90/38/EEC: Commission Decision of 13 December 1989 relating to a proceeding under Article 85 of the EEC Treaty (IV/32.026 - Bayo-n-ox) (Only the German text is authentic)

• Articles: 8

Article 1

The agreements which were in force from 10 July 1986 to 13 November 1989 between Bayer AG and its customers, under which such customers were required to use 'Bayo-n-ox Premix 10 %' solely to cover their own requirements in their own works, constitute infringements of Article 85 of the EEC Treaty.

Article 1

The agreements which were in force from 10 July 1986 to 13 November 1989 between Bayer AG and its customers, under which such customers were required to use "Bayo-n-ox Premix 10 %' solely to cover their own requirements in their own works, constitute infringements of Article 85 of the EEC Treaty .

Article 2

A fine of ECU 500 000 is imposed on Bayer AG in respect of the infringement referred to in Article 1.

Article 2

A fine of ECU 500 000 is imposed on Bayer AG in respect of the infringement referred to in Article 1 .

Article 3

The fine imposed in Article 2 shall be paid within three months of notification of this Decision to the following bank account:

No 310-0933000-43,

Banque Bruxelles-Lambert,

Agence européenne,

5 Rond Point Schuman,

B - 1040 Brussels.

After the expiry of that period, interest shall be automatically payable at the rate charged by the European Monetary Cooperation Fund for transactions in ecus on the first working day of the month in which this Decision was adopted, plus 3,5 percentage points, e.e. 14,25 %.

Article 3

The fine imposed in Article 2 shall be paid within three months of notification of this Decision to the following bank account :

No 310-0933000-43,

Banque Bruxelles-Lambert,

Agence européenne,

5 Rond Point Schuman,

B _ 1040 Brussels .

After the expiry of that period, interest shall be automatically payable at the rate charged by the European Monetary Cooperation Fund for transactions in ecus on the first working day of the month in which this Decision was adopted, plus 3,5 percentage points, e.e . 14,25 %.

Article 4

This Decision is addressed to Bayer Aktiengesellschaft, D - 5090 Leverkusen.

Done at Brussels, 13 December 1989.

For the Commission

Leon BRITTAN

Vice-President

(1) Established case law of the Court of Justice of the European Communities; Case 19/77, Miller International Schallplatten GmbH, [1978] ECR p. 131.

(1) Case 187/80 Merck v. Stephar [1981] ECR, p. 2063.

(2) Loc. cit., 2082 and the case law cited there.

(3) Case 258/78 Nungesser [1982] ECR, p. 2082.

( 42 ) However, the own-use requirement applying to German purchasers of Bayo-n-ox on the basis of the agreement concluded with Bayer AG excludes any trade, i.e . it also excludes trade with authorized firms in the Federal Republic of Germany and trade in other Member States . There are no legal provisions preventing an authorized undertaking operating in the feedingstuffs industry from also performing trading functions . However, the undertaking must comply with the provisions applying to each of such functions . Even if certain German Bayo-n-ox customers did in certain commercial transactins infringe the provisions relating to them as dealers, an agreement which in principle rules out any trading activity still has the effect of restricting competition .

( 43 ) Lastly, Bayer AG invokes the principles of selective distribution, according to which a contractual restriction of the group of resellers does not constitute a restriction of competition provided that resellers are chosen on the basis of objective criteria of a qualitative nature relating to the technical qualifications of the reseller and his staff and h suitability of his trading premises and that such conditions are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion ( 1 ).

However, if it is to be unobjectionable from a competition policy

point of view, selective distibution must in particular include freedom to trade within the network of authorized firms . Such freedom is not allowed in the case in point .

( c ) Object and effect of restricting competition

( 44 ) Article 85 ( 1 ) presupposes that the agreements in question have as their object or effect the restriction of competition .

( 45 ) The term "object' has an objective meaning in this context . It does not matter what the intention subjectively pursued by the parties was .

( 46 ) The ban on trading in Bayo-n-ox is directly evident from the wording of the agreements . As far as examination of the applicability of Article 85 ( 1 ) is concerned, therefore, Bayer AG's contention that it did not pursue any anti-competitive object in requiring its customers to purchase only for their own requirements ( see paragraph 21 ) is irrelevant . Furthermore, the ban also has the effect of restricting competition, since the scoppe of choice for third parties was affected by the conclusion of the agreements .

( d ) Appreciability of the restriction of competition

( 47 ) The question of whether there is an appreciable restriction of competition must be decided on the basis of the legal and economic context within which the agreements restraint of competition were concluded .

( 1 ) The content of the letter to customers which did not confirm in writing the circular of 10 and 11 July 1986 is adapted accordingly .

( 2 ) OJ No L 270, 14 . 12 . 1970, p . 1 .

( 3 ) OJ No L 237, 27 . 8 . 1988, p . 39 .

( 4 ) Council Directive 87/317/EEC ( OJ No L 160, 20 . 6 . 1987, p . 34 ); see also Order of the President of the Court of Justice of the European Communities of 8 April 1987 in Case 65/87-R Pfizer, not yet reported .

( 5 ) OJ No L 364, 31 . 12 . 1976, p . 18 .

( 6 ) OJ No L 323, 4 . 12 . 1985, p . 12 .

( 1 ) Case 26/76, Metro ( 1977 ) ECR, p . 1875 .

( 48 ) Because of the immediate competition which Bayo-n-ox had to face in the Federal Republic of Germany after the expiry of patent protection for Olaquindox and because of the resulting collapse in prices, each of Bayer AG's German customers became an economically attractive source of supply for Bayo-n-ox purchasers, at least in the adjoining Member States . The contractual elimination of almost all of these sources of supply restricts competition appreciably between the latter and the relevant Bayer distribution companies in particular .

( e ) Effect on trade between Member States

( 49 ) The contractual ban on resale means that goods belonging to an undertaking cannot participate in trade between Member States . However, it remains to be examined whether the effect here is appreciable .

( 50 ) Although Bayer AG has organized its distribution system in such a way that only undertakings operating in the feedingstuffs industry are supplied, it is economically advantageous for such undertakings in circumstances such as the presente to exercise trading activities ( see paragraph 29 ).

( 51 ) Because of Bayer AG's "own-requirements' measures, a number of undertakings are barred from trading activities which account for more than one ( . . . ) % of the German market for growth promoters used with pigs . Since, apart from transport costs, there are no other substantial barriers to access to other markets, it would be possible for Bayo-n-ox purchasers, at least in adjacent markets, to make their purchases from Bayer AG customers, a practice which did indeed actually take place on a considerable scale ( see paragraphs 23 et seq .).

( 52 ) The agreements existing between Bayer AG and its customers thus partition a large proportion of the German market for growth promoters used with pigs from other Community markets and may therefore significantly affect trade between Member States .

( 53 ) The fact that, even after 10 and 11 July 1986, sales of Bayo-n-ox of German origin took place in the adjoining Member States and caused a further decline in prices there does not detract from the liability of the agreements to affect trade . The actual effects of an agreement which by its nature may affect trade have to be determined precisely in only a very small numer of cases . Article 85 ( 1 ) does not require that an agreement in restraint of competition must be successful in achieving its desired effect ( 1 ).

2 . Article 85 ( 3 ) of the Treaty

( 54 ) The agreements which existed between Bayer AG and the undertakings listed in the Annex were not notified to the Commission in accordance with Article 4 ( 1 ) of Regulation No 17 . Nor are they exempt from notification pursuant to Article 4 ( 1 ) of that Regulation, since in particular they relate to "exports between Member States' within the meaning of Article 4 ( 2 ) ( 1 ) of the Regulation .

( 55 ) Even if the agreements had been notified or were exempt from notification, the provisions of Article 85 ( 1 ) could not be declared inapplicable to the agreements pursuant to Article 85 ( 3 ).

( 56 ) The agreements do not improve the production or distribution of goods or contribute to technical or economic progress within the Community . On the contrary, they are liable to compartmentalize a large proportion of an aggregate, cross-frontier market and are therefore prima facie incompatible with the principles of the EEC . In particular, Bayer AG's contention that councelling and sales form an inseparable whole that prevents resale of Bayo-n-ox by Bayer AG's customers does not stand up to examination . Any distribution system that is to be compatible with the common market presupposes that all customers who have acquired the product lawfully within the European Community will be

provided with counselling and other necessary services throughout the European Community . Furthermore, the restrictions imposed on the German purchasers of Bayo-n-ox are not induspensable to the achievement of the objectives cited by Bayer AG ( see paragrph 21 ). If Bayer AG's in fact been to prevent unlawful trade, the content of the agreement should have been restricted to this . For the rest, the question of whether restrictions of competitions arising from the assumption by undertakings of funtions belonging to the regulatory authorities are exempt from the scope of Article 85 may in this context be left open .

3 . Encroachment on the validity of patent rights

( 57 ) Bayer AG objects that a ban on the agreements would undermine its existing industrial property rights for Laquindox in other Member States . Although it could in such countries continue to defend itself against competition in Olaquindox products manufactured by other producers, the distribution of German Bayo-n-ox, whose marketing terms are already geared to competitive pressure from other Olaquindox products, would in such countries lead to the same result .

( 58 ) This objection does not stand up to scrutiny . The legal status of the Bayo-n-ox industrial property rights in other Member States will clearly not be affected by a ban on the agreements . Nor is the exercise of such rights affected to an extent which would wholly undermine their validity and thus infringe the common constitutional principles of the Member States which guarantee property rights in the community legal order .

( 59 ) The substance of a patent right or of an equivalent property right essentially consists in granting the inventor the exclusive right to bring the product on to the market before anyone else . If the inventor decides to sell the product in a Member State in which legal patent protection does not exist or no longer exists for the product, he must accept the consequences of such a decision in so far as trade within the common market is concerned ( 1 ). The right to defend oneself in all the Member States of the Community in which patent protection still exists agaisnt products of other manufacturers that infringe patent law continues to apply without any restriction .

( 60 ) It is part of the Court's established case law that "the proprietor of an industrial or commercial property right protected by the law of a Member State cannot rely on that law to prevent the importation of a product which has been lawfully marketed in another Member States by the proprietor himself or with his consent' ( 2 ).

( 61 ) This principle applying to the legal content of the property right under the Community legal order may not be undermined by agreements falling within the scope of Article 85 ( 1 ) ( 3 ).

4 . Termination of the infringement

( 62 ) Bayer AG, by distributing a new circular on 13 November 1989 effectively terminated its infringement of Article 85 ( 1 ) on that date .

( 63 ) It is not appropriate to limit the finding of the present infringement pursuant to Article 3 of Regulation 17 to that part of the agreement which goes beyond the legal restraints on the ability of purchasers freely to dispose of the goods acquired . There are no indications that Bayer AG and its customers wished such a limited agreement at all; the false legal interpretation adopted by Bayer AG of Article 21 of the German Feedstuffs Order ( see paragraph 21 ) clearly refutes such a wish .

5 . Fine

( 64 ) A fine is imposed pursuant to Article 15 ( 2 ) of Regulation No 17 only on Bayer AG, since the agreements were concluded on the initiative and in the interests of Bayer AG .

( 65 ) Bayer AG intentionally infringed Article 85 from 10 July 1986 until 13 November 1989 .

( 66 ) Bayer AG has not submitted business records clearly showing a direct link between the "own-requirements' measures and the alleged intention ( paragraph 21 ), nor does the Commission have in its possession any such records from another source . On the other hand, such intention cannot be disproved .

( 67 ) Nevertheless, the instructions to the sales department ( paragraph 17 ) and the memo from the legal department described in paragrpah 22 indicate that the competitive position in Germany and its impact on market conditions in other Member States were an important factor behind the initiation of the "own-requirements' measures .

( 68 ) The infringement being assessed here is, morevoer, particularly serious . In 1983, the Commission pointed out that export bans and market partitioning were particularly serous offences ( 13th Report on Competition Policy, point 62 et seq .). A further factor in this case is that, if the distribution system applied by the Bayer group is absued, it could jeopardize the attainment of the common market . This is because of the vertical integration of the distribution function into the Bayer group and because of the

chosen distribution policy of supplying only undertakings in manufacturing industry . If supplies are then quantitatively restricted to the own requirements of the relevant purchaser, the partitioning of market is complete .

( 69 ) A further factor to be taken into account against Bayer AG is the fact that it obstructed the Commission's enquiries in this proceeding . As a result of the letter it sent to its Bayo-n-ox customers on 15 December 1987, the information provided by the undertakings concerned is of reduced value, since it cannot be determined to what extent such information was influenced by the relevant measure taken by Bayer AG .

( 70 ) The amount of the fine must take account of the turnover of Bayer AG and of the undertakings associated with it in Bayo-n-ox in the relevant geographical market ( Federal Republic of Germany, France, Netherlands and Belgium/Luxembourg ) as well as the economic importance of Bayer which is reflected by its total turnover,

HAS ADOPTED THIS DECISION :

Article 4

This Decision is addressed to Bayer Aktiengesellschaft, D _ 5090 Leverkusen .

Done at Brussels, 13 December 1989 .

For the Commission

Leon BRITTAN

Vice-President

( 1 ) Established case law of the Court of Justice of the European Communities; Case 19/77, Miller International Schallplatten GmbH, ( 1978 ) ECR p . 131 .

( 1 ) Case 187/80 Merck v . Stephar ( 1981 ) ECR, p . 2063 .

( 2 ) Loc . cit ., 2082 and the case law cited there .

( 3 ) Case 258/78 Nungesser ( 1982 ) ECR, p . 2082 .