EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
11. Articles 85 and 86 seek to achieve
the same aim on different levels, viz.
the maintenance of effective
competition within the Common
Market. The restraint of competition
which is prohibited if it is the result
of behaviour falling under Article 85
cannot become permissible by the
fact that such behaviour succeeds
under the influence of a dominant
undertaking and results in the'
merger of the undertakings
concerned.
12. The list of abuses contained in Article
86 of the Treaty is not an exhaustive
enumeration of the abuses of adominant
position prohibited by the
Treaty.
Article 86 is not only aimed at
practices which may cause damage
to consumers directly, but also at
those which are detrimental to them
through their impact on an
effective competition structure such
as is mentioned in Article 3 (f) of
the Treaty. Abuse may therefore
occur if an undertaking in a dominant
position strengthens such position
in such a way that the degree of
dominance reached substantially
fetters competition, i.e. that only
undertakings remain in the market
whose behaviour depends on the
dominant one.
If it can, irrespective of any fault,
be regarded as an abuse if an
undertaking holds a position so
dominant that the objectives of the
Treaty are circumvented by an
alteration to the supply structure
which seriously endangers the
consumer's freedom of action in the
market, such a case necessarily exists
if practically all competition is
eliminated.
13. The question of the link of causality
between the dominant position and
its abuse is of no consequence, for
the strengthening of the position of
an undertaking may be an abuse and
prohibited under Article 86 of the
Treaty regardless of the means and
procedure by which it is achieved, if
it has the effect of substantially
fettering competition.
14. The definition of the relevant
market is of essential significance,
for the possibilities of competition
can only be judged in relation to
those characteristics of the products
in question by virtue of which those
products are particularly apt to
satisfy an inelastic need and are only
to a limited extent interchangeable
with other products. In order to be
regarded as constituting a distinct
market, the products in question
must be individualized not only by
the mere fact that they are used for
packing certain products, but by
particular characteristics of production
which make them specifically
suitable for this purpose.
15. A dominant position on the market
for light metal containers for meat
and fish cannot be decisive as long
as it has not been proved that
competitors from other sectors of
the market for light metal containers
are not in a position to enter this
market by a simple adaptation, with
sufficient strength to create a serious
counterweight.
In Case 6/72
EUROPEMBALLAGE CORPORATION, Brussels (Belgium), and CONTINENTAL CAN
COMPANY INC., New York (USA), represented by Alfred Gleiss, Helmuth Lutz,
Christian Hootz, Martin Hirsch and Partners, of the Stuttgart Bar, and Jean
Loyrette, Advocate at the Court of Paris, having chosen their address for
217
JUDGMENT OF 21. 2. 1973 — CASE 6/72
service in Luxembourg in the chambers of Me Georges Reuter, 7, avenue de
l'Arsenal,
applicants,
v
Commission of the European Communities, represented by its legal advisers
Bastiaan Van der Esch and Jochen Thiesing, acting as agents, having chosen
its address for service in Luxembourg in the office of its legal adviser Emile
Reuter, 4, boulevard Royal,
defendant,
Application for annulment of the decision of the Commission of 9 December
1971 relating to a procedure in application of Article 86 of the Treaty Case
IV/26811 — Europemballage Corporation (OJ 1972, L 7),
THE COURT
composed of: R. Lecourt, President, R. Monaco (Rapporteur) and P. Pescatore,
Presidents of Chambers, A. M. Donner and H. Kutscher, Judges,
Advocate-General: K. Roemer
Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Facts and procedure
The facts and procedure may be
summarized as follows:
1. Continental Can Company Inc.
(Continental) of New York (USA), a
company manufacturing metal packages,
packaging materials of paper and plastic
and machines for manufacturing and
using these packages, by successive
purchases during the year 1969, brought
its share in Schmalbach-Lubeca-Werke
AG (SLW) of Brunswick (Germany) to
85 8 % of the nominal capital.
During the same year, Continental
contemplated the formation, with The
Metal Box Company Ltd (MB) of
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
London, of a European holding
company for packaging, in which the
licensees of Continental in the
Netherlands and in France, Thomassen
& Drijver-Verblifa N.V. (TDV) of
Deventer and J. J. Carnaud and Forges
de Basse-Indre (Carnaud) of Paris,
would be invited to participate.
However, Carnaud indicated, at the end
of August 1969, that it could not
participate in the contemplated holding
company.
On 16 February 1970, an agreement was
signed between Continental and TDV
whereby it was agreed:
(a) that Continental would set up in
Delaware (USA) a company
(subsequently called Europemballage
Corporation) to which it would
transfer its interests in SLW;
(b) that Continental would induce
Europemballage to offer to the
shareholders of TDV other than MB
and Carnaud, a sum of 140 florins
cash for each TDV share of 20
florins nominal value. Each TDV
shareholder offering his shares
would also receive a certificate
granting him a preferential right to
purchase ordinary shares in
Europemballage when these should
be offered to the public. Continental
would provide Europemballage with
the necessary funds for such a
purchase by acquiring additional
shares in Europemballage.
In implementation of this agreement:
— on 20 February 1970, a company
called Europemballage Corporation
(Europemballage) was set up in
Wilmington, under the legislation of
the state of Delaware. This company
opened an office in New York and
another in Brussels;
— on 16 March 1970, TDV published
the take-over bid made by
Europemballage.
In March and April, the Commission
drew the attention of the undertakings
concerned to the possible incompatibility
of the transaction contemplated with the
provisions of Article 86 of the Treaty,
and to the legal and financial
consequences which might thereby arise
for these companies. MB then indicated
that it was postponing its contemplated
transaction with Europemballage.
On 8 April 1970, Europemballage
carried out the purchase of the shares
and debentures of TDV offered up to
that date, thus bringing the initial share
of Continental in TDV to 91 07 %.
2. On 9 April 1970, the Commission
decided to open of its own motion a
procedure (in application of Article 3 (1)
of Regulation No 17/62) against
Continental and its subsidiary Europemballage
concerning the acquisition by the
latter of the majority of the shares in
TDV. On completion of that procedure
the Commission made, on 9 December
1971, a decision under Article 86 of the
Treaty which, having set out the reasons
on which it was based concerning the
characteristics of the undertakings in
question, their mutual links on a
personal, financial, contractual and
technical level and, particularly as
regards SLW and TDV, the
characteristics of their production, their
sales on their respective markets, the
exports of one company into the
territory of the other, their competitive
situation, etc., provides as follows:
'Article 1
It is found that Continental Can
Company Inc. of New York, which
holds through the medium of its
subsidiary, Schmalbach-Lubeca-Werke
AG of Brunswick, a dominant position
over a substantial part of the Common
Market on the market for light
packaging for preserved meat, fish and
Crustacea and on the market in metal
caps for glass jars, has abused this
dominant position by the purchase made
in April 1970 by its subsidiary
Europemballage Corporation of approximately
80 % of the shares and
convertible debentures of the Dutch
219
JUDGMENT OF 21. 2. 1973 — CASE 6/72
undertaking Thomassen & Drijver-Verblifa
N.V. of Deventer. This purchase
has had the effect of practically
eliminating competition in the abovementioned
packaging products over a
substantial part of the Common Market.
Article 2
Continental Can Company Inc. is
required to put an end to the
infringement of Article 86 of the Treaty
establishing the EEC found in Article 1.
For this purpose it must submit
proposals to the Commission before 1
July 1972.
Article 3
This decision is addressed to Continental
Can Company Inc. in New York.'
This decision, published in the Official
Journal of the European Communities of
8 January 1972, No L 7 — wherein it is
stated that 'the French language version
is the only authentic version' — was
notified to Europemballage on 14
December 1971 and to Continental Can
by post during the same month. The
German version also was communicated
to counsel for the applicants on 20
December 1971.
This decision is the subject of the present
application, lodged with the Registry of
the Court on 9 February 1972.
3. In the application, and subsequently
by a separate document lodged with the
Registry of the Court on 23 February
1972, the applicants submitted, under
Article 185 of the EEC Treaty, a request
for suspension of execution of Article 2
of the contested decision. The Presidenr
of the Court, after hearing the parties,
rejected this request by order dated 21
March 1972.
On the report of the Judge-Rapporteur,
after hearings the Advocate-General, the
Court decided to open the oral
procedure, after inviting the parties to
reply before 1 September 1972 to a
certain number of questions.
The parties presented oral arguments at
the hearing on 20 September 1972.
The Advocate-General presented his
opinion at the hearing on 21 November
1972.
II — Submissions of the
parties
The applicants submit that the Court
should:
'1. Declare null and void the decision of
the Commission of the European
Communities of 9 December 1971
'IV/26 811 — Europemballage'
finding that in purchasing 80 % of
the shares of the undertaking
Thomassen & Drijver-Verblifa N.V.
of Deventer, through the medium of
its subsidiary Europemballage Corporation,
Continental Can Company
Inc. of New York has infringed
Article 86 of the EEC Treaty,
requiring it to put an end to this
infringement and enjoining it to
submit proposals to the Commission
before 1 July 1972.
2. Hold that under Article 73 (b) of the
Rules of Procedure of the Court of
Justice of the European Communities
the Commission of the European
Communities is required to repay to
the applicants the costs incurred by
the parties in these proceedings.'
The defendant submits that the Court
should:
'dismiss the application and order the
applicants to bear the costs.'
III — Pleas and arguments
of the parties
The pleas and arguments of the parties
may be summarized as follows:
A — General observations
The applicants submit that the
procedure leading up to the adoption of
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
the contested decision involved
irregularities which also had an effect on
that decision:
— First, the statement of reasons for the
objections notified by the Commission
to the interested parties in its
communication of 15 March 1971 is
insufficient, since the Commission
confined itself to expressing its legal
opinion without attempting to give
reasons for it.
— Secondly, the decision taken
essentially reiterated the objections
set out in the abovementioned
communication from the Commission,
without showing any reaction
to the reply which had been made to
this communication on 9 August
1971 and without indicating the
reasons on which its legal opinion
was based. I
— Finally, this attitude is not
compatible with the proper conduct
of the oral hearing provided for by
Article 7 of Regulation No 99/63, so
that in the present case the hearing
was inadequate, the Commission
having confined itself to protesting
against the statement of facts
contained in the reply of 9 August
1971, without its representatives and
those of the other authorities taking
part having asked the slightest
question.
After emphasizing that it is for the
Commission to prove and to give
reasons for its objections, the applicants
refer to the wording of the said reply,
indicating that they rely on it as a
subsidiary document in so far as its
contents are not superseded by the
argument developed in the application.
The defendant replies inter alia as
follows:
— The statement of objections satisfied
the conditions laid down in Article 4
of Regulation No 99/63, since it
indicates clearly — albeit in a concise
form — the essential facts on which
it is based. In its statement the
Commission not only set out the
facts but also explained in what way
the Continental group holds a
dominant position and has abused
that position by purchasing the
majority of the shares of TDV.
— In an administrative procedure under
Regulation No 17/62, the Commission
is not obliged to give reasons for
rejecting the arguments adduced by
the parties. Moreover, the decision
dismissed in favour of the applicants
several points made in the statement
of objections of 15 March 1971.
— According to Article 7 of Regulation
No 99/63, the oral hearing is only
intended to afford an opportunity for
completing or developing the written
observations already submitted under
Article 5. Since the applicants had
made very detailed written observations,
the officials of the Commission
and of the Member States had no
questions to ask at the hearing on 21
September 1971. Moreover, it was
only after a close examination of the
statement of its objections, the reply
of 9 August 1971 and the minutes of
the hearing, that the Commission
issued the decision.
B — Procedure
The applicants call attention to a certain
number of formal irregularities
committed by the Commission, which in
their view suffice to nullify the decision
challenged, particularly:
— lack of 'notification' of the decision
challenged to Continental, at any
rate by the normal, i.e. diplomatic,
channel, Continental having merely
received in December 1971 one or
two letters from the Commission
which had been addressed to it by
post and which it sent back to the
Commission on the advice of its
lawyers;
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JUDGMENT OF 21. 2. 1973 — CASE 6/72
— irregular description in the Official
Journal of the European Communities
of 8 January 1972 of the
procedure opened against Continental,
the French version of the decision
being entitled 'Europemballage
Corporation';
— infringement of the language rules
(Article 3 of Regulation No 1 of the
Council, OJ No 17, 1958), the
Commission having indicated the
French version of the decision as the
authentic version whereas counsel for
Europemballage, authorized to reply
to the Commission's statement of
objections, had indicated in the letter
accompanying his reply that the
German version of this document
should be authentic;
— violation of the rights of the defence,
Article 2 of the decision challenged
specifying Continental whereas the
Commission's statement of objections
(addressed solely to Europemballage)
had not been notified to
Continental, so that the latter had
not had an opportunity to make
known its point of view in
accordance with Article 19 (1) of
Regulation No 17/62;
— the fact that in this case the
Commission has exceeded its powers
since Articles 1 to 3 of the decision
challenged specify Continental,
which, not having a registered office
and not exercising any activity on
the territory of the Member States, is
not, according to the general
principles of the law of nations,
subject to the authority of the
Commission nor to the jurisdiction
of the Court of Justice.
The defendant replies as follows:
— Community law does not require
that notification should be by
diplomatic means. Moreover, even if
the notification of the act challenged
was vitiated by an irregularity, this
irregularity does not justify the
request for annulment submitted by
the applicants.
— The description of the procedure in
the Official Journal is not decisive
for the purposes of the validity of the
decision challenged. It is in any case
indisputable that Continental must
be considered the indirect purchaser
and Europemballage as the direct
purchaser of the majority of the
shares of TDV.
— Since Continental has its registered
office in a third state, the
Commission was entitled, under
Article 3 of Regulation No 1, to
choose any af the four official
languages of the Community. It
chose the French language chiefly
because Europemballage, which
acquired the TDV shares on behalf
of Continental, has an office in
Brussels and had itself drawn up in
French its reply to the Commission's
objections.
— The allegation that Continental did
not have the opportunity to make
known its point of view regarding
the objections made by the
Commission is disproved by a whole
series of facts forming part of the
procedure in question and recorded
in the dossier, and also by the
conclusions which might be drawn
from a statement by Mr Charles B.
Stauffacher, Vice-Chairman of the
Board of Continental Can Company
and Chairman of the Board of
Europemballage Corporation, at the
hearing on 21 September 1971.
— Even on the strict application of the
so-called principle of territoriality,
there is no doubt that States (and the
Community) are entitled to apply
their legislation to acts carried out on
the territory subject to their
sovereignty, whatever may be the
nationality of the authors of those
acts. Continental has indeed acted
within the Community through the
medium of a subsidiary which,
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
although having its own legal
personality, possesses no economic
independence.
The applicants insist on the 'lack of
competence' of the Commission in
relation to Continental, contending that
the behaviour of its subsidiary cannot be
imputed to that undertaking without
violating the fundamental principle of
the autonomy of legal personality.
Furthermore, the legal person which
committed the alleged abuse (Europemballage)
is not the same as that which
held the dominant position (SLW).
The defendant objects that these
arguments are based on purely formal
concepts. Having regard to the purpose
for which Continental set up
Europemballage and to the fact that the
latter, although having legal personality,
has no economic independence, the legal
personality of Europemballage cannot be
taken into account for the purposes of
application of the rules of Community
law on competition. Moreover, a
telegram sent by Continental to the
Commission dated 14 April 1970
indicates that Europemballage was not
yet completely organized at the time
when it published its bid in March 1970.
It did not, therefore, have at that time
any representative who could even in
theory have refused to carry out the
instructions given by the parent
company. Furthermore, it cannot be
disputed that SLW, which holds a
dominant position on the German
market, is placed under the direct
control of Europemballage and under
the indirect control of Continental.
Finally, the references contained in the
memorandum of Me. Loyrette to the
legal situation existing in the Member
States as regards the problem of
imputing the behaviour of a subsidiary
to its parent company are not correct
having regard to the solution given to
this problem in Germany, in the
Netherlands and in Belgium. As for
American anti-trust law, it is clear that
in that law companies which form a unit
from the economic point of view are
considered as a legal whole even if each
of them has a distinct legal personality.
Finally, the defendant objects to the
lodging by the applicants of a
memorandum drawn up by counsel for
Continental in New York, Mr Helmer
Johnson. This memorandum cannot be
taken into account, first because its
author is not qualified under the
provisions of Article 17 of the Protocol
on the Statute of the Court and secondly
because he does not fulfil the conditions
of Article 29 (3) of the Rules of
Procedure. Subject to these objections,
the defendant observes that the
arguments of Mr Johnson on the
problem of 'competence' reflect ideas
borrowed from American law which are
inappropriate in applying Community
law, for which it suffices that the effects
of the behaviour in question are
produced within the Common Market.
C — Merits
The discussion on the merits of the
dispute between the parties is concerned
with the legal problems bound up with
the interpretation of Article 86 of the
Treaty and with its application to
concentrations of undertakings, and with
the factual questions underlying the
contested act.
1. Interpretation of Article 86:
'dominant position' and 'abuse of
dominant position'
The applicants contend that the concept
of abuse enunciated by the Commission
(part II, consideration C, 23) arises from
a legal conception whose object is to
make Article 86 of the Treaty an
instrument for controlling concentrations,
in disregard of the objective
content and scope of this provision.
This conception is contrary to the results
arrived at by an objective analysis of
Article 86 in the light of various criteria
of interpretation:
— The very wording of this Article
shows that it is not concerned with the
223
JUDGMENT OF 21. 2. 1973 — CASE 6/72
creation or reinforcement of dominant
positions nor with facts which might
impede them or bring them to an end.
The preparatory work on the Treaty
contains nothing to militate against this
conclusion. Moreover, a comparison
between the ECSC Treaty and the EEC
Treaty shows that whilst Article 85 of
the EEC Treaty is essentially in line with
Article 65 of the ECSC Treaty, Article 66
of the ECSC Treaty has not been
subsumed by Article 86 of the Treaty of
Rome except for the part relating to the
'dominant position' (Article 66 (7) ). If
the legislator had also intended to set up
under the latter Treaty a control of
concentrations and a possibility of
dissolving them, it would have been easy
for him to include in it provisions
analagous to those of Article 66 (1) to
(6) of the former Treaty.
In striving to achieve a preconceived
result in the sphere of competition
policy, the Commission has far exceeded
the limits of a teleological or dynamic
interpretation. To attain the desired
result it cannot base itself on Article
3 (f) of the EEC Treaty, for the rule laid
down by that provision is merely a
framework rule, which the authors of
the Treaty have only made specific in
Article 86 by prohibiting certain forms
of abuse of a dominant position, without
however laying down any provisions on
the creation or the enlargement of that
position, which are phenomena of a
structural nature.
— These conclusions are confirmed by
an analysis of the constituent elements of
Article 86. In defining in its decision the
concepts of 'dominant position' and
'abuse of dominant position', the
Commission has introduced a distinction
within the process of 'domination' which
is not to be found in Article 86. It has
allotted two phases to this process, one
consisting in the 'possibility of
independent behaviour', the other in the
'reinforcing of the dominant position
with the elimination of residuary
competition, potential or effective', and
it has identified the second phase with
the concept of 'abuse'.
The first phase quite simply defines the
ability of the entrepreneur to exercise a
substantial influence on the market
situation, and corresponds both to the
natural inclination of the entrepreneur
and to the typical characteristics of a
market economy. This is why Article 86
does not take it into account. It is only
the second phase that is indicative of a
situation where economic power attains
the degree of intensity necessary and
sufficient for the concept of 'dominant
position'. By wrongly identifying this
phase with a case of 'abuse' the
Commission has misconstrued the
meaning and structure of Article 86 of
the Treaty. In this way it has arrived at
an erroneous conception of the meaning
of dominant position and of abuse of
this position, and has applied it
erroneously to the present case.
(a) Dominant position
The concept of 'dominant position'
adopted in the decision in question (part
II, consideration B, 3) is, according to
the applicants, purely theoretical. First it
is based on an unrealistic criterion, which
can only with difficulty be subjected to
judicial control. The existence in the
present case of 'independent behaviour'
such as excessive prices, scarcity of
goods, deterioration in quality, has not
been proved anywhere in the disputed
decision. If the Commission's view were
correct, it would follow that the
Continental group would be in a
position to increase its profits or at least
to maintain them at the same level
without having to take any account of
its competitors. However, the contrary
has occurred since the acquisition of the
TDV shares, the net profit of SLW in
1971 having fallen in relation to 1969.
Furthermore, the only concrete fact
produced by the Commission in support
of its objection relates to the share of the
market held by this company. But even
supposing that this element were
correctly calculated it does not suffice to
224
EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
prove the existence of a dominant
position, since it gives no indication of
the effective margin of action available
to the undertaking. The existence or the
maintenance of a dominant position is
not necessarily linked with the share of
the market held by the undertaking, but
with various factors liable to arise on
that market from time to time. By reason
of the increased dynamism of technology
and of present-day markets a dominant
position might today be changed to the
point of disappearing more rapidly than
the material and geographical boundaries
of the market which it is supposed to
dominate.
Furthermore, to establish the existence
of a dominant position — which implies
the need to define the 'relevant market'
— any production other than that
concerning the products in question
cannot be taken into account, but must
be considered in the context of
competition by alternative products.
The defendant replies that the
application of Article 86 to the present
case rests fairly and squarely on
objective facts which the applicants
cannot dispute. It is incorrect that the
existence in this case of a dominant
position had to be proved by the
'behaviour' mentioned by the applicants.
Such practices in fact constitute cases of
'abuse' of a dominant position.
Moreover, the argument based on the
alleged decline in the profits of SLW is
not such as to call in question the
existence of such a position. If SLW had
really made less profit in 1971, it is not
easy to see why Continental has recently
made an offer to the independent
shareholders of SLW still remaining,
who hold about 14 % of the share
capital, to purchase their shares at a rate
equal to 375 %.
The applicants reply that the purchase of
the remaining SLW shares was decided
upon by Continental with a view to
clarifying its relations with the minority
shareholders. The defendant observes
that it is not sufficient to refer to figures
to support a 'fall in profits', but for this
purpose it is necessary to take into
account numerous factors extending
over several financial years.
(b) Abuse of dominant position
The applicants then criticize the concept
of 'abuse' adopted in the contested
decision (part II, consideration C, 23 and
24), which they contend is based on an
erroneous interpretation of the scope of
Article 86.
This Article sets out in its second
paragraph various types of behaviour on
the part of undertakings which are
regarded as abuse. Whilst it is true that
the phrase 'in particular' makes it clear
that this list is not exhaustive, it is
nonetheless true that the cases listed in a
legislative provision, even by way of
example, reveal the intention of the
legislator and indicate implicitly the kind
of situations he envisaged.
In this case, it is clear from this
enumeration that the kind of practices
aimed at by Article 86 are behaviour
having direct effects on the market. This
conclusion also applies to the case
mentioned in item (b) of the said
paragraph. The explicit reference to the
prejudice which the behaviour mentioned
must cause to consumers shows
that such behaviour cannot simply
consist of practices internal to the
undertaking or of a structural character.
Admittedly, it is not excluded that the
phrase 'in particular' is intended to allow
for the case where a concentration has
been achieved under the effect of a
constraint exercised by an undertaking
which uses its dominant position for this
purpose. But where, as in the present
case, the concentration has been made
possible without any pressure being
exercised, by the offer made to the
shareholders to purchase their shares at
favourable prices, there can be no
question of abuse.
Quite apart from these considerations,
Article 86 of the Treaty requires at least
the existence of a link of causality
between the dominant position and its
abuse. By reason of this link, action
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cannot be taken against Continental for
infringement of Article 86 unless it
appears that it has used the allegedly
dominant position of SLW in the Federal
Republic of Germany with a view to
purchasing the shares of TDV in the
Netherlands. Such a link, however, is
lacking in the present case, from which it
is apparent that there has not been any
use of a dominant position within the
meaning of Article 86. Continental could
have bought the shares of TDV on the
capital market without having control of
SLW, and even if the latter company had
not existed. More, it would even have
been impossible in the present case to
use such a position on the market in the
products in question.
It is also apparent, from the definition of
dominant position adduced in the
decision itself and from the link of
causality described above, that the abuse
must occur on the same market as is
allegedly dominated, or, to put it more
strictly, on a market in similar products.
This requirement also is not fulfilled in
the present case.
Continental did not purchase the shares
of TDV either on the market in products
in relation to which there is, according
to the Commission, a dominant position
in Germany, nor on the German market
in other products in the packaging
industry. Nor did the purchase of TDV
shares take place on the market in these
products in the Netherlands, but solely
on the market in shares and debentures.
The disputed aquisition of TDV shares,
therefore, as regards both its subject
matter and its geographical limits, took
place on a market other than the one
allegedly dominated.
The defendant shares the view that
Article 86 of the Treaty does not afford
a basis for effective intervention in
advance in a process of concentration.
However, the contested decision has
nothing to do with the problem of prior
control of concentrations in the sense of
Article 66 of the ECSC Treaty, so that
the observations made on this subject by
the applicants are not relevant in the
present case.
The defendant, moreover, does not see
whence the applicants have drawn their
conclusions on the intention of the
legislator at the time of drawing up
Article 86 of the Treaty, since the
proceedings of the inter-governmental
conference which drew up the text of the
Treaty in 1956-1957 have not been
published. It is only on the basis of a
process of exegesis with due regard to
the fundamental objectives of the
Community that the content and scope
of Article 86 can be discerned. The
method of interpretation followed by the
Commission is in conformity with the
nature of the Treaty which, as a
framework treaty, entrusts to the
Commission the task of seeing to its
application, under the judicial control of
the Court, with a view to ensuring the
correct functioning and development of
the Common Market.
Since the concept of abuse has not been
defined in Article 86, it is necessary in
the Commission's opinion to take
account, first of all, of the objectives and
purposes which the Treaty has laid
down for the Community, and then to
take into consideration the examples of
abuse cited by Article 86 itself.
It is clear from Article 2 of the Treaty
that the Community has as its task inter
alia, by establishing the Common
Market, to promote throughout the
Community a harmonious development
of economic activities and an accelerated
raising of the standard of living in the
Member States. For this purpose the
contracting parties considered it
absolutely necessary to guarantee the
maintenance of an effective system of
competition (Article 3 (f) of the Treaty).
In the context of such a system, the
concept of abuse is linked with the
existence of behaviour on the part of an
undertaking which is 'objectively' illicit
in relation to the purposes of the Treaty.
Since the 'objective' existence of such
behaviour is sufficient to establish an
abuse contrary to the Treaty, the
concept of abuse of dominant position in
Article 86 does not therefore imply that
there is also a fault in the sense of a
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failure in propriety or morality. It does
not matter, for example, whether in the
present case the applicants paid, as they
allege, a fair purchase price to the
shareholders of TDV. The real problem
is whether the applicants have by this
acquisition practically eliminated the
competition which existed or at least
was possible in these products between
TDV and SLW at the date of the
transaction in question.
The abovementioned behaviour might
take place in relation to competitors
(real or potential) as well as in relation
to suppliers and users. The allegation
that the prohibition of Article 86 is
concerned only with certain abusive
behaviour on the market is without
foundation, as is apparent from Article
86 (b). In the examples of abusive
behaviour cited by this provision, there
is no question of behaviour on the
market, but of measures internal to an
undertaking. The Treaty imposes
restrictions on undertakings in a
dominant position even in the matter of
internal measures, with a view to
protecting consumers from any
prejudice. It suffices in this connection,
to give rise to a presumption of abuse,
that the behaviour has prejudicial effects
for consumers.
The applicants base themselves also on
an erroneous conception of the link of
causality within the meaning of Article
86, particularly as regards the argument
that the abuse of a dominant position
must take place on the same market as
that on which the undertaking holds
such a position.
The question whether there is or is not
an abuse of a dominant position depends
on the situation created on the market
where the dominant undertaking
exercises its activity.
The defendant concludes by specifying
that since the market in question extends
at least from the north of Benelux to the
centre of the Federal Republic of
Germany the abuse of a dominant
position affects trade between Member
States within the meaning of Article 86
of the Treaty.
The applicants reply that on the
practical level, the situation of the
undertaking concerned in a case of
subsequent control is even less
favourable than in that of prior control,
particularly since Article 86, unlike
Article 85 (3) of the EEC Treaty and
Article 66 of the ECSC Treaty, confines
itself to prohibiting purely and simply
the abuse of a dominant position
without providing any possibility of
authorization.
The Commission must, then, in the
present case, investigate whether there is
an abuse of a dominant position, that is
to say illicit behaviour involving damage
to the detriment of suppliers,
competitors, or customers. It cannot
'evade' this concept of abuse, to appeal
solely to concepts as vague as 'the
objectives of the Treaty'.
Furthermore, the defendant itself has
considered it indispensable that the
behaviour of a dominant undertaking
should in fact lead to prejudice to
consumers, which has not been the case
here. Also Article 86 (b) supposes the
existence in fact, nor merely the
theoretical existence, of such prejudice.
If the Commission is seeking indirectly
to apply this provision, it cannot rely on
the argument that the acquisition of the
TDV shares amounts to 'limiting
production, markets.. .' since the
production of metal cans and its
technical development at increasingly
favourable prices has progressed in
Europe, thanks to Continental, to the
benefit of consumers. If, on the other
hand, the Commission is seeking to use
Article 86 (b) to indicate a situation by
way of example, it cannot continue to
see in this situation a case of 'measures
internal to an undertaking', since it is
clear from the words 'to the prejudice of
consumers' in this Article that the
behaviour regarded as an abuse of a
dominant position must have a bearing
on the market involving the consumer.
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Finally, the applicants believe that they
can discern the origin of the argument
adduced by the Commission:
— in an erroneous conception from the
outset on the subject of interpretation,
which has led the Commission
to interpret the relevant rules of the
Treaty according to the principles
applicable in American anti-trust
legislation, whose sources, philosophy
and history are, however,
different from those of the
competition law created by the six
Member States, and in certain
theoretical studies on competition,
which they analyse briefly.
After citing certain literature in support
of their argument, the applicants
conclude by asserting that there is an
obvious contradiction between the
prohibition of the merger of large-scale
undertakings and the industrial policy
laid down by the Commission, the
European Parliament and the Economic
and Social Committee.
The defendant in its rejoinder puts
forward the view that the applicants are
mistaken in thinking that undertakings
are in a less favourable position in the
case of retrospective control of mergers
than in the case of antecedent control.
The defence submits that the applicants
in this line of argument fail to recognize
that Article 66 of the ECSC Treaty made
all mergers subject to prior approval and
that as a result the freedom of action of
undertakings was more severely
restricted than in a situation where the
authorities can retrospectively demand
measures of dissolution. In addition,
Community law offers undertakings the
possibility of making sure about the
Commission's verdict on any intended
behaviour, as they can apply for a
negative clearance under Article 2 of
Regulation No 17.
The defendant goes on to make its
standpoint more precise by attempting,
in view of the silence of the provisions
on this point, to develop the scope of
Article 86 on the basis of the examples
cited in the second paragraph, especially
that mentioned in sub-paragraph (b). It
argues that this latter example shows
that even so-called 'internal' measures,
i.e. actions which are not directly aimed
at the market, fulfil the conditions for
abuse and are thus forbidden, if they are
damaging to consumers. The reason for
this is obvious. If one or several
undertakings has a dominant position,
then this results in a limitation of
competition and a serious restriction of
consumers' freedom in obtaining
supplies. Article 86 expressly forbids the
abuse of this dependence of the
consumers on these undertakings. The
detriment to the consumers becomes
even more serious if an undertaking in a
dominant position, by means of a merger
with its remaining competitors, further
restricts consumers' freedom of choice.
This is even more true in the present
case, in which the applicants, by means
of a merger with the last remaining
serious competitor, have practically
eliminated the competition still
remaining in the relevant market.
In addition, it is argued, an
interpretation of the general clause of
Article 86 in the light of the examples
given in the second paragraph suggests
that Article 86 prohibits undertakings in
a dominant position from engaging in
practices which are permissible for a
'normal' undertaking. Such actions, even
if adopted by a normal undertaking
cannot be viewed as fitting in with the
aims of the Treaty; however, they are
less damaging, both for trading partners
and competitors and for consumers,
since the normal undertaking, which is
exposed to competition, runs the risk in
the long run of losing its customers to
other suppliers. The undertaking in a
dominant position is, however, not
exposed to this risk. 'Limiting
production, markets, ... etc.', leads, in
consequence of the dominant position,
directly to the detriment of consumers,
who have at their disposal only
insufficient possibilities, or none at all,
of changing to products offered by other
undertakings.
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In the same way a merger of two
comparatively small undertakings that
had previously been in competition with
one another could indeed bring about a
noticeable restriction of competition, but
it does not lead to the elimination of all
effective competition, because trading
partners and consumers still have
sufficient possibilities of alternative
choice. But if, on the other hand, an
undertaking in a dominant position, by
means of a merger with the last serious
competitor, totally excludes all
competition, then possibilities of choice
for trading partners and consumers no
longer exist.
Thus the applicants' thesis that a direct
link of causality must exist between the
dominant position and the acquisition of
the majority shareholding in TDV, so
that the dominant position had been
used as the instrument of abuse
becomes, it is argued, untenable. Such a
use of the dominant position might
admittedly be in the background to the
cases quoted as examples in
sub-paragraphs (a), (c) and (d) of Article
86, but in the case of sub-paragraph (b)
and the present case this point has no
significance.
2. The facts underlying the disputed
decision
The applicants are of the view that the
statement of reasons for the disputed
decision is insufficient, incomplete or
erroneous, both with regard to the facts
of the case and with regard to the
conclusions drawn from them by the
Commission. The description of the facts
of the case in particular is said to
contain a series of 'background claims',
which are devoid of substance and could
give the superficial observer the
impression that an extensive conspiracy
against competition was at work. There
can be no justification for saying that
there is any plan by Continental to
merge its European participations within
the framework of Europemballage.
Moreover, as far as the decision on the
legal dispute is concerned, what is
important is not what the firms
Continental and Europemballage might
possibly have intended to do, but what
they have actually done.
To this, the defendant makes objection
that the description of the facts in the
case is by no means incorrect or
insufficient, but in connection with the
conclusions drawn from it gave a precise
picture of the actual market conditions.
A totally false picture would have arisen
if the disputed decision had not taken
into consideration Continental's position
in the packaging industry and in
particular in the market for all light
metal containers, as well as its economic,
financial and technical importance.
In addition, the defendant maintains its
position that there was a plan by
Continental to extend its dominant
position in Europe by means of the
purchase of existing undertakings. In this
connection the defendant draws
attention to a section (on pages 7 and 8)
of Annex 1 of the reply.
The applicants and the defendant go on
to discuss several points in the statement
of reasons for the decision and in
particular the following sections:
'The facts' (part 1 of the statement of
reasons for the decision)
Characteristics of SLW: Consideration
B 2
The applicants declare that the number
of SLW's employees, its profit and its
invested capital were in 1971 less than
the Commission stated. In addition four
of the plants mentioned in the decision
had been closed on account of
insufficient profitability.
To this, the defendant replies that the
data contained in the decision described
the state of affairs at the time of the
events reported. If the number of
employees had decreased in 1971, this
was most probably to be attributed to
measures of rationalization after the
merger with TDV.
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Continental's licensees and their
freedom to sell: Consideration D 1
The applicants argue, in opposition to
what is stated in the decision, that
Continental's licensee is 'always' and not
only 'in principle' free to sell the
products manufactured under licence
outside his territory. The sale of the
products made under licence by
competitors of the applicants is not
restricted by the licence system, but by
the variety of specifications desired by
the users in different countries.
To the statement of the defendant that
licensees had agreed on limitations of
competition among themselves in the
framework of the so-called market
information system described in section
b of consideration D 4, the applicants
reply that this market information
system has nothing to do with the
question in dispute.
SLW's total sales of metal cans:
Consideration E 4
The applicants contest the correctness of
the figures mentioned in the decision in
dispute as far as the percentage share of
cans for meat products in SLW's total
sales is concerned. These figures actually
include the sales of cans for animal
foods, which are in a category of their
own that is quite distinct. To be able to
survey the total position of SLW, one
would have to take into consideration,
in addition to the light metal containers,
every other activity of SLW in the
packaging field (plastic containers,
cardboard, paper, machinery and
apparatus, etc.). The low percentage
shares, within SLW's total sales, actually
occupied by the figures mentioned in the
decision shows that these figures do not
have the importance attributed to them
by the Commission (cf. Annex 8 of the
application).
The defendant points to the fact that the
statement of SLW's and TDV's total
sales in 1969 is based on the data which
SLW and TDV had made available to
the Commission. SLW itself had not
differentiated between cans for meat
products and cans for animal foods.
These latter cans are not, moreover, a
separate and quite distinct category from
meat cans. Official German statistics do
not include a special category called
'cans for animal foods'. Since the
decision is only concerned with light
metal containers, in which the applicants
hold a dominant position through the
medium of SLW, further data were not
required. It is not claimed in the decision
that Continental (through Europemballage
as well as through SLW and TDV)
possesses a dominant position in other
types of packaging. The data in Annex 8
of the application moreover confirm that
SLW's turnover predominantly arises
from the sale of metal containers.
To this, the applicants reply that cans
for animal foods and meat cans are two
separate categories, which are differentiated
in particular by their intended
application. If SLW did not report the
figures for animal food cans separately,
that was because the Federal Statistical
Office, for reasons of confidentiality,
does not and cannot distinguish between
these two categories.
The defendant objects that cans for
animal foods have no particular
characteristic attributes: they can also be
filled with other products, especially
meat, for human consumption. In
addition the applicants themselves admit
that SLW is the only producer of these
cans in Germany. If one accepts the
applicants' point of view that there was
a particular separate market for these
products, then one would come to the
conclusion that the applicants have a
monopoly position in that market.
Shares of the market held by TDV:
Consideration F
The applicants state that TDV's share of
the market in meat cans in Holland was
not as large as the Commission alleges,
because imports by Cebal (France)
occupied a small share of the market.
Also as far as beer cans were concerned,
the alleged percentage is no longer
correct, on account of the imports of the
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
firm Kaiser-Aluminium (Germany)
which after the merger has become a
serious competitor in the market for this
kind of packaging in the Netherlands.
Besides, these cans do not form part of
the 'relevant market', and have nothing
to do with meat cans, if only because the
type of machinery required for the
production of these cans is different in
the two cases.
Finally, as far as the cans for fish and
crustacea are concerned, the percentage
mentioned by the Commission gives a
misleading picture of the real situation,
since there was only a very restricted
market in Holland in this field, in which
TDV's turnover in 1970 had shown a
tendency to fall rapidly.
The defendant replies that at the time of
the disputed merger TDV was almost
the only supplier of cans for meat
products and for beer in the
Netherlands. The imports of Cebal and
Kaiser-Aluminium had been minimal;
and they had essentially not started until
after the merger. In the case of cans for
fish and Crustacea, TDV is still the only
supplier in the Netherlands. Even if there
was something of a fall in this market,
this was far and away compensated by
the rapid development of the market for
beer cans.
Substitute products: Consideration H
The applicants are of the view that the
importance of competition by substitute
products would become clearer, if it had
been mentioned under section 3 of this
consideration that 99 % of the beer sold
in small containers is put into glass
bottles and that glass is used for by far
the majority of preserved fruits, jams,
instant coffee and baby foods.
To this, the defendant objects that it is
generally well known that for a number
of preserves there is competition by
substitutes, that is glass packaging, and
thus it had been unnecessary to make
special mention of it. However, the
decision did expressly refer to this
circumstance.
Change in the type of packaging:
Recital I
The applicants are of the view that the
Commission failed to indicate that the
users' choice of type of packaging is not
determined by the 'various criteria'
mentioned in the decision, because all
large scale packers can at practically any
time change over from one means of
packaging to another, and in fact do so.
To the objection of the defendant that a
change in the type of packaging, for
which considerable investment is
required, is for smaller and middle-sized
firms bound up with considerable
difficulties, and poses problems even for
large undertakings, the applicants put
forward an estimate of the cost of a
glass-filling machine with a capacity of
150 glass jars per minute.
The defendant objects that the change
from one type of packaging to another is
not only a question of costs. The
peculiarities of the products to be
packed, as well as the habits of
consumers, also restrict the possibilities
of such a change.
3. The 'economic assessment' of the
facts found by the Commission
(a) The 'dominant position'
— SLW's share of the market
The market in cans for meat
products and fish: Recital B, 5 and 6
The applicants dispute the allegation
that SLW has in the Federal Republic of
Germany a share of the market in cans
for meat products of between 70 and
80 %. After the defendant has put
forward figures in support of its
estimate, the applicants reply that the
calculation is incorrect, because the
figures for other competitors apart from
Züchner, and also the figures for
imports, are missing. The applicants, on
their part, put forward a new calculation
giving the result that the share of SLW
of the market in meat cans comes to
65 %.
In addition, as far as the market for fish
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cans in concerned, the Commission has
not taken into consideration the fact that
glass and plastic containers, with a
market share of about 30 %, with a
tendency, in the case of the latter, to a
slight increase, represent essential
competition between these products and
metal cans.
To the objection of the defendant that in
the case of preserved fish products, glass
receptacles and plastic containers on the
one hand, and metal cans on the other,
are hardly in competition with one
another because they are used almost
exclusively for the packing of products
of different kinds, the applicants remark
that metal is also used for products that
are not sterilized and that glass is also
used for 'genuine' preserves.
The defendant replies that in the light of
the weak position of other suppliers and
importers a market share of 65 % in the
case of meat cans would in itself suffice
for the assumption of a dominant
position of SLW in this market. In actual
fact, however, SLW's shares of the
market must be much higher. The
applicants' estimates are incorrect
because they take into consideration
cans imported from Germany. It must be
assumed that the import and export of
cans for meat and animal foods are in
approximately the same ratio as is stated
in the decision in dispute (Part I, Recital
J, 1) for the import and export of open
cans for preservatives of every kind in
1969, viz. 6 : 5.
As far as the market for fish cans is
concerned, the defendant refers to a
passage in SLW's annual report for 1969,
from which it appears that SLW had
increased its turnover in this product
(page 16 of the rejoinder).
The market for metal caps: Recital B, 7
The applicants argue that it is incorrect
to state that SLW has a 50 to 55 % share
of the market in metal caps in Germany.
Besides this, the market in metal caps
has peculiarities which preclude the
existence of a dominant position even
more clearly than in the case of cans for
fish and meat.
In the first place the problem of
transport is of no importance at all in
the case of these products, and in the
second place 'White Caps' are produced
in about 47 countries by licensees who
are not obliged to observe any territorial
restrictions in the sale of their products,
and in fact sell them within whatever
geographical area they can reach.
The defendant in reply puts forward a
calculation made on the basis of the
official German statistics for 1969 and
data supplied by SLW: from these, it is
argued, it can be concluded that SLW's
share of the market in Germany in metal
caps for glass containers (of the
'twist-off type) comes to 52 %.
As far as the peculiarities of the market
are concerned, while it is theoretically
correct that other metal caps can be
imported into Germany without special
difficulties and without high transport
costs, users prefer the 'twist-off type of
cap, which Continental has legally
protected by patents and which may
only be produced by its licensees. In
Germany SLW is practically the only
undertaking supplying metal caps of the
'twist-off type and the machines
necessary for their use, because the
licensees in other countries only
exceptionally export these caps to
Germany.
The applicants reply that the
calculations of the defendant are
incorrect and that SLW's share of the
market in metal caps only comes to
about 42 %. The Commission's estimate
is based on a gap in the official German
statistics, which could be explained by
an error (since corrected) in the figures
supplied by one of the SLW plants.
Moreover, the applicants dispute the
suggestion that the licensees in other
countries only exceptionally export
'twist-off caps to Germany. For
example, Metal Box supplies a number
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
of German customers, as also does the
firm le Bouchage Mécanique, which
belongs to the Saint Gobain Group. The
preference of users for caps of this type
cannot be blamed on the applicants,
because there are sufficient substitute
products for closing glass receptacles.
The defendant does not accept the
explanation given by the applicants as
regards the alleged inaccuracy of the
official statistics on this point. If this
explanation is correct, then the
applicants omitted to declare no less
than 46 % of their production of metal
caps, and this seems scarcely credible.
Moreover, the statements of the
applicants cannot be reconciled with
their own data about SLW's share of the
market in all types of metal closures
(Part I of the decision, Recital F, d). If
the share of the market in metal caps
were reduced in accordance with the
applicants' explanation, then the share
of the market in crown corks would
have to be raised correspondingly, so
that the total market share cited by SLW
would again be reached. This share
would then be clearly higher than SLW
had reached according to the defendant's
investigations in 1969.
In the decision it has also been taken
into consideration that metal closures
(including metal caps) were imported
into Germany (at this point the
defendant refers to Part I, Recitals G
and I, 1 c of the decision).
Finally, there could be no question of
the applicants being blamed for the
consumers' preference for 'twist-off
caps. Glass containers could be closed
with three different types of caps
('twist-off, 'Pano' or 'Omnia'), but in
each case they are produced for a
definite type of cap. TDV produces all
three kinds of cap, so that the applicants
can now offer also products which could
be used as a substitute for 'twist-off
caps. At the time of the merger, TDV
exported metal caps to Germany in
fairly large quantities. Since then two
production lines for 'twist-off caps have
been removed by TDV to Germany.
The market in metal containers for
beverages: Recital B, 8 a and b
In the opinion of the applicants the
description of the market for beverage
containers given by the Commission, in
sub-section a, gives the impression that
although SLW was not, even in the
Commission's view, in a dominant
position in the total market for beverage
packaging, it was very strong on the
market in metal containers. A strong
position in the case of containers for
beer and other beverages is, however, of
no significance, since for example 99 %
of packaged beer is bottled, and in the
case of fresh milk, the metal can has
practically no share of the market at all
(the applicants refer to Annex 9 to the
application).
In 8 b) the Commission was apparently
trying to give the impression that SLW
had a strong position in the market for
plastic packaging for fish as well. At the
same time no consideration was paid to
the fact that fish, apart from fish
preserves and marinated fish products, is
mainly marketed fresh, frozen or
smoked. In addition fish frequently
comes in containers provided by the
producers themselves.
The defendant points out that the
decision itself makes it clear that for the
packing of liquid nourishment, glass
containers have the first place. But it
correctly states that SLW, with the share
of the market mentioned, has a strong
position in the field of metal' containers
for beverages.
In b) the decision states that SLW also
manufactures plastic containers with
various applications, so that it is in a
position to deliver such packaging for
fish products. The argument that fish is
mainly marketed fresh or frozen has no
value. The same is true for meat, fruit
and vegetables.
The applicants remark that it is of no
importance whether SLW is in a position
to deliver plastic packaging for fish as
well, but whether SLW actually does
make such deliveries.
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The supply of machinery and the
scope of the production programme:
Recitals B 9, 10, 11 and 13
The applicants point out that
Continental's advantage in producing
certain machines itself for the production
and use of light metal containers does
not establish any dominant position for
SLW on the German market. No
customer of SLW uses Continental
machines for the production of cans, for
the simple reason that the cans are sold
ready-made by SLW. Users who made
their own packaging exclusively used
machines of suppliers other than
Continental. Besides, no closing
machines manufactured by Continental
are being used by SLW's customers.
SLW's product diversification, it is
stated, is brought about largely by
differences in the types and dimensions
of the products themselves. Small
enterprises are more adaptable than
SLW, because they have a relatively
broad production programme due to
semi-automated techniques, and this
allows them to change over easily to
many different products. SLW, in order
not to lose its customers to such smaller
producers, now has, regardless of
production costs, to offer too many
diverse products: that obviously does
not strengthen its market position.
Finally the conclusions reached by the
Commission in Recitals 10, 13 and 14
with regard to the position held by
Continental in the relevant market,
especially on the basis of its technical
experience and economic and financial
strength, were insufficiently based upon
facts and not proven.
The defendant objects that the fact that
an undertaking not only manufactures
packaging, but also the machinery
necessary for the production and use of
the packaging, must in the long run
provide it with a technical lead and
therefore with an advantage over its
competitors who only make packaging.
In claiming that no closing machine
manufactured by Continental was being
used by SLW's customers, the applicants
were apparently failing to take into
consideration the fact that both SLW
and the International Machinery
Corporation (Belgium) manufacture such
machines under licence from Continental
for sale in Europe. Besides, the
applicants cannot deny that the major
manufacturers of metal containers
mentioned in Recital 10 are
Continental's licensees and rely on its
know-how.
Finally, it is argued, it is indisputable
that the extensive production programme
makes it possible for SLW to
offer users almost all desired types of
packaging. By this means SLW has a
competitive advantage, because for
reasons of convenience users prefer to
obtain all the packaging they need from
the same supplier. Finally, the statement
in Recital 13 that Continental has, owing
to its size, easier access to the
international capital market than smaller
undertakings is indisputable.
With regard to the supply of machines
the applicants reply that there are
enough suppliers of packaging machines
that are independent of the applicants to
exclude the possibility of SLW having a
technical lead in the long run, and
therefore a competitive advantage, over
competitors who only manufacture
packaging. SLW did not manufacture
any closing machines under licence from
Continental and moreover there is an
abundance of competing suppliers of
such machines.
Dealing with the production programme,
the applicants make the point that whilst
it may be convenient for purchasers to
buy all the packaging they require from
the same manufacturer, what is decisive
is the fact that they are at liberty to
obtain it elsewhere. Naturally Europemballage
has considerable financial
backing from Continental. But that does
not make it different from other
undertakings active in the European
packaging market. American Can, Saint
Gobain, and Metal Box, for example,
have the same access to the capital
market, and this access is therefore no
234
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special peculiarity of the Continental
Group.
Over against this, the defendant remarks
that it is not only convenient for users,
but almost unavoidable, to buy all cans
from the same manufacturer. In
addition, it is necessary to use for the
filling and closing of cans machinery and
other apparatus provided by the
manufacturer of the cans. Many of the
cans manufactured by the undertakings
of the Continental Group are made in
such a way that they can only be filled
and closed by a certain type of machine.
As far as this necessity does not arise
from technical data, the undertakings of
the Continental Group create it
artificially by supplying machines and
additional apparatus only on hire, and
only on condition that they are used
exclusively for cans manufactured by
them. That is evident, for example, from
paragraph 1 (b) of the standard hire
contract used by SLW in Germany.
In addition, the claim that SLW
manufactures no closing machines under
licence from Continental is incompatible
with SLW's annual report for 1969 and
with the fact established during the
examination of the case that of a total of
37 licensing agreements concluded with
SLW, 7 referred to Continental closing
machines.
Competition by substitutes: Recital B,
16 a
The applicants dispute the arguments
that light metal packaging is not
interchangeable with other kinds of
packaging. It is, they say, not correct
that the contents of metal packages can
be sterilized or pasteurized after closure
more quickly than is the case with glass
jars. In the Federal Republic fruit is
sold more frequently in jars than in
metal containers. In Holland unsweetened
condensed milk is practically only
sold in glass jars. In the Federal Republic
it is sold in metal containers as well, but
these are made mainly by the sellers
themselves. In addition, in the Federal
Republic only 169 % of vegetable oils
and fats are supplied in metal containers
while chemicotechnical products are
predominantly supplied in plastic
containers.
The defendant, after pointing out that
the applicants do not dispute that meat
and fish preserves are predominantly
packed in metal cans, goes on to say that
no reference was made in the decision
on this point to any particular national
market. The claim of the applicants with
regard to the packaging of edible oils
and fats, moreover, does not refute the
argument that olive oil is mainly sold in
metal containers.
The applicants counter this last point by
saying that there is no separate market
for olive oil — which only represents
5 % of the total vegetable oil market —
and that glass bottles are used alongside
metal cans for olive oil, too.
Competition of major buyers: Recital
B 18
The applicants express their astonishment
at the conclusions reached by the
Commission in this recital. It cannot, in
their opinion, seriously be claimed that
technological progress and favourable
prices are 'prohibited as incompatible
with the Common Market'. On account
of these advantages, they say, the
large-scale buyers prefer to obtain their
cans from SLW and TDV, although they
could on the basis of their market
strength manufacture them themselves.
As is apparent, moreover, from (amongst
other sources) a report of the British
Monopolies Commission in 1970, the
container industry, which is so dynamic
and strong in Great Britain today, is
built on technology imported from the
United States. In this framework the
granting of licences has been of
inestimable value to the licensees.
The applicants go on to make the point
that five customers take 27 % of SLW's
meat can production and four customers
take up to 53 % of its fish can
production. Two of these customers
have a greater market power than SLW,
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and themselves manufacture packaging
for other purposes. Here, it is stated, a
development can be observed, which
consists of a reduction in the number of
customers and an increase in their
proportional share of their purchases
from SLW; this development will
continue as long as the customers'
demand increases.
The defendant counters on the first
point that this paragraph of the decision
by no means was intended to forbid
technological progress and favourable
prices as incompatible with the Common
Market, but confined itself here to the
objective listing of those elements which
indicated the existence of a dominant
position on the market.
In addition one must not under-estimate
the significance of the contacts between
Continental and its European licensees.
A note made by Mr P. C. (correctly:
R. C.) Hietink about a meeting of the
Board of Directors of TDV on 15
October 1969 illustrates this.
On the second point the defendant
remarks that while 27 % of SLW's
production of meat cans goes to five
customers, 23 % of this production is
supplied to a large number of buyers, so
that it is not possible to speak in this
sector of a buyers' power of demand.
And in the case of fish cans, too, where
the situation is possibly somewhat less
favourable, it could not be said that the
buyers are in a particularly strong
position, particularly as the remaining
47 % of the production was delivered to
numerous smaller purchasers. On top of
this, the applicants themselves continually
rely on the argument that the market
for fish cans is a shrinking and relatively
unimportant one.
To this, the applicants counter that as
far as the power of demand of SLW's
buyers is concerned, Unilever, for
example, the biggest customer for meat
and fish cans, is in a position at any time
to manufacture its own cans, which it
does, incidentally, in other spheres. Both
SLW and TDV can only supply their cans
to Unilever if they satisfy Unilever's
requirements and give that undertaking
no grounds for manufacturing the cans
itself. The same is true for the other
customers. Even if only one of the five
major buyers of meat cans from SLW
were to stop purchasing them, that
would endanger its whole production, to
the disadvantage of all the other buyers,
or in any case would make it more
expensive. The applicants support this
point with the percentages of the meat
cans actually sold by SLW in 1969. And
if the market for fish cans is contracting,
this can only strengthen the power of
customers' demand still further.
On this point, the defendant argues that
Continental's technical lead in fact
guarantees its dominant position
vis-à-vis the buyers of the cans, who
would in fact meet with very great
difficulties if they were to try to engage
in manufacture of their own cans.
The difficulties which, according to the
arguments of the applicants, a
manufacturer of cans would meet with,
if he wished to change his supplier of
tinplate (cf. on this point the arguments
on Recital C set out later), would be
much greater for a purchaser who
wished to begin manufacturing his own
cans, because he would not have the
experience and the knowledge which the
Continental Group has at its disposal for
the manufacture of technically perfect
cans. In face of these obstacles, even an
undertaking with the financial power of
Unilever is discouraged. In addition, this
undertaking is not a particularly large
purchaser of metal packaging, because it
uses other forms of packaging for the
major part of its products.
(b) Abuse of a dominant position
Potential competition between SLW
and TDV: Recital C 25
The applicants argue that if the
Commission includes fish cans amongst
the three markets in which SLW is
allegedly dominant, this category of
products is not a valid criterion of
evaluation in the case of TDV, because
there is practically no market for fish
cans in the Netherlands.
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
In addition the claims that SLW could
have competed with TDV in the Benelux
countries through the firm of
Schuybroek in Antwerp, and TDV could
have competed with SLW in Germany
through the firm of Tedeco in Hamburg,
are purely theoretical and unfounded.
To begin with, SLW's share in
Schuybroek only comes to 45 % and
that of TDV in Tedeco only to 50 %.
Such shares are not sufficient to make
the partly-owned company sell products
of the competing, even if shareholding,
enterprise.
Another point which should not be
overlooked is the fact that an American
undertaking with independent powers of
decision, the Illinois Tool Works,
participates with a share of 50 % in the
firm Tedeco, which operates in any case
on a different market, that for plastic
containers.
Secondly, it is stated, competition
between TDV and SLW in the German
market is not possible, simply because of
the lack of standardization of
dimensions and can specifications. In the
case of meat cans the German
production is almost entirely aimed at
the home market, whereas more than
75 % of the cans manufactured by TDV
are designed for export. In the case of
fish cans, German consumers did not
wish to use the types and specifications
of TDV cans, and still do not wish to do
so. In addition, competition between
these undertakings in the Benelux
market has been and is still difficult
because, apart from any other
circumstances, tinplate has been dearer
for a long time in the Federal Republic
than in those countries. To the remark
of the defendant on this last point, that
such a large consumer as SLW could
obtain supplies also from other
manufacturers in the Community,
especially in the Benelux countries or in
third countries (for example Japan), the
applicants reply that this remark is not
realistic. Modern technology requires for
the manufacture of tinplate containers a
very close cooperation between the
supplier of this metal and the customer.
To change suppliers would entail high
costs for the manufacturer of the cans
and a long period of adaptation would
be unavoidable. Besides other factors,
supplies from other countries (e.g.
Japan) did not give any genuine
possibility of alternative choice on
account of the very close cooperation
between supplier and processor which
was necessary, quite apart from freight
costs.
Besides, there has not only been
practically no competition between TDV
and SLW across frontiers before the
merger, and there could not be even
today on account of reasons not
connected with the merger, but also no
orders had come from other countries
which were more favourably situated as
regards transport, at least for part of the
products, and such orders were hardly
coming in even today (e.g. from France,
Denmark or England).
If, on the other hand, the Commission
laid such great value on potential
competition, it should also have taken
into consideration the potential
competition after the enlargement of the
Community, for example that from
Metal Box for metal closures of the
'White Cap' type, in the case of which
distances are of no consequence, and
that of Haustrup (Denmark) for meat
cans, because Denmark is so close to the
relevant markets. The Commission
contradicts itself by saying, on the one
hand, that it does not expect any
substantial competition in the future
from manufacturers outside the
Continental Group, yet it expects on the
other hand that potential competition
would arise in the case of a dissolution
of the merger between SLW and TDV.
Even the French firm Ferembal, which
was not concerned in the agreements
alleged by the Commission to be in
restraint of competition, exports very
little to Belgium and Germany, although
its geographical position would have
made this very possible.
To the defendants objection that
Ferembal, which moreover has a link
with Carnaud, is trying to penetrate the
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German market, but is only able to do
so in certain areas in Southern Germany,
the applicants reply that it is not obvious
why Ferembal cannot penetrate further,
since the Commission itself says that a
distance of 1 000 km need not be any
economic hindrance for the transport of
packaging.
The defendant goes on to state that in
view of the turnover achieved by TDV
in the years 1967 to 1970 in the case of
fish cans, it cannot be claimed that there
is practically no market in the
Netherlands for fish cans. What is
decisive is the fact that TDV
manufactures fish cans and could have
entered into competition with SLW in
this market in Germany, all the more
because in the case of smaller packages,
transport distances up to 1 000 km are
economically possible.
In addition, the defendant maintains its
position that competition could have
arisen between SLW and TDV. It is of
the opinion that SLW with the help of
its share in the firm Schuybroek and
TDV with the help of its share in
Tedeco could particularly easily have
become active in each other's sphere.
This seems in particular plausible in the
case of Tedeco, just because it is active
in a quite different market from TDV,
and is not in competition with it. TDV's
share in Tedeco is admittedly only 50 %,
but the remaining 50 % is only a financial
share, which exerts no influence
on business decisions. As far as the firm
Schuybroek is concerned, this firm
manufactures only crown corks and
general line cans, so that only 44 % of
SLW's production programme corresponds
with that of Schuybroek. It is
therefore conceivable that Schuybroek
could have become active in the market
in the Benelux countries for the remaining
56 % of SLW's production.
The weakness of competition in the
packaging industry is caused by the fact
that all the major enterprises are
licensees of Continental and are linked
with one another by various
relationships and agreements. The
smaller enterprises, on account of the
superiority of the big ones, can work
practically only in such areas and in
such particular markets as the big ones
leave accessible to them. As far as the
possibility of any competition by the
Group PLM-Haustrup is concerned, it
was stated, this undertaking (Continental's
licensee in Scandinavia) has up to
now — and probably for the reasons
indicated above — abstained from
entering into any competition with SLW
and TDV in the market for metal
packaging.
The applicants refute the argument of
the defendant as to the consequences
which the system of licensing criticized
has for competition in the packaging
industry. Continental's licensees, it is
said, have had quite different reasons for
concentrating in the first place on their
home markets, and have never been
influenced in this respect by Continental,
not even obliquely by means of licences.
The reasons are mainly production
specifications, packaging specifications,
and consumer preferences. The smaller
enterprises are not active only in markets
which the applicants 'left accessible' to
them, but competed even with the
applicants with offers at cut prices.
The defendant maintains its viewpoint
and remarks in conclusion, on the
potential competition between SLW and
TDV, that the argument based on the
tinplate price in Germany is two-edged,
because if SLW really had to pay more
for tinplate than TDV, then it must be
all the easier for TDV to enter into
competition with SLW in the German
market. The defendant goes on to
remark that the figures given for the
import and export of containers to and
from Germany (part I of Recital J 1 c of
the contested decision) prove that the
claims of the applicants are very
exaggerated, according to which the
differing specifications and consumer
preferences make the exchange of cans
between different countries, and in
particular between the Benelux States
and the Federal Republic of Germany,
practically impossible. If these claims
were correct then neither the market
238
EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
information system nor the 'Commercial
Commission' formed in 1968 (part I of
Recital D 4 b and c of the contested
decision) would have been necessary for
Continental. It had been the aim of these
arrangements, it is argued, to limit or
control international competition both
between the participants and from third
parties.
Self-manufacture by major buyers:
Recital C 30 e
The applicants argue that it is not
correct that — as is claimed in this
recital — only the major buyers have the
possibility vis-à-vis the SLW-TDV
Group of manufacturing for themselves
the packaging materials they require.
The Belgian firm Talpe — a
medium-sized undertaking producing
tinned vegetables — began in 1971
manufacturing all its cans itself.
The defendant remarks that its statement
is not weakened by the fact that in one
individual case a medium-sized
enterprise in the canning industry has
begun to manufacture vegetable cans
itself (quite apart from the fact that cans
for vegetables are for technical reasons
the easiest to manufacture). To this, the
applicants reply that it is sufficient for a
few of the larger buyers to change over
to manufacturing their own cans to
make SLW's plant unprofitable. (For
further arguments, cf. above, Recital I, B,
18).
Grounds of judgment
1 By an action commenced on 9 February 1972, the applicants sought
annulment of the Commission's decision of 9 December 1971, finding that
Continental Can Company Inc. (hereinafter called Continental) had infringed
Article 86 of the EEC Treaty by acquiring, through the Europemballage
Corporation (hereinafter called Europemballage), approximately 80 % of the
shares and convertible debentures of Thomassen & Drijver-Verbliva N.V.
(hereinafter called TDV).
A — On the irregularity of the administrative
procedure
2 (a) The applicants argue that the contested decision was irregular on account
of the fact that Continental had been given no opportunity to state its point
of view in the administrative procedure in accordance with Article 19 of
Regulation No 17/62 of the Council and Article 7 of Regulation No 99/63
of the Commission. Therefore, it was argued, the decision offended against
the right of being heard.
3 It is established that the applicants, by letter of 14 May 1970 sent through
their representative, requested the Commission, which had previously directed
its enquiries as to the acquisition of the TDV shares and debentures to
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JUDGMENT OF 21. 2. 1973 — CASE 6/72
Continental, to apply in future to Europemballage. From the minutes supplied
by the applicants of the hearing of the parties on 21 September, 1971, it is
moreover clear that amongst the people taking part in this hearing was Mr
Charles B. Stauffacher, in his capacity as a member of the Board of Directors
of both the applicants. From these circumstances it is clear that Continental
has had the opportunity to state its case in the administrative procedure.
4 (b) The applicants also argue that the statement of objections of 15 March
1971 was not accompanied by a sufficient statement of reasons, for the
Commission had simply cited its objections without mentioning the
supporting reasons. The statement of reasons in the decision was also
insufficient since it merely repeated the statement of objections of 15 March
1971 without taking into consideration the reply given by the affected parties
on 9 August 1971, and also because it made no mention of supporting-reasons
for the objections made.
5 As far as the first plea is concerned, Article 4 of Regulation No 99/63 states
that the Commission should only take into consideration in its decisions those
objections on which the addressee has had the opportunity to express an
opinion. The statement of objections fulfils this requirement as it indicates
the essential facts on which the Commission bases its case in an admittedly
concise, but nevertheless clear form. In its communication of 15 March 1971
the Commission clearly presented and stated the essential facts on which it
based its objections and indicated the extent of the dominant position held by
Continental and how it had been abused. The criticisms made of the statement
of objections are therefore unfounded.
6 As far as the second plea is concerned, the Commission is admittedly obliged
to provide the reasons for its decision, but it does not need to refute all the
arguments adduced during the administrative proceedings.
7 (c) The applicants go on to discern a formal error in the contested decision,
since the administrative proceedings are headed 'Continental Can Company'
in the Official Journal of the European Communities of 8 January 1972,
whereas the French version, which alone is authentic, is entitled 'Europemballage
Corporation'.
8 This circumstance, however, on account of the economic and legal links
between Continental and Europemballage, cannot affect the validity of the
contested measure.
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
9 (d) The applicants go on to argue that the contested decision was irregular
because it was not duly notified to Continental. The undertaking had
received one or two letters from the Commission by post in December 1971,
although the decision should have been notified through diplomatic channels.
10 A decision is properly notified within the meaning of the Treaty, if it reaches
the addressee and puts the latter in a position to take cognizance of it. This
was so in the present case, because the contested decision actually reached
Continental and the latter cannot make use of its own refusal to take
cognizance of the decision in order to render this communication ineffective.
11 (e) The applicants finally claim that the Commission offended against
Article 3 of Regulation No 1/58 of the Council on the regulation of the
language system for the European Economic Community, by describing the
French text of the contested decision as authentic instead of the German one.
12 According to Article 3 of the abovementioned Regulation, written documents,
which any organ of the Community sends to a person subject to the jurisdiction
of a Member State, are to be drawn up in the language of that State.
As the applicants have their registered office in a third state, the choice in the
present case of the official language of the decision had to be based on what
relations existed within the Common Market between the applicants and one
state or another of the Community. Europemballage had opened an office in
Brussels and set out its written observations in the administrative procedure
in French. The facts of the case being as indicated, it is not evident that the
choice of the French language as the official language of the decision offended
against Article 3 of Regulation No 1/58 of the Council.
13 The pleas based on formal errors in the administrative procedure must
therefore be dismissed.
B — On the competence of the Commission
14 The applicants argue that according to the general principles of international
law, Continental, as an enterprise with its registered office outside the
Common Market, is neither within the administrative competence of the
Commission nor under the jurisdiction of the Court of Justice. The Com-
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JUDGMENT OF 21. 2. 1973 — CASE 6/72
mission, it is argued, therefore has no competence to promulgate the contested
decision with regard to Continental and to direct to it the instruction
contained in Article 2 of that decision. Moreover, the illegal behaviour against
which the Commission was proceeding, should not be directly attributed to
Continental, but to Europemballage.
15 The applicants cannot dispute that Europemballage, founded on 20 February
1970, is a subsidiary of Continental. The circumstance that this subsidiary
company has its own legal personality does not suffice to exclude the
possibility that its conduct might be attributed to the parent company. This
is true in those cases particularly where the subsidiary company does not
determine its market behaviour autonomously, but in essentials follows
directives of the parent company.
16 It is certain that Continental caused Europemballage to make a take-over
bid to the shareholders of TDV in the Netherlands and made the necessary
means available for this. On 8 April 1970 Europemballage took up the shares
and debentures in TDV offered up to that point. Thus this transaction, on the
basis of which the Commission made the contested decision, is to be attributed
not only to Europemballage, but also and first and foremost to Continental.
Community law is applicable to such an acquisition, which influences market
conditions within the Community. The circumstance that Continental does
not have its registered office within the territory of one of the Member States
is not sufficient to exclude it from the application of Community law.
17 The plea of lack of competence must therefore be dismissed.
C — On Article 86 of the Treaty and abuse of a
dominant position
18 In Articles 1 and 2 of the Commission's decision of 9 December 1971
Continental Can is blamed for having infringed Article 86 of the EEC Treaty
by abusing the dominant position which it allegedly held through SchmalbachLubeca-Werke
AG of Brunswick (hereinafter called SLW) in a substantial
part of the Common Market in the market for light metal containers for
meat, meat products, fish and crustacea as well as in the market for metal
closures for glass jars. According to Article 1 the abuse consists in Continental
having acquired in April 1970, through its subsidiary Europemballage, about
80 % of the shares and debentures of TDV. By this acquisition competition
242
EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
in the containers mentioned was practically eliminated in a substantial part
of the Common Market.
19 The applicants maintain that the Commission by its decision, based on an
erroneous interpretation of Article 86 of the EEC Treaty, is trying to introduce
a control of mergers of undertakings, thus exceeding its powers. Such an
attempt runs contrary to the intention of the authors of the Treaty, which is
clearly seen not only from a literal interpretation of Article 86, but also from
a comparison of the EEC Treaty and the national legal provisions of the
Member States. The examples given in Article 86 of abuse of a dominant
position confirm this conclusion, for they show that the Treaty refers only
to practices which have effects on the market and are to the detriment of
consumers or trade partners. Further, Article 86 reveals that the use of
economic power linked with a dominant position can be regarded as an abuse
of this position only if it constitutes the means through which the abuse is
effected. But structural measures of undertakings — such as strengthening
a dominant position by way of merger — do not amount to abuse of this
position within the meaning of Article 86 of the Treaty. The decision
contested is, therefore, said to be void as lacking the required legal basis.
20 Article 86 (1) of the Treaty says 'Any abuse by one or more undertakings of
a dominant position within the common market or in a substantial part of it
shall be prohibited as incompatible with the common market in so far as it
may affect trade between Member States'. The question is whether the word
'abuse' in Article 86 refers only to practices of undertakings which may
directly affect the market and are detrimental to production or sales, to
purchasers or consumers, or whether this word refers also to changes in the
structure of an undertaking, which lead to competition being seriously
disturbed in a substantial part of the Common Market.
21 The distinction between measures which concern the structure of the
undertaking and practices which affect the market cannot be decisive, for any
structural measure may influence market conditions, if it increases the size
and the economic power of the undertaking.
22 In order to answer this question, one has to go back to the spirit, general
scheme and wording of Article 86, as well as to the system and objectives of
the Treaty. These problems thus cannot be solved by comparing this Article
with certain provisions of the ECSC Treaty.
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23 Article 86 is part of the chapter devoted to the common rules on the
Community's policy in the field of competition. This policy is based on
Article 3 (f) of the Treaty according to which the Community's activity shall
include the institution of a system ensuring that competition in the Common
Market is not distorted. The applicants' argument that this provision merely
contains a general programme devoid of legal effect, ignores the fact that
Article 3 considers the pursuit of the objectives which it lays down to be
indispensable for the achievement of the Community's tasks. As regards in
particular the aim mentioned in (f), the Treaty in several provisions contains
more detailed regulations for the interpretation of which this aim is decisive.
24 But if Article 3 (f) provides for the institution of a system ensuring that
competition in the Common Market is not distorted, then it requires a fortiori
that competition must not be eliminated. This requirement is so essential that
without it numerous provisions of the Treaty would be pointless. Moreover,
it corresponds to the precept of Article 2 of the Treaty according to which one
of the tasks of the Community is 'to promote throughout the Community a
harmonious development of economic activities'. Thus the restraints on
competition which the Treaty allows under certain conditions because of the
need to harmonize the various objectives of the Treaty, are limited by the
requirements of Articles 2 and 3. Going beyond this limit involves the risk
that the weakening of competition would conflict with the aims of the
Common Market.
25 "With a view to safeguarding the principles and attaining the objectives set
out in Articles 2 and 3 of the Treaty, Articles 85 to 90 have laid down general
rules applicable to undertakings. Article 85 concerns agreements between
undertakings, decisions of associations of undertakings and concerted
practices, while Article 86 concerns unilateral activity of one or more
undertakings. Articles 85 and 86 seek to achieve the same aim on different
levels, viz. the maintenance of effective competition within the Common
Market. The restraint of competition which is prohibited if it is the result
of behaviour falling under Article 85, cannot become permissible by the fact
that such behaviour succeeds under the influence of a dominant undertaking
and results in the merger of the undertakings concerned. In the absence of
explicit provisions one cannot assume that the Treaty, which prohibits in
Article 85 certain decisions of ordinary associations of undertakings restricting
competition without eliminating it, permits in Article 86 that undertakings,
after merging into an organic unity, should reach such a dominant position
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
that any serious chance of competition is practically rendered impossible.
Such a diverse legal treatment would make a breach in the entire competition
law which could jeopardize the proper functioning of the Common Market.
If, in order to avoid the prohibitions in Article 85, it sufficed to establish such
close connections between the undertakings that they escaped the prohibition
of Article 85 without coming within the scope of that of Article 86, then, in
contradiction to the basic principles of the Common Market, the partitioning
of a substantial part of this market would be allowed. The endeavour of the
authors of the Treaty to maintain in the market real or potential competition
even in cases in which restraints on competition are permitted, was explicitly
laid down in Article 85 (3) (b) of the Treaty. Article 86 does not contain the
same explicit provisions, but this can be explained by the fact that the system
fixed there for dominant positions, unlike Article 85 (3), does not recognize
any exemption from the prohibition. With such a system the obligation to
observe the basic objectives of the Treaty, in particular that of Article 3 (f),
results from the obligatory force of these objectives. In any case Articles 85
and 86 cannot be interpreted in such a way that they contradict each other,
because they serve to achieve the same aim.
26 It is in the light of these considerations that the condition imposed by
Article 86 is to be interpreted whereby in order to come within the prohibition
a dominant position must have been abused. The provision states a certain
number of abusive practices which it prohibits. The list merely gives examples,
not an exhaustive enumeration of the sort of abuses of a dominant position
prohibited by the Treaty. As may further be seen from letters (c) and (d) of
Article 86 (2), the provision is not only aimed at practices which may cause
damage to consumers directly, but also at those which are detrimental to them
through their impact on an effective competition structure, such as is
mentioned in Article 3 (f) of the Treaty. Abuse may therefore occur if an
undertaking in a dominant position strengthens such position in such a way
that the degree of dominance reached substantially fetters competition, i.e.
that only undertakings remain in the market whose behaviour depends on the
dominant one.
27 Such being the meaning and the scope of Article 86 of the EEC Treaty, the
question of the link of causality raised by the applicants which in their opinion
has to question exist between the dominant position and its abuse, is of no
consequence, for the strengthening of the position of an undertaking may be
an abuse and prohibited under Article 86 of the Treaty, regardless of the means
and procedure by which it is achieved, if it has the effects mentioned above.
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D — On the facts set forth in the statement of reasons
in the decision
28 The Commission based its decision, inter alia, on the thesis that the acquisition
of the majority holding in a competing company by an undertaking or
a group of undertakings holding a dominant position may, in certain
circumstances, amount to an abuse of this position. This is the case, according
to the Commission, if an undertaking in a dominant position strengthens such
position through a merger in such a way that real or potential competition
in the goods concerned is in practice eliminated in a substantial part of the
Common Market.
29 If it can, irrespective of any fault, be regarded as an abuse if an undertaking
holds a position so dominant that the objectives of the Treaty are circumvented
by an alteration to the supply structure which seriously endangers the
consumer's freedom of action in the market, such a case necessarily exists,
if practically all competition is eliminated. Such a narrow precondition as the
elimination of all competition need not exist in all cases. But the Commission,
basing its decision on such elimination of competition, had to state legally
sufficient reasons or, at least, had to prove that competition was so essentially
affected that the remaining competitors could no longer provide a sufficient
counterweight.
30 In order to justify its thesis the Commission viewed the consequences of the
disputed merger from various angles. In this respect a distinction has to be
made in the statement of reasons for its decision between four essential
elements:
(a) the present market share of the combined undertakings in the products
concerned,
(b) the relative proportions of the new unit created by the merger compared
to the size of potential competitors in this market,
(c) the economic power of the purchasers vis-a-vis that of the new unit, and
(d) the potential competition of either the manufacturers of the same
products, who are situated in geographically distant markets, or of other
products made by manufacturers situated in the Common Market.
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EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION
In examining these various factors the decision on the one hand is based on
the vary high market share already held by SLW in metal containers, on the
weak competitive position of the competitors remaining in the market, on
the economic weakness of most of the consumers in relation to that of the
new unit and on the numerous legal and factual links between Continental
and potential competitors; and, on the other hand, on the financial and
technical difficulties involved in entering a market characterized by a strong
concentration.
31 The applicant contests the exactitude of the data on which the Commission
basis its decision. It cannot be concluded from SLW's market share, amounting
to 70 to 80 % in meat cans, 80 to 90 % in cans for fish and crustacea and
50 to 55 % in metal closures with the exception of crown corks — percentages
which moreover are too high and could not be proved by the
defendant —, that this undertaking dominates the market for light metal
containers. The decision, moreover, excluded the possibility of competition
arising from substitute products (glass and plastic containers) relying on
reasons which do not stand up to examination. The statements about
possibilities of real and potential competition as well as about the allegedly
weak position of the consumers are therefore, in the applicants' view,
irrelevant.
32 For the appraisal of SLW's dominant position and the consequences of the
disputed merger, the definition of the relevant market is of essential
significance, for the possibilities of competition can only be judged in relation
to those characteristics of the products in question by virtue of which those
products are particularly apt to satisfy an inelastic need and are only to a
limited extent interchangeable with other products.
33 In this context recitals Nos 5 to 7 of the second part of the decision deal in
turn with a 'market for light containers for canned meat products', a ‘market
for light containers for canned seafood', and a 'market for metal closures for
the food packing industry, other than crown corks', all allegedly dominated
by SLW and in which the disputed merger threatens to eliminate competition.
The decision does not, however, give any details of how these three markets
differ from each other, and must therefore be considered separately. Similarly,
nothing is said about how these three markets differ from the general market
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for light metal containers, namely the market for metal containers for fruit
and vegetables, condensed milk, olive oil, fruit juices and chemico-technical
products. In order to be regarded as constituting a distinct market, the
products in question must be individualized, not only by the mere fact that
they are used for packing certain products, but by particular characteristics
of production which make them specificially suitable for this purpose.
Consequently, a dominant position on the market for light metal containers
for meat and fish cannot be decisive, as long as it has not been proved that
competitors from other sectors of the market for light metal containers are
not in a position to enter this market, by a simple adaptation, with sufficient
strength to create a serious counterweight.
34 Besides, there are in the decision itself indications which make one doubt
whether the three markets are to be considered separately from other markets
for light metal containers, indications which rather lead one to conclude that
they are parts of a larger market. In the first part of the statement of reasons,
where, under letter J, it deals with the main competitors of SLW in Germany
and of TDV in Benelux, the decision mentions a German undertaking which
holds a higher share of production of light metal containers for fruit and
vegetables than SLW, and another one which supplies 38 to 40 % of the
German demand for crown corks: this seems to confirm that the production
of metal cans for meat and fish cannot be considered separately from the
production of metal cans for other purposes and that, when considering the
production of metal closures, crown corks must not be left out. Furthermore,
the decision, when examining the possibilities of competition by substitutes,
does not — in No 16 of its second part — confine itself to the three relevant
'markets', but deals with the market for light metal containers for other
purposes as well; in this connection it states that these containers could be
replaced by containers made of other material to a limited extent only. The
fact that the Commission could not maintain this allegation in view of the
facts put forward by the applicants in the course of the proceedings, proves
in itself how necessary it is sufficiently to define the market concerned in
order that the relative strength of the undertakings in such a market might
be considered.
35 Since there are in the decision no data on the particular characteristics of
metal containers for meat and fish and metal closures (other than crown
corks) designed for the food packing industry, whereby these goods constitute
separate markets which could be dominated by the manufacturer holding
the highest share of this market, it is for this reason characterized by an
uncertainty which has an effect on the other statements, from which the
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decision infers the absence of real or potential competition in the market in
question. As regards in particular competition by other manufacturers of
metal containers, the Commission argued in the course of the proceedings
in Court that Continental licensees 'agreed upon restrictions of competition
within the framework of the so-called market information system described ...
under D 4 b', but it claims, on the other hand, that TDV and SLW had had
‘the possibility of entering into competition with each other’. The argument
put forward in No 19 of the statement of reasons that the plants of certain
manufacturers in the countries bordering on Germany were located too far
away from most German consumers to enable the latter to decide to use
them as a permanent source of supply, has not been substantiated. Moreover,
this argument is difficult to reconcile with the allegation in No 25 (a) that
the break-even distances for the transport of empty containers are 150-300
kilometres for the relatively large containers, and 500-1 000 kilometres for
smaller ones. In addition, it is uncontested that transport costs are of no
essential significance in the case of metal closures.
36 Besides, as far as potential competition from large consumers capable of
manufacturing their own cans is concerned, the decision alleges in No 18
that such competition is out of the question due to the heavy capital investments
involved and the technical lead of the Continental Group in this field,
whereas in the last paragraph in J No 3 it is stated that in the Belgian market
the Marie Thumas cannery through its subsidiary Eurocan makes metal
containers for its own use and for sale to other consumers. This contradiction
is a further indication of the Commission's uncertainty with regard to the
definition of the market or markets concerned. In letter (e) of No 30 of the
statement of reasons in the decision, it is stated that 'except for Marie
Thumas/Eurocan, manufacturers of their own cans do not make more than
they themselves need and are not suppliers of empty metal containers', while,
on the contrary, under K No 2, second paragraph, it says that certain German
firms who manufacture their own had begun to market their surplus output
of metal containers. It can be concluded from all this that some undertakings
which have begun to manufacture their own containers were able to overcome
the technological difficulties, yet the decision does not contain any criteria
for evaluating the power of competition of these undertakings. These considerations
show further contradictions which, likewise, affect the validity of
the decision contested.
37 All this leads to the conclusion that the decision has not, as a matter of law,
sufficiently shown the facts and the assessments on which it is based. It must
therefore be annulled.
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Costs
38 Under Article 69 (2) of the Rules of Procedure the losing party is to be
ordered to bear the costs.
The defendant has lost its case.
On those grounds,
Upon reading the pleadings;
Upon hearing the report of the Judge-Rapporteur;
Upon hearing the oral arguments of the parties;
Upon hearing the opinion of the Advocate-General;
Having regard to the Treaty establishing the European Economic Community,
especially Articles 2, 3, 85 and 86;
Having regard to the Protocol on the Statute of the Court of Justice of the
European Economic Community;
Having regard to the Rules of Procedure of the Court of Justice of the
European Communities;
THE COURT
hereby:
1. Annuls the decision of the Commission of 9 December 1971 on a
procedure under Article 86 of the EEC Treaty (IV/26.811 — Europemballage
Corporation)
2. Orders the defendant to bear the costs of the proceedings.
Lecourt Monaco Pescatore
Donner Kutscher
Delivered in open court in Luxembourg on 21 February 1973.
A. Van Houtte
Registrar
R. Lecourt
President
250