader and T & L, due to the relatively low cane refining margin, is a price follower, was also noted by the MMC in its second report (see paragraphs 16.37 and 16.59).
(1) For fuller details of the different sweeteners available, and their particular characteristics, see paragraphs 2.59-2.75 of the Monopolies and Mergers Commission report on the existing and proposed mergers between Tate & Lyle plc or Ferruzzi Finanziaria SpA and S & W Berisford (HMSO Cmd89) (hereinafter the 'second MMC report').
(2) For a more in-depth analysis of the mechanisms and regulations constituting the EEC sugar regime, see the Monopolies and Mergers Commission report on the proposed merger between S & W Berisford and the British Sugar Corporation Limited, 25 March 1981 (ISBN 0 10 224181 3) (hereinafter the 'first MMC report'), and the second MMC report.
(1) Protocol 3 on ACP sugar annexed to the ACP-EEC Convention of Lomé, signed on 28 February 1975, and contained in Protocol 7 of the third ACP-EEC Convention signed at Lomé on 8 December 1984.
(2) House of Lords session 1979/1980, 44th Report Select Committee on the European Communities 'EEC Sugar Policy', 19 March 1980.
(53) Thus the Commission concludes that BS acts as a price leader on the relevant market, and T & L as a price follower. The Commission accepts, as the MMC pointed out, that T & L - with sales of sugar similar in quantity to those of BS - provides BS with competition for individual accounts; but considers that this marginal competition, taking account of the fact that T & L 'is unable to implement price increases on its own and is unwilling because of its financial position to initiate general price reductions (1), does not prevent BS from enjoying a dominant position on the relevant market.
Imports
(54) Imported sugar acts as a limit to the price that BS may charge for its domestically produced sugar, thus giving BS a margin within which it may set United Kingdom sugar prices. During the period under consideration, BS has set British prices just under that at which it would be consistently profitable to undertake imports. The role of imports on the British market has therefore been as a complement to domestic sugar, rather than as a fully competitive alternative. In the light of this, the Commission considers that competition afforded by imported sugar did not, during the period in question, prevent BS from enjoying a dominant position within the meaning of Article 86.
(iii) A b i l i t y o f B S u n i l a t e r a l l y t o i n c r e a s e p r i c e s, w h i c h t h e m a r k e t f o l l o w s
(55) On 1 July 1986 BS increased its retail sugar price to all its clients by £ 10 per tonne. BS subsequently made a further increase in its retail sugar price by £ 10 per tonne on 20 October 1986. BS has been able to maintain these price rises, and the other producers of retail sugar have also increased their price by similar amounts.
This indicates that BS has 'the power to determine prices [ . . . ] for a significant part of the products in question' (2), and furthermore has 'the power to behave to an appreciable extent independently of its competitors, customers and ultimately of the consumers' (3).
(iv) B a r r i e r s t o e n t r y
Beet-origin sugar
Under Council Regulations (EEC) No 1785/81 (4), as last amended by Regulation (EEC) No 1107/88 (5), and (EEC) No 193/82 (6), the United Kingdom Government has the ability but not the obligation to reallocate the basic quantity of sugar received by United Kingdom producers amongst varying producers. At present BS receives all the United Kingdom basic quantity. It appears unlikely that the United Kingdom Government would give part of the allocation to a new producer, taking account of the fact that BS already has sufficient modern and efficient capacity to produce all the United Kingdom basic quantity of sugar.
(56) BS has a well-developed integrated production system and is responsible for all stages of production, from the provision of seed to the growers to the sale of the finished product. Such established, advanced and integrated operations make it difficult for a new producer, which produces on only one level of production, to operate.
(57) Thus considerable barriers to entry exist regarding the production of beet-origin sugar. Indeed, the fact that no new producer of sugar from beet origin has set up in the United Kingdom since 1936 despite the fact that BS has consistently been profitable, indicates that these barriers to entry are real and appreciable.
Cane-origin sugar
(58) It appears unlikely that any new company will enter the market importing and refining cane-origin sugar due to the cost disadvantage presently suffered by cane-sugar producers compared to beet-sugar producers.
Imports
(59) As explained above, imports act as a complement to British domestic sugar rather than as a fully competitive alternative.
Conclusion
(60) The Commission concludes that, taking account of BS's high market share on the relevant market, the inability of its main competitors to compete fully and effectively with it, the barriers to entry existing on the British sugar market, and BS's proven ability to influence the price at which sugar is sold in Britain by unilateral action, BS holds a dominant position within the meaning of Article 86 on the relevant market - white granulated sugar for both retail and industrial sale in Great Britain.
C. Abuse of a dominant position
Refusal to supply
(61) BS refused to supply NB with industrial sugar. NB requested 30 000 tonnes of industrial sugar during
the 1985/86 sugar year, and BS was only prepared to offer NB 7 148 tonnes or to offer NB 30 000 tonnes of 'special grain' sugar at a price so high that NB would be unable to use the sugar. BS claims that its refusal to meet NB's request is justified by the necessity of it implementing a quota scheme.
(62) However, the evidence outlined above shows that the quota scheme implemented by BS was not necessary and was put forward only in order to justifiy BS's refusal to supply.
BS refused to supply NB with the objective of removing NB as a producer of retail sugar; it is clear that the natural and foreseeable consequence of the refusal to supply NB would be to precipitate NB's withdrawal from the retail sugar market. Indeed, the handwritten document of BS's executive marketing director, proposing to refuse to supply NB, and the documents found at BS relating to BS's 'de-listing' policy, indicate that BS's refusal to supply was made with just such an intention.
(63) NB cannot be considered to be a new client of BS in relation to this refusal to supply. BS had supplied NB with industrial sugar before, e.g. 30 000 tonnes in 1984/85, a similar amount and type of sugar that NB was requesting in the present case. The fact that NB intended to package a part of this into retail bags, selling the rest to industrial clients as it had done in the past, cannot result in NB being considered as a new client for the purposes of this case.
(64) The Commission considers that BS has abused its dominant position by refusing to supply industrial sugar to NB without objective necessity, the intention or foreseeable result of which would have been to precipitate the removal of NB from the United Kingdom retail sugar market, thereby reducing competition on that market.
This conclusion is supported by the judgment of the European Court in Joined Cases 6 and 7/73: ICI and CSC v. Commission ('Commercial Solvents') (1). In this case the European Court held that:
'. . . an undertaking being in a dominant position as regards the production of raw material and therefore able to control the supply to manufacturers of derivatives, cannot, just because it decides to start manufacturing these derivatives (in competition with its former customers) act in such a way as to eliminate their competition which in the case in question, would amount to eliminating one of the principal manufacturers of ethambutol in the common market.
Since such conduct is contrary to the objectives expressed in Article 3 (f) of the Treaty and set out in greater detail in Articles 85 and 86, it follows that an undertaking which has a dominant position in the market in raw materials and which, with the object of reserving such raw material for manufacturing its own derivatives, refuses to supply a customer, which is itself a manufacturer of these derivatives, and therefore risks eliminating all competition on the part of this customer, is abusing his dominant position within the meaning of Article 86'. (Emphasis added.)
BS's pricing policy
(i) T h e p r i c i n g p o l i c y o f B S r e g a r d i n g i t s s a l e s o f r e t a i l s u g a r s i n c e N B's e n t r y o n t o t h e r e t a i l s u g a r m a r k e t
(65) The pricing information indicated above shows that BS has engaged in a price cutting campaign leaving an insufficient margin for a packager and seller of retail sugar, as efficient as BS itself in its packaging and selling operations, to survive in the long term.
(66) The maintaining, by a dominant company, which is dominant in the markets for both a raw material and a corresponding derived product, of a margin between the price which it charges for a raw material to the companies which compete with the dominant company in the production of the derived product and the price which it charges for the derived product, which is insufficient to reflect that dominant company's own costs of transformation (in this case the margin maintained by BS between its industrial and retail sugar prices compared to its own repackaging costs) with the result that competition in the derived product is restricted, is an abuse of dominant position (2).
In the present case, BS's action of reducing the margin between its industrial and retail sugar prices such that it sold retail sugar at a price which no longer reflected its own transformation costs resulted in an abuse of a dominant position and a restriction of competition within the meaning of Article 86. It is clear from the facts as set out above that should BS have maintained this margin in the long term, NB, or any company equally efficient in repackaging as BS without a self-produced source of industrial sugar, would have been obliged to
leave the United Kingdom retail sugar market. Thus, taken in the context of the other abuses as outlined above, and of the fact that the intention or natural and foreseeable consequence of the maintenance of this pricing policy by BS would be the removal of NB from the British retail sugar market, the Commission considers that BS's pricing policy constitutes an abuse of a dominant position within the meaning of Article 86.
(67) In its written reply to the Statement of Objections, BS states that certain documents were disclosed to BS's lawyers alone, and not to BS. These documents show in fine detail NB's costs of repackaging industrial sugar into retail bags. BS argues that these documents can only be meaningfully dealt with by BS and not its lawyers, and therefore that the Commission cannot rely on these figures.
(68) In relation to the disclosure of documents, the Commission makes the observations that:
- the documents in question clearly constitute business secrets within the meaning of Article 20 of Regulation No 17 (which NB has insisted upon maintaining secret vis-à-vis BS) which it would be unreasonable for BS to have access to,
- NB's costs, grouped into general headings, were given to BS in the Statement of Objections. The finely detailed information in question has been made available to BS's lawyers subject to their undertaking not to reveal the detailed figures to BS themselves. It was therefore open to BS's lawyers to confirm to BS that the Commission is in possession of documents that accurately reflect the general grouped figures given in the Statement of Objections. BS could therefore, clearly comment on the global figures provided in the Statement of Objections.
In the light of these facts, and also taking account of the fact that the figures are only quoted in the Statement of Objections and this Decision in order to achieve the limited objective of showing that the result of BS's actions in maintaining the abovementioned pricing margin would have had the logical result of eventually obliging NB to leave the United Kingdom retail sugar market, the Commission considers that BS's rights of defence were safeguarded in the present case.
(ii) E x f a c t o r y p r i c i n g
(69) BS has accepted that, before the end of 1986, it refused to supply sugar to its customers unless the customer also accepted that BS itself (whether BS delivered the sugar itself or did so through third parties acting under contract for BS being irrelevant) supplied the service of delivery of the sugar. It was thus reserving for itself the separate but ancillary activity of delivering the sugar which could, under normal circumstances be undertaken by an individual contractor acting alone (e.g. acting as a real merchant delivering the sugar to a third party customer using his own transport facilities). As the MMC stated in paragraph 2.104 of its second report '. . . merchants also sell on their own account sugar purchased from the two United Kingdom producers. This form of competition can be expected to restrain the United Kingdom producers from charging excessively for distribution (although not if they refuse to supply sugar on an ex-factory basis).'
(70) The Commission is not aware of any objective necessity requiring BS to reserve such an activity to itself, and the fact that following BS's undertaking it has offered a choice to its clients between ex factory or delivered sugar, indicates that no such objective necessity exists.
(71) The Commission considers that BS has abused its dominant position on the sugar market by refusing to grant to its customers an option between purchasing sugar on an ex factory or delivered price basis, thereby reserving for itself the ancillary activity of the delivery of that sugar, thus eliminating all competition in relation to the delivery of the products.
(72) This conclusion is supported by the judgment of the European Court in the Case Centre Belge d'Études de Marché - Télémarketing SA v. Compagnie Luxembourgeoise de Télédiffusion SA and Information Publicité Benelux SA.
In this case, the Court held that:
' . . . an abuse within the meaning of Article 86 is commiteed where, without any objective necessity, an undertaking holding a dominant position on a particular market reserves to itself or to an undertaking belonging to the same group, an ancillary activity which might be carried out by another undertaking as part of its activities on a neighbouring but separate market, with the possibility of eliminating all competition from such undertaking.'
Beet origin: discrimination
(73) The Commission considers that BS has applied 'discriminatory conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage' (1), and has thus abused its dominant position, by denying exclusively beet-origin sugar to NB, while supplying it to others.
(1) The Second MMC report, paragraph 16.6.
(2) See the European Court of Justice's definition of a dominant position in the case of Continental Can, Case 6/72 ECR (1973), 215.
(3) See the European Court's decision in United Brands, ECR (1978), 207.
(4) OJ No L 177, 1. 7. 1981, p. 4.
(5) OJ No L 110, 29. 4. 1988, p. 20.
(6) OJ No L 21, 29. 1. 1982, p. 3.
(1) 6 March 1974, ECR [1974], 223, at point 25 (also United Brands v. Commission, Case 22/76; 14 February 1978, ECR [1978], 207).
(2) For a similar case under the ECSC Treaty, see National Carbonising Company v. Commission, Case 109/75, 22 October 1975, ECR [1975], p. 1193.
(1) Article 86 (c) EEC.
Group commitment, or loyalty bonuses
(74) BS made an offer to the [ . . . ] which involved the granting by BS of a rebate on the price it was willing to offer the members of the buying group at that time purchasing exclusively from BS if, in future, all the members of [ . . . ] agreed to purchase exclusively from BS.
Such an offer, which has the effect of requiring certain existing BS customers to 'tie-in' other companies to purchase exclusively from BS in order to receive a reduced price for retail sugar, is, in a manner similar to the operation of a loyalty rebate, designed to deprive the purchasers in question of, or restrict their possible choices of, sources of supply and furthermore to deny other producers, and in this case specifically NB, access to the market.
Due to the commitment bonus, pressure was put upon the members of [ . . . ] not purchasing from BS to recommence purchasing from BS, not only because they would benefit from the bonus themselves but also because, should they wish to purchase elsewhere for price or quality reasons, the remaining members of the group would thereafter be obliged to pay a higher price for their sugar. As a result of BS's offer, one member of the group, [ . . . ] which was previously purchasing from NB, switched to purchasing sugar from BS.
(75) The Commission considers that BS has abused its dominant position by offering to conclude, and subsequently concluding, a contract which included a provision for a group commitment bonus.
(76) This conclusion is confirmed by the judgment of the European Court in the case Hoffman-La-Roche v. Commission (1), in which the European Court of Justice considered the application of Article 86 to exclusive purchasing contracts and fidelity rebates involving a dominant undertaking.
D. Effect on trade between Member States
(77) The Commission considers that the facts as outlined above establish that BS engaged in practices which had the foreseeable result that NB would have been forced to withdraw from the retail sugar market. Indeed, in this case, evidence (e.g. the documents regarding 'de-listing') shows that the alleged abuses were carried out with the intention of removing NB from that market.
The removal of NB from the British retail sugar market would have had clear effects upon trade between Member States, and furthermore, would have affected the structure of competition and trade within the common market.
(78) A United Kingdom sugar merchant such as NB has two sources of sugar, domestic and imports, and will import sugar for resale whenever, for example, currency fluctuations make such imports profitable. Thus, NB has purchased in the past, and intends to purchase in the future, sugar from other Member States for both its retail and industrial operations whenever conditions are favourable. Contrary to BS's arguments, these imports cannot be considered to be abnormal and artificial but are part of the normal pattern of trade.
Imports of sugar into the United Kingdom have in the past been almost exclusively of industrial sugar (imports of retail sugar are difficult not only because English language bags must be specifically printed for such an operation, but furthermore because drop sizes are generally smaller for retail than for industrial sugar) (2).
NB entered the market using, and intending to continue using, both domestic and imported industrial sugar for its repackaging operations. As a result of NB's entry onto the market, an avenue was opened whereby imported industrial sugar would for the first time be used for retail repackaging whenever conditions favoured the use of such sugar - NB, being the only British repackager without its own domestically produced source of sugar, is thus the only repackager free to choose to source its sugar for repackaging from either domestic or imported sugar, whichever is cheaper at any moment in time. Should NB have been removed from the market, this avenue through which imported sugar could freely and easily be sold upon the British retail market, would have been effectively closed.
NB entered the British retail sugar market because it believed that the differential between the selling price of packet sugar and that of bulk sugar greatly exceeded the cost of an efficient packaging operation (3). This large differential occurred because although, as recognized above, imported sugar effectively limits the price that may be charged for industrial sugar in Britain, such imported sugar could not effectively limit retail prices due to the difficulties in importing retail sugar which are outlined above. NB's entry onto the retail market established the first link, independent from domestically produced industrial sugar, between the price of industrial sugar which is limited by the price of imports, and retail sugar, the price of which has not, to the same extent, been limited by the price of imported sugar. Should NB have been removed
from the retail sugar market, this independent link between British retail and industrial sugar prices, and thus between imported industrial and British retail sugar prices, would have been effectively closed.
Thus, the Commission concludes that an effect on trade between Member States would have resulted from NB's removal from the market. This is confirmed by the following argument put forward by BS before the MMC in 1981, in which BS recognizes the importance of sugar imported by merchants as a real restraint to the maximum prices that BS may charge on the British market:
'Since BS was the price leader in the UK and Tate & Lyle (because of its low margins) was a price follower, imported continental sugar was the key to price competition. As long as there was a substantial surplus of sugar in the EEC, the continental price could effectively set a ceiling on the price in this country and it was the merchants commercial interest in selling imports (on which they earned a margin and not merely a handling allowance) which provided competition between merchants and BS.'
(79) As the Court of Justice held in Case 27/62 United Brands (at ground 201), where the occupier of a dominant position established in the common market aims at eliminating a competitor also established in the common market, it is immaterial whether this behaviour relates directly to trade between Member States once it has been shown that such elimination will have repercussions on the patterns of competition within the common market.
This is particularly the case when a dominant company attempts, as in the present case, to remove a competitor whose activities include the import, transformation and resale of a product.
As shown above, BS's actions, having the intention or foreseeable result of precipitating NB's removal from the retail sugar market, had a potential effect on the structure of competition and trade within the common market, and thus on trade between Member States within the meaning of Article 86.
(80) The refusal of BS to sell industrial sugar to NB had direct and appreciable effects on inter-State trade. Because NB could not purchase beet-origin sugar from BS, it purchased such sugar (under 1986 market conditions more expensively) from other Community producers in France, Denmark and the Netherlands. Until 5 June 1986, NB was unable to use T & L industrial sugar for repackaging because [ . . . ]. Even if NB had been able to purchase T & L sugar for repackaging, it would still have been unwilling to use such sugar for this purpose, because it cannot receive the Community sugar storage rebate for the storage of cane-origin sugar. In this respect, it is notable that NB ordered more than twice as much Continental sugar for import between October 1985 and June 1986 compared with the amounts purchased between October 1984 and September 1985.
Thus an artificial pattern of trade between Member States was created because, had it not been for BS's refusal to supply, NB would not have undertaken a large part of these imports, rather purchasing cheaper sugar from BS. The fact that BS's refusal to supply effectively increased the level of trade between Member States does not prevent BS's action from affecting trade within the meaning of Article 86. As the European Court stated in Consten and Grundig v. Commission (1):
'. . . what is particularly important is whether the agreement is capable of constituting a threat, either direct or indirect, actual or potential, to freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market between states. Thus, the fact that an agreement encourages an increase, even a large one, in the volume of trade between states, is not sufficient to exclude the possibility that the agreement may ''affect'' such trade in the abovementioned manner.'
BS's refusal to supply industrial sugar to NB therefore had an affect on trade between Member States within the meaning of Article 86.
The Commission therefore concludes that BS's abovementioned behaviour had an affect on trade within the meaning of Article 86 of the Treaty of Rome.
E. Conclusion
(81) On the basis of the considerations set out above, the Commission considers that BS infringed Article 86 of the EEC Treaty in the following ways:
1. By refusing to supply industrial granulated sugar to NB;
2. By reducing its prices for retail sugar to the extent that an insufficient margin existed between its prices for retail and industrial sugar;
3. By refusing to sell sugar unless it was on a delivered-price basis;
4. By discriminating against NB in refusing to supply exclusively beet-origin sugar to NB whereas it supplied exclusively beet-origin sugar to other purchasers at their request;
5. By offering 'group commitment' bonuses.
TERMINATION OF THE INFRINGEMENT - REMEDY
(82) The Commission considers that, taking account of the comprehensive compliance programme adopted by BS and of BS's exemplary behaviour since its receipt of the interim measures Statement of Objections, it is unnecessary to make an order pursuant to Article 3 of Regulation No 17, requiring BS to bring the abovementioned infringements to an end because, in the eyes of the Commission, BS has on its own initiative brought the infringements to an end. NB, the Complainant, concurs with this view.
However, it must be noted that the gravity of the abuses in question were such as to warrant fines regarding BS's actions in the past. The levying of such fines necessitate a formal decision of the Commission.
REMEDIES
(a) Fines
(83) Under Article 15 of Regulation No 17, infringements of Article 86 may be sanctioned by fines of up to 1 million ECU or 10 % of the turnover of the undertaking in the preceding business year, whichever is the greater. Regard must be had to both the gravity and the duration of the infringement.
(84) The evidence demonstrates that BS abused its dominant position in several important ways. These several abuses were all designed to have the same effects; namely, to severely damage the position of, or even eliminate, a newly established competitor on the market.
BS sought, as a result of this behaviour, to maintain or reinforce its dominant position.
In fact, the infringements in question were designed to have an adverse effect on the structure of competition in a substantial part of the common market. Moreover, had the Commission not issued a Statement of Objections that led to BS's undertaking, a competitor could have been irreversibly removed from the market.
(85) In the light, of this, the Commission takes the view that it should impose a fine on BS. In setting the level of this fine, the Commission takes account not only of BS's abusive behaviour, as outlined above, but also of the exemplary manner in which BS has conducted itself following its receipt of the interim measures Statement of Objections.
(86) As the present Decision relates solely to BS's actions in the past, the fine is set taking account of the fact that the abuses in question occurred in the period between the events leading up to NB's packaging of sugar for retail sale and the adoption by BS of its undertaking and subsequent Community compliance programme - between approximately April 1985 and early August 1986.
(87) It is the practice of the Commission, in setting a fine, to take account of whether or not the rules of competition of the EEC Treaty have been sufficiently developed by the Decisions of the Commission in any particular area (1). As stated above, the Commission has decided that BS, in selling sugar exclusively on a delivered price basis, abused its dominant position under Article 86. Such a decision constitutes the first time that the Commission has stated that the maintenance of a delivered-price-only system by a dominant company may constitute an abuse of a dominant position within the meaning of Article 86. In the light of this, the Commission has not fined BS in relation to this particular abuse.
In relation to BS's retail-sugar pricing practices, BS argues that the competition rules have been insufficiently developed when the abuse occurred to justify the imposition of a fine. The Commission considers that such pricing practices, adopted with the intention or foreseeable result of removing NB from the retail sugar market, are types of predatory practices clearly envisaged by Article 86, and thus considers that BS intentionally or at least negligently abused its dominant position in this respect. The imposition of a fine for this abuse is therefore justified. The Commission does, however, accept that the law relating to such an abuse has been less fully clarified by Commission Decision and Court ruling than in respect to the other abuses committed by BS, and has taken this into account in fixing the level of the fine.
(88) However, the Commission considers that, as regards the other abuses outlined above, BS undertook these abuses intentionally or at least negligently. Furthermore, the rules of competition of the EEC Treaty have been sufficiently developed by previous Decisions of the Commission and the European Court of Justice, or are sufficiently clear from the provisions of the Treaty of Rome in the areas covered by those abuses, in order to justify the imposition of a fine in relation thereto,
HAS ADOPTED THIS DECISION:
