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THE COURT OF JUSTICE DECLARES THAT GERMANY HAS FAILED TO IMPLEMENT PROPERLY THE COMMISSION'S DECISION ORDERING THE RECOVERY OF STATE AID GRANTED TO WestLB

«(Failure of a Member State to fulfil obligations – Measure implemented by the Federal Republic of Germany for the bank Westdeutsche Landesbank Girozentrale (WestLB) – Merger of the Wohnungsbauförderungsanstalt des Landes Nordrhein-Westfalen (WfA) with WestLB – Resulting increase in own funds of WestLB – Remuneration of the Land as sole shareholder in WfA – Commission Decision 2000/392/EC – Obligation to recover the illegal State aid – Failure to implement)» Summary of the Judgment 1.. State aid – Recovery of unlawful aid – Application of national law – Suitability of measure adopted for producing the same effect on the conditions of competition as repayment State aid – Recovery of unlawful aid – Application of national law – Suitability of measure adopted for producing the same effect on the conditions of competition as repayment 2.. Actions for failure to fulfil obligations – Proof of failure – Burden of proof borne by the Commission – Failure to fulfil obligation to recover illegal aid – Recovery allegedly effected by means other than cash payment – Duty of Member State to provide information (Arts 88(2) EC and 226 EC) Actions for failure to fulfil obligations – Proof of failure – Burden of proof borne by the Commission – Failure to fulfil obligation to recover illegal aid – Recovery allegedly effected by means other than cash payment – Duty of Member State to provide information 3.. Actions for failure to fulfil obligations – Non-compliance with a Commission decision concerning State aid – Pleas in defence – Absolute impossibility of implementation (Art. 88(2) EC) Actions for failure to fulfil obligations – Non-compliance with a Commission decision concerning State aid – Pleas in defence – Absolute impossibility of implementation JUDGMENT OF THE COURT (Sixth Chamber)12 December 2002 (1) ((Failure by a Member State to fulfil its obligations – Measure implemented by the Federal Republic of Germany for the bank Westdeutsche Landesbank Girozentrale (WestLB) – Merger of the Wohnungsbauförderungsanstalt des Landes Nordrhein-Westfalen (WfA) with WestLB – Resulting increase in own funds of WestLB – Remuneration of the Land as sole shareholder in WfA – Commission Decision 2000/392/EC – Obligation to recover the illegal State aid – Failure to implement))applicant, vdefendant, THE COURT (Sixth Chamber),,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 20 September 2001,gives the followingFactsOn those grounds, THE COURT (Sixth Chamber),SchintgenGulmann Skouris MackenCunha Rodrigues R. Grass J.-P. Puissochet RegistrarPresident of the Sixth Chamber 1 – Language of the case: German. Language of the case: German.

baf87-5a81b70-42ec

EN

THE COURT DECLARES INADMISSIBLE THE REFERENCE FOR A PRELIMINARY RULING ON THE COMPATIBILITY OF THE BELGIAN LAW ON GIVING EVIDENCE IN LEGAL PROCEEDINGS AND THE LUXEMBOURG LAW ON BANKING SECRECY WITH THE PRINCIPLE OF FREE MOVEMENT OF SERVICES

«(Freedom to provide services – Banking activities – Employee of a credit institution established in a Member State and canvassing for clients in another Member State – National legislation on banking secrecy – Refusal to answer questions and to give evidence in a judicial investigation)» Summary of the Judgment Preliminary rulings – Jurisdiction of the Court – Limits – Questions submitted in a context precluding a useful answer – Question based on a hypothetical interpretation of a national law other than the national court's own law – Question inadmissible unless there is a specific statement of reasons(Art. 234 EC)Preliminary rulings – Jurisdiction of the Court – Limits – Questions submitted in a context precluding a useful answer – Question based on a hypothetical interpretation of a national law other than the national court's own law – Question inadmissible unless there is a specific statement of reasonsJUDGMENT OF THE COURT10 December 2002 (1) ((Freedom to provide services – Banking activities – Employee of a credit institution established in a Member State and canvassing for clients in another Member State – National legislation on banking secrecy – Refusal to answer questions and to give evidence in a judicial investigation))THE COURT,,after considering the written observations submitted on behalf of: ─ Mr der Weduwe, by J. Mertens, advocaat, ─ the Belgian Government, by A. Snoecx, acting as Agent, and M. van der Woude, P. Callens and T. Chellingsworth, advocaten, ─ the Commission of the European Communities, by C. Tufvesson, and T. van Rijn, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Mr der Weduwe, represented by B. Poelemans, advocaat; of the Belgian Government, represented by M. van der Woude and T. Chellingsworth; of the Luxembourg Government, represented by N. Mackel, acting as Agent, and by P. Kinsch, avocat, and of the Commission, represented by C. Tufvesson and T. van Rijn, at the hearing on 29 January 2002, after hearing the Opinion of the Advocate General at the sitting on 23 April 2002,gives the followingLegal backgroundOn those grounds, THE COURT,PuissochetWathelet Schintgen TimmermansGulmann Edward La PergolaJann Skouris MackenColnericvon BahrCunha RodriguesR. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: Dutch. Language of the case: Dutch.

03721-f7693c5-4f60

EN

THE COURT UPHOLDS THE VALIDITY OF THE DIRECTIVE ON THE MANUFACTURE, PRESENTATION AND SALE OF TOBACCO PRODUCTS

«(Directive 2001/37/EC – Manufacture, presentation and sale of tobacco products – Validity – Legal basis – Articles 95 EC and 133 EC – Interpretation – Applicability to tobacco products packaged in the Community and intended for export to non-member countries)» Summary of the Judgment 1.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Protection of public health a decisive factor in the choices involved in the harmonising measures – Not relevant (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Protection of public health a decisive factor in the choices involved in the harmonising measures – Not relevant 2.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Prohibition of manufacture intended to prevent the circumvention of the marketing rules in the internal market – Included (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council, Art. 3(1)) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Prohibition of manufacture intended to prevent the circumvention of the marketing rules in the internal market – Included 3.. Acts of the institutions – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Choice of legal basis – Criteria – Community measure pursuing a twofold basis or having a twofold component – Reference to the main or predominant purpose or component – Incorrect reference to Article 133 EC as a second legal basis – Not relevant to the validity of the directive (Arts 95 EC and 133 EC; Directive 2001/37 of the European Parliament and of the Council) Acts of the institutions – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Choice of legal basis – Criteria – Community measure pursuing a twofold basis or having a twofold component – Reference to the main or predominant purpose or component – Incorrect reference to Article 133 EC as a second legal basis – Not relevant to the validity of the directive 4.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Harmonising measures – No breach of the principle of proportionality (Directive 2001/37 of the European Parliament and of the Council, Arts 3, 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Harmonising measures – No breach of the principle of proportionality 5.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Respect of the right to property – Trade mark – Proportionate restrictions not impairing the very substance of that right (Directive 2001/37 of the European Parliament and of the Council, Arts 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Respect of the right to property – Trade mark – Proportionate restrictions not impairing the very substance of that right 6.. Community law – Principles – Principle of subsidiarity – Application to acts adopted for the purpose of establishing the internal market – Review of observance of the principle of subsidiarity – Criteria (Art. 95 EC) Community law – Principles – Principle of subsidiarity – Application to acts adopted for the purpose of establishing the internal market – Review of observance of the principle of subsidiarity – Criteria 7.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Article 7 – Prohibition of the use of descriptors likely to mislead consumers – Applicable only to tobacco products marketed within the Community (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council, Arts 3, 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Article 7 – Prohibition of the use of descriptors likely to mislead consumers – Applicable only to tobacco products marketed within the Community JUDGMENT OF THE COURT10 December 2002 (1) ((Directive 2001/37/EC – Manufacture, presentation and sale of tobacco products – Validity – Legal basis – Articles 95 EC and 133 EC – Interpretation – Applicability to tobacco products manufactured in the Community and intended for export to non-member countries))andTHE COURT,,after considering the written observations submitted on behalf of: ─ British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd, by D. Wyatt QC and D. Anderson QC, and by J. Stratford, Barrister, instructed by Lovells, Solicitors, ─ Japan Tobacco Inc. and JT International SA, par O.W. Brouwer, advocaat, and N.P. Lomas, Solicitor, both of Freshfields Bruckhaus Deringer, Solicitors, ─ the United Kingdom Government, by P. Ormond, acting as Agent, and by N. Paine QC, and T. Ward, Barrister, ─ the Belgian Government, by A. Snoecx, acting as Agent, assisted by E. Gillet and G. Vandersanden, avocats, ─ the German Government, by W.-D. Plessing, acting as Agent, assisted by J. Sedemund, Rechtsanwalt, ─ the Greek Government, by V. Kontolaimos and S. Charitakis, acting as Agents, ─ the French Government, by G. de Bergues and R. Loosli-Surrans, acting as Agents, ─ the Italian Government, by U. Leanza, acting as Agent, and O. Fiumara, avvocato dello Stato, ─ the Luxembourg Government, by J. Faltz, acting as Agent, assisted by P. Kinsch, avocat, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the Finnish Government, by E. Bygglin, acting as Agent, ─ the Swedish Government, by A. Kruse, acting as Agent, ─ the European Parliament, by C. Pennera and M. Moore, acting as Agents, ─ the Council of the European Union, by E. Karlsson and J.-P. Hix, acting as Agents, ─ the Commission of the European Communities, by I. Martinez del Peral and K. Fitch, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd, represented by D. Wyatt and D. Anderson, and by J. Stratford; of Japan Tobacco Inc. and JT International SA, represented by O.W. Brouwer and N.P. Lomas; of the United Kingdom Government, represented by J.E. Collins, acting as Agent, and N. Paine and T. Ward; of the Belgian Government, represented by G. Vandersanden; of the German Government, represented by M. Lumma, acting as Agent, assisted by J. Sedemund; of the Greek Government, represented by V. Kontolaimos and S. Charitakis; of the French Government, represented by R. Loosli-Surrans; of the Irish Government, represented by J. Buttimore BL; of the Italian Government, represented by O. Fiumara; of the Luxembourg Government, represented by N. Mackel, acting as Agent, assisted by P. Kinsch; of the Netherlands Government, represented by J. van Bakel, acting as Agent; of the Finnish Government, represented by E. Bygglin; of the Parliament, represented by C. Pennera and M. Moore; of the Council, represented by E. Karlsson and J.-P. Hix, and of the Commission, represented by I. Martinez del Peral and K. Fitch, at the hearing on 2 July 2002, after hearing the Opinion of the Advocate General at the sitting on 10 September 2002,gives the followingThe relevant provisionsOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Edward La PergolaJann Skouris MackenColnericvon BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: English. Language of the case: English.

20cc7-51ecaf5-4475

EN

THE COURT HAS ANNULLED IN PART THE DECLARATION OF ACCESSION OF THE EUROPEAN ATOMIC ENERGY COMMUNITY (EAEC OR EURATOM) TO THE NUCLEAR SAFETY CONVENTION, WITH REGARD TO THE SCOPE OF THE EAEC'S COMPETENCES IN THE FIELD

«(International agreements – Convention on Nuclear Safety – Accession decision – Compatibility with the Euratom Treaty – External competence of the Community – Articles 30 to 39 of the Euratom Treaty)» Summary of the Judgment 1.. Actions for annulment – Subject-matter – Partial annulment – Condition – Whether contested provisions can be severed – Declaration attached to the Council decision approving the accession of the European Atomic Energy Community to the Nuclear Safety Convention (Euratom Treaty, Art. 146) Actions for annulment – Subject-matter – Partial annulment – Condition – Whether contested provisions can be severed – Declaration attached to the Council decision approving the accession of the European Atomic Energy Community to the Nuclear Safety Convention 2.. Actions for annulment – Actionable measures – Council decision approving the accession of the European Atomic Energy Community to an international agreement – Absence in the Euratom Treaty of a procedure for seeking a preliminary opinion from the Court – Not relevant (Euratom Treaty, Art. 146) Actions for annulment – Actionable measures – Council decision approving the accession of the European Atomic Energy Community to an international agreement – Absence in the Euratom Treaty of a procedure for seeking a preliminary opinion from the Court – Not relevant 3.. International agreements – Council Decision approving the accession of the European Atomic Energy Community to the Nuclear Safety Convention – Obligation for the Council to communicate a complete declaration of its competences (Euratom Treaty, Art. 101(2)) International agreements – Council Decision approving the accession of the European Atomic Energy Community to the Nuclear Safety Convention – Obligation for the Council to communicate a complete declaration of its competences 4.. EAEC – Community competences in the area of nuclear safety – Definition on the basis of a distinction between protection of the health of the general public and the safety of sources of ionising radiation – Excluded EAEC – Community competences in the area of nuclear safety – Definition on the basis of a distinction between protection of the health of the general public and the safety of sources of ionising radiation – Excluded 5.. EAEC – Health protection – Community competences in the fields covered by the Nuclear Safety Convention (Euratom Treaty, Arts 30 to 32, 33, second para., and 37) EAEC – Health protection – Community competences in the fields covered by the Nuclear Safety Convention JUDGMENT OF THE COURT10 December 2002 (1) ((International agreements – Convention on Nuclear Safety – Accession decision – Compatibility with the Euratom Treaty – External competence of the Community – Articles 30 to 39 of the Euratom Treaty))applicant, vdefendant, THE COURT,,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 13 December 2001,gives the followingThe Convention on Nuclear SafetyOn those grounds, THE COURT,Rodríquez IglesiasPuissochet Schintgen TimmermansGulmann Edward La PergolaJann Skouris MackenColnericvon BahrCunha Rodrigues R. Grass G.C. Rodríquez Iglesias RegistrarPresident 1 – Language of the case: English. Language of the case: English.

7cad3-da95ca6-443d

EN

ADVOCATE GENERAL STIX-HACKL TAKES THE VIEW THAT A NATIONAL SYSTEM SUCH AS THE GERMAN SYSTEM OF COMPULSORY MILITARY SERVICE ONLY FOR MEN DOES NOT COME WITHIN THE SCOPE OF THE COMMUNITY PROVISIONS ON EQUAL TREATMENT OF MEN AND WOMEN

«(Inapplicability of Community law to compulsory military service – Equal treatment of men and women – Article 2 of Directive 76/207/EEC – Compulsory military service in Germany limited to men only – Directive not applicable)» Summary of the Judgment 1.. Community law – Scope – National measures concerning the organisation of the armed forces – No general exception for measures taken for reasons of public security Community law – Scope – National measures concerning the organisation of the armed forces – No general exception for measures taken for reasons of public security 2.. Social policy – Men and women – Access to employment and working conditions – Equal treatment – Directive 76/207 – Scope – Access to posts in the armed forces – Included – Discretion of the Member States – Scope – Judicial review (Council Directive 76/207) Social policy – Men and women – Access to employment and working conditions – Equal treatment – Directive 76/207 – Scope – Access to posts in the armed forces – Included – Discretion of the Member States – Scope – Judicial review 3.. Community law – Scope – Member States' choices of military organisation for the defence of their territory or of their essential interests – Compulsory military service for men only – Excluded Community law – Scope – Member States' choices of military organisation for the defence of their territory or of their essential interests – Compulsory military service for men only – Excluded JUDGMENT OF THE COURT11 March 2003 (1) ((Inapplicability of Community law to compulsory military service – Equal treatment of men and women – Article 2 of Directive 76/207/EEC – Compulsory military service in Germany limited to men only – Directive not applicable))andTHE COURT,,after considering the written observations submitted on behalf of: ─ the Federal Republic of Germany and the German Government, in its capacity as a Member State and as a party to the main proceedings, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents, ─ the French Government, by R. Abraham, C. Bergeot-Nunes and C. Chevallier, acting as Agents, ─ the Finnish Government, by T. Pynnä, acting as Agent, ─ the Commission of the European Communities, by J. Sack and N. Yerrell, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Mr Dory, represented by W. Dory and C. Lenz, Rechtsanwälte; the German Government, represented by W.-D. Plessing, assisted by C. Tomuschat, Sachverständiger; the Finnish Government, represented by T. Pynnä; and the Commission, represented by J. Sack, at the hearing on 16 April 2002, after hearing the Opinion of the Advocate General at the sitting on 28 November 2002,gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulmann EdwardJann Skouris MackenColneric von Bahr Cunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

17664-2f4d9f5-48aa

EN

THE COURT OF FIRST INSTANCE ANNULS THE COMMISSION DECISIONS ORDERING THE WITHDRAWAL OF MARKETING AUTHORISATIONS FOR ANTI-OBESITY DRUGS

| 62000A0074 Judgment of the Court of First Instance (Second Chamber, extended composition) of 26 November 2002. - Artegodan GmbH and Others v Commission of the European Communities. - Medicinal products for human use - Community arbitration procedures - Withdrawal of marketing authorisations - Competence - Criteria for withdrawal - Anorectics: amfepramone, clobenzorex, fenproporex, norpseudoephedrine, phentermine - Directives 65/65/EEC and 75/319/EEC. - Joined cases T-74/00, T-76/00, T-83/00, T-84/00, T-85/00, T-132/00, T-137/00 and T-141/00. European Court reports 2002 Page II-04945 Keywords 1. Approximation of laws - Proprietary medicinal products - Marketing authorisation - Withdrawal of authorisation - Authorisations granted in accordance with the provisions of Chapter III' of Directive 75/319 - Definition - National authorisations harmonised under a procedure based on Article 12 of the directive - Not included(Council Directive 75/319, Arts 12 and 15a)2. Approximation of laws - Proprietary medicinal products - Marketing authorisation - Withdrawal of authorisation - Criteria laid down by Directive 65/65 - Exhaustive - Interpretation in accordance with the general principle that protection of public health takes precedence over other considerations(Council Directive 65/65, Arts 11 and 21)3. Approximation of laws - Proprietary medicinal products - Marketing authorisation - Withdrawal of authorisation - Criteria laid down by Directive 65/65 - Need for new scientific data or information - Scope - Changes in an assessment criterion - Not included(Council Directive 65/65, Art. 11) Summary $$1. Article 15a(1) of Directive 75/319 relating to medicinal products provides that the variation, suspension or withdrawal of marketing authorisations granted in accordance with the provisions of [Chapter III]' of that directive, on the initiative of a Member State with a view to the protection of public health, falls within the exclusive competence of the Commission, when adopting a decision following an opinion of the Committee for Proprietary Medicinal Products in accordance with the procedures laid down in Articles 13 and 14 of that directive. Conversely, the variation, suspension and withdrawal of marketing authorisations which do not fall within the ambit of Article 15a remain, in principle, subject to the exclusive competence of the Member States.The concept of a marketing authorisation granted in accordance with the provisions of Chapter III cannot be interpreted as also including authorisations harmonised following consultation of the Committee for Proprietary Medicinal Products under Article 12 of that directive.Article 12 sets up, in the field of competence of the Member States, a purely consultative procedure, which is also optional and can, moreover, be initiated not only by the Member States concerned, but also by the Commission, or the applicant or holder of a marketing authorisation. In those circumstances, the principle that the Community is to act within the limits of the powers conferred upon it, precludes an interpretation of Article 15a to the effect that the harmonisation of certain marketing authorisations under a procedure based on Article 12, can have the effect of depriving the Member States concerned of their powers, by triggering the application of the arbitration procedure provided for in Article 15a in respect of the adoption of any subsequent decision regarding the suspension or withdrawal of such authorisations.( see paras 121, 150, 155 )2. The substantive criteria for withdrawal of a marketing authorisation are exclusively governed by Article 11 of Directive 65/65 relating to medicinal products, in accordance with Article 21 of that directive, which provides that an authorisation may not be refused, suspended or revoked except on the grounds set out in that directive. Those criteria must be interpreted in accordance with the general principle that protection of public health must unquestionably take precedence over economic considerations.( see paras 171, 173 )3. The withdrawal of a marketing authorisation pursuant to Article 11 of Directive 65/65 relating to medicinal products is in principle justified only where a new potential risk or the lack of efficacy is substantiated by new, objective, scientific and/or medical data or information. Mere changes in an assessment criterion, even if based on a consensus' in the medical community, cannot on their own justify the withdrawal of an authorisation where those changes are not based on new scientific data or information.( see paras 194, 211 ) Parties In Joined Cases T-74/00, T-76/00, T-83/00 to T-85/00, T-132/00, T-137/00 and T-141/00,Artegodan GmbH, established in Lüchow (Germany), represented by U. Doepner, lawyer, with an address for service in Luxembourg,applicant in Case T-74/00,Bruno Farmaceutici SpA, established in Rome (Italy),Essential Nutrition Ltd, established in Brough (United Kingdom),Hoechst Marion Roussel Ltd, established in Denham (United Kingdom),Hoechst Marion Roussel SA, established in Brussels (Belgium),Marion Merell SA, established in Puteaux (France),Marion Merell SA, established in Barcelona (Spain),Sanova Pharma GmbH, established in Vienna (Austria),Temmler Pharma GmbH & Co. KG, established in Marburg (Germany),represented by B. Sträter and M. Ambrosius, lawyers, with an address for service in Luxembourg,applicants in Case T-76/00,Schuck GmbH, established in Schwaig (Germany), represented by B. Sträter and M. Ambrosius, lawyers, with an address for service in Luxembourg,applicant in Case T-83/00,Laboratórios Roussel Lda, established in Mem Martins (Portugal), represented by B. Sträter and M. Ambrosius, lawyers, with an address for service in Luxembourg,applicant in Cases T-84/00 and T-85/00,Laboratoires Roussel Diamant SARL, established in Puteaux (France), represented by B. Sträter and M. Ambrosius, lawyers, with an address for service in Luxembourg,applicant in Case T-84/00,Roussel Iberica SA, established in Barcelona (Spain), represented by B. Sträter and M. Ambrosius, lawyers, with an address for service in Luxembourg,applicant in Case T-85/00,Gerot Pharmazeutika GmbH, established in Vienna (Austria), represented by K. Grigkar, lawyer, with an address for service in Luxembourg,applicant in Case T-132/00,Cambridge Healthcare Supplies Ltd, established in Norfolk (United Kingdom), represented by D. Vaughan, K. Bacon, barristers, and S. Davis, solicitor, with an address for service in Luxembourg,applicant in Case T-137/00,Laboratoires pharmaceutiques Trenker SA, established in Brussels, represented by L. Defalque and X. Leurquin, lawyers, with an address for service in Luxembourg,applicant in Case T-141/00,vCommission of the European Communities, represented by H. Støvlbæk and R. Wainwright, acting as Agents, and B. Wägenbaur, lawyer, with an address for service in Luxembourg,defendant,APPLICATION for annulment of the Commission decisions of 9 March 2000 concerning the withdrawal of marketing authorisations of medicinal products for human use containing respectively amfepramone' (C(2000) 453), as regards Cases T-74/00, T-76/00 and T-141/00, inter alia norpseudoephedrine', clobenzorex' and fenproporex' (C(2000) 608), as regards Cases T-83/00 to T-85/00, and phentermine' (C(2000) 452), as regards Cases T-132/00 and T-137/00,THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Second Chamber, Extended Composition),composed of: R.M. Moura Ramos, President, V. Tiili, J. Pirrung, P. Mengozzi and A.W.H. Meij, Judges,Registrar: D. Christensen, Administrator,having regard to the written procedure and further to the hearing on 7 and 8 May 2002gives the followingJudgment Grounds Legal contextDirective 65/65/EEC1 On 26 January 1965, the Council adopted Directive 65/65/EEC on the approximation of provisions laid down by law, regulation or administrative action relating to medicinal products (OJ, English Special Edition 1965-1966, p. 20). That directive has been amended on several occasions, in particular by Council Directive 83/570/EEC of 26 October 1983 (OJ 1983 L 332, p. 1) and Council Directive 93/39/EEC of 14 June 1993 (OJ 1993 L 214, p. 22) (hereinafter, as amended, Directive 65/65'). Article 3 of that directive lays down the principle that no medicinal product may be placed on the market of a Member State unless an authorisation has first been issued by the competent authorities of that Member State in accordance with that directive or an authorisation has been granted in accordance with Council Regulation (EEC) No 2309/93 of 22 July 1993 laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Agency for the Evaluation of Medicinal Products (OJ 1993 L 214, p. 1).2 Article 4 of Directive 65/65 provides, inter alia, that, in order to obtain a marketing authorisation as provided for in Article 3, the person responsible for placing the product on the market is to apply to the competent authority of the Member State concerned. Under Article 5, that authorisation is to be refused if it proves that the medicinal product is harmful in the normal conditions of use, or that its therapeutic efficacy is lacking or is insufficiently substantiated by the applicant, or that its qualitative and quantitative composition is not as declared, or if the particulars and documents submitted in support of the application do not comply with Article 4. Under Article 4b of Directive 65/65, when the marketing authorisation referred to in Article 3 is issued, the person responsible for placing that product on the market is to be informed, by the competent authorities of the Member State concerned, that they approve the summary of the product characteristics referred to in point 9 of the second paragraph of Article 4, the content of which is defined in Article 4a.3 Article 10(1) of Directive 65/65 states that the authorisation is to be valid for five years and is to be renewable for five-year periods after consideration by the competent authority of a dossier containing, in particular, details of the data on pharmacovigilance and other information relevant to the monitoring of the medicinal product.4 The first paragraph of Article 11 of Directive 65/65 provides:The competent authorities of the Member States shall suspend or revoke an authorisation to place a medicinal product on the market where that product proves to be harmful in the normal conditions of use, or where its therapeutic efficacy is lacking, or where its qualitative and quantitative composition is not as declared. Therapeutic efficacy is lacking when it is established that therapeutic results cannot be obtained with the medicinal product.'5 Under Article 21 of Directive 65/65, a marketing authorisation for a medicinal product is not to be refused, suspended or revoked except on the grounds set out in that directive.Directive 75/318/EEC6 Council Directive 75/318/EEC of 20 May 1975 on the approximation of the laws of Member States relating to analytical, pharmaco-toxicological and clinical standards and protocols in respect of the testing of medicinal products (OJ 1975 L 147, p. 1), which has been amended on several occasions, in particular by Directives 83/570 and 93/39 (hereinafter, as amended, Directive 75/318'), lays down uniform rules for the conduct of the tests and trials referred to in point 8 of the second paragraph of Article 4 of Directive 65/65 and specifies the particulars which must accompany an application for marketing authorisation for a medicinal product pursuant to points 3, 4, 6 and 7 of that paragraph.7 The seventh and eighth recitals in the preamble to that directive read as follows:[w]hereas the concepts of "harmfulness" and "therapeutic efficacy" referred to in Article 5 of Directive 65/65/EEC can only be examined in relation to each other and have only a relative significance depending on the progress of scientific knowledge and the use for which the medicinal product is intended; whereas the particulars and documents which must accompany an application for authorisation to place a medicinal product on the market [must] demonstrate that potential risks are outweighed by the therapeutic efficacy of the product; whereas failing such demonstration, the application must be rejected;[w]hereas the evaluation of "harmfulness" and "therapeutic efficacy" may be modified in the light of new discoveries and standards and protocols must be amended periodically to take account of scientific progress'.Directive 75/319/EEC8 Second Council Directive 75/319/EEC of 20 May 1975 on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products (OJ 1975 L 147, p. 13), amended on several occasions, in particular by Directives 83/570 and 93/39 (hereinafter, as amended, Directive 75/319'), establishes, in Chapter III (Articles 8 to 15c) a procedure for the mutual recognition of national marketing authorisations (Article 9), together with Community arbitration procedures.9 That directive expressly provides for referrals to the Committee for Proprietary Medicinal Products (hereinafter the CPMP') of the European Agency for the Evaluation of Medicinal Products, for application of the procedure governed by Article 13, where, in the context of the procedure for mutual recognition established by Article 9, a Member State considers that there are grounds for supposing that the authorisation of the medicinal product concerned may present a risk to public health and the Member States do not reach agreement within the prescribed time-limit (Article 10 of that directive), where Member States have adopted divergent decisions concerning the grant, suspension or withdrawal of national authorisations (Article 11), and in specific cases where the interests of the Community are involved (Article 12). In addition, the directive expressly provides that the variation, suspension and withdrawal of marketing authorisations granted in accordance with the provisions of Chapter III thereof are subject to the procedures laid down in Articles 13 and 14 (Articles 15 and 15a). Finally, Article 15b provides that Articles 15 and 15a are to apply by analogy to medicinal products authorised by the Member States following an opinion of the CPMP issued prior to 1 January 1995, in accordance with Article 4 of Council Directive 87/22/EEC of 22 December 1986 on the approximation of national measures relating to the placing on the market of high-technology medicinal products, particularly those derived from biotechnology (OJ 1987 L 15, p. 38). The procedures established by Articles 12 and 15a of Directive 75/319 are of particular relevance in the present case.10 Article 12 of Directive 73/319 provides:The Member States or the Commission or the applicant or holder of the marketing authorisation may, in specific cases where the interests of the Community are involved, refer the matter to the [CPMP] for the application of the procedure laid down in Article 13 before reaching a decision on a request for a marketing authorisation or on the suspension or withdrawal of an authorisation, or on any other variation to the terms of a marketing authorisation which appears necessary, in particular to take account of the information collected under the pharmacovigilance system provided for in Chapter Va.The Member State concerned or the Commission shall clearly identify the question which is referred to the [CPMP] for consideration and shall inform the person responsible for placing the medicinal product on the market.The Member States and the aforementioned person shall forward to the [CPMP] all available information relating to the matter in question.'11 Article 15a of Directive 75/319 states:1. Where a Member State considers that the variation of the terms of a marketing authorisation which has been granted in accordance with the provisions of this chapter or its suspension or withdrawal is necessary for the protection of public health, the Member State concerned shall forthwith refer the matter to the [CPMP] for the application of the [procedures] laid down in Articles 13 and 14.2. Without prejudice to the provisions of Article 12, in exceptional cases, where urgent action is essential to protect public health, until a definitive decision is adopted a Member State may suspend the marketing and the use of the medicinal product concerned on its territory. It shall inform the Commission and the other Member States no later than the following working day of the reasons for its action.'12 Article 13 of Directive 75/319 governs the procedure before the CPMP, which issues a reasoned opinion. Paragraph 5 of that article provides that the European Agency for the Evaluation of Medicinal Products is to forward the final opinion of the CPMP to the Member States, the Commission and the person responsible for placing the medicinal product on the market, together with a report describing the assessment of the medicinal product and stating the reasons for its conclusions. Article 14 of that directive governs the Community decision-making procedure. The first subparagraph of Article 14(1) provides that within 30 days of the receipt of the CPMP opinion, the Commission is to prepare a draft of the decision to be taken in respect of the application, taking into account Community law. Under the third subparagraph of Article 14(1), [w]here, exceptionally, the draft decision is not in accordance with the opinion of the [European] Agency [for the Evaluation of Medicinal Products], the Commission shall also annex a detailed explanation of the reasons for the differences'. The final decision is adopted in accordance with the regulatory procedure governed by Articles 5 and 7 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (OJ 1999 L 184, p. 23). The Commission is assisted in that procedure by the Standing Committee on Medicinal Products for Human Use, set up by Article 2b of Directive 75/318.Community code on medicinal products for human use13 All the directives relating to medicinal products for human use which govern the decentralised Community procedure', in particular Directives 65/65, 75/318 and 75/319, have been recast in Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use (OJ 2001 L 311, p. 67; hereinafter, the Code'). Even though the Code was not in force when the contested decisions were adopted, it should be taken into account where appropriate. In so far as the Code restates in a more structured corpus, without amending them, the provisions of Directives 65/65 and 75/319, a systematic analysis of the provisions of Chapter III of Directive 75/319 is part of the scheme of that code.Facts14 The applicants are holders of marketing authorisations, initially issued by the competent national authorities, for medicinal products containing amphetamine-like' anorectic agents. Those centrally-acting anorectics, so-called because they act at the level of the central nervous system, accelerate the feeling of satiety and have been used for many years in a number of Member States in the treatment of obesity.15 The applicants in Cases T-74/00, T-76/00 and T-141/00 are holders of marketing authorisations of medicinal products containing amfepramone. The applicants in Cases T-83/00, T-84/00 and T-85/00 hold marketing authorisations for medicinal products containing norpseudoephedrine, clobenzorex and fenproporex respectively. The applicants in Cases T-132/00 and T-137/00 hold marketing authorisations for medicinal products containing phentermine.16 On 9 March 2000, the Commission adopted, on the basis of Article 15a of Directive 75/319, three decisions (hereinafter the contested decisions') concerning the withdrawal of marketing authorisations of medicinal products for human use which contain phentermine' (C(2000) 452), amfepramone' (C(2000) 453) and the substances clobenzorex', fenbutrazate', fenproporex', mazindol', mefenorex', norpseudoephedrine', phenmetrazine', phendimetrazine' or propylhexedrine' (C(2000) 608). In Article 1 of the operative part of each of those decisions, the Commission ordered the Member States to withdraw the national marketing authorisations provided for in the first paragraph of Article 3 of Directive 65/65 ... concerning the medicinal products listed in Annex I [to the decision] which contain the [substance or substances assessed]'. Article 2 of each of the contested decisions justified that withdrawal by referring to the scientific conclusions which were appended to the CPMP final opinion of 31 August 1999 on the substance or substances concerned and annexed to the respective decision (Annex II). Article 3 of each of those decisions required the Member States concerned to comply with the decision within 30 days of its notification.17 The anorectic agents referred to in those decisions had already been the subject of Commission Decision C(96) 3608 final/1 of 9 December 1996 concerning the placing on the market of the medicinal products for human use which contain the following substances: clobenzorex, norpseudoephedrine, phentermine, fenproporex, mazindol, amfepramone, phendimetrazine, phenmetrazine, mefenorex (hereinafter the decision of 9 December 1996'), subsequent to an opinion of the CPMP to which the matter had been referred under Article 12 of Directive 75/319 (see below, paragraphs 20 to 25). The contested decisions were adopted following a reassessment of those substances, under Article 15a of that directive, at the request of several Member States.18 According to the applicants' replies to a written question from the Court, the five-year validity period - specified in Article 10(1) of Directive 65/65 - of the marketing authorisations of some of the medicinal products which are marketed by the applicants and covered by the contested decisions, had expired before those decisions were adopted. However, the applicants explained at the hearing that when those decisions were adopted those authorisations were the subject of renewal procedures before the competent authorities of the Member States concerned. Those procedures were suspended following the contested decisions. The marketing authorisations therefore remained in force, in accordance with the applicable national rules, pending the adoption of decisions on the applications for renewal. The Commission has not contested the applicants' submissions in that regard.19 At the hearing, the applicants did however add that, in the meantime, the competent authorities of the Member States concerned have either suspended the marketing authorisations of the medicinal products in question or withdrawn them in compliance with the contested decisions. In reply to a question put by the Court, the applicants confirmed that if the contested decisions were annulled on the ground of the Commission's lack of competence, the resumption, if any, of the marketing of the medicinal products in question would be conditional upon the adoption of positive decisions by the competent national authorities.Commission Decision C(96) 3608 final/1 of 9 December 199620 On 17 May 1995, the Federal Republic of Germany made a referral to the CPMP under Article 12 of Directive 75/319, expressing its concerns in respect of the risks presented by certain centrally-acting anorectics. That referral covered both amphetamine-like' anorectics - marketed by the applicants -, which enhance neurotransmission at the level of the neurotransmitters (catecholamine) and usually have a stimulant effect, and serotonergic anorectics, which act by increasing the release and reducing the re-uptake of serotonin and have no stimulant or euphoriant effect. The competent national authority suspected those medicinal products of inducing primary pulmonary hypertension (PPH').21 The CPMP initiated the procedure provided for in Article 13 of Directive 75/319 for the purpose of investigating those two classes of anorectics.22 In his scientific assessment report of 5 February 1996, the rapporteur, Dr Le Courtois, assessed the benefit/risk balance of anorectics. In that connection, he found, first, that there was a risk of PPH, which was most of the time fatal', and that anorectics in combination with diet induced a weight-loss of 3 to 4 kg and were often prescribed in an aesthetic aim to young women who are not really obese'. He inferred that measures restricting the use of anorectics were justified because, in the absence of such measures, the risks linked with the use of anorectics obviously outweigh the therapeutic benefit'. Second, he pointed out that when obesity is [so] marked that it decreases the patient's life expectancy, there is a need for a pharmacological treatment as adjunctive therapy, in the context of a global approach including diet, psychotherapy, exercise. Only anorectics are today available as pharmacological treatment, thus they have a place in the treatment of obesity'. He concluded by recommending the harmonisation of certain information contained in the summaries of product characteristics of the medicinal products in question.23 On 17 July 1996, the CPMP issued three final opinions on amfepramone, phentermine and the third group of amphetamine-like' substances under consideration, which included clobenzorex, fenproporex and norpseudoephedrine. It recommended maintaining the marketing authorisations subject to a certain number of amendments to the summaries of product characteristics for the medicinal products containing those substances.24 In its assessment report of 18 July 1996 on all anorectic agents, the CPMP essentially explained inter alia that the International Primary Pulmonary Hypertension Study (hereinafter the IPPH Study)', which had been the subject of a report of 7 March 1995, had proven a causal link between the use of anorectics and the occurrence of PPH. The risk of PPH was higher when the treatment duration exceeded three months. The CPMP noted that the reported cases showed that this was a class effect' common to all anorectics. As regards the efficacy of those substances, the CPMP found that the weight-loss obtained after short-term treatment was 2 to 5 kg on average, that long-term efficacy had not been established, and that weight-regain occurred immediately after the pharmacological treatment was discontinued. In those circumstances, it considered the benefit/risk balance for the anorectic compounds to be favourable, subject to amendment of the summaries of product characteristics for the medicinal products in question.25 That procedure led to the adoption of the decision of 9 December 1996 which is expressly based on Article 14 of Directive 75/319. In line with the CPMP opinions of 17 July 1996, the Commission instructed the Member States concerned to amend certain clinical particulars in the summaries of product characteristics approved when the marketing authorisations of the medicinal products in question were granted. It stipulated that the following clinical particulars be included:Therapeutic indicationsAdjunctive therapy to diet, in patients with obesity and a body mass index (BMI) of 30 kg/m2 or higher who have not responded to an appropriate weight-reducing regimen alone.Note: short-term efficacy only has been demonstrated with regard to weight-reduction. No significant data on changes in morbidity or mortality are yet available.'Posology and method of administrationIt is recommended that treatment should be conducted under the care of physicians experienced in the treatment of obesity. ...The management of obesity should be undertaken using a global approach which should include dietary, medical and psychotherapeutic methods. ...The duration of treatment is 4-6 weeks and should not exceed three months.'Contraindications- Pulmonary artery hypertension- Severe arterial hypertension- Current or past history of cardio-vascular or cerebro-vascular disease- Current or past medical history of psychiatric disorders including anorexia nervosa and depression- Propensity towards drug abuse, known alcoholism- Children below 12 yearsCombination drug therapy with any other centrally-acting anorectic agent is contraindicated due to the increased risk of potentially fatal pulmonary artery hypertension.'Special warnings and precautions for useCases of severe, often fatal, pulmonary artery hypertension have been reported in patients who have received anorectics [of this type]. An epidemiological study has shown that anorectic intake is ... strongly associated with an increased risk for this adverse drug reaction. In view of this rare but serious risk ... careful compliance with the indication and the duration of treatment is required ... .'Undesirable effects... pulmonary arterial hypertension ... The occurrence or aggravation of exertional dyspnea is usually the first clinical sign and requires treatment discontinuation and investigation in a specialised unit ... .[E]ffects [on the central nervous system]- the prolonged use of [these substances] is associated with a risk of pharmacological tolerance [reduction in efficacy], dependence and withdrawal syndrome- the most common adverse reactions which have been described are: psychotic reactions or psychosis, depression, nervousness, agitation, sleep disorders and vertigo- convulsions have been reportedCardio-vascular effects- the most common reported reactions are tachycardia, palpitations, hypertension, precordial pain- rarely cases of cardiovascular or cerebro-vascular accidents have been described in patients treated with anorectic agents. In particular stroke, angina, myocardial infarction, cardiac failure and cardiac arrest have been reported.'Decision C(2000) 453 concerning the withdrawal of marketing authorisations of medicinal products which contain amfepramone, contested in Cases T-74/00, T-76/00 and T-141/0026 By letter of 7 November 1997, the Belgian Ministry for Social Affairs, Public Health and the Environment informed the CPMP of several cases of cardiac valve disorders observed in patients treated with medicinal products containing fenfluramine, either in monotherapy or in combination with medicinal products containing phentermine and amfepramone. The procedure under Article 15a of Directive 75/319 had already been initiated, on 22 October 1997, in respect of fenfluramine and dexfenfluramine. The Belgian Government therefore requested that such a procedure be initiated in respect of amfepramone and phentermine.27 On 19 November 1997, the CPMP initiated the procedure under Article 13 of Directive 75/319 in respect of amfepramone used in monotherapy.28 From 12 to 14 May 1998, the draft first scientific report on amfepramone (the Picon/Abadie Report) was discussed by the pharmacovigilance' working party, which is composed of national experts in the field of pharmacovigilance and is responsible for advising the CPMP on matters relating to the safety of medicinal products (pharmacological vigilance). In its report to the CPMP, that working party concluded:... a causal relationship between the occurrence of valve heart disorders and the use of amfepramone could not [be] established. The benefit is considered unchanged compared to the previous CPMP opinion. [T]he benefit/risk balance of amfepramone-containing medicinal products remains unchanged'.29 The Picon/Abadie Report, drawn up on 4 June 1998, states:There is no clinical, epidemiological or experimental argument to evidence an association between amfepramone and the occurrence of heart valvular disease ... The benefit of amfepramone in the treatment of obesity is not modified ...'.30 By letters of 27 July 1998, the CPMP requested the holders of marketing authorisations of medicinal products containing amfepramone and phentermine to submit their observations on inter alia the benefit/risk balance of those medicinal products in the light of the Note for guidance on clinical investigation of drugs used in weight control', which was approved by the CPMP in December 1997 and came into effect in June 1998 (hereinafter the CPMP Note for Guidance').31 At its meeting of 17 September 1998, the CPMP decided to conduct the two procedures for amfepramone and phentermine separately from, but at the same time as, the procedure initiated on the same day concerning inter alia clobenzorex, fenproporex and norpseudoephedrine (see below, paragraph 62). In its report of 31 August 1999 on phentermine (see below, paragraph 55), the CPMP justified that decision on the grounds that medicinal products constituted only one of the factors in the treatment of obesity and that all the substances under consideration had the same pharmacological characteristics and the same indications.32 A new report supplementing the Picon/Abadie Report was drawn up in April 1999 (the Castot/Fosset Martinetti/Saint-Raymond Report). That report concluded:[a]mfepramone does not fulfil the criteria of an effective therapy in obesity-treatment. Due to its potentials for tolerance and psychological dependence, amfepramone can only be used for less than three months, [which] contradicts current guidelines recommending long-term treatment. Considering the lack of therapeutic efficacy and the negative safety profile for long-term treatment (more than three months), the benefit/risk ratio of amfepramone is negative'.33 On 12 April 1999, Professor Winkler sent to the members of the CPMP a discussion paper which drew attention to the negative evaluation of the benefit/risk balance of the substances under consideration, which had been made in the assessment reports on amfepramone (referred to above), on phentermine (see below, paragraph 47 et seq.), and also on clobenzorex, fenproporex and norpseudoephedrine (see below, paragraph 61 et seq.), and summarised the oral observations made by the holders of the marketing authorisations concerned. As regards, in particular, the efficacy of those substances, it is apparent from that discussion paper that, in one oral question, the marketing authorisation holders had been requested to provide data showing that the substances evaluated made it possible to achieve either a long-term reduction in body weight, and thus had a therapeutic benefit (namely, a decrease in morbidity or mortality or an improvement in quality of life), or a short-term reduction in body weight carrying long-term advantages within an anti-obesity programme. In addition, in his discussion paper, Professor Winkler refuted the argument put forward by the marketing authorisation holders that there had been no new developments concerning the safety and efficacy of the substances under consideration. On the basis of the CPMP Note for Guidance and new national guidelines, he relied on the developments in the evaluation criteria in order to assert that there was now a general consensus' that the treatment of obesity requires a significant and long-term loss of weight (over more than one year). Medicinal products containing anorectic substances were therefore effective only if they were suitable for long-term use or if their short-term use resulted in a significant and lasting weight-loss. Furthermore, Professor Winkler stated that the introduction of new drugs to the market, namely orlistat' and sibutramine', apparently suitable for such long-term treatment, further demonstrated how the anorectic field had changed within a few years. Finally, he disputed the relevance of two new studies, the Trenker Study' on amfepramone, carried out by Professor Rottiers (1999), and the study on phentermine carried out by Professor Caterson and others, designed to show the long-term efficacy of those substances.34 On 22 April 1999, the CPMP issued its opinion (CPMP/969/99) on the scientific assessment of medicinal products containing amfepramone and recommended withdrawing the marketing authorisations of those products.35 The applicants appealed to the CPMP against that opinion, pursuant to the second sentence of Article 13(4) of Directive 75/319.36 In their report of 17 August 1999 on amfepramone, the rapporteur and co-rapporteur in the appeal procedure, Professors Garattini and de Andres-Trelles, recommended that medicinal products containing amfepramone be withdrawn from the market. In particular, they pointed out that very high risks were acceptable when compensated for by benefits. If the expected benefit were near trivial, no level of potentially important risk could be accepted.37 On 27 August 1999, the applicants proposed carrying out further clinical trials of amfepramone.38 In its final opinion of 31 August 1999 (CPMP/2163/99), the CPMP rejected the applicants' appeals and, on the basis of an assessment of the benefit/risk balance, recommended withdrawing the marketing authorisations of medicinal products containing amfepramone.39 In its scientific conclusions annexed to that opinion, the CPMP stated:Therapeutic efficacy for treating obesity requires a significant and long-term lowering of body weight (at least one year). This is based on accumulated scientific knowledge acquired over the years and is laid down in current medical recommendations; this is reflected in the [CPMP Note for Guidance]. This is also expressed in current guidelines, e.g. the Scottish guideline (November 1996), a guideline from the Royal College of Physicians (1998) and in a guideline from the American Society for Clinical Nutrition (1998).'40 The CPMP found that, according to most of the available studies on amfepramone, when associated with a low-calorie diet that substance induced a weight-loss greater than a placebo. However, the mean effect was modest, never exceeding 5.1 kg whatever the duration of treatment. Moreover, no specific effect on recognised risk factors of obesity had been demonstrated. In addition, rapid weight-regain occurred once treatment was discontinued and there were no controlled studies demonstrating that a limited short-term effect provided any clinical benefit within a programme for the treatment of obesity. The Trenker Study on amfepramone failed to demonstrate the efficacy of treatment with amfepramone over a 12-month period given, first, the small number of patients included in the study (29 in the amfepramone group), the high drop-out rate (25%) and the unbalanced groups and, second, the modest loss of weight. On the subject of efficacy, the CPMP concluded that:in spite of the fact that nowadays obesity is considered a chronic disorder and that its management should be envisaged as a long-term strategy, amfepramone has only been shown to produce modest short-term weight-reductions of dubious and unproven relevance for the outcome of the disorder. Its long-term effects remain unproven'.41 As regards the safety of amfepramone, the CPMP essentially reiterated the undesirable effects already taken into consideration in the decision of 9 December 1996.42 With particular regard to the risk of PPH, it recalled that, in its opinions of 17 July 1996 (see above, paragraphs 23 and 24), it had relied on the IPPH Study to conclude that the risk of inducing PPH might be a class effect of amphetamine-like agents. However, data published subsequently had shown that study to be inconclusive on that matter. Noting that, in the data from spontaneous reporting, several cases of [PPH] with amfepramone have been reported', the CPMP found that:in the absence of more formal epidemiological evidence, the possibility of an increased risk of [PPH] associated with amfepramone cannot currently be supported [or] refuted'.43 Finally, after stating that 25 cases of cardiac valve disorders associated with amfepramone use, mostly in combination with fenfluramine or dexfenfluramine, had been spontaneously reported, it concluded:[i]t would appear that amfepramone monotherapy does not increase the risk of cardiac valve disorders but, as ... is often the case in the absence of specifically-designed epidemiological studies, the possibility cannot be categorically excluded'.44 As regards the benefit/risk balance, the CPMP considered that [o]n the basis of the available evidence on [amfepramone's] efficacy, it is no longer possible to consider that amfepramone has therapeutic efficacy in the treatment of obesity or (as a consequence) that its benefit/risk balance is positive.'45 In a dissenting opinion appended to the CPMP final opinion of 31 August 1999, four members of that committee, Professor Hildebrandt, Dr Haase, Professor Odlind and Dr Sjöberg, declared themselves in favour of suspending, rather than withdrawing, the marketing authorisations of medicinal products containing amfepramone, given the fact that obesity was a significant health problem'. After pointing out, first, the absence of any significant new safety concerns since the CPMP opinion of 17 July 1996 and, second, the lack of data on the long-term efficacy of amfepramone, they referred to the particular need, in the light of recent guidelines in the treatment of obesitas', to carry out clinical trials in order to collect data long-term (over a period of more than one year) on the efficacy and safety of the substance in question.46 On 9 March 2000, the Commission adopted the contested decision, C(2000) 453.Decision C(2000) 452 concerning the withdrawal of marketing authorisations of medicinal products which contain phentermine, contested in Cases T-132/00 and T-137/0047 On 19 November 1997, following a referral by the Belgian Ministry for Social Affairs, Public Health and the Environment (see above, paragraph 26), the CPMP initiated the procedure under Article 13 of Directive 75/319 in respect of phentermine used in monotherapy.48 The pharmacovigilance working party concluded in its report on phentermine, drawn up at its meeting of 12 to 14 May 1998, at which the co-rapporteur, Professor Hildebrandt, submitted his draft scientific report, that, as was the case for amfepramone (see above, paragraph 28), the evaluation of the efficacy of phentermine had not changed since the CPMP opinion of 17 July 1996.49 In his final scientific report on phentermine of 12 April 1999, the co-rapporteur concluded that that substance had a benefit/risk balance which was not satisfactory'. As regards the benefits, he found that the efficacy of phentermine as an adjunctive treatment for obesity had been demonstrated in a small number of studies which included relatively few patients and did not conform to current standards. The weight-loss achieved was modest and there was no data on the long-term effects of phentermine and a fortiori on the maintenance of weight-loss. Consequently, most of the basic requirements laid down in the CPMP Note for Guidance were not met.50 On the same date, the aforementioned discussion paper drawn up by Professor Winkler (paragraph 33) was sent to the members of the CPMP.51 In its opinion of 22 April 1999 on phentermine (CPMP/968/99), the CPMP recommended withdrawing the marketing authorisations of medicinal products containing that substance. The applicants appealed to the CPMP against that opinion.52 By letter of 13 August 1999, the holders of marketing authorisations of medicinal products containing phentermine also proposed carrying out clinical trials to investigate its long-term efficacy.53 In their report of 17 August 1999 on phentermine, the rapporteur and co-rapporteur in the appeal procedure, Professors Garattini and de Andres-Trelles, proposed recommending the withdrawal of those marketing authorisations. They pointed out, inter alia, that the best available evidence for efficacy in longer-term use (but still over only 36 weeks) came from the 1968 report by Dr Munro and others. However, according to that study, the weight-loss was less than 10% of the original weight, applied only to a small percentage of patients and tended to diminish with the duration of the treatment. In addition, the weight-regain at the end of the treatment could result in the post-treatment weight exceeding the original weight. There were no studies of longer than 36 weeks. The available results did not constitute sufficient proof of the long-term efficacy of phentermine.54 On 31 August 1999, the CPMP issued its final opinion on phentermine, in which it recommended that the marketing authorisations of medicinal products containing that substance be withdrawn on the ground that the benefit/risk balance was unfavourable. It relied essentially on the same arguments as those set out in its final opinion on amfepramone (see above, paragraphs 39 to 44). Those two opinions gave rise to similar dissenting opinions (see above, paragraph 45).55 In its scientific conclusions annexed to its final opinion on phentermine, and in its report of 31 August 1999 on that substance, the CPMP first of all noted essentially that, according to the latest guidelines, therapeutic efficacy required a significant and long-term lowering of body weight (for at least one year). As regards phentermine in particular, it stated that, according to a number of short-term studies, only a slight decrease in body weight can be achieved' with phentermine. Moreover, no studies were available concerning the effects of phentermine on the risk factors of obesity. The new study relied on by certain marketing authorisation holders did not provide any additional relevant information. In addition, weight was rapidly regained after treatment was discontinued and there were no controlled studies demonstrating that a limited short-term effect had any clinical benefit within an obesity-treatment programme. The CPMP therefore concluded, in terms similar to those used in respect of amfepramone (see above, at the end of paragraph 40), that phentermine lacked therapeutic efficacy.56 In respect of safety, the CPMP also recalled the undesirable effects of the substances under consideration, which had already been taken into consideration by the Commission in its decision of 9 December 1996.57 However, as regards the risk of PPH, the CPMP acknowledged that phentermine had not been among the substances investigated in the IPPH Study on which it had based its opinion of 17 July 1996, and that, as a consequence, formal evidence from epidemiological studies is lacking'. After observing that several cases of PPH associated with phentermine had been reported, it suggested that, in the absence of evidence that there is an association between phentermine and that medical condition, the possibility of an increased risk of [PPH] ... cannot be excluded'.58 In respect of the risk of cardiac valve disorders, the CPMP pointed out that, in 1997, the United States Food and Drug Administration (hereinafter the FDA') had reported numerous cases of cardiac valve disorders in patients receiving fenfluramine in combination with phentermine and more than five cases of cardiac valve disorders associated with the use of phentermine in monotherapy. In two cases the treatment duration was less than three months. In the European Union, only 10 cases (in Belgium), associated with the combined use of phentermine and other anorectic agents, had been reported to the pharmacovigilance systems. The CPMP deduced that although there is not enough evidence to assert that phentermine increases the risk of cardiac valve disorders, such [a] hypothesis cannot be ruled out for the time being'.59 The CPMP concluded, just as in respect of amfepramone (see above, paragraph 44), that the benefit/risk balance of phentermine was unfavourable on the ground of its lack of efficacy.60 On 9 March 2000, the Commission adopted the contested decision, C(2000) 452.Decision C(2000) 608 concerning the withdrawal of marketing authorisations of medicinal products which contain, inter alia, clobenzorex, fenproporex and norpseudoephedrine, contested in Cases T-83/00, T-84/00 and T-85/0061 In its letter to the CPMP of 31 August 1998, prompted by the aforementioned referral to that committee in respect of phentermine and amfepramone (paragraph 26), the Austrian Federal Ministry for Labour, Health and Social Affairs pointed out that clobenzorex, fenbutrazate, fenproporex, mazindol, mefenorex, norpseudoephedrine, phenmetrazine, phendimetrazine and propylhexedrine belonged to the same group of amphetamine-related anorectics. It added that it was likely that all those substances shared the same effects and side effects and requested the CPMP to issue a reasoned opinion, under Article 15a of Directive 75/319, on all the medicinal products containing those substances. It pointed out that recent developments concerning the efficacy of anorectics (namely, the CPMP decisions in connection with new anti-obesity medicinal products, the CPMP Note for Guidance, and the cardiac valve disorders reported by the Belgian Government) justified a re-evaluation of the benefit/risk balance of those substances.62 On 17 September 1998, the CPMP initiated the procedure under Article 13 of Directive 75/319 in respect of the substances referred to in the Austrian request.63 The rapporteur and co-rapporteurs submitted their scientific assessment reports on those substances. On 12 April 1999, Professor Winkler's discussion paper, referred to above (paragraph 33), was sent to the members of the CPMP.64 On 22 April 1999, the CPMP issued an opinion on the substances under consideration, in which it recommended withdrawing the marketing authorisations for medicinal products containing those substances. The applicants appealed to the CPMP against that opinion.65 On 27 August 1999, the applicants proposed carrying out further clinical trials, in accordance with the latest CPMP guideline'.66 In its final opinion of 31 August 1999 (CPMP/2164/99), the CPMP rejected the applicants' appeals and, on the basis of an analysis of the benefit/risk balance, recommended withdrawing the marketing authorisations for medicinal products containing, inter alia, clobenzorex, fenproporex and norpseudoephedrine. That CPMP opinion was the subject of a dissenting opinion similar to those annexed to the CPMP opinions on amfepramone and phentermine (see above, paragraph 45).67 In its scientific conclusions annexed to that opinion, the CPMP pointed out essentially, in the same terms as in its opinions on amfepramone and phentermine (see above, paragraphs 39 and 55), that according to the latest guidelines therapeutic efficacy in the treatment of obesity requires a significant and long-term lowering of body weight for at least one year.68 It noted that there were a very few double-blind placebo studies which showed that amphetamine-like substances could lower body weight at least for a short period and to a limited degree. The administration of higher doses resulted in more pronounced weight-loss, but was accompanied by significant side effects. Within weeks of treatment, pharmacological tolerance developed. Moreover, rapid weight-regain occurred once treatment was discontinued and there were no controlled studies demonstrating that a limited short-term effect provided any clinical benefit within an obesity-treatment programme. In addition, due to the risk of dependence associated with the substances examined, it had not been possible to carry out any studies to investigate whether, when used for more than three months, those substances induced a long-term reduction in weight. The CPMP concluded that, given current scientific knowledge and medical recommendations' on the treatment of obesity, the substances examined lacked therapeutic efficacy when used for three months or less. Since it was not acceptable to prescribe those substances for longer than three weeks, their long-term use was of no relevance.69 In respect of safety, the CPMP pointed out the undesirable effects of the substances under consideration, which had already been reported in the decision of 9 December 1996.70 As regards, more specifically, the risk of PPH, the CPMP noted, as in respect of amfepramone (see above, paragraph 42), that according to data published subsequently the IPPH Study, on the basis of which it had concluded in its opinion of 17 July 1996 that there was a risk of PPH, was inconclusive in that regard. As to that risk, it stated:taking into account data from spontaneous reports and in the absence of more formal epidemiological evidence, the possibility of an increased risk of PPH associated with these active substances cannot currently be ruled out'.71 Finally, as regards the risk of cardiac valve disorders, the CPMP stated that no cases had been reported for the substances evaluated in the opinion. It found that, at that time, there was no evidence of a link between cardiac valve disorders and the use of those substances.72 The CPMP concluded, as in respect of amfepramone and phentermine, that the substances evaluated had an unfavourable benefit/risk balance on the ground of their lack of efficacy (see above, paragraph 44).73 On 9 March 2000, the Commission adopted Decision C(2000) 608.Procedure74 By applications lodged at the Court Registry on 30 March, 3 and 6 April and 17, 22 and 25 May 2000 respectively, the applicants brought the present actions.75 By separate documents, lodged at the Court Registry on the same day as the principal applications, they submitted eight applications for suspension of the operation of the three contested decisions.76 By order of 28 June 2000 in Case T-74/00 R Artegodan v Commission [2000] ECR II-2583, the President of the Court of First Instance ordered suspension of the operation of Decision C(2000) 453 in respect of the applicant Artegodan. No appeal was lodged against that order.77 By order of 19 October 2000 in Case T-141/00 R Trenker v Commission [2000] ECR II-3313 and six other orders of 31 October 2000 in Cases T-76/00 R Bruno Farmaceutici and Others v Commission [2000] ECR II-3557, T-83/00 R II Schuck v Commission [2000] ECR II-3585, T-84/00 R Roussel and Roussel Diamant v Commission [2000] ECR II-3591, T-85/00 R Roussel and Roussel Iberica v Commission [2000] ECR II-3613, T-132/00 R Gerot Pharmazeutika v Commission [2000] ECR II-3635 and T-137/00 R Cambridge Healthcare Supplies v Commission [2000] ECR II-3653, the President of the Court of First Instance also ordered suspension of the operation of the three contested decisions in respect of the applicants in those cases. The Commission appealed against those seven orders. By orders of 11 April 2001 in Cases C-459/00 P(R) Commission v Trenker [2001] ECR I-2823, C-471/00 P(R) Commission v Cambridge Healthcare Supplies [2001] ECR I-2865, C-474/00 P(R) Commission v Bruno Farmaceutici and Others [2001] ECR I-2909, C-476/00 P(R) Commission v Schuck [2001] ECR I-2995, C-477/00 P(R) Commission v Roussel and Roussel Diamant [2001] ECR I-3037, C-478/00 P(R) Commission v Roussel and Roussel Iberica [2001] ECR I-3079 and C-479/00 P(R) Commission v Gerot Pharmazeutika [2001] ECR I-3121, the President of the Court of Justice set aside the orders of the Court of First Instance and dismissed the applications for interim relief.78 In Case T-74/00 R Artegodan v Commission, cited above, the Commission sought, by application lodged at the Court Registry on 20 April 2001, the cancellation, under Article 108 of the Rules of Procedure of the Court of First Instance, of the aforementioned order of the President of the Court of First Instance of 28 June 2000. By order of 5 September 2001 ([2001] ECR II-2367), the President of the Court of First Instance dismissed that application. On 13 November 2001, the Commission brought an appeal against that order. By order of 14 February 2002, the Court of Justice set aside the order of 5 September 2001 and cancelled the aforementioned order of 28 June 2000, thereby ending the suspension of the operation of the contested decision (C(2000) 453) as regards Artegodan (Case C-440/01 P(R) Commission v Artegodan [2001] ECR I-1489).79 In its application, the applicant in Case T-141/00 had sought to have that case joined with Case T-76/00. By order of 23 July 2001, after hearing all the parties, the President of the Second Chamber ordered that Cases T-74/00, T-76/00, T-83/00, T-84/00, T-85/00, T-132/00, T-137/00 and T-141/00 be joined for the purposes of the oral procedure and of the final judgment.80 By decision of 14 March 2002, the Court of First Instance referred the cases to the Second Chamber, Extended Composition, in accordance with Article 51(1) of its Rules of Procedure.81 By order of 25 April 2002, the President of the Second Chamber, Extended Composition, after hearing all the parties, ordered that the aforementioned cases and Case T-147/00 be joined for the purposes of the oral procedure.82 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Second Chamber, Extended Composition) opened the oral procedure. By way of measures of organisation of procedure, the parties were requested to reply to a number of written questions from the Court and to produce certain documents. They complied with those requests.83 The oral arguments of the parties were heard as were their replies to the questions put by the Court at the hearing on 7 and 8 May 2002. At that hearing, the experts advising the parties were also heard, inter alia at the request of the parties.Forms of order sought84 In Case T-74/00, the applicant claims that the Court should:- annul Commission Decision C(2000) 453 of 9 March 2000;- in the alternative, annul that decision in so far as Article 1 thereof, in conjunction with Annex I thereto, requires Germany to withdraw the marketing authorisation of the medicinal product Tenuate Retard', containing amfepramone, marketed by the applicant;- order the Commission to pay the costs.85 In Case T-76/00, the applicants claim that the Court should:- annul Commission Decision C(2000) 453 of 9 March 2000;- in the alternative, annul that decision in so far as Article 1 thereof, in combination with Annex I thereto, requires Belgium, Denmark, Germany, the United Kingdom, France, Italy, Luxembourg, Austria and Spain to withdraw the marketing authorisations of the medicinal products containing amfepramone which are marketed by the applicants;- order the defendant to pay the costs.86 In Case T-141/00, the applicant claims that the Court should:- annul Commission Decision C(2000) 453 of 9 March 2000;- order the defendant to pay the costs.87 In Case T-83/00, the applicant claims that the Court should:- annul Commission Decision C(2000) 608 of 9 March 2000;- in the alternative, annul that decision in so far as Article 1 thereof, in conjunction with Annex I thereto, requires Germany to withdraw the marketing authorisations of the medicinal product containing norpseudoephedrine which is marketed by the applicant;- order the defendant to pay the costs.88 In Case T-84/00, the applicants claim that the Court should:- annul Commission Decision C(2000) 608 of 9 March 2000;- in the alternative, annul that decision in so far as Article 1 thereof, in conjunction with Annex I thereto, requires France and Portugal to withdraw the marketing authorisations of the medicinal products containing clobenzorex, which are marketed by the applicants;- order the defendant to pay the costs.89 In Case T-85/00, the applicants claim that the Court should:- annul Commission Decision C(2000) 608 of 9 March 2000;- in the alternative, annul that decision in so far as Article 1 thereof, in conjunction with Annex I thereto, requires Spain and Portugal to withdraw the marketing authorisations of the medicinal products containing fenproporex which are marketed by the applicants;- order the defendant to pay the costs.90 In Case T-132/00, the applicant claims that the Court should:- annul Commission Decision C(2000) 452 of 9 March 2000;- in the alternative, annul that decision in so far as Article 1 thereof, in conjunction with Annex I thereto, requires Austria to withdraw the marketing authorisations of the medicinal product Adipex Retard-Kapseln' containing phentermine which is marketed by the applicant;- order the defendant to pay the costs.91 In Case T-137/00, the applicant claims that the Court should:- annul Commission Decision C(2000) 452 of 9 March 2000;- order the defendant to pay the costs.92 In the eight joined cases, the defendant contends that the Court should:- dismiss the applications;- order the applicants to pay the costs.Law93 In support of their applications for annulment, the applicants rely on a series of pleas in law which it is appropriate to classify and group together as follows: first, the Commission's lack of competence and, second, infringement of Articles 11 and 21 of Directive 65/65, of Article 15a of Directive 75/319 and of the principles of non-retroactivity, legal certainty and proportionality, as well as breach of essential procedural requirements, manifest error of assessment and misuse of powers. The applicants also rely on, third, alleged amendment of the subject-matter of the arbitration procedures initiated at Belgium's request; fourth, failure to observe the time-limits laid down in Articles 13 and 14 of Directive 75/319; fifth, infringement of the right of the undertakings concerned to be heard; sixth, infringement of certain provisions of Directive 75/318 and, seventh, breach of the obligation to state reasons.1. The plea alleging the Commission's lack of competence to take the contested decisionsPleas in law and arguments of the parties94 All the applicants submit that the Commission was not competent to adopt the contested decisions. They claim that the marketing authorisations of the medicinal products in question are purely national and that, consequently, Article 15a of Directive 75/319 does not provide the Commission with a valid legal basis for taking those decisions. That article allows a Member State to initiate the Community decision-making procedure provided for in Articles 13 and 14 of Directive 75/319 only in respect of authorisations granted in accordance with the provisions of Chapter III of that directive.95 In that regard, the applicants point out that in the Community there are three co-existing marketing authorisation procedures for medicinal products: the procedure for authorisation by the competent national authorities, provided for in Article 3(1) of Directive 65/65, the decentralised Community procedure established by Chapter III of Directive 75/319 and, finally, the centralised Community procedure established by Regulation No 2309/93.96 In the present case, contrary to the Commission's contention, the fact that the national marketing authorisations in question were supplemented by the decision of 9 December 1996, which was the outcome of a procedure based on Article 12 of Directive 75/319, does not permit the inference that they were granted in accordance with the provisions of Chapter III of that directive and thus fall within the scope of Article 15a.97 In the decision of 9 December 1996, the Commission merely amended certain particulars in the summary of product characteristics. Even assuming that that decision partially harmonised the marketing authorisations of the medicinal products in question, such a harmonisation cannot be treated as equivalent to the grant of a marketing authorisation under the provisions of Chapter III of Directive 75/319.98 The applicants in Cases T-76/00, T-83/00, T-84/00, T-85/00, T-132/00 and T-141/00 claim that Article 15a of Directive 75/319 clearly states that the Community arbitration procedure provided for therein applies only to marketing authorisations granted in accordance with the mutual recognition procedure referred to in Article 9 of that directive. In the scheme of Chapter III of Directive 75/319, the aim of Article 15a is to ensure that the harmonisation attained when a marketing authorisation is issued by way of mutual recognition is maintained if a subsequent amendment or the withdrawal of that marketing authorisation appears necessary to a Member State on grounds of protection of public health. In that system, marketing authorisations which have not been the subject of mutual recognition are purely national and therefore cannot, under any circumstances, be the subject-matter of a Community arbitration procedure under Article 15a.99 The applicant in Case T-74/00 takes the view that Article 15a of Directive 75/319 applies to marketing authorisations granted by way of mutual recognition, under Article 9 of that directive, or in accordance with the procedures provided for in Articles 10 and 11 of the directive. By contrast, the procedure for consultation of the CPMP established by Article 12 of that directive cannot result in an authorisation granted in accordance with the provisions of [Chapter III]'.100 The applicant in Case T-137/00 considers that Articles 15 and 15a of Directive 75/319 establish mandatory arbitration procedures in cases where a marketing authorisation has been granted by way of mutual recognition or following a referral to the CPMP under Articles 10, 11 or 12 of that directive. It claims that, as a result of the intervention of the CPMP, the grant of authorisation has already been subject to a degree of harmonisation'. It therefore makes sense that the authorisation may only be varied, suspended or withdrawn by a decision which is uniform throughout the Community. By contrast, the Member States remain competent to vary, suspend or withdraw a marketing authorisation granted on the basis of a purely national procedure, even where that authorisation has already been subject to variation following a CPMP opinion under Article 12 of Directive 75/319. In that context, the Member States have the option of making a referral to the CPMP under Articles 11 and 12 of that directive in order to obtain a consultative opinion.101 In support of their arguments, the applicants in Cases T-74/00 and T-137/00 maintain that Article 12 of Directive 75/319 does not allow for even the partial harmonisation of national marketing authorisations. That article does not empower the Commission to adopt a binding decision. Just like Articles 10 and 11 of that directive, it does no more than expressly provide for consultation of the CPMP in accordance with the procedure laid down in Article 13 of that directive. The decision of 9 December 1996 is therefore unlawful and cannot provide the basis for the Commission's competence under Article 15a of that directive.102 In reply to a question put by the Court at the hearing, all the applicants pointed out that Articles 15 and 15a of Directive 75/319 expressly provide for the application of the procedures laid down in Articles 13 and 14 of that directive. In that context, the lack of any reference in Articles 10, 11 and 12 of Directive 75/319 to the decision-making procedure governed by Article 14 is not a drafting omission, as is clear from the strictly identical wording of the corresponding articles in the Code.103 Furthermore, the applicant in Case T-74/00 adds that, given, in particular, the object and the purpose of Article 15a of Directive 75/319, the procedure which it prescribes is not applicable by analogy' to national marketing authorisations which have been varied in part under Article 12 of that directive. Under the procedure for mutual recognition provided for in Article 9 of that directive, all the information and particulars referred to in Articles 4, 4a and 4b of Directive 65/65 - which have been sent to the competent authority of a Member State for the purpose of obtaining a national marketing authorisation - are submitted, under Article 9(1) of Directive 75/319, to the competent authorities of the Member States which have received applications for recognition of the initial national authorisation. It is the concurrent examination' of that abundant documentation by the Member States which, according to the applicant, justifies the arbitration procedure provided for in Article 15a of Directive 75/319. There is no such justification in the case of a purely national authorisation which has been varied in accordance with Article 12 of the directive.104 The Commission rejects that line of argument. It follows from the wording of Article 15a of Directive 75/319, which expressly refers to authorisations granted in accordance with the provisions of Chapter III - which contains Articles 8 to 15b -, that that article does not refer solely to marketing authorisations granted under the mutual recognition procedure provided for in Article 9 of that directive but also covers marketing authorisations harmonised under Article 12 of that directive.105 In addition, a teleological interpretation of Article 15a of Directive 75/319 confirms that a marketing authorisation harmonised under Article 12 of that directive falls within the scope of Article 15a. Just as in the case of Articles 15 and 15b of that directive, the aim of Article 15a is to prevent unilateral national measures from jeopardising a uniform assessment of specific medicinal products or groups of medicinal products, in order to protect public health and safeguard the single market.106 In particular, the purpose of Article 15a precludes a narrow interpretation excluding partial harmonisation from the scope of that article. In that regard, the Commission recalls that it pointed out in point 7 of its Communication 98/C 229/03 of 22 July 1998 on the Community marketing authorisation procedures for medicinal products (OJ 1998 C 229, p. 4) that [t]he principle that achieved harmonisation has to be maintained is ... not limited to products which have undergone mutual recognition ... it also covers all other cases in which a [summary of product characteristics] was fully or partly harmonised through any Community procedure'.107 In the present case, the decision of 9 December 1996, based on Article 12 of Directive 75/319, partly harmonised at European level the national marketing authorisations of medicinal products containing substances referred to in the contested decisions, by requiring Member States significantly to amend the summaries of product characteristics relating to those medicinal products. The summary of product characteristics, referred to in Article 4a of Directive 65/65, constitutes the core of the marketing authorisation of a medicinal product. More specifically, the clinical particulars in that summary, referred to in Article 4a(5) of that directive, are the most direct means of safeguarding public health, which is the primary purpose of Directive 65/65 (first recital in the preamble). The authorisations of the medicinal products under consideration in the present case were therefore significantly and radically' amended by the decision of 9 December 1996.108 On that point, the Commission disputes the applicants' argument that the decision of 9 December 1996 did not harmonise the marketing authorisations for the medicinal products in question, since Article 12 of Directive 75/319 does not provide for the application of the decision-making procedure governed by Article 14 of that directive. It asserts that Articles 13 and 14 of that directive establish a single procedure, inasmuch as Article 14(1) provides that the Commission is to prepare a draft decision after receipt of the CPMP opinion forwarded to it in accordance with Article 13(5).109 At the hearing, the Commission added, in reply to a question from the Court, that all the provisions of Chapter III of Directive 75/319 must be interpreted in the light of the purpose specified in Article 8 of that directive, which is to facilitate the adoption by the Member States of common decisions on the authorisation of medicinal products. The pursuit of that objective finds its concrete expression in the automatic application of the decision-making procedure provided for in Article 14 of that directive following consultation of the CPMP in accordance with Article 13 thereof. That objective is supported by the fourth recital in the preamble to Directive 93/39 which essentially states that, in the event of disagreement between Member States in the mutual recognition procedure, a referral is to be made to the CPMP leading to a single decision, and by Article 7a of Directive 65/65, which requires a Member State which considers that the marketing authorisation of a medicinal product granted by another Member State may present a risk to public health to apply the procedures set out in Articles 10 to 14 of Directive 75/319/EEC'. The inseparable nature of the procedures provided for in Articles 13 and 14 - as confirmed by Article 7a of Directive 65/65 and the fourth recital in the preamble to Directive 93/39, in connection with Article 10 of Directive 75/319 - also holds true in connection with Article 12 of that directive, because that article refers to specific cases where the interests of the Community are involved'. In the present case, the decision of 9 December 1996 was thus validly adopted.110 In any event, that decision was not contested by the applicants in sufficient time, and its validity can thus no longer be challenged. The harmonisation of the national marketing authorisations carried out in 1996 must therefore be maintained, irrespective of the question of interpretation of Article 12 of Directive 75/319, which is of no relevance to the present case. In those circumstances the withdrawal of those authorisations fell in any event, according to the Commission's replies to questions put by the Court at the hearing, within the competence conferred on it by Article 15a of Directive 75/319.111 Finally, the Commission claims that the applicants' contention would result in a situation where, notwithstanding a Community harmonisation decision under Article 12 of Directive 75/319, medicinal products could continue to be authorised in some Member States and be the subject of a decision withdrawing their marketing authorisation in others, a situation which would be incompatible with a single market. In addition, that contention does not take account of the fact that the Member States in any event participate in the procedure established by Article 15a(1) of Directive 75/319 inasmuch as they are represented on the Standing Committee on Medicinal Products for Human Use.Findings of the Court112 It is appropriate at the outset to clarify the legal rules applicable to the marketing authorisations of the medicinal products referred to by the contested decisions, in the light of the relevant principles of transitional law, and then to determine the legal implications of the dispute as to the effects of the decision of 9 December 1996, before examining the relevant provisions of Chapter III of Directive 75/319 in order to determine whether the withdrawal of the authorisations in question fell within the competence of the Commission.The legal rules applicable to the marketing authorisations of the medicinal products referred to by the contested decisions, in the light of the principles of transitional law113 It is common ground between the parties that the marketing authorisations of the medicinal products referred to by the contested decisions were granted, and in some cases renewed, in accordance with the national procedures applicable in the various Member States concerned, and not in accordance with the mutual recognition procedure coupled with arbitration procedures, provided for in Chapter III of Directive 75/319.114 Leaving aside the decision of 9 December 1996, those authorisations were thus purely national. Disregarding that decision, the suspension, variation or withdrawal of those authorisations therefore came, at the time when the contested decisions were adopted, within the exclusive competence of the Member States concerned, a competence which, following the introduction of the mutual recognition procedure by Directive 93/39, is essentially residual.115 Since 1 January 1998, there have been only two autonomous, distinct procedures for authorisation and monitoring of medicinal products co-existing in the Community: the centralised Community procedure established by Regulation No 2309/93, which has been applicable since 1 January 1995, and the decentralised Community authorisation procedure', in the words of the eighth recital in the preamble to Regulation No 2309/93. The latter procedure, also applicable since 1 January 1995, was set up, in Chapter III of Directive 75/319, in the form of a procedure for the mutual recognition of the initial national marketing authorisation of the medicinal product in question - issued by the reference Member State in accordance with the common criteria of quality, safety and efficacy set out in Directive 65/65 - together with Community arbitration procedures, applicable where the mutual recognition procedure is frustrated and in respect of the management of marketing authorisations which come within the scope of those arrangements.116 In those circumstances, by defining the scope of the mutual recognition procedure, Article 9 of Directive 75/319 and Articles 7 and 7a of Directive 65/65 serve to define a contrario the essentially residual field of exclusive competence of the Member States. Since 1 January 1995 that exclusive competence has been restricted to, first, the grant and management of marketing authorisations for medicinal products marketed solely in a single Member State and, second, the management of purely national marketing authorisations granted before that date or during the transitional period from 1 January 1995 to 31 December 1997. The relevant provisions of Chapter III of Directive 75/319 expressly provide for a Community procedure to be applied in the management of only those authorisations granted under the provisions of that chapter. Moreover, it is clear from Article 4 of Directive 93/39, in conjunction with Article 7a of Directive 65/65, that, during the transitional period, the Member States were competent to grant marketing authorisations in respect of medicinal products which had already been marketed in one or more other Member States in cases where the applicant opted for the national marketing authorisation procedure rather than the mutual recognition procedure.117 The present dispute comes within the ambit of the system described above, which has been applicable since 1 January 1995. According to the principles of transitional law, that new system could be applied immediately in respect of the future consequences and the management, from that date on, of the marketing authorisations previously granted (see, to that effect, Case 1/73 Westzucker [1973] ECR 723, paragraph 5). In the present case, the national authorisations in question were thus immediately subject to the relevant provisions of Directive 75/319, as amended by Directive 93/39.118 In this case, the effect of the decision of 9 December 1996 on the classification of those authorisations and, accordingly, the competence of the Commission to adopt the contested decisions must therefore be assessed in the light of those rules.The legal implications of the dispute as to the effects of the decision of 9 December 1996119 It is for the Court to determine whether, following their amendment pursuant to the decision of 9 December 1996, the marketing authorisations of the medicinal products referred to by the contested decisions fell within the scope of Article 15a(1) of Directive 75/319.120 In that regard, it should be noted at the outset that the Commission correctly submits that that amendment concerned an essential aspect of the aforementioned authorisations (see above, paragraph 107). In reality, those authorisations were partially harmonised, although the question remains as to whether that harmonisation was the consequence of a binding decision, validly adopted by the Commission.121 Article 15a(1) of Directive 75/319 refers to marketing authorisations granted in accordance with the provisions of [Chapter III]' of that directive. It essentially provides that the variation, suspension or withdrawal of such authorisations, on the initiative of a Member State with a view to the protection of public health, fall within the exclusive competence of the Commission, when adopting a decision following a CPMP opinion in accordance with the procedures laid down in Articles 13 and 14 of Directive 75/319. Conversely, the variation, suspension and withdrawal of marketing authorisations which do not fall within the ambit of Article 15a remain, in principle, subject to the exclusive competence of the Member States.122 In the present case, the applicants submit essentially that national authorisations, harmonised under a procedure based on Article 12 of Directive 75/319, continue to come within the exclusive competence of the Member States.123 The defendant, relying, in particular, on its communication of 22 July 1998, claims that the management of those authorisations comes within the scope of a community arbitration procedure.124 That communication cannot provide an authoritative interpretation of the relevant provisions. It can only serve to make known the Commission's interpretation of the rules governing the Community procedures relating to the marketing authorisations of medicinal products. While, in such a communication, the Commission is entitled to clarify, and even supplement, specific provisions of the applicable legislation with a view to ensuring their practical efficacy, that communication cannot have the effect of amending the mandatory rules set out in that legislation (see, to that effect, Case C-322/93 P Peugeot v Commission [1994] ECR I-2727, paragraphs 12 and 15, and Case T-9/92 Peugeot v Commission [1993] ECR II-493, paragraphs 44 and 46). In particular, it cannot require the application of a Community arbitration procedure which is not provided for in the applicable legislation.125 In this case, the wording of Articles 12 and 15a of Directive 75/319 provides no clear guidance. It is therefore necessary to consider whether, in the scheme of Chapter III of that directive, and in the light of the aims of that directive, Article 15a(1), in conjunction with Article 12, can be construed as also applying to national marketing authorisations which have been harmonised under Article 12.126 To that end, having regard to the facts of the case and the arguments of the parties, the Court must determine, first, whether - as the Commission submits - Article 12 establishes an arbitration procedure which transfers competence from the Member States concerned to the Community. In the scheme of Chapter III of Directive 75/319, the variation, withdrawal and suspension of marketing authorisations harmonised within the framework of an arbitration procedure are necessarily governed by Article 15a of that directive. In that respect, since the mutual recognition procedure established by Chapter III of Directive 75/319 provides for the adoption of common decisions, there is no need, when considering whether such authorisations meet the criteria for application of Article 15a(1) of that directive, to distinguish between harmonisation which took place when the original authorisations were granted and harmonisation which occurred later, when those authorisations were substantively amended.127 Conversely, if Article 12 must be interpreted as establishing a merely consultative procedure, the decision of 9 December 1996 has no legal basis. On that view, although the decision is now definitive since it was not challenged in sufficient time, it cannot have the effect of altering the division of powers between the Member States and the Community laid down in the relevant legislation on the withdrawal of marketing authorisations. In that case, it is necessary to consider, second, whether national marketing authorisations of medicinal products voluntarily harmonised by the Member States following a CPMP opinion under Article 12 of Directive 75/319 can be placed on the same footing as marketing authorisations granted in accordance with the provisions of [Chapter III]' of that directive.The authority competent to adopt a decision following a CPMP opinion under Article 12 of Directive 75/319128 It is necessary to determine whether, despite the fact that Article 12 of Directive 75/319 does no more than expressly provide for the application of the consultative procedure set out in Article 13, a referral to the CPMP under Article 12 of that directive (Article 31 of the Code) has the effect of conferring on the Commission the competence to adopt a decision under the decision-making procedure provided for in Article 14 of that directive. To that end, after first examining the main provisions relating to the mutual recognition procedure, Article 12 of Directive 75/319 must be interpreted in the context of Chapter III of that directive. Given the lack of clarity and, consequently, transparency of certain provisions of Chapter III of Directive 75/319, a detailed examination of the provisions, albeit not applicable in the present case, relating to the mutual recognition procedure is essential for the purposes of a systemic interpretation of Article 12 of that directive.129 First, it should be recalled that in the mutual recognition procedure established by Article 9(4) of Directive 75/319 (Article 28(4) of the Code), the Member States concerned are to recognise the initial marketing authorisation granted by the reference State within 90 days of receipt of the application and the assessment report drawn up by that State, save in the exceptional case' provided for in Article 10(1) of that directive (Article 29(1) of the Code), in which a Member State declines to recognise the initial authorisation.130 In such a case, Article 10(2) of that directive (Article 29(2) of the Code) provides for the application of a two-stage procedure. First, all the Member States concerned shall use their best endeavours to reach agreement on the action to be taken in respect of the application'. If they do not reach agreement by the time-limit referred to in the previous paragraph then, as a second stage, they are to refer the matter to the CPMP for the application of the procedure laid down in Article 13'. That procedure is purely consultative.131 It follows that while Articles 15 and 15a of Directive 75/319 expressly provide for the application of the procedures laid down in Articles 13 and 14 of that directive, Article 10(2) does not expressly establish a Community arbitration procedure in cases where concertation between the Member States has failed. It is thus necessary to consider the legal implications of the lack of any express reference to the decision-making procedure laid down in Article 14, in the context of the mutual recognition procedure.132 It must be stated in this respect that the purpose of the mutual recognition procedure militates against a literal interpretation of Article 10(2) of Directive 75/319 which would preclude application of the procedure provided for in Article 14. Recital 12 in the preamble to the Code, which essentially reproduces the fourth recital in the preamble to Directive 93/39 establishing the mutual recognition procedure, states that a marketing authorisation for a medicinal product granted by a competent authority in one Member State ought to be recognised by the competent authorities of the other Member States unless there are serious grounds for supposing that the authorisation of the medicinal product concerned may present a risk to public health. In the event of a disagreement between Member States about the quality, the safety or the efficacy of a medicinal product, a scientific evaluation of the matter should be undertaken according to a Community standard, leading to a single decision on the area of disagreement binding on the Member States concerned. Whereas this decision should be adopted by a rapid procedure ensuring close cooperation between the Commission and the Member States'. Furthermore, the eighth recital in the preamble to Regulation No 2309/93 confirms that Directive 93/39 has provided that if such a disagreement between Member States occurs, the matter should be resolved by a binding Community decision following a scientific evaluation of the issues involved within [the CPMP]'.133 Article 10(2) of Directive 75/319 must therefore be interpreted, in conjunction with recital 12 in the preamble to the Code, as meaning that if the Member States have not overcome their differences within the prescribed period, they are obliged to initiate an arbitration procedure by referring the matter to the CPMP for application of the procedures set out in Articles 13 and 14 of that directive. In that context, the close cooperation between the Commission and the Member States referred to in recital 12 in the preamble to the Code finds its concrete expression in the implementation of the regulatory procedure, in which the Commission is assisted by the Standing Committee on Medicinal Products for Human Use, consisting of representatives of the Member States with a representative of the Commission as chairman, in accordance with Article 2b of Directive 75/318.134 That interpretation is compatible with the wording of Articles 13 and 14 of Directive 75/319. As pointed out by the Commission, Article 13(5) requires the CPMP opinion to be forwarded at the end of the consultative procedure not only to the Member States and the relevant marketing authorisation holders, but also to the Commission. In addition, while Article 13(1) provides that the CPMP is to consider the matter and issue an opinion [w]hen reference is made to the procedure described in this article', Article 14 merely states that, within 30 days of the receipt of the opinion, the Commission is to prepare a draft decision and refers to the regulatory procedure for adoption of the final decision. It is thus clear that the procedures set out in Articles 13 and 14 of Directive 75/319 are in principle intended to be automatically linked and to culminate in a community decision. Against that background, a teleological and systemic interpretation of Article 10(2) of that directive makes it possible to fill a gap in the drafting of Article 10 caused by the lack of any express reference to the procedure laid down in Article 14.135 Furthermore, it is only that interpretation which confers any practical effect on the provisions relating to the mutual recognition procedure. In particular, when the two-stage procedure established by Article 10(2) of Directive 75/319 is implemented, the second stage, which is triggered in precisely the case where concertation between the Member States has failed in the first stage, would risk being rendered redundant if it were purely consultative. Moreover, if the second stage of the procedure were considered to be consultative, even though earlier legislation had already provided for obligatory consultation of the CPMP in certain circumstances, the introduction by Directive 93/39 of a first stage of concertation prior to referral to the CPMP would merely delay the consultation of that committee. In view of the progressive harmonisation of the rules on medicinal products, the introduction of a two-stage procedure can therefore be logically justified only if the second stage consists in arbitration which is binding on the Member States.136 Against that background, the Court must determine, second, whether, in the scheme of Chapter III of Directive 75/319 and having regard to the objectives pursued, Article 12 of that directive can, like Article 10(2), be interpreted as impliedly providing for application of the procedure governed by Article 14.137 Article 12, cited above (paragraph 10), was substantially amended by Directive 93/39. The previous version of that article (as amended by Directive 83/570) stated:The competent authorities of Member States may, in specific cases where the interests of the Community are involved, refer the matter to the [CPMP] before reaching a decision on a request for a marketing authorisation or on the suspension or revocation of an authorisation.'138 The amendments made to Article 12 by Directive 93/39 do not however permit the inference that that article, in its amended form, establishes an arbitration procedure. The amendments did no more than, first, extend to the Commission and applicants or holders of marketing authorisations the right, previously held only by the Member States, to refer a matter to the CPMP. Accordingly, it is no longer expressly apparent from the wording of Article 12 that the power to adopt the final decision lies with the authorities of the Member States concerned, an omission which can be put down to drafting considerations, given the extension of the right to refer matters to the CPMP. Second, emphasis was placed on the fact that a matter can be referred to the CPMP, in particular to take account of the information collected in connection with pharmacovigiliance. Moreover, it became possible to refer a matter not only before reaching any decision on a request for a marketing authorisation or on the suspension or withdrawal of an authorisation, but also before any variation to the terms of an authorisation.139 In those circumstances, the Commission is competent to adopt decisions on national marketing authorisations following a referral to the CPMP under Article 12 of Directive 75/319 only if that competence is clearly apparent from the purpose of that provision or is expressly provided for in the system established by Chapter III of that directive.140 In contrast to Article 10(2) of Directive 75/319, which relates to the mutual recognition procedure and must accordingly be interpreted in accordance with the purpose of that procedure, as specifically defined in recital 12 in the preamble to the Code, Article 12 of Directive 75/319, like Article 11 of that directive, is not one of the provisions providing the framework for the mutual recognition procedure. That procedure is expressly governed by Articles 9 and 10 on the grant of marketing authorisations, and Articles 15 and 15a on their management.141 Furthermore, contrary to the Commission's contentions, Article 8 of Directive 75/319 does not support an interpretation of Article 12 of that directive to the effect that it establishes a community arbitration procedure or that the opinion issued by the CPMP and forwarded, inter alia, to the Member States is binding on them. Article 8 merely states that the CPMP has been set up in order to facilitate the adoption of common decisions by Member States on the authorisation of medicinal products. The French version of that article - which, in referring to the adoption by the Member States of une attitude commune' (a common position'), reproduces the wording of that provision prior to its amendment by Directive 93/39 and thereby differs on that point from the other language versions - contains a drafting error in that respect.142 For all those reasons, in the scheme of Chapter III of Directive 75/319, Article 12 of that directive, which does not include any express definition of its scope, is intended to apply in the residual field of exclusive competence of the Member States, or when the initial marketing authorisation of a medicinal product is granted by the reference Member State (see above, paragraphs 115 and 116). Against that background, it makes sense that that article provides for consultation of the CPMP only under Article 13. The Member States, which have the mere option to consult the CPMP, must not find themselves by implication deprived of their competence if they make use of that option or if the Commission, the applicant, or the holder of a marketing authorisation makes a referral to the CPMP under Article 12.143 In that regard, contrary to the defendant's contentions, the concept of interests of the Community', which determines the scope of Article 12 of Directive 75/319 and which provided grounds for consultation of the CPMP pursuant to that article even before the introduction of Community arbitration procedures by Directive 93/39, cannot legitimate such a transfer of competence in the absence of express provisions to that effect.144 Moreover, the wording of Articles 13(5) and 14(1) of Directive 75/319, which confirms that the consultative procedure and the Community decision-making procedure are in principle intended to be linked (see above, paragraph 134), does not, of itself, permit Article 12 to be interpreted as establishing a Community arbitration procedure. The aforementioned provisions of Articles 13 and 14, relied on by the defendant, are purely procedural. In the absence of any provision expressly providing for a transfer of competence to the Community, those provisions therefore do not provide any guidance on the interpretation of Article 12 of Directive 75/319. In the scheme of Chapter III of Directive 75/319, the automatic link between the consultative procedure and the decision-making procedure, given concrete expression in Articles 13(5) and 14(1) of that directive, specifically relates to the mutual recognition procedure, which is precisely the subject of that chapter, a chapter which is indeed reproduced in Chapter 4 of Title III of the Code, under the heading Mutual recognition of authorisations'.145 In addition, the fact that Article 15a(2) of Directive 75/319 entitles a Member State, in exceptional circumstances, without prejudice to the provisions of Article 12', to suspend the marketing authorisation of a medicinal product pending the adoption of a definitive decision does not provide any guidance on the interpretation of Article 12.146 Finally, in the scheme of Chapter III of Directive 75/319, the difference in kind between the procedures established by Articles 11 and 12 on the one hand, and the arbitration procedure established by Article 10(2), on the other, is also demonstrated by the essential differences in the documents to be forwarded to the CPMP. While, in the arbitration procedure, the CPMP is sent all the documents and information referred to in particular in Article 4 of Directive 65/65, Articles 11 and 12 provide only that [t]he Member State[s] and the person responsible for placing the medicinal product on the market shall forward to the [CPMP] all available information relating to the matter in question'. Those factors confirm the purely consultative nature of the procedures established by Articles 11 and 12.147 It follows that, in the scheme of Chapter III of Directive 75/319 and in the light of its objectives, Article 12 cannot be interpreted as implicitly empowering the Commission to adopt a binding decision under the procedure set out in Article 14.148 However, in the present case, since the decision of 9 December 1996 has been complied with by the Member States concerned, it is necessary to consider whether, in the scheme of Chapter III of that directive, authorisations harmonised by the Member States following consultation of the CPMP under Article 12 of Directive 75/319 can nevertheless be placed on the same footing as marketing authorisations granted in accordance with the provisions of Chapter III (see paragraph 127 above).The classification of national marketing authorisations harmonised by the Member States following a CPMP opinion under Article 12 of Directive 75/319149 The system of harmonisation set up by Chapter III of Directive 75/319 is, as has already been observed (see above, paragraphs 115 and 128 to 135), based on the principle of mutual recognition in association with binding arbitration procedures. Against that background, national marketing authorisations which have been harmonised in accordance with a CPMP opinion under Article 12 of that directive are not, in principle, included in the concept of a marketing authorisation granted in accordance with the provisions of [Chapter III]' within the meaning of Article 15a(1) of that directive.150 As the Court has already held (see above, paragraphs 136 to 147), Article 12 of Directive 75/319 sets up, in the field of competence of the Member States, a purely consultative procedure, which is also optional and can, moreover, be initiated not only by the Member States concerned, but also by the Commission, or the applicant or holder of a marketing authorisation. In those circumstances, in the absence of an express provision, the principle, set out in the first paragraph of Article 5 EC, that the Community is to act within the limits of the powers conferred upon it, precludes an interpretation of Article 15a(1) of Directive 75/319 to the effect that the harmonisation of certain marketing authorisations, in accordance with a non-binding opinion of the CPMP under Article 12 of that directive, can have the effect of depriving the Member States concerned of their powers, by triggering the application of the arbitration procedure provided for in Article 15a in respect of the adoption of any subsequent decision regarding the suspension or withdrawal of such authorisations.151 Furthermore, it must be noted that neither the preamble to Directive 93/39 nor Chapter III of Directive 75/319 includes any general reference among their objectives to the notion, invoked by the Commission, that achieved harmonisation must be maintained. In the scheme of Chapter III of Directive 75/319, that notion is only related to the specific objective of the mutual recognition procedure and has led to the establishment of the arbitration procedures provided for in Articles 15 and 15a of that directive in respect of the management of marketing authorisations granted within the framework of the mutual recognition procedure.152 Accordingly, contrary to the Commission's assertions, it is not possible to interpret Article 15a(1), in conjunction with Article 12 of Directive 75/319, by analogy with Article 15b of that directive, which states that Articles 15 and 15a shall apply by analogy to medicinal products authorised by Member States following an opinion of the [CPMP] given in accordance with Article 4 of Directive 87/22/EEC before 1 January 1995'.153 The insertion of Article 15b into Chapter III of Directive 75/319 can be accounted for by the special character of the high-technology medicinal products industry which, since 1 January 1995, has been governed by Regulation No 2309/93 establishing the centralised Community procedure. That insertion clearly reflects the intention to make the management of high-technology medicinal products subject to a transitional system of Community arbitration where they have been authorised under the aegis of Directive 87/22, which was repealed with effect from 1 January 1995 by Council Directive 93/41/EEC of 14 June 1993 (OJ 1993 L 214, p. 14). In that respect, it should be recalled that Directive 87/22, as is apparent from the seventh recital in the preamble thereto, had provided for a Community mechanism for concertation, prior to any national decision, with a view to arriving at uniform decisions throughout the Community'. That procedure had been introduced because the procedures for coordinating national decisions' provided for in Directive 75/319, as amended by Directive 83/570, had not been considered sufficient to open up to high-technology medicinal products the large Community-wide single market they require' (the third and fifth recitals in the preamble to Directive 87/22).154 In those circumstances, no analogy can be drawn between marketing authorisations harmonised under Article 12 of Directive 75/319 and authorisations granted within the framework of Directive 87/22. The latter authorisations were transitionally subject to the scheme established by Articles 15 and 15a of Directive 75/319, in order to ensure the adoption of the common decisions necessary to the development of high-technology medicinal products, after the centralised Community procedure became applicable to that sector.155 For all the above reasons, in the scheme of Directive 75/319, the concept of a marketing authorisation granted in accordance with the provisions of Chapter III of that directive, referred to in Article 15a(1), cannot be interpreted as also including authorisations harmonised following consultation of the CPMP under Article 12. The contested decisions therefore have no legal basis and the plea in law alleging the Commission's lack of competence is well founded.156 Furthermore, even assuming that the Commission had been competent to adopt the contested decisions, they would nevertheless be flawed on the ground of infringement of Article 11 of Directive 65/65. In that regard, the Court makes the following observations.2. Interpretation of the conditions for withdrawal of marketing authorisations of medicinal products laid down in Article 11 of Directive 65/65Summary of the arguments of the parties157 The applicants submit that the contested decisions infringe Article 11 of Directive 65/65 in three respects. First, they do not respect the rules of evidence laid down in that article. Under Article 11 of Directive 65/65, the burden of proof of lack of therapeutic efficacy or harmfulness of an authorised substance lies with the competent authority. Furthermore, in the case of withdrawal of the marketing authorisation of a medicinal product, the lack of therapeutic efficacy or the harmfulness of that medicinal product in the normal conditions of use must be established beyond doubt, whereas, in the case of an application for authorisation, insufficient substantiation, which covers disagreement between scientists, may be grounds for refusing authorisation. In the present case, the CPMP and the Commission acted on the basis of mere doubts and transferred the burden of proof to the holders of the authorisations of the medicinal products in question.158 Second, the applicants in Cases T-74/00 and T-137/00 consider that Article 11 of Directive 65/65 does not provide for an assessment of the benefit/risk balance.159 Third, all the applicants submit that the criterion of long-term efficacy, on which the contested decisions are based, is not supported by new scientific data justifying withdrawal of the marketing authorisations of the medicinal products concerned.160 According to the applicants in Cases T-74/00 and T-141/00, that criterion has the effect of favouring long-term medicinal products based on orlistat and sibutramine - two new, recently authorised substances which have not been sufficiently tested. Conversely, amfepramone is a known alternative with no risk of unexpected side effects.161 At the hearing, all the applicants also pointed out that following the contested decisions there are now only two substances for the treatment of obesity available on the Community market, orlistat and sibutramine. In view of the seriousness of the medical disorders associated with obesity, the withdrawal of the marketing authorisations of the medicinal products in question here, in breach of the conditions set out in Article 11 of Directive 65/65, thus fails to have regard to the interests related to protection of public health. Moreover, medicinal products containing amfepramone are still authorised in the United States, and the FDA has reauthorised medicinal products containing phentermine.162 The Commission submits, first, that in this case, contrary to the applicants' claims, the latest scientific data justify an assessment of the efficacy of the substances in question which differs from that given in the CPMP opinion of 17 July 1996. In its scientific conclusions annexed to the contested decisions, the CPMP expressly stated that the new information, as compared to that available to it in 1996, lay in the changes in the scientific criteria in the treatment of obesity. In that regard, it is clear from the CPMP Note for Guidance that, owing to the chronic nature of the condition, therapeutic efficacy for treating obesity requires a significant and long-term lowering of body weight (of at least one year). That criterion of long-term efficacy is also enshrined in the Scottish guideline of November 1996, the guideline from the Royal College of Physicians of December 1998, and the guideline from the American Society for Clinical Nutrition of 1998, which reflect a broad medical consensus.163 The defendant explains that the current scientific rules' mentioned in the first part of the CPMP Note for Guidance, which contains general considerations relating to the treatment of obesity, were applicable in the present case. Conversely, the specific, but non-binding, recommendations relating to clinical trials, which constitute the second part of that Note for Guidance, do not relate to medicinal products which have already received a marketing authorisation, and were not applied in the present case.164 Furthermore, the CPMP, in the observations forwarded to the Court by the Commission in reply to written questions, and the expert advising the Commission at the hearing, Ms Saint-Raymond, have confirmed that the criterion of long-term efficacy which was applied in the present case was not based on new scientific information or data. In 1999, the CPMP based its assessment on the scientific data already available to it in 1996, since in the meantime there had been only two new studies, on amfepramone and on phentermine, which, owing to their poor quality, provided no new insights. The new scientific evidence consists in this case of a new consensus in the medical community, expressed in the aforementioned guidelines, which no longer permits the inference that the substances in question are effective. Such changes in the scientific assessment of a form of treatment, leading to its discontinuance, are common. By way of example, streptomycin, which may still have an effect on the Koch bacillus, is no longer used in the treatment of tuberculosis because the medical community recognises the utility of other medicinal products.165 Against that background, the Commission accepts that under the first paragraph of Article 11 of Directive 65/65 the onus was on it to prove that the substances in question lacked therapeutic efficacy. In the present case, contrary to the applicants' claims, the Commission did not consider that the applicants were required to demonstrate that the medicinal products containing the substances in question had a long-term effect. The CPMP's conclusion that the substances under consideration lacked efficacy was not based on mere doubts. On the contrary, it is apparent from the CPMP's scientific conclusions, annexed to the contested decisions, that, on the basis of the scientific data at its disposal, the CPMP carried out an analysis of the therapeutic effects of the substances in question, and concluded that they lacked efficacy on the ground that they appear to induce only modest, short-term weight-loss. There have been no controlled studies establishing that those substances have a relevant long-term influence on weight or provide a clinical benefit in the treatment of obesity. At the hearing, the Commission pointed out that it is not the task of the CPMP to carry out scientific studies in order to generate additional data.166 The defendant claims that, in the present case, it was impossible to take the view that the short-term effects of the substances under consideration could result in a long-term benefit, because, as the CPMP noted in its scientific conclusions, the initial loss of weight does not prevent rapid weight-regain after treatment is stopped. In Case T-141/00, the defendant notes that recent clinical studies show, by contrast, that other medicinal products intended for the treatment of obesity, such as Xenical (containing orlistat) and Reductil/Zelium/Reduxade (containing sibutramine), can lead to satisfactory weight-loss after treatment for one year, without otherwise causing excessive weight-loss. Treatment with Xenical, which has been authorised in the Community since 29 July 1998, can be continued for two years. It has some minor side effects and there is no risk of dependence. The medicinal product Reductil/Zelium/Reduxade, which have been authorised in Germany since January 1999, can be used for up to 12 months.167 In its observations forwarded to the Court by the Commission in reply to a written question from the Court, the CPMP pointed out, however, that it assessed the benefit/risk balance of the anorectics in question solely on the basis of their individual properties and had not taken into account the existence of other substances. In particular, its conclusions were not based on a comparison of the efficacy of those anorectics with the efficacy of medicinal products suitable for long-term use. In that regard, the expert advising the Commission at the hearing confirmed, in reply to a question from the Court, that, when the CPMP issued its final opinions on the substances in question, it was not in possession of comparative studies on those substances, sibutramine and orlistat. The expert stated that, in certain cases, the CPMP requests comparative studies in order to assess the efficacy of a new medicinal product where there is already a medicinal product whose medical usage is well established and which has recognised efficacy and an acceptable level of safety. However, in the present case, it would not have been fair to make such a request in order to re-evaluate established medicinal products which have been authorised for more than 15 or 20 years on the basis of the scientific criteria applicable at the time of authorisation. For a comparative analysis, new studies which meet current standards would have had to be carried out on those medicinal products. Finally, as regards sibutramine, the CPMP explained that following its initial authorisation in Germany in January 1999, that substance was authorised in various Member States by way of the mutual recognition procedure. It was then the subject of a Commission decision of 26 March 2001 under Article 12 of Directive 75/319 which made the continuation of the marketing authorisations of medicinal products containing that substance subject to a number of conditions. A procedure for withdrawal of those authorisations was initiated in March 2002 on the ground of safety, on the basis of Article 36 of the Code (which reproduces Article 15a of Directive 75/319).168 Second, the defendant disputes the contention that medicinal products containing the substances in question are safe in the normal conditions of use. It points out that the risks reported by the CPMP in 1999 had already been taken into consideration in the decision of 9 December 1996.169 The inadequate therapeutic efficacy of medicinal products containing the substances in question, in the light of the current scientific criteria, was accordingly weighed, as required under Article 11 of Directive 65/65, against the unchanged but indisputable risks' posed by that type of substance, leading the CPMP to conclude that the benefit/risk balance was unfavourable.Findings of the Court170 It is necessary first to clarify the legal rules governing withdrawal of a marketing authorisation before considering the specific issue of whether the contested decisions comply with the conditions for withdrawal laid down in the applicable rules.The criteria for withdrawal of a marketing authorisation and the rules of evidence171 In accordance with Article 21 of Directive 65/65, which provides that a marketing authorisation may not be refused, suspended or revoked except on the grounds set out in that directive, the substantive criteria for withdrawal of a marketing authorisation in order to protect public health are exclusively governed by Article 11 of that directive (see, to that effect, Case C-83/92 Pierrel and Others [1993] ECR I-6419, paragraphs 21 to 23).172 The first paragraph of Article 11 of Directive 65/65 expressly provides that the competent authorities are to suspend or revoke the marketing authorisation of a medicinal product where that product proves to be harmful in the normal conditions of use, or where its therapeutic efficacy is lacking, or where its qualitative and quantitative composition is not as declared.173 The aforementioned conditions for withdrawal of an authorisation must be interpreted in accordance with the general principle, identified in the case-law, that protection of public health must unquestionably take precedence over economic considerations (see, in particular, order in Case C-180/96 R United Kingdom v Commission [1996] ECR I-3903 paragraph 93, and the judgment in Case C-183/95 Affish [1997] ECR I-4315, paragraph 43).174 In the context of the grant and management of marketing authorisations of medicinal products, that principle requires, first, the taking account exclusively of considerations relating to the protection of public health; second, the re-evaluation of the benefit/risk balance of a medicinal product where new data give rise to doubts as to its efficacy or safety and, third, the application of rules of evidence in accordance with the precautionary principle, which is implicitly relied on by the Commission (see above, paragraph 165) and is, in particular, the corollary of the principle that the requirements of the protection of public health are to prevail over economic interests.- Account to be taken exclusively of considerations relating to the protection of health, in decisions on the authorisation of medicinal products175 The general principle that precedence must be given to the protection of public health is, as regards medicinal products for human use, expressly enshrined in the first recital in the preamble to Directive 65/65 (recital 2 in the preamble to the Code), which states that the primary purpose' of any rules concerning the production and distribution of medicinal products must be to safeguard public health', and in the third recital in the preamble to Directive 93/39, which provides that in the interest of public health and of the consumer of medicinal products, it is necessary that decisions on the authorisation to place medicinal products on the market be exclusively based on the criteria of quality, safety and efficacy ... extensively harmonised by ... Directive 65/65 ...'.176 Those provisions confirm that only requirements related to the protection of public health must be taken into consideration when a marketing authorisation is granted under Article 5 of Directive 65/65 (Article 26 of the Code), when such an authorisation is renewed under Article 10(1) of that directive (Article 24 of the Code), and in the management of marketing authorisations in accordance with Article 11 of that directive (Article 116 of the Code).177 In particular, in view of the precedence thereby accorded to the protection of public health, where, on the basis of the progress of scientific knowledge and new data collected in particular in the context of pharmacovigilance, the competent authority proves to the requisite legal standard that a medicinal product no longer meets one of the criteria set out in Article 11 of the directive, the holder of the marketing authorisation of that medicinal product, which is valid for five years and renewable for five-year periods pursuant to Article 10 of Directive 65/65, may not claim that he is entitled, by virtue of the principle of legal certainty, to specific protection of his interests during the period of the authorisation's validity.- Re-evaluation of the benefit/risk balance in the light of new data178 It should be noted that, in any evaluation of a medicinal product, the degree of harmfulness which the competent authority may regard as acceptable depends, in practical terms, on the benefits which the medicinal product is deemed to provide. As the seventh recital in the preamble to Directive 75/318 states, the concepts of harmfulness' and therapeutic efficacy' can only be examined in relation to each other and have only a relative significance depending on the progress of scientific knowledge. That provision has, moreover, been reproduced as recital 7 in the preamble to the Code, which clearly confirms that, contrary to the applicants' claims, the requirement to carry out an evaluation of the benefit/risk balance of a medicinal product does not apply exclusively to the grant of a marketing authorisation but applies in particular to the procedure for withdrawal of such an authorisation. Furthermore, in the introduction of the Annex to Directive 75/318, the legislature states essentially that after the marketing authorisation has been issued any new data or information must be submitted to the competent authorities in order to monitor the benefit/risk assessment'.179 Against that background, contrary to the applicants' arguments, the proposal submitted by the Commission on 26 November 2001 for a directive amending Directive 2001/83/EC on the Code (COM (2001) 404 final), which seeks specific reference in Article 116 of the Code (corresponding to Article 11 of Directive 65/65) to the assessment of the risk-benefit balance, merely makes explicit the conditions set out in that article, in the version currently in force.180 It follows, in particular, that the reasons which have led a competent authority to maintain a marketing authorisation of a medicinal product notwithstanding certain harmful effects may cease to apply if that authority finds that the benefits justifying such an authorisation, that is to say the existence of a therapeutic effect, are no longer present and, consequently, the medicinal product under consideration no longer has a favourable benefit/risk balance (cf. order in Commission v Trenker, cited above, paragraph 67).- The rules of evidence in relation to the precautionary principle181 In addition, where there is scientific uncertainty, it is for the competent authority to assess the medicinal product in question in accordance with the precautionary principle. It is therefore appropriate to recall the origin and content of that principle before explaining its effect on the rules of evidence in connection with the system of prior authorisation of medicinal products.182 As regards environmental matters, the precautionary principle is expressly enshrined in Article 174(2) EC, which establishes the binding nature of that principle. Furthermore, Article 174(1) includes protecting human health among the objectives of Community policy on the environment.183 Therefore, although the precautionary principle is mentioned in the Treaty only in connection with environmental policy, it is broader in scope. It is intended to be applied in order to ensure a high level of protection of health, consumer safety and the environment in all the Community's spheres of activity. In particular, Article 3(p) EC includes a contribution to the attainment of a high level of health protection' among the policies and activities of the Community. Similarly, Article 153 EC refers to a high level of consumer protection and Article 174(2) EC assigns a high level of protection to Community policy on the environment. Moreover, the requirements relating to that high level of protection of the environment and human health are expressly integrated into the definition and implementation of all Community policies and activities under Article 6 EC and Article 152(1) EC respectively.184 It follows that the precautionary principle can be defined as a general principle of Community law requiring the competent authorities to take appropriate measures to prevent specific potential risks to public health, safety and the environment, by giving precedence to the requirements related to the protection of those interests over economic interests. Since the Community institutions are responsible, in all their spheres of activity, for the protection of public health, safety and the environment, the precautionary principle can be regarded as an autonomous principle stemming from the abovementioned Treaty provisions.185 It is settled case-law that, in the field of public health, the precautionary principle implies that where there is uncertainty as to the existence or extent of risks to human health, the institutions may take precautionary measures without having to wait until the reality and seriousness of those risks become fully apparent (Case C-180/96 United Kingdom v Commission [1998] ECR I-2265, paragraph 99, and Case T-199/96 Bergaderm and Goupil v Commission [1998] ECR II-2805, paragraph 66). Prior to the enshrinement in case-law of the precautionary principle, on the basis of the Treaty provisions, that principle was implicitly applied in the review of proportionality (see, to that effect, order in Case C-180/96 R United Kingdom v Commission, paragraphs 73 to 78, and the order of the President of the Court of First Instance in Case T-76/96 R National Farmers' Union and Others v Commission [1996] ECR II-815, paragraphs 82 to 93, in particular paragraph 89).186 Where scientific evaluation does not make it possible to determine the existence of a risk with sufficient certainty, whether to have recourse to the precautionary principle depends as a general rule on the level of protection chosen by the competent authority in the exercise of its discretion (on the distinction between scientific advice, on the one hand, and that discretionary assessment of the competent authority, on the other, see the judgment in Case C-405/92 Mondiet [1993] ECR I-6133, paragraph 31, and the Opinion of Advocate General Gulmann in that case, point 28). That choice must, however, comply with the principle that the protection of public health, safety and the environment is to take precedence over economic interests, as well as with the principles of proportionality and non-discrimination.187 In the Community system of prior authorisation of medicinal products the competent authority, when considering an application for authorisation of a medicinal product, in principle exercises its discretion in weighing up the benefits and risks of that medicinal product - reserving the right subsequently to revise its assessment of that benefit/risk balance in the light of new scientific data.188 As regards, more specifically, the rules of evidence applicable to that system, it is for the undertaking seeking marketing authorisation of a medicinal product to prove, first, the efficacy of the medicinal product and, second, its safety, that proof being based, in particular, on trials in accordance with the provisions of Directive 75/318.189 Subsequently, when an application for renewal of an authorisation, the validity of which is limited to five years under Article 10(1) of Directive 65/65, is considered, the assessment of the medicinal product is to be carried out, according to that article, on the basis of the details of pharmacovigilance data and other information relevant to the monitoring of medicinal products.190 Furthermore, it is clear from Article 10(2) of that directive that it is only [i]n exceptional circumstances, and following consultation with the applicant' that an authorisation may be made subject to certain specific obligations, including, in particular, the carrying out of further studies following the granting of authorisation. Those exceptional decisions may be adopted only for objective and verifiable reasons, referred to in Part 4(G) of the Annex to Directive 75/318, that is in particular where in the present state of scientific knowledge the applicant cannot provide comprehensive information on the efficacy and safety of the medicinal product in question under normal conditions of use.191 In that system, save in the special situation provided for in Article 10(2) of Directive 65/65, the holder of the marketing authorisation of a medicinal product is not required to provide evidence of the efficacy and/or safety of that medicinal product during the period of that authorisation's validity. As the Commission acknowledges, the onus is indisputably on the competent authority to prove that just one of the conditions for withdrawal, variation or suspension of a marketing authorisation, which are set out in Article 11 of Directive 65/65, is met. Contrary to the applicants' contentions, acceptance that in cases of scientific uncertainty reasonable doubts as to the efficacy or safety of a medicinal product are capable of justifying a precautionary measure cannot be treated as equivalent to a reversal of the burden of proof.192 The precautionary principle requires the suspension or withdrawal of a marketing authorisation where new data give rise to serious doubts as to either the safety or the efficacy of the medicinal product in question and those doubts lead to an unfavourable assessment of the benefit/risk balance of that medicinal product (see above, paragraph 178). Against that background, the competent authority need do no more than provide, in accordance with the general rules of evidence, solid and convincing evidence which, while not resolving the scientific uncertainty, may reasonably raise doubts as to the safety and/or efficacy of the medicinal product.193 In addition, the passages in the legislation which highlight the relative nature of the assessment of a medicinal product, in particular the seventh and eighth recitals in the preamble to Directive 75/318, refer to the progress of scientific knowledge' and to new discoveries'. It is also clear from the introduction of the Annex to Directive 75/318 that the benefit/risk balance is to be assessed continuously on the basis of any new information or data submitted to the competent authorities.194 Against that background, leaving aside the exceptional situation in which the competent authority makes a detailed acknowledgement that it had incorrectly assessed a medicinal product when taking the decision to grant or, as the case may be, maintain or renew the authorisation, the withdrawal of a marketing authorisation must in principle be regarded as justified only where a new potential risk or the lack of efficacy is substantiated by new, objective, scientific and/or medical data or information. In particular, it is entirely logical that the application of a new assessment criterion, which reflects a current consensus in the medical community, is justifiable during the period of the authorisation's validity only if that development is based on new data or information.195 Those requirements are clearly compatible with the need to ensure the highest level of health protection in the management of marketing authorisations of medicinal products. Before obtaining the marketing authorisation of a medicinal product, the applicant is required to prove that that medicinal product has a favourable benefit/risk balance. In addition, the validity of the authorisation is in principle limited to a renewable period of five years. In those circumstances, the system of prior authorisation allows the presumption that, during that period, in the absence of any solid evidence to the contrary, the medicinal product in question has a favourable benefit/risk balance, subject always to the possibility of suspending the authorisation in cases of emergency. Where there is no such evidence, the need not to reduce the range of medicinal products available for the treatment of a particular disorder argues in favour of keeping the medicinal product on the market so that, in every case, the most appropriate medicinal product may be prescribed.Review of the contested decisions196 Before considering the lawfulness of the contested decisions, it is appropriate at the outset to define the scope of the Court's review.197 The procedure established in Article 15a of Directive 75/319 is characterised by the vital role accorded to an objective and detailed scientific assessment by the CPMP of the substances in question. Although the CPMP's opinion does not bind the Commission, it is none the less extremely important so that any unlawfulness of that opinion must be regarded as a breach of essential procedural requirements rendering the Commission's decision unlawful.198 Since the Commission is not in a position to carry out scientific assessments of the efficacy and/or harmfulness of a medicinal product, the aim of the mandatory consultation of the CPMP is to provide the Commission with the evidence of scientific assessment which is essential for it to be able to determine, in full knowledge of the facts, the appropriate measures to ensure a high level of public health protection (see, by analogy, on cosmetic products, Case C-212/91 Angelopharm [1994] ECR I-171, paragraphs 31, 32 and 38, and Bergaderm and Goupil v Commission, cited above, paragraph 64).199 Against that background, for the purposes of assessing the lawfulness of a Commission decision based on Article 15a of Directive 75/319, the Community judicature may be called upon to review, first, the formal legality of the CPMP's scientific opinion and, second, the Commission's exercise of its discretion.200 As regards the CPMP opinion, the Court cannot substitute its own assessment for that of the CPMP. It is only the proper functioning of the CPMP, the internal consistency of the opinion and the statement of reasons contained therein which are subject to judicial review. As regards the last aspect, the Court is empowered only to examine whether the opinion contains a statement of reasons from which it is possible to ascertain the considerations on which the opinion is based, and whether it establishes a comprehensible link between the medical and/or scientific findings and its conclusions. In that respect, in its opinion the CPMP is obliged to refer to the main reports and scientific expert opinions on which it relies and to explain, in the event of a significant discrepancy, the reasons why it has departed from the conclusions of the reports or expert opinions supplied by the undertakings concerned. That obligation is particularly strict in cases of scientific uncertainty. By guaranteeing that the consultation of the CPMP is inter partes and transparent, it ensures that the substance in question has undergone a detailed and objective scientific assessment, based on a comparison of the most representative scientific opinions with the scientific arguments advanced by the pharmaceutical laboratories concerned (cf. Case T-27/98 Nardone v Commission [1999] ECR-SC I-A-267; ECR-SC II-1293, paragraphs 30 and 88).201 As regards the Commission's exercise of its discretion, it should be noted that it is settled case-law that where a Community institution is called upon to make complex assessments it enjoys a wide measure of discretion, the exercise of which is subject to a judicial review restricted to verifying that the measure in question is not vitiated by a manifest error or a misuse of powers and that the competent authority did not clearly exceed the bounds of its discretion (Mondiet, cited above, paragraph 32; United Kingdom v Commission, cited above, paragraph 97, and Case C-120/97 Upjohn [1999] ECR I-223, paragraph 34).202 In the contested decisions, the Commission justifies the withdrawal of the marketing authorisations of the medicinal products in question by referring, in Article 2 of the operative part of those decisions, to the scientific conclusions of the CPMP attached to its final opinions, which are annexed to those decisions.203 It is clear from those scientific conclusions that the contested decisions are based on a negative assessment of the benefit/risk balance of the substances in question, following a reevaluation of their efficacy on the basis of a criterion different from that applied in the CPMP opinions of 17 July 1996 on the same substances, in the light of its assessment report of 18 July 1996 (see above, paragraphs 23 and 24). By contrast, as regards safety, it is evident from the CPMP's scientific conclusions, and confirmed by the Commission's statements in these proceedings, that the CPMP considered in the present case that the risks posed by the substances in question had not changed since 1996. In mentioning in its scientific conclusions on amfepramone and on phentermine that the risk of cardiac valve disorders could not be ruled out, the CPMP was merely stating that no evidence could be supplied to show that there was no such risk. Moreover, its scientific conclusions explicitly stated that, for all the substances under consideration, there was no solid evidence to justify an assumption that their use increases the risk of cardiac valve disorders. In addition, when carrying out its assessment of the benefit/risk balance of the substances in question, the CPMP weighed their purported lack of efficacy against only those risks which had already been taken into consideration in 1996.204 As regards the efficacy of those substances, the Court finds that even in 1996 the CPMP stated that the long-term efficacy of the substances under consideration had not been proven, that no significant data was available as to the effects of those substances on morbidity and mortality, and that weight-regain occurred immediately after discontinuation of the pharmacological treatment. It did however accept that the weight-loss of 2 to 5 kg on average, achieved after short-term treatment, was evidence of the efficacy of those substances, an opinion endorsed by the Commission in its decision of 9 December 1996. In the present case the CPMP opinions of 31 August 1999 and the contested decisions, while revising that evaluation, are based on medical and scientific data in respect of the therapeutic effects of the substances in question, which are strictly identical to those taken into consideration in 1996, as the Commission has moreover confirmed.205 In that regard, it must however be observed that, in the present case, neither the CPMP, in its final opinions, nor the Commission, in the contested decisions, claims to have relied on an assessment of the acceptable risk in respect of the short-term therapeutic effects of the medicinal products in question which was different from the assessment of 1996. Accordingly the Commission has not at any point called into question the choice it made in 1996 to maintain the marketing authorisations of those medicinal products and merely to amend the summaries of product characteristics. On the contrary, the Commission maintains that that choice was justified, at that time.206 In justification of the adoption of measures fundamentally different from those adopted in 1996, the Commission refers only to the application of the criterion of the long-term efficacy of the medicinal products in the treatment of obesity.207 It is important to note that that criterion is not a legal criterion which supplements or modifies the efficacy criterion set out in Article 11 of Directive 65/65, but a purely scientific criterion relating specifically to the assessment of the medicinal products in the treatment of obesity.208 The Commission has also confirmed that the possible existence of substitute substances - which, having regard to the data available in 1999, could, in appropriate cases, have had a more favourable benefit/risk balance - was not taken into consideration by the CPMP when it evaluated the substances in question, which were the subject of strictly individual assessments (see above, paragraph 167). In that respect, it should be noted that although two new substances designed for the treatment of obesity and suitable for long-term use were referred to in both a preparatory report common to the three procedures and the Commission's defence in Case T-141/00 (see above, paragraphs 33 and 166), they were not mentioned by either the CPMP in its opinions or the Commission in the contested decisions. In those circumstances, none of the evidence before the Court supports the presumption that the existence of those substances had any effect on the application of the criterion of long-term efficacy in the present case.209 In this case, an examination of, in particular, the successive preparatory reports drawn up in the course of the administrative procedure relating to amfepramone confirms that the change in the CPMP's position as regards the evaluation of the efficacy of the substances in question followed the entry into force, in June 1998, of the Note for Guidance adopted by the CPMP in November 1997. Accordingly, as regards, for example, amfepramone, the pharmacovigilance working party's report of May 1998 and the Picon/Abadie Report of 4 June 1998 stated that the efficacy of that substance in the treatment of obesity had not changed. It was the questionnaire sent to the undertakings concerned on 27 July 1998 which made the first reference to the evaluation of the benefit/risk balance of the substances in question in the light of the CPMP Note for Guidance. The Castot/Fosset Martinetti/Saint-Raymond Report, drawn up in April 1999, found that amfepramone lacked efficacy on the ground that the duration of treatment with medicinal products containing that substance was limited to three months, which, according to the report, was incompatible with the current guidelines recommending long-term treatment. Finally, in a discussion paper of 12 April 1999, Professor Winkler relied on the CPMP Note for Guidance to refute the argument put forward by the undertakings concerned that there was no new data on the efficacy or safety of the substances concerned which was capable of justifying a departure from the CPMP opinion of 1996 on the same substances. Professor Winkler asserted that in 1999 there was a general consensus that therapeutic efficacy in the treatment of obesity required a significant and lasting loss of weight (see above, paragraphs 28 to 30, 32 and 33). Furthermore, the referral to the CPMP by Austria on 31 August 1998 in respect of, inter alia, clobenzorex and the other substances in question in Cases T-83/00 to T-85/00 (see above, paragraph 61) mentions the guidelines among the recent developments concerning the efficacy of anorectics.210 Furthermore, it is common ground that the use, in the present case, of a criterion for assessing the efficacy of the substances in question which differs from that applied in 1996 is based solely on the purported development of a consensus' within the medical community on the criterion for assessing the efficacy of medicinal products in the treatment of obesity, as confirmed by the Commission on numerous occasions both in its written observations and at the hearing (see above, paragraphs 162 and 164). That new consensus is purportedly reflected in the CPMP Note for Guidance and the national guidelines, which were cited in the CPMP's scientific conclusions. Yet, neither those documents nor the scientific conclusions of the CPMP make any reference to new scientific data or information which were not available in 1996 and would explain the development of that consensus.211 In those circumstances, the Court finds that mere changes in a scientific criterion or, in more concrete terms, in good clinical practices - that is to say, therapeutic practices considered to be the most appropriate in the light of current scientific knowledge -, even if based on a consensus' in the medical community, cannot on their own justify the withdrawal of a marketing authorisation of a medicinal product under Article 11 of Directive 65/65 where, as has been held above (paragraphs 192 to 195), those changes are not based on new scientific data or information.212 Moreover, the Court in any event finds that neither the CPMP Note for Guidance nor the national guidelines referred to in the CPMP opinions of 31 August 1999 establishes any new criterion for assessing the efficacy of a medicinal product in the treatment of obesity.213 As submitted by the applicants, the CPMP expressly stated in its Note for Guidance that that note was to be read in conjunction with the Annex [to] Directive 75/318' and that it accordingly related to the clinical trials whose results must accompany the initial applications for marketing authorisations of medicinal products used for weight control, which are submitted under Article 4 of Directive 65/65. As the Commission acknowledges, only the general considerations on the treatment of obesity set out in that Note for Guidance are thus of relevance to the present case.214 In those general considerations, the CPMP does not refer to a criterion for efficacy which differs from that applied in 1996. It states that obesity is a chronic clinical condition which usually requires long-term therapy to induce and maintain weight-loss. It adds that [t]he treatment of obesity should be clinically relevant, aiming for prolonged and maintained weight loss in order to decrease associated morbidity and mortality'. That passage, which, according to the written observations submitted by the Commission, after consulting the CPMP, in reply to a written question from the Court, confirms that the guidelines establishing the criterion of long-term efficacy applied in the present case, does not contain any innovation when compared with the passage in the assessment report of 18 July 1996 in which the CPMP had already stated:[t]he objective of the treatment of obesity must be to reach a clinically relevant and maintained weight loss, which is likely to decrease cardio-vascular risk factors, in order to prevent morbidity and mortality'.215 In fact, in its Note for Guidance the CPMP summarises the various non-pharmacological and pharmacological treatment options (centrally-acting, amphetamine-like or serotonergic anorectics; orlistat, which was being developed at the time the CPMP Note for Guidance was adopted). The extract cited above thus refers to all the complementary therapies used in the treatment of obesity. In the introduction to its Note for Guidance, the CPMP notes, in particular, that pharmacological treatment is considered only as an adjunct to dietary measures. As regards, more specifically, the amphetamine-like anorectics, which include the substances in question in this case, it notes that their stimulant or euphoric effect has been associated with potential for abuse'. More generally, as regards centrally- acting anorectics it also reports that it has been shown that a duration of treatment greater than three months and a BMI of greater than 30 kg/m2 increase the risk of developing pulmonary artery hypertension'. It does not however conclude that the fact that those medicinal products cannot be used continuously for longer than a limited period means that they lack efficacy.216 It must be stated that the other three extracts from the CPMP Note for Guidance cited by the Commission - in reply to a question from the Court which sought to identify the specific passages in that document, and in the other three guidelines relied on in the CPMP's scientific conclusions, which refer to the criterion of long-term efficacy as applied in the present case - do not lay down the criterion applied in the present case. By stating, under the heading Measurement of Weight Loss', first, that [a] further illustration of the size of the treatment effect should be provided by looking at the proportions of responders in the various treatment arms - where response is more than 10% weight loss at the end of a 12 month period' and, second, that [t]he maintenance of weight loss or the prevention of weight regain, after the plateau in weight [often observed after five to six months of treatment] has been reached, could also be considered as an efficacy criterion', the CPMP was clearly simply identifying a number of criteria for assessing the efficacy of a medicinal product in the treatment of obesity without conferring on them any exclusivity. Under that same heading, it also noted, at the outset, that [r]elevant decreases in certain risk factors associated with obesity have been seen with loss of at least 5 to 10% of initial weight' and that [d]emonstration of a significant degree of weight loss of at least 10% of baseline weight ... is considered to be a valid primary efficacy criterion in clinical trials evaluating new anti-obesity drugs'. Finally, the CPMP was expressly referring to the clinical trials which must be carried out for the purpose of granting a new marketing authorisation for a medicinal product when, under the heading Strategy and design of clinical trials', it stated: [a]t present, trials documenting the effect of treatment for at least one year are required but a longer prospective study would be required by an applicant intending to demonstrate the effect of weight loss on morbidity and mortality'. Contrary to the Commission's contentions, that last recommendation is thus of absolutely no relevance to the present case.217 The aim of the three national guidelines referred to in the CPMP opinions of 31 August 1999 is to present good clinical practices in the treatment of obesity, in the light of the available evidence. The passages in those guidelines cited by the Commission in reply to the aforementioned question from the Court do not however lend more support to the criterion of the long-term efficacy of the medicinal products which was applied in the present case. The extracts from the Royal College of Physicians' Guideline relied on by the defendant stress the chronic nature of obesity and state that [t]reatment programmes must be for the longer term, possible lifelong, and include measures to prevent relapse'. Such programmes clearly include the entire range of therapies used in the treatment of that disorder. They may include pharmacological treatment which, however, according to the decision of 9 December 1996, is only to be used as second line adjunctive treatment.218 Similarly, the passages from the Guideline of the American Society for Clinical Nutrition cited by the Commission unquestionably refer to the overall treatment of obesity and do not specifically relate to the assessment of the efficacy of the medicinal products. That guideline also points out that pharmacotherapy is only a second line adjunctive treatment.219 Finally, the definition of weight maintenance' in the Scottish Guideline of November 1996, as long term, i.e., > 2 year, maintenance of body weight achieved following a period of weight loss...', relates in general terms to all the therapies employed in the treatment of obesity. It does not permit the inference that weight maintenance for such a period constitutes the criterion for assessing the efficacy of medicinal products in the treatment of obesity. In addition, under the heading Drug selection and duration of treatment', which addresses the long-term use of the medicinal products, the guideline states that many earlier medicinal products were misused, that several had amphetamine-like actions which led to dependence, and that [t]he Guideline Development Group considers that these drugs should not be used until separately evaluated with prolonged (> 1 year) use'. Put back into its context, that passage, relied on by the Commission, thus relates more specifically to the evaluation of the side-effects of the substances under consideration when used long-term. Earlier in the guideline it was stated under the same heading that the guideline development group considered that the restriction of pharmacotherapy to a maximum of three months was inappropriate and that continued therapy might be warranted, although it was expressly noted that that question was open to debate. It is therefore not possible to infer from that guideline the existence of the purported medical consensus in favour of the criterion of long-term efficacy in the form applied in the present case. Moreover, the guideline does not refer to any new data or information, not yet available in 1996, to justify the inappropriateness of pharmacological treatment limited to a term of three months.220 In those circumstances, given the lack of any new scientific data or information relating to assessment of the efficacy of the substances in question, Article 11 of Directive 65/65 precluded the competent authority from revising the positive assessment of the efficacy of the substances under consideration, which had been issued in 1996. It follows that, on any view, the contested decisions are in breach of the provisions of that article.221 The contested decisions must be annulled in so far as they relate to the medicinal products marketed by the applicants. Decision on costs Costs222 Under Article 87(2) of the Rules of Procedure of the Court of First Instance, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the defendant has been unsuccessful, it must, in accordance with the form of order sought by the applicants, be ordered to pay all the costs including those relating to the interlocutory proceedings. Operative part On those grounds,THE COURT OF FIRST INSTANCE (Second Chamber, Extended Composition),hereby:1. Annuls the Commission Decisions of 9 March 2000 (C(2000) 452, C(2000) 453 and C(2000) 608) in so far as they relate to the medicinal products marketed by the applicants;2. Orders the Commission to pay all the costs, including those incurred in the interlocutory proceedings.

b6765-e3fa968-4735

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MARITIME TRANSPORT BETWEEN RHODES AND TURKEY CANNOT BE SUBJECT TO MORE ONEROUS CONDITIONS THAN THOSE TO WHICH SUCH TRANSPORT BETWEEN RHODES AND PORTS IN GREECE OR OTHER MEMBER STATES IS SUBJECT.

| 62000J0435 Judgment of the Court (Sixth Chamber) of 14 November 2002. - Geha Naftiliaki EPE and Others v NPDD Limeniko Tameio DOD/SOU and Elliniko Dimosio. - Reference for a preliminary ruling: Dioikitiko Protodikeio Rodou - Greece. - Transport - Maritime transport - Freedom to provide services - Restriction - National legislation applicable to all persons providing services, irrespective of their nationality, that distinguishes between domestic or intra-Community transport and transport to third countries. - Case C-435/00. European Court reports 2002 Page I-10615 Parties In Case C-435/00,REFERENCE to the Court under Article 234 EC by the Diikitiko Protodikio Rodou (Greece) for a preliminary ruling in the proceedings pending before that court betweenGeha Naftiliaki EPE, Total Scope NE,Stavros Georgiou,Charalambis Bros OE,Anastasios Charalambis,Nikolaos Sarlis,Dimitrios Kattidenios,Antonios Charalambis,Vasilios DimitrakopoulosandNPDD Limeniko Tamio Dodekanisou,Elliniko Dimosio,on the interpretation of Article 1 of Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries (OJ 1986 L 378, p. 1),THE COURT(Sixth Chamber),composed of: J.-P. Puissochet (Rapporteur), President of the Chamber, C. Gulmann, F. Macken, N. Colneric and J.N. Cunha Rodrigues, Judges,Advocate General: S. Alber,Registrar: R. Grass,after considering the written observations submitted on behalf of:- Geha Naftiliaki EPE, Total Scope NE, Mr Georgiou, Charalambis Bros OE, Mr Anastasios Charalambis and Mr Sarlis, by E. Bakaloumas, dikigoros,- NPDD Limeniko Tamio Dodekanisou, by I. Stamoulis, dikigoros,- the Commission of the European Communities, by M. Patakia and B. Mongin, acting as Agents,having regard to the report of the Judge-Rapporteur,after hearing the Opinion of the Advocate General at the sitting on 9 July 2002,gives the followingJudgment Grounds 1 By order of 10 July 2000, received at the Court on 27 November 2000, the Diikitiko Protodikio Rodou (Administrative Court of First Instance, Rhodes) referred to the Court for a preliminary ruling under Article 234 EC three questions on the interpretation of Article 1 of Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries (OJ 1986 L 378, p. 1).2 Those questions were referred in proceedings brought by Geha Naftiliaki EPE, Total Scope NE, Mr Georgiou, Charalambis Bros OE, Mr Anastasios Charalambis, Mr Sarlis, Mr Kattidenios, Mr Antonios Charalambis and Mr Dimitrakopoulos against NPDD Limeniko Tamio Dodekanisou (hereinafter `the Dodecanese Harbour Fund') and Elliniko Dimosio (the Greek State). They relate to the setting, under Greek legislation, of higher harbour dues for passengers travelling to third countries.Legal backgroundCommunity legislation3 Regulation No 4055/86 provides as follows:`Article 11. Freedom to provide maritime transport services between Member States and between Member States and third countries shall apply in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended.2. The provisions of this Regulation shall also apply to nationals of the Member States established outside the Community and to shipping companies established outside the Community and controlled by nationals of a Member State, if their vessels are registered in that Member State in accordance with its legislation....4. For the purpose of this Regulation, the following shall be considered "maritime transport services between Member States and between Member States and third countries" where they are normally provided for remuneration:(a) intra-Community shipping services:the carriage of passengers or goods by sea between any port of a Member State and any port or off-shore installation of another Member State;(b) third-country traffic:the carriage of passengers or goods by sea between the ports of a Member State and ports or off-shore installations of a third country....Article 61. If a Member State's nationals or shipping companies, as defined in Article 1, paragraphs 1 and 2, are experiencing, or are threatened by, a situation where they do not have an effective opportunity to ply for trade to and from a particular third country, the Member State concerned shall inform the other Member States and the Commission as soon as possible....Article 7The Council, acting in accordance with the conditions laid down in the Treaty, may extend the provisions of this Regulation to nationals of a third country who provide maritime transport services and are established in the Community....Article 9As long as restrictions on freedom to provide services have not been abolished, each Member State shall apply such restrictions without distinction on grounds of nationality or residence to all persons providing services within the meaning of Article 1(1) and (2)....Article 12This Regulation shall enter into force on the day following its publication in the Official Journal of the European Communities.'National legislation4 Article 6 of Law No 2399/1996 (FEK, A 90), in the version in force when the measures contested in the main proceedings were adopted (hereinafter `Law No 2399/1996'), provides as follows:`1. Every passenger who boards a means of marine transport for a destination within Greece or abroad shall be charged special dues in favour of the public body administering and operating the port of embarkation, for the modernisation and improvement of harbour works and facilities, for the use of the port and for other connected objectives relating to improvement of the service to the travelling public.2. The dues shall consist of a percentage increase in the price of the ticket or a fixed sum in drachmas, depending on the passenger's port of destination, the kind of journey in accordance with the class of vessel and so forth, and shall be determined as follows:A. For passengers of every kind of passenger vessel, passenger/car vessel and hydrofoil on domestic routes, 5% on the price of tickets.B. For passengers of passenger and passenger/car vessels flying the Greek or a foreign flag on international routes:(a) fixed dues of GRD 5 000 for each passenger with a destination of any port of a foreign country, with the exception of the countries of the European Union, Cyprus, Albania, Russia, Ukraine, Moldova and Georgia on the Black Sea;...(e) 30% of the revenue from the fixed dues which are provided for in the preceding subparagraphs of this paragraph shall be paid by the harbour funds concerned to the Merchant Seamen's Fund in accordance with the procedures laid down in the relevant provisions applicable to that fund.C. For passengers who partake in tourist trips (cruises) on tourist passenger vessels (cruise ships) flying the Greek or a foreign flag:(a) fixed dues of GRD 50 for each passenger who partakes in a day trip between Greek ports, for every port at which the vessel calls. If the day trip also extends to a port abroad, the fixed dues provided for in paragraph B(a), (b) and (c) above shall, as the case may be, be paid at the last port.......4. The dues shall be indicated on the tickets and their collection shall be the responsibility of the persons who issue the tickets, that is to say shipping agencies, tourist bureaux and similar undertakings. The sum collected in respect of each calendar month must be deposited by the persons responsible for collection, within the first 10 days of the following month, in the special account for the public body administering and operating the port entitled to that sum, which bears the sole reference "Execution of works serving the travelling public" and is held at the Bank of Greece, together with a return indicating the number of tickets issued for each class and the sum of money due. Those sums shall be allocated exclusively to works serving passengers.5. The undertakings responsible for collection shall be jointly and severally liable with the passengers for payment of the dues in full. ...6. Sums owing by way of harbour dues shall be assessed by act of the board of the public body administering and operating the port. ...'The main proceedings and the questions referred for a preliminary ruling5 Geha Naftiliaki EPE and Total Scope NE are the respective owners of the hydrofoils Fl. Marianna and Fl. Zeus. Messrs Anastasios Charalambis, Sarlis, Kattidenios, Antonios Charalambis and Dimitrakopoulos are co-owners of the hydrofoil Iviskos, the shipping agent for which is Charalambis Bros OE.6 These three vessels are used for day excursions from the port of Rhodes to Turkey and back. In June 1996, they carried 4 067 day-trippers and 3 703 transit passengers.7 By assessment of 1 August 1996, the Dodecanese Harbour Fund found that there was a shortfall in the harbour dues payable by, amongst others, Mr Georgiou, representing Geha Naftiliaki EPE and Total Scope NE, and Charalambis Bros OE. That finding was approved on 5 August 1996 by the regional director for the Dodecanese.8 By the action brought before the national court, the applicants in the main proceedings request that the decisions referred to in the foregoing paragraph be annulled and that certain sums paid in harbour dues be refunded.9 In support of their action, they submit that the amounts of the harbour dues at issue in the main proceedings were calculated unlawfully. They take the view that the harbour dues should have been calculated on the basis of Article 6(2)(A) of Law No 2399/1996, that is to say at 5% on the price of the ticket, and not on the basis of Article 6(2)(B)(a) of that Law, that is to say at GRD 5 000 for each passenger, since the vessels were chartered under a full charter by tourist agencies for the purpose of day excursions from Rhodes to Turkey and back, and the final destination of those vessels was Rhodes, a domestic port, and not Turkey.10 The applicants in the main proceedings also contend that hydrofoils are not subject to the dues provided for in Article 6(2)(B)(a) of Law No 2399/1996, because they are not specifically referred to in that provision, but to the dues provided for in Article 6(2)(A) of that Law.11 They claim that calculating harbour dues by reference to the vessel's destination gives rise to discrimination not only against them but also against passengers. In their submission that discrimination is prohibited by Greece's international obligations. It is, above all, incompatible with Article 59 of the EC Treaty (now, after amendment, Article 49 EC), Article 62 of the EC Treaty (repealed by the Treaty of Amsterdam) and Article 84 of the EC Treaty (now, after amendment, Article 80 EC), and with Regulation No 4055/86.12 The national court takes the view that the amount of harbour dues found owing under the assessment of 1 August 1996 by the Dodecanese Harbour Fund was lawfully calculated in accordance with Article 6(2)(B)(a) of Law No 2399/1996 because Article 6(2)(C)(a) of that Law is applicable in the main proceedings inasmuch as they relate to day trips.13 The national court considers that it was correct to apply the dues provided for in Article 6(2)(B)(a) of Law No 2399/1996 to passengers transported by the hydrofoils Fl. Marianna, Fl. Zeus and Iviskos.14 It furthermore points out that the harbour dues in question in the main proceedings are collected for the use of ports and for the modernisation and improvement of harbour facilities. The dues are levied in return for a specific service provided to vessels which call at the ports and to their passengers on the occasion of the use of those facilities, and they are paid to the public body administering and operating the port.15 The national court observes that Regulation No 4055/86 applies the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries, with effect from 1 January 1987.16 Taking the view that application of that regulation to the main proceedings gives rise to difficulties, the Diikitiko Protodikio Rodou has referred the following questions to the Court for a preliminary ruling:`(1) Is Article 1 of Council Regulation (EEC) No 4055/86 to be interpreted as prohibiting national legislation of a Member State from imposing restrictions in respect of the provision of maritime transport services between Member States and third countries generally, even if those restrictions are imposed without distinction on all vessels, whether they are used by its own nationals providing services or by nationals of other Member States, and on all passengers irrespective of nationality, or is it to be interpreted as prohibiting national legislation of a Member State from introducing restrictions only in respect of the provision of services between another Member State and a third country, reserving in that way more favourable treatment to domestic carriers who provide maritime transport to third countries compared with carriers who are nationals of the other Member States?(2) May a Member State impose different (higher) harbour dues for the passengers of vessels which call at, or have as their final destination, a port of a third (non-European Union) country than the dues which are imposed on passengers whose destinations are domestic ports or ports in the other Member States of the European Union, even if those dues in both the above cases are imposed on all passengers irrespective of their nationality or that of the vessels, or does a provision of that kind constitute a restriction on the freedom to transport passengers to third countries because the higher dues might have an effect on the choice of routes, so that that provision is inconsistent with Article 1 of Regulation No 4055/86?(3) If the answer is in the negative, is it possible for the harbour dues which are imposed on passengers whose destinations are ports of third countries to be differentiated still further, according to the third country, on the basis of the criterion of the distance of the ports or their geographical location, or is a national legislative provision of that kind also contrary to the abovementioned regulation, because it constitutes discrimination as regards maritime transport to a particular third country (or particular third countries) and therefore a restriction on maritime transport provided to that country (or those countries)?'The first question17 By its first question, the national court is essentially asking whether Article 1 of Regulation No 4055/86 precludes a Member State from imposing, by virtue of national law, any restriction on the supply of services in the area of maritime transport between Member States and third countries, or whether that provision prohibits only restrictions that discriminate between domestic carriers and carriers who are nationals of other Member States engaging in maritime transport to third countries.18 The Dodecanese Harbour Fund states that the harbour dues at issue in the main proceedings are payable not by maritime transport companies but by the passengers whom they carry and that they therefore do not fall within the scope of Regulation No 4055/86. It claims that the harbour dues are intended to cover construction and maintenance expenses of harbour facilities and the provision of harbour services in general. Accordingly, they constitute fees that are compatible with Article 81 of the EC Treaty (now Article 77 EC), and their validity cannot be called into question by a provision of secondary Community law such as Article 1 of Regulation No 4055/86.19 However, as the Commission points out, increasing harbour dues affects the price of the journey in a direct and mechanical way, so that a difference in the fees borne by passengers automatically affects the costs of the journey. The Court has held that the application of harbour charges which differ according to whether a journey is undertaken within one Member State or between Member States constitutes an infringement of the principle of the freedom to provide services, which is prohibited under Regulation No 4055/86 (see Case C-381/93 Commission v France [1994] ECR I-5145, paragraph 21, and, in regard to airport taxes, Case C-70/99 Commission v Portugal [2001] ECR I-4845).20 Since Regulation No 4055/86 has rendered applicable to the sphere of maritime transport between Member States the totality of the Treaty rules governing the freedom to provide services (see Commission v France, cited above, paragraph 13), it precludes the application of any national legislation whose effect is to make the provision of services between Member States more difficult than that of purely domestic services within a Member State, unless that legislation is justified by compelling reasons of public interest and the measures enacted thereby are necessary and proportionate (see Commission v Portugal, cited above, paragraph 28).21 Since Article 1(1) of Regulation No 4055/86 has extended the principle of the freedom to provide services as regards intra-Community traffic to traffic between a Member State and a third country, the rules established in relation to the former must be applied to the latter.22 Consequently, the provision of maritime transport services between the port of Rhodes and a Turkish port cannot, in the absence of objective justification (see Commission v France, cited above, paragraph 16), be subject to more onerous conditions than those to which the provision of comparable services between the port of Rhodes and ports in Greece or other Member States are subject.23 With regard to Article 81 EC, on which the Dodecanese Harbour Fund has relied, that provision in no way precludes the application of Regulation No 4055/86. Article 81 permits the collection by the carrier, when frontiers are crossed, of charges or dues taking into account `the costs actually incurred thereby'. The Harbour Fund has not demonstrated that those costs differ according to destination in the same proportions as the harbour dues at issue in the main proceedings.24 The reply to the first question must therefore be that Article 1 of Regulation No 4055/86 precludes the application in a Member State of different harbour dues for domestic or intra-Community traffic and traffic between a Member State and a third country if that difference is not objectively justified.The second question25 By its second question the national court is essentially asking whether, in the light of Article 1 of Regulation No 4055/86, a Member State may impose on passengers of vessels that call at or whose final destination is a port in a third country harbour dues different from those imposed on passengers of vessels whose destination is domestic or in another Member State, where those dues apply irrespective of the nationality of the passengers or of the flag flown by the vessels.26 Having regard to the considerations set out at paragraphs 19 to 24 of this judgment, the reply to this question must be that the imposition on passengers of vessels that call at or whose final destination is a port in a third country of different harbour dues from those imposed on passengers of vessels whose destination is domestic or in another Member State, without there being any correlation between that difference and the cost of the harbour services enjoyed by those categories of passengers, amounts to a restriction on the freedom to provide services contrary to Article 1 of Regulation No 4055/86.The third question27 By its third question, the national court is essentially asking whether Article 1 of Regulation No 4055/86 permits the imposition, for journeys to ports in third countries, of harbour dues that vary according to criteria relating to the distance of those ports or their geographical location.28 A criterion based on the distance or geographical location of the port of destination cannot in itself justify the imposition of different harbour dues. Such a difference may be justified only where there are objective differences in the services provided to passengers by the carriers (see to that effect Commission v France, cited above, paragraph 16, and Commission v Portugal, cited above, paragraph 36).29 The reply to the third question must therefore be that Article 1 of Regulation No 4055/86 does not permit the imposition, for journeys to ports in third countries, of harbour dues that vary according to criteria relating to the distance of those ports or their geographical location if the difference in the dues is not objectively justified by differences in the way passengers are treated on account of their destination or the place from which they have come. Decision on costs Costs30 The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT(Sixth Chamber),in answer to the questions referred to it by the Diikitiko Protodikio Rodou by order of 10 July 2000, hereby rules:1. Article 1 of Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries precludes the application in a Member State of different harbour dues for domestic or intra-Community traffic and traffic between a Member State and a third country if that difference is not objectively justified.2. The imposition on passengers of vessels that call at or whose final destination is a port in a third country of different harbour dues from those imposed on passengers of vessels whose destination is domestic or in another Member State, without there being any correlation between that difference and the cost of the harbour services enjoyed by those categories of passengers, amounts to a restriction on the freedom to provide services contrary to Article 1 of Regulation No 4055/86.3. Article 1 of Regulation No 4055/86 does not permit the imposition, for journeys to ports in third countries, of harbour dues that vary according to criteria relating to the distance of those ports or their geographical location if the difference in the dues is not objectively justified by differences in the way passengers are treated on account of their destination or the place from which they have come.

08cec-3a64eb2-4048

EN

THE PROPRIETOR OF A TRADE MARK MUST BE ABLE TO PREVENT ITS USE BY A THIRD PARTY IF THAT USE IS LIABLE TO AFFECT THE GUARANTEE OF ORIGIN OF THE GOODS

| 62001J0206 Judgment of the Court of 12 November 2002. - Arsenal Football Club plc v Matthew Reed. - Reference for a preliminary ruling: High Court of Justice (England & Wales), Chancery Division - United Kingdom. - Approximation of laws - Trade marks - Directive 89/104/EEC - Article 5(1)(a) - Scope of the proprietor's exclusive right to the trade mark. - Case C-206/01. European Court reports 2002 Page I-10273 Parties In Case C-206/01,REFERENCE to the Court under Article 234 EC by the High Court of Justice of England and Wales, Chancery Division, for a preliminary ruling in the proceedings pending before that court betweenArsenal Football Club plcandMatthew Reed,on the interpretation of Article 5(1)(a) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1),THE COURT,composed of: G.C. Rodríguez Iglesias, President, J.-P. Puissochet, M. Wathelet, C.W.A. Timmermans (Rapporteur) (Presidents of Chambers), C. Gulmann, D.A.O. Edward, P. Jann, V. Skouris, F. Macken, N. Colneric and S. von Bahr, Judges,Advocate General: D. Ruiz-Jarabo Colomer,Registrar: L. Hewlett, Principal Administrator,after considering the written observations submitted on behalf of:- Arsenal Football Club plc, by S. Thorley QC and T. Mitcheson, Barrister, instructed by Lawrence Jones, Solicitors,- Mr Reed, by A. Roughton, Barrister, instructed by Stunt & Son, Solicitors,- the Commission of the European Communities, by N.B. Rasmussen, acting as Agent,- the EFTA Surveillance Authority, by P. Dyrberg, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of Arsenal Football Club plc, represented by S. Thorley and T. Mitcheson; Mr Reed, represented by A. Roughton and S. Malynicz, Barrister; and the Commission, represented by N.B. Rasmussen and M. Shotter, acting as Agent, at the hearing on 14 May 2002,after hearing the Opinion of the Advocate General at the sitting on 13 June 2002,gives the followingJudgment Grounds 1 By order of 4 May 2001, received at the Court on 18 May 2001, the High Court of Justice of England and Wales, Chancery Division, referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Article 5(1)(a) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1, `the Directive').2 Those questions were raised in proceedings between Arsenal Football Club plc (`Arsenal FC') and Mr Reed concerning the selling and offering for sale by Mr Reed of scarves marked in large lettering with the word `Arsenal', a sign which is registered as a trade mark by Arsenal FC for those and other goods.Legal backgroundCommunity legislation3 The Directive states, in the first recital in its preamble, that national trade mark laws contain disparities which may impede the free movement of goods and freedom to provide services and may distort competition within the common market. According to that recital, it is therefore necessary, in view of the establishment and functioning of the internal market, to approximate the laws of the Member States. The third recital in the preamble states that it is not necessary at present to undertake full-scale approximation of national laws on trade marks.4 According to the 10th recital in the preamble to the Directive:`... the protection afforded by the registered trade mark, the function of which is in particular to guarantee the trade mark as an indication of origin, is absolute in the case of identity between the mark and the sign and goods or services ...'.5 Article 5(1) of the Directive provides:`The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.'6 Article 5(3)(a) and (b) of the Directive provides:`The following, inter alia, may be prohibited under paragraphs 1 and 2:(a) affixing the sign to the goods or to the packaging thereof;(b) offering the goods, or putting them on the market or stocking them for these purposes ...'7 Under Article 5(5) of the Directive:`Paragraphs 1 to 4 shall not affect provisions in any Member State relating to the protection against the use of a sign other than for the purposes of distinguishing goods or services, where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.'8 Article 6(1) of the Directive reads as follows:`The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade,(a) his own name or address;(b) indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services;(c) the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts;provided he uses them in accordance with honest practices in industrial or commercial matters.'National legislation9 In the United Kingdom the law of trade marks is governed by the Trade Marks Act 1994, which replaced the Trade Marks Act 1938 in order to implement the Directive.10 Section 10(1) of the Trade Marks Act 1994 provides:`A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.'11 Under Section 10(2)(b) of the Trade Marks Act 1994:`A person infringes a registered trade mark if he uses in the course of trade a sign where because -...(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered,there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trade mark.'The main proceedings and the questions referred for a preliminary ruling12 Arsenal FC is a well-known football club in the English Premier League. It is nicknamed `the Gunners' and has for a long time been associated with two emblems, a cannon device and a shield device.13 In 1989 Arsenal FC had inter alia the words `Arsenal' and `Arsenal Gunners' and the cannon and shield emblems registered as trade marks for a class of goods comprising articles of outer clothing, articles of sports clothing and footwear. Arsenal FC designs and supplies its own products or has them made and supplied by its network of approved resellers.14 Since its commercial and promotional activities in the field of sales of souvenirs and memorabilia under those marks have expanded greatly in recent years and provide it with substantial income, Arsenal FC has sought to ensure that `official' products - that is, products manufactured by Arsenal FC or with its authorisation - can be identified clearly, and has endeavoured to persuade its supporters to buy official products only. The club has also brought legal proceedings, both civil and criminal, against traders selling unofficial products.15 Since 1970 Mr Reed has sold football souvenirs and memorabilia, almost all marked with signs referring to Arsenal FC, from several stalls located outside the grounds of Arsenal FC's stadium. He was able to obtain from KT Sports, licensed by Arsenal FC to sell its products to vendors around the stadium, only very small quantities of official products. In 1991 and 1995 Arsenal FC had unofficial articles of Mr Reed's confiscated.16 The High Court states that in the main proceedings it is not in dispute that Mr Reed sold and offered for sale from one of his stalls scarves marked in large lettering with signs referring to Arsenal FC and that these were unofficial products.17 It also states that on that stall there was a large sign with the following text:`The word or logo(s) on the goods offered for sale, are used solely to adorn the product and does not imply or indicate any affiliation or relationship with the manufacturers or distributors of any other product, only goods with official Arsenal merchandise tags are official Arsenal merchandise.'18 The High Court further states that when, exceptionally, he was able to obtain official articles Mr Reed, in his dealings with his customers, clearly distinguished the official products from the unofficial ones, in particular by using a label with the word `official'. The official products were also sold at higher prices.19 Since it considered that by selling the unofficial scarves Mr Reed had both committed the tort of `passing off' - which, according to the High Court, is conduct on the part of a third party which is misleading in such a way that a large number of persons believe or are led to believe that articles sold by the third party are those of the claimant or are sold with his authorisation or have a commercial association with him - and infringed its trade marks, Arsenal FC brought proceedings against him in the High Court of Justice of England and Wales, Chancery Division.20 In view of the circumstances in the main proceedings, the High Court dismissed Arsenal FC's action in tort (`passing off'), essentially on the ground that the club had not been able to show actual confusion on the part of the relevant public and, more particularly, had not been able to show that the unofficial products sold by Mr Reed were all regarded by the public as coming from or authorised by Arsenal FC. In this respect, the High Court observed that it seemed to it that the signs referring to Arsenal FC affixed to the articles sold by Mr Reed carried no indication of origin.21 As to Arsenal FC's claim concerning infringement of its trade marks, based on section 10(1) and (2)(b) of the Trade Marks Act 1994, the High Court rejected their argument that the use by Mr Reed of the signs registered as trade marks was perceived by those to whom they were addressed as a badge of origin, so that the use was a `trade mark use'.22 According to the High Court, the signs affixed to Mr Reed's goods were in fact perceived by the public as `badges of support, loyalty or affiliation'.23 The High Court accordingly considered that Arsenal FC's infringement claim could succeed only if the protection conferred on the trade mark proprietor by section 10 of the Trade Marks Act 1994 and the provisions of the Directive implemented by that statute prohibits use by a third party other than trade mark use, which would require a wide interpretation of those provisions.24 On this point, the High Court considers that the argument that use other than trade mark use is prohibited to a third party gives rise to inconsistencies. However, the contrary argument, namely that only trade mark use is covered, comes up against a difficulty connected with the wording of the Directive and the Trade Marks Act 1994, which both define infringement as the use of a `sign', not of a `trade mark'.25 The High Court observes that it was in view of that wording in particular that the Court of Appeal of England and Wales, Civil Division, held in Philips Electronics Ltd v Remington Consumer Products ([1999] RPC 809) that the use other than trade mark use of a sign registered as a trade mark could constitute an infringement of a trade mark. The High Court observes that the state of the law on this point still remains uncertain.26 The High Court also rejected Mr Reed's argument on the alleged invalidity of the Arsenal FC trade marks.27 In those circumstances, the High Court of Justice of England and Wales, Chancery Division, decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:`1. Where a trade mark is validly registered and(a) a third party uses in the course of trade a sign identical with that trade mark in relation to goods which are identical with those for [which] the trade mark is registered; and(b) the third party has no defence to infringement by virtue of Article 6(1) of [Directive 89/104/EEC];does the third party have a defence to infringement on the ground that the use complained of does not indicate trade origin (i.e. a connection in the course of trade between the goods and the trade mark proprietor)?2. If so, is the fact that the use in question would be perceived as a badge of support, loyalty or affiliation to the trade mark proprietor a sufficient connection?'The questions referred for a preliminary ruling28 The High Court's two questions should be examined together.Observations submitted to the Court29 Arsenal FC submits that Article 5(1)(a) of the Directive allows the trade mark proprietor to prohibit the use of a sign identical to the mark and does not make exercise of that right conditional on the sign being used as a trade mark. The protection conferred by that provision therefore extends to the use of the sign by a third party even where that use does not suggest the existence of a connection between the goods and the trade mark proprietor. That interpretation is supported by Article 6(1) of the Directive, since the specific limitations on the exercise of trade mark rights there provided for show that such use falls in principle within the scope of Article 5(1)(a) of the Directive and is permitted only in the cases exhaustively listed in Article 6(1) of the Directive.30 Arsenal FC submits, in the alternative, that in the present case Mr Reed's use of the sign identical to the Arsenal trade mark must in any event be classified as trade mark use, on the ground that this use indicates the origin of the goods even though that origin does not necessarily have to designate the trade mark proprietor.31 Mr Reed contends that the commercial activities at issue in the main proceedings do not fall within Article 5(1) of the Directive, since Arsenal FC has not shown that the sign was used as a trade mark, that is, to indicate the origin of the goods, as required by the Directive, in particular Article 5. If the public do not perceive the sign as a badge of origin, the use does not constitute `trade mark use' of the sign. As to Article 6 of the Directive, nothing in that provision shows that it contains an exhaustive list of activities which do not constitute infringements.32 The Commission submits that the right which the trade mark proprietor derives from Article 5(1) of the Directive is independent of the fact that the third party does not use the sign as a trade mark, and in particular of the fact that the third party does not use it as a badge of origin and informs the public by other means that the goods do not come from the trade mark proprietor, or even that the use of the sign has not been authorised by that proprietor. The specific object of a trade mark is to guarantee that only its proprietor can give the product its identity of origin by affixing the mark. The Commission further submits that it follows from the 10th recital in the preamble to the Directive that the protection provided for in Article 5(1)(a) is absolute.33 At the hearing, the Commission added that the concept of `trade mark use' of the mark, if found to be relevant at all, refers to use which serves to distinguish goods rather than to indicate their origin. The concept also covers use by third parties which affects the interests of the trade mark proprietor, such as the reputation of the goods. In any event, public perception of the word `Arsenal', which is identical to a verbal trade mark, as a token of support for or loyalty or affiliation to the proprietor of the mark does not exclude the possibility that the goods concerned are in consequence also perceived as coming from the proprietor. Quite the contrary, such perception confirms the distinctive nature of the mark and increases the risk of the goods being perceived as coming from the proprietor. Even, therefore, if `trade mark use' of the mark is a relevant criterion, the proprietor should be entitled to prohibit the commercial activity at issue in the main proceedings.34 The EFTA Surveillance Authority submits that, for the trade mark proprietor to be able to rely on Article 5(1) of the Directive, the third party must use the sign to distinguish - as is the primary traditional function of a trade mark - goods or services, that is, use the mark as a trade mark. If that condition is not satisfied, only the provisions of national law referred to in Article 5(5) of the Directive may be relied on by the proprietor.35 However, the condition of use as a trade mark within the meaning of Article 5(1) of the Directive, which must be understood as a condition of use of a sign identical to the trade mark for the purpose of distinguishing goods or services, is a concept of Community law which should be interpreted broadly, so as to include in particular use as a badge of support for or loyalty or affiliation to the proprietor of the trade mark.36 According to the EFTA Surveillance Authority, the fact that the third party who affixes the trade mark to goods indicates that they do not come from the trade mark proprietor does not exclude the risk of confusion for a wider circle of consumers. If the proprietor were not entitled to prevent third parties from acting in that way, that could result in a generalised use of the sign. In the end, this would deprive the mark of its distinctive character, thus jeopardising its primary traditional function.The Court's reply37 Article 5 of the Directive defines the `[r]ights conferred by a trade mark' and Article 6 contains provisions on the `[l]imitation of the effects of a trade mark'.38 Under the first sentence of Article 5(1) of the Directive, the registered trade mark confers exclusive rights on its proprietor. Under Article 5(1)(a), that exclusive right entitles the proprietor to prevent all third parties, acting without his consent, from using in the course of trade any sign which is identical to the trade mark in relation to goods or services which are identical to those for which the trade mark is registered. Article 5(3) gives a non-exhaustive list of the kinds of use which the proprietor may prohibit under Article 5(1). Other provisions of the Directive, such as Article 6, define certain limitations on the effects of a trade mark.39 With respect to the situation in point in the main proceedings, it should be observed that, as is apparent in particular from point 19 of and Annex V to the order for reference, the word `Arsenal' appears in large letters on the scarves offered for sale by Mr Reed, together with other much less prominent markings including the words `The Gunners', all referring to the trade mark proprietor, namely Arsenal FC. Those scarves are intended inter alia for supporters of Arsenal FC who wear them in particular at matches in which the club plays.40 In those circumstances, as the national court stated, the use of the sign identical to the mark is indeed use in the course of trade, since it takes place in the context of commercial activity with a view to economic advantage and not as a private matter. It also falls within Article 5(1)(a) of the Directive, as use of a sign which is identical to the trade mark for goods which are identical to those for which the mark is registered.41 In particular, the use at issue in the main proceedings is `for goods' within the meaning of Article 5(1)(a) of the Directive, since it concerns the affixing to goods of a sign identical to the trade mark and the offering of goods, putting them on the market or stocking them for those purposes within the meaning of Article 5(3)(a) and (b).42 To answer the High Court's questions, it must be determined whether Article 5(1)(a) of the Directive entitles the trade mark proprietor to prohibit any use by a third party in the course of trade of a sign identical to the trade mark for goods identical to those for which the mark is registered, or whether that right of prohibition presupposes the existence of a specific interest of the proprietor as trade mark proprietor, in that use of the sign in question by a third party must affect or be liable to affect one of the functions of the mark.43 It should be recalled, first, that Article 5(1) of the Directive carries out a complete harmonisation and defines the exclusive rights of trade mark proprietors in the Community (see, to that effect, Joined Cases C-414/99 to C-416/99 Zino Davidoff and Levi Strauss [2001] ECR I-8691, paragraph 39 and the case-law there cited).44 The ninth recital of the preamble to the Directive sets out its objective of ensuring that the trade mark proprietor enjoys `the same protection under the legal systems of all the Member States' and describes that objective as `fundamental'.45 In order to prevent the protection afforded to the proprietor varying from one State to another, the Court must therefore give a uniform interpretation to Article 5(1) of the Directive, in particular the term `use' which is the subject of the questions referred for a preliminary ruling in the present case (see, to that effect, Zino Davidoff and Levi Strauss, paragraphs 42 and 43).46 Second, the Directive is intended, as the first recital of the preamble shows, to eliminate disparities between the trade mark laws of the Member States which may impede the free movement of goods and the freedom to provide services and distort competition within the common market.47 Trade mark rights constitute an essential element in the system of undistorted competition which the Treaty is intended to establish and maintain. In such a system, undertakings must be able to attract and retain customers by the quality of their goods or services, which is made possible only by distinctive signs allowing them to be identified (see, inter alia, Case C-10/89 HAG GF [1990] ECR I-3711, paragraph 13, and Case C-517/99 Merz & Krell [2001] ECR I-6959, paragraph 21).48 In that context, the essential function of a trade mark is to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin. For the trade mark to be able to fulfil its essential role in the system of undistorted competition which the Treaty seeks to establish and maintain, it must offer a guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality (see, inter alia, Case 102/77 Hoffman-La Roche [1978] ECR 1139, paragraph 7, and Case C-299/99 Philips [2002] ECR I-0000, paragraph 30).49 The Community legislature confirmed that essential function of trade marks by providing, in Article 2 of the Directive, that signs which are capable of being represented graphically may constitute a trade mark only if they are capable of distinguishing the goods or services of one undertaking from those of other undertakings (see, inter alia, Merz & Krell, paragraph 23).50 For that guarantee of origin, which constitutes the essential function of a trade mark, to be ensured, the proprietor must be protected against competitors wishing to take unfair advantage of the status and reputation of the trade mark by selling products illegally bearing it (see, inter alia, Hoffmann-La Roche, paragraph 7, and Case C-349/95 Loendersloot [1997] ECR I-6227, paragraph 22). In this respect, the 10th recital of the preamble to the Directive points out the absolute nature of the protection afforded by the trade mark in the case of identity between the mark and the sign and between the goods or services concerned and those for which the mark is registered. It states that the aim of that protection is in particular to guarantee the trade mark as an indication of origin.51 It follows that the exclusive right under Article 5(1)(a) of the Directive was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions. The exercise of that right must therefore be reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods.52 The exclusive nature of the right conferred by a registered trade mark on its proprietor under Article 5(1)(a) of the Directive can be justified only within the limits of the application of that article.53 It should be noted that Article 5(5) of the Directive provides that Article 5(1) to (4) does not affect provisions in a Member State relating to protection against the use of a sign for purposes other than that of distinguishing goods or services.54 The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark, having regard to its functions. Thus certain uses for purely descriptive purposes are excluded from the scope of Article 5(1) of the Directive because they do not affect any of the interests which that provision aims to protect, and do not therefore fall within the concept of use within the meaning of that provision (see, with respect to a use for purely descriptive purposes relating to the characteristics of the product offered, Case C-2/00 Hölterhoff [2002] ECR I-4187, paragraph 16).55 In this respect, it is clear that the situation in question in the main proceedings is fundamentally different from that in Hölterhoff. In the present case, the use of the sign takes place in the context of sales to consumers and is obviously not intended for purely descriptive purposes.56 Having regard to the presentation of the word `Arsenal' on the goods at issue in the main proceedings and the other secondary markings on them (see paragraph 39 above), the use of that sign is such as to create the impression that there is a material link in the course of trade between the goods concerned and the trade mark proprietor.57 That conclusion is not affected by the presence on Mr Reed's stall of the notice stating that the goods at issue in the main proceedings are not official Arsenal FC products (see paragraph 17 above). Even on the assumption that such a notice may be relied on by a third party as a defence to an action for trade mark infringement, there is a clear possibility in the present case that some consumers, in particular if they come across the goods after they have been sold by Mr Reed and taken away from the stall where the notice appears, may interpret the sign as designating Arsenal FC as the undertaking of origin of the goods.58 Moreover, in the present case, there is also no guarantee, as required by the Court's case-law cited in paragraph 48 above, that all the goods designated by the trade mark have been manufactured or supplied under the control of a single undertaking which is responsible for their quality.59 The goods at issue are in fact supplied outside the control of Arsenal FC as trade mark proprietor, it being common ground that they do not come from Arsenal FC or from its approved resellers.60 In those circumstances, the use of a sign which is identical to the trade mark at issue in the main proceedings is liable to jeopardise the guarantee of origin which constitutes the essential function of the mark, as is apparent from the Court's case-law cited in paragraph 48 above. It is consequently a use which the trade mark proprietor may prevent in accordance with Article 5(1) of the Directive.61 Once it has been found that, in the present case, the use of the sign in question by the third party is liable to affect the guarantee of origin of the goods and that the trade mark proprietor must be able to prevent this, it is immaterial that in the context of that use the sign is perceived as a badge of support for or loyalty or affiliation to the proprietor of the mark.62 In the light of the foregoing, the answer to the national court's questions must be that, in a situation which is not covered by Article 6(1) of the Directive, where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of the Directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor. Decision on costs Costs63 The costs incurred by the Commission and by the EFTA Surveillance Authority, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the High Court of Justice of England and Wales, Chancery Division, by order of 4 May 2001, hereby rules:In a situation which is not covered by Article 6(1) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor of the mark is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of that directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor.

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EN

THE COURT OF JUSTICE EXPLAINS, BY THESE JUDGMENTS, THE DISTRIBUTION OF COMPETENCE AS REGARDS THE CONCLUSION OF INTERNATIONAL AIR TRANSPORT AGREEMENTS

| 61998J0466 Judgment of the Court of 5 November 2002. - Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland. - Failure by a Member State to fulfil its obligations - Conclusion and application by a Member State of a bilateral agreement with the United States of America - Agreement authorising the United States of America to revoke, suspend or limit the traffic rights of air carriers designated by the United Kingdom which are not owned by the latter or its nationals - Article 52 of the EC Treaty (now, after amendment, Article 43 EC). - Case C-466/98. European Court reports 2002 Page I-09427 Parties In Case C-466/98,Commission of the European Communities, represented by F. Benyon, acting as Agent, with an address for service in Luxembourg,applicant,vUnited Kingdom of Great Britain and Northern Ireland, represented by J.E. Collins, acting as Agent, assisted by D. Anderson QC, with an address for service in Luxembourg,defendant,supported byKingdom of the Netherlands, represented by M.A. Fierstra and J. van Bakel, acting as Agents,intervener,APPLICATION for a declaration that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which provides for the revocation, suspension or limitation of traffic rights in cases where air carriers designated by the United Kingdom of Great Britain and Northern Ireland are not owned by the United Kingdom or United Kingdom nationals, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 52 of the EC Treaty (now, after amendment, Article 43 EC),THE COURT,composed of: J.-P. Puissochet, President of the Sixth Chamber, acting for the President, R. Schintgen (President of Chamber), C. Gulmann, D.A.O. Edward, A. La Pergola, P. Jann, V. Skouris (Rapporteur), F. Macken, N. Colneric, S. von Bahr and J.N. Cunha Rodrigues, Judges,Advocate General: A. Tizzano,Registrar: H. von Holstein, Deputy Registrar, and D. Louterman-Hubeau, Head of Division,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 8 May 2001, during which the Commission was represented by F. Benyon, the United Kingdom by J.E. Collins, assisted by D. Anderson, and the Kingdom of the Netherlands by J. van Bakel, H.G. Sevenster and J. van Haersolte, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 31 January 2002,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 18 December 1998, the Commission of the European Communities brought an action under Article 169 of the EC Treaty (now Article 226 EC) for a declaration that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which provides for the revocation, suspension or limitation of traffic rights in cases where air carriers designated by the United Kingdom of Great Britain and Northern Ireland are not owned by the United Kingdom or United Kingdom nationals, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 52 of the EC Treaty (now, after amendment, Article 43 EC).2 By order of the President of the Court of 8 July 1999, the Kingdom of the Netherlands was granted leave to intervene in support of the form of order sought by the United Kingdom.Background to the dispute3 Towards the end of the Second World War or shortly thereafter, several States which subsequently became Members of the Community, including the United Kingdom, concluded bilateral agreements on air transport with the United States of America.4 One such bilateral agreement, the first of the Bermuda Agreements (hereinafter `the Bermuda I Agreement'), was concluded between the United Kingdom and the United States in 1946. Under Article 6 of that agreement, `[e]ach Contracting Party reserves the right to withhold or revoke the exercise of the rights specified in the Annex to this Agreement by a carrier designated by the other Contracting Party in the event that it is not satisfied that substantial ownership and effective control of such carrier are vested in nationals of either Contracting Party ...'.5 Subsequently, another agreement, the second of the Bermuda Agreements (hereinafter `the Bermuda II Agreement'), replaced the Bermuda I Agreement with effect from 23 July 1977, the date upon which it was signed and entered into force. Article 5 of the Bermuda II Agreement provides:`(1) Each Contracting Party shall have the right to revoke, suspend, limit or impose conditions on the operating authorisations or technical permissions of an airline designated by the other Contracting Party where:(a) substantial ownership and effective control of that airline are not vested in the Contracting Party designating the airline or in nationals of such Contracting Party;...(2) ... such rights shall be exercised only after consultation with the other Contracting Party.'6 Furthermore, according to Article 3(6) of the Bermuda II Agreement, each Contracting Party is required to grant the appropriate operating authorisations and technical permissions to an airline when certain conditions are satisfied, including the condition that substantial ownership and effective control of that airline be vested in the Contracting Party designating the airline or in its nationals.7 The documents before the Court show that, in 1992, the United States of America took the initiative of offering to individual European States the possibility of concluding a bilateral `open skies' agreement. In 1993 and 1994, the United States of America strengthened its efforts to conclude such agreements with the largest possible number of European States.8 In a letter of 17 November 1994, addressed to the Member States, the Commission drew their attention to the negative effects that such bilateral agreements could have on the Community and stated its position to the effect that that type of agreement was likely to affect internal Community legislation. It added that negotiation of such agreements could be carried out effectively, and in a legally valid manner, only at Community level.9 In the light of that correspondence, by letter of 20 April 1995, the Commission sought an assurance from the Government of the United Kingdom that it would not negotiate, initial, conclude or ratify a bilateral agreement with the United States of America. However, the United Kingdom continued to negotiate an agreement with the United States and concluded that agreement on 5 June 1995.Facts and pre-litigation procedure10 On 17 July 1995, the Commission sent a letter of formal notice to the United Kingdom, stating inter alia that, as far as it was aware, the traffic rights accorded to the United Kingdom by the United States of America under their agreement were to be granted solely on the basis of the nationality of the carrier. According to the Commission, that constituted an infringement of Article 52 of the EC Treaty because, under the terms of that agreement, amongst the air carriers which had obtained a licence from the United Kingdom in accordance with Council Regulation (EEC) No 2407/92 on licensing of air carriers (OJ 1992 L 240, p. 1), those established in the United Kingdom which were owned and controlled by nationals of another Member State would have traffic rights in the United States of America refused to them, whereas those owned and controlled by United Kingdom nationals would be granted those rights.11 The United Kingdom replied to the Commission's letter of formal notice by letter of 13 September 1995. It is apparent from that letter that the United Kingdom and the United States of America agreed to amend the Bermuda II Agreement by the agreement concluded on 5 June 1995. In relation to Article 52 of the Treaty, the United Kingdom indicated that the clause in the Bermuda II Agreement on the ownership and control of air carriers had not been amended by the agreement of 5 June 1995. In its view, that provision did not prohibit the designation by the United Kingdom authorities of air carriers which were not owned or controlled by United Kingdom nationals, but only gave the United States of America the opportunity to refuse to accept such a designation whilst allowing the United Kingdom to seek consultations in the event of such a refusal.12 In reply, the Commission sent the United Kingdom a reasoned opinion on 16 March 1998, in which it stated that, by concluding the Bermuda II Agreement with the United States of America and by applying that agreement, which provides for the revocation, suspension or limitation of traffic rights in cases where air carriers designated by the United Kingdom are not owned by the United Kingdom or United Kingdom nationals, the United Kingdom had failed to fulfil its obligations under Article 52 of the Treaty. It called upon the United Kingdom to comply with the reasoned opinion within two months of notification thereof.13 The United Kingdom replied, by letter of 19 June 1998, that the disputed provision of the Bermuda II Agreement merely repeated a clause in the Bermuda I Agreement, which was concluded before the accession of the United Kingdom to the European Communities. In its view, therefore, the disputed right enjoyed by the United States of America under the Bermuda II Agreement had its origin in the Bermuda I Agreement and was maintained by virtue of Article 234 of the EC Treaty (now, after amendment, Article 307 EC).14 Since it was not convinced by the United Kingdom's arguments, the Commission brought the present action.The action15 In its action, the Commission charges the United Kingdom with having infringed its obligations under Article 52 of the Treaty by concluding and applying the Bermuda II Agreement, which includes the abovementioned clause concerning the ownership and control of air carriers.16 In its defence, the United Kingdom begins by arguing that the right granted to the United States of America to revoke, suspend or limit traffic rights in cases where air carriers designated by the United Kingdom are not owned by the latter or its nationals is covered and therefore maintained by Article 234 of the Treaty. It then contends that Article 52 of the Treaty does not apply in this case or, if it does, that that article has not been infringed. Finally, it argues that the clause on the ownership and control of air carriers is, in any event, justified under Article 56 of the EC Treaty (now, after amendment, Article 46 EC).The applicability of Article 234 of the TreatyArguments of the parties17 The United Kingdom submits that the protection afforded by Article 234 of the Treaty is not limited to agreements which were concluded by Member States before the Treaty entered into force in their territory, but extends to the rights and obligations arising from such agreements. According to the United Kingdom, the question whether a pre-accession agreement has been amended or even replaced since the accession of the Member State concerned to the Community is of only secondary importance. Thus, Article 234 of the Treaty does not apply to rights and obligations contained in an agreement after the expiry of the latter, save in circumstances where substantially similar rights and obligations are carried over, without interruption, into a new agreement.18 That, the United Kingdom submits, is the case here. Although the Bermuda II Agreement was concluded in 1977, four years after the EEC Treaty entered into force in the United Kingdom, the right granted to the United States by Article 5 of that agreement was originally conferred in relation to scheduled services by Article 6 of the Bermuda I Agreement and has not, in substance, changed. Even though their wording is not in all respects the same, reflecting the different structure of the two Bermuda agreements, Article 6 of the Bermuda I Agreement and Article 5 of the Bermuda II Agreement are in substance identical in their application to scheduled air services, which illustrates the continuity of the right in question between the two agreements. Although there is a substantive difference between the effects of the Bermuda I Agreement and those of the Bermuda II Agreement, in that the latter also applies to charter flights, that is not a difference in principle between the two agreements but an amendment made in order to adapt to the growing importance of charter flights.19 The Netherlands Government, which also argues that Article 234 of the Treaty applies in this case, submits that the amendments that the United Kingdom made to the Bermuda II Agreement by the agreement of 5 June 1995 cannot be considered to be a new agreement, because it is apparent that only the amendments to Annex I to the Bermuda II Agreement in regard to traffic rights are substantial amendments.20 The Commission disputes the United Kingdom's line of argument. It maintains that Article 234 of the Treaty applies only to agreements concluded, in the case of the United Kingdom, before its accession to the Community in 1973, whereas the Bermuda II Agreement was concluded later, namely in 1977. According to the Commission, Article 234 must, as an exception to the Treaty provisions, be interpreted strictly. In particular, it does not follow from that provision that it must apply to the rights and obligations which formed part of agreements in force at a given moment, without taking account of the fact that those agreements have since expired. Even if those rights and obligations are repeated in another agreement, that cannot justify the claim that the initial agreement is in some way perpetuated.21 In this case, the final recital in the preamble to the Bermuda II Agreement clearly states that that agreement was concluded `for the purpose of replacing' the Bermuda I Agreement and therefore any possible application of Article 234 of the Treaty disappeared along with the Bermuda I Agreement. Consequently, the Commission argues, it is impossible to bring within that article a clause of the Bermuda I Agreement the formulation of which, moreover, was altered when introduced into the Bermuda II Agreement.Findings of the Court22 The first paragraph of Article 234 of the Treaty provides that the rights and obligations arising from agreements concluded before the entry into force of the Treaty between one or more Member States, on the one hand, and one or more non-member countries, on the other, are not to be affected by the provisions of the Treaty. However, the second paragraph of that article requires Member States to take all appropriate steps to eliminate any incompatibilities between such agreements and the Treaty.23 Article 234 of the Treaty is of general scope and applies to any international agreement, irrespective of subject-matter, which is capable of affecting application of the Treaty (Case 812/79 Attorney General v Burgoa [1980] ECR 2787, paragraph 6; Case C-158/91 Levy [1993] ECR I-4287, paragraph 11; Case C-62/98 Commission v Portugal [2000] ECR I-5171, paragraph 43).24 As is clear from paragraph 8 of the judgment in Burgoa, the purpose of the first paragraph of Article 234 of the Treaty is to make it clear, in accordance with the principles of international law [see, in that connection, Article 30(4)(b) of the Convention on the Law of Treaties signed in Vienna on 23 May 1969] that application of the Treaty does not affect the duty of the Member State concerned to respect the rights of non-member countries under a prior agreement and to perform its obligations thereunder.25 According to Article 5 of the Act concerning the conditions of accession to the European Communities of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland and the adjustments to the Treaties (OJ, English Special Edition 1972 (27 March)), Article 234 of the Treaty applies to agreements concluded by the United Kingdom before its accession, that is to say before 1 January 1973.26 However, the rights and obligations which flow for the United States of America and the United Kingdom respectively from the clause on the ownership and control of air carriers arise, not from an agreement before, but from an agreement after the accession of the United Kingdom to the European Communities, namely the Bermuda II Agreement, which was concluded in 1977.27 As a result, Article 234 of the Treaty cannot apply in this case.28 That finding cannot be called into question by the fact that a clause drafted in similar terms already appeared in the Bermuda I Agreement, which, having been concluded before the accession of the United Kingdom to the European Communities, remained in force until 1977.29 As the final recital in its preamble states, the Bermuda II Agreement was concluded `for the purpose of replacing' the Bermuda I Agreement, in particular in order to take into account the development of traffic rights between the Contracting Parties. It thus gave rise to new rights and obligations between those parties. In those circumstances, it is not possible to attach to the Bermuda I Agreement the rights and obligations which, for the United Kingdom and the United States of America, have flowed from the clause in the Bermuda II Agreement concerning the ownership and control of air carriers since the entry into force of that latter agreement.30 It is therefore necessary to consider whether, as the Commission maintains, the content of that clause infringes Article 52 of the Treaty.Infringement of Article 52 of the TreatyArguments of the parties31 The Commission submits that, unlike Article 59 of the EC Treaty (now, after amendment, Article 49 EC), on the freedom to provide services within the Community, application of which to the transport sector was expressly excluded by Article 61 of the EC Treaty (now, after amendment, Article 51 EC), application of Article 52 of the Treaty is neither suspended nor excluded in relation to that sector. Article 52 applies in all sectors, including air transport, and, as a basic provision of the Treaty, also applies to the other areas falling within the competence of Member States (Case C-221/89 Factortame and Others [1991] ECR I-3905; Case C-151/96 Commission v Ireland [1997] ECR I-3327; Case C-336/96 Gilly [1998] ECR I-2793; Case C-274/96 Bickel and Franz [1998] ECR I-7637 and Case C-212/97 Centros [1999] ECR I-1459).32 In this case, the Commission argues, Article 5 of the Bermuda II Agreement is contrary to Article 52 of the Treaty in that it permits the United States of America to refuse to issue operating authorisations or technical permissions to airlines designated by the United Kingdom but of which a substantial part of the ownership and effective control is not vested in the United Kingdom or United Kingdom nationals, or to revoke, suspend or limit operating authorisations or technical permissions already granted to such airlines. Under Article 5 of that agreement, an airline owned or controlled by a Member State other than the United Kingdom or by nationals of such a Member State, established in the United Kingdom, is prevented from receiving the same treatment as that reserved for airlines owned and controlled by the United Kingdom or by United Kingdom nationals.33 Contrary to what the United Kingdom maintains, the conduct of the United States of America is not relevant in this action, since infringement of Article 52 of the Treaty consists in the granting by the United Kingdom to the United States of America of the right contained in Article 5 of the Bermuda II Agreement which it negotiated and concluded.34 The United Kingdom submits, to begin with, that Article 52 of the Treaty cannot cover a type of trade with non-member countries, namely air transport outside the Community, in respect of which the Community has never exercised a legislative power. Moreover, the only economic activity which has the potential to be affected by Article 5 of the Bermuda II Agreement is largely located outside the Community.35 It then maintains that, even if Article 52 of the Treaty were applicable, the United Kingdom has not in any way infringed it. First, Article 5 of the Bermuda II Agreement grants the United Kingdom no power to discriminate in any way against other Community airlines on the basis of their ownership or control, or in relation to their establishment in the United Kingdom or their designation. Second, the power to refuse traffic rights to airlines not controlled or owned by United Kingdom nationals is a sovereign choice of the United States of America, which the United Kingdom is in no position to influence or prevent. The power of the United States of America to discriminate in that way does not originate in the Bermuda I and II Agreements, so that the United Kingdom cannot be held responsible for the signature and application of an agreement permitting that discrimination. Possible discrimination against Community nationals by the authorities of a non-member country lies outside the categories of mischief which Article 52 of the Treaty was designed to prohibit.36 At the hearing, the United Kingdom relied in that respect on the judgment in Case C-307/97 Saint-Gobain v Finanzamt Aachen-Innenstadt [1999] ECR I-6161, paragraphs 59 and 60, which shows, in its submission, that, although Article 52 of the Treaty may require a Member State to amend its legislation unilaterally so as not to discriminate against an undertaking of another Member State established in its territory, that provision cannot require it to amend agreements already concluded with non-member countries in order to impose new obligations upon them. This, the United Kingdom submits, is what the Commission is asking it to do in this case in relation to authorisations issued by the United States of America, which, moreover, concern the use of the United States' own airspace.37 Finally, the United Kingdom submits that the Commission has not given any example of a Community airline that has been harmed by the application of the clause concerning the ownership and control of air carriers.38 The Netherlands Government also contends that there has been no infringement of Article 52 of the Treaty by the United Kingdom.Findings of the Court39 As regards the applicability of Article 52 of the Treaty in this case, it should be pointed out that that provision, which the United Kingdom is charged with infringing, applies in the field of air transport.40 Whereas Article 61 of the EC Treaty (now, after amendment, Article 51 EC) precludes the Treaty provisions on the freedom to provide services from applying to transport services, the latter being governed by the provisions of the title concerning transport, there is no article in the Treaty which precludes its provisions on freedom of establishment from applying to transport.41 It is to be observed, next, that the application of Article 52 of the Treaty in a given case depends, not on the question whether the Community has legislated in the area concerned by the business which is carried on, but on the question whether the situation under consideration is governed by Community law. Even if a matter falls within the power of the Member States, the fact remains that the latter must exercise that power consistently with Community law (Factortame and Others, paragraph 14; Case C-124/95 Centro-Com [1997] ECR I-81, paragraph 25; Case C-264/96 ICI v Colmer [1998] ECR I-4695, paragraph 19).42 Consequently, the claim by the United Kingdom that the Community has not legislated on air transport outside the Community, even if substantiated, is not capable of rendering Article 52 of the Treaty inapplicable in that sector.43 The same applies to the United Kingdom's claim that the only economic activity capable of being affected by Article 5 of the Bermuda II Agreement is largely located outside the Community. All companies established in a Member State within the meaning of Article 52 of the Treaty are covered by that provision, even if the subject-matter of their business in that State consists in services directed towards non-member countries.44 As regards the question whether the United Kingdom has infringed Article 52 of the Treaty, it should be borne in mind that, under that article, freedom of establishment includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 58 of the EC Treaty (now the second paragraph of Article 48 EC) under the conditions laid down for its own nationals by the legislation of the Member State in which establishment is effected.45 Articles 52 and 58 of the Treaty thus guarantee nationals of Member States of the Community who have exercised their freedom of establishment and companies or firms which are assimilated to them the same treatment in the host Member State as that accorded to nationals of that Member State (Saint-Gobain, paragraph 35), both as regards access to an occupational activity on first establishment and as regards the exercise of that activity by the person established in the host Member State.46 The Court has thus held that the principle of national treatment requires a Member State which is a party to a bilateral international treaty with a non-member country for the avoidance of double taxation to grant to permanent establishments of companies resident in another Member State the advantages provided for by that treaty on the same conditions as those which apply to companies resident in the Member State that is party to the treaty (see Saint-Gobain, paragraph 59, and judgment of 15 January 2002 in Case C-55/00 Gottardo v INPS [2002] ECR I-413, paragraph 32).47 In this case, Article 5 of the Bermuda II Agreement permits the United States of America, inter alia, to revoke, suspend or limit the operating authorisations or technical permissions of an airline designated by the United Kingdom but of which a substantial part of the ownership and effective control is not vested in that Member State or its nationals.48 There can be no doubt that airlines established in the United Kingdom of which a substantial part of the ownership and effective control is vested either in a Member State other than the United Kingdom or in nationals of such a Member State (`Community airlines') are capable of being affected by that clause.49 By contrast, it is clear from Article 3(6) of the Bermuda II Agreement that the United States of America is in principle under an obligation to grant the appropriate operating authorisations and the required technical permissions to airlines of which a substantial part of the ownership and effective control is vested in the United Kingdom or its nationals (`United Kingdom airlines').50 It follows that Community airlines may always be excluded from the benefit of the Bermuda II Agreement, while that benefit is assured to United Kingdom airlines. Consequently, Community airlines suffer discrimination which prevents them from benefiting from the treatment which the host Member State, namely the United Kingdom, accords to its own nationals.51 Contrary to what the United Kingdom maintains, the direct source of that discrimination is not the possible conduct of the United States of America but Article 5 of the Bermuda II Agreement, which specifically acknowledges the right of the United States of America to act in that way.52 Consequently, by concluding and applying that agreement, the United Kingdom has failed to fulfil its obligations under Article 52 of the Treaty.53 That finding cannot be disturbed by the argument which the United Kingdom derives from the Court's reasoning in paragraphs 59 and 60 of the Saint-Gobain judgment.54 In those paragraphs, the Court merely held that the extension to permanent establishments of companies having their seat in a Member State other than the Federal Republic of Germany of a tax advantage provided for by a bilateral international agreement concluded by the Federal Republic of Germany with a non-member country could be decided upon unilaterally by the former without in any way affecting the rights of the non-member country arising from that agreement and without imposing any new obligations on that non-member country. That does not mean, however, that, where the infringement of Community law results directly from a provision of a bilateral international agreement concluded by a Member State after its accession to the Community, the Court is prevented from holding that that infringement exists so as not to compromise the rights which non-member countries derive from the very provision which infringes Community law.Justification under Article 56 of the TreatyArguments of the parties55 The United Kingdom submits that, even if there was discrimination prima facie contrary to Article 52 of the Treaty, it is justified on grounds of public policy under Article 56 of the Treaty. In particular, the United Kingdom asserts a public-policy interest in retaining the right to revoke, suspend, limit or impose conditions on the operating authorisations or technical permissions of airlines designated by the United States of America but owned and effectively controlled by other non-member countries or their nationals. If the Commission's view were to be accepted, Member States would lose their power to restrict the access of any airline which the United States of America chose to designate. The implications of such a loss of power go beyond the purely economic aspects and encompass foreign policy, safety and security considerations.56 The Commission contends that the public-policy exception in Article 56 of the Treaty is a derogation from a fundamental freedom and must therefore be construed narrowly (see Case 79/85 Segers [1986] ECR 2375). According to the Commission, that exception may never be relied on in order to pursue economic aims (Case 352/85 Bond van Adverteerders and Others v Netherlands State [1988] ECR 2085). Moreover, the Commission maintains that in the light of the provisions of Council Directive 64/221/EEC of 25 February 1964 on the coordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ, English Special Edition 1963-1964, p. 117), which require public-policy considerations to relate to the conduct of a particular individual and not to be based simply on general conduct, it is not clear how Article 5 of the Bermuda II Agreement, which discriminates against an entire class of operators, can be justified as a measure of public policy under Article 56 of the Treaty.Findings of the Court57 It should be recalled that, according to settled case-law, recourse to justification on grounds of public policy under Article 56 of the Treaty presupposes the need to maintain a discriminatory measure in order to deal with a genuine and sufficiently serious threat affecting one of the fundamental interests of society (see, to that effect, Case 30/77 R v Bouchereau [1977] ECR I-1999, paragraph 35; Case C-114/97 Commission v Spain [1998] ECR I-6717, paragraph 46; Case C-348/96 Calfa [1999] ECR I-11, paragraph 21). It follows that there must be a direct link between that threat, which must, moreover, be current, and the discriminatory measure adopted to deal with it (see, to that effect, Case 352/85 Bond van Adverteerders and Others, paragraph 36; and Calfa, paragraph 24).58 In this case, Article 5 of the Bermuda II Agreement does not limit the power to refuse operating authorisations or the necessary technical permissions to an airline designated by the other party solely to circumstances where that airline represents a threat to the public policy of the party granting those authorisations and permissions.59 In any event, there is no direct link between such (purely hypothetical) threat to the public policy of the United Kingdom as might be represented by the designation of an airline by the United States of America and generalised discrimination against Community airlines.60 The justification put forward by the United Kingdom on the basis of Article 56 of the Treaty must therefore be rejected.61 Having regard to all the foregoing considerations, it must be held that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which allows that non-member country to revoke, suspend or limit traffic rights in cases where air carriers designated by the United Kingdom are not owned by the United Kingdom or its nationals, the United Kingdom has failed to fulfil its obligations under Article 52 of the Treaty. Decision on costs Costs62 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the United Kingdom has been unsuccessful, the latter must be ordered to pay the costs.P63 Pursuant to Article 69(4) of the Rules of Procedure, the Kingdom of the Netherlands is to bear its own costs. Operative part On those grounds,THE COURThereby:1. Declares that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which allows that non-member country to revoke, suspend or limit traffic rights in cases where air carriers designated by the United Kingdom of Great Britain and Northern Ireland are not owned by it or its nationals, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 52 of the EC Treaty (now, after amendment, Article 43 EC);2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs;3. Orders the Kingdom of the Netherlands to bear its own costs.

daeb2-d414be7-4470

EN

THE COURT OF FIRST INSTANCE ANNULS A COMMISSION DECISION PROHIBITING THE MERGER OF TETRA LAVAL AND SIDEL AND THE RELATED DIVESTITURE DECISION.

| 62002A0005 Judgment of the Court of First Instance (First Chamber) of 25 October 2002. - Tetra Laval BV v Commission of the European Communities. - Competition - Regulation (EEC) No 4064/89 - Decision declaring a concentration incompatible with the common market - Rights of the defence - Horizontal and vertical effects - Foreseeable conglomerate effects - Leveraging - Potential competition - General effect of reinforcement. - Case T-5/02. European Court reports 2002 Page II-04381 Keywords 1. Competition - Concentrations - Administrative procedure - Access to the file - Observance of the rights of the defence - Infringement - Condition(Council Regulation No 4064/89)2. Competition - Concentrations - Administrative procedure - Access to the file - Detailed rules governing access - Commission's power to assess of its own volition the risk of disclosure of confidential information - Obligation to justify any restrictions on the right of access to the file - Scope(Art. 287 EC; Council Regulation No 4064/89; Commission Regulation No 447/98, Art. 17(1) and (2))3. Competition - Concentrations - Examination by the Commission - Assessments of an economic nature - Discretion as regards assessment - Review by the Court - Limits(Council Regulation No 4064/89, Art. 2)4. Competition - Concentrations - Assessment of compatibility with the common market - Concentrations which neither create nor reinforce a dominant position(Council Regulation No 4064/89, Art. 2(2) and (3))5. Competition - Concentrations - Assessment of compatibility with the common market - Conglomerate-type concentration - Definition - Assessment according to criteria applicable to other types of concentration - Taking into account of the likelihood that a dominant position will be created or reinforced through leveraging on the reference market for one of the undertakings party to the concentration - Whether permissible - Whether the Commission may rely on foreseeable conduct of the entity resulting from the concentration - Conditions - Presentation of a close examination supported by convincing evidence(Council Regulation No 4064/89, Art. 2(2) and (3))6. Competition - Concentrations - Assessment of compatibility with the common market - Conglomerate-type concentration - Taking into account of foreseeable conduct of the entity resulting from the concentration likely to constitute in itself abuse of an existing dominant position - Whether permissible - Obligation of the Commission to assess the likelihood of such conduct having regard to the risks inherent in the adoption of that conduct and the commitments offered by the notifying parties in relation thereto(Council Regulation No 4064/89, Art. 2(2) and (3))7. Competition - Concentrations - Assessment of compatibility with the common market - Taking into account of the likelihood that a dominant position will be created or reinforced through leveraging on the reference market for one of the undertakings party to the concentration - Taking into account of leveraging between the markets for two products which are technical substitutes - Whether permissible - Condition(Council Regulation No 4064/89, Art. 2(2) and (3))8. Competition - Concentrations - Assessment of compatibility with the common market - Taking into account of the elimination or significant reduction of potential but growing competition tending to reinforce a dominant position - Whether permissible - Obligation of the Commission to rely on convincing evidence of the alleged reinforcement(Council Regulation No 4064/89, Art. 2(2) and (3))9. Competition - Concentrations - Assessment of compatibility with the common market - Taking into account of the likelihood that a dominant position will be created or reinforced on the reference market for one of the undertakings party to the concentration - Taking into account of the impact of a reduction of potential competition from neighbouring markets on the reference markets - Whether permissible(Council Regulation No 4064/89, Art. 2(1), (2) and (3)) Summary $$1. The general principles of Community law governing the right of access to the Commission's file are applicable to the procedures provided for by Regulation No 4064/89 on the control of concentrations between undertakings, even though their application may reasonably be adapted to the need for speed, which characterises the general scheme of that regulation. Those principles are designed to ensure effective exercise of the rights of the defence and breach thereof in the procedure prior to the adoption of the decision can, in principle, cause the decision to be annulled if the rights of defence of the undertaking concerned have been infringed.The rights of the defence have been infringed if the non-disclosure of the documents in the Commission's file might have influenced the course of the procedure and the content of the decision to the applicant's detriment.( see paras 89-91 )2. As regards the responses given by third parties to the Commission's requests for information, the mere fact that Article 17(2) of Regulation No 447/98 on the notifications, time limits and hearings provided for in Regulation No 4064/89 on the control of concentrations between undertakings imposes an obligation on each third party requesting confidentiality to indicate clearly which parts of its response are to be considered confidential does not prevent the Commission, in the light of Article 17(1) and the objective of Article 287 EC, from examining of its own volition whether there is a risk that business secrets of some of the third parties involved in the procedure, or even other confidential information, may be divulged if unlimited access is allowed to the responses of other third parties who have not themselves requested confidentiality.However, when faced with a request for access to the file from a notifying party, it is for the Commission, at least until the Advisory Committee has been consulted pursuant to Article 18(1) of Regulation No 4064/89, to justify any restrictions on that right of access, since any exception to that right must be interpreted narrowly, particularly when the Commission intends to prohibit the notified merger in question.The need for speed, which characterises the general scheme of Regulation No 4064/89, cannot by itself justify a refusal to allow access to the responses gathered as part of a market investigation carried out on the commitments offered by a notifying party. If the Commission does not have the time needed to ask the respondents to the market investigation for a non-confidential version of their responses, pursuant to Article 17(2) of Regulation No 447/98, it has at least to explain to the notifying party how the nature and scope of the fear of reprisals or other negative or undesired consequences expressed by those respondents who simply requested confidentiality without providing a non-confidential version of their responses justifies a refusal to allow access to those responses or to a non-confidential version thereof. Although the short deadlines in the second phase of a merger procedure may, for practical reasons and especially when many requests for confidentiality have been received, give grounds for drawing up non-confidential summaries, the Commission is still obliged to give valid reasons for a blanket refusal to allow access to those responses. That obligation applies even more strongly to the responses submitted to it without any - at least any formal - request for confidentiality.( see paras 101-102, 105 )3. The substantive rules of Regulation No 4064/89 on the control of concentrations between undertakings, in particular Article 2, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review by the Community judicature of the exercise of that discretion, which is essential for defining the rules on concentrations, must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations.( see para. 119 )4. Under Article 2(3) of the Regulation No 4064/89 on the control of concentrations between undertakings, a concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it must be declared incompatible with the common market. Conversely, the Commission is bound declare a concentration falling within the scope of application of that regulation compatible with the common market where the two conditions laid down in that provision are not fulfilled. If, therefore, a dominant position is not created or strengthened, the transaction must be authorised and there is no need to examine the effects of the transaction on effective competition.( see para. 120 )5. A merger which is conglomerate in type, that is, a merger of undertakings which, essentially, do not have a pre-existing competitive relationship, either as direct competitors or as suppliers and customers, do not give rise to true horizontal overlaps between the activities of the parties to the merger or to a vertical relationship between the parties in the strict sense of the term. Thus it cannot be presumed that such mergers produce anti-competitive effects and must therefore be prohibited. For them to be prohibited, it is necessary, as with any other concentration, that the two conditions laid down in Article 2(3) of Regulation No 4064/89 on the control of concentrations between undertakings are met.Although it is true that, in principle, a merger between undertakings which are active on distinct markets is not usually of such a nature as immediately to create or strengthen a dominant position due to the combination of the market shares held by the parties to the merger, since the factors which are of significance for the relative positions of competitors within a given market are generally to be found within the market itself, it is possible for the conditions of competition on a market to be affected by factors external to that market. This is the case where the markets in question are neighbouring markets and one of the parties to a merger transaction already holds a dominant position on one of them if the means and capacities brought together by the transaction may immediately create conditions allowing the merged entity to leverage its way so as to acquire, in the relatively near future, a dominant position on the other market.If, in a prospective analysis of the effects of a conglomerate-type merger transaction, the Commission is able to conclude that a dominant position would, in all likelihood, be created or strengthened in the relatively near future and would lead to effective competition on the common market being significantly impeded, it must prohibit it.Where, however, the creation or strengthening of a dominant position on the second market does not immediately result from the merger, but will occur only after a certain time and will result from conduct engaged in by the merged entity on the first market where it already holds a dominant position, that is, where it is not the structure resulting from the merger transaction itself but rather the future conduct in question which will create or strengthen a dominant position, it is for the Commission, if it intends to prohibit the concentration, to conduct a particularly close examination of the circumstances which are relevant for an assessment of the anti-competitive effect of the planned conglomerate in the reference market and to produce convincing evidence in support of its analysis.( see paras 142-155 )6. Although Regulation No 4064/89 on the control of concentrations between undertakings provides for the prohibition of a merger creating or strengthening a dominant position which has significant anti-competitive effects, these conditions do not require it to be demonstrated that the merged entity will, as a result of the merger, engage in abusive, and consequently unlawful, conduct. Although it cannot therefore be presumed that Community law will not be complied with by the parties to a conglomerate-type merger transaction, such a possibility cannot be excluded by the Commission when it carries out its control of mergers. Accordingly, when the Commission, in assessing the effects of such a merger, relies on foreseeable conduct which in itself is likely to constitute abuse of an existing dominant position, it is required to assess whether, despite the prohibition of such conduct, it is none the less likely that the entity resulting from the merger will act in such a manner or whether, on the contrary, the illegal nature of the conduct and/or the risk of detection will make such a strategy unlikely. While it is appropriate to take account, in its assessment, of incentives to engage in anti-competitive practices which might result from the situation created by the merger, the Commission must also consider the extent to which those incentives would be reduced, or even eliminated, owing to the illegality of the conduct in question, the likelihood of its detection, action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue. The fact that a notifying party offers commitments regarding its future conduct is also a factor which the Commission must take into account in assessing whether it is likely that the merged entity will act in a manner which might result in the creation of a dominant position on one or more of the relevant markets.( see paras 159, 161 )7. The possibility cannot be excluded that leveraging from one market into another may take place when a product in one market and a product in another market are merely technical substitutes. Leveraging may be carried out when the products in question are ones which the customer finds suitable for the same end use.( see para. 196 )8. When the Commission relies on the elimination or significant reduction of potential competition, even of competition which will tend to grow, in order to justify the prohibition of a notified merger, the factors which it identifies to show the strengthening of a dominant position must be based on convincing evidence. The mere fact that the acquiring undertaking already holds a clear dominant position on the relevant market may constitute an important factor but does not in itself suffice to justify a finding that a reduction in the potential competition which that undertaking must face constitutes a strengthening of its position.( see para. 312 )9. Given the criteria laid down in Article 2(1) of Regulation No 4064/89 on the control of concentrations between undertakings, which the Commission is bound to apply in assessing notified merger transactions, it does not commit any error in examining the impact of a reduction of potential competition from neighbouring markets on the reference markets.( see para. 323 ) Parties In Case T-5/02,Tetra Laval BV, established in Amsterdam (Netherlands), represented by A. Vandencasteele, D. Waelbroeck, A. Weitbrecht and S. Völcker, lawyers,applicant,vCommission of the European Communities, represented by A. Whelan and P. Hellström, acting as Agents, with an address for service in Luxembourg,defendant,APPLICATION for annulment of Commission Decision C (2001) 3345 final of 30 October 2001 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case No COMP/M.2416 - Tetra Laval/Sidel),THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (First Chamber),composed of: B. Vesterdorf, President, J. Pirrung and N.J. Forwood, Judges,Registrar: D. Christensen, Administrator,having regard to the written procedure and further to the hearing on 3 and 4 July 2002,hereby gives the followingJudgment Grounds Legal background1 Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1, corrected version in OJ 1990 L 257, p. 13, as amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1), hereinafter the Regulation) provides for a system of control by the Commission of concentrations having a Community dimension as defined by Article 1(2) of the Regulation.2 Article 2 of the Regulation states:1. Concentrations within the scope of this Regulation shall be appraised in accordance with the following provisions with a view to establishing whether or not they are compatible with the common market.In making this appraisal, the Commission shall take into account:(a) the need to maintain and develop effective competition within the common market in view of, among other things, the structure of all the markets concerned and the actual or potential competition from undertakings located either within or outwith the Community;(b) the market position of the undertakings concerned and their economic and financial power, the alternatives available to suppliers and users, their access to supplies or markets, any legal or other barriers to entry, supply and demand trends for the relevant goods and services, the interests of the intermediate and ultimate consumers, and the development of technical and economic progress provided that it is to consumers' advantage and does not form an obstacle to competition.2. A concentration which does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared compatible with the common market.3. A concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared incompatible with the common market....3 Article 4 of the Regulation requires the party acquiring control, or the parties acquiring joint control, of another undertaking to notify the concentration within a week to the Commission, which is required by Article 6(1) to examine that notification as soon as it is received. Article 6(1)(c), read in conjunction with Article 10(1), provides that the Commission is to initiate proceedings in respect of a notified concentration within one month, and at most six weeks, where it finds that the concentration falls within the scope of the Regulation and raises serious doubts as to its compatibility with the common market.4 Once proceedings have been initiated in respect of a notification, the decision-making powers of the Commission are fixed by Article 8 of the Regulation. Under Article 8(3), [w]here the Commission finds that a concentration fulfils the criterion laid down in Article 2(3) ..., it shall issue a decision declaring that the concentration is incompatible with the common market. Under Article 10(3), such decisions must be taken within not more than four months of the date on which the proceedings are initiated.5 Although Article 7(1) of the Regulation provides that a concentration is not to be put into effect either before its notification or until it has been declared compatible with the common market, the implementation of a public bid that has been notified to the Commission may, in accordance with Article 7(3), proceed provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the Commission under paragraph 4.6 Article 18 of the Regulation, which concerns the hearing of the parties and of third parties, provides:1. Before taking any decision provided for in Article 7(4), Article 8(2), second subparagraph, and (3) to (5), and Articles 14 and 15, the Commission shall give the persons, undertakings and associations of undertakings concerned the opportunity, at every stage of the procedure up to the consultation of the Advisory Committee, of making known their views on the objections against them....3. The Commission shall base its decision only on objections on which the parties have been able to submit their observations. The rights of the defence shall be fully respected in the proceedings. Access to the file shall be open at least to the parties directly involved, subject to the legitimate interest of undertakings in the protection of their business secrets....7 Article 13(3) of Commission Regulation (EC) No 447/98 of 1 March 1988 on the notifications, time-limits and hearings provided for in Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings (OJ 1998 L 61, p. 1) provides:After having addressed its objections to the notifying parties, the Commission shall, upon request, give them access to the file for the purpose of enabling them to exercise their rights of defence.The Commission shall, upon request, also give the other involved parties who have been informed of the objections access to the file in so far as this is necessary for the purposes of preparing their observations.8 Article 17 of Regulation 447/98, entitled Confidential information, provides:1. Information, including documents, shall not be communicated or made accessible in so far as it contains business secrets of any person or undertaking, including the notifying parties, other involved parties or of third parties, or other confidential information the disclosure of which is not considered necessary by the Commission for the purpose of the procedure, or where internal documents of the authorities are concerned.2. Any party which makes known its views under the provisions of this Chapter shall clearly identify any material which it considers to be confidential, giving reasons, and provide a separate non-confidential version within the time limit fixed by the Commission.Factual background9 On 27 March 2001, Tetra Laval SA, a privately held company incorporated under French law and a wholly owned subsidiary of Tetra Laval BV (hereinafter Tetra or the applicant), a holding company belonging to the Tetra Laval group, announced a public bid for all outstanding shares in Sidel SA (hereinafter Sidel), a French publicly quoted company. On the same day, Tetra Laval SA acquired roughly 9.75% of the shares in Sidel from Azeo (5.56%) and Sidel's directors (4.19%).10 The bid was in cash at EUR 50 per share and, in accordance with French law, was unconditional. Acceptance of the bid was unanimously recommended by the Board of Directors of Sidel and was also approved by Sidel's major shareholders. The joint offer document from Tetra Laval SA and Sidel was approved on 11 April 2001 by the stock exchange committee. Following publication on 14 April 2001, the bid was officially opened for the period 17 April to 22 May 2001. It provided that, in the event of the bid being successful, the shares of Tetra SA would be quoted again in the week beginning 11 June 2001, subject to the restrictions in Article 7(3) of the Regulation.11 Pursuant to the bid, Tetra acquired approximately 81.3%, of the outstanding shares in Sidel. After the closing of the bid, the applicant acquired certain additional shares, making its current holdings roughly 95.20% of the shares and 95.93% of the voting rights in Sidel.12 Tetra comprises, inter alia, the Tetra Pak company, which is mainly active in the area of liquid food carton packaging, where Tetra Pak is the world-wide market leader. Tetra also has more limited activities in the plastic packaging sector, mainly as a converter (which consists of manufacturing and supplying empty packaging to producers who then fill the packaging themselves), particularly of high density polyethylene (hereinafter HDPE) bottles.13 Sidel is involved in the design and production of packaging equipment and systems, particularly stretch blow moulding machines (hereinafter SBM machines), which are used in the production of polyethylene terephthalate (hereinafter PET) plastic bottles. It is the world-wide leader for the production and supply of SBM machines. It is also active in barrier technology, used to make PET compatible with products which are sensitive to gas and light, as well as in the manufacture of filling machines for PET and, to a lesser extent, HDPE bottles.14 On 18 May 2001, the operations by which Tetra acquired its shareholding in Sidel were notified to the Commission.15 It is agreed by the parties that those operations (hereinafter the merger or the notified transaction) constitute an acquisition within the meaning of Article 3(1)(b) of the Regulation and that the merger has a Community dimension within the meaning of Article 1(2) thereof.16 By decision of 5 July 2001, the Commission, having concluded that the merger raised serious doubts as to its compatibility with the common market and the Agreement on the European Economic Area (the EEA Agreement), initiated proceedings in accordance with Article 6(1)(c) of the Regulation.17 On 7 September 2001, the Commission sent to Tetra and Sidel a statement of objections, in accordance with Article 18 of the Regulation, explaining why its initial conclusion was that the transaction should be prohibited. The applicant replied to the statement on 21 September 2001.18 On 24 September 2001, an additional statement of objections, which focused in particular on the activities of Tetra in the HDPE sector, was sent to Tetra and Sidel, and was replied to by the applicant on 1 October 2001.19 On 25 September 2001, the applicant proposed a number of commitments, in accordance with Article 8(2) of the Regulation, with a view to remedying the competition concerns expressed in the first statement of objections.20 On 26 September 2001, a hearing took place before the hearing officer, in accordance with Articles 14, 15 and 16 of Regulation No 447/98.21 On 9 October 2001, the applicant offered the Commission a new set of firm commitments (hereinafter the commitments), replacing those dated 25 September 2001.22 The Commission carried out a specific market investigation regarding the commitments by sending 51 questionnaires to different operators in the economic sector in question (customers, converters and competitors); the questionnaires were sent out on 11 October 2001, with the deadline for reply set at 17 October. It received 34 responses (hereinafter the responses to the market investigation) and, judging them to be entirely confidential, drew up two non-confidential summaries concerning, first, customers and converters and, second, competitors. It sent those summaries to the applicant.23 The draft of the Commission's final decision, which also dealt with the commitments, was discussed and approved by the Advisory Committee on concentrations at its meeting on 19 October 2001.24 By decision of 30 October 2001 (Case No COMP/M.2416 - Tetra Laval/Sidel C (2001) 3345 final) (hereinafter the contested decision), the Commission declared the notified transaction incompatible with the common market and the functioning of the EEA Agreement, pursuant to Article 8(3) of the Regulation.25 The contested decision was notified to Tetra on 6 November 2001.26 In the light of the findings in the contested decision and following a separate administrative procedure initiated by the sending of a statement of objections to Tetra on 19 November 2001, the Commission adopted, on 30 January 2002, a decision setting out measures in order to restore conditions of effective competition pursuant to Article 8(4) of the Regulation (Case No COMP/M.2416 - Tetra Laval/Sidel).The contested decision27 In the contested decision, the Commission, in analysing the compatibility of the transaction with the common market, first describes the liquid food packaging industry and examines the relevant product and geographic markets, and then assesses the notified transaction from a competition standpoint. After that analysis, the Commission assesses the scope of the commitments in the light of that prior assessment of competition.The liquid food packaging sector28 The Commission considers that the competitive impact of [the notified transaction] will be primarily in the liquid food packaging industry, (liquid food meaning essentially liquid dairy products (LDPs)), fruit juices and nectars (juices), fruit flavoured still drinks (FFDs) and tea/coffee drinks, these four products together being referred to hereinafter as the sensitive products) and, in particular an impact on the sectoral segments in which the parties are primarily active, namely plastic, in particular PET packaging, and carton packaging (recital 12). The Commission states that PET enables the manufacture of transparent bottles. For products which are sensitive to oxygen and light, PET must be enhanced using a barrier technology. There are three stages in the PET packaging process: (i) production of plastic preforms, which are the pre-production tubes used to make the bottles; (ii) production of the empty bottles themselves using SBM machines (see paragraph 13 above); and (iii) filling of the bottles (recital 20). It describes HDPE packaging as having a rather cloudy appearance. HDPE is produced in a similar way to PET but using extrusion blow moulding machines (hereinafter EBM machines) (recital 26). Unlike plastic packaging, pack construction, filling and sealing are integrated operations in the carton packaging process (recital 28).29 The Commission draws several distinctions, in particular between aseptic and non-aseptic packaging, in line with its earlier decisions in this area, between the packaging itself and the packaging machines, and between packaging performed in-house by the producers of liquid foods and packaging by converters (see paragraph 12 above). However, according to the Commission, that distinction is lessened by the existence of hole-through-the-wall arrangements (hereinafter HTW arrangements) whereby a converter produces the bottles at a site next to the premises of the beverage producer and conveys them directly to the producer for filling.The relevant product markets30 Since the competitive impact of [the notified transaction] will be primarily in the liquid food packaging industry, the Commission concentrated its analysis on the segments of that industry in which Tetra and Sidel are primarily active: plastic, in particular PET packaging, and carton packaging (recital 12). The Commission considers that end-use segmentation constitutes a meaningful analytical tool for assessing the liquid food packaging equipment market (recital 44). It acknowledges that packaging systems using different materials, for example glass and cans, form distinct relevant product markets for competition law analysis and that, therefore, PET packaging systems belong to a distinct product market. The Commission categorically rejects the idea that carton and PET do not share common product segments and that there can be no interaction between the two and, accordingly, decides to look at the interplay between carton and PET and the future growth of PET in the traditional carton end-use segments (recital 53).31 Turning to carton packaging, which is non-transparent, the Commission considers that it is suitable for oxygen and light-sensitive products but cannot withstand carbonation. PET packaging, on the other hand, is transparent and can withstand carbonation but has been traditionally less suitable for oxygen- and light-sensitive products (recital 55). The Commission emphasises that PET is a suitable material for the packaging of all the products that have been traditionally packaged in carton, that is, sensitive products, and concludes that PET may potentially provide an alternative competing material for the entire spectrum of carton-packaged products (recital 57, emphasis in the original). These products can none the less be distinguished from one another, because the specific characteristics of the product dictate slightly different packaging solutions (juices are high acid whereas LDPs are low acid, FFDs and ice tea do not require the same extent of oxygen barrier as juices) (recital 58).32 Regarding the expected growth of PET use for sensitive products, the Commission dismisses the assertion of Tetra that PET's use is very limited and will not grow significantly in the future (recitals 59 to 148). It states in that regard that [t]he fastest growing PET segment has been water and [carbonated soft drinks] mainly due to a switch from glass packaging and that PET is popular with consumers and producers (recital 55, footnote 22). The Commission finds that already today it is possible to package and sell commercially fresh milk, flavoured milk, ice tea, fresh juice, long-life (hot-fill) juices, fruit flavoured drinks and sports drinks in PET and that there are only two segments for which PET use presents technical problems: aseptic juices and aseptic white (UHT) milk (recital 61). Referring to the figures provided on behalf of Tetra by the consulting company Canadean, it observes that, even though PET use is not currently very significant for LDPs and juices (0.5% in both segments in 2000), the picture [...] is already today very different for the segments of FFDs and tea/coffee drinks which do not require the same barrier properties as LDPs and juices, segments where PET has already made more significant inroads (recital 69) (reaching 20% for FFDs and 25% for tea/coffee drinks in 2000).33 For the years 2000 to 2005, the Commission, in the light of its own market investigation, that of Canadean and independent studies by PCI, Warrick and Pictet (recital 104), concludes that there is already significant overlap between PET and carton in the FFDs and tea/coffee drinks segments and that PET will continue to make inroads into these segments at the expense of carton, so much so that [u]nder a conservative estimate, with PET reaching 30% in each of these segments by 2005, PET would pack 800 million litres of tea/coffee drinks (including sports drinks) and 1 billion litres of FFDs (recital 144). It adds that improvements in barrier technology and aseptic PET filling are expected to enhance PET's position in all four [sensitive] product segments and that in the LDP and juice segment, PET will grow significantly in the next five years (recital 146). According to the Commission, it is realistic to expect that PET will reach at least 10-15% in fresh milk and 25% in flavoured and other dairy beverages by 2005, but that PET's use for UHT milk (which represents approximately 50% of the total milk market in the EEA) is uncertain (recital 147). Emphasising the significant potential of PET, at least in smaller, premium segments of aseptic milk such as single serve packages, the Commission considers that [w]ith PET reaching at least 15% of fresh milk, 25% other dairy beverages and only 1% UHT milk by 2005, PET will package approximately 3 billion litres per annum (this represents approximately 9% of the total European market for [LDPs] (recital 147). Regarding juices, the Commission believes that it is realistic to expect PET to reach at least 20% of the overall juice market in the EEA by 2005, even if this growth will mainly result from substantial switching from glass to PET (recital 148).34 Turning to the competition between PET and carton in overlap products, the Commission concludes that carton packaging systems and PET packaging systems (and hence carton packaging equipment and PET packaging equipment) form distinct relevant product markets. It finds that although substitution between the two systems does not currently have the necessary effectiveness and immediacy required for the purposes of market definition (i.e. they are weak substitutes), this may change in the future as PET's barrier technology improves and PET/carton costs converge. The convergence could even be such that the two systems might in future, belong to the same relevant product market for competition law purposes (recital 163).35 The Commission then examines the segments of specific equipment within each packaging system in order to determine whether there are distinct relevant product markets for each of them (recital 164).36 Regarding the PET packaging systems, the Commission considers that, for SBM machines, in the light of the specific characteristics of the sensitive products and the ability for price discrimination, separate relevant markets exist for each distinct group of customers on the basis of end-use in particular in the four "sensitive" beverage segments, LDPs, juice, FFDs and tea/coffee drinks (recital 188). The Commission considers that the different barrier technologies form part of the same product market, although some of them might, in future, be placed in a distinct product market (recitals 198 et 199). There are also two distinct markets for aseptic and non-aseptic PET filling machines (recital 204), whilst PET preforms constitute yet another distinct market (recital 206).37 With respect to carton packaging systems, the Commission notes that there is consensus that there are four distinct product markets: aseptic carton packaging machines, aseptic cartons, non-aseptic carton packaging machines and non-aseptic cartons (recital 209).The relevant geographic market38 The relevant geographic market is defined as the EEA because all suppliers [of PET packaging equipment] are active throughout the EEA, [and] are capable of providing and provide their equipment on a cross-border basis (recitals 210 and 211)Competition law analysis of the notified transaction39 The assessment of the merger under competition law is contained in a detailed analysis (recitals 213 to 408) and is essentially as follows:213 The Commission's market investigation and analysis has shown that the operation could strengthen Tetra's dominant position in the market for aseptic carton packaging machines and aseptic cartons and create a dominant position in the market for PET packaging equipment and, in particular SBM machines (low and high capacity) in the "sensitive" product and end-use segments, LDPs, juices, FFDs and tea/coffee drinks.214 The merged entity's future dominant position in two closely neighbouring markets as well as a notable position in a third market (EBM machines and HDPE filling machines) are likely to reinforce its position in both markets, raise barriers to entry, minimise the importance of existing competitors and lead to a monopolistic structure of the whole market for aseptic and non-aseptic packaging of "sensitive" products in the EEA.40 In support of its findings, the Commission notes, first, that, as regards the carton packaging market, very little has changed since the Tetra Pak II judgments (Case T-83/91 Tetra Pak v Commission [1994] ECR II-755, confirmed on appeal in Case C-333/94 P Tetra Pak v Commission [1996] ECR I-5951). Thus it finds that, in the year 2000 in the EEA, Tetra had a dominant position on the market for aseptic packaging machines and cartons, with a market share of 80% (recitals 219 and 223) and a leading position in the market for non-aseptic packaging machines and cartons, with a market share of [50-60%] (recitals 229 and 231). Second, whilst acknowledging that Sidel does not have a dominant position on the market for SBM machines, the Commission concludes that it has a leading position, since it is the only company capable of providing the full range of SBM machines from very low capacity to the highest capacity always using leading rotary technology (recital 248). Noting that [t]he importance of effectively managing filling operations in combination with blow moulding is particularly apparent with regard to "sensitive" products such as milk and fruit juice to ensure clean or ultra-clean packaging processes (recital 249), the Commission observes that Sidel manufactures aseptic and non-aseptic filling machines (recital 250) and that it has an innovative Combi technology which allows it to integrate blowing, filling and capping in a single machine (recital 254). The Commission concludes that Sidel has a leading position in the [...] SBM market and a strong position in other PET packaging equipment, in particular aseptic filling machines, secondary equipment and associated services (recital 259).41 With respect to the creation of a dominant position on the market for PET and the reinforcement of Tetra's position on the carton markets, the contested decision deals, firstly, with the horizontal and vertical effects of the merger; secondly, the leveraging effect from the carton markets into the PET market; thirdly, the effects on the carton markets following from the elimination of competitive pressure from the PET market; and, lastly, the overall effects on the carton and PET markets.42 First of all, as regards horizontal effects, the Commission considers that, since both Tetra and Sidel are active on three distinct product markets: SBM machines (low capacity); barrier technology and aseptic PET filling machines (recital 263), the transaction would strengthen the position of the merged entity on those three markets. Whilst acknowledging that that position does not constitute a dominant position, the Commission finds that it would reach the level of dominance through the leveraging of the merged entity's dominant position in aseptic carton packaging equipment and aseptic cartons (recital 263).43 Secondly, the Commission states that the significant vertical effects which would result from the vertical integration of the merged entity in the three packaging systems (carton, PET and HDPE) could lead to vertical foreclosure of independent converters (recital 291). The market structure created by the merger would foreclose independent converters in the following way (recital 292):(i) the merged entity would be the only vertically integrated liquid food packaging company in carton (carton packaging machines and carton reels), HDPE (EBM machines and HDPE bottles) and PET packaging (SBM machines, barrier technology, aseptic fillers, preforms and bottles); (ii) the merged entity's dual position as supplier and competitor of converters would be likely to create a channel conflict in the market. Using its strong market position as supplier of SBM machines to converters which are to a certain extent dependent on Sidel, the merged entity may be able to raise converters' costs and marginalise their market position as suppliers of preforms and turnkey installations. Tetra/Sidel may be able to offer combined packages of SBM machines and preforms for instance by using Tetra's successful business strategy in carton, offering the SBM machines at a low price and recouping the cost by tying the customer with a long-term contract for the supply of standard and barrier enhanced preforms. The merged entity may also have the ability to offer turnkey installations to its customers without the use of converters.44 Next, the extent of Tetra's vertical integration on the markets for carton is highlighted, markets in which it has a business model of offering integrated solutions of machines and cartons (reels or blanks) to its customers (recital 296) on the market for HDPE, where it produces HDPE bottles on EBM machines through an alliance with Graham Engineering Corporation and supplies them to customers as a converter through HTW agreements, and also on the PET market. Regarding the PET market, the Commission observes that Tetra is the third largest independent preform supplier in the world with a market share of 10%, that it has plans to produce a limited number of finished PET bottles enhanced with its proprietary barrier technology Glaskin and that, since 1999, it is active in plastic beverage bottle closures through its subsidiary Novembal with a [10-20%] market share in 2000 in the EEA (recital 298). This integration distinguishes it from Sidel, which is not a vertically integrated company (recital 293). None the less, the entity resulting from the merger is likely to create a channel conflict in the market as the merged entity would be a supplier and competitor of converters (recital 301) and may have the ability to marginalise converters by offering customers combined packages of SBM machines and preforms as well as turnkey installations (recital 312). It is also possible that it might be able to marginalise converters from these activities by refusing the supply of SBM machines or raising their costs and favouring its own integrated business (recital 318). As for Tetra's decision to leave the preforms market, the Commission states that it does not conclude that these vertical concerns would, by themselves, result in the creation of a dominant position for PET or preforms (recital 324).45 The Commission then sets out in detail (recitals 325 to 389) the reasons for its concern that the merged entity would exploit its dominant position on the carton markets by leveraging into the market for PET packaging equipment in order to dominate the PET market for "sensitive" end-products (recital 328). It takes the view that it is sufficient that Tetra/Sidel have that possibility for the transaction to be incompatible with the common market. Thus the concerns of the Commission arise not from the position currently held by Sidel on the SBM machine market, but rather from Tetra's dominance in the carton market (recital 328, emphasis in the original). Referring inter alia to the close links between the two markets for carton packaging and PET packaging equipment, the Commission finds that the merger would create a market structure providing considerable scope for anti-competitive effects arising from the merged entity's simultaneous dominant and leading position in carton and PET equipment respectively (recital 330).46 Its analysis [is] explained in four stages (recital 331). First, the markets for carton and PET packaging systems belong to closely neighbouring product markets with a common pool of customers. Second, given the future growth of PET in the new sensitive product segments, the merger would enable the merged entity to acquire a dominant position on the PET market by leveraging Tetra's current dominant position on the carton markets. Third, the merger would strengthen Tetra's dominant position in the carton markets. Fourth, the combination of the two dominant positions would consolidate the merged entity's position in the sector for packaging for sensitive products, especially aseptic packaging, thus reinforcing the two dominant positions.47 In support of its analysis, the Commission cites the fact that the notified transaction is of strategic importance to Tetra, that Tetra has the ability and would have an incentive to engage in leveraging, that the competitors of the merged entity would not be able to rival it at various levels, and, lastly, that Tetra could practise price discrimination.48 With respect to the ability and the incentive to engage in leveraging, the Commission concludes that the market structure resulting from the merger would be particularly conducive to leveraging effects (recital 359):(a) There would be a common pool of customers requiring both carton and PET packaging systems to package "sensitive" liquids.(b) Tetra has a particularly strong dominant position in aseptic carton packaging with more than [80-90%] of the market and a dependent customer base.(c) Tetra/Sidel would start from a strong, leading, position in PET packaging systems and in particular SBM machines with a market share in the region of [60-70%].(d) Tetra/Sidel would have the ability to target selectively specific customers or specific customer groups as the structure of the market enables price discrimination.(e) Tetra/Sidel would have a strong economic incentive to engage in leveraging practices. As carton and PET are technical substitutes, when a customer switches to PET he/she is a lost customer on the carton side of the business either because he/she partially switched from carton or because he/she did not switch some of the production to carton from other packaging materials. This creates an added incentive to capture the customer on the PET side of the business to recover the loss. Therefore, by leveraging its current market position in carton, Tetra/Sidel would not only enhance its market share on the PET side but defend or compensate its possible loss on the carton side.(f) Competitors of Tetra/Sidel in both the carton and the PET equipment markets would be much smaller, with the largest competitor having no more than [10-20%] share in the market for carton packaging machines or SBM machines.49 The leveraging practices would be based on Tetra's current dominant position on the aseptic carton markets (recital 364):Leveraging [this position] [...] in a number of ways [...] Tetra/Sidel would have the ability to tie carton packaging equipment and consumables with PET packaging equipment and, possibly, preforms (in particular barrier-enhanced preforms). Tetra/Sidel would also have the ability to use pressure or incentives (such as predatory pricing or price wars and loyalty rebates) so that its carton customers buy PET equipment and, possibly, preforms from ... Tetra/Sidel and not from its competitors or converters.50 The Commission also states that [m]any customers who will continue to need carton packaging for part of their production needs could be forced or provided with incentives to source both their carton and PET equipment from a single supplier of carton and PET packaging equipment and that [c]ustomers having long-term agreements with Tetra for their carton packaging needs will be particularly vulnerable to such pressures (recital 365).51 The leveraging could cause competitors of Tetra/Sidel to be foreclosed from the SBM machine market for sensitive products for the following reasons (recital 369):(a) whether competitors can continue to sell in the untied product segments (e.g. water or CSDs) is not relevant. This is due to the ability to price discriminate and target specific customer groups which results in a segmentation of the relevant markets by end-use; b) the "sensitive" product segments consist of very complex liquids which require very specific PET lines including barrier technologies and aseptic filling machines or aseptic Combi SBM machines [which combine blowing, filling and capping]. Competitors would not have sufficient incentive to invest and compete in these high technology areas of PET equipment [...] [and] would thus be foreclosed from the so-called "second era" markets of PET.52 They could also be foreclosed from the rest of the SBM machine market (recital 370).53 According to the Commission, this outcome is all the more likely given the weak position of the merged entity's competitors and its customers' lack of purchasing power. The Commission notes, in relation to the competitors' position, that a crucial point for it is that, even if Sidel's three competitors in the market for high capacity SBM machines can match Sidel's offerings, the fact remains that they will lack the merged entity's dominant position in carton packaging (recital 372). It states that:The SIG group, the only one of the three competitors which will have both carton and PET activities, will have market shares of no more than [10-20%] in carton packaging machines and SBM machines. SIG lacks the full range of the merged entity in PET equipment as it currently lacks an essential element, barrier technology, for any future penetration in PET's new product segments. No other supplier of packaging equipment will be able to offer both carton and PET packaging equipment.54 It concludes that by combining the dominant company in carton packaging, Tetra, and the leading company in PET packaging equipment, Sidel, the proposed transaction would create a market structure which would provide the merged entity with the incentives and tools to turn its leading position in PET packaging equipment, in particular SBM machines (low and high capacity) used for the "sensitive" product segments, into a dominant position. This is also likely to enhance the merged entity's position and have anti-competitive effects on the overall SBM machine market (recital 389).55 Regarding the alleged effects on the carton markets, the Commission takes the view that the merger would create a market structure which would enable Tetra to strengthen its current dominant position in carton packaging by eliminating a source of significant competitive constraint, which could have serious negative consequences in the carton packaging sector (recitals 390 and 391). The Commission refers to the need to be particularly vigilant when faced with the strengthening of such a high degree of dominance, as in the present case.56 According to the Commission, without the merger, companies active in PET packaging, especially Sidel and converters, would engage in business strategies aimed at increasing the use of PET in order to take market share from carton. It dismisses the relevance of Tetra's argument that Sidel is able to influence only the price of SBM machines, which forms a very small proportion of the total packaging cost, on the ground that it is the ability of Tetra to influence the price of both carton machines and cartons which is important.57 Without the merger, PET companies would be expected to compete vigorously to gain market share from carton (recital 398), and Tetra would also be expected to defend its position fiercely by seeking to improve its carton packaging solutions by innovating, bringing better carton technology, new carton shapes and closures and, in some cases, lowering carton prices to defend its position. Indeed, Tetra has been active in this field and has produced new carton packages with more user-friendly features such as the carton gable top package with screw top closure (recital 398). The merger would not only eliminate the need for Tetra to compete as vigorously, but would also enable it to control significantly the shift from carton to PET (recital 399). Thus, it could keep its carton package prices at the current high levels for those customers or that part of customers' production unable or unlikely to switch totally or partially to PET due to consumer preferences, switching costs and long-term contracts, whilst continuing, for customers wishing to switch to PET, to be in a position to influence its customers' choice of packaging machines, for example, through the timing of the shift, and to offer its timely and tailor-made solutions, thus increasing its PET equipment market share (recital 399). Thus, Tetra could pre-empt the major advantage of its main competitor, the SIG group which is the only other company in the world that manufactures and sells both carton and PET packaging equipment (recital 400).58 The Commission also finds that [t]he fact that the merged entity [holds] dominant positions in two closely related neighbouring markets (carton and PET packaging equipment) and a notable presence in a third market (HDPE) would enable the merged entity to have a particularly strong presence in the sectors for the packaging of the relevant end-use products (LDPs, juice, FFDs, tea/coffee drinks) (recital 404). This would also strengthen the already strong position (recital 407) of Tetra in the sector of packaging of the sensitive products and would increase the barriers to entry for the competitors of Tetra/Sidel, which would allow the merged entity to marginalise competitors and [...] reinforc[e] dominance in the relevant markets for carton packaging equipment and PET packaging equipment, in particular SBM machines used for "sensitive" products (recital 408).The commitments59 The commitments, set out in the Annex to the contested decision, are summarised by the Commission as consisting of: (i) divestiture of Tetra's SBM business; (ii) divestiture of Tetra's PET preform business; (iii) holding Sidel separate from Tetra Pak companies and pre-existing behavioural remedies under Article 82 of the Treaty; and (iv) granting a licence for Sidel's SBM machines for sale to customers filling "sensitive" products and for sales to converters (recital 410). The Commission finds them to be insufficient to eliminate the major competition concerns identified on the PET packaging equipment and carton packaging markets (recital 424). The proposed divestiture of Tetra's SBM business and PET preform business would only have a minimal impact on the position of the merged entity, whilst the licence, in particular for Sidel's SBM machine business for sensitive products, would not only be insufficient to eliminate the problems but would not appear to be a viable option (recital 424). The licence may actually introduce complex mechanisms in the market resulting in artificial regulation (recital 424). Lastly, the two behavioural commitments concerning the separation of Sidel's and Tetra's business and compliance with Article 82 EC are considered insufficient as such to resolve the concerns arising from the structure of the market following the merger (recital 424).60 Given their overall insufficiency to address the competition concerns raised by the transaction, the Commission finds that the commitments thus cannot form the basis for an authorisation decision (recital 451).61 Accordingly, Article 1 of the contested decision states:The concentration, notified to the Commission by Tetra Laval BV [...], whereby Tetra would acquire sole control of the undertaking Sidel SA is declared incompatible with the common market and the functioning of the EEA Agreement.Procedure62 By application lodged with the Registry of the Court of First Instance on 15 January 2002, the applicant brought the present action against the contested decision.63 By a separate document lodged the same day, the applicant also applied for an expedited procedure, pursuant to Article 76a of the Rules of Procedure. The Commission, in its observations on that application, lodged on 5 February 2002, agreed that the procedure was justified.64 On 6 February 2002, the First Chamber of the Court of First Instance, to which the case has been assigned, decided to grant the application for an expedited procedure.65 The Commission lodged its defence on 12 March 2002.66 By application lodged at the Registry of the Court of First Instance on 19 March 2002, the applicant brought an action, registered under Case T-80/02, seeking the annulment of the decision of 30 January 2002 (see paragraph 26 above) and the joinder of the present case with Case T-80/02. By a separate document lodged on the same day, Tetra also requested an expedited procedure in Case T-80/02, which was supported by the Commission in its observations in respect of that application, lodged on 3 April 2002. That case was also assigned to the First Chamber of the Court of First Instance.67 By way of measures of organisation of procedure, on 19 March 2002 the parties were requested, pursuant to Article 64(3)(e) of the Rules of Procedure, to attend an informal meeting on 4 April 2002 with the Judge-Rapporteur.68 The applicant accepted at the informal meeting that its application for joinder of the present case and Case T-80/02 could be regarded as withdrawn if the oral hearings in both cases could be held consecutively and if the judgments were to be delivered, pursuant to the expedited procedure, on the same date. At the meeting the parties were given leave to lodge speaking notes no later than one week prior to the oral hearings for the two cases.69 On 18 April 2002, the First Chamber of the Court of First Instance granted the application for the procedure to be expedited in Case T-80/02 and set 26 and 27 June 2002 as the dates for the hearings in the two cases.70 Upon hearing the report of the Judge-Rapporteur, the First Chamber of the Court of First Instance decided, at its meeting on 10 June 2002, to open the oral procedure and, by way of measures of organisation of the procedure, invited the parties to answer, preferably before the hearing by the deadline set for the filing of speaking notes or, if not, at the hearing, a number of written questions notified by letter of 11 June 2002 (hereinafter the written questions). The Commission was also requested to produce one document.71 On 19 June 2002, the parties lodged their speaking notes with the Registry of the Court of First Instance. The applicant's notes contained a request that some of the information contained in some of the documents in the case-file be treated as confidential. In its notes the Commission does not dispute the confidentiality of those documents. On the same day, the parties also replied to the written questions and the Commission lodged the document requested.72 As one of the judges of the First Chamber of the Court of First Instance was prevented from attending, the President of the Court designated Judge Pirrung on 24 June 2002, pursuant to Article 32(3) of the Rules of Procedure, in order to attain the quorum necessary to give judgment and re-scheduled the two hearings for 3 and 4 July 2002.73 By letter of 24 June 2002, the applicant supplemented its request for confidential treatment of some of the information contained in the case-file.74 By separate letter on the same day, it asked that a document, a copy of which was already held by the Commission, be included in the case-file. The document in question is the rapport de gestion du Conseil d'administration of Sidel for the 2001 fiscal year (hereinafter the Sidel annual report). The request was granted by the First Chamber of the Court of First Instance by decision of 26 June 2002.75 Upon hearing a supplementary report of the Judge-Rapporteur, the First Chamber of the Court of First Instance decided, at its meeting on 27 June 2002, to ask the Commission to produce a number of documents, in particular the Canadean, PCI, Warrick and Pictet studies, and to answer two additional written questions (hereinafter the additional written questions).76 On 1 July 2002, the Commission lodged its answers to the additional written questions and produced the documents requested. Those documents, with the exception of the responses to the market investigation, which the Commission considered to be confidential, were put into the case-file.77 The parties presented oral argument and answered questions put to them by the Court of First Instance at the hearing on 3 and 4 July 2002.78 At the hearing, the Court of First Instance decided to grant the applicant access to a non-confidential version of some of the responses to the market investigation. Five of the responses were found, following verification by the Court, either not to contain answers to the questions asked (four documents) or clearly to be of an entirely confidential nature (one document) and were not given to the applicant. The non-confidential version of the responses, as drawn up by the Court pursuant to Article 67(3) of the Rules of Procedure, was put into the case-file and a copy was supplied to the applicant. The applicant requested, and was granted by the Court, a week to lodge any written observations it might have on that version of the responses to the market investigation. By letter of 8 July 2002, the applicant waived that right, whilst maintaining its substantive plea concerning those documents.Forms of order sought79 Since the conditions stated during the informal meeting for the amendment of the form of order sought have been met, the applicant claims that the Court should:- annul the contested decision;- order the Commission to pay the costs.80 The Commission contends that the Court should:- dismiss the action as unfounded;- order the applicant to pay the costs.Law81 The applicant puts forward essentially five pleas in support of its action. At the informal meeting on 4 April 2002, the applicant stressed that, as stated in its written pleadings, it was contesting the contested decision in so far as it prohibited the merger as modified by the commitments (hereinafter the modified merger). It has asked the Court to focus its examination on the situation which would result following the commitments it has offered.82 By its first plea, of a procedural nature, the applicant argues that the Commission did not respect the applicant's right of access to the case-file prior to the adoption of the contested decision. On the merits, it maintains that, by refusing to allow the modified merger, the Commission incorrectly applied Article 2(3) of the Regulation. In support of this claim, the applicant asserts that the modified merger has (i) no appreciable anti-competitive horizontal or vertical effects and (ii) no appreciable anti-competitive conglomerate effect. Furthermore, it claims (iii) that the assessment by the Commission of the applicant's commitments is inadequate and (iv) that the Commission has failed to give sufficient reasons for the contested decision.I - The plea alleging infringement of the right of access to the fileA - Arguments of the parties83 The applicant states that the Commission failed to give it access to the file, as several documents on which the Commission relies extensively for the purpose of making findings adverse to Tetra in the contested decision were never communicated to it. They are, first, the report of 10 September 2001 by an external economic expert, Professor Ivaldi (hereinafter the Ivaldi report), containing an econometric analysis of Sidel's previous sales margins (hereinafter the econometric analysis) of which the applicant received only a one-page summary, and, second, the responses to the market investigation, of which it received two summaries. Despite a request by Tetra on 19 October 2001 to obtain complete access to those responses, as opposed to inadequate summaries, on 25 October 2001 the hearing officer confirmed the Commission's refusal to allow access to those documents. The applicant maintains that the refusal is contrary to both the Commission Notice on the internal rules for processing requests for access to the file in cases pursuant to Articles [81] and [82] of the EC Treaty, Articles 65 and 66 of the ECSC Treaty and Council Regulation (EEC) No 4064/89 (OJ 1997 C 23, p. 3, hereinafter the access to the file notice) and the case-law (Case 107/82 AEG v Commission [1983] ECR 3151, paragraph 23 et seq.; and Case T-30/91 Solvay v Commission [1995] ECR II-1775, paragraph 58 et seq.).84 The applicant also stresses that the Commission, because of the importance it gave to the econometric analysis in the contested decision (particularly in recital 346 et seq.), must have relied on documents other than merely the Ivaldi report in the form of the summary disclosed to the applicant.85 The Commission states that the applicant had access to matters in the file to which the Commission refers and on which it relies in the contested decision. Referring to Article 13(3) of Regulation No 447/98 and to Case T-221/95 Endemol v Commission [1999] ECR II-1299, paragraph 65, the Commission states that access to the file is justified only in so far as it enables the undertaking in question, faced with the Commission's objections and with the documents on which the Commission relies, to present observations on the foundation of those objections. In the present case, Tetra was given the opportunity to present such observations.86 Firstly, as regards the Ivaldi report, the Commission states that, during the administrative procedure, the applicant did not complain about lack of access to the file so far as concerns the econometric analysis and, accordingly, cannot now argue that its rights of defence have been infringed. The brevity of the summary of that analysis in the report can be explained by the fact that it was a response and correction to the analysis previously submitted by Tetra. Tetra could have presented its observations on that report (and its experts did so during the oral hearing before the Commission on 26 September 2001). Moreover, the report constituted merely a supplementary part of the market investigation carried out by the Commission. Thus, even if there were some substance to the applicant's allegations, which there is not, this should not lead to annulment of the contested decision because the report did not affect its content.87 Secondly, as regards the responses to the market investigation, the Commission states that they also were of secondary importance, since it relied on its own analysis of the inadequacy of the commitments. The Commission is required to refuse access to those responses on grounds of confidentiality (Case C-310/93 P BPB Industries and British Gypsum v Commission [1995] ECR I-865, paragraph 26), and, although Article 17(2) of Regulation No 447/98 allows a party which submits observations to supply a non-confidential version of its response, the Commission had the right, as confirmed by Endemol v Commission, to prepare objective, non-confidential summaries and to limit access by the applicant to those summaries.88 The Commission did, moreover, discuss the responses with the applicant at a meeting on 18 October 2001, during which the summaries were made available to it. That access, along with the examination and confirmation by the hearing officer of the objectivity of the summaries, ensured that the applicant's rights of defence were fully respected. In any event, as the results of the investigation merely confirmed the Commission's initial analysis, there is no reason to conclude that the contested decision would have been different even if the requested access had been granted. The alleged infringement of rights of the defence cannot, therefore, justify the annulment of the contested decision.B - Findings of the Court1. Preliminary observations89 First of all, it must be observed that access to the file in competition cases is intended in particular to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission's file, so that on the basis of that evidence they can express their views effectively on the conclusions reached by the Commission in its statement of objections (Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraphs 9 and 11; BPB Industries and British Gypsum v Commission, paragraph 21; Case C-51/92 P Hercules Chemicals v Commission [1999] ECR I-4235, paragraph 75). The general principles of Community law governing the right of access to the Commission's file are designed to ensure effective exercise of the rights of the defence and, in the case of a decision concerning infringement of the competition rules applicable to undertakings and imposing fines or penalty payments, breach of those general principles of Community law in the procedure prior to the adoption of the decision can, in principle, cause the decision to be annulled if the rights of defence of the undertaking concerned have been infringed (Hercules Chemicals v Commission, paragraphs 76 and 77).90 It must also be recalled that, in order to hold that the rights of the defence have been infringed, it is sufficient for it to be established that the non-disclosure of the documents in question might have influenced the course of the procedure and the content of the decision to the applicant's detriment (Case T-36/91 ICI v Commission [1995] ECR II-1847, paragraph 78; Joined Cases T-305/94, T-306/94, T-307/94, T-313/94, T-314/94, T-315/94, T-316/94, T-318/94, T-325/94, T-328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappij and Others v Commission [1999] ECR II-931, paragraph 1021; and Endemol v Commission, paragraph 87).91 The Court of First Instance has already confirmed that these principles are applicable to the procedures provided for by the Regulation, even though their application may reasonably be adapted to the need for speed, which characterises the general scheme of the Regulation (Endemol v Commission, paragraph 68).92 Accordingly, in the present case it is necessary to examine whether the applicant's rights of defence were affected by the conditions under which it had access to some of the documents in the Commission's administrative file.2. The first part of the plea: the Ivaldi report93 First of all, even if the Commission's argument regarding the lateness of the complaint of infringement of the rights of the defence were valid, it cannot, in the particular circumstances of the present case, be upheld. The applicant's assertion that Professor Ivaldi apparently had a very limited role at the hearing before the hearing officer has not been denied by the Commission; nor did the Commission respond to the economists' report produced by Tetra at that hearing. In those circumstances, it is reasonable to conclude that the applicant did not, prior to the adoption of the contested decision, appreciate the importance which the Commission would attach to the econometric analysis in the Ivaldi report.94 Secondly, it must, however, be observed that the applicant had sufficient access to the Ivaldi report, a fact which it has not seriously disputed. The Court accepts the Commission's explanation that the report is brief because it was a response to an analysis submitted by the applicant itself. It follows that only the existence of other documents relating to the econometric analysis in the contested decision and to which Tetra did not have access could establish a failure by the Commission to allow access to the file.95 In that connection, it is clear from case-law that, where the institution concerned asserts that a particular document to which access has been sought does not exist, there is a presumption that it does not exist. That, none the less, is a simple presumption, which the applicant may rebut in any way by relevant and consistent evidence (see, to this effect, Case T-123/99 JT's Corporation v Commission [2000] ECR II-3269, paragraph 58; Case T-311/00 British American Tobacco (Investments) v Commission [2002] ECR II-2781, paragraph 35). It must be found in the present case, however, that the applicant has not rebutted that presumption.96 In support of its allegation, the applicant essentially refers to the details of the econometric analysis carried out in the contested decision. However, it is apparent from the file, in particular the annexes to the parties' written observations concerning the accuracy of the opposing econometric analyses, that the Commission's analysis is based largely on the information supplied to it by the applicant. The only other factors which the Commission took into account in the formulation of the variables used in its analysis are based on some of the criticisms of the variables used in the Tetra analysis which Professor Ivaldi made in his report. This is corroborated by the very title of the Ivaldi report in that it is referred to, in the singular, as a Note to the File/Internal.97 That conclusion is not affected by the applicant's argument based on the access to the file notice. In fact, it is clear that the assistance, in the form of advice provided by Professor Ivaldi, is not a study which must be made accessible pursuant to the fourth subparagraph of point I B of the access to file notice. Nor can the adequacy of the analysis in the report be contested by alleging an infringement of the right of access to the file. It follows that the Commission, in having Professor Ivaldi assist it in the study of the econometric analyses submitted by the applicant, did not fail to meet the obligations which it imposed on itself in the access to the file notice.3. The second part of the plea: the responses to the market investigation98 As for the second part of the plea, concerning the responses to the market investigation, the case-law also makes it clear that, with regard to answers by third parties to requests by the Commission for information, the Commission must take into account the risk that an undertaking holding a dominant position might adopt retaliatory measures against competitors, suppliers or customers who have collaborated in the investigation carried out by the Commission (BPB Industries and British Gypsum v Commission, paragraph 26; and Endemol v Commission, paragraph 66). Faced with such a risk, third parties who submit documents to the Commission in the course of its investigations, and who consider that reprisals might be taken against them as a result, are entitled to expect that their request for confidentiality will be complied with.99 It is possible, where certain third parties have asked that their identity not be divulged, that it will be necessary for the Commission not to reveal the identity of other third parties who are involved in the procedure but who did not request confidentiality before replying to the Commission's questionnaires (Endemol v Commission, paragraph 70).100 Thus it cannot be excluded that this requirement of confidentiality also justifies the drawing up of non-confidential summaries of all of the responses in question (see, to this effect, Endemol v Commission, paragraphs 71 and 72).101 In other words, the mere fact that Article 17(2) of Regulation No 447/98 imposes an obligation on each third party requesting confidentiality to indicate clearly which parts of its response are to be considered confidential does not prevent the Commission, in the light of Article 17(1) of Regulation No 447/98 and the objective of Article 287 EC, from examining of its own volition whether there is a risk that business secrets of some of the third parties involved in the procedure, or even other confidential information, may be divulged if unlimited access is allowed to the responses of other third parties who have not themselves requested confidentiality.102 However, when faced with a request for access to the file from a notifying party (namely a person concerned within the meaning of Article 18(1) of the Regulation), it is for the Commission, at least until the Advisory Committee has been consulted pursuant to that article, to justify any restrictions on that right of access, since any exception to the right of access to the file must be interpreted narrowly, particularly when the Commission intends to prohibit the notified merger in question.103 Tetra was allowed access to only two non-confidential summaries by the Commission of all the responses to the market investigation and not to the responses themselves or to a non-confidential version of them (see paragraph 22 above). The Commission observes that it received requests for confidential treatment from many of those responding to the market investigation, in some cases because they stated that they feared reprisals. However, following verification by the Court of First Instance pursuant to Article 67(3) of the Rules of Procedure, it became clear that the Commission had not informed the 51 recipients of the questionnaires, at least in the faxed cover sheets of the questionnaires, of their obligation under Article 17(2) of Regulation No 447/98 to indicate clearly all those parts of their responses which they deemed to be confidential. Despite that omission, six of the 30 usable responses, out of the 34 responses received, expressly requested confidentiality. One of the respondents provided a non-confidential version of its response to the Commission, pursuant to Article 17(2) of Regulation No 447/98.104 Accordingly, it is necessary to examine whether the Commission was justified in refusing the applicant access to the responses to the market investigation and to one non-confidential version of those responses, and in limiting access to two non-confidential summaries of all of the responses.105 The need for speed, which characterises the general scheme of the Regulation, cannot by itself justify a refusal of the kind at issue here. If the Commission did not have the time needed to ask the respondents to the market investigation for a non-confidential version of their responses, pursuant to Article 17(2) of Regulation No 447/98, it had at least to explain to the applicant how the nature and scope of the fear of reprisals or other negative or undesired consequences expressed by respondents who simply requested confidentiality without providing a non-confidential version of their responses justified a refusal to allow access to those responses or to a non-confidential version thereof. Although the short deadlines in the second phase of a merger procedure may, for practical reasons and especially when many requests for confidentiality have been received, give grounds for drawing up non-confidential summaries, the Commission is still obliged to give valid reasons for a blanket refusal to allow access to the responses to a market investigation concerning the commitments offered by a person concerned. That obligation applies even more strongly to the responses submitted to it without any - at least any formal - request for confidentiality.106 It is apparent from the hearing officer's reply of 25 October 2001 to the applicant's request for access of 19 October 2001 that the Commission's position on access to the file in the present case reflects its general position. The Commission believed that the provision of summaries of the responses to the market investigation, the accuracy and detail of which was confirmed by the hearing officer, constituted adequate access to the file and thus respected Tetra's rights of defence.107 It must be held, first, in particular in the light of the fact that some of the respondents to the market investigation expressed their fears of possible retaliation by the applicant if their responses were not treated confidentially, that confidential treatment had to be given to all of the responses.108 Since the Court of First Instance has itself been able to establish that access could have been given to a non-confidential version of at least 30 of the responses to the market investigation, prepared by blanking out confidential information, it is necessary to examine whether access solely to the summaries did actually infringe the applicant's rights of defence in the present case.109 The Commission's assertion that it referred to the responses to the market investigation in the contested decision only to support a conclusion it had already reached concerning the commitments for other unrelated reasons is supported to a certain extent by the wording of the contested decision (see recitals 424 and 425). It is nevertheless true that at least one adverse finding for the applicant regarding the commitments is presented as being confirmed by the market test (recital 428).110 It should be noted that, in a memorandum of 18 October 2001 and a formal complaint filed by Tetra on 19 October 2001 with the hearing officer, Tetra complained of a number of deficiencies and inaccuracies in the market investigation questionnaires to which it had access, particularly as concerns the discussion of the commitment offered by Tetra concerning the licence for Sidel's SBM machines. In his reply of 25 October 2001, the hearing officer stated that the Commission's market investigation was conducted in an objective manner and that the questionnaires were not misleading. He also stated that, since the non-confidential version of the commitments had been attached to the questionnaires, the Commission was entitled to assume that the recipients of the questionnaires had read that document.111 It must be pointed out, firstly, that the complaint and the memorandum are both annexed to, and cited in a footnote of, the application. It follows that the Court cannot uphold the objection raised by the Commission at the hearing, namely that the arguments in the applicant's oral submissions regarding the alleged inaccuracy of the fifth question in the questionnaire sent to customers were new and, therefore, inadmissible.112 The Court cannot, however, accept the applicant's argument that the questionnaires, by asking the recipients to express a view on whether the commitments [would] reduce significantly the applicant's position in carton packaging and [would] effectively eliminate the strong position of the merged entity on the market for sensitive liquid food packaging, may have misled the recipients as to the test under Article 2(3) of the Regulation. Suffice it to note in that respect that, even if some of the recipients may have formulated their answers by reference to a test other than that prescribed by Article 2(3) of the Regulation, the applicant did not need to have access to the answers to those questions in order to be able to remind the Commission of the significance of that test during the administrative procedure.113 This is confirmed by the fact that Tetra did actually have access from the beginning to the questionnaires sent to customers and converters, as it acknowledged in its memorandum of 18 October 2001. Although the Commission was required to give it access also to the questionnaire sent to its competitors, the applicant nevertheless acknowledged at the hearing that it had subsequently gained access to it by other means. In any event, as Tetra also acknowledged at the hearing, its arguments do not really relate to the latter questionnaire. It is thus clear that, through its access to the questionnaires and using the summaries of the responses supplied by the Commission, the applicant was able to point out, in its complaint to the hearing officer, that the Commission should apply only the test laid down in Article 2(3) of the Regulation.114 As regards the allegedly misleading nature of the depiction, in the questionnaires sent to customers and converters, of Tetra's commitment regarding the licence, it can be seen, merely by reading them, that a normally attentive recipient could not have been misled. Whilst the questions asked did contain certain details about the licence which, at most, might have the potential to mislead a recipient who did not take care to examine them in the light of the non-confidential version of the commitments attached as an annex, the Commission was entitled to assume that such an examination was in fact undertaken. The applicant has not shown that, in so far as a recipient might have found the details to be ambiguous, a simple check against the commitment concerning the licence would not have clarified the precise scope of that commitment.115 In any event, it is not apparent from the non-confidential version of the responses by the customers and converters to the market investigation that they were misled or confused when formulating their responses. Nor do the summaries of the responses provided to Tetra by the Commission, when examined in the light of the non-confidential version of the responses, indicate that information or details were omitted which might have been useful to the applicant to show that recipients of the questionnaires had been misled or confused in that way. This conclusion is supported by Tetra's decision not to submit additional written comments on that version of the responses during the present proceedings (see, to this effect, Hercules Chemicals v Commission, paragraph 80).116 Lastly, there is nothing in the summaries of the responses to the market investigation to indicate that they do not faithfully reflect the one response whose entirely confidential nature has been recognised by the Court, following its verification of that question (see paragraph 78 above).117 It follows that the Commission's decision to allow Tetra access only to the non-confidential summaries of the responses to the market investigation did not infringe Tetra's rights of defence.4. Conclusion118 It follows from the foregoing that the plea alleging infringement of the right of access to the file must be dismissed.II - The pleas alleging infringement of Article 2 of the RegulationA - Preliminary observations119 As a preliminary point, it must be recalled that the substantive rules of the Regulation, in particular Article 2, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review by the Community judicature of the exercise of that discretion, which is essential for defining the rules on concentrations, must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations (Joined Cases C-68/94 and C-30/95 France and Others v Commission (Kali & Salz) [1998] ECR I-1375, paragraphs 223 and 224; Case T-102/96 Gencor v Commission [1999] ECR II-753, paragraphs 164 and 165; and Case T-342/99 Airtours v Commission [2002] ECR II-2585, paragraph 64).120 It must also be recalled that under Article 2(3) of the Regulation a concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it must be declared incompatible with the common market. Conversely, the Commission is bound declare a concentration falling within the scope of application of the Regulation compatible with the common market where the two conditions laid down in that provision are not fulfilled (Case T-2/93 Air France v Commission [1994] ECR II-323, paragraph 79; see also, to this effect, Gencor v Commission, paragraph 170; and Airtours v Commission, paragraphs 58 and 82). If, therefore, a dominant position is not created or strengthened, the transaction must be authorised and there is no need to examine the effects of the transaction on effective competition (Air France v Commission, paragraph 79).121 The issue of whether the applicant's second, third and fourth pleas are well founded must be examined in the light of these considerations.B - The plea based on the absence of horizontal and vertical anti-competitive effects of the modified merger1. Preliminary observations122 The applicant argues that the commitments eliminated all the potential negative horizontal and vertical effects arising from the notified transaction which are identified in the contested decision. However, inasmuch as the Commission raises some objections to the merger which are based on such effects (recitals 263 to 324), Tetra maintains that the objections have become unfounded in the light of those commitments.123 The Commission contends that the applicant is wrong to state that the contested decision contains objections relating to horizontal or vertical effects. The decision does not refer to the creation or strengthening of a dominant position as a result of the horizontal or vertical effects of the merger taken in isolation. The Commission maintains, however, that the modified merger would have significant continuing horizontal and vertical effects which it cannot ignore. It states that the contested decision correctly took into account the remaining (post-commitment) horizontal and vertical effects of the modified merger in the assessment of the conglomerate effects.124 The Court finds that, even though the Commission did not base the contested decision on those horizontal and vertical effects, it did take them into account in support of its finding that the modified merger must be prohibited. Thus, the Commission states in the contested decision that the strengthening and creation of dominance on the market for PET packaging equipment, in particular the market for high- and low-capacity SBM machines, and the market for carton packaging systems would take place through a number of factors, including horizontal and vertical effects (recital 262). Moreover, the observations of the Commission, especially the explanations given by its Agent at the hearing, indicate that it is its concerns about the PET equipment markets in particular which are based on such effects. Accordingly, it is necessary to examine the applicant's separate plea relating to the creation of a dominant position on those markets due to those effects.2. Horizontal effects(a) Arguments of the parties125 The applicant begins by stating that, although the contested decision finds that there is an overlap between three markets, each one of which is considered to be a distinct market, namely low-capacity SBM machines, aseptic PET filling machines, and barrier technologies, the Commission does not foresee either the creation or the strengthening of a dominant position in any of those markets. The main problem identified by the Commission as regards horizontal effects concerns the market for low-capacity SBM machines, but Tetra's decision to divest itself of Dynaplast, that is to say, its own SBM machines business, would eliminate this problem. The applicant also emphasises that its commitment to grant a licence for Sidel SBM machines would reduce even further Sidel's pre-existing position on the market for low-capacity SBM machines.126 The Commission acknowledges that the horizontal effects of the modified merger would not by themselves, that is, independently of the other effects of the transaction, lead to the creation or strengthening of a dominant position, but maintains that they would significantly strengthen the position of the merged entity on the PET market and would not be eliminated by the commitments. Moreover, the commitments would not resolve the problem of the strengthening of Tetra's dominant position on the carton markets which, according to the Commission, would result from the elimination of Sidel as a potential competitor on the global market for packaging systems for sensitive products. The Commission stresses that the divestiture of Dynaplast would eliminate only the horizontal overlap between the activities of Tetra and Sidel in low-capacity SBM machines, whilst the commitments would have no effect on Sidel's leading position in high-capacity SBM machines. The Commission also stresses, both in its defence and its answers to the written questions, that the merger would strengthen the global position of the merged entity for PET equipment, including aseptic PET filling machines, barrier technology and PET bottle capping systems.(b) Findings of the Court127 The contested decision identifies three horizontal effects which are problematic from a competition law standpoint and which, as acknowledged by the Commission at the hearing, concern only the PET market. They are the alleged negative effects of the transaction on the markets for low-capacity SBM machines, aseptic PET filling machines, and barrier technology. It is therefore necessary to examine whether, despite the commitments, negative horizontal effects remain which could support the Commission's argument that the merged entity might use its current dominant position on the carton markets to leverage its way into a dominant position on the PET market.128 As regards low-capacity SBM machines, the commitment by the applicant to divest itself of Dynaplast means that the merger would not strengthen in any way the share of that market currently held by Sidel. This precludes Sidel's position from being strengthened on that market and, a fortiori, the transaction from significantly impeding competition in that part of the SBM machine market. The contested decision (recital 427) even recognises that the commitments will eliminate the horizontal overlap of the parties to the transaction in the market for these machines. Although the information obtained from the responses to the market investigation, to which the Commission refers in its defence on this point, have some probative value, the Commission cannot, on the one hand, rely on Dynaplast's contribution to Sidel's position in the market for low-capacity SBM machines, namely an almost [20-30%] market share (recital 266), and, on the other hand, plead before the Court that some of the responses refer to the unimportance or unprofitability of that range of machines. Nor can the mere fact that Tetra was subsequently unable to find a purchaser for Dynaplast, as it confirmed in its answers to the written questions and at the hearing, support the conclusion reached by the Commission, since it merely confirms Tetra's unprofitable and, notwithstanding a large market share, relatively weak position in the market for low-capacity SBM machines prior to the merger.129 It must therefore be held that the modified merger would not create any horizontal overlap between the activities of the parties thereto in the market for low-capacity SBM machines. The correctness of this conclusion cannot be called into question, at least not in support of the validity of the contested decision, by the Commission's reference to an alleged new technology, TetraFast, developed by Tetra for low-capacity SBM machines, which the Commission mentioned for the first time in its answers to the written questions.130 As regards the market for aseptic PET filling machines, the Commission should have ruled out the existence of significant, negative horizontal effects on competition. First of all, the modified merger would have only relatively modestly strengthened the merged entity's market share ([0-10%] of the installed base of this type of machine in 2000 in the EEA), if that share is calculated in relation to Sidel's current position, which is [10-20%] on that market (recital 288). Second, there are already sizeable competitors on this market, including new arrivals who have already captured a significant share of the sales on this market (namely [40-50%]), as acknowledged in the contested decision (recital 251). Lastly, the emphasis placed by the Commission, in its written answers and at the hearing, on the commercial potential of LFA-20 machines, referred to in the contested decision (recital 82, footnote 32, and recital 202), which will be capable of filling aseptically both HDPE and PET bottles, cannot support its argument. Those machines, at least according to Tetra, which the Commission did not contradict on this point at the hearing, are still being tested by it and by three competitors which are also developing them.131 As regards the market for barrier technologies, the Commission acknowledges that the effects of the notified transaction would significantly enhance the merged entity's position in that market, but not to the extent that a dominant position [...] would be created (recital 282). The Commission could have hardly found otherwise, since the combination of Tetra's and Sidel's activities in this area would only provide the merged entity with a market share in the order of [10-20%], and that is without taking into account the, at least potential, effects of Tetra's renunciation of its licence to the Sealica technology, a point confirmed by the Commission in its answers to the written questions. This estimate of the market share is, moreover, strongly disputed by the applicant in its answers to the written questions. It has argued convincingly that, given that these are emerging technologies, the market shares calculated by reference to existing products are not very reliable. At the hearing, moreover, Tetra referred to the problems currently posed by the development of plasma barriers, such as Sidel's Actis technology for beer, a point confirmed by Sidel's annual report. It also stressed that new barrier technologies, especially for some sensitive products like LDPs, do not use PET but require the development of a new plastic resin. In the light of the foregoing, it must be found that the Commission has not shown that there would be significant, negative horizontal effects on competition in the market for barrier technologies.132 It follows that, if the commitments are taken into account, the negative horizontal effects of the merger referred to by the Commission in the contested decision are merely minimal, if not almost non-existent, on the various relevant PET packaging equipment markets. In these circumstances, the Court finds that the Commission made a manifest error of assessment in so far as it relied on the horizontal effects of the modified merger to support its finding that a dominant position on those PET markets would be created for the merged entity through leveraging.3. Vertical effects(a) Arguments of the parties133 The applicant submits that the Commission's main fear arises from the alleged vertical integration of the merged entity in carton, PET and HDPE packaging systems. Since Tetra/Sidel would have a significant position in the SBM machines market, there would, according to the Commission, be a channel conflict resulting from the partial dependency of converters on Sidel. That conflict would allow the merged entity to marginalise converters by offering their customers combined packages of SBM machines, preforms and turnkey installations, in other words integrated PET solutions, thereby foreclosing converters from those activities. The Commission recognised, however, that these fears would be realised only if Sidel became dominant on the market for SBM machines. It also recognised that Tetra's commercial decision to exit the preforms market would eliminate all the concerns raised by the converters, and that the anticipated vertical problems would not by themselves result in the creation of a dominant position for the merged entity for PET equipment or preforms. The applicant concludes from this that the modified merger does not have vertical anti-competitive effects in the PET packaging market, does not strengthen Tetra's pre-existing vertical integration on the carton markets and, as recognised by the Commission, does not create any dominant position in the market for EBM machines producing aseptic HDPE bottles with handles.134 The Commission maintains that the vertical integration of the merged entity could lead to converters being foreclosed from the market. Although the entity's vertical integration would not make it dominant in the preforms and PET equipment markets, the opportunity provided by that integration to marginalise converters is an important factor in the assessment of the conglomerate effects of the merger. The commitments do not eliminate all of these effects, because the merged entity could still offer integrated PET solutions without offering preforms, for instance, through HTW agreements. Neither the proposed exit by Tetra from the preforms market nor the granting of a licence for the Sidel technology would eliminate the dependency of the converters on the merged entity. These commitments could even serve to uphold the strong position of the merged entity in the sale of SBM machines to converters because there would no longer be any channel conflict which might encourage them to purchase SBM machines from competitors of Sidel.(b) Findings of the Court135 It should be observed, initially, that, as the Commission pointed out several times during the hearing, its concerns about the modified merger pertain mainly to Tetra. Unlike Sidel, Tetra is a highly vertically integrated company in the aseptic carton markets and, consequently, has a reputation for offering its customers integrated packaging systems. The Commission is of the view that the applicant's presence in the merged entity would lead to a substantial reduction in competition in the PET packaging equipment markets.136 First of all, it must be found that the sale by Tetra of its interests in preforms would entirely eliminate the initial concern raised by the Commission about converters.137 Turning to the Commission's post-commitment concern that the converters will purchase more readily from Sidel once Tetra had divested itself of its interests in preforms, thereby strengthening the position of the merged entity, no cogent evidence to that effect was put forward by the Commission in the contested decision, other than the reference to the responses to the market investigation (recital 428). Although it cannot be excluded that some converters will be less worried about purchasing SBM machines from the merged entity if it is no longer active in preforms, the reassurance thereby given is far from being equivalent to the channel conflict referred to in the statement of objections (points 232 to 236 and 249 of the statement of objections). Since there is currently strong competition in the preforms market, that reassurance for some converters would at most only slightly reduce the scope for Sidel's competitors to sell SBM machines to them.138 Whilst it is true that the modified merger would enable Sidel, through Tetra's presence in the market for plastic bottle capping systems, to offer almost totally integrated PET lines, it is obvious that the vertical effects of Sidel's entry into that market through the merged entity, and Sidel's concomitant disappearance as a potential customer of the other operators active on that market, would be minimal in the light of the relatively weak position held by Tetra on that market. In addition, the global capacity of the merged entity, compared with Sidel's current capacity, to offer such integrated PET lines would not be strengthened by the modified merger, because Tetra would divest itself of its PET preforms activities. The Sidel annual report shows that sales of those lines accounted for only around 20% of Sidel's SBM machine sales in 2001, despite the alleged exponential growth of 30% between 1999 and 2000 to which the Commission refers in its defence.139 As for the alleged effects on the EBM machines market, the contested decision expressly acknowledges that, in the light of Tetra's reply of 1 October 2001 to the supplemental statement of objections, the position of other players allayed concerns about dominance in a potential market for machines producing aseptic HDPE bottles with handles (recital 297, footnote 125). It is thus clear that the modified merger would not have significant negative effects on the position of converters active in the HDPE market. That market would, post-merger, remain a highly competitive market.140 Consequently, it has not been shown that the modified merger would result in sizeable or, at the very least, significant vertical effects on the relevant market for PET packaging equipment. In those circumstances, the Court finds that the Commission made a manifest error of assessment in so far as it relied on the vertical effects of the modified merger to support its finding that a dominant position on those PET markets would be created for the merged entity through leveraging.4. Conclusion141 It follows from the foregoing that the Commission committed manifest errors of assessment in relying on the horizontal and vertical effects of the modified merger to support its analysis of the creation of a dominant position on the relevant PET markets. These errors do not, however, lead to the annulment of the contested decision, since the conglomerate effect alleged by the Commission could by itself suffice to justify the decision. Accordingly, the plea based on the lack of conglomerate effect must be examined.C - The plea based on the lack of foreseeable conglomerate effect1. Preliminary observations142 It is common ground between the parties that the modified merger is conglomerate in type, that is, a merger of undertakings which, essentially, do not have a pre-existing competitive relationship, either as direct competitors or as suppliers and customers. Mergers of this type do not give rise to true horizontal overlaps between the activities of the parties to the merger or to a vertical relationship between the parties in the strict sense of the term. Thus it cannot be presumed as a general rule that such mergers produce anti-competitive effects. However, they may have anti-competitive effects in certain cases.143 In the contested decision, the Commission essentially considers that the modified merger will have foreseeable anti-competitive conglomerate effects in three ways. First, the merger would enable the merged entity to use its dominant position on the global carton packaging market as a lever in order to achieve a dominant position on the PET packaging equipment markets. Second, the merger would reinforce the current dominant position of Tetra on the markets for aseptic carton packaging equipment and aseptic cartons, because it would eliminate the competitive constraint, represented by Sidel, coming from the neighbouring PET markets. Third, the merger would generally strengthen the overall position of the merged entity on the market for packaging of sensitive products.144 At the hearing, the Commission stressed the intrinsically prospective nature of its analysis, in which it must assess the future effects of a merger transaction notified to it. It stressed that, in a case involving a merger with a conglomerate effect, just as in a case involving a classical horizontal merger, the concern of the Commission is to prevent future anti-competitive conduct which would be likely to follow from the transaction, and that its analysis must be conducted having regard to the existing means and capacities of the parties to the notified transaction. The mere fact that with a conglomerate-type merger, unlike other types of merger, the probability of such conduct does not result directly from the combination in a single market of the market shares which will be held in future by the merged entity does not mean that a different approach must be adopted.145 The three pillars of the Commission's reasoning concerning leveraging, the elimination of potential competition and the general effect of strengthening the competitive position of the merged entity must be examined in turn.2. The first pillar: leveraging(a) Considerations relating to the general context of the case146 It should be observed, first, that the Regulation, particularly at Article 2(2) and (3), does not draw any distinction between, on the one hand, merger transactions having horizontal and vertical effects and, on the other hand, those having a conglomerate effect. It follows that, without distinction between those types of transactions, a merger can be prohibited only if the two conditions laid down in Article 2(3) are met (see paragraph 120 above). Consequently, a merger having a conglomerate effect must, like any other merger (see paragraph 120 above), be authorised by the Commission if it is not established that it creates or strengthens a dominant position in the common market or in a substantial part of it and that, as a result, effective competition will be significantly impeded.147 However, the analysis of potentially anti-competitive conglomerate effects of a merger transaction raises a certain number of specific problems relating to the nature of such a transaction. Those problems should be examined first. In that connection, the Court will first examine the temporal aspects of the conglomerate effects and then the aspects relating to the specific nature of those effects, which may be either structural in the sense that they arise directly from the creation of an economic structure, or behavioural in the sense that they will occur only if the entity resulting from the transaction engages in certain commercial practices.(i) Temporal aspects of conglomerate effects148 It is necessary first to determine whether a merger transaction creating a competitive structure which does not immediately confer on the merged entity a dominant position may nevertheless be prohibited under Article 2(3) of the Regulation, when in all likelihood it will allow that entity, as a result of leveraging by the acquiring party from a market in which it is already dominant, to obtain in the relatively near future a dominant position on another market in which the party acquired currently holds a leading position, and when the acquisition in question has significant anti-competitive effects on the relevant markets.149 The applicant stressed the need to establish with certainty that the merger would enable it to achieve a dominant position on the PET equipment markets in question, that is to say, not to establish the likely occurrence of such a position, but to foresee its immediate emergence. As pointed out in paragraph 144 above, the Commission, referring to Kali & Salz, stressed the inherently prospective nature of the analysis it is required to carry out when it examines the foreseeable effects which the notified transaction will have on the reference market.150 The Court observes that, in principle, a merger between undertakings which are active on distinct markets is not usually of such a nature as immediately to create or strengthen a dominant position due to the combination of the market shares held by the parties to the merger. The factors which are of significance for the relative positions of competitors within a given market are generally to be found within the market itself, namely in particular the market shares held by the competitors and the conditions of competition on the market. It does not follow, however, that the conditions of competition on a market can never be affected by factors external to that market.151 Thus, by way of example, in a case where the markets in question are neighbouring markets and one of the parties to a merger transaction already holds a dominant position on one of the markets, the means and capacities brought together by the transaction may immediately create conditions allowing the merged entity to leverage its way so as to acquire, in the relatively near future, a dominant position on the other market. This could especially be the case where the relevant markets are tending to converge and where, in addition to the dominant position held by one of the parties to the transaction on a market, the other party, or one of the other parties, to the transaction holds a leading position on another market.152 Any other interpretation of Article 2(3) of the Regulation could deprive the Commission of the power to exercise control over merger transactions which have solely or principally a conglomerate effect.153 Consequently, in a prospective analysis of the effects of a conglomerate-type merger transaction, if the Commission is able to conclude that a dominant position would, in all likelihood, be created or strengthened in the relatively near future and would lead to effective competition on the market being significantly impeded, it must prohibit it (see, in this regard, Kali & Salz, paragraph 221; Gencor v Commission, paragraph 162; and Airtours v Commission, paragraph 63).(ii) Aspects concerning the specific nature of the conglomerate effects154 In this context, it is also appropriate to distinguish, on the one hand, between a situation where a merger having conglomerate effects immediately changes the conditions of competition on the second market and results in the creation or strengthening of a dominant position on that market due to the dominant position already held on the first market and, on the other hand, a situation where the creation or strengthening of a dominant position on the second market does not immediately result from the merger, but will occur, in those circumstances, only after a certain time and will result from conduct engaged in by the merged entity on the first market where it already holds a dominant position. In this latter case, it is not the structure resulting from the merger transaction itself which creates or strengthens a dominant position within the meaning of Article 2(3) of the Regulation, but rather the future conduct in question.155 The Commission's analysis of a merger producing a conglomerate effect is conditioned by requirements similar to those defined by the Court with regard to the creation of a situation of collective dominance (Kali & Salz, paragraph 222; and Airtours v Commission, paragraph 63). Thus the Commission's analysis of a merger transaction which is expected to have an anti-competitive conglomerate effect calls for a particularly close examination of the circumstances which are relevant for an assessment of that effect on the conditions of competition in the reference market. As the Court has already held, where the Commission takes the view that a merger should be prohibited because it will create or strengthen a dominant position within a foreseeable period, it is incumbent upon it to produce convincing evidence thereof (Airtours v Commission, paragraph 63). Since the effects of a conglomerate-type merger are generally considered to be neutral, or even beneficial, for competition on the markets concerned, as is recognised in the present case by the economic writings cited in the analyses annexed to the parties' written pleadings, the proof of anti-competitive conglomerate effects of such a merger calls for a precise examination, supported by convincing evidence, of the circumstances which allegedly produce those effects (see, by analogy, Airtours v Commission, paragraph 63).156 In the present case, the leveraging from the aseptic carton market, as described in the contested decision, would manifest itself - in addition to the possibility of the merged entity engaging in practices such as tying sales of carton packaging equipment and consumables to sales of PET packaging equipment and forced sales (recitals 345 and 365) - firstly, by the probability of predatory pricing by the merged entity (recital 364, cited in paragraph 49 above); secondly, by price wars; and, thirdly, by the granting of loyalty rebates. Engaging in these practices would enable the merged entity to ensure, as far as possible, that its customers on the carton markets obtain from Sidel any PET equipment they may require. The contested decision finds that Tetra holds a dominant position on the aseptic carton markets, that is to say, the markets for aseptic carton packaging systems and aseptic cartons (recital 231, see paragraph 40 above), a finding which is not disputed by the applicant.157 It should be recalled that, according to settled case-law, where an undertaking is in a dominant position it is in consequence obliged, where appropriate, to modify its conduct so as not to impair effective competition on the market regardless of whether the Commission has adopted a decision to that effect (Case 322/81 Michelin v Commission [1993] ECR 3461, paragraph 57; Case T-51/89 Tetra Pak v Commission [1990] ECR II-309, paragraph 23; and Joined Cases T-125/97 and T-127/97 Coca-Cola v Commission [2000] ECR II-1733, paragraph 80).158 Moreover, in response to the questions put by the Court at the hearing, the Commission did not deny that leveraging by Tetra through the conduct described above could constitute abuse of Tetra's pre-existing dominant position in the aseptic carton markets. This could also be the case, according to the concerns expressed by the Commission in its defence, in circumstances where the merged entity refused to participate in the installation and any necessary conversion of Sidel SBM machines, to provide after-sales service or to honour the guarantees for such machines when sold by converters. However, the Commission went on to state that the fact that a type of conduct may constitute an independent infringement of Article 82 EC does not preclude that conduct from being taken into account in the Commission's assessment of all forms of leveraging made possible by a merger transaction.159 In this regard, it must be stated that, although the Regulation provides for the prohibition of a merger creating or strengthening a dominant position which has significant anti-competitive effects, these conditions do not require it to be demonstrated that the merged entity will, as a result of the merger, engage in abusive, and consequently unlawful, conduct. Although it cannot therefore be presumed that Community law will not be complied with by the parties to a conglomerate-type merger transaction, such a possibility cannot be excluded by the Commission when it carries out its control of mergers. Accordingly, when the Commission, in assessing the effects of such a merger, relies on foreseeable conduct which in itself is likely to constitute abuse of an existing dominant position, it is required to assess whether, despite the prohibition of such conduct, it is none the less likely that the entity resulting from the merger will act in such a manner or whether, on the contrary, the illegal nature of the conduct and/or the risk of detection will make such a strategy unlikely. While it is appropriate to take account, in its assessment, of incentives to engage in anti-competitive practices, such as those resulting in the present case for Tetra from the commercial advantages which may be foreseen on the PET equipment markets (recital 359), the Commission must also consider the extent to which those incentives would be reduced, or even eliminated, owing to the illegality of the conduct in question, the likelihood of its detection, action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue.160 Since the Commission did not carry out such an assessment in the contested decision, it follows that, in so far as the Commission's assessment is based on the possibility, or even the probability, that Tetra will engage in such conduct in the aseptic carton markets, its findings in this respect cannot be upheld.161 Moreover, the fact that the applicant offered commitments regarding its future conduct is also a factor which the Commission should have taken into account in assessing whether it was likely that the merged entity would act in a manner which could result in the creation of a dominant position on one or more of the relevant PET equipment markets. There is no indication in the contested decision that the Commission took account of the implications of those commitments when it assessed the creation of such a position in future through leveraging.162 It follows from the foregoing that it is necessary to examine whether the Commission based its analysis of the likelihood of leveraging from the aseptic carton markets, and of the consequences of such leveraging by the merged entity, on sufficiently convincing evidence. In the course of that examination it is necessary, in the present case, to take account only of conduct which would, at least probably, not be illegal. In addition, since the anticipated dominant position would only emerge after a certain lapse of time, by 2005 according to the Commission, its analysis of the future position must, whilst allowing for a certain margin of discretion, be particularly plausible.(b) Arguments of the parties(i) The possibility of leveraging163 The applicant claims that the Commission has not shown that the merged entity will be able, by leveraging, to acquire a dominant position on the PET packaging equipment markets, in particular the market for high- and low-capacity SBM machines.164 The applicant claims that the Commission has acknowledged that PET packaging equipment and carton packaging equipment are not complements in the economic sense of the term but rather technical substitutes (recital 345). In this case, however, contrary to the Commission's assertions, the economic incentive to leverage is weaker than when the products are complements. Firstly, the incentive to bundle sales of different products is clearly weaker in those circumstances. Secondly, there is no significant customer overlap for the two products. Thirdly, the fact that the two products are not complements precludes the setting-up of barriers owing to the incompatibility of the Tetra carton machines with the SBM machines offered by manufacturers other than Sidel.165 The Commission's position is all the more untenable in that its decision-making practice shows that it has consistently relied on the complementarity of products to justify concerns about conglomerate effects (see, inter alia, decisions of the Commission declaring a concentration to be compatible with the common market: Case IV/M.0050 - AT& T/NCR (OJ 1991 C 16, p. 20); Case IV/M.164 - Mannesmann/VDO (OJ 1992 C 88, p. 13); Case IV/M.836 - Gillette/Duracell (OJ 1996 C 364, p. 4); decision of 29 September 2000, Case COMP/M.1879 - Boeing/Hughes; and decision of 3 July 2001 declaring a concentration to be incompatible with the common market, Case COMP/M.2220 - General Electric/Honeywell).166 The demonstration of leveraging through future growth in the PET markets is not convincing. That growth would, in fact, not result significantly from a switch from carton to PET, because most of the products currently packaged using PET cannot be packaged using carton. Products which can be packaged using either carton or PET account for a mere 5% of total PET usage. Moreover, PET packaging for beer offers the most significant growth prospects, owing to the possible discontinuance of glass as a form of packaging.167 In addition, large-scale customers, who for the most part are the only ones to use both carton and PET packaging, would be able to resist any leveraging.168 The Commission contends that the structural conditions favourable to leveraging would be created by the merger. It relies on a number of factors in making this assertion: first, Tetra's dominant position on the aseptic carton markets and Sidel's leading position on the PET packaging equipment markets; second, the negligible positions of the competitors of Tetra and Sidel on those markets; and, third, the so-called first-mover advantage which the merged entity would have due to its strong presence in the sensitive products segment, products which are common to the carton and PET markets. The Commission also emphasises the financial strength of the merged entity, which would be largely superior to that of its competitors, its high degree of vertical integration, despite the commitments, and its high level of expertise and know-how in aseptic processing.169 Leveraging is possible not only when the products in question are complements in the economic sense of the term, but also when they are commercial complements, that is to say, when the products are used by the same group of customers. This is so when, for example, as in the present case, the products in question are related and belong to closely neighbouring markets. The assessment of leveraging involving products which are commercially related (such as whisky and gin or vitamins for different psychological needs) is based on an approach which is supported by the case-law (Case T-30/89 Hilti v Commission [1991] ECR II-1439, confirmed on appeal in Case C-53/92 P Hilti v Commission [1994] ECR I-667; and also the Tetra Pak II cases, cited above in paragraph 40).170 According to the Commission, since Tetra holds an undisputed dominant position on the aseptic carton markets, and since the customers will continue to require that kind of packaging in order to work in parallel with the new PET chains during the switch-over period to PET, it is obvious that the applicant will be able to leverage the lost customers into the market for the new material.171 As regards the customer overlap between the parties to the merger, although most of the producers of sensitive products currently use carton, the potential future overlap between carton packaging and PET packaging would be in the order of 100% if barrier technologies were found which enabled the use of PET for all of those products.172 The Commission argues that the PET growth forecasts used in the contested decision (see paragraphs 32 and 33 above) are based on a prudent analysis of the PCI, Warrick and Pictet studies (hereinafter the independent studies) and on a solid, coherent bundle of evidence obtained by it through its general market investigation (recitals 141 to 143).173 The Commission stresses, as further evidence of the potential for leveraging, the leading role which would be played by the merged entity in the important switch to PET from carton, where Tetra holds a dominant, almost monopolistic, position on the aseptic carton market.(ii) Foreclosure effects174 According to Tetra, since it is unlikely (recital 367) that the merged entity would resort to bundling or tying, the Commission's concerns are in reality based on the ability of the merged entity to use indirect means such as incentives or pressure (recital 364) in order to foreclose the PET markets. However, such means are not anti-competitive inasmuch they would not foreclose other competitors from the PET markets in question. The Commission's arguments in this respect are defective.175 First, the Commission wrongly distinguishes the markets according to the final product to be packaged. The definition of those alleged separate markets is also erroneous because SBM machines are generic and can be used for any of the sensitive products. At the hearing, Tetra stated that the SBM machines can be adapted, at low cost, to suit the product to be packaged. The COMBI and hot-fill machines are only rarely used for sensitive products.176 Second, the sensitive products segment makes up only a small proportion of PET packaging activities as a whole. Thus, even if the merged entity tried to marginalise Sidel's current competitors on the market for machines for sensitive products, it would not be in a position to diminish significantly their financial resources.177 Third, even if the Commission's strong growth forecasts for sensitive products are correct, it is unlikely that the merger would prevent Sidel's competitors, in particular SIG, from having an incentive to expand.178 Fourth, Tetra stated at the hearing that the technical obstacles (mainly barrier technologies against light and oxygen) do not affect all sensitive products in the same manner. Thus, there is no longer a technical problem as regards PET packaging for FFDs and tea/coffee drinks. This means that any undertaking active in non-sensitive products would be able to enter the market for sensitive products for which there are no specific technical requirements. As for segments involving barrier treatment, it would not only be the merged entity which would offer the necessary barrier technologies, since it holds only a [10-20%] share of the specific market for those technologies.179 Fifth, the importance of the overlap between Tetra's and Sidel's customers has been exaggerated. The few cases of overlap concern customers who have major purchasing power and would thus be able to resist any pressure which might be brought to bear on them.180 The Commission argues that Article 2(3) of the Regulation does not require that it be proven that the planned merger would lead to the definite elimination of competitors. Rather, the relevant legal criterion is whether the competitors would be marginalised, that is to say, whether the merged entity would be in a position to act largely in disregard of its competitors, its customers and ultimately consumers (Hoffmann-La Roche v Commission, cited in paragraph 89 above, paragraphs 38 and 39).181 Tetra's line of argument, aimed at proving the absence of distinct markets for SBM machines for sensitive and non-sensitive products, was correctly analysed and dismissed in the contested decision (recitals 176 to 188 and 346 to 358). Even the allegedly generic SBM machines would have to be extensively adapted to make them suitable for their specific end-use and would require complex additional components. The segmentation of the PET equipment market into distinct sub-markets, by distinguishing inter alia between sensitive and non-sensitive products, is justified (Case T-229/94 Deutsche Bahn v Commission [1997] II-1689, paragraph 56).182 Turning to price discrimination, the Commission contends that the evidence submitted shows that Sidel has in the past engaged in price discrimination according to end-use.183 It was rightly held in the contested decision that competitors might lose an incentive to develop their activities in the sensitive products segment. Almost all of the PET equipment market is still closed to them, because the SBM machines market is highly concentrated, with Sidel holding a roughly [60-70%] share. Competitors remaining after the merger would not be in a position to strengthen their presence in the sensitive products segment due to technical, commercial and strategic barriers to entry.184 Turning to barrier technologies, the Commission lists several additional components which it maintains are necessary to enable an SBM machine to be used in a PET chain for sensitive products. It also argued, particularly at the hearing, that a truly aseptic facility must also have complex barrier technologies to protect against oxygen in the case of juices, FFDs and tea/coffee drinks and, in the case of LDPs, an additional barrier against light.185 As regards commercial barriers, because of the high risk of contamination producers of sensitive products do not want to take risks with suppliers of aseptic PET equipment without a proven reputation. Tetra's unquestionable reputation in aseptic filling would be a major advantage for the merged entity.186 There is also an important strategic barrier to entry to the PET market for sensitive products owing to the fact that more than [80-90%] of the producers of UHT (i.e., aseptic) milk are currently customers of Tetra on the carton markets. According to the contested decision, Tetra's customer base covers almost the entire LDP and juice industry (recital 361). The merged entity would thus have a considerable first-mover advantage in those segments. In addition, the merged entity would have a large customer base, would wield enormous financial strength, would have sizeable research and development capacity, and would be a major presence in three packaging materials: carton, PET and HDPE, all of which are used to varying degrees for the packaging of sensitive products.187 At the hearing, the Commission stressed the very strong position held by Sidel on the market for high-capacity SBM machines (those capable of blowing more than 8 000 bottles per hour, hereinafter bph), in which it now has the highest-performance machine in the world, with a capacity of over [...] bph. It also highlighted Sidel's strong position at the top end of the market for low-capacity machines, namely those just under the threshold of 8 000 bph, using a rotative technology comparable to that used in high-capacity machines.(c) Findings of the Court188 It should be observed, as a preliminary point, that the contested decision (particularly recitals 213 and 389, referred to in paragraphs 39 and 54 above) shows that the Commission's competition law analysis of leveraging is based on the hypothesis that a market structure would immediately be created which would confer on the merged entity the incentive and necessary tools to transform its current leading position on the markets for PET equipment, especially the market for low- and high-capacity SBM machines used for sensitive products, into a dominant position. Moreover, the statement of objections (point 289) and the contested decision (recital 328, referred to in paragraph 45 above) indicate that a dominant position on the PET equipment markets could be achieved in the near future through leveraging from Tetra's dominant position on the aseptic carton markets, rather than through Sidel's current position on the SBM machines market.189 It should be noted, first, that the definition of the relevant markets is virtually undisputed by the applicant. Thus, it is necessary to distinguish the SBM machines market, itself divided into low- and high-capacity machines according to the number of bph (recital 167); the barrier technology market (recitals 189 to 191); the PET filling machines market, itself divided into aseptic and non-aseptic machines (recital 201); the PET preforms market (recital 206); and also the markets for auxiliary equipment, distribution packaging equipment and services relating to various relevant sectors (recital 257).190 On the other hand, the applicant challenges the subdivision of the markets for SBM machines according to their end use, particularly the identification of a specific market for the sensitive products in question here (recital 188), that is, the products common to the carton and PET markets (recital 45). In challenging the subdivision, Tetra essentially argues that the SBM machines are generic in nature and are not manufactured for specific uses. It follows, according to the applicant, that leveraging aimed at sales of SBM machines could not be successful owing to the number of active competitors, particularly in the market for low-capacity machines. Consequently, this challenge will be examined below only as part of the assessment of the foreseeable consequences of a possible leveraging effect on the SBM machine markets.191 It is appropriate to examine, first, whether the implementation of the merger would, at least in principle, enable the merged entity to exercise leveraging.(i) The possibility of leveraging192 The Commission's analysis of foreseeable leveraging as a result of the modified merger is based on mostly objective, well-established evidence. The analysis of the close links between the markets for carton packaging and PET packaging is based on a series of factors which, taken together, support the findings of the Commission to the requisite legal standard: the markets belong to the same industrial sector; PET can be used to package most carton-packaged products (that is, sensitive products) to such an extent that PET can be considered to be a weak substitute for carton; the principal suppliers of carton packaging, namely, Tetra (at least until the sale of its PET preforms operations and the divestiture of its interests in Dynaplast), SIG and Elopak, are all present on the PET markets; some customers require both carton and SBM machines, and their number will inevitably increase in future with the anticipated growth of PET for sensitive products (recital 329).193 As regards growth of the PET sector, as is noted in the contested decision (recital 72) and as the applicant confirmed at the hearing, the applicant accepts that some growth is anticipated for sensitive products such as FFDs and tea/coffee drinks. However, it disputes the level of expected growth for other sensitive products, and challenges the Commission's refusal to take account of the effects of the foreseeable growth in PET use for beer packaging.194 In rejecting, in the contested decision, the argument of the parties to the merger that the PET market would not grow significantly by 2005 due to technical limitations, the Commission also relied on convincing evidence. The contested decision (especially recitals 73 to 88) indicates that aseptic filling technologies which are currently available enable PET to be used for all sensitive products and that these technologies will continue to improve. The principal impediment to growth for these technologies is the commercial difficulty in applying them, in particular to LDPs.195 The Court finds in that regard that the Commission has established to the requisite legal standard that growth in the PET market is foreseeable, rendering possible the occurrence of the predicted leveraging. However, the extent of the growth for the various sensitive products will have to be examined subsequently, as part of the assessment of the Commission's assertion that that growth will give the merged entity an incentive to leverage.196 The Court finds unconvincing the applicant's argument that no leveraging from one market into another is possible when, as in the present case, a product in one market and a product in another market are merely technical substitutes. From Hoffmann La Roche v Commission, cited in paragraph 89 above, and Hilti v Commission, cited in paragraph 165 above, it can be concluded by analogy that leveraging may be carried out when the products in question are ones which the customer finds suitable for the same end use, namely, in the present case, the packaging of certain types of beverages. This assessment is not affected by the Commission's decision-making practice referred to by Tetra (see paragraph 165 above), since those decisions concerned mergers involving factual circumstances very different from those at issue in this case. The Commission did not commit an error in relying in the present case on factors such as the use of the products by the same customer group (manufacturers of sensitive products) for the same purpose (the packaging of sensitive products) and on the fact that the Commission's market investigation confirms the willingness of those manufacturers to use simultaneously both types of packaging, a point not contested by the applicant. The Commission rightly pointed out in this connection that the extent of the need those manufacturers perceive for PET is a question of marketing, although the cost factor cannot be ignored (recital 333). Accordingly, as the Commission pointed out at the hearing, it is not very likely that they will abandon carton altogether, but they will probably feel a need to move some of their production over to PET, which supports the finding of a link between the relevant products in the present case.197 In those circumstances, given the very strong dominant position held by Tetra on the aseptic carton markets, with a roughly 80% market share (recital 219), and the dominant position it holds on the global carton packaging market (namely the aseptic and non-aseptic carton markets taken as a whole), with some [60-70%] of the market (recital 231), it is clear that a large number of the manufacturers of sensitive products who will move their production over to PET are current Tetra customers. In particular, as regards LDP's, the contested decision finds that consumption of milk in single serve bottles and flavoured milk, for example, is expected to grow fast and that the capacity for such products does not necessarily need to replace existing capacity (recital 99), a finding which is not contested by the applicant. In finding, at least as regards the installation at dairies of new lines of production, that the costs of switching to PET need not necessarily lead to excessive delays in the development of PET use, the Commission did not commit a manifest error of assessment. Thus it correctly emphasised the first-mover advantage which the merged entity would have for those products. In addition there is, in particular, the financial strength of the parties to the merger, especially that of Tetra; Tetra's outstanding reputation and the widely recognised reputation of Sidel on the carton and PET markets, respectively; and the wide range of products and services they offer, including after-sales service.198 The merged entity's ability to engage in leveraging practices is not called into question by the applicant's argument that there is no significant overlap between the customers of the parties to the merger. The Commission did not commit a manifest error of assessment by finding, on the basis of the current overlap found to exist and in the light of expected growth in use of PET for sensitive products, that the number of customers using both carton and PET equipment at the same time will increase and could, at least in theory, give rise to a very significant overlap in packaging for sensitive products (recital 341).199 Consequently, the Commission did not commit a manifest error of assessment in finding that it would be possible for the merged entity to engage in leveraging practices.200 It is, therefore, necessary to examine whether the merged entity will have an incentive to engage in such practices owing to the foreseeable growth in the PET market, as the Commission maintains.(ii) Likely levels of growth201 The contested decision indicates, and the Commission confirmed this point at the hearing, that the incentive for the merged entity to exercise leveraging depends to a large extent on the anticipated level of growth in the PET markets. Accordingly, it is appropriate to examine whether the foreseeable volume of sensitive products packaged in PET by 2005, as compared with the total future volume of products packaged in PET, makes that incentive unlikely or at least reduces the likelihood significantly, as the applicant maintains.202 According to the Commission, PET use in the common product segments will grow significantly in the next 5 years (recital 103). In considering that growth, the Commission relied not only on its own specific market investigation, but also on the Canadean study and on the independent studies (recital 104). The relevant forecasts in those studies will be examined first.203 For the period 2000 to 2005, the Canadean study forecasts growth of 0.7% in the use of PET for LDP packaging and 0.6% for juices (table 5, recital 105). For FFDs and tea/coffee drinks, it forecasts faster growth of 1.5% and 5.1%, respectively (recital 107). The Commission also refers to an independent study carried out by Canadean in 2000 on PET penetration in the juice segment. According to the Commission, although PET was non-existent in that segment in 2000, if the example of other regions is followed Europe represents enormous growth potential (recital 126).204 The PCI study, entitled The Potential for PET in the Packaging of Liquid Dairy Products (2001), considers that PET is not likely to capture new market shares in UHT milk and that it will reach 9.2% for plain fresh milk and 25% for other dairy beverages based on milk, that is, flavoured milk and drinks based on milk and yoghurt. As for the low-end commodity part of the milk market, the PCI study does not anticipate that PET will be very successful in replacing existing packaging - mainly cartons and HDPE - [...] mainly because this is by and large a price sensitive segment (PCI, p. 12, cited in recital 129).205 The Warrick study, entitled Warrick Research Report Packaging Markets - "Aseptic Packaging Markets World & Western Europe" (2000), forecasts, for the period 1999 to 2003, annual growth of 2.4% in this market, giving a total of 28 billion litres packaged (Warrick, p. 4). Whilst it observes that milk and juice account for roughly 80% of aseptically packed product volume (see also recital 131), the forecasted annual growth for UHT milk and flavoured milk is 0.8% and 1%, respectively, and a small decline is forecast for other milk-based drinks (Warrick, p. 6). Aseptic packaging is expected to grow by about 50% for the period 1999 to 2003, and that growth will be mainly in PET, the use of which could double to 2 billion packs per year (Warrick, p. 32, see also recital 136). That growth will be concentrated mainly in ready-to-drink tea (Warrick, p. 16). It is, however, the aseptic carton packages which account for 70% of packs, representing 90% of packaged products in terms of volume (Warrick, p. 15). Growth in these types of packaging is expected to be around 2% per year, to reach 30.8 billion packs for 2003. The ideal application of aseptic PET packages will concern premium products which do not require a complete barrier, such as tea/coffee drinks (including isotonic drinks) and possibly juices and juice-based drinks (Warrick, p. 4). Most of the expected growth will, therefore, be in these products (Warrick, p. 32).206 According to the Pictet study, entitled Analysts' Report, Pictet "European Packaging Machinery, Move into PET", September 2000, PET offers advantages for large-scale filling of consumer goods, such as mineral water and soft drinks, and future world demand for PET will increase by 10% per year, and that will be strongly underpinned by the use of PET bottles for oxygen-sensitive products (Pictet, p. 5 and 12). According to the report, there are clear comparative advantages for PET containers over aseptic cartons [...] and [...] plastic [can be expected] to gain ground rapidly on cartons (Pictet, p. 11, see also recital 138). Whilst no figures are given for growth in PET use for milk, growth of 12% to 25% for the period 1996 to 2006 is forecast for juice.207 Like the statement of objections (point 90), the contested decision finds that the market investigation carried out by the Commission shows that third parties were very enthusiastic about PET's future growth when improvements in barrier technology become established (recital 143). In such a situation, a large number of operators expect growth of over 50% by 2005 for milk and juice, at the expense of carton. At the hearing, the Commission stated that it did not share this same level of optimism, but had opted for much more prudent forecasts (see paragraph 33 above).208 The contested decision also refers to a number of earlier forecasts from Tetra and Sidel. Thus, in a presentation in May 2000, Sidel forecasted that PET sales for juice and tea/coffee drinks would grow by over [...] (recital 139), whilst Sidel's president, in an interview with the trade publication PET Planet published in the same month, stated that he foresaw growth of [...%] due to a new application [which] will include beer, milk, fruit juices ... (recital 139). As regards Tetra, the contested decision refers to its forecast of [20-30%] annual growth in the coming years for the aseptic PET filling market (recital 140).209 On the basis of this evidence, the Commission foresees major growth for the LDP and juice segments for the period 2000 to 2005 which will bring PET up to at least a 10% to 15% share for fresh milk and 25% for flavoured milk and milk-based drinks (see paragraph 33 above). For UHT milk, which represents approximately 50% of the milk market, the Commission acknowledges that the future of PET is uncertain (recital 147) but none the less predicts that it will attain 1%. Taking the upper figure of 15% predicted for fresh milk and taking into account its forecasts for other milk-based drinks, the Commission concludes that in 2005 PET will be used to package approximately 3 billion litres per year, or 9% of the European LDP market (see paragraph 33 above). For juices, whilst it predicts growth generating a 20% share of the total market for 2005, the Commission acknowledges that that growth will be due mainly to switch-over from glass to PET. For FFDs and tea/coffee drinks, it believes that PET will continue to gain market shares at the expense of carton, to reach 30% in each of those segments by 2005.210 At the hearing, the Commission stated that its reasoning is not based on the precise accuracy of its forecasts, inasmuch as it is accepted that there will be significant future growth. It also acknowledged there that, in the light of the remaining uncertainties surrounding the commercial applicability of the necessary barrier technologies, it could not assume significant PET growth for the UHT milk market, and that even the weak growth predicted in the contested decision could turn out to be an overestimation. It did, however, emphasise that its forecasts for probable strong growth in the use of PET for fresh milk, juices, FFDs and particularly tea/coffee drinks in the period up to 2005 were entirely plausible.211 The Court finds that the use of PET will not actually increase for UHT milk and, consequently, for approximately half of the LDP market.212 As regards the rest of the LDP market, it must be found that the PCI report, the only independent study to concentrate on the LDP market, predicts growth as a result of which PET use will be 9.2% of the fresh non-flavoured milk market in 2005 (PCI, p. 64). In addition there is the fact that, for aseptic packaging, the Warrick report predicts only minimal growth, of 1%, for flavoured milk, and a slight decline for other milk-based drinks, whilst the Pictet report does not give any specific forecasts for LDPs. On the basis of that evidence, the Commission has not shown what it claims to have shown in its defence, namely that its forecasts for LDPs are based on a prudent analysis of the independent studies or on a solid, coherent body of evidence obtained by it through its market investigation. The growth estimates adopted by the Commission (paragraph 209 above) are not really very convincing. The PCI report, on the other hand, provides the only proof which might possibly support the forecast of a 25% market share for PET in other milk-based drinks (namely flavoured milk and drinks based on milk and yoghurt) by 2005 (PCI, pp. 63 and 64). However, if that growth were to be realised, the relevant volume would increase only by 62 000 tonnes for 2000, to reach 92 800 tonnes in 2005, an increase which is not very significant in relation to the roughly 120 million tonnes of milk produced in the Community each year (PCI, p. 9). More generally, the contested decision does not explain adequately how PET could displace HDPE as the main material competing with carton by 2005, especially in the important fresh milk packaging segment. It must be pointed out that the Commission does not dispute either the overall figure of 17.3% for the use of HDPE for LDPs given by Canadean for 2000 (see table 3 in recital 66) or the forecast that that figure could reach 19.5% by 2005 (see table 5 in recital 105).213 As regards juices, the Commission's forecast is even less convincing. Although the Commission itself acknowledged that the growth in question would be due mainly to a switch from glass to PET, it did not conduct any analysis of the glass market. In the absence of such an analysis, the Court is unable to ascertain the accuracy of the Commission's forecasts for juices. An analysis of that kind would have been indispensable to enable the Court to determine the likely level of switch from glass to carton, PET and HDPE. It was all the more indispensable given the differences between the relevant forecasts made in the Canadean and Warrick studies, on the one hand, and the Pictet study, on the other, as regards levels of growth and the time periods used in the analyses.214 It follows that the growth forecasts for LDPs and juices as stated by the Commission in the contested decision have not been proven to the requisite legal standard. Although a certain amount of growth in those segments is likely, especially for premium products, convincing evidence of the extent of the growth is lacking.215 By contrast, the independent studies do show that, by 2005, there will in all likelihood be a significant increase in the use of PET for packaging FFDs and tea/coffee drinks, including isotonic drinks. Since the level of growth forecast in the contested decision was not seriously called into question by the applicant at the hearing and is not overestimated compared with the forecast in the studies, the Court finds that the Commission did not commit an error on this point.216 However, having regard to the fact that PET use will probably increase by 2005, even if less sharply than that forecast by the Commission, the incentive to leverage cannot be excluded. It is, therefore, necessary to examine the ways in which the merged entity could engage in leveraging.(iii) Leveraging methods217 The leveraging methods referred to in recital 364 of the contested decision (cited in paragraph 49 above) are based on Tetra's dominant position on the aseptic carton markets. Given, in particular, Tetra's commitment to divest itself of its preforms operations, the leveraging would be carried out by two types of measures: first, through pressure leading to tied sales or sales which bundle equipment and consumables for carton packaging jointly with PET packaging equipment. That pressure could be put on Tetra customers needing to continue to use carton packaging for some of their production and especially those customers with long-term agreements with Tetra for their carton packaging needs (recital 365, cited in paragraph 50 above). Second, measures could be adopted to offer incentives, such as predatory pricing, price wars and loyalty rebates.218 However, the use, by an undertaking with a dominant position like Tetra's on the aseptic carton markets, of pressure in the form of tied sales or incentives such as predatory pricing or loyalty rebates that are not objectively justified, would usually constitute an abuse of that position. As this Court has already held, the possible recourse to such strategies cannot be presumed by the Commission, as it has done in the contested decision, in order to justify a decision prohibiting a merger transaction which has been notified to it in accordance with the Regulation (see paragraphs 154 to 162 above). It follows that the leveraging practices which may be taken into consideration by the Court are limited to those which, at least probably, do not constitute an abuse of a dominant position on the aseptic carton markets.219 It is, therefore, necessary merely to consider strategies for tied or bundled sales which are not in themselves forced, for loyalty rebates that are objectively justified on the carton markets, and for offers of reduced prices for carton or PET packaging equipment that are not predatory within the meaning of well-established case-law (Case C-62/86 AKZO v Commission [1991] ECR I-3359, particularly paragraphs 102, 115, 156 and 157; judgment in Case C-333/94 Tetra Pak v Commission, paragraphs 41 to 44, upholding the judgment in Case T-83/91, and the Opinion of Advocate General Fennelly in Joined Cases C-395/96 P and C-396/96 P Compagnie maritime belge transports and Others v Commission [2000] ECR I-1365, particularly paragraphs 123 to 130). Against that background, it is necessary to examine whether the Commission took account of the commitment concerning separation between Sidel and Tetra Pak companies, agreed in principle for a 10-year period, according to which no joint offerings of any of Tetra Pak's carton products together with Sidel's SBM machines are to be made.220 It is apparent from the contested decision that Tetra asked the Commission to take note of its existing obligations under Article 3(3) of Commission Decision 92/163/EEC of 24 July 1991 relating to a proceeding pursuant to Article [82] of the [EC] Treaty (IV/31.043 - Tetra Pak II) (OJ 1992 L 72, p. 1), which provides:Tetra Pak shall not practice predatory or discriminatory prices and shall not grant to any customer any form of discount on its products or more favourable payment terms not justified by an objective consideration. Thus, discounts on cartons should be granted solely according to the quantity of each order, and orders for different types of carton may not be aggregated for that purpose.221 It follows that Tetra gave a clear indication of its willingness to comply fully with the special obligations imposed on it by Article 82 EC as a result of the dominant position it holds on the aseptic carton markets. It also reiterated its acceptance of all of the relevant obligations imposed on it following the finding in Decision 92/163 of an infringement of Article 82 EC as regards those markets. It also undertook, in the context of the present proceedings, to make no joint offers of its carton products together with Sidel's SBM machines.222 Consequently, the only methods of tied or bundled sales which would actually be feasible for the merged entity would be offers made by Tetra to its current customers on the carton markets which would not be compulsory or forced and which would only be in respect of carton packaging equipment and/or carton products, on the one hand, and PET packaging equipment other than SBM machines, on the other. It must also be observed that, notwithstanding the emphasis placed by the Commission in the contested decision (recitals 177 and 369), in its written observations and oral pleadings on the significance of the merged entity's ability to offer almost all of the equipment necessary for setting up an integrated PET production line, it is clear from the commitments that it would not be possible for that entity to make a joint offer to a customer for carton packaging equipment and an integrated PET production line, at least not one containing a Sidel SBM machine.223 Moreover, although the finding in the contested decision regarding the price discrimination allegedly practised in the past by Sidel is not, having regard to the parties' written pleadings and the oral pleadings of the Commission concerning the underlying econometric analysis, vitiated by a manifest error of assessment, it cannot constitute sufficiently convincing evidence that the merged entity will continue to behave in a similar way. Unlike Sidel prior to the merger, the merged entity would be bound not only by the commitments but also by the various obligations limiting Tetra's conduct.224 It must therefore be found that the merged entity's possible means of leveraging would be quite limited. An examination of the foreseeable consequences of its resorting to such conduct must take account of this.225 When examining the foreseeable effects of leveraging, it is necessary to distinguish the various PET equipment markets from those specifically for SBM machines.(iv) Foreseeable consequences of leveraging on the markets for PET equipment other than SBM machinesPreliminary considerations226 Notwithstanding the fact that the applicant challenges the Commission's definition of distinct markets for each category of sensitive product likely to be packaged in carton or in PET (see recitals 45 and 188), it is clear from the contested decision that the Commission's choice to confine its analysis solely to the sensitive products examined by it is due to the fact that those products can now, at least technically, be packaged in both carton and PET and that the anticipated growth in the use of PET makes the switch from carton to PET foreseeable. In its conclusion on the analysis of leveraging, the Commission foresees that the leading position of the merged entity in PET packaging equipment would be turned into a dominant position (recital 389). Since this analysis relates to machines used for packaging sensitive products, it is therefore necessary to examine the consequences of any leveraging on the various PET equipment markets identified in the contested decision.227 Although it is clear from the contested decision, and from the confirmation by the Commission in particular at the hearing, that the Commission's main concern from a competition standpoint is the future creation of a dominant position for the merged entity on the SBM machine markets, particularly for high-capacity machines, it stresses the possible acquisition of a dominant position on each of the PET equipment markets on which the merged entity would be active. It is necessary to examine this contention in relation to the objective information about those PET markets in order to determine whether it is supported by convincing evidence.228 Since Tetra has given a commitment to divest itself of its PET preforms operations, the relevant markets are the markets for barrier technologies, aseptic and non-aseptic PET filling machines and plastic bottle closure systems. It is also appropriate to consider Sidel's interests in the auxiliary markets for equipment, mainly conveyor belts and distribution packaging equipment, such as palletisers, the importance of which was emphasised by the Commission at the hearing in relation to the attractive range of products (and services) which could be offered by the merged entity.Barrier technologies229 The contested decision principally examines the position of the parties to the merger in the area of plasma technology, which is a technology applied to PET bottles using specialised machines in a separate step after the bottles have been blown (recital 272). This approach is justified and largely uncontested by the applicant. It is based on the Commission's market investigation of the notified transaction, according to which the widely-held opinion in the industry is that the multi-layer technology, such as Tetra's Sealica, is not the winning technology, that is, the technology of the future; rather, it is plasma. Accordingly, it is necessary to consider the position of the parties in the area of plasma technology and the foreseeable conglomerate effects of the implementation of the modified merger on that position.230 The Commission acknowledges that, to date, Sidel has not achieved great success with its Actis technology (recital 273). Nor did it dispute the applicant's statement at the hearing that it is mainly a technology intended for packaging beer and that Sidel had encountered problems in developing this technology. The Commission merely emphasises the importance of the Actis Lite technology, to which reference is made in the same point, at least as regards juices. Regarding Tetra, the Commission refers to two different technologies (recital 274), namely, Glaskin, a plasma technology, and Sealica, whilst noting the commercial decision to abandon the latter, a decision which was in fact subsequently specified in one of the commitments. It finds that [i]n the overall barrier technology market, the combination of the parties' technologies would give the merged entity a market share [of] approximately [10-20%] on the basis of barrier-enhanced bottles produced in 2000 (recital 275). It stated at the hearing that this estimate was based on that of the parties to the merger (point 156 of the notification); the estimate excluded certain monolayer technologies (improved plastics already containing barrier properties), whereas the parties to the merger took the view that they should have been included (recitals 192 and 195 and footnotes 93 and 95).231 However, the Commission stated that the technical complexity of the market prevents it from confirming or rebutting the allegation of the parties to the merger that a combination of Sidel's Actis and Tetra's Glaskin technologies, even if that were possible, would not result in an enhanced winning plasma barrier (recital 279). It none the less concludes that the combination of the parties' plasma and multilayer technologies would enhance the merged entity's position [...] significantly, although not to the extent that a dominant position in barrier technology would be created (recital 282).232 The Court considers that it is clear that a market share of [10-20%] is far short of amounting to a dominant position on that market. It should be recalled that the 15th recital in the preamble to the Regulation states that concentrations which, by reason of the limited market share of the undertakings concerned, are not liable to impede effective competition may be presumed to be compatible with the common market; [...] an indication to this effect exists, in particular, where the market share of the undertakings concerned does not exceed 25%. The contested decision does not provide any additional evidence to support the Commission's argument, with the possible exception of the various references to the financial strength of the merged entity and the reputation of Tetra's and Sidel's allegedly extensive research programmes, whose importance was emphasised several times by the Commission at the hearing.233 It has not been shown in the contested decision that the applicant is in a better position than its various competitors on this market. In the notification, the parties to the merger stated that there were at least 20 other actual or potential competitors working alone, together or under licence, to find a high-performance technology. They included undertakings with resources comparable to those of the merged entity. The Court finds that the veracity of this information is, in essence, confirmed by the contested decision (see especially recitals 69 and 87).234 Against this background, the discovery of the technology of the future would ordinarily be the one factor which would enable an undertaking or an association of undertakings active in this market to capture a dominant position. Accordingly, the Commission committed an error in finding, at least on the basis of the evidence to which it refers in the contested decision, that the modified merger would significantly enhance the merged entity's position in barrier technology.235 It follows that, as regards the barrier technology market, the evidence in the contested decision is not sufficient as a matter of law to show that, if the anticipated leveraging were to take place, the foreseeable consequences would be sufficiently far-reaching to enable the merged entity to achieve a dominant position on that market by 2005.PET filling machines236 As regards PET filling machines, the Commission maintains the distinction it drew in particular in Tetra Pak II between aseptic and non-aseptic packaging systems (recitals 201 and 204). That finding is not disputed by the applicant (recital 51), which, moreover, stressed that the PET filling machines should be separated into these two distinct product markets (paragraph 312 of the notification, recital 200 of the Decision).237 Although there is no dispute that aseptic filling is possible with glass containers and PET and HDPE packaging, the Commission states that carton is the main aseptic packaging material (recital 46). According to the Commission, this filling method is used mainly for certain sensitive products, namely juices (or juice-based drinks) and [LDPs], although they may also be packaged non-aseptically in which case they require refrigerated distribution, whilst [m]ost other products are packaged non-aseptically without requiring chilled distribution (recital 47). It follows that a major part of the sensitive products market as defined by the Commission in the contested decision, namely sensitive products belonging to the common product segments (recital 45), uses non-aseptic methods for the filling of the products concerned. The positions held by the parties to the merger on the market for non-aseptic PET filling machines should therefore be examined first.- Non-aseptic PET filling machines238 The contested decision provides only limited information about the non-aseptic PET filling machines market. The decision contains, firstly, under the heading Sidel's leading position in PET packaging equipment a section entitled Sidel's strong experience in [...] non-aseptic PET filling and the innovative Combi-machines, which includes recitals 249 to 255. Secondly, the Commission states that Sidel manufactures non-aseptic filling machines (recital 250). Thirdly, as regards combined machines, namely SBM machines and filling machines integrated in a single machine, which are described as innovative (recital 243), reference is made to Sidel's Combi SRU (ultra-clean non-aseptic filling) range of machines for sensitive products (recitals 173 and 254). The contested decision (recital 84) states that Sidel has already sold three combined machines of this type in the United States for the filling of extended shelf life milk. Lastly, the fact that Tetra is not present on the non-aseptic filling machines market and that Sidel holds a market share of under 10% is recognised in the contested decision (table 8 in recital 299).239 The above information does not show that the merged entity, whose position would not in any way be strengthened by the contribution from Tetra, would be able to achieve a dominant position on that market by 2005, if ever. Even if it is true that Sidel is the first undertaking to offer a non-aseptic combined PET machine for non-sensitive products, a fact recognised in the notification itself (recital 380), and although it is clear from the information provided at the hearing that the current use of those machines is almost exclusively confined to that segment (56 combined machines sold worldwide by various manufacturers, as compared with only two machines sold in the aseptic filling segment, that is, excluding extended shelf life milk, one of which sold by Sidel) there is nothing in the contested decision to support a finding that this advantage of Sidel would be so spectacularly strengthened by the merger that the merged entity would achieve a dominant position in the market for non-aseptic filling machines by 2005. This conclusion is confirmed by the fact that the technical difficulties which currently impede the development and sale of combined machines for aseptic filling have not been encountered in relation to non-aseptic filling machines. Thus, as Tetra argued at the hearing, without being contradicted by the Commission on this point, almost all of the manufacturers of non-aseptic filling machines already offer non-aseptic combined machines.- Aseptic PET filling machines240 Tetra and Sidel both became active in the market for aseptic PET filling machines through acquisitions in 1999. Between 1998 and 2002, the market for these machines grew by [70-80%] and the Commission believes, on the basis of the information provided in the notification, that it will continue to grow by at least [20-30%] annually in the next few years (recital 250). The Commission examines Tetra's and Sidel's share of the installed base in the EEA - shares being calculated in terms of capacity because that is the most reliable method by which to reflect their actual position on this new, growing market - and concludes that the merged entity would have a strong position in aseptic PET filling machines, being one of the three biggest players in the aseptic PET filling machine market with one third of the installed base, possession of leading aseptic PET filling technology, high aseptic "brand" recognition and an international sales force (recital 290). In its answers to the written questions, the Commission none the less admits that the market share must be understood as being a mere [25-35%]. It recognises that Procomac is clearly the market leader in this market, having made [...%] of sales between 1998 and 2000, giving it [30-40%] of the installed base of machines in 2000 (recitals 288 and 289). It also accepts that Procomac has sold world-wide five of the 21 machines sold in the first two quarters of 2001, compared to three sold by Sidel (recital 289, footnote 121), and that several new competitors have entered that market since 1998 and have captured almost [40-50%] of new sales between 1998 and 2000 (recital 288).241 The Court finds, first of all, that the joining of Tetra's and Sidel's operations on this market will not enable them to obtain directly a leading position on the market, since the joining only modestly strengthens (namely [0-10%]) Sidel's current share (see paragraph 130 above). Given the power of Procomac and the intensity of competition on the market, especially with the arrival of new competitors, it is also unlikely, on the basis of the current market shares held by Tetra and Sidel, that the merged entity would be able to achieve a dominant position in the relatively near future through leveraging from the aseptic carton markets. This is at least implicitly recognised by the Commission in the contested decision when it mentions the strong position the merged entity would have on this market (recital 290).242 There are, however, several items in the contested decision which might, at first sight, support the Commission's contention that a dominant position would be created on this market by 2005. They are Tetra's own analysis, according to which [t]here seems to be an opportunity to take a leading position for a company that acts decisively (recital 289, referring to an internal document of Tetra attached as an annex to the notification), and the existence of certain aseptic filling machines, namely Tetra's LFA-20 ON and Sidel's Combi SRA (see paragraph 130 above).243 As regards the Tetra analysis, however, the mere fact that Tetra believes it is possible to achieve a leading position in the market and thus replace Procomac as the pre-eminent company, does not in itself, in the absence of other evidence to support that analysis, have any probative value and does not, in any event, show at all that such a position could then be transformed into a dominant position. Admittedly, the Commission does emphasise the peerless reputation of Tetra in aseptic carton filling, which could make the purchase of aseptic filling machines manufactured by the merged entity an attractive option, at least for Tetra's current or former customers in the aseptic carton markets who intend to switch to PET, even though carton technology is not directly applicable to PET filling machines. However, the contested decision does not examine the advantage held in this area by the company Serac, which is, at least potentially, of comparable commercial importance.244 According to the notification, Serac is, unlike both Tetra and Sidel, one of the pioneers in aseptic PET filling and currently holds a strong, recognised position in this field, with a market share of [...%] in 2000 (points 244 and 250). It also holds a leading position on the market for aseptic HDPE filling, with a [...%] market share (point 323). Since the contested decision refers to the fact that the existing technical distinctions which currently separate the PET and HDPE filling machines markets may blur in the future with the development of machines such as Tetra's LFA-20 ON that can switch between HDPE and PET aseptic filling (recital 202), the Commission should at least have examined the apparent advantage of Serac in this area. This is all the more so when Tetra's relatively modest position on the market for aseptic PET filling machines is considered (recital 284), given the fact that Tetra had not been able, at least not by the date of the notification, to sell an aseptic HDPE filling machine, with the possible exception of one machine being tested (notification, point 322) and the fact that the LFA-20 ON machine is also being tested (see paragraph 130 above).245 In any event, the Commission committed an error by failing to examine the fundamental issue of the intensity of competition on the market for aseptic PET filling machines, a market which, according to an undisputed forecast, will see strong, continued growth. On this issue, the contested decision does not state how the merged entity would manage, by permissible forms of leveraging (see paragraphs 217 to 224 above), to prevent new competitors from entering the market. In other words, even if it is possible to find that there will be growth in combined sales of SBM machines and aseptic PET filling machines, it has not been shown that the number of sales could reach a level which could threaten the strong competition prevailing on the market, as represented particularly by Procomac (see paragraph 240 above).246 It must therefore be concluded that the Commission's prediction that a dominant position would be achieved in future on the market for aseptic filling machines is not plausible.247 Regarding aseptic combined PET machines, in the contested decision the Commission decided not to treat them as a separate market (recital 175). Although there is currently only one Sidel machine of this type, the Combi SRA, installed at a Spanish juice producer (recital 85), it is clear that, in the light of the advantages of these machines (basically, as outlined in recital 174, the fact that they take up less space and are less labour intensive than a traditional PET production line), the commercial success of this machine would strengthen Sidel's current position on the market for aseptic PET filling machines. However, it is much less clear that those advantages suffice to enable the merged entity to achieve a dominant position on this latter market through sales of Combi SRA machines.248 It should be noted in that regard, that the Commission did not dispute the two statements made by the applicant at the hearing concerning these machines. Firstly, Tetra stated that one of the disadvantages of the combined machines which has, at least to date, been a factor in delaying their sales in the aseptic filling segment, is the need to maintain aseptic conditions when moulds are being replaced. Secondly, the use of these machines is less flexible than the combination of an SBM machine and a PET filling machine in a normal PET production line.249 Nor does the Commission dispute in the contested decision Tetra's statement, in its response to the statement of objections, that the combined machines of some major competitors of the merged entity, namely Krones and Procomac/Sipa, have substantially the same advantages (recital 174). Tetra also stated in its response to the statement of objections, and reiterated its position at the hearing, that Procomac/Sipa sold the only other aseptic combined machine already installed in Europe. This statement is not disputed in the contested decision and the Commission merely observed in its pleadings that it was only a quasi-combi type of machine. In any event, the Commission itself highlighted the investments that various companies which are active in the aseptic filling market are making to develop aseptic combined machines. Given the current level of competition in this market, it is likely that at least one of the main competitors will manage to market a combined machine comparable to Sidel's Combi SRA in the near future.250 Lastly, as regards hot-fill machines, the importance of which, at least for the German market, was emphasised by the Commission at the hearing, it should be noted that the Commission, in the contested decision, on the one hand recognises that those machines are of limited use in the EEA (recital 171). Apparently Sidel has sold only five in the EEA (recital 170) out of a total of eight sales of those machines estimated in the notification (point 315). On the other hand, the Commission held that these machines did not constitute a distinct market from the market for aseptic filling machines. The Court finds, firstly, that hot-fill machines represent only a small part of the market for aseptic filling machines and, secondly, that it is unlikely that that share will increase significantly, given the inherent disadvantages of this method (change in taste). Accordingly, the Commission cannot rely on the merged entity's market share for hot-fill machines in order to show that a dominant position on the market for aseptic PET filling machines will be acquired in the future.- Conclusion regarding PET filling machines251 It follows from the foregoing that, as regards the markets for aseptic and non-aseptic PET filling machines, the contested decision does not adduce evidence that suffices in law to show that the implementation of the modified merger would make it likely that, as a result of leveraging practised essentially on Tetra's current carton customers who wish to switch to PET for packaging sensitive products, a dominant position on those markets would be created in the future and, at the latest, by 2005.Plastic bottle closure systems and auxiliary PET equipment252 As for plastic bottle closure systems, it is apparent from Tetra's relatively weak position on this market, a market share of merely [10-20%] (see paragraph 44 above), that it is very unlikely that the anticipated leveraging practices would be sufficient, at least in the near future, to transform that position into a dominant one. Although Sidel's current position on some of the various auxiliary PET equipment markets is stronger than Tetra's on the market for bottle closure systems, the Commission does not dispute the applicant's statement that the relevant market shares do not generally exceed [20-30%] (recital 257). Moreover, the contested decision does not answer the assertion in the notification that the equipment in question is not very complicated from a technical standpoint and can, in any event, easily be supplied by numerous engineering firms (point 347).253 It is, therefore, clear that it has not been demonstrated that it is likely that a dominant position will be created for the merged entity by 2005.General conclusion on the markets for PET equipment other than SBM machines254 It is clear from the foregoing that the contested decision does not provide sufficiently convincing evidence to show that leveraging from the aseptic carton market would enable a dominant position to be created for the new entity by 2005 on the markets for barrier technology, aseptic and non-aseptic filling machines, plastic bottle closure systems and auxiliary equipment.255 At the hearing, the Commission placed particular emphasis on how the strengthening of the merged entity's position on the PET equipment markets would be the result of a cascade effect from the position acquired on those SBM machine markets. It should be noted, however, that this analysis does not appear explicitly in the contested decision and has not therefore been proved to the requisite legal standard. In any event, the merged entity's foreseeable position on the markets for PET equipment other than SBM machines, as found above, is sufficiently weak that, even if such a cascade effect were foreseeable, it would not have a fundamental effect on that position.256 In the absence of convincing evidence, it must be concluded that the first condition under Article 2(3) of the Regulation is not met as regards the abovementioned PET equipment markets.257 It is necessary, next, to examine the Commission's analysis of the creation of a dominant position on the SBM machines markets.(v) The SBM machines marketsThe generic nature of SBM machines258 It is first necessary to examine the evidence on which the Commission relies in distinguishing specific sub-markets for SBM machines by reference to the sensitive products, an approach disputed by the applicant on the ground that these machines are generic in nature.259 In the contested decision, the Commission finds, firstly, that even for an allegedly "generic" piece of equipment such as an SBM machine it is justified to examine the equipment market with reference to the end-use segments, which is even more relevant when comparing whole packaging systems in order to assess whether or not they may belong in the same product market (recital 43). It goes on to state that each liquid product intended for packaging has its very particular characteristics which dictate the availability of a given form of packaging, before concluding that end-use segmentation constitutes a meaningful analytical tool for assessing the liquid food packaging equipment market (recital 44, cited in paragraph 30 above). Thus it distinguishes between sensitive products belonging to common product segments and other products, on the basis of the ability of the former to be packaged, at least from a technical standpoint, in either carton or PET, unlike non-sensitive products such as water and carbonated drinks, which cannot be packaged in carton (recital 58). Whilst accepting that the majority of SBM machines are "generic" (recital 177), the Commission states in the same recital that a PET packaging line, of which the SBM machine is only one component, is usually tailored to the specific products filled by the customer, which is especially the case for sensitive products, an argument reiterated in its assessment of the consequences of leveraging (recital 369). It refers by way of example to Sidel's SRS G Combi, which is designed for carbonated drinks [and] cannot be a substitute for a beverage producer wanting to fill juices (recital 177), for which an aseptic Combi SRA machine is required. Referring to the Commission Notice on the definition of relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5, point 43), it then finds that the two conditions which normally must be met for a finding of a distinct group of customers and thus of a narrower product market are met in the present case: it is possible to identify clearly which group an individual customer belongs to at the moment it purchases an SBM machine, and the trade in the machines among customers or arbitrage by third parties is not feasible (recital 178).260 The Court finds, firstly, that the emphasis placed in the contested decision on sensitive products belonging to common product segments is based on an objective criterion, namely the fact that these products belong to the category of carton-packaged products and the possibility, at least from a technical standpoint, of them being packaged in PET, which, in the light of the growth to be expected (see paragraphs 201 to 216 above), is likely to become a fairly widespread commercial reality by 2005, at least for FFDs and tea/coffee drinks.261 However, the contested decision fails to provide sufficiently convincing evidence to demonstrate the allegedly specific characteristics of SBM machines used for packaging sensitive products. Admittedly, a combined machine specifically designed for filling carbonated drinks cannot be used for juices. However, that far from proves that low- and high-capacity SBM machines, even ones tailored before sale to the specific wishes of their purchasers, do not remain generic machines, as argued in essence by the applicant, that is to say, capable of packaging several types of products.262 As for the alleged specificity of packaging moulds according to the product intended for them, as argued by the Commission, whilst the applicant does not dispute that the number of moulds determines the capacity of the machine, this specific fact does not prove that SBM machines, of which moulds are merely a component, differ significantly from each other. It is clear from the notification that moulds last on average for three years, whilst an SBM machine lasts for up to 15 years (recital 304). Although Sidel makes its own moulds, the contested decision does not dispute the information on the moulds market provided in the notification, according to which Sidel is not active in that market (that is, as a supplier of moulds to third parties) and the competition amongst those undertakings which are active is very strong, especially from SIG, which claims on its internet site that it is a world leader (recital 309).263 Nor does the contested decision call into question the statement in the notification that, in a large facility, a customer can use several SBM machines in order to combine them for its various production needs. The contested decision does not contain any examination of whether the flexibility required by some customers for SBM machine moulds can be explained by needs relating to such uses.264 In its defence, the Commission refers to a number of changes which can be made to an SBM machine to enhance its performance or make it more useful in an integrated PET production line, such as the addition of a special blow air filtration system or ultraviolet treatment to reduce the risk of contamination before the preforms enter the SBM machine. At the hearing, the Commission stated that these changes are evidence of the very specific characteristics of an SBM machine used in a PET packaging line to which the contested decision refers (recital 177). Tetra, whilst disputing the Commission's approach of attributing specific characteristics of other components of a PET production line to SBM machines, none the less stated that these changes represented a mere 5% of the cost of an SBM machine.265 The Court finds, first, that the contested decision makes no reference to this information. Although the decision correctly stresses the importance of the individual needs of customers who require an aseptic PET filling line in particular, namely a basic guarantee of aseptic conditions, this cannot justify the definition of a distinct sub-market for SBM machines used in filling lines for the sensitive products at issue here. The mere fact that each SBM machine must be installed in a PET line in order to be useful to its purchaser does not justify that specific characteristics of other PET equipment in that line should be attributed to the SBM machines themselves.266 There is all the more reason to accept the generic nature of SBM machines, inasmuch as at the hearing the Commission was unable to rebut Tetra's assertion regarding the relatively low cost, when compared to the cost of a so-called standard SBM machine, especially a high-capacity SBM machine, of making any necessary changes to render the machine more compatible for use with aseptic and non-aseptic PET filling machines, or possibly with aseptic filling machines capable of conversion from PET to HDPE.267 The parties agree, moreover, that combined machines, which are still only rarely used for aseptic filling (see paragraphs 248 and 249 above), do not constitute a distinct market, as is also clear from the contested decision.268 As regards the possibility of determining exactly which group a given customer belongs to when he purchases an SBM machine and whether or not that customer may, at least currently within the EEA, be able to find a better price through arbitrage between the available suppliers, it is clear that those possibilities, if established, would apply as much to SBM machines used for non-sensitive products as to those used to package sensitive products. The possibility for the merged entity to identify the group to which a customer belongs is due to the fact that many customers in the carton markets who will switch to PET will be current Tetra customers. However, this possible benefit, resulting from the first-mover advantage which the merged entity will foreseeably have, does not preclude those customers from turning to other suppliers of SBM machines if they become dissatisfied with the conditions offered by the merged entity.269 Therefore, on the basis of the evidence in the contested decision, the Commission committed an error, first, by finding that the majority of SBM machines are generic (recital 177) and, second, by distinguishing between them according to end-use. The contested decision does not provide sufficient evidence to justify the definition of distinct sub-markets among SBM machines with reference to their end-use. Consequently, the only sub-markets it is necessary to consider are those for low- and high-capacity machines.Foreseeable foreclosure effects270 The Court finds, as a preliminary point, that the two distinct SBM machine markets identified by the Commission display notable differences as to the level and intensity of the current level of competition which Sidel must face in them. Accordingly, the consequences of the foreseeable leveraging by the merged entity from the carton market onto the distinct markets for low- and high-capacity SBM machines must be examined separately.- Low-capacity SBM machines market271 It should be recalled, as regards low-capacity SBM machines, that the merger would in no way strengthen Sidel's current market share (see paragraph 128 above). The finding in the contested decision that the merged entity would be by far the biggest player in that market and that [s]everal competitors would remain in the market but with small market shares of no more than [10-20%] (recital 269) is not, in the light of Tetra's commitment to divest itself of Dynaplast, an undertaking which is active on this market, sufficient evidence of the likelihood of a future dominant position being created for the merged entity on this market. In its written pleadings, the Commission maintains - referring to the finding in the contested decision that Sidel's competitors could be foreclosed from the low-capacity SBM machine market (recital 370) - that it is not necessary to establish that Sidel's competitors will be foreclosed from the market, as long as it is shown that they will be marginalised. At the hearing, it stressed that, through a cascade effect, the notified transaction could enable the merged entity to achieve a dominant position on that market, given that Sidel's competitors are dispersed and that Sidel already has a leading position in certain segments of the market, in particular the segment for low-capacity machines that are at the top end of that range of machines and are equipped with rotary technology, that is, the technology used in all high-capacity machines except for those of Sasib, an undertaking recently acquired by SIG, whose machines use a two-step linear technology with a capacity of [...] bph (notification, point 48).272 In order to examine the Commission's conclusion with respect to this market, it is necessary to consider the merged entity's share of this market after implementation of the modified merger. The Commission admits in the contested decision that, in low-capacity SBM machines, Sidel had a market share of [30-40%] both in terms of capacity and by unit sales in the EEA in 2000 (recital 233). The Commission highlights the fact that Sidel's competitors are much smaller, the biggest one being ADS with a market share of around [10-20%] (recital 233). Inasmuch as elsewhere in the contested decision the Commission refers to Sidel's current leading position with [60-70%] of the SBM machine market, it clearly neglected to take account of Tetra's commitment relating to Dynaplast (recital 370).273 The notification indicates that during the period from 1998 to 2000, Sidel's share of the low-capacity SBM machine market was, without exception, under 40% and that its share and that of Tetra - the latter entered the market through its acquisition of Dynaplast, which was at its peak in 2000, thus capturing a market share of 24% - were only estimates which may even have been overstated (point 56). Referring to some 12 other competitors who were all, according to the parties to the merger, capable of providing an appropriate SBM machine for the needs of any low-capacity machine customer, they stressed that the competition on the market was not only strong but intense (points 57 and 71). In its reply to the statement of objections (point 51), moreover, Tetra stated that two new major competitors had then entered the market in 2001, one of whom, Uniloy, holds a leading position on the EBM machine market, whilst the other, Husky, holds a similar position on the preforms production machine market, the importance of which is recognised in the contested decision (recital 321, footnote 138).274 The contested decision, which does not take account of this very pertinent information, merely accepts, without further explanation, that since 1998 Sidel has experienced a decline of only [0-10%] in the low-capacity machines market (recital 238). This single fact is not sufficient to support the Commission's finding that the merged entity would face negligible competition, especially if it did not have Dynaplast's means and capacity. Nor is any assessment made, either in the contested decision or in the Commission's written pleadings, of the likely fate of Dynaplast's market share, which had always increased up to 2000. At the hearing, in response to questions from the Court about Dynaplast's operations which, in the course of a relatively short period under Tetra's control (1994 to 2000) had been able to capture a fairly high market share, the Commission stated that its initial success could be attributed to Tetra's financial strength and the fact that Tetra could offer attractive bundled sales combining SBM machines and PET preforms. However, since Tetra has given a commitment to divest itself of its preforms operations and Sidel is not active on the preforms market, the merged entity would no longer be able to pursue such a strategy. Its competitors, especially the new arrival Husky, the Canadian company which is a world leader in the manufacture of preforms production machines, would not be hampered by this constraint.275 The contested decision does not provide evidence to show that the merged entity would be able to capture a particularly large proportion of Dynaplast's former customers or obtain through other means enough new customers to enable it to achieve a dominant position on the low-capacity SBM machine market, either in the near future or especially by 2005. Such a position is a fortiori not foreseeable in the light of the growing competition currently on that market.276 In both its written and oral pleadings, the Commission, in highlighting Sidel's strong position in the high-capacity machines market and, at least partially, in assimilating the sale of low-capacity SBM machines with the packaging of non-sensitive products, stressed the power of the merged entity in the "new era" PET markets i.e. "sensitive" beverages) (recital 369). The contested decision states that the merged entity's share of the SBM market (regardless of end-use) [...] leaves a smaller part of the market available to competitors, whilst the [...] non-sensitive product markets are saturated and much less growth is expected (recital 370). This finding of saturation is based on information in Sidel's annual accounts for 1999 and a study of Sidel carried out by BNP-Paribas, dated 9 October 2000.277 The importance of the low-capacity machines market cannot thus be underestimated, either generally or as regards the sensitive products. The case-file shows that, at least to date, there has not been a great difference in the use of low- and high-capacity machines for the packaging of non-sensitive products. As stated by the applicant at the hearing, everything depends on customers' requirements. Non-sensitive products account for 95% of all beverages currently packaged in PET. Yet the contested decision contains no analysis of the breakdown of low- and high-capacity SBM machines according to product. The notification indicates that high-capacity machines are usually sold to large-scale customers, such as [...], who produce large quantities of soft drinks and mineral water (point 93). In its reply to the statement of objections, Tetra stated that the fastest machine sold by Sidel had a capacity of [...] bph and was sold in [...] to [...], a producer mainly of mineral waters (point 44) and that the statement of objections ignored the fact that low-capacity machines are, among many other uses, also used for packaging sensitive products (point 45).278 The Court is thus not in a position to assess precisely the scale of low- and high-capacity SBM machine sales for packaging non-sensitive products. It is likely, given the very high volumes of these products already packaged in PET (over 35 billion litres in 1999 for water and soft drinks according to table 2 in recital 56), that sales of these two types of machine will remain very strong for packaging of non-sensitive products, even after the implementation of the modified merger. The assertion regarding the alleged saturation of the PET packaging market for these products has not been established to the requisite legal standard. Leaving aside the enormous market potential for PET in beer packaging, the independent studies referred to in the contested decision confirm that PET packaging of mineral waters in particular will continue to see steady growth. It follows that there is no proof that demand for low-capacity SBM machines will decline in any significant manner during the period 2000 to 2005.279 Nor is the analysis in the contested decision convincing as regards packaging of sensitive products. According to the information supplied by the applicant in its reply to the statement of objections, low-capacity machines have hitherto been used for much, if not most of, the packaging of sensitive products. Thus, according to the reply, the average rate of machines sold by Dynaplast and used for the packaging of such products was just over [...] bph, whereas Sidel's machines packed (at least for juices) at a rate of [...] bph (point 45). The applicant stated that the use of low-capacity machines could be explained by the fact that sensitive beverages currently are and will mostly remain niche products with lower production volumes than the other products. The Commission replied in the contested decision by stating that all SBM machines having a capacity of over 8 000 bph used for that purpose should be considered high-capacity machines and that the use of low-capacity machines can be explained by the fact that customers do not wish to purchase high-capacity machines when they initially equip themselves to package sensitive products in PET (recitals 184 and 185). Although this latter explanation is not clearly erroneous, the fact remains that a significant proportion of the SBM machines used to package sensitive products will, in all likelihood, be low-capacity machines. As pointed out by the applicant at the hearing, this settled use seems all the more likely for more specialised beverages such as tea/coffee drinks and FFDs, which will see some growth, given their smaller production volumes as compared to LDPs and juices. Thus, a significant part of the foreseeable growth between now and 2005 in sensitive product packaging in PET will probably be in products for which low-capacity machines are particularly appropriate.280 Thus the contested decision does not contain a sufficient analysis of current and future use of low-capacity SBM machines. It is clear that, with Tetra's exit from that market, the merged entity's position will remain basically unchanged as compared to Sidel's current position. Sidel will, moreover, be far from holding a dominant position. The merged entity may remain the most important operator on this market, with a market share of approximately [30-40%], but it will have to face competition from at least 12 other undertakings, not to mention new competitors which have just entered the market (see paragraph 272 above).281 The contested decision does not therefore provide sufficiently convincing evidence to show that the merged entity would be in a position, by leveraging current Tetra carton customers wishing to purchase a low-capacity SBM machine or a PET production line comprising a low-capacity SBM machine, to marginalise its competitors, especially those whose customer base is comprised principally of producers of non-sensitive products and beer, to the point where it would succeed in transforming its current position into a dominant position by 2005. This finding is all the more valid given that a bundled sales offer made by the merged entity cannot include such a machine.282 Regarding the argument that a dominant position on the low-capacity machine market could be achieved through a cascade effect from the future creation of a dominant position on the market for high-capacity machines, it suffices to find that, since the analysis in the contested decision does not deal with this eventuality, the Court is not in a position to examine it.283 Consequently, as regards low-capacity SBM machines, it must be found that, in so far as the Commission predicts that a dominant position will be created on that market by 2005 through leveraging, it committed a manifest error of assessment.- High-capacity SBM machines market284 The Court observes that the Commission was correct in highlighting Sidel's leading position on this market. With a market share of [60-70%] in terms of capacity, it is, as stated by the Commission at the hearing, three times as big as its three main competitors and almost [45-55%] bigger than all competitors together on this market. It is thus by far the market leader. It does not, however, hold a dominant position (recital 248) and Tetra would add nothing to the merged entity on this market.285 It is, therefore, necessary to assess, first, whether the modified merger would enable the merged entity, by leveraging directed at Tetra's current customers on the carton markets, to capture enough additional customers on the PET market to attain a dominant position on the high-capacity SBM machine market by 2005 and, if so, whether the remaining competition would be significantly weakened.286 Admittedly, as regards FFDs and tea/coffee drinks as well, probably, as juices, at least the premium ones, the merged entity would be able to offer, to its customers on the carton markets who wish to switch part of their production to PET, sales of aseptic PET filling machines or combined machines bundled with other important components of a PET production line, such as bottle closures. Those offers could be attractive for those products, given the importance of the aseptic guarantee for those customers and Tetra's strong reputation in aseptic filling, especially as a supplier of aseptic carton packaging equipment. This could be even more so for customers having long-term contracts with Tetra.287 There are, however, some factors which diminish the foreseeable importance of these advantages, most of which are not assessed adequately in the contested decision.288 First, the first-mover advantage has been overestimated in the present case. The foreseeable growth in PET use among Tetra's current customers on the aseptic carton market is not considerable (see paragraphs 201 to 216 above). Thus, it is not very likely that its dairy customers will want to switch from carton to PET, since there is no barrier against light which can be used in a commercially satisfactory manner and the cost of PET is higher than that of carton and HDPE (see paragraph 34 above). The contested decision does not give an adequate explanation as to why, if there were to be a major movement towards plastic, that movement would not be, completely or to a large extent, towards HDPE rather than PET. This finding is supported by the fact that the Commission no longer maintains that there is a likelihood of significant growth in PET use by 2005 for UHT milk, a very important LDP sector. It is also noteworthy that the share of the LDP market already held by HDPE, the material which is currently carton's main competitor, will probably grow by 2005 in the important UHT milk and fresh milk segments, according to both the Canadean study and the independent PCI study.289 As regards fresh milk in particular, the contested decision does not give an adequate explanation of the relationship between HDPE and PET. Given the cost advantage of HDPE, amounting to 10%, it is at least as likely that Tetra's existing customers who wish to switch part of their fresh milk production to plastic will choose HDPE rather than PET. Fresh milk is not a product for which the marketing advantages offered by PET have any particular importance. The contested decision does not explain why Tetra, which acts as a converter on the HDPE market, would be more concerned to see its customers switch to PET than simply to utilise HTW agreements in order to sell them HDPE plastic bottles blown to suit their requirements, as it currently does in the United Kingdom, according to the notification (point 326). It should also be observed that the merged entity would be in a position to provide main components of an HDPE filling line, such as EBM machines and aseptic or non-aseptic HDPE filling machines. Moreover, since barrier technologies are not relevant for fresh milk, which is distributed in a refrigerated line, it is difficult to see how the merged entity could view leveraging as a useful strategy for that product line, since many of the merged entity's competitors would be able to offer both SBM machines and the other components of a non-aseptic PET production line which are necessary for a dairy customer wishing to switch from fresh milk in carton to PET.290 As for juices, although the Commission expects substantial switching from glass to PET and a more limited switching from carton to PET to occur (recital 148), there is no analysis of the glass market. The applicant argues that this fact places its competitors, in particular SIG, Krones and KHS (Klöckner), all three of whom are active on the glass and PET packaging markets, in a position where they can enjoy an important first-mover advantage with respect to customers switching from glass to PET. Against this background, the Commission has not shown to the requisite legal standard the extent of the first-mover advantage which the merged entity would have in the context of the likely, but uncertain, level of growth in PET use for juice packaging in the period 2000 to 2005.291 As regards FFDs and tea/coffee drinks, it is common ground that the volume of packaged products will remain fairly low. Even with an increase by 2005 of 20% to 30% for the first category of products and 25% to 30% for the second (attaining an annual total of 1.8 billion litres packaged), the extent, in terms of volume, of the first-mover advantage for the merged entity would be limited. Furthermore, although the contested decision does not call into question Canadean's forecast for carton use in those segments (anticipated to be 37% and 46%, respectively, by 2005 for those products, compared to 42% and 53% for 2000), it does not state why those increases in the use of PET would enable the merged entity, by leveraging Tetra's current customers on the carton markets, to attain a sufficiently large additional share of the high-capacity SBM machine market and thereby achieve a dominant position. This explanation was all the more necessary given that it is at least probable that a significant number of the machines used in new PET production lines intended for these niche products would be low-capacity machines, for which the market is very competitive (see paragraphs 271 to 283 above).292 Second, Tetra's commitment not to offer sales of its carton products bundled with SBM machines would reduce the scope for leveraging. A current carton customer could be attracted by a favourable price for a part of a PET production line other than an SBM machine, for instance an aseptic PET filling machine, the most important part, but still purchase an SBM machine from one of Sidel's current competitors. Whilst it is true that this option would not be open to him if a bundled sale concerned a combined machine, the contested decision does not provide evidence to establish that the use of those machines, at least for the aseptic filling market - which on the whole is the one most concerned by the anticipated growth in PET use in the sensitive product segments - will become sufficiently widespread that the merged entity will actually be able to sell combined machines as a way of circumventing its commitment not to make joint offerings for carton packaging equipment and SBM machines.293 Third, the Commission committed an error in finding that, apart from SIG, [n]o other supplier of packaging equipment will be able to offer both carton and PET packaging equipment (recital 372). The contested decision itself refers to a recent example of PET introduction for fresh milk by the Czech dairy OLMA. However, it is Elopak which is the supplier of the additional PET line in question (recital 94). The contested decision also notes that Elopak has entered into alliances with PET equipment manufacturers to address its consumers' needs (footnote 146 at recital 329). Thus it is clear that at least two major competitors of Tetra in the carton packaging equipment markets are already able to offer both carton and PET products, and to do so without the constraints on the range of PET equipment that would apply to offerings of bundled sales by the merged entity. Given especially the growing overlap between the carton and PET packaging equipment markets foreseen in the contested decision, there should have been an adequate analysis of the potential importance of the first-mover advantage enjoyed by SIG and Elopak.294 The Court's assessment of the foreseeable effects of leveraging by the merged entity is also hampered by the absence in the contested decision of an adequate analysis of the competition which Sidel must face in the market for high-capacity machines. The competition provided by its three major competitors, SIG, SIPA and Krones, is under-estimated. Those competitors were able to increase their market shares from [10-20%] to [35-45%] in three years (1997 to 2000), with each one attaining comparable new market shares, which is by no means insignificant. Since the market is thus evidently subject to competition which is growing and at least quite considerable, the contested decision should have examined in more detail the ability of that competition to resist leveraging on the part of the merged entity.295 In fact, only SIG's position is examined, and even then only summarily. The contested decision finds that it lacks the full range of the merged entity in PET equipment and also an essential element, barrier technology, for any future penetration in PET's new product segments (recital 372). This statement cannot be reconciled, in the absence of further explanation which is not to be found in the present case, with the notification, which shows SIG's far from insignificant positions on the markets for aseptic and non-aseptic PET filling machines, on the latter market through its recent acquisition of Sasib. Moreover, in the light of the fact that there are over 20 companies (recital 87) offering different oxygen barrier technology solutions suitable for juices, the manner in which SIG would be prevented from competing with the merged entity on that market - where the growth in terms of volume will probably be the greatest - is far from evident in the contested decision. In so far as that growth comes from glass, SIG will have a first-mover advantage which the merged entity will not have. Moreover, at the hearing, the Commission did not dispute the applicant's statement that SIG also had the necessary barrier technology for FFDs and tea/coffee drinks.296 Furthermore, in its written and oral pleadings, Tetra stressed that, in a presentation made in April 2002 at the first world congress on PET, SIG described itself as a supplier with the ability to offer a complete PET packaging line. That presentation shows that SIG, unlike the merged entity following Tetra's commitment to divest itself of its preform operations, would from now on be present on the preforms market. The notification also shows that SIG holds a very significant position in the mould manufacturing market for SBM machines, and has more than 50 years' experience in moulds (point 309).297 It follows, on the basis of the evidence relied on in the contested decision, that the Commission committed an error in under-estimating the importance of SIG's current position on the market for high-capacity machines and by playing down the positions held on that market by the merged entity's other principal competitors, in particular SIPA and Krones.298 It should also be remembered that high-capacity SBM machines, like low-capacity machines, are in fact generic. Therefore, the merged entity's competitors may well hold strong positions in the sale of high-capacity SBM machines to producers of non-sensitive products and to brewers which would enable them to resist any leveraging by the merged entity from its position on the aseptic carton packaging markets into sales of high-capacity SBM machines. The finding in the contested decision that this cannot be the case is not based on evidence which is sufficient in law.299 Moreover, since the leveraging which would have an impact particularly on the high-capacity machines market is, according to the Commission, rendered foreseeable due to the growth in PET, it must be pointed out that beer represents a significant part of the anticipated growth in PET. The sole fact that beer cannot be packaged in carton does not by itself justify the total failure to take account of this distinct sensitive product - according to recital 41, when PET is used to package beer both a light barrier and oxygen barrier are necessary - in the light of trends in the PET markets. This is all the more so given that growth in PET packaging of beer is anticipated not only by the applicant but also in the Pictet study.300 According to the notification, PET packaging of beer is expected to grow by 10% per year over the next five years (point 86). In addition, with a switch of 5% of world beer production to PET bottle packaging, this market will account for 15 billion packs per annum, making it comparable in size to the current market for carbonated soft drinks sold in PET packaging in Europe (point 15). This forecast is supported, at least in part, by the independent studies referred to by the Commission to justify its own growth forecasts in the common product segments. Thus, according to the Pictet study, the vast beer market is about to be opened for PET (p. 10). The notification also states that PET is already being used by some of the larger breweries in Europe, such as [...], to package beer using multilayer barrier technologies supplied by competitors of Tetra and Sidel (principally Schmabach-Lubeca) (points 119 and 157).301 Since beer is not packaged in carton, the merged entity could not in any way exercise leverage on breweries which switch from glass and metal cans to PET. Furthermore, since some of the merged entity's main competitors in the SBM machines markets (SIG, Krones and KHS (Klöckner)) are also active on the glass and metal can packaging markets, they will have a first-mover advantage with the breweries who switch part of their production over to PET. If significant PET growth for beer materialises by 2005, the incentive will increase for the merged entity's competitors to remain in the SBM machine market. However, the contested decision provides no analysis of the potential importance of this development.302 It should also be observed that, according to the notification, the barrier technology necessary for packaging beer in PET could be modified for application to sensitive products in the common products segment, at least for juices (points 119 and 157). At the hearing, the applicant reiterated this argument, maintaining that beer raises some very difficult technical problems in terms of PET use (most notably the risk of carbon dioxide escaping from the packaging), but that, since these are surmountable problems, the technology could be used for other PET applications, both aseptic and non-aseptic. The contested decision makes no analysis of this potentially very important aspect either.303 As part of the prospective analysis which the Commission carried out for the other sensitive products, it should have explained why the possible growth in PET packaging for beer by 2005 did not justify an analysis of the influence which that might have on the incentive for the merged entity to exercise leveraging with regard to sensitive products in the common products segments defined in the Commission's analysis.304 Lastly, the Court finds that the applicant rightly raised the question of converters at the hearing. Since converters are not active in the aseptic carton markets, the implementation of a commercial policy by the merged entity aimed at leveraging could not hamper them significantly in the supply of finished PET bottles to producers of sensitive products, under HTW agreements or, possibly, the supply of SBM machines which they have previously purchased from manufacturers, and they could do so also to Tetra's current customers on the carton markets who chose to switch some of their production to PET. The current structure of the industry (namely the commercial strategy of PET equipment suppliers to concentrate on PET equipment sales rather than to offer complete production lines, with or without preforms) facilitates converters' operations, a point recognised in the contested decision (recitals 293 and 294). It does not explain why a large increase by 2005 in sales of complete production lines by the merged entity as compared to their current level (20% of Sidel's SBM machines sales in 2001) might suffice to marginalise converters.305 The Commission argues, however, that converters are to a certain extent dependent on Sidel for their SBM machine purchases and that they would continue to be dependent on the merged entity (recital 310). At the hearing, it added that the absence of converters in the carton markets was a disadvantage for them if they wish to sell SBM machines to Tetra's current customers on the carton markets. However, given the current level of existing competition, also in the high-capacity SBM machine market, the finding of the converters' dependency on Sidel is not convincing. If the sales conditions offered by the merged entity were to become less attractive, converters could always purchase such machines from one of Sidel's current competitors (see paragraph 137 above), particularly SIG, whilst SIG and Elopak could also offer carton equipment if the converters' customers want the joint supply of PET and carton packaging equipment.306 Consequently, as regards the market for high-capacity SBM machines, the evidence relied on by the Commission does not justify a finding that both the merged entity's competitors and the converters would be marginalised by 2005 due to leveraging by that entity directed at Tetra's current customers on the carton markets who, during that period, intend to switch all or part of their production over to PET for packaging of sensitive products.Conclusion on SBM machines307 It must therefore be concluded that the contested decision does not prove to the requisite legal standard that by 2005 the merged entity could acquire a dominant position on the market for low- and high-capacity machines, thereby fulfilling the conditions of Article 2(3) of the Regulation as regards those markets.(vi) General conclusion on leveraging308 It follows from the foregoing that, in relying as it did on the consequences of leveraging by the merged entity in order to support its finding that a dominant position would be created by 2005 on the PET packaging equipment markets, especially those for low- and high-capacity SBM machines used for sensitive products, the Commission committed a manifest error of assessment.309 Since the conditions required by Article 2(3) of the Regulation have not been fulfilled as regards the leveraging foreseen by the Commission, it must be examined whether those conditions are fulfilled with regard to the second pillar of the Commission's reasoning concerning the carton markets.3. The second pillar: reduction of potential competition on the carton markets(a) Preliminary considerations310 The contested decision finds that the modified merger would enable Tetra to strengthen its current dominant position in carton packaging by eliminating a source of significant competitive constraint (recital 390). The present case thus raises the question whether the Commission, when it wishes to prohibit a merger on the ground that it would strengthen an existing dominant position, in this case that of the acquiring party on the aseptic carton markets, may rely on the elimination or, as it stated at the hearing, at least the significant reduction, of potential but growing competition on a neighbouring market from the undertaking acquired, in this case Sidel, which holds a significant position on the PET markets.311 The Commission refers to Tetra Pak II, to support its analysis of the extent to which that potential competition would be weakened. At the hearing, it stated that the commitments would in no way reduce the harmful effect on competition resulting from the weakening of that competition, and that the merger would, therefore, enable Tetra to feel much less threatened on the aseptic carton markets, which would be tantamount to a strengthening of its dominant position, as competition on those markets is already very limited.312 The Court finds in that regard that when the Commission relies on the elimination or significant reduction of potential competition, even of competition which will tend to grow, in order to justify the prohibition of a notified merger, the factors which it identifies to show the strengthening of a dominant position must be based on convincing evidence. The mere fact that the acquiring undertaking already holds a clear dominant position on the relevant market may constitute an important factor, as the contested decision finds, but does not in itself suffice to justify a finding that a reduction in the potential competition which that undertaking must face constitutes a strengthening of its position.(b) Arguments of the parties313 According to the applicant, the contested decision finds that the PET and carton packaging equipment markets are distinct owing in particular to the current weak cross-elasticity of demand by reference to price between the two materials. The applicant maintains that marketing- and barrier technology-related factors are, and will remain, decisive for the choice of packaging and prevent a future increase in such cross-elasticity of price between PET and carton.314 The Commission's specific arguments concerning the strategies which Tetra might pursue through the merged entity in order to strengthen its dominant position on the aseptic carton markets are erroneous. In particular, the Commission wrongly asserts that the merged entity would have an incentive not to lower its prices and to stop innovating on the carton markets.315 As regards prices, the notified transaction would not have any effect on the incentive for the merged entity to lower its carton prices, since, firstly, customers on the carton markets switching to PET might decide to obtain their supplies from competitors of Sidel; secondly, the merged entity will certainly prefer to sell a carton packaging system rather than an SBM machine.316 Nor, as regards innovation, would the merger affect the rate of innovation on the carton markets. First, any lack of innovation in carton would essentially benefit Tetra's current competitors in the carton markets. Second, as past experience as shown, the principal driving forces behind innovation in carton are consumer preferences and marketing strategies, and not the arrival of PET on the packaging market.317 According to the Commission, the contested decision does not merely recognise that the merged entity could simply slow down the erosion of its power on the carton markets, but states that Tetra's dominance on those markets would be strengthened by the notified transaction (recital 399). Referring to Tetra Pak II, the Commission maintains that where the weakening of a dominant position which would benefit an external source of competition is prevented, that can strengthen the dominant position within the meaning of Article 2 of the Regulation.318 The Commission maintains that, notwithstanding the fact that carton and PET packaging systems do not belong to the same market, they may converge in future and there is already significant interaction between them. In the present case, since the aseptic carton markets are highly concentrated, competition on them is already weakened to such an extent that any further reduction, even from external sources, could have a significant impact. The Commission asserts that carton and PET will be used in future to package the same products. PET would thus exert pressure on the aseptic carton markets; it is not necessary for the two materials to belong to the same relevant product market.319 As for Tetra's pricing policies, the Commission maintains that the merged entity will have sufficient increased capacity to be able to act independently of its competitors. The entity could attract customers wishing to switch from carton to PET and still maintain high carton prices, or even increase them more easily than Tetra could have if the merger had not taken place. The merged entity would, in any event, have much less incentive to compete in order to retain marginal customers, since it would be likely that most of Tetra's existing lost customers on the carton markets would be drawn to Sidel.320 As for the rate of innovation in carton, it would henceforth be determined principally by the competition from PET. Where Tetra supplies a customer specific carton packaging, it is with a view to enabling its customer to compete with products packaged in PET bottles. The Commission argues in particular that improvements in the production speed of carton packaging equipment, the importance of which was recognised in the independent Warrick Report, could enable Tetra to resist better the potential threat posed by PET.(c) Findings of the Court321 Before examining the extent of the potential competition which could be eliminated or reduced by the modified merger, it is necessary to ascertain the relevance of Tetra Pak II, on which the Commission relies. It should be observed as a preliminary point that the applicant does not dispute the findings of the contested decision that Tetra still holds a dominant position on the aseptic carton markets and a leading position on the non-aseptic carton markets (see paragraph 40 above).322 The Court finds, first, as the contested decision itself states (recitals 224, 226 and 227), that there is, in principle, nothing to prevent the application of the associative links theory in merger control, the exceptional application of which was recognised in the context of the applying of Article 82 EC in Tetra Pak II. The Commission's analysis underlying the second pillar of its reasoning relates to the strengthening of Tetra's current position on the aseptic carton markets resulting from the elimination of the potential competition represented by Sidel on the neighbouring markets for PET packaging equipment. Tetra Pak II concerned precisely conduct on the non-aseptic carton markets which, exceptionally, constituted an abuse of Tetra's dominant position on the aseptic carton markets under Article 82 EC, since the two market categories were closely associated and Tetra was placed in a situation comparable to that of holding a dominant position on the markets in question as a whole (Case C-333/94 Tetra Pak v Commission, cited in paragraph 40 above, paragraph 31).323 The reference to Tetra Pak II is not relevant here, however, since the present case concerns simply the effect of the elimination, or the significant reduction, of potential competition which is, according to the Commission, sizeable and growing. It suffices to point out in that regard that amongst the criteria laid down in Article 2(1) of the Regulation, which the Commission is bound to apply in assessing notified merger transactions, are the structure of all the markets concerned and the [...] potential competition from undertakings. Thus the Commission did not commit any error in examining the significance for the carton markets of a reduction of potential competition from the PET equipment markets. It does have to show, however, that such a reduction, if it exists, would tend to strengthen Tetra's dominant position in relation to its competitors on the aseptic carton markets.324 In maintaining that significant competitive pressure will be eliminated as a result of the modified merger, the Commission relies principally on the considerable growth it foresees in PET use for packaging sensitive products. However, the above analysis of the first pillar, concerning leveraging (see paragraphs 201 to 216 above), shows that this growth, with the exception of growth in FFDs and tea/coffee drinks, will probably be much less marked than the Commission believes. As for FFDs and tea/coffee drinks, the contested decision itself recognises that their potential influence on the position of carton is more limited than that of other sensitive products in view of the fact that their segments are smaller in size (recital 393). It is, therefore, not possible, on the basis of the evidence relied on in the contested decision, to determine, with the certainty required to justify the prohibition of a merger, whether the implementation of the modified merger would place Tetra in a situation where it could be more independent than in the past in relation to its competitors on the aseptic carton markets.325 The Court stresses in that regard that the two factual elements regarding Tetra's future conduct, on which the Commission relies in order to prove the alleged negative effects which the modified merger would have on the aseptic carton markets, have, on any view, not been established to the requisite legal standard. Thus it has not been shown that, in the event of elimination or significant reduction of competitive pressure from the PET markets, Tetra would have an incentive not to reduce its carton packaging prices and would stop innovating.326 As regards price competition, the contested decision does not call into question the finding of the independent Warrick Report, to which it refers and according to which PET is 30-40% more expensive than carton currently and that, to be competitive on total cost, the packaging price of PET would need to be 5-10% lower than aseptic carton cost, to compensate for the lower distribution cost of carton systems (recital 90).327 As regards the more price-sensitive carton customers who indicated to the Commission, during its market investigation, that they would only consider a switch from carton to PET if carton prices rose by a significant amount of 20% or more (recital 397), it is clear that a lowering of carton prices is not necessary to keep them in the carton markets. In finding simply that [t]hese same price-sensitive customers would presumably be dissuaded from making a switch from carton to PET if a carton-price reduction increased the price difference between a carton and PET packaging line (recital 397), the contested decision does not explain why, without the merger, Tetra would be obliged to make such price reductions in order to keep those customers. These customers would not switch to PET unless carton prices rose by at least 20% or there was a corresponding reduction in PET prices. The finding that, in the absence of the merger, Tetra would [...] defend its position fiercely [...] in some cases, [by] lowering carton prices (recital 398) is, therefore, not based on convincing evidence. Inasmuch as the Commission pleads before the Court that, once the merger is implemented, it is possible that Tetra might find it more easy to raise its prices on the aseptic carton markets for those customers, it does not explain, in particular, why this would not enable Tetra's competitors on the carton markets who are also active on the PET market, such as SIG and Elopak, to benefit from this.328 As for beverage producers who will switch from carton to PET for commercial reasons despite the fact that PET is considerably more costly than carton, a reduction in carton prices would not necessarily persuade those non-price-sensitive customers to keep carton packaging. The contested decision does not show why companies active in the PET equipment markets which, without the modified merger, would be expected to compete vigorously to gain market share from carton (recital 398), would modify their behaviour following the transaction in question here. If the pressure from Sidel were to disappear, the contested decision does not explain why, if Sidel's competitors had not been marginalised through successful leveraging, the other companies active in the PET equipment markets would no longer be able to promote the advantages of PET to Tetra's customers on the carton markets. The finding in the contested decision that Tetra would be exposed to less pressure to lower its carton prices if it could acquire Sidel is, therefore, not based on convincing evidence.329 Turning to the allegedly diminished need for Tetra to innovate following implementation of the modified merger, both the contested decision and the explanations given in the Commission's written and oral pleadings show that, at present, competition on the various carton markets takes place principally through innovation. According to the Commission, Tetra's introduction in the past of new carton packages with more user-friendly features such as the carton top package with screw top closure (recital 398) shows that innovation is a practical necessity. According to Tetra's pleadings at the hearing, which were not disputed on this point by the Commission, these innovations were not due to pressure from the PET equipment markets, but rather to the demands of consumers of carton-packaged products. Even if the acquisition of Sidel were to reduce the pressure on innovation emanating from the indirect, but growing, competition from the PET equipment markets, at least as regards FFDs and tea/coffee drinks packaging, for which not insignificant growth is predicted by 2005, the contested decision does not state why demand from customers wishing to remain with carton would not continue in the future to be the driving force behind innovation, especially on the aseptic carton markets. Although the Commission correctly points out, in particular, that Tetra can improve the production rate of its carton packaging equipment, the contested decision does not show that the incentive to do so would disappear simply because of the acquisition of Sidel. This is even less likely given that it is not disputed that Tetra's activities in the carton markets are very profitable. Consequently, it is unlikely that Tetra, following the modified merger, would be less inclined to continue investing in any innovation possible for the range of equipment and products it offers its customers on the carton markets.330 This finding is supported by the continued presence of competitors of the merged entity on the aseptic carton markets. Although Tetra's share of that market is very strong at present, the Commission recognises that its position is slightly lower (recital 220) compared with 1991. No explanation whatsoever is given of why Tetra's competitors, particularly SIG, its main competitor (recital 400), with a market share of [10-20%] (recital 218), could not benefit from a decision by the merged entity to innovate less. Such an explanation was all the more necessary in the light of the fact that SIG is active in particular on the carton packaging equipment and PET packaging equipment markets and, unlike the merged entity, would not be subject to any constraints as to joint offers of carton and SBM machines. Against that background, the mere fact that Tetra possess know-how and superiority of [...] technology in aseptic carton and that SIG, at present, cannot match Tetra's system of [packaging by] continuous reel of aseptic carton (recital 218) does not suffice to show that SIG, or its other competitors, would not be able to benefit from a possible decision by the merged entity to innovate less in carton. The reference by the Commission at the hearing to the high costs of innovation on the relevant markets, although pertinent and probably correct, cannot by itself justify its finding that Tetra's competitors would not be able to benefit from a decision by the merged entity to innovate less.331 The Commission was also incorrect in finding that, apart from Tetra, the SIG group is the only other company in the world that manufactures and sells both carton and PET packaging equipment (recital 400), since, as is apparent from the contested decision (recital 94 and footnote 146 at recital 329), the Elopak group can also do this, under agreements with other companies active on the PET equipment markets (see, in this connection, paragraph 291 above). Although the Commission was aware of this capacity of Elopak at the time of adoption of the contested decision, it has not explained why it believed it to be irrelevant for the purposes of the contested decision.332 Consequently, the contested decision has not established to the requisite legal standard that the merged entity would have less incentive than Tetra currently has to innovate in the carton sector.333 It follows that the evidence relied on in the contested decision does not establish to the requisite legal standard that the effects of the modified merger on Tetra's position, principally on the aseptic carton markets, would, by eliminating Sidel as a potential competitor, be such as to fulfil the conditions of Article 2(3) of the Regulation. It follows from the foregoing that it has not been shown that the merged entity's position would be strengthened vis-à-vis its competitors on the carton markets.4. The third pillar: general strengthening effect334 The last pillar of the Commission's reasoning as regards the conglomerate effect of the modified transaction concerns the overall position which the merged entity would achieve in sensitive products packaging, that is, dominant positions in two closely related neighbouring markets (carton and PET packaging equipment) and a notable presence in a third market (HDPE) (recital 404). According to the Commission, the merged entity would then be able to strengthen its dominant position on the carton and PET markets by raising the barriers to entry into those markets and by marginalising its competitors.335 The Court points out that this pillar of the contested decision concerns the overall position of the merged entity in the packaging of sensitive products. These effects of the notified transaction cannot, however, be considered in isolation from the analysis in the contested decision concerning the first two pillars of the Commission's reasoning. Since the analysis of those two pillars is vitiated by manifest errors of assessment (see paragraphs 146 to 333 above), the third pillar must also be dismissed and it is not necessary to examine it in detail.5. General conclusion regarding the plea alleging an absence of foreseeable conglomerate effect336 It follows from all of the foregoing that the contested decision does not establish to the requisite legal standard that the modified merger would give rise to significant anti-competitive conglomerate effects. In particular, it does not establish to the requisite legal standard that any dominant position would be created on one of the various relevant PET packaging equipment markets and that Tetra's current position on the aseptic carton markets would be strengthened. It must therefore be concluded that the Commission committed a manifest error of assessment in prohibiting the modified merger on the basis of the evidence relied on in the contested decision relating to the foreseen conglomerate effect.III - Overall conclusion337 Accordingly, the pleas alleging lack of horizontal, vertical and conglomerate anti-competitive effects must be declared well founded, and it is not necessary to examine the other pleas.338 Consequently, the contested decision is annulled. Decision on costs Costs339 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the defendant has been unsuccessful and the applicant has asked for the defendant to pay the costs, the latter must be ordered to bear its own costs and to pay those of the applicant. Operative part On those grounds,THE COURT OF FIRST INSTANCE (First Chamber),hereby:1. Annuls Commission Decision C (2001) 3345 final of 30 October 2001 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case No COMP/M.2416 - Tetra Laval/Sidel);2. Orders the Commission to bear its own costs and to pay the costs of the applicant.

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THE ADVOCATE GENERAL CONCLUDES THAT COMMUNITY LAW DOES NOT PRECLUDE NATIONAL LEGISLATION PROVIDING FOR HEALTH BENEFITS IN KIND WHICH REQUIRES AN INSURED PERSON SEEKING OUT-PATIENT MEDICAL TREATMENT IN ANOTHER MEMBER STATE TO OBTAIN PRIOR AUTHORISATION

«(Freedom to provide services – Articles 59 of the EC Treaty (now, after amendment, Article 49 EC) and 60 of the EC Treaty (now Article 50 EC) – Sickness insurance – System providing benefits in kind – System of agreements – Medical costs incurred in another Member State – Prior authorisation – Criteria – Justification)» Summary of the Judgment 1.. Freedom to provide services – Restrictions – National rules on reimbursement of medical costs incurred in another Member State – Treatment provided in a hospital – Requirement of prior authorisation from the insurance fund in the Member State in which the person concerned is insured – Grant subject to requirements that the treatment must be necessary – Whether permissible – Conditions – Possibility of obtaining equally effective treatment without undue delay – Criteria for assessment (EC Treaty, Art. 59 (now, after amendment, Art. 49 EC) and Art. 60 (now Art. 50 EC)) Freedom to provide services – Restrictions – National rules on reimbursement of medical costs incurred in another Member State – Treatment provided in a hospital – Requirement of prior authorisation from the insurance fund in the Member State in which the person concerned is insured – Grant subject to requirements that the treatment must be necessary – Whether permissible – Conditions – Possibility of obtaining equally effective treatment without undue delay – Criteria for assessment 2.. Freedom to provide services – Restrictions – National rules on reimbursement of medical costs incurred in another Member State – Non-hospital treatment – Requirement of prior authorisation from the insurance fund in the Member State in which the person concerned is insured – Not permissible – Whether justifiable – Threat to the financial balance of the social security system, the protection of public health and the essential characteristics of the national sickness insurance scheme – None (EC Treaty Art. 59 (now, after amendment, Art. 49 EC) and Art. 60 (now Art. 50 EC)) Freedom to provide services – Restrictions – National rules on reimbursement of medical costs incurred in another Member State – Non-hospital treatment – Requirement of prior authorisation from the insurance fund in the Member State in which the person concerned is insured – Not permissible – Whether justifiable – Threat to the financial balance of the social security system, the protection of public health and the essential characteristics of the national sickness insurance scheme – None JUDGMENT OF THE COURT13 May 2003 (1) ((Freedom to provide services – Articles 59 of the EC Treaty (now, after amendment, Article 49 EC) and 60 of the EC Treaty (now Article 50 EC) – Sickness insurance – System providing benefits in kind – System of agreements – Medical costs incurred in another Member State – Prior authorisation – Criteria – Justification))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Ms Müller-Fauré, by J. Blom, advocaat, ─ Onderlinge Waarborgmaatschappij OZ Zorgverzekeringen UA, by J.K. de Pree, advocaat, ─ the Netherlands Government, by M.A. Fierstra, acting as Agent, ─ the Belgian Government, by P. Rietjens, acting as Agent, ─ the Danish Government, by J. Molde, acting as Agent, ─ the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents, ─ the Spanish Government, by N. Díaz Abad, acting as Agent, ─ the Irish Government, by M.A. Buckley, acting as Agent, and N. Hyland BL, ─ the Italian Government, by U. Leanza, acting as Agent, and I.M. Braguglia, avvocato dello Stato, ─ the Swedish Government, by A. Kruse, acting as Agent, ─ the United Kingdom Government, by R. Magrill, acting as Agent, and S. Moore, Barrister, ─ the Icelandic Government, by E. Gunnarsson, H.S. Kristjánsson and V. Hauksdóttir, acting as Agents, ─ the Norwegian Government, by H. Seland, acting as Agent, ─ the Commission of the European Communities, by P. Hillenkamp and H.M.H. Speyart, acting as Agents, after considering the additional written observations submitted at the Court's request on behalf of: ─ Ms Van Riet, by A.A.J. van Riet, ─ Onderlinge Waarborgmaatschappij OZ Zorgverzekeringen UA, by J.K. de Pree, ─ Onderlinge Waarborgmaatschappij ZAO Zorgverzekeringen, by H.H.B. Limberger, acting as Agent, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the Spanish Government, by N. Díaz Abad, ─ the Irish Government, by D.J. O'Hagan, acting as Agent, ─ the Swedish Government, by A. Kruse, ─ the United Kingdom Government, by D. Wyatt QC, acting as Agent, and S. Moore, ─ the Norwegian Government, by H. Seland, ─ the Commission, by H.M.H. Speyart, having regard to the Report for the Hearing,after hearing the oral observations of Onderlinge Waarborgmaatschappij OZ Zorgverzekeringen UA, represented by J.K. de Pree; Onderlinge Waarborgmaatschappij ZAO Zorgverzekeringen, represented by R. Out, acting as Agent; the Netherlands Government, represented by H.G. Sevenster; the Danish Government, represented by J. Molde; the Spanish Government, represented by N. Díaz Abad; the Irish Government, represented by A. Collins BL; the Finnish Government, represented by T. Pynnä, acting as Agent; the United Kingdom Government, represented by D. Lloyd-Jones QC, and the Commission, represented by H. Michard, acting as Agent, and H.M.H. Speyart, at the hearing on 10 September 2002, after hearing the Opinion of the Advocate General at the sitting on 22 October 2002,gives the followingNational legal frameworkOn those grounds, THE COURT,Rodríguez IglesiasWathelet Schintgen TimmermansEdward La Pergola JannMacken Colneric von BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: Dutch. Language of the case: Dutch.

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THE COURT OF FIRST INSTANCE ANNULS THE COMMISSION'S DECISIONS PROHIBITING THE CONCENTRATION BETWEEN SCHNEIDER AND LEGRAND AND ORDERING THEM TO SEPARATE ACCORDINGLY

| 62001A0310 Judgment of the Court of First Instance (First Chamber) of 22 October 2002. - Schneider Electric SA v Commission of the European Communities. - Competition - Action for annulment. - Case T-310/01. European Court reports 2002 Page II-04071 Keywords 1. Competition - Concentrations - Examination by the Commission - Decision requesting information addressed to the notifying parties - Automatic suspension of the four-month period referred to in Article 10(3) of Regulation No 4064/89(Council Regulation No 4064/89, Arts 10(3) and (4) and 11(5))2. Competition - Concentrations - Assessment of compatibility with the common market - Relevant market - Geographical definition(Council Regulation No 4064/89, Art. 2(3))3. Competition - Concentrations - Assessment of compatibility with the common market - Creation or strengthening of a dominant position impeding competition - Assessment criteria(Council Regulation No 4064/89, Art. 2(3))4. Competition - Concentrations - Assessment of compatibility with the common market - Creation or strengthening of a dominant position impeding competition - Relevance of the range of products and brands of the entity created by the concentration - Not decisive where presence and supply vary from one national market to another(Council Regulation No 4064/89, Art. 2(3))5. Competition - Concentrations - Incompleteness of a decision declaring a concentration incompatible with the common market - Not relevant if the decision is otherwise justified by a set of factors(Council Regulation No 4064/89, Art. 2(3))6. Competition - Concentrations - Administrative procedure - Observance of the rights of the defence - Statement of objections - Necessary content(Commission Regulation No 447/98, Art. 13(2)) Summary $$1. Where, following a failure by the parties notifying a concentration between undertakings to respond to a letter requesting information within the reasonable period set therein, the Commission adopts a decision, pursuant to Article 11(5) of Regulation No 4064/89 on the control of concentrations between undertakings, ordering the parties to provide it with the information requested, the four-month period referred to in Article 10(3) of that regulation is exceptionally ... suspended, under the mandatory terms of Article 10(4). Where a decision requiring information has been properly sent by the Commission to a notifying undertaking, the fact that the term exceptionally is used does not preclude that decision from automatically suspending the four-month period from the date on which it is found that the necessary information has not been provided until the date on which it is provided.What is exceptional, within the meaning of Regulation No 4064/89, about suspension of the relevant period is the occurrence of the conditions which allow a decision requesting information to be adopted and not the consequences to be inferred from such a decision.( see paras 99-100, 104, 106, 109 )2. The geographic market to be taken into account for the purpose of applying Regulation No 4064/89 on the control of concentrations between undertakings is a defined geographic area in which the product concerned is marketed and where the conditions of competition are sufficiently homogeneous for all economic operators, so that the effect on competition of the concentration notified can be evaluated rationally.( see para. 154 )3. When applying Regulation No 4064/89 on the control of concentrations between undertakings, the Commission must, for the purpose of demonstrating the risk of the creation or strengthening of a dominant position impeding competition on previously defined national sectoral markets, use evidence of economic power relating to those markets. It may also take account of transnational effects which may increase the impact which a concentration has on each of the national sectoral markets deemed relevant but those effects must be demonstrated to the requisite legal standard and not merely presumed to exist.( see paras 171, 178-179 )4. When applying Regulation No 4064/89 on the control of concentrations between undertakings, the Commission may not base the arguments supporting its assessment of the risk of the creation or strengthening of a dominant position impeding competition on the national sectoral markets affected by a concentration on the fact that the new entity will have a range of products and brands which is unrivalled throughout the European Community where it is unable to establish that the entire range is offered on the relevant national markets.( see paras 239-243, 255-257, 262 )5. However incomplete a Commission decision finding a concentration incompatible with the common market may be, that cannot entail annulment of the decision if, and to the extent to which, all the other elements of the decision permit the Community judicature to conclude that in any event implementation of the transaction will create or strengthen a dominant position as a result of which effective competition will be significantly impeded for the purposes of Article 2(3) of Regulation No 4064/89 on the control of concentrations between undertakings.( see para. 412 )6. The statement of objections must contain an account of the objections cast in sufficiently clear terms to achieve the objective ascribed to it by the Community regulations, namely to provide all the information the undertakings need to defend themselves properly before the Commission adopts a final decision.That requirement is particularly strict in the procedures for reviewing concentrations between undertakings governed by Regulation No 4064/94 in which the Commission adopts a prospective approach to the state of competition to which the concentration under examination is likely to give rise in the future In those procedures, the statement of objections is not solely intended to spell out the complaints and give the undertaking to which it is addressed the opportunity to submit comments in response. It is also intended to give the notifying parties the chance to suggest corrective measures and, in particular, proposals for divestiture and sufficient time, given the requirement for speed which characterises the general scheme of Regulation No 4064/89, to ascertain the extent to which divestiture is necessary with a view to rendering the transaction compatible with the common market in good time.( see paras 440-444 ) Parties In Case T-310/01,Schneider Electric SA, established in Rueil-Malmaison (France), represented by F. Herbert, J. Steenbergen and M. Pittie, lawyers,applicant,supported byFrench Republic, represented by G. de Bergues and F. Million, acting as Agents, with an address for service in Luxembourg,intervener,vCommission of the European Communities, represented by P. Oliver, P. Hellström and F. Lelièvre, acting as Agents, with an address for service in Luxembourg,defendant,supported byComité central d'entreprise de la SA Legrand,Comité européen du groupe Legrand,established in Limoges (France), represented by H. Masse-Dessen, lawyer,interveners,APPLICATION for annulment of Commission Decision C(2001)3014 final declaring a concentration to be incompatible with the common market and the EEA Agreement (Case COMP/M.2283 - Schneider-Legrand),THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (First Chamber),composed of: B. Vesterdorf, President, N.J. Forwood and H. Legal, Judges,Registrar: B. Pastor, Deputy Registrar,having regard to the written procedure and further to the hearing on 10 July 2002,gives the followingJudgment Grounds Legal framework1 Article 2 of Council Regulation (EEC) No 4064/89/EEC of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1, corrected version in OJ 1990 L 257, p. 13), as most recently amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1) (hereinafter Regulation No 4064/89) provides:1. Concentrations within the scope of this Regulation shall be appraised in accordance with the following provisions with a view to establishing whether or not they are compatible with the common market.In making this appraisal, the Commission shall take into account:(a) the need to maintain and develop effective competition within the common market in view of, among other things, the structure of all the markets concerned and the actual or potential competition from undertakings located either within or outwith the Community;(b) the market position of the undertakings concerned and their economic and financial power, the opportunities available to suppliers and users, their access to supplies or markets, any legal or other barriers to entry, supply and demand trends for the relevant goods and services, the interests of the intermediate and ultimate consumers, and the development of technical and economic progress provided that it is to consumers' advantage and does not form an obstacle to competition.2. A concentration which does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared compatible with the common market.3. A concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared incompatible with the common market....2 Under Article 6(1)(c) of Regulation No 4064/89, where the Commission finds that the concentration notified falls within the scope of the regulation and raises serious doubts as to its compatibility with the common market, it is to decide to initiate proceedings.3 Article 7 of Regulation No 4064/89 provides:1. A concentration as defined in Article 1 shall not be put into effect either before its notification or until it has been declared compatible with the common market ......3. Paragraph 1 shall not prevent the implementation of a public bid which has been notified to the Commission in accordance with Article 4(1), provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the Commission pursuant to paragraph 4....4 Article 8 of Regulation No 4064/89 provides in particular:2. Where the Commission finds that, following modification by the undertakings concerned if necessary, a notified concentration fulfils the criterion laid down in Article 2(2) ... , it shall issue a decision declaring the concentration compatible with the common market....3. Where the Commission finds that a concentration fulfils the criterion defined in Article 2(3) ... , it shall issue a decision declaring that the concentration is incompatible with the common market.4. Where a concentration has already been implemented, the Commission may, in a decision pursuant to paragraph 3 or by separate decision, require the undertakings or assets brought together to be separated or the cessation of jointcontrol or any other action that may be appropriate in order to restore conditions of effective competition.5 Under Article 10(3) of Regulation No 4064/89, a decision declaring that a concentration is incompatible with the common market must be taken within not more than four months of the date on which proceedings are initiated.6 Under Article 10(4), that period is exceptionally to be suspended where, owing to circumstances for which one of the undertakings involved in the concentration is responsible, the Commission has had to request information by decision pursuant to Article 11(5) of Regulation No 4064/89.7 Under Article 10(5) of Regulation No 4064/89, where the Court of Justice gives a judgment which annuls the whole or part of a Commission decision taken under the regulation, the periods laid down therein are to start again from the date of the judgment.8 Article 10(6) of Regulation No 4064/89 provides that where the Commission has not taken a decision in accordance with Article 8(3) within the four-month time-limit referred to above, the concentration is to be deemed to have been declared compatible with the common market.9 Article 11(1) of Regulation No 4064/89 enables the Commission, in carrying out the duties assigned to it by the regulation, to obtain all necessary information from, among others, the parties to the concentration which has been notified.10 Article 11(5) provides that where an undertaking does not provide the information so requested by the Commission within the period fixed or provides incomplete information, the Commission is, by decision, to require the information to be provided. The decision must specify what information is required, fix an appropriate period within which it is to be supplied and state that the person concerned has the right to have the decision reviewed by the Community Courts.11 Article 18(3) of Regulation No 4064/89 provides that the Commission is to base its decision only on objections on which the parties have been able to submit their observations and that the rights of the defence are to be fully respected in the proceedings.12 Finally, under Article 9(1)(a) of Commission Regulation (EC) No 447/98 of 1 March 1998 on the notifications, time-limits and hearings provided for in Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings (OJ 1998 L 61, p. 1), the period of four months is to be suspended where the Commission, under Article 11(5) of Regulation No 4064/89, has to take a decision because the information requested from one of the notifying parties has not been provided or has not been provided in full within the time-limit fixed by the Commission.Facts13 Schneider Electric SA (Schneider), a company incorporated under French law, is the parent company of a group engaged in the manufacture and sale of products and systems in the electrical distribution, industrial control and automation sectors. In the 2000 financial year Schneider's turnover was EUR 8 750 million worldwide and EUR 4 095 million within the Community.14 Legrand SA is a company incorporated under French law which specialises in the manufacture and sale of electrical equipment for low-voltage installations. In 2000 its turnover amounted to EUR 2 791 million worldwide and EUR 1 684 million within the Community.15 On 16 February 2001 Schneider and Legrand, in accordance with the requirements in Regulation No 4064/89, notified the Commission of Schneider's proposal to make a public exchange offer (the offer) in respect of all the shares in Legrand held by the public.16 That step was taken after informal notifications had been submitted on 12 December 2000 and 5 January 2001.17 The notifying parties sent the Commission a further draft notification on 29 January 2001.18 Schneider and Legrand then replied to 71 questions sent by the Commission on 7 February 2001 and intended to finalise the third draft notification.19 The Commission concluded that the concentration notified fell within the scope of Regulation No 4064/89 and that there were serious doubts as to its compatibility with the common market and the European Economic Area (EEA).20 As a result, the Commission adopted, on 30 March 2001, a decision under Article 6(1)(c) of Regulation No 4064/89, by which it opened the second stage of the procedure for examining the transaction notified.21 By letter of 6 April 2001, the Commission sent Schneider and Legrand a request for information under Article 11(1) of Regulation No 4064/89.22 Since by the end of the period for responding, which expired on 18 April 2001, neither company had provided all the information requested on the various markets affected by the concentration, the Commission sent each of them a decision pursuant to Article 11(5) of Regulation No 4064/89 dated 27 April 2001.23 By 25 June 2001 the Commission had received all the information requested.24 On 7 June 2001, Schneider submitted the terms of its offer to the French Financial Markets Council (Conseil Français des Marchés Financiers), which at its meeting of 14 June 2001 stated that it had no objections. The offer was approved by the Commission des Opérations de Bourse (Stock Exchange Commission) on 19 June 2001.25 Since Article 7(3) of Regulation No 4064/89 allows the implementation of public bids which have been notified to the Commission, provided that the purchaser does not exercise the voting rights attached to the securities concerned, Schneider launched its offer on 21 June 2001 and closed it on 25 July 2001.26 On 3 August 2001, the Commission, acting in accordance with Article 13(2) of Regulation No 447/98, sent Schneider a statement of objections in which it concluded that the transaction would create or strengthen a dominant position in a number of national sectoral markets.27 On 6 August 2001 the Commission des Opérations de Bourse announced the final outcome of Schneider's offer for Legrand shares. Schneider thus acquired 98.7% of the shares in Legrand.28 Schneider submitted to the Commission a report dated 14 August 2001 which had been drawn up by Professor L. Waverman and the consultancy, National Economic Research Associates, on behalf of the notifying parties (the first NERA report). That report examines the definition of the sectoral market in switchboards and panel-boards, the integrated sales of panel-board components of two of Schneider's competitors, ABB and Siemens, and also competition on the market for panel-boards in Italy, Spain, Portugal and Denmark.29 The notifying parties replied to the Statement of Objections by a document lodged on 16 August 2001.30 A hearing was held on 21 August 2001.31 On 29 August 2001, a meeting took place between Schneider and Commission officials with a view to drawing up modifications, for the purposes of Article 8(1) of Regulation No 4064/89, intended to solve the competition problems identified by the Commission.32 To that end, Schneider submitted its proposed commitments (remedies or corrective measures) on 14 September 2001, the final day of the period prescribed for that purpose.33 On 18 September 2001, the Commission sent the other parties concerned a questionnaire concerning the proposals.34 The Advisory Committee on Concentrations met on 19 September 2001 to examine the draft of the final decision.35 On 24 September 2001 Schneider sent the Commission a new version of its commitments of 14 September in response to the specific requests made by the Commission on 21 September.36 On the same date, the Commission convened a meeting with the parties.37 In a note enclosed with their letter of 25 September 2001 to the Member of the Commission responsible for competition matters, Schneider and Legrand expressed their utter surprise at the Commission's further negative reaction to their new proposed commitments, since they envisaged that Legrand would withdraw from the markets for panel-board components throughout the entire EEA.38 The Advisory Committee on Concentrations met again on 28 September 2001 to examine the proposed corrective measures and to express its view on the draft decision.39 On 10 October 2001 the Commission adopted a decision on the basis of Article 8(3) of Regulation No 4064/89 (C (2001) 3014 final (Case COMP/M.2282 - Schneider/Legrand)) (the Decision).40 Article 1 of the Decision states:The concentration notified to the Commission by Schneider on 16 February 2001, which would allow it to acquire sole control of Legrand, is declared incompatible with the common market and the EEA Agreement.41 The Decision includes a description of the sector for low voltage electrical equipment (Section V.A Compatibility with the Common Market), a definition of the national sectoral markets affected by the merger (Section V.B), an analysis of the transaction (Section V.C) and an assessment of the remedies proposed by Schneider to resolve the competition problems identified by the Commission (Section VI, Corrective Measures).42 The industrial sector affected by the concentration consists of equipment used in industrial, tertiary or residential buildings, downstream from the connection to the medium voltage distribution grid. That equipment can be arranged in three categories, which are described in recital 12 to the Decision.43 First, low-voltage distribution switchboards are used essentially for supplying electricity to the various levels of the installation and protecting the installation and the user against power surges and short-circuits.44 Those switchboards, mainly composed of a cabinet and safety components such as circuit breakers, fuses or differential switches, may be subdivided into three groups of products corresponding to the different levels of electrical distribution:- main switchboards, used to connect large tertiary or industrial buildings to the medium-voltage grid;- distribution panel-boards, used on the individual floors of a building;- final panel-boards, used by end-users with low current requirements, such as the occupant of an apartment.45 Second, cableways/ladders and busbar trunking are used to carry electric cables in the basement, service shafts or false ceilings of a building.46 Third, the electrical equipment situated downstream from the final distribution panel-board is composed of six categories of product (see, in particular, recital 302 to the Decision):- ultraterminal equipment making up the final part of the electrical installation (sockets, switches, etc.);- control systems running a specific application, such as heating, in an individual area of a building;- safety systems, protecting property and people (alarm systems, fire detectors, safety lighting, etc.);- computer connectors for communication systems (computer connectors, interconnection boxes, etc.);- fixing and shunting equipment, used for shunting, fixing and wiring equipment downstream from final panel-boards;- trunking components (concealed trunking, floor boxes or conduits).47 The concentration also impacts on other types of products for industrial use, in particular accessories for control and signalling, also known as industrial pushbuttons, and equipment for supplying and transforming electricity.48 The parties agreed to divide the relevant industrial sector into segments as shown in the table below, which is set out at recital 14 to the Decision:>lt>049 Six categories of operators are involved in the supply of, and demand for, the equipment concerned.50 Manufacturers, such as Schneider and Legrand, are the industrial groups producing the electrical equipment concerned.51 Wholesalers are the local distributors who buy from the manufacturers and offer the range of materials which installation engineers and switchboard assemblers need in order to carry out an electrical installation.52 Switchboard assemblers are professionals who put together the various components of a switchboard in a building. In practice, they carry out four functions, namely:- designing and adapting the board to the particular needs of each installation;- supplying and assembling the parts of the board (cabinet components, circuit breakers, fuses, etc.);- wiring the board;- checking that the assembly works properly.53 The switchboard assemblers then deliver the cabinets ready for use to the installation engineer, who will fit them at the end-user's premises. In practice, switchboard assemblers are mainly involved with main switchboards and distribution panel-boards. Final panel-boards are generally adapted and assembled directly by installation engineers.54 Installation engineers are professionals responsible for fitting low-voltage electrical equipment at the end-user's premises.55 Project managers are architects, research consultancies, construction companies or property developers responsible for projects involving the installation of electrical equipment.56 End-users are the persons or undertakings which own the building in which the electrical equipment is installed. Typically, end-users can be divided into two broad categories: (i) industrial and (ii) construction undertakings. The construction sector is itself sometimes subdivided into companies in the tertiary sector and residential customers.57 The Commission concluded, at recital 782 to the Decision, that the transaction would create a dominant position as a result of which effective competition would be significantly impeded on the following markets:- the markets for moulded case circuit breakers, miniature circuit breakers and cabinets intended for distribution panel-boards in Italy;- the markets for miniature circuit breakers, differential circuit breakers and cabinets intended for final panel-boards in Denmark, Spain, Italy and Portugal;- the markets for connector circuit breakers in France and Portugal;- the market for cableways in the United Kingdom;- the market for sockets and switches in Greece;- the market for watertight equipment in Spain;- the market for fixing and shunting equipment in France;- the market for electrical transformation products in France;- the market for control and signalling accessories in France.58 The Commission also took the view, at recital 783 to the Decision, that the projected transaction would strengthen a dominant position as a result of which effective competition would be significantly impeded on the following markets:- the markets for moulded case circuit breakers, miniature circuit breakers and cabinets intended for distribution panel boards in France;- the markets for miniature circuit breakers, differential switches and boxes intended for final panel boards in France;- the market for sockets and switches in France;- the market for watertight equipment in France;- the market for security lighting systems or independent emergency lighting units in France.59 The Commission finally concluded that the commitments proposed by Schneider would not resolve the competition problems identified in the Decision.60 Schneider submitted a second report to the Commission. This was prepared by NERA in December 2001 (the second NERA report) and dealt with demand elasticity as regards panel-board components, the brand loyalty of installation engineers, distribution structure in Italy, Spain, Portugal and Denmark, the features of ABB's and Siemen's integrated sales of panel-board components and, finally, definition of the sectoral market for electrical switchboards and panel-boards to be taken into consideration.Procedure before the Court61 Schneider brought an action for annulment of the Decision by application lodged at the Court Registry on 13 December 2001.62 By separate document, Schneider requested the Court to adjudicate on its case under an expedited procedure, in accordance with Article 76a of the Rules of Procedure.63 On 23 January 2002, the Court dismissed that application having taken account of the nature of the case and, in particular, the volume of the application and the documents annexed to it.64 On 5 April 2002, an informal meeting was organised between the President of the First Chamber and the Judge-Rapporteur and the parties' representatives.65 On 3 May 2002 the Court (First Chamber) decided, after hearing the Commission's views, to grant Schneider's application for the case to be adjudicated under the expedited procedure, since Schneider had confirmed that it would adhere to the abridged version of its application, submitted on 12 April 2002.66 By order of 6 May 2002, the French Republic was granted leave to intervene in support of the form of order sought by Schneider.67 On 16 May 2002, the Commission lodged a new version of the defence that it had previously lodged, adapted to the abridged version of the application.68 By order of 7 June 2002, the Works Council of SA Legrand and the European Works Council of the Legrand group were granted leave to intervene in the proceedings in support of the form of order sought by the Commission.69 Upon hearing the report of the Judge-Rapporteur, the Court decided to open the oral procedure and put a number of questions to the parties, by way of measures of organisation of procedure, as provided for in Article 64 of the Rules of Procedure of the Court of First Instance. The parties complied with the requests.70 The parties presented oral argument and replied to the Court's questions at the hearing on 10 July 2002.Forms of order sought by the parties71 Schneider, supported by the French Republic, claims that the Court should:- primarily, allowing the first plea in law, annul the Decision and declare that Article 10(5) of Regulation No 4064/89 is not applicable to the present case;- in the alternative, annul the Decision;- in so far as may be necessary, reserve the applicant's right to request the adoption of any measure of organisation of procedure or measure of inquiry necessary for establishment of the facts and for analysis of the disputed concentration;- order the Commission to pay all the costs.72 The Commission, supported by the Works Council of SA Legrand and by the European Works Council of the Legrand group, contends that the Court should:- dismiss the application;- order Schneider to pay the costs.Law73 The arguments developed by Schneider in support of its action are set out in various pleas, which, for ease of presentation, are to be regarded as alleging (i) procedural irregularity as regards Article 10(3) of Regulation No 4064/89, (ii) manifest errors on the part of the Commission in its appraisal, first, of the impact of the concentration and, second, of the commitments submitted by Schneider in order to render the transaction compatible with the common market and (iii) infringement of the rights of the defence.Procedural irregularityFirst plea, alleging infringement of Article 10(3) of Regulation No 4064/89- Arguments of the parties74 In the context of this plea, raised by way of principal claim, Schneider observes that, under Article 10(3) of Regulation No 4064/89, the Commission had a period of four months starting on 30 March 2001, the date on which the second stage of the procedure began, to make a finding as to whether the concentration was incompatible with the common market.75 That mandatory period expired on 10 August 2001, as a result of the application of the provisions of Regulation No 447/98 relating to the calculation of time-limits, i.e. before the Commission adopted the Decision on 10 October 2001.76 In those circumstances, the disputed concentration must be deemed to have been declared compatible with the common market, in accordance with Article 10(6) of Regulation No 4064/89.77 The Commission, however, relied on the exceptional suspension of the four-month period prescribed by Article 10(4) of Regulation No 4064/89 where, owing to circumstances for which one of the undertakings involved in the concentration is responsible, the Commission has been obliged to request information by decision pursuant to Article 11(5) of Regulation No 4064/89.78 The decision of 27 April 2001 sent to Schneider (see paragraph 22 above) in effect required it to provide the Commission with information which the Commission, by letter of 6 April 2001, had already asked it to provide by 18 April 2001. However, the very strict conditions to which Article 10(4) of Regulation No 4064/89 subjects suspension of the four-month period had not been met.79 Suspension of that period is exceptional and does not necessarily follow from every request for information. In the present case, the Commission was obliged to adopt the decision not because of circumstances for which the parties to the concentration were responsible but because of the fact that, in the letter of 6 April 2001, the parties were given five working days within which to respond to 322 questions. Those questions involved gathering more than 300 000 pieces of information, whose later use in the appraisal of the transaction remains to be shown.80 The Commission thus itself created a situation which it later used to justify adopting a decision requesting information and having a suspensive effect.81 Schneider points out that the Decision, at recital 8, takes Article 10(4) of Regulation No 4064/89 as the basis for suspending the period for adopting a decision, whilst the decision of 27 April 2001 requesting information is founded, in that regard, on Article 9 of Regulation No 447/98.82 The Commission cannot attempt to justify suspending the four-month period by contending that Article 9 of Regulation No 447/98, unlike Article 10(4) of Regulation No 4064/89, does not refer to the exceptional nature of the suspension and the need to establish that there were circumstances for which the parties to the concentration were responsible. Regulation No 447/98 cannot provide an exception to the provisions of the basic Regulation, No 4064/89, which it implements.83 The fact that Schneider did not directly bring an action for annulment of the decision of 27 April 2001 does not affect the admissibility of the present plea. Suspension of the maximum four-month period is not a substantive measure affecting the rights of the undertakings. That interpretation is not affected by the fact that it was stated in the body of the decision of 27 April 2001 that an action for annulment could be brought against it. The operative part did not mention suspension of the four-month time-limit and Schneider could not in any event have shown sufficient legal interest to apply for annulment of the decision.84 In so far as the first plea is upheld, Schneider also asks the Court to find, on the basis of Article 241 EC, that Article 10(5) of Regulation No 4064/89 is inapplicable. Article 10(5) provides that the periods laid down in the regulation are to start again from the date of a judgment annulling a Commission decision. To cause time to run again in a case in which a decision on compatibility is deemed to have been given would be tantamount not to condemning but to endorsing the unlawful act, since the Commission would thereby be granted a fresh period within which to determine the matter.85 The Commission claims that the plea alleging that the decision of 27 April 2001 is illegal is manifestly inadmissible, since the decision was not challenged within the period prescribed for bringing an action for annulment (Case C-178/95 Wiljo [1997] ECR I-585, paragraph 19).86 The decision of 27 April 2001 requesting information, which was adopted under Article 11(5) of Regulation No 4064/89, is a measure against which an action for annulment may be brought. In addition, Schneider had a vested and present interest in applying directly for annulment of that decision.87 In any event, the plea is unfounded: the decision complies with Regulation No 4064/89 and Regulation No 447/98. In particular, the information requested was necessary for the investigation and the Commission was actually obliged to adopt the decision because of a delay for which the notifying parties were responsible.88 Whether a time-limit is reasonable must be determined in relation to the particular circumstances of each case (Joined Cases T-213/95 and T-18/96 SCK and FNK v Commission [1997] ECR II-1739) and the Commission is obliged to observe mandatory time-limits.89 The letter of 6 April 2001 amounted to no more than the logical follow-up to the various questions which the Commission had been asking since the start of the procedure, to which an undertaking such as Schneider was required to reply with all the diligence expected of a reasonably well-informed operator.90 There is no difference, as regards the effects of decisions requesting information under Article 11(5) of Regulation No 4064/89, between Article 10(4) of Regulation No 4064/89 and Article 9 of Regulation No 447/98. It is possible to refer to either of those provisions.91 In those circumstances, it is of no consequence that, in stating reasons for suspending the four-month period, the decision of 27 April 2001 takes as its legal basis, at its tenth recital, Article 9 of Regulation No 447/98, and that the Decision, at its eighth recital, takes Article 10(4) of Regulation No 4064/89 as such.92 Furthermore, the Commission regards as premature, and therefore inadmissible, the plea of illegality raised in respect of Article 10(5) of Regulation No 4064/89, which provides that the periods laid down in that regulation are to start again from the date on which a judgment annulling a decision is given.93 In any event, it is logical, indeed essential, that Regulation No 4064/89 should contain a provision setting out the effects which annulment of a decision based on that regulation is to have on the periods prescribed therein.- Findings of the Court94 The contested suspension of the four-month period within which the Commission was to take a decision covers the period between 19 April 2001, the day following the deadline set in the Commission's request for information of 6 April 2001, and 25 June 2001, the date on which the Commission considers that it received all the information requested.95 It is not disputed that, if the suspension of the period were to be regarded as lawful, the Decision, adopted on 10 October 2001, would have been given, account being taken of the calculation of working days, within the four-month period commencing on 30 March 2001, the date on which the procedure was initiated. By contrast, if the suspension were found to be unlawful, the Commission would have to be regarded as not having taken a decision under Article 8(3) within the statutory period.96 Suspension of this kind, which Regulation No 4064/89 describes as exceptional, presupposes that the Commission has been obliged to request information by decision because of circumstances for which one of the parties to the concentration is responsible.97 In that regard, the Commission noted, in the seventh recital to its decision of 27 April 2001, that the information requested in its letter of 6 April 2001 was necessary, for the purposes of Article 11(1) of Regulation No 4064/89, to enable it to examine the compatibility of the proposed transaction with the common market and, in particular, to determine the position of the notifying parties on the various sectoral markets concerned.98 Schneider does not fundamentally dispute that the information was necessary, since it merely submits that the later use of the information in the appraisal of the transaction remains to be shown.99 Nor is it disputed that the parties to the notification did not comply with the deadline for replying, set for 18 April 2001 by the letter of 6 April 2001. As stated in the fourth recital to the decision of 27 April 2001, the notifying parties informed the Commission by letter of 23 April 2001 that they were not in a position to meet the deadline for responding.100 Given the circumstances of the present case (see, in particular, paragraphs 15 to 18 above), and the requirement for speed which characterises the overall scheme of Regulation No 4064/89, the Court regards the time-limit for responding set by the letter of 6 April 2001, which expired on 18 April 2001, as reasonable.101 The letter of 6 April 2001 followed a series of contacts and conversations between the notifying parties and the Commission which had begun on 8 December 2000. In the course of that period, the notifying parties had already had occasion to reply to numerous informal requests for information.102 In view of its nature, the information requested in the letter of 6 April 2001, which was of a similar kind to much of the information already supplied during the informal stage of the enquiry, should, therefore, in the normal course of events have been available at short notice within a company of Schneider's size.103 Furthermore, the notifying parties did not immediately challenge the extent of the information requested in the letter of 6 April 2001, since they did not react until they wrote to the Commission on 23 April 2001 (see above).104 It does not therefore appear that the Commission acted incorrectly when, on 27 April 2001, it adopted a decision pursuant to Article 11(5) of Regulation No 4064/89 requiring the parties to provide it with the information requested.105 That finding is not affected by the fact that on 23 April 2001, i.e. five days after expiry of the deadline for responding set by the letter of 6 April 2001, the parties suggested that the deadline should be postponed until 29 April 2001.106 In such a situation, the four-month period referred to in Article 10(3) of Regulation No 4064/89 is exceptionally ... suspended, under the mandatory terms of Article 10(4). Where a decision requiring information has been properly sent by the Commission to a notifying undertaking, the fact that the term exceptionally is used does not preclude that decision from automatically suspending the four-month period from the date on which it is found that the necessary information has not been provided until the date on which it is provided.107 In that regard, there is no contradiction between the wording of Article 10(4) of Regulation No 4064/89 and that of Article 9 of Regulation No 447/98.108 Also, the Commission was entitled to state, at the tenth recital to the decision of 27 April 2001:Under Article 9 of Regulation No 447/98, the periods set by Article 10(1) and (3) of Regulation No 4064/89 are to be suspended, where the Commission adopts a decision pursuant to Article 11(5) of that regulation, throughout the period between the end of the time-limit set in the request for information and receipt of the complete and correct information required by that decision.109 The Court is not convinced by the argument that the application of the basic rule in Regulation No 4064/89 was exceptional and unlawful. What is exceptional about suspension of the relevant period is the occurrence of the conditions which allow a decision requesting information to be adopted and not the consequences to be inferred from such a decision. As is clear from the above arguments, Schneider has failed to show that that decision was unlawful.110 Since the Commission was entitled to adopt the decision of 27 April 2001, the effect of which was to suspend the four-month period within which the Commission was to take a decision on the compatibility of the transaction notified, the Decision is not unlawful in that respect.111 In those circumstances, the first plea in law must be rejected and there is no need to rule on its admissibility in so far as it indirectly alleges that the decision of 27 April 2001 is unlawful.112 The plea alleging that Article 10(5) of Regulation No 4064/89 is illegal in so far as it has the effect that the relevant periods are to start again where a decision on incompatibility is annulled, was raised only if and in so far as the Court should uphold the plea alleging that suspension of the four-month period was unlawful. Accordingly, there is no need to adjudicate on the former plea.113 Moreover, even if the plea had been upheld, the objection of illegality would have had to be rejected as inadmissible, since the Commission has not at this stage adopted vis-à-vis Schneider any decision based on the provision whose illegality is raised indirectly (see, to that effect, Joined Cases C-432/98 P and C-433/98 P Council v Chvatal and Others [2000] ECR I-8535, paragraph 33).Pleas criticising the Commission's assessment of the impact of the concentration114 In the alternative, Schneider argues that the objections relating to the creation of a dominant position are not properly reasoned. In addition, the Decision is vitiated by manifest errors of methodology and assessment and fails correctly to apply the conditions necessary under Article 2(3) of Regulation No 4064/89 for a finding that a concentration is incompatible with the common market. The Decision thus contains substantive defects such as to justify its annulment.115 Before undertaking an examination of the various pleas falling under this heading, the Court will set out the substance of the economic reasoning on which the Commission based its analysis of the impact of the concentration.116 According to recital 488 of the Decision, the examination in the introduction to the Commission's analysis of the effects of the concentration (Section V.C.1.1. of the Decision) of the main features of competition so far as switchboards and panel-boards are concerned applies mutatis mutandis to the other product markets affected by the transaction, subject to particular considerations ... mentioned in the sections relating to the products concerned.117 In the general analysis set out between recitals 489 and 520, the Commission emphasises the low price sensitivity of demand for low-voltage electrical equipment. First, the decision to undertake building or renovation projects is not influenced by the price of electrical equipment, which often accounts for only a small part of the total cost of the work. Second, electrical equipment often represents only 20% of the overall value of the electrical installation, the other 80% being essentially labour costs. Consequently, an overall rise in the price of electrical equipment would have little, or indeed no, effect on demand.118 The Commission also considers that installation engineers and switchboard assemblers show significant loyalty to their manufacturer's brand and do not readily desert that manufacturer even if they are offered lower prices by competing producers.119 The Commission makes clear, however, that such brand loyalty is not absolute. As long as one brand guarantees that low-voltage electrical equipment is of good quality and is immediately available, it is not easy for other manufacturers to win over the customers, even if they offer better products and/or lower prices. By contrast, if a brand ceases to satisfy the basic requirements of installation engineers and switchboard assemblers, it will quickly lose their confidence and will find it difficult to regain it.120 Where, because the brand is one of the main factors which determine electricians' choices, a particular brand represents a significant barrier to market entry or diversification by manufacturers on other sectoral markets, the extent of the product range is, in the Commission's view, a further factor in the manufacturer's success. Manufacturers' readiness to extend their product ranges corresponds to wholesalers' inclination to prefer manufacturers with very extensive product ranges in order to optimise their costs.121 As indicated at recital 71, although wholesalers are not involved in sales of components for main switchboards, they account for between 80 and 90% of sales of the other types of electrical equipment affected by the transaction.122 Furthermore, manufacturers with extensive product ranges have an advantage at distributor level because of the various discounts which they offer to wholesalers and which represent a significant part of wholesalers' turnover (see recital 589). In particular, the basis for calculating volume discounts is the value of sales of all low-voltage electrical equipment (recital 587).123 As a result, although the criteria which influence their choices must clearly reflect those of their customers (switchboard assemblers and installation engineers), wholesalers nevertheless look for suppliers with the most extensive possible product range (recital 81).124 In the Commission's view, the merged entity will become an irresistible force in the distribution of the products concerned owing to its ability to reinforce its current market positions, at the expense of its competitors, owing to its unrivalled geographic coverage, its privileged relations with wholesalers, its unequalled product range and its incomparable variety of brands.125 Given the atomised nature of demand from switchboard assemblers and installation engineers and their loyalty to the best-known brands, the new group will be in a position to impose price rises, without their effect being negated by corresponding losses in market share (recitals 592 and 688).126 The Commission concludes that the transaction is likely to have a particularly acute effect on the price of panel-boards (recital 612), cableways (recital 641) and ultraterminal electrical equipment (recital 688).Second plea, alleging errors in the economic reasoning underpinning the analysis of the impact of the concentration- Arguments of the parties127 First, Schneider claims that the Commission's conclusion that the merged entity would be able to act independently of other players and, consequently, to raise prices is predicated on the low price sensitivity of overall demand for low-voltage electrical equipment. However, that factor is not relevant to an assessment of the competitive structures on each of the various sectoral markets.128 Instead, the analysis should be based on the elasticity inherent in an undertaking's tariff offer. In that regard, the second NERA report established that where manufacturers ran advertising campaigns for a particular item, sales increased to the detriment of competitors.129 The Commission observes that it pointed out, at recitals 517 to 519, that overall demand for low-voltage electrical equipment is not very price sensitive, or inelastic, since it is largely determined by exogenous factors.130 The point on which the Commission and Schneider disagree is therefore the price sensitivity of demand vis-à-vis each manufacturer. That issue is actually one and the same as the issue of purchasers' loyalty to manufacturers' brands.131 The Commission contends that the two NERA reports do not establish that sales promotions enabled manufacturers to win over their competitors' customers. Despite the low level of demand elasticity, however, those promotions could provide the opportunity to launch new products and could provide the necessary means of ensuring continuing consumer brand loyalty.132 Second, Schneider submits that the Commission cannot, without being inconsistent, find that the high degree of brand loyalty of switchboard assemblers and installation engineers puts competitors in a better position to withstand the concentration and at the same time find that such brand loyalty none the less represents a significant barrier to market entry which should be taken into account for the purposes of analysing the anti-competitive effects of the transaction.133 The Commission observes that, according to recital 499, the degree of brand loyalty has no consequences for the assessment of a dominant position and that such loyalty is not absolute but significant. It does not place existing players in an impregnable position (recital 494). However, that reasoning is not undermined by - nor is it inconsistent with - the fact that, for potential competitors, brand loyalty is a barrier to market entry.- Findings of the Court134 The Court finds, first, that, as is apparent from the second NERA report, Schneider does not call into question the relative inelasticity of overall demand for low-voltage electrical equipment. The dispute between the parties relates only to the need, perceived by Schneider, to take account of any cross elasticity between manufacturers when assessing the competitive structures of the various markets for low-voltage electrical equipment.135 Schneider's arguments suggest that that question is closely linked to that of the brand loyalty of switchboard assemblers and installation engineers. Thus, the second NERA report, at point 2.1.2, concludes from the increased sales of promotion items that customers, such as switchboard assemblers and installation engineers, change brands quickly when the prices of electrical equipment change.136 Schneider has not challenged recital 22, which states that direct purchases from manufacturers are the province of wholesalers, whose low price sensitivity to which the Commission refers (in particular at recital 650), is not discussed.137 Nor does it appear that Schneider has criticised recital 70, according to which only large industrial customers or large-scale switchboard assemblers operating in the main switchboard segment, which does not involve wholesalers, may find it advantageous to buy products directly from the manufacturers.138 In those circumstances, the increase in certain manufacturers' sales of promotion items - on the assumption that it was to the detriment of competitors - does not seem, in itself, to be capable of affecting what the Commission found to be the significant brand loyalty of switchboard assemblers and installation engineers.139 In fact, it is not inconceivable that the increase in sales of products promoted by the manufacturers can be accounted for by wholesalers.140 Therefore, it cannot necessarily be inferred from the increased sales of promotion items either that switchboard assemblers and installation engineers have a tendency to change brands quickly or, as a consequence, that there is high cross elasticity of demand on the part of those operators.141 As a result, the Court accepts the Commission's finding that switchboard assemblers and installation engineers have significant loyalty to the brands of manufacturers of low-voltage electrical equipment.142 In those circumstances, Schneider has not shown that the Commission, for the purposes of assessing the impact of the transaction, was wrong to use the test of price sensitivity of overall demand for low-voltage electrical equipment instead of relying on cross elasticity of demand (which has not been proved) on the part of switchboard assemblers and installation engineers.143 The Court finds, second, that, owing to what must be recognised as the significant loyalty of switchboard assemblers and installation engineers, it cannot be precluded that penetration of a national sectoral market may prove difficult for a new competitor.144 None the less, it cannot be precluded that such loyalty may also be a factor which, in this instance, puts a manufacturer already present on the relevant market in a better position to withstand the impact of the concentration.145 Therefore, the Commission's assessment of electricians' brand loyalty does not appear to be inconsistent.146 In those circumstances, the plea must be rejected.Third plea, alleging overestimation of the strength of the merged entity- Arguments of the parties147 Schneider observes that the Commission's approach was to define country by country the various product markets affected by the transaction, whilst the notifying parties had, on the contrary, contended during the administrative procedure that certain sectoral markets were European in scale.148 Without taking issue with that definition, Schneider complains that the Commission carried out, in Section V.C of the Decision, an overall analysis at European level of the impact of the transaction, instead of proceeding country by country on the basis of the definition of the product markets set out in Section V.B of the Decision.149 That overall analysis prompted the Commission to describe the new entity as the European leader and to conclude that it would enjoy certain substantial advantages in comparison with its competitors, in particular, the extent of its geographic coverage, its relations with wholesalers, the extent of its product range and the wide variety of its brands.150 However, the Commission cannot complain that the future entity would become the unchallenged European leader, whilst the strict national definition of the markets which it had undertaken shows, on the contrary, the narrow geographic limits of the competition problems identified.151 The Commission contends that it concluded that the transaction would lead to the creation or strengthening of a dominant position, relying solely on an analysis of the impact of the transaction in each country affected, irrespective of whether those effects were common to the national markets as a whole or specific to one or some of them.152 The Commission denies that it tried to establish that the merged entity would have a dominant position on any sectoral market of European scale or that it was the European leader. The Commission draws attention to the fact that the merged entity enjoyed, in particular, unrivalled geographic cover, and a product range and variety of brands which are appreciably more extensive than those of its competitors.- Findings of the Court153 It follows from point 8 of the Commission Notice on the definition of relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5, point 7) that the geographic market to be taken into account comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas.154 The Court has confirmed that the geographic market is a defined area in which the product concerned is marketed and where the conditions of competition are sufficiently homogeneous for all economic operators, so that the effect on competition of the concentration notified can be evaluated rationally (Joined Cases C-68/94 and C-30/95 France and Others v Commission [1998] ECR I-1375, paragraph 143).155 At Section V.B of the Decision, Definition of the relevant markets, the Commission described the national dimension of the various markets and market segments for low-voltage electrical equipment identified beforehand and set out in the table reproduced at paragraph 48 of this judgment.156 The Commission's conclusion that there were national markets for distribution and final panel-board components was founded on four factors (see recital 194).157 First, there are significant differences between the products sold in the various countries.158 Second, prices are set at national level and the price of certain reference products varies considerably (by up to twice as much) from one country to another.159 Third, the key factors in competition, both on the supply side (positioning of brands, access to wholesalers) and on the demand side (customer structure and expectations), are dependent upon essentially national factors, such as the concentration, size and sphere of activity of wholesalers, or installation engineers' perception of brands and product ranges. In addition, those factors vary significantly from one country to another. In particular, the extent to which wholesalers are concentrated varies markedly between countries and wholesalers' purchasing is organised on a national basis (recital 220). Negotiations between manufacturers and wholesalers, in particular as regards choice of suppliers and selection of the product ranges to be bought and sold, take place almost entirely at national or regional level (recital 223).160 Fourth, there are significant barriers to entry and expansion between countries. Those barriers can be attributed in particular to the conservatism of installation engineers (see recital 240), to national practices (see recitals 194 and 203) and to the absence of full harmonisation of technical standards at Community level (see recital 201) and can require a new entrant to invest significant sunk costs.161 At recital 268 the Commission points out that those key factors apply by analogy to cableways and busbar trunking.162 Similarly, the Commission takes the view that the various market segments in ultraterminal electrical equipment are national in scale (recitals 380, 381 to 384, 394 and 424).163 On concluding of its analysis of the transaction, the Commission finds that there are a certain number of objections relating to the creation or strengthening of a dominant position on the various national sectoral markets affected by the transaction and, as such, listed at recitals 782 and 783 (see paragraphs 57 and 58 of this judgment).164 The Commission's analysis of the effect of the disputed concentration on each of the national sectoral markets affected by the transaction is none the less also founded on the positions held by the merged entity outside those markets, inasmuch as the Commission took into account its unrivalled geographic coverage, i.e. the fact that its activities extend to the whole of the EEA.165 As regards, first, national markets for switchboard and panel-board components, the Commission, in order to illustrate that the new entity would acquire an unrivalled position, refers to the strength of the combined entity on the markets for low-voltage electrical equipment as a whole (recital 551) and sets out in Table 30, which is reproduced below, the range of low-voltage electrical equipment which the Schneider-Legrand group would be able to offer in each of the 15 countries listed:Table 30Markets for low-voltage electrical equipment affected by the transaction>lt>1Key: one star (*) represents 10 to 20% of total sales and so on up to five stars (*****), which represent a share of sales in excess of 50%.166 In that regard, the Commission explains at recital 550 that prior to the proposed transaction, the parties each had a very wide range of products in the low-voltage electrical-equipment sector. They most frequently held very significant positions for some of those products and in certain geographic areas. Thus the transaction [will] enable the parties to combine Schneider's strong positions in the Nordic countries in electrical equipment used downstream from final panel-boards with Legrand's strong positions in Southern Europe. Likewise, Schneider brings its strength in all categories of switchboards and panel-boards and reinforces Legrand's strong position in downstream products as a whole.167 The Commission continues as follows at recital 551:Following the transaction, there [will] be only two countries in the EEA (Germany and Finland) in which the combined entity will not have a leading position. More generally, it should also be pointed out that Schneider states that for low-voltage electrical equipment it is ranked second globally whilst Legrand portrays itself as world leader in ultraterminal electrical distribution ....168 The Commission goes on to observe, at recital 552, that none of Schneider-Legrand's competitors [will] have such a wide range of products and such geographic coverage with strong positions on the relevant markets.169 As regards, second, national markets for ultraterminal electrical equipment, the Commission draws attention to the fact that the merged entity will offer a full range of products and that its coverage of the EEA as a whole will be comprehensive and unmatched (recitals 654 and 658). The proposed transaction will therefore result, in the Commission's opinion, in the combination of Schneider's large market shares in Northern Europe and those of Legrand in Southern Europe (recital 659).170 Thus, although the Commission used the national dimension of the sectoral markets for low-voltage electrical equipment to demonstrate that a dominant position would be created or strengthened in those markets, it nevertheless had recourse to evidence of economic power drawn from all the national sectoral markets, irrespective of whether the concentration would give rise to competition problems on those markets.171 However, the Court observes that the creation or strengthening of a dominant position on national sectoral markets could, in this instance, be apprehended only on the basis of evidence of economic power relating to those markets, possibly supplemented by a consideration of transnational effects, assuming such effects should be shown to exist in the present case. However, that is not the position.172 In that regard, the Commission itself points out, at recitals 534 and 537, that, although the transaction creates, for example, a cumulation of market shares on all the national markets for panel-boards, it none the less gives rise to competition problems in only five countries, as may be seen from Tables 27 to 29, reproduced below.Table 27Market shares in distribution panel-board components>lt>21- Abbreviation of General Electric.* Confidential data.Table 28Market shares in final panel-board components>lt>3* Confidential data.Table 29Market shares in connector circuit breakers>lt>4* Confidential data.173 Likewise, the purpose of Table 35 in the Decision, reproduced below, is to illustrate the presence of the merged entity and of its main competitors on the various segments of the market for ultraterminal electrical equipment throughout the EEA.Table 35Presence of the major manufacturers on the markets for equipment used downstream from the final panel-board>lt>5Key: one star (*) represents a market share of between 5 and 20%, two stars (**) a market share of between 20 and 50% and three stars (***) a market share in excess of 50%.174 Of the segments of national markets referred to in Table 35 only the following segments were referred to in the objections relating to the creation or strengthening of a dominant position, set out at recitals 782 and 783:>lt>61 - Objections including the sockets and switches segment and the watertight equipment segment.2 - Objection relating to watertight equipment.175 It follows that, of all the national sectoral markets referred to in Table 30 reproduced at paragraph 165 above, the factual evidence in the Decision indicates that only the markets and segments shown below entail competition problems relating to the creation or strengthening of a dominant position:>lt>71 - Objection relating to watertight equipment segment.2 - Objection also relating to market for connector circuit breakers.3 - Objections relating to segments for sockets and plugs, watertight equipment and security systems.4 - Objection relating to the market for sockets and plugs.5 - Objection also relating to market for connector circuit breakers.Key: one star (*) represents a market share of between 5 and 20%, two stars (**) a market share of between 20 and 50% and three stars (***) a market share in excess of 50%.176 The Court thus finds that the Commission incorporated, not only in its presentation, but also in its analysis, of the facts, the unmatched geographic coverage of the merged entity throughout the whole of the EEA, in order to show that a dominant position would be created or strengthened on the national sectoral markets for switchboard components and for ultraterminal equipment as referred to in the objections set out at recitals 782 and 783.177 The Court points out in that respect that the transaction, as the documentary material in the Decision itself shows, in reality poses competition problems only in France and on six other national markets.178 Admittedly, as pointed out at paragraph 171 above, it is in principle open to the Commission to take account of transnational effects which may increase the impact which a concentration has on each of the national sectoral markets deemed relevant.179 Those effects may not be presumed to exist, however: on the contrary, the Commission must provide sufficient evidence that they do.180 It must be pointed out that, in order to provide evidence of the competition problems which would arise on the sectoral markets affected by the concentration and referred to at recitals 782 and 783, the Commission focused exclusively on the power which the merged entity would have on all the other national sectoral markets in Table 30, without weighing that power against the competitive strength of its competitors on those markets.181 None of those competitors features in Table 30. The table gives no indication of the impact of the transaction on each of the various national sectoral markets in which no competition problems will arise as a result of the concentration.182 In particular, Table 30 does not make clear that Legrand was present on the markets for distribution panel-board components in only three of the 15 countries referred to in Table 30, namely France, Italy and Norway (see recital 530). Nor, as a consequence, does it make clear that the proposed merger is likely to pose competition problems only in those three countries.183 Nor does Table 30 indicate whether the strength attributed to the merged entity on each of the national sectoral markets listed would result from the transaction or from the presence on those markets, prior to the transaction, of one or other of the notifying parties (see paragraphs 327 and 392 below). In particular, the table fails to indicate that before the transaction Legrand was not present on any of the national markets for main switchboard components and that, as a consequence, the transaction cannot give rise to competition problems in those markets (recital 245).184 Furthermore, ABB, Siemens and GE have a huge range of low-voltage products (recital 17), whilst ABB and Siemens are generally present in a large number of Member States (recital 20). In particular, ABB is represented on all the national markets for ultraterminal electrical equipment, or most of them, whilst Siemens and Hager are present on several of those markets (recitals 644 and 645).185 Nor, in light of the general scheme of the Decision, can the Court accept the assertion that the assessment of the role to be played by Schneider-Legrand at European level, far from casting doubt on the geographic definition of the relevant markets as being of national dimension, is an integral part of the analysis of the impact of the concentration on each of the national markets and product markets affected (recital 654).186 At the hearing, the Commission stated that a company present on all markets and holding a dominant position on all the geographic markets of the EEA as a whole is capable of retaliation.187 It was, however, by reference to each of the territories concerned that the Commission pointed out, at recital 605, that the combined entity's ability to offer a very wide range of products would enable it to direct targeted retaliatory measures against its competitors.188 Likewise, according to the Commission's own interpretation of Table 30 in its reply to the seventh plea (see paragraph 304 of this judgment), it is within the same geographic market that the new entity is supposed to gain a significant competitive advantage as a result of its strong position on other product markets on which the same wholesalers are active.189 Thus, only the Spanish market would appear to be affected by what the Commission claims at recitals 678 and 685 to be Schneider's ability to capitalise on the substantial presence it is known to enjoy on the markets for panel-board components in Spain and force wholesalers to stock its ultraterminal electrical equipment.190 Similarly, according to recital 604, it is only in Portugal that Schneider, which is deemed to be in a very strong position on the market for miniature circuit breakers, especially for industrial and tertiary applications, is accused of regularly fuelling the price war in the residential segment, in such a way as to confine Hager and ABB to that less profitable market and thereby protect its market shares in the segments for tertiary and industrial applications.191 It follows from the foregoing that the Commission, in its analysis of the merged entity's geographic coverage, incorrectly applied Article 2(3) of Regulation No 4064/89.192 The plea must therefore be accepted.Fourth plea, alleging inconsistency in the analysis of the structure of competition at wholesaler level- Arguments of the parties193 Schneider claims, first, that there are manifest errors of reasoning in the Commission's overall assessment of the relative strength of manufacturers and wholesalers and, second, that there are inconsistencies in the consequences which in the Commission's contention follow from, in particular, the greater or lesser degree of concentration in distribution for the competitive pressure which the wholesalers are capable of exercising on the merged entity.194 The Commission replies that the degree of concentration among wholesalers, and thus the extent of buyer power, varies significantly from one country to another. However, irrespective of the degree of concentration among wholesalers, rivalry between them does not have an impact on the manufacturers, at least not on the largest manufacturers, amongst whose leaders the merged entity is to be found.195 The competition between wholesalers consequent upon a low (Italy and Spain) or average (Portugal) degree of concentration of distribution does not mean that the resulting competition between wholesalers leads to significant pressure being brought to bear on the leading manufacturers. On the contrary, the wholesalers' room for manoeuvre vis-à-vis the manufacturers is particularly limited and does not enable them to constrain prices in any appreciable way.196 In countries in which distribution is highly concentrated (France and Denmark), wholesalers are dependent for a very large number of products on the major manufacturers with the best-known brands. The leading manufacturers grant even larger discounts to wholesalers when they concentrate on selling the manufacturers' products, so that there is even less incentive for wholesalers to exert their buyer power on manufacturers.- Findings of the Court197 It is appropriate to point out that the Commission confined itself, at recitals 579 to 583, to a very general examination of the relative strengths of manufacturers and wholesalers at a transnational level, whilst the national dimension of the geographic markets stated to be relevant would have called for a detailed country-by-country analysis.198 In addition, the examination carried out by the Commission does not prove that the new entity would be an unavoidable trading partner for wholesalers nor that they would be incapable of exercising any competitive restraints on it.199 First, it does not appear that the Commission's method of gauging the wide variations which it found in the extent to which distribution was concentrated on the various national markets provided a sufficiently reliable basis for the conclusions it reached about the relative strengths of manufacturers and wholesalers.200 At recitals 26 and 221, the Commission classed Portugal, together with Spain, among the countries in which wholesalers were most atomised. The Commission also notes, at recital 594, First, installation engineers and switchboard assemblers are too atomised to exercise significant buyer power over the merged entity. The same is true of Spanish, Danish and Portuguese wholesalers.201 However, it does not follow from Table 6 in the Decision, set out below, that the structure of distribution is atomised in Portugal, since two wholesalers between them have 40% of the market for switchboards and panel-boards.Table 6Schneider's estimate of the market shares of the five groups of international wholesalers on the markets for switchboards/panel-boards>lt>8* Confidential data.202 In any event, the structure of distribution obtaining in Portugal can be distinguished from that in Spain, where three wholesalers together have 19% of the market for switchboards and panel-boards, and that in Denmark, where two wholesalers together control 13%. In its defence, the Commission also classifies Portugal as a country in which there is an average degree of concentration, as is clear from the Commission's answer to the plea set out above.203 Second, several passages of the Decision (see recitals 26 and 221) are at variance with the Commission's conclusion that in countries in which distribution is not highly concentrated wholesalers' room for manoeuvre vis-à-vis manufacturers is particularly limited and does not enable them to constrain prices in any appreciable way.204 At recital 26, the Commission observes, with reference to Legrand's medium-term plans, that according to the parties' internal documents, those structural differences [in distribution] are not without consequences for the conduct of wholesalers in the countries concerned and that it thus appears that in the countries in which wholesalers are the most fragmented, such as Portugal, competition between wholesalers leads to a price war which has repercussions at manufacturing level. Nevertheless, the Commission regards Legrand as having a strong position in Southern Europe.205 At recital 221, the Commission states:As an internal document from Legrand shows, "there are several classes of distributor in Portugal, chiefly independent speculative family-run businesses, without a structured commercial policy, and operating in the very short term. Consequence: strong anarchic competition between them, which entails (i) a fall in prices generally and in their profit margin in particular, resulting in constant pressure on manufacturers to give better purchasing terms"...206 The example of Portugal cited by the Commission does not therefore lend weight to the proposition that in countries where distribution is not highly concentrated, wholesalers are not in a position to restrain prices in any appreciable way.207 Similarly, according to Legrand's medium-term (2001-2005) plan for Spain, [distributors'] margins and their profitability continue to fall year on year because of the strong pressure on prices caused by the large number of distributors on the market, the fall in those prices then rebounding on manufacturers.208 Thus, those data undermine the Commission's argument at recital 579 that it is highly unlikely that Spanish wholesalers each have sufficient buyer power to restrain the merged entity's competitive conduct in any appreciable way and, contrary to the Commission's contention at recital 581, it cannot be taken as proved that the merged entity would be an unavoidable trading partner for the wholesalers (see paragraph 216 et seq. below).209 Third, the Court does not consider that there is sufficient evidence to support the Commission's finding that where wholesalers are highly concentrated, there is still no strong downward pressure on prices.210 In support of that finding, the Commission points out, at recital 582, that in a number of countries, including Italy, wholesalers favour Legrand's products particularly because of their relatively high prices, which give them increased profit margins.211 On the one hand, it follows from the foregoing that the Commission places Italy among the countries where distribution is not highly concentrated, as is evident from Table 6 in the Decision, reproduced at paragraph 201 above.212 The reference to Italy therefore does not demonstrate that there is no strong downward pressure on prices where distribution is highly concentrated.213 The reference at recital 582 to the structure of distribution in Austria is irrelevant: according to the Decision itself, no relevant sectoral market in that country is affected by the concentration (see recitals 782 and 783).214 Further, the characteristics of overall demand for electrical equipment, including customer-side demand, must also be taken into consideration.215 In that regard, it is apparent from recital 213 that the high cost of Legrand's products may actually be a significant impediment in that it sometimes makes the products ill-suited to the customers' purchasing power.216 Fourth, Table 31 of the Decision, reproduced below, does not effectively support either the description of the merged entity at recital 567 as an unavoidable trading partner for most wholesalers, which is based on the fact that it has sway over a very substantial proportion - in some cases more than 40% - of national sales or the contention that it has significant market positions in each country.217 Table 31, reproduced below, provides percentage brackets for sales of all low-voltage electrical equipment by the leading manufacturers to wholesaler [A] *.Table 31Wholesaler [A's] * percentage sales of low-voltage electrical equipment>lt>9218 Since, as regards low-voltage electrical equipment as a whole, there is no indication of how distribution is concentrated nationally (as there was in Table 6 in the case of the markets for switchboards and panel-boards), it is impossible to decide from Table 31 whether national wholesalers of low-voltage electrical equipment as a whole will find the merged entity an irresistible force.219 Nor does a comparison of Tables 31 and 6 (on the assumption that any such comparison is possible, since Table 6 deals only with switchboard and panel-board components) make it possible in any event to regard the new entity's share of sales to wholesalers as substantial.220 The 30 to 40% bracket sales of low-voltage electrical equipment by wholesaler [A] * in Italy attributed to the Schneider-Legrand group in Table 31 is not an adequate basis for an accurate assessment of the economic power which that group will have vis-à-vis distributors in that country.221 First, that wholesaler accounts for only 4% of the Italian market for panel-board components. According to the Commission itself, account should be taken of how well established wholesalers are when ascertaining to what extent the manufacturers' competitive position is essentially determined by their access to distribution.222 At recital 73, the Commission thus points out that the competitive position of the various manufacturers will to a large extent be determined by ... their access to wholesalers, at least in the Member States in which the latter are sufficiently well established.223 Second, Table 6 is not exhaustive. As the Commission states, at recital 72, manufacturers do not necessarily have access to the same wholesalers. Whilst the larger manufacturers tend to work with large international groups, the smaller competitors are more inclined to operate at regional level and work with smaller wholesalers.224 The first NERA report indicates, and is not disputed in that regard by the Commission, that, according to Legrand's estimates, there are about 800 wholesalers on the Italian market for ultraterminal electrical equipment.225 Furthermore, recital 63 makes clear that local wholesalers supplying installation engineers are not necessarily subsidiaries of international wholesalers.226 For the same reasons, the Court is also unable to accept the Commission's assertion, at recital 676, that the new group will account for a significant proportion of the wholesalers' turnover and, as a result, a significant proportion of their purchasing in most of the EEA Member States (see further above, Table 31).227 The Court cannot accept the Commission's contention at recital 637 that the merged entity will have privileged access to distribution on the United Kingdom markets for products for electrical distribution on the ground that it will account for between 10 and 20% of the sales of electrical-distribution products by one of the largest wholesalers in the United Kingdom, whilst that wholesaler's second supplier accounts for less than 10% of its sales.228 Owing to its imprecise nature, since it could be anywhere between less than 1% and more than 19%, the difference between Schneider-Legrand and the supplier in second place cannot be regarded as a reliable indication of privileged access to distribution.229 For the same reason, the Court cannot accept the finding at recital 573 that the Schneider-Legrand group in Spain will be relatively larger than its competitors, having regard to the brackets of shares of sales by [A] * accounted for by each of the leading operators on the market for low-voltage electrical equipment and set out in Table 31, which includes equally imprecise percentage brackets of market shares.230 In those circumstances, neither the fact that the merged entity will be an unavoidable trading partner for wholesalers nor their inability to exercise competitive constraints on it have been properly demonstrated.231 The plea must therefore be declared founded.Fifth plea, alleging errors in the analysis of the impact of the concentration on the various national sectoral markets referred to in the Commission's objections- Arguments of the parties232 Schneider submits that the Commission's Europe-wide analysis of the impact of the transaction led it to substitute general considerations for an analysis of the merged entity's position on each of the national markets affected. Instead of carrying out such an analysis, the Commission confined itself to general arguments relating to the product range and to the new entity's incomparable variety of brands. In reality, the Commission has drawn inferences about the other national product markets from the situation regarding competition on the French sectoral markets.233 The Commission contends that it structured its analysis of the transaction by presenting, category by category, arguments which applied to each of the markets concerned, although to varying degrees and using different methods, which are duly explained. The general presentation did not distort the subsequent analysis of each of the markets affected by the transaction: in fact it was helpful in shedding light on the analysis of competition on each of those markets.- Findings of the Court234 In its reply to the seventh plea (see paragraph 304 below), the Commission contends that Table 30 (see paragraph 165 above) is intended to show that, on each of the markets affected by the transaction, the new entity will derive a substantial competitive advantage from the fact that it will be in a strong position, in the same geographic market, in other product markets in which the same wholesalers are active (recitals 567 to 578).235 In taking the range of low-voltage electrical equipment which the merged entity will offer to wholesalers as evidence of economic power, the Commission relied, as is apparent from the answers it gave at the hearing, on Article 2(1)(b) of Regulation No 4064/89.236 That provision indeed states that the Commission is to take into account the access of the undertakings concerned to markets and, therefore, their access to distribution in order to establish whether a concentration is compatible with the common market.237 The Court takes the view, however, that the Commission did not properly incorporate that criterion into its assessment of the new entity's economic power on each of the national sectoral markets affected by the transaction and listed at recitals 782 and 783 of the Decision, owing to the lacunae and inconsistencies in the analysis of the structure of distribution which the Court found to exist when considering the fourth plea.238 As a result of those shortcomings, the Court finds that the Commission has failed to establish the ability of the merged entity to compel wholesalers on each of the national sectoral markets affected by the transaction to distribute other products from its range which they did not thus far distribute.239 In addition, the Commission qualifies the Schneider-Legrand group's product range as unrivalled on the basis of an abstract combination of the various kinds of low-voltage electrical equipment which the group will supply throughout the EEA as a whole and not of an assessment of the product range which the group will actually offer on each of the national sectoral markets affected by the proposed transaction and referred to in the objections set out at recitals 782 and 783 of the Decision.240 As was made clear above, the Commission contends that the transaction would enable the parties to combine Schneider's strong positions in the Nordic countries in electrical equipment used downstream from final panel-boards with Legrand's strong positions in Southern Europe and to associate Schneider's strength in all categories of panel-boards with Legrand's strong position in downstream products as a whole (recital 550). Thus, the merged entity will, in the Commission's contention, have a full range of products covering all markets for electrical equipment downstream from the final panel-board (recital 654).241 However, contrary to what recital 654 might suggest, it does not follow from the Decision that the combined entity will necessarily offer the whole range of low-voltage electrical equipment on each of the national markets referred to in the objections listed at recitals 782 and 783 of the Decision.242 Thus, Table 35, reproduced at paragraph 173 above, shows that the Schneider-Legrand group will not be present on certain segments of the market for ultraterminal electrical equipment, even in France, Italy and Spain. In particular, the Schneider-Legrand group will not be present in the control systems segment, even in France.243 It is apparent that the Commission took a transnational approach in putting together the merged entity's product range. That notional range cannot, however, give a valid indication of the entity's economic power on each of the national sectoral markets affected by the transaction.244 It is common ground that decisions about the product ranges to be bought and sold as between the manufacturers and the wholesalers are made almost entirely at national or regional level (recital 223, cited above).245 Furthermore, apart from the fact that it does not mention, for example, either the extent or the distribution of the market shares held by the new entity's competitors on the national sectoral markets affected, Table 30 gives only broad market share brackets, instead of sufficiently precise market positions, which alone would allow the entity's economic power to be accurately evaluated. The same is true of Table 35.246 It is clear that its hypothetical approach led the Commission to overestimate the new group's power on certain of the national sectoral markets affected by the transaction. The statement, at recital 550, that Schneider brings its strength in all categories of panel-boards is thus at variance with Table 28, reproduced at paragraph 172 above, which indicates that the Commission accepted that Schneider's market shares on the Italian markets for final panel-board components fluctuate between [...] * and [...] *.247 It is also necessary to put into perspective the importance attached by the Commission to the actual extent of the range of low-voltage electrical equipment. At recital 507, the Commission observes that, according to the notifying parties, in order to be viable in distribution panel-boards and final panel-boards, it is necessary to supply the full range of components (cabinets, fuses, circuit breakers, differential protection devices and control systems etc) corresponding to those panel-boards, and ... for the purposes of distribution installation, manufacturers must offer the full range of products.248 Although the extent of the product range supplied by a manufacturer may be a factor in its success, it none the less does not follow from recital 507 that a manufacturer must necessarily supply wholesalers with the entire range of low-voltage electrical equipment or that wholesalers must try to reduce the number of their suppliers indiscriminately throughout all the sectoral markets for low-voltage electrical equipment.249 In any event, recital 141 itself states that all the parties' large competitors (such as ABB, Siemens or Hager) have the full range of panel-board components, which should enable them to meet the need, referred to at recital 82, to offer the fullest possible product ranges in that sector.250 The Commission also observes, at recital 507, that each of the large manufacturers, including not only Schneider and Legrand but also ABB, Siemens and GE, offers more than 2000 items for distribution panel-board components and more than 5 000 items for final panel-board components.251 Likewise, the Commission notes, at recital 17, that ABB, Siemens and GE have a huge range of low-voltage products. It also appears from recital 507 that the large manufacturers' product catalogues of equipment used downstream from final panel-boards and related equipment also include several thousand items.252 Furthermore, brand mixing exists even in the case of certain switchboard and panel-board components (recitals 136 and 163). In that regard, the Commission points out, at recital 168, that single branding is not absolute for either final panel-boards or distribution panel-boards.253 In addition, it seems from the Decision that brand mixing may well exist between switchboard and panel-board components and other types of low-voltage electrical equipment.254 Finally, account must also be taken of the important role which, as the Commission acknowledges, is played by end-users and project managers in the choice of visible equipment (plugs, switches, trunking, etc.). Their main selection criteria are appearance and practicality (recitals 66 and 79) and not whether a wide range of products is available.255 The Commission was not therefore lawfully entitled, for the purposes of assessing the merged entity's economic power on the national sectoral markets affected and defined at recitals 782 and 783, to rely on a product range whose alleged superiority to those of its competitors resulted from its being a notional whole based on a combination of the various kinds of low-voltage electrical equipment that will be supplied by the merged entity throughout the EEA.256 It follows that the Commission has again overestimated the economic power of the new entity on the national sectoral markets referred to at recitals 782 and 783 by including in its analysis of the impact of the transaction on those markets the total effect of a product range which does not reflect the true competitive situation which will obtain in those markets following the concentration.257 The same reasoning must apply as regards the merged entity's wide variety of brands, which is also deemed to be unrivalled because the brands owned by the notifying parties in the EEA as a whole have been taken together in the abstract.258 Since it does not necessarily supply the whole range of low-voltage products on each of the various national sectoral markets concerned, the Schneider-Legrand group will not necessarily offer in those markets all the brands which it owns throughout the EEA.259 It is also appropriate to take into account the number and reputation of the other competitors on each national sectoral market. It is thus clear from the Commission's answer at the hearing to a question asked by the Court that, in comparison with the four competitors in Tables 27 and 28, which are reproduced at paragraph 172 above, the Schneider-Legrand group will, for example, own only two brands on the market for final panel-board components in Denmark, Spain and Portugal.260 The Court also observes that, even if the importance to competition of the range of components and brands is accepted, it is none the less the case, as the Commission itself points out at recital 176, that the strength of a brand is principally based on the competitiveness of its various constituent parts.261 That finding puts into perspective the importance which the Commission attaches in its arguments to the merged entity's wide variety of brands.262 It follows that the Commission was wrong to take as its reference point the entire range of products and brands which the merged entity will have throughout the EEA for the purpose of assessing the entity's economic power on each of the various national sectoral markets affected by the transaction.263 To that extent the Commission has misapplied Article 2(3) of Regulation No 4064/89.264 The plea must therefore be accepted.Sixth plea, alleging manifest errors of assessment in the analysis of the impact of the concentration on certain national markets for panel-board components- Arguments of the parties265 Schneider challenges the Commission's refusal to include within the market shares of ABB and Siemens (two of the merged entity's leading competitors) the not insignificant proportion of the sales of panel-board components made by those companies to installation engineers and switchboard assemblers which are vertically integrated within those groups.266 Since they are all capable of winning tenders for large construction projects, the manufacturers of panel-boards are to be viewed as direct competitors, irrespective of whether they have integrated switchboard assembly and installation businesses.267 The notifying parties provided the Commission with specific examples of tenders in which they competed directly with the bids submitted by ABB and Siemens through their integrated subsidiaries.268 That competition testifies to the existence of an independent market in distribution channels selected by each manufacturer. To that extent, the market for panel-board components is radically different from the situation in which products are manufactured in-house for purely internal consumption.269 By refusing to take ABB's and Siemens' integrated sales into account, the Commission underestimated those companies' market shares and, consequently, overestimated the new entity's economic power on the French and Italian markets for distribution panel-board components and on the Danish, Spanish, French, Italian and Portuguese markets for final panel-board components.270 Schneider goes on to complain that the Commission made a manifest error of assessment in its quantification of ABB's and Siemens' integrated sales. Schneider indicates that it put the proportion represented by integrated sales at [...] of the turnover to be taken into account for the sale of panel-boards in Europe. That percentage is far higher than the figure of 5% stated by Siemens at the hearing on 21 August 2001 and reproduced, unexamined, by the Commission at recital 527.271 The Schroder Salomon Smith Barney study confirmed Schneider's assessment in the following terms:Around [... *] of [Automation] & [Drives] 2000 sales that includes Low Voltage Activities were made to other Siemens divisions.272 The Commission replies that it did not take integrated sales of components made by ABB and Siemens into account, since those products cannot immediately be rechannelled into the open market. As such they do not exert any direct competitive pressure and should not be included in the calculation of the market shares of the undertakings concerned, in particular where added value is conferred on the products in question (Commission Decision 2000/174/EC of 3 May 2000 declaring a concentration to be compatible with the common market and the EEA Agreement (Case No COMP/M.1693 - Alcoa/Reynolds, OJ 2002 L 58, p. 25)). That practice in taking decisions was approved by the Court of First Instance in Case T-221/95 Endemol v Commission [1999] ECR II-1299, paragraph 109.273 Each category of operators on the three levels of the vertical chain of distribution and final panel-board production adds value to the component (wholesalers (around 20%), switchboard assemblers (between 15 and 20%) and installation engineers (around 80%)) before they are installed at the end-user's premises (recital 523 and paragraph 179 of the defence).274 Schneider cannot therefore criticise the Commission for differentiating between alleged modes of distribution, since the components used for the purposes of ABB's and Siemens' integrated business are not sold but are directly incorporated into mounted and wired panel-boards (by switchboard assemblers) or installed (by installation engineers).275 In order for those internal sales to be available at short notice and at minimal cost, the manufacturers concerned would have to have an economic interest in making available on the free market the components which they use in their integrated businesses.276 In that regard, Schneider cannot, without being inconsistent, maintain that ABB and Siemens were prepared to forgo sales as switchboard assemblers or installation engineers in favour of additional sales of components as manufacturers and, at the same time, claim that their integrated activities gave them a competitive advantage. Furthermore, if they abandoned those sales they would then provide an advantage to third-party switchboard assemblers and installation engineers who would not necessarily use ABB's and Siemens' components.277 Even on the assumption that it was in ABB's and Siemens' interest to do so, they would still have to have a means of disposing of their former internal sales, for which they would need, in particular, greater access to distribution and a recognised brand.278 It is not immediately apparent that supply on the open market is substitutable for internal supply, which means that ABB's and Siemens' internal sales cannot be included in the calculation of their market shares.279 The Commission states that it was purely as an ancillary exercise that it undertook a quantitative assessment of ABB's and Siemens' internal sales of components, on the basis of data provided by the operators, in order to show the low impact of such sales.280 The different methods of assessing market share proposed by Schneider are not convincing. In any event, the inclusion of integrated sales, when they are accurately assessed, has only a marginal impact on the relative strengths on the markets in question (recital 528).- Findings of the Court281 First, it is apparent from the first NERA report, which the Commission does not challenge on this point, that large construction projects are normally carried out following an invitation to tender and that the manufacturers submit bids directly.282 It cannot be denied that, in the context of such competitive procedures, ABB and Siemens, as integrated producers, compete with their non-integrated counterparts such as Schneider, either directly where the non-integrated manufacturers agree with switchboard assemblers or installation engineers to submit their bids or indirectly where those manufacturers sell panel-board components to a switchboard assembler whose bid has been accepted. In both cases, the prices of the non-integrated manufacturers are subject directly to competitive pressure from the parallel bids made by ABB and Siemens in response to the same invitation to tender.283 In those circumstances, the Commission's reasons for refusing to take into account ABB's and Siemens' integrated sales of panel-board components, the basis for which is that there are three levels in the vertical chain of panel-board production, do not address the fact that there is direct competition between producers submitting bids in response to invitations to tender for large construction projects.284 This direct competition between manufacturers, which, significantly, does not involve wholesalers, is also indirectly apparent from Section V.A of the Decision, which describes the entire low-voltage electrical equipment sector.285 The Commission draws attention to the fact that larger customers and switchboard assemblers, who work on complex projects, most often obtain supplies directly from the manufacturers (recitals 25 and 29).286 The Commission affirms, at recital 41, that in most industrial contracts and large building contracts manufacturers sell the electrical equipment concerned either directly to the end-customer, in the case of large industrial sites, or to the large switchboard assemblers.287 At recital 71, the Commission also observes that there is a disparity between large projects and other installations in which wholesalers will be a necessary intermediary between manufacturers and installation engineers (or switchboard assemblers). It then concludes, at recital 79, that, in the case of industrial contracts and large building contracts, the equipment is, as a general rule, selected by a project manager or a large switchboard assembler and obtained directly from the manufacturers.288 Second, the Court cannot accept the assertion that if ABB's and Siemens' integrated sales were taken into account in calculating their market shares, that would in any event have only a slight effect on the assessment of relative strength on the relevant markets.289 The quantitative significance of ABB's and Siemens' integrated sales in their respective market shares is increased if it is acknowledged that those undertakings traditionally deal with industrial customers, as the Commission appears to accept at recital 42.290 Conversely, it should be noted that, because of Legrand's absence from the sector for main switchboard components, the concentration concerned will not significantly impede competition there (recital 245).291 Finally, the Court notes that, according to recital 17, Schneider's third major competitor, GE, is also to some extent vertically integrated.292 The Commission was therefore wrong to refuse to take ABB's and Siemens' integrated sales of panel-board components into account when calculating market shares.293 When it took the view that the inclusion of those integrated sales would have only a marginal impact, the Commission relied on ABB's and Siemens' estimate that those sales represented 5% of their turnover from production of panel-board components.294 That percentage is, however, only a general estimate, provided without further explanation, of integrated sales of panel-board components, which, furthermore, is not related to a specific national market. The Commission made clear, at recital 28, that ABB and Siemens have their own switchboard assembly facilities only in certain countries.295 In those circumstances, no probative value can be attributed to the figure of 5% adopted by the Commission, which is not reliable and which, additionally, concerns only Siemens' Europe-wide business. Contrary to the Commission's suggestion at recital 528, the extent to which the market shares need to be adjusted as a result of the inclusion of Schneider's competitors' integrated sales of panel-board components cannot be measured from that figure. Nor, consequently, can it be established from that figure that taking the competitors' integrated sales into account would only marginally affect the merged entity's position on the national markets affected and referred to in the objections listed at recitals 782 and 783.296 It follows from the foregoing that, in refusing to include in ABB's and Siemens' market shares their integrated sales of panel-board components, the Commission underestimated the economic power of the merged entity's two main competitors and correspondingly overestimated that entity's strength on the French and Italian markets for distribution panel-board components and on the Danish, Spanish, French, Italian and Portuguese markets for final panel-board components.297 The plea must therefore be accepted.Seventh plea, alleging incorrect analysis of the impact of the concentration on the Danish markets for final panel-board components- Arguments of the parties298 First, Schneider disputes that the new entity will have a dominant position in Denmark or unrivalled power on the markets for miniature circuit-breakers, differential switches and cabinets intended for final panel-boards.299 The Commission complains that the new entity would have had a market share pointing to dominance (recitals 534 to 536), since it is significantly higher than the market shares of its competitors (recital 542). The combined share of its three main competitors does not undermine that finding.300 Second, Schneider claims that the Commission had no grounds for stating, at recital 546, that the transaction would also eliminate competition between Schneider and Legrand. There never was any competition between those two companies on the Danish market.301 The Commission complains that Legrand was an active competitor on the Danish market for final panel-boards (or their components) and was strong there (recital 545). There was competition between Schneider and Legrand and the proposed merger would have enabled the merged entity to become the undisputed leader on that market.302 Third, Schneider submits that Table 30 of the Decision (reproduced at paragraph 165 above) does not show that the new entity had the wide variety of products attributed to it by the Commission. That table cannot replace the analysis of competition which the Commission should have carried out in relation to the Danish markets.303 Furthermore, neither the overlaps nor the real market shares of the new entity are shown there, since the Commission merely gave percentage brackets. Nor are competitors found there. Finally, the Commission used only the French market in its commentary on Table 30, at recital 552, which is also wholly contradictory.304 The Commission contends that Table 30 is intended to show the significant competitive advantage which the Schneider-Legrand group will enjoy on each of the markets concerned by the merger, owing to its strong position within the same geographic market on other product markets in which the same wholesalers are active (recitals 567 to 578).305 Fourth, Schneider submits that the arguments drawn by the Commission from its incomparable variety of brands do not go to show that the dominant position alleged would be created on the market in question. Installation engineers in Denmark are not familiar with the Legrand brand.306 The Commission asserts that it explained, at recitals 554 to 565, that the wide variety of brands which the merged entity could offer would give it a significant competitive advantage over each of its competitors. Panel-boards and their components marketed under the Legrand brand would have accounted for [... *] of sales in Denmark in 2000. In addition, the Legrand brand would be used to market other categories of low-voltage electrical equipment in Denmark and would thus have a certain reputation there.307 In addition, as recital 565 explains, the fact that the merged entity would own several brands would enable it to consolidate its market power by means of targeted retaliation against competitors or by concentrating the entity's commercial efforts on one of the two brands.308 Fifth, Schneider submits that there is no proof that there are no significant restrictions on demand in Denmark. The Commission has not established that wholesalers will be forced to have recourse to the new entity, that a high level of concentration does not necessarily entail downward pressure and that the complex relations between the Schneider-Legrand group and wholesalers will be conducive to upholding the merged entity's position. The Decision does not describe demand on the Danish market, which is not even mentioned in Table 31, reproduced at paragraph 217 above.309 The fact that wholesalers in Denmark are highly concentrated means that considerable pressure may be exerted on the manufacturers. There is no indication that the emergence of the new entity would have promoted the conclusion between Schneider and certain distributors of convergence agreements which did not exist before. Direct sales to switchboard assemblers and installation engineers represent 50% of total sales. Demand is determined by installation engineers and not by wholesalers, who are actually responsible for the logistics of supplying the products required by the installation engineers.310 The Commission replies that neither wholesalers, nor switchboard assemblers nor installation engineers would have been in a position to challenge a rise in the merged entity's prices. In Denmark, distributors are less important to manufacturers as a means of distributing their products owing to the fact that 50% of sales are made directly to switchboard assemblers and installation engineers. There are very large numbers of such engineers and assemblers and individually they do not account for a significant proportion of the manufacturers' total sales. Nor do they appear to have any incentive to exert any pressure on the manufacturers.311 Finally, sixth, Schneider submits that the Commission's contention that there are no significant restraints on competition is unsupported, in the absence of any analysis of competition on the Danish market for final panel-boards. Three important competitors, ABB, Siemens and Hagar, share [... *] or [... *] of that market.312 Schneider accuses the Commission of serious inconsistencies. At recital 610, the Commission states that, in Hager's submission, the development of a product range comparable to that of the new entity in all the countries concerned is almost inconceivable. The Commission none the less points out, at recital 141, that all the parties' large competitors, such as ABB, Siemens or Hager, are able to offer the full range of components.313 The Commission observes that, at recital 609, it stated that it was unlikely that a new competitor could enter the Danish market for final panel-boards (or their components), precisely because of the competitive advantages which the merged entity would have amassed (recitals 595 to 608).- Findings of the Court314 As is clear from the presentation of the plea, Schneider cites, as regards the Danish markets for final panel-board components, the errors (already noted above) made by the Commission in its assessment of the merged entity's economic power on each of the various national sectoral markets affected by the transaction and listed at recitals 782 and 783.315 It follows that the conclusions drawn by the Commission in finding, at recitals 611 and 613, that the concentration would be incompatible with the common market as regards the Danish markets for components are vitiated by the defects found to exist by the Court in the course of its examination of the third, fourth, fifth and sixth pleas.316 Schneider's arguments about the Danish market for final panel-board components, in addition to providing an illustration of the preceding pleas, also supplement those pleas.317 It is apparent that the Commission's analysis of the impact of the concentration on the Danish markets for the products in question suffers from particular defects, which affect more specifically the legality of the finding of incompatibility as regards those markets.318 Thus, in failing to include ABB's and Siemens' integrated sales of panel-board components in their shares of the Danish markets for final panel-board components, the Commission overestimated the Schneider-Legrand group's economic power on those markets.319 In that regard, it can actually be seen from the table below, taken from point 461 of the application, that the shares of the Schneider-Legrand group on those markets vary markedly according to whether or not the integrated sales of components attributed to ABB and Siemens by Schneider are taken into account.Danish markets for final panel-board components>lt>10* Confidential data.320 In those circumstances, it cannot be taken as proven that the addition of Legrand's market shares to those of Schneider in the wake of the transaction is in itself sufficient to create a dominant position on each of those various markets, notwithstanding the quantitative significance to which such addition none the less gives rise.321 In addition, even if it were established that the new entity had a dominant position, that position could not be regarded, on the basis of the Decision, as significantly impeding effective competition in Denmark within the meaning of Article 2(3) of Regulation No 4064/89.322 First, it has not been proved, contrary to the Commission's statement at recital 544, that the transaction would have the effect of eliminating a direct competitor on the Danish markets for final panel-board components.323 It is clear from a comparison of the market shares of the main players set out in Table 28 and in the table at paragraph 319 above that Legrand is in fifth position on each of the product markets concerned and cannot therefore be regarded as Schneider's direct competitor.324 Nor, contrary to the Commission's observations at recitals 544 and 545, does it appear that the proposed merger can be interpreted, vis-à-vis the Danish markets for final panel-board components, as substantially strengthening the leader via the acquisition of additional business on other sectoral markets for low-voltage electrical equipment.325 Legrand is not present in any of the segments of the Danish market for ultraterminal electrical equipment listed in Table 35, reproduced at paragraph 173 above, or, as is clear from Tables 14 and 15 below taken from recitals 286 and 288 of the Decision, on the Danish markets for busbar trunking and cableways.Table 14Market shares of the leading operators on the market for busbar trunking in the larger EEA Member States>lt>11* Confidential data.Table 15Market shares of the leading operators on the market for cableways in various EEA Member States>lt>12* Confidential data.326 Contrary to the Commission's interpretation of Table 30 in its argument set out above, the data in the Decision do not establish that the merged entity will enjoy a substantial competitive advantage in the form of strong market positions on sectoral markets other than those for final panel-board components.327 In short, it is not clear from Tables 14, 15 and 35 that it is because of the concentration that the Schneider-Legrand group is present in Denmark on those other sectoral markets. An examination of the abovementioned tables suggests, rather, that its presence can be accounted for by Schneider's position there even before the transaction took place.328 Accordingly, the Court does not regard as adequately made out the Commission's argument at recital 546 that the merger between Schneider and Legrand will eliminate competition between those two undertakings, whose rivalry would appear to constitute a key aspect of competition in the relevant countries.329 In addition to the fact that the contention that it is important lacks assurance, the rivalry between the two undertakings cannot be regarded as established in the case of Denmark. The examples cited by the Commission at paragraph 547 in support of its proposition concern only France and Portugal. As to recital 540, it merely makes a general reference to no further rivalry between Schneider and Legrand in certain markets, without further details.330 Furthermore, such rivalry could scarcely be expected in Denmark from two undertakings whose centre of gravity is, according to the Decision, in Northern Europe for one of them and in Southern Europe for the other (recitals 550 and 659).331 Second, owing to the fact that Legrand is not present in the segments of the Danish market for ultraterminal equipment set out in Table 35, the contribution and reputation of the Legrand brands are necessarily limited, as is clear from the lists of the notifying parties' brands in Table 36 and in Annex 2 to the Decision. Those lists suggest that, all in all, Legrand owns only two brands in Denmark in the whole of the low-voltage electrical equipment sector.332 The Court observes, in that regard, that Denmark is never cited, per se, in the Commission's arguments, at recitals 554 to 565, about the wide variety of brands attributed to the merged entity.333 In fact, given that Legrand is not present in any of the segments of the Danish market for ultraterminal equipment listed in Table 35, it does not appear that the last sentence of recital 555 is relevant to Denmark: it states that the parties' reputation and brand image are obviously further enhanced by their presence in a key part of the sector for low-voltage electrical equipment, as shown by Table 30 above.334 Consequently, it is impossible to accept the Commission's argument, set out above, that the Legrand brand is well-known because it markets low-voltage electrical equipment other than panel-board components in Denmark.335 Third, it also follows that it cannot be taken as proved that Legrand, the weaker of the notifying parties in Denmark (see recital 545), had privileged access to the major international wholesalers.336 That lack of proof is all the more striking in that Denmark does not feature in Table 31, reproduced at paragraph 217 above, from which the Commission draws the specific conclusion, at recital 573, that each of the parties accounts for a very considerable proportion of the turnover of the main wholesalers, if all low-voltage electrical equipment is taken together.337 Nor, given that Legrand is not present in the segments of the Danish market for ultraterminal equipment set out in Table 35, is it possible to accept that the new group would be an unavoidable trading partner for wholesalers, as the Commission alleges at recital 567, on account of its unrivalled range of electrical equipment.338 The Commission confines itself, at recital 567, to stating that the unavoidable nature of the merged entity vis-à-vis wholesalers will be most pronounced in France and to a lesser extent in Spain, Italy and Portugal, and therefore Denmark is not mentioned at all.339 In addition, in the Commission's own view, prior to the merger, competition from third party undertakings vis-à-vis the notifying parties on the markets for panel-board components was, in terms of market share, not inconsiderable (recital 548).340 In fact, the relative size and concentration of the market shares of the merged entity's three immediate competitors are worthy of note.341 Fourth, the Commission's assertion, at recital 595, that the merged entity's existing competitors will find it difficult to exert any significant constraints on its conduct is not borne out in the Decision so far as Denmark is concerned.342 In that regard, Section V.C.1.4. of the Decision does not include an analysis of the structure of competition as regards other manufacturers present on the Danish markets examined. However, the relative size and concentration of the main competitors' market shares, which may be seen from the table reproduced at paragraph 319 above, should have merited much more detailed treatment because, according to recital 548, the notifying parties faced not inconsiderable competition, in terms of market share, from those third-party undertakings.343 The Commission adds nothing to the brief statements at recitals 536 and 548, where it says that the transaction, first, will result in the creation of very strong market positions and, second, will allow the merged entity to become the undisputed market leader on the relevant Danish markets.344 Such findings do not in themselves establish that any dominant position resulting from the transaction would significantly impede effective competition on those markets.345 Furthermore, Denmark is not cited, as such, by the Commission in its description, at Section V.C.1.4. of the Decision, of the difficulties that the merged entity's existing competitors would encounter in exerting significant constraints on its conduct.346 Thus, the arguments on this subject in the Decision, at recital 596 et seq., emphasise the preeminence of the leading brands of the parties to the transaction, backed up by references drawn, once again, from national markets other than the Danish markets.347 The difficulty referred to at recital 601 which the merged entity's competitors could encounter among installation engineers and switchboard assemblers owing to the allegedly inferior reputation of their products is wholly unsupported by any factual evidence relating directly to Denmark.348 Finally, since Legrand does not have a significant presence on the Danish markets for low-voltage electrical equipment and, in particular, since it is not present on the Danish markets for ultraterminal equipment depicted in Table 35, the Court cannot accept the Commission's finding at recital 606 that the merger would give each of the notifying parties a stronger position in their traditional areas of excellence and would allow the formation of a group with reference brands in each of the three relevant segments (residential, tertiary and industrial).349 It follows that there is not sufficient evidence either that the merger would result in a dominant position on the Danish markets for final panel-board components or, even if that were the case, that effective competition on those markets would be significantly impeded, for the purposes of Article 2(3) of Regulation No 4064/89, as a result of the dominant position.350 It is therefore appropriate to uphold the plea as founded.Eighth plea, alleging errors in the analysis of the impact of the concentration on the Italian markets for distribution and final panel-board components- Arguments of the parties351 Schneider claims, first, that the market shares of the leading players on the Italian markets for distribution and final panel-board components, where there is keen competition, are such that a dominant position could not be created there. In Schneider's submission, the merger will not substantially strengthen the existing leader there.352 It is not possible to conclude from the fact that in one year Gewiss acquired [... *] only of the market for miniature circuit breakers for distribution or final panel-boards that there are significant barriers to entry to the Italian market. Keen competition in a market, a feature of which is the presence of eight brands, cannot be taken as indicative of the existence of such barriers. On the contrary, Gewiss's penetration of the markets for distribution and final panel-boards and its meteoric acquisition of [... *] of cabinets for final panel-boards show that those barriers do not exist.353 The Commission replies that the merged entity's market shares, in comparison with those of its competitors, are clearly a genuine indication of dominance. Gewiss is an exceptional case, since, as is apparent from recital 516, it was able to surmount barriers to entry, with very relative success, by obtaining supplies from ABB and by gaining access to wholesalers and installation engineers as a result of its activities on the market for ultraterminal equipment.354 Second, Schneider complains that the Commission largely founded its analysis on the elimination of the competition between Schneider and Legrand, which was not a key factor in competition. ABB, Siemens and GE, on the market for distribution panel-boards, and ABB, Siemens, Hager and GE, on the market for final panel-boards, were Legrand's equal in terms of size.355 The Commission replies that recital 545 shows that Legrand is the yardstick for competition in Italy. Schneider has a substantial position there, is well-known and enjoys privileged access to the major international wholesalers. The wholesalers class Schneider and Legrand as market leaders.356 Schneider observes, third, that the Italian markets for panel-board components are not focused solely on three brands (Bticino, ABB and Merlin-Gerin), as the Commission contends, but incorporate new products (Gewiss) and renewals (GE, Siemens).357 The Commission's finding of strong brand loyalty would render redundant any decision by the new entity to intensify specialisation in each of Schneider's and Legrand's reference brands in industrial and tertiary applications, on the one hand, and in residential applications, on the other.358 The Commission replies that, as is made clear at recital 565, there is not a full overlap between Schneider's and Legrand's customers, so that the Schneider-Legrand group can reinforce specialisation of its brands with certain categories of customers.359 Fourth, Schneider denies that the new entity is an irresistible force, since ABB and GE both offer alternatives. It is difficult to see how Legrand's good relations with its wholesalers in Italy, assuming they can be proved, could restrict competition. The major wholesalers control a very small proportion of distribution as is shown by Table 6 in the Decision (see paragraph 201 above).360 In addition, the greater part of the distributors' sales are not accounted for by the notifying parties, since each of the distributors sells several different brands. Schneider and Legrand do not enjoy privileged relations with wholesalers. The proposed transaction would not marginalise the other manufacturers, since wholesalers would restore equilibrium among the products they offer by buying from other manufacturers.361 Furthermore, it is hard to see how the concentration would weaken competitors, since the combined sales of the notifying parties account for only [... *] of their main wholesaler's total sales. Finally, if it is the case that there is a high degree of brand loyalty, it will be in the wholesalers' interest to continue to meet demand with products from the smaller manufacturers.362 In order to show that where distribution is heavily concentrated there is not necessarily an intense downward pressure on prices, the Commission maintains that wholesalers hold Legrand's products in high regard, since the products' relatively high prices provide them with good profit margins. Schneider objects on the ground that distribution is very atomised on the Italian markets for distribution and final panel-boards, as the Commission itself states in Table 6 of the Decision.363 The Commission points to three factors which ensure that demand in Italy will find the merged entity an irresistible force: it accounts for a very substantial proportion of the wholesalers' overall turnover, it has an unequalled range of electrical equipment and it has strong competitive positions in each country (see Table 30). In addition, Schneider does not challenge the explanation, at recitals 584 to 591, of the means which will be available to the Schneider-Legrand group to establish its dominance. Thus, wholesalers are not in a position to exert any significant constraints on the merged entity.364 Finally, fifth, Schneider regards as inaccurate, given the plethora of brands on the Italian market, the Commission's conclusion that the merger will lead to brand concentration and weaken competitors.365 It is an exaggeration to say that other competitors will be marginalised. The power of competitors like ABB, Siemens and GE on the markets for panel-boards is comparable to that of the new entity. Competitors like Hager, Gewiss and Moeller also have a good reputation.366 To claim that there are no competitor-driven constraints is also fundamentally inconsistent with the structure of the markets and distribution in Italy, given their great enthusiasm for any promotion arranged by a plausible competitor, the presence of such competitors among the wholesalers and the lack of any privileged access (see the first NERA report, points 4.3, 4.4, and 4.5).367 The Commission observes, first, that Schneider acknowledges that the merged entity's only genuine competitor is ABB and, second, that the NERA report related only to conditions of competition prior to the transaction and not to its effects.368 The Commission merely concluded that competitors will experience greater difficulties in enticing customers away from the Schneider-Legrand group and could be satisfied with being followers on the relevant markets (recital 602). At recital 608, the Commission further observes: The parties' existing competitors are not in a position to exert sufficiently strong pressure to constrain the merged entity's conduct.- Findings of the Court369 Like the preceding plea, the eighth plea invokes, as regards the Italian markets for distribution and final panel-board components, the errors, already noted above, which the Commission made in its assessment of the economic power of the merged entity on each of the various national sectoral markets affected by the transaction and set out at recitals 782 and 783.370 It follows that the conclusions on which the Commission based its finding, at recitals 611 and 613, that the disputed concentration was incompatible with the common market on the relevant Italian markets for components, are vitiated by the same defects as those found to exist by the Court in the course of its examination of the third, fourth, fifth and sixth pleas.371 Schneider's arguments concerning the Italian market in final panel-board components, in addition to providing an illustration of the preceding pleas, also supplement those pleas.372 In that regard, it is clear that the Commission's analysis of the impact of the concentration on the Italian markets under consideration is vitiated by specific defects, which more particularly concern the legality of the finding of incompatibility as regards those markets.373 Thus, in failing to include ABB's and Siemens' integrated sales of panel-board components in their shares of the Italian markets for distribution and final panel-board components, the Commission overestimated the Schneider-Legrand group's economic power on those markets.374 In that regard, it can actually be seen from the table below, taken from point 461 of the application, that the shares of the Schneider-Legrand group on those markets vary markedly according to whether or not the integrated sales of components attributed to ABB and Siemens by Schneider are taken into account.Italian markets for distribution panel-board components>lt>13* Confidential data.Italian markets for final panel-board components>lt>14* Confidential data.375 Furthermore, at recital 195, in the part of the Decision relating to the geographic definition of the market for panel-boards, the Commission classes Gewiss among Legrand's main competitors in Italy. Gewiss does not feature in Tables 27 and 28 of the Decision, reproduced at paragraph 172 above.376 In addition, Schneider submitted at the hearing, without being challenged on that point by the Commission, that Gewiss controls [... *] of the Italian market for cabinets for final panel-boards as against the merged entity, which controls [... *].377 In that regard, the Court notes that the total of the shares of the components market held by the manufacturers with a presence in Italy and shown in Table 28 comes to only 66%. The table thus gives no indication of the division or distribution of the market shares of the producer(s) controlling the remaining 34% market share.378 Since the analysis of the structure of the relevant markets is thus incomplete, the Court cannot regard as sufficiently reliable either the various producers' shares or those which the merged entity will control once the notifying parties' market shares are added together.379 Consequently, it has not been proved that the concentration will result in a dominant position on the Italian markets for distribution and final panel-boards.380 In addition, even supposing it were established, any dominant position that the merged entity might have is not shown by the Decision to constitute a significant impediment to effective competition on those markets for the purposes of Article 2(3) of Regulation No 4064/89.381 Since account must be taken of ABB's and Siemens' integrated sales of components, it is doubtful that Schneider can be regarded as ranked first, in terms of its shares of the markets for distribution panel-board components, given that there is not much distance between it and ABB, according to the Commission's figures in Table 27.382 In those circumstances, there is no support for the conclusion, at recital 549, that the merger will increase the already substantial size of one of the notifying parties, in this case Schneider, on the Italian markets for distribution panel-boards.383 On the Italian markets for final panel-board components set out in Table 28, Schneider, prior to the proposed transaction, was only in third place, a considerable way behind ABB. If ABB's and Siemens' integrated sales of components, as estimated by Schneider, are taken into account, then Schneider drops to second-to- last position (see the second table reproduced at paragraph 374 above).384 Thus, there is no proof to support the Commission's assertion at recital 544 that the transaction will eliminate a direct competitor of the leader, Legrand, on the Italian markets for final panel-board components.385 Furthermore, the rivalry which, as the Commission states at recital 546, existed between Schneider and Legrand, is not adequately demonstrated as regards Italy, the examples cited by the Commission, at recital 547, in support of that assertion being drawn solely from the French and Portuguese markets. Recital 540 merely makes a general reference to elimination of the rivalry between Schneider and Legrand on certain markets, without giving further details.386 Likewise, the Commission, at recital 612, describes the rivalry between Schneider and Legrand as the fundamental source of competition on certain of the relevant markets, particularly in France, again without any specific reference to Italy.387 It should also be observed that, as Schneider itself admits, its performance in logistical matters is mediocre and it must considerably improve performance if it is to attain its objectives both in Italy and centrally (recital 214).388 Furthermore, as the Commission points out at recital 158, a feature of Schneider's position is its relative lack of competitiveness as regards residential customers.389 Contrary to the Commission's statement at recital 545, it cannot be concluded from the Decision that Schneider, the weaker of the parties to the merger on the Italian markets for final panel-board components, had privileged access to the main international wholesalers in Italy.390 In fact, recital 545 refers specifically only to France and to the case of Legrand, whose very significant positions on other markets for low-voltage electrical equipment are pointed out by the Commission.391 Unlike the case of Legrand in France, Schneider cannot be described as having very significant positions in Italy on the markets for low-voltage electrical equipment other than on the markets for panel-board components.392 Out of all the segments of the market for ultraterminal electrical equipment shown in Table 35, shown at paragraph 173 above, Schneider is in fact present in Italy only on the segment for fixing and shunting equipment. In addition, as is clear from Table 15, shown at paragraph 325 above, Schneider has no presence at all on the Italian market for cableways. Finally, Italy is not among the countries shown in Table 14 of the Decision showing shares of the market for busbar trunking (see paragraph 325 above). Consequently, Schneider's position in Italy on that sectoral market is not even dealt with by the Decision.393 The Commission has thus failed to prove that, owing to the acquisition of additional businesses, the merger will substantially reinforce Legrand's position on the Italian markets for final panel-board components (see recital 544).394 As regards the unrivalled collection of brands attributed to the merged entity, the Commission observes, at recital 556, but without much conviction, that the entity appears to have a significant competitive advantage in Italy, because the market is concentrated on the three leading brands (Bticino, ABB and Merlin Gerin).395 That putative finding must in any event be viewed in perspective, given the absence of Gewiss, which is none the less regarded by the Commission as one of Legrand's main competitors.396 The Court also observes that the Commission classes ABB's brand among the three leading brands. ABB is the merged entity's main competitor on the markets dealt with by the present plea. ABB also owns the Vimar brand, as Table 36 of the Decision shows. Moreover, it is apparent from recital 195 that that brand is of not inconsiderable significance.397 As regards the new entity's relations with wholesalers, the Court observes that the Commission, having stated at recital 567 that the merged entity will be a particularly unavoidable trading partner for wholesalers in France and, to a lesser extent, in ... Italy, notes, at recital 569, that Legrand has very good relations with distributors there.398 Owing to their lack of precision, those two findings do not assist in proving to the requisite legal standard that the merged entity will be an unavoidable trading partner for Italian wholesalers.399 In addition, the Decision does not prove, with regard to Italy, that, as the Commission states at recital 595, the new entity's existing competitors will have difficulty in exerting any significant constraints on its conduct.400 In the Commission's view, that circumstance arises because the new entity will be an unavoidable trading partner for wholesalers. The foregoing arguments show that it is not possible to accept that that is the case in Italy, given the facts put forward by the Commission in support of its assertion.401 Finally, the difficulty that the merged entity's competitors will encounter, according to recital 601, at installation-engineer and switchboard-assembler level owing to the allegedly poorer reputation of their products is not substantiated by factual material relating directly to Italy.402 Thus, it has not been proved to the requisite legal standard that the merger results in the creation of a dominant position on the Italian markets for distribution and final panel-board components or, even if there should prove to be a dominant position, that it significantly impedes effective competition on those markets for the purposes of Article 2(3) of Regulation No 4064/89.403 In those circumstances, the plea must be accepted.The consequences of the findings of errors of analysis and assessment404 The Court considers the errors, omissions and inconsistencies which it has found in the Commission's analysis of the impact of the merger to be of undoubted gravity.405 In taking as its basis the fact that the merged entity's activities extend throughout the EEA, the Commission has included indicators of economic power outside the scope of the national sectoral markets affected by the merger and having the effect of unduly magnifying the impact of the transaction on those markets.406 In that regard, it is appropriate to bear in mind that none of the findings of fact in the Decision suggest that the proposed transaction could give rise to competition problems on markets other than the sectoral markets in France and in six other countries, which the Decision identifies, at recitals 782 and 783, as affected by the transaction.407 In particular, the Decision does not contain any analysis of the structure of competition in the national sectoral markets not affected by the concentration at issue (see Table 30, reproduced at paragraph 165 above).408 Owing to the incompleteness of, and inconsistencies in, the analysis of distribution structures, the Commission could not qualify as substantial competitive advantages for the merged entity either its alleged privileged access to distributors consequent upon its positions on all the markets for low-voltage electrical equipment at distributor level or the inability of wholesalers to exert competitive constraints on the new entity.409 The abstract nature of the indicators of economic power based on the Schneider-Legrand group's unrivalled range of products and incomparable variety of brands and the fact that those indicators bore no relation to the relevant national sectoral markets, led the Commission to overestimate even further the merger's impact on the national sectoral markets affected.410 The same is true, first, of the Commission's refusal to take account of the integrated sales made by ABB and Siemens on the national markets for panel-board components affected by the merger and, second, of the incomplete nature, in particular, of the analysis of the impact of the transaction on the Danish markets for final panel-board components and on the Italian markets for components for distribution panel-boards and final panel-boards.411 The errors of analysis and assessment found above are thus such as to deprive of probative value the economic assessment of the impact of the concentration which forms the basis for the contested declaration of incompatibility.412 None the less, however incomplete a Commission decision finding a concentration incompatible with the common market may be, that cannot entail annulment of the decision if, and to the extent to which, all the other elements of the decision permit the Court to conclude that in any event implementation of the transaction will create or strengthen a dominant position as a result of which effective competition will be significantly impeded for the purposes of Article 2(3) of Regulation No 4064/89.413 In that regard, the errors found do not in themselves suffice to call in question the objections which the Commission raised in respect of each of the French sectoral markets listed at recitals 782 and 783.414 The Court notes in that regard that Schneider did not fundamentally dispute the analysis of the impact of the transaction on those markets. On the contrary, it applied itself to criticising the Commission for having used the competitive situation obtaining on the French markets in the aftermath of the transaction to draw conclusions about the other national sectoral markets affected.415 In the light of the factual findings in the Decision, it is impossible not to subscribe to the Commission's conclusion that the proposed transaction will create or strengthen on the French markets, where each of the notifying parties was already very strong, a dominant position as a result of which, for the purposes of Article 2(3) of Regulation No 4064/89, effective competition will be significantly impeded in the common market or in a substantial part of it (see, as to the concept of a substantial part of the common market, Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraphs 375 and 448).416 It is clear from the Decision that the Schneider-Legrand group has, on each of the French markets affected, market shares which are indicative of dominance or of a strengthened dominant position, given the weak market presence and thinly spread market shares of its main competitors (see in particular Tables 27 to 29, reproduced at paragraph 172 above).417 In addition, as the Commission found at recital 582, without challenge from Schneider, and as is also clear from Tables 7 to 10 at recitals 228 and 234, the prices paid by wholesalers for low-voltage electrical equipment prior to the merger were on average appreciably higher in France than on the other national markets affected.418 Finally, there is no doubt that the rivalry between the notifying parties was extremely significant on the French sectoral markets to which the objections relate and that one effect of the merger will be to eliminate a key factor in competition there.419 The economic analysis underpinning the Decision can therefore be held inadequate only as regards all the national sectoral markets affected apart from the French markets; and the latter markets indisputably constitute a substantial part of the common market within the meaning of Article 2(3) of Regulation No 4064/89.420 It is thus appropriate to examine, as regards solely the French markets affected by the transaction, the other pleas raised in the application and, in particular, Schneider's plea alleging infringement of the rights of the defence in connection with the proposed corrective measures which it submitted during the procedure before the Commission to render the concentration compatible with the common market.Infringement of the rights of defenceNinth plea, alleging inconsistency between the statement of objections and the Decision- Arguments of the parties421 Schneider, supported by the French Republic, argues in substance that the Commission, at recital 811, based a key objection on the strengthening, in France, of Schneider's dominant position on the markets for distribution panel-boards and final panel-boards owing to Legrand's leading position in the sector for ultraterminal equipment, which was distinct from any overlap between the businesses of the two notifying parties.422 That complaint was not formulated in the statement of objections with sufficient precision to allow Schneider to identify it as such, to submit practical comments and to take appropriate action, including by proposing appropriate remedies for the competition problems identified by the Commission.423 The analysis in the statement of objections of the impact of the concentration on competition covered the various geographic markets in general but did not focus on the particular case of France. Furthermore, when the statement of objections deals with Legrand's dominance on certain markets in France, it never mentions Schneider's position on the markets for switchboards and panel-boards.424 In the supplementary report of 8 October 2001, the Hearing Officer recognised that there was indeed an objection based on the combined market strength of the notifying parties vis-à-vis wholesalers distinct from any overlap in their activities. The Hearing Officer none the less took the view that that objection was already found in the statement of objections where it refers to one of the key factors in the creation or strengthening of a dominant position.425 However, none of the points which the Hearing Officer derived from the analysis of competition in the statement of objections refers to an objection based on the combination of the parties' dominant positions on the two French sectoral markets concerned which would in itself justify a decision prohibiting the concentration.426 That objection was presented to the notifying parties as a decisive obstacle to the alternative proposals for corrective measures submitted by Schneider on 24 September 2001. The objection in question is reproduced in the Decision in the section dealing with corrective measures, as obvious grounds for rejecting the solutions put forward by Schneider.427 The Commission contends that the plea is inadmissible on formal grounds in that it is imprecise and does not allow the Commission to formulate a defence.428 As to substance, the Commission observes that Schneider is doubtless seeking to show that the Commission relied on a concept foreign to Regulation No 4064/89, i.e. the mere combination of dominant positions on discrete sectoral markets, without any overlap in businesses. The Commission finds that argument perplexing, since Schneider acknowledges, at paragraph 177 of the application, that the concept does not feature in the Decision either.429 Since that wholly spurious objection is not mentioned in the Decision, Schneider attempts to show that the Commission made various tacit or veiled references to such an objection in the Decision.430 However, its attempt lacks conviction. The passages of the decision which Schneider cites do not reveal any substantial changes to the objections set out in the statement notified to the parties on 3 August 2001. The extracts cited by Schneider are confined, on the basis of the comments and information provided by the parties and third parties in the course of the administrative procedure, either to drawing the logical conclusion from the statement of objections, a practice found to be acceptable by the Court in Endemol v Commission (at paragraph 81), or to illustrating a proposition by examples.431 Schneider is confusing the concept, which does not apply here, of combination of dominant positions and the objection that the merged entity will have the ability to have privileged access to wholesalers, owing to its range of activities.432 On that last point, both the statement of objections and the Decision stated that the new entity would have a range of activities on the various relevant markets and that its unequalled range of products would ensure that it was an unavoidable trading partner for wholesalers. In each of those documents, the Commission took the view that the fact of having that range of activities would, when combined with a series of other factors, such as the creation of a new player with very large market shares, the elimination of rivalry between Schneider and Legrand and the combination of the brands owned by them into one incomparable line of brands, constitute one of the main factors in the creation and strengthening of a dominant position, in view of the characteristics of the markets affected by the transaction.433 Schneider had ample opportunity to express its opinion on this point during the administrative procedure; and the Hearing Officer rejected its complaint on the point in the first paragraph of his supplementary report of 8 October 2001.434 In so far as the plea concerns remedies, it would have been physically impossible to deal with them in the statement of objections since they had not yet been put forward by Schneider.435 On the assumption that the new objection is quite clear from recital 811, as Schneider submits at paragraph 179 of the application, the Commission wonders why Schneider does not take the trouble to analyse that issue and explain what the new objection consists of.436 In so far as the new objection refers to the combination of dominant positions in France, it is clear from the foregoing arguments that by this branch of the plea Schneider is merely criticising the Commission for having used that expression during a meeting held on 24 September 2001. Even on the assumption that the criticism is a valid one, it is nevertheless difficult to understand how Schneider's rights of defence have been infringed, since the alleged objection does not appear in either the statement of objections or the Decision.- Findings of the Court437 The Court considers that the claim that Schneider's rights of defence have been infringed in that the Commission included in the Decision a specific objection which was not clearly expressed in the statement of objections is stated sufficiently precisely and coherently for the Commission to respond properly to the plea and for the Court to assess its merits.438 According to well-established case-law, the Decision need not necessarily replicate the statement of objections. Thus, it is permissible to supplement the statement of objections in the light of the parties' response, whose arguments show that they have actually been able to exercise their rights of defence. The Commission may also, in the light of the administrative procedure, revise or supplement its arguments of fact or law in support of its objections (see, to that effect, Case T-86/95 Compagnie Générale Maritime and Others v Commission [2002] ECR II-1011, paragraph 448).439 As the Commission contended at the hearing, it is clearly open to it to finalise its assessment of the compatibility of a concentration with the common market in the light of the corrective measures proposed by the notifying parties, since, by definition, those measures could not be envisaged before the statement of objections was drawn up.440 None the less the statement of objections must contain an account of the objections cast in sufficiently clear terms to achieve the objective ascribed to it by the Community regulations, namely to provide all the information the undertakings need to defend themselves properly before the Commission adopts a final decision.441 That is particularly so in this case, where what the Commission did was not to take proceedings under Articles 81 EC and 82 EC in respect of anti-competitive practices which had already taken place and of which the undertakings concerned could not have failed to be aware: what it found to be incompatible with the common market was a concentration affecting the structure of competition in the national sectoral markets listed at recitals 782 and 783.442 In addition, in the procedures for reviewing concentrations, the statement of objections is not solely intended to spell out the complaints and give the undertaking to which it is addressed the opportunity to submit comments in response. It is also intended to give the notifying parties the chance to suggest corrective measures and, in particular, proposals for divestiture and sufficient time, given the requirement for speed which characterises the general scheme of Regulation No 4064/89, to ascertain the extent to which divestiture is necessary with a view to rendering the transaction compatible with the common market in good time.443 Furthermore, it is evident from Section VI of the Decision that the Commission, as required under Regulation No 4064/89 (France and Others v Commission, cited above, paragraph 221), adopted a prospective approach to the state of competition to which the concentration was likely to give rise in the future, in order to come to a decision on the proposals Schneider put forward for divestiture.444 The Commission was consequently required to explain all the more clearly the competition problems raised by the proposed merger, in order to allow the notifying parties to put forward, properly and in good time, proposals for divestiture capable, if need be, of rendering the concentration compatible with the common market.445 It is not apparent on reading the statement of objections that it dealt with sufficient clarity or precision with the strengthening of Schneider's position vis-à-vis French distributors of low-voltage electrical equipment as a result not only of the addition of Legrand's sales on the markets for switchboard components and panel-board components but also of Legrand's leading position in the segments for ultraterminal electrical equipment. The Court observes in particular that the general conclusion in the statement of objections lists the various national sectoral markets affected by the concentration, without demonstrating that the position of one of the notifying parties on a given product market would in any way buttress the position of the other party on another sectoral market.446 As the Commission affirmed in the course of its oral argument relating to the Decision's examination of the remedies, two factors were instrumental in strengthening that position, as stated at recital 811, which refers to the analysis of competition on the relevant markets: first, the mere fact of the overlap between the shares of the market for distribution and final panel-board components and, second, the strengthening of Schneider's position vis-à-vis wholesalers resulting from the addition of Legrand's sales and from Legrand's leading position in the sector for ultraterminal electrical equipment.447 The Commission also reiterated at the hearing that the proposed commitments given on 24 September 2001 in respect of the French markets for switchboards and panel-boards would have eliminated only the additional shares of the market for the components thereof.448 On the other hand, the increased strength consequent upon the addition of Legrand's power vis-à-vis wholesalers to that of Schneider would have remained unchanged. The merged entity would have retained most of Legrand's ultraterminal business, which put Legrand in a strong position vis-à-vis wholesalers, so that the problem of the new entity's privileged access to distribution would not have been remedied.449 The Commission draws attention, at recital 545, to the fact that Legrand has very substantial positions on markets for low-voltage products other than switchboards and panel-boards and that Legrand already has dominant positions on the markets for sockets and switches, watertight equipment, fixing and shunting equipment and independent emergency lighting units. However, that information does not feature in the corresponding passage of the statement of objections (point 460).450 Point 501 of the statement of objections states that the proposed transaction brings into existence a group which, on many markets for low-voltage electrical products, will be the main supplier to wholesalers, substantially ahead of the second supplier. The Commission nevertheless felt it necessary to make clear, at recital 590 of the Decision, that [a]s explained above, that will be particularly the case in France.451 Furthermore, it is clear from point 4 of its note of 18 September 2001 to the members of the Advisory Committee on Concentrations concerning the proposed commitments put forward by the notifying parties, that the Commission made its approval of the remedies suggested in the economic sector concerned conditional on the divestiture being sufficiently extensive to eliminate the instances of all competitive overlap identified in the statement of objections.452 Competitive overlap is conceivable only within a single national sectoral market and is thus different in nature from the mutual support provided at distribution level where two undertakings hold leading positions in one country in two distinct but complementary sectoral markets.453 It follows that the statement of objections did not permit Schneider to assess the full extent of the competition problems to which the Commission claimed the concentration would give rise at distributor level on the French market for low-voltage electrical equipment.454 It follows that Schneider's rights of defence have been infringed in various respects.455 Schneider, first, was not afforded the opportunity of properly challenging the substance of the Commission's argument that, at distributor level, Schneider's dominant position would be strengthened in France in the sector for distribution and final panel-board components by Legrand's leading position in ultraterminal equipment.456 It follows that Schneider was not given a proper opportunity to submit its observations in that regard either in its response to the statement of objections or at the hearing on 21 August 2001.457 If it had been given such an opportunity, the Commission could have reconsidered its position or, on the contrary, have provided further evidence in support of its proposition, so that the Decision might have been different in any event.458 Schneider must therefore be regarded as not having been afforded the opportunity to submit, properly and in good time, proposals for divestiture sufficiently extensive to provide a solution to the competition problems identified by the Commission on the relevant French sectoral markets.459 The Court notes, in that connection, that Schneider stated at the hearing that it had not in fact been able to propose in good time any remedies for the competition problems in respect of which it did not challenge the Decision.460 Thus Schneider was indirectly deprived of the chance of obtaining the approval which the Commission might have given to the remedies proposed, had the notifying parties been put in a position to submit in good time proposals for divestiture sufficiently extensive to resolve all the competition problems identified by the Commission at distribution level in France.461 The effect of those irregularities is all the more serious, because, as the Commission stated several times at the hearing, remedies are the only means of preventing a concentration falling under Article 2(3) of Regulation No 4064/89 from being declared incompatible.462 Consequently, the Decision is vitiated by an infringement of the rights of defence and the plea must be accepted.463 In those circumstances the Decision must be annulled, without there being any need to adjudicate on the other pleas and arguments put forward by Schneider in support of its action and directed, in particular, against the Commission's assessment of the proposals for divestiture which Schneider submitted with a view to rendering the transaction compatible with the common market.464 Under Article 233 EC, it is incumbent upon the Commission to take the necessary measures to comply with this judgment.465 Such measures to comply with the judgment must have regard to the grounds constituting the essential basis for the operative part of the judgment (see Joined Cases 97/86, 99/86, 193/86 and 215/86 Asteris and Others v Commission [1988] ECR 2181, paragraph 27). The relevant grounds of this judgment require, in particular, that, if the Commission should resume its examination of the compatibility of the transaction, Schneider should be placed in a position, as regards the relevant national sectoral markets in respect of which the economic analysis in the Decision has not been rejected, i.e. the French sectoral markets, to put forward a proper defence and, where appropriate, to propose corrective measures addressing the objections made and previously indicated by the Commission. Decision on costs Costs466 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has been essentially unsuccessful, it must be ordered to bear its own costs and to pay those incurred by Schneider, since Schneider applied for costs.467 Under the third paragraph of Article 87(4) of the Rules of Procedure, the Comité central d'entreprise de Legrand SA and the Comité européen du groupe Legrand, interveners, are to bear their own costs.468 Under the first paragraph of Article 87(4) of the Rules of Procedure, Member States which intervene in the proceedings before the Court of First Instance are to bear their own costs. It follows that the French Republic must bear its own costs. Operative part On those grounds,THE COURT OF FIRST INSTANCE (First Chamber)hereby:1. Annuls Commission Decision C(2001)3014 final of 10 October 2001 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case COMP/M.2283 - Schneider-Legrand);2. Orders the Commission to bear its own costs and, in addition, to pay those incurred by Schneider Electric SA;3. Orders the Comité central d'entreprise de SA Legrand and the Comité européen du groupe Legrand to bear their own costs;4. Orders the French Republic to bear its own costs.

09532-61fe34e-4a53

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RULES GOVERNING THE ACQUISITION BY THIRD PARTIES OF TELEVISION RIGHTS FOR SPORTING EVENTS UNDER EUROVISION LEAD TO RESTRICTIONS ON COMPETITION IN BREACH OF THE PROVISIONS OF THE TREATY

| 62000A0185 Judgment of the Court of First Instance (Second Chamber, extended composition) of 8 October 2002. - Métropole Télévision SA (M6) (T-185/00), Antena 3 de Televisión, SA (T-216/00), Gestevisión Telecinco, SA (T-299/00) and SIC - Sociedade Independente de Comunicação, SA (T-300/00) v Commission of the European Communities. - Competition - Decision granting exemption - Television rights - Eurovision system - Article 81(1) and (3) EC - Manifest error of assessment. - Joined cases T-185/00, T-216/00, T-299/00 and T-300/00. European Court reports 2002 Page II-03805 Keywords 1. Competition - Agreements, decisions and concerted practices - Prohibition - Exemption - Conditions - Assessment made by the Commission without previously defining exactly the relevant product market and geographic market - Narrowest possible market taken into account - No effect on assessment made - Whether permissible(Art. 81(3) EC)2. Competition - Agreements, decisions and concerted practices - Prejudicial to competition - Professional association of radio and television organisations - Agreements organising the joint acquisition of exclusive television rights to sporting events - Competition between members and between members and non-member undertakings restricted(Art. 81(1) and (3)(b) EC)3. Competition - Agreements, decisions and concerted practices - Prohibition - Exemption - Conditions - Not possible to eliminate competition in respect of a substantial part of the products in question - Professional association of radio and television organisations - Agreements organising the joint acquisition of exclusive television rights to sporting events - Very limited access for non-member undertakings to the rights acquired by the association - Agreements eliminating competition - Exemption excluded(Art. 81(3)(b) EC) Summary $$1. It cannot properly be complained that the Commission has failed to define exactly the product market or geographic markets concerned when examining whether a set of agreements, such as that established by the European Broadcasting Union (EBU), a professional association of radio and television organisations, on the acquisition and exploitation of rights to broadcast sporting events could be granted an exemption under Article 81(3) EC, if it has taken as the basis for its examination the narrowest possible market, in this instance the market consisting of certain major international sporting events, such as the Olympic Games, and if that approach has not, in the specific case, affected its analysis of whether the condition for the grant of an exemption laid down in Article 81(3)(b) EC has been satisfied.( see para. 57 )2. The television programme exchange system set up by the European Broadcasting Union (EBU), a professional association of radio and television organisations, which provides for the joint acquisition of television rights to sporting events, comprises two types of restrictions on competition. First, the joint acquisition of such rights, their sharing and the exchange of signal restricts or even eliminates competition among EBU members which are competitors on both the upstream market, for the acquisition of rights, and the downstream market, for televised transmission of sporting events. In addition, that system gives rise to restrictions on competition as regards third parties since those rights are generally sold on an exclusive basis, so that EBU non-members would not in principle have access to them. While it is true that the purchase of televised transmission rights for an event is not in itself a restriction on competition likely to fall under Article 81(1) EC and may be justified by particular characteristics of the product and the market in question, the exercise of those rights in a specific legal and economic context may none the less lead to such a restriction.( see paras 63-64 )3. The set of agreements established by the European Broadcasting Union (EBU), a professional association of radio and television organisations, on the acquisition and exploitation of televised broadcasts of sporting events does not, for the purposes of Article 81(3)(b) EC, make it possible to avoid the elimination of competition and therefore cannot be exempted under that provision because the sub-licensing scheme included in those agreements does not guarantee the competing undertakings sufficient access to the exclusive transmission rights jointly acquired by the association undertakings. Apart from a few exceptions, the scheme does not enable third parties to obtain sub-licences for the live broadcast of unused rights and, in reality, grants them access only to the acquisition of sub-licences to transmit roundups of competitions under extremely restrictive conditions.( see paras 83, 85 ) Parties In Joined Cases T-185/00, T-216/00, T-299/00 and T-300/00,Métropole télévision SA (M6), established in Neuilly-sur-Seine (France), represented by D. Théophile, lawyer, with an address for service in Luxembourg,applicant in Case T-185/00,Antena 3 de Televisión SA, established in Madrid (Spain), represented by F. Pombo García, E. Garayar Gutiérrez and R. Alonso Pérez-Villanueva, lawyers, with an address for service in Luxembourg,applicant in Case T-216/00,Gestevisión Telecinco SA, established in Madrid, represented by S. Muñoz Machado and M. López-Contreras Gonzalez, lawyers, with an address for service in Luxembourg,applicant in Case T-299/00,SIC - Sociedade Independente de Comunicação SA, established in Linda-a-Velha (Portugal), represented by C. Botelho Moniz, lawyer,applicant in Case T-300/00,supported byDeutsches SportFernsehen GmbH (DSF), established in Ismaning (Germany), represented by K. Metzlaff, lawyer, with an address for service in Luxembourg,intervener in Case T-299/00,and byReti Televisive Italiane Spa (RTI), established in Rome (Italy), represented by G. Amorelli, lawyer, with an address for service in Luxembourg,intervener in Case T-300/00,vCommission of the European Communities, represented, in Case T-185/00, by K. Wiedner and B. Mongin, acting as Agents; in Cases T-216/00 and T-299/00, by K. Wiedner and É. Gippini Fournier, acting as Agents, assisted by J. Rivas Andrés, lawyer; and in Case T-300/00, by K. Wiedner and M. França, acting as Agents, with an address for service in Luxembourg,defendant,supported byUnion européenne de radio-télévision (UER), established in Grand-Saconnex (Switzerland), represented by D. Waelbroeck and M. Johnsson, lawyers, with an address for service in Luxembourg,intervener in Cases T-185/00, T-216/00, T-299/00 and T-300/00,and byRadiotelevisión Española (RTVE), established in Madrid, represented by J. Gutiérrez Gisbert, lawyer, with an address for service in Luxembourg,intervener in Cases T-216/00 and T-299/00,APPLICATION for annulment of Commission Decision 2000/400/EC of 10 May 2000 relating to a proceeding pursuant to Article 81 of the EC Treaty (Case IV/32.150 - Eurovision) (OJ 2000 L 151, p. 18),THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Second Chamber, Extended Composition),composed of: R.M. Moura Ramos, President, V. Tiili, J. Pirrung, P. Mengozzi and A.W.H. Meij, Judges,Registrar: B. Pastor, Principal Administrator,having regard to the written procedure and further to the hearing on 13 and 14 March 2002,gives the followingJudgment Grounds The European Broadcasting Union and the Eurovision system1 The European Broadcasting Union (EBU) is a professional non-profit association of radio and television organisations set up in 1950 and with its headquarters in Geneva (Switzerland). In accordance with Article 2 of its Statutes as amended on 3 July 1992, the objectives of the EBU are to represent the interests of its members in the field of programming and in legal, technical and other areas, and in particular to promote the exchange of radio and television programmes by all means - for example, Eurovision and Euroradio - and any other form of cooperation among its members and with other broadcasting organisations or their associations, as well as to assist its active members in negotiations of all kinds and, when asked, to negotiate on their behalf.2 Eurovision constitutes the main framework for the exchange of programmes among the active members of the EBU. It has been in existence since 1954 and is one of the main objectives of the EBU. According to Article 3(6) of the EBU Statutes, in the version of 3 July 1992, "Eurovision" is a television programme exchange system organised and coordinated by the EBU, based on the understanding that members offer to the other members, on the basis of reciprocity, ... their coverage of sports and cultural events taking place in their countries and of potential interest to other members, thereby enabling each other to provide a high quality service in these fields to their respective national audiences. Eurovision members include active members of the EBU as well as consortia of such members. All active members of the EBU may participate in a system of joint acquisition and sharing of television rights (and of the costs relating thereto) to international sports events, which are referred to as Eurovision rights.3 To become an active member, a broadcasting organisation must satisfy the conditions relating, inter alia, to national coverage and to the nature and financing of programming (hereinafter the membership conditions).4 Until 1 March 1988, the benefit of EBU and Eurovision services was exclusively reserved to their members. However, when the Statutes of the EBU were amended in 1988, a new paragraph (in the current version, paragraph 7) was added to Article 3, providing that contractual access to Eurovision may be granted to associated members as well as non-members of the EBU.Applicants5 Métropole télévision (M6) is a company incorporated under French law, which operates a national television service broadcast free-to-air via a land radio relay channel as well as by cable and satellite.6 Since 1987, M6 has lodged an application to join the EBU six times. Each time, its application has been rejected on the ground that it does not fulfil the membership conditions laid down by the EBU Statutes. Following the last refusal of the EBU, M6 filed a complaint with the Commission on 5 December 1997, complaining of EBU's practices towards it, and in particular the refusal of its applications for admission. By decision of 29 June 1999, the Commission dismissed the applicant's complaint. The Court of First Instance, in its judgment in Métropole télévision v Commission (Case T-206/99 [2001] ECR II-1057), annulled that decision to reject the complaint on the grounds that the Commission infringed its obligations to state reasons and the obligations it has when dealing with complaints.7 Meanwhile, on 6 March 2000, M6 filed a new complaint with the Commission, asking it to declare the EBU's membership conditions as amended in 1998 anti-competitive and not qualifying for an exemption under Article 81(3) EC. By letter of 12 September 2000, the Commission dismissed that complaint. The applicant brought an action for annulment of that dismissal. That action was held inadmissible by order of the Court of First Instance in Case T-354/00 M6 v Commission [2001] ECR II-3177.8 Antena 3 de Televisión SA (hereinafter Antena 3) is a company governed by Spanish law set up on 7 June 1988, which has been granted by the competent Spanish authority a concession indirectly to operate the public television service.9 On 27 March 1990. Antena 3 lodged an application to join the EBU. By letter of 3 June 1991, Antena 3 was notified of the decision by the EBU's administrative council to refuse that application.10 Gestevisión Telecinco SA (hereinafter Telecinco) is a company governed by Spanish law which operates a terrestrial television channel with national coverage, broadcast free-to-air. In accordance with Spanish national law, that undertaking is one of three private operators to which the Spanish authorities granted a 10-year concession in 1989 to operate indirectly the public television service. The concession for Telecinco was renewed for an additional 10 years.11 SIC - Sociedade Independente de Comunicação SA (hereinafter SIC) is a company governed by Portuguese law whose purpose is to carry out television-related activities and which has, since October 1992, operated one of the main national television stations broadcast free-to-air in Portugal.Background to the proceedings12 In response to a complaint of 17 December 1987 by the company Screensport, the Commission examined the rules governing the Eurovision system of joint acquisition and sharing of sport television rights to see whether they were compatible with Article 81 EC. The complaint related, in particular, to the refusal by the EBU and its members to grant sub-licences for sporting events. On 12 December 1988, the Commission sent the EBU a statement of objections referring to the rules governing the acquisition and use, within the Eurovision system, of television rights for sporting events, which are generally exclusive. The Commission stated that it was prepared to consider an exemption for those rules, on the condition that a requirement to grant sub-licences to non-members be laid down for a substantial portion of the rights in question, under reasonable conditions.13 On 3 April 1989, the EBU notified to the Commission the provisions of its Statute and other rules governing the acquisition of television rights to sporting events, the exchange of sports programmes within the framework of Eurovision and contractual access to such programmes for third parties, in order to obtain negative clearance or, alternatively, an exemption pursuant to Article 81(3) EC.14 After the EBU revised its rules to make it possible to obtain sub-licences for the broadcasts in question (the 1993 access scheme for non-members of the EBU, hereinafter the sub-licensing scheme), the Commission adopted, on 11 June 1993, Decision 93/403/EEC relating [to] a proceeding pursuant to Article [81] of the EEC Treaty (IV/32.150 - EBU/Eurovision System) (OJ 1993 L 179, p. 23), under which it granted an exemption pursuant to Article 81(3). That decision was annulled by judgment of the Court of First Instance in Joined Cases T-528/93, T-542/93, T-543/93 and T-546/93 Métropole Télévision and Others v Commission [1996] ECR II-649.15 Subsequently, upon request by the Commission, the EBU adopted and submitted to the Commission, on 26 March 1999, rules granting access to Eurovision rights operated on pay-channel television (the sub-licensing rules of 1999 relating to the exploitation of Eurovision rights on pay-TV channels of 26 March 1999, hereinafter the sub-licensing rules).16 On 10 May 2000, the Commission adopted Decision 2000/400/EC relating to a proceeding pursuant to Article 81 of the EC Treaty (Case IV/32.150 - Eurovision) (OJ 2000 L 151, p. 18, hereinafter the contested decision), by which the Commission granted a new exemption pursuant to Article 81(3).17 In Article 1 of the contested decision, the Commission declared that, pursuant, inter alia, to Article 81(3) EC, the provisions of Article 81(1) EC are inapplicable from 26 February 1993 until 31 December 2005 to the following notified agreements:(a) the joint acquisition of sport television rights;(b) the sharing of the jointly acquired sport television rights;(c) the exchange of the signal for sporting events;(d) the sub-licensing scheme;(e) the sub-licensing rules.18 The sub-licensing scheme and the sub-licensing rules together constitute the access scheme for third parties to the Eurovision system.19 In connection with the sub-licensing scheme, the contested decision states:[T]he EBU and its members undertake to grant non-member broadcasters extensive access to Eurovision sports programmes the rights for which have been acquired on an exclusive basis through collective negotiations. ... [That scheme] grants live and deferred transmission rights to third parties of jointly acquired Eurovision sports rights. In particular the non-EBU members have significant access to the unused rights, i.e. for the transmission of sporting events which are not transmitted by, or of which only a minor part are transmitted by, an EBU member. The terms and conditions of access are freely negotiated between the EBU (for transnational channels), or the member(s) in the country concerned (for national channels), and the non-member ... (paragraph 28 of the contested decision).20 In connection with the sub-licensing rules, the contested decision specifies that a non-member of the EBU may buy television rights in order to broadcast on its pay-TV channel sports competitions which are identical or comparable to those presented by the members of Eurovision on their own pay-TV channels. The fee to be paid by the non-member is to fairly reflect the terms on which the rights were obtained by the Eurovision member (Annex II (iii) to the contested decision).21 The declaration of exemption contained in Article 1 of the contested decision is subject to a condition and an obligation. The condition requires the EBU and its members collectively to acquire television rights to sporting events only under agreements which allow them to grant access to third parties in conformity with the access scheme or, subject to the approval of the EBU, on conditions more favourable to the non-member. The obligation requires the EBU to inform the Commission of any amendments and additions to the access scheme and of all arbitration procedures concerning disputes under the access scheme (Article 2 of the contested decision).Procedure and forms of order sought22 M6, Antena 3, SIC and Telecinco brought their actions by applications lodged at the Registry of the Court of First Instance on 13 July, 21 August and 18 and 19 September 2000, respectively.23 By applications lodged at the Registry of the Court of First Instance on 5, 17 and 26 January 2001, the EBU and Radiotelevisión Española (hereinafter RTVE) sought leave to intervene, the former in Cases T-185/00, T-216/00, T-299/00 and T-300/00 and the latter in Cases T-216/00 and T-299/00, in support of the forms of order sought by the defendant. Those applications were granted by orders of the President of the Fourth Chamber of the Court of First Instance on 7 February, 29 March and 7 May 2001.24 By letter of 22 February 2001, SIC lodged at the Registry of the Court of First Instance a request for confidentiality for parts of the application. The Court granted that request by order of the President of the Fourth Chamber of 30 April 2001.25 By applications lodged at the Registry of the Court of First Instance on 7 March and 13 March 2001, Deutsches SportFernsehen GmbH (DSF) and Reti Televisive Italiane Spa (RTI) sought leave to intervene in Cases T-299/00 and T-300/00 respectively in support of the forms of order sought by the applicant. Those applications were granted by orders of the President of the Fourth Chamber of the Court of First Instance on 7 May and 7 June 2001.26 Owing to a change in the composition of the Chambers of the Court of First Instance as of 20 September 2001, the Judge-Rapporteur was assigned to the Second Chamber and the present cases were therefore assigned to that Chamber.27 By decision of the Court of First Instance of 20 February 2002, the cases were referred to a Chamber composed of five judges.28 By order of 25 February 2002, the President of the Second Chamber (Extended Composition) joined the four cases for the purposes of the oral procedure and the judgment, pursuant to Article 50 of the Rules of Procedure of the Court of First Instance.29 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Second Chamber, Extended Composition) decided to open the oral procedure. Within the framework of the measures of organisation of procedure, he invited the parties to produce certain documents and to provide written responses to certain questions.30 The oral arguments of the parties and their responses to the Court's questions were heard at the hearing on 13 and 14 March 2001.31 In Case T-185/00, M6 claims that the Court should:- annul the contested decision;- order the Commission to pay the costs;- order the EBU to pay the costs of its intervention.32 In Case T-216/00, Antena 3 claims that the Court should:- order the Commission to add several documents to the file;- annul the contested decision;- order the Commission to pay the costs;- order the interveners to pay the costs of their interventions.33 In Case T-299/00, Telecinco claims that the Court should:- annul the contested decision;- order the Commission to pay the costs.34 In Case T-300/00, SIC claims that the Court should:- order the Commission to produce certain documents;- annul the contested decision;- order the Commission to pay the costs;- order the EBU to pay the costs of its intervention.35 In the four joined cases, the Commission contends that the Court should:- dismiss the applications;- order the applicants to pay the costs.36 DSF, intervener in support of the form of order sought by Telecinco in Case T-299/00, claims that the Court of First Instance should annul the contested decision.37 RTI, intervener in support of the form of order sought by SIC in Case T-300/00, claims that the Court should:- annul the contested decision;- order the Commission to pay the costs, including those of the intervener.38 The EBU, intervener in the four cases in support of the form of order sought by the Commission, claims that the Court should:- dismiss the applications;- order the applicants to bear the costs of their interventions.39 The RTVE, intervener in Cases T-216/00 and T-299/00 in support of the form of order sought by the Commission, claims that the Court should:- dismiss the application;- order the applicants to bear the costs of their intervention.LawPreliminary observations40 The applicants put forward seven pleas altogether in support of their action. The first plea, raised in the four cases, relates to infringement of the obligation to comply with the judgments of the Court of First Instance. The second plea, put forward in Cases T-216/00 and T-300/00, relates to an error as to the facts and an infringement of the obligation to provide a statement of reasons. The third plea, raised in all the cases, alleges misapplication of Article 81(1) EC. The fourth plea, raised in the four cases, concerns infringement of Article 81(3) EC. The fifth plea, raised in all the cases, is based on errors in law relating to the material and temporal scope of the contested decision. The sixth plea, raised in Case T-216/00, relates to infringement of the principle of sound administration. Finally, the seventh plea, raised in all the cases, alleges misuse of powers.41 It is appropriate to analyse first the fourth plea, raised in all four cases, concerning infringement of Article 81(3) EC.42 By that plea, the applicants claim that the Eurovision system does not satisfy any of the criteria for exemption laid down in Article 81(3) EC, in particular the absence of the possibility of eliminating competition in respect of a substantial part of the products in question. Further, the submissions put forward by M6 as regards the discriminatory nature of the sub-licensing scheme and the indispensable character of that discrimination should be amended, inasmuch as, by those arguments, M6 is essentially claiming that the sub-licensing scheme does not guarantee access for non-member channels to the rights acquired by the EBU, thereby leading to compartmentalisation of the market for televised rebroadcasting rights and, as a result, the elimination of competition in that market.The fourth plea, concerning infringement of Article 81(3) EC as regards the criterion relating to the absence of the possibility of eliminating competition in respect of a substantial part of the products in questionArguments of the parties43 The applicants claim that the Commission misapplied Article 81(3)(b) EC in the present case, for two main reasons.44 First, the Commission did not exactly define either the product market or the geographic market in question. In the absence of a definition of the relevant market, the Commission's conclusion that the agreements notified do not afford the undertakings benefiting from the exemption the possibility of eliminating competition in respect of a substantial part of the products in question can have no basis of reference. Without a preliminary definition it is impossible to determine whether the guarantees offered by the third party access scheme to the Eurovision system satisfy the condition in Article 81(3)(b) EC.45 In addition, inasmuch as the contested decision accepts that major international sporting events, such as the Olympic Games or major football championships, constitute autonomous markets, the Commission should have concluded that, within those markets, the Eurovision system eliminates any competition.46 Second, as regards the guarantees provided by the third-party access scheme to the Eurovision system which, according to the contested decision, makes it possible to avoid eliminating competition in the market, the applicants consider that if the Commission had correctly analysed the product market, it would have noted that the third-party access scheme could not avoid eliminating from competition general channels such as the applicants. First, that scheme in fact only authorises deferred transmission of sports programmes and, second, it does not really work in the case of general channels which, like the applicants, compete against EBU members.47 The Commission, supported by the EBU, contends that it is settled practice for it to leave open the definition of the relevant product market or geographic market when, on the basis of the narrowest possible definition of the market, no problem of restriction on competition arises.48 In the present case, the Commission considers it clear that the agreements notified affect trade between Member States (paragraph 81 of the contested decision) and that they restrict competition (paragraph 71 of the contested decision). However, the Commission considers that on the narrowest definition of the product market, such as the market for the acquisition of transmission rights for specific sporting events like the summer Olympics, and taking account of the structure of the market and all the rules governing sub-licensing for access to Eurovision sports programmes by broadcasting organisations which are not EBU members, the notified agreements do not give rise to any restriction on competition.49 The Commission considers that, in the light of the narrowest possible definition of the market, the restrictive effects of the notified agreements have been resolved by the amendment of the agreements and by the conditions imposed by the Commission (relating to the third-party access scheme to the Eurovision system). There is therefore no need to define more precisely the markets concerned.50 As regards the third-party access scheme to the Eurovision system, the Commission, supported by the EBU and RTVE, points out that following the changes made to that scheme, live transmission rights which are not used by EBU members are made available to their competitors. The access to deferred transmission rights imposed by the Commission was also greatly enlarged. That scheme functioned in practice and a number of competitors of EBU members had recourse to it for both live and deferred transmissions, as well as for the transmission of extracts. In short, as a result of that scheme, it was not possible to eliminate competition in a substantial part of the market, even by defining the market as narrowly as the transmission rights for the summer Olympics.Findings of the Court51 In light of the arguments of the parties, the terms of the contested decision should first be set out as they relate to the definition of the market to which the notified agreements refer. In that regard, the contested decision specifies, in paragraphs 38 to 49:4.1. Product marketThe EBU considers that the relevant market for the assessment of the case is the market for the acquisition of the television rights to important sporting events in all disciplines of sport, irrespective of the national or international character of the event. The EBU is only active in the acquisition of television rights to sporting events of pan-European interest.The Commission shares the EBU's view that sports programmes have particular characteristics; they are able to achieve high viewing figures and reach an identifiable audience, which is a special target for certain important advertisers.However, contrary to what the EBU suggests, the attraction of sports programmes and hence the level of competition for the television rights varies according to the type of sport and the type of event. Mass sports like football, tennis or motor-racing generally attract large audiences, the preferences varying from country to country. By contrast, minority sports achieve very low ratings. International events tend to be more attractive for the audience in a given country than national ones, provided the national team or a national champion is involved, while international events in which no national champion or team is participating can often be of little interest. In the last 10 years, with increased competition in the television markets, the prices for television rights to sporting events have increased considerably ...; this is particularly true with regard to outstanding international events such as the Football World Cup or the Olympic Games.The preferences of viewers determine the value of a programme to advertisers and pay-TV broadcasters. ... However, if we observe that sports broadcasts achieve the same or similar sized audiences whether or not they are competing with simultaneously broadcast sporting events, there is strong evidence that those events could determine the subscribers' or advertisers' choice of a certain broadcaster.Indeed, data on viewer behaviour, among major sporting events, show that for at least some sporting events which have been analysed, such as the summer Olympics, the winter Olympics, the Wimbledon Finals and the Football World Cup, viewing behaviour does not appear to be influenced by the coincidence of other major sporting events being broadcast simultaneously, or nearly simultaneously. That is, viewing figures for the major sporting events appear to be largely independent of whatever other major sports are broadcast at a similar time. Therefore, the offer of such sporting events could influence the subscribers or advertisers to such an extent that the broadcaster would be inclined to pay much higher prices.In conclusion, the Commission's investigation shows that the market definition proposed by the EBU is too large and that there is a strong likelihood that there are separate markets for the acquisition of some major sporting events, most of them international.However, it is not necessary for the purposes of this case to exactly define the relevant product markets. Taking into account the present structure of the market and the sub-licensing ... rules granting access to non-EBU members to Eurovision sport programmes, these agreements do not raise competition concerns, even on the basis of markets for the acquisition of particular sporting events such as the summer Olympics....4.2. Geographic marketSome sporting events rights are acquired on an exclusive basis for the whole European territory and, regardless of the technical means of transmission, are to be resold thereafter per country, [while] others are acquired on a national basis. The kind of major sporting event rights for which the EBU bids, which have a pan-European interest from the viewers' perspective, such as the Olympic Games, will normally fall within the first category of European licences.Nevertheless, irrespective of the scope of the licences ... the preferences of viewers can significantly vary from country to country depending on the type of sport and the type of event and, therefore, the conditions of competition for the television rights can vary accordingly.With regard to the downstream markets affected by the present notification, the free-to-air and pay-TV broadcasting markets should be considered, largely for linguistic, cultural, licensing and copyright reasons, generally national or extending to single linguistic areas.However, for the purposes of this case it is not necessary to define the relevant geographic market exactly. Taking into account the present structure of the market and the sub-licensing rules granting non-EBU members access to the Eurovision sport programmes, these agreements do not raise competition concerns even on the basis of national markets for the acquisition of sports rights, nor for the downstream markets of free-to-air and pay-TV broadcasting.52 It follows from the contested decision, and particularly those passages reproduced in the preceding paragraph, that the Commission's position with respect to defining the markets concerned may be summarised as follows: the Eurovision system gives rise to effects in two distinct markets, that of the acquisition of television rights, where the EBU is in competition with other large European multimedia groups (the upstream market), and that of the transmission of purchased sports rights, where EBU members are competing, for each country or linguistic area, with other television channels, for the most part national.53 As regards the upstream market, the Commission admits that there is a strong likelihood (in English, which is the only authentic text) that there are separate markets for the acquisition of rights to some major international sporting events which are normally acquired for the whole European territory. Concerning the downstream market, even if the Commission does not make it clear as regards the definition of the product market, its analysis nevertheless shows that, with respect to the preference of television viewers and their influence on the value of programmes for announcers and pay-TV companies, a specific market for the transmission of major sporting events exists. That market, which according to the Commission is subdivided into a free-to-air TV market and a pay-TV market, is generally limited to the national territory or to a homogeneous linguistic area.54 None the less, the Commission considered it unnecessary to define exactly either the product market or the geographic market affected by the Eurovision system, since even if the narrowest possible market is taken as a reference point - that is, the market for acquiring rights to certain sporting events such as the Olympic Games - the Commission takes the view that the Eurovision system, given the structure of the market and the third-party access scheme to the system, does not give rise to competition concerns.55 Second, the Commission states, in paragraphs 100 to 103 of the contested decision, relating to the non-elimination of competition in respect of a substantial part of the products in question as regards the joint acquisition of rights, that despite the fact that the EBU is facing increasing competition from media groups and brokers, the Commission was concerned that some of the jointly acquired rights affect sporting events, for instance the Olympic Games, of particular economic and popular importance, which could constitute a ... market ... exclusively held by the Eurovision members. It goes on:To address these concerns the EBU has modified the notified agreements to include a set of sub-licensing rules which make sure that non-EBU members have extensive access to the Eurovision sports rights. This counterbalances the restrictive effects of the joint acquisition of the sports rights. The schemes will provide extensive live and deferred transmission access for non-members on reasonable terms.56 Moreover, as regards the restriction arising from the sharing of Eurovision rights between EBU members competing for the same audience, the Commission concludes, in paragraph 104 of the contested decision, that there will be no elimination of competition given the current market structure and considering that non-EBU members will be able to participate in the broadcast of the sporting events in question following the EBU sub-licensing schemes.57 It thus appears from the contested decision that, even if the Commission did not consider it necessary exactly to define the product market concerned, it nevertheless assumed the existence of a market consisting entirely of certain major international sporting events, such as the Olympic Games, in order to verify whether the Eurovision system complies with the conditions for exemption provided for in Article 81(3) EC. Therefore, the absence of such an exact definition has not, in the present case, affected the Commission's analysis of whether the Eurovision system satisfies the condition for exemption laid down in Article 81(3)(b) EC and, consequently, that part of the applicants' reasoning must be held to have no bearing on the issue.58 Second, it should be determined whether and, if necessary, to what extent the defendant made a manifest error of assessment when applying the relevant condition for exemption in concluding that, even in a market made up of specific international sporting events, the third-party scheme for access to the Eurovision system made it possible to compensate for restrictions on competition in relation to third parties and thus to avoid competition being eliminated to their detriment.59 Before analysing that scheme, it is necessary first to set out the structure of the markets at issue and the restrictions on competition to which the Eurovision system gives rise.60 As far as the structure of the markets is concerned, the contested decision indicates, inter alia, that television rights to sporting events are granted for a given territory, normally on an exclusive basis. That exclusivity is considered necessary by broadcasters in order to guarantee the value of a given sports programme in terms of viewing figures and advertising revenues (paragraph 51 of the contested decision).61 Television rights are normally held by the organiser of a sporting event, who controls access to the premises where the event is staged. In order to control the televising of the event and to guarantee exclusivity, the organiser admits only one broadcaster or a limited number of broadcasters to produce the television signal. Under their contract with the organiser, they are not allowed to make their signal available to any third party who has not acquired the relevant television rights (paragraph 52 of the contested decision).62 The Commission observes that the EBU has lost significant market share in the relevant markets over the past 10 years. With regard to the acquisition of television rights to certain sporting events, the EBU has faced competition from the big European media groups as well as from international brokers. The EBU has also lost a large number of important sporting events during the past years as the result of higher competitive offers (paragraphs 54 and 55 of the contested decision). However, the EBU remains in a strong market position in the acquisition of rights to major international sporting events with a very strong appeal for European viewers, in respect of which the rights owners still insist that the events must not be broadcast on pay television. In addition, the EBU still has a unique one-stop-shop position, which guarantees the organisers the widest possible viewing audience in Europe. The fact that the European television rights for the Olympic Games have always been sold to the EBU is of particular importance (paragraphs 55 to 57 of the contested decision).63 As regards the effects of the Eurovision system on competition, the contested decision shows (paragraphs 71 to 80) that there are two types of restrictions. First, the joint acquisition of television rights to sporting events, their sharing and the exchange of signal restricts or even eliminates competition among EBU members which are competitors on both the upstream market, for the acquisition of rights, and for the downstream market, for televised transmission of sporting events. In addition, that system gives rise to restrictions on competition as regards third parties since those rights, as set out in paragraph 75 of the contested decision, are generally sold on an exclusive basis, so that EBU non-members would not in principle have access to them.64 While it is true that the purchase of televised transmission rights for an event is not in itself a restriction on competition likely to fall under Article 81(1) EC and may be justified by particular characteristics of the product and the market in question, the exercise of those rights in a specific legal and economic context may none the less lead to such a restriction (see, by analogy, Case 262/81 Coditel v Ciné-Vog Films [1982] ECR 3381, paragraphs 15 to 17).65 In that vein, the Commission states, in paragraph 45 of the contested decision, that the acquisition of exclusive TV rights to certain major sporting events has a strong impact on the downstream television markets in which the sporting events are broadcast.66 In addition, it appears from the analysis of the documents in the case and the arguments of the parties that the acquisition of transmission rights to a major international sporting event such as the Olympics or the football World Cup cannot fail to affect strongly the market in sponsorship and advertising, which is the main source of revenue for television channels which broadcast free-to-air, since those programmes attract a very wide audience.67 Moreover, as pointed out by SIC, the effects which restrict competition for third parties as a result of the Eurovision system are accentuated, first, by the level of vertical integration of the EBU and its members, which are not merely purchasers of rights but also television operators which broadcast the rights purchased, and second, by the geographic extent of the EBU, whose members broadcast in all the countries of the European Union. As a result, when the EBU acquires transmission rights for an international sporting event, the access to that event is in principle automatically precluded for all non-member operators. By contrast, the situation appears to be different when the transmission rights for sporting events are acquired by an agency which buys those rights in order to resell them, or when they are bought by a media group which only has operators in certain Member States, since that group will tend to enter into negotiations with operators in other Member States in order to sell those rights. In that case, despite the exclusive purchase of the rights, other operators still have the opportunity to negotiate their acquisition for their respective markets.68 In light of those facts - that is, the structure of the market, the position of the EBU in the market for certain international sporting events and the level of vertical integration of the EBU and its members - there is reason to determine whether the scheme for third-party access to the Eurovision system makes it possible to counterbalance the restrictions on competition affecting those third parties and thus to avoid their exclusion from competition.69 Before that analysis is made, it should be noted that the contested decision indicates (inter alia, in paragraphs 106 to 108) that, when the Commission concluded, in paragraphs 103 and 104 of the contested decision (see paragraphs 55 and 56 above) that restrictions on competition resulting from the Eurovision system are compensated for by a series of sub-licensing rules, it was referring to the full scheme for access by third parties to the Eurovision system, which includes the sub-licensing scheme and the sub-licensing rules (see paragraph 18 above). However, as the applicants are television channels which transmit free-to-air, only the sub-licensing scheme is likely to counterbalance the restrictions on competition of which they complain. Therefore, the Court's analysis will apply only to that scheme.70 In paragraph 107 of the contested decision, the Commission states that, under the sub-licensing scheme, the EBU and its members undertake to grant non-member broadcasters extensive access to Eurovision sports programmes for which the rights have been acquired through collective negotiations .... According to the Commission, [t]he 1993 scheme grants live and deferred transmission rights to third parties of jointly acquired Eurovision sports rights. In addition, in paragraph 28 of the contested decision, it is suggested in that regard that the non-EBU members have significant access to the unused rights, i.e. for the transmission of sporting events which are not transmitted by, or of which only a minor part are transmitted by, an EBU member.71 As is apparent from Annex I to the contested decision, the sub-licensing scheme, applicable to free-to-air television channels, provides that sub-licences may be granted for live and deferred transmissions. Live transmissions (Annex I, Part IV(1)) are stipulated only for residual transmissions, that is, for transmissions of those competitions or parts of competitions which are not reserved for live transmission by EBU members, since an event is considered to be transmitted live if the majority of the principal competitions constituting it are transmitted live (Annex I, Part IV(1.3)). Therefore, an EBU member need only reserve the live transmission of the majority of the competitions of an event for non-members competing for the same market to be refused sub-licences for live transmission of the entire event, including competitions in that event which no EBU member will transmit live.72 The answers given by SIC to the questions posed by the Court of First Instance indicate that, in application of that rule, the Portuguese public operator (RTP-Radiotelevisão Portuguesa SA, hereinafter RTP), an EBU member, refused to sell SIC sub-licences for the live broadcast of 1994 World Cup matches, including for matches that RTP did not intend to broadcast, on the ground that RTP intended to broadcast live the majority of the matches in that competition, that is, 47 matches out of 52.73 However, even if it proves necessary, for reasons linked to exclusive transmission rights for sporting events and the guarantee of their economic value (see paragraph 60 above), for EBU members to reserve for themselves live transmission of the programmes acquired by the EBU, none of these reasons justifies their being able to extend that right to all the competitions which are part of the same event, even when they do not intend to broadcast all those competitions live.74 In addition, as a result of the joint application of the sub-licensing scheme (applicable to channels which transmit free-to-air) and the sub-licensing rules (applicable to pay-TV channels), even when an EBU member transmits less than the majority of the competitions of a sporting event but nevertheless broadcasts the remaining competitions of that event on its pay-TV channel, the non-member of EBU has access only to deferred transmission, unless it itself is a pay-TV channel - in which case, under the sub-licensing rules, it may purchase sub-licences for live transmissions of competitions identical or comparable to that being transmitted by the EBU member.75 As a result, as the documents in the case make clear, in particular the correspondence between M6 and the Groupement de radiodiffuseurs français de l'union européenne de radio-télévision (GRF) and the correspondence between SIC and the RTP, the opportunity for non-members of the EBU to transmit the main sporting events live is rendered inoperative to the extent that EBU members can themselves either transmit the events live or make use, under the sub-licensing scheme, of a right of reserve which also applies to events which they do not intend to transmit live.76 Those restrictions are all the more severe in view of the fact that, as these proceedings show, generally only live transmission is of real interest to the applicants, which are general television channels transmitting free-to-air with national coverage, since televised broadcasts of sporting competitions - at least the most important of them - are able to attract a wide audience and thereby justify their economic cost only as long as the result of those competitions remains unknown and, therefore, only if the broadcast is live. The deferred broadcast of sporting events, by contrast, is of no real interest in economic terms for general television channels, such as the applicants, whose financing depends exclusively on broadcast publicity and sponsorship.77 Added to those restrictions - at least in the case of France, where several television channels are EBU members - are questions of a practical nature which make it difficult for non-members to have access both to the direct purchase of sub-licences and to the purchase in auction of EBU rights which have not been used by its members (that was the case for the television transmission rights for the Sydney Olympic Games on French television). Those difficulties are in essence linked to the fact that television channels which are not members of the EBU do not have available to them sufficiently early the information they need in order to set up the technical facilities necessary, first, to televise transmissions of sporting events and, second, to adapt both their programming and their public information so as to attract large enough audiences to justify the investment.78 Thus, following the request by M6 by letter of 18 January 1996 that it be notified of the events of the Atlanta Olympic Games (July 1996) which it could broadcast, it was not until a discussion on 7 June 1996 that the GRF informed it, in very vague terms, that the French members of the EBU were going to broadcast those games live for 15 hours a day and that, as a result, access by M6 to direct transmissions might possibly apply to a few football matches or events of little interest, such as softball.79 In the light of all the preceding considerations, the first conclusion to be made is that, contrary to what the Commission contends, the sub-licensing scheme does not guarantee that live transmission rights which are not used by EBU members are made available to their competitors.80 As regards the possibility of acquiring sub-licences to cover deferred events or to provide roundups of these, and keeping in mind the fact that those modes of transmission are of limited interest for general channels which transmit free-to-air with national coverage, it is clear that this possibility is also subject to several restrictions. First, competitions the rights for which have been purchased by the EBU may not be broadcast until, at the earliest, one hour after the end of the event (the one-hour embargo) or of the last competition of the day, but never before 22.30 local time. Second, as is clear from the documents included in the file by the applicants, in reality, the members of the EBU, in any case in the countries where the applicants operate, impose even stricter conditions on embargo times and the editing of programmes.81 Lastly, the scheme under analysis enables non-members of the EBU to purchase the rights to transmit news commentaries (two per event or per day of competition, of 90 seconds each), called News Access. However, as pointed out by the applicants, that opportunity is always guaranteed them in the countries where they operate, independently of the sub-licensing scheme. In Spain and Portugal, the option to broadcast roundups of sporting events for public information is guaranteed under the constitutional right to information. In France, that opportunity exists under the code of good conduct which applies to French television channels.82 In answer to the questions put by the Court of First Instance as to what information led the Commission to state that the scheme for third-party access to Eurovision rights, in force for channels transmitting free-to-air since 1993, gives extensive possibilities for live and deferred transmissions for non-members under reasonable conditions, the Commission placed on the file a list issued by the EBU which sets out the sub-licences granted up until 13 May 1997. Nevertheless, far from confirming the statements by the Commission and the EBU as regards the scheme for third-party access to the Eurovision system, the data in that list invalidate them. They show that while in certain States, such as The Netherlands, Sweden and Norway, EBU members appear to grant sub-licences to competing television channels, in other Member States the granting of sub-licences remains extremely restricted, limited to the sub-licences granted to regional television channels which operate in narrowly limited markets, as in Spain (that is, moreover, confirmed by the list of sub-licences which RTVE has provided in the context of its intervention), or to sub-licences which are for the most part limited to the transmission of news commentaries for public information (News Access), as in Italy or Germany. For the countries where two of the applicants operate, France and Portugal, no sub-licence is mentioned.83 All the information provided to the Court of First Instance thus goes to show that, contrary to what the Commission concludes in the contested decision, the sub-licensing scheme does not guarantee competitors of EBU members sufficient access to rights to transmit sporting events held by the latter on the basis of their participation in that purchasing association. Apart from a few exceptions, nothing in the rules or mode of implementation of the scheme enables competitors of EBU members to obtain sub-licences for the live broadcast of unused Eurovision rights. In reality, the scheme merely permits the acquisition of sub-licences to transmit roundups of competitions under extremely restrictive conditions.84 That conclusion is not invalidated by the argument put forward by the EBU to the effect that the proof of the proper functioning of the scheme for access by third parties to the Eurovision system is the absence of recourse to the arbitration procedures which it provides for. First, that argument proves incorrect, inasmuch as the correspondence between SIC and the RTP shows that those operators had recourse to arbitration, at least in relation to the purchase of sub-licences for the 1994 world football championships. In addition, recourse to arbitration is foreseen in the scheme analysed only for disputes concerning the price of sub-licences, which implies that the parties will resort to it only when they agree on all the other conditions of access (see Annex I, Part IV(5.1) and Annex II(iii) to the contested decision). Therefore, the failure to use that procedure cannot show that the sub-licensing scheme allows genuine access to the programmes acquired by the EBU.85 It follows from all the preceding considerations that the Commission made a manifest error of assessment in the application of Article 81(3)(b) EC in determining that, even if a product market limited to certain major international sports events exists, the sub-licensing scheme guarantees access for third parties which are competitors of the EBU's members to Eurovision rights and consequently avoids the elimination of competition in that market.86 Since the Commission's decision to grant individual exemption assumes that the agreement or the decision of the association of undertakings satisfies all four conditions laid down in Article 81(3) EC and that an exemption must be refused if any of the four conditions is not met (see, inter alia, Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299, 347 and Case T-17/93 Matra Hachette v Commission [1994] ECR II-595, paragraph 104), the contested decision must be annulled without there being any need to rule on the other pleas put forward or to deal with the requests for production of documents made by the applicants in Cases T-216/00 and T-300/00. Decision on costs Costs87 Under Article 87(2) of the Rules of Procedure, the unsuccessful party must be ordered to pay the costs if they have been applied for in the successful party's pleadings.88 Since the Commission has been unsuccessful and the applicants, as well as the RTI, the intervener in Case T-300/00, have applied for costs, the Commission must be ordered to pay its own costs and to bear the costs incurred by the applicants and the RTI. Since DSF has not applied for the Commission to be ordered to pay the costs of its intervention in Case T-299/00, that intervener must bear its own costs.89 Since Antena 3 has claimed that the EBU and RTVE should be ordered to bear the costs of their interventions in Case T-216/00, the EBU and RTVE must be ordered to pay their own costs as well as those incurred by Antena 3 in its intervention. Since M6 and SIC have requested that the EBU be ordered to pay the costs of its intervention in Cases T-185/00 and T-300/00, the EBU must be ordered to pay its own costs as well as those incurred by M6 and SIC in their interventions. As Telecinco did not request that the EBU and RTVE be ordered to pay the costs of their interventions in Case T-299/00, those interveners need only pay their own costs in that case. Operative part On those grounds,THE COURT OF FIRST INSTANCE (Second Chamber, Extended Composition),hereby:1. Annuls Commission Decision 2000/400/EC of 10 May 2000 relating to a proceeding pursuant to Article 81 of the EC Treaty (IV/32.150 - Eurovision);2. Orders the Commission to pay its own costs, together with those of the applicants and of the intervener Reti Televisive Italiane Spa;3. Orders DSF Deutsches SportFernsehen GmbH to bear the costs of its intervention;4. Orders the intervener Union européenne de radio-télévision to bear its own costs, together with those incurred by Métropole télévision SA, Antena 3 de Televisión SA and SIC - Sociedade Independente de Comunicação SA for their interventions;5. Orders the intervener Radiotelevisión Española to bear its own costs, together with those incurred by Antena 3 de Televisión SA for its intervention;6. Orders Gestevisión Telecinco SA to bear the costs it incurred in connection with the intervention of the Union européenne de radio-télévision and of Radiotelevisión Española.

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THE COURT OF JUSTICE PARTIALLY ANNULS THE DECISION ADOPTED BY THE COMMISSION IN 1998 CONCERNING THE SPANISH AID SCHEME, IMPLEMENTED WITHIN THE FRAMEWORK OF THE "PLAN RENOVE INDUSTRIAL", FOR THE PURCHASE OF COMMERCIAL VEHICLES

| 61998J0351 Judgment of the Court (Sixth Chamber) of 26 September 2002. - Kingdom of Spain v Commission of the European Communities. - State aid - Effect on competition and trade between Member States - De minimis rule - Sectoral guidelines and guidelines on aid for environmental protection - Horizontal aid with sectoral effects. - Case C-351/98. European Court reports 2002 Page I-08031 Keywords 1. State aid - Definition - Differential treatment of undertakings in the application of charges(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))2. State aid - Effect on trade between Member States - Aid relatively small in amount - Commission's exclusion of the transport sector from the benefit of the de minimis rule - Scope - Undertakings which carry out transport only to meet their own needs(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))3. State aid - Investment aid reserved to undertakings established in the territory of the Member State concerned - Discrimination - None(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))4. Acts of the institutions - Statement of reasons - Obligation - Scope - Commission decision on State aid - Characterisation of effect on trade between Member States(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC) and Art. 190 (now Art. 253 EC))5. State aid - Effect on trade between Member States - Adverse effect on competition - Aid the individual amounts of which are relatively small but awarded in a sector with strong competition resulting from overcapacity and a large number of small companies(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))6. State aid - Investigation by the Commission - Prior investigation - Taking into account of effects recorded a posteriori - Impermissible(EC Treaty, Art. 93(3) (now Art. 88(3) EC))7. Acts of the institutions - Statement of reasons - Obligation - Scope - Refusal by the Commission to authorise State aid under guidelines that are binding on it - Requirement to classify the aid according to an essential distinction made in the guidelines(EC Treaty, Art. 92(3) (now, after amendment, Art. 87(3) EC) and Art. 190 (now Art. 253 EC))8. State aid - Investigation by the Commission - Compatibility of aid with the common market - Aid within the guidelines on environmental protection aid - Prohibition on cumulation with other aid - None(EC Treaty, Art. 92(3)(c) (now, after amendment, Art. 87(3)(c) EC)) Summary $$1. The concept of State aid does not encompass differential treatment of undertakings in the application of charges, where that differential treatment flows from the nature and general scheme of the system of charges in question. None the less that concept does include the support given to certain undertakings in particular in funding part of the charges that normally come out of their budgets such as the need to replace their commercial vehicles.( see paras 42-43 )2. The position of professional transport companies and companies which carry out transport only to meet their own needs are such that the latter cannot be considered to operate on the transport market or to form part of the transport sector. Therefore the exclusion, in the area of State aid, of the transport sector from the benefit of the de minimis rule laid down by the Commission's guidelines and notices, which are binding on it where they do not depart from the rules in the Treaty and are accepted by the Member States, does not apply to aid granted to undertakings which carry out transport only to meet their own needs to replace their commercial vehicles.( see paras 48, 53 )3. Discrimination consists in particular in treating like cases differently, involving a disadvantage for some operators in relation to others, without that difference in treatment being justified by the existence of substantial objective differences. Since a measure to support investment adopted by a public authority can by definition apply only in respect of the territory for which it is responsible, the fact that the benefit of the measure does not extend to undertakings not established in its territory, since such undertakings are in a wholly different position vis-à-vis the authority from undertakings established within the territory, cannot be regarded as discriminatory.( see para. 57 )4. In certain cases the very circumstances in which the aid has been granted show that it is liable to affect trade between Member States and to distort or threaten to distort competition. In such cases, the Commission must set out those circumstances in the statement of reasons for its decision. A statement of reasons explaining that aid applies to an indeterminate number of beneficiaries above the de minimis threshold, that it relates to services the supply of which is liberalised between the Member States and those services are by nature liable to be the subject of inter-State supplies satisfies that requirement.( see para. 58 )5. State aid of a relatively low amount is liable to affect competition and trade between Member States where there is strong competition in the sector in which undertakings receiving that aid operate. Except where operators on the market in question engage in anti-competitive conduct, a sector characterised by overcapacity, must necessarily be one with strong competition. Moreover, where a sector has a large number of small companies, aid potentially available to all or a very large number of undertakings in that sector can, even if individual amounts are small, have an impact on competition and trade between Member States and thus be caught by Article 92(1) of the Treaty (now, after amendment, Article 87(1) (EC).( see paras 63-65 )6. Under Article 93(3) of the Treaty (now Article 88(3) EC), aid schemes must be notified to and authorised by the Commission before their entry into force and accordingly they can be examined only by reference to their general characteristics as they appear a priori and not in the light of results recorded a posteriori. Otherwise Member States which implement aid schemes before obtaining the Commission's permission to do so would unquestionably be in a more favourable position than those which comply with the obligation not to implement the contemplated measures prior to a final decision from the Commission.( see para. 67 )7. Since the Community guidelines on State aid for environmental protection it has adopted in the field of State aid, and which are binding on it in so far as it does not depart from the rules in the Treaty and is accepted by the Member States, make clear that it is essential that aid be classified as aid for investment or operating aid, the Commission cannot decide that aid cannot be authorised under those Guidelines without classifying it as falling into one of those two categories in the statement of reasons for its decision.( see paras 76-78, 81 )8. If it fulfils the criteria laid down by the Community guidelines applicable to State aid for environmental protection and, where appropriate, certain sectoral rules, a national aid scheme intended to reduce pollution and nuisances cannot be declared incompatible as a whole with the common market on the ground that some of the recipients have already received State aid authorised under another head since such incompatibility is not justified by those guidelines or by the Communication on cumulation of aid for different purposes.( see para. 90 ) Parties In Case C-351/98,Kingdom of Spain, represented by R. Silva de Lapuerta, acting as Agent, with an address for service in Luxembourg,applicant,vCommission of the European Communities, represented by J. Guerra Fernández and D. Triantafyllou, acting as Agents, with an address for service in Luxembourg,defendant,APPLICATION for partial annulment of Commission Decision 98/693/EC of 1 July 1998 concerning the Spanish Plan Renove Industrial system of aid for the purchase of commercial vehicles (August 1994 - December 1996) (OJ 1998 L 329, p. 23),THE COURT (Sixth Chamber),composed of: F. Macken, President of the Chamber, C. Gulmann, J.-P. Puissochet (Rapporteur), V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: S. Alber,Registrar: L. Hewlett, Principal Administrator,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 31 January 2002,after hearing the Opinion of the Advocate General at the sitting on 7 May 2002,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 25 September 1998 the Kingdom of Spain sought, under the first paragraph of Article 173 of the EC Treaty (now, after amendment, the first paragraph of Article 230 EC), the annulment of Articles 3 and 4 of Commission Decision 98/693/EC of 1 July 1998 concerning the Spanish Plan Renove Industrial system of aid for the purchase of commercial vehicles (August 1994 - December 1996) (OJ 1998 L 329, p. 23, hereinafter the contested decision).Factual background and the contested decision2 By an agreement concluded on 27 September 1994 by the Spanish Ministry of Industry and Energy and the Instituto de Crédito Oficial, the Spanish authorities established a regime, applicable in the form at issue in this case from August 1994 to December 1996, called the Plan Renove Industrial (hereinafter the Plan), whose purpose was to facilitate the replacement of commercial vehicles belonging to natural persons, small and medium-sized enterprises (hereinafter SMEs), regional public bodies and bodies providing local public services.3 The mechanism consisted in the grant of an interest subsidy for loans to finance the purchase or hire-purchase of eligible new vehicles. The loans granted under the Plan covered up to 70% of the purchase price excluding VAT of the vehicle and the subsidy was granted on the condition that a commercial vehicle more than 10 years old (or more than seven years old in the case of tractor units) which met certain requirements that varied according to the type of vehicle purchased be withdrawn from circulation in return. Given the duration of the loans, the subsidy was equivalent to aid of up to 6.5% of the VAT-exclusive purchase price of the new vehicle.4 Taking the view that the measure in question did not amount to State aid within the meaning of Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC), the Spanish authorities did not notify it to the Commission under Article 93(3) of the EC Treaty (now Article 88(3) EC).5 The Commission became aware of the measure from the press. It first asked the Spanish authorities for information on 9 February 1995 and, after several exchanges of correspondence with them, initiated the procedure provided for in Article 93(2) of the Treaty. It informed the Spanish authorities of this by a letter of 26 June 1996 and published that letter in the Official Journal of the European Communities (OJ 1996 C 266, p. 10), inviting any interested parties to submit their comments.6 The Spanish authorities submitted their comments by a letter of 26 July 1996. No other Member State or other third party submitted comments. Following further requests for information and exchanges of correspondence, and a bilateral meeting between representatives of the Commission and the Spanish Government, the Commission adopted the contested decision.7 In Part II of the grounds of that decision, the Commission first of all notes that the international market for the carriage of persons by road and the international road haulage market have been completely liberalised in the Community since 1 June 1992 and 1 January 1993 respectively. The Commission observes that road passenger transport cabotage was liberalised on 30 August 1992 (except for regular services) and that road haulage cabotage was progressively liberalised between 1990 and 1 July 1998.8 The Commission goes on to state, in Part IV of the grounds of the contested decision, that neither the subsidies granted to regional public bodies and bodies providing local public services, nor those granted to natural persons or SMEs for the purchase of small commercial vehicles, where they pursue a business other than transport (hereinafter non-transport companies) at a solely local or regional level, constitute State aid within the meaning of Article 92(1) of the Treaty. In the Commission's view such aid does not affect trade between Member States. In particular, with regard to non-transport companies operating at a solely local or regional level, the Commission considers that, because of the type of journey undertaken by small commercial vehicles and the lack of any economically viable alternative enabling those journeys to be contracted out to professional transport companies, there is no effect on trade between Member States or the transport market. That assessment is restated at Articles 1 and 2 of the operative part of the contested decision.9 However, the Commission considers that all other aid awarded under the Plan to natural persons or SMEs (hereinafter the contested aid) constitutes State aid within the meaning of Article 92(1) of the Treaty that is illegal and incompatible with the common market. That assessment is restated at Article 3 of the operative part of the contested decision.10 First of all, the Commission considers that the contested aid is financed from State resources, that it distorts competition by reducing the recipients' normal business expenses and that it affects trade in the road transport sector which is in the course of being completely liberalised. In that connection, the Commission points out that the beneficiaries of the aid are in competition with transport companies established in Spain and other Member States which cannot benefit from it. It argues that, at least in practice, the Plan discriminates against carriers not established in Spain who, if they wish to benefit from it, first have to enter into an agreement with a Spanish operator willing to withdraw a suitable vehicle registered in Spain from circulation.11 Secondly, the Commission considers that the contested aid cannot benefit from any derogation and that in particular it cannot fall within the exemption provided for in Article 92(3)(c) of the Treaty, which covers aid to facilitate the development of certain economic activities.12 It explains that the de minimis rule, which provides that small amounts of aid are not caught by Article 92 of the Treaty and was established under the Community guidelines on State aid for SMEs adopted by the Commission (see OJ 1992 C 213, p. 2, OJ 1996 C 213, p. 4, and OJ 1996 C 68, p. 9, respectively) does not apply to the transport sector, which also encompasses transport undertaken by non-transport companies on their own account. Such transport is interchangeable with that provided by specialist companies.13 Nor can the justification relied on by the Spanish authorities relating to the Plan's environmental protection objectives be upheld since, with some exceptions that are not relevant to this case, the Community guidelines on State aid for environmental protection (OJ 1994 C 72, p. 3, hereinafter the Environmental Guidelines) provide for the possibility of awarding aid only to encourage actions that go beyond what is prescribed by law in the environmental field, which the contested aid does not. The subsidies are calculated on the basis of the price of the new vehicle, irrespective of any ecological consideration. Furthermore, road transport is characterised by overcapacity, which the Plan reinforces by enabling old vehicles to be exchanged for new vehicles of greater capacity. The Commission adds that it is its general aid practice to authorise aid for new investment which could not otherwise take place, but not aid just for replacement.14 The Commission also considers that there is a risk of cumulation with other aid it has authorised elsewhere.15 Finally, the Commission decided that the subsidies constituting State aid within the meaning of Article 92(1) of the Treaty should be recovered from the recipients in order to restore the competitive conditions that prevailed before they were granted. It points out that the contested aid was illegally granted and that it cannot have become lawful by virtue of the time that has elapsed since the Plan was implemented, and it rejects the Spanish authorities' argument that, in view of the small amount of aid, to recover it would contravene the principle of proportionality. The requirement that the aid be recovered is the subject of Article 4 of the contested decision.Procedure and forms of order sought16 After the Kingdom of Spain had filed its action, the Confederación Española de Transporte de Mercancías (CETM) brought a parallel action before the Court of First Instance of the European Communities, also for annulment of Articles 3 and 4 of the contested decision. That action was registered under number T-55/99. The procedure before the Court of First Instance followed the normal course.17 By an order of 25 January 2000, after the parties had submitted argument, the Court of Justice stayed proceedings under the third paragraph of Article 47 of the EC Statute of the Court of Justice and Article 82a(1)(a) of the Rules of Procedure, pending delivery of a final decision by the Court of First Instance in Case T-55/99. By judgment of 29 September 2000 (Case T-55/99 CETM v Commission [2000] ECR II-3207), the Court of First Instance dismissed CETM's action.18 When asked, the Spanish Government stated to the Court of Justice that the proceedings before it should continue notwithstanding delivery of the judgment of the Court of First Instance in CETM v Commission.19 The Kingdom of Spain claims that the Court should:- annul Articles 3 and 4 of the contested decision;- order the Commission to pay the costs.20 The Commission claims that the Court should:- dismiss the action as unfounded;- order the Kingdom of Spain to pay the costs.The application21 The Spanish Government advances five pleas in law in support of its application for annulment. First of all, the contested aid does not fall within the scope of Article 92(1) of the Treaty. Secondly, even if it constituted aid falling within that provision, it should have been authorised under Article 92(3)(c) of the Treaty. Thirdly, the Commission infringed the principle of the protection of legitimate expectations. Fourthly, the obligation to recover the contested aid infringes the principle of proportionality. Fifthly and finally, the decision does not state reasons in regard to the obligation to recover the aid.Plea alleging infringement of Article 92(1) of the TreatyArguments of the parties22 According to the Spanish Government the measures referred to in Article 3 of the contested decision do not constitute State aid within the meaning of Article 92(1) of the Treaty.23 First of all, the contested aid does not favour certain undertakings or the production of certain goods. It targets an indeterminate group of potential beneficiaries. Nor is it discriminatory since carriers not established in Spain can benefit indirectly from the aid either by concluding an agreement with an owner of a vehicle registered in Spain willing to send that vehicle for scrap, or by registering their own vehicles in Spain and then sending them for scrap. The Spanish Government adds that the exclusion of large undertakings from the Plan is consistent with the nature and scheme of the system, which is to encourage environmental protection, road safety and replacement of vehicles on the road. Large companies renew their fleets of vehicles earlier than smaller undertakings and do not therefore need aid for that purpose.24 The Spanish Government refers to the definition of a specific subsidy in Article 2.1(b) of the Agreement on Subsidies and Countervailing Measures set out in Annex 1A to the Agreement establishing the World Trade Organisation (hereinafter the Agreement on Subsidies), which was approved on behalf of the European Community by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1). According to the Spanish Government, that definition, as explained in footnote 2 to Article 2.1(b) of the Agreement on Subsidies, excludes subsidies accorded pursuant to criteria or conditions which are neutral, which do not favour certain enterprises over others, and which are economic in nature and horizontal in application, such as number of employees or size of enterprise. It infers from that that the scope of the Plan fulfils the criterion for compatibility with the nature and scheme of the system, which enables it to escape classification as aid within the meaning of Article 92(1) of the Treaty.25 Secondly, the contested aid does not distort competition or affect trade between Member States.26 The Spanish Government refers first of all to the Community guidelines on State aid for SMEs, cited above, adopted by the Commission and, in particular, to the de minimis rule established therein. The Commission set the amount of aid below which Article 92(1) of the Treaty does not apply at ECU 100 000 per undertaking over a period of three years. According to the Spanish Government, even if the guidelines on State aid for SMEs do not apply to the transport sector, the reasons behind the de minimis rule should cause it to be applied in this case.27 The Spanish Government then cites a number of factors to demonstrate the very modest effect of the contested aid on the common market. It argues, in particular, that the aid is, for the most part, directed only at undertakings transporting on their own account at local level, or at professional transport companies the vast majority of which have only a small number of vehicles. Accordingly, the Plan essentially targets vehicles that are not in competition with vehicles from other Member States.28 With regard, more particularly, to non-transport companies which undertake transport only on their own account, the Spanish Government argues that the Commission itself recognised that such transport is not in competition with transport undertaken on behalf of third parties by professional transport companies in its report COM(1998) 47 final of 4 February 1998 on the implementation of Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State (OJ 1993 L 279, p. 1), which appraised cabotage activities from 1990 to 1995, and which left own-account cabotage undertaken by a person in a Member State other than that where he is established out of consideration because it was so insignificant.29 The Spanish Government also advances several arguments to show that professional transport on behalf of third parties and own-account transport are not part of the same market.30 In the Spanish Government's view, the Commission's grounds for finding an effect on competition and trade, namely the liberalisation of road transport of passengers and goods, are in any event insufficient to demonstrate any such effect. Referring to the Court's judgments in Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809 and Joined Cases C-329/93, C-62/95 and C-63/95 Germany and Others v Commission [1996] ECR I-5151, the Spanish Government maintains that a finding that trade between Member States is affected must be based on reasons relating in particular to the actual situation on the market under consideration, the market share of the undertakings receiving the aid, the position of competitor undertakings and trade patterns for the goods or services in question between Member States. None of those factors is mentioned in the grounds of the contested decision.31 The Spanish Government says that it is clear that the only beneficiaries of the contested aid in fact able to compete with carriers from other Member States are those which bought the biggest vehicles, and subsidised vehicles in that category represent only 0.1% of the commercial vehicle fleet.32 The Commission contests the argument that the Plan does not favour certain undertakings or the production of certain goods and therefore constitutes a general measure not amounting to an aid scheme for the purposes of Article 92(1) of the Treaty. First of all, the Plan benefits only undertakings that need commercial vehicles and those that do not need such vehicles therefore do not benefit from the contested aid. Secondly, SMEs are the only enterprises eligible for aid. Thirdly, the fact that the categories of beneficiary are defined impersonally does not alter the fact that the aid is selective. Fourthly, the exclusion of large enterprises is by no means justified by the nature and general scheme of the system within the meaning of the case-law of the Court of Justice. Fifthly, the rules in the Agreement on Subsidies are not relevant to assessing a measure in the light of Article 92(1) of the Treaty, particularly as regards whether the measure is selective.33 The Commission also contests the assertion that the Plan does not distort competition and does not affect trade between Member States.34 It claims that the Kingdom of Spain cites the de minimis rule without demonstrating that the undertakings that benefit from the aid do not receive an amount above the applicable ceiling. It argues that that rule cannot in any event apply to the transport sector because the sector is characterised, first of all, by overcapacity which is exacerbated by any aid however small and, secondly, by a huge number of operators, particularly in Spain, which means that even a small amount of aid granted to all operators has a significant impact on the sector as a whole. The Commission argues that the total capacity of the Spanish commercial vehicle fleet has increased as a result of the adoption of the Plan.35 The Commission also argues that professional transport on behalf of third parties and own-account transport are two segments of the same market, since the services are largely interchangeable. The fact that the report on cabotage of 4 February 1998 found that undertakings which engage in transport on their own behalf made little use of the possibility of cabotage in other Member States between 1990 and 1995 is entirely to be expected, since it was only when Commission Regulation (EC) No 792/94 of 8 April 1994 laying down detailed rules for the application of Council Regulation (EEC) No 3118/93 to road haulage operators on own account (OJ 1994 L 92, p. 13) entered into force that such enterprises gained free access to cabotage.36 With regard to the effect on competition, the Commission also points out that, even if the contested aid does not have any impact on fees charged by the beneficiaries, owing to the vehicles' depreciation rate, it certainly strengthens their financial position. The fact that only 0.5% of the Spanish commercial vehicle fleet was renewed using the Plan is not relevant. First of all, the Commission could not predict the actual effect of the aid in adopting the contested decision and, secondly, the reference figure to be taken into account is the number of vehicles over 10 years old eligible to benefit from the aid and not the entire commercial vehicle fleet.37 With regard more particularly to the effect on trade between Member States, the Commission advances a number of arguments to show that there is such an effect and claims that in any event no analysis of the actual effects of the contested aid on intra-Community trade was necessary, because the circumstances from which it is obvious that trade would be adversely affected (sector open to competition, overcapacity, strengthening of financial capacity and recipient undertakings' scope for action compared with foreign competitors) are mentioned in the contested decision and the case-law does not require a detailed economic analysis, particularly in relation to unnotified aid. The Commission relies in that connection on case T-214/95 Vlaams Gewest v Commission [1998] ECR II-717.Findings of the Court38 Article 92(1) of the Treaty defines aid governed by the Treaty as any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between Member States.39 The Spanish Government's argument that the contested aid does not favour certain undertakings or the production of certain goods should be considered first.40 It must first of all be observed that, irrespective of the question as to whether or not the Plan is discriminatory, it is not available to undertakings which are not SMEs and it is therefore targeted at certain undertakings in particular, albeit that they are not limited in number.41 Next, the exclusion of undertakings that are not SMEs from the benefit of the Plan cannot be justified on the basis of the nature and scheme of the system of which it forms part, which would have enabled the Plan to escape classification as aid covered by Article 92(1) of the Treaty.42 It is true that the concept of aid has been interpreted by the Court as not encompassing differential treatment of undertakings in the application of charges, where that differential treatment flows from the nature and general scheme of the system of charges in question (see, to that effect, Case 173/73 Italy v Commission [1974] ECR 709, paragraph 15; Joined Cases C-72/91 and C-73/91 Sloman Neptun [1993] ECR I-887, paragraph 21; and Case C-390/98 Banks [2001] ECR I-6117, paragraph 33).43 However, in the present case the charges in question arise as a result of the undertakings' need to replace their commercial vehicles and normally come out of those undertakings' budgets. Accordingly, the support given to certain undertakings in funding part of those charges is not a consequence of the nature or general scheme of the system of charges in question and must be considered to favour those undertakings. In those circumstances the reasons cited by the Spanish Government to explain why large undertakings are ineligible under the Plan can only be viewed as justifying the way in which the measure is targeted, not as enabling the measure to escape classification as aid.44 Finally, the fact that the contested aid would not be considered to be a specific subsidy under the Agreement on Subsidies cannot reduce the scope of the definition of aid under Article 92(1) of the Treaty.45 The Spanish Government's first argument in support of the claim that the contested aid does not fall within the scope of Article 92(1) of the Treaty must accordingly be rejected.46 Turning secondly to the argument that the contested aid does not distort competition and does not affect trade between Member States, consideration must first of all be given to the factors relied on by the Spanish Government relating to non-transport companies which carry out transportation only on their own account. The Spanish Government essentially argues on this point that such undertakings are not in competition with professional transport companies and that the Commission should have applied the de minimis rule to them.47 It is undoubtedly true that executive decisions taken by those undertakings as to whether their transport needs are to be outsourced or met within the company impact on the transport market. Where a non-transport company invests in vehicles in order to meet all or part of its transport needs, that company in principle diminishes for a given period the market open to professional transport companies. Indeed the same is true of all markets for goods or services which a company may elect either to produce or perform itself to meet its needs or to contract out to external suppliers.48 However, the differences between the position of professional transport companies and companies which carry out transport only to meet their own needs are such that the latter cannot be considered to operate on the transport market or to form part of the transport sector. In particular, non-transport companies do not have customers to whom they supply transport services or seek such customers, and the transport services which they undertake and are interchangeable with those offered by professional transport companies are confined to those that meet their own needs. The situation of professional transport companies and companies which carry out transport only on their own account are therefore not sufficiently homogeneous in order for both categories to belong to the same sector and be operational on the same market.49 Therefore, whilst the Commission was entitled to examine the effect on the transport sector of the grant of the contested aid to non-transport companies, it could not simply treat those companies as if they were operators in the transport sector.50 The Commission was therefore not entitled to refuse to examine whether, as the Spanish authorities claimed, the assistance given to non-transport companies could fall within the de minimis rule, the application of which, according to notices issued by the Commission itself, is excluded only in certain sectors and for export aid.51 In that connection, whilst the Court has held that the relatively small amount of aid or the relatively small size of the undertaking which receives it does not as such exclude the possibility that intra-Community trade might be affected (see, in particular, Case C-142/87 Belgium v Commission (the Tubemeuse case) [1990] ECR I-959, paragraph 43), a small amount of aid to an undertaking over a given period does not affect trade between Member States in particular economic sectors.52 The Commission was therefore entitled to reach the view, in the exercise of its discretion to assess the possible economic effects of aid, that, other than in certain sectors where competitive conditions are of a particular kind and except in respect of export aid, aid in amounts falling below those laid down in the Community guidelines on State aid for SMEs, and subsequently in its Notice on the de minimis rule for State aid (OJ 1996 C 68, p. 9), does not affect trade and is therefore not caught by Articles 92 and 93 of the Treaty. The amounts laid down by the Commission have not hitherto been challenged.53 The Commission is, however, bound by the guidelines and notices that it issues in the area of supervision of State aid where they do not depart from the rules in the Treaty and are accepted by the Member States (Case 310/85 Deufil v Commission [1987] ECR 901, paragraph 22; Case C-313/90 CIRFS and Others v Commission [1993] ECR I-1125, paragraph 36; and Case C-311/94 IJssel-Vliet [1996] ECR I-5023, paragraph 43). The Commission may not therefore refuse to apply the de minimis rule to aid granted to undertakings in sectors which the various applicable provisions do not exclude from application of the rule.54 In those circumstances, Articles 3 and 4 of the contested decision must be annulled in so far as they relate to aid granted to natural persons or SMEs which carry on business other than in the transport sector of amounts below the de minimis threshold laid down in the Commission's guidelines and notices in force at the time when the aid was granted.55 With regard to aid to non-transport companies that exceeds the de minimis threshold, it is to be noted that the reasons stated in the contested decision for finding that such aid affects competition and trade between Member States relate exclusively to the transport sector.56 The Commission argues in the contested decision that the contested aid affects competition with transport companies established both in Spain and in other Member States, since the liberalisation of road transport has opened up competition with undertakings from other Member States in the international transportation and cabotage sector. It states that in practice there is discrimination against undertakings from other Member States, since the mechanism implemented under the Plan makes access to aid more difficult for them.57 It must first of all be pointed out that the Commission's argument that the Plan is discriminatory is without foundation. It is settled case-law that discrimination consists in particular in treating like cases differently, involving a disadvantage for some operators in relation to others, without that difference in treatment being justified by the existence of substantial objective differences (see, in particular, Joined Cases 17/61 and 20/61 Klöckner-Werke and Hoesch v High Authority [1962] ECR 325, at p. 345; Case 250/83 Finsider v Commission [1985] ECR 131, paragraph 8; and Banks, cited above, paragraph 35). A measure to support investment adopted by a public authority can by definition apply only in respect of the territory for which it is responsible and the authority cannot be criticised for not extending the benefit of the measure to undertakings not established in its territory, since such undertakings are in a wholly different position vis-à-vis the authority from undertakings established within the territory. That statement does not, however, mean that such a measure of support cannot be classified as aid within the meaning of Article 92(1) of the Treaty if it fulfils the conditions laid down by that provision.58 In that connection, in certain cases the very circumstances in which the aid has been granted show that it is liable to affect trade between Member States and to distort or threaten to distort competition. In such cases, the Commission must set out those circumstances in the statement of reasons for its decision (see Netherlands and Leeuwarder Papierwarenfabriek v Commission, cited above, paragraph 24; Germany and Others v Commission, cited above, paragraph 52; and Joined Cases C-15/98 and C-105/99 Italy and Sardegna Lines v Commission [2000] ECR I-8855, paragraph 66). Contrary to what the Spanish Government claims, the statement of reasons in the contested decision, as set out in the first sentence of paragraph 56 above, is sufficient to explain the effect of the Plan on competition and trade between Member States since the Plan applies to an indeterminate number of beneficiaries above the de minimis threshold, it relates to services the supply of which is liberalised between the Member States and those services are by nature liable to be the subject of inter-State supplies. The fact that only a small number of professional transport companies from other Member States actually engage in cabotage in Spain is irrelevant precisely because the Plan could have the effect of hampering growth in the supply of such services.59 It follows from the foregoing that the Commission has demonstrated satisfactorily that the contested aid affects competition and trade between Member States with regard to such aid as exceeds the de minimis threshold awarded to non-transport companies.60 The same arguments apply a fortiori to aid exceeding the de minimis threshold awarded to professional transport companies.61 The question remains whether the Commission has satisfactorily established that aid awarded to professional transport companies in amounts below the de minimis threshold affects competition and trade. The Commission stated in that connection in the contested decision that the de minimis rule expressly excludes the transport sector from its scope because in that sector, which is characterised by a large number of small companies, relatively small sums can have an impact on competition and trade between Member States. It also pointed out that the road transport sector is characterised by overcapacity and that the Plan did, according to information from the Spanish authorities, result in a slight increase in transport capacity by volume.62 The Spanish Government for its part maintains that the vast majority of the professional transport companies which received the contested aid have only a small number of vehicles. Specifically, 81% of those recipients who have bought vehicles in the highest categories have only one vehicle and 97% of them have fewer than five vehicles. Only about half of the vehicles in the lower categories belonging to professional transport companies have a transport permit at national level. Of the vehicles with a national transport permit, which are the only ones considered by the Spanish Government to be in a position to compete with carriers from other Member States, only 10% could have been replaced under the Plan because they were over 10 years old. Overall only 0.5% of the Spanish commercial vehicle fleet was replaced (with replaced vehicles in the highest categories representing, as indicated at paragraph 31 above, only 0.1% of that fleet). Finally, aid of a maximum of 6.5% of the VAT-exclusive purchase price of each vehicle cannot create a significant competitive advantage in relation to charges over the period of use of the vehicle concerned.63 It must be recalled that aid of a relatively low amount is liable to affect competition and trade between Member States where there is strong competition in the sector in which undertakings receiving that aid operate (Case 259/85 France v Commission [1987] ECR 4393, paragraph 24, and Case C-303/88 Italy v Commission [1991] ECR I-1433, paragraph 27).64 Except where operators on the market in question engage in anti-competitive conduct, a sector characterised by overcapacity, which is how the Commission classifies the road transport sector, and the Spanish Government has not challenged it on that point, must necessarily be one with strong competition. It is, moreover, true, as the Commission states in Part V of the grounds for the contested decision that, where a sector has a large number of small companies, aid potentially available to all or a very large number of undertakings in that sector can, even if individual amounts are small, have an impact on competition and trade between Member States. In that connection, the figures provided by the Spanish Government confirm that the vast majority of recipients of the contested aid are small companies.65 In those circumstances, the Commission has satisfactorily demonstrated that the aid granted to professional transport companies of an amount below the de minimis threshold falls within the scope of Article 92 of the Treaty.66 The Spanish Government's arguments, as summarised at paragraph 62 above, do not affect that assessment. The fact that approximately half the replaced vehicles in the lower categories have only a local or regional transport permit does not mean that those vehicles cannot compete with carriers in other Member States who do or may engage in cabotage in Spain. Similarly, the fact that only 10% of vehicles with a national transport permit could have been replaced under the Plan does not prevent their replacement, which the Plan makes possible, from having an effect on competition and trade between Member States. Finally, the fact that it was established a posteriori that only a small part of the Spanish commercial vehicle fleet was in fact replaced pursuant to the Plan is likewise not a valid argument against the contested decision.67 First of all, under Article 93(3) of the Treaty, aid schemes must be notified to and authorised by the Commission before their entry into force and accordingly they can be examined only by reference to their general characteristics as they appear a priori and not in the light of results recorded a posteriori. Otherwise Member States which implement aid schemes before obtaining the Commission's permission to do so would unquestionably be in a more favourable position than those which comply with the obligation not to implement the contemplated measures prior to a final decision from the Commission. Secondly, even if the findings made a posteriori in this case were taken into account, it would still be the case that several thousand commercial vehicles were replaced under the Plan, which, in a sector characterised by overcapacity and strong competition, is sufficient to cause the Plan to affect trade and competition, as stated at paragraph 64 of this judgment. The argument that the amount of the contested aid is too small to confer a significant competitive advantage on its recipients may be rejected on similar grounds.68 It follows from the foregoing that the plea alleging infringement of Article 92(1) of the Treaty may be upheld only in relation to aid falling below the de minimis threshold granted to natural persons or SMEs which carry on business outside the transport sector, and that the remainder of the plea must be rejected.Plea alleging infringement of Article 92(3)(c) of the TreatyArguments of the parties69 The Spanish Government argues that the Commission should in any event have authorised the Plan under Article 92(3)(c) of the Treaty in the light of the road safety improvement objectives and environmental protection objectives of the Plan.70 It states that there can be no doubt of the Plan's impact on those objectives. If the benefit attached to the contested aid is not a result of the fact that the new vehicles purchased comply with even more stringent standards than those generally applicable to new vehicles, that is because the latter standards are already high and therefore replacing an old vehicle with a new one early will bring about a perceptible improvement with regard to the two abovementioned objectives. It is, in any event, an objective of the Plan to bring about an improvement in relation to the general standards in force for vehicles on the road, by encouraging the withdrawal of old, lower-performance vehicles that are, however, still allowed to be driven. The cost of the hoped-for improvement in this case must necessarily equate to the purchase price of the new vehicle and it is on that basis that the level of aid to which the subsidy corresponds should be calculated (6.5% at most). The subsidy does not constitute operating aid since it merely compensates for high interest rates to which undertakings established in Spain are subject, and which are higher than those in force in the other Member States. The Spanish Government adds that the very reason why carriers established in other Member States have no interest in requesting aid under the Plan is the level of interest rates, which are more attractive in other Member States, and is in no way attributable to any discrimination against them. As to an increase in transport capacity by volume owing to the replacement of vehicles more than 10 years' old by larger new vehicles, that occurred in only 12.3% of cases. Finally, the Spanish authorities have adopted measures to avoid cumulation of aid amongst beneficiaries.71 According to the Commission, the Spanish Government has not demonstrated the positive effect of the Plan on the environment and road safety. The contested aid simply covers part of the cost of the new vehicle, regardless of any environmental or safety factor. Models which have been available for years, and which do not perform impressively on either of those points, are potentially eligible for aid. Environmental and safety standards in any event apply to all vehicles in circulation, including those whose withdrawal is encouraged by the Plan. Whilst those standards may be more stringent for vehicles newly put into circulation than for older vehicles, the possibility that some older vehicles in fact attain comparable performance levels to those of new vehicles cannot be ruled out. In any event the Plan can only encourage the application of existing standards.72 The Commission's policy on State aid for environmental protection as set out in the Environmental Guidelines is based on the principle that only aid aimed at attaining objectives higher than the level of mandatory standards is necessary. It follows from those Guidelines that the Plan could have been exempted only if the contested aid had related purely to that part of the investment aimed at attaining environmental objectives rather than the whole of the investment and if, of those eligible costs, only a maximum of 15% had been covered. The basis for calculating the aid in the present case is, however, the cost of the new vehicle in its entirety and not simply the cost of improvements compared to old vehicles. It is therefore simply operating aid which relieves undertakings of costs which they normally have to pay and which, by its very nature, distorts trade to an extent contrary to the common interest.73 Furthermore, the Plan's incompatibility with the common market is underlined by a number of factors including in particular overcapacity in the transport sector, which is increased rather than reduced by the Plan, and the real danger of the aid granted under the Plan being cumulated with aid previously authorised by the Commission. In that regard, the assurances which, according to the Commission, the Spanish Government provided for the first time in its reply, are imprecise and insufficient to avert that risk and in any event were not made known to the Commission prior to the adoption of the contested decision.Findings of the Court74 In the application of Article 92(3) of the Treaty, the Commission has a wide discretion the exercise of which involves economic and social assessments which must be made in a Community context (see, for example, Deufil v Commission, cited above, paragraph 18). Judicial review of the manner in which that discretion is exercised is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with and to verifying the accuracy of the facts relied on and that there has been no error of law, manifest error of assessment in regard to the facts or misuse of powers.75 It is clear from the very wording of Articles 92(3)(c) and 93 of the Treaty that the Commission may consider aid covered by the first of those provisions compatible with the common market. Accordingly, although the Commission always has to rule on the compatibility with the common market of State aid subject to review by it, even if that aid has not been notified to it (see Case C-301/87 France v Commission (the Boussac Saint Frères case) [1990] ECR I-307, paragraphs 15 to 24), it is not bound to declare such aid compatible with the common market.76 None the less, as stated at paragraph 53 above, the Commission is bound by the guidelines and notices that it issues in the area of supervision of State aid where they do not depart from the rules in the Treaty and are accepted by the Member States. Secondly, under Article 190 of the EC Treaty (now Article 253 EC), the Commission must give reasons for its decisions, including decisions refusing to declare aid compatible with the common market under Article 92(3)(c) of the Treaty. Infringement of Article 190 of the Treaty may be raised by the Court of its own motion.77 It is clear from the Environmental Guidelines that it is essential that aid be classified as aid for investment or operating aid in order to determine whether it may be authorised under those Guidelines.78 Paragraph 3.2 of the Guidelines, which relates to aid for investment, states first of all at paragraph 3.2.1 that such aid, including aid for equipment intended to reduce pollution or nuisances, may be authorised within the limits laid down in the Guidelines. The Guidelines state that eligible costs must be strictly confined to the extra investment costs necessary to meet environmental objectives and that costs not attributable to environmental protection must be excluded. Thus, in the case of replacement plant, the cost of the basic investment involved merely to replace production capacity without improving environmental performance is not eligible. In any case, aid ostensibly intended for environmental protection measures but which is in fact for general investment is not covered by the Guidelines.79 Paragraph 3.2.3 of the Environmental Guidelines goes on to provide that aid for environmental investment can be authorised up to certain levels. It distinguishes between: (A) aid to help firms adapt to new mandatory standards, which is further subdivided into (A1) aid to assist with adaptation of existing plant and equipment and (A2) aid towards the replacement of plant; and (B) aid to encourage firms to improve on mandatory environmental standards.80 On the other hand, paragraph 3.4 of the Guidelines makes it clear that the Commission will not approve operating aid, even where it is intended to meet environmental protection objectives, other than in very specific cases relating to waste management and temporary relief from environmental taxes.81 It is not, however, possible to discern clearly from an examination of the contested decision in the present case whether the Commission considered the aid in question to be operating aid or aid for investment, despite the fact that the Environmental Guidelines establish different regimes for the two categories. The 12th, 13th and 15th paragraphs in Part V of the grounds for the contested decision rather indicate that the aid is for investment, whilst the 17th paragraph, on the other hand, gives the impression that it is operating aid.82 The statement of reasons required by Article 190 of the Treaty must explain clearly and unambiguously the reasoning followed by the Community institution which has adopted the contested act, so as to enable interested parties to take cognisance of the justifications for the measure for the purpose of defending their rights and to enable the courts to exercise their powers of review.83 Because the aid in question was not clearly classified either as aid for investment or as operating aid, the Kingdom of Spain was not in a position fully to defend its rights.84 It is true that the Commission argued before the Court that the aid constituted operating aid. However, the statement of reasons must, unless there are exceptional circumstances, be notified to the person concerned at the same time as the decision adversely affecting him, and an infringement of Article 190 of the Treaty cannot be remedied before the Court of Justice (see, in particular, Case 195/80 Michel v Parliament [1981] ECR 2861, at p. 2876).85 The contested decision is therefore vitiated by a defect in the statement of reasons concerning the Plan's incompatibility with the criteria laid down in the Environmental Guidelines.86 It should also be noted that the particular circumstances which, according to the Commission, make it impossible to declare the contested aid compatible in the light of the rules laid down in the Environmental Guidelines are not decisive.87 With regard first of all to the fact that the Plan encourages overcapacity in the transport sector, it is to be observed that, under paragraph 2.1 of the Environmental Guidelines, the Guidelines apply to aid in all the sectors governed by the EC Treaty (with the exception of a particular field in the agricultural sector) including those subject to specific Community rules on State aid (the transport sector is explicitly referred to), in so far as such rules do not provide otherwise. In that connection, it is not necessary to determine whether the specific rules in the transport sector prohibit any aid that increases transport capacity by volume: it need merely be stated that in the contested decision the Commission could have confined the declaration of incompatibility to aid enabling a vehicle in a higher category than that covering the vehicle withdrawn from circulation to be purchased.88 As regards, secondly, the risk of the contested aid being cumulated with aid previously authorised by the Commission, the only provisions in the Environmental Guidelines on cumulation of aid, which appear at paragraph 3.8, are confined to stating that the limits set on the level of aid that may be granted for the various environmental purposes referred to in the Guidelines apply to aid from all sources. That statement does not in any way concern the question of possible cumulation of aid for different purposes within the same undertaking, on which the Commission relied in support of its arguments.89 That question, on the other hand, is the subject of the Commission communication on the cumulation of aids for different purposes (OJ 1985 C 3, p. 2), which defines methods for notifying significant instances of cumulation of aid for different purposes awarded to a given investment project. However, it in no way follows from that communication that an aid scheme might not be declared compatible with the common market on the ground that some of the beneficiaries have already received aid authorised under another head.90 Accordingly, if it fulfils the criteria laid down by the guidelines applicable to it and, where appropriate, by certain sectoral rules, an aid scheme intended to reduce pollution and nuisances cannot be declared incompatible as a whole with the common market on the ground that some of the recipients have already received State aid authorised under another head. The Member State concerned has only, where appropriate, to notify the Commission of significant instances of cumulation of aid for different purposes awarded to a single undertaking, as provided by the communication on cumulation.91 It follows from the foregoing that, with regard to the aid granted under the Plan to professional transport companies and the aid above the de minimis threshold granted to non-transport companies, the Commission infringed Articles 92(3)(c) and 190 of the Treaty by declaring, on the basis of the statement of reasons given in the contested decision, that all that aid was incompatible with the common market.92 Having regard also to the finding at paragraph 68 of this judgment, the action must therefore be upheld and Articles 3 and 4 of the contested decision annulled, without it being necessary to examine the other pleas in law relied on by the Spanish Government. Decision on costs Costs93 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Kingdom of Spain has applied for costs and the Commission has been unsuccessful, the latter must be ordered to pay the costs. Operative part On those grounds,THE COURT (Sixth Chamber)hereby:1. Annuls Articles 3 and 4 of Commission Decision 98/693/EC of 1 July 1998 concerning the Spanish Plan Renove Industrial system of aid for the purchase of commercial vehicles (August 1994 - December 1996);2. Orders the Commission of the European Communities to pay the costs.

e766f-10d1989-40a9

EN

THE ADVOCATE GENERAL CONCLUDES THAT THE NE BIS IN IDEM PRINCIPLE INCORPORATED IN THE SCHENGEN IMPLEMENTING CONVENTION (SIC) PREVENTS A PERSON FROM BEING TRIED ON THE SAME FACTS IN ANOTHER SIGNATORY STATE WHEN PROSECUTION IS BARRED FOLLOWING A SETTLEMENT WITH THE PROSECUTING AUTHORITY

«(Convention implementing the Schengen Agreement – Ne bis in idem principle – Scope – Decisions by which the Public Prosecutor definitively discontinues criminal proceedings, without the involvement of a court, once the accused has satisfied certain conditions)» Summary of the Judgment 1.. European Union – Police and judicial cooperation in criminal matters – Protocol integrating the Schengen acquis – Convention implementing the Schengen Agreement – Ne bis in idem principle – Scope – Decision of the Public Prosecutor definitively discontinuing criminal proceedings against an accused provided the accused fulfils certain obligations – Whether included (Convention implementing the Schengen Agreement, Arts 54, 55 and 58) European Union – Police and judicial cooperation in criminal matters – Protocol integrating the Schengen acquis – Convention implementing the Schengen Agreement – Ne bis in idem principle – Scope – Decision of the Public Prosecutor definitively discontinuing criminal proceedings against an accused provided the accused fulfils certain obligations – Whether included 2.. European Union – Police and judicial cooperation in criminal matters – Protocol integrating the Schengen acquis – Convention implementing the Schengen Agreement – Ne bis in idem principle – Application as regards a decision of the Public Prosecutor definitively discontinuing criminal proceedings against an accused provided the accused fulfils certain obligations – Scope limited to acts of public authorities, not affecting the victim's civil rights of action (Convention implementing the Schengen Agreement, Art. 54) European Union – Police and judicial cooperation in criminal matters – Protocol integrating the Schengen acquis – Convention implementing the Schengen Agreement – Ne bis in idem principle – Application as regards a decision of the Public Prosecutor definitively discontinuing criminal proceedings against an accused provided the accused fulfils certain obligations – Scope limited to acts of public authorities, not affecting the victim's civil rights of action JUDGMENT OF THE COURT11 February 2003 (1) ((Convention implementing the Schengen Agreement – Ne bis in idem principle – Scope – Decisions by which the Public Prosecutor definitively discontinues criminal proceedings, without the involvement of a court, once the accused has satisfied certain conditions)) THE COURT,,after considering the written observations submitted on behalf of: ─ Mr Gözütok, by N. Hack, Rechtsanwalt, (C-187/01), ─ the German Government, by W.-D. Plessing, acting as Agent (C-187/01 and C-385/01), ─ the Belgian Government, by A. Snoecx, acting as Agent (C-385/01), ─ the French Government, by R. Abraham, G. de Bergues and C. Isidoro, acting as Agents (C-187/01), ─ the Netherlands Government, by H. G. Sevenster, acting as Agent (C-187/01 and C-385/01), ─ the Commission of the European Communities, by W. Bogensberger and C. Ladenburger (C-187/01) and by W. Bogensberger and R. Troosters (C-385/01), acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Mr Gözütok, represented by N. Hack, of the German Government, represented by A. Dittrich, acting as Agent, of the Belgian Government, represented by A. Snoecx, J. Devadder and W. Detavernier, acting as Agents, of the French Government, represented by R. Abraham, of the Italian Government, represented by G. Aiello, avvocato dello Stato, of the Netherlands Government, represented by C. Wissels, acting as Agent, and of the Commission, represented by W. Bogensberger and R. Troosters, at the hearing on 9 July 2002, after hearing the Opinion of the Advocate General at the sitting on 19 September 2002,gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulmann La PergolaJann Skouris MackenColneric von Bahr Cunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Languages of the case: Germanand Dutch. Languages of the case: Germanand Dutch.

3ca07-b727103-4374

EN

Monsanto Agricoltura Italia and Others v Presidenza del Consiglio dei Ministri and Others

«(Regulation (EC) No 258/97 – Novel foods – Placing on the market – Safety assessment – Simplified procedure – Substantial equivalence to existing foods – Foods produced from genetically modified maize – Presence of residues of transgenic protein – Measure by a Member State temporarily restricting or suspending the trade in or use of a novel food in its territory)» Summary of the Judgment 1.. Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Simplified procedure – Substantial equivalence to existing foods – Concept – Use of that procedure notwithstanding the presence of residues of transgenic protein in novel foods – Whether permissible – Limits – Potential risks to human health (Regulation No 258/97 of the European Parliament and of the Council, Art. 3(4), first subpara.)Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Simplified procedure – Substantial equivalence to existing foods – Concept – Use of that procedure notwithstanding the presence of residues of transgenic protein in novel foods – Whether permissible – Limits – Potential risks to human health 2.. Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Simplified procedure – Procedure not covered by consent, even tacit, by the Commission – Member States' right of recourse to the safeguard clause where use of that procedure is not warranted – Need for a preliminary challenge to such consent – Not required(Regulation No 258/97 of the European Parliament and of the Council, Art. 5 and Art. 12(1)) Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Simplified procedure – Procedure not covered by consent, even tacit, by the Commission – Member States' right of recourse to the safeguard clause where use of that procedure is not warranted – Need for a preliminary challenge to such consent – Not required 3.. Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Member States' right of recourse to the safeguard clause regardless of the procedure followed for placing on the market and its validity (Regulation No 258/97 of the European Parliament and of the Council, Art. 3(4), second subpara. and Arts 5, 12 and 13)Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Member States' right of recourse to the safeguard clause regardless of the procedure followed for placing on the market and its validity 4.. Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Use of the safeguard clause – Justification – Potential risks to human health – Burden of proof(Regulation No 258/97 of the European Parliament and of the Council, Arts 3(1) and 12)Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Use of the safeguard clause – Justification – Potential risks to human health – Burden of proof 5.. Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Simplified procedure – Condition of substantial equivalence – Detailed rules sufficient to ensure a high level of protection for human health and the environment – Compliance with the precautionary principle and the principle of proportionality – Validity (Arts 152(1) EC and 174(2) EC; Regulation No 258/97 of the European Parliament and of the Council, Art. 3(4), first subpara., and Art. 5) Approximation of laws – Novel foods and novel food ingredients – Placing on the market – Simplified procedure – Condition of substantial equivalence – Detailed rules sufficient to ensure a high level of protection for human health and the environment – Compliance with the precautionary principle and the principle of proportionality – Validity JUDGMENT OF THE COURT9 September 2003 (1) ((Regulation (EC) No 258/97 – Novel foods – Placing on the market – Safety assessment – Simplified procedure – Substantial equivalence to existing foods – Foods produced from genetically modified maize – Presence of residues of transgenic protein – Measure by a Member State temporarily restricting or suspending the trade in or use of a novel food in its territory))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Monsanto Agricoltura Italia SpA and Others, by E.A. Raffaelli, G.F. Ferrari and P. Todaro, avvocati, ─ the Italian Government, by I.M. Braguglia, acting as Agent, assisted by M. Fiorilli, avvocato dello Stato, ─ the Norwegian Government, by B. Ekeberg, acting as Agent, ─ the European Parliament, by C. Pennera and G. Ricci, acting as Agents, ─ the Council of the European Union, by A. Lo Monaco and F.P. Ruggeri Laderchi, acting as Agents, ─ the Commission of the European Communities, by M. Shotter and A. Aresu, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Monsanto Agricoltura Italia SpA and Others, the Italian Government, the Parliament, the Council and the Commission at the hearing on 24 September 2002, after hearing the Opinion of the Advocate General at the sitting on 13 March 2003,gives the followingLegal frameworkOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Timmermans GulmannEdward La Pergola JannSkouris von Bahr Cunha RodriguesRosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: Italian. Language of the case: Italian.

cc4dd-8e8a25e-4305

EN

A MUNICIPALITY WHICH ORGANISES A TENDER PROCEDURE FOR THE OPERATION OF AN URBAN BUS SERVICE IS ENTITLED TO TAKE ACCOUNT OF ECOLOGICAL CONSIDERATIONS CONCERNING THE BUS FLEET OFFERED

| 61999J0513 Judgment of the Court of 17 September 2002. - Concordia Bus Finland Oy Ab, formerly Stagecoach Finland Oy Ab v Helsingin kaupunki and HKL-Bussiliikenne. - Reference for a preliminary ruling: Korkein hallinto-oikeus - Finland. - Public service contracts in the transport sector - Directives 92/50/EEC and 93/38/EEC - Contracting municipality which organises bus transport services and an economically independent entity of which participates in the tender procedure as a tenderer - Taking into account of criteria relating to theprotection of the environment to determine the economically most advantageous tender - Whether permissible when the municipal entity which is tendering meets those criteria more easily. - Case C-513/99. European Court reports 2002 Page I-07213 Keywords Approximation of laws - Procedures for the award of public service contracts - Directive 92/50 - Award of contracts - Most economically advantageous tender - Criteria - Protection of the environment - Whether permissible - Conditions - Criterion which can be satisfied only by a few undertakings, one of which belongs to the contracting entity - No effect - Same result if Directive 93/38 applicable(Council Directives 92/50, Art. 36(1)(a), and 93/38, Art. 34(1)(a)) Summary $$Article 36(1)(a) of Directive 92/50 relating to the coordination of procedures for the award of public service contracts must be interpreted as meaning that where, in the context of a public contract for the provision of urban bus transport services, the contracting authority decides to award a contract to the tenderer who submits the economically most advantageous tender, it may take into consideration ecological criteria such as the level of nitrogen oxide emissions or the noise level of the buses, provided that they are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the authority, are expressly mentioned in the contract documents or the tender notice, and comply with all the fundamental principles of Community law, in particular the principle of non-discrimination.Moreover, the principle of equal treatment does not preclude the taking into consideration of such criteria solely because the contracting entity's own transport undertaking is one of the few undertakings able to offer a bus fleet satisfying those criteria.It would be no different if the procedure for the award of the public contract in question fell within the scope of Directive 93/38 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors. Since the directives concerning public procurement, whose provisions relating to award criteria have substantially the same wording, aim to achieve similar objectives in their respective fields, and the duty to observe the principle of equal treatment lies at the very heart of those directives, there is no reason to give them different interpretations.( see paras 69, 86, 88-93, operative part 1-3 ) Parties In Case C-513/99,REFERENCE to the Court under Article 234 EC by the Korkein hallinto-oikeus (Finland) for a preliminary ruling in the proceedings pending before that court betweenConcordia Bus Finland Oy Ab, formerly Stagecoach Finland Oy Ab,andHelsingin kaupunki,HKL-Bussiliikenne,on the interpretation of Articles 2(1)(a), (2)(c) and (4) and 34(1) of Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ 1993 L 199, p. 84), as amended by the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1), and Article 36(1) of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1),THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann and F. Macken (Presidents of Chambers), C. Gulmann, D.A.O. Edward, A. La Pergola, M. Wathelet, R. Schintgen and V. Skouris (Rapporteur), Judges,Advocate General: J. Mischo,Registrar: H. von Holstein, Deputy Registrar,after considering the written observations submitted on behalf of:- Concordia Bus Finland Oy Ab, by M. Heinonen, oikeustieteen kandidaatti,- Helsingin kaupunki, by A.-L. Salo-Halinen, acting as Agent,- the Finnish Government, by T. Pynnä, acting as Agent,- the Greek Government, by D. Tsagkaraki and K. Grigoriou, acting as Agents,- the Netherlands Government, by M.A. Fierstra, acting as Agent,- the Austrian Government, by C. Pesendorfer, acting as Agent,- the Swedish Government, by A. Kruse, acting as Agent,- the Commission of the European Communities, by M. Nolin, acting as Agent, assisted by E. Savia, avocat,having regard to the Report for the Hearing,after hearing the oral observations of Concordia Bus Finland Oy Ab, represented by M. Savola, asianajaja; Helsingin kaupunki, represented by A.-L. Salo-Halinen; the Finnish Government, represented by T. Pynnä; the Greek Government, represented by K. Grigoriou; the Austrian Government, represented by M. Winkler, acting as Agent; the Swedish Government, represented by A. Kruse; the United Kingdom Government, represented by R. Williams, Barrister; and the Commission, represented by M. Nolin, assisted by E. Savia, at the hearing on 9 October 2001,after hearing the Opinion of the Advocate General at the sitting on 13 December 2001,gives the followingJudgment Grounds 1 By order of 17 December 1999, received at the Court on 28 December 1999, the Korkein hallinto-oikeus (Supreme Administrative Court) referred for a preliminary ruling under Article 234 EC three questions on the interpretation of Articles 2(1)(a), (2)(c) and (4) and 34(1) of Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ 1993 L 199, p. 84), as amended by the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1) (Directive 93/38), and Article 36(1) of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1).2 Those questions were raised in proceedings between Concordia Bus Finland Oy Ab (Concordia) and Helsingin kaupunki (City of Helsinki) and HKL-Bussiliikenne (HKL) concerning the validity of a decision of the Liikepalvelulautakunta (commercial service committee) of the city of Helsinki awarding the contract for the operation of a route in the urban bus network of Helsinki to HKL.Legal backgroundCommunity legislationDirective 92/503 Article 1 of Directive 92/50 provides:For the purposes of this Directive:(a) public service contracts shall mean contracts for pecuniary interest concluded in writing between a service provider and a contracting authority, to the exclusion of:...(ii) contracts awarded in the fields referred to in Articles 2, 7, 8 and 9 of Directive 90/531/EEC or fulfilling the conditions in Article 6(2) of the same Directive;...4 Article 36 of Directive 92/50, headed Criteria for the award of contracts, reads as follows:1. Without prejudice to national laws, regulations or administrative provisions on the remuneration of certain services, the criteria on which the contracting authority shall base the award of contracts may be:(a) where the award is made to the economically most advantageous tender, various criteria relating to the contract: for example, quality, technical merit, aesthetic and functional characteristics, technical assistance and after-sales service, delivery date, delivery period or period of completion, price; or(b) the lowest price only.2. Where the contract is to be awarded to the economically most advantageous tender, the contracting authority shall state in the contract documents or in the tender notice the award criteria which it intends to apply, where possible in descending order of importance.Directive 93/385 Article 2 of Directive 93/38 provides:1. This Directive shall apply to contracting entities which:(a) are public authorities or public undertakings and exercise one of the activities referred to in paragraph 2;(b) when they are not public authorities or public undertakings, have as one of their activities any of those referred to in paragraph 2 or any combination thereof and operate on the basis of special or exclusive rights granted by a competent authority of a Member State.2. Relevant activities for the purposes of this Directive shall be:...(c) the operation of networks providing a service to the public in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable.As regards transport services, a network shall be considered to exist where the service is provided under operating conditions laid down by a competent authority of a Member State, such as conditions on the routes to be served, the capacity to be made available or the frequency of the service;...4. The provision of bus transport services to the public shall not be considered to be a relevant activity within the meaning of paragraph 2(c) where other entities are free to provide those services, either in general or in a particular geographical area, under the same condition as the contracting entities....6 Under Article 34 of Directive 93/38:1. Without prejudice to national laws, regulations or administrative provisions on the remuneration of certain services, the criteria on which the contracting entities shall base the award of contracts shall be:(a) the most economically advantageous tender, involving various criteria depending on the contract in question, such as: delivery or completion date, running costs, cost-effectiveness, quality, aesthetic and functional characteristics, technical merit, after-sales service and technical assistance, commitments with regard to spare parts, security of supplies and price; or(b) the lowest price only.2. In the case referred to in paragraph 1(a), contracting entities shall state in the contract documents or in the tender notice all the criteria which they intend to apply to the award, where possible in descending order of importance....7 Article 45(3) and (4) of Directive 93/38 states:3. Directive 90/531/EEC shall cease to have effect as from the date on which this Directive is applied by the Member States and this shall be without prejudice to the obligations of the Member States concerning the deadlines laid down in Article 37 of that Directive.4. References to Directive 90/531/EEC shall be construed as referring to this Directive.National legislation8 Directives 92/50 and 93/38 were transposed into Finnish law by the Julkisista hankinnoista annettu laki (Law on Public Procurement) 1505/1992, as amended by Laws 1523/1994 and 725/1995 (Law 1505/1992).9 Under Paragraph 1 of Law 1505/1992, State and local authorities and other contracting entities specified in the law must comply with the provisions of the law in order to create competition and ensure fair and non-discriminatory treatment of participants in tender procedures.10 Under Paragraph 2 of Law 1505/1992, contracting entities include municipal authorities.11 Paragraph 7(1) of Law 1505/1992 provides, first, that contracts are to be awarded as favourably as possible and, second, that the tender to be approved is the one which is cheapest in price or most advantageous in overall economic terms.12 Procedures for the award of public contracts in Finland are regulated in more detail by Regulation 243/1995 on supply, service and works contracts exceeding the threshold values and by Regulation 567/1994 on contracts of entities operating in the water, energy, transport and telecommunications sectors exceeding the threshold value, as amended by Regulation 244/1995 (Regulation 567/1994).13 Paragraph 4(1) of Regulation 243/1995 excludes from the scope of that regulation contracts to which Regulation 567/1994 applies. Paragraph 1(10) of the latter excludes from its scope contracts to which Regulation 243/1995 applies.14 Paragraph 43 of Regulation 243/1995 provides:1. The contracting entity must approve either the tender which is economically most advantageous overall according to the assessment criteria for the contract or the tender which is lowest in price. Criteria for assessment of overall economic advantage may be, for example, the price, delivery period, completion date, costs of use, quality, life cycle costs, aesthetic or functional characteristics, technical merit, maintenance services, reliability of delivery, technical assistance and environmental questions....15 Similarly, Paragraph 21(1) of Regulation 567/1994 lays down that the contracting entity must approve the tender which is economically most advantageous overall according to the assessment criteria for the supply, service or works, or the tender which is lowest in price. Criteria for assessment of overall economic advantage may be, for example, the price, delivery period, costs of use, life cycle costs, quality, environmental effects, aesthetic and functional characteristics, technical merit, maintenance services and technical assistance.The main proceedings and the questions referred for a preliminary rulingOrganisation of bus transport services in the city of Helsinki16 It appears from the order for reference that the Helsinki city council decided on 27 August 1997 to introduce tendering progressively for the entire bus transport network of the city of Helsinki, in such a way that the first route to be awarded would start operating from the autumn 1998 timetable.17 Under the rules governing public transport in the city of Helsinki, the planning, development, implementation and other organisation and supervision of public transport, unless provided otherwise, are the responsibility of the Joukkoliikennelautakunta (public transport committee) and the Helsingin kaupungin liikennelaitos (transport department of the city of Helsinki, the transport department) which is subordinate to it.18 According to the regulations applicable, the commercial service committee of the city of Helsinki is responsible for decisions on awarding public transport services within the city in accordance with the objectives adopted by the Helsinki city council and the public transport committee. In addition, the purchasing unit of the city of Helsinki is responsible for carrying out operations relating to contracts for urban public transport services.19 The transport department is a commercial undertaking of the municipality which is divided operationally and economically into four production units (buses, trams, metro, and track and property services). The production unit for buses is HKL. The department also includes a head unit, which consists of a planning unit and an administrative and economic unit. The planning unit acts as an order-placing office concerned with the preparation of proposals for the public transport committee, the routes to be put out to tender, and the level of service to be required. The production units are economically distinct from the rest of the transport department and have separate accounting and balance sheets.The tender procedure at issue in the main proceedings20 By letter of 1 September 1997 and a notice published in the Official Journal of the European Communities of 4 September 1997, the purchasing unit of the city of Helsinki called for tenders for operating the urban bus network within the city of Helsinki, in accordance with routes and timetables described in a document in seven lots. The main proceedings concern lot 6 of the tender notice, relating to route 62.21 It appears from the documents in the case that, according to the tender notice, the contract would be awarded to the undertaking whose tender was most economically advantageous overall to the city. That was be assessed by reference to three categories of criteria: the overall price of operation, the quality of the bus fleet, and the operator's quality and environment management.22 As regards, first, the overall price asked, the most favourable tender would receive 86 points and the number of points of the other tenders would be calculated by using the following formula: Number of points = amount of the annual operating payment of the most favourable tender divided by the amount of the tender in question and multiplied by 86.23 As regards, next, the quality of the vehicle fleet, a tenderer could receive a maximum of 10 additional points on the basis of a number of criteria. Thus points were awarded inter alia for the use of buses with nitrogen oxide emissions below 4 g/kWh (+2.5 points/bus) or below 2 g/kWh (+3.5 points/bus) and with external noise levels below 77 dB (+1 point/bus).24 As regards, finally, the operator's quality and environment programme, additional points were to be awarded for various certified quality criteria and for a certified environment protection programme.25 The purchasing office of the city of Helsinki received eight tenders for lot 6, including those from HKL and from Swebus Finland Oy Ab (Swebus, subsequently Stagecoach Finland Oy Ab (Stagecoach), then Concordia). The latter's tender comprised two offers, designated A and B.26 The commercial service committee decided on 12 February 1998 to choose HKL as the operator for the route in lot 6, as its tender was regarded as the most economically advantageous overall. According to the order for reference, Concordia (then Swebus) had submitted the lowest-priced tender, obtaining 81.44 points for its A offer and 86 points for its B offer. HKL obtained 85.75 points. As regards the bus fleet, HKL obtained the most points, 2.94 points, Concordia (then Swebus) obtaining 0.77 points for its A tender and -1.44 points for its B tender. The 2.94 points obtained for vehicle fleet by HKL included the maximum points for nitrogen oxide emissions below 2 g/kWh and a noise level below 77 dB. Concordia (then Swebus) did not receive any extra points for the criteria relating to the buses' nitrogen oxide emissions and noise level. HKL and Concordia obtained maximum points for their quality and environment certification. In those circumstances, HKL received the greatest number of points overall, 92.69. Concordia (then Swebus) took second place with 86.21 points for its A offer and 88.56 points for its B offer.The proceedings before the national courts and tribunals27 Concordia (then Swebus) made an application to the Kilpailuneuvosto (Finnish Competition Council) for the decision of the commercial service committee to be set aside, arguing inter alia that the award of additional points to a fleet with nitrogen oxide emissions and noise levels below certain limits was unfair and discriminatory. It submitted that additional points had been awarded for the use of a type of bus which only one tenderer, HKL, was in fact able to offer.28 The Kilpailuneuvosto dismissed the application. It considered that the contracting entity was entitled to define the type of vehicle it wanted to be used. The selection criteria and their weight had to be determined objectively, however, taking into account the needs of the contracting entity and the quality of the service. The contracting entity had to be able, if necessary, to give reasons to justify its choice and the application of its criteria of assessment.29 The Kilpailuneuvosto observed that the city of Helsinki's decision to give preference to low-pollution buses was an environment policy decision aimed at reducing the harm caused to the environment by bus traffic. That did not constitute a procedural defect. If that criterion was applied to a tenderer unfairly, it was possible to intervene. The Kilpailuneuvosto found, however, that all the tenderers had the possibility, if they so wished, of acquiring buses powered by natural gas. It therefore concluded that it had not been shown that the criterion in question discriminated against Concordia.30 Concordia (then Stagecoach) appealed to the Korkein hallinto-oikeus to have the decision of the Kilpailuneuvosto set aside. It argued that awarding additional points to the least polluting and least noisy buses favoured HKL, the only tenderer which was able in practice to use a fleet which could obtain those points. It further submitted that, in the overall assessment of the tenders, no account can be taken of ecological factors which are not directly linked to the subject-matter of the tender.31 In its order for reference, the Korkein hallinto-oikeus states, first, that in order to decide whether Regulation 243/1995 or Regulation 567/1994 is applicable in the present case, it is necessary to examine whether the contract at issue in the main proceedings falls within the scope of Directive 92/50 or Directive 93/38. It notes that Annex VII to Directive 93/38 mentions, with respect to Finland, both the public or private entities which operate bus transport in accordance with the Laki luvanvaraisesta henkilöliikenteestä tiellä (Law on licensed passenger transport by road) 343/1991, and also the transport department which operates the metro and tram networks in Helsinki.32 It states, next, that examination of the case also requires the interpretation of provisions of Community law as to whether a municipality, when awarding a contract of the kind at issue in the main proceedings, may take account of ecological considerations concerning the bus fleet tendered. If Concordia's argument as regards the points awarded for the environmental criteria and in other respects were accepted, that would mean that the number of points obtained by its B offer exceeded the points obtained by HKL.33 It observes that Article 36(1)(a) of Directive 92/50 and Article 34(1)(a) of Directive 93/38 do not mention environmental questions in the list of criteria for determining the economically most advantageous tender. It notes that the Court has ruled in Case 31/87 Gebroeders Beentjes [1988] ECR 4635 and Case C-324/93 Evans Medical and Macfarlan Smith [1995] ECR I-563 that in selecting the most economically advantageous tender the contracting authorities are free to choose the criteria to be used in awarding the contract. Their choice may relate only, however, to criteria designed to identify the most economically advantageous tender.34 It refers, finally, to the Commission's communication of 11 March 1988, Public Procurement in the European Union (COM(1998) 143 final), in which the Commission considers that it is legitimate to take environmental considerations into account for the purpose of choosing the economically most advantageous tender overall, if the organiser of the tender procedure itself benefits directly from the ecological qualities of the product.35 In those circumstances, the Korkein hallinto-oikeus decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:1. Are the provisions on the scope of Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors ..., in particular Article 2(1)(a), (2)(c) and (4), to be interpreted as meaning that that directive applies to a procedure of a city which is a contracting entity for the award of a contract concerning the operation of bus transport within the city, if- the city is responsible for the planning, development, implementation and other organisation and supervision of public transport in its area,- for the above functions the city has a public transport committee and a city transport department subordinate thereto,- within the city transport department there is a planning unit which acts as an ordering unit which prepares proposals for the public transport committee on which routes should be put out to tender and what level of quality of services should be required, and- within the city transport department there are production units, economically distinct from the rest of the transport department, including a unit which provides bus transport services and takes part in tender procedures relating thereto?2. Are the Community provisions on public procurement, in particular Article 36(1) of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts ... or the equivalent Article 34(1) of Directive 93/38/EEC, to be interpreted as meaning that, when organising a tender procedure concerning the operation of bus transport within the city, a city which is a contracting entity may, among the criteria for awarding the contract on the basis of the economically most advantageous tender, take into account, in addition to the tender price and the quality and environment programme of the transport operator and various other characteristics of the bus fleet, the low nitrogen oxide emissions and low noise level of the bus fleet offered by a tendering undertaking, in a manner announced beforehand in the tender notice, such that if the nitrogen oxide emissions or noise level of the individual buses are below a certain level, extra points for the fleet may be taken into account in the comparison?3. If the answer to the above question is affirmative, are the Community provisions on public procurement to be interpreted as meaning that the awarding of extra points for the abovementioned characteristics relating to nitrogen oxide emissions and noise level of the fleet is, however, not permitted if it is known beforehand that the department operating bus transport belonging to the city which is the contracting entity is able to offer a bus fleet possessing the above characteristics, which in the circumstances only a few undertakings in the sector are otherwise able to offer?The questions referred for a preliminary ruling36 It should be observed to begin with that, as may be seen from the order for reference, the arguments put forward by Concordia in support of its appeal to the Korkein hallinto-oikeus relate solely to the alleged unlawfulness of the points system for the criteria relating to the bus fleet specified in the invitation to tender at issue in the main proceedings.37 Thus by its second and third questions the national court essentially asks, first, whether Article 36(1) of Directive 92/50 or Article 34(1)(a) of Directive 93/38 permits the inclusion, among the criteria for the award of a public contract on the basis of the most economically advantageous tender, of a reduction of the nitrogen oxide emissions or the noise level of the vehicles in such a way that if those emissions or that noise level is below a certain ceiling additional points may be awarded for the comparison of tenders.38 It also asks, second, whether the rules laid down by those directives, in particular the principle of equal treatment, permit the taking into account of such criteria where it appears from the outset that the transport undertaking which belongs to the municipality organising the tender procedure is one of the few undertakings able to offer buses which satisfy those criteria.39 It is clear that the provisions of Article 36(1)(a) of Directive 92/50 and Article 34(1)(a) of Directive 93/38 have substantially the same wording.40 Moreover, as appears from the order for reference, there was no discussion in the main proceedings as to the national or Community legislation applicable.41 As may be seen from the wording of the first question, the Korkein hallinto-oikeus is not asking the Court about the applicability of Directive 92/50, but only about the applicability of Directive 93/38 to the main proceedings.42 It must therefore be considered, first, that the second and third questions relate to the compatibility with the relevant provisions of Directive 92/50 of award criteria such as those at issue in the main proceedings, and, second, that by its first question the national court essentially asks whether the answer to those questions would be different if Directive 93/38 were applicable. It follows that the second and third questions should be considered in turn, followed by the first question.The second question43 By its second question, the national court essentially asks whether Article 36(1)(a) of Directive 92/50 is to be interpreted as meaning that, where in the context of a public contract for the provision of urban bus transport services the contracting authority decides to award that contract to the tenderer submitting the most economically advantageous tender, it may take into account the reduction of nitrogen oxide emissions or the noise level of the vehicles in such a way that, if those emissions are or that noise level is below a certain ceiling, additional points may be awarded for the purposes of comparing the tenders.Observations submitted to the Court44 Concordia contends that in a public tender procedure the criteria for the decision must, in accordance with the wording of the relevant provisions of Community law, always be of an economic nature. If the objective of the contracting authority is to satisfy ecological or other considerations, recourse should be had to a procedure other than a public tender procedure.45 On the other hand, the other parties to the main proceedings, the Member States which have submitted observations and the Commission submit that it is permissible to include ecological criteria in the criteria for the award of a public contract. They refer, first, to Article 36(1)(a) of Directive 92/50 and Article 34(1)(a) of Directive 93/38, which list merely as examples factors which the contracting entity may take into account when awarding such a contract; next, they refer to Article 6 EC, which requires environmental protection to be integrated into the other policies of the Community; finally, they refer to the Beentjes and Evans Medical and Macfarlan Smith judgments, which allow a contracting entity to choose the criteria it regards as relevant when it assesses the tenders submitted.46 In particular, the city of Helsinki and the Finnish Government state that it is in the interest of the city and its inhabitants for noxious emissions to be limited as much as possible. For the city of Helsinki itself, which is responsible for protection of the environment within its territory, direct economies follow from this, especially in the medico-social sector, which represents about 50% of its overall budget. Factors which contribute even on a modest scale to improving the overall state of health of the population enable it to reduce its charges rapidly and to a considerable extent.47 The Greek Government adds that the discretion given to the national authorities as to the choice of the criteria for awarding public contracts presumes that that choice is not arbitrary and the criteria taken into consideration do not infringe the provisions of the EC Treaty, in particular the fundamental principles enshrined in it, such as freedom of establishment, freedom to provide services and prohibition of discrimination on grounds of nationality.48 The Netherlands Government states that the criteria for awarding public contracts applied by the contracting authority must always have an economic dimension. It contends, however, that that condition is satisfied in the main proceedings, as the city of Helsinki is both the contracting authority and the body with financial responsibility for environment policy.49 The Austrian Government submits that Directives 92/50 and 93/38 introduce two essential restrictions on the choice of the criteria for awarding public contracts. First, the criteria chosen by the contracting entity must relate to the contract to be awarded and make it possible to determine the most economically advantageous tender for it. Second, the criteria must be capable of guiding the discretion of the contracting entity on an objective basis and must not include elements of arbitrary choice. Moreover, according to the Government, the award criteria must be directly linked to the subject-matter of the contract, have effects which can be measured objectively, and be quantifiable at the economic level.50 Similarly, the Swedish Government submits that the contracting entity's choice is limited, in that the award criteria must be related to the contract to be awarded and suitable for determining the most advantageous tender from the economic point of view. It adds that the criteria must also be consistent with the Treaty provisions on the free movement of goods and services.51 According to the United Kingdom Government, the provisions of Article 36(1) of Directive 92/50 and Article 34(1) of Directive 93/38 must be interpreted as meaning that, when arranging an award procedure for the operation of bus transport services, a contracting authority or entity may, among other criteria for awarding the contract, take environmental criteria into consideration for assessing the economically most advantageous tender, provided that those criteria allow a comparison of all the tenders, are linked to the services to be provided, and have been published beforehand.52 The Commission contends that the criteria for the award of public contracts which may be taken into consideration when assessing the economically most advantageous tender must satisfy four conditions. They must be objective, apply to all the tenders, be strictly linked to the subject-matter of the contract in question, and be of direct economic advantage to the contracting authority.Findings of the Court53 Article 36(1)(a) of Directive 92/50 provides that the criteria on which the contracting authority may base the award of contracts may, where the award is made to the economically most advantageous tender, be various criteria relating to the contract, such as, for example, quality, technical merit, aesthetic and functional characteristics, technical assistance and after-sales service, delivery date, delivery period or period of completion, or price.54 In order to determine whether and under what conditions the contracting authority may, in accordance with Article 36(1)(a), take into consideration criteria of an ecological nature, it must be noted, first, that, as is clear from the wording of that provision, in particular the use of the expression for example, the criteria which may be used as criteria for the award of a public contract to the economically most advantageous tender are not listed exhaustively (see also, to that effect, Case C-19/00 SIAC Construction [2001] ECR I-7725, paragraph 35).55 Second, Article 36(1)(a) cannot be interpreted as meaning that each of the award criteria used by the contracting authority to identify the economically most advantageous tender must necessarily be of a purely economic nature. It cannot be excluded that factors which are not purely economic may influence the value of a tender from the point of view of the contracting authority. That conclusion is also supported by the wording of the provision, which expressly refers to the criterion of the aesthetic characteristics of a tender.56 Moreover, as the Court has already held, the purpose of coordinating at Community level the procedures for the award of public contracts is to eliminate barriers to the free movement of services and goods (see, inter alia, SIAC Construction, paragraph 32).57 In the light of that objective and also of the wording of the third sentence of the first subparagraph of Article 130r(2) of the EC Treaty, transferred by the Treaty of Amsterdam in slightly amended form to Article 6 EC, which lays down that environmental protection requirements must be integrated into the definition and implementation of Community policies and activities, it must be concluded that Article 36(1)(a) of Directive 92/50 does not exclude the possibility for the contracting authority of using criteria relating to the preservation of the environment when assessing the economically most advantageous tender.58 However, that does not mean that any criterion of that nature may be taken into consideration by the contracting authority.59 While Article 36(1)(a) of Directive 92/50 leaves it to the contracting authority to choose the criteria on which it proposes to base the award of the contract, that choice may, however, relate only to criteria aimed at identifying the economically most advantageous tender (see, to that effect, concerning public works contracts, Beentjes, paragraph 19, Evans Medical and Macfarlan Smith, paragraph 42, and SIAC Construction, paragraph 36). Since a tender necessarily relates to the subject-matter of the contract, it follows that the award criteria which may be applied in accordance with that provision must themselves also be linked to the subject-matter of the contract.60 It should be recalled, first, that, as the Court has already held, in order to determine the economically most advantageous tender, the contracting authority must be able to assess the tenders submitted and take a decision on the basis of qualitative and quantitative criteria relating to the contract in question (see, to that effect, concerning public works contracts, Case 274/83 Commission v Italy [1985] ECR 1077, paragraph 25).61 Further, it also appears from the case-law that an award criterion having the effect of conferring on the contracting authority an unrestricted freedom of choice as regards the award of the contract to a tenderer would be incompatible with Article 36(1)(a) of Directive 92/50 (see, to that effect, Beentjes, paragraph 26, and SIAC Construction, paragraph 37).62 Next, it should be noted that the criteria adopted to determine the economically most advantageous tender must be applied in conformity with all the procedural rules laid down in Directive 92/50, in particular the rules on advertising. It follows that, in accordance with Article 36(2) of that directive, all such criteria must be expressly mentioned in the contract documents or the tender notice, where possible in descending order of importance, so that operators are in a position to be aware of their existence and scope (see, to that effect, concerning public works contracts, Beentjes, paragraphs 31 and 36, and Case C-225/98 Commission v France [2000] ECR I-7445, paragraph 51).63 Finally, such criteria must comply with all the fundamental principles of Community law, in particular the principle of non-discrimination as it follows from the provisions of the Treaty on the right of establishment and the freedom to provide services (see, to that effect, Beentjes, paragraph 29, and Commission v France, paragraph 50).64 It follows from the above considerations that, where the contracting authority decides to award a contract to the tenderer who submits the economically most advantageous tender, in accordance with Article 36(1)(a) of Directive 92/50, it may take criteria relating to the preservation of the environment into consideration, provided that they are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the authority, are expressly mentioned in the contract documents or the tender notice, and comply with all the fundamental principles of Community law, in particular the principle of non-discrimination.65 With respect to the main proceedings, it must be stated, first, that criteria relating to the level of nitrogen oxide emissions and the noise level of the buses, such as those at issue in those proceedings, must be regarded as linked to the subject-matter of a contract for the provision of urban bus transport services.66 Next, criteria whereby additional points are awarded to tenders which meet certain specific and objectively quantifiable environmental requirements are not such as to confer an unrestricted freedom of choice on the contracting authority.67 In addition, as stated in paragraphs 21 to 24 above, the criteria at issue in the main proceedings were expressly mentioned in the tender notice published by the purchasing office of the city of Helsinki.68 Finally, whether the criteria at issue in the main proceedings comply in particular with the principle of non-discrimination falls to be examined in connection with the answer to the third question, which concerns precisely that point.69 Consequently, in the light of all the foregoing, the answer to the second question must be that Article 36(1)(a) of Directive 92/50 is to be interpreted as meaning that where, in the context of a public contract for the provision of urban bus transport services, the contracting authority decides to award a contract to the tenderer who submits the economically most advantageous tender, it may take into consideration ecological criteria such as the level of nitrogen oxide emissions or the noise level of the buses, provided that they are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the authority, are expressly mentioned in the contract documents or the tender notice, and comply with all the fundamental principles of Community law, in particular the principle of non-discrimination.The third question70 By its third question, the national court essentially asks whether the principle of equal treatment precludes the taking into consideration of criteria concerned with protection of the environment, such as those at issue in the main proceedings, because the contracting entity's own transport undertaking is one of the few undertakings able to offer a bus fleet satisfying those criteria.Observations submitted to the Court71 Concordia submits that the possibility of using buses powered by natural gas, which were in practice the only ones to meet the additional criterion of reducing the level of nitrogen oxide emissions and the noise level, was very limited. At the date of the invitation to tender, there was only one service station in the whole of Finland supplying natural gas. Its capacity enabled it to supply about 15 gas-powered buses. Shortly before the invitation to tender, HKL placed an order for 11 new gas-powered buses, which meant that the station's capacity was fully used and it was not possible to supply fuel to other vehicles. Moreover, the service station was only a provisional one.72 Concordia concludes that HKL was the only tenderer which had a real possibility of offering gas-powered buses. It therefore proposes that the answer to the third question should be that awarding points according to the nitrogen oxide emissions and reduced noise levels of the buses cannot be permitted, at least in a case where not all the operators in the sector in question have, even theoretically, the possibility of offering services eligible for those points.73 The city of Helsinki submits that it was not under any obligation to put its own bus transport services out to tender, either under Community legislation or under Finnish legislation. Since an award procedure always involves additional work and expense, it would have had no reasonable ground for organising that procedure if it had known that the undertaking it owns was the only one able to offer a bus fleet satisfying the conditions laid down in the tender notice, or if it had really wished to reserve to itself the operation of that transport.74 The Finnish Government submits that assessing the objectivity of the criteria stated in the invitation to tender at issue in the main proceedings is ultimately a matter for the national court.75 The Netherlands Government submits that it follows from the Court's case-law that the award criteria must be objective and that there must be no discrimination between tenderers. It says, however, that in paragraphs 32 and 33 of the judgment in Case C-27/98 Fracasso and Leitschutz [1999] ECR I-5697 the Court indeed held that where, following a procedure for the award of a public contract, only one tender remains, the contracting authority is not required to award the contract to the only tenderer judged to be suitable. But it does not follow that if, as a result of the award criteria applied, there is only one tenderer left, those criteria are unlawful. In any event, it is for the national court to determine whether, in the case at issue in the main proceedings, competition was in fact distorted.76 According to the Austrian Government, the use of the award criteria at issue in the main proceedings may in principle be permitted, even in a case where, as here, only a comparatively small number of tenderers are able to satisfy those criteria. It appears, however, according to the Court's case-law (Case 45/87 Commission v Ireland [1988] ECR 4929), that there is a limit to the permissibility of certain minimum ecological standards where the criteria applied restrict the market for the services or goods to be supplied to the point where there is only one tenderer remaining. There is no indication, however, that that was the case in the main proceedings.77 The Swedish Government submits that the taking into account of the criterion relating to nitrogen oxide emissions in the way in which this was done in the case at issue in the main proceedings meant that a tenderer which had buses powered by gas or alcohol was rewarded. According to the Government, there was nothing to prevent the other tenderers from acquiring such buses. They had been available on the market for some years.78 The Swedish Government maintains that the award of additional points for low nitrogen oxide emissions and noise levels of the buses which the tenderer intends to operate does not constitute direct discrimination, but is applied without distinction. Moreover, it does not appear to be indirect discrimination, in the sense of necessarily having the effect of benefiting HKL.79 According to the United Kingdom Government, Directive 93/38 does not prohibit the awarding of additional points in the assessment of tenders where it is known beforehand that few undertakings will be able to obtain those additional points, as long as the contracting entity has made it known at the stage of the tender notice that such additional points may be obtained.80 The Commission considers that, in view of the divergent opinions of the parties in the context of the main proceedings, it is not in a position to determine whether the criteria which were applied breach the principle of equal treatment of tenderers. It is therefore for the national court to rule on that question and to determine, on the basis of objective, relevant and consistent evidence, whether those criteria were adopted with the sole purpose of selecting the undertaking which was eventually selected or were defined to that end.Findings of the Court81 It must be stated that the duty to observe the principle of equal treatment lies at the very heart of the public procurement directives, which are intended in particular to promote the development of effective competition in the fields to which they apply and which lay down criteria for the award of contracts which are intended to ensure such competition (see, to that effect, Case C-243/89 Commission v Denmark [1993] ECR I-3353, paragraph 33).82 Thus, according to the case-law cited in paragraph 63 above, the award criteria must observe the principle of non-discrimination as it follows from the Treaty provisions on freedom of establishment and freedom to provide services.83 In the present case, it should be noted, first, that, as is apparent from the order for reference, the award criteria at issue in the main proceedings were objective and applied without distinction to all tenders. Next, the criteria were directly linked to the fleet offered and were an integral part of a system of awarding points. Finally, under that system, additional points could be awarded on the basis of other criteria linked to the fleet, such as the use of low-floor buses, the number of seats and tip-up seats and the age of the buses.84 Moreover, as Concordia acknowledged at the hearing, it won the tender for route 15 of the Helsinki urban bus network, even though that invitation to tender specifically required the operation of gas-powered vehicles.85 It must therefore be held that, in such a factual context, the fact that one of the criteria adopted by the contracting entity to identify the economically most advantageous tender could be satisfied only by a small number of undertakings, one of which was an undertaking belonging to the contracting entity, is not in itself such as to constitute a breach of the principle of equal treatment.86 In those circumstances, the answer to the third question must be that the principle of equal treatment does not preclude the taking into consideration of criteria connected with protection of the environment, such as those at issue in the main proceedings, solely because the contracting entity's own transport undertaking is one of the few undertakings able to offer a bus fleet satisfying those criteria.The first question87 By its first question, the national court essentially asks whether the answer to the second and third questions would be different if the procedure for the award of the public contract at issue in the main proceedings fell within the scope of Directive 93/38.88 On this point, it must be noted, first, that the provisions of Article 36(1)(a) of Directive 92/50 and Article 34(1)(a) of Directive 93/38 have substantially the same wording.89 Second, the provisions concerning award criteria of Council Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts (OJ 1993 L 199, p. 1) and those of Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54) also have substantially the same wording as those of Article 36(1)(a) of Directive 92/50 and Article 34(1)(a) of Directive 93/38.90 It should be observed, third, that those directives taken as a whole constitute the core of Community law on public contracts and are intended to attain similar objectives in their respective fields.91 In those circumstances, there is no reason to give a different interpretation to two provisions which fall within the same field of Community law and have substantially the same wording.92 It should also be noted that the Court has already held, in paragraph 33 of Commission v Denmark, that the duty to observe the principle of equal treatment lies at the very heart of all the public procurement directives. The documents in the main proceedings have not disclosed anything to show that, as regards the contracting entity's choice of award criteria, the interpretation of that principle should depend in this case on the particular directive applicable to the contract in question.93 The answer to the first question must therefore be that the answer to the second and third questions would not be different if the procedure for the award of the public contract at issue in the main proceedings fell within the scope of Directive 93/38. Decision on costs Costs94 The costs incurred by the Finnish, Greek, Netherlands, Austrian, Swedish and United Kingdom Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Korkein hallinto-oikeus by order of 17 December 1999, hereby rules:1. Article 36(1)(a) of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts must be interpreted as meaning that where, in the context of a public contract for the provision of urban bus transport services, the contracting authority decides to award a contract to the tenderer who submits the economically most advantageous tender, it may take into consideration ecological criteria such as the level of nitrogen oxide emissions or the noise level of the buses, provided that they are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the authority, are expressly mentioned in the contract documents or the tender notice, and comply with all the fundamental principles of Community law, in particular the principle of non-discrimination.2. The principle of equal treatment does not preclude the taking into consideration of criteria connected with protection of the environment, such as those at issue in the main proceedings, solely because the contracting entity's own transport undertaking is one of the few undertakings able to offer a bus fleet satisfying those criteria.3. The answer to the second and third questions would not be different if the procedure for the award of the public contract at issue in the main proceedings fell within the scope of Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors.

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THE COURT OF FIRST INSTANCE UPHOLDS THE COUNCIL'S DECISION TO BAN THE USE OF CERTAIN ANTIBIOTICS AS ADDITIVES IN ANIMAL FEED AND SETS OUT THE CONDITIONS ON WHICH THE PRECAUTIONARY PRINCIPLE MAY BE APPLIED

| 61999A0013 Judgment of the Court of First Instance (Third Chamber) of 11 September 2002. - Pfizer Animal Health SA v Council of the European Union. - Transfer of resistance to antibiotics from animals to humans - Directive 70/524/EEC - Regulation concerning the withdrawal of the authorisation of an additive in feedingstuffs - Admissibility - Article 11 of Directive 70/524/EEC - Manifest error of assessment - Precautionary principle - Risk assessment and risk management - Consultation of a scientific committee - Principle of proportionality - Legitimate expectations - Obligation to state reasons - Right to property - Misuse of powers. - Case T-13/99. European Court reports 2002 Page II-03305 Keywords 1. Actions for annulment - Natural or legal persons - Measures of direct and individual concern to them - Regulation providing for the withdrawal of authorisation to market certain additives in feedingstuffs, including virginiamycin, within the Community - Admissibility(EC Treaty, Art. 173, fourth para. (now, after amendment, Art. 230, fourth para., EC); Council Regulation No 2821/98)2. Agriculture - Common agricultural policy - Implementation - Requirements relating to protection of health to be taken into account - Application of the precautionary principle(EC Treaty, Art. 130r(1) and (2) (now, after amendment, Art. 174(1) and (2) EC), and Art. 129(1), third para. (now, after amendment, Art. 152 EC))3. Agriculture - Common agricultural policy - Discretion of the Community institutions - Possibility of adopting guidelines - Judicial review - Limits4. Agriculture - Common agricultural policy - Use of virginiamycin as an additive in feedingstuffs - Scientific uncertainty as to the existence or extent of risks to human health - Application of the precautionary principle - Scope - Limits(EC Treaty, Art. 130r(1) and (2) (now, after amendment, Art. 174(1) and (2) EC))5. Agriculture - Common agricultural policy - Scientific risk assessment - Requirement for a high level of human health protection - Scope(EC Treaty, Art. 129(1), first para. (now, after amendment, Art. 152 EC))6. Agriculture - Common agricultural policy - Discretion of the Community institutions - Extent - Judicial review - Limits7. Agriculture - Common agricultural policy - Application of the precautionary principle - Scope - Limits - Observance of guarantees afforded by the Community legal order in administrative proceedings8. Community law - Procedural law - Procedure which must culminate in a decision or legislative measure - Procedural implications of an expert opinion - Consultation of a scientific committee - Respective roles of the scientific committee and the competent Community institution9. Agriculture - Common agricultural policy - Power of the Community institutions - Ability to withdraw authorisation from an additive in feedingstuffs without first having obtained a scientific opinion from the competent scientific committee - Exceptional nature10. Actions for annulment - Contested measure - Assessment of legality on the basis of the information available at the time when the measure was adopted(EC Treaty, Art. 173 (now, after amendment, Art. 230 EC))11. Agriculture - Common agricultural policy - Regulation providing for the withdrawal of authorisation to market certain additives in feedingstuffs, including virginiamycin, within the Community - Discretion of the Community institutions(Council Regulation No 2821/98; Council Directive 70/524, Art. 3a(e))12. Community law - Principles - Proportionality - Acts of the institutions - Proportional character - Criteria for assessment - Discretion of Community legislature in relation to the common agricultural policy - Judicial review - Limits(EC Treaty, Arts 40 and 43 (now, after amendment, Arts 34 EC and 37 EC))13. Agriculture - Common agricultural policy - Absence, at international level, of Community measures against the import of meat produced using virginiamycin as a growth promoter - Invalidity of ban on use of that product at Community level - Not invalid14. Community law - Principles - Fundamental rights - Freedom to pursue a trade or profession - Restrictions introduced for the purposes of the protection of public health - Whether permissible(Council Regulation No 2821/98)15. Agriculture - Common agricultural policy - No action taken against the use of substances other than virginiamycin - Breach of the principle of non-discrimination - None16. Community law - Principles - Rights of the defence - Observance of the rights of the defence in legislative procedures - Limits Summary $$1. A regulation is of individual concern to a person where, in the light of the specific circumstances of the case concerned, it adversely affects a particular right on which that person could rely.Furthermore, by terminating or, at the least, suspending the procedure which had been opened, at the request of an economic operator, for the purposes of obtaining a new authorisation of virginiamycin as an additive in feedingstuffs, and in the course of which that operator had the benefit of procedural guarantees, Regulation No 2821/98 providing for the withdrawal of the authorisation to market certain additives in feedingstuffs, including virginiamycin, within the Community affects that operator by reason of a legal and factual situation which differentiates it from all other persons. That fact is also such as to distinguish it for the purposes of the fourth paragraph of Article 173 of the Treaty (now, after amendment, the fourth paragraph of Article 230 EC).( see paras 98-100, 104 )2. In accordance with Article 130r(2) of the Treaty (now, after amendment, Article 174(2) EC), the precautionary principle is one of the principles on which Community policy on the environment is based. The principle also applies where the Community institutions take, in the framework of the common agricultural policy, measures to protect human health. It is apparent from Article 130r(1) and (2) of the Treaty that Community policy on the environment is to pursue the objective inter alia of protecting human health, that the policy, which aims at a high level of protection, is based in particular on the precautionary principle and that the requirements of the policy must be integrated into the definition and implementation of other Community policies. Furthermore, as the third subparagraph of Article 129(1) of the Treaty (now, after amendment, Article 152 EC) provides, and in accordance with settled case-law, health protection requirements form a constituent part of the Community's other policies and must therefore be taken into account when the common agricultural policy is implemented by the Community institutions.( see para. 114 )3. The Community institutions may lay down for themselves guidelines for the exercise of their discretionary powers by way of measures not provided for in Article 189 of the Treaty (now Article 249 EC), in particular by communications, provided that they contain directions on the approach to be followed by the Community institutions and do not depart from the Treaty rules. In such circumstances, the Community judicature ascertains, applying the principle of equal treatment, whether the disputed measure is consistent with the guidelines that the institutions have laid down for themselves by adopting and publishing such communications.( see para. 119 )4. Where there is scientific uncertainty as to the existence or extent of risks to human health, the Community institutions may, by reason of the precautionary principle, take protective measures without having to wait until the reality and seriousness of those risks become fully apparent.It follows, first, that as a result of the precautionary principle, as enshrined in Article 130r(2) of the Treaty (now, after amendment, Article 174(2) EC), the Community institutions were entitled to take a preventive measure regarding the use of virginiamycin as an additive in feedingstuffs, even though, owing to existing scientific uncertainty, the reality and the seriousness of the risks to human health associated with that use were not yet fully apparent. A fortiori, the Community institutions were not required, for the purpose of taking preventive action, to wait for the adverse effects of the use of the product as a growth promoter to materialise. Thus, in a situation in which the precautionary principle is applied, which by definition coincides with a situation in which there is scientific uncertainty, a risk assessment cannot be required to provide the Community institutions with conclusive scientific evidence of the reality of the risk and the seriousness of the potential adverse effects were that risk to become a reality.However, a preventive measure cannot properly be based on a purely hypothetical approach to the risk, founded on mere conjecture which has not been scientifically verified. It follows from the Community Courts' interpretation of the precautionary principle that a preventive measure may be taken only if the risk, although the reality and extent thereof have not been fully demonstrated by conclusive scientific evidence, appears nevertheless to be adequately backed up by the scientific data available at the time when the measure was taken.The taking of measures, even preventive ones, on the basis of a purely hypothetical risk is particularly inappropriate in the matter of additives in feedingstuffs. In such matters a zero risk does not exist, since it is not possible to prove scientifically that there is no current or future risk associated with the addition of antibiotics to feedingstuffs. Moreover, that approach is even less appropriate in a situation in which the legislation already makes provision, as one of the possible ways of giving effect to the precautionary principle, for a procedure for prior authorisation of the products concerned.The precautionary principle can therefore apply only in situations in which there is a risk, notably to human health, which, although it is not founded on mere hypotheses that have not been scientifically confirmed, has not yet been fully demonstrated.In such a situation, risk thus constitutes a function of the probability that use of a product or a procedure will adversely affect the interests safeguarded by the legal order.Consequently, the purpose of a risk assessment is to assess the degree of probability of a certain product or procedure having adverse effects on human health and the seriousness of any such adverse effects.( see paras 139-148 )5. In the assessment of risk, it is for the Community institutions to determine the level of risk - i.e. the critical probability threshold for adverse effects on human health and for the seriousness of those possible effects - which in their judgment is no longer acceptable for society and above which it is necessary, in the interests of protecting human health, to take preventive measures in spite of any existing scientific uncertainty.Although they may not take a purely hypothetical approach to risk and may not base their decisions on a zero-risk, the Community institutions must nevertheless take account of their obligation under the first subparagraph of Article 129(1) of the Treaty (now, after amendment, Article 152 EC) to ensure a high level of human health protection, which, to be compatible with that provision, does not necessarily have to be the highest that is technically possible.The level of risk deemed unacceptable will depend on the assessment made by the competent public authority of the particular circumstances of each individual case. In that regard, the authority may take account, inter alia, of the severity of the impact on human health were the risk to occur, including the extent of possible adverse effects, the persistency or reversibility of those effects and the possibility of delayed effects as well as of the more or less concrete perception of the risk based on available scientific knowledge.In matters relating to additives in feedingstuffs the Community institutions are responsible for carrying out complex technical and scientific assessments. In such circumstances a scientific risk assessment must be carried out before any preventive measures are taken.A scientific risk assessment is commonly defined, at both international level and Community level, as a scientific process consisting in the identification and characterisation of a hazard, the assessment of exposure to the hazard and the characterisation of the risk.The competent public authority must, in compliance with the relevant provisions, entrust a scientific risk assessment to experts who, once the scientific process is completed, will provide it with scientific advice.Scientific advice is of the utmost importance at all stages of the drawing up and implementation of new legislation and for the execution and management of existing legislation. The duty imposed on the Community institutions by the first subparagraph of Article 129(1) of the Treaty to ensure a high level of human health protection means that they must ensure that their decisions are taken in the light of the best scientific information available and that they are based on the most recent results of international research.Thus, in order to fulfil its function, scientific advice on matters relating to consumer health must, in the interests of consumers and industry, be based on the principles of excellence, independence and transparency.When the precautionary principle is applied, it may prove impossible to carry out a full risk assessment because of the inadequate nature of the available scientific data. A full risk assessment may require long and detailed scientific research. Unless the precautionary principle is to be rendered nugatory, the fact that it is impossible to carry out a full scientific risk assessment does not prevent the competent public authority from taking preventive measures, at very short notice if necessary, when such measures appear essential given the level of risk to human health which the authority has deemed unacceptable for society.The competent public authority must therefore weigh up its obligations and decide either to wait until the results of more detailed scientific research become available or to act on the basis of the scientific information available. Where measures for the protection of human health are concerned, the outcome of that balancing exercise will depend, account being taken of the particular circumstances of each individual case, on the level of risk which the authority deems unacceptable for society.Where experts carry out a scientific risk assessment, the competent public authority must be given sufficiently reliable and cogent information to allow it to understand the ramifications of the scientific question raised and decide upon a policy in full knowledge of the facts. Consequently, if it is not to adopt arbitrary measures, which cannot in any circumstances be rendered legitimate by the precautionary principle, the competent public authority must ensure that any measures that it takes, even preventive measures, are based on as thorough a scientific risk assessment as possible, account being taken of the particular circumstances of the case at issue. Notwithstanding the existing scientific uncertainty, the scientific risk assessment must enable the competent public authority to ascertain, on the basis of the best available scientific data and the most recent results of international research, whether matters have gone beyond the level of risk that it deems acceptable for society. That is the basis on which the authority must decide whether preventive measures are called for and, should that be the case, which measures appear to it to be appropriate and necessary to prevent the risk from materialising.( see paras 151-163 )6. In matters concerning the common agricultural policy the Community institutions enjoy a broad discretion regarding definition of the objectives to be pursued and choice of the appropriate means of action. In that regard, review by the Community judicature of the substance of the relevant act must be confined to examining whether the exercise of such discretion is vitiated by a manifest error or a misuse of powers or whether the Community institutions clearly exceeded the bounds of their discretion.The Community institutions enjoy a broad discretion, in particular when determining the level of risk deemed unacceptable for society.Where a Community authority is required to make complex assessments in the performance of its duties, its discretion also applies, to some extent, to the establishment of the factual basis of its action.It follows that judicial review of the Community institutions' performance of their duty must be limited. The Community judicature is not entitled to substitute its assessment of the facts for that of the Community institutions, on which the Treaty confers sole responsibility for that duty. Instead, it must confine itself to ascertaining whether the exercise by the institutions of their discretion in that regard is vitiated by a manifest error or a misuse of powers or whether the institutions clearly exceeded the bounds of their discretion.( see paras 166-169 )7. Under the precautionary principle the Community institutions are entitled, in the interests of human health to adopt, on the basis of as yet incomplete scientific knowledge, protective measures which may seriously harm legally protected positions, and they enjoy a broad discretion in that regard.In such circumstances, the guarantees conferred by the Community legal order in administrative proceedings are of even more fundamental importance. Those guarantees include, in particular, the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case.It follows that a scientific risk assessment carried out as thoroughly as possible on the basis of scientific advice founded on the principles of excellence, transparency and independence is an important procedural guarantee whose purpose is to ensure the scientific objectivity of the measures adopted and preclude any arbitrary measures.( see paras 170-172 )8. Against a legislative background in which the Community institution is not bound by the scientific opinion given by the competent scientific committee, the role played by a committee of experts, such as the Scientific Committee for Animal Nutrition, in a procedure designed to culminate in a decision or a legislative measure, is restricted, as regards the answer to the questions which the competent institution has asked it, to providing a reasoned analysis of the relevant facts of the case in the light of current knowledge about the subject, in order to provide the institution with the factual knowledge which will enable it to take an informed decision.However, the competent Community institution must, first, prepare for the committee of experts the factual questions which need to be answered before it can adopt a decision and, second, assess the probative value of the opinion delivered by the committee. In that regard, the Community institution must ensure that the reasoning in the opinion is full, consistent and relevant.To the extent to which the Community institution opts to disregard the opinion, it must provide specific reasons for its findings by comparison with those made in the opinion and its statement of reasons must explain why it is disregarding the latter. The statement of reasons must be of a scientific level at least commensurate with that of the opinion in question.( see paras 197-199 )9. Even if, under the relevant legislation, the Community institutions are able to withdraw authorisation from an additive without first having obtained a scientific opinion from the competent scientific committees, it must be held that it is only in exceptional circumstances and where there are adequate guarantees of scientific objectivity that the Community institutions may, when they are required to assess particularly complex facts of a technical or scientific nature, adopt a preventive measure withdrawing authorisation from an additive without obtaining an opinion from the scientific committee set up for that purpose at Community level on the relevant scientific material.( see paras 265, 270 )10. In an action for annulment under Article 173 of the Treaty (now, after amendment, Article 230 EC), the assessment made by the Community institutions can be challenged only if it appears incorrect in the light of the elements of fact and law which were available to them at the time when the contested measure was adopted.( see para. 324 )11. In an action for annulment of Regulation No 2821/98 providing for withdrawal of the authorisation to market certain additives in feedingstuffs, including virginiamycin, in the Community, it is not for the Community Courts to assess the merits of either of the scientific points of view argued before them and to substitute their assessment for that of the Community institutions, on which the Treaty confers sole responsibility in that regard. Since the Community institutions could reasonably take the view that they had a proper scientific basis for a link between the use of virginiamycin as an additive in feedingstuffs and the development of streptogramin resistance in humans, the mere fact that there were scientific indications to the contrary does not establish that they exceeded the bounds of their discretion in finding that there was a risk to human health.It is clear, on the contrary, that the Community institutions could properly find that there were serious reasons concerning human health, within the meaning of Article 3a(e) of Directive 70/524 concerning additives in feedingstuffs, for restricting streptogramins to medical use.( see paras 393, 402 )12. The principle of proportionality, which is one of the general principles of Community law, requires that measures adopted by Community institutions should not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question, and where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued.However, in matters concerning the common agricultural policy, the Community legislature has a discretionary power which corresponds to the political responsibilities given to it by Articles 40 and 43 of the Treaty (now, after amendment, Articles 34 EC and 37 EC). Consequently, the legality of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate, regard being had to the objective which the competent institution is seeking to pursue.( see paras 411-412 )13. The fact that the Community institutions have not adopted measures at international level against imports of meat produced using virginiamycin as a growth promoter cannot of itself affect the validity of the ban on the use of virginiamycin within the Community. It would rather have to be established that in the absence of any such action the contested regulation was in itself a manifestly inappropriate means of achieving the objective pursued.( see para. 433 )14. The importance of the objective pursued by Regulation No 2821/98 providing for withdrawal of the authorisation to market certain additives in feedingstuffs, including virginiamycin, within the Community, i.e. the protection of human health, may justify adverse economic consequences, and even substantial adverse consequences, for certain traders. The protection of public health, which the regulation is intended to guarantee, must take precedence over economic considerations.Furthermore, although the freedom to pursue a trade or business forms part of the general principles of Community law, that principle does not amount to an unfettered prerogative but must be viewed in the light of its social function. Consequently, it may be restricted, provided that the restrictions imposed in fact correspond to objectives of general interest pursued by the Community and do not, in relation to the aim pursued, constitute a disproportionate and intolerable interference which would affect the very substance of the right so guaranteed.( see paras 456-457 )15. The principle of non-discrimination, which constitutes a fundamental principle of law, prohibits comparable situations from being treated differently or different situations from being treated in the same way, unless such difference in treatment is objectively justified. The lack of any action against the use of other substances, even if assumed to be unlawful, could not in itself affect the lawfulness of the ban on virginiamycin. Even if it were established that the authorisations of other products should also be withdrawn, it would not however be proved that the regulation was unlawful for breach of the principle of non-discrimination, in so far as there is no equality in illegality, since the principle of non-discrimination does not found an entitlement to the non-discriminatory application of unlawful treatment.( see paras 478-479 )16. The right to be heard in an administrative procedure taken against a specific person, which must be observed, even in the absence of any rules governing the procedure, cannot be transposed to a legislative procedure leading, as in the present case, to the adoption of a measure of general application. The fact that an economic operator is directly and individually concerned by the contested regulation does not alter that finding.( see para. 487 ) Parties In Case T-13/99,Pfizer Animal Health SA, established in Louvain-la-Neuve (Belgium), represented by I.S. Forrester QC, M. Powell, Solicitor, E. Wright, Barrister, and W. van Lembergen, lawyer, instructed by S.J. Gale-Batten, Solicitor, with an address for service in Luxembourg,applicant,supported byAsociación nacional de productores de ganado porcino (Anprogapor), having its registered office in Madrid (Spain),andAsociación española de criadores de vacuno de carne (Asovac), having its registered office in Barcelona (Spain),represented by J. Folguera Crespo, A. Gutiérrez Hernández, J. Massaguer Fuentes and E. Navarro Varona, lawyers, with an address for service in Luxembourg,and byFédération européenne de la santé animale (Fedesa), having its registered office in Brussels (Belgium),andFédération européenne des fabricants d'adjuvants pour la nutrition animale (Fefana), having its registered office in Brussels (Belgium),represented by D. Waelbroeck and D. Brinckman, lawyers, with an address for service in Luxembourg,interveners,vCouncil of the European Union, represented by J. Carbery, M. Sims and F.P. Ruggeri Laderchi, acting as Agents,defendant,supported byCommission of the European Communities, represented by P. Oliver, T. Christoforou and K. Fitch, acting as Agents, with an address for service in Luxembourg,byKingdom of Denmark, represented by J. Molde, acting as Agent, N. Holst-Christensen and S. Ryom, with an address for service in Luxembourg,byKingdom of Sweden, represented by A. Kruse and L. Nordling, acting as Agents, with an address for service in Luxembourg,byRepublic of Finland, represented by H. Rotkirch, T. Pynnä and E. Bygglin, acting as Agents, with an address for service in Luxembourg,and byUnited Kingdom of Great Britain and Northern Ireland, represented by R. Magrill, acting as Agent, with M. Hoskins, Barrister, with an address for service in Luxembourg,interveners,APPLICATION for annulment of Council Regulation (EC) No 2821/98 of 17 December 1998 amending, as regards withdrawal of the authorisation of certain antibiotics, Directive 70/524/EEC concerning additives in feedingstuffs (OJ 1998 L 351, p. 4),THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES(Third Chamber),composed of: J. Azizi, President, K. Lenaerts and M. Jaeger, Judges,Registrar: F. Erlbacher, Legal Secretary,having regard to the written procedure and further to the hearing on 2 July 2001,gives the followingJudgment Grounds Legal frameworkI - The Act of Accession1 Article 151(1) of the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, `the Act of Accession') provides as follows:`The acts listed in Annex XV to this Act shall apply in respect of the new Member States under the conditions laid down in that Annex.'2 Under Annex XV, Title VII, point E1(4) of the Act of Accession, the Kingdom of Sweden may maintain in force until 31 December 1998 its pre-accession legislation with regard to the restriction on, or prohibition of, the use in feedingstuffs of additives belonging to the group of antibiotics. Before that date, `a decision shall be taken in accordance with the procedure laid down in Article 7 of Directive 70/524/EEC on requests for adaptation presented by the Kingdom of Sweden; those requests shall be accompanied by a detailed scientific statement of reasons.'II - The Community rules on additives in feedingstuffsA - General description3 On 23 November 1970 the Council adopted Directive 70/524/EEC concerning additives in feedingstuffs (OJ, English Special Edition 1970 (III), p. 840). This Directive laid down the Community rules applying to the authorisation, and withdrawal of authorisation, of additives for incorporation in feedingstuffs.4 Directive 70/524 has been amended and supplemented on several occasions. In particular, it was heavily amended by Council Directive 84/587/EEC of 29 November 1984 (OJ 1984 L 319, p. 13) and by Council Directive 96/51/EC of 23 July 1996 (OJ 1996 L 235, p. 39). It was supplemented inter alia by the decisions cited at paragraphs 24 to 26 and 28 below.5 Directive 96/51 introduced new rules for authorisation, and withdrawal of authorisation, of additives in feedingstuffs (`the new rules') in place of the rules which had applied until then (`the original rules').6 To bring about the transition from the original rules to the new rules, which took effect on 1 October 1999, Directive 96/51 introduced a number of rules applicable from 1 April 1998 to certain additives authorised under the original rules, including antibiotics (`the transitional rules'). For this purpose, Article 2(1)(a) of Directive 96/51 provided that the Member States were to bring into force the laws, regulations and administrative provisions necessary to comply with certain provisions of the directive by 1 April 1998.B - Definition of additives in feedingstuffs7 Under the original rules additives were defined in Article 2 of Directive 70/524, as amended by Directive 84/587, as `substances ... which, when incorporated in feedingstuffs, are likely to affect their characteristics or livestock production'.8 According to recital 3 of the preamble to Directive 96/51, it was considered necessary, under the new rules, to draw a distinction between `additives which are widely used and present no particular dangers for the manufacture of feedingstuffs' and `high technology additives with a very specific composition for which the person responsible for putting them into circulation must receive authorisation, in order to avoid copies which might not be in conformity and might therefore be unsafe'. Effect is given to that distinction by Article 2 of Directive 70/524, as amended by Article 1(3)(i) of Directive 96/51. Article 2, as amended, contains the following definitions:`(a) "additives": substances or preparations used in animal nutrition in order to:- affect favourably the characteristics of feed materials or of compound feedingstuffs or of animal products; or- satisfy the nutritional needs of animals or improve animal production, in particular by affecting the gastro-intestinal flora or the digestibility of feedingstuffs; or- introduce into nutrition elements conducive to attaining particular nutritional objectives or to meeting the specific nutritional needs of animals at a particular time; or- prevent or reduce the harmful effects caused by animal excretions or improve the animal environment;(aa) "micro-organisms": micro-organisms forming colonies;(aaa) "additives subject to authorisation linked to the person responsible for putting them into circulation": the additives listed in Part I of Annex C;(aaaa) "other additives": additives not subject to authorisation linked to the person responsible for putting them into circulation and referred to in Part II of Annex C.'9 It is apparent from Annex C to Directive 70/524, as inserted by Article 1(20) of Directive 96/51, that all additives belonging to the group of antibiotics or the group of growth promoters fall within the class of additives covered by Article 2(aaa) and are therefore subject to authorisation linked to the person responsible for putting them into circulation.C - The rules on authorisation and withdrawal of authorisation of antibiotics used as additives in feedingstuffs1. The rules on authorisation of additives10 Under the original rules, Article 3(1) of Directive 70/524, which was repealed by Directive 96/51, provided that `Member States shall provide that, as regards feedingstuffs, only those additives listed in Annex I which comply with this Directive may be marketed and that they may be incorporated in feedingstuffs only subject to the requirements set out in that Annex ...'. However, under Article 4(1)(a) of Directive 70/524, repealed by Directive 96/51, the Member States could, by way of derogation from Article 3(1) and subject to certain conditions set out in Directive 70/524, authorise the marketing and use, within their own territory, of additives listed in Annex II to that Directive.11 Under the new rules (Article 3 of Directive 70/524 as amended by Directive 96/51), only additives which have a Community authorisation granted under a Commission regulation may be put into circulation. Under the new Article 3a of Directive 70/524, authorisation of an additive is given inter alia if:`...(e) for serious reasons concerning human or animal health its use must not be restricted to medical or veterinary purposes.'12 Article 4 of Directive 70/524, as amended by Directive 96/51, lays down the procedure for obtaining Community authorisation of an additive under both the new rules and the transitional rules.13 Article 9 of Directive 70/524, as amended by Directive 96/51, provides that `[a]dditives as referred to in Article 2(aaa) which meet the conditions laid down in Article 3a shall be authorised and included in Chapter I of the list referred to in Article 9t(b)'. Chapter I includes additives whose authorisation is linked to a person responsible for putting them into circulation and is granted for a period of 10 years. Under the new Article 9b, authorisation is to be renewable for 10-year periods.14 Furthermore, Article 2(k) of Directive 70/524, as amended by Directive 96/51, defines `putting into circulation' and `circulation' as:`the holding of products for the purposes of sale, including offering for sale, or any other form of transfer, whether free or not, to third parties, and the sale and other forms of transfer themselves'.15 Article 2(1) of Directive 70/524, as amended by Directive 96/51, defines `person responsible for putting into circulation' as:`the natural or legal person who has responsibility for the conformity of the additive which has been granted Community authorisation and for putting it into circulation'.16 Under the new Article 9c(1) of Directive 70/524, `the scientific data and other information in the initial dossier submitted for the purpose of the first authorisation may not be used for the benefit of other applicants for a period of 10 years'. The reasons for that restriction are given as follows in recital 14 of the preamble to Directive 96/51: `[w]hereas the search for new additives [referred to in Article 2(aaa)] requires costly investment; whereas protection for a period fixed at 10 years should therefore be afforded to scientific data or information included in the dossier on the basis of which the first authorisation is granted'.2. The withdrawal of authorisation of an additive17 The procedure for withdrawing the authorisation of an additive is the same under the new rules as under the old ones and is laid down in Article 23 of Directive 70/524. However, under Article 11 of Directive 70/524, Member States may take safeguard measures in respect of an additive. In that case, the procedure for withdrawing the authorisation of an additive affected by such a safeguard measure is laid down in Article 24 of Directive 70/524.18 Article 11 of Directive 70/524, as amended by Article 1(1) of Directive 84/587 and Article 1(7) of Directive 96/51, provides that:`1. Where a Member State, as a result of new information or of a reassessment of existing information made since the provisions in question were adopted, has detailed grounds for establishing that the use of one of the additives authorised or its use in conditions which may be specified constitutes a danger to animal or human health or the environment although it complies with the provisions of this Directive, that Member State may temporarily suspend or restrict application of the provisions in question in its territory. It shall immediately inform the other Member States and the Commission thereof, giving reasons for its decision.2. The Commission shall, as soon as possible, examine the grounds cited by the Member State concerned and consult the Member States within the Standing Committee for Feedingstuffs; it shall then deliver its opinion without delay and take the appropriate measures.3. Should the Commission consider that amendments to the Directive are necessary in order to mitigate the difficulties mentioned in paragraph 1 and to ensure the protection of animal or human health or the environment, it shall initiate the procedure laid down in Article 24 with a view to adopting these amendments; the Member State which has adopted safeguard measures may in that event retain them until the amendments enter into force.'19 Article 24 of Directive 70/524, as inserted by Article 1(1) of Directive 84/587 and most recently amended by Annex I to the Act of Accession, provides as follows;`1. Where the procedure laid down in this Article is to be followed, matters shall be referred to the [Standing] Committee [for Feedingstuffs] without delay by the chairman, either on his own initiative or at the request of a Member State.2. The representative of the Commission shall submit to the Committee a draft of the measures to be taken. The Committee shall deliver its opinion within two days. The opinion shall be delivered by the majority laid down in Article 148(2) of the [EC] Treaty [(now Article 205(2) EC)] in the case of decisions which the Council is required to adopt on a proposal from the Commission. The votes of the representatives of the Member States within the Committee shall be weighted in the manner set out in that article. The Chairman shall not vote.3. The Commission shall adopt the measures and implement them forthwith where they are in accordance with the opinion of the Committee. Where they are not in accordance with the opinion of the Committee or if no opinion is delivered, the Commission shall without delay propose to the Council the measures to be adopted. The Council shall adopt the measures by a qualified majority.If the Council has not adopted any measures within 15 days of the proposal being submitted to it, the Commission shall adopt the proposed measures and implement them forthwith, except where the Council has voted by a simple majority against such measures.'3. The transitional rules20 For additives such as antibiotics, which were authorised under the original rules and whose authorisation Directive 96/51 thereafter linked to the person responsible for putting them into circulation, Articles 9g, 9h and 9i of Directive 70/524, introduced by Directive 96/51, provide for a transitional period during which those additives remain provisionally authorised but must be the subject of a new authorisation under the new rules.21 Article 9g of Directive 70/524 provides that:`1. Additives as referred to in Article 2(aaaa) included in Annex I before 1 January 1988 shall be provisionally authorised as from 1 April 1998 and transferred to Chapter I of Annex B with a view to their re-evaluation as additives linked to a person responsible for putting them into circulation.2. With a view to their re-evaluation, the additives as referred to in paragraph 1 must, before 1 October 1998, be the subject of new applications for authorisation; such applications, accompanied by the monographs and the identification notes provided for in Articles 9n and 9o respectively, shall be addressed by the person responsible for the dossier on the basis of which the former authorisation was granted or by his successor or successors, via the Member State acting as rapporteur, to the Commission, sending copies to the other Member States, which shall acknowledge receipt thereof.3. In accordance with the procedure laid down in Article 23, provisional authorisation of the additives shall be withdrawn through the adoption of a Regulation and they shall be deleted from the list in Chapter I of Annex B before 1 October 1999:(a) if the documents prescribed in paragraph 2 are not submitted within the time allowed or(b) if, after scrutiny of the documents, it is established that the monographs and identification notes are not in accordance with the data in the dossier on the basis of which the original authorisation was given.4. Member States shall ensure that the person responsible for putting an additive as referred to in paragraph 1 into circulation submits, as provided for in Article 4 and not later than 30 September 2000, the dossier referred to in Article 4 with a view to re-evaluation. Where he fails to do so, the authorisation of the additive in question shall be withdrawn through the adoption of a regulation in accordance with the procedure laid down in Article 23 and it shall be deleted from the list in Chapter I of Annex B.5. The Commission shall take all necessary measures to ensure that re-evaluation of the dossiers referred to in paragraph 4 is completed no later than three years after the dossier is submitted.In accordance with the procedure laid down in Article 23, authorisations of the additives referred to in Article 1:(a) shall be withdrawn and they shall be deleted from the list in Chapter I of Annex B through the adoption of a regulation, or(b) shall be replaced by authorisations linked to the person responsible for putting them into circulation for a period of 10 years through the adoption of a regulation taking effect no later than 1 October 2003 and included in Chapter I of the list referred to in Article 9t(b)....'22 Article 9h contains provisions similar to those of Article 9g for additives included in Annex I to Directive 70/524 after 31 December 1987. These products are to be transferred to Chapter II of Annex B to the Directive, as amended by Directive 96/51. However, unlike the additives transferred to Chapter I of Annex B pursuant to Article 9g, which are subject to re-evaluation and in respect of which authorisation linked to the person responsible for putting them into circulation may be granted no later than 1 October 2003, the additives included in Chapter II of Annex B to Directive 96/51 pursuant to Article 9h must be authorised - or, where appropriate, prohibited - no later than 1 October 1999, without prior re-evaluation. Where authorisation is given, those additives are included for a period of 10 years in Chapter I of the list referred to in Article 9t(b), which was mentioned above.23 For additives included in Annex II to Directive 70/524 before 1 April 1998, Article 9i contains provisions similar to those of Article 9h. Those additives are to be transferred to Chapter III of Annex B to the Directive, as amended by Directive 96/51. The period of provisional authorisation of those additives may not, however, exceed five years, account being taken of the period of inclusion in Annex II.D - The `Standing Committee', the Scientific Committee for Animal Nutrition and the Scientific Steering Committee24 The Standing Committee for Feedingstuffs (`the Standing Committee'), which is referred to in Article 24 of Directive 70/524 cited at paragraph 19 above, was established by Council Decision 70/372/EEC of 20 July 1970 setting up a Standing Committee for Feedingstuffs (OJ, English Special Edition 1970 (II), p. 534). It consists of representatives of the Member States with a representative of the Commission as chairman.25 By Decision 76/791/EEC of 24 September 1976 establishing a Scientific Committee for Animal Nutrition (OJ 1976 L 279, p. 35), replaced by Commission Decision 97/579/EC of 23 July 1997 setting up Scientific Committees in the field of consumer health and food safety (OJ 1997 L 237, p. 18), the Commission appointed a Scientific Committee for Animal Nutrition (`SCAN'). Article 2(1) and (3) of Decision 97/579 provides as follows:`1. The Scientific Committees shall be consulted in the cases laid down by Community legislation. The Commission may also decide to consult them on other questions of particular relevance to consumer health and food safety....3. At the Commission's request, the Scientific Committees shall provide scientific advice on matters relating to consumer health and food safety ... .'26 The Annex to Decision 97/579 defines the field of competence of SCAN as `[s]cientific and technical questions concerning animal nutrition, its effect on animal health, on the quality and health of products of animal origin, and concerning the technologies applied to animal nutrition'.27 In addition, Article 8(1) of Directive 70/524, as amended by Directive 96/51, provides as follows:`The Scientific Committee for Animal Nutrition established by [Decision 76/791] shall be responsible for assisting the Commission, at the latter's request, on all scientific questions relating to the use of additives in animal nutrition.'28 Finally, by Decision 97/404/EC of 10 June 1997 establishing a Scientific Steering Committee (OJ 1997 L 169, p. 85; `the SSC'), the Commission appointed such a Committee.Background to the proceedingsI - Scientific background to the case as at the time when the contested regulation, Regulation (EC) No 2821/98, was adopted29 Defined in general terms, an antibiotic is a substance of biological or synthetic origin, specifically acting at an essential stage of the metabolism of bacteria (antibacterial agents) or fungi (antifungal agents). Antibiotics, which may be grouped into several classes, are used both in humans and animals to treat various bacterial infections and to prevent such infections.30 Certain antibiotics, including virginiamycin, are also used as additives in feedingstuffs as growth promoters for animals. They are added in very low concentrations to the feedingstuffs of growing poultry, pigs and calves. This results in improved growth and improved weight gain, so that an animal needs less time and less food to attain its required weight for slaughter. The practice is also said to have beneficial side effects, in particular the prevention of diseases in animals and reduced production of waste in livestock-farming.31 Certain bacteria are naturally resistant to certain antibiotics. Nevertheless, in humans and in animals bacteria which are, as a general rule, sensitive to certain antibiotics may develop the capacity to resist those antibiotics. The development of resistance of that kind enables a bacterium to live in the presence of an antibiotic which would, in normal circumstances, kill it or prevent its reproduction. Where a bacterium has developed resistance to an antibiotic, treatment of the patient concerned with that antibiotic becomes totally or partly ineffective. In addition, a bacterium resistant to one member of a class of antibiotics may also become resistant to other antibiotics of the same class. This process is called `cross-resistance'.32 The phenomenon of resistance to antibiotics in humans was discovered shortly after the first antibiotics were developed. However, generally speaking, resistance to antibiotics in humans has increased in recent years. At the same time, although the pharmaceutical industry continues to research and develop new products, there has been a relative decline in the development and marketing of effective new antimicrobial chemotherapeutic agents designed to combat certain pathogens.33 The recommendations made in the report on a European-Union conference held in Copenhagen in September 1998 on the subject of the microbial threat (`the Copenhagen Recommendations') state that `resistance to antimicrobial agents is a major public health problem in Europe'. Antibiotic resistance in humans can result in a substantial rise in the number of complications in the treatment of certain diseases and even an increased mortality risk arising from those diseases.34 The reasons for the development of resistance to antibiotics in humans have not yet been entirely clarified. It appears from the documents before the Court that there is a broad consensus among experts that this phenomenon is primarily caused by the excessive and inappropriate use of antibiotics in human medicine.35 Nevertheless, the existence of a link between the use of antibiotics as growth promoters in animals and the development of resistance to those products in humans is, to a large extent, recognised by the scientific community. It is presumed that the antibiotic resistance which has developed in animals can be transferred to humans.36 The possibility and the probability of such transfer and the risk which it may entail for public health continue to give rise to argument in scientific circles (see the parties' submissions on this point, particularly in connection with the plea concerning breach of the precautionary principle). However, on the basis of the available results of research, numerous international, Community and national bodies adopted various recommendations on the subject over the years preceding the adoption of Council Regulation (EC) No 2821/98 of 17 December 1998 amending, as regards withdrawal of the authorisation of certain antibiotics, Directive 70/524 (OJ 1998 L 351, p. 4; `the contested regulation'). (See in that regard the report of a World Health Organisation Meeting (`WHO') in Berlin in October 1997, `The Medical Impact of the Use of Antimicrobials in Food Animals', (`the WHO report'); the Resolution of the European Parliament of 15 May 1998 on the use of antibiotics in feedingstuffs (OJ 1998 C 167, p. 306); the Opinion of the Economic and Social Committee of 9 September 1998 on the subject: `Resistance to antibiotics: a threat to public health' (OJ 1998 C 407, p. 7); the Copenhagen Recommendations; the House of Lords Science and Technology Committee (United Kingdom), Seventh Report, March 1998, `the House of Lords report'; the document from the Centre for Science in the Public Interest (Washington D.C., United States of America) entitled `Protecting the Crown Jewels of Medicine', May 1998; the document from the United Kingdom Ministry of Agriculture, Fisheries and Food, `A Review of Antimicrobial Resistance on the Food Chain', July 1998, `the United Kingdom report'; the document from the Health Council of the Netherlands, `Antimicrobial Growth Promoters', August 1998, `the Netherlands report'.)37 In particular, the abovementioned bodies have almost unanimously recommended increasing research efforts in this field. For example, in 1997 the Commission, jointly with the Member States and the pharmaceutical industry, set up a research programme (`Surveillance Programme'), the first results of which were to be published in 2000. In addition, some of those bodies recommend the systematic replacement of all antibiotics used as growth promoters by safer alternatives. Furthermore, several bodies, including the WHO, have recommended the immediate or gradual discontinuance of the use of antibiotics as growth promoters in animals. Some of the abovementioned reports suggest prohibiting the practice, first, where the antibiotics concerned are used in human medicine or their use in humans is envisaged and, second, where they are known to `select' cross-resistance to antibiotics used as medicinal products for humans.38 Virginiamycin is an antibiotic belonging to the streptogramin class. It has been used exclusively as a growth promoter for animals for more than 30 years. A certain level of resistance to virginiamycin has been observed in animals which have been treated with that product.39 Other antibiotics belonging to the same class are used in human medicine, namely pristinamycin, used for 30 years in certain Member States, particularly France, and Synercid, which is a mixture of the antibiotics dalfopristin and quinupristin and has recently been developed and authorised in the United States but which, at the date of adoption of the contested regulation, had not yet been authorised in the Community.40 Although at present dalfropristin and quinupristin are relatively little used in human medicine, they could play an important part in the Community in the treatment of infections caused in patients by bacteria which have developed resistance to other antibiotics, namely the bacteria Enterococcus faecium (`E. faecium') and Staphylococcus aureus. These bacteria may cause dangerous infections, particularly in hospital patients who already have a deficient immune system. Hitherto patients infected by these bacteria have been treated with an antibiotic belonging to another class, vancomycin. However, it has been found that these bacteria are becoming increasingly resistant to vancomycin. Experts refer to `vancomycin-resistant E. faecium' (VRE) and `methicillin-resistant Staphylococcus aureus' (MRSA), which has also become resistant to vancomycin (`vancomycin-resistant MRSA'). In those circumstances, the administration of streptogramins, particularly Synercid, could be the treatment of last resort against infections caused by those bacteria, at least until other antibiotics capable of combating those infections have been developed and placed on the market. However, the effectiveness of such treatment could be reduced or even eliminated by any transfer of resistance to virginiamycin from animals to humans and by the development of cross-resistance in humans to the other members of the streptogramin class.41 It is common ground between the parties and is apparent from the preamble to the contested regulation that, at the time when the measure was adopted, the transfer and development of such resistance had not yet been scientifically established in respect of streptogramins.II - The procedure leading to the adoption of the contested regulation42 When the contested regulation was adopted, Pfizer Animal Health SA (`Pfizer') was the only producer in the world of virginiamycin, which was made in its factory in Rixensart, Belgium. The product was marketed under the trade name `Stafac'.43 Virginiamycin was authorised as an additive in feedingstuffs for certain poultry and pigs when Directive 70/524 entered into force and was included in Annex I to that Directive. That authorisation was subsequently extended to other animals. In certain cases the authorisation was without limitation as to time, while in others it was for a specific period. After Directive 96/51 entered into force, and for the purpose of granting a further authorisation under the new rules, the various authorisations of virginiamycin were transferred to Chapter I, II or III of Annex B to Directive 70/524 in accordance with Articles 9g, 9h and 9i of that directive.44 In reliance on the safeguard clause provided for in Article 11 of Directive 70/524, the Kingdom of Denmark, by letters of 13 January 1998, informed the Commission and the competent authorities of the Member States of the European Economic Area (`EEA') of its decision to ban the use in its territory of virginiamycin in feedingstuffs with effect from 16 January 1998. In doing so, it relied on a report from the National Veterinary Laboratory dated 7 January 1998 (`the Status Report'), which contains the following conclusions:`It is strongly indicated that the use of virginiamycin as a growth promoter for pigs and broilers selects for virginiamycin-resistant E. faecium (selection). Virginiamycin-resistant E. faecium are simultaneously resistant to other streptogramins, such as pristinamycin and Synercid, potentially useful for treatment of human enterococcal infections (cross-resistance). In some of the virginiamycin-resistant E. faecium from animals, the sat A gene which confers streptogramin resistance was detected. This gene has also been found to occur in streptogramin-resistant E. faecium causing infection in human hospital patients in France. It is very probable that virginiamycin-resistant E. faecium can be transmitted from animals to human beings, and furthermore, it cannot be excluded that the sat A gene may be transferred from E. faecium animals to E. faecium in humans.At present streptogramins are not in use for treatment of human infections in Denmark. Therefore an acute threat to public health does not exist. However, it cannot be ruled out that streptogramins will be used for treating human infections in the future. If that happens, the use of virginiamycin as a growth promoter will increase that risk of adverse resistance development.'45 On 22 January 1998 the Kingdom of Belgium, the Member State acting as rapporteur for the purposes of Article 4 of Directive 70/524 on the dossier concerning virginiamycin, forwarded the Status Report to Pfizer and requested it to submit its observations.46 On 2 February 1998 the Kingdom of Sweden, with a view to a decision being taken by 31 December 1998 and in accordance with Annex XV to the Act of Accession (see paragraph 2 above), submitted a request for the adaptation of Directive 70/524, together with a detailed scientific statement of reasons, seeking withdrawal of the authorisation, inter alia, of antibiotics used as growth promoters, including virginiamycin (`the Swedish report').47 On 25 February 1998 the Kingdom of Denmark wrote to the Commission and the other Member States to notify them that at a later date it would send them a supplementary scientific report setting out its reasons for applying the safeguard clause in relation to virginiamycin.48 On 12 and 13 March 1998 the Danish authorities sent the Commission and the Member States of the EEA two new scientific publications concerning the transfer of antimicrobial resistance from animals to humans.49 On 16 and 23 March 1998 discussions took place between Pfizer and Commission officers dealing with the matter.50 On 31 March 1998 Pfizer submitted its observations on the Status Report, together with scientific reports and literature, to the Commission, the Member States and the members of SCAN. In its observations Pfizer submits that examination of the reports and scientific literature annexed to them shows that scientific knowledge relating to the possible transfer of resistance to virginiamycin from animals to human beings is either totally absent or inadequate. It concludes:`The issue of antibiotic resistance is without question an important public health issue. It is also clear that the current body of scientific data - including the Danish studies - do not provide the scientific evidence necessary to conduct a detailed evaluation of any potential risk associated with the use of virginiamycin as a feed additive antibiotic. Aside from the methodological weakness or preliminary nature of the studies cited in the Status Report, new and relevant streptogramin susceptibility surveillance data from human clinical isolates stand in direct contradistinction to the risks hypothesised.'51 On 1 April 1998 the Kingdom of Denmark sent the Commission and SCAN the supplementary report of the National Veterinary Laboratory, as it had said it would in the letter of 25 February 1998 (`the supplementary report from the Danish Veterinary Laboratory'). The report sets out the results of scientific research by the National Veterinary Laboratory, which are based on 10 conclusions and led the Danish authorities to adopt the safeguard measure.52 On 13 May 1998 Pfizer submitted its observations on the Supplementary Report from the Danish Veterinary Laboratory to the Commission, the EEA Member States and the members of SCAN.53 On 10 July 1998 SCAN published, at the Commission's request, a scientific opinion on the immediate and longer-term risk to the value of streptogramins in human medicine posed by the use of virginiamycin as an animal growth promoter (`the SCAN opinion'). In that opinion, SCAN analysed the conclusions in the Supplementary Report from the Danish Veterinary Laboratory and added a comment in respect of each of those conclusions. Lastly, SCAN drew the following general conclusions:`I. Having considered the evidence provided by the Danish Government in support of their action taken under the safeguard clause against virginiamycin, the SCAN concludes that:1. No new evidence has been provided to substantiate the transfer of a streptogramin or vancomycin resistance from organisms of animal origin to those resident in the human digestive tract and so compromise the future use of therapeutics in human medicine.2. The development of vancomycin resistance amongst E. faecium and methicillin-resistant strains of Staphylococcus aureus, which the SCAN recognises are increasingly responsible for nosocomial infections worldwide, are evidently a cause for concern. However, the data provided in the supplementary report from the Danish Veterinary Laboratory do not justify the immediate action taken by Denmark to preserve streptogramins as therapeutic agents of last resort in humans.3. As survey data provided under the aegis of DANMAP and included in the supplementary report from the Danish Veterinary Laboratory failed to detect a single case of VRE, as Denmark has amongst the lowest incidence of MRSA in Europe and North America, and as coagulase-negative staphylococci remain sensitive to vancomycin, there are no clinical reasons to require the introduction of streptogramins as human therapeutics in Denmark now or in the immediate future. Furthermore, as the Commission has elected to take the precautionary action of removing avoparcin from the antibiotics permitted for use as growth promoters to help preserve the efficacy of vancomycin in human therapy, any future need for streptogramins might be delayed further in Denmark.For these reasons the SCAN concludes that the use of virginiamycin as a growth promoter does not constitute an immediate risk to public health in Denmark.II. The SCAN is sympathetic to the general concern highlighted by the Danish action about the hazard that a reservoir of resistance genes within the animal population poses for humans. However, it is of the opinion that a full risk assessment cannot be made until quantitative evidence of the extent of transfer of antimicrobial resistance from livestock sources is obtained and the significance of this within the overall use of antimicrobials for clinical and non-clinical purposes evaluated. The SCAN is also of the opinion that this is best approached by considering the totality of antimicrobial use within the countries of the European Union rather than on a case by case basis. The Scientific Steering Committee has established a multidisciplinary working group with this remit.The SCAN also notes that in countries that permit the use of streptogramins in both animal production and human medicine, notably France and the USA, the use of pristinamycin has not been compromised by the use of virginiamycin as growth promoter.The SCAN is therefore firmly of the opinion that any risk that might be posed in the future by the use of virginiamycin as a growth promoter will not materialise in the time required to make such an evaluation and most probably not for some years afterwards. In the meantime monitoring initiated by the Danish Government and the EU will be able to detect any significant increases in glycopeptide and streptogramin resistance in enterococci and staphylococci should that occur.'54 At the Standing Committee meeting of 16 and 17 July 1998, the Danish member of the Committee informed the other members that a new scientific study of live laboratory rats, carried out in Denmark after the adoption of the safeguard measure (B. Jacobsen and others, `In vivo Transfer of the Sat A gene between isogenic strains of Enterococcus faecium in the Mammalian Gastrointestinal Tract': `the new study on live rats') provided new relevant evidence that resistance to streptogramins could be transferred from animals to humans under normal conditions. A copy of it was distributed informally to all members of the Standing Committee. At the request of the Commission, on 27 August 1998 Denmark sent the study to Pfizer, the Commission and the EEA Member States.55 On 15 September 1998 Pfizer, pursuant to Articles 9g(2) and 9h(2) of Directive 70/524, lodged new applications for the authorisation of virginiamycin as an additive linked to a person responsible for putting it into circulation.56 On 5 October 1998 the Kingdom of Denmark sent Pfizer, the Commission, the EEA Member States and the members of SCAN its observations on the SCAN Opinion. Denmark requested the Commission and SCAN to re-examine the question posed in the light of the new study on live rats.57 At the plenary session of 5 November 1998, SCAN made the following statement concerning the new study on live rats, which appears in the minutes of the meeting as approved at the meeting of 25 January 1999:`The Committee considered the document submitted by Denmark on virginiamycin and stated that it does not bring new information on the subject.'58 On 10 November 1998 a meeting took place between Pfizer and members of the cabinet of Mr Fischler, the Member of the Commission responsible for agriculture.III - The contested regulation59 On 17 December 1998 the Council adopted the contested regulation, which was published in the Official Journal of the European Communities on 29 December 1998. The operative part of the contested regulation reads as follows:`Article 1The entries in Annex B to Directive 70/524/EEC for the following antibiotics shall be deleted:...- virginiamycin,...Article 2The Commission shall re-examine the provisions of this regulation before 31 December 2000 on the basis of the results given by:- the different investigations concerning the induction of resistances by the use of the antibiotics concerned, and- the surveillance programme of microbial resistance in animals which have received antibiotics, to be carried out in particular by the persons responsible for putting the additives concerned into circulation.Article 3This Regulation shall enter into force on the day of its publication in the Official Journal of the European Communities.It shall apply from 1 January 1999.However, where, on the date on which this Regulation enters into force, a Member State has not banned, in accordance with Community law, one or more of the antibiotics referred to in Article 1 of this Regulation, such antibiotic or antibiotics shall remain authorised in that Member State until 30 June 1999....'.Procedure60 By application lodged at the Registry of the Court of First Instance on 18 January 1999, Pfizer brought the present action.61 By separate document lodged at the Court Registry on 10 March 1999, the Council raised an objection of inadmissibility pursuant to Article 114(1) of the Rules of Procedure. By order of 7 March 2000, the Court (Third Chamber) reserved its decision on the objection of inadmissibility for the final judgment pursuant to Article 114(4) of the Rules of Procedure. In addition, by way of measures of organisation of procedure, the Court, on 13 March 2000, sent a number of written questions to the parties, who replied within the period allowed.62 By separate document lodged at the Court Registry on 15 February 1999, Pfizer also applied, pursuant to Articles 185 and 186 of the EC Treaty (now Articles 242 EC and 243 EC), first, for suspension, either wholly or in part, of operation of the contested regulation pending judgment in the main action or until a date to be fixed, and, second, for the adoption of such other measures as justice might require. By order of 30 June 1999 in Case T-13/99 R Pfizer Animal Health v Council [1999] ECR II-1961, the President of the Court of First Instance dismissed the application for interim relief. Pfizer appealed against that order and its appeal was dismissed by order of the President of the Court of Justice of 18 November 1999 (Case C-329/99 P(R) Pfizer Animal Health v Council [1999] ECR I-8343).63 Upon application by them, the President of the Third Chamber, by order of 25 June 1999, granted the following parties leave to intervene in support of Pfizer: Asociación nacional de productores de ganado porcino (`Anprogapor'), Asociación española de criadores de vacuno de carne (`Asovac'), Fédération européenne de la santé animale (`Fedesa'), Fédération européenne des fabricants d'adjuvants pour la nutrition animale (`Fefana'), and Mr Kerckhove and Mr Lambert. By the same order, the President dismissed the applications to intervene submitted by the Asociación española de productores de huevos and The Pig Veterinary Society. As a result of the withdrawal of Mr Kerckhove and Mr Lambert as interveners, the President of the Third Chamber removed their names from the list of interveners by order of 26 September 2000.64 The interveners supporting Pfizer lodged their written observations, initially limited to the admissibility of the action, on 6 September 1999 (Anprogapor and Asovac) and 7 September 1999 (Fedesa and Fefana), and subsequently on the substance of the case, on 30 June 2000 (Anprogapor and Asovac) and 13 July 2000 (Fedesa and Fefana).65 Also upon application by them, the President of the Third Chamber, by orders of 25 March, 19 May and 6 September 1999, granted the Commission, the Kingdom of Denmark, the Kingdom of Sweden, the Republic of Finland and the United Kingdom of Great Britain and Northern Ireland leave to intervene in support of the form of order sought by the Council. The interveners lodged their written observations, initially limited to the admissibility of the action, on 31 May 1999 (the Commission) and 11 August 1999 (the Kingdom of Denmark). By letter of 25 October 1999, the United Kingdom of Great Britain and Northern Ireland stated that it did not intend to lodge observations as to admissibility. The Republic of Finland and the Kingdom of Sweden did not lodge observations on admissibility. Subsequently, the interveners lodged written observations on the substance of the case, on 30 June 2000 (the Republic of Finland and the Kingdom of Sweden), 17 July 2000 (the United Kingdom of Great Britain and Northern Ireland) and 25 July 2000 (the Commission).66 By separate document of 30 July 2000, Pfizer requested, first, that the case be given priority under Article 55(2) of the Rules of Procedure and, second, that a number of measures of organisation of procedure be adopted pursuant to Article 64 of the Rules of Procedure. The Council lodged written observations on these requests on 9 September 1999. The interveners lodged their observations on 6 September 1999 (Fedesa and Fefana), 7 September 1999 (the Commission), 9 September 1999 (the Republic and Finland and the Kingdom of Sweden) and 13 September 1999 (Anprogapor and Asovac).67 The written procedure was closed by the lodging of the rejoinder on 12 October 2000. Upon hearing the report of the Judge Rapporteur, the Court (Third Chamber) decided to open the oral procedure. By way of measures of organisation of procedure, on 18 December 2000 and 20 June 2001, the Court called on the parties to reply to certain questions and to produce certain documents. The parties complied with those requests. Furthermore, the Court had regard, as far as possible given the volume of the pleadings and of the documentation produced, to the request that the case be given priority.68 The parties were heard in oral argument and answered questions put to them by the Court at the hearing on 2 July 2001. At the hearing the Court asked the Council and the Commission to produce documents. Once they had complied with that request, Pfizer was requested to submit its observations on those documents. On 3 September 2001, the President of the Third Chamber of the Court of First Instance closed the oral procedure.Forms of order sought69 Pfizer claims that the Court should:- annul the contested regulation in its entirety or as regards virginiamycin;- take such other measures as it deems appropriate;- order the Council to pay the costs.70 The Council contends that the Court should:- dismiss the action as manifestly inadmissible;- in the alternative, dismiss the action as unfounded;- order Pfizer to pay the costs.71 Anprogapor, Asovac, Fedesa and Fefana intervene in support of the form of order sought by Pfizer.72 The Commission, the Kingdom of Denmark, the Kingdom of Sweden, the Republic of Finland and the United Kingdom of Great Britain and Northern Ireland intervene in support of the form of order sought by the Council.AdmissibilityI - Arguments of the parties73 The Council begins by observing that Pfizer, which seeks annulment of the contested regulation in its entirety, has adduced no arguments whatsoever with regard to additives which are not produced and marketed by it. Its action is in any event manifestly exorbitant in that respect.74 In addition, according to the Council, the contested regulation is an act of general application which applies to objectively determined situations and produces legal effects on categories of persons viewed abstractly and in their entirety.75 In the alternative, the Council contends that the contested regulation is not of individual concern to Pfizer for the purposes of the fourth paragraph of Article 173 of the EC Treaty (now, after amendment, the fourth paragraph of Article 230 EC). With regard to virginiamycin in particular, there is nothing to distinguish Pfizer from all other producers or potential producers of that product in the Community or in other parts of the world, who are subject to the same restrictions and are hence affected by the contested regulation in the same way. Furthermore, the Council considers that the ban on the use of the additive in question also affects farmers, who will no longer enjoy the economic benefits deriving from its use, as well as producers and distributors of feedingstuffs.76 Nor can the action be considered admissible on account of the contacts which Pfizer had with the Commission prior to the adoption of the contested regulation, since the provisions of Directive 70/524 governing the withdrawal of authorisation of additives do not confer any procedural guarantee on the traders concerned.77 Pfizer's situation in this case also differs from that of the applicant in Case C-309/89 Codorniu v Council [1994] ECR I-1853. The contested regulation does not concern the use of intellectual property rights, as was the case in Codorniu. It merely bans a particular use of the substances in question, whether they are marketed by Pfizer or by anyone else under a different name. Therefore Pfizer is not in a situation comparable to that of an undertaking such as Codorniu, which exploited a trade mark for sparkling wines, but rather in a situation comparable to that of champagne producers.78 The Commission adds that, as regards the nature of the contested regulation, it is purely by chance that there was only one producer of virginiamycin in the world. That fact was in no way relevant to the adoption of the regulation. The fact that Pfizer was the only manufacturer of virginiamycin in the world did not mean that it had a manufacturing monopoly and there was nothing to prevent another undertaking from manufacturing the substance concerned.79 The Kingdom of Denmark observes in particular that a case such as this should be dealt with exclusively by the national courts, which may make a reference to the Court of Justice for a preliminary ruling. It adds that there was nothing to prevent Pfizer from bringing an action before a national court and that it had in fact done so. Furthermore, with regard to the requirement that the applicant be individually concerned by the contested regulation, the Kingdom of Denmark observes that neither the product name, `Stafac', nor Pfizer's name appears in the contested regulation. The Kingdom of Denmark adds that, were virginiamycin to be authorised again in the Community, there would be no legal obstacle to prevent other producers from obtaining authorisation to market it, provided that they applied for such authorisation. Consequently Pfizer has never had, and could never obtain, the exclusive right to produce and market virginiamycin.80 Pfizer and the interveners supporting it maintain that the contested regulation is in the nature of a decision addressed to Pfizer. In any event, Pfizer is directly and individually concerned by the measure.II - Findings of the Court81 The fourth paragraph of Article 173 of the Treaty gives individuals the right to challenge inter alia any decision which, albeit in the form of a regulation, is of direct and individual concern to them. The particular objective of that provision is to prevent the Community institutions from being able, merely by choosing the form of a regulation, to preclude an individual from bringing an action against a decision which concerns him directly and individually and thus to make it clear that the nature of a measure cannot be changed by the form chosen (see, inter alia, Joined Cases 789/79 and 790/79 Calpak and Società Emiliana Lavorazione Frutta v Commission [1980] ECR 1949, paragraph 7, and Case T-298/94 Roquette Frères v Council [1996] ECR II-1531, paragraph 35).82 The criterion distinguishing a regulation from a decision must be sought in the general application, or otherwise, of the measure in question (see, in particular, the order in Case C-168/93 Gibraltar and Gibraltar Development v Council [1993] ECR I-4009, paragraph 11, and the order in Case T-107/94 Kik v Council and Commission [1995] ECR II-1717, paragraph 35). A measure is of general application if it applies to objectively determined situations and produces its legal effects with respect to categories of persons viewed generally and in the abstract (see, for example, Case 307/81 Alusuisse v Council and Commission [1982] ECR 3463, paragraph 9, and the order in Kik v Council and Commission, cited above, paragraph 35).83 In this instance the contested regulation provides for withdrawal of the authorisation to market certain additives in feedingstuffs, including virginiamycin, in the Community. That measure applies not only to all the existing or potential manufacturers of that product but also to other traders, such as livestock farmers and producers and distributors of feedingstuffs. It thus applies to objectively determined situations and has legal effects with respect to categories of persons viewed generally and in the abstract. It is therefore general in nature.84 However, the fact that the contested regulation is of general application does not preclude it from being of direct and individual concern to certain natural and legal persons (see, to that effect, Codorniu v Council, cited at paragraph 77 above, paragraph 19, and the order in Case T-11/99 Van Parys and Others v Commission [1999] ECR II-2653, paragraph 40). In those circumstances, a Community measure can be of a general nature and, at the same time, vis-à-vis some of the traders concerned, in the nature of a decision (Joined Cases T-481/93 and T-484/93 Exporteurs in Levende Varkens and Others v Commission [1995] ECR II-2941, paragraph 50, and the order in Van Parys and Others v Commission, paragraph 40).85 In so far as the contested regulation concerns additives other than virginiamycin which are not manufactured by Pfizer, the Court finds that it does not have any effect on Pfizer's legal situation. Consequently, the application must be dismissed as inadmissible to the extent to which it seeks annulment of the contested regulation in so far as it concerns additives other than virginiamycin.86 As regards the requirement that the contested regulation should be of direct concern in so far as it concerns virginiamycin, it is appropriate to observe that, in order to meet that requirement, the measure at issue must directly affect the legal situation of the individual and leave no discretion to the addressees of that measure who are entrusted with the task of implementing it, such implementation being purely automatic and resulting from Community rules without the application of other intermediate rules (see, in particular, Case C-354/87 Weddel v Commission [1990] ECR I-3847, paragraph 19; Case C-404/96 P Glencore Grain v Commission [1998] ECR I-2435, paragraph 41; and Case C-386/96 P Dreyfus v Commission [1998] ECR I-2309, paragraph 43).87 As the Council recognises, Pfizer is directly concerned by the contested regulation in so far as it withdraws the authorisation of virginiamycin as an additive in feedingstuffs. The effect of the measure, which applies directly to all the traders concerned without any need for intermediate rules to be adopted, is to remove Pfizer's authorisation to market that substance.88 As to whether Pfizer is individually concerned by the contested regulation in so far as it concerns virginiamycin, the Court observes that natural or legal persons may claim that a measure of general application is of individual concern to them only if they are affected by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons (Case 25/62 Plaumann v Commission [1963] ECR 95, at 107; Codorniu v Council, cited at paragraph 77 above, paragraph 20; and Case T-12/93 CCE de Vittel and Others v Commission [1995] ECR II-1247, paragraph 36).89 Contrary to Pfizer's submission, the fact that at the time when the contested regulation was adopted Pfizer was the only manufacturer of virginiamycin in the world and the only undertaking to market that substance in the Community is not, in itself, such as to distinguish Pfizer from all the other traders concerned. It must be borne in mind that the fact that it is possible to determine the number or even the identity of the persons to whom a measure applies at a given moment with a greater or lesser degree of precision does not mean that those persons must be considered to be individually concerned by it, as long as it is established that the measure is applied by virtue of an objective legal or factual situation defined by it (Case C-213/91 Abertal and Others v Council [1993] ECR I-3177, paragraph 17; and the order of 30 September 1997 in Case T-122/96 Federolio v Commission [1997] ECR II-1559, paragraph 55).90 However, it is appropriate to analyse the provisions under which the contested regulation was adopted in so far as the latter concerns virginiamycin in order to ascertain whether Pfizer was affected by the adoption of the measure by reason of certain attributes which are peculiar to it or by reason of circumstances in which it is differentiated from all other persons.91 Although the withdrawal of the authorisation of virginiamycin was adopted under Articles 11 and 24 of Directive 70/524, it is nevertheless appropriate to take into account that the authorisation was withdrawn in the course of the procedure for re-evaluating the authorisation of that substance prescribed by the transitional rules laid down by Articles 9g, 9h and 9i of Directive 70/524, which were inserted by Directive 96/51 (see paragraphs 20 to 23 above).92 Virginiamycin was authorised as an additive in feedingstuffs under the relevant provisions of the original rules, namely under Directive 70/524 prior to the entry into force of Directive 96/51. Under the original rules authorisation to market those substances as additives was not linked to specific manufacturers. Article 13 of Directive 70/524, as amended by Directive 84/587, merely provided, as regards manufacturers, that antibiotics could be put on the market as additives in feedingstuffs only if they had been produced by manufacturers found by at least one Member State to have fulfilled certain minimum conditions and whose names had been published by the Member State concerned and forwarded to the other Member States and to the Commission. Consequently, although, as Pfizer has pointed out, competitors had material difficulties in producing and marketing virginiamycin, from a legal standpoint any natural or legal person who met the abovementioned criteria could market it.93 One of the major changes that Directive 96/51 made to the original rules was to link the authorisation of additives such as antibiotics to the person or, where appropriate, the persons responsible for putting the product into circulation, who are the only persons authorised to put the additives in question into circulation. The `person responsible for putting [an additive] into circulation' was defined in Article 2(1) of Directive 70/524, as amended by Directive 96/51, as the natural or legal person who has responsibility for the conformity of the additive which has been granted Community authorisation and for putting it into circulation. Under the new rules, authorisations to market antibiotics as additives in feedingstuffs are thus granted by way of a Commission or Council regulation, in accordance with the procedure referred to in Article 4 of Directive 70/524, as amended by Directive 96/51, to specific producers whose names are published each year in the Official Journal in accordance with Article 9t of the Directive.94 As is apparent from recital 2 of the preamble to Directive 96/51, the link between the authorisation of an additive, such as an antibiotic, and a specific producer was introduced in order to prevent poor copies of additives from being put into circulation in the Community.95 It is true that, as the Council and the interveners supporting it have pointed out, at the time when the contested regulation was adopted, Pfizer had not acquired the status of person responsible for putting virginiamycin into circulation. At that time, the re-evaluation procedure prescribed by the transitional rules had not yet been completed.96 However, under Articles 9g, 9h and 9i of Directive 70/524, as amended by Directive 96/51, which lay down the procedures for re-evaluation and new authorisation of the additives concerned, only the person or persons responsible for the dossier on the basis of which the former authorisation was granted, or their successor or successors, were in a position to make a new application, before 1 October 1998, for authorisation of the additive concerned; similarly, following that application, only that person or those persons could, on the basis of those provisions and by means of a regulation to be adopted no later than 1 October 2003, obtain a new authorisation as the person responsible for first putting the product concerned into circulation, for a period of 10 years or 5 years as appropriate.97 In the present case Pfizer, the only producer of virginiamycin in the world, made applications on 15 September 1998 under Articles 9g and 9h for re-evaluation of that substance as an additive in the feedingstuffs of certain animals. Consequently, under those provisions, Pfizer was the only person who, at the time when the contested regulation was adopted, was in a legal position which would have enabled it to obtain, under those particular procedural provisions and through a Commission or Council regulation, authorisation to market virginiamycin as the person first responsible for putting it into circulation and thereby to be entered on the list provided for in Article 9t of Directive 70/524. Furthermore, if, following re-examination of the withdrawal of the authorisation of virginiamycin, as provided for in Article 2 of the contested regulation, that product had been authorised again, only Pfizer, following the re-opening of the re-evaluation procedure, would have been in a position to obtain a new authorisation of virginiamycin as an additive linked to a person responsible for putting it into circulation. Consequently, although, at the time when the contested regulation was adopted, it had not acquired the status of person first responsible for putting virginiamycin into circulation, since the re-evaluation procedure laid down by Directive 96/51 was still continuing, Pfizer was already able to rely on an inchoate right in that regard.98 Although it is also true that the status of person first responsible for putting an additive into circulation for the purposes of Articles 9g, 9h and 9i does not confer on that person an exclusive right to market the additive, it is none the less the case that, by virtue of having made an application for a further authorisation, Pfizer had obtained a position in respect of which Directive 70/524 offered legal safeguards. In particular, under Article 9c(1) of Directive 70/524, `the scientific data and other information in the initial dossier submitted for the purpose of the first authorisation may not be used for the benefit of other applicants for a period of 10 years' from the date of the first authorisation by means of regulation. The reason for that provision is stated in recital 14 of the preamble to Directive 96/51 to be the fact that `the search for new additives belonging to the group of substances for which authorisation is linked to those persons responsible for putting them into circulation requires costly investment'. In the particular circumstances of the present case, certain elements of that provision closely resemble a specific right comparable to the right on which the applicant undertaking could rely in Codorniu v Council (cited at paragraph 77 above).99 Therefore, under the broad scheme of Directive 70/524, as amended by Directive 96/51, manufacturers who, like Pfizer, submit a new application for authorisation under Articles 9g, 9h and 9i of the Directive enjoy a particular legal situation. In accordance with those provisions, manufacturers such as Pfizer have taken all the steps necessary to acquire the status of person first responsible for putting the additive concerned into circulation, to take responsibility in the future for ensuring that the product complies with its Community authorisation and to gain protection for the scientific data and other information provided by them in the dossier submitted with a view to obtaining for their product the first authorisation as an additive linked to a person responsible for putting it into circulation.100 Consequently, even before the end of the transitional period, Pfizer was affected by withdrawal of the authorisation of virginiamycin following on the adoption of the contested regulation by reason of certain attributes which were peculiar to it and which differentiated it from all other persons.101 As to Pfizer's participation in the procedure culminating in the adoption of the contested regulation, the Court observes that the regulation was adopted under the procedure laid down in Article 24 of Directive 70/524 and that that provision does not entitle the traders concerned to take part in the procedure (see paragraph 19 above). In that context, the Council rightly points out that, in accordance with settled case-law, the fact that a person is involved in some way or other in the procedure leading to the adoption of a Community measure is capable of distinguishing that person individually in relation to the measure in question only if the applicable Community legislation grants him certain procedural guarantees (see, to that effect, paragraph 55 of the judgment in Exporteurs in Levende Varkens and Others v Commission, cited at paragraph 84 above; and the order in Case T-585/93 Greenpeace and Others v Commission [1995] ECR II-2205, paragraphs 56 and 63).102 Account must nevertheless be taken of the fact that, by making new applications for authorisation of virginiamycin in accordance with paragraphs (2) and (4) of Article 9g of Directive 70/524, as amended by Directive 96/51, Pfizer was in a position to be able to submit, in accordance with the procedure laid down in Article 4 of that directive and no later than 30 September 2000, a scientific dossier with a view to re-evaluation of the additive concerned. However, the procedure laid down in Article 4 is not only instigated on the application of the operator concerned but also confers on that person procedural guarantees. The operator concerned must be notified, throughout the various stages of that procedure, if the application does not comply with the relevant provisions, if it is rejected or even if processing of it is merely postponed.103 Although it is true, as the Council has pointed out, that the procedure in Article 24 of Directive 70/524, as applied in this instance, is different from the procedure under Articles 9g and 4 thereof, it is nevertheless the case that adoption of the contested regulation terminated or, at the least, suspended the procedure under Articles 9g and 4, which had been instigated by Pfizer's application for a new authorisation. That fact is borne out by a letter of 8 November 1999, in which the competent officials at the Commission indicated to Pfizer, following its specific question, that `as a consequence of the [contested] regulation, virginiamycin is not subject any more to Articles 9g, 9h and 9i ... Thus, although Pfizer has submitted before 1 October 1998 identification notes and monographs in accordance with Article 9g, 9h and 9i(2), the above articles do not apply any longer to virginiamycin. As long as virginiamycin is not covered by the said provisions, it is not possible to submit or evaluate a dossier under the procedure they provide for.'104 In such a context, by terminating or, at the least, suspending the procedure which had been opened, at Pfizer's request, for the purposes of obtaining a new authorisation of virginiamycin as an additive in feedingstuffs, and in the course of which Pfizer had the benefit of procedural guarantees, the contested regulation affects Pfizer by reason of a legal and factual situation which differentiates it from all other persons. That fact is also such as to distinguish Pfizer for the purposes of the fourth paragraph of Article 173 of the Treaty.105 It follows that, so far as Pfizer is concerned, a series of factors exists, constituting a particular situation which differentiates Pfizer, as regards the measure in question, from all other traders concerned by the regulation. Pfizer must therefore be regarded as individually concerned by the contested regulation in so far as it concerns withdrawal of the authorisation of virginiamycin.106 Therefore the application is admissible to the extent to which it seeks annulment of the contested regulation in so far as the latter withdraws the authorisation of virginiamycin as an additive in feedingstuffs.Substance107 Pfizer puts forward eight pleas in law alleging infringement of Article 11 of Directive 70/524 (first plea), manifest errors of assessment (second plea), breach of the precautionary principle (third plea), breach of the principle of proportionality (fourth plea), breach of the principle of legitimate expectations (fifth plea), breach of the obligation to state reasons (sixth plea), infringement of the right to property (seventh plea) and misuse of powers (eighth plea).108 In the context of the first four pleas and the seventh and eighth pleas, Pfizer submits, in essence, that the contested regulation should be annulled, since the Community institutions have made errors in their analysis, by which is meant the assessment and management, of any risks to human health associated with the use of virginiamycin as a growth promoter, as well as in their application of the precautionary principle. The Court deems it appropriate to examine those pleas together.I - The pleas alleging errors of risk assessment and management and misapplication of the precautionary principle109 The preamble to the contested regulation shows that the Council, in adopting the measure, took the view that the use of virginiamycin as an additive in feedingstuffs involved a risk to human health and that accordingly it was necessary to withdraw the authorisations relating to the use of the product.110 Following some preliminary remarks (A), the Court will start by examining whether, as Pfizer submits, the Council was wrong, on conclusion of a risk assessment that was not properly conducted, to find that the use of virginiamycin as a growth promoter constituted a risk to human health (B). It will then assess whether the Council, in adopting the contested regulation, made errors in its management of the risk (C).A - Preliminary considerations111 By the contested regulation, which was adopted on a proposal from the Commission, the Council withdrew Community authorisation from four antibiotics, including virginiamycin, as additives in feedingstuffs. The regulation was adopted on the basis of Directive 70/524, which, in turn, is founded on Article 43 of the EC Treaty (now, after amendment, Article 37 EC). Thus it forms part of the framework of the common agricultural policy.112 More specifically, as regards virginiamycin, the contested regulation was adopted on the basis of Article 11(3) of Directive 70/524, which inter alia permits the Commission to initiate under Article 24 a procedure amending the lists of authorised antibiotics where it considers such amendments necessary in order to mitigate the difficulties mentioned by a Member State in connection with a safeguard measure and to ensure the protection of human or animal health or the environment. In addition, it is apparent from recital 5 to the contested regulation that the Council took as its basis Article 3a(e) of Directive 70/524, which provides that Community authorisation of an additive in feedingstuffs is to be given only if `for serious reasons concerning human or animal health its use must not be restricted to medical or veterinary purposes'. Finally, as the preamble, in particular recital 21 thereof, to the contested regulation shows, the Council took the view that, so far as virginiamycin was concerned, there was a `serious reason', for the purposes of the abovementioned provision, justifying withdrawal of the authorisation of virginiamycin as an additive in feedingstuffs, namely the risk that the effectiveness of certain human medicinal products might be reduced or even eliminated as a result of the use of virginiamycin.113 It is common ground between the parties that, at the time when the contested regulation was adopted, neither the reality nor the seriousness of the risk had been scientifically proven. It was against that background, as is clear from recital 29 to the contested regulation, that the Council relied on the precautionary principle as justification for adopting the regulation.114 In accordance with Article 130r(2) of the EC Treaty (now, after amendment, Article 174(2) EC), the precautionary principle is one of the principles on which Community policy on the environment is based. It is not disputed by the parties that the principle also applies where the Community institutions take, in the framework of the common agricultural policy, measures to protect human health (see, to that effect, Case C-180/96 United Kingdom v Commission [1998] ECR I-2265, paragraph 100, `the BSE judgment'; and Case C-157/96 National Farmers' Union and Others [1998] ECR I-2211, paragraph 64, `the NFU judgment'). It is apparent from Article 130r(1) and (2) of the Treaty that Community policy on the environment is to pursue the objective inter alia of protecting human health, that the policy, which aims at a high level of protection, is based in particular on the precautionary principle and that the requirements of the policy must be integrated into the definition and implementation of other Community policies. Furthermore, as the third subparagraph of Article 129(1) of the EC Treaty (now, after amendment, Article 152 EC) provides, and in accordance with settled case-law (see, to that effect, Case C-146/91 KYDEP v Council and Commission [1994] ECR I-4199, paragraph 61), health protection requirements form a constituent part of the Community's other policies and must therefore be taken into account when the common agricultural policy is implemented by the Community institutions.115 Moreover, the existence of such a principle has in essence and at the very least implicitly been recognised by the Court of Justice (see, in particular, Case C-331/88 Fedesa and Others [1990] ECR I-4023; Case C-405/92 Mondiet [1993] ECR I-6133; Case C-435/92 APAS [1994] ECR I-67; Case C-179/95 Spain v Council [1999] ECR I-6475; and Case C-6/99 Greenpeace France and Others [2000] ECR I-1651), by the Court of First Instance (see, in particular, Case T-199/96 Bergaderm and Goupil v Commission [1998] ECR II-2805, upheld on appeal by the Court of Justice in Case C-352/98 P Bergaderm and Goupil v Commission [2000] ECR I-5291, the order of 30 June 1999 in Pfizer Animal Health v Council, cited at paragraph 62 above, upheld on appeal by the order of 18 November 1999 in Pfizer Animal Health v Council, cited at paragraph 62 above, and the order of the President of the Court of First Instance of 30 June 1999 in Case T-70/99 R Alpharma v Council [1999] ECR II-2027) and by the EFTA Court (Case E-3/00 EFTA Surveillance Authority v Norway, not yet published in the EFTA Court Reports).116 Although it is common ground that the Community institutions may, in the context of Directive 70/524, adopt a measure based on the precautionary principle, the parties nevertheless fail to agree on either the interpretation of that principle or whether the Community institutions correctly applied it in the present case.117 Neither the Treaty nor the secondary legislation applicable to the present case contains a definition of the precautionary principle.118 In that regard, whilst maintaining that the Community institutions have infringed Directive 70/524, Pfizer and the parties intervening on its behalf also claim that there has been a failure to act in accordance with two Commission documents concerning the interpretation of that principle under Community law. Those documents are, (i) a paper dated 17 October 1998 entitled `Guidelines on the Application of the Precautionary Principle' and (ii) the Communication from the Commission on the Precautionary Principle of 2 February 2000 (COM(2000)1, `the Communication on the Precautionary Principle').119 There is certainly settled case-law to the effect that the Community institutions may lay down for themselves guidelines for the exercise of their discretionary powers by way of measures not provided for in Article 189 of the EC Treaty (now Article 249 EC), in particular by communications, provided that they contain directions on the approach to be followed by the Community institutions and do not depart from the Treaty rules (see, to that effect, Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711, paragraph 53; Case T-149/95 Ducros v Commission [1997] ECR II-2031, paragraph 61; and Case T-214/95 Vlaams Gewest v Commission [1998] ECR II-717, paragraphs 79 and 89). In such circumstances, the Community judicature ascertains, applying the principle of equal treatment, whether the disputed measure is consistent with the guidelines that the institutions have laid down for themselves by adopting and publishing such communications.120 However, in the present case, Pfizer cannot reasonably argue that the contested regulation is unlawful because it is inconsistent with the documents referred to at paragraph 118 above.121 The first document, entitled `Guidelines on the Application of the Precautionary Principle', dated 17 October 1998, was neither adopted nor published by the Commission but is exclusively a working document, prepared by the Directorate-General `Consumer Policy and Consumer Health Protection' with a view to a communication being adopted by the Commission itself. It was sent to various interested parties with the sole aim of consulting them on the position taken therein by the Directorate-General. This is clear from a letter of 20 November 1998 from the Director-General of that Directorate General to Fedesa, in which the document was expressly described as a `discussion paper' which `[did] not reflect the position of the Commission' but merely sought to `obtain the views of the various interested parties straight away'. It follows that Pfizer - which, moreover, was not even the addressee of the letter of 20 November 1998 - cannot validly contend that the Commission informed the interested parties that it undertook to be bound by that document in the future. Consequently, that document, despite its title, was no more than a draft and could not, in this instance, entail any self-imposed limitation on the Community institutions' discretion for the purposes of the case-law cited at paragraph 119 above. That document is hereinafter referred to as the `Draft Guidelines'.122 As regards the Communication on the Precautionary Principle, the Court must point out that it was not published until over a year after the contested regulation had been adopted and that therefore it, too, was incapable, as such, of operating in this instance as a self-imposed limitation on the discretion of the Community institutions.123 However, it is clear from the communication that, in publishing it, the Commission was seeking to inform all interested parties not only of the manner in which it intended to apply the precautionary principle in future but also of the way in which it was applying it at that time (`[t]he aim of this Communication is to inform all interested parties ... of the manner in which the Commission applies or intends to apply the precautionary principle ...', paragraph 2 of the Communication on the Precautionary Principle). Furthermore, the Commission contended before the Court that the approach taken in adopting the contested regulation was broadly consistent with the principles set out in the communication. Consequently, as the Commission acknowledged at the hearing, certain aspects of the communication could reflect the law as it stood at the time when the contested regulation was adopted in relation to the interpretation of the precautionary principle, as enshrined in Article 130r(2) of the Treaty.124 Furthermore, the Court observes that in two Communications adopted and published prior to adoption of the contested regulation, namely the Communication of 30 April 1997 on Consumer Health and Food Safety (COM(97)183 final, `the Communication on Consumer Health and Food Safety') and the green paper of 30 April 1997 on the general principles of food law in the European Union (COM(97)176 final, `the green paper'), the Commission had already made a number of statements, in particular concerning the manner in which it intended to carry out risk assessment.125 In view of the foregoing, rather than considering whether the Community institutions failed to act in accordance with the documents referred to at paragraph 118 above, the Court must assess, when dealing with these pleas, whether the institutions correctly applied the relevant provisions of Directive 70/524, as they are to be interpreted in the light of the rules of the Treaty and, in particular, of the precautionary principle, as enshrined in Article 130r(2) of the Treaty.B - Errors in assessing the risks associated with the use of virginiamycin as a growth promoter126 Pfizer does not dispute that, in principle, the Community institutions may take preventive measures under Directive 70/524 if, following a risk assessment, it is found that the use of an antibiotic, such as virginiamycin, as a growth promoter in animals involves a risk of a transfer of antimicrobial resistance from animals to humans and, consequently, of a reduction in the effectiveness of certain medicinal products used in human medicine for the treatment of dangerous infections.127 However, in the present case, Pfizer maintains that the Community institutions did not correctly assess that risk and complains essentially that they adopted a decision for reasons of political expediency without a proper scientific basis.128 The various claims raised in this regard by Pfizer will be examined as follows. First, the Court will analyse the arguments of the parties concerning, in general, the purpose of risk assessment when the precautionary principle is applied (1). Second, it will consider whether, as Pfizer maintains, the contested regulation is unlawful because of the inadequate nature of the scientific data provided by the Danish authorities (2). Third, it will examine the argument that, in essence, the relevant findings of fact made by the Community institutions in the present case were incorrect (3). Fourth, it will consider whether, on the basis of the findings of fact thus made, the Community institutions exceeded the bounds of their discretion when they held that the use of virginiamycin as a growth promoter constituted a risk to human health (4).1. The purpose of risk assessment when the precautionary principle is applied(a) Arguments of the parties129 Pfizer and the interveners supporting it take the view that the Community institutions may not take preventive measures until they have carried out a scientific assessment of the risks allegedly associated with the product or procedure concerned.130 Supported more specifically by Fedesa and Fefana, Pfizer submits that in any such risk assessment, the Community institutions must show that the risk, although it has not actually become a reality, is nevertheless probable. The existence of a `very remote risk' should be allowed given the concrete positive elements arising from the use of the product concerned. In any event, the Community institutions cannot legitimately apply a test which Pfizer describes as a `zero risk test'. Such a test is inappropriate since it is impossible to satisfy. It amounts essentially to requiring probatio diabolica from the industry, something which is recognised as unlawful in all the legal systems of the Member States (Opinion of Advocate General Mischo in the Greenpeace case cited at paragraph 115 above, ECR I-1651, at I-1653, point 72). It is never possible to prove conclusively that a chemical or pharmaceutical compound or anything created by modern technology represents a zero risk to public health now or that it will do so in the future. To apply such a test would quickly lead to the paralysis of technological development and innovation.131 Nor is such a test in keeping with the rules governing additives in feedingstuffs. Pfizer submits that under Directive 70/524 those additives, before being authorised for marketing, are subject to very detailed examination in relation to the potential risks that they could represent to public health. In addition, once those products are on the market, an important monitoring procedure, known as `pharmacovigilance', is applied to ensure that all side-effects of using them are identified, studied and mitigated. Finally, procedures are laid down which can lead to suspension or withdrawal of a marketing authorisation.132 Furthermore, Pfizer submits that, generally, the fact that a measure is taken under the precautionary principle does not reverse the burden of proof. The manufacturers of an additive which has been authorised for marketing in the common market and which is subject to a procedure for withdrawal from the market are not required to prove that the product is not dangerous to human health. On the contrary, in Pfizer's submission, under Article 11 of Directive 70/524, during a procedure for withdrawal of the authorisation of an additive, it is for the public authorities to demonstrate that, as a result of new information or of a reassessment of existing information, the use of the additive in question is a hazard to human health and to show the level of risk associated with it.133 According to the Council and the interveners supporting it, the contested regulation was adopted on the basis of an adequate assessment of all the scientific knowledge available at the time of its adoption.134 They confirm that any such measure withdrawing authorisation cannot be based on a test described as `zero risk'. However, the fact that the competent authorities have, at a given time, considered that a particular additive meets the conditions for authorisation and have therefore authorised it does not imply that the manufacturer is freed from the onus of proving that its product continues to meet such conditions. Scientific knowledge and the risks to human health associated with use of a particular product evolve. Consequently, when faced with new scientific evidence that the use of an additive poses a hazard to public health and that the hazard has reached alarming proportions since the additive was first authorised, the Community institutions are fully entitled to require the manufacturer in question to demonstrate that its product continues not to represent a risk to human health.(b) Findings of the Court135 In view of the parties' arguments, it is necessary, first, to define the `risk' which must be assessed when the precautionary principle is applied. It is then appropriate to identify the two components of the task which falls to the competent public authority when a risk assessment is performed. Finally, it is necessary to determine how the burden of proof should be apportioned in the matter and to recall the settled case-law concerning the scope of judicial review in a situation of this kind.(i) The `risk' assessed when the precautionary principle is applied136 It is clear from Article 11(1) and (3) of Directive 70/524 that the Community institutions may withdraw authorisation of an additive in feedingstuffs where use of the additive constitutes `a danger to ... human health'.137 First, as regards the interpretation of `danger', the Court observes that in the preamble to the contested regulation a different term is used in that regard, namely that, in the institutions' view, the use of virginiamycin as a growth promoter constitutes a `risk' to human health. The same term, `risk', was also used by the parties in their arguments before the Court.138 The `risk' associated with the product, the reality and the seriousness of which are in dispute between the parties, is the possibility that the use of virginiamycin as an additive in feedingstuffs will give rise to adverse effects on human health, namely a transfer of antimicrobial resistance from animals to humans, and, consequently, a reduction in the effectiveness of certain medicinal products in human medicine. As is clear from recital 5 to the contested regulation, the Council's finding of that `risk' was considered by it to be a `serious reason', within the meaning of Article 3a(e) of Directive 70/524, for restricting virginiamycin to medical use.139 It is appropriate to bear in mind that, as the Court of Justice and the Court of First Instance have held, where there is scientific uncertainty as to the existence or extent of risks to human health, the Community institutions may, by reason of the precautionary principle, take protective measures without having to wait until the reality and seriousness of those risks become fully apparent (the BSE judgment, cited at paragraph 114 above, paragraph 99, the NFU judgment, cited at paragraph 114 above, paragraph 63, and the judgment at first instance in Bergaderm and Goupil v Commission, cited at paragraph 115 above, paragraph 66).140 It follows, first, that as a result of the precautionary principle, as enshrined in Article 130r(2) of the Treaty, the Community institutions were entitled to take a preventive measure regarding the use of virginiamycin as an additive in feedingstuffs, even though, owing to existing scientific uncertainty, the reality and the seriousness of the risks to human health associated with that use were not yet fully apparent.141 A fortiori, the Community institutions were not required, for the purpose of taking preventive action, to wait for the adverse effects of the use of the product as a growth promoter to materialise (see, in relation to the interpretation of Council Directive 79/409/EEC of 2 April 1979 on the conservation of wild birds (OJ 1979 L 103, p. 1), the judgment of the Court of Justice in Case C-355/90 Commission v Spain [1993] ECR I-4221, paragraph 15).142 Thus, in a situation in which the precautionary principle is applied, which by definition coincides with a situation in which there is scientific uncertainty, a risk assessment cannot be required to provide the Community institutions with conclusive scientific evidence of the reality of the risk and the seriousness of the potential adverse effects were that risk to become a reality (see, in that context, Mondiet, cited at paragraph 115 above, paragraphs 29 to 31; and Spain v Council, cited at paragraph 115 above, paragraph 31).143 However, it is also clear from the case-law cited at paragraph 139 above that a preventive measure cannot properly be based on a purely hypothetical approach to the risk, founded on mere conjecture which has not been scientifically verified (see also, to that effect, EFTA Surveillance Authority v Norway, cited at paragraph 115 above, in particular paragraphs 36 to 38).144 Rather, it follows from the Community Courts' interpretation of the precautionary principle that a preventive measure may be taken only if the risk, although the reality and extent thereof have not been `fully' demonstrated by conclusive scientific evidence, appears nevertheless to be adequately backed up by the scientific data available at the time when the measure was taken.145 As Pfizer has rightly pointed out, the taking of measures, even preventive ones, on the basis of a purely hypothetical risk is particularly inappropriate in a matter such as the one at issue here. The parties do not dispute that in such matters a `zero risk' does not exist, since it is not possible to prove scientifically that there is no current or future risk associated with the addition of antibiotics to feedingstuffs. Moreover, as Pfizer has also rightly pointed out, that approach is even less appropriate in a situation of this kind, in which the legislation already makes provision, as one of the possible ways of giving effect to the precautionary principle, for a procedure for prior authorisation of the products concerned (see, as to the specific procedural obligations relating to such prior authorisation, Greenpeace France and Others, cited at paragraph 115 above, paragraph 44).146 The precautionary principle can therefore apply only in situations in which there is a risk, notably to human health, which, although it is not founded on mere hypotheses that have not been scientifically confirmed, has not yet been fully demonstrated.147 In such a situation, `risk' thus constitutes a function of the probability that use of a product or a procedure will adversely affect the interests safeguarded by the legal order. `Hazard' (`danger') is, in this context, commonly used in a broader sense and describes any product or procedure capable of having an adverse effect on human health (see in that regard, at an international level, the provisional communication from the Codex Alimentarius Commission of the Food and Agriculture Organisation of the United Nations and the World Health Organisation, CX 2/20, CL 1996/21-GEN, June 1996).148 Consequently, in a case such as this, the purpose of a risk assessment is to assess the degree of probability of a certain product or procedure having adverse effects on human health and the seriousness of any such adverse effects.(ii) The two complementary components of risk assessment: ascertaining what level of risk is deemed unacceptable and conducting a scientific assessment of the risks149 As the Commission stated in its Communication on the Precautionary Principle, which may be taken as a codification of the law as it stood at the time when the contested regulation was adopted (see paragraph 123 above), risk assessment includes for the competent public authority, in this instance the Community institutions, a two-fold task, whose components are complementary and may overlap but, by reason of their different roles, must not be confused. Risk assessment involves, first, determining what level of risk is deemed unacceptable and, second, conducting a scientific assessment of the risks.150 As regards the first component, it is appropriate to observe that it is for the Community institutions to define, observing the applicable rules of the international and Community legal orders, the political objectives which they intend to pursue within the parameters of the powers conferred on them by the Treaty. Thus within the World Trade Organisation (`the WTO') and, more specifically, in the Agreement on the Application of Sanitary and Phytosanitary Measures, which is set out in Annex 1A to the Agreement establishing the WTO, as approved by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1), it is specifically provided that members of that organisation may determine the level of protection which they deem appropriate (see the sixth recital to, and Article 3(3) of, the abovementioned Agreement and the Report of the Appellate Body of the WTO of 16 January 1998 on Community measures concerning growth hormones, particularly paragraphs 124 and 176).151 In that regard, it is for the Community institutions to determine the level of protection which they deem appropriate for society. It is by reference to that level of protection that they must then, while dealing with the first component of the risk assessment, determine the level of risk - i.e. the critical probability threshold for adverse effects on human health and for the seriousness of those possible effects - which in their judgment is no longer acceptable for society and above which it is necessary, in the interests of protecting human health, to take preventive measures in spite of any existing scientific uncertainty (see, to that effect, Case C-473/98 Toolex [2000] ECR I-5681, paragraph 45). Therefore, determining the level of risk deemed unacceptable involves the Community institutions in defining the political objectives to be pursued under the powers conferred on them by the Treaty.152 Although they may not take a purely hypothetical approach to risk and may not base their decisions on a `zero-risk' (see paragraph 145 above), the Community institutions must nevertheless take account of their obligation under the first subparagraph of Article 129(1) of the Treaty to ensure a high level of human health protection, which, to be compatible with that provision, does not necessarily have to be the highest that is technically possible (Case C-284/95 Safety Hi-Tech [1998] ECR I-4301, paragraph 49).153 The level of risk deemed unacceptable will depend on the assessment made by the competent public authority of the particular circumstances of each individual case. In that regard, the authority may take account, inter alia, of the severity of the impact on human health were the risk to occur, including the extent of possible adverse effects, the persistency or reversibility of those effects and the possibility of delayed effects as well as of the more or less concrete perception of the risk based on available scientific knowledge.154 As regards the second component of risk assessment, the Court of Justice has already had occasion to note that in matters relating to additives in feedingstuffs the Community institutions are responsible for carrying out complex technical and scientific assessments (see Case 14/78 Denkavit v Commission [1978] ECR 2497, paragraph 20). The Council itself has drawn attention in its arguments to the fact that the decision to withdraw the authorisation of virginiamycin was based on extremely complex scientific and technical assessments over which scientists have widely diverging views (see in particular (4) below).155 In such circumstances a scientific risk assessment must be carried out before any preventive measures are taken.156 A scientific risk assessment is commonly defined, at both international level (see the provisional communication from the Codex Alimentarius Commission, cited at paragraph 147 above) and Community level (see the Communication on the Precautionary Principle, the Communication on Consumer Health and Food Safety and the green paper, cited at paragraphs 118 and 124 above), as a scientific process consisting in the identification and characterisation of a hazard, the assessment of exposure to the hazard and the characterisation of the risk.157 In that regard, it is appropriate to point out, first, that, when a scientific process is at issue, the competent public authority must, in compliance with the relevant provisions, entrust a scientific risk assessment to experts who, once the scientific process is completed, will provide it with scientific advice.158 As the Commission pointed out in its Communication on Consumer Health and Food Safety (see paragraph 124 above), scientific advice `is of the utmost importance at all stages of the drawing up of new legislation and for the execution and management of existing legislation' (page 9 of the Communication). Furthermore, the Commission stated there that it `will use this advice for the benefit of the consumer in order to ensure a high level of protection of health' (ibid). The duty imposed on the Community institutions by the first subparagraph of Article 129(1) of the Treaty to ensure a high level of human health protection means that they must ensure that their decisions are taken in the light of the best scientific information available and that they are based on the most recent results of international research, as the Commission has itself emphasised in the Communication on Consumer Health and Food Safety.159 Thus, in order to fulfil its function, scientific advice on matters relating to consumer health must, in the interests of consumers and industry, be based on the principles of excellence, independence and transparency, as stated in both the preamble to Commission Decision 97/579 and the Commission's Communications on the Precautionary Principle and on Consumer Health and Food Safety.160 Second, it is common ground between the parties that, when the precautionary principle is applied, it may prove impossible to carry out a full risk assessment, as defined at paragraph 156 above, because of the inadequate nature of the available scientific data. A full risk assessment may require long and detailed scientific research. The case-law cited at paragraph 139 above shows that unless the precautionary principle is to be rendered nugatory, the fact that it is impossible to carry out a full scientific risk assessment does not prevent the competent public authority from taking preventive measures, at very short notice if necessary, when such measures appear essential given the level of risk to human health which the authority has deemed unacceptable for society.161 In such a situation, the competent public authority must therefore weigh up its obligations and decide either to wait until the results of more detailed scientific research become available or to act on the basis of the scientific information available. Where measures for the protection of human health are concerned, the outcome of that balancing exercise will depend, account being taken of the particular circumstances of each individual case, on the level of risk which the authority deems unacceptable for society.162 So, where experts carry out a scientific risk assessment, the competent public authority must be given sufficiently reliable and cogent information to allow it to understand the ramifications of the scientific question raised and decide upon a policy in full knowledge of the facts. Consequently, if it is not to adopt arbitrary measures, which cannot in any circumstances be rendered legitimate by the precautionary principle, the competent public authority must ensure that any measures that it takes, even preventive measures, are based on as thorough a scientific risk assessment as possible, account being taken of the particular circumstances of the case at issue. Notwithstanding the existing scientific uncertainty, the scientific risk assessment must enable the competent public authority to ascertain, on the basis of the best available scientific data and the most recent results of international research, whether matters have gone beyond the level of risk that it deems acceptable for society (see paragraphs 150 to 153 above). That is the basis on which the authority must decide whether preventive measures are called for.163 Furthermore, a scientific risk assessment must also enable the competent authority to decide, in relation to risk management, which measures appear to it to be appropriate and necessary to prevent the risk from materialising.(iii) Apportionment of the burden of proof and the scope of judicial review164 As regards apportionment of the burden of proof, it is clear from the finding made at paragraph 140 above that Pfizer was wrong to criticise the Community institutions for failing, in the risk assessment carried out during the procedure culminating in adoption of the contested regulation, to produce proof of the reality or the seriousness of the risks to human health associated with the use of virginiamycin as a growth promoter.165 Rather, the Community institutions must show, first, that the contested regulation was adopted following as thorough a scientific risk assessment as possible, which took account of the particular circumstances of the present case, and, second, that they had available, on the basis of that assessment, sufficient scientific indications to conclude, on an objective scientific basis, that the use of virginiamycin as a growth promoter constituted a risk to human health.166 As to the scope of judicial review, it is settled case-law that in matters concerning the common agricultural policy the Community institutions enjoy a broad discretion regarding definition of the objectives to be pursued and choice of the appropriate means of action. In that regard, review by the Community judicature of the substance of the relevant act must be confined to examining whether the exercise of such discretion is vitiated by a manifest error or a misuse of powers or whether the Community institutions clearly exceeded the bounds of their discretion (Case 98/78 Racke [1979] ECR 69, paragraph 5; Case 265/87 Schräder [1989] ECR 2237, paragraph 22; Joined Cases C-267/88 to C-286/88 Wuidart and Others [1990] ECR I-435, paragraph 14; Fedesa and Others, cited at paragraph 115 above, paragraph 14; the BSE judgment, cited at paragraph 114 above, paragraph 60; and the NFU judgment, cited at paragraph 114 above, paragraph 39).167 It follows that, in this instance, the Community institutions enjoyed a broad discretion, in particular when determining the level of risk deemed unacceptable for society.168 Furthermore, it is settled case-law that where a Community authority is required to make complex assessments in the performance of its duties, its discretion also applies, to some extent, to the establishment of the factual basis of its action (see, to that effect, Case 138/79 Roquette Frères v Council [1980] ECR 3333, paragraph 25; Joined Cases 197/80 to 200/80, 243/80, 245/80 and 247/80 Ludwigshafener Walzmühle v Council and Commission [1981] ECR 3211, paragraph 37; Case C-27/95 Bakers of Nailsea [1997] ECR I-1847, paragraph 32; Case C-4/96 Nifpo and Northern Ireland Fishermen's Federation [1998] ECR I-681, paragraphs 41 and 42; Case C-120/97 Upjohn [1999] ECR I-223, paragraph 34; and Spain v Council, cited at paragraph 115 above, paragraph 29).169 It follows that in this case, in which the Community institutions were required to undertake a scientific risk assessment and to evaluate highly complex scientific and technical facts, judicial review of the way in which they did so must be limited. The Community judicature is not entitled to substitute its assessment of the facts for that of the Community institutions, on which the Treaty confers sole responsibility for that duty. Instead, it must confine itself to ascertaining whether the exercise by the institutions of their discretion in that regard is vitiated by a manifest error or a misuse of powers or whether the institutions clearly exceeded the bounds of their discretion.170 In particular, under the precautionary principle the Community institutions are entitled, in the interests of human health to adopt, on the basis of as yet incomplete scientific knowledge, protective measures which may seriously harm legally protected positions, and they enjoy a broad discretion in that regard.171 However, according to the settled case-law of the Court of Justice and the Court of First Instance, in such circumstances, the guarantees conferred by the Community legal order in administrative proceedings are of even more fundamental importance. Those guarantees include, in particular, the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case (Case C-269/90 Technische Universität München [1991] ECR I-5469, paragraph 14).172 It follows that a scientific risk assessment carried out as thoroughly as possible on the basis of scientific advice founded on the principles of excellence, transparency and independence is an important procedural guarantee whose purpose is to ensure the scientific objectivity of the measures adopted and preclude any arbitrary measures.173 It is in the light of the foregoing that the Court must examine whether the risk assessment carried out by the Community institutions in the present case is vitiated by the errors alleged by Pfizer.2. Whether the contested regulation is unlawful because of the inadequate nature of the scientific data provided by the Danish authorities(a) Arguments of the parties174 In Pfizer's submission, the Danish authorities' safeguard measure was taken in breach of Article 11 of Directive 70/524. The authorities did not rely, at least at the time when the measure, which entered into force on 16 January 1998, was adopted on 15 January 1998, on `new information' or on `a reassessment of existing information' for the purposes of Article 11 of Directive 70/524. In addition, as regards the additional information sent by the Danish authorities on 12 and 13 March, 1 April and 5 October 1998, i.e. after the safeguard measure was taken, Pfizer claims that on any view the national authorities were not entitled to take a safeguard measure and then provide scientific reasons for their decision at a later date. Such an approach is not consistent with Article 11.175 Pfizer maintains that the fact that the safeguard measure is unlawful means that the contested regulation is also unlawful, given that it was adopted on the basis of that measure. Only a safeguard measure complying with the requirements of Article 11 empowers the Community institutions to initiate the procedure laid down in Article 24 of Directive 70/524.176 The Council contends that the Danish authorities' dossier contained adequate scientific information. In any event, the contested regulation was not, in its contention, adopted on the basis of the Danish authorities' decision to adopt a safeguard measure but on the basis of an independent analysis carried out by the Community institutions of the risk associated with the use of virginiamycin.(b) Findings of the Court177 Under Article 11(1) and (2) of Directive 70/524, as it must be construed in light of the findings made in paragraphs 137 and 138 above, where a Member State `as a result of new information or of a reassessment of existing information made since the provisions in question were adopted, has detailed grounds for establishing' that an additive authorised in the Community for feeding animals constitutes a risk to human health, that Member State may adopt a safeguard measure in respect of the product concerned. It must immediately inform the other Member States and the Commission thereof, `giving reasons for its decision'. The Commission must, as soon as possible, examine those grounds and, after consulting the Member States within the Standing Committee, deliver its opinion on the measure. Then, in accordance with Article 11(3) of Directive 70/524, the Commission is to initiate the procedure for amending Directive 70/524, laid down in Article 24, `[s]hould [it] consider that amendments to the Directive are necessary in order to mitigate the difficulties mentioned [by the Member State concerned] and to ensure the protection of human ... health'.178 Under Article 24 the representative of the Commission is to submit to the Standing Committee a draft of the measures to be adopted. The Committee is to deliver an opinion on the measures before they are adopted by the Commission or, as the case may be, the Council on a proposal from the Commission.179 It follows that where a Member State informs the Commission of its decision to take a safeguard measure under Article 11 of Directive 70/524 in respect of a product, the Commission must, as soon as possible, examine whether the measure is well founded. In particular, the Commission must ascertain whether, when it found the product to constitute a risk to human health, the Member State relied on detailed grounds including new scientific data or a reassessment of existing scientific information made since the product was authorised under the directive.180 If, following that examination and after consultation of the Member States within the Standing Committee, the Commission takes the view that the safeguard measure was not based on such grounds, it may take `appropriate measures', including, where necessary, infringement proceedings as provided for in Article 169 of the EC Treaty (now Article 226 EC). Otherwise, it initiates the procedure for amending Directive 70/524, laid down in Article 24 of that directive, following which the institutions may either withdraw the Community authorisation from the product concerned - as in the present case - or maintain the authorisation.181 In the present case, the Court notes that the Danish authorities sent the Status Report referred to at paragraph 44 above to the Commission among others, three days before the safeguard measure concerning virginiamycin entered into force. In that report the Danish authorities set out the grounds on which, in their view, the measure could be justified. However, the minutes of the meetings of the Standing Committee of 16 and 17 February 1998 and 16 and 17 March 1998 show that the Danish authorities had not initially sent a full scientific dossier in support of their safeguard measure. The dossier was completed on 1 April 1998 when the supplementary report from the Danish Veterinary Laboratory was forwarded (see paragraph 51 above).182 However, contrary to Pfizer's submission, that does not invalidate the contested regulation.183 First, the Status Report already showed that the Danish authorities were relying on a `reassessment of existing information' within the meaning of Article 11(1) of Directive 70/524. Therefore, the Commission cannot be criticised for initiating the procedure laid down in Article 24 of Directive 70/524 on the basis of the grounds cited in the Status Report.184 Second, it is for the Commission, once it decides to initiate the procedure laid down in Article 24 of Directive 70/524, to carry out at Community level its own risk assessment in respect of the product concerned. The risk assessment carried out by the Commission at Community level is independent of that carried out by the national authorities. Only the lawfulness of the Community-level risk assessment is subject to judicial review by the Court in this case. It follows that, even if the safeguard measure taken by the Danish authorities were unlawful, notably because the scientific evidence provided by the authorities was inadequate, that would still not prove that the contested regulation was unlawful.185 It follows that Pfizer's plea must be rejected as unfounded.3. Errors in the relevant findings of fact in this case186 It is clear from the preamble to the contested regulation that, in concluding that the use of virginiamycin as an additive in feedingstuffs constituted a risk to human health, the Community institutions relied, first, on the SCAN opinion, despite the fact that in the opinion SCAN concluded that virginiamycin did not entail an immediate risk to human health in Denmark. Second, the Community institutions cited a scientific study produced by the Danish authorities after SCAN had delivered its opinion. Third, the institutions took account of the conclusions and recommendations in a number of reports produced by international, Community and national bodies, published in the years preceding adoption of the contested regulation. Therefore, it is appropriate to consider whether the Community institutions, in their analysis of the various items of scientific evidence, made the errors that Pfizer alleges.(a) The SCAN opinion187 Pfizer considers, first, that it was not open to the Community institutions to disregard SCAN's conclusions and, second, that they distorted the SCAN opinion.(i) The Community institutions' obligation to accept the SCAN opinionArguments of the parties188 Pfizer and the interveners supporting it observe that SCAN carried out a scientific risk assessment and concluded in its opinion that there was no immediate risk associated with virginiamycin. However, despite the clarity of that conclusion, the Community institutions reached a diametrically opposed conclusion.189 Pfizer acknowledges that under the relevant legislation the Community institutions are not bound by SCAN's opinion. However, referring to the judgment of the Court of First Instance in Case T-120/96 Lilly Industries v Commission [1998] ECR II-2571, paragraph 83, Fedesa and Fefana assert that where a scientific committee established by a Community measure publishes an opinion the Community institutions are bound by that opinion.190 At the very least, the Community institutions could not ignore that opinion and allow themselves to be influenced instead by concerns expressed in the media. Similarly, they could not solely take account of the fact that, under Article 151 of the Act of Accession, they were obliged to take measures by 31 December 1998. Fedesa and Fefana submit that action of that kind amounted to a misuse of powers. Anprogapor and Asovac add that the Community institutions could not disregard the SCAN opinion without having obtained an alternative risk assessment to the one prepared by SCAN.191 The Council and the interveners supporting it contend that the institutions are not bound by the SCAN opinion.192 Furthermore, at the hearing the Council confirmed that SCAN is exclusively a Commission advisory body. In the present case, the contested regulation was adopted by the Council. Therefore, the Council stated at the hearing that `whatever the SCAN might say [in its opinion], it cannot have any influence on the Council position'.Findings of the Court193 It is apparent from recital 15 to the contested regulation that the Council recognises that SCAN had concluded in its opinion that `the use of virginiamycin as a growth promoter did not constitute a real immediate risk to public health in Denmark since Denmark had provided no new evidence to substantiate the transfer of streptogramin resistance from organisms of animal origin to those resident in the human digestive tract, which would compromise the future use of human medicinal products'. However, as is clear from recitals 16 and 21 to the regulation, the Council took account of the fact that in the Commission's view there was sufficient scientific information to conclude that a risk to human health associated with the use of virginiamycin did exist. In that regard, the Council relied, in particular, on various aspects of the scientific analysis in the SCAN opinion, summarised at recitals 17 to 19 to the contested regulation.194 It follows, first, that, far from having ignored the SCAN opinion, the Council relied primarily on certain matters analysed in the opinion, although it decided not to accept the conclusions expressed there by SCAN.195 It also follows that the Council was wrong to maintain at the hearing that the assessment made in the SCAN opinion could not have any influence on its own position. It is certainly the case, as the Council points out, that SCAN is an advisory committee attached to the Commission and that it is at the request of the Commission, which assumes responsibility therefor, that SCAN carries out risk assessments and delivers its scientific opinions. However, it is apparent from the preamble to the contested regulation, which was adopted in accordance with the procedure laid down in Article 24 of Directive 70/524 by the Council on a proposal from the Commission, that the Council did not ask for an alternative risk assessment to that carried out by SCAN, but that it endorsed the position adopted by the Commission in its proposal and did so on the basis, inter alia, of the SCAN opinion. It follows that the risk assessment carried out in this case by the Commission on the basis, inter alia, of the SCAN opinion also binds the Council.196 That being so, under the relevant legislation the Commission, when it requests an opinion from SCAN, is not, as Pfizer acknowledges, bound to accept the conclusions reached in the opinion. It is clear from both Article 8(1) of Directive 70/524, as amended by Directive 96/51, and Decision 97/579, that SCAN is an advisory body.197 Against that kind of legislative background, the role played by a committee of experts, such as SCAN, in a procedure designed to culminate in a decision or a legislative measure, is restricted, as regards the answer to the questions which the competent institution has asked it, to providing a reasoned analysis of the relevant facts of the case in the light of current knowledge about the subject, in order to provide the institution with the factual knowledge which will enable it to take an informed decision.198 However, the competent Community institution must, first, prepare for the committee of experts the factual questions which need to be answered before it can adopt a decision and, second, assess the probative value of the opinion delivered by the committee. In that regard, the Community institution must ensure that the reasoning in the opinion is full, consistent and relevant.199 To the extent to which the Community institution opts to disregard the opinion, it must provide specific reasons for its findings by comparison with those made in the opinion and its statement of reasons must explain why it is disregarding the latter. The statement of reasons must be of a scientific level at least commensurate with that of the opinion in question. In such a case, the institution may take as its basis either a supplementary opinion from the same committee of experts or other evidence, whose probative value is at least commensurate with that of the opinion concerned. In the event that the Community institution disregards only part of the opinion, it may also avail itself of those parts of the scientific reasoning which it does not dispute.200 It follows that the Commission - and the Council where, as in the present case, the measure is adopted by the Council on a proposal from the Commission - may disregard the conclusions drawn in the SCAN opinion, even though, in some places, it relies on certain aspects of the scientific analysis in the opinion.201 That finding can also be justified on grounds of principle relating to the political responsibilities and democratic legitimacy of the Commission. Whilst the Commission's exercise of public authority is rendered legitimate, pursuant to Article 155 of the EC Treaty (now Article 211 EC), by the European Parliament's political control, the members of SCAN, although they have scientific legitimacy, have neither democratic legitimacy nor political responsibilities. Scientific legitimacy is not a sufficient basis for the exercise of public authority.202 As to the judgment in Lilly Industries v Commission, pleaded by Fedesa and Fefana (see paragraph 189 above), it is appropriate to point out that, under the provisions which applied in that case, consultation with the competent scientific committee within a period prescribed by those provisions was a pre-requisite for adoption of a Commission proposal. For that reason alone, the legal context of this case differs from that in Lilly Industries, which can therefore provide no support for the arguments of the interveners.203 However, in this instance, where what is at issue is a measure taken for the purpose of protecting human health, the findings made by the institutions, which differ from those set out in the SCAN opinion, must be founded on that purpose alone. That also means that, if they are to disregard the findings set out in the opinion of the competent scientific committee, the Community institutions must be able to rely on a proper examination, carefully and impartially carried out, of all the relevant aspects of the individual case, which include the reasoning on which the committee concerned based the findings in its opinion.204 In that regard, the Court observes that, contrary to Pfizer's submission, the Council, when it ratified the Commission's proposal, did give reasons for its decision not to accept the SCAN opinion, inasmuch as it took the view, on the basis of the precautionary principle and notwithstanding the existing scientific uncertainty, to which attention was drawn in the SCAN opinion, that `the risk of reducing the effectiveness of human medicinal products ... as a result of cross-resistance caused by virginiamycin should be avoided' (recital 21). In particular, taking into account both the SCAN opinion and the reports of specialist international, Community and national bodies, some of which are mentioned in recital 23 to the contested regulation, the Council found that the authorisations of additives used in feedingstuffs should be withdrawn from antibiotics used in human medicine or which, like virginiamycin, are known to select cross-resistance to antibiotics used in human medicine (recital 26).205 It follows that the Community institutions explained their decision to depart from the SCAN opinion on the ground that it was in the interests of human health protection.206 Nor is it possible to accept Pfizer's argument that the Community institutions took a decision solely in the light of the fact that, under Article 151 of the Act of Accession, a decision had to be taken before 31 December 1998 on the Swedish authorities' request that the legislation should be amended. It is certainly clear from the case-file that the institutions took account of that date during the procedure which culminated in adoption of the contested regulation and that, in addition, that date is also mentioned in the first recital to the regulation. However, as the Court has found above, that deadline, even though it might have provided an additional incentive for adopting the contested regulation, was not the main reason for its adoption. Pfizer's assertion to the contrary is not borne out by any evidence in the documents before the Court and is belied by the wording of the abovementioned recitals to the contested regulation. Nor, therefore, is there any ground for Pfizer's contention that the Community institutions misused their powers in that regard.207 For the same reasons, the Court cannot, in the absence of any evidence, accept Pfizer's assertion that the Community institutions allowed themselves to be influenced, as regards the risk assessment, by concerns expressed in the media.208 As to the requirement that the divergent view taken by the institutions should have a scientific basis, the Court, while noting that it may prove helpful in such a case to commission an alternative opinion drawn up in accordance with the principles referred to at paragraph 159 above, must nevertheless find that no obligation to do so exists under the relevant provisions.209 On the contrary, it is apparent from the preamble to the contested regulation that in reaching its conclusion the Council relied primarily on various aspects of SCAN's own analysis. The Court will consider below whether, as Pfizer maintains, the Council distorted those aspects of the analysis and whether the Community institutions had a proper scientific basis on which to conclude, despite the findings in the SCAN opinion, that there was a risk to human health which justified preventive measures. However, the Court observes that the Community institutions cannot be criticised for having founded their decision not to accept the conclusions in the SCAN opinion on various aspects of the analysis in the opinion. There is no doubt that the SCAN opinion meets the criteria of excellence, independence and transparency required of scientific advice. Furthermore, as is stated in point 15 of SCAN's rules of procedure, a SCAN opinion must include not only an answer to the question submitted by the Commission but also `a scientific explanation and any minority opinions'. That is the only way in which an opinion enables a public authority to perform the duty imposed on it, namely to decide whether it is necessary to take measures, and, if so, what sort of measures.210 Consequently, the Community institutions did not make an error when they decided not to accept the conclusions of the SCAN opinion.(ii) Distortion of the SCAN opinion211 Pfizer claims, both in its plea alleging breach of the obligation to state reasons and in those alleging errors of assessment and misuse of powers, that the preamble to the contested regulation incorrectly summarised or even distorted the SCAN opinion. That is shown by a comparison between the findings in the SCAN opinion, on the one hand, and the preamble to the contested regulation on the other.212 First, Pfizer, supported by Fedesa and Fefana, refers to the following extracts from recital 15 to the contested regulation:`Whereas after examining the grounds put forward, [SCAN] concluded in its opinion of 10 July 1998 [the SCAN opinion] that the use of virginiamycin as a growth promoter did not constitute a real immediate risk to public health in Denmark since Denmark had provided no new evidence to substantiate the transfer of streptogramin resistance from organisms of animal origin to those resident in the human digestive tract, which would compromise the future use of human medicinal products; ...'213 Pfizer and the interveners submit that the SCAN opinion was more forceful on this issue. They point out that it reads as follows:`E. faecium resistant to virginiamycin could be detected in Danish food samples, particularly those of poultry origin.The limited information provided, indicates that there are genetic factors (sat A) for virginiamycin resistance existing within the human population in the Netherlands. However, in the absence of data on prevalence, this information is of limited value. No corresponding data for the Danish population are presented. Reference to Danish faecal samples in Conclusion 5 is made on the basis of a single unsubstantiated statement in the [supplementary report from the Danish Veterinary Laboratory] (p. 7) commenting on data from the DANMAP survey yet to be published and so not available for evaluation....Streptogramins are neither essential nor used for the treatment of human infections in Denmark at present. Danish concerns derive from the experience in the USA and other parts of Europe where nosocomial infections involving staphylococci and enterococci have increased significantly' (description of conclusions 5 and 8 of the supplementary report from the Danish Veterinary Laboratory).214 In that regard, SCAN stated in the general conclusions to its opinion that, first, `no new evidence has been provided to substantiate the transfer of a streptogramin or vancomycin resistance from organisms of animal origin to those resident in the human digestive tract and so compromise the future use of therapeutics in human medicine' (see, for the full text, paragraph 53 above). Second, having summarised the reasons why the use of streptogramins in human medicine was less significant in Denmark than in some other Member States, SCAN concluded that `the use of virginiamycin as a growth promoter does not constitute an immediate risk to public health in Denmark'.215 It follows that recital 15 to the contested regulation contains an accurate summary of those two central findings of the SCAN opinion. The passages from that opinion cited by Fedesa and Fefana in support of their arguments do not alter that conclusion. It is true that those passages contain more detailed information about the reasons why, on the basis of available scientific knowledge, the use of streptogramins in human medicine was less significant in Denmark than in some other Member States. However, there is nothing in the wording of recital 15 to the contested regulation from which it might be concluded that the Community institutions tried to play down the criticisms made by SCAN regarding the information submitted by the Danish authorities in support of the safeguard measure.216 Consequently, there are no grounds for Pfizer's view that the contested regulation misrepresents or distorts the SCAN opinion on that point.217 Second, Pfizer refers to recital 16 to the contested regulation, which is worded as follows:`(16) Whereas, none the less, SCAN acknowledges that a reservoir of resistant genes within the animal population poses a potential risk for humans; whereas, contrary to the Commission, it is of the opinion that a full risk assessment cannot be made until, in particular, quantitative evidence of the extent of transfer of antimicrobial resistance from livestock sources is obtained'.218 Pfizer observes that that recital is at variance with SCAN's comments on the ninth conclusion of the supplementary report from the Danish Veterinary Laboratory, in which it stated that the validity of the conclusion (that minimising the occurrence of virginiamycin-resistant E. faecium and staphylococci in animals and food could be critical for preserving the effect of streptogramins in human therapy) depended on the establishment of a link between a pool of resistance factors held within the bacteria comprising the animal gut flora and their transfer to human gut flora. It is apparent from the SCAN opinion that the reports submitted by the Danish authorities did not contain any new evidence to indicate the frequency of such transfers or whether they occurred at all.219 In that regard, the Court observes that in recital 16 to the contested regulation, the Community institutions summarised the first two sentences of Part II of the general conclusions in the SCAN opinion:`SCAN is sympathetic to the general concern highlighted by the Danish action about the hazard that a reservoir of resistance genes within the animal population poses for humans. However, it is of the opinion that a full risk assessment cannot be made until quantitative evidence of the extent of transfer of antimicrobial resistance from livestock sources is obtained and the significance of this within the overall use of antimicrobials for clinical and non-clinical purposes evaluated.'220 It follows that essentially SCAN confirmed that the use of virginiamycin as a growth promoter was a `hazard' to human health but that, because of the inadequacy of the available quantitative scientific data, it was not possible to carry out a full scientific assessment of the risks associated with the product. In essence, Pfizer complains that the Community institutions were wrong to suggest in the recitals that, according to SCAN, there was a proper scientific basis on which to conclude that there was a `risk' associated with the use of virginiamycin as a growth promoter. Pfizer relies, in this respect, on those parts of the SCAN opinion in which SCAN, conversely, expressed strong reservations about the likelihood of a link existing between the use of virginiamycin as a growth promoter and the development of resistance to streptogramins in humans.221 However, although the Community institutions used the term `risk', which has a different meaning from `hazard' for the purposes of risk assessment and risk management (see paragraph 147 above), they did make clear that, according to SCAN, use of virginiamycin as a growth promoter entailed a `potential risk'. It is clear from the preamble to the contested regulation as a whole that, by referring to a potential risk, the Community institutions intended to convey that SCAN did not exclude such a risk. It is only in recitals 17 to 20 to the contested regulation that the Community institutions summarised the various matters which they regarded as sufficient indication of the probability that use of the product would have adverse effects, leading them to conclude that the product entailed a risk to human health (see the analysis under (c) below).222 Similarly, other parts of the SCAN opinion are at variance with Pfizer's arguments.223 It is appropriate to point out that, in relation to conclusion 3 of the supplementary report from the Danish Veterinary Laboratory, according to which the sat A gene (which `encodes' information about resistance to streptogramins) has been detected not only in virginiamycin-resistant E. faecium bacteria found in animals but also in streptogramin-resistant E. faecium bacteria causing infections in humans, SCAN adds the following comment:`SCAN notes, however, that the presence of sat A was found only in a minority of animal strains in both studies but was associated with a far greater proportion of streptogramin-resistant human isolates. This difference may be an artefact reflecting the relatively low number of isolates examined, isolations made from farms which did not use virginiamycin, the quality of the PCR primer used to detect sat A or the presence of other, yet unrecognised, resistance factors. Also possible is that the constant use of a low concentration of virginiamycin in farm animals primarily selects for intrinsic resistance of a type that is almost universal amongst the related E. faecalis strains and that this provides the greatest source of resistance to streptogramins. In contrast, in humans where there is no selection pressure for intrinsic resistance, resistance is of the acquired type. Intrinsic resistance is less readily transferred than acquired resistance.'224 In other words, SCAN takes the view that the conclusion drawn by the Danish authorities can be more satisfactorily accounted for by explanations other than the transfer of resistance via a transfer of the sat A gene. However, a transfer of resistance is not ruled out.225 Similarly, as regards the in vitro tests carried out by the Danish authorities (conclusion 4 of the supplementary report from the Danish Veterinary Laboratory) and referred to in recital 19 to the contested regulation, SCAN takes the view that `the data presented on frequency [are] misleading and [are], at best, an indication of the maximum rate possible. The likelihood of a mating occurring is directly related to the similarity of the genetic background between donor and recipient strains. The use of a single strain acting both as donor and recipient, and one selected on the basis of its aptitude for conjugation, is artificial. Data on the frequency of matings between the initial isolates, assuming that these were of animal origin, and the recipient strain would have been of greater value.'226 Here too, SCAN expresses a view on the likelihood that the transfer effected in vitro will also occur in normal conditions and in no way excludes the possibility that such a transfer may occur under normal conditions.227 Next, SCAN takes the view that the scientific data on which conclusions 5 and 6 of the supplementary report from the Danish Veterinary Laboratory relating to the discovery of virginiamycin-resistant E. faecium bacteria in food and human faecal samples were based were too inadequate to allow any conclusions to be drawn.228 The same may be said in respect of conclusion 7 of the supplementary report from the Danish Veterinary Laboratory, according to which the `vat B' gene was detected in virginiamycin-resistant staphylococci found in poultry and in staphylococci responsible for human infections.229 Furthermore, as regards conclusion 8 of the supplementary report from the Danish Veterinary Laboratory, according to which streptogramins were expected to play a pivotal role in the treatment of certain human infections, SCAN states:`Data provided in the DANMAP survey [show] that in 1995/6, the latest information presented, none of the enterococci or coagulese-negative staphylococci isolated from blood cultures in Denmark were resistant to vancomycin. Most were also susceptible to penicillin or its semi-synthetic derivatives. In fact Denmark appears to have one of the lowest recorded incidences of methicillin-resistance among Staphylococcus aureus strains at < 1%, compared to 3% in the Netherlands, 8% in the UK, 10% in the USA and 30% in France. Thus, at present, existing strategies for coping with hospital infections caused by enterococci or staphylococci remain successful in Denmark and the [supplementary report from the Danish Veterinary Laboratory] contains no evidence that existing therapies are likely to be compromised in the short term.'230 Consequently, in those comments, SCAN points out that, in its view, the medicinal products currently used in Denmark are successful in treating infections. However, its comments in no way indicate that SCAN is ruling out the possibility that resistance may be transferred to humans.231 Instead, it is apparent from recital 16 to the contested regulation that rather than having disregarded or even distorted the SCAN opinion, the Community institutions drew different conclusions from the available scientific data. Unlike SCAN, they concluded that, despite the existing scientific uncertainty, they had a proper scientific basis for taking action under the precautionary principle.232 It follows that recital 16 does not distort the SCAN opinion as regards the degree of probability of the risk associated with virginiamycin.233 Third, Pfizer refers to recital 17 to the contested regulation, which is worded as follows:`Whereas SCAN is also concerned about the development of vancomycin resistance amongst enterococci and methicillin-resistant strains of Staphylococcus aureus, which are increasingly responsible for nosocomial infections, particularly in the United States and southern Europe; whereas that could make it necessary to use streptogramins as therapeutic agents of last resort to treat germs which have developed resistance to other antibiotics'.234 In Pfizer's submission, while acknowledging the existence of methicillin-resistant strains of Staphylococcus aureus, the SCAN opinion also stated that Denmark appeared to have one of the lowest recorded incidences of methicillin-resistance among strains of Staphylococcus aureus, i.e. less than 1%. SCAN thus concluded that existing strategies for coping with hospital infections caused by enterococci or staphylococci continued to be effective in Denmark. SCAN also noted that the Status Report contained no evidence that existing therapies were likely to be compromised in the short term.235 That argument cannot be accepted either. First, recital 15 to the contested regulation states that SCAN concluded that the use of virginiamycin as a growth promoter did not pose an immediate risk to public health in Denmark (see paragraph 212 above). Second, as the Court has held at paragraph 184 above, where, after a Member State has taken a safeguard measure, the Commission initiates the procedure for amending Directive 70/524 laid down in Article 24, it must carry out its own risk assessment at Community level. Therefore, it was right that attention was drawn to the fact, in the preamble to the contested regulation, that, as SCAN indicated in paragraph 2 of its general conclusions I (cited at paragraph 53 above), the development of multiple resistant strains of enterococci and staphylococci represents a significant problem worldwide and, in particular, in certain Member States.236 Therefore it has not been proved in relation to recital 17 to the contested regulation that the facts have been in any way distorted.237 Fourth, Pfizer refers to recital 18 to the contested regulation, which is worded as follows:`Whereas, furthermore, SCAN notes in its opinion that the virginiamycin-resistant enterococci and staphylococci isolated from poultry and pigs all had cross-resistance to pristinamycin used in human medicine or the combination dalfopristin/quinupristin, which is due to be authorised as a human medicinal product shortly'.238 On that point, Pfizer argues that the SCAN opinion (more specifically SCAN's comments on conclusion 2 of the supplementary report from the Danish Veterinary Laboratory) had indicated that, while the data submitted in the reports from the Danish authorities supported the general conclusions concerning cross-resistance between streptogramins, they did not support the more specific statement in the body of the Danish reports that the resistance determinants were the same and could be specified.239 The Court observes in that regard that the SCAN opinion bears out the Danish authorities' conclusion relating to the existence of cross-resistance between streptogramins. Furthermore, the more specific assertion by the Danish authorities that the resistance determinants were the same and could be specified was criticised by SCAN and was not referred to in the preamble to the contested regulation.240 Fedesa and Fefana consider, for their part, that the SCAN opinion arrived at an entirely different conclusion from that summarised in recital 18 to the contested regulation. They refer to the following passages from the SCAN opinion:`Despite the potential for transfer of resistance factors, virginiamycin does not appear to have greatly compromised the value of pristinamycin in those countries which allow the use of streptogramins as both growth promoter and human therapeutics. After more than 20 years' use of both streptogramins in France, resistance to pristinamycin amongst staphylococci remains low at around 5% of isolates. More importantly, in a survey of nearly 1 000 MRSA collected from hospitals throughout France, 98.5% were found susceptible to both pristinamycin and Synercid (Gazagne et al., 1998). Unfortunately, corresponding data for E. faecium in France [are] not available. However, evidence from the USA, where a survey of 1 000 strains of E. faecium found 95-97% sensitive to Synercid, also suggests that use of virginiamycin has not, in practice, reduced the value of streptogramins as a human therapeutic agent' (extracts from comments on conclusion 9).241 However, the evidence relied on by those interveners does not relate to the existence of cross-resistance among streptogramins as such but to the fact, at issue between the parties (see paragraph 325 et seq. below), that, despite that phenomenon, the use of virginiamycin as a growth promoter has not yet brought about a significant reduction in the effectiveness of pristinamycin and Synercid, even in countries where virginiamycin has been used as an additive in feedingstuffs.242 Therefore, recital 18 to the contested regulation does not contain any errors of assessment of the SCAN opinion either.243 Fifth, Fedesa and Fefana maintain that recital 19 to the contested regulation expresses the Commission's opinion that the case of a Dutch farmer - in whom strains of E. faecium bacteria resistant to virginiamycin and pristinamycin were found which had the same genetic fingerprint as those isolated from his poultry - provided an indication that resistance might be transferred from animals to humans, something which might be confirmed by other cases in the future. According to Fedesa and Fefana, so far as that particular observation was concerned, the Community institutions failed to add SCAN's view that `this generalisation from the particular remains unsound and without foundation' (comment on conclusion 6 of the supplementary report from the Danish Veterinary Laboratory).244 The Court observes that the Community institutions, after summarising that scientific observation, in recital 19 to the contested regulation, went on to say that `even if general conclusions about the transfer of resistant enterococci from animals to humans should not be drawn from a single case, the Commission sees it as an indication that this might be confirmed by other cases in the future'.245 In doing so, the Community institutions took sufficient account of the criticisms made by SCAN of the conclusions of the Danish authorities relating to the scientific value of that observation. Therefore, the Community institutions have not distorted the SCAN opinion in that regard.(iii) Conclusion246 It follows from the foregoing that the Community institutions did not make any errors in their assessment of the SCAN opinion. Similarly, the Court has not found a misuse of powers. Consideration will be given below (see paragraph 312 et seq.) to Pfizer's allegation that the Community institutions made manifest errors of assessment in forming the view, contrary to the claims in the SCAN opinion, that the use of virginiamycin constituted a risk to human health.(b) The fact that the new study on live rats was taken into account without SCAN's opinion being sought(i) Arguments of the parties247 Pfizer submits that the contested regulation is unlawful since the Community institutions took account in their risk assessment of the new study on live rats, which had been provided by the Danish authorities after the SCAN opinion. Pfizer asks on what scientific basis the Council and Commission could, as they did in recital 20 to the contested regulation, properly describe that study as `major fresh evidence' without having sought SCAN's opinion.248 Although Pfizer recognises that the relevant legislation does not lay down an obligation to ask in every case for SCAN's opinion before authorisation of an additive is withdrawn, it none the less submits that, because of the scientific complexity of the dossier, the Commission was bound to seek a second scientific opinion from SCAN concerning that new scientific study in order to be in a position to make a proper assessment of its scientific value. Once the Commission had decided to consult SCAN about the safeguard measure taken by the Danish authorities, it could not decide, on grounds of political expediency, not to continue the dialogue with the experts on that committee when new scientific data were brought to its notice.249 Referring to Case C-212/91 Angelopharm [1994] ECR I-171, paragraphs 31 to 41, Fedesa and Fefana submit that, to the extent to which the Commission does not itself have adequate scientific and technical knowledge to assess the relevant evidence in this type of case, then, regardless of the wording of the relevant legislation, consultation of the competent scientific committee becomes mandatory in all cases in order to ensure that measures taken at Community level are necessary and appropriate to the objective of protecting human health. Furthermore, it is clear from the judgments of the Court of First Instance in Case T-105/96 Pharos v Commission [1998] ECR II-285, paragraphs 65 and 68, and in Bergaderm and Goupil v Commission, cited at paragraph 115 above, paragraph 55, that in cases concerning public health the Community institutions must have enough time to prepare their decisions and, in particular, to arrange, where necessary, for the scientific issues which will determine their decisions to be examined afresh.250 Furthermore, in Pfizer's submission, it is standard practice for the Commission to request an opinion from the competent scientific committee before acting, even if the relevant legislation does not require it to do so. That is clear both from the stance taken by the Commission in other cases before the Community Courts (Denkavit v Commission, cited at paragraph 154 above, and Pharos v Commission, cited at paragraph 249 above, paragraph 59) and from its Communication on Consumer Health and Food Safety, cited at paragraph 124 above.251 The Council and the interveners supporting it observe, first, that the relevant legislation does not impose any obligation to consult SCAN a second time about the observations carried out by the Danish authorities. Likewise, they contend that it cannot be inferred from either the case-law cited by Pfizer or the practice of the institutions that any such obligation exists.252 In any event, the Council and the Commission contend that the scientific evidence in their possession was sufficient to allow them to assess the implications of the new study on live rats and that they were not necessarily obliged to consult SCAN formally again. Referring to the minutes of the SCAN meeting of 5 November 1998, the Council and the Commission point out, however, that, contrary to Pfizer's contention, the Commission consulted SCAN a second time about the study but that SCAN refused to deliver a second opinion to the Commission, confining itself to stating that the study `does not bring new information on the subject'. At the hearing, the Council and the Commission maintained that a statement to that effect was an important scientific finding.253 Finally, also at the hearing, the Council contended that it may base itself on scientific data which have not been assessed by the Commission's advisory body, SCAN, but which have been discussed in the Standing Committee. Even if it is the case that the Standing Committee is composed of representatives of Member States and the Commission and that the members did not necessarily have sufficient scientific knowledge, each member of the Committee is nevertheless assisted on the relevant scientific and technical questions by experts appointed for that purpose by his or her Member State. In this instance the Standing Committee held very detailed discussions about the scientific questions raised.(ii) Findings of the CourtIntroduction254 As noted at paragraphs 54 and 56 above, it was in the context of the Standing Committee meetings that the Danish authorities, in the wake of the SCAN opinion, forwarded the new study on live rats to the other members of that Committee.255 It is apparent from recital 20 to the contested regulation that the Community institutions found in that regard that the study constituted `major fresh evidence ... demonstrating a transfer in vivo under experimental conditions in the gastro-intestinal tract of rats of the sat A gene, via a plasmid, between isogenic strains of E. faecium [bacteria]'.256 It is necessary to assess whether the Community institutions could properly take that new study into account and describe it as `major fresh evidence' without having first obtained an opinion on it from SCAN.As to whether consultation of SCAN about the new study on live rats was mandatory or optional257 First of all, under Article 8(1) of Directive 70/524 SCAN is to be `responsible for assisting the Commission, at the latter's request, on all scientific questions relating to the use of additives in animal nutrition'. In addition, Article 2(1) of Decision 97/579 provides that SCAN is to be consulted `in the cases laid down by Community legislation' and that `[t]he Commission may also decide to consult it on other questions of particular relevance to consumer health and food safety'. In such cases, Article 2(3) of Decision 97/579 provides that `[a]t the Commission's request' the Committee is to provide `scientific advice'.258 Neither Article 11 nor Article 24 of Directive 70/524 makes provision for SCAN to be consulted.259 Therefore, the abovementioned provisions of Directive 70/524 and Decision 97/579 of themselves have the effect that the Commission has the power to consult SCAN before withdrawing authorisation from an additive but is not under a duty to do so.260 A fortiori, in a situation such as this, where new scientific evidence emerges after SCAN, at the Commission's request, has delivered its opinion, those provisions of Directive 70/524 and Decision 95/579 do not of themselves require the Commission to consult SCAN a second time in relation to that new scientific evidence.261 Contrary to Pfizer's submission, neither the case-law of the Court of Justice or the Court of First Instance nor the Commission's practice provides grounds for inferring that there is an obligation to consult SCAN before any withdrawal of authorisation of an additive under Directive 70/524 and, therefore, an obligation to consult SCAN a second time about new evidence which has emerged after it has delivered its opinion.262 To begin with, the Court notes that the Angelopharm judgment, cited at paragraph 249 above, deals with the interpretation of a directive relating to cosmetic products and, in particular, with whether consultation of the competent scientific committee (the Scientific Committee on Cosmetology) was mandatory or optional. The Court of Justice found that the directive at issue admitted of both the abovementioned interpretations (see paragraph 26 of the judgment). It was only in those circumstances that the Court of Justice found, following a purposive interpretation of the relevant provisions of the directive, that `[s]ince the purpose of consulting the Scientific Committee is to ensure that the measures adopted at Community level are necessary and adapted to the objective, pursued by the Cosmetics Directive, of protecting human health, consultation of the Committee must be mandatory in all cases' (see paragraph 38 of the judgment). Given the unequivocal wording of the provisions applying in this case (see paragraphs 25 and 27 above), that precedent is not applicable to the present case.263 Likewise, Pfizer is wrong to rely on Pharos v Commission, cited at paragraph 249 above, upheld by the Court of Justice in Case C-151/98 P Pharos v Commission [1999] ECR I-8157, and Bergaderm and Goupil v Commission, cited at paragraph 115 above, in support of its argument. Certainly, in those judgments the Court of First Instance held that the Commission could not be criticised, in cases concerning public health, for having taken the time necessary to address the relevant scientific issues and, in particular, for having referred them for a second examination by the competent scientific committee (Bergaderm and Goupil v Commission, paragraph 55, and Pharos v Commission, cited at paragraph 249 above, paragraphs 65 and 68). However, since the relevant legislation confers a discretion on the Commission in that regard, those judgments do not constitute authority for the opposite conclusion that, in a situation such as this, the Commission would be obliged to act in that way.264 As regards what is alleged to be the Commission's standard practice, which, Pfizer submits, emerges from the Communication on Consumer Health and Food Safety, cited at paragraph 124 above, the Court finds that the Commission specifically stated in the communication that consultation of scientific committees was not compulsory in all cases (see paragraph 2.3 of the communication). Moreover, as regards the position allegedly adopted by the Community institutions in the cases already decided by the Court of Justice and the Court of First Instance and cited at paragraph 249 above, the Community institutions have at no time stated that they were obliged to consult those committees. Rather, those cases concern the question whether, in the particular circumstances of the individual cases, the Community institutions could be criticised for having waited until the committees had delivered their opinions before taking the decisions which they were obliged to take.265 Therefore, the Court must conclude that the intention of the Community legislature was that under Directive 70/524 the Community institutions should be able to withdraw authorisation from an additive in feedingstuffs, such as virginiamycin, without first having obtained an opinion from the abovementioned scientific committees.266 A fortiori, in a case such as this, the contested regulation cannot be found to be unlawful merely because a second scientific opinion was not obtained from SCAN concerning the new study on live rats.267 That being so, it has already been held at paragraph 154 above that the decision to maintain or withdraw the authorisation of antibiotics, including virginiamycin, called for particularly complex technical and scientific assessments on the part of the Community institutions. That finding clearly applies in relation to the new study on live rats. It is clear both from the study, prepared by four scientists at the Danish Veterinary Laboratory, and from recital 20 to the contested regulation that its purpose was to analyse whether, under experimental conditions in the gastro-intestinal tract of rats, a transfer of the sat A gene conferring resistance to virginiamycin via a plasmid could take place between isogenic strains of E. Faecium bacteria. The aim of the study, which had to be assessed by the Community institutions as part of their risk assessment, was thus to ascertain whether a transfer of genes similar to those observed in in vitro experiments could take place in vivo, in the gastro-intestinal system of live rats.268 As held at paragraphs 158 and 159 above, in a case like this, expert scientific advice meeting the requirements of excellence, independence and transparency is of the utmost importance in risk assessment to ensure that the regulatory measures adopted by the Community institutions have a proper scientific basis and to ensure that the institutions were in a position to examine carefully and impartially all relevant evidence in a particular case.269 In that connection, account must be taken of the fact that the Commission set up SCAN specifically with the aim of ensuring that Community legislation is founded on objective and sound scientific findings. The first recital to Decision 97/579 states that `sound scientific advice is an essential basis for Community rules on consumer health'. Similarly, in the preamble to the decision, the Commission stated that advice from scientific committees, such as SCAN, `must, in the interests of consumers and industry, be based on the principles of excellence, independence and transparency'.270 In the light of the foregoing, the Court finds that it is only in exceptional circumstances and where there are adequate guarantees of scientific objectivity that the Community institutions may, when - as here - they are required to assess particularly complex facts of a technical or scientific nature, adopt a preventive measure withdrawing authorisation from an additive without obtaining an opinion from the scientific committee set up for that purpose at Community level on the relevant scientific material, in this case the new study on laboratory rats.271 In that connection, the Community institutions have essentially put forward three main arguments.The second consultation of SCAN272 First, the Council states that, contrary to Pfizer's submission, the Commission did consult SCAN and that consequently Pfizer's argument can on no account be accepted.273 In that regard, it is clear from the documents before the Court that, at the meeting of the Standing Committee on 16 and 17 July 1998, the Danish authorities informally brought the new study on live rats to the attention of the other members of the Committee. The study was formally distributed to members of the Committee, at the Commission's request, only on 27 August 1998. Furthermore, it is apparent from an undated transmission report that the Commission sent the study to SCAN, indicating that it would be discussed at SCAN's next meeting, which was scheduled to take place on 29 and 30 September 1998. However, no mention is made of that study in the minutes of the SCAN meeting of 29 and 30 September 1998. By contrast, it is apparent from the minutes of the SCAN meeting of 5 November 1998 that on that occasion SCAN examined the new study and stated that it `does not bring new information on the subject.'274 In so far as the Council essentially maintained at the hearing that that statement amounted to a scientific opinion, the Court begins by observing that it was not adopted in accordance with the rules of procedure which SCAN adopted on 12 March 1998 under Article 8(1) of Decision 97/579. Those rules provide for a formal procedure for obtaining an opinion from SCAN, a procedure which was not followed in the present case. As the Council and the Commission confirmed in their answers to the Court's written questions, consultation of SCAN is initiated by a written request from Commission staff - a request which was not made in the present case. Furthermore, under paragraph 15 of the SCAN rules of procedure, SCAN's opinion `comprises the response given to a question posed by the Commission, a scientific explanation and any minority opinions'. Under Article 10 of Decision 97/579 and paragraph 15 of the rules of procedure, opinions of the committee are published subject to commercial confidentiality. Those principles, which, in a case such as this, amount to significant procedural guarantees (see paragraphs 170 to 172 above), were not respected in this instance, since SCAN confined itself to stating that the new study on live rats `does not bring new information on the subject', without providing any scientific explanation.275 Furthermore, since no reasons are given in support of the statement, it is not possible to ascertain to what extent the Commission itself can have been aware of the reasons on which SCAN based its conclusion. Nor is it possible to ascertain from the statement whether the Commission was able, on sound scientific grounds, to draw conclusions from it which appeared to it to be adequate and which in some circumstances might (as they were here) be contrary to those put forward in SCAN's statement. As the Court has stated in paragraph 162 above, it is essential to provide a statement of reasons in order to enable the Community institutions to determine their position vis-à-vis the problem which has arisen in full knowledge of the facts.276 In so far as the Council is of the view that SCAN refused to deliver a second opinion despite being consulted by the Commission, the Court finds that in any event, under Article 2(5) of Decision 97/579, the Commission could have `require[d] the adoption of an opinion within a specified period', making use if necessary of the accelerated procedure provided for in SCAN's rules of procedure for urgent cases. Furthermore, the Community institutions cannot properly rely on organisational difficulties within departments and committees set up by them to explain their failure to comply with a duty incumbent upon them, namely to carry out as thorough a scientific assessment of the risks as possible and, in that connection, to obtain if necessary an opinion from the relevant scientific committees before adopting preventive measures.277 It follows that the statement made by SCAN at its meeting on 5 November 1998 about the new study on live rats does not amount to a scientific opinion for the purposes of the relevant provisions but is merely a view expressed by the members of SCAN pursuant to informal consultation by the Commission. The statement as such is therefore not capable of refuting Pfizer's argument.The role of the Standing Committee278 Second, the Council and the Commission maintain that the new study on live rats was analysed by the Standing Committee.279 In that regard, it is appropriate to point out in limine that it is clear from Articles 11 and 24 of Directive 70/524 that that Committee must be consulted by the Commission both at the stage of risk assessment and at the stage of risk management. Further, it follows from Article 2 of Decision 70/372 setting up the Standing Committee that, as well as its advisory functions, the Committee may `consider any other question arising under such instruments [Directive 70/524] and referred to it by the Chairman either on his own initiative or at the request of a Member State'.280 However, attention should be drawn to the fact that the responsibilities conferred by Directive 70/524 on the Standing Committee must not be confused with those conferred on SCAN. The Standing Committee was set up with a fundamentally different aim from that of SCAN.281 It is apparent from the preamble to Decision 70/372 that the Standing Committee was set up in order to ensure close cooperation between Member States and the Commission in the sphere of feedingstuffs.282 The Committee, set up under Article 145 of the EC Treaty (now Article 202 EC) and made up of representatives of Member States and the Commission, is part of a mechanism for review by the representatives of the Member States of the Commission's exercise of the powers delegated to it by the Council (see, to that effect, the Opinion of Advocate General Jacobs in Angelopharm, cited at paragraph 249 above, ECR I-171, at I-173, point 38). It is clear from Article 24(3) of Directive 70/524 that the Commission itself can adopt measures entailing amendment of the annexes to the directive only if the measures are in accordance with the opinion of the Standing Committee. If they are not in accordance with that opinion or if, as in this case, the Standing Committee has not delivered an opinion, the Council, on a proposal from the Commission, is to adopt the measures within 15 days. Under Article 24(2) and (3) of Directive 70/524, and as is the case with Council decisions following a proposal from the Commission, opinions from the Standing Committee are delivered by the majority laid down in Article 148(2) of the EC Treaty (now Article 205(2) EC). Furthermore, the votes of the representatives of the Member States within the Standing Committee are also weighted as provided for in that article.283 Consequently, whatever professional qualifications its members may have, the Standing Committee must be regarded as a political body representative of the Member States and not as an independent scientific body.284 Moreover, against the background of cooperation between the Member States and the Commission, the Standing Committee also assists the Commission in the exercise of the powers conferred on it by the Council (see, to that effect, Case T-188/97 Rothmans v Commission [1999] ECR II-2463, paragraphs 57 to 60). It is in that context that, as is clear from the short reports of the meetings of the Standing Committee held prior to adoption of the contested regulation, the members of the Committee analysed the relevant scientific evidence, including the SCAN opinion and the new study on live rats.285 However, contrary to the substance of what the Council, supported by the Commission, asserted at the hearing, the results of the analysis of the scientific material by the members of the Standing Committee cannot be regarded as scientific advice based on the principles of excellence, transparency and independence, even though the members of the Committee are assisted by experts appointed by the Member States who are capable of understanding and explaining the full significance of that scientific evidence.286 First, as the Court has just held and as the Council itself acknowledged at the hearing, the Standing Committee is not an independent scientific committee.287 Second, it must be noted that, unlike SCAN opinions, the Standing Committee's analysis of scientific material is not published. Certainly, as the Council pointed out at the hearing, short reports of the meetings of the Committee are published on the Commission's web-site. However, the short reports of the meetings held prior to adoption of the contested regulation do not contain any trace of a structured scientific analysis essential to scientific advice. Even if it were the case, as the Council none the less maintained in substance at the hearing, that the work actually done within the Standing Committee was consistent with the principle of excellence of scientific advice, it would not, failing publication, meet the requirement that scientific advice should be transparent.288 Analysis of scientific material by members of the Standing Committee, assisted where necessary by scientists appointed by the Member States, performs another function as important as the scientific risk assessment carried out at the Commission's request by independent experts from SCAN. As the Council rightly pointed out, there are bound to be limits to the role of scientific committees. They are purely advisory bodies. It is for the competent political authority to decide upon the measures to be taken, in general on the basis of scientific advice but without being bound, at least under the provisions applying in this instance, by any conclusions expressed therein (see paragraph 199 above). Defining the objectives to be pursued and risk management - duties which are, under the relevant provisions, divided between the Council and the Commission - can be properly performed by a public authority only if it acquires from the various bodies and departments working on its behalf and preparing the way for it to take a decision, sufficient technical knowledge to grasp the full significance of the scientific analysis performed by the independent experts and to decide, in full knowledge of the facts, whether a preventive measure should be taken and, if so, which.289 It follows that the Standing Committee's analysis of the new study on live rats, provided by the Danish authorities after delivery of the SCAN opinion, cannot be regarded in itself as a scientific opinion. The Standing Committee's work does not therefore discharge the Community institutions from their duty to carry out a scientific risk assessment and, when doing so, to draw, as a general rule, on a scientific opinion delivered by the competent scientific committee set up at Community level or, in exceptional circumstances, on other appropriate scientific material (see paragraph 270). However, it is necessary to take account of the work when considering the errors of assessment allegedly made by the Community institutions in determining the level of risk deemed unacceptable and in managing the risk.290 Therefore, the second argument advanced by the Council and the Commission must also be rejected.The exceptional circumstances allowing the Community institutions to take account of the new study on live rats without having obtained a further opinion from SCAN291 Finally, the Court must assess whether, as the Community institutions maintain, the Commission, following consultation of the Standing Committee, was in a position to grasp the full significance of the new study on live rats and to take the view that there was a proper scientific basis on which to conclude that it amounted to `major fresh evidence', which had to be taken into account in the assessment of the risks associated with the use of virginiamycin as a growth promoter.292 It is clear from the summary of the study, which was carried out by four scientists at the Danish Veterinary Laboratory, and from recital 20 to the contested regulation that its purpose was to analyse whether, under experimental conditions, a plasmid transfer of the sat A gene conferring resistance to virginiamycin could take place between isogenic strains of E. faecium bacteria in the gastro-intestinal tract of rats.293 In that regard, it is appropriate to take account of the fact that in its opinion, and as mentioned at the beginning of recital 19 to the contested regulation, SCAN had already assessed the issue of the transfer of the sat A gene between isogenic strains of E. faecium bacteria and had analysed the observations of that in vitro transfer. The SCAN opinion confirmed that the exchange of genetic information between isogenic strains of enterococci was a recognised phenomenon (`[e]nterococci are known to be promiscuous and exchange of genetic information between similar strains is a common occurrence', comments on conclusion 4 of the supplementary report from the Danish Veterinary Laboratory). Similarly, it concluded that the observation carried out in that regard in vitro by researchers at the Danish Veterinary Laboratory confirmed that was possible (`[t]his experiment confirms that such conjunctions can involve plasmids carrying resistance genes including sat A', ibid).294 However, the SCAN opinion disputed in substance that it was possible to conclude from that observation that the genetic transfer of resistance could take place under normal conditions. As noted at paragraph 225 above, it stated:`However, the data presented on frequency is misleading and is, at best, an indication of the maximum rate possible. The likelihood of a mating occurring is directly related to the similarity of the genetic background between donor and recipient strains. The use of a single strain acting both as donor and recipient, and one selected on the basis of its aptitude for conjugation, is artificial. Data on the frequency of matings between the initial isolates, assuming that these were of animal origin, and the recipient strain would have been of greater value.'295 Next, the Court observes that the fact that no observations had been carried out under natural conditions had also been criticised by Pfizer itself in its observations on the supplementary report from the Danish Veterinary Laboratory.`Again, if one were to ignore the omissions in the report and make the assumption that the results are valid, this study would merely show that transfer of resistance genes can occur in vitro. The incidence recorded appears remarkably high, but if this were to have occurred in vivo [it] would have resulted in an extremely high incidence of resistance among the human population. Such is clearly not the case, and suggests that the results would therefore add little to the elucidation of whether such phenomenon occurs in vivo where contact between donor and recipient is less intimate and frequent' (page 11).296 Pfizer criticised the method employed and submits that the observations, even though they were performed on live rats, were actually carried out in artificial conditions. However, that fact was not disputed by the scientists who had carried out the in vivo study. It is clear from the summary of the study that it was carried out `under experimental conditions' and that it merely suggests - rather than proves - `that a similar transfer may take place under natural conditions'.297 The statement made by SCAN at its meeting on 5 November 1998 also seems to bear that out - lack of probative value, in SCAN's submission, but some evidential value according to the Community institutions. In stating that the study did not bring any new information on the subject, SCAN, in essence, repeated its abovementioned criticisms concerning methodology.298 It follows that, on the basis of the SCAN opinion, scientific data submitted by the Danish authorities and comments made in that regard by Pfizer itself, the Community institutions were well aware of the methodological limitations of the new study on live rats and of the fact that it was purely indicative as regards any risk associated with the use of virginiamycin as an additive in feedingstuffs. Contrary to Pfizer's submission, they were sufficiently well informed to take the study into account in their risk assessment as evidence supplementary to the scientific data evaluated in the SCAN opinion and to conclude, without necessarily being obliged to request a formal opinion from SCAN, that the study amounted to major fresh evidence.Conclusion299 Consequently, the Community institutions did not err when they took account of the new study on live rats without having obtained a second opinion on it from SCAN.(c) The fact that the conclusions and recommendations of international, Community and national bodies were taken into account(i) Arguments of the parties300 Pfizer complains that the Community institutions based their risk assessment on certain conclusions and recommendations found in reports produced by various international, Community and national bodies and published over the years preceding adoption of the contested regulation.301 In Pfizer's submission, those reports do not contain enough specific evidence relating to the risk associated with the use of virginiamycin to enable the Community institutions to carry out their risk assessment but deal with the problem of resistance to antibiotics in general. Any action taken in respect of virginiamycin should be founded not on general concerns but on the specific situation of virginiamycin.302 The Council contends that those reports specifically concern the problem of resistance to antibiotics and the link between that phenomenon and the use of antibiotics as additives in feedingstuffs. It points out that virginiamycin is specifically mentioned in some of the reports.(ii) Findings of the Court303 It is clear from the preamble to the contested regulation that, contrary to Pfizer's submission, the Community institutions relied principally for the purpose of their risk assessment of virginiamycin on certain aspects of the scientific analysis in the SCAN opinion, summarised at recitals 15 to 19 to the contested regulation, and on the new study on live rats.304 However, it is evident from recital 23 to the contested regulation that the Community institutions took the conclusions and recommendations in the various reports from international, Community and national bodies into account only as supplementary material and did so for the purposes of their analysis of all the products affected by the measure.305 It follows, first, that, contrary to what Pfizer in essence submits, the Community institutions did not replace a scientific analysis of the risks associated with the use of virginiamycin by references to the conclusions and recommendations of the various reports. Nor did they base their decision to depart from the findings in the SCAN opinion on the conclusions in those reports: rather they based it principally on aspects of the SCAN opinion.306 Second, the Court observes that even if those reports relate to the problem of resistance to antibiotics in general, they deal, in particular, with the possible implications of the use of antibiotics as additives in feedingstuffs. Furthermore, those reports specifically analyse the risks associated with the use of antibiotics, such as virginiamycin, which may entail cross-resistance to antibiotics used in human medicine. Last, in some of those reports, virginiamycin is specifically mentioned as one of the products whose use as a growth promoter might lead to a reduction in the effectiveness of certain antibiotics in human medicine.307 Third, and more specifically, it is clear that the WHO report and the Copenhagen Recommendations, cited at recital 23 to the contested regulation, were adopted following wide consultation of a large number of scientists. It is also apparent from the Copenhagen Recommendations that representatives of the pharmaceutical industry attended the conference following which that report was adopted. The Court therefore has no reason to doubt that those reports were drawn up on the basis of the best scientific data available at international level.308 Fourth, the same findings may be made as regards the reports of certain national specialist bodies, such as the Swedish report, the Netherlands report, the House of Lords report and the United Kingdom report (cited at paragraphs 36 and 46 above). Although, with the exception of the Swedish report, those documents are not referred to in the preamble to the contested regulation, the Council and the interveners supporting it nevertheless stated at the hearing that the Commission took account of those reports, which were brought to its notice in the context of the close cooperation between the Member States and the Commission within the Standing Committee. Mention is specifically made of the United Kingdom and Netherlands reports in the short report of the meeting of the Standing Committee held on 17 and 18 September 1998.309 Consequently, there was nothing to preclude the Community institutions from taking account of those various reports in their assessment of the risks associated with virginiamycin. On the contrary, such an approach made it possible to ensure that the action taken by the Community institutions took account of the most recent results of international research.310 It follows that the Community institutions did not err in that regard either.(d) Conclusion311 In the light of the foregoing, it must be concluded that the Community institutions did not make the errors alleged by Pfizer when they made findings in respect of the relevant facts in this case. The Court must nevertheless consider whether the Community institutions made a manifest error of assessment when they concluded, on the basis of those facts, that the use of virginiamycin as a growth promoter constituted a risk to human health.4. The errors which the Community institutions are alleged to have made in concluding that the use of virginiamycin as a growth promoter constituted a risk to human health(a) Introduction312 Pfizer, supported by the parties intervening on its behalf, argues that the Community institutions were wrong to disregard the conclusions in the SCAN opinion and take the view that the use of virginiamycin as a growth promoter constituted a risk to human health and that preventive protective measures should be taken. The arguments put forward may be reordered in two claims. First, Pfizer claims that human resistance to streptogramins does not have any adverse effects on human health (b). Second, it submits that the Community institutions were not entitled, on the basis of the available scientific data, to find a link between the use of virginiamycin as an additive in feedingstuffs and the development of streptogramin resistance in humans (c).313 Before ascertaining whether these claims are well founded, the Court will first summarise the scientific background described in the documents before it and recall the purpose and scope of judicial review.314 As regards the scientific background, the parties are in agreement that the use of virginiamycin as an additive in feedingstuffs constitutes a risk to human health only (i) if, owing to such use, resistance to that antibiotic develops in the animals concerned, (ii) if that resistance can be transferred from animals to humans and (iii) if, owing to the development of resistance in humans, the effectiveness of that antibiotic - or antibiotics of the same class - against certain dangerous infections in humans is eliminated or reduced.315 It is apparent from the documents before the Court that Pfizer does not dispute that it is broadly accepted by scientists that a consequence of using antibiotics in general, and virginiamycin in particular, as growth promoters is to increase the pool of bacteria resistant to those products in animals. Even though Pfizer argues that there are other explanations for that phenomenon, it does not put forward any specific argument to challenge the conclusion drawn by the Community institutions in that regard in recital 18 to the contested regulation. Moreover, that conclusion was endorsed by SCAN in its opinion (comment on conclusion 1 of the supplementary report from the Danish Veterinary Laboratory).316 Likewise, it is clear from the documents before the Court that Pfizer does not deny that there is a possibility of cross-resistance between virginiamycin, which is used solely as an additive in feedingstuffs, and other antibiotics of the same class, namely pristinamycin and Synercid.317 However, Pfizer denies that the Community institutions had a proper scientific basis as regards the other aspects of the link which they found between the use of virginiamycin as a growth promoter and the development of streptogramin resistance in humans. Those other aspects are, first, the physical movement of resistant bacteria from animals to humans and, second, either the colonisation of the human organism by those bacteria or the transfer of resistance via transmission of genetic information.318 In that regard, it is clear from the documents before the Court that, for a transfer of antimicrobial resistance from animals to humans to take place, resistant bacteria must first move physically from animals to humans. It is thought that the transfer could take place either via direct human contact with animal excrement or with water contaminated with those bacteria or via the food chain, which could happen if meat is contaminated with resistant bacteria when an animal is slaughtered in unhygienic conditions and if those bacteria survive both rinsing in the slaughterhouse and the preparation and cooking of the meat and pass into the human digestive system.319 Once resistant bacteria have physically moved from animals to humans, the scientific reports submitted to the Court mention two ways in which actual resistance can be transferred to humans. The first involves resistant bacteria of animal origin colonising the human digestive system, i.e. surviving there and, if they are capable of doing so, causing infections (zoonotic bacteria). The second involves resistant bacteria of animal origin which, whether they are capable of causing infections or whether they are, in principle, harmless to humans (commensal bacteria, such as enterococci), transmit the resistance information `encoded' in certain of their genes to bacteria normally present in humans which are themselves capable of causing infections (pathogens such as staphylococci).320 In that regard, moreover, the parties are agreed that, at the time when the contested regulation was adopted, it was not yet scientifically established that the use of virginiamycin as an additive in feedingstuffs had or could have adverse effects on human health caused by a transfer of antimicrobial resistance from animals to humans. Pfizer nevertheless accepted that the possibility that use of that product would have such a consequence could not be definitively precluded either.321 Referring to the terms employed at paragraph 147 above, Pfizer accepts that use of virginiamycin entails a `hazard' to human health. However, it argues that the mere fact that a hazard, within the meaning of those terms, exists is not enough to justify withdrawing authorisation from a product on the basis of the precautionary principle. When questioned at the hearing, the Council stated that in the present case, the mere existence of a `hazard' within the meaning of the abovementioned terms, associated with the use of virginiamycin as a growth promoter, would not have allowed it to adopt the contested regulation, since any modern pharmaceutical product has some hazards.322 It is therefore necessary to examine whether, in the present case, the scientific evidence available to the Community institutions was sufficiently reliable and cogent for them to conclude that there was a risk, within the meaning of the term used in paragraph 147 above, associated with the use of virginiamycin as a growth promoter.323 As regards the purpose and scope of judicial review, the Court observes, first, that in support of their respective arguments, the parties have, both during the written procedure and at the hearing, submitted for review by the Court a large number of arguments of a scientific and technical nature, based on a large number of studies and scientific opinions from eminent scientists. In that regard, it must be borne in mind that where, as in such a situation, the Community institutions are required to make complex assessments of a scientific and technical nature, judicial review is restricted and does not imply that the Community judicature can substitute its assessment for that of the Community institutions (see paragraphs 168 and 169 above).324 Second, in so far as the parties have referred to information which was not available at the time when the contested regulation was adopted, it must be borne in mind that the assessment made by the Community institutions can be challenged only if it appears incorrect in the light of the elements of fact and law which were available to them at the time when the contested regulation was adopted (see, to that effect, Wuidart and Others, cited at paragraph 169 above, paragraph 14, and Joined Cases C-133/93, C-300/93, C-362/93 Crispoltoni and Others [1994] ECR I-4863, paragraph 43, and Case T-6/99 ESF Elbe-Stahlwerke Feralpi v Commission [2001] ECR II-1523, paragraph 93, and the case-law cited there). It follows that, subject to that condition, the information in question cannot be taken into account for the purposes of the review of the legality of the contested regulation.(b) The adverse effects on human health should streptogramin resistance develop in humans325 Pfizer maintains, in essence, that even if streptogramin resistance were to develop in humans because of a transfer of resistance, that would not have any adverse effects on human health. It puts forward three lines of argument.326 First, Pfizer draws attention to the fact that the SCAN opinion concluded that in Denmark existing strategies for coping with infections caused by enterococci and staphylococci remained successful and that the use of streptogramins for the treatment of such infections was not essential. It is apparent from recitals 17 and 21 to the contested regulation that the Community institutions disregarded that aspect of the SCAN opinion and concluded that it was necessary to preserve the effectiveness of streptogramins in human medicine for use as a treatment of last resort.327 The Court observes in limine that SCAN has confirmed, and Pfizer has not disputed, that the development of resistance to antibiotics in bacteria in general, and among enterococci and staphylococci in particular, has been observed worldwide and constitutes a serious threat to human health.328 Further, as regards more specifically the question of the use of antibiotics belonging to the class of streptogramins to fight infections caused by enterococci and staphylococci, it is clear from the SCAN opinion that streptogramins were not used for the treatment of human infections in Denmark and that, in any event, those antibiotics were not essential for such treatment. Moreover, SCAN noted that in that country infections caused by staphylococci could be treated with the assistance of other antibiotics, notably methicillin. It went on to confirm that a significant increase in methicillin-resistant staphylococci (MRSA) had been observed in certain Member States. In that regard, Synercid, although not yet authorised in Europe at that time, could be used as a treatment of last resort. SCAN noted that that development was relatively unimportant in Denmark and that therefore `at present, existing strategies for coping with hospital infections caused by enterococci or staphylococci remain successful in Denmark and the [supplementary report from the Danish Veterinary Laboratory] contains no evidence that existing therapies are likely to be compromised in the short term' (comment on conclusion 8 of the supplementary report from the Danish Veterinary Laboratory).329 It follows, first, that the SCAN finding to which Pfizer draws attention relates solely to the situation in Denmark and is not based on an analysis of the problem at Community level. The Court held at paragraph 184 above that in the procedure laid down in Article 24 of Directive 70/524 it is the responsibility of the Community institutions to carry out a risk assessment at Community level.330 Second, it is apparent from the SCAN opinion that the presence of staphylococci and enterococci resistant to the antibiotics used until now for the treatment of infections caused by those bacteria, in particular vancomycin, was perceived as a major problem in human medicine, in particular in the United States but also, to a lesser extent, in certain Member States. Moreover, that finding is corroborated by various reports by international, Community and national bodies produced to the Court. Synercid was, in that regard, seen as a treatment of last resort and preservation of its effectiveness was perceived as imperative. By way of example, in the House of Lords report, the situation was described as follows: `Enterococci have natural resistance to numerous antibiotics, and cause serious infections in hospitalised immune-impaired patients. Infection with enterococci resistant to the glycopeptide vancomycin (VRE) is almost untreatable ... The [WHO] report expresses concern at the possibility of increased dissemination of glycopeptide resistance genes to Enterococci faecalis and their spread to other gram-positive organisms, particularly to MRSA for which vancomycin is the drug of last resort' (paragraph 3.20 of the report).331 It follows that, analysed at Community level, the development of streptogramin-resistant enterococci and staphylococci in humans was considered a serious threat to public health.332 Third, as Pfizer points out, it is clear from the SCAN opinion and the various reports produced to the Court that the use of streptogramins in human medicine was still relatively unimportant in Europe, particularly because the rate of increase of VRE and MRSA had been lower than in the United States.333 However, as Pfizer has itself recognised, that phenomenon has increased in recent years.334 Furthermore, in response to questions put by the Court, the experts stated at the hearing that anti-microbial resistance has significant long-term effects on public health in that it is a virtually irreversible phenomenon and, therefore, is eliminated, if ever, only long after the antibiotic has ceased to be added to feedingstuffs.335 The Community institutions cannot be criticised for having taken account of those factors in their assessment at Community level of the risks associated with the use of virginiamycin as a growth promoter (see paragraph 153 above). From that perspective, contrary to the view held by SCAN, which had ruled out any `immediate' risk, the Community institutions could properly adopt a cautious approach and pursue the objective of preserving the effectiveness of products used in human medicine even though, at the time when the contested regulation was adopted, they were little used in that sphere.336 Pfizer's first line of argument must therefore be rejected.337 Second, Pfizer submits that, since the adoption of the contested regulation, the pharmaceutical industry has made unceasing efforts to develop new antibiotics effective in the treatment of bacteria which have become resistant to antibiotics available on the market. In particular, in the United States a new antibiotic, linezolid, has already been authorised for the treatment of E. faecium bacteria resistant to other antibiotics. Consequently, even if streptogramin resistance were to be observed in some patients, they could be treated with the new product.338 In that regard, the Court observes that, when the experts called to give evidence for the institutions were questioned at the hearing, they emphasised, without being challenged on that point by Pfizer's experts, the great importance in human medicine of the possibility of using several antibiotics to treat the same infection. Therefore, the Court must conclude that, given the fact that the new antibiotics mentioned by Pfizer, in particular linezolid, were not authorised in the Community at the time when the contested regulation was adopted and also the ever-increasing difficulty of creating new antibiotics effective in human medicine, and in view of the increasingly limited number of such antibiotics, the Community institutions could properly take the view that it was necessary to preserve the greatest possible number of antibiotics capable of being used in human medicine, irrespective of the existence of other products.339 Third, Pfizer observes that E. faecium bacteria are, as a general rule, harmless and cause infections only in patients who already have a defective immune system, such as patients suffering from the human immunodeficiency virus (`HIV') or being treated with immuno-suppressive drugs, for example transplant patients. Those patients could, in principle, be treated with other antibiotics and medical complications would arise only if the E. faecium bacteria had already developed resistance to every other antibiotic on the market.340 The Court considers that that argument cannot undermine the validity of the objective pursued by the Community institutions of preserving the effectiveness of streptogramins for the treatment of those infections. The objective of ensuring that patients with a reduced immune system, in particular those suffering from the greatest health scourge of modern times, HIV, are effectively treated is consonant with the objective laid down in the Treaty, namely ensuring a high level of human health protection. Similarly, there are no reasonable grounds for denying that preservation of the effectiveness of medicinal products capable of being used for the treatment of patients needing a particularly high level of protection, such as transplant patients, is a valid objective. The fact that an antibiotic can only be important in the treatment of a particular category of patients can on no account be a valid reason for not taking all the measures necessary to ensure that it continues to be effective.341 For all those reasons, the Court must conclude that the Community institutions did not make a manifest error of assessment when they found that the development of streptogramin-resistant enterococci and staphylococci was a serious threat to human health and that it was necessary, in order to prevent that adverse effect for human health from materialising, to preserve the effectiveness of streptogramins so that they may be used now or in the future in human medicine. Consequently, Pfizer's argument that the increase of streptogramin resistance in humans does not entail any adverse effects for human health cannot be accepted.(c) The link between the use of virginiamycin as an additive in feedingstuffs and the development of streptogramin resistance in humans342 Recitals 19 and 20 to the contested regulation reveal that when they accepted that there was a link between the use of virginiamycin as a growth promoter and the development of streptogramin resistance in humans, the Community institutions relied, in the main, on the results of recent scientific research submitted by the Danish authorities in support of their safeguard measure. Pfizer submits, in essence, that that research could not constitute a proper scientific basis. Before the merits of Pfizer's arguments are examined, it is appropriate to give a brief summary of the various pieces of scientific research.(i) Summary of the research referred to in recitals 19 and 20 to the contested regulation343 With reference to the physical movement of resistant bacteria from animals to humans, the Community institutions referred to a scientific study described in the supplementary report from the Danish Veterinary Laboratory. In that study a significant number of virginiamycin-resistant E. faecium bacteria were detected in food originating from pigs (22%) and poultry (54%) in sales outlets in Denmark. The study had shown that there was a high level of human exposure to resistant bacteria through the food chain.344 Furthermore, the Community institutions cited an observation carried out by scientists from the Danish Veterinary Laboratory, in particular A.E. van den Bogaard, at a farm in the Netherlands, involving the farmer and his poultry. In that case, two strains of E. faecium bacteria with the same genetic fingerprint and resistant to virginamycin and pristinamycin were detected, one in the farmer's cells and the other in the excrement of one of the turkeys on his farm (`the Dutch farm observation'). In recital 19 to the contested regulation, the Council noted in respect of that observation that `even if general conclusions about the transfer of resistant enterococci from animals to humans should not be drawn from a single case, the Commission sees it as an indication that this might be confirmed by other cases in the future'. That observation also demonstrated that the human digestive system can be colonised by resistant bacteria originating in animals.345 The Community institutions also relied on two scientific studies carried out in laboratory conditions during which the transfer of the sat A gene, which confers resistance to virginiamycin on the bacteria concerned, between isogenic strains of E. faecium was examined. In the first study the sat A gene was transferred in vitro from a resistant E. faecium bacterium originating in animals to a non-resistant isogenic bacterium, i.e. one with a similar genetic structure (`the in vitro study of genetic transfer'). In the second study (the new study on live rats referred to at paragraph 54 above), which was submitted by the Danish authorities only after the SCAN opinion had been delivered, a transfer of that gene between isogenic strains of E. faecium bacteria was demonstrated in live rats, more specifically in the gastro-intestinal tract of rats under experimental conditions.346 Finally, the Community institutions cited a number of observations described in the Status Report, which indicated that strains of enterococci with genetic factors conferring resistance to virginiamycin existed within the human population.(ii) Arguments of the parties347 Pfizer claims essentially that the various pieces of scientific research cited by the Community institutions in recitals 19 and 20 to the contested regulation were not apt to prove that a risk existed, within the meaning of the terms cited above.348 As regards the Dutch farm observation, Pfizer reiterates the criticism made by SCAN on 10 July 1998 in its opinion, i.e. that it is not possible to conclude from this single and anecdotal incident that E. faecium bacteria detected in the farmer originated in one of his turkeys. They could just as easily have a different common source. Similarly, the bacteria could have been transferred from the farmer to his poultry and not the other way around.349 For the same reason, in Pfizer's submission, the observations relating to the presence of resistant bacteria both in meat intended for consumption and in the human population do not prove conclusively that those bacteria were actually of animal origin.350 As regards the in vitro study of genetic transfer and the new study on live rats, Pfizer relies on the SCAN opinion, in which SCAN pointed out major methodological weaknesses of the experiments and gaps in the scientific data. SCAN's comments on the in vitro study of genetic transfer show that the same strain of E. faecium bacteria was used as donor and recipient. Given that the probability of a gene transfer is directly related to the similarity of the genetic material of the donor and recipient strains, the use of identical strains significantly increases the probability that gene transfer will occur. Thus there is nothing surprising in the fact that two identical strains of bacteria should reciprocally transfer genetic material between them. The same objections could, in Pfizer's submission, be made in respect of the new study on live rats, in so far as it was conducted under artificial conditions, since the rats used did not have the intestinal flora of animals living in natural conditions. Pfizer therefore maintains that that study, although carried out with live rats, adds little to the first in vitro experiment.351 Pfizer submits that those observations and experiments could in reality serve only as working hypotheses, incapable of demonstrating that a risk existed. Before taking a decision as to whether to withdraw or maintain the authorisation of virginiamycin as an additive in feedingstuffs, the Community institutions should have awaited completion of other scientific research in order to ascertain whether those hypotheses were correct.352 Before they acted, the Community institutions should, like the competent authorities in the United States and Australia, have embarked on a research programme designed to ascertain the level of exposure of meat to resistant bacteria in order to obtain reliable data enabling the level of exposure to be quantified and the effectiveness of hygiene measures to be assessed.353 Likewise, it was also necessary to verify the results of the Dutch farm observation by conducting other observations and experiments in order to be in a position to endorse or rebut the results obtained, which Pfizer deems insufficiently conclusive (Professor I. Phillips stated at the hearing: `It's an important observation that really needs experimental exploration'). Without such research, the movement of virginiamycin-resistant E. faecium bacteria cannot be scientifically proved or disproved, nor can the prevalence of the phenomenon be measured.354 As regards the in vitro study of genetic transfer and the new study on live rats, Pfizer submits that observations and experiments should have been carried out in the real world rather than, as was the case with those two studies, in artificial laboratory conditions. Thus, responding to a written question from the Court, Pfizer maintained: `The key question, however, is whether this transfer actually happens in the real world'.355 In Pfizer's submission, the fact that streptogramin resistance has developed in humans can be more plausibly explained by factors other than those connected with the use of virginiamycin as an additive in feedingstuffs.356 First, referring in particular to the SCAN opinion, Pfizer argues that research carried out in France and the United States has shown that, in spite of the use of virginiamycin as a growth promoter, streptogramins have remained very largely effective in human medicine in those countries. Similarly, Pfizer points out that although virginiamycin has been used for more than 30 years, there is no known case of a patient being infected by streptogramin-resistant E. faecium bacterium of animal origin.357 It goes on to point out that it is well known that certain bacteria, in particular some enterococci, E. faecalis, are naturally resistant to streptogramins. Similarly, the development of resistance in humans is, to a large extent, due to the excessive and inappropriate use of antibiotics in human medicine.358 The Council contends, however, that the various pieces of research referred to in recitals 19 and 20 to the contested regulation together amounted to a coherent body of evidence suggesting that there was a link between the use of virginiamycin as a growth promoter and the development of streptogramin resistance in humans. It denies that the arguments put forward by Pfizer are capable of showing that proposition to be unfounded.(iii) Findings of the Court359 In the light of the foregoing, it is appropriate to consider whether the Community institutions could properly disregard the SCAN opinion and conclude that, by virtue of the various scientific studies referred to in recitals 19 and 20 to the contested regulation, they had a proper scientific basis as regards the various stages of the transfer of streptogramin resistance from animals to humans.360 The Court observes in limine that Pfizer (like SCAN in its opinion) does not exclude the possibility that the various stages of the transfer of resistance, as summarised at paragraph 313 et seq. above, may occur.361 Supported by Professor I. Phillips, Pfizer stated at the hearing that there was no doubt that the physical movement of resistant bacteria from animals to humans might occur. Likewise, in response to a written question put by the Court, Pfizer confirmed that it was not denying that genetic material conferring resistance to virginiamycin could be transferred between isogenic strains of E. faecium bacteria under experimental conditions in a laboratory. Pfizer also acknowledges that the results obtained can be explained by the transfer of resistance from animals to humans, even though, in its opinion, other explanations are more plausible.362 Similarly, the Court observes that Pfizer does not question the relevance of the various observations and experiments cited by the institutions but rather the methods applied and the conclusions drawn from them.363 As regards the discovery of resistant bacteria on meat intended for consumption, Pfizer has even confirmed, in answer to the Court's written question, that the level of resistant organisms on meat intended for human consumption was a critical component in the assessment of risks to human health associated with that food. Similarly, when questioned at the hearing, Professor I. Phillips confirmed that the Dutch farm observation was, in itself, `impeccable'. Finally, Pfizer does not question that the in vitro experiment on gene transfer and the new study on live rats show that E. faecium bacteria can exchange genetic material conferring resistance to virginiamycin amongst themselves, as indeed SCAN confirmed in its opinion (comment on conclusion 4 of the supplementary report from the Danish Veterinary Laboratory).364 In addition, Pfizer affirms that, as is also clear from the SCAN opinion, other observations and experiments, similar to those referred to in recital 19 to the contested regulation, had already been carried out in respect of other antibiotics.365 In particular, it is clear from the documents before the Court that observations had been conducted in 1997 on the resistance of E. faecium bacteria to another antibiotic, vancomycin (Study by A.E. van den Bogaard and others entitled `Vancomycin-Resistant Enterococci in Turkeys and Farmers', The New England Journal of Medicine, 1997). That study, which was submitted to the Commission by Pfizer in its observations on the Status Report and evaluated in the reports submitted by the Danish authorities and which formed the subject-matter of a number of scientific reports drawn up before the adoption of the contested regulation and submitted to the Court, concludes: `These findings confirm the high prevalence of vancomycin-resistant enterococci in healthy persons living in areas where avoparcin [the related antibiotic] is used as an antimicrobial growth promoter'.366 When asked at the hearing whether those studies were relevant to the instant case, Professor I. Phillips, giving evidence for Pfizer, confirmed that that observation `contributes to the general case'.367 Similarly, as regards the possibility of a transfer of resistance by means of a temporary colonisation of the human digestive system by resistant bacteria, the Court observes that a study published in 1997 by M. Blom and others entitled `Ingestion of Vancomycin-Resistant Enterococcus faecium Strains of Food [of] Animal Origin by Human Healthy Volunteers' reveals that `[i]ngestion of VRE strains of food [of] animal origin by healthy volunteers may result in temporary intestinal growth and colonisation. Since vancomycin resistance determinants are transferable, there is a potential risk for transferring vancomycin resistance to the commensal and pathogenic flora during a temporary colonisation'. Although, as Pfizer submits, that study failed to prove that that method of resistance transfer actually occurs, it also failed to disprove the results of research carried out in respect of streptogramins, as Pfizer acknowledged at the hearing.368 Likewise, a study carried out in 1997 by Woodford and others entitled `Methicillin-resistant Staphylococcus aureus and Vancomycin-resistant enterococci' described observations relating to the resistance of vancomycin-resistant enterococci. The Swedish report referred to at paragraph 46 above summarised that study as follows: `Woodford and co-workers (1997) reported streptogramin resistance in vancomycin-resistant enterococci (VRE) isolated from raw chicken (3 isolates) and from a hospital patient (1 isolate) in the UK. The resistance trait included cross-resistance to macrolides and lincosamides and was transferable to other enterococci. The authors commented on the fact that no streptogramin is yet licensed for use in human therapy in [the] UK, whereas virginiamycin is widely used for growth promotion in animals. A reservoir of streptogramin resistance may be present in animal bacteria. Since infection with VRE is one of the main indications for quinpristin-dalfopristin [synercid] therapy, acquisition of streptogramin resistance by those organisms is most alarming' (see page 308 of the Swedish report).369 The Court concludes that the Community institutions had a scientific basis on which to reach a decision, since they could draw on some results of the most recent scientific research on the matter.370 That being so, Pfizer disputes that that scientific basis was adequate or appropriate. It submits that those various pieces of scientific research did not amount to adequate scientific evidence of a risk associated with the use of virginiamycin as a growth promoter.371 Pfizer argues essentially that the research in question consisted exclusively of observations and experiments which were not scientifically controlled and that no definitive conclusions can be drawn from the results obtained. Relying in particular on the SCAN opinion, Pfizer submits that that research does not provide a definitive answer to the question whether bacteria discovered on meat intended for consumption or in the digestive system of the Dutch farmer were actually of animal origin. Similarly, Pfizer maintains that it is not possible to determine conclusively from those studies whether the cases examined are isolated cases - as it believes is more plausible and as SCAN maintained (`anecdotal', `unsound and without foundation') - or whether, on the contrary, the cases examined are evidence of a widespread phenomenon in natural conditions.372 The Court observes that the weaknesses in the various observations and experiments are not disputed by the defendant, which does not even contend that they admit of scientific certainty or allow any definitive conclusions to be drawn. On the contrary, the parties even seem to be agreed on the reasons for those weaknesses.373 At the hearing, Professor P. Courvalin, giving evidence for the Community institutions, explained that, inasmuch as E. faecium bacteria are found in huge numbers everywhere in the environment, it is physically impossible to retrace their origin with any certainty. Professor I. Phillips, for Pfizer, said more or less the same thing when he stated in essence that, for the same reason, (`It's all over the place. It's in vegetables, it's in fish, it's in all sorts of things that have not been explored') it was in practice extremely difficult, if not impossible, to prove the origin of an E. faecium bacterium in an individual case.374 Likewise, it is apparent from the documents before the Court that the difficulty, even the impossibility, of retracing the origin of E. faecium bacteria detected on meat intended for consumption and in the human population had already been raised in the course of the procedure before the Commission culminating in adoption of the contested regulation. In particular, in its submission on the conclusions of the supplementary report from the Danish Veterinary Laboratory, Pfizer stated:`A potential pathway exists from animal to food either as a result of contamination of the natural environment (e.g. salad) or faecal contamination of carcasses during slaughter and subsequent inadequate cooking before eating. It is much more difficult to show that this movement truly occurs. In reality ... it is impossible to fully retrace the path of contamination to the animal. Contamination detected at any point could have come from an extraneous source ..., a retrospective study cannot be initiated to categorically determine the original source' (page 18).375 Similarly, as regards experiments relating to gene transfer, Professor P. Courvalin explained at the hearing, without being challenged by Pfizer's expert witnesses, that, given the large number of bacteria in both the human and animal digestive system, it was physically impossible to observe a gene transfer between two bacteria in natural conditions outside the laboratory (`You cannot pick up two bacteria in flagrante delicto').376 In those circumstances, the Court must consider whether, as Pfizer maintains in reliance on the SCAN opinion, the Community institutions were required to wait until additional scientific research of the type indicated by Pfizer had been carried out or whether, despite the weaknesses of the available research and disregarding the conclusions of the SCAN opinion, they could conclude on the basis of that research that the use of virginiamycin as a growth promoter involved a risk to human health.377 In that regard, it is appropriate to bear in mind, first, that, when SCAN concluded that the scientific research in question did not justify the safeguard measure taken by the Danish authorities, it, in essence, maintained that although broadly it shared the authorities' concerns, it nevertheless took the view that a full risk assessment should be carried out on the basis of quantitative evidence of the extent of transfer of antimicrobial resistance and the significance of that phenomenon within the overall use of antibiotics (see the SCAN conclusions cited at paragraph 53 above). It added that `any risk that might be posed in the future by the use of virginiamycin as a growth promoter will not materialise in the time required to make such an evaluation and most probably not for some years afterwards. In the meantime monitoring initiated by the Danish Government and the EU will be able to detect any significant increases in glycopeptide and streptogramin resistance in enterococci and staphylococci should that occur.'378 Second, the consequence of Pfizer's argument is that the real purpose of the research which, it submits, should have been carried out before a measure was taken with regard to virginiamycin is to determine conclusively, from experiments conducted in natural conditions, the origin of streptogramin-resistant bacteria detected on meat intended for human consumption and in the human digestive system. A further consequence of that argument is that, in Pfizer's submission, the research should have established whether a transfer between bacteria present in humans of genes conferring streptogramin resistance was possible and the degree of propagation of such genes.379 Questioned at the hearing about the proof which should, in its submission, have been adduced to justify withdrawing the authorisation of virginiamycin, Pfizer stated: `It would be proven with the first infection, or with the first proof of colonisation, or the first proof of transfer in a human'. Professor M.A. Pfaller expressed a similar view when he wrote in the scientific opinion submitted by Pfizer: `Caution and common sense would dictate that whenever possible, utilisation of agents that represent a therapeutic class as growth promoter should be avoided. However, this is only true if those agents have been documented to create strains of potential human pathogens that are resistant to the therapeutic agent and have been shown to be transmitted (organism or resistance gene) from the animal or food source to humans'.380 Similarly, at the hearing, Pfizer explained that if in November 1998 a patient had been infected with an E. faecium bacterium and if that bacterium had turned out to be resistant to streptogramins, virginiamycin would have had to be removed very rapidly from the market, since in that case adverse effects on health would have been established. However, since, in Pfizer's submission, neither transfer nor infection had ever been observed, the whole question is one of pure speculation.381 The Court finds that both the view taken by SCAN in its opinion and the arguments put forward by Pfizer are based on an incorrect interpretation of the precautionary principle.382 First, it must be borne in mind that, when the precautionary principle is applied, the fact that there is scientific uncertainty and that it is impossible to carry out a full risk assessment in the time available does not prevent the competent public authority from taking preventive protective measures if such measures appear essential, regard being had to the level of risk to human health which the public authority has decided is the critical threshold above which it is necessary to take preventive measures.383 Therefore, Pfizer cannot reasonably criticise the Community institutions for basing themselves on scientific studies which did not admit of scientific certainty as to the link between the use of virginiamycin as an additive in feedingstuffs and the development of resistance to that product in man. Likewise, contrary to the claim made by Pfizer in reliance on the SCAN opinion, since the scientific data available were inadequate, it was not necessary to carry out a full scientific risk assessment before taking preventive measures in respect of the product (see paragraph 160 above).384 Second, the Court held at paragraph 141 above that the Community institutions were not required, for the purpose of taking preventive action, to wait for the risk to become a reality and for any adverse effects to materialise.385 In contrast to the view expressed by SCAN in its opinion, the Community institutions were entitled to take action on the basis of the precautionary principle before quantitative evidence of the extent of the problem posed by the use of virginiamycin as an additive in feedingstuffs was available. Research aimed at obtaining that evidence has as its purpose to observe and analyse the transfer of antimicrobial resistance from animals to humans and, above all, the extent of such transfer and, thus, the reality and the seriousness of any adverse effects of using virginiamycin, which the precautionary principle is specifically intended to prevent.386 If the Community institutions were unable to take any preventive protective measures until such research was completed, the precautionary principle, the aim of which it to prevent the occurrence of any such adverse effects, would be rendered devoid of purpose.387 The precautionary principle allows the competent public authority to take, on a provisional basis, preventive protective measures on what is as yet an incomplete scientific basis, pending the availability of additional scientific evidence. As the Court held at paragraph 161 above, the competent public authority must weigh up its obligations and decide either to wait until the results of more detailed scientific research become available or to act on the basis of the scientific information available. Having taken account, first, of the seriousness of the repercussions should the risk of streptogramin resistance being transferred from animals to humans become a reality and, second, of the results of the scientific research examined above, the Court concludes that the Community institutions did not make a manifest error of assessment when they came to weigh up their obligations.388 Contrary to what Pfizer submitted at the hearing, the Community institutions were entitled to take preventive protective measures before proof was provided of the first colonisation of the human intestinal system by streptogramin-resistant bacteria of animal origin or of the first case of a transfer of streptogramin resistance from animals to humans. Still less were the Community institutions obliged to await the first case of human infection by a streptogramin-resistant bacterium of animal origin, let alone the first human death to occur when such an infection proved untreatable owing to the development of resistance.389 In the light of the foregoing, the Court finds that the Community institutions did not exceed the bounds of the discretion conferred on them by the Treaty when they took the view that the various experiments and observations referred to in recitals 19 and 20 to the contested regulation were not mere conjecture but amounted to sufficiently reliable and cogent scientific evidence for them to conclude that there was a proper scientific basis for a possible link between the use of virginiamycin as an additive in feedingstuffs and the development of streptogramin resistance in humans.390 In those circumstances, Pfizer's arguments that the development of streptogramin resistance in humans can be more plausibly explained by other factors cannot be accepted.391 Relying on the SCAN opinion and the advice of Professor Casewell and Professor Pugh, Pfizer has, admittedly, put forward a number of factors which could be advanced to counter the argument that there is a link between the use of virginiamycin as an additive in feedingstuffs and the development of streptogramin resistance in humans. In particular, Pfizer has drawn attention to research in France and in the United States which shows that in those countries streptogramins continued to be very effective although virginiamycin had been used there as an additive in feedingstuffs for many years. Similarly, Pfizer maintained that some bacteria had a certain level of natural resistance, which was one plausible explanation for the level of streptogramin resistance observed.392 However, Pfizer does not claim that those arguments prove conclusively that there is no link between the use of virginiamycin as an additive in feedingstuffs and the development of streptogramin resistance in humans. They merely demonstrate that the existence of such a link is `very unlikely' and that other `plausible explanations' existed. Furthermore, the Council and the interveners challenged the merits of Pfizer's arguments relying, in their turn, on experts.393 It is not for the Court to assess the merits of either of the scientific points of view argued before it and to substitute its assessment for that of the Community institutions, on which the Treaty confers sole responsibility in that regard. In the light of the foregoing, the Court nevertheless finds that the parties' arguments, supported in each case by the opinions of eminent scientists, show that there was great uncertainty, at the time of adoption of the contested regulation, about the link between the use of virginiamycin as an additive in feedingstuffs and the development of streptogramin resistance in humans. Since the Community institutions could reasonably take the view that they had a proper scientific basis for a possible link, the mere fact that there were scientific indications to the contrary does not establish that they exceeded the bounds of their discretion in finding that there was a risk to human health.394 Finally, it is apparent from the documents before the Court that, at the time when the contested regulation was adopted, other scientists and specialist bodies had taken a different view from that of SCAN and the experts called by Pfizer.395 The WHO report, referred to at paragraph 37 above, which was adopted in October 1997 following a working meeting attended by 522 specialists from 42 different countries, states that despite the uncertainty `there is enough evidence to cause concern'. In particular, the report states (p. 6):`Due to the limited number of agents available for the treatment of glycopeptide-resistant enterococci, antimicrobial agents not previously used in humans are being sought, including drugs from classes currently used as growth promoters in animals. Therefore the selection of further resistance in enterococci is undesirable, e.g. streptogramin resistance due to use of virginiamycin as a feed additive in animals.'396 Similarly, the Copenhagen recommendations include the following passage:`For many years antibiotics have been used in animal husbandry as growth promoters. The potential for resistance development is our particular concern where similar or closely related antibiotics are or will be developed for use both as growth promoters and for the treatment of human infectious disease. The workshop recognised that this was a controversial subject. The large majority of the workshop considered the use of antibiotics for growth promotion was not justified and agreed with the opinion of the WHO expert meeting that "increased concerns regarding risks to human health resulting from the use of antimicrobial growth promoters indicate that it is essential to have a systematic approach towards replacing growth promoting antimicrobials with safer non-antimicrobial alternatives"; and recommendations from the Economic and Social Committee of the EU (ESC), that "the emphasis should be first and foremost on limiting the use of antibiotics that can provoke cross resistance to drugs that are or will become relevant to human health care". Several members felt that before an antibiotic is permitted as a growth promoter, its lack of any risk for human health should be demonstrated. The workshop was, however, unanimous that the use of an antibiotic as a growth promoter should be stopped whenever there was clear evidence of a significant risk to human health from such usage.' (Page 35 of the recommendations).397 Following a thorough analysis of the available scientific data, the authors of the Swedish report came to the following conclusion regarding virginiamycin:`Increased resistance to ... virginiamycin would hamper the therapeutic use of substances from these classes in both animals and humans. Exposure of bacteria to ... virginiamycin ... selects for resistant strains, usually carrying one or several transmissible resistance determinants. In order not to further diminish their therapeutic value, [virginiamycin] should be restricted to therapeutic use ...'398 Following a thorough analysis of the available scientific data based on an 11-page list of the literature used, the 13 scientists on the Netherlands Health Council stated:`The Committee concludes that bacterial resistance development in humans is a health risk that cannot be neglected. In spite of the lack of knowledge concerning the extent to which the use of growth promoters in livestock farming has contributed towards this development, measures to reduce and finally stop the use of antibiotics as growth promoters are justified and necessary' (see page 19 of the Netherlands report).399 According to that body, there are particularly strong grounds for taking measures as regards products such as virginiamycin, for which the phenomenon of cross-resistance has been established.400 Similar conclusions are drawn in the House of Lords report. It is apparent from that report that the House of Lords Select Committee on Science and Technology heard a large number of experts, some of whom represented the industry concerned (one of them was in fact employed by Pfizer). In that report the Committee drew, inter alia, the following conclusions:`The new antibiotic Synercid is the PHLS's [Public Health Laboratory Service] best hope as a treatment for multi-resistant enterococci; but resistance to Synercid may have been induced already by use of the related growth promoter virginiamycin, used in pigs, poultry and cattle [paragraph 3.22 of the report] ... On the evidence before us ... we recommend that antibiotic growth promoters such as virginiamycin, which belong to classes of antimicrobial agent used (or proposed to be used) in man and are therefore most likely to contribute to resistance in human medicine, should be phased out, preferably by voluntary agreement between the professions and industries concerned, but by legislation if necessary ...' (paragraph 11.20 of the report).(d) Conclusion401 In the light of the foregoing, the Court concludes that Pfizer has not established that the Community institutions erred when they disregarded the SCAN opinion and concluded, on the basis of the scientific knowledge available at the time of adoption of the contested regulation, that the use of virginiamycin as an additive in feedingstuffs entailed a risk to human health.402 It is clear, on the contrary, that the Community institutions could properly find that there were serious reasons, within the meaning of Article 3a(e) of Directive 70/524, concerning human health for restricting streptogramins to medical use.403 For the same reasons, Pfizer's argument that the Community institutions applied the so-called `zero risk' test in this case is also unfounded.5. Conclusion404 In view of all of the foregoing, the Court concludes that Pfizer has not succeeded in proving that the Community institutions made errors in their risk assessment.C - Errors in managing the risks associated with the use of virginiamycin as a growth promoter405 As the Commission has indicated in its Communication on Consumer Health and Food Safety, the Community institutions must, when managing risks, determine the nature and scope of the measures to be taken in the light of the risk assessment.406 On that point, it is appropriate to bear in mind that the Community institutions enjoy a broad discretion in that respect and that review by the Community judicature must be restricted to examining whether the exercise of such discretion is vitiated by a manifest error or a misuse of powers or whether the Community institutions clearly exceeded the bounds of their discretion (see paragraph 166 above).1. Breach of the principle of proportionality and of the right to property, errors in the `cost/benefit' analysis and misuse of powers(a) Introduction407 Pfizer argues that the contested regulation was adopted in breach of the principle of proportionality inasmuch as it is a manifestly inappropriate means of achieving the objective pursued and the institutions, which had a choice between a number of measures, failed to choose the least onerous one. Putting forward essentially the same arguments, Pfizer also maintains that the contested regulation constituted a breach of the right to property and a misuse of powers.408 Furthermore, in Pfizer's submission, the Community institutions made errors in the `cost/benefit analysis', in which the costs and benefits to society expected from the action envisaged are compared with the costs and benefits which would apply if no action were taken.409 Although the Council does not dispute that in a situation such as this the Community institutions were obliged to carry out such an analysis, it contends that no errors were made in that regard.410 The Court considers that a cost/benefit analysis is a particular expression of the principle of proportionality in cases involving risk management. It therefore considers it appropriate to examine the merits of the arguments relating to that analysis together with those concerning breach of the principle of proportionality.411 The Court observes in limine that the principle of proportionality, which is one of the general principles of Community law, requires that measures adopted by Community institutions should not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question, and where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (Fedesa and Others, cited at paragraph 115 above, paragraph 13).412 Likewise, in matters concerning the common agricultural policy the Community legislature has a discretionary power which corresponds to the political responsibilities given to it by Article 40 of the EC Treaty (now, after amendment, Article 34 EC) and Article 43 of the Treaty. Consequently, the legality of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate regard being had to the objective which the competent institution is seeking to pursue (Fedesa and Others, cited at paragraph 115 above, paragraph 14).413 In the light of the foregoing, the Court will examine the merits of the parties' arguments regarding the question, first, whether the contested regulation constitutes a manifestly inappropriate means of achieving the objective pursued (b), second, whether other less onerous measures could have been taken (c), third, whether the disadvantages caused by the contested regulation are disproportionate to the objective pursued (d), and, fourth, whether, in the framework of a cost/benefit analysis, those disadvantages are disproportionate by comparison with the advantages which would ensue if no action were taken (e).(b) Whether the withdrawal of the authorisation of virginiamycin as an additive in feedingstuffs was manifestly inappropriate to the objective pursued(i) The excessive and inappropriate use of antibiotics in human medicine414 Pfizer reiterates that in its view the use of virginiamycin as a growth promoter does not constitute a risk to human health. At the very least, the possible or actual transfer of streptogramin resistance from animals to humans is still insufficiently documented. However, Pfizer maintains that there is a broad consensus among experts that the development of antibiotic resistance in humans is primarily due to the excessive and inappropriate use of antibiotics in human medicine (see paragraph 34 above). The contested regulation was not apt to remedy the situation and was therefore a manifestly inappropriate means of achieving the objective which it pursued, i.e. preservation of the effectiveness of streptogramins in human medicine.415 The Council does not dispute that the ban on the use of antibiotics as additives in feedingstuffs is only one of the measures for attaining the aim pursued. However, first, the measures envisaged by Pfizer to a large extent fall outside the powers of the Community institutions. Second, the fact that it may be necessary to adopt other measures does not support the conclusion that withdrawal of the authorisation of virginiamycin is inappropriate.416 The Court observes that it has already held that the Community institutions did not make an error of assessment when they found that, despite existing uncertainty, they had a proper scientific basis on which to conclude that the use of virginiamycin as a growth promoter constituted a risk to human health.417 It follows, first, that in such circumstances the Community institutions cannot be criticised for having taken protective measures without waiting for that scientific uncertainty to be dispelled.418 Second, even on the assumption that the Community institutions had the power and the duty to adopt certain other measures to prevent an excessive and inappropriate use of antibiotics in human medicine, that could not affect the validity of the ban on virginiamycin as an additive in feedingstuffs.419 Furthermore, inasmuch as the Community institutions were entitled to conclude that there was a link between the use of virginiamycin as an additive in feedingstuffs and the development of resistance in humans, the ban on that use constitutes an appropriate, albeit not the only, means of preventing the effectiveness of streptogramins in human medicine from being reduced or even eliminated. In such circumstances, contrary to Pfizer's submission, the Community institutions could reasonably conclude that the adoption of measures intended to reduce or improve the use of antibiotics in human medicine was not an alternative to withdrawing the authorisation of virginiamycin but came under the head of possible further action. The fact that it might be necessary to adopt such further measures does not establish that the contested regulation was inappropriate.(ii) The negative effects of banning virginiamycin420 In support of Pfizer, Fedesa and Fefana argue that a side-effect of using virginiamycin in feedingstuffs is improved animal welfare and that its use allows certain diseases to be prevented and the mortality rate in animals to be reduced. Consequently, drawing on reports published following the banning of antibiotics in Sweden and Finland, the interveners submit that the ban on virginiamycin as an additive in feedingstuffs will result in more antibiotics being used for therapeutic purposes in animals. Contrary to what emerges from the reports, use of antibiotics cannot simply be replaced by an improvement in husbandry and hygiene. In a world in which intensive farming plays even more than before a major part in producing more meat at lower cost, that is simply unrealistic (`wishful thinking'), at least in the majority of Member States. Furthermore, the ban on antibiotics which had been authorised as additives in feedingstuffs will result in alternative, unauthorised products being used by farmers, with considerable risk to consumers. In such circumstances, Fedesa and Fefana submit that the risk of the development of resistance in animals and, consequently, in humans, is greater than if antibiotics continued to be used as growth promoters. Therefore, the adoption of the contested regulation will actually result in an increased - instead of a reduced - risk of resistance developing in humans.421 The Council, supported in particular by the Kingdom of Denmark, the Republic of Finland and the Kingdom of Sweden, rejects that argument. Those parties contend that experiments carried out in those countries following the ban on the use of antibiotics as growth promoters do not substantiate the arguments put forward by Fedesa and Fefana. On the contrary, better animal husbandry and more hygienic farm conditions, in particular, have made it possible to reduce the use of antibiotics for therapeutic purposes without affecting the competitiveness of farmers in those countries.422 The Court notes in that regard that, particularly since Sweden banned the use of antibiotics as additives in 1986, several studies have been undertaken with a view to ascertaining the implications of the ban for animal health and for the productivity of farms. The results of those studies have been summarised in some of the reports of national bodies mentioned at paragraphs 36 and 46 above (the Swedish report, the Netherlands report and the House of Lords report (paragraphs 3.27 to 3.29)). They concur, to a large extent, with the results of a study carried out by G. Bories and P. Louisot, dated February 1998, and submitted by Fedesa and Fefana in support of their arguments. In their submission, that study was brought to the attention of the institutions during the procedure culminating in the adoption of the contested regulation.423 It is clear from the various reports that, although significant difficulties with animal health arose in the first three years following Sweden's ban on the use of antibiotics as growth promoters, considerable progress has been made in terms of hygiene, so that those difficulties have been overcome in recent years. Furthermore, those reports reveal that the total consumption of antibiotics in farming has been reduced since the ban was introduced. Finally, those reports reveal that, after a phase when productivity declined sharply, Swedish farms have, with the exception of pig farms (- 2%), returned to pre-ban production levels. In total, the ban represented a loss of profit of SEK 74 million for pig farmers and SEK 12 million for poultry farmers.424 However, as Fedesa and Fefana have pointed out, it is clear from those reports that the relatively positive results observed in Sweden can, in part, be explained by the low density of animals in that country (whose share of Community production does not exceed 1.5%), as compared with other Member States, such as Denmark, the Netherlands or France, which are large Community meat producers and which have more intensive farming methods. It is reckoned that the consequences of any ban in those countries on antibiotics as additives in feedingstuffs will be more negative than those observed in Sweden, both in terms of animal health (and thus in terms of antibiotic use for therapeutic or preventive purposes) and in economic terms (greater loss of profits).425 However, those reports also reveal that alternative products exist, even though they are regarded by some experts as being less effective, and it is suggested in the reports that changes in farming methods should to some extent allow initial difficulties to be overcome. There are nevertheless differing points of view as regards the extent of those difficulties and the cost to society of such changes in farming methods. The report submitted by Fedesa and Fefana concludes that, although it is perfectly possible to rear animals without using antibiotics as growth promoters, doing so involves an increase both in the cost of meat production and in the quantities of antibiotics administered for therapeutic or preventive purposes. However, in its analysis of the possible consequences of a ban on antibiotics as growth promoters in the Netherlands, the Health Council of the Netherlands concluded that `events in Sweden since 1986 suggest ... that, although problems might initially occur, there is no reason why the therapeutic veterinary use of antibiotics should increase following the complete withdrawal of [antimicrobial growth promoters] ... [I]f appropriate countermeasures were taken, the effect on animal health and welfare would be small' (paragraph 5.3.2 of the Netherlands report).426 Second, as regards the argument that the ban on virginiamycin as a growth promoter would result in an increase in the use of certain antibiotics for therapeutic purposes in animals, it is reasonable to accept, as the Kingdoms of Denmark and Sweden and the Republic of Finland have submitted, that, even on the assumption that such a correlation were established, the potential effects of an increase in the use of antibiotics for therapeutic purposes would, to some extent, be offset by the fact that antibiotics were no longer being used as growth promoters. As the Council and the interveners have argued, the WHO report reveals that long-term use of a small quantity of antibiotics as growth promoters is alleged to be more dangerous, as regards the development of resistance, than using large doses administered over a shorter period (`[l]ow-level, long-term exposure to antimicrobials may have a greater selective potential than short-term, full-dose therapeutic use').427 Furthermore, Pfizer has not substantiated its argument that the ban on virginiamycin will result in the unlawful use of unauthorised additives. That argument, supposing it to have some basis, does not call in question the lawfulness of the contested regulation but at the most brings to the attention of the competent authorities the fact that it may be necessary to take appropriate measures to guard against any such unlawful use.428 Those facts do not establish that the ban on virginiamycin as a growth promoter is a manifestly inappropriate measure. Although in Pfizer's opinion, which is not however shared by all the experts, the ban makes it necessary to change farming methods to avoid too great a use of antibiotics and entails increased production costs for farmers, it is nevertheless the case that the taking of such a measure is a matter for the Community legislature, on which the Treaty confers responsibility for defining the policy which appears to it to be the most appropriate and power to put into effect, should it deem it necessary, a readjustment of the common agricultural policy.429 It follows that the Court cannot accept Pfizer's argument that the contested regulation is manifestly inappropriate owing to the negative effects of withdrawing the authorisation of virginiamycin on animal health and, ultimately, human health.(iii) No action against imports from non-member countries430 Pfizer and the interveners supporting it point out that the ban on the use of virginiamycin by Community farmers was not accompanied by a ban on imports of meat produced in non-member countries in which its use as a growth promoter is authorised. On the contrary, it is apparent from recent statistics that, since the adoption of the contested regulation, there has been a significant increase in imports from non-member countries of meat from animals raised on feed containing the substances banned by the contested regulation.431 Pfizer also observes that, following adoption of the contested regulation, the Commission was asked by the Council to present a report before 30 June 1999 on the economic, legal and public health implications of the case at the international level. Pfizer submits that such a report has never been presented by the Commission, which suggests that the contested regulation is a manifestly inappropriate means of attaining the aim pursued.432 The Council contends that the legality of a measure must be assessed in the light of the legal and factual situation existing at the date of its adoption. At that time, the Council had already asked the Commission to present a report on the measures to be taken at an international level. The fact that the Commission has not yet done so cannot affect the legality of the contested regulation. Furthermore, use of antibiotics as additives by European farmers is in itself more dangerous, since it is thought that the transfer of resistance can take place not only via the food chain but also in other ways. Finally, relatively little meat is imported from non-member countries and the problem caused by those imports is thus negligible.433 The Court observes, first, that the fact that the Community institutions have not adopted measures at international level against imports of meat produced using virginiamycin as a growth promoter cannot of itself affect the validity of the ban on the use of virginiamycin within the Community. It would rather have to be established that in the absence of any such action the contested regulation was in itself a manifestly inappropriate means of achieving the objective pursued.434 Pfizer has not adduced any proof that that is so. On the contrary, by way of guidance, the Council, in its defence, submitted to the Court statistics for 1999, whose accuracy and value as a record of imports made before the contested regulation was adopted have not been disputed by Pfizer. It is clear from those statistics that imports of meat from all types of animals amounted to only 2.3% of Community production (3.3% for bovine meat, 0.3% for pig meat, 2.5% for poultry). Furthermore, those statistics show that 82% of beef imports and 82% of pork imports came from countries where antibiotics were not authorised as growth promoters in feedingstuffs at that time. As regards poultry imports, the parties present conflicting data: according to the Council, only 28% of imports came from countries where virginiamycin was still authorised as a growth promoter for chickens; according to Pfizer, that figure was as high as 53%.435 Replying to the institutions, Pfizer rightly states that, although it is acknowledged that the transfer of streptogramin resistance can take place via the food chain (see paragraph 318 above), those statistics do not indicate that the risk caused by those meat imports is `negligible'.436 First of all, however, the Council's assertion that the risk is negligible is not consistent with what it did following adoption of the contested regulation, since it asked the Commission to consider the effect of those imports and to present a report in that regard. The fact that the Commission has not yet followed up that request cannot of itself call in question the lawfulness of the contested regulation.437 Second, it is evident from those statistics that the institutions did not make a manifest error of assessment when they found that the risk to human health resulting from the import of meat produced using antibiotics as growth promoters was statistically much lower than the risk posed by meat produced with such additives in the Community. Furthermore, it is appropriate to bear in mind (see paragraph 318 above) that the transfer of resistance is thought to take place not only via the food chain but also by humans having direct contact with animal excrement or contaminated water, which does not apply in the case of imported meat.438 Therefore, the risk to human health from imports of meat produced using antibiotics as additives must be regarded as distinct from the risk where antibiotics are used for the same purposes in the production of meat in the Community and as adding a risk to the latter risk. Consequently, the Community institutions cannot be criticised for having sought initially to eliminate the risk of a transfer of streptogramin resistance associated with the consumption of meat produced in the Community and having then gone on to assess the need for action at an international level.439 Consequently, Pfizer has not succeeded in proving that, because no action was taken against imports of meat in whose production antibiotics were used as additives in feedingstuffs, the withdrawal of the authorisation of virginiamycin as an additive in feedingstuffs in meat production in the Community was a manifestly inappropriate means of preventing the effectiveness of streptogramins in human medicine from being reduced or even eliminated.(iv) Conclusion440 On the basis of the foregoing, the Court concludes that adoption of the contested regulation was not a manifestly inappropriate means of achieving the objective pursued.(c) The duty to take other, less onerous, measures441 First, Pfizer submits that the institutions should have awaited the results of the various ongoing studies. Those detailed and expensive studies, some of which were conducted by the industry concerned in cooperation with the Commission, were aimed at finding out whether there was a link between the use of antibiotics, particularly virginiamycin, and the development of resistance to antibiotics in humans. In particular, virginiamycin was undergoing re-evaluation pursuant to Directive 96/51, which provided a suitable framework for examining the issue in detail. The successful conclusion of the studies was jeopardised by withdrawal of the authorisation of virginiamycin. By depriving scientists of the chance to collect data at source, the effect of the measure was to cut off the supply of data to be checked. Pfizer also observes, that, faced with the same problem, the competent authorities in the United States and Australia did not ban the use of virginiamycin as a growth promoter but decided, in 1999 and 2000 respectively, to embark on detailed studies in order to gather all the relevant evidence, on the basis of which a decision could subsequently be taken.442 In that regard, the Court observes in limine that in the course of the risk assessment the institutions found that there had been a considerable increase in the rate of development of antibiotic resistance during the years preceding adoption of the contested regulation and that, at the same time, the rate at which new antibiotics were put on the market had slowed down. In addition, it has been found that antimicrobial resistance is a virtually irreversible phenomenon (see paragraph 334 above).443 In such circumstances, and given that the existence of a link between the use of antibiotics as growth promoters and the development of resistance in humans had not yet been scientifically proved but was nevertheless corroborated by a certain amount of reliable scientific data, it was for the Council, on a proposal from the Commission, to exercise its discretion and assume its political responsibilities in the face of a particularly complex and delicate situation.444 The institutions cannot be criticised for having chosen to withdraw provisionally the authorisation of virginiamycin as an additive in feedingstuffs, in order to prevent the risk from becoming a reality, and, at the same time, to continue with the research that was already under way. Such an approach, moreover, was consonant with the precautionary principle, by reason of which a public authority can be required to act even before any adverse effects have become apparent.445 Contrary to Pfizer's submission, that finding is not undermined by the fact, even on the assumption that it is correct, that withdrawing the authorisation of virginiamycin had an adverse impact on the relevance and effectiveness of the studies in progress. When faced with such a choice, the institutions were entitled to give priority to human health protection over the successful conclusion of research in progress and to do so even if the research had, in part, been initiated by the institutions themselves and gave rise to considerable expense for the industry concerned.446 Furthermore, the documents before the Court show that some of the studies in progress were completed despite adoption of the contested regulation. As regards more specifically the procedure for the re-evaluation of antibiotics during the transitional period, as provided for in Directive 96/51, it should be observed, first, that no provision of that directive prohibits the institutions from initiating the procedure for withdrawal of the authorisation of additives during the transitional period. Second, under Article 2 of the contested regulation, the Commission was obliged to re-examine the withdrawal before 31 December 2000 on the basis of the results of the different investigations concerning the induction of resistances connected with the use of the antibiotics concerned.447 Likewise, the fact that the competent authorities in the United States and Australia decided to undertake fuller research before taking action does not in itself call in question the lawfulness of the contested regulation. First, the fact that certain authorities adopted a different approach from that taken by the Community institutions does not establish that the institutions' action is disproportionate. Second, as the Council correctly pointed out, risk management necessarily entails political choices which can vary from one society to another according to the threshold of risk deemed acceptable.448 Consequently, the first argument cannot be upheld.449 Second, Pfizer goes on to maintain that it would have been possible to provide for veterinary scrutiny of the amount of virginiamycin consumed by different animals or to lower the maximum age limits up to which virginiamycin could be used. At the very least, the institutions ought to have provided for the gradual phasing out of the use of virginiamycin.450 In that connection, Pfizer has not established whether or how such measures would have allowed the objective pursued by the contested regulation, namely to protect human health, to be achieved. Pfizer and the parties which have intervened in support of it have not succeeded in rebutting the argument of the defendant and the interveners supporting it that such measures are ineffective since antimicrobial resistance is, in the view of the experts, a virtually irreversible phenomenon (see paragraph 334 above) and, therefore, is eliminated, if ever, only long after the antibiotic has ceased to be added to feedingstuffs.451 Consequently, Pfizer has not shown that other, less onerous, measures existed and would have allowed the objective pursued by the contested regulation to be achieved.(d) The disproportionate nature of the disadvantages caused by comparison with the objective pursued, and breach of the right to property452 Referring to the BSE judgment, cited at paragraph 114 above, Pfizer argues that withdrawing the authorisation of a product can be regarded as proportionate only if, as in the BSE case, there is a serious and identifiable risk causing great uncertainty and if there is evidence that the source against which action is to be taken is the most likely explanation of the risk faced.453 Referring to the arguments submitted in connection with errors made in the risk assessment, Pfizer submits that, so far as virginiamycin is concerned, those conditions were not met at the time when the contested regulation was adopted. It further points out that it was the only producer of virginiamycin in the world, that the income from that product and substantial investment have been lost because of adoption of the contested regulation and that the regulation gives rise to significant job losses. Likewise, it points out that virginiamycin had been authorised for 30 years as a growth promoter and that the safety and efficacy of the product had been repeatedly checked. Consequently, in its submission, the immediate banning of the product as a growth promoter is a manifestly disproportionate measure.454 For the same reasons the contested regulation also constitutes an interference with the right to property as recognised in Article 1 of the First Protocol to the European Convention on Human Rights and Fundamental Freedoms. Pfizer accepts that the objective of preserving human health is a legitimate reason for restricting that right. However, in this case, the restriction of its right to property, brought about by the contested regulation, is, in the light of the aim pursued, a disproportionate and intolerable interference with the rights of the owner, impinging upon the very substance of the right to property.455 Finally, Pfizer submits that the institutions adopted the contested regulation with the sole aim of creating a favourable political impression in the eyes of the press and public opinion, which is tantamount to a misuse of powers.456 The Court observes that the importance of the objective pursued by the contested regulation, i.e. the protection of human health, may justify adverse consequences, and even substantial adverse consequences, for certain traders (Case C-183/95 Affish [1997] ECR I-4315, paragraph 42, and Fedesa and Others, cited at paragraph 115 above, paragraph 17). The protection of public health, which the contested regulation is intended to guarantee, must take precedence over economic considerations (see Affish, cited above, paragraph 43).457 Furthermore, it is settled case-law that although the freedom to pursue a trade or business forms part of the general principles of Community law, that principle does not amount to an unfettered prerogative but must be viewed in the light of its social function. Consequently, it may be restricted, provided that the restrictions imposed in fact correspond to objectives of general interest pursued by the Community and do not, in relation to the aim pursued, constitute a disproportionate and intolerable interference which would affect the very substance of the right so guaranteed (Case 44/79 Hauer [1979] ECR 3727, paragraph 23, and Case T-113/96 Dubois v Council and Commission [1998] ECR II-125, paragraphs 74 and 75).458 In that regard, it is necessary to start by referring to the conclusions which the Court has drawn from its assessment of the errors which the institutions were alleged to have made in their risk assessment.459 Then, account must be taken of the fact that the use of antibiotics is not strictly necessary in animal husbandry and that there are alternative methods of husbandry even if they can lead to higher costs for farmers and, ultimately, consumers.460 In addition, withdrawal of the authorisation of virginiamycin as a growth promoter is a provisional measure which is subject to the Community institutions' duty of re-examination, as is clear from Article 2 of the contested regulation. Finally, it is apparent from Article 3 of the contested regulation that the ban on the use of virginiamycin was subject to a transitional period of six months, during which the product could continue to be marketed and used in those States which had not banned the product before entry into force of the measure, i.e. all the Member States apart from Sweden and Denmark.461 From that perspective, the fact that the measure taken in the contested regulation entails serious economic consequences for Pfizer does not mean that it can be described as disproportionate for the purpose of challenging its lawfulness.462 Pfizer's claim that the contested regulation was adopted with the sole aim of creating a favourable political impression in the press and with public opinion is not borne out by the evidence in the documents before the Court. Rather, those documents show that the contested regulation pursues, above all else, public health objectives. In any event, the restoration of consumer confidence can in such circumstances also be an important objective which may justify even substantial economic consequences for certain traders.463 In those circumstances, the withdrawal by the contested regulation of the authorisation of virginiamycin as an additive in feedingstuffs is not disproportionate, nor does it amount to an unwarranted restriction of the right freely to pursue a trade or profession or of the right to property, regard being had to the public interest objectives pursued by the Community legislature.(e) Errors in the cost/benefit analysis464 According to Pfizer, if the elimination of an identified risk is very costly to society, not only in socio-economic terms but also in terms of well-being and ethics, or if it leads to situations entailing a higher risk or shifting the risk to another population group, less drastic measures, or even no measures at all, should be considered.465 In that regard, Pfizer claims that the ban on virginiamycin has a negative impact not only on it but also on farmers and feedingstuff dealers.466 Virginiamycin has been used for 30 years and, with some variation depending on species, by around 50% of farmers in the European Union; it enables production costs to be kept down. For certain species of animal virginiamycin is the only authorised product on the market. Banning the product will therefore cause farmers and feedingstuff dealers to lose revenue: those facts should have been taken into account in any decision as to what action was appropriate. Anprogapor and Asovac estimate that losses for pork and beef producers in Spain alone will amount to approximately EUR 30 million. They submit that if the Community institutions had carried out a cost/benefit analysis, they would have come down in favour of an alternative, less onerous, solution which would also have achieved the objective pursued.467 Lastly, Pfizer, together with Fedesa and Fefana, emphasise the fact that the ban on the use of antibiotics as growth promoters has significant adverse effects on the environment, which ought also to have been taken into account by the Community institutions. In their view, use of those products as additives allows waste from farming, such as nitrogen and phosphates, to be reduced and makes it unnecessary to use other additives based on zinc oxide, a heavy metal causing extensive pollution.468 The Court notes in limine that the contested regulation is founded on a political choice, in respect of which the Community institutions were required to weigh up, on the one hand, maintaining, while awaiting further scientific studies, the authorisation of a product which primarily enables the agricultural sector to be more profitable and, on the other, banning the product for public health reasons.469 As regards Pfizer's complaint that the institutions, when making their policy choice, did not carry out a cost/benefit analysis, it is apparent from the documents before the Court that an assessment of that kind was made in several of the reports by international bodies which had been submitted to the institutions during the procedure culminating in adoption of the contested regulation and which were examined by the Standing Committee. In particular, the Netherlands report includes an assessment of the possible implications of banning antibiotics as growth promoters. Furthermore, a detailed analysis of Sweden's experience of the economic effects of ceasing to use antibiotics as growth factors can be found in the Swedish report. Similarly, it is clear from the conclusions in the Copenhagen Recommendations that the implications were extensively discussed by specialists from all the Member States, the Commission and the industry (pp. 8 and 9).470 However, as regards Pfizer's claim that the institutions made errors when weighing up the various options, the Court observes that the legality of the contested regulation could be called in question only if the institutions had made a manifest error of assessment in deciding upon their policy.471 In that regard, it is appropriate to begin by observing that public health, which the contested regulation is intended to protect, must take precedence over economic considerations (see paragraph 456 above).472 Next, it is not disputed that use of antibiotics as growth promoters is not essential to meat production. Nor is it disputed that there were alternatives to that practice, even though, as Pfizer maintains, those alternatives make it essential to alter farming methods and may entail higher production costs and higher meat prices. However, there is nothing to suggest that the policy choice made by the institutions was unreasonable in that regard.473 Furthermore, following the ban on virginiamycin, farmers could continue to use the four other antibiotics which the Council did not ban under the contested regulation. In that regard it is clear from the lists of antibiotics authorised as growth promoters in the Community that, for almost all the animals for which virginiamycin was authorised before adoption of the contested regulation, an alternative product continued to be authorised.474 Finally, as regards the arguments concerning increased environmental pollution, it is appropriate to point out, as the Republic of Finland submitted in its statement in intervention, that it is not the ban on the use of virginiamycin as a growth promoter, but a particular agricultural practice, that results in soil pollution and that other measures should be taken to resolve that problem on a broader scale.475 It follows that the argument that errors were made in the cost/benefit analysis must also be rejected.(f) Conclusion476 It follows from all the foregoing considerations that the contested regulation is not vitiated by the breaches and errors pleaded by Pfizer.2. Breach of the principle of non-discrimination477 Pfizer also submits that the contested regulation is vitiated by breach of the principle of non-discrimination since other antibiotics, some of which may be used in veterinary or perhaps even human medicine, were not banned. Also discriminatory is the fact that the institutions' approach was highly protective of health by comparison with the risk posed by the use of antibiotics as growth promoters, whilst other hazards to human health, such as that posed by tobacco, are not treated in the same way.478 The Court observes that the principle of non-discrimination, which constitutes a fundamental principle of law, prohibits comparable situations from being treated differently or different situations from being treated in the same way, unless such difference in treatment is objectively justified (see, for instance, Case C-174/89 Hoche [1990] ECR I-2681, paragraph 25; Case C-354/95 National Farmers' Union and Others [1997] ECR I-4559, paragraph 61; the BSE judgment, cited at paragraph 114 above, paragraph 114; and Case 203/86 Spain v Council [1988] ECR 4563, paragraph 25).479 In that regard, it is appropriate to point out that the lack of any action against the use of other substances, even if assumed to be unlawful, could not in itself affect the lawfulness of the ban on virginiamycin (see, to that effect, Safety Hi-Tech, cited at paragraph 152 above, paragraph 41). It has been held above that the institutions were entitled to withdraw the authorisation of virginiamycin as an additive in feedingstuffs in the overriding interest of public health protection. Consequently, even if Pfizer had established that the authorisations of other products should also be withdrawn for reasons corresponding to the one which has prevailed in this case, it would not have proved that the contested regulation was unlawful for breach of the principle of non-discrimination, in so far as there is no equality in illegality, since the principle of non-discrimination does not found an entitlement to the non-discriminatory application of unlawful treatment.480 It is therefore solely in the interest of completeness that the Court will consider whether the contested regulation treats comparable situations differently and, if so, whether the difference in treatment is objectively justified, regard being had, in that respect, to the Council's broad discretion as regards the objective justification of any different treatment (see Case T-267/94 Oleifici Italiani v Commission [1997] ECR II-1239, paragraph 47).481 First, Anprogapor and Asovac have not established in what way the risk posed to human health by certain other products, such as tobacco, and the protective measures that might be taken in that respect are comparable to the risk posed by the use of antibiotics such as virginiamycin as growth promoters.482 Second, as regards the other antibiotics whose authorisation was not withdrawn by the contested regulation, the Court observes that the aim of the regulation was to withdraw from the market antibiotics which are used not only as growth promoters but also in human medicine or which are known to select cross-resistance with antibiotics used in human medicine. As is apparent from recitals 28, 30 and 31 to the contested regulation, unlike virginiamycin, the antibiotics still available on the market do not belong to either of those categories.483 Therefore Pfizer has not established that the position of virginiamycin is comparable to that of other antibiotics.484 Consequently, the contested regulation did not breach the principle of non-discrimination.3. No transparency in the legislative process485 Pfizer argues that, contrary to the statement in the Draft Guidelines (paragraph 3.2) mentioned at paragraph 121 above, the Community institutions did not involve all the parties concerned, with maximum transparency, in consideration of the various possible management options once the results of the risk assessment were known. In particular, Anprogapor and Asovac complain that the institutions failed to consult farmers at all before adopting the contested regulation, although farmers were directly affected by the ban.486 In that regard, it must be borne in mind that the contested regulation was adopted under the procedure laid down in Article 24 of Directive 70/524 and that the provision does not confer on the traders concerned a right to take part in the procedure (see paragraph 121 above). Moreover, the Court held at paragraph 121 above that Pfizer cannot rely on the Draft Guidelines to found such a right.487 The right to be heard in an administrative procedure taken against a specific person, which must be observed, even in the absence of any rules governing the procedure in question (Case C-32/95 P Commission v Lisrestal and Others [1996] ECR I-5373, paragraph 21; and Case T-50/96 Primex Produkte Import-Export and Others v Commission [1998] ECR II-3773, paragraph 59), cannot be transposed to a legislative procedure leading, as in the present case, to the adoption of a measure of general application (Case C-104/97 P Atlanta v European Community [1999] ECR I-6983, paragraphs 34 and 37; and Case T-521/93 Atlanta and Others v European Community [1996] ECR II-1707, paragraphs 70 to 74). The fact that Pfizer - unlike the farmers in particular - is directly and individually concerned by the contested regulation does not alter that finding (Atlanta v European Community, cited above, paragraph 35; see also the Opinion of Advocate General Mischo in that case, ECR I-6983 at I-6987, points 57 to 70).488 Furthermore, as Pfizer has itself accepted, the facts show that Pfizer, to a large extent, was able to make its views on the evidence used by the Commission known during the procedure culminating in adoption of the contested regulation.489 Consequently, the argument Pfizer puts forward here must also be rejected.4. Conclusion490 It follows that Pfizer has not proved, either, that the institutions erred in managing the risk associated with the use of virginiamycin as a growth promoter.D - Conclusion491 Given all of the foregoing, the pleas alleging errors in the risk assessment and risk management and breach of the precautionary principle must be rejected.II - The plea alleging breach of the principle of protection of legitimate expectations492 Any trader with regard to whom an institution has given rise to justified hopes may rely on the principle of the protection of legitimate expectations (Case 78/77 Lührs [1978] ECR 169, paragraph 6; and Case T-489/93 Unifruit Hellas v Commission [1994] ECR II-1201, paragraph 51). However, a person may not plead a breach of that principle unless he has been given precise assurances (Case T-290/97 Mehibas Dordtselaan v Commission [2000] ECR II-15, paragraph 59). Likewise, where a prudent and discriminating trader could have foreseen the adoption of a Community measure likely to affect his interests, he cannot plead that principle if the measure is adopted (Lührs, cited above, paragraph 6; and Exporteurs in Levende Varkens and Others, cited at paragraph 83 above, paragraph 148).493 Pfizer submits, in the first place, that under Article 11 of Directive 70/524 it could legitimately expect that the Commission would consult SCAN a second time on the new scientific evidence provided by the Danish authorities in August 1998 and referred to at paragraph 54 above.494 The Court observes in that connection that, in the present case, the Commission was under no obligation to consult SCAN a second time about the new evidence before adopting a decision on the maintenance or withdrawal of the authorisation of virginiamycin as an additive in feedingstuffs (see paragraph 298 above). Pfizer was therefore not entitled to take that provision as a basis for a legitimate expectation.495 In the second place, Pfizer relies on a statement made by the Member of the Commission responsible for agriculture, Mr Fischler, to the European Parliament on 15 May 1998, in which he emphasised that the withdrawal of antibiotics as growth promoters could be implemented only on the basis of appropriate and detailed scientific arguments. Similarly, Pfizer submits that at a meeting on 23 March 1998 the Commission officials dealing with the case indicated that there might be doubts as to whether the dossier provided by the Danish authorities in support of their safeguard measure included a proper scientific basis on which the authorisation of virginiamycin could be withdrawn. On the basis of those factors, Pfizer submits that it had justified hopes, which were breached by the contested regulation, which, in its submission, was adopted without a proper scientific basis.496 The Court has also held that the institutions did not err when they took the view, in adopting the contested regulation, that they had a proper scientific basis for taking a preventive protective measure in respect of virginiamycin. Likewise, the Court has also held that, as regards the procedure laid down in Article 24 of Directive 70/524, the Community institutions are under a duty to carry out their own risk assessment and that that assessment is, in that regard, independent of the assessment carried out by the Member State which adopted a safeguard measure. Therefore Pfizer's argument cannot be accepted.497 In the third place, Pfizer claims that it had a legitimate expectation that no decision would be taken concerning virginiamycin before the results of the various ongoing scientific studies were published, i.e., first, the conclusions of the Surveillance Programme set up in 1998 following the adoption of Directive 97/6 (see paragraph 37 above) and, second, the SSC report (see paragraph 28 above), publication of which was expected to be in May 1999.498 Pfizer also produces an extract from Mr Fischler's answer to a written question from a Member of the European Parliament given during the session of 20 November 1998. On that occasion, Mr Fischler stated:`The Commission is aware of the fact that resistance to antimicrobials is a major public health concern. ... The Commission has asked the [SSC] to examine this question and its relationship with the use of antimicrobials in human and veterinary medicine, animal husbandry and plant protection. If necessary, the Commission shall propose measures in the light of this scientific opinion, which should be available around April next year ...'.499 According to Pfizer, in making that statement, Mr Fischler gave a specific assurance on behalf of the Commission that no action would be taken before 1999, and that any action would in any event be taken only on the basis of the SSC report, whereas in fact the institutions acted in December 1998 and were thus unable to base themselves on that report.500 The Court observes, first, that neither the wording of the provisions referred to by Pfizer nor the Surveillance Programme set up by the Commission gives any indication that a decision on withdrawal or maintenance of the authorisation of antibiotics, including virginiamycin, as growth promoters would be conditional upon completion of the relevant research. In particular, Directive 96/51, which provides for the re-evaluation of antibiotics, including virginiamycin, does not preclude the possibility that certain products might be withdrawn even before conclusion of the re-evaluation, on the basis, in particular, of a safeguard measure taken by a Member State.501 Next, the Court notes, first of all, that Mr Fischler's statement is taken from an answer to a parliamentary question concerning the Commission's policy on the increase of antibiotic resistance as such. His answer is cast in general terms and cannot therefore give the precise assurance which Pfizer invokes. Furthermore, even though Mr Fischler indicated that the Commission intended to await publication of the SSC report before proposing any measures to be taken, the Council cannot be criticised for having decided, on a proposal from the Commission, for overriding reasons of public health protection and with a proper scientific basis for believing a risk of that kind to exist, to take preventive protective measures and to depart from the broad policy initially adopted.502 That conclusion is all the more compelling in that, as the Council has rightly pointed out, Pfizer, as a prudent and discriminating operator in the pharmaceutical sector, knew or should have known, since the adoption of Directive 70/524, that where authorisation is granted under that directive it may be withdrawn by means of a safeguard clause. In addition, at least since the Act of Accession was signed by the Kingdom of Sweden, Pfizer, the only producer of virginiamycin, should have known that the Community institutions would take certain measures in respect of that product before the end of 1998. Likewise, the reports from international, Community and national bodies, recent scientific publications, the adoption of Directive 97/6 on avoparcin, the requests for amendment of Directive 70/524 made by the Kingdom of Sweden and the activation of the safeguard clause by the Danish authorities should all have put Pfizer on notice that it was not impossible that the Community institutions would act as they eventually did when they adopted the contested regulation.503 Consequently, the documents in the case-file to which Pfizer refers do not lead to the conclusion that the institutions gave Pfizer precise assurances capable of giving rise to a legitimate expectation that no decision concerning virginiamycin would be taken before the results of the scientific studies were available and the re-evaluation procedure concluded.504 Having regard to all of the foregoing, the Court concludes that the contested regulation is not vitiated by a breach of the principle of protection of legitimate expectations. The present plea must therefore be rejected as unfounded.III - The plea alleging breach of the obligation to state reasons505 In the first part of this plea, Pfizer claims that the preamble to the contested regulation contains a misleading description of the SCAN opinion and, in the second part, it claims that the preamble does not adequately explain the reasons which led to adoption of the regulation.506 Regarding the first part of the plea, the Court held at paragraph 246 above that the institutions did not distort the SCAN opinion. Therefore, this part of the plea must be rejected as unfounded.507 As regards the second part of the plea, Pfizer submits that the preamble to the contested regulation does not adequately explain why, despite the SCAN opinion, the Community institutions performed a volte-face after receiving the Danish authorities' observations on the SCAN opinion. If the Commission decides to act in spite of the lack of scientific data, or in spite of what is revealed by such data, it must, in Pfizer's submission, provide specific details which will allow the parties concerned and the Court to understand the reasons for its action.508 Anprogapor and Asovac add that recital 26 to the contested regulation acknowledges that the ban on additives is only one of the possible means of achieving the objective of the regulation but that those alternative means are not specified.509 The Council contends that the preamble to the contested regulation sets out concisely and comprehensively the objective of the regulation and the background against which it was adopted.510 The Court observes that the statement of reasons required by Article 190 of the EC Treaty (now Article 253 EC) must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure, in order to defend their rights, and to enable the Community Courts to exercise their power of review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 190 of the Treaty must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (Case C-265/97 P VBA v Florimex and Others [2000] ECR I-2061, paragraph 93). In particular, in the case, as here, of measures of general application, it has consistently been held that the statement of reasons may be confined to indicating the general situation which led to its adoption, on the one hand, and the general objectives which it is intended to achieve, on the other (Case C-150/94 United Kingdom v Council [1998] ECR I-7235, paragraph 25 and the case-law cited there).511 The Court finds that the first argument is founded on an incorrect assumption. The preamble to the contested regulation unequivocally shows that the institutions took the view that, on the basis of the SCAN opinion (recitals 15 to 19) and the scientific reports referred to in recital 23, they had sufficient information to take a preventive measure. Contrary to Pfizer's assertion, nothing suggests that, following the submission of new evidence by the Danish authorities in August 1998, the institutions suddenly performed a volte face in relation to the risk posed by the use of virginiamycin as a growth promoter. On the contrary, it is clear from recital 20 to the contested regulation that the new study on live rats mentioned at paragraph 54 above is just one of the items which the institutions took as their basis.512 Furthermore, the preamble to the contested regulation (in particular recital 16) clearly and unequivocally shows that the institutions did not accept the conclusions in the SCAN opinion, in particular SCAN's view that it was not possible to carry out an adequate scientific assessment on the basis of the scientific data available.513 As to the second argument, the background to the contested regulation clearly shows that the measure which it implements forms part of a series of measures taken by the institutions in order to preserve the effectiveness of antibiotics used in human medicine. Those measures include the establishment of a surveillance programme, the systematic taking into account of ongoing research and of the SSC report at the time of the re-examination of the ban on virginiamycin, and the re-evaluation of authorised additives provided for in Directive 96/51. Moreover, recitals 28 and 30 to 32 to the contested regulation show that, as regards certain other antibiotics which were not used in human medicine, the institutions took a different approach, namely to await the results of ongoing research before deciding whether to maintain or withdraw the authorisations.514 In the light of the foregoing, the plea alleging breach of the obligation to state reasons must also be rejected as unfounded.515 Since none of the pleas put forward to challenge the contested regulation has been upheld, the application must be dismissed as unfounded. Decision on costs Costs516 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since Pfizer has been unsuccessful, it must be ordered to pay the costs of these proceedings, including those relating to the proceedings for interim relief, in accordance with the form of order sought by the Council.517 Under Article 87(4) of the Rules of Procedure, the Court may order an intervener to bear its own costs. Anprogapor, Asovac, Fedesa and Fefana, which have intervened in these proceedings on behalf of the unsuccessful party, are to bear their own costs and to pay those incurred by the Council in respect of their intervention in the main proceedings and the proceedings for interim relief.518 The Asociación española de productores de huevos and the Pig Veterinary Society are to bear their own costs and to pay those incurred by the Council in respect of their applications for leave to intervene, those costs having been reserved in the order of 25 June 1999 by which their applications for leave to intervene were dismissed (see paragraph 63 above).519 Under Article 87(4) of the Rules of Procedure, the Member States and institutions which intervened in the procedure are to bear their own costs. Consequently, the Commission, the Kingdom of Denmark, the Kingdom of Sweden, the Republic of Finland and the United Kingdom of Great Britain and Northern Ireland are to bear their own costs both in the main proceedings and in the proceedings for interim relief. Operative part On those grounds,THE COURT OF FIRST INSTANCE(Third Chamber),hereby:1. Dismisses the application;2. Orders Pfizer to bear its own costs and to pay those incurred by the Council, including those relating to the proceedings for interim relief;3. Orders the Asociación nacional de productores de ganado porcino, the Asociación española de criadores de vacuno de carne, the Fédération européenne de la santé animale and the Fédération européenne des fabricants d'adjuvants pour la nutrition animale to bear their own costs and to pay those incurred by the Council in respect of their intervention in the main proceedings and the proceedings for interim relief;4. Orders the Asociación española de productores de huevos and the Pig Veterinary Society to bear their own costs and to pay those incurred by the Council in respect of their applications for leave to intervene;5. Orders the Commission, the Kingdom of Denmark, the Kingdom of Sweden, the Republic of Finland and the United Kingdom of Great Britain and Northern Ireland to bear their own costs, both in the main proceedings and in the proceedings for interim relief.

2969f-2138988-4816

EN

«(Directive 2001/37/EC – Manufacture, presentation and sale of tobacco products – Validity – Legal basis – Articles 95 EC and 133 EC – Interpretation – Applicability to tobacco products packaged in the Community and intended for export to non-member countries)» Summary of the Judgment 1.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Protection of public health a decisive factor in the choices involved in the harmonising measures – Not relevant (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Protection of public health a decisive factor in the choices involved in the harmonising measures – Not relevant 2.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Prohibition of manufacture intended to prevent the circumvention of the marketing rules in the internal market – Included (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council, Art. 3(1)) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Prohibition of manufacture intended to prevent the circumvention of the marketing rules in the internal market – Included 3.. Acts of the institutions – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Choice of legal basis – Criteria – Community measure pursuing a twofold basis or having a twofold component – Reference to the main or predominant purpose or component – Incorrect reference to Article 133 EC as a second legal basis – Not relevant to the validity of the directive (Arts 95 EC and 133 EC; Directive 2001/37 of the European Parliament and of the Council) Acts of the institutions – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Choice of legal basis – Criteria – Community measure pursuing a twofold basis or having a twofold component – Reference to the main or predominant purpose or component – Incorrect reference to Article 133 EC as a second legal basis – Not relevant to the validity of the directive 4.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Harmonising measures – No breach of the principle of proportionality (Directive 2001/37 of the European Parliament and of the Council, Arts 3, 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Harmonising measures – No breach of the principle of proportionality 5.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Respect of the right to property – Trade mark – Proportionate restrictions not impairing the very substance of that right (Directive 2001/37 of the European Parliament and of the Council, Arts 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Respect of the right to property – Trade mark – Proportionate restrictions not impairing the very substance of that right 6.. Community law – Principles – Principle of subsidiarity – Application to acts adopted for the purpose of establishing the internal market – Review of observance of the principle of subsidiarity – Criteria (Art. 95 EC) Community law – Principles – Principle of subsidiarity – Application to acts adopted for the purpose of establishing the internal market – Review of observance of the principle of subsidiarity – Criteria 7.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Article 7 – Prohibition of the use of descriptors likely to mislead consumers – Applicable only to tobacco products marketed within the Community (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council, Arts 3, 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Article 7 – Prohibition of the use of descriptors likely to mislead consumers – Applicable only to tobacco products marketed within the Community JUDGMENT OF THE COURT10 December 2002 (1) ((Directive 2001/37/EC – Manufacture, presentation and sale of tobacco products – Validity – Legal basis – Articles 95 EC and 133 EC – Interpretation – Applicability to tobacco products manufactured in the Community and intended for export to non-member countries))andTHE COURT,,after considering the written observations submitted on behalf of: ─ British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd, by D. Wyatt QC and D. Anderson QC, and by J. Stratford, Barrister, instructed by Lovells, Solicitors, ─ Japan Tobacco Inc. and JT International SA, par O.W. Brouwer, advocaat, and N.P. Lomas, Solicitor, both of Freshfields Bruckhaus Deringer, Solicitors, ─ the United Kingdom Government, by P. Ormond, acting as Agent, and by N. Paine QC, and T. Ward, Barrister, ─ the Belgian Government, by A. Snoecx, acting as Agent, assisted by E. Gillet and G. Vandersanden, avocats, ─ the German Government, by W.-D. Plessing, acting as Agent, assisted by J. Sedemund, Rechtsanwalt, ─ the Greek Government, by V. Kontolaimos and S. Charitakis, acting as Agents, ─ the French Government, by G. de Bergues and R. Loosli-Surrans, acting as Agents, ─ the Italian Government, by U. Leanza, acting as Agent, and O. Fiumara, avvocato dello Stato, ─ the Luxembourg Government, by J. Faltz, acting as Agent, assisted by P. Kinsch, avocat, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the Finnish Government, by E. Bygglin, acting as Agent, ─ the Swedish Government, by A. Kruse, acting as Agent, ─ the European Parliament, by C. Pennera and M. Moore, acting as Agents, ─ the Council of the European Union, by E. Karlsson and J.-P. Hix, acting as Agents, ─ the Commission of the European Communities, by I. Martinez del Peral and K. Fitch, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd, represented by D. Wyatt and D. Anderson, and by J. Stratford; of Japan Tobacco Inc. and JT International SA, represented by O.W. Brouwer and N.P. Lomas; of the United Kingdom Government, represented by J.E. Collins, acting as Agent, and N. Paine and T. Ward; of the Belgian Government, represented by G. Vandersanden; of the German Government, represented by M. Lumma, acting as Agent, assisted by J. Sedemund; of the Greek Government, represented by V. Kontolaimos and S. Charitakis; of the French Government, represented by R. Loosli-Surrans; of the Irish Government, represented by J. Buttimore BL; of the Italian Government, represented by O. Fiumara; of the Luxembourg Government, represented by N. Mackel, acting as Agent, assisted by P. Kinsch; of the Netherlands Government, represented by J. van Bakel, acting as Agent; of the Finnish Government, represented by E. Bygglin; of the Parliament, represented by C. Pennera and M. Moore; of the Council, represented by E. Karlsson and J.-P. Hix, and of the Commission, represented by I. Martinez del Peral and K. Fitch, at the hearing on 2 July 2002, after hearing the Opinion of the Advocate General at the sitting on 10 September 2002,gives the followingThe relevant provisionsOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Edward La PergolaJann Skouris MackenColnericvon BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: English. Language of the case: English.

dfd75-23cd13a-4383

EN

CHARGES FOR REGISTRATION OF COMPANY DOCUMENTS IN THE REGISTER OF COMPANIES ARE LAWFUL ONLY IF THEY ARE CALCULATED ON THE BASIS OF THE COST OF THE SERVICE PROVIDED

| 61999J0216 Judgment of the Court (Sixth Chamber) of 10 September 2002. - Riccardo Prisco Srl v Amministrazione delle Finanze dello Stato (C-216/99) and Ministero delle Finanze v CASER SpA (C-222/99). - References for a preliminary ruling: Tribunale di Milano and Corte d'appello di Roma - Italy. - Directive 69/335/EEC - Indirect taxes on the raising of capital - Articles 10 and 12(1)(e) - Register of companies - Registration of companies' instruments of incorporation and other company documents - Recovery of sums paid but not due - Procedural time-limits under national law - Interest. - Joined cases C-216/99 and C-222/99. European Court reports 2002 Page I-06761 Keywords 1. Tax provisions - Harmonisation of laws - Indirect taxes on the raising of capital - Registration of capital companies - Retroactive charges for the registration of company documents in the register of companies, not constituting capital duty or duties paid by way of fees or dues - Not permissible - Duties paid by way of fees or dues - Definition(Council Directive 69/335, Arts 10 and 12(1)(e))2. Community law - Direct effect - National duties incompatible with Community law - Repayment - Application of a time-limit under national law - Permissible - Conditions3. Community law - Direct effect - National duties incompatible with Community law - Repayment - National provisions affecting the repayment of such charges specifically and less favourably than those which would otherwise apply - Not permissible Summary $$1. Article 10 of Directive 69/335 concerning indirect taxes on the raising of capital must be interpreted as prohibiting, subject to the exceptions in Article 12 of that directive, retroactive charges for the registration of company documents in the register of companies where they do not constitute capital duty permitted by that directive. Article 12(1)(e) of the directive must be interpreted as meaning that such retroactive charges do not constitute duties paid by way of fees or dues permitted by that provision where the registrations in the register of companies for which they are charged have already given rise to charges for which the retroactive charges are intended to be a substitute but which are not reimbursed to those who have paid them. Otherwise, for such retroactive charges to constitute duties paid by way of fees or dues permitted by Article 12(1)(e) of the directive, their amounts, which may vary according to the legal form of the company, must be calculated solely on the basis of the cost of the formalities in question, although they may also cover the costs of minor operations carried out free of charge, and must take account of any other charges paid in parallel which are also intended to pay for the same service rendered. In calculating those amounts, a Member State is entitled to take into account all the costs linked with the registration operations, including the share of overheads attributable to them. A Member State also has the option of introducing flat-rate charges and setting their amounts for an indeterminate period, as long as it ensures at regular intervals that those amounts still do not exceed the average cost of the operations concerned.( see para. 57, operative part 1 )2. Community law does not prohibit a Member State from resisting actions for repayment of charges levied in breach of Community law by relying on a time-limit under national law of three years, by way of derogation from the ordinary rules governing actions between private individuals for the recovery of sums paid but not due, for which the period allowed is more favourable, provided, first, that that time-limit applies in the same way to actions based on Community law for repayment of such charges as to those based on national law, and, second, that it does render practically impossible or excessively difficult the exercise of rights conferred by Community law.( see paras 69-70, operative part 2 )3. Community law precludes the adoption by a Member State of provisions making repayment of a tax held to be contrary to Community law by a judgment of the Court, or whose incompatibility with Community law is apparent from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those which would otherwise be applied to repayment of the tax in question.( see para. 79, operative part 3 ) Parties In Joined Cases C-216/99 and C-222/99,REFERENCES to the Court under Article 234 EC by the Tribunale di Milano (Italy) (C-216/99) and the Corte d'appello di Roma (Italy) (C-222/99) for preliminary rulings in the proceedings pending before those courts betweenRiccardo Prisco SrlandAmministrazione delle Finanze dello Stato (C-216/99),and betweenMinistero delle FinanzeandCASER SpA (C-222/99),on the interpretation of Articles 10 and 12(1)(e) of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (OJ, English Special Edition 1969(II), p. 412) and on the interpretation of Community law on the recovery of sums paid but not due,THE COURT (Sixth Chamber),composed of: F. Macken, President of the Chamber, J.-P. Puissochet (Rapporteur), R. Schintgen, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: C. Stix-Hackl,Registrar: L. Hewlett, Principal Administrator,after considering the written observations submitted on behalf of:- Riccardo Prisco Srl, by M. Costanza and A. Bozzi, avvocati,- CASER SpA, by A. Crosta, A. Bozzi and G. Bozzi, avvocati,- the Italian Government, by U. Leanza, acting as Agent, assisted by F. Quadri, avvocato dello Stato,- the Commission of the European Communities, by E. Traversa and H. Michard, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Riccardo Prisco Srl, represented by M. Costanza and A. Bozzi; CASER SpA, represented by A. Bozzi and G. Bozzi; the Italian Government, represented by G. de Bellis, avvocato dello Stato; and the Commission, represented by E. Traversa, at the hearing on 22 November 2001,after hearing the Opinion of the Advocate General at the sitting on 31 January 2002,gives the followingJudgment Grounds 1 By orders of 15 and 12 May 1999, received at the Court on 7 and 10 June 1999 respectively, the Tribunale di Milano (District Court, Milan) and the Corte d'appello di Roma (Court of Appeal, Rome) each referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Articles 10 and 12(1)(e) of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (OJ, English Special Edition 1969(II), p. 412, the Directive) and on the interpretation of Community law on the recovery of sums paid but not due.2 Those questions were raised in proceedings between Riccardo Prisco Srl (Prisco) and CASER SpA (CASER) and the Italian tax authorities concerning the repayment of charges paid by those two companies between 1985 and 1992 and subsequently held to be contrary to Community law.3 The charges were levied as tassa di concessione governativa (administrative charge) for the registration in the register of companies of various documents concerning the existence of companies. The claims for repayment by Prisco and CASER concern charges paid for the registration of the company's instrument of incorporation and its renewal in subsequent years.4 The conformity with Community law of those charges and the conditions for their repayment has already been the subject of references for preliminary rulings on which the Court has given judgment in Joined Cases C-71/91 and C-178/91 Ponente Carni and Cispadana Costruzioni [1993] ECR I-1915, Case C-231/96 Edis [1998] ECR I-4951, Case C-260/96 Spac [1998] ECR I-4997 and Joined Cases C-279/96, C-280/96 and C-281/96 Ansaldo Energia and Others [1998] ECR I-5025.Background to the disputes and the legal context5 The administrative charge, levied for registration in the register of commercial companies kept by the registrars of the district courts of the principal documents concerning the existence of companies, was introduced by Decree No 641 of the President of the Republic of 26 October 1972 (GURI No 292 of 11 November 1972, Supplement No 3).6 The charge was levied on the registration of the following documents: instrument of incorporation, increase of capital, extension of the duration of the company, change in the objects or type of the company, merger, other amendments to the instrument of incorporation, and documents of the company whose registration is compulsory under the Civil Code.7 The amount of the administrative charge, which was altered on numerous occasions, varied according to the legal form of the companies concerned as regards registration of the instrument of incorporation, but there was a single rate for registration of other documents. Decree-Law No 853 of 19 December 1984 (GURI No 347 of 19 December 1984), converted into law by Law No 17 of 17 February 1985 (GURI No 41 bis of 17 February 1985), provided that the administrative charge payable for registration of the instrument of incorporation was also payable on 30 June of each subsequent calendar year.8 After companies challenged the conformity with Articles 10 and 12 of the Directive of the administrative charge in so far as it related to the registration of the instrument of incorporation and its maintenance in subsequent years, the Court, to which a reference had been made for a preliminary ruling, held in Ponente Carni that Article 10 of the Directive is to be interpreted as prohibiting, subject to the derogating provisions of Article 12, an annual charge due in respect of the registration of capital companies even though the product of that charge contributes to financing the department responsible for keeping the register of companies. The Court also held that Article 12 of the Directive is to be interpreted as meaning that the duties paid by way of fees or dues referred to in Article 12(1)(e) may be payment collected by way of consideration for transactions required by law in the public interest such as, for example, the registration of capital companies, and that the amount of such duties, which may vary according to the legal form taken by the company, is to be calculated on the basis of the cost of the transaction, which may be assessed on a flat-rate basis.9 On a reference for a preliminary ruling from a court of another Member State, the Court held in Case C-188/95 Fantask and Others [1997] ECR I-6783 that Article 12(1)(e) of the Directive is to be interpreted as meaning that, in order for charges levied on registration of public and private limited companies and on their capital being increased to be by way of fees or dues, their amount must be calculated solely on the basis of the cost of the formalities in question; it may, however, also cover the costs of minor services performed without charge. In calculating their amount, a Member State is entitled to take account of all the costs related to the effecting of registration, including the proportion of the overheads which may be attributed thereto. Furthermore, a Member State may impose flat-rate charges and fix their amount for an indefinite period, provided that it checks at regular intervals that they continue not to exceed the average cost of the registrations at issue.10 Following the Ponente Carni judgment, the levying of the administrative charge for registration of the instrument of incorporation and in each subsequent year was held by several national courts to be contrary to Community law, and the Italian authorities adopted Decree-Law No 331 of 30 August 1993 (GURI No 203 of 30 August 1993), converted into law, after amendment, by Law No 427 of 29 October 1993 (GURI No 255 of 29 October 1993). Article 61(1) of that decree-law fixed a single amount of ITL 500 000, whatever the legal form of the company concerned, for the charge due on registration of the instrument of incorporation (the charge was then definitively abolished with effect from 1 January 1998 by Law No 549 of 28 December 1995); it abolished the annual charge for subsequent years and fixed a single amount of ITL 250 000 for the registration of all documents other than the instrument of incorporation.11 In proceedings following claims for repayment of the charges levied until 1992 for registration of the instrument of incorporation and its maintenance in subsequent years, the Corte suprema di cassazione (Court of Cassation) held, in judgment No 3458 of 23 February 1996, that those repayments were subject to the time-limit laid down by Article 13(2) of Decree No 641/1972, which provides:A taxpayer may claim repayment of charges paid in error within a time-limit of three years from the date of payment or, in the event of rejection of the document subject to the charge, from the date of notification of rejection.12 In response to references by several Italian courts for preliminary rulings on the compatibility of such a time-limit with Community law, the Court ruled in the Edis, Spac and Ansaldo Energia judgments that the fact that the Court has given a preliminary ruling interpreting a provision of Community law without limiting the temporal effects of its judgment does not affect the right of a Member State to impose a time-limit under national law within which, on penalty of being barred, proceedings for repayment of charges levied in breach of that provision must be commenced. The Court further ruled that Community law does not prohibit a Member State from resisting actions for repayment of charges levied in breach of Community law by relying on a time-limit under national law of three years, by way of derogation from the ordinary rules governing actions between private individuals for the recovery of sums paid but not due, for which the period allowed is more favourable, provided that that time-limit applies in the same way to actions based on Community law for repayment of such charges as to those based on national law. Finally, the Court ruled that, in circumstances such as those described to it, Community law does not prevent a Member State from resisting actions for repayment of charges levied in breach of a directive by relying on a time-limit under national law which is reckoned from the date of payment of the charges in question, even if, at that date, the directive concerned had not yet been properly transposed into national law.13 In addition, in Ansaldo Energia, on the question of the interest payable on such repayments, the Court ruled that Community law does not preclude, in the event of the repayment of charges levied in breach thereof, payment of interest calculated by methods less favourable than those applicable under the ordinary rules governing actions for the recovery of sums paid but not due between private individuals, provided that those methods apply in the same way to such actions brought under Community law as to those brought under national law.14 Article 11 of Law No 448 of 29 December 1998, the Finance Law for 1999 (GURI of 29 December 1998, ordinary supplement No 302), the application of which is the subject of the main proceedings, was subsequently adopted to regulate retroactively the question of repayment of the registration charges levied in the period from 1985 to 1992, that is, the period preceding the application of the provisions of Decree-Law No 331/1993 summarised in paragraph 10 above.15 That article provides:1. Article 61(1) of Decree-Law No 331 of 30 August 1993, converted into law, after amendment, by Law No 427 of 29 October 1993, shall be interpreted as meaning that the administrative charge for registrations in the register of companies, referred to in Article 4 of the scale annexed to Decree No 641 of the President of the Republic of 26 October 1972, as amended by the said Article 61, is payable for the years 1985, 1986, 1987, 1988, 1989, 1990, 1991 and 1992 in the sum of ITL 500 000 for registration of the instrument of incorporation and in the following fixed annual sums for registration of other company documents for each of the years 1985 to 1992:(a) for share companies and partnerships limited by shares, ITL 750 000;(b) for private limited companies, ITL 400 000;(c) for other types of company, ITL 90 000.2. Companies which, in the years indicated in paragraph 1, paid the administrative charge for registration in the register of companies and the annual charge, in accordance with in Article 3(18) and (19) of Decree-Law No 853 of 19 December 1984, converted into law, after amendment, by Law No 17 of 17 February 1985, may obtain repayment of the difference between the sums paid and those due under paragraph 1 above, provided that they have submitted a claim for repayment within the time-limits laid down in Article 13 of Decree No 641 of the President of the Republic of 26 October 1972.3. Interest shall be payable on the sum to be repaid at the statutory rate in force at the date of entry into force of the present law, as from the date of submission of the claim....16 Thus, for the period from 1985 to 1992, the administrative charge payable for registration of the instrument of incorporation was fixed retroactively at a single amount of ITL 500 000, whatever the legal form of the company concerned, and was due only once (this also applied from 1993), while the administrative charges payable for registration of other company documents varied according to the legal form of the companies concerned and were combined into a flat-rate annual payment whatever the number of documents actually registered (this differs from what applied from 1993, since under Decree-Law No 331/1993 each document registered, whatever the legal form of the company concerned, incurs an individual charge of ITL 250 000).17 Article 11 of Law No 448/1998 also regulates, in paragraphs 2 and 3, the terms of repayment of the charges paid by companies from 1985 to 1992, under the originally applicable provisions of Decree-Law No 853/1984, for the registration of the instrument of incorporation and its maintenance in subsequent years which were, following the Ponente Carni judgment, declared by several Italian courts to be incompatible with Articles 10 and 12 of the Directive. It is laid down that the amount of the repayment is to be the difference between the sums due on the basis of the retroactive charges introduced by Article 11(1) of Law No 448/1998 and those paid under the system of administrative charges originally applicable, provided that a claim for repayment is submitted within the time-limit laid down in Article 13(2) of Decree No 641/1972.18 According to the information provided by the Corte d'appello di Roma, the rate of interest on the repayment from the date of the claim, as fixed in Article 11(3) of Law No 448/1998, is lower than the interest rates applicable to repayments of sums paid but not due to the State in tax matters on the basis of national law and the interest rates applicable in connection with the repayment of sums paid but not due in civil matters.The main proceedings and the questions referred for preliminary rulingsCase C-216/9919 The tax authorities pleaded the three-year time-limit mentioned in Article 13 of Decree No 641/1972 against Prisco's claim for reimbursement of the sums it paid from 1987 to 1992 as charges for registration of the instrument of incorporation and its maintenance in the following years under the system of administrative charges originally applicable.20 In those circumstances, the Tribunale di Milano, before which the dispute had been brought, referred the following questions to the Court for a preliminary ruling:1. Do the principles of legal certainty and the protection of individuals - which, according to the judgment of the Court of Justice of 21 June 1988 in Case 257/86 [Commission v Italy [1988] ECR 3249] and other judgments, require that, in areas covered by Community law, the Member States' legislation should be worded unequivocally so as to give the persons concerned a clear and precise understanding of their rights and obligations and enable the national courts to ensure that those rights and obligations are observed - and the Community principle of proportionality preclude a Member State from pleading national rules on time-limits such as those deriving from the provisions of Article 11(2) of Law No 448 of 23 December 1998 in conjunction with Article 13(2) of Decree of the President of the Republic No 641/1972, regard being had to the fact that the said Article 11 retroactively extended to taxes paid but not due the three-year time-limit which, however, in the said Article 13(2) - on the basis of the true meaning of the words used in context - was expressly limited solely to the case of "repayment of charges paid in error" so as to induce not only the interested parties but also all the trial judges to interpret it in that manner? In short, does the principle of legal certainty allow the national court to apply - a posteriori - a time-limit based on a provision which, having regard to the ordinary meaning of the words, does not apply to the case before it?2. Must the provisions of Articles 10 and 12(1)(e) of Council Directive 69/335/EEC be interpreted as preventing the introduction of national legislation such as that introduced by the Italian legislature in Article 11(1) and (2) of Law No 448/1998, which - a posteriori - reduces the amounts to be repaid as having been paid but not due by way of annual charge on an arbitrary flat-rate basis for registration in the register of companies (kept at that time by court registries) of company documents for each of which each company has already paid a sum provided for by the national legislation? In short, is it permitted - in the light of that directive - for the national legislature to duplicate, a posteriori by means of what purports to be an interpretative law, charges which have already been paid?Case C-222/9921 CASER obtained from the Tribunale di Roma (District Court, Rome) a judgment, published on 4 February 1995, ordering the tax authorities to repay the sum of ITL 78 000 000, plus statutory interest from the date of bringing the action, corresponding to the charges it had paid from 1985 to 1992 under the system of administrative charges originally applicable, for the maintenance of the registration of its instrument of incorporation.22 The tax authorities appealed to the Corte d'appello di Roma, and relied before that court on the retroactive provisions of Article 11 of Law No 448/1998, both to reduce the principal sum to be repaid (by deducting the retrospective flat-rate annual charges due for the registration from 1985 to 1992 of documents other than the instrument of incorporation) and to apply a lower rate of interest than that allowed by the court at first instance.23 In those circumstances, the Corte d'appello di Roma referred the following questions to the Court for a preliminary ruling:1. For the purposes of an action brought by a company before the Italian courts for repayment of the administrative charge paid from 1985 to 1992 under laws conflicting with Article 10 of Council Directive 69/335/EEC of 17 July 1969 (see the judgment of 20 April 1993 in Joined Cases C-71/91 and C-178/91 [Ponente Carni]), may Article 11(1) of Law No 448 of 23 December 1998 which retroactively lays down the single charge of ITL 500 000 for registration of the instrument of incorporation and various flat-rate charges for the registration of other company documents (varying from ITL 750 000 to ITL 90 000 depending on the kind of company) be considered compatible with the principles of Community law and with the interpretation of the said directive given by the Court of Justice in its judgment in Joined Cases C-71/91 and C-178/91?This is asked in the light of the fact that the abovementioned provision (Article 11(1) of Law No 448 of 1998), while apparently - in view of the objectively modest sums and the reference ex novo to the registration of company documents - intended to refer to flat-rate figures apparently commensurate with the cost of the service (that is, duties paid by way of fees or dues: Article 12(1)(e) of Directive 69/335), was in fact adopted without any previous determination or calculation of the costs of the service rendered to the companies (costs which are easily ascertainable, because they relate to past years, on the basis of the number and qualification of the officials, the time they take and the various material costs necessary for carrying out the transaction), and without there being any visible connection between the amounts levied and the service actually received at the time by the companies, which had in fact paid a charge for registration and for annual renewal thereof and not for the registration of company documents on a flat-rate basis.2. Regardless of whether the amounts levied by the Italian State under Article 11(1) of Law No 448 of 1998 rank as duties paid by way of fees or dues, is the statutory interest payable by the State - in addition to the repayments to the companies - with effect, as specifically indicated in Article 11(3), from the date of submission of the claim for repayment and at an annual rate equivalent to 2.5%, that is, lower than the annual rates laid down generally for tax paid but not due by Articles 1 and 5 of Law No 29 of 29 January 1961 (and successive provisions) or, for other sums paid but not due, by Article 2033 of the Civil Code, compatible with the principle of equivalence between the two legal orders (domestic and Community) as regards the protection of individuals' rights and/or with the principle of effective exercise of the rights conferred by Community law - both principles having been upheld repeatedly by the Court of Justice in its judgments of 15 September 1998 in Case C-260/96 Spac, Case C-231/96 Edis and Joined Cases C-279/96, C-280/96 and C-281/96 Ansaldo Energia?24 By order of the President of the Court of 17 September 2001, Cases C-216/99 and C-222/99 were joined for the purposes of the oral procedure and the judgment.25 By application lodged at the Court Registry on 23 April 2002, Prisco and CASER sought for the oral procedure, which had been closed on 31 January 2002 with the delivery of the Advocate General's Opinion, to be reopened.26 The Court may, of its own motion, on a proposal from the Advocate General or at the request of the parties, reopen the oral procedure, in accordance with Article 61 of its Rules of Procedure, if it considers that it lacks sufficient information or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see Joined Cases C-270/97 and C-271/97 Deutsche Post v Sievers and Schrage [2000] ECR I-929, paragraph 30).27 In support of their request, Prisco and CASER refer, as a new fact, to the making by the Corte costituzionale (Constitutional Court) on 10 April 2002 of an order, No 113/2002, following a referral to that court by the Tribunale di Firenze (District Court, Florence) for an assessment of the conformity with the Italian constitution of Article 13(2) of Decree No 641/1972.28 The referral by the Tribunale di Firenze thus related to one of the national provisions at issue in the first question referred to the Court by the Tribunale di Milano in Case C-216/99. However, it is apparent that the order of the Corte costituzionale dismisses the referral by the Tribunale di Firenze as manifestly inadmissible on the ground that Article 13(2) of Decree No 641/1972 does not apply directly and specifically to the dispute before that court, the provision directly applicable thereto being, according to the Corte costituzionale, Article 11(2) of Law No 448/1988. The order of the Corte costituzionale does not deal with the substance of Article 13(2) of Decree No 641/1972 and does not therefore alter the presentation of the national legal framework as it appears from the procedure followed in the main proceedings.29 Consequently, the order of the Corte costituzionale cannot be regarded as a new fact with respect to the questions submitted to the Court justifying reopening the oral procedure, and the request by Prisco and CASER must be dismissed.30 The questions submitted by the two national courts relate essentially to three aspects.31 First, the courts wish to obtain an interpretation of Community law to enable them to rule on the compatibility with Articles 10 and 12 of the Directive of the retroactive charges introduced by Article 11(1) of Law No 448/1998 to cover, for the years 1985 to 1992, registration of the instrument of incorporation and other company documents, in particular in so far as those charges are deducted from the repayments of the charges paid under the originally applicable provisions of Decree-Law No 853/1984 (second question of the Tribunale di Milano and first question of the Corte d'appello di Roma).32 Second, the Tribunale di Milano, by its first question, asks as to the compatibility with Community law of the three-year time-limit which the tax authorities apply, under Article 11(2) of Law No 448/1998 in conjunction with Article 13 of Decree No 641/1972, to claims for repayment of the charges paid under the originally applicable provisions of Decree-Law No 853/1984.33 Third, the Corte d'appello di Roma, by its second question, asks as to the compatibility with Community law of the interest rate determined under Article 11(3) of Law No 448/1998 for repayment of the charges paid under the originally applicable provisions of Decree-Law No 853/1984.The retroactive charges deducted from the repayments claimedObservations submitted to the Court34 Prisco and CASER submit, to begin with, that for the period from 1985 to 1992 at issue in the main proceedings, companies were already charged capital duty and also paid registry fees and, in some cases, stamp duties paid by way of fees or dues on each occasion that they had a document or event registered pursuant to the Civil Code. The administrative charges were thus additional to the capital duty, referred to in Article 2 to 9 of the Directive, and to charges by way of fees or duties, specifically permitted by Article 12(1)(e) of the Directive, for the same operations or registrations.35 With respect, first, to the retroactive administrative charge for registration of the instrument of incorporation, Prisco and CASER submit that remuneration of the service provided for registration has already been covered by the registry fees. They put forward a calculation to show that the sum of ITL 8 000 demanded from 1985 to 1992 as registry fees easily covered the registries' costs. Consequently, according to Prisco and CASER, the charge for registration of the instrument of incorporation is contrary in any event to Articles 10 and 12 of the Directive, since it amounts to paying twice for the same service.36 In the alternative, Prisco and CASER contend that, before fixing the amount of the retroactive charge for registration of the instrument of incorporation, the costs of the service provided from 1985 to 1992 for registration of such a document should have been determined. They contend that the amount of ITL 500 000 is too high since the ITL 8 000 charged as registry fees already suffices. They say that it is not necessary to bring the sums due up to date, since both the registry fees and the administrative charges payable under the originally applicable provisions were paid to the authorities at the time. Finally, observing that the Court held in Fantask that a flat-rate charge must be reasonable, taking into account in particular the number and qualification of the officials involved, the time they take and the various material costs necessary for carrying out the transaction, Prisco and CASER submit that there is no reason to suppose that such principles were complied with in the main proceedings. Consequently, the charge at issue is not a duty paid by way of fees or dues and is contrary to Articles 10 and 12 of the Directive.37 With respect, second, to the retroactive annual flat-rate charge for registration of documents other than the instrument of incorporation, Prisco and CASER point out that in Case C-2/94 Denkavit Internationaal and Others [1996] ECR I-2827 the Court interpreted Article 10(c) of the Directive as being intended to prevent taxes which, although not imposed on capital contributions as such, are nevertheless imposed on account of formalities connected with the company's legal form, in other words on account of the instrument employed for raising capital.38 According to Prisco and CASER, it is beyond doubt that the charges for registration of company documents other than the instrument of incorporation relate to a formality connected with the legal form of the companies in question. Moreover, it cannot be argued that, because Article 10(c) of the Directive refers to registration or any other formality required before the commencement of business, the administrative charges payable for registration of documents other than the instrument of incorporation are not caught by the prohibition laid down in that provision. The Court explained in Fantask that the formalities referred to in that provision are all those with which companies are required to comply in order not only to commence their business but also to carry it on.39 Prisco and CASER submit that the retroactive flat-rate charge for registration of documents other than the instrument of incorporation during the years 1985 to 1992 cannot be regarded as a duty paid by way of fees or dues permitted by Article 12(1)(e) of the Directive, since that charge is levied even if, in the particular case, there were in fact no registrations during the years in question, and the costs incurred have in any event already been covered by the registry fees. Prisco and CASER also submit that companies which actually had documents other than the instrument of incorporation registered during the years 1985 to 1992 could have to pay three times for the registration: once as the administrative charges originally applicable, once as registry fees, and once as the retroactive flat-rate charge.40 Should the Court consider that the retroactive flat-rate charge is nevertheless capable of being a duty paid by way of fees or dues, Prisco and CASER submit that its amount was fixed without any prior determination or calculation of the costs of the service rendered to the companies, as the Corte d'appello di Roma pointed out.41 The Italian Government submits, first, that in Ponente Carni the Court held that the duties paid by way of fees or dues permitted by Article 12(1)(e) of the Directive cover only payments collected on registration or annually, the amount of which is calculated on the basis of the cost of the service rendered, and that that payment cannot be calculated on the basis of all the costs of the administrative department concerned. The Italian courts accordingly declared that the administrative charge system originally applied from 1985 to 1992 was contrary to Community law.42 According to the Italian Government, the new system introduced retroactively to avoid no remuneration being paid for the registration services rendered from 1985 to 1992 do, on the other hand, comply with the principles set out in Ponente Carni. First, no double charging of fees for the same service arises from the system. In particular, if some offices charged from 1985 to 1992 individual administrative charges for the registration of documents other than the instrument of incorporation, that was due to an incorrect interpretation of Decree-Law No 853/1984. Those registrations were covered by the charge levied at that time on 30 June each year. Second, the retroactive flat-rate annual charge for registration of documents other than the instrument of incorporation is payable in respect of a year only if such registrations have actually been made during that year. Third, the Directive does not require a correlation between the flat-rate amount charged and the actual cost to the authorities of providing the specific service rendered to a company. To require such a correlation would amount to ruling out the possibility of fixing flat-rate charges, although that possibility was accepted by the Court in Ponente Carni and Fantask. In the present case, the amount of the charges is reasonable and within the range of charges applied in other Member States for similar formalities.43 As regards the retroactive charge for registration of the instrument of incorporation, the Commission contends that there is no doubt that that charge, the continuity of which with the previous charge is apparent from the reference to Decree No 641/1972 in Article 11 of Law No 448/1998, falls within the prohibition laid down in Article 10(c) of the Directive, unless it is justified under Article 12(1)(e) of the Directive.44 The Commission contends that a Member State complies with the conditions necessary for the charges in question to be duties paid by way of fees or dues if their amount is reasonable. In its written observations, relying on a comparative study of registration charges in twelve Member States which it carried out in connection with the Ponente Carni case and has since updated, it submitted that the amount of ITL 500 000 charged under Article 11 of Law No 448/1998 for registration of the instrument of incorporation for the years 1985 to 1992 was reasonable. It observed that, at the present rate of exchange between the euro and the lira, the average amount of the charges levied by those twelve Member States in 1991 was ITL 314 000 and that, taking into account the eight years which had since passed and the inevitable differences in average costs between States, the amount of ITL 500 000 charged in 1999 did not appear excessive.45 At the hearing, however, the Commission stated that it had received information that registry fees had also been collected for registration of the instrument of incorporation from 1985 to 1992. Consequently, even if the administrative charges originally paid for that registration and its maintenance in subsequent years were repaid, the application of the new retroactive charge meant the operation being taxed twice. In the Commission's view, the exception to the prohibition of charges for duties paid by way of fees or dues, in Article 12(1)(e) of the Directive, only makes sense if one charge only is levied to pay for a service. In a situation where two or more charges are levied in connection with the provision of one service, only the charge specifically levied at the time when the service is rendered by the authorities who provide it can be a duty paid by way of fees or dues. In the present case, only the registry fees collected between 1985 and 1992 were such duties and could be justified by Article 12(1)(e) of the Directive, whatever the amount of the new retroactive charge may be.46 As regards the new retroactive annual flat-rate charge payable for registration of documents other than the instrument of incorporation, the Commission considers essentially, for the same reasons as Prisco and CASER, that that charge also falls within Article 10(c) of the Directive and cannot benefit from the exception for duties paid by way of fees or dues in Article 12(1)(e). It submits that, having regard to the automatic nature of the payment of that charge, even if no documents were registered during the year, the existence of the registry fees and the fact that charges were already paid if a registration was made under the administrative charge system originally in force, the new retroactive system may result in a company having to pay charges in the absence of any service, or indeed to pay two or even three times for the same service.Findings of the Court47 The Court will start by examining whether charges such as those at issue, introduced by Article 11(1) of Law No 448/1998, fall within one of the prohibitions in Article 10 of the Directive. It is not disputed that the charges do not constitute capital duty.48 Article 10 of the Directive, read in the light of the last recital in its preamble, prohibits in particular indirect taxes with the same characteristics as capital duty. The taxes thus referred to include any which are payable in respect of the formation of a capital company or an increase in its capital (Article 10(a)) or in respect of registration or any other formality required before the commencement of business to which a company may be subject by reason of its legal form (Article 10(c)). The latter prohibition is justified by the fact that, although the taxes in question are not imposed on capital contributions as such, they are nevertheless imposed on account of formalities connected with the company's legal form, in other words on account of the instrument employed for raising capital, so that their continued existence would similarly risk frustrating the aims of the Directive (Denkavit Internationaal, paragraph 23, and Fantask, paragraph 21).49 In the present case, in so far as the charge for registration of the instrument of incorporation is paid on the registration of new companies, it is directly referred to in the prohibition laid down by Article 10(c) of the Directive. A similar conclusion must also be reached where charges are payable on the registration of other company documents, since they too are imposed on account of a formality connected with the legal form of the companies in question. While registration of those documents does not formally amount to a procedure which is required before a capital company commences business, it is none the less necessary for the carrying on of that business (see, to that effect, Fantask, paragraph 22).50 It must therefore be examined whether charges such as those at issue in the main proceedings may come under the exception for duties paid by way of fees or dues under Article 12(1)(e) of the Directive.51 The distinction between taxes prohibited by Article 10 of the Directive and duties paid by way of fees or dues implies that the latter cover only payments collected on registration of company documents whose amount is calculated on the basis of the cost of the service rendered. A payment the amount of which had no link with the cost of the particular service or was calculated not on the basis of the cost of the transaction for which it is consideration but on the basis of all the running and capital costs of the department responsible for that transaction would have to be regarded as a tax falling solely under the prohibition of Article 10 of the Directive (Ponente Carni, paragraphs 41 and 42, and Fantask, paragraph 27).52 As regards the retroactive annual flat-rate administrative charges payable for registration of documents other than the instrument of incorporation, introduced by Article 11 of Law No 448/1998, it is apparent that, if those charges are levied over and above the administrative charges already paid during the years 1985 to 1992 for registration of the same documents under the system originally applicable and, having regard in particular to the time-limit under Article 13 of Decree No 641/1972, the companies concerned cannot obtain reimbursement of the latter charges, the Italian authorities have already, in respect of the registration of those documents, levied similar charges purporting to pay for the service rendered. In such circumstances, without its being necessary to examine whether the cost of registration of those documents has also already been covered by the registry fees, the flat-rate charges cannot be regarded as duties paid by way of fees or dues.53 A fortiori, the retroactive annual flat-rate administrative charges cannot be paid by way of fees or dues if they relate to years in which there were no registrations of documents other than the instrument of incorporation.54 As regards the retroactive administrative charge for registration of the instrument of incorporation, likewise introduced by Article 11 of Law No 448/1998, the same reasoning as in paragraph 52 above applies with respect to companies which have already paid an administrative charge for registration of the instrument of incorporation between 1985 and 1992 and, having regard in particular to the time-limit following from paragraph 2 of that article and Article 13 of Decree No 641/1972, cannot claim repayment of that charge.55 With respect to companies which can claim repayment of the administrative charges already paid between 1985 and 1992 for registration of the instrument of incorporation or of other documents, it is for the national courts to ascertain whether or not the new retroactive charges introduced for those operations are paid by way of fees or dues, taking into account the principles referred to in paragraphs 8 and 9 above.56 They would of course not be paid by way of fees or dues if it were clear that the registry fees also paid for those operations already covered the entire costs of the service rendered. However, contrary to the Commission's submissions at the hearing, in the absence of harmonisation of the methods of collecting duties paid by way of fees or dues, the Member States are free to collect several payments in parallel for the service rendered, as long as the total does not exceed the actual cost of providing it (see, to that effect, with reference to charges payable for customs formalities, Case C-209/89 Commission v Italy [1991] ECR I-1575, paragraph 10). Consequently, the mere fact that registry fees are charged in parallel in respect of the same registrations as those for which retroactive administrative charges are levied does not suffice to show that the latter are not duties paid by way of fees or dues permitted by Article 12(1)(e) of the Directive.57 The answer to the second question of the Tribunale di Milano and the first question of the Corte d'appello di Roma must therefore be that Article 10 of the Directive is to be interpreted as prohibiting, subject to the exceptions in Article 12 of the Directive, retroactive charges for the registration of company documents in the register of companies where they do not constitute capital duty permitted by the Directive. Article 12(1)(e) of the Directive must be interpreted as meaning that such retroactive charges do not constitute duties paid by way of fees or dues permitted by that provision where the registrations in the register of companies for which they are charged have already given rise to charges for which the retroactive charges are intended to be a substitute but which are not reimbursed to those who have paid them. Otherwise, for such retroactive charges to constitute duties paid by way of fees or dues permitted by Article 12(1)(e) of the Directive, their amounts, which may vary according to the legal form of the company, must be calculated solely on the basis of the cost of the formalities in question, although they may also cover the costs of minor operations carried out free of charge, and must take account of any other charges paid in parallel which are also intended to pay for the same service rendered. In calculating those amounts, a Member State is entitled to take into account all the costs linked with the registration operations, including the share of overheads attributable to them. A Member State also has the option of introducing flat-rate charges and setting their amounts for an indeterminate period, as long as it ensures at regular intervals that those amounts still do not exceed the average cost of the operations concerned.The time-limitObservations submitted to the Court58 Prisco concludes from the judgments in Case 309/85 Barra and Others [1988] ECR 355 and Case 240/87 Deville [1988] ECR 3513 that a Member State may not adopt provisions making repayment of a tax held to be contrary to Community law by a judgment of the Court, or whose incompatibility with Community law is apparent from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those which would otherwise be applied to repayment of the tax in question.59 Prisco submits that the provisions of Article 13 of Decree No 641/1972, considered by the Court in Edis, both predated the Ponente Carni judgment and did not relate specifically to the charges at issue, so that the Court held that that principle did not apply. However, Article 11 of Law No 448/1998, at issue in the main proceedings, was later than Ponente Carni and related specifically to the charges which were held to be incompatible with Community law following that judgment. That article no longer allowed the national courts to interpret Article 13 of Decree No 641/1972 as applying only to charges paid as a result of a material error, and not to charges whose repayment is sought on the ground of incompatibility with Community law. Consequently, the principle of equivalence referred to in Barra and Deville was not complied with by Article 11 of Law No 448/1998.60 That provision furthermore infringed the principles of legal certainty, protection of legitimate expectations, and proportionality, having regard in particular to the fact that it was retroactive and that, at the time of its adoption, the time-limit of three years it applied had long since expired since the payment in 1992 of the last charges whose repayment is sought.61 The Italian Government submits that Article 11 of Law No 448/1998 did not extend the scope of the three-year time-limit to the cases of repayment of charges referred to in that article. According to the Government, Article 13 of Decree No 641/1972, as interpreted by the Corte suprema di cassazione in judgment No 3458/1996, already entailed applying such a period to claims for the repayment of administrative charges based on non-compliance with Community law. The Government adds that in any event the question of the scope of Article 13 of Decree No 641/1972 is a pure question of national law which is not for the Court to rule on, and that the situation is still the same as that considered by the Court in the Edis, Spac and Ansaldo Energia cases, in which it held that Community law does not prohibit a Member State from resisting actions for repayment of charges levied in breach of Community law by relying on a three-year time-limit under national law, by way of derogation from the more favourable ordinary rules governing actions between private individuals for the recovery of sums paid but not due, provided that that time-limit applies in the same way to actions based on Community law for repayment of such charges as to those based on national law (principle of equivalence) and provided that they do not render practically impossible or excessively difficult the exercise of rights conferred by the Community legal order (principle of effectiveness).62 The Commission contends that the question raised by the national court of observance of the principles of legal certainty and protection of individuals arises with respect to Article 13 of Decree No 641/1972, as interpreted by the Corte suprema di cassazione in judgment No 3458/1996, rather than with respect to Article 11 of Law No 448/1998, and that this is a question more of Italian law than Community law.63 On this point, the Commission deduces from Edis, Case C-228/96 Aprile [1998] ECR I-7141 and Case C-343/96 Dilexport [1999] ECR I-579 the following principles concerning rules for repayment of taxes contrary to Community law. Member States may not retain rules adopted after a judgment of the Court establishing the incompatibility with Community law of those taxes which apply exclusively to them and are less favourable to the taxpayers than those which would otherwise have applied.64 The Commission submits that in the main proceedings the first two conditions are satisfied. However, whether the third is satisfied is linked with the interpretation of Article 13 of Decree No 641/1972: if the three-year time-limit laid down by that article already applied to claims for repayment of charges unlawfully levied, Article 11 of Law No 448/1998 made no change and could not be held to be contrary to Community law. If, on the other hand, Article 13 of Decree No 641/1972 applied only to claims for repayment of charges paid as a result of material errors, the opposite conclusion would apply. The answer thus depends on the interpretation of the national provisions, which the Court cannot itself perform.Findings of the Court65 The application of Article 13 of Decree No 641/1972 to claims for repayment of the charges declared contrary to Community law following the Ponente Carni judgment was already at issue in Edis. The Court observed, first, that the interpretation of Article 13 of Decree No 641/1972 given by the Corte suprema di cassazione in judgment No 3458/1996 related to a national provision which had been in force for several years when judgment was delivered in Ponente Carni and, second, that that provision was concerned not only with repayment of the charge at issue in that judgment but also with that of all registration charges levied by the Italian Government. The Court concluded that its findings in Barra and Deville did not apply (Edis, paragraph 25).66 The Court then said that, according to information provided by the Italian Government and not disputed, a time-limit similar to that at issue applied also to actions for repayment of certain indirect taxes, and that it did not appear from the wording of Article 13 of Decree No 641/1972 that it applied only to actions based on Community law. The Court also said that it was clear from the case-law of the Corte suprema di cassazione that the time-limits relating to taxes applied also to actions for repayment of charges or dues levied under laws that had been declared incompatible with the Italian constitution (Edis, paragraph 38).67 In those circumstances, the Court held that Community law does not prohibit a Member State from resisting actions for repayment of charges levied in breach of Community law by relying on a time-limit under national law of three years, by way of derogation from the ordinary rules governing actions between private individuals for the recovery of sums paid but not due, for which the period allowed is more favourable, provided that that time-limit applies in the same way to actions based on Community law for repayment of such charges as to those based on national law (Edis, paragraph 39).68 With respect to Article 11(2) of Law No 448/1998, it must be stated that that provision does no more than refer to the provisions of Article 13 of Decree No 641/1972, as analysed by the Court in Edis, and does not alter their scope. Moreover, no new factor arising from the present proceedings requires the Court to differ from the assessment it made in that judgment.69 In particular, a provision such as Article 11(2) of Law No 448/1998 does not render practically impossible or excessively difficult the exercise of rights conferred by Community law, in so far as compliance with the three-year time-limit it refers to in order to define the conditions governing repayment of charges paid between 1985 and 1992 is assessed at the time of lodging the claim for reimbursement, not the date of adoption of that provision in 1998. Such a provision, although formally retroactive, cannot in any event be contrary to the principles of legal certainty, protection of legitimate expectations and proportionality, in that it does not itself alter the scope of the rules which already applied before it was enacted.70 The answer to the national court's question must therefore be the same as in Edis, namely that Community law does not prohibit a Member State from resisting actions for repayment of charges levied in breach of Community law by relying on a time-limit under national law of three years, by way of derogation from the ordinary rules governing actions between private individuals for the recovery of sums paid but not due, for which the period allowed is more favourable, provided that that time-limit applies in the same way to actions based on Community law for repayment of such charges as to those based on national law.The rules for calculating interest on repaymentsObservations submitted to the Court71 CASER states that Law No 29 of 25 January 1961 (GURI No 53 of 1 March 1961), as amended, regulates generally the interest rates applicable, whether for the benefit of the State or of taxpayers, to sums due as indirect turnover taxes and charges in the event of late payment by taxpayers or repayment of sums wrongfully levied by the State. CASER submits that, applying that law, the interest which should be paid it as from its claim for repayment (ITL 30 810 000 on 30 June 1999) is greater than the interest under Article 11(3) of Law No 448/1998 (ITL 17 550 000). The same applies if the statutory interest prescribed by Article 1284 of the Civil Code for repayment of all sums wrongly paid as from the date of bringing proceedings is applied (ITL 40 950 000). The differences between the amounts payable as interest of various kinds show plainly that Article 11(3) of Law No 448/1998 does not comply with the principle of equivalence.72 CASER points out that the situation now before the Court differs from that in Ansaldo Energia. The question in that case was whether Community law precludes the fixing of different interest rates in tax cases from those in civil cases. In the main proceedings, however, the issue is the fixing of different interest rates in tax cases, with the less favourable rate, which was moreover fixed retroactively, applying specifically to repayment of the charges declared contrary to Community law following the Ponente Carni judgment.73 The Italian Government notes that in Ansaldo Energia the Court stated that a Member State cannot be required to extend its most favourable national rules on repayment to all claims for the repayment of charges or duties levied in breach of Community law. Moreover, as Article 11(3) of Law No 448/1998 did not reserve the rate it lays down, 2.5% (the statutory rate at the date of entry into force of that law), solely to cases involving repayment of the administrative charges levied in breach of Community law but applied it to all possible cases of claims for repayment relating to those amounts and to those based on national law, the principle of equivalence is also complied with.74 The Commission points out that, contrary to the position in the Ansaldo Energia case, it is clear from the actual wording of Article 11 that it applies only to the reimbursement of particular charges which were held to be contrary to Community law, but not to the many other governmental administrative charges, which themselves form part of the broader category of indirect taxes other than turnover taxes.75 Observing, moreover, that the rate of interest applicable under Article 11(3) of Law No 448/1998 is lower, taking the periods in question as a whole, than the rate of interest applicable to tax debts under Law No 29/1961, the Commission concludesthat the principle of equivalence is not complied with. The same would apply if the reference taken were the statutory interest rate applicable during the same periods to civil debts, in the event of reclassification of the legal relations between the tax authorities and the companies which paid the administrative charges at issue, following the declaration of the incompatibility of those charges with Community law.Findings of the Court76 The Court observed in paragraph 29 of Ansaldo Energia that national rules on repayment comply with the principle of equivalence if they apply without distinction to actions alleging infringements of Community law and to those alleging infringements of national law, with respect to the same kind of charges or dues, but that that principle cannot be interpreted as requiring a Member State to extend its most favourable rules governing recovery under national law to all actions for repayment of charges or dues levied in breach of Community law. The Court concluded, in paragraph 30 of that judgment, that Community law does not preclude a Member State from laying down, with respect to interest, methods of calculation for repayment of charges improperly levied which are less favourable than those applicable to actions between private individuals for the recovery of sums paid but not due, provided that the methods in question apply without distinction to actions based on Community law and to those based on national law.77 However, as the Court also held, a Member State may not adopt provisions making repayment of a tax held to be contrary to Community law by a judgment of the Court, or whose incompatibility with Community law is apparent from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those which would otherwise be applied to repayment of the tax in question (see Edis, paragraph 24, Aprile, paragraph 26, and Dilexport, paragraph 39).78 It appears that in the circumstances at issue in the main proceedings, which differ on this point from those in the Ansaldo Energia case, the rules for calculating interest laid down in Article 11(3) of Law No 448/1998, which relate specifically to the administrative charges for registration in the register of companies and the annual payment for its maintenance in subsequent years which were declared contrary to Community law following the Ponente Carni judgment, are less favourable that the rules applicable to repayment of other tax debts, including repayment of other administrative charges of the same kind. In such circumstances, the presence of which is for the national court to ascertain, legislation such as that at issue in the main proceedings would be contrary to Community law and should be disapplied and replaced by the provisions on interest applicable to repayments of other administrative charges of the same kind.79 The answer to the national court must therefore be that Community law precludes the adoption by a Member State of provisions making repayment of a tax held to be contrary to Community law by a judgment of the Court, or whose incompatibility with Community law is apparent from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those which would otherwise be applied to repayment of the tax in question. Decision on costs Costs80 The costs incurred by the Italian Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the actions pending before the national courts, the decision on costs is a matter for those courts. Operative part On those grounds,THE COURT (Sixth Chamber),in answer to the questions referred to it by the Tribunale di Milano by order of 15 May 1999 and by the Corte d'appello di Roma by order of 12 May 1999, hereby rules:1. Article 10 of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital must be interpreted as prohibiting, subject to the exceptions in Article 12 of that directive, retroactive charges for the registration of company documents in the register of companies where they do not constitute capital duty permitted by that directive. Article 12(1)(e) of Directive 69/335 must be interpreted as meaning that such retroactive charges do not constitute duties paid by way of fees or dues permitted by that provision where the registrations in the register of companies for which they are charged have already given rise to charges for which the retroactive charges are intended to be a substitute but which are not reimbursed to those who have paid them. Otherwise, for such retroactive charges to constitute duties paid by way of fees or dues permitted by Article 12(1)(e) of Directive 69/335, their amounts, which may vary according to the legal form of the company, must be calculated solely on the basis of the cost of the formalities in question, although they may also cover the costs of minor operations carried out free of charge, and must take account of any other charges paid in parallel which are also intended to pay for the same service rendered. In calculating those amounts, a Member State is entitled to take into account all the costs linked with the registration operations, including the share of overheads attributable to them. A Member State also has the option of introducing flat-rate charges and setting their amounts for an indeterminate period, as long as it ensures at regular intervals that those amounts still do not exceed the average cost of the operations concerned.2. Community law does not prohibit a Member State from resisting actions for repayment of charges levied in breach of Community law by relying on a time-limit under national law of three years, by way of derogation from the ordinary rules governing actions between private individuals for the recovery of sums paid but not due, for which the period allowed is more favourable, provided that that time-limit applies in the same way to actions based on Community law for repayment of such charges as to those based on national law.3. Community law precludes the adoption by a Member State of provisions making repayment of a tax held to be contrary to Community law by a judgment of the Court, or whose incompatibility with Community law is apparent from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those which would otherwise be applied to repayment of the tax in question.

169a0-7d4e7f0-4611

EN

THE COURT REAFFIRMS THE IMPORTANCE OF PROTECTING THE FAMILY LIFE OF NATIONALS OF THE MEMBER STATES TO WHOM THE COMMUNITY LEGISLATION ON FREEDOM OF MOVEMENT APPLIES

| 61999J0459 Judgment of the Court of 25 July 2002. - Mouvement contre le racisme, l'antisémitisme et la xénophobie ASBL (MRAX) v Belgian State. - Reference for a preliminary ruling: Conseil d'Etat - Belgium. - Third country nationals who are the spouse of a Member State national - Requirement for a visa - Right of entry for spouses not in possession of identity documents or a visa - Right of residence for spouses who have entered unlawfully - Right of residence for spouses who have entered lawfully but whose visa has expired when they apply for a residence permit - Directives 64/221/EEC, 68/360/EEC and 73/148/EEC and Regulation (EC) No 2317/95. European Court reports 2002 Page I-06591 Keywords 1. Freedom of movement for persons - Right of entry and residence for nationals of Member States - Right of entry for members of their family - Spouse who is a third country national and is not in possession of identity documents or a visa but able to prove his identity and the conjugal ties - No grounds of public policy, public security or public health - Sending back at the border - Not permissible(Council Regulation No 2317/95; Council Directives 68/360, Arts 3 and 10, and 73/148, Arts 3 and 8)2. Freedom of movement for persons - Right of entry and residence for nationals of Member States - Right of residence for members of their family - Spouse who is a third country national able to prove his identity and the conjugal ties who has entered the territory of a Member State unlawfully - Refusal of a residence permit and issue of an expulsion order based on that ground alone - Not permissible - Adoption of measures of public policy or public security referred to in Directive 64/221 - Not permissible(Council Directives 64/221, Art. 3, 68/360, Arts 4 and 10, and 73/148, Arts 4, 6 and 8)3. Freedom of movement for persons - Right of entry and residence for nationals of Member States - Right of entry and residence for members of their family - Spouse who is a third country national and has entered the territory of a Member State lawfully - Refusal of a residence permit and issue of an expulsion order on the sole ground that a visa has expired - Not permissible(Council Directives 64/221, Art. 3(3), 68/360, Arts 3 and 4(3), and 73/148, Arts 3 and 6)4. Freedom of movement for persons - Derogations - Decisions concerning the control of aliens - Decision refusing to issue a first residence permit - Decision ordering expulsion before any residence permit has been issued - Examination and opinion procedure before the competent authority - Scope - Decisions adopted against a foreign national married to a national of a Member State and not in possession of identity documents or a visa - Included(Council Directive 64/221, Arts 1(2) and 9) Summary $$1. On a proper construction of Article 3 of Directive 68/360, Article 3 of Directive 73/148 and Regulation No 2317/95, read in the light of the principle of proportionality, a Member State may not send back at the border a third country national who is married to a national of a Member State and attempts to enter its territory without being in possession of a valid identity card or passport or, if necessary, a visa, where he is able to prove his identity and the conjugal ties and there is no evidence to establish that he represents a risk to the requirements of public policy, public security or public health within the meaning of Article 10 of Directive 68/360 and Article 8 of Directive 73/148.In view of the importance which the Community legislature has attached to the protection of family life, it is in any event disproportionate and, therefore, prohibited to send back a third country national in such a case.( see paras 61-62, operative part 1 )2. On a proper construction of Article 4 of Directive 68/360 and Article 6 of Directive 73/148, a Member State is not permitted to refuse issue of a residence permit and to issue an expulsion order against a third country national who is able to furnish proof of his identity and of his marriage to a national of a Member State on the sole ground that he has entered the territory of the Member State concerned unlawfully.While Community law does not prevent the Member States from prescribing, for breaches of national provisions concerning the control of aliens, any appropriate sanctions necessary in order to ensure the efficacity of those provisions provided that those sanctions are proportionate, refusal of a residence permit, and an expulsion order, based solely on the failure of the person concerned to comply with legal formalities concerning the control of aliens would impair the very substance of the right of residence and would be manifestly disproportionate to the gravity of the infringement. Nor can such failure in itself give rise to application of the measures of public policy and public security referred to in Article 3 of Directive 64/221.( see paras 77-80, operative part 2 )3. On a proper construction of Articles 3 and 4(3) of Directive 68/360, Articles 3 and 6 of Directive 73/148 and Article 3(3) of Directive 64/221, a Member State may neither refuse to issue a residence permit to a third country national who is married to a national of a Member State and entered the territory of that Member State lawfully, nor issue an order expelling him from the territory, on the sole ground that his visa expired before he applied for a residence permit.While Article 4(3) of Directive 68/360 and Article 6 of Directive 73/148 authorise the Member States to demand, for the purpose of issue of a residence permit, production of the document with which the person concerned entered their territory, they do not lay down that that document must still be valid. Furthermore, an order of expulsion from national territory on the sole ground that a visa has expired would constitute a sanction manifestly disproportionate to the gravity of the breach of the national provisions concerning the control of aliens.( see paras 89-91, operative part 3 )4. On a proper construction of Articles 1(2) and 9(2) of Directive 64/221, a foreign national married to a national of a Member State has the right to refer to the competent authority envisaged in Article 9(1) a decision refusing to issue a first residence permit or ordering his expulsion before the issue of the permit, including where he is not in possession of an identity document or where, requiring a visa, he has entered the territory of a Member State without one or has remained there after its expiry.The provisions of Article 9 of the directive call for a broad interpretation as regards the persons to whom they apply, since the requirement for judicial review of any decision of a national authority reflects a general principle stemming from the constitutional traditions common to the Member States and enshrined in Articles 6 and 13 of the European Convention for Human Rights.Moreover, the minimum procedural guarantees laid down in Article 9 of the directive would be rendered largely ineffective if entitlement to them were excluded in the absence of an identity document or visa or where one of those documents has expired.( see paras 101, 103-104, operative part 4 ) Parties In Case C-459/99,REFERENCE to the Court under Article 234 EC by the Conseil d'État (Belgium) for a preliminary ruling in the proceedings pending before that court betweenMouvement contre le racisme, l'antisémitisme et la xénophobie ASBL (MRAX)andÉtat belge,on the interpretation of Articles 1(2), 3(3) and 9(2) of Council Directive 64/221/EEC of 25 February 1964 on the co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ, English Special Edition 1963-1964, p. 117), Articles 3 and 4 of Council Directive 68/360/EEC of 15 October 1968 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families (OJ, English Special Edition 1968 (II), p. 485), Articles 3 and 6 of Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services (OJ 1973 L 172, p. 14) and Council Regulation (EC) No 2317/95 of 25 September 1995 determining the third countries whose nationals must be in possession of visas when crossing the external borders of the Member States (OJ 1995 L 234, p. 1),THE COURT,composed of: G.C. Rodríguez Iglesias, President, N. Colneric and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward, J.-P. Puissochet, M. Wathelet, R. Schintgen and J.N. Cunha Rodrigues (Rapporteur), Judges,Advocate General: C. Stix-Hackl,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- Mouvement contre le racisme, l'antisémitisme et la xénophobie ASBL (MRAX), by I. de Viron, avocat;- the État belge, by E. Matterne and E. Derriks, avocats;- the Austrian Government, by A. Längle, acting as Agent;- the Commission of the European Communities, by H. Michard, C. O'Reilly and N. Yerrell, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Mouvement contre le racisme, l'antisémitisme et la xénophobie ASBL (MRAX), the État belge and the Commission at the hearing on 29 May 2001,after hearing the Opinion of the Advocate General at the sitting on 13 September 2001,gives the followingJudgment Grounds 1 By judgment of 23 November 1999, received at the Court on 2 December 1999, the Belgian Conseil d'État (Council of State) referred to the Court for a preliminary ruling under Article 234 EC four questions on the interpretation of Articles 1(2), 3(3) and 9(2) of Council Directive 64/221/EEC of 25 February 1964 on the co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ, English Special Edition 1963-1964, p. 117), Articles 3 and 4 of Council Directive 68/360/EEC of 15 October 1968 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families (OJ, English Special Edition 1968 (II), p. 485), Articles 3 and 6 of Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services (OJ 1973 L 172, p. 14) and Council Regulation (EC) No 2317/95 of 25 September 1995 determining the third countries whose nationals must be in possession of visas when crossing the external borders of the Member States (OJ 1995 L 234, p. 1).2 Those questions were raised in proceedings between Mouvement contre le racisme, l'antisémitisme et la xénophobie ASBL (Movement to combat racism, anti-Semitism and xenophobia; MRAX) and the Belgian State for annulment of the Circular of the Ministers for the Interior and for Justice of 28 August 1997 concerning the procedure for publication of banns of marriage and the documents which must be produced in order to obtain a visa for the purpose of contracting a marriage in the Kingdom of Belgium or to obtain a visa for the purpose of reuniting a family on the basis of a marriage contracted abroad (Moniteur belge of 1 October 1997, p. 25905; the Circular of 28 August 1997).Legal frameworkCommunity legislation3 Article 1(1) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475) provides:Any national of a Member State shall, irrespective of his place of residence, have the right to take up an activity as an employed person, and to pursue such activity, within the territory of another Member State in accordance with the provisions laid down by law, regulation or administrative action governing the employment of nationals of that State.4 Article 10 of Regulation No 1612/68 states:1. The following shall, irrespective of their nationality, have the right to install themselves with a worker who is a national of one Member State and who is employed in the territory of another Member State:(a) his spouse and their descendants who are under the age of 21 years or are dependants;(b) dependent relatives in the ascending line of the worker and his spouse.2. Member States shall facilitate the admission of any member of the family not coming within the provisions of paragraph 1 if dependent on the worker referred to above or living under his roof in the country whence he comes.3. For the purposes of paragraphs 1 and 2, the worker must have available for his family housing considered as normal for national workers in the region where he is employed; this provision, however must not give rise to discrimination between national workers and workers from the other Member States.5 Under Article 1 of Directive 68/360, the Member States, acting as provided in that directive, are to abolish restrictions on the movement and residence of nationals of the Member States and of members of their families to whom Regulation No 1612/68 applies.6 Article 3 of Directive 68/360 states:1. Member States shall allow the persons referred to in Article 1 to enter their territory simply on production of a valid identity card or passport.2. No entry visa or equivalent document may be demanded save from members of the family who are not nationals of a Member State. Member States shall accord to such persons every facility for obtaining any necessary visas.7 Article 4(1) of Directive 68/360 provides that the Member States are to grant the right of residence in their territory to the persons referred to in Article 1 who are able to produce the documents listed in Article 4(3).8 As set out in the second indent of Article 4(3), for members of a worker's family those documents are:(c) the document with which they entered the territory;(d) a document issued by the competent authority of the State of origin or the State whence they came, proving their relationship;(e) in the cases referred to in Article 10(1) and (2) of Regulation (EEC) No 1612/68, a document issued by the competent authority of the State of origin or the State whence they came, testifying that they are dependent on the worker or that they live under his roof in such country.9 Article 10 of Directive 68/360 provides:Member States shall not derogate from the provisions of this Directive save on grounds of public policy, public security or public health.10 Under Article 1(1) of Directive 73/148, the Member States shall, acting as provided in this Directive, abolish restrictions on the movement and residence of:(a) nationals of a Member State who are established or who wish to establish themselves in another Member State in order to pursue activities as self-employed persons, or who wish to provide services in that State;(b) nationals of Member States wishing to go to another Member State as recipients of services;(c) the spouse and the children under 21 years of age of such nationals, irrespective of their nationality;(d) the relatives in the ascending and descending lines of such nationals and of the spouse of such nationals, which relatives are dependent on them, irrespective of their nationality.11 Article 3 of Directive 73/148 is in essentially the same terms as Article 3 of Directive 68/360.12 Article 4(1) of Directive 73/148 states:Each Member State shall grant the right of permanent residence to nationals of other Member States who establish themselves within its territory in order to pursue activities as self-employed persons, when the restrictions on these activities have been abolished pursuant to the Treaty.As proof of the right of residence, a document entitled "Residence Permit for a National of a Member State of the European Communities" shall be issued. This document shall be valid for not less than five years from the date of issue and shall be automatically renewable....13 Article 6 of Directive 73/148 provides:An applicant for a residence permit or right of abode shall not be required by a Member State to produce anything other than the following, namely:(a) the identity card or passport with which he or she entered its territory;(b) proof that he or she comes within one of the classes of person referred to in Articles 1 and 4.14 Article 8 of Directive 73/148 is in the same terms as Article 10 of Directive 68/360.15 Article 1 of Directive 64/221 states:1. The provisions of this Directive shall apply to any national of a Member State who resides in or travels to another Member State of the Community, either in order to pursue an activity as an employed or self-employed person, or as a recipient of services.2. These provisions shall apply also to the spouse and to members of the family who come within the provisions of the regulations and directives adopted in this field in pursuance of the Treaty.16 Article 2 of Directive 64/221 provides:1. This Directive relates to all measures concerning entry into their territory, issue or renewal of residence permits, or expulsion from their territory, taken by Member States on grounds of public policy, public security or public health.2. Such grounds shall not be invoked to [serve] economic ends.17 Article 3 of Directive 64/221 states:1. Measures taken on grounds of public policy or of public security shall be based exclusively on the personal conduct of the individual concerned.2. Previous criminal convictions shall not in themselves constitute grounds for the taking of such measures.3. Expiry of the identity card or passport used by the person concerned to enter the host country and to obtain a residence permit shall not justify expulsion from the territory.4. The State which issued the identity card or passport shall allow the holder of such document to re-enter its territory without any formality even if the document is no longer valid or the nationality of the holder is in dispute.18 Article 8 of Directive 64/221 states:The person concerned shall have the same legal remedies in respect of any decision concerning entry, or refusing the issue or renewal of a residence permit, or ordering expulsion from the territory, as are available to nationals of the State concerned in respect of acts of the administration.19 Article 9 provides:1. Where there is no right of appeal to a court of law, or where such appeal may be only in respect of the legal validity of the decision, or where the appeal cannot have suspensory effect, a decision refusing renewal of a residence permit or ordering the expulsion of the holder of a residence permit from the territory shall not be taken by the administrative authority, save in cases of urgency, until an opinion has been obtained from a competent authority of the host country before which the person concerned enjoys such rights of defence and of assistance or representation as the domestic law of that country provides for.This authority shall not be the same as that empowered to take the decision refusing renewal of the residence permit or ordering expulsion.2. Any decision refusing the issue of a first residence permit or ordering expulsion of the person concerned before the issue of the permit shall, where that person so requests, be referred for consideration to the authority whose prior opinion is required under paragraph 1. The person concerned shall then be entitled to submit his defence in person, except where this would be contrary to the interests of national security.20 Regulation No 2317/95 was annulled by judgment of 10 June 1997 in Case C-392/95 Parliament v Council [1997] ECR I-3213. However, the Court held that the effects of the annulled regulation should be maintained until the Council of the European Union adopted new legislation in the matter.21 Article 5 of Regulation No 2317/95 states:For the purposes of this Regulation, "visa" shall mean an authorisation given or a decision taken by a Member State which is required for entry into its territory with a view to:- an intended stay in that Member State or in several Member States of no more than three months in all,- transit through the territory of that Member State or several Member States, except for transit through the international zones of airports and transfers between airports in a Member State.22 On 12 March 1999 the Council adopted Regulation (EC) No 574/1999 determining the third countries whose nationals must be in possession of visas when crossing the external borders of the Member States (OJ 1999 L 72, p. 2). That regulation was replaced by Council Regulation (EC) No 539/2001 of 15 March 2001 listing the third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement (OJ 2001 L 81, p. 1).National legislation23 The Law on access to the territory, residence, establishment and expulsion of foreign nationals of 15 December 1980 (Moniteur belge of 31 December 1980), as amended by the Law of 15 July 1996 (Moniteur belge of 12 October 1996) (the Law of 15 December 1980), provides in the first paragraph of Article 2:Foreign nationals shall be permitted to enter the Kingdom where they are in possession of:...(ii) or a valid passport or travel document in lieu of a passport, bearing a visa or equivalent authorisation valid for Belgium affixed by a Belgian diplomatic or consular representative or by such a representative of a State party to an international Convention concerning the crossing of external borders which is binding on Belgium.24 Under subparagraph (ii) of the first paragraph of Article 3 of the Law of 15 December 1980, the authorities responsible for border controls may send back foreign nationals who attempt to enter the Kingdom without being in possession of the documents required by Article 2.25 Under subparagraphs (i) and (ii) of the first paragraph of Article 7, a foreign national who is not authorised or allowed to reside for more than three months or to establish himself in the Kingdom may be ordered by the competent minister or a person delegated by him to leave national territory before a specified date:(i) if he is staying in the Kingdom without being in possession of the documents required by Article 2;(ii) if he remains in the Kingdom beyond the time-limit set in accordance with Article 6 or cannot prove that that time-limit has not been exceeded.26 Article 40(2) to (6) of the Law of 15 December 1980 states:2. For the purposes of this Law, "EC foreign national" shall mean any national of a Member State of the European Communities who resides in or travels to the Kingdom and who:(i) pursues or intends to pursue there an activity as an employed or self-employed person;(ii) receives or intends to receive services there:(iii) enjoys or intends to enjoy there a right to remain;(iv) enjoys or intends to enjoy there a right of residence after ceasing a professional activity or occupation pursued in the Community;(v) undergoes or intends to undergo there, as a principal pursuit, vocational training in an approved educational establishment; or(vi) belongs to none of the categories under (i) to (v) above.3. Subject to any contrary provisions of this Law, the following persons shall, whatever their nationality, be treated in the same way as an EC foreign national covered by paragraph 2(i), (ii) and (iii) above, provided that they come in order to settle, or do settle, with him:(i) the spouse of that national;...4. Subject to any contrary provisions of this Law, the following persons shall, whatever their nationality, be treated in the same way as an EC foreign national covered by paragraph 2(iv) and (vi) above, provided that they come in order to settle, or do settle, with him:(i) the spouse of that national;...5. Subject to any contrary provisions of this Law, the spouse of an EC foreign national covered by paragraph 2(v) above and his children or those of his spouse who are dependent on them shall, whatever their nationality, be treated in the same way as the EC foreign national provided that they come in order to settle, or do settle, with him.6. The spouse of a Belgian who comes in order to settle, or does settle, with him, and also their descendants who are under 21 years of age or dependent on them, their ascendants who are dependent on them and any spouse of those descendants or ascendants, who come to settle, or do settle, with them, shall also be treated in the same way as an EC foreign national.27 Article 41 of the Law of 15 December 1980 provides:The right to enter the Kingdom shall be granted to an EC foreign national upon production of a valid identity card or national passport.Spouses and family members referred to in Article 40 who are not nationals of a Member State of the European Communities must be in possession of the document required under Article 2.A person holding a document issued by the Belgian authorities which he has used to enter and reside in a Member State of the Communities shall be accepted without formality on Belgian territory even if his nationality is disputed or if the document has expired.28 Article 42 of the Law of 15 December 1980 provides:A right of residence shall be granted to EC foreign nationals under the conditions and for the period determined by the King in accordance with the regulations and directives of the European Communities.Such right of residence shall be proved by a permit issued in the cases and under the detailed rules laid down by the King, in accordance with the said regulations and directives.The decision concerning issue of a residence permit shall be taken as quickly as possible and no later than six months from the application.29 Article 43 of the Law of 15 December 1980 states:Entry and residence may not be denied to EC foreign nationals except on grounds of public policy, public security or public health, and then only subject to the following limitations:...(iii) expiry of a document used for entry into and residence in Belgian territory cannot by itself justify expulsion from the territory;....30 Subparagraph (i) of the first paragraph of Article 44 states:An application for review, as provided for by Article 64, may be made in respect of:(i) any refusal to issue a residence permit to an EC foreign national to whom a right of residence is granted under Article 42 and any decision ordering expulsion from the territory before such a permit is issued.31 Article 64 of the Law of 15 December 1980 states:Apart from the decisions referred to in Articles 44 and 44a, an application for review by the minister conducted in accordance with the following provisions may be made in respect of:(i) a decision refusing under Article 11 to grant a right of residence;(ii) a requirement to return to the country of origin;(iii) refusal of an application for authorisation for establishment;...(vii) a decision requiring a foreign national, pursuant to Article 22, to leave specified premises, to stay away from them or to reside at a specified location;(viii) a decision refusing authorisation to reside to a foreign national who wishes to study in Belgium.32 Article 69 of the Law of 15 December 1980 provides:An action for annulment, governed by Article 14 of the Laws on the Conseil d'État, consolidated on 12 January 1973, may be brought against a decision refusing entitlement to a right envisaged by this Law.The lodging of an application for review shall not preclude an action being brought directly for annulment of the decision whose review is sought.In that case, consideration of the action for annulment shall be suspended until the minister has ruled on the admissibility of the application for review.33 The Circular of 28 August 1997 is worded as follows:The aim of this circular is to resolve certain problems relating to the procedure for publication of banns ... which have recently given rise to controversy. In addition, it provides clarification with regard to the documents which must be produced in order to obtain a visa for the purpose of contracting a marriage in the Kingdom or to obtain a visa for the purpose of reuniting a family on the basis of a marriage contracted abroad....4. Lodging an application for residence after celebration of a marriage....However, as regards residence, it is to be remembered that the documents required for entry into the Kingdom must be produced in support of the application for residence submitted under subparagraphs (i) or (iv) of the first paragraph of Article 10 or Article 40(3) to (6) of the Law of 15 December 1980 on access to the territory, residence, establishment and expulsion of foreign nationals.That means specifically that the foreign national must be in possession of a valid national passport or travel document in lieu of a passport, bearing if necessary a visa or equivalent authorisation valid for Belgium affixed by a Belgian diplomatic or consular representative or by such a representative of a State party to an international Convention concerning the crossing of external borders which is binding on Belgium (Article 2 of the Law of 15 December 1980).Where a foreign national fails to produce the abovementioned entry documents, his application for residence shall in principle be declared inadmissible....34 The Circular of the Minister for the Interior of 12 October 1998 relating to applications for residence or establishment in the Kingdom submitted, following contraction of marriage, on the basis of Article 10 or 40 of the Law of 15 December 1980 on access to the territory, residence, establishment and expulsion of foreign nationals (Moniteur belge of 6 November 1998, p. 36360; the Circular of 12 October 1998) was adopted in order to define more precisely the rule set out in paragraph 4 of the Circular of 28 August 1997. Paragraphs 1 and 2 of the Circular of 12 October 1998 provide:1. The general rule that an application for residence or establishment in the Kingdom in order to reunite a family will not be considered where the foreign national is not in possession of valid entry documents, that is to say a national passport or a travel document in lieu of a passport which is valid when the application is made and bears, if necessary, a valid visa, continues to apply.2. In derogation from that general rule, an application for establishment submitted on the basis of Article 40 of the Law of 15 December 1980 by a foreign national (requiring a visa) married to a Belgian national or a national of a Member State of the EEA, who produces only a national passport, or a travel document in lieu of a passport, which is valid but bears an expired visa will however be considered in so far as the documents concerning his ties of kinship or marriage to the Belgian national or the national of a Member State of the EEA are produced at the time of the application for establishment....The main proceedings and the questions referred for a preliminary ruling35 By application of 28 November 1997 to the Conseil d'État, MRAX sought annulment of the Circular of 28 August 1997.36 It submitted in support of its action that the circular, in particular paragraph 4, was incompatible with the Community directives on movement and residence within the Community.37 Since the Conseil d'État found that an interpretation of Community law was required in order to dispose of the case before it, it decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:1. Must Article 3 of Directive 68/360 of 15 October 1968, Article 3 of Directive 73/148 of 21 May 1973 and Regulation No 2317/95 of 25 September 1995, read in the light of the principles of proportionality and non-discrimination and the right to respect for family life, be interpreted as meaning that the Member States may, at the border, send back foreign nationals subject to a visa requirement and married to a Community national who attempt to enter the territory of a Member State without being in possession of an identity document or visa?2. Must Article 4 of Directive 68/360 and Article 6 of Directive 73/148, read in the light of Article 3 of each of those directives and of the principles of proportionality and non-discrimination and the right to respect for family life, be interpreted as meaning that Member States may refuse to issue a residence permit to the spouse of a Community national who has entered their territory unlawfully and issue an expulsion order against him?3. Do Articles 3 and 4(3) of Directive 68/360, Article 3 of Directive 73/148 and Article 3(3) of Directive 64/221 of 25 February 1964 mean that the Member States may neither withhold a residence permit nor expel a foreign spouse of a Community national who has entered national territory lawfully but whose visa has expired when application is made for the issue of that permit?4. Must Articles 1 and 9(2) of Directive 64/221 of 25 February 1964 be interpreted as meaning that foreign spouses of Community nationals who are not in possession of identity documents or a visa or whose visa has expired have the right to refer the matter to the competent authority mentioned in Article 9(1) when applying for the issue of a first residence permit or when they have an expulsion order made against them before the issue thereof?Preliminary point38 The Belgian State contends that the national legislature has placed spouses of Belgian nationals on the same footing as nationals of the Member States so that they are not treated less favourably than a spouse or family member of a national of another Member State. However, according to the Belgian State the Court of Justice has no jurisdiction where the situation of a third country national married to a Belgian national is at issue.39 As to that submission, Community legislation concerning freedom of movement for workers, freedom to provide services and freedom of establishment is not applicable to situations not presenting any link to any of the situations envisaged by Community law. Consequently, that legislation cannot be applied to the situation of persons who have never exercised those freedoms (see, in particular, Case C-206/91 Koua Poirrez [1992] ECR I-6685, paragraphs 10, 11 and 12, and Case C-60/00 Carpenter [2002] ECR I-6279, paragraph 28).40 It is in that light that the Court will answer the questions inviting it to rule on the effect of a number of provisions of Directives 64/221, 68/360 and 73/148 and Regulation No 2317/95 with regard to third country nationals married to a Member State national.Question 1Observations submitted to the Court41 MRAX submits that to send back at the border of a Member State a third country national married to a Member State national on the ground that he does not have a visa issued by that Member State infringes Article 3 of Directive 68/360, Article 3 of Directive 73/148, Regulation No 2317/95 and Article 8(2) of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention).42 In addition MRAX argues that, in the case of third country nationals married to a Member State national, examination of the conditions for obtaining a visa should take place in Belgium and not in their country of origin.43 With regard to the requirement for an identity document, the Belgian State contends that the Member States have the task of checking whether or not third country nationals who wish to enter their territory or, having already entered, claim a right of residence, may rely on Community law. The obligation to produce a valid passport at the point of entry to the Member State is thus justified by the need for a third country national to prove his identity or his family ties with a national of a Member State.44 With regard to the requirement for a visa, the Belgian State submits that the obligation to apply for a visa before entering the territory of a Member State provides the Member States with means of checking both whether a third country national who wishes to enter their territory as the spouse of a Member State national fulfils the requisite conditions and whether he does not fall within the category of persons liable to be refused entry on grounds of public policy, public security or public health in accordance with Directive 64/221. Accordingly, Article 3 of Directive 68/360 and Article 3 of Directive 73/148, which authorise the Member States to demand a visa from third country nationals who are a member of the family of a Member State national, should be interpreted as entitling the Member States to send back such persons at their borders if they have no visa. The opposite interpretation would render those provisions nugatory.45 The Belgian State adds that many matters relating to a third country national can be clarified only by the Belgian representation in his country of origin. For that reason it is appropriate to issue the visa in the third country rather than at the Belgian border.46 The Austrian Government submits that the obligation on third country nationals married to a Member State national to obtain a visa is not discriminatory in so far as both Belgian law and Community law prescribe such an obligation.47 On the other hand, to allow third country nationals who have not complied with the requirement for a visa to enter Belgian territory would infringe the principle of equality to the disadvantage of third country nationals who have complied with that requirement. However, in light of the principles of freedom of movement for persons and proportionality, a Member State is permitted to create exemptions from the general requirement for a visa in exceptional circumstances, as provided for in particular by Article 4 of Regulation No 574/1999.48 The Commission underlines the particular position of a third country national who is a member of the family of a Member State national vis-à-vis other third country nationals who arrive at the external border of the Community. He derives from Community law the right to settle in the Community with the Member State national.49 According to the Commission, a Member State national can be refused entry into a Member State if he cannot prove his nationality. The same must accordingly hold for a third country national who is unable to prove his family ties with a Member State national.50 If, on the other hand, a third country national is able to establish those family ties and, therefore, rights which he derives from Community law, the lack of a visa is not to affect those rights and cannot in any event justify refusal of entry at the border. Such a measure would amount to negation of the rights and appears disproportionate.51 The Commission submits that, where a person establishes family ties with a migrant Community worker, the visa has a merely formal character and must be issued virtually automatically by the Member State through which he enters the Community. His right to enter the Community is not founded in any way on the visa but derives, pursuant to Community law, from the family ties alone.52 The Commission adds that issue of visas by consulates of a Member State located in third country nationals' States of origin is merely an organisational measure which cannot restrict the exercise of rights arising from Community law.The Court's answer53 It is apparent in particular from the Council regulations and directives on freedom of movement for employed and self-employed persons within the Community that the Community legislature has recognised the importance of ensuring protection for the family life of nationals of the Member States in order to eliminate obstacles to the exercise of the fundamental freedoms guaranteed by the Treaty (Carpenter, cited above, paragraph 38).54 Thus, Article 10 of Regulation No 1612/68, Article 1 of Directive 68/360 and Article 1 of Directive 73/148 extend in identical terms the application of Community law relating to entry into and residence in the territory of the Member States to the spouse of a Member State national who is covered by those provisions (Case 48/75 Royer [1976] ECR 497, paragraph 13).55 In addition, under Article 3(1) of Directive 68/360 and Article 3(1) of Directive 73/148, which are worded in almost identical terms, the Member States are to allow nationals of the Member States and members of their family who are covered by those directives to enter the territory of the Member States simply on production of a valid identity card or passport.56 Nevertheless, in accordance with Article 3(2) of Directive 68/360 and Article 3(2) of Directive 73/148, when a national of a Member State moves within the Community with a view to exercising the rights conferred upon him by the Treaty and those directives, the Member States may demand an entry visa or equivalent document from members of his family who are not nationals of a Member State. The list of third countries whose nationals must be in possession of a visa when crossing the external borders of the Member States was determined by Regulation No 2317/95, which was replaced by Regulation No 574/1999, itself since replaced by Regulation No 539/2001.57 As Community legislation does not specify the measures which a Member State may take should a third country national married to a Member State national wish to enter Community territory without being in possession of a valid identity card or passport or, if necessary, a visa, sending him back at the border does not appear to be precluded (see in particular, to that effect, with regard to Article 3(1) of Directive 68/360 and Article 3(1) of Directive 73/148, Case C-68/89 Commission v Netherlands [1991] ECR I-2637, paragraph 11).58 First, in the absence of a valid identity card or passport, documents which are intended to enable their holder to provide proof of his identity and nationality (see, to that effect, in particular Case C-376/89 Giagounidis [1991] ECR I-1069, paragraphs 14 and 15), the person concerned cannot as a rule properly prove his identity or, consequently, his family ties.59 Second, while, as the Commission correctly points out, the right of a third country national married to a Member State national to enter the territory of the Member States derives under Community law from the family ties alone, the fact remains that, according to the very wording of Article 3(2) of Directive 68/360 and Article 3(2) of Directive 73/148, exercise of that right may be conditional on possession of a visa. Indeed, Article 5 of Regulation No 2317/95 defines a visa as an authorisation given or a decision taken by a Member State which is required for entry into its territory.60 However, Article 3(2) of Directive 68/360 and Article 3(2) of Directive 73/148 state that the Member States are to accord to such persons every facility for obtaining any necessary visas. This means that, if those provisions of Directives 68/360 and 73/148 are not to be denied their full effect, a visa must be issued without delay and, as far as possible, at the place of entry into national territory.61 In view of the importance which the Community legislature has attached to the protection of family life (see paragraph 53 of this judgment), it is in any event disproportionate and, therefore, prohibited to send back a third country national married to a national of a Member State where he is able to prove his identity and the conjugal ties and there is no evidence to establish that he represents a risk to the requirements of public policy, public security or public health within the meaning of Article 10 of Directive 68/360 and Article 8 of Directive 73/148.62 The answer to the first question referred for a preliminary ruling must therefore be that, on a proper construction of Article 3 of Directive 68/360, Article 3 of Directive 73/148 and Regulation No 2317/95, read in the light of the principle of proportionality, a Member State may not send back at the border a third country national who is married to a national of a Member State and attempts to enter its territory without being in possession of a valid identity card or passport or, if necessary, a visa, where he is able to prove his identity and the conjugal ties and there is no evidence to establish that he represents a risk to the requirements of public policy, public security or public health within the meaning of Article 10 of Directive 68/360 and Article 8 of Directive 73/148.Question 2Observations submitted to the Court63 MRAX states that in order for a third country national who has got married in Belgium while resident there unlawfully to claim a right of residence, he is obliged to return to his country of origin to obtain a visa. However, the Belgian State sometimes agrees, in its discretion, to regularise the residence of a spouse of a Member State national.64 Accordingly, in MRAX's submission, the Belgian State's administrative practice does not provide spouses of Member State nationals with any legal certainty and may be perceived as discriminatory.65 MRAX observes that the Court has never ruled on the sanction to be imposed on a third country national who has entered the territory of a Member State unlawfully; however, it has held that a national of a Member State who is not in possession of the document required (a passport) in order to be able to reside in another Member State cannot have an expulsion order issued against him but may be sentenced to payment of a fine in criminal proceedings (see Case 8/77 Sagulo and Others [1977] ECR 1495). MRAX wonders whether the measures which may be taken against a national of a Member State should not be transposed to the spouse of such a national and whether infringements in respect of entry into and residence in the territory of a Member State could not be punished by a fine, whether administrative or imposed in criminal proceedings, a sanction which would be more in keeping with the principle of freedom of movement and the right to respect for private life.66 The Belgian State contends that Article 4 of Directive 68/360 and Article 6 of Directive 73/148 must be interpreted as allowing a Member State to refuse to grant a residence permit to a third country national who is married to a Member State national and has entered its territory unlawfully and to issue an expulsion order against him. To decide otherwise would render Article 3 of Directive 68/360 and Article 3 of Directive 73/148 meaningless and entirely redundant.67 The Belgian State maintains that, in a situation such as that envisaged in the second question referred for a preliminary ruling, an expulsion order cannot be regarded as disproportionate, having regard to the competing interests, namely public policy requirements and the requirements of respect for private and family life. In its submission, the interference with family life would be extremely limited if the third country national were refused entry or requested to leave national territory: the spouses would be separated for a brief period if the person concerned were able to establish entitlement to the benefit of the Community law provisions since, in that case, it should be possible to grant him a visa within a short time.68 The Austrian Government observes that if both primary and secondary law provide that the Member States may terminate the right of nationals of other Member States to reside in their territory if the conditions for further residence are not, or are no longer, fulfilled, a Member State must a fortiori be able to expel a third country national who is a member of the family of a Member State national (see Article 10 of Directive 68/360 and Article 8 of Directive 73/148).69 The Commission maintains that if a third country national who is married to a Member State national furnishes proof of those family ties when he submits an application for a residence permit in accordance with Article 4(1) of Directive 68/360, he should not be refused a residence permit on the sole ground that he entered the Member State concerned unlawfully.70 The Commission points out in this connection that the Court ruled in Royer, cited above, that the mere failure by a national of a Member State to comply with the formalities concerning the entry, movement and residence of aliens is not of such a nature as to constitute in itself conduct threatening the requirements of public policy and public security and cannot therefore, by itself, justify a measure ordering expulsion or temporary imprisonment for that purpose. According to the Commission, there is nothing to prevent that case-law from applying by analogy to a third country national who is covered by Community law because of his family ties with a migrant Community worker.71 The Commission submits that under Directive 64/221 a residence permit can be refused, or expulsion from national territory ordered, only on grounds of public policy, public security or public health and that such measures must be based exclusively on the personal conduct of the individual concerned. Unlawful entry into the territory of a Member State cannot systematically constitute a threat to the requirements of public policy calling into question the very right of residence.72 The Commission adds that in Case 118/75 Watson and Belmann [1976] ECR 1185 the Court defined its position with regard to the sanctions which the Member States may impose in the event of a failure to comply with certain formalities provided for by Community legislation. Having regard to that case-law, the Member States may prescribe proportionate sanctions if their territory is entered unlawfully, such as a fine (Sagulo, cited above, paragraph 6). However, the imposition of such sanctions must not affect issue of the residence permit.The Court's answer73 The second question must be understood as referring to the position of a third country national who has entered the territory of a Member State unlawfully and is able to furnish proof of his identity and of his marriage to a Member State national falling within the provisions of Directives 68/360 or 73/148.74 As the Court has stated on several occasions, issue of a residence permit to a national of a Member State (see, in particular, Case C-363/89 Roux [1991] ECR I-273, paragraph 12) is to be regarded not as a measure giving rise to rights but as a measure by a Member State serving to prove the individual position of a national of another Member State with regard to provisions of Community law. The same finding must be made with regard to a third country national married to a national of a Member State, whose right of residence derives directly from Article 4 of Directive 68/360 or Article 4 of Directive 73/148, irrespective of issue of a residence permit by the competent authority of a Member State.75 The detailed rules governing issue of residence permits are determined for employed persons and members of their families by Directive 68/360 and for self-employed persons and members of their families by Directive 73/148.76 Under Article 4(3) of Directive 68/360 and Article 6 of Directive 73/148, a Member State may make issue of a residence permit conditional upon production of the document with which the person concerned entered its territory (see Roux, cited above, paragraphs 14 and 15).77 Furthermore, Community law does not prevent the Member States from prescribing, for breaches of national provisions concerning the control of aliens, any appropriate sanctions necessary in order to ensure the efficacity of those provisions (Royer, cited above, paragraph 42), provided that those sanctions are proportionate (see, in particular, Case 157/79 Pieck [1980] ECR 2171, paragraph 19).78 On the other hand, refusal of a residence permit, and a fortiori an expulsion order, based solely on the failure of the person concerned to comply with legal formalities concerning the control of aliens would impair the very substance of the right of residence directly conferred by Community law and would be manifestly disproportionate to the gravity of the infringement (see, by analogy, in particular Royer, paragraph 40).79 It is true that Article 10 of Directive 68/360 and Article 8 of Directive 73/148 do not prevent the Member States from derogating from those directives on grounds of public policy, public security or public health, while Article 3(1) of Directive 64/221 lays down that measures taken on grounds of public policy or of public security are to be based exclusively on the personal conduct of the individual concerned. However, failure to comply with the legal formalities concerning the entry, movement and residence of aliens cannot in itself give rise to application of the measures referred to in Article 3 of Directive 64/221 (Royer, paragraphs 47 and 48).80 The answer to the second question referred for a preliminary ruling must therefore be that, on a proper construction of Article 4 of Directive 68/360 and Article 6 of Directive 73/148, a Member State is not permitted to refuse issue of a residence permit and to issue an expulsion order against a third country national who is able to furnish proof of his identity and of his marriage to a national of a Member State on the sole ground that he has entered the territory of the Member State concerned unlawfully.Question 3Observations submitted to the Court81 MRAX argues that Article 4 of Directive 68/360 does not require that the document with which members of the family of a Community worker have lawfully entered the territory of a Member State must still be valid when they apply for issue of a residence permit. Therefore, paragraph 4 of the Circular of 28 August 1997, according to which an application for residence by a spouse of a Member State national is inadmissible where it is submitted after the document has expired, infringes Community law.82 The Belgian State submits that, under Article 3(3) of Directive 64/221, expiry of the identity card or passport used by the person concerned to enter the host Member State and to obtain a residence permit is not to justify expulsion from the territory. It follows a contrario that, where the document expires before a residence permit is applied for, the Member State is entitled to refuse the application and expel the third country national married to a Member State national. Thus, the document with which the former entered the territory of a Member State that is envisaged by Article 4(3) of Directive 68/360 can only be a passport bearing a visa which is still valid.83 The Austrian Government contends that expiry of the visa within the Member State justifies a refusal to issue a residence permit.84 The Commission submits that the third question referred for a preliminary ruling should be answered in the affirmative. Where the spouse of a Member State national establishes that family tie, Directives 68/360 and 73/148 apply and the Member States are under an obligation to issue a residence permit to him, as follows from Royer, cited above. The Commission takes this to mean that in principle a residence permit cannot be refused on the ground that the visa expired after entry into national territory. That formal defect is not such as to affect the validity of the passport for the purposes of issue of a residence permit. This analysis is confirmed by Article 3(3) of Directive 64/221, which demonstrates the intention of the Community legislature that the substance of an application for a residence permit should prevail over its purely formal aspects.85 The Commission adds that failure to submit an application for a residence permit before a visa expires cannot in itself constitute personal conduct liable to threaten the requirements of public policy and public security justifying, as such, refusal to issue a residence permit or, a fortiori, a measure ordering expulsion.The Court's answer86 Where a third country national remains in the territory of a Member State after his visa has expired, he infringes the legislation of that Member State concerning residence of aliens.87 Article 3(3) of Directive 64/221, which has been referred to in the course of the proceedings before the Court, provides that expiry of the identity card or passport used by a national of a Member State or members of his family to enter the host Member State and to obtain a residence permit is not to justify expulsion from the territory.88 However, the third question submitted for a preliminary ruling concerns the situation of a person married to a national of a Member State and requiring a visa, who entered lawfully but did not apply for a residence permit before his visa expired.89 While Article 4(3) of Directive 68/360 and Article 6 of Directive 73/148 authorise the Member States to demand, for the purpose of issue of a residence permit, production of the document with which the person concerned entered their territory, they do not lay down that that document must still be valid. Accordingly, where a third country national requires a visa, issue of a residence permit to him cannot be made subject to the condition that his visa is still valid. That is all the more the case because, as the Court held in Giagounidis, cited above, at paragraphs 22 and 23, the Member States are obliged to grant the right of residence within their territory to the workers referred to in Article 1 of Directive 68/360 who can produce either a valid identity card or a valid passport, regardless of the document with which they entered their territory.90 Consequently, a Member State cannot make issue of a residence permit under Directives 68/360 and 73/148 conditional upon production of a valid visa. Furthermore, as follows from paragraph 78 of this judgment, an order of expulsion from national territory on the sole ground that a visa has expired would constitute a sanction manifestly disproportionate to the gravity of the breach of the national provisions concerning the control of aliens.91 The answer to the third question referred for a preliminary ruling must therefore be that, on a proper construction of Articles 3 and 4(3) of Directive 68/360, Articles 3 and 6 of Directive 73/148 and Article 3(3) of Directive 64/221, a Member State may neither refuse to issue a residence permit to a third country national who is married to a national of a Member State and entered the territory of that Member State lawfully, nor issue an order expelling him from the territory, on the sole ground that his visa expired before he applied for a residence permit.Question 4Observations submitted to the Court92 MRAX states that Articles 8 and 9 of Directive 64/221 have been transposed into Belgian law by Articles 44 and 64 of the Law of 15 December 1980. However, the Belgian State's current administrative practice denies third country nationals who are married to Member State nationals and are not in possession of a visa or whose visa has expired the right to make an application for review as provided for in Articles 44 and 64 of the Law of 15 December 1980 when a decision is made refusing them a residence permit or ordering their expulsion. They are permitted only to bring an action for suspension and annulment of the decision before the Conseil d'État, which merely reviews the decision's legality and cannot review whether the decision was appropriate in the light of the facts and circumstances of the case. Accordingly, Belgian administrative practice does not comply with the requirements of Community law.93 According to the Belgian State, Articles 8 and 9 of Directive 64/221, under which a third country national may refer the matter to the competent authority of the Member State, envisaged in Article 9(1), where he applies for issue of a first residence permit or his expulsion is ordered before such a permit is issued, do not apply where he has not entered the territory of that Member State lawfully.94 Article 1(2) of Directive 64/221 limits the directive's scope to members of the family of a Member State national who come within the provisions of the regulations and directives adopted in the field. A Member State national's spouse who is not in possession of an identity document or visa or whose visa has expired does not come within the conditions set out in Articles 3 and 4 of Directive 68/360 and in Regulation No 2317/95.95 The Austrian Government submits that, in the absence of absolute urgency, a decision to expel a person protected by Community law is not to be implemented until he has been able to exhaust the remedies which he is guaranteed by Articles 8 and 9 of Directive 64/221 (Royer, cited above, and Case 131/79 Santillo [1980] ECR 1585).96 However, if under Belgian law entry and residence of third country nationals who are a member of the family of a Member State national is conditional upon production of a valid passport or identity card and of a visa, it is legitimate to deny such a family member who has entered Belgian territory unlawfully the right to bring the matter before the competent authority within the meaning of Article 9(1) of Directive 64/221.97 On the other hand, having regard to Article 3(3) of Directive 64/221, the family member is to enjoy the right of recourse provided for in Article 9 of the directive where he has entered the territory of the Member State lawfully but the identity card or passport used by him to enter and to obtain a residence permit has expired. In such a case expulsion from national territory is not justified.98 The Commission contends that Article 1(2) of Directive 64/221 applies to third country nationals who are a member of the family of a Member State national, even if they are not in possession of a visa or their visa has expired. Provided that the family ties are established, there is no doubt that they enjoy the rights of recourse provided for in Article 9(2) of Directive 64/221.99 On the other hand, if there are no identity documents the answer should be the same as that suggested for the first question. The status of spouse of a Member State national must be established in order for the Community law protection to apply.The Court's answer100 The purpose of Article 9(2) of Directive 64/221 is to provide minimum procedural guarantees for persons refused a first residence permit, or whose expulsion is ordered before the issue of the permit, in any of the three cases defined in Article 9(1). Where the right of appeal against administrative measures is restricted to the legality of the decision, the purpose of the intervention of the competent authority is to enable an examination of the facts and circumstances, including factors demonstrating the appropriateness of the proposed measure, to be carried out before the decision is finally taken (see, to that effect, Joined Cases C-65/95 and C-111/95 Shingara and Radiom [1997] ECR I-3343, paragraphs 34 and 37).101 The provisions of Article 9 of Directive 64/221, which are complementary to those relating to the system of appeals to a court of law referred to in Article 8 and are intended to mitigate the effect of deficiencies in those remedies (see, in particular, Case 98/79 Pecastaing [1980] ECR 691, paragraphs 15 and 20), call for a broad interpretation as regards the persons to whom they apply. In the field of Community law, the requirement for judicial review of any decision of a national authority reflects a general principle stemming from the constitutional traditions common to the Member States and enshrined in Articles 6 and 13 of the Convention (Case 222/86 Unectef v Heylens and Others [1987] ECR 4097, paragraph 14, Case C-97/91 Oleificio Borelli v Commission [1992] ECR I-6313, paragraph 14, and Case C-226/99 Siples [2001] ECR I-277, paragraph 17).102 Accordingly, contrary to the argument put forward by the Belgian State, any foreign national married to a Member State national claiming to meet the conditions necessary to qualify for the protection afforded by Directive 64/221 benefits from the minimum procedural guarantees laid down in Article 9 of the directive, even if he is not in possession of an identity document or, requiring a visa, he has entered the territory of a Member State without one or has remained there after its expiry.103 Moreover, those procedural guarantees would be rendered largely ineffective if entitlement to them were excluded in the absence of an identity document or visa or where one of those documents has expired.104 The answer to the fourth question referred for a preliminary ruling must therefore be that, on a proper construction of Articles 1(2) and 9(2) of Directive 64/221, a foreign national married to a national of a Member State has the right to refer to the competent authority envisaged in Article 9(1) of that directive a decision refusing to issue a first residence permit or ordering his expulsion before the issue of the permit, including where he is not in possession of an identity document or where, requiring a visa, he has entered the territory of a Member State without one or has remained there after its expiry. Decision on costs Costs105 The costs incurred by the Austrian Government and the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Conseil d'État by judgment of 23 November 1999, hereby rules:1. On a proper construction of Article 3 of Council Directive 68/360/EEC of 15 October 1968 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families, Article 3 of Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services and Council Regulation (EC) No 2317/95 of 25 September 1995 determining the third countries whose nationals must be in possession of visas when crossing the external borders of the Member States, read in the light of the principle of proportionality, a Member State may not send back at the border a third country national who is married to a national of a Member State and attempts to enter its territory without being in possession of a valid identity card or passport or, if necessary, a visa, where he is able to prove his identity and the conjugal ties and there is no evidence to establish that he represents a risk to the requirements of public policy, public security or public health within the meaning of Article 10 of Directive 68/360 and Article 8 of Directive 73/148.2. On a proper construction of Article 4 of Directive 68/360 and Article 6 of Directive 73/148, a Member State is not permitted to refuse issue of a residence permit and to issue an expulsion order against a third country national who is able to furnish proof of his identity and of his marriage to a national of a Member State on the sole ground that he has entered the territory of the Member State concerned unlawfully.3. On a proper construction of Articles 3 and 4(3) of Directive 68/360, Articles 3 and 6 of Directive 73/148 and Article 3(3) of Council Directive 64/221/EEC of 25 February 1964 on the co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health, a Member State may neither refuse to issue a residence permit to a third country national who is married to a national of a Member State and entered the territory of that Member State lawfully, nor issue an order expelling him from the territory, on the sole ground that his visa expired before he applied for a residence permit.4. On a proper construction of Articles 1(2) and 9(2) of Directive 64/221, a foreign national married to a national of a Member State has the right to refer to the competent authority envisaged in Article 9(1) of that directive a decision refusing to issue a first residence permit or ordering his expulsion before the issue of the permit, including where he is not in possession of an identity document or where, requiring a visa, he has entered the territory of a Member State without one or has remained there after its expiry.

94496-b6a8508-4b95

EN

THE COURT OF JUSTICE REAFFIRMS ITS CASE-LAW ON THE CONDITIONS FOR THE ACCESS OF INDIVIDUALS TO THE COMMUNITY COURTS

| 62000J0050 Judgment of the Court of 25 July 2002. - Unión de Pequeños Agricultores v Council of the European Union. - Appeal - Regulation (EC) No 1638/98 - Common organisation of the market in oils and fats - Action for annulment - Person individually concerned - Effective judicial protection - Admissibility. - Case C-50/00 P. European Court reports 2002 Page I-06677 Keywords 1. Community law - Principles - Right to effective judicial protection - Enshrinement in the European Convention on Human Rights2. European Communities - Judicial review of the legality of acts of the institutions - Acts of general application - Need for natural or legal persons to have recourse to a plea of illegality or a reference for a preliminary ruling on validity - Obligation for national courts to apply national procedural rules in a way that enables the legality of Community acts of general application to be challenged - Availability of an action for annulment before the Community Court in the event of an insurmountable obstacle at the level of national procedural rules - Excluded(EC Treaty, Arts 5, 177 and 184 (now Arts 10 EC, 234 EC and 241 EC) and Art. 173, fourth para. (now, after amendment, Art. 230 EC, fourth para))3. Actions for annulment - Natural or legal persons - Measures of direct and individual concern to them - Interpretation contra legem of the requirement of being individually concerned - Not permissible(EC Treaty, Art. 173, fourth para. (now, after amendment, Art. 230 EC, fourth para); Art. 48 EU) Summary $$1. The European Community is a community based on the rule of law in which its institutions are subject to judicial review of the compatibility of their acts with the Treaty and with the general principles of law which include fundamental rights.Individuals are therefore entitled to effective judicial protection of the rights they derive from the Community legal order, and the right to such protection is one of the general principles of law stemming from the constitutional traditions common to the Member States. That right has also been enshrined in Articles 6 and 13 of the European Convention on Human Rights.( see paras 38-39 )2. By Article 173 (now, after amendment, Article 230 EC) and Article 184 (now Article 241 EC), on the one hand, and by Article 177 (now Article 234 EC), on the other, the Treaty has established a complete system of legal remedies and procedures designed to ensure judicial review of the legality of acts of the institutions, and has entrusted such review to the Community Courts. Under that system, where natural or legal persons cannot, by reason of the conditions for admissibility laid down in the fourth paragraph of Article 173 of the Treaty, directly challenge Community measures of general application, they are able, depending on the case, either indirectly to plead the invalidity of such acts before the Community Courts under Article 184 of the Treaty or to do so before the national courts and ask them, since they have no jurisdiction themselves to declare those measures invalid, to make a reference to the Court of Justice for a preliminary ruling on validity.Thus it is for the Member States to establish a system of legal remedies and procedures which ensure respect for the right to effective judicial protection.In that context, in accordance with the principle of sincere cooperation laid down in Article 5 of the Treaty (now Article 10 EC), national courts are required, so far as possible, to interpret and apply national procedural rules governing the exercise of rights of action in a way that enables natural and legal persons to challenge before the courts the legality of any decision or other national measure relative to the application to them of a Community act of general application, by pleading the invalidity of such an act.It is not acceptable to adopt an interpretation of the system of remedies to the effect that a direct action for annulment before the Community Court will be available where it can be shown, following an examination by that Court of the particular national procedural rules, that those rules do not allow the individual to bring proceedings to contest the validity of the Community measure at issue. Such an interpretation would require the Community Court, in each individual case, to examine and interpret national procedural law. That would go beyond its jurisdiction when reviewing the legality of Community measures.( see paras 40-43 )3. According to the system for judicial review of the legality of Community measures of general application which was established by the Treaty, a natural or legal person can bring an action challenging a regulation only if it is concerned both directly and individually. Although this last condition must be interpreted in the light of the principle of effective judicial protection by taking account of the various circumstances that may distinguish an applicant individually, such an interpretation cannot have the effect of setting aside the condition in question, expressly laid down in the Treaty, without going beyond the jurisdiction conferred by the Treaty on the Community Courts.While it is, admittedly, possible to envisage a system of judicial review of the legality of Community measures of general application different from that established by the founding Treaty and never amended as to its principles, it is for the Member States, if necessary, in accordance with Article 48 EU, to reform the system currently in force.( see paras 44-45 ) Parties In Case C-50/00 P,Unión de Pequeños Agricultores, having its registered office in Madrid (Spain), represented by J. Ledesma Bartret and J. Jiménez Laiglesia y de Oñate, Abogados, with an address for service in Luxembourg,appellant,APPEAL against the order of the Court of First Instance of the European Communities (Third Chamber) of 23 November 1999 in Case T-173/98 Unión de Pequeños Agricultores v Council [1999] ECR II-3357, seeking to have that order set aside,the other parties to the proceedings being:Council of the European Union, represented by I. Díez Parra, acting as Agent, with an address for service in Luxembourg,defendant at first instance,supported byCommission of the European Communities, represented by J. Guerra Fernández and M. Condou-Durande, acting as Agents, with an address for service in Luxembourg,intervener in the appeal,THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann, F. Macken, N. Colneric, S. von Bahr (Presidents of Chambers), C. Gulmann (Rapporteur), D.A.O. Edward, A. La Pergola, J.-P. Puissochet, M. Wathelet, R. Schintgen, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: F.G. Jacobs,Registrar: D. Louterman-Hubeau, Head of Division,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 6 November 2001, at which Unión de Pequeños Agricultores was represented by J. Jiménez Laiglesia y de Oñate, the Council by I. Díez Parra and the Commission by J. Guerra Fernández and M. Condou-Durande,after hearing the Opinion of the Advocate General at the sitting on 21 March 2002,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 16 February 2000, Unión de Pequeños Agricultores brought an appeal, pursuant to Article 49 of the EC Statute of the Court of Justice, against the order of the Court of First Instance of 23 November 1999 in Case T-173/98 Unión de Pequeños Agricultores v Council [1999] ECR II-3357 (the contested order), by which that court dismissed its application for partial annulment of Regulation (EC) No 1638/98 of 20 July 1998 amending Regulation No 136/66/EEC on the establishment of a common organisation of the market in oils and fats (OJ 1998 L 210, p. 32; the contested regulation).The legal framework2 On 22 September 1966, the Council adopted Regulation No 136/66/EEC on the establishment of a common organisation of the market in oils and fats (OJ, English Special Edition 1965-1966, p. 221). In particular, that regulation set up a common organisation of the markets in olive oil, structured around a system of guaranteed prices and production aid. Several subsequent amendments were made to the mechanisms introduced by Regulation No 136/66. The common organisation of the olive oil markets, as amended, laid down schemes in respect of intervention prices, production aid, consumption aid and storage, as well as imports and exports.3 On 20 July 1998 the Council adopted the contested regulation which reforms, in particular, the common organisation of the olive oil markets. For that purpose, the previous intervention scheme was abolished and replaced by a system of aid for private storage contracts. Consumption aid and the specific allocation of aid to small producers were discontinued. The stabiliser mechanism for production aid based on a maximum guaranteed quantity for the Community as a whole was amended by being apportioned among the producer Member States in the form of national guaranteed quantities. Finally, olive groves planted after 1 May 1998 are excluded, subject to certain exceptions, from any future aid scheme.Procedure before the Court of First Instance and the contested order4 By application lodged at the Registry of the Court of First Instance on 20 October 1998, Unión de Pequeños Agricultores, a trade association which represents and acts in the interests of small Spanish agricultural businesses and which has legal personality under Spanish law, brought an action, pursuant to the fourth paragraph of Article 173 of the EC Treaty (now, after amendment, the fourth paragraph of Article 230 EC), for annulment of the contested regulation, with the exception of the aid scheme for table olives.5 By separate document lodged at the Registry of the Court of First Instance on 23 December 1998, the Council raised an objection of inadmissibility under Article 114(1) of the Rules of Procedure of the Court of First Instance.6 By the contested order, the Court of First Instance upheld that objection of inadmissibility, with the result that it dismissed the application as manifestly inadmissible.7 First, the Court of First Instance pointed out in paragraph 34 of the contested order that, according to settled case-law, the fourth paragraph of Article 173 of the Treaty allows individuals to challenge any decision which, although in the form of a regulation, is of direct and individual concern to them and that the test for distinguishing between a regulation and a decision is whether or not the measure in question is of general application. The Court held, in paragraph 44 of that order, that the contested regulation is, by its nature and its scope, legislative in character and does not constitute a decision within the meaning of Article 189 of the EC Treaty (now Article 249 EC).8 Next, the Court of First Instance pointed out in paragraph 45 of the contested order that, in certain circumstances, even a legislative measure which applies generally to the economic operators affected by it may be of individual concern to some of them and that, therefore, a Community measure may be in the nature of a legislative provision and also, in respect of some of the operators affected, of a decision. The Court held:- in paragraph 46 of the contested order, that [t]o establish this, however, natural or legal persons must be able to show that they are affected by the measure in question by reason of certain attributes which are peculiar to them or by reason of factual circumstances in which they are differentiated from all other persons ... and,- in paragraph 47 of that order, that, furthermore, actions brought by associations may, in this context, be held admissible at least in situations where a legal provision expressly grants a series of procedural powers to trade associations, where the association represents the interests of undertakings which would, themselves, be entitled to bring proceedings and where the association is distinguished individually because of the impact of the contested measure on its own interests as an association, in particular because its negotiating position has been affected by the measure whose annulment is being sought.9 In the present case, the Court of First Instance held, in paragraph 48 of the contested order, that the appellant could not rely on any of these three situations in order to establish the admissibility of its action.10 In that regard, the Court of First Instance particularly noted, in paragraph 50 of the contested order, that the applicant has not established that its members are affected by the contested regulation by reason of certain attributes which are peculiar to them or by reason of factual circumstances in which they are differentiated from all other persons. In that regard it need merely be pointed out that the fact that the regulation may, at the time it was adopted, have affected those of the applicant's members then operating in the olive oil markets and, in some circumstances, caused them to cease trading, cannot differentiate them from all the other operators in the Community, since they are in an objectively determined situation comparable to that of any other trader who may enter those markets now or in the future ... The contested regulation concerns the applicant's members only on the basis of their objective capacity as operators trading in those markets, in the same way as all the other operators who trade in them.11 The Court of First Instance also pointed out, in paragraphs 53 to 55 of the contested order, that nor could the appellant validly claim, in support of the admissibility of its action, that the contested regulation affected some of its specific interests and it held, in paragraph 58 of that order, that the appellant was not differentiated by reason of any of the tests established by case-law for the admissibility of an action for annulment brought by an association.12 Finally, the Court of First Instance examined the last argument put forward by the appellant to prove that it was individually concerned by the provisions of the contested regulation, namely that there is a risk that it will not receive effective judicial protection. In that regard, it held as follows:61 The argument that no effective legal protection is afforded consists of the complaint that there are no legal remedies under national law which make it possible, if necessary, to review the legality of the contested regulation by means of a reference for a preliminary ruling under Article 177 of the [EC] Treaty [(now Article 234 EC)].62 It must be pointed out, in this connection, that the principle of equality for all persons subject to Community law in respect of the conditions for access to the Community judicature by means of the action for annulment requires that those conditions do not depend on the particular circumstances of the judicial system of each Member State. In this regard it should also be observed that, in accordance with the principle of sincere cooperation laid down in Article 5 of the EC Treaty (now Article 10 EC), the Member States are required to implement the complete system of legal remedies and procedures established by the EC Treaty to permit the Court of Justice to review the legality of measures adopted by the Community institutions (see, on this point, the judgment in [Case 294/83] Les Verts v Parliament [[1986] ECR 1339], paragraph 23).63 However, these factors do not provide the Court of First Instance with a reason for departing from the system of remedies established by the fourth paragraph of Article 173 of the Treaty, as interpreted by case-law, and exceeding the limits imposed on its powers by that provision.64 Moreover, the applicant cannot validly base any argument on the possible length of proceedings under Article 177 of the Treaty. That circumstance cannot justify a change in the system of remedies and procedures established by Articles 173, 177 and 178 of the EC Treaty (now Article 235 EC) which is designed to give the Court of Justice the power to review the legality of acts of the institutions. In no case can such an argument enable an action for annulment brought by a natural or legal person which does not satisfy the conditions laid down by the fourth paragraph of Article 173 of the Treaty to be declared admissible (order of the Court of Justice in Case C-87/95 P CNPAAP v Council [1996] ECR I-2003, paragraph 38).13 In the light of those considerations, the Court of First Instance held, in paragraph 65 of the contested order, that the appellant could not be regarded as individually concerned by the contested regulation and that since it did not satisfy one of the conditions for admissibility laid down by the fourth paragraph of Article 173 of the Treaty, it was not necessary to consider whether it was directly concerned by that regulation.The appeal14 By its appeal, the appellant claims that the Court should:- set aside the contested order;- declare its main action admissible and refer the case back to the Court of First Instance for judgment on the merits.15 The Council contends that the Court should:- declare the appeal manifestly inadmissible or, in the alternative, manifestly unfounded;- order the appellant to pay the costs.16 By order of the President of the Court of 12 September 2000, the Commission was given leave to intervene in support of the forms of order sought by the Council.17 In support of its appeal, the appellant relies on four pleas in law.18 First, it submits that the Court of First Instance, in paragraph 61 of the contested order, misinterpreted its argument that no effective judicial protection would be afforded if the application were declared inadmissible. It did not base that argument on the mere absence of remedies under national law, but on the fact that a declaration of inadmissibility would not in the present case meet the requirement of effectiveness attaching to the fundamental right relied upon. Second, the appellant claims that the reasoning of the contested order is inadequate because the order does not address the arguments of fact and of law put forward in its application and in its observations on the objection of inadmissibility but merely, in paragraph 64, selects one of those arguments which, moreover, it reproduces incorrectly. Third, the appellant claims that paragraph 62 of that order is contradictory. In that regard, it argues that if the principle of sincere cooperation requires the creation of a remedy under national law enabling, where necessary, a reference to be made for a preliminary ruling on the question of the validity of a Community measure, respect for an individual's right to effective judicial protection does indeed depend on the particular circumstances of the judicial system of each Member State. Fourth, the appellant claims that, by failing to examine in the present case whether the fact of declaring the application inadmissible did not entail, given all the elements of fact and of law, an infringement of the fundamental right to effective judicial protection, the contested order infringed a fundamental right which forms part of the Community legal order.Admissibility of the appeal19 The Council, like the Commission, raises a plea of manifest inadmissibility of the appeal on the ground that the appellant had no legal interest in bringing proceedings. All the reasoning of the Court of First Instance on effective judicial protection is obiter, since the actual ground of the inadmissibility of the action is, as stated in paragraph 65 of the contested order, that the appellant does not satisfy one of the conditions for admissibility laid down by the fourth paragraph of Article 173 of the Treaty. Even if national law does not afford any opportunity to bring proceedings before the courts, the Community Courts should still continue to apply that Treaty provision by assessing whether the conditions for admissibility which it lays down are fulfilled or not.20 Therefore, they contend, for its action to be successful, the appellant should have appealed on the ground that the contested order infringed the fourth paragraph of Article 173 of the Treaty and, more specifically, by demonstrating that it was individually concerned by the contested regulation, and not on the ground of a possible failure to afford effective judicial protection which, as Community development now stands, could not in any event render that action admissible.21 It should be recalled that for a person to have an interest in bringing appeal proceedings the appeal must be likely, if successful, to procure an advantage for that party (Case C-174/99 P Parliament v Richard [2000] ECR I-6189, paragraph 33).22 The contested order dismissed as inadmissible the appellant's application before the Court of First Instance.23 If the appeal were successful, the appellant would procure a definite advantage since its application could be examined on its merits. The question whether the alleged right to effective judicial protection may or may not, in certain circumstances, render admissible an action for annulment of a regulation brought by a natural or legal person relates to the substance of the appeal and cannot, in any event, prejudge the question whether the appellant has an interest in bringing appeal proceedings.24 In those circumstances, the appeal must be declared admissible.Substance of the appealArguments of the parties25 By its four pleas in law, which it is appropriate to examine together, the appellant claims essentially that the dismissal of its application as inadmissible, in so far as it is based on the reasoning set out in paragraphs 61 to 64 of the contested order, infringes its right to effective judicial protection for the defence of its own interests or those of its members.26 According to the appellant, the disputed provisions of the contested regulation, which abolish the intervention scheme, consumption aid and aid to small producers, do not require any national implementing legislation and do not occasion the taking of any measures by the Spanish authorities. Consequently, the appellant cannot, under the Spanish legal system, seek annulment of a national measure relating to the disputed provisions. A reference for a preliminary ruling to assess their validity is therefore precluded. Furthermore, the appellant or its members cannot even infringe such provisions so as to be in a position to challenge the validity of any sanction that might, if appropriate, be imposed on them.27 The appellant contends that the contested order has infringed a fundamental right which forms part of the Community legal order in that it failed to examine whether, given the circumstances of the case, the fact of declaring inadmissible the application for partial annulment of the contested regulation does not lead to disregard for the effectiveness of the appellant's right to judicial protection.28 The appellant submits that the right to effective judicial protection requires a specific examination of the particular circumstances of the case. A right cannot be truly effective unless consideration is given to its effectiveness in practice. In reality, such an examination necessarily entails an inquiry into whether, in the particular case, there is an alternative legal remedy. In that regard, the appellant refers to paragraphs 32 and 33 of the judgment in Case C-321/95 P Greenpeace Council and Others v Commission [1998] ECR I-1651, which, in its submission, confirms that where there is no legal remedy under national law an application for annulment under the fourth paragraph of Article 173 of the Treaty must be held admissible.29 The Council and the Commission contend in substance that the appeal is, in any event, manifestly unfounded since there is no provision in the fourth paragraph of Article 173 of the Treaty to the effect that the lack of access to a judicial remedy under national law constitutes a criterion or a circumstance such as to justify the admissibility of a direct action for annulment brought by a natural or legal person against a Community measure of general application. The only relevant test is whether the applicant is directly and individually concerned by the contested measure. The appeal does not address the question whether the appellant is individually and directly concerned but refers solely to the analysis of the Court of First Instance of the arguments put forward on the subject of effective judicial protection.30 The Council and the Commission recall in addition that the Treaty has established a complete system of legal remedies designed to enable the Court to review the legality or validity of acts of the institutions and, in particular, of acts of general application. Admittedly, according to the Commission, a Member State which makes it excessively difficult, or even impossible, to submit a question for a preliminary ruling infringes the fundamental right to effective judicial protection and thereby fails to fulfil its duty of sincere cooperation laid down in Article 5 of the Treaty. However, even in that case, such infringement cannot be overcome by straining the meaning of the fourth paragraph of Article 173 of the Treaty. Instead, infringement proceedings should be brought against the Member State in question, in accordance with Article 226 EC.31 The Commission states, furthermore, that it does not understand how the appellant can assert that Spanish law does not provide any judicial remedy against the contested regulation. It observes that the regulation is a binding measure which directly produces rights and obligations on the part of individuals, so that any infringement of its provisions may be invoked before the national courts. In Spanish law, as no doubt in other legal systems of the Member States, the administrative authorities are required to take decisions on applications made by the persons concerned. If, beyond a certain time-limit, the competent authorities have failed to adopt a position on those applications, such silence is treated as a negative response or, on the contrary, a positive response in certain cases, which enables proceedings to be brought where the applicant in question is not satisfied with the response given. Once judicial proceedings have been initiated, there is nothing to prevent that individual from invoking all the rules of Community law and requesting, where appropriate, a reference for a preliminary ruling under Article 234 EC on the interpretation or validity of the contested measure.Findings of the Court32 As a preliminary point, it should be noted that the appellant has not challenged the finding of the Court of First Instance, in paragraph 44 of the contested order, to the effect that the contested regulation is of general application. Nor has it challenged the finding, in paragraph 56 of that order, that the specific interests of the appellant were not affected by the contested regulation or the finding, in paragraph 50 of that order, that its members are not affected by the contested regulation by reason of certain attributes which are peculiar to them or by reason of factual circumstances in which they are differentiated from all other persons.33 In those circumstances, it is necessary to examine whether the appellant, as representative of the interests of its members, can none the less have standing, in conformity with the fourth paragraph of Article 173 of the Treaty, to bring an action for annulment of the contested regulation on the sole ground that, in the alleged absence of any legal remedy before the national courts, the right to effective judicial protection requires it.34 It should be recalled that, according to the second and third paragraphs of Article 173 of the Treaty, the Court is to have jurisdiction in actions brought by a Member State, the Council or the Commission on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaty or of any rule of law relating to its application, or misuse of powers or, when it is for the purpose of protecting their prerogatives, by the European Parliament, by the Court of Auditors and by the European Central Bank. Under the fourth paragraph of Article 173, [a]ny natural or legal person may, under the same conditions, institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former.35 Thus, under Article 173 of the Treaty, a regulation, as a measure of general application, cannot be challenged by natural or legal persons other than the institutions, the European Central Bank and the Member States (see, to that effect, Case 92/78 Simmenthal v Commission [1979] ECR 777, paragraph 40).36 However, a measure of general application such as a regulation can, in certain circumstances, be of individual concern to certain natural or legal persons and is thus in the nature of a decision in their regard (see, in particular, Case C-358/89 Extramet Industrie v Council [1991] ECR I-2501, paragraph 13; Case C-309/89 Codorniu v Council [1994] ECR I-1853, paragraph 19, and Case C-41/99 P Sadam Zuccherifici and Others v Council [2001] ECR I-4239, paragraph 27). That is so where the measure in question affects specific natural or legal persons by reason of certain attributes peculiar to them, or by reason of a factual situation which differentiates them from all other persons and distinguishes them individually in the same way as the addressee (see, in particular, Case 25/62 Plaumann v Commission [1963] ECR 95, 107, and Case C-452/98 Nederlandse Antillen v Council [2001] ECR I-8973, paragraph 60).37 If that condition is not fulfilled, a natural or legal person does not, under any circumstances, have standing to bring an action for annulment of a regulation (see, in that regard, the order in CNPAAP v Council, cited above, paragraph 38).38 The European Community is, however, a community based on the rule of law in which its institutions are subject to judicial review of the compatibility of their acts with the Treaty and with the general principles of law which include fundamental rights.39 Individuals are therefore entitled to effective judicial protection of the rights they derive from the Community legal order, and the right to such protection is one of the general principles of law stemming from the constitutional traditions common to the Member States. That right has also been enshrined in Articles 6 and 13 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (see, in particular, Case 222/84 Johnston [1986] ECR 1651, paragraph 18, and Case C-424/99 Commission v Austria [2001] ECR I-9285, paragraph 45).40 By Article 173 and Article 184 (now Article 241 EC), on the one hand, and by Article 177, on the other, the Treaty has established a complete system of legal remedies and procedures designed to ensure judicial review of the legality of acts of the institutions, and has entrusted such review to the Community Courts (see, to that effect, Les Verts v Parliament, paragraph 23). Under that system, where natural or legal persons cannot, by reason of the conditions for admissibility laid down in the fourth paragraph of Article 173 of the Treaty, directly challenge Community measures of general application, they are able, depending on the case, either indirectly to plead the invalidity of such acts before the Community Courts under Article 184 of the Treaty or to do so before the national courts and ask them, since they have no jurisdiction themselves to declare those measures invalid (see Case 314/85 Foto-Frost [1987] ECR 4199, paragraph 20), to make a reference to the Court of Justice for a preliminary ruling on validity.41 Thus it is for the Member States to establish a system of legal remedies and procedures which ensure respect for the right to effective judicial protection.42 In that context, in accordance with the principle of sincere cooperation laid down in Article 5 of the Treaty, national courts are required, so far as possible, to interpret and apply national procedural rules governing the exercise of rights of action in a way that enables natural and legal persons to challenge before the courts the legality of any decision or other national measure relative to the application to them of a Community act of general application, by pleading the invalidity of such an act.43 As the Advocate General has pointed out in paragraphs 50 to 53 of his Opinion, it is not acceptable to adopt an interpretation of the system of remedies, such as that favoured by the appellant, to the effect that a direct action for annulment before the Community Court will be available where it can be shown, following an examination by that Court of the particular national procedural rules, that those rules do not allow the individual to bring proceedings to contest the validity of the Community measure at issue. Such an interpretation would require the Community Court, in each individual case, to examine and interpret national procedural law. That would go beyond its jurisdiction when reviewing the legality of Community measures.44 Finally, it should be added that, according to the system for judicial review of legality established by the Treaty, a natural or legal person can bring an action challenging a regulation only if it is concerned both directly and individually. Although this last condition must be interpreted in the light of the principle of effective judicial protection by taking account of the various circumstances that may distinguish an applicant individually (see, for example, Joined Cases 67/85, 68/85 and 70/85 Van der Kooy v Commission [1988] ECR 219, paragraph 14; Extramet Industrie v Council, paragraph 13, and Codorniu v Council, paragraph 19), such an interpretation cannot have the effect of setting aside the condition in question, expressly laid down in the Treaty, without going beyond the jurisdiction conferred by the Treaty on the Community Courts.45 While it is, admittedly, possible to envisage a system of judicial review of the legality of Community measures of general application different from that established by the founding Treaty and never amended as to its principles, it is for the Member States, if necessary, in accordance with Article 48 EU, to reform the system currently in force.46 In the light of the foregoing, the Court finds that the Court of First Instance did not err in law when it declared the appellant's application inadmissible without examining whether, in the particular case, there was a remedy before a national court enabling the validity of the contested regulation to be examined.47 The appeal must therefore be dismissed. Decision on costs Costs48 Under Article 69(2) of the Rules of Procedure, which applies to the procedure on appeal by virtue of Article 118, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Council had applied for the appellant to be ordered to pay the costs and the appellant has been unsuccessful, the latter must be ordered to pay the costs.49 Under the first subparagraph of Article 69(4) of the Rules of Procedure, which also applies to the procedure on appeal by virtue of Article 118, the institutions which intervened in the proceedings are to bear their own costs. In accordance with that provision, the Commission must bear its own costs. Operative part On those grounds,THE COURT,hereby:1. Dismisses the appeal;2. Orders Unión de Pequeños Agricultores to pay the costs;3. Orders the Commission of the European Communities to bear its own costs.

b7886-a442583-47e8

EN

A NATIONAL OF A MEMBER STATE ESTABLISHED IN THAT STATE, WHO CARRIES ON A CROSS-BORDER BUSINESS PROVIDING SERVICES, MAY RELY ON COMMUNITY LAW FOR THE PURPOSE OF ENABLING HIS SPOUSE, WHO IS A NATIONAL OF A THIRD COUNTRY, TO OBTAIN A RIGHT TO RESIDE IN THAT STATE.

| 62000J0060 Judgment of the Court of 11 July 2002. - Mary Carpenter v Secretary of State for the Home Department. - Reference for a preliminary ruling: Immigration Appeal Tribunal - United Kingdom. - Freedom to provide services - Article 49 EC - Directive 73/148/EEC - National of a Member State established in that State and providing services to persons established in other Member States - Right of residence in that State of a spouse who is a national of a third country. - Case C-60/00. European Court reports 2002 Page I-06279 Keywords 1. Freedom to provide services - Treaty provisions - Not applicable in situations purely internal to a Member State(Art. 49 EC)2. Freedom to provide services - Treaty provisions - Scope - Services provided to persons established in other Member States - Included - Possibility for the provider to rely on the Treaty provisions as against the Member State of establishment(Art. 49 EC)3. Freedom to provide services - Restrictions justified by reasons of public interest - Permissibility conditional on respect for fundamental rights - Observance ensured by the Community judicature - European Convention on Human Rights taken into consideration - Right to respect for family life - Decision to deport a person from a country where close members of his family are living(Art. 49 EC; European Convention on Human Rights, Art. 8)4. Freedom to provide services - Restrictions - National of a Member State established in that State providing services in other Member States - Spouse who is a national of a third country refused right to reside - Measure constituting an infringement of the right to respect for family life guaranteed by the European Convention on Human Rights - Not permissible - Criterion(Art. 49 EC; European Convention on Human Rights, Art. 8) Summary $$1. The provisions of the Treaty relating to the freedom to provide services, and the rules adopted for their implementation, are not applicable to situations which do not present any link to any of the situations envisaged by Community law.( see para. 28 )2. The right freely to provide services guaranteed by Article 49 EC may be relied on by a provider as against the State in which he is established if the services are provided for persons established in another Member State.( see para. 30 )3. A Member State may invoke reasons of public interest to justify a national measure which is likely to obstruct the exercise of the freedom to provide services only if that measure is compatible with the fundamental rights whose observance the Court ensures. In that regard, the removal of a person from a country where close members of his family are living may amount to an infringement of the right to respect for family life as guaranteed by Article 8 of the European Convention on Human Rights, which is among the fundamental rights which are protected in Community law. Such an infringement will infringe the Convention if such a decision does not meet the requirements of paragraph 2 of that article, that is unless it is in accordance with the law, motivated by one or more of the legitimate aims under that paragraph and necessary in a democratic society, that is to say justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued.( see paras 40-42 )4. Article 49 EC, read in the light of the fundamental right to respect for family life, is to be interpreted as precluding a refusal by the Member State of origin of a provider of services established in that Member State who provides services to recipients established in other Member States, of the right to reside in its territory to that provider's spouse, who is a national of a third country, if such a decision, which constitutes an infringement of the right to respect for family life, is not proportionate to the objective pursued.( see paras 45-46, operative part ) Parties In Case C-60/00,REFERENCE to the Court under Article 234 EC by the Immigration Appeal Tribunal (United Kingdom) for a preliminary ruling in the proceedings pending before that court betweenMary CarpenterandSecretary of State for the Home Department,on the interpretation of Article 49 EC and Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services (OJ 1973 L 172, p. 14),THE COURT,composed of: G.C. Rodríguez Iglesias, President, N. Colneric and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward, J.-P. Puissochet, M. Wathelet, R. Schintgen and J.N. Cunha Rodrigues (Rapporteur), Judges,Advocate General: C. Stix-Hackl,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- Mrs Carpenter, by J. Walsh, Barrister, instructed by J. Wyman, Solicitor,- the United Kingdom Government, by G. Amodeo, acting as Agent, and by D. Wyatt QC,- the Commission of the European Communities, by N. Yerrell, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of Mrs Carpenter, represented by J. Walsh, of the United Kingdom Government, represented by R. Magrill, acting as Agent, and by D. Wyatt QC, and of the Commission, represented by N. Yerrell and H. Michard, acting as Agent, at the hearing on 29 May 2001,after hearing the Opinion of the Advocate General at the sitting on 13 September 2001,gives the followingJudgment Grounds 1 By order of 16 December 1999, received at the Court on 21 February 2000, the Immigration Appeal Tribunal referred to the Court for a preliminary ruling under Article 234 EC a question on the interpretation of Article 49 EC and Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services (OJ 1973 L 172, p. 14, hereinafter the Directive).2 The question was raised in proceedings between Mrs Carpenter, a national of the Philippines, and the Secretary of State for the Home Department (hereinafter the Secretary of State) concerning her right to reside in the United Kingdom.Legislative frameworkCommunity legislation3 The first paragraph of Article 49 EC provides:Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended.4 The first recital of the preamble to the Directive states as follows:Whereas freedom of movement of persons as provided for in the Treaty and the General Programmes for the abolition of restrictions on freedom of establishment and on freedom to provide services entails the abolition of restrictions on movement and residence within the Community for nationals of Member States wishing to establish themselves or to provide services within the territory of another Member State.5 Article 1(1) of the Directive provides:The Member States shall, acting as provided in this Directive, abolish restrictions on the movement and residence of:(a) nationals of a Member State who are established or who wish to establish themselves in another Member State in order to pursue activities as self-employed persons, or who wish to provide services in that State;(b) nationals of Member States wishing to go to another Member State as recipients of services;(c) the spouse and the children under 21 years of age of such nationals, irrespective of their nationality;(d) the relatives in the ascending and descending lines of such nationals and of the spouse of such nationals, which relatives are dependent on them, irrespective of their nationality.6 The first subparagraph of Article 4(2) of the Directive provides:The right of residence for persons providing and receiving services shall be of equal duration with the period during which the services are provided.United Kingdom legislation7 In terms of the Immigration Act 1971 and the 1994 United Kingdom Immigration Rules (House of Commons Paper 395, hereinafter the Immigration Rules), a person who is not a British citizen may not, as a general rule, enter or remain in the United Kingdom unless he has obtained permission to do so. Such permission is called respectively leave to enter and leave to remain.8 Section 7(1) of the Immigration Act 1988 provides:A person shall not under the [Immigration Act 1971] require leave to enter or remain in the United Kingdom in any case in which he is entitled to do so by virtue of an enforceable Community right or of any provision made under section 2(2) of the European Communities Act 1972.9 Paragraph 281 of the Immigration Rules lists the requirements for leave to enter the United Kingdom as the spouse of a person present and settled in the United Kingdom. Paragraph 281(vi) states that the applicant must hold a valid United Kingdom entry clearance for entry as a spouse. However, a person present in the United Kingdom with leave to enter or remain in another capacity may switch into the spouse category if he or she satisfies the requirements of paragraph 284 of the Immigration Rules.10 Paragraph 284 of the Immigration Rules lays down the requirements for an extension of stay in the United Kingdom as the spouse of a person present and settled in the United Kingdom. Paragraph 284(i) provides that the applicant must have limited leave to remain in the United Kingdom (this would include leave to enter) and Paragraph 284(iv) states that the applicant must not have remained in breach of the immigration laws.11 Section 3(5)(a) of the Immigration Act 1971 lays down the general rules relating to deportation from the United Kingdom. It provides:A person who is not a British Citizen shall be liable to deportation from the United Kingdom -(a) if, having only a limited leave to enter or remain, he does not observe a condition attached to the leave or remains beyond the time limited by the leave ....12 As regards, more particularly, the deportation of spouses of UK nationals, the Secretary of State is required, under paragraph 364 of the Immigration Rules, to consider the particular circumstances of each case before deciding whether or not to order deportation. However, a published policy concession, DP 3/96, sets out the circumstances in which the Secretary of State will normally grant leave to remain to spouses who are liable to deportation or who are in the United Kingdom illegally. Paragraph 5 of the concession states that, as a general rule, deportation action should not normally be initiated where the person concerned has a genuine and subsisting marriage with someone settled in the United Kingdom and the couple have lived together in the United Kingdom continuously since their marriage for at least two years before the commencement of enforcement action, and it is unreasonable to expect the settled spouse to accompany his/her spouse on removal.The dispute in the main proceedings13 Mrs Carpenter, a national of the Philippines, was given leave to enter the United Kingdom as a visitor on 18 September 1994 for six months. She overstayed that leave and failed to apply for any extension of her stay. On 22 May 1996 she married Peter Carpenter, a United Kingdom national.14 It appears from the order for reference that Mr Carpenter runs a business selling advertising space in medical and scientific journals and offering various administrative and publishing services to the editors of those journals. The business is established in the UK, where the publishers of the journals for which he sells advertising space are based. A significant proportion of the business is conducted with advertisers established in other Member States of the European Community. Mr Carpenter travels to other Member States for the purpose of his business.15 On 15 July 1996 Mrs Carpenter applied to the Secretary of State for leave to remain in the UK as the spouse of a national of that Member State. Her application was refused by a decision of the Secretary of State of 21 July 1997.16 The Secretary of State also decided to make a deportation order against Mrs Carpenter removing her to the Philippines. Under that decision it is open to Mrs Carpenter to leave the United Kingdom voluntarily. If she does not do so, the Secretary of State will sign the deportation order and Mrs Carpenter will have to obtain its revocation before she can seek leave to enter the United Kingdom as the spouse of a UK citizen.17 Mrs Carpenter appealed against the decision to make a deportation order to an Immigration Adjudicator (United Kingdom), arguing that the Secretary of State was not entitled to deport her because she was entitled to a right to remain in the United Kingdom under Community law. She maintained that since her husband's business required him to travel around in other Member States, providing and receiving services, he could do so more easily as she was looking after his children from his first marriage, so that her deportation would restrict her husband's right to provide and receive services.18 The Immigration Adjudicator was satisfied that Mrs Carpenter's marriage was genuine and that she played an important part in the upbringing of her stepchildren. He also accepted that she could be indirectly responsible for the increased success of her husband's business and that her husband was a provider of services for the purposes of Community law. According to the Immigration Adjudicator, Mr Carpenter has the right to travel to other Member States to provide services and to be accompanied for that purpose by his spouse. However, while he is resident in the United Kingdom, he cannot be considered to be exercising any freedom of movement within the meaning of Community law. The Immigration Adjudicator therefore dismissed Mrs Carpenter's appeal by decision of 10 June 1998.19 On Mrs Carpenter's appeal to the Immigration Appeal Tribunal, it considered that the issue of Community law raised by the proceedings before it was whether it was contrary to Community law and, in particular, Article 49 EC and/or the Directive, for the Secretary of State to refuse to grant a right of residence to, and to decide to deport Mrs Carpenter where, first, Mr Carpenter was exercising his freedom to provide services in other Member States, and second, the childcare and homemaking performed by Mrs Carpenter might indirectly assist and facilitate Mr Carpenter's exercise of his rights under Article 49 EC, by providing him with economic assistance which permitted him to spend greater time on his business.20 Since it considered that the case turned on the interpretation of Community law, the Immigration Appeal Tribunal decided to stay proceedings and refer the following question to the Court of Justice for a preliminary ruling:In circumstances where:(a) a national of a Member State, who is established in that Member State and who provides services to persons in other Member States; and(b) has a spouse who is not a national of a Member State;can the non-national spouse rely on(i) Article 49 EC and/or(ii) Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services,to provide the non-national spouse with the right to reside with his or her spouse in his or her spouse's Member State of origin?Is the answer to the question referred different if the non-national spouse indirectly assists the national of a Member State in carrying on the provision of services in other Member States by carrying out childcare?The question referredObservations submitted to the Court21 Mrs Carpenter admits that she has no right of her own to reside in any Member State but claims that her rights derive from those enjoyed by Mr Carpenter to provide services and to travel within the European Union. Her husband is entitled to carry on his business throughout the internal market without being subjected to unlawful restrictions. Her deportation would require Mr Carpenter to go to live with her in the Philippines or separate the members of the family unit if he remained in the United Kingdom. In both cases Mr Carpenter's business would be affected. Moreover it cannot be maintained that the restriction on the freedom to provide services, to which Mr Carpenter would be subjected if his spouse was deported, would be a purely internal matter, since he provides services throughout the internal market.22 According to the United Kingdom Government the provisions of the Directive mean, for example, that a UK national wishing to provide services in another Member State is entitled to reside in that State for the period during which the services are provided, and that his or her spouse would be entitled to reside there for the same period. Those provisions do not, however, give any right of residence in the United Kingdom to UK nationals, who have such a right in any event under United Kingdom law, or to their spouses. The Court has confirmed that interpretation in its judgment in Case C-370/90 Singh [1992] ECR I-4265, paragraphs 17 and 18.23 The United Kingdom Government points out that, in its judgment in Case C-107/94 Asscher [1996] ECR I-3089, the Court considered the question whether a national of a Member State pursuing an activity as a self-employed person in another Member State, in which he resides, may rely on Article 52 of the EC Treaty (now, after amendment, Article 43 EC) against his Member State of origin, on whose territory he pursues another activity as a self-employed person. The Court held, at paragraph 32 of that judgment, that, although the provisions of the Treaty relating to freedom of establishment cannot be applied to situations which are purely internal to a Member State, the scope of Article 52 of the Treaty nevertheless cannot be interpreted in such a way as to exclude a given Member State's own nationals from the benefit of Community law where by reason of their conduct they are, with regard to their Member State of origin, in a situation which may be regarded as equivalent to that of any other person enjoying the rights and liberties guaranteed by the Treaty.24 However, since Mr Carpenter has not exercised his right to freedom of movement, his spouse cannot rely on Singh or Asscher, cited above. Therefore, a person in Mrs Carpenter's position is not entitled to derive from Community law any right to enter or remain in the United Kingdom.25 According to the Commission, the situation of Mrs Carpenter must be clearly distinguished from that of a spouse of a national of a Member State who has exercised his right to freedom of movement and has left his Member State of origin and moved to another Member State in order to become established or to work there.26 In that case the spouse, whatever his or her nationality, would undoubtedly be covered by Community law, and would be entitled to establish himself or herself, with the Community national in the host Member State, since otherwise that national might be deterred from exercising his or her right to freedom of movement. Also, as the Court held at paragraph 23 of its judgment in Singh, cited above, when that Community national returns to his or her country of origin, his or her spouse must enjoy at least the same rights of entry and residence as would be granted to him or her under Community law, if his or her spouse chose to enter and reside in another Member State.27 On the other hand, the principle expressed in paragraph 23 of the judgment in Singh, cited above, cannot be applied to a situation such as that in issue in the main proceedings, in which a national of a Member State has never sought to establish himself with his spouse in another Member State but merely provides services from his State of origin. The Commission submits that such a situation is rather to be classified as an internal situation within the meaning of the judgment in Joined Cases 35/82 and 36/82 Morson and Jhanjan [1982] ECR 3723, so that Mrs Carpenter's right to remain in the United Kingdom, if it exists, depends exclusively on United Kingdom law.Findings of the Court28 It is to be noted, at the outset, that the provisions of the Treaty relating to the freedom to provide services, and the rules adopted for their implementation, are not applicable to situations which do not present any link to any of the situations envisaged by Community law (see, to that effect, among others, Case C-97/98 Jägerskiöld [1999] ECR I-7319, paragraphs 42 to 45).29 As is apparent from paragraph 14 of this judgment, a significant proportion of Mr Carpenter's business consists of providing services, for remuneration, to advertisers established in other Member States. Such services come within the meaning of services in Article 49 EC both in so far as the provider travels for that purpose to the Member State of the recipient and in so far as he provides cross-border services without leaving the Member State in which he is established (see, in respect of cold-calling, Case C-384/93 Alpine Investments [1995] ECR I-1141, paragraphs 15 and 20 to 22).30 Mr Carpenter is therefore availing himself of the right freely to provide services guaranteed by Article 49 EC. Moreover, as the Court has frequently held, that right may be relied on by a provider as against the State in which he is established if the services are provided for persons established in another Member State (see, among others, Alpine Investments, cited above, paragraph 30).31 With regard to the right of establishment and the freedom to provide services, the Directive aims to abolish restrictions on the movement and residence of nationals of Member States within the Community.32 It follows both from the objective of the Directive and the wording of Article 1(1)(a) and (b) thereof, that it applies to cases where nationals of Member States leave their Member State of origin and move to another Member State in order to establish themselves there, or to provide services in that State, or to receive services there.33 That interpretation is borne out, in particular, by Article 2(1) of the Directive, whereby Member States shall grant the persons referred to in Article 1 the right to leave their territory; Article 3(1), whereby Member States shall grant to the persons referred to in Article 1 the right to enter their territory merely on production of a valid identity card or passport; Article 4(1), whereby [e]ach Member State shall grant the right of permanent residence to nationals of other Member States who establish themselves within its territory; and Article 4(2) of the Directive, whereby, [t]he right of residence for persons providing and receiving services shall be of equal duration with the period during which the services are provided.34 It is true that Article 1(1)(c) of the Directive extends to the spouses of the Member States' nationals referred to in subparagraphs (a) and (b) of that article the right to enter and reside in another Member State, irrespective of their nationality. But, in so far as the Directive aims to facilitate the exercise by Member States' nationals of freedom of establishment and freedom to provide services, the rights were accorded to their spouses so that they can accompany them when they exercise, in the circumstances provided for by the Directive, the rights which they derive from the Treaty by moving to or residing in a Member State other than their Member State of origin.35 Therefore, it follows from both its objectives and its content that the Directive governs the conditions under which a national of a Member State, and the other persons covered by Article 1(1)(c) and (d), may leave that national's Member State of origin and enter and reside in another Member State, for one of the purposes set out in Article 1(1)(a) and (b), for a period specified in Article 4(1) or (2).36 Since the Directive does not govern the right of residence of members of the family of a provider of services in his Member State of origin, the answer to the question referred to the Court therefore depends on whether, in circumstances such as those in the main proceedings, a right of residence in favour of the spouse may be inferred from the principles or other rules of Community law.37 As has been held in paragraphs 29 and 30 of this judgment, Mr Carpenter is exercising the right freely to provide services guaranteed by Article 49 EC. The services provided by Mr Carpenter make up a significant proportion of his business, which is carried on both within his Member State of origin for the benefit of persons established in other Member States, and within those States.38 In that context it should be remembered that the Community legislature has recognised the importance of ensuring the protection of the family life of nationals of the Member States in order to eliminate obstacles to the exercise of the fundamental freedoms guaranteed by the Treaty, as is particularly apparent from the provisions of the Council regulations and directives on the freedom of movement of employed and self-employed workers within the Community (see, for example, Article 10 of Council Regulation (EEC) No 1612/68 of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475); Articles 1 and 4 of Council Directive 68/360/EEC of 15 October 1968 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families (OJ, English Special Edition 1968 (II), p. 485), and Articles 1(1)(c) and 4 of the Directive).39 It is clear that the separation of Mr and Mrs Carpenter would be detrimental to their family life and, therefore, to the conditions under which Mr Carpenter exercises a fundamental freedom. That freedom could not be fully effective if Mr Carpenter were to be deterred from exercising it by obstacles raised in his country of origin to the entry and residence of his spouse (see, to that effect, Singh, cited above, paragraph 23).40 A Member State may invoke reasons of public interest to justify a national measure which is likely to obstruct the exercise of the freedom to provide services only if that measure is compatible with the fundamental rights whose observance the Court ensures (see, to that effect, Case C-260/89 ERT [1991] ECR I-2925, paragraph 43, and Case C-368/95 Familiapress [1997] ECR I-3689, paragraph 24).41 The decision to deport Mrs Carpenter constitutes an interference with the exercise by Mr Carpenter of his right to respect for his family life within the meaning of Article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950 (hereinafter the Convention), which is among the fundamental rights which, according to the Court's settled case-law, restated by the Preamble to the Single European Act and by Article 6(2) EU, are protected in Community law.42 Even though no right of an alien to enter or to reside in a particular country is as such guaranteed by the Convention, the removal of a person from a country where close members of his family are living may amount to an infringement of the right to respect for family life as guaranteed by Article 8(1) of the Convention. Such an interference will infringe the Convention if it does not meet the requirements of paragraph 2 of that article, that is unless it is in accordance with the law, motivated by one or more of the legitimate aims under that paragraph and necessary in a democratic society, that is to say justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued (see, in particular, Boultif v Switzerland, no. 54273/00, §§ 39, 41 and 46, ECHR 2001-IX).43 A decision to deport Mrs Carpenter, taken in circumstances such as those in the main proceedings, does not strike a fair balance between the competing interests, that is, on the one hand, the right of Mr Carpenter to respect for his family life, and, on the other hand, the maintenance of public order and public safety.44 Although, in the main proceedings, Mr Carpenter's spouse has infringed the immigration laws of the United Kingdom by not leaving the country prior to the expiry of her leave to remain as a visitor, her conduct, since her arrival in the United Kingdom in September 1994, has not been the subject of any other complaint that could give cause to fear that she might in the future constitute a danger to public order or public safety. Moreover, it is clear that Mr and Mrs Carpenter's marriage, which was celebrated in the United Kingdom in 1996, is genuine and that Mrs Carpenter continues to lead a true family life there, in particular by looking after her husband's children from a previous marriage.45 In those circumstances, the decision to deport Mrs Carpenter constitutes an infringement which is not proportionate to the objective pursued.46 In view of all the foregoing, the answer to the question referred to the Court is that Article 49 EC, read in the light of the fundamental right to respect for family life, is to be interpreted as precluding, in circumstances such as those in the main proceedings, a refusal, by the Member State of origin of a provider of services established in that Member State who provides services to recipients established in other Member States, of the right to reside in its territory to that provider's spouse, who is a national of a third country. Decision on costs Costs47 The costs incurred by the United Kingdom Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the question referred to it by the Immigration Appeal Tribunal by order of 16 December 1999, hereby rules:Article 49 EC, read in the light of the fundamental right to respect for family life, is to be interpreted as precluding, in circumstances such as those in the main proceedings, a refusal, by the Member State of origin of a provider of services established in that Member State who provides services to recipients established in other Member States, of the right to reside in its territory to that provider's spouse, who is a national of a third country.

a0e44-b04502f-4c68

EN

ADVOCATE GENERAL STIX-HACKL GIVES HER OPINION IN REGARD TO THE PROHIBITION OF DISCRIMINATION AGAINST SLOVAKIAN WORKERS CONTAINED IN THE AGREEMENT BETWEEN THE EU AND SLOVAKIA

«(External relations – Association Agreement between the Communities and Slovakia – Article 38(1) – Freedom of movement for workers – Principle of non-discrimination – Handball – Limitation on the number of professional players having the nationality of non-member countries who may play on a team in the league of a sports federation)» Summary of the Judgment 1.. International agreements – Agreements concluded by the Community – Direct effect – Article 38(1), first indent, of the Association Agreement between the Communities and Slovakia (Association Agreement between the Communities and Slovakia, Art. 38(1), first indent) International agreements – Agreements concluded by the Community – Direct effect – Article 38(1), first indent, of the Association Agreement between the Communities and Slovakia 2.. International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Article 38(1), first indent, of the Agreement – Scope – Rule laid down by a sports federation determining the conditions under which professional sportsmen may engage in gainful employment – Included (Association Agreement between the Communities and Slovakia, Art. 38(1), first indent)International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Article 38(1), first indent, of the Agreement – Scope – Rule laid down by a sports federation determining the conditions under which professional sportsmen may engage in gainful employment – Included 3.. International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Rule laid down by a sports federation limiting the participation in certain competitions of professional players originating in non-member countries – Not permissible (Association Agreement between the Communities and Slovakia, Art. 38(1), first indent)International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Rule laid down by a sports federation limiting the participation in certain competitions of professional players originating in non-member countries – Not permissible JUDGMENT OF THE COURT (Fifth Chamber)8 May 2003 (1) ((External relations – Association Agreement between the Communities and Slovakia – Article 38(1) – Free movement of workers – Principle of non-discrimination – Handball – Limitation on the number of professional players having the nationality of non-member countries who may play on a team in the league of a sports federation)) andTHE COURT (Fifth Chamber),,after considering the written observations submitted on behalf of: ─ Deutscher Handballbund eV, by P. Seydel, H.J. Bodenstaff and R. Jersch, Rechtsanwälte, ─ the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents, ─ the Spanish Government, by R. Silva de Lapuerta, acting as Agent, ─ the Italian Government, by U. Leanza, acting as Agent, assisted by D. Del Gaizo, avvocato dello Stato, ─ the Commission of the European Communities, by M.-J. Jonczy, D. Martin and H. Kreppel, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Deutscher Handballbund eV, represented by R. Jersch; of Mr Kolpak, represented by M. Schlüter, Rechtsanwalt; of the Greek Government, represented by V. Pelekou and S. Spyropoulos, acting as Agents; of the Spanish Government, represented by R. Silva de Lapuerta; of the Italian Government, represented by G. Aiello, avvocato dello Stato; and of the Commission, represented by M.-J. Jonczy and H. Kreppel, at the hearing on 20 June 2002, after hearing the Opinion of the Advocate General at the sitting on 11 July 2002,gives the followingThe Association Agreement with SlovakiaOn those grounds, THE COURT (Fifth Chamber),Edward La PergolaJann von Bahr Rosas R. Grass M. Wathelet RegistrarPresident of the Fifth Chamber 1 – Language of the case: German. Language of the case: German.

b4dd9-f8cd22f-414c

EN

A MEMBER STATE MAY LIMIT ACCESS TO INTERNAL ROUTES OF COMMUNITY AIR CARRIERS DURING THE TRANSITIONAL PERIOD FOR LIBERALISATION OF THE SECTOR, EVEN IF IT ISSUES AN INVITATION TO TENDER IN ORDER TO ENSURE SERVICE TO DISTANT OR THINLY-SERVED NATIONAL DESTINATIONS

| 62000J0181 Judgment of the Court (Sixth Chamber) of 9 July 2002. - Flightline Ltd v Secretário de Estado dos Transportes e Comunicações and Transportes Aéreos Portugueses SA (TAP). - Reference for a preliminary ruling: Supremo Tribunal Administrativo - Portugal. - Articles 3(2) and 4(1)(a) and (d) of Regulation (EEC) No 2408/92 - Imposition of public service obligations on scheduled air services serving a peripheral region - Compatibility with Member States' power to restrict cabotage until 1 April 1997 - Interpretation of Article 1(e) of Decision 94/698/EC. - Case C-181/00. European Court reports 2002 Page I-06139 Keywords 1. Preliminary rulings - Jurisdiction of the Court - Limits - Questions on the interpretation of Community law - Obligation to give a ruling(Art. 234 EC)2. Transport - Air transport - Access of Community carriers to intra-Community routes - Article 4 of Regulation No 2408/92 - Imposition of public service obligations on scheduled air services serving a peripheral region - Compatibility with Member States' power to restrict cabotage until 1 April 1997(Council Regulation No 2408/92, Arts 3(2) and 4)3. Transport - Air transport - Access of Community carriers to intra-Community routes - Invitation to tender issued under Article 4(1) of Regulation No 2408/92 - Obligation on air carriers licensed by another Member State to submit bids in accordance with the conditions in Article 3(2) of the regulation - Whether compatible with Community law - Proviso(Council Regulation No 2408/92, Arts 3(2) and 4(1))4. Transport - Air transport - State aid - Decision by the Commission making approval of aid to an airline subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of Regulation No 2408/92 to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest - Right of that Member State to limit access to the relevant routes solely to carriers holding a licence that meets the conditions laid down by Article 3(2) of Regulation No 2408/92(Council Regulation No 2408/92, Arts 3(2) and 4(1)(d); Commission Decision 94/698, Art. 1(e)) Summary $$1. Whilst the Court does not have jurisdiction under Article 234 EC to apply the rules of Community law to a particular case or to judge the compatibility of provisions of national law with those rules, it may provide a national court with all the elements relating to the interpretation of Community law which may be useful to it in assessing the effects of the provisions of that law.In the context of the system of cooperation between the Court of Justice and the national courts provided for by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling.( see paras 20-21 )2. The exercise by a Member State of the rights and powers laid down in Article 4 of Regulation No 2408/92 on access for Community air carriers to intra-Community air routes in particular the right to impose public service obligations on scheduled air services to an airport serving a peripheral region or development region in its territory or on a thin route to any regional airport in its territory, does not presuppose or mean that that Member State must waive its right under Article 3(2) of that regulation to restrict competition until 1 April 1997 in cabotage services within its territory.On the contrary, by stating at Article 4(d), that [t]he right to operate such services shall be offered ... to any Community air carrier entitled to operate such services, Article 4 had the effect, until 1 April 1997, of limiting operation of those services to carriers who satisfy the conditions laid down in the regulation, and in particular those laid down in Article 3(2).( see paras 26, 33, operative part 1 )3. In so far as an invitation to tender issued under Article 4(1) of Regulation No 2408/92 does not imply any waiver of the right to limit the allocation of cabotage rights in accordance with Article 3(2) of the regulation, it is not incompatible with Community law for the Member State to require air carriers, in the context of such an invitation to tender, to submit their offers in accordance with the conditions laid down in Article 3(2), provided that the invitation to tender did not continue to have effect beyond 1 April 1997.( see paras 35-37, operative part 2 )4. Article 1(e) of Decision 94/698 concerning increase in capital, credit guarantees and tax exemption in favour of an airline, which makes approval of the aid for which it provides subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of Regulation No 2408/92 to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest and publish the public service obligations for the routes in question, does not preclude that Member State from exercising its right under Article 3(2) of that regulation to limit access to the relevant routes solely to carriers holding a licence that meets the conditions laid down by that latter provision.On the contrary, it is clear from the sixth paragraph of point 3 of Chapter VIII of that decision that the Portuguese Republic undertook to follow a public tender procedure for the connections between the Portuguese mainland and the islands of Madeira and the Azores in 1995 and that the right to operate those services was to be offered by public tender to any European air carrier entitled to operate such air services.The words entitled to operate such air services also appear in Article 4(1)(d) of the regulation and cannot have a different meaning in Decision 94/698. Therefore, the Portuguese Republic was entitled to limit the right to operate those routes to carriers that satisfied the conditions laid down in Article 3(2) of the regulation.( see paras 41-43, 45, operative part 3 ) Parties In Case C-181/00,REFERENCE to the Court under Article 234 EC by the Supremo Tribunal Administrativo (Portugal) for a preliminary ruling in the proceedings pending before that court betweenFlightline LtdandSecretário de Estado dos Transportes e Communicações,Transportes Aéreos Portugueses SA (TAP),on the interpretation of Articles 3(2) and 4(1)(a) and (d) of Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community air routes (OJ 1992 L 240, p. 8) and Article 1(e) of Commission Decision 94/698/EC of 6 July 1994 concerning increase in capital, credit guarantees and tax exemption in favour of TAP (Transportes Aéreos Portugueses) (OJ 1994 L 279, p. 29),THE COURT (Sixth Chamber),composed of: F. Macken (Rapporteur), President of the Chamber, C. Gulmann, R. Schintgen, V. Skouris and J.N. Cunha Rodríguez, Judges,Advocate General: S. Alber,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- Flightline Ltd, by J.L. Mota de Campos, advogado,- Transportes Aéreos Portugueses SA (TAP), by J.N. Barata, advogado,- the Portuguese Government, by L. Fernandes and A. Pato, acting as Agents,- the Commission of the European Communities, by M. Afonso, M. Huttunen and D. Triantafyllou, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Flightline Ltd, Transportes Aéreos Portugueses SA (TAP), the Portuguese Government and the Commission at the hearing on 5 July 2001,after hearing the Opinion of the Advocate General at the sitting on 27 September 2001,gives the followingJudgment Grounds 1 By a judgment of 13 April 2000, filed at the Court on 15 May 2000, the Supremo Tribunal Administrativo referred three questions to the Court under Article 234 EC on the interpretation of Articles 3(2) and 4(1)(a) and (d) of Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community air routes (OJ 1992 L 240, p. 8, hereinafter the Regulation) and Article 1(e) of Commission Decision 94/698/EC of 6 July 1994 concerning increase in capital, credit guarantees and tax exemption in favour of TAP (Transportes Aéreos Portugueses) (OJ 1994 L 279, p. 29).2 Those questions were raised in proceedings between Flightline Ltd (hereinafter Flightline), established in the United Kingdom, and the Secretário de Estado dos Transportes e Comunicações (the Secretary of State for Transport and Communications, hereinafter the Transport Secretary) and Transportes Aéreos Portugueses SA (hereinafter TAP), relating to the Transport Secretary's refusal of Flightline's application for the right to fly certain routes in Portugal.Legal background and Decision 94/6983 The first recital in the preamble to the Regulation states that it is important to establish an air transport policy for the internal market over a period expiring on 31 December 1992.4 Article 1(4) of the Regulation provides as follows:Airports in the Greek islands and in the Atlantic islands comprising the autonomous region of the Azores shall be exempted from the application of this Regulation until 30 June 1993. Unless otherwise decided by the Council, on a proposal from the Commission, this exemption shall apply for a further period of five years and may be continued for five years thereafter.5 Article 3(1) and (2) of the Regulation provide as follows:1. Subject to this Regulation, Community air carriers shall be permitted by the Member State(s) concerned to exercise traffic rights on routes within the Community.2. Notwithstanding paragraph 1, before 1 April 1997 a Member State shall not be required to authorise cabotage traffic rights within its territory by Community air carriers licensed by another Member State, unless:(i) the traffic rights are exercised on a service which constitutes and is scheduled as an extension of a service from, or as a preliminary of a service to, the State of registration of the carrier;(ii) the air carrier does not use, for the cabotage service, more than 50% of its seasonal capacity on the same service of which the cabotage service constitutes the extension or the preliminary.6 Article 4(1)(a) and (d) of the Regulation provide as follows:(a) A Member State, following consultations with the other Member States concerned and after having informed the Commission and air carriers operating on the route, may impose a public service obligation in respect of scheduled air services to an airport serving a peripheral or development region in its territory or on a thin route to any regional airport in its territory, any such route being considered vital for the economic development of the region in which the airport is located, to the extent necessary to ensure on that route the adequate provision of scheduled air services satisfying fixed standards of continuity, regularity, capacity and pricing, which standard air carriers would not assume if they were solely considering their commercial interest. The Commission shall publish the existence of this public service obligation in the Official Journal of the European Communities....(d) If no air carrier has commenced or is about to commence scheduled air services on a route in accordance with the public service obligation which has been imposed on that route, then the Member State may limit access to that route to only one air carrier for a period of up to three years, after which the situation shall be reviewed. The right to operate such services shall be offered by public tender either singly or for a group of such routes to any Community air carrier entitled to operate such air services. The invitation to tender shall be published in the Official Journal of the European Communities and the deadline for submission of tenders may not be earlier than one month after the day of publication. The submissions made by air carriers shall forthwith be communicated to the other Member States concerned and to the Commission.7 By letter of 26 January 1994, the Republic of Portugal notified the Commission under Article 93(3) of the EC Treaty (now Article 88(3) EC) of a proposed grant of aid to TAP in the context of a restructuring programme affecting that company.8 By Decision 94/698, that aid was declared compatible with the common market provided that a number of conditions were met. Article 1(e) of that decision states one of those conditions to be that the Portuguese Government [fulfil] its commitment to apply Article 4 of Council Regulation (EEC) No 2408/92 to the Atlantic islands of Madeira and the Azores as of 1 January 1996 at the latest, publishing public service obligations for the individual routes in question (see Chapter VIII, point 3).9 The sixth paragraph of point 3 of Chapter VIII of the grounds of Decision 94/698 states more particularly as follows: The Portuguese Government has:- confirmed that the liberalisation of the non-scheduled transport between all Community airports and the Archipelago of the Azores, refers to all the services, as expressed in Regulation (EEC) No 2408/92, including the "seat-only charter" and "one-way charter". This means that these types of air services will be authorised notwithstanding that the Azores are temporarily excluded from the application of Regulation (EEC) No 2408/92,- reaffirmed its determination and willingness to follow in 1995 a public tender procedure for the connections between the Portuguese mainland and the islands of Madeira and the Azores in accordance with Article 4 of Regulation (EEC) No 2408/92. Moreover, it is the intention of Portugal to inform the Commission during the first half of 1995 about the contents of the obligations of these public services, in order that they may be published in the Official Journal of the European Communities. In that respect the Commission recalls that Article 4 of that Regulation means that the contents of the public service obligations are to be separately published in the Official Journal of the European Communities. Following publication, should no European carrier declare its readiness to fulfil these public service obligations, the right to operate such services shall be offered by public tender either singly or for a group of such routes to any European air carrier entitled to operate such air services.10 On the date of adoption of Decision 94/698, 6 July 1994, the Commission also adopted Commission Decision 94/666/EC concerning compensation in respect of the deficit incurred by TAP on the routes to the autonomous regions of the Azores and Madeira (OJ 1994 L 260, p. 27). Article 1 of that decision declared the aid regime, which is intended to compensate for the deficit incurred by TAP in fulfilling public service requirements imposed on it on the routes to the autonomous regions of the Azores and Madeira, to be compatible with the common market until 1 January 1996, provided the aid granted did not exceed the deficit incurred on those routes.11 Pursuant to Decision 94/698, the Portuguese Government decided to impose public service obligations, as from 1 January 1996, on nine routes between the Portuguese mainland and the autonomous regions of the Azores and Madeira, and on routes between those regions; the terms of those obligations were published (OJ 1995 C 200, p. 3).12 An invitation to tender for scheduled air services on the nine routes subject to public service obligations was published (OJ 1995 C 223, p. 16, hereinafter the invitation to tender) in accordance with the provisions of Article 4(1)(d) of the Regulation.13 Paragraph 8 of the invitation to tender provides: The contract shall start on 1.1.1996. It shall end on 31.12.1998.14 Paragraph 3 of the invitation to tender provides: All air carriers holding a valid operating licence issued by a Member State pursuant to Council Regulation (EC) No [2408/92], as well as an adequate air-operator certificate, are eligible to tender. Paragraph 3 goes on to state: However, as Portugal is applying the provision of Article 3(2) of Regulation No 2408/92, carriers licensed by a Member State other than Portugal may not, until 1.4.1997, use for the cabotage service within Portugal more than 50% of their seasonal capacity on the same service of which the cabotage service must be the extension or the preliminary.15 Paragraph 11 of the invitation to tender stated first of all that pursuant to Article 4(1)(d) of the Regulation, the validity of the invitation was subject to the condition that no Community carrier who might be authorised to operate the routes applied before 1 November 1995 for authorisation to operate one or more of those routes with effect from 1 January 1996 in accordance with the public service obligations without receiving financial compensation and, secondly, that the invitation to tender would remain valid just for those routes for which no carrier had tendered by 1 November 1995 under those conditions.The main proceedings and the questions referred16 On 30 October 1995, Flightline applied in accordance with the conditions laid down in paragraph 11 of the invitation to tender for authorisation to operate, without financial compensation, eight of the nine routes referred to in the invitation to tender, together with one further route. The tender was for routes located wholly in Portugal.17 That application was refused on 22 December 1995 by the Transport Secretary. He took the view that Flightline was not licensed by the Portuguese Republic so that, by virtue of Article 3(2) of the Regulation, it could, until 1 April 1997, only operate internal flights constituting the extension or the preliminary of main services between the Member State that licensed it and Portugal. Flightline appealed against that decision to the Second Section of the First Chamber of the Supremo Tribunal Administrativo, which dismissed the appeal.18 That is the background against which Flightline brought an appeal before the First Chamber, sitting in plenary session, of the Supremo Tribunal Administrativo, which decided to stay proceedings and refer the following three questions to the Court:(1) Does the exercise by a Member State of the rights and powers provided for by Article 4 of Council Regulation (EEC) No 2408/92 of 23 July 1992 presuppose or mean that the power provided for in Article 3(2) of that Regulation of that Member State to be able to restrict, until 1 April 1997, competition in cabotage services within its territory is necessarily waived?(2) May a Member State in a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on such a route under Article 4 of the Regulation require air carriers licensed by another Member State which submit bids to meet the conditions laid down in Article 3(2) of that same Regulation?(3) Must Article 1(e) of Commission Decision 94/698/EC be interpreted as meaning that, by making approval of the aid for which it provides subject to the condition that Portugal honour the undertaking to apply Article 4 of Regulation (EEC) No 2408/92 to the Autonomous Regions, with effect from 1 January 1996, by publishing the public service obligations for the individual routes in question ("pursuant to Chapter VIII, point 3"), Portugal is precluded from exercising the power granted to Member States by Article 3(2) of the Regulation?Admissibility19 Although TAP does not formally argue that the questions referred are inadmissible, it takes the view first of all that Article 234 EC does not confer on the Court of Justice jurisdiction to apply the law to specific situations, because that is a matter for the national courts. Secondly, it questions the need for this reference for a preliminary ruling in the light of the clear wording of the relevant Community legislation.20 In that regard it must first of all be observed that whilst the Court does not have jurisdiction under Article 234 EC to apply the rules of Community law to a particular case or to judge the compatibility of provisions of national law with those rules, it may provide a national court with all the elements relating to the interpretation of Community law which may be useful to it in assessing the effects of the provisions of that law (see the judgment in Case 128/88 Di Felice [1989] ECR 923, paragraph 7).21 Secondly, in the context of the system of cooperation between the Court of Justice and the national courts provided for by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraph 59).22 It is therefore appropriate to reply to the questions referred by the national court.The first question23 By its first question the national court is asking whether the exercise by a Member State of its rights and powers under Article 4 of the Regulation presupposes or means that that Member State must waive its right under Article 3(2) of the Regulation to restrict, until 1 April 1997, competition in cabotage services within its territory.24 Flightline argues that, in consideration of the aid awarded to TAP, which was authorised by the Commission, the Commission laid down certain conditions, including a requirement to issue an invitation to tender in accordance with Article 4 of the Regulation and to publish the terms of the public service requirements. Accordingly, although under Article 3 of the Regulation the Portuguese Republic was entitled, until 1 April 1997, to refuse to authorise Community air carriers licensed by another Member State to exercise cabotage rights, the Commission required that obstacles protecting TAP from competition, including the limitation of cabotage rights, be removed as consideration for the award of aid.25 TAP, the Portuguese Government and the Commission, in contrast, essentially consider that application of Article 4 of the Regulation does not imply any waiver of the provisions of Article 3(2).26 It must first of all be pointed out that it does not follow from the wording of Article 4 of the Regulation that application of that article implies a waiver of the provisions of Article 3. On the contrary, by stating at Article 4(d), that [t]he right to operate such services shall be offered ... to any Community air carrier entitled to operate such services, Article 4 had the effect, until 1 April 1997, of limiting operation of those services to carriers who satisfy the conditions laid down in the Regulation, and in particular those laid down in Article 3(2).27 Secondly, as regards the context in which the Regulation was adopted, it must be recalled first of all that, with a view to the gradual establishment of the internal market for air transport, the Community legislature adopted three sets of measures, in 1987, 1990 and 1992, which were known as packages on account of the fact that they consisted of several documents.28 Secondly, until the Regulation was adopted, an air carrier's right to transport passengers within a Member State other than the Member State where it is licensed was subject to more stringent conditions than those laid down by Article 3(2) of the Regulation.29 Finally, the objective of the Regulation, according to the 10th recital in the preamble, is to phase in cabotage rights in order to stimulate the development of the Community air transport sector, first by relaxing, for a temporary period ending on 1 April 1997, the conditions on which an airline licensed in one Member State may fly in another Member State and, second, by removing all conditions at the end of that period.30 In accordance with that objective, Article 3(2) of the Regulation seeks to authorise the Member States, during the transitional period, to adapt to the process of liberalisation so as to bring about a situation where any airline licensed by any Member State may be authorised to operate cabotage services in a Member State other than that where it is licensed.31 Article 4 of the Regulation, on the other hand, relates to a different situation. It authorises any Member State, even after the transitional period referred to in Article 3(2) of the Regulation has expired, to guarantee a sufficient level of air services on certain thin routes or to airports serving peripheral or underdeveloped regions, subject to conditions relating, inter alia, to frequency, timetabling, capacity and price.32 However, as the Commission was right to point out, for the period from 1 January 1993, the date on which the Regulation entered into force, to 1 April 1997 inclusive, a Member State could effectively apply the provisions of Article 4(1)(d) of the Regulation, even if it was exercising its power under Article 3(2) of the Regulation. Issuing an invitation to tender pursuant to Article 4(1)(d) enabled the various air carriers licensed by the Member State concerned to compete immediately for allocation of the right to operate routes subject to public service obligations. That partial liberalisation was therefore intended to pave the way for complete liberalisation at the end of the transitional period referred to in Article 3(2) of the Regulation.33 The reply to the first question must therefore be that the exercise by a Member State of the rights and powers laid down in Article 4 of the Regulation does not presuppose or mean that that Member State must waive its right under Article 3(2) of the Regulation to restrict competition until 1 April 1997 in cabotage services within its territory.The second question34 By its second question the national court is asking whether, in a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on that route under Article 4 of the Regulation, a Member State may require air carriers licensed by another Member State which submit bids to meet the conditions laid down in Article 3(2) of that Regulation.35 Having regard to the reply to the first question, in so far as an invitation to tender issued under Article 4(1) of the Regulation does not imply any waiver of the right to limit the allocation of cabotage rights in accordance with Article 3(2) of the Regulation, it is not incompatible with Community law for the Member State to require air carriers, in the context of such an invitation to tender, to submit their offers in accordance with the conditions laid down in Article 3(2).36 However, the effects of Article 3(2) of the Regulation cannot, under the wording of that provision itself, extend beyond 1 April 1997.37 The reply to the second question must therefore be that, in a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on that route under Article 4 of the Regulation, a Member State was entitled to require air carriers licensed by another Member State which submitted bids to meet the conditions laid down in Article 3(2) of the Regulation, provided that the invitation to tender did not continue to have effect beyond 1 April 1997.The third question38 By its third question, the national court is asking whether Article 1(e) of Decision 94/698, which makes approval of the aid for which it provides subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of the Regulation to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest, and publish the public service obligations for the routes in question, must be interpreted as meaning that the Portuguese Republic is precluded from exercising its right under Article 3(2) of the Regulation.39 It must first of all be observed that while the Regulation applies to the autonomous region of Madeira from the time of its entry into force, 1 January 1993, the autonomous region of the Azores was excluded from the scope of the Regulation until 30 June 1993, by virtue of Article 1(4) thereof, and then, following an extension, until 30 June 1998.40 None the less, the Portuguese Republic's undertaking in Article 1(e) of Decision 94/698 means that Article 4 of the Regulation also applies to the Azores from 1 January 1996.41 In that regard, it must be observed that Article 1(e) of Decision 94/698 does not provide that, having regard to the application of Article 4 of the Regulation, the Portuguese Republic must waive the right under Article 3(2) of the Regulation to limit access to the relevant routes solely to carriers holding a licence that meets the conditions laid down by that latter provision.42 On the contrary, it is clear from the sixth paragraph of point 3 of Chapter VIII of that decision that the Portuguese Republic undertook to follow a public tender procedure for the connections between the Portuguese mainland and the islands of Madeira and the Azores in 1995 and that the right to operate those services was to be offered by public tender to any European air carrier entitled to operate such air services.43 The words entitled to operate such air services also appear in Article 4(1)(d) of the Regulation and cannot have a different meaning in Decision 94/698. Therefore, as stated in paragraph 26 of this judgment, the Portuguese Republic was entitled to limit the right to operate those routes to carriers that satisfied the conditions laid down in Article 3(2) of the Regulation.44 None the less, since the Regulation has applied to the autonomous region of Madeira since 1 January 1993, all European air carriers licensed by a Member State have, since 1 April 1997, been entitled to fly to or from that region on intra-Community routes. As regards the autonomous region of the Azores, such carriers have been entitled to engage in cabotage since 1 July 1998.45 The reply to the third question must therefore be that Article 1(e) of Decision 94/698, which makes approval of the aid for which it provides subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of the Regulation to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest and publish the public service obligations for the routes in question, does not preclude that Member State from exercising its right under Article 3(2) of the Regulation. Decision on costs Costs46 The costs incurred by the Portuguese Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT (Sixth Chamber),in answer to the questions referred to it by the Supremo Tribunal Administrativo by judgment of 13 April 2000, hereby rules:1. The exercise by a Member State of the rights and powers laid down in Article 4 of Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community air routes does not presuppose or mean that that Member State must waive its right under Article 3(2) of that regulation to restrict competition until 1 April 1997 in cabotage services within its territory.2. In a public tender procedure organised in 1995 for the provision of scheduled air services on a route subject to public service obligations imposed on that route under Article 4 of Regulation No 2408/92, a Member State was entitled to require air carriers licensed by another Member State which submitted bids to meet the conditions laid down in Article 3(2) of that regulation, provided that the invitation to tender did not continue to have effect beyond 1 April 1997.3. Article 1(e) of Commission Decision 94/698/EC of 6 July 1994 concerning increase in capital, credit guarantees and tax exemption in favour of TAP, which makes approval of the aid for which it provides subject to the condition that the Portuguese Republic honour its undertaking to apply Article 4 of Regulation No 2408/92 to the autonomous regions of Madeira and the Azores with effect from 1 January 1996 at the latest and publish the public service obligations for the routes in question, does not preclude that Member State from exercising its right under Article 3(2) of that regulation.

77a19-8d4ab44-4a71

EN

THE ADVOCATE GENERAL REGARDS THE STATUTORY FREEZING OF COMPULSORY MOTOR INSURANCE PREMIUMS IN ITALY AS CONTRARY TO COMMUNITY LAW

«(Failure of a Member State to fulfil obligations – Directive 92/49/EEC – Freedom to set premiums and abolition of prior or systematic controls over premiums and contracts – Gathering of information)» Summary of the Judgment Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Direct insurance other than life assurance – Directive 92/49 – Freedom to set premiums – Price-control system applicable to contracts of insurance covering third-party liability arising from the use of motor vehicles – Not permissible(Council Directive 92/49, Arts 6, 29 and 39)Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Direct insurance other than life assurance – Directive 92/49 – Freedom to set premiums – Price-control system applicable to contracts of insurance covering third-party liability arising from the use of motor vehicles – Not permissibleJUDGMENT OF THE COURT25 February 2003 (1) ((Failure by a Member State to fulfil obligations – Directive 92/49/EEC – Freedom to set premiums and abolition of prior or systematic controls over premiums and contracts – Gathering of information))applicant, vdefendant, THE COURT,,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 4 July 2002,gives the followingLegal backgroundOn those grounds, THE COURTRodríguez IglesiasPuissochetWatheletTimmermans EdwardJannMackenColneric von BahrCunha Rodrigues Rosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: Italian. Language of the case: Italian.

91bc0-f4f7e86-443f

EN

A LUXEMBOURG ROAD HAULAGE COMPANY THAT COMPLIES WITH THE REGULATIONS AND CARRIES OUT CABOTAGE IN GERMANY MAY NOT BE REQUIRED TO REGISTER ITS LORRIES THERE OR PAY THE TAXES ARISING FROM SUCH REGISTRATION

| 62000J0115 Judgment of the Court of 2 July 2002. - Andreas Hoves Internationaler Transport-Service SARL v Finanzamt Borken. - Reference for a preliminary ruling: Finanzgericht Münster - Germany. - Transport of goods by road - Tax on motor vehicles - Member State of registration. - Case C-115/00. European Court reports 2002 Page I-06077 Keywords 1. Transport - Road transport - Permission for non-resident carriers to operate national goods transport services - Regulation No 3118/93 - Host Member State levying a motor vehicle tax on vehicles registered in the Member State of establishment and holding a cabotage authorisation - Not permissible(Council Regulation No 3118/93, Art. 6)2. Transport - Road transport - Tax provisions - Harmonisation of laws - Taxes on certain vehicles used for the carriage of goods by road and charges for the use of certain infrastructures - Directive 93/89 - Host Member State levying a motor vehicle tax on vehicles registered in the Member State of establishment and holding a cabotage authorisation - Not permissible(Council Regulation No 3118/93; Council Directive 93/89, Art. 5) Summary $$1. Article 6 of Regulation No 3118/93 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State, which provides that the performance of cabotage transport operations is to be subject to the laws, regulations and administrative provisions in force in the host Member State in a number of areas, the latter constituting an exhaustive list which does not include either the obligation to register the vehicle in the host Member State or the obligation to pay the tax on motor vehicles, precludes national provisions of a host Member State which entail the latter levying vehicle tax on the use of motor vehicles for the carriage of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, and that they should therefore be registered there, when they are registered in the Member State of establishment and are used in the host Member State to carry out cabotage by road, in accordance with authorisations lawfully issued by the Member State of establishment.To require the carrier to register the vehicle in the host Member State would be the very negation of the freedom to provide the cabotage service by road, the exercise of which presupposes that the motor vehicle is registered in the Member State of establishment. Similarly, to require a carrier to pay a tax on the motor vehicles in the host Member State, even though he has already paid such a tax in the Member State of establishment, would be contrary to the objective of Regulation No 3118/93, which is aimed at removing all restrictions against the person providing the services on the grounds of his nationality or the fact that he is established in a different Member State from the one in which the service is to be provided.( see paras 54-56, 59, operative part 1 )2. Article 5 of Directive 93/89 on the application by Member States of taxes on certain vehicles used for the carriage of goods by road and tolls and charges for the use of certain infrastructures, which provides that the taxes shall be charged solely by the Member State of registration, precludes national provisions of a host Member State, within the meaning of Article 1(1) of Regulation No 3118/93 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State, which entail the levying by the latter of vehicle tax on the use of motor vehicles for the carriage of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, and that they should therefore be registered there, when they are registered and the tax referred to in Article 3(1) of that directive has been paid in the Member State of establishment and those vehicles are used in the host Member State for cabotage by road, in accordance with authorisations lawfully issued by the Member State of establishment.Even if Directive 93/89, which has harmonised the national systems of taxes on certain commercial vehicles, does not contain any conflict of law rule to determine which Member State is competent as regards registration and hence taxation, the objective of Regulation No 3118793, namely to encourage the development of cabotage services by road, combined with the harmonisation of taxes effected by Directive 93/89, could not be achieved if the host Member State were able, on the ground that a vehicle falls within the scope of the national law on the taxation of vehicles, require a carrier using that vehicle for cabotage to pay in respect of that vehicle one of the taxes referred to in that directive, when such a tax has already been paid in the Member State of establishment.( see paras 67, 70-72, operative part 2 ) Parties In Case C-115/00,REFERENCE to the Court under Article 234 EC by the Finanzgericht Münster (Germany) for a preliminary ruling in the proceedings pending before that court betweenAndreas Hoves Internationaler Transport-Service SàrlandFinanzamt Borken,on the interpretation of Article 6 of Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State (OJ 1993 L 279, p. 1) and Article 5 of Council Directive 93/89/EEC of 25 October 1993 on the application by Member States of taxes on certain vehicles used for the carriage of goods by road and tolls and charges for the use of certain infrastructures (OJ 1993 L 279, p. 32),THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann, F. Macken, N. Colneric and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward, A. La Pergola, J.-P. Puissochet, M. Wathelet (Rapporteur), R. Schintgen, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: D. Ruiz-Jarabo Colomer,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- Andreas Hoves Internationaler Transport-Service Sàrl, by B. Jansen-Weber and A. Hoves, directors of that company,- the French Government, by K. Rispal-Bellanger and S. Seam, acting as Agents,- the Commission of the European Communities, by M. Wolfcarius and E. Traversa, acting as Agents, assisted by A. Böhlke, Rechtsanwalt,having regard to the Report for the Hearing,after hearing the oral observations of Finanzamt Borken, represented by W. Busch, acting as Agent, of the United Kingdom Government, represented by P. Whipple, Barrister, and of the Commission, represented by M. Wolfcarius, assisted by A. Böhlke, at the hearing on 16 October 2001,after hearing the Opinion of the Advocate General at the sitting on 27 November 2001,gives the followingJudgment Grounds 1 By order of 23 February 2000, received at the Court on 27 March 2000, the Finanzgericht Münster (Finance Court, Münster) referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Article 6 of Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State (OJ 1993 L 279, p. 1) and Article 5 of Council Directive 93/89/EEC of 25 October 1993 on the application by Member States of taxes on certain vehicles used for the carriage of goods by road and tolls and charges for the use of certain infrastructures (OJ 1993 L 279, p. 32).2 Those questions were raised in a dispute between Andreas Hoves Internationaler Transport-Service Sàrl (the Hoves company) and the Finanzamt (Tax Office) Borken concerning a tax on motor vehicles claimed by the latter under German law in respect of lorries registered by Hoves in Luxembourg and carrying out cabotage operations in Germany.Legal backgroundCommunity legislation3 An initial transitional system governing cabotage was established by Council Regulation (EEC) No 4059/89 of 21 December 1989 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State (OJ 1989 L 390, p. 3).4 That regulation provided that, with effect from 1 July 1990, any road haulage carrier for hire and reward established in a Member State (the Member State of establishment), in accordance with its legislation and authorised in that State to operate international road haulage services, was to be entitled, provided he held a cabotage authorisation, to operate on a temporary basis national road haulage services in another Member State (the host Member State), without having a registered office or other establishment there.5 The regulation fixed a Community quota corresponding to a certain number of two-month cabotage authorisations, capable of being increased each year by the Commission, and determined the method of allocating those authorisations between the various Member States. The Commission sent the cabotage authorisations to the Member States of establishment. The competent authorities of those States then issued them to carriers who applied for them.6 That transitional system was applicable until 31 December 1992, it being provided in Article 9 of Regulation No 4059/89 that, before 1 July 1992, the Council was to adopt a regulation laying down the definitive system of cabotage which was to enter into force on 1 January 1993.7 By judgment of 16 July 1992 in Case C-65/90 Parliament v Council [1992] ECR I-4593, the Court of Justice annulled Regulation No 4059/89 for breach of essential procedural requirements, but maintained its effects until the adoption of new legislation in due and proper form.8 On 25 October 1993, the Council adopted Regulation No 3118/93, applicable from 1 January 1994. That regulation provided for the admission to national road haulage services of any carrier of goods holding the Community licence provided for in Council Regulation (EEC) No 881/92 of 26 March 1992 on access to the market in the carriage of goods by road within the Community to or from the territory of a Member State or passing across the territory of one or more Member States (OJ 1992 L 95, p. 1).9 Regulation No 3118/93 organised a new transitional system of authorisation and Community quotas for cabotage haulage services. It fixed a Community quota corresponding to a certain number of two-month cabotage authorisations and laid down the method of allocating those authorisations amongst the various Member States. The annual increase of that quota was laid down by that regulation in accordance with a fixed proportion.10 Article 12(2) of Regulation No 3118/93 provided that the Community authorisation and quota system for cabotage operations laid down in Article 2 was to cease to apply on 1 July 1998. The first subparagraph of Article 12(3) provided that, from that date, any non-resident carrier meeting the conditions laid down in that regulation was to be entitled to operate, on a temporary basis and without quantitative restrictions, national road haulage services in another Member State, without having a registered office or other establishment in that State.11 Article 1(1) of Regulation No 3118/93 is worded as follows:Any road haulage carrier for hire or reward who is a holder of the Community authorisation provided for in Regulation (EEC) No 881/92 shall be entitled, under the conditions laid down in this Regulation, to operate on a temporary basis national road haulage services for hire and reward in another Member State, hereinafter referred to respectively as "cabotage" and as the "host Member State", without having a registered office or other establishment therein.12 The first and second subparagraphs of Article 3(3) of Regulation No 3118/93 provide:A cabotage authorisation shall be made out in the name of the carrier. ... [It] may be used by only one vehicle at a time."Vehicle" means a motor vehicle registered in the Member State of establishment or a coupled combination of vehicles of which at least the motor vehicle is registered in the Member State of establishment and which are used exclusively for the carriage of goods.13 Under Article 6(1) and (3) of Regulation No 3118/93, which are worded almost identically with Article 5(1) and (2) of Regulation No 4059/89:1. The performance of cabotage transport operations shall be subject, save as otherwise provided in Community Regulations, to the laws, regulations and administrative provisions in force in the host Member State in the following areas:(a) rates and conditions governing the transport contract;(b) weights and dimensions of road vehicles ... ;(c) requirements relating to the carriage of certain categories of goods, in particular dangerous goods, perishable foodstuffs, live animals;(d) driving and rest time;(e) value added tax (VAT) on transport services. ......3. The provisions referred to in paragraph 1 shall be applied to non-resident transport operators on the same conditions as those which that Member State imposes on its own nationals, so as to prevent any open or hidden discrimination on grounds of nationality or place of establishment.14 On 25 October 1993, the Council also adopted Directive 93/89. That directive is designed to eliminate distortions of competition between transport undertakings in the Member States by harmonising levy systems and establishing fair mechanisms for charging infrastructure costs to hauliers. In accordance with the first subparagraph of Article 13(1) of that directive, it was to be implemented before 1 January 1995.15 The first paragraph of Article 1 of that directive thus provides that Member States are, if necessary, amongst other things, to adjust their systems of vehicle taxes.16 In accordance with Article 2 of Directive 93/89, vehicle is defined for the purposes of the directive as a motor vehicle or articulated vehicle combination intended exclusively for the carriage of goods by road and with a maximum permissible gross laden weight of not less than 12 tonnes.17 The taxes on vehicles referred to by Directive 93/89 are listed in Article 3(1) of the directive, which mentions:- Germany: Kraftfahrzeugsteuer,...- Luxembourg: taxe sur les véhicules automoteurs,...18 Article 5 of Directive 93/89 provides:As regards vehicles registered in the Member States, the taxes referred to in Article 3 shall be charged solely by the Member State of registration.19 By judgment of 5 July 1995 in Case C-21/94 Parliament v Council [1995] ECR I-1827, the Court of Justice annulled Directive 93/89, but maintained its effects until the adoption of new legislation. The latter is Directive 1999/62/EC of the European Parliament and of the Council of 17 June 1999 on the charging of heavy goods vehicles for the use of certain infrastructures (OJ 1999 L 187, p. 42), which entered into force on 20 July 1999.National legislation20 The relevant national legislation, as described by the national court in the order for reference, is the following.21 The first piece of legislation in question is the Kraftfahrzeugsteuergesetz (Law on Motor Vehicle Tax; the KraftStG), Paragraph 1 of which, entitled Object of taxation, provides, in the version which applied until 31 December 1994:1. The following shall be subject to motor vehicle tax:...(2) the keeping of foreign motor vehicles for use on the public highway, if the vehicles are in the Federal Republic of Germany;(3) unlawful use of motor vehicles; ...22 In the version which applied from 1 January 1995, that provision of the KraftStG reads:1. The following shall be subject to motor vehicle tax:...(2) the keeping of foreign motor vehicles for use on the public highway, if the vehicles are in the Federal Republic of Germany. Exemptions shall apply to motor vehicles and articulated vehicle combinations intended exclusively for the carriage of goods by road and with a maximum permissible gross laden weight under road transport law of not less than 12 000 kg, which are registered in another Member State of the European Community in accordance with Article 5 of Council Directive 93/89/EEC of 25 October 1993 (OJ 1993 L 279, p. 32); this shall not apply to cases under section 3;(3) unlawful use of motor vehicles; ...23 Paragraph 2 of the KraftStG, headed Definition of terms, participation by transport authorities, provides:...(4) A motor vehicle is a foreign motor vehicle where it is registered under the registration procedure of another State.(5) Unlawful use within the meaning of this Law exists where a motor vehicle is used on public roads in the Federal Republic of Germany without the registration required under road transport law. Tax in respect of unlawful use shall not be imposed where the keeping of the motor vehicle would be exempt from the tax or the tax has already been imposed pursuant to Paragraph 1(1)(1) or (2).24 The second piece of legislation in question is the Strassenverkehrs-Zulassungsordnung (Road Transport Registration Code; the StVZO), Paragraph 18 of which, headed Obligation to register, reads:Motor vehicles with a maximum speed determined by their type of more than 6 km/h and their trailers (vehicles carried behind motor vehicles with the exception of non-operational vehicles, which are being towed and towing axles) may be operated on public roads only if they have been registered to operate through the issue of an operating permit or an EC type approval and through the allocation of a registration number for motor vehicles or trailers by the administrative authority (registration office).25 Paragraph 23(1) of the StVZO, headed Allocation of registration number, provides:The person enjoying the right of disposal shall apply for the allocation of the registration number for a motor vehicle or a motor vehicle trailer to the administrative authority (registration office) in whose district the vehicle has its regular base. ...26 Thirdly, Paragraph 1(1) of the Verordnung über internationalen Kraftfahrzeugverkehr (Regulation on International Motor Vehicle Traffic; the IntKfzVO) of 12 November 1934 (RGBl. 1934 I, p. 1137), in the version in force during the period in question, provides:Foreign motor vehicles and motor vehicle trailers shall be registered to operate temporarily within the area of application of this Regulation where a competent authority has issued for it a valid...(b) foreign registration certificate and a regular base has not been established within the area of application of this Regulation. ...The dispute in the main proceedings and the questions referred27 The order for reference shows that the Hoves company, formed in Luxembourg by a company agreement of 6 June 1989, is a company under Luxembourg law established in the Grand Duchy of Luxembourg. Since 13 September 1993, Mr Hoves has been its sole shareholder. He was initially the sole manager of the company, then, by notarial act of 24 March 1998, Bettina Jansen-Weber was also appointed as a manager. The two managers are jointly authorised to represent the company. Mr Hoves is also manager of the German company Hoves Speditionsgesellschaft mbH, Rhede (Germany) (hereinafter referred to as the GmbH).28 The object of the Hoves company is national and international carriage of goods. Until the end of 1995, it operated solely as a carrier for the GmbH. That activity was governed by a written contract of 27 January 1993. Under that contract, the operational plans for vehicles and drivers were handled by the GmbH. After freight orders were carried out, the account was settled with the Hoves company by way of a credit entry.29 Fifteen lorries were registered in the name of the Hoves company in Luxembourg. The company paid the Luxembourg tax on motor vehicles in respect of those vehicles. The Luxembourg authorities issued cabotage authorisations to that company in accordance with Article 5 of Regulation No 4059/89. The company employed eight drivers, all living in Germany.30 In connection with a tax dispute concerning the years 1993 and 1994, separate from the present dispute in the main proceedings and pending before the Finanzgericht Köln (Germany), the Bundesamt für Finanzen asked the Luxembourg authorities for judicial and administrative assistance in order to determine the place of management of the Hoves company. By letter of 12 July 1996, on the basis of Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation (OJ 1977 L 336, p. 15), the Luxembourg Direction des Contributions Directes provided a certain amount of information.31 According to that information, as set out by the referring court, the Hoves company did not have either its own garage or parking spaces for the lorries in Luxembourg. Since the activity in Luxembourg was essentially restricted to administration of haulage operations and major decisions concerning that company were taken solely by Mr Hoves, who was domiciled in Germany and, for the most part, resided there, the company's place of management within the meaning of Article 3(6) of the Luxembourg/Germany Double Taxation Convention of 23 August 1958 (BGBl. 1959 II, p. 1270), in its amended version of 15 July (read: June) 1973 (BGBl. 1978 II, p. 111) was not in Luxembourg, but in Germany. However, a clear answer could not be given as to whether the offices in Remich and Esch/Alzette (Luxembourg) were a permanent establishment within the meaning of the Double Taxation Convention. A permanent establishment may have existed in Bertrange (Luxembourg) from 9 February 1996.32 The German tax authorities concurred with the view of the Luxembourg authorities. They held that the seat of management of the Hoves company was in Rhede and they therefore assessed the bases for corporation tax and turnover tax for 1989-1995, capital tax for 1992 and wages tax for 1989-1994. The appeals lodged against those assessments were not yet decided at the date the order for reference was pronounced.33 The Finanzamt Borken also assessed the basis of taxation in respect of motor vehicle tax for the vehicles registered in the name of the Hoves company and assessed the motor vehicle tax for periods from 1991 to 1996. The action before the Finanzgericht Münster is directed against those decisions and tax notices concerning motor vehicle tax.34 The national court notes that the regular base for the purposes of Paragraph 23(1) of the StVZO, as interpreted by the case-law, is the place from which the vehicle is directly placed into circulation on the public highway and where it is parked at the end of its journey. In the case of inter-regional transport, as in the main proceedings, it is the place where decisions are taken concerning the use of the vehicle, including the rest time of drivers. In this case, in the national court's view, the regular base of the vehicles is in Rhede.35 Having a regular base in Germany, the vehicles should be registered there in accordance with Article 18 of the StVZO. Liability to the German tax on motor vehicles arises from Paragraph 1(1)(2) of the KraftStG for the period up to 31 December 1994, and from the second half of the second sentence of Paragraph 1(1)(2) of the KraftStG in conjunction with Paragraph 1(1)(3) thereof as from 1 January 1995. In the view of the national court, the vehicles have been used unlawfully within the meaning of the first sentence of Paragraph 2(5) of the KraftStG.36 According to the national court, neither national law nor the Double Taxation Convention of 23 August 1958 provides grounds for exemption from the tax. The court examines several national provisions in succession and states that the bilateral convention on the tax regime for motor vehicles concluded with the Grand Duchy of Luxembourg (see the decree of the Reichsminister der Finanzen of 1 July 1930, RStBl. 1930, p. 454), also assumes a purely temporary stay of the vehicles in Germany.37 The national court has doubts, however, as to the conformity of that legal situation with Community provisions, particularly Article 6 of Regulation No 3118/93 and Article 5 of Directive 93/89.38 The Finanzgericht Münster notes that, in accordance with the judgment in Case C-212/97 Centros [1999] ECR I-1459, the seat of a company should be determined by its constitution. The Hoves company has its seat in Luxembourg and an establishment there, and the question whether its place of management is there also is irrelevant. During the period at issue in the main proceedings, that company had no subsidiary, agency, branch or other secondary establishment in Germany, in the sense of a fixed establishment for an indefinite period, that is to say a stable establishment for the purposes of tax law. Neither the management of vehicles of the Hoves company by the GmbH nor the fact that the manager of the Hoves company lived in Germany support the argument that such an establishment exists. Moreover, the Grand Duchy of Luxembourg granted the road haulage authorisations.39 Concerning the aim of preventing tax avoidance and excluding the possibility of abuse, the national court points out that the Hoves company has done no more than make use of legal possibilities existing within the European Community, even if it was with the aim of economising on taxes by paying the tax on motor vehicles in a Member State with an advantageous tax system.40 In the light of those factors, the Finanzgericht Münster decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:1. Does Article 6 of Council Regulation (EEC) No 3118/93 of 25 October 1993 (OJ 1993 L 279, p. 1) preclude national rules which result in motor vehicle tax being charged for the use of commercial goods vehicles which are registered in another Member State of the European Union, for which a cabotage authorisation has been issued in that Member State, which carry out cabotage operations in the Federal Republic of Germany and which have their regular base there?2. Does Article 5 of Council Directive 93/89/EEC of 25 October 1993 (OJ 1993 L 279, p. 32), in cases like that mentioned in Question 1, preclude national rules such as the second half of the second sentence of Paragraph 1(1)(2) of the Kraftfahrzeugsteuergesetz in conjunction with Paragraph 1(1)(3) of the KraftStG?The first question41 By its first question, the national court essentially asks whether Article 6 of Regulation No 3118/93 precludes national provisions of a host Member State which entail the latter levying vehicle duty in respect of transport of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, even though they are registered in the Member State of establishment and are used in the host Member State for cabotage by road, in accordance with authorisations lawfully issued by the Member State of establishment.Arguments before the Court42 Stating its opinion on both questions at the same time, the Hoves company suggests that they should be answered in the affirmative. It argues that the Luxembourg Ministry of Transport issued Community licences or authorisations for cabotage in respect of all the vehicles, and that it checks each year for compliance with the various conditions to which the granting of the latter is subject, including determination of the principal office of the company and the normal base of the vehicles, as well as verification of compliance with technical and economic rules. To maintain that the issuing of transport authorisations in Luxembourg was devoid of significance would imply that the action of the Luxembourg Ministry of Transport was not in accordance with Community law, since the issuing of licences and transport undertakings' access to the market are governed in a harmonised manner at Community level.43 The Hoves company does not deny that it never had a real depot in Luxembourg or parking spaces for the lorries. It considers, however, that that was not compulsory. In its submission, if those were conditions precedent for operating a transport undertaking, the Ministry of Transport would not have issued the corresponding licences.44 Concerning the regular base of a vehicle for determining whether the tax is due, the Hoves company does not accept that it may be defined as the place where decisions are taken concerning the use of the vehicle. If that were the case, any large transport company could avoid vehicle tax by moving its department that takes such decisions to a Member State where the tax is lower. To apply the regular base criterion laid down by the German statute would affect many companies in Europe, since the GmbH governed the use not only of the vehicles of the Hoves company but also of transport companies established in Italy, Spain and Portugal, in which it had no stake.45 In the submission of the Hoves company, the centre of operations must be defined by objective criteria. It points out in that regard that:- the great majority of the vehicles were used abroad;- the rest periods of the lorries in Luxembourg were at least as long as those applicable in Germany;- the registration and taxation of the vehicles took place in Luxembourg;- the technical inspections were carried out in Luxembourg;- the vehicles were refuelled mainly in Luxembourg;- the lorries were insured in Luxembourg, and the drivers were registered and insured in that Member State;- Luxembourg transport licences, which had to be applied for each year, were used;- the regulations and conditions of access to the occupation of road haulier in force in Luxembourg were complied with;- the Hoves company was regularly inspected and assessed for the tax.46 The French Government, in its written observations, and the Finanzamt Borken, in its oral observations at the hearing, argue that Article 6 of Regulation No 3118/93 does not preclude national provisions concerning the tax on motor vehicles, even if they entail the levying of the tax on vehicles used for the transport of goods by road which are registered in another Member State and in respect of which a cabotage authorisation has been issued in that State. The tax on motor vehicles was not expressly mentioned in that provision, but the latter was applicable save as otherwise provided in Community Regulations. The matter of taxes on certain vehicles used for the transport of goods by road formed the subject-matter of Directive 93/89, but the period prescribed for the transposition of the latter in the legal systems of the Member States did not expire until 1 January 1995. Until that date, Regulation No 3118/93, as such, did not preclude application of the legislation of the Member States concerning the taxation of motor vehicles.47 In its observations submitted at the hearing, the United Kingdom Government has argued that each Member State has power to determine the circumstances in which it may require the registration and taxation of a vehicle. Community law lays down a number of exceptions to that freedom, of which Regulation No 3118/93 is one. To require payment of road tax in respect of a vehicle using the roads of a Member State temporarily pursuant to a cabotage authorisation would go against the objective of that regulation, which is precisely to permit temporary transport in another Member State.48 The Commission considers that, since the provisions referred to in Article 6 of Regulation No 3118/93 are exhaustive, and do not include the tax on motor vehicles, that article precludes the levying of such a tax by the host Member State for the duration of the cabotage authorisation issued by the Member State of establishment, whatever the regular base of the motor vehicle used for the transport of goods by road during the period in question.49 It points out that the Hoves company has enjoyed cabotage authorisations, of two months' duration, which have been issued successively over many years, but it adds that the regularity of the issuing of the cabotage authorisations by the Luxembourg authorities during those years is not the subject-matter of the dispute. It argues in that respect that, in its capacity as the host Member State, the Federal Republic of Germany may check the lawfulness of the cabotage transport operations and, in case of serious irregularity, adopt sanctions or request the intervention of the Member State of establishment. However, it did not appear that any such steps were taken with the Luxembourg authorities.Answer of the Court50 In accordance with Article 61 of the EC Treaty (now, after amendment, Article 51 EC), freedom to provide services in the field of transport is to be governed by the provisions of the Title relating to transport.51 Article 75 of the EC Treaty (now, after amendment, Article 71 EC) provides that, for the purpose of implementing the common transport policy, and taking into account the distinctive features of transport, the Council is required to establish, in accordance with a given procedure, inter alia, the conditions under which non-resident carriers may operate transport services within a Member State. The Council carried out that obligation by successively adopting Regulations Nos 4059/89 and 3118/93, both based on Article 75 of the Treaty.52 Under Article 1 of Regulation No 3118/93, the beneficiaries of that freedom to operate national road haulage services in another Member State are [a]ny road haulage carrier for hire or reward who is a holder of the Community authorisation provided for in Regulation (EEC) No 881/92. That latter regulation states, in Article 3(2), that Community authorisation is to be issued to any haulier carrying goods by road for hire or reward who ... is established in a Member State ... in accordance with the legislation of that Member State, and who is entitled in that Member State, in accordance with the legislation of the Community and of that State concerning admission to the occupation of road haulage operator to carry out the international carriage of goods by road.53 It follows that a company such as the Hoves company, lawfully constituted in accordance with Luxembourg legislation and empowered, in the Grand Duchy of Luxembourg, to carry out the international carriage of goods by road, is one of the beneficiaries of the freedom to operate national road haulage services in another Member State, so long as it obtains cabotage authorisations issued by the competent authorities of the Member State of establishment, which, in the case at issue in the main proceedings, means the Luxembourg authorities.54 As Article 6 of Regulation No 3118/93 provides, the performance of cabotage transport operations is to be subject to the laws, regulations and administrative provisions in force in the host Member State in a number of areas. The wording of that provision shows that the areas listed in Article 6(1)(a) to (e) constitute an exhaustive list which does not include either the obligation to register the vehicle in the host Member State or the obligation to pay the tax on motor vehicles.55 In that respect, to require the carrier to register the vehicle in the host Member State would be the very negation of the freedom to provide the cabotage service by road, the exercise of which presupposes, as the second subparagraph of Article 3(3) of Regulation No 3118/93 provides, that the motor vehicle is registered in the Member State of establishment.56 Similarly, to require a carrier to pay a tax on the motor vehicles in the host Member State, even though he has already paid such a tax in the Member State of establishment, would be contrary to the objective of Regulation No 3118/93, which, according to the second recital in its preamble, is aimed at removing all restrictions against the person providing the services on the grounds of his nationality or the fact that he is established in a different Member State from the one in which the service is to be provided.57 It is irrelevant in that respect that, under German law, the regular base of the vehicles, justifying the levying of the German tax on motor vehicles, is situated in Germany by reason of the fact that it is in that Member State that the place where decisions are taken concerning the use of the vehicles is situated. A company such as the Hoves company was entitled to collaborate with a company situated in another Member State and to entrust to the latter certain decisions concerning the organisation of transport operations, without thereby ceasing to be a company providing cabotage services by road.58 In any event, Article 8(1) of Regulation No 3118/93 provides that Member States are to assist one another in applying that regulation. If the German authorities had doubts as to the lawfulness of cabotage authorisations issued by the Luxembourg authorities, it was their responsibility to refer that question to those authorities so that, if need be, the latter could re-examine the situation. In their capacity as authorities of the host Member State, the German authorities were, however, not entitled to decline to recognise cabotage authorisations issued by the Member State of establishment or to impose a condition for carrying out cabotage by road not laid down by Regulation No 3118/93 (see, to that effect, Case C-202/97 FTS v Bestuur van het Landelijk Instituut Sociale Verzekeringen [2000] ECR I-883, paragraphs 51 to 56, and Case C-178/97 Banks and Others v Théâtre Royal de la Monnaie [2000] ECR I-2005, paragraphs 38 to 43).59 Having regard to the above considerations, the answer to the first question must be that Article 6 of Regulation No 3118/93 precludes national provisions of a host Member State which entail the latter levying vehicle tax on the use of motor vehicles for the carriage of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, when they are registered in the Member State of establishment and are used in the host Member State to carry out cabotage by road, in accordance with authorisations lawfully issued by the Member State of establishment.The second question60 By its second question, the national court essentially asks whether Article 5 of Directive 93/89 precludes national provisions of a host Member State, within the meaning of Article 1(1) of Regulation No 3118/93, entailing the levying by the latter of vehicle tax on the use of motor vehicles for the carriage of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, when they are registered and the tax referred to in Article 3(1) of that directive is paid in the Member State of establishment and those vehicles are used in the host Member State to carry out cabotage by road in accordance with authorisations lawfully issued by the Member State of establishment.Arguments before the Court61 The Finanzamt Borken emphasises the connection which exists between the right of a Member State to require registration of a vehicle and the right to require payment of the tax on that vehicle. Since there is no Community harmonisation provision on the matter of registration, two Member States might take the view that registration was necessary in a given situation and, in consequence, both demand the tax. In the Finanzamt's submission, Article 5 of Directive 93/89 does not prevent that.62 The French Government draws attention to the purpose of Directive 93/89 as it appears in the first recital in its preamble, namely the harmonisation of levy systems. In its submission, that harmonisation takes the form of an exclusive allocation of the right to levy vehicle tax to the Member State of registration, and, correspondingly, an exemption from similar taxes applicable in other Member States. It considers it self-explanatory in that regard that the State of registration is the State of legal registration of the vehicles.63 At the hearing, the United Kingdom Government stated its agreement with the French Government and the Commission. It proposes that the answer to the second question should be that Article 5 of Directive 93/89 precludes national rules linking liability to the tax referred to in Article 3(1) of Directive 93/89 with unlawful use of a vehicle on the public highway where that unlawful use is defined as absence of registration.64 The Commission maintains that the directive creates an indissoluble link between the right to tax and registration, without however becoming involved in registration itself. Since the criteria relating to the registration of vehicles used for carriage of goods by road have not yet been harmonised, conflicts in the matter of registration are inevitable and must be resolved. They do not however, as such, authorise the breaking of the indissoluble link between the right to tax and registration. They cannot lead to the creation contra legem of facts giving rise to a tax on motor vehicles other than that resulting from registration.65 The Commission therefore considers that, according to Directive 93/89, tax on motor vehicles is the consequence of registration and not a substitute for it. It therefore proposes that the answer to the question should be that, for the duration of registration in another Member State, Article 5 of the directive precludes a national provision which attaches the levying of the tax referred to in Article 3 of the directive to unlawful use of the vehicle, namely its use on the public highway without its being lawfully registered in accordance with road traffic legislation.Answer of the Court66 The dispute in the main proceedings arises from a positive conflict of laws concerning the registration of vehicles, and thus concerning their taxation. On the one hand, Luxembourg legislation requires registration of the Hoves company's vehicles in so far as that company has its principal office in Luxembourg, whereas, on the other hand, German legislation requires registration of those same vehicles on the ground that they have their regular base in Germany. By reason of the link between the registration of vehicles and their taxation, levying of the tax on motor vehicles is required pursuant to the legislation of both countries.67 It should be noted in that respect that, in order to eliminate distortions of competition between the transport undertakings of Member States, Directive 93/89 has harmonised the national systems of taxes on certain commercial vehicles of more than a certain gross laden weight.68 That directive lays down minimum rates of tax to be applied to the vehicles concerned and provides that those taxes may be levied only by the Member State of registration.69 The general scheme of Directive 93/89 shows that the latter assumes the existence of a single Member State where the vehicles are registered. Thus Article 5 of that directive provides that the taxes are levied solely by the Member State of registration.70 Directive 93/89 does not, however, contain any conflict of law rule to determine which Member State is competent as regards registration.71 However, the objective of Regulation No 3118/93, namely to encourage the development of cabotage services by road, combined with the harmonisation of taxes on certain commercial vehicles effected by Directive 93/89, could not be achieved if the host Member State were able, on the ground that a vehicle falls within the scope of the national law on the taxation of vehicles, to require a carrier using that vehicle for cabotage in accordance with authorisations lawfully issued by the Member State of establishment, to pay in respect of that vehicle one of the taxes referred to in Article 3(1) of that directive, when such a tax has already been paid in the Member State of establishment.72 The answer to the second question must therefore be that Article 5 of Directive 93/89 precludes national provisions of a host Member State, within the meaning of Article 1(1) of Regulation No 3118/93, which entail the levying by the latter of vehicle tax on the use of motor vehicles for the carriage of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, when they are registered and the tax referred to in Article 3(1) of that directive has been paid in the Member State of establishment and those vehicles are used in the host Member State for cabotage by road, in accordance with authorisations lawfully issued by the Member State of establishment. Decision on costs Costs73 The costs incurred by the French and United Kingdom Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Finanzgericht Münster by order of 23 February 2000, hereby rules:1. Article 6 of Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State precludes national provisions of a host Member State which entail the latter levying vehicle tax on the use of motor vehicles for the carriage of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, when they are registered in the Member State of establishment and are used in the host Member State to carry out cabotage by road, in accordance with authorisations lawfully issued by the Member State of establishment.2. Article 5 of Council Directive 93/89/EEC of 25 October 1993 on the application by Member States of taxes on certain vehicles used for the carriage of goods by road and tolls and charges for the use of certain infrastructures precludes national provisions of a host Member State, within the meaning of Article 1(1) of Regulation No 3118/93, which entail the levying by the latter of vehicle tax on the use of motor vehicles for the carriage of goods by road on the ground that those vehicles have their regular base in the territory of that host Member State, when they are registered and the tax referred to in Article 3(1) of that directive has been paid in the Member State of establishment and those vehicles are used in the host Member State for cabotage by road, in accordance with authorisations lawfully issued by the Member State of establishment.

ae6a8-e49f068-4b78

EN

FOR REASONS OF CONSUMER PROTECTION AND FAIR COMPETITION, “IMITATION” PARMESAN MANUFACTURED IN ITALY IS NOT ELIGIBLE FOR PROTECTION UNDER THE TRANSITIONAL PROCEDURE FOR DESIGNATIONS OF ORIGIN

| 62000J0066 Judgment of the Court of 25 June 2002. - Criminal proceedings against Dante Bigi, third party: Consorzio del Formaggio Parmigiano Reggiano. - Reference for a preliminary ruling: Tribunale di Parma - Italy. - Regulation (EEC) No 2081/92 - Protection of geographical indications and designations of origin of agricultural products and foodstuffs - Article 13 - System of derogations - Scope. - Case C-66/00. European Court reports 2002 Page I-05917 Keywords 1. Preliminary rulings - Jurisdiction of the Court - Limits - Manifestly irrelevant questions and questions regarding hypothetical problems in a context which precludes any useful answer - Questions not related to the purpose of the main proceedings(Art. 234 EC)2. Agriculture - Uniform legislation - Protection of geographical indications and designations of origin for agricultural products and foodstuffs - Regulation No 2081/92 - System of derogation from Article 13(2) - Scope - Products originating in the State of the protected designation of origin - Not covered(Council Regulation No 2081/92, Art. 13(2)) Summary $$1. In the context of the cooperation between the Court of Justice and the national courts established by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling.However, in exceptional circumstances, it is for the Court to examine the conditions in which the case was referred to it by the national court, in order to assess whether it has jurisdiction. The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it.( see paras 18-19 )2. On a proper construction of Article 13(2) of Regulation No 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, as amended by Regulation No 535/97, products are not covered by the system of derogations set up by that article where they originate in the State which obtained the protected designation of origin the protection of which under Article 13(1)(a) and (b) of Regulation No 2081/92, as amended, is at issue and they do not meet the product specification for that protected designation of origin.( see para. 34, operative part ) Parties In Case C-66/00,REFERENCE to the Court under Article 234 EC by the Tribunale di Parma (Italy) for a preliminary ruling in the criminal proceedings before that court againstDante Bigi,third party:Consorzio del Formaggio Parmigiano Reggiano,on the interpretation of Article 13 of Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (OJ 1992 L 208, p. 1), as amended by Council Regulation (EC) No 535/97 of 17 March 1997 (OJ 1997 L 83, p. 3),THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann, F. Macken, N. Colneric and S. von Bahr (Presidents of Chambers), D.A.O. Edward (Rapporteur), J.-P. Puissochet, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: P. Léger,Registrar: L. Hewlett, Administrator,after considering the written observations submitted on behalf of:- Mr Bigi, by G.G. Lasagni, avvocato,- the Consorzio del Formaggio Parmigiano Reggiano, by F. Capelli, avvocato,- the Italian Government, by U. Leanza, acting as Agent, and by O. Fiumara, avvocato dello Stato,- the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents,- the Greek Government, by I.K. Chalkias and C. Tsiavou, acting as Agents,- the Austrian Government, by H. Dossi, acting as Agent,- the Commission of the European Communities, by J.L. Iglesias Buhigues and P. Stancanelli, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Mr Bigi, represented by G.G. Lasagni; the Consorzio del Formaggio Parmigiano Reggiano, represented by F. Capelli; the Italian Government, represented by U. Leanza and O. Fiumara; the German Government, represented by W.-D. Plessing; the Greek Government, represented by G. Kanellopoulos, acting as Agent, and C. Tsiavou; the French Government, represented by C. Vasak and L. Bernheim, acting as Agents; the Portuguese Government, represented by L.I. Fernandes, acting as Agent; and the Commission, represented by J.L. Iglesias Buhigues and P. Stancanelli, at the hearing on 6 June 2001,after hearing the Opinion of the Advocate General at the sitting on 9 October 2001,gives the followingJudgment Grounds 1 By order of 21 February 2000, received at the Court on 28 February 2000, the Tribunale di Parma referred to the Court for a preliminary ruling under Article 234 EC seven questions on the interpretation of Article 13 of Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (OJ 1992 L 208, p. 1), as amended by Council Regulation (EC) No 535/97 of 17 March 1997 (OJ 1997 L 83, p. 3, hereinafter Regulation No 2081/92).2 Those questions were raised in criminal proceedings instituted against Mr Bigi following a complaint from the Consorzio del Formaggio Parmigiano Reggiano (hereinafter the Consorzio), in which he is charged with violating Italian laws on fraudulent trading, on the marketing of products bearing misleading marks or signs, and on the use of protected designations of origin (hereinafter PDOs)The legal context3 Regulation No 2081/92 establishes a system of Community protection of designations of origin and geographical indications for agricultural products and foodstuffs.4 Article 3(1) of Regulation No 2081/92 provides:Names that have become generic may not be registered.For the purposes of this regulation, a "name that has become generic" means the name of an agricultural product or a foodstuff which, although it relates to the place or the region where this product or foodstuff was originally produced or marketed, has become the common name of an agricultural product or a foodstuff....5 Article 4(1) of that regulation provides that [t]o be eligible to use a protected designation of origin (PDO) or a protected geographical indication (PGI) an agricultural product or foodstuff must comply with a specification. Paragraph 2 of that article lists the minimum particulars which are to be included in the product specifications.6 Article 13(1) and (2) of Regulation No 2081/92 states:1. Registered names shall be protected against:(a) any direct or indirect commercial use of a name registered in respect of products not covered by the registration in so far as those products are comparable to the products registered under that name or insofar as using the name exploits the reputation of the protected name;(b) any misuse, imitation or evocation, even if the true origin of the product is indicated or if the protected name is translated or accompanied by an expression such as "style", "type", "method", "as produced in", "imitation" or similar;(c) any other false or misleading indication as to the provenance, origin, nature or essential qualities of the product, on the inner or outer packaging, advertising material or documents relating to the product concerned, and the packing of the product in a container liable to convey a false impression as to its origin;(d) any other practice liable to mislead the public as to the true origin of the product.Where a registered name contains within it the name of an agricultural product or foodstuff which is considered generic, the use of that generic name on the appropriate agricultural product or foodstuff shall not be considered to be contrary to (a) or (b) in the first subparagraph.2. By way of derogation from paragraph 1(a) and (b), Member States may maintain national systems that permit the use of names registered under Article 17 for a period of not more than five years after the date of publication of registration, provided that:- the products have been marketed legally using such names for at least five years before the date of publication of this Regulation,- the undertakings have legally marketed the products concerned using those names continuously during the period referred to in the first indent,- the labelling clearly indicates the true origin of the product.However, this derogation may not lead to the marketing of products freely within the territory of a Member State where such names were prohibited.7 In addition to the normal registration procedure provided for in Articles 5 to 7, Regulation No 2081/92 establishes a simplified transitional procedure, set out in Article 17, which permits registration of designations of origin already protected under national law.8 Article 17 of Regulation No 2081/92 thus provides:1. Within six months of the entry into force of the Regulation, Member States shall inform the Commission which of their legally protected names or, in those Member States where there is no protection system, which of their names established by usage they wish to register pursuant to this Regulation.2. In accordance with the procedure laid down in Article 15, the Commission shall register the names referred to in paragraph 1 which comply with Articles 2 and 4. Article 7 shall not apply. However, generic names shall not be added.3. Member States may maintain national protection of the names communicated in accordance with paragraph 1 until such time as a decision on registration has been taken.9 Applying that simplified procedure, the Italian Republic informed the Commission that it wished to register, inter alia, the name Parmigiano Reggiano. The Commission effected that registration by including that name in the list of PDOs in the Annex to Commission Regulation (EC) No 1107/96 of 12 June 1996 on the registration of geographical indications and designations of origin under the procedure laid down in Article 17 of Regulation No 2081/92 (OJ 1992 L 148, p. 1).The main proceedings10 Nuova Castelli SpA (hereinafter Castelli), of which Mr Bigi is the person vested with legal representation, is a company which produces several types of cheese in Italy. As well as producing a cheese which conforms to the specification for the PDO Parmigiano Reggiano, it has, for some considerable time, produced a dried, grated pasteurised cheese in powder form, made from a mixture of several types of cheese of various origins, which does not comply with that specification and which may not therefore be sold in Italy. That second type of cheese, sold with a label bearing the word parmesan, is marketed exclusively outside Italy, inter alia in France.11 On 11 November 1999, a quantity of that second type of cheese, packaged with that label bearing the word parmesan and intended for export towards other Member States was seized at the premises of a distributor established in Parma. The seizure was made following a complaint by the Consorzio, a grouping of producers of cheese bearing the PDO Parmigiano Reggiano which claimed damages in criminal proceedings brought against Mr Bigi in the Tribunale di Parma.12 Mr Bigi is charged with fraudulent trading and selling industrial products with misleading indications by producing and marketing that cheese in those circumstances. Mr Bigi is also accused of having contravened the prohibition on using recognised designations of origin or typical designations, altering or partially modifying them by adding, even if indirectly, qualifying terms, such as type, purpose, taste or similar expression.13 In his defence, Mr Bigi relies on the provisions of Article 13(2) of Regulation No 2081/92 and contends that the Italian Republic is not entitled to prohibit producers established in Italy from manufacturing cheese which does not meet the requirements of the PDO Parmigiano Reggiano, where that cheese is intended to be exported for marketing in other Member States.The questions referred for a preliminary ruling14 Unsure of the correct interpretation of the Community legislation applicable, the Tribunale di Parma decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:1. Must Article 13(2) of Regulation No 2081/92 (as amended by Article 1 of Regulation (EC) No 535/97) be interpreted as meaning that no official measure of a legislative or administrative nature need be adopted by the Member State concerned in order to allow the use on its territory of designations which may be confused with those registered under Article 17 of Regulation No 2081/92?2. Therefore, in order to allow use of the designations referred to above in the territory of the Member State concerned, is it sufficient that there is no opposition by that Member State to such use?3. Does the lack of any opposition by the Member State in whose territory the designation which is open to confusion with one registered under Article 17 of Regulation No 2081/92 is used render lawful the use of that designation by an undertaking whose registered office is in the territory of the Member State in which the designation was registered, if that undertaking uses the designation which is open to confusion only for products intended to be sold outside the country of registration and only within the territory of the Member State which is not opposed to use of the said designation?4. Does the period of five years referred to in Article 13(2) of Regulation No 2081/92 for use of a name in relation to a product whose designation was registered on 12 June 1996 (see Regulation No 1107/96, cited above) expire on 12 June 2001?5. Therefore, is an undertaking whose registered office is in a Member State at whose request a protected designation of origin (PDO) has been registered in accordance with Article 17 of Regulation No 2081/92, which has used a designation that is open to confusion with the one registered uninterruptedly over the five years prior to the entry into force of Regulation No 2081/92 (24 July 1993), entitled to use the same designation to distinguish products which are intended to be sold only outside the Member State of registration and only in the territory of a Member State which has not opposed the use of that designation in the said territory?6. If Question 5 is answered in the affirmative, may the undertaking whose registered office is in the Member State of registration of the protected designation of origin legitimately describe its products by using the designation which is open to confusion with the one registered until the expiry of the fifth year following the date of registration of the protected designation (12 June 1996), in other words until 12 June 2001?7. As from the day following the date indicated in Question 6 above (12 June 2001), must the use of any designation open to confusion with the one registered in all the Member States by any operator who is not expressly authorised to use the registered designation within the meaning of Regulation (EEC) No 2081/92 be regarded as prohibited.The admissibility of the questions referred for a preliminary ruling15 The German Government contends that the reference for a preliminary ruling is inadmissible on the ground that the answer to the questions referred is not necessary for the decision in the main proceedings. The designation parmesan used by Mr Bigi is, it argues, a generic name and not a PDO within the meaning of Regulation No 2081/92.16 The name parmesan is generic because it has become, in general, a name which on its own refers to a grated cheese or cheese intended for grating. Thus, it is argued, parmesan has become the common name of ... a foodstuff within the meaning of Article 3(1) of Regulation No 2081/92. The German Government refers inter alia to point 35 of the Opinion of Advocate General Ruiz-Jarabo Colomer in Case C-317/95 Canadane Cheese Trading and Kouri [1997] ECR I-4681, concerning the generic nature of the name parmesan cheese.17 The German Government argues that, since only the name Parmigiano Reggiano has been registered, Community protection is confined to that name and only covers that precise formulation of the name registered. It adds that, according to the case-law of the Court of Justice, the protection of each of the constituent parts of a compound designation can be envisaged only if they are not generic or common terms (Joined Cases C-129/97 and C-130/97 Chiciak and Fol [1998] ECR I-3315, paragraph 37).18 It is settled case-law that, in the context of the cooperation between the Court of Justice and the national courts established by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, for example, Case C-415/93 Bosman [1995] ECR I-4921, paragraph 59).19 However, the Court has also stated that, in exceptional circumstances, it can examine the conditions in which the case was referred to it by the national court, in order to assess whether it has jurisdiction. The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, for example, Case C-390/99 Canal Satélite Digital [2002] I-607, paragraph 19).20 However, in the present case it is far from clear that the designation parmesan has become generic. It is contended by all the governments which have submitted written observations in this case, apart from the German Government and, to a certain extent, the Austrian Government, and by the Commission that the French designation parmesan is the correct translation of the PDO Parmigiano Reggiano.21 Against that background it cannot be argued that it is clear that the questions raised by the referring court are covered by one of the situations listed in the case-law cited at paragraph 19 of this judgment. It follows that the reference for a preliminary ruling is admissible.The questions referred for a ruling22 The questions referred for a preliminary ruling concern certain aspects of the system of derogations established by Article 13(2) of Regulation No 2081/92.23 The products at issue in the main proceedings originate in the Member State which obtained the registration of the PDO (the State of the PDO), without, however, meeting the PDO requirements. It is the protection conferred by such registration under Article 13(1)(a) and (b) of Regulation No 2081/92 that is at issue. Consequently, the first question is whether that system of derogations can be applied to such products.24 The scope of that system of derogations must therefore be determined. Account should be taken not only of the wording of Article 13(2) of Regulation No 2081/92 but also of the purpose of that provision in the general scheme of the regulation.25 According to its wording, Article 13(2) of Regulation No 2081/92 provides for a system of derogations implementation of which depends on the desire of the Member State concerned to maintain, within its national territory and for a limited period, its previous national system and requires certain conditions to be fulfilled. Those conditions essentially require that an undertaking wishing to rely on the system of derogations should have legally marketed the products at issue for a specified period under the name that has since been registered and that the labelling should clearly indicate their true origin.26 The second subparagraph of Article 13(2) of Regulation No 2081/92 provides, further, that this exception may not lead to the marketing of such products freely on the territory of a Member State where that name was prohibited.27 Thus, Article 13(2) of Regulation No 2081/92 implements one of the objectives of Regulation No 2081/92, namely that of not abolishing with immediate effect the option of using names registered under Article 17 of Regulation No 2081/92 for products which do not meet the specification of the PDO concerned. As the third recital in the preamble to Regulation No 535/97 indicates, the Community legislature considered it necessary to grant an adjustment period in order not to prejudice producers who had been using such names for a long time.28 However, as that recital also makes clear, such a transitional period should apply only to names registered under Article 17 of that regulation, that is to say to names, such as that in issue here, which have been registered under the simplified procedure. That procedure presupposes, inter alia, that the name which a Member State seeks to register should be legally protected in that Member State or, in Member States where there is no system of protection, validated through use.29 In other words, the simplified procedure presupposes that, at the time when a Member State applies to register a name as a PDO, products which do not comply with the specification for that name cannot be marketed legally on its territory.30 Accordingly, Regulation No 2081/92 must be interpreted as meaning that, once a name has been registered as a PDO, the system of derogations provided for by Article 13(2) of Regulation No 2081/92, in order to allow the continued use of that name under certain conditions and within certain limits, applies only to products not originating in the State of the PDO.31 As the Advocate General observed in points 71 to 79 of his Opinion, that interpretation of Article 13(2) of Regulation No 2081/92 is consistent with the objectives of consumer protection and fair competition set out in the sixth and seventh recitals in the preamble to Regulation No 2081/92.32 Thus, on a proper construction of Article 13(2) of Regulation No 2081/92, products are not covered by the system of derogations set up by Article 13(2) where they originate in the State of the PDO the protection of which under Article 13(1)(a) and (b) of Regulation No 2081/92 is at issue and they do not meet the product specification for that PDO.33 Accordingly, given that the system of derogations laid down by Article 13(2) of Regulation No 2081/92 does not apply to products such as those at issue here, there is no need to reply to the questions as put by the Tribunale di Parma.34 In the light of those considerations, the answer to be given to the national court is that, on a proper construction of Article 13(2) of Regulation No 2081/92, products are not covered by the system of derogations set up by Article 13(2) where they originate in the State of the PDO the protection of which under Article 13(1)(a) and (b) of Regulation No 2081/92 is at issue and they do not meet the product specification for that PDO. Decision on costs Costs35 The costs incurred by the Italian, German, Greek, French, Austrian and Portuguese Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Tribunale di Parma by order of 21 February 2000, hereby rules:On a proper construction of Article 13(2) of Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, as amended by Council Regulation (EC) No 535/97 of 17 March 1997, products are not covered by the system of derogations set up by Article 13(2) where they originate in the State of the protected designation of origin the protection of which under Article 13(1)(a) and (b) of Regulation No 2081/92, as amended, is at issue and they do not meet the product specification for that protected designation of origin.

65054-f99fc5b-43ea

EN

British American Tobacco Investments and Imperial Tobacco

«(Directive 2001/37/EC – Manufacture, presentation and sale of tobacco products – Validity – Legal basis – Articles 95 EC and 133 EC – Interpretation – Applicability to tobacco products packaged in the Community and intended for export to non-member countries)» Summary of the Judgment 1.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Protection of public health a decisive factor in the choices involved in the harmonising measures – Not relevant (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Protection of public health a decisive factor in the choices involved in the harmonising measures – Not relevant 2.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Prohibition of manufacture intended to prevent the circumvention of the marketing rules in the internal market – Included (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council, Art. 3(1)) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Legal basis – Article 95 EC – Improvement of the conditions for the functioning of the internal market – Prohibition of manufacture intended to prevent the circumvention of the marketing rules in the internal market – Included 3.. Acts of the institutions – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Choice of legal basis – Criteria – Community measure pursuing a twofold basis or having a twofold component – Reference to the main or predominant purpose or component – Incorrect reference to Article 133 EC as a second legal basis – Not relevant to the validity of the directive (Arts 95 EC and 133 EC; Directive 2001/37 of the European Parliament and of the Council) Acts of the institutions – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Choice of legal basis – Criteria – Community measure pursuing a twofold basis or having a twofold component – Reference to the main or predominant purpose or component – Incorrect reference to Article 133 EC as a second legal basis – Not relevant to the validity of the directive 4.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Harmonising measures – No breach of the principle of proportionality (Directive 2001/37 of the European Parliament and of the Council, Arts 3, 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Harmonising measures – No breach of the principle of proportionality 5.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Respect of the right to property – Trade mark – Proportionate restrictions not impairing the very substance of that right (Directive 2001/37 of the European Parliament and of the Council, Arts 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Respect of the right to property – Trade mark – Proportionate restrictions not impairing the very substance of that right 6.. Community law – Principles – Principle of subsidiarity – Application to acts adopted for the purpose of establishing the internal market – Review of observance of the principle of subsidiarity – Criteria (Art. 95 EC) Community law – Principles – Principle of subsidiarity – Application to acts adopted for the purpose of establishing the internal market – Review of observance of the principle of subsidiarity – Criteria 7.. Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Article 7 – Prohibition of the use of descriptors likely to mislead consumers – Applicable only to tobacco products marketed within the Community (Art. 95 EC; Directive 2001/37 of the European Parliament and of the Council, Arts 3, 5 and 7) Approximation of laws – Directive 2001/37 concerning the manufacture, presentation and sale of tobacco products – Article 7 – Prohibition of the use of descriptors likely to mislead consumers – Applicable only to tobacco products marketed within the Community JUDGMENT OF THE COURT10 December 2002 (1) ((Directive 2001/37/EC – Manufacture, presentation and sale of tobacco products – Validity – Legal basis – Articles 95 EC and 133 EC – Interpretation – Applicability to tobacco products manufactured in the Community and intended for export to non-member countries))andTHE COURT,,after considering the written observations submitted on behalf of: ─ British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd, by D. Wyatt QC and D. Anderson QC, and by J. Stratford, Barrister, instructed by Lovells, Solicitors, ─ Japan Tobacco Inc. and JT International SA, par O.W. Brouwer, advocaat, and N.P. Lomas, Solicitor, both of Freshfields Bruckhaus Deringer, Solicitors, ─ the United Kingdom Government, by P. Ormond, acting as Agent, and by N. Paine QC, and T. Ward, Barrister, ─ the Belgian Government, by A. Snoecx, acting as Agent, assisted by E. Gillet and G. Vandersanden, avocats, ─ the German Government, by W.-D. Plessing, acting as Agent, assisted by J. Sedemund, Rechtsanwalt, ─ the Greek Government, by V. Kontolaimos and S. Charitakis, acting as Agents, ─ the French Government, by G. de Bergues and R. Loosli-Surrans, acting as Agents, ─ the Italian Government, by U. Leanza, acting as Agent, and O. Fiumara, avvocato dello Stato, ─ the Luxembourg Government, by J. Faltz, acting as Agent, assisted by P. Kinsch, avocat, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the Finnish Government, by E. Bygglin, acting as Agent, ─ the Swedish Government, by A. Kruse, acting as Agent, ─ the European Parliament, by C. Pennera and M. Moore, acting as Agents, ─ the Council of the European Union, by E. Karlsson and J.-P. Hix, acting as Agents, ─ the Commission of the European Communities, by I. Martinez del Peral and K. Fitch, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd, represented by D. Wyatt and D. Anderson, and by J. Stratford; of Japan Tobacco Inc. and JT International SA, represented by O.W. Brouwer and N.P. Lomas; of the United Kingdom Government, represented by J.E. Collins, acting as Agent, and N. Paine and T. Ward; of the Belgian Government, represented by G. Vandersanden; of the German Government, represented by M. Lumma, acting as Agent, assisted by J. Sedemund; of the Greek Government, represented by V. Kontolaimos and S. Charitakis; of the French Government, represented by R. Loosli-Surrans; of the Irish Government, represented by J. Buttimore BL; of the Italian Government, represented by O. Fiumara; of the Luxembourg Government, represented by N. Mackel, acting as Agent, assisted by P. Kinsch; of the Netherlands Government, represented by J. van Bakel, acting as Agent; of the Finnish Government, represented by E. Bygglin; of the Parliament, represented by C. Pennera and M. Moore; of the Council, represented by E. Karlsson and J.-P. Hix, and of the Commission, represented by I. Martinez del Peral and K. Fitch, at the hearing on 2 July 2002, after hearing the Opinion of the Advocate General at the sitting on 10 September 2002,gives the followingThe relevant provisionsOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Edward La PergolaJann Skouris MackenColnericvon BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: English. Language of the case: English.

946eb-3d2b915-4c4c

EN

ADVOCATE GENERAL STIX-HACKL TAKES THE VIEW THAT A GERMAN RULE IMPOSING THE ENTIRE BURDEN OF PROVING EXHAUSTION OF TRADE-MARK RIGHTS ON A RESELLER IS CONTRARY TO COMMUNITY LAW.

«(Trade marks – Directive 89/104/EEC – Article 7(1) – Exhaustion of the right conferred by the trade mark – Evidence – Place where the goods are first placed on the market by the trade mark proprietor or with his consent – Consent of the trade mark proprietor to placing on the market in the EEA)» Summary of the Judgment Approximation of laws – Trade marks – Directive 89/104 – Exhaustion of the right conferred by a trade mark – Rule placing the burden of proof on the third party relying on exhaustion – Whether permissible – Limits(Arts 28 and 30 EC; Council Directive 89/104, Art. 7(1))Approximation of laws – Trade marks – Directive 89/104 – Exhaustion of the right conferred by a trade mark – Rule placing the burden of proof on the third party relying on exhaustion – Whether permissible – LimitsJUDGMENT OF THE COURT8 April 2003 (1) ((Trade marks – Directive 89/104/EEC – Article 7(1) – Exhaustion of the right conferred by the trade mark – Evidence – Place where the goods are first placed on the market by the trade mark proprietor or with his consent – Consent of the trade mark proprietor to placing on the market in the EEA))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Lifestyle sports + sportswear Handelsgesellschaft mbH and Michael Orth, by K. Seidelmann, Rechtsanwalt ─ the German Government, by A. Dittrich and T. Jürgensen, acting as Agents, ─ the French Government, by G. de Bergues and A. Maitrepierre, acting as Agents, ─ the Commission of the European Communities, by K. Banks, acting as Agent, assisted by I. Brinker and W. Berg, Rechtsanwälte, having regard to the Report for the Hearing,after hearing the oral observations of Lifestyle sports + sportswear Handelsgesellschaft mbH and Mr Orth, of the German Government, of the French Government and of the Commission at the hearing on 8 January 2002, after hearing the Opinion of the Advocate General at the sitting on 18 June 2002, gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenGulmann La Pergola JannSkouris Macken Colnericvon Bahr R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

d07ca-529a9fc-4572

EN

ONLY MARKS WITH DISTINCTIVE CHARACTER BY THEIR NATURE OR THROUGH THE USE MADE OF THEM ARE CAPABLE OF DISTINGUISHING THEIR PRODUCTS FROM THOSE OF OTHER UNDERTAKINGS AND THEREBY CAPABLE OF REGISTRATION

| 61999J0299 Judgment of the Court of 18 June 2002. - Koninklijke Philips Electronics NV v Remington Consumer Products Ltd. - Reference for a preliminary ruling: Court of Appeal (England & Wales) (Civil Division) - United Kingdom. - Approximation of laws - Trade marks - Directive 89/104/EEC - Articles 3(1) and (3), 5(1) and 6(1)(b) - Signs capable of being trade marks - Signs consisting exclusively of the shape of the product. - Case C-299/99. European Court reports 2002 Page I-05475 Keywords 1. Approximation of laws - Trade marks - Directive 89/104 - Where registration of a trade mark may be refused or the trade mark declared invalid - Trade mark devoid of distinctive character - Relation between the provisions of Article 3(1)(b), (c) and (d) and 3(3), on the one hand, and Article 3(1)(a), on the other(Council Directive 89/104, Art. 3(1)(a), (b), (c) and (d) and Art. 3(3))2. Approximation of laws - Trade marks - Directive 89/104 - Signs capable of constituting a trade mark - Determination whether a trade mark has a distinctive character - Criteria - Capricious addition - Criterion not necessary(Council Directive 89/104, Art. 2)3. Approximation of laws - Trade marks - Directive 89/104 - Where registration of a trade mark may be refused or the trade mark declared invalid - Trade mark devoid of distinctive character - Distinctive character acquired by use - Meaning - Criteria(Council Directive 89/104, Art. 3(3))4. Approximation of laws - Trade marks - Directive 89/104 - Where registration of a trade mark may be refused or the trade mark declared invalid - Sign consisting of the shape of the product necessary to obtain a technical result - Meaning - Existence of other shapes which allow the same technical result to be obtained - Not relevant to the ground for refusal(Council Directive 89/104, Art. 3(1)(e)) Summary $$1. There is no category of marks which is not excluded from registration by Article 3(1)(b), (c) and (d) and Article 3(3) of Directive 89/104 to approximate the laws of the Member States relating to trade marks which is none the less excluded from registration by Article 3(1)(a) thereof on the ground that such marks are incapable of distinguishing the goods of the proprietor of the mark from those of other undertakings.( see para. 40, operative part, para. 1 )2. In order to be capable of distinguishing an article for the purposes of Article 2 of Directive 89/104 to approximate the laws of the Member States relating to trade marks, the shape of the article in respect of which the sign is registered does not require any capricious addition, such as an embellishment which has no functional purpose. The criteria for assessing the distinctive character of three-dimensional trade marks are no different from those to be applied to other categories of trade mark and the shape in question must simply be capable of distinguishing the product of the proprietor of the trade mark from those of other undertakings and thus of fulfilling its essential purpose of guaranteeing the origin of the product.( see paras 48 to 50, operative part, para. 2 )3. Where a trader has been the only supplier of particular goods to the market, extensive use of a sign which consists of the shape of those goods may be sufficient to give the sign a distinctive character for the purposes of Article 3(3) of Directive 89/104 to approximate the laws of the Member States relating to trade marks, in circumstances where, as a result of that use, a substantial proportion of the relevant class of persons associates that shape with that trader and no other undertaking or believes that goods of that shape come from that trader. However, it is for the national court to verify that the circumstances in which the requirement under that provision is satisfied are shown to exist on the basis of specific and reliable data, that the presumed expectations of an average consumer of the category of goods or services in question, who is reasonably well-informed and reasonably observant and circumspect, are taken into account and that the identification, by the relevant class of persons, of the product as originating from a given undertaking is as a result of the use of the mark as a trade mark.( see para. 65, operative part, para. 3 )4. Article 3(1)(e), second indent, of Directive 89/104 to approximate the laws of the Member States relating to trade marks must be interpreted to mean that a sign consisting exclusively of the shape of a product is unregistrable by virtue thereof if it is established that the essential functional features of that shape are attributable only to the technical result. Moreover, the ground for refusal or invalidity of registration imposed by that provision cannot be overcome by establishing that there are other shapes which allow the same technical result to be obtained.( see para. 84, operative part, para. 4 ) Parties In Case C-299/99,REFERENCE to the Court under Article 234 EC by the Court of Appeal (England and Wales) (Civil Division) (United Kingdom) for a preliminary ruling in the proceedings pending before that court betweenKoninklijke Philips Electronics NVandRemington Consumer Products Ltd,on the interpretation of Articles 3(1) and (3), 5(1) and 6(1)(b) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1),THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann, F. Macken (Rapporteur), N. Colneric and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward, A. La Pergola, J.-P. Puissochet, J.N. Cunha Rodrigues and C.W.A. Timmermans, Judges,Advocate General: D. Ruiz-Jarabo Colomer,Registrar: D. Louterman-Hubeau, Head of Division,after considering the written observations submitted on behalf of:- Koninklijke Philips Electronics NV, by H. Carr QC and D. Anderson QC, and by Professor W.A. Hoyng, instructed initially by Eversheds Solicitors, and, subsequently, by Allen & Overy, Solicitors,- Remington Consumer Products Ltd, by Lochners Technology Solicitors, Solicitors,- the United Kingdom Government, by R. Magrill, acting as Agent, and S. Moore, Barrister,- the French Government, by K. Rispal-Bellanger and A. Maitrepierre, acting as Agents,- the Commission of the European Communities, by K. Banks, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of Koninklijke Philips Electronics NV, represented by H. Carr and W.A. Hoyng; of Remington Consumer Products Ltd, represented by S. Thorley QC and R. Wyand QC; of the United Kingdom Government, represented by R. Magrill, assisted by D. Alexander, Barrister; and of the Commission, represented by K. Banks, at the hearing on 29 November 2000,after hearing the Opinion of the Advocate General at the sitting on 23 January 2001,gives the followingJudgment Grounds 1 By order of 5 May 1999, received at the Court on 9 August 1999, the Court of Appeal (England and Wales) (Civil Division) referred for a preliminary ruling under Article 234 EC seven questions concerning the interpretation of Articles 3(1) and (3), 5(1) and 6(1)(b) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1, hereinafter the Directive).2 Those questions have arisen in a dispute between Koninklijke Philips Electronics NV (Philips) and Remington Consumer Products Ltd (Remington) concerning an action for infringement of a trade mark which Philips had registered on the basis of use under the Trade Marks Act 1938.Legal contextCommunity legislation3 The purpose of the Directive is, as the first recital in its preamble states, to approximate the laws of the Member States on trade marks in order to remove existing disparities which may impede the free movement of goods and freedom to provide services and may distort competition within the common market.4 However, according to the third recital in its preamble, the Directive is not intended to effect full-scale approximation of the laws of the Member States relating to trade marks.5 Article 2 of the Directive provides, under the heading Signs of which a trade mark may consist:A trade mark may consist of any sign capable of being represented graphically, particularly words, including personal names, designs, letters, numerals, the shape of goods or of their packaging, provided that such signs are capable of distinguishing the goods or services of one undertaking from those of other undertakings.6 Article 3 of the Directive, which lists the grounds for refusal or invalidity of registration, provides:1. The following shall not be registered or if registered shall be liable to be declared invalid:(a) signs which cannot constitute a trade mark;(b) trade marks which are devoid of any distinctive character;(c) trade marks which consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin, or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service;(d) trade marks which consist exclusively of signs or indications which have become customary in the current language or in the bona fide and established practices of the trade;(e) signs which consist exclusively of:- the shape which results from the nature of the goods themselves, or- the shape of goods which is necessary to obtain a technical result, or- the shape which gives substantial value to the goods;...3. A trade mark shall not be refused registration or be declared invalid in accordance with paragraph 1(b), (c) or (d) if, before the date of application for registration and following the use which has been made of it, it has acquired a distinctive character. Any Member State may in addition provide that this provision shall also apply where the distinctive character was acquired after the date of application for registration or after the date of registration....7 Article 5(1), which concerns the rights conferred by a trade mark, provides:The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.8 Article 6 of the Directive provides, under the heading Limitation of the effects of a trade mark:1. The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade,(a) his own name or address;(b) indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services;(c) the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts;provided he uses them in accordance with honest practices in industrial or commercial matters....National legislation9 Trade mark registration in the United Kingdom was formerly governed by the Trade Marks Act 1938. That Act was repealed and replaced by the Trade Marks Act 1994, which implements the Directive and contains the new law on registered trade marks.10 On the basis of Schedule 3 of the Trade Marks Act 1994, trade marks registered under the Trade Marks Act 1938 may be considered to have the same effect as if they had been registered under the 1994 Act.The main proceedings and the questions referred11 In 1966, Philips developed a new type of three-headed rotary electric shaver. In 1985, Philips filed an application to register a trade mark consisting of a graphic representation of the shape and configuration of the head of such a shaver, comprising three circular heads with rotating blades in the shape of an equilateral triangle. That trade mark was registered on the basis of use under the Trade Marks Act 1938.12 In 1995, Remington, a competing company, began to manufacture and sell in the United Kingdom the DT 55, which is a shaver with three rotating heads forming an equilateral triangle, shaped similarly to that used by Philips.13 Philips accordingly sued Remington for infringement of its trade mark. Remington counter-claimed for revocation of the trade mark registered by Philips.14 The High Court of Justice of England and Wales, Chancery Division (Patents Court) (United Kingdom), allowed the counter-claim and ordered revocation of the registration of the Philips trade mark on the ground that the sign relied on by Philips was incapable of distinguishing the goods concerned from those of other undertakings and was devoid of any distinctive character. The High Court also held that the trade mark consisted exclusively of a sign which served in trade to designate the intended purpose of the goods and of a shape which was necessary to obtain a technical result and which gave substantial value to the goods. It went on to hold that, even if the trade mark had been valid, it would not have been infringed.15 Philips appealed to the Court of Appeal against that decision of the High Court.16 As the arguments of the parties raised questions relating to the interpretation of the Directive, the Court of Appeal (England and Wales) (Civil Division) decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:1. Is there a category of marks which is not excluded from registration by Article 3(1)(b), (c) and (d) and Article 3(3) of Council Directive 89/104/EEC which is none the less excluded from registration by Article 3(1)(a) of the Directive (as being incapable of distinguishing the goods of the proprietor from those [of] other undertakings)?2. Is the shape (or part of the shape) of an article (being the article in respect of which the sign is registered) only capable of distinguishing for the purposes of Article 2 if it contains some capricious addition (being an embellishment which has no functional purpose) to the shape of the article?3. Where a trader has been the only supplier of particular goods to the market, is extensive use of a sign, which consists of the shape (or part of the shape) of those goods and which does not include any capricious addition, sufficient to give the sign a distinctive character for the purposes of Article 3(3) in circumstances where as a result of that use a substantial proportion of the relevant trade and public(a) associate the shape with that trader and no other undertaking;(b) believe that goods of that shape come from that trader absent a statement to the contrary?4. (a) Can the restriction imposed by the words "if it consists exclusively of the shape of goods which is necessary to achieve a technical result" appearing in Article 3(1)(e)(ii) be overcome by establishing that there are other shapes which can obtain the same technical result or(b) is the shape unregistrable by virtue thereof if it is shown that the essential features of the shape are attributable only to the technical result or(c) is some other and, if so, what test appropriate for determining whether the restriction applies?5. Article 3(1)(c) of the Directive applies to "trade marks which consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose ... of the goods or service". Article 6(1)(b) of the Directive applies to the use by a third party of "indications concerning the kind, quality, quantity, intended purpose ... of goods or services". The word "exclusively" thus appears in Article 3(1)(c) and is omitted in Article 6(1)(b) of the Directive[.] On a proper interpretation of the Directive, does this omission mean that, even if a mark consisting of the shape of goods is validly registered, it is not infringed by virtue of Article 6(1)(b) in circumstances where(a) the use of the shape of goods complained of is and would be taken as an indication as to the kind of goods or the intended purpose thereof and(b) a substantial proportion of the relevant trade and public believe that goods of that shape come from the trade mark proprietor, absent a statement to the contrary?6. Does the exclusive right granted by Article 5(1) extend to enable the proprietor to prevent third parties using identical or similar signs in circumstances where that use was not such as to indicate origin or is it limited so as to prevent only use which wholly or in part does indicate origin?7. Is use of an allegedly infringing shape of goods, which is and would be seen as an indication as to the kind of goods or the intended purpose thereof, none the less such as to indicate origin if a substantial proportion of the relevant trade and public believe that goods of the shape complained of come from the trade mark proprietor absent a statement to the contrary?17 By application lodged at the Court Registry on 25 April 2001, Philips requested the reopening of the oral procedure, which was closed on 23 January 2001 following the delivery of the Opinion of the Advocate General, and/or the joinder of the present case with Case C-53/01 Linde AG, Case C-54/01 Winward Industries and Case C-55/01 Rado, in which requests for preliminary rulings referred by the Bundesgerichtshof (Federal Court of Justice) (Germany) had been lodged with the Court Registry on 8 February 2001.18 In support of its application, Philips submits that, before replying to the referring court in the present case, it would be sensible to take account of the views of the Bundesgerichtshof in the cases mentioned in the previous paragraph, which raise similar questions, and thus to give the parties concerned an opportunity to submit their observations in that connection.19 By letters of 8 and 16 May 2001, Remington opposed the request for reopening and/or joinder.20 The Court may of its own motion, on a proposal from the Advocate General or at the request of the parties, order that the oral procedure be reopened, in accordance with Article 61 of its Rules of Procedure, if it considers that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see Joined Cases C-270/97 and C-271/97 Deutsche Post [2000] ECR I-929, paragraph 30).21 The Court considers that it is not appropriate to join this case to those mentioned in paragraph 17 of this judgment and that it has all the information it needs to answer the questions raised in the main proceedings.22 The application made by Philips must therefore be dismissed.The first question23 By its first question the referring court seeks to know whether there is a category of marks which is not excluded from registration by Article 3(1)(b), (c) and (d) and Article 3(3) of the Directive which is none the less excluded from registration by Article 3(1)(a) thereof on the ground that such marks are incapable of distinguishing the goods of the proprietor from those of other undertakings.24 According to Philips, by this question the national court seeks to know whether there is a special class of marks which, even though distinctive in fact, are none the less incapable of distinguishing as a matter of law. Philips submits that this cannot be the case, in the light of the Court's reasoning in its judgment in Joined Cases C-108/97 and C-109/97 Windsurfing Chiemsee [1999] ECR I-2779. Subject to the exception in Article 3(1)(e) of the Directive, if a shape has acquired a distinctive character in accordance with Article 3(3), the grounds for refusal or invalidity listed in Article 3(1)(a) to (d) cannot apply and the shape cannot be considered devoid of distinctive character as a matter of law.25 Remington contends that there is a significant difference between signs which do not fulfil the conditions laid down in Article 2 of the Directive in that they are not capable of distinguishing the products of one undertaking from those of another, referred to in Article 3(1)(a) of that Directive, and marks which do not meet the criteria listed in Article 3(1)(b), (c) and (d) thereof. Whereas the former can never be registered, even on proof of extensive use, the latter can be registered, under Article 3(3), on proof of a distinctive character arising from such use.26 The United Kingdom Government submits that if a sign which on its face is non-distinctive is nevertheless proved to have acquired a distinctive character, that sign must in fact be capable of distinguishing the goods of one undertaking from those of others within the meaning of Article 2 of the Directive. In its judgment in Windsurfing Chiemsee, cited above, the Court made the point that the Directive permits the registration of highly descriptive words, which prima facie would not be capable of distinguishing the goods or services of one undertaking from those of other undertakings within the meaning of Article 2, where those words have in fact acquired a distinctive character within the meaning of Article 3(3) and, accordingly, a secondary meaning as a trade mark.27 The French Government submits that the Directive does not in itself exclude from registration a particular category of trade marks. Article 3 of the Directive may lead on a case-by-case basis to the exclusion of signs from trade mark protection but it must not be interpreted as excluding from such protection a category of signs per se.28 The Commission contends that a mark which has acquired a distinctive character within the meaning of Article 3(3) of the Directive cannot be excluded from registration on the basis of Article 3(1)(a) thereof on the ground that it is incapable of distinguishing the goods of the trade mark proprietor from those of other undertakings.Findings of the Court29 In this connection, it should be recalled to begin with that, as stated in the tenth recital in the preamble to the Directive, the purpose of the protection afforded by a trade mark is inter alia to guarantee the trade mark as an indication of origin.30 Moreover, according to the case-law of the Court, the essential function of a trade mark is to guarantee the identity of the origin of the marked product to the consumer or end-user by enabling him, without any possibility of confusion, to distinguish the product or service from others which have another origin, and for the trade mark to be able to fulfil its essential role in the system of undistorted competition which the Treaty seeks to establish, it must offer a guarantee that all the goods or services bearing it have originated under the control of a single undertaking which is responsible for their quality (see, in particular, Case C-349/95 Loendersloot [1997] ECR I-6227, paragraphs 22 and 24, and Case C-39/97 Canon [1998] ECR I-5507, paragraph 28).31 That essential function of the trade mark is also clear from the wording and the structure of the various provisions of the Directive concerning the grounds for refusal of registration.32 First of all, Article 2 of the Directive provides that all signs may constitute trade marks provided that they are capable both of being represented graphically and of distinguishing the goods or services of one undertaking from those of other undertakings.33 Second, under the rule laid down by Article 3(1)(b), (c) and (d), trade marks which are devoid of any distinctive character, descriptive marks, and marks which consist exclusively of indications which have become customary in the current language or in the bona fide and established practices of the trade are to be refused registration or declared invalid if registered (Windsurfing Chiemsee, cited above, paragraph 45).34 Finally, Article 3(3) of the Directive adds a significant qualification to the rule laid down by Article 3(1)(b), (c) and (d) in that it provides that a sign may, through use, acquire a distinctive character which it initially lacked and thus be registered as a trade mark. It is therefore through the use made of it that the sign acquires the distinctive character which is a prerequisite for its registration (see Windsurfing Chiemsee, paragraph 44).35 As the Court observed at paragraph 46 of its judgment in Windsurfing Chiemsee, just as distinctive character is one of the general conditions for registering a trade mark under Article 3(1)(b), distinctive character acquired through use means that the mark must serve to identify the product in respect of which registration is applied for as originating from a particular undertaking, and thus to distinguish that product from goods of other undertakings.36 It is true that Article 3(1)(a) of the Directive provides that signs which cannot constitute a trade mark are to be refused registration or if registered are liable to be declared invalid.37 However, it is clear from the wording of Article 3(1)(a) and the structure of the Directive that that provision is intended essentially to exclude from registration signs which are not generally capable of being a trade mark and thus cannot be represented graphically and/or are not capable of distinguishing the goods or services of one undertaking from those of other undertakings.38 Accordingly, Article 3(1)(a) of the Directive, like the rule laid down by Article 3(1)(b), (c) and (d), precludes the registration of signs or indications which do not meet one of the two conditions imposed by Article 2 of the Directive, that is to say, the condition requiring such signs to be capable of distinguishing the goods or services of one undertaking from those of other undertakings.39 It follows that there is no class of marks having a distinctive character by their nature or by the use made of them which is not capable of distinguishing goods or services within the meaning of Article 2 of the Directive.40 In the light of those considerations, the answer to the first question must be that there is no category of marks which is not excluded from registration by Article 3(1)(b), (c) and (d) and Article 3(3) of the Directive which is none the less excluded from registration by Article 3(1)(a) thereof on the ground that such marks are incapable of distinguishing the goods of the proprietor of the mark from those of other undertakings.The second question41 By its second question, the national court seeks to know whether the shape of an article (being the article in respect of which the sign is registered) is capable of distinguishing for the purposes of Article 2 of the Directive only if it contains some capricious addition, such as an embellishment which has no functional purpose.42 As to that, Philips submits that if, contrary to its argument relating to the first question, there is a category of marks which can be shown to have acquired a distinctive character, but which are nevertheless incapable of distinguishing goods, it is not appropriate to use the capricious addition test formulated by the referring court in order to ascertain which marks come within that category. If it were necessary to create a special category of marks which are not capable of distinguishing those goods, even though they have, in fact, a distinctive character, Philips suggests that an alternative test would be to ask whether the mark in question is the only practical way of describing the goods concerned.43 Remington, in contrast, contends that if the shape of an article contains no capricious addition, it will consist solely of a functional shape which will be incapable of distinguishing goods made to that shape from the same goods of another undertaking. A capricious addition alone is capable of acting as an indication of origin in such cases. Moreover, Remington contends that the degree of descriptiveness is an important factor, so that the more descriptive the sign, the less distinctive it will be. Accordingly, a wholly descriptive sign cannot be capable of distinguishing goods and the presence of a capricious addition is necessary to give a sign the ability to develop distinctive character.44 The United Kingdom Government submits in this regard that it is not helpful to consider whether a sign consisting of a shape contains some capricious addition or embellishment as a means of assessing whether it is capable of distinguishing for the purposes of Article 2 of the Directive.45 According to the French Government, there is nothing in the provisions of Articles 2 and 3 of the Directive to suggest that the shape of an article can be capable of distinguishing that article from those of other undertakings only if it contains some capricious addition, consisting of an embellishment which has no functional purpose.46 In the light of its observations relating to the first question, the Commission proposes not to reply to the second question. In any event, it observes that Articles 2 and 3(1)(a) of the Directive do not constitute a separate ground for refusing registration of a sign in connection with a lack of distinctiveness.Findings of the Court47 First, it is clear from Article 2 of the Directive that a trade mark has distinctive character if it serves to distinguish, according to their origin, the goods or services in respect of which registration has been applied for. It is sufficient, as is clear from paragraph 30 of this judgment, for the trade mark to enable the public concerned to distinguish the product or service from others which have another commercial origin, and to conclude that all the goods or services bearing it have originated under the control of the proprietor of the trade mark to whom responsibility for their quality can be attributed.48 Second, Article 2 of the Directive makes no distinction between different categories of trade marks. The criteria for assessing the distinctive character of three-dimensional trade marks, such as that at issue in the main proceedings, are thus no different from those to be applied to other categories of trade mark.49 In particular, the Directive in no way requires that the shape of the article in respect of which the sign is registered must include some capricious addition. Under Article 2 of the Directive, the shape in question must simply be capable of distinguishing the product of the proprietor of the trade mark from those of other undertakings and thus fulfil its essential purpose of guaranteeing the origin of the product.50 In the light of those considerations, the answer to the second question must be that, in order to be capable of distinguishing an article for the purposes of Article 2 of the Directive, the shape of the article in respect of which the sign is registered does not require any capricious addition, such as an embellishment which has no functional purpose.The third question51 By its third question, the referring court essentially seeks to know whether, where a trader has been the only supplier of particular goods to the market, extensive use of a sign which consists of the shape of those goods is sufficient to give the sign a distinctive character for the purposes of Article 3(3) of the Directive in circumstances where, as a result of that use, a substantial proportion of the relevant class of persons associates the shape with that trader, and no other undertaking, or believes that goods of that shape come from that trader in the absence of a statement to the contrary.52 According to Philips, the criterion in Article 3(3) of the Directive is satisfied where, because of extensive use of a particular shape, the relevant trade and public believe that goods of that shape come from a particular undertaking. Moreover, Philips submits that a long-standing de facto monopoly on products with the relevant shape is important evidence which supports the acquisition of distinctiveness. If a trader wishes to base an application for registration upon distinctiveness acquired through use, a de facto monopoly is almost a prerequisite for such registration.53 Remington submits that in the case of a shape which is made up of functional features only, strong evidence is required that the shape itself has been used also as an indication of origin so as to confer on that shape a sufficient secondary meaning to justify registration. Where there has been a monopoly supplier of goods, particular care needs to be taken to ensure that the factual analysis is focused on the relevant matters.54 The United Kingdom Government submits that any shape which is refused registration under Article 3(1)(e) of the Directive cannot be protected by Article 3(3) since the latter applies only to signs that would otherwise be declared invalid under Article 3(1)(b), (c) or (d), and not to those that fall within the scope of Article 3(1)(e). Assuming, however, that the shape is not excluded from registration pursuant to the latter provision, the United Kingdom Government submits that the requirements of Article 3(3) are not satisfied where the public's recognition has come about not because of the trade mark but because of the monopoly on the supply of the goods.55 The French Government submits that the third question should be answered in the affirmative. The distinctive character required by Article 3(3) of the Directive may perfectly well be constituted by the fact that, as a result of use, a substantial proportion of the relevant trade and public associate the shape of the goods with a given trader and no other undertaking and believe that goods of that shape come from that trader.56 In the Commission's view, whether the distinctive character was acquired in a monopoly situation or in some other way, the requirements of Article 3(3) are satisfied as long as a substantial proportion of the relevant public believes that goods bearing the mark in question come from a particular undertaking.Findings of the Court57 In that regard, it must first be observed that if a shape is refused registration pursuant to Article 3(1)(e) of the Directive, interpretation of which is the subject of the fourth question, it can in no circumstances be registered by virtue of Article 3(3).58 However, Article 3(3) of the Directive provides that a mark which is refused registration under Article 3(1)(b), (c) or (d) may acquire, following the use made of it, a distinctive character which it did not have initially and can thus be registered as a trade mark. It is thus through use that the mark acquires the distinctive character which is the precondition of registration.59 The distinctive character of a mark, including that acquired by use, must be assessed in relation to the goods or services in respect of which registration is applied for.60 As is clear from paragraph 51 of the judgment in Windsurfing Chiemsee, in assessing the distinctive character of a mark in respect of which registration has been applied for, the following may inter alia also be taken into account: the market share held by the mark; how intensive, geographically widespread and long-standing use of the mark has been; the amount invested by the undertaking in promoting the mark; the proportion of the relevant class of persons who, because of the mark, identify goods as originating from a particular undertaking; and statements from chambers of commerce and industry or other trade and professional associations.61 The Court has also held that if, on the basis of those factors, the competent authority finds that the relevant class of persons, or at least a significant proportion thereof, identify goods as originating from a particular undertaking because of the trade mark, it must in any event hold that the requirement for registering the mark laid down in Article 3(3) of the Directive is satisfied (Windsurfing Chiemsee, paragraph 52).62 However, it must first be pointed out that the Court has made clear that the circumstances in which the requirement under Article 3(3) of the Directive may be regarded as satisfied cannot be shown to exist solely by reference to general, abstract data, such as predetermined percentages (Windsurfing Chiemsee, paragraph 52).63 Second, the distinctive character of a sign consisting in the shape of a product, even that acquired by the use made of it, must be assessed in the light of the presumed expectations of an average consumer of the category of goods or services in question, who is reasonably well-informed and reasonably observant and circumspect (see, to that effect, the judgment in Case C-210/96 Gut Springenheide and Tusky [1998] ECR I-4657, paragraph 31).64 Finally, the identification, by the relevant class of persons, of the product as originating from a given undertaking must be as a result of the use of the mark as a trade mark and thus as a result of the nature and effect of it, which make it capable of distinguishing the product concerned from those of other undertakings.65 In the light of those considerations, the answer to the third question must be that, where a trader has been the only supplier of particular goods to the market, extensive use of a sign which consists of the shape of those goods may be sufficient to give the sign a distinctive character for the purposes of Article 3(3) of the Directive in circumstances where, as a result of that use, a substantial proportion of the relevant class of persons associates that shape with that trader and no other undertaking or believes that goods of that shape come from that trader. However, it is for the national court to verify that the circumstances in which the requirement under that provision is satisfied are shown to exist on the basis of specific and reliable data, that the presumed expectations of an average consumer of the category of goods or services in question, who is reasonably well-informed and reasonably observant and circumspect, are taken into account and that the identification, by the relevant class of persons, of the product as originating from a given undertaking is as a result of the use of the mark as a trade mark.The fourth question66 By its fourth question the referring court is essentially asking whether Article 3(1)(e), second indent, of the Directive must be interpreted to mean that a sign consisting exclusively of the shape of a product is unregistrable by virtue of that provision if it is established that the essential functional features of the shape are attributable only to the technical result. It also seeks to know whether the ground for refusal or invalidity of the registration imposed by that provision can be overcome by establishing that there are other shapes which can obtain the same technical result.67 In that regard, Philips submits that the purpose of that provision of the Directive is to prevent the obtaining of a monopoly in a particular technical result by means of trade mark protection. However, the registration of a mark consisting of a shape which has a technical result imposes no unreasonable restraint on industry and innovation if that technical result can be obtained by other shapes which are readily available to competitors. According to Philips, there are many alternatives to the shape constituting the trade mark at issue which would achieve the same technical result in shaving terms at an equivalent cost to that of its products.68 According to Remington, the clear meaning of Article 3(1)(e) of the Directive is that a shape that is necessary to achieve a technical result, in the sense that it performs a function in achieving that result but is not necessarily the only shape that can achieve that function, must be excluded from registration. The construction argued for by Philips would render the exclusion so narrow as to be useless and would require a technical evaluation of alternative designs, which would mean that the Directive could not ensure protection of the public interest.69 The United Kingdom Government submits that registration must be refused if the essential features of the shape of which the sign consists are attributable only to the technical result.70 According to the French Government, the purpose of the exclusion provided for in Article 3(1)(e), second indent, is to prevent the protection of technical creations, which is limited in time, from being circumvented by recourse to the rules on trade marks, the effects of which are potentially longer lasting.71 Both the French Government and the United Kingdom Government take the view that the ground for refusal of registration under Article 3(1)(e), second indent, of the Directive cannot be overcome by establishing that there are other shapes capable of achieving the same technical result.72 Given the legislative history of Article 3(1)(e), second indent, and the need to construe exceptions narrowly, the Commission is of the view that the relevant criterion is the availability of alternative shapes to achieve the desired technical result.Findings of the Court73 It must first be observed in this regard that, under Article 2 of the Directive, a trade mark may, as a rule, consist of any sign capable both of being represented graphically and of distinguishing the goods or services of one undertaking from those of other undertakings.74 Second, it must also be borne in mind that the grounds for refusal to register signs consisting of the shape of a product are expressly listed in Article 3(1)(e) of the Directive. Under that provision, signs which consist exclusively of the shape which results from the nature of the goods themselves, or the shape of the goods which is necessary to obtain a technical result, or the shape which gives substantial value to the goods cannot be registered or if registered are liable to be declared invalid. According to the seventh recital in the preamble to the Directive, those grounds for refusal have been listed in an exhaustive manner.75 Finally, the marks which may be refused registration on the grounds listed in Article 3(1)(b), (c) or (d) of the Directive may under Article 3(3) acquire a distinctive character through the use made of them. However, a sign which is refused registration under Article 3(1)(e) of the Directive can never acquire a distinctive character for the purposes of Article 3(3) by the use made of it.76 Article 3(1)(e) thus concerns certain signs which are not such as to constitute trade marks and is a preliminary obstacle liable to prevent a sign consisting exclusively of the shape of a product from being registrable. If any one of the criteria listed in Article 3(1)(e) is satisfied, a sign consisting exclusively of the shape of the product or of a graphic representation of that shape cannot be registered as a trade mark.77 The various grounds for refusal of registration listed in Article 3 of the Directive must be interpreted in the light of the public interest underlying each of them (see, to that effect, Windsurfing Chiemsee, paragraphs 25 to 27).78 The rationale of the grounds for refusal of registration laid down in Article 3(1)(e) of the Directive is to prevent trade mark protection from granting its proprietor a monopoly on technical solutions or functional characteristics of a product which a user is likely to seek in the products of competitors. Article 3(1)(e) is thus intended to prevent the protection conferred by the trade mark right from being extended, beyond signs which serve to distinguish a product or service from those offered by competitors, so as to form an obstacle preventing competitors from freely offering for sale products incorporating such technical solutions or functional characteristics in competition with the proprietor of the trade mark.79 As regards, in particular, signs consisting exclusively of the shape of the product necessary to obtain a technical result, listed in Article 3(1)(e), second indent, of the Directive, that provision is intended to preclude the registration of shapes whose essential characteristics perform a technical function, with the result that the exclusivity inherent in the trade mark right would limit the possibility of competitors supplying a product incorporating such a function or at least limit their freedom of choice in regard to the technical solution they wish to adopt in order to incorporate such a function in their product.80 As Article 3(1)(e) of the Directive pursues an aim which is in the public interest, namely that a shape whose essential characteristics perform a technical function and were chosen to fulfil that function may be freely used by all, that provision prevents such signs and indications from being reserved to one undertaking alone because they have been registered as trade marks (see, to that effect, Windsurfing Chiemsee, paragraph 25).81 As to the question whether the establishment that there are other shapes which could achieve the same technical result can overcome the ground for refusal or invalidity contained in Article 3(1)(e), second indent, there is nothing in the wording of that provision to allow such a conclusion.82 In refusing registration of such signs, Article 3(1)(e), second indent, of the Directive reflects the legitimate aim of not allowing individuals to use registration of a mark in order to acquire or perpetuate exclusive rights relating to technical solutions.83 Where the essential functional characteristics of the shape of a product are attributable solely to the technical result, Article 3(1)(e), second indent, precludes registration of a sign consisting of that shape, even if that technical result can be achieved by other shapes.84 In the light of those considerations, the answer to the fourth question must be that Article 3(1)(e), second indent, of the Directive must be interpreted to mean that a sign consisting exclusively of the shape of a product is unregistrable by virtue thereof if it is established that the essential functional features of that shape are attributable only to the technical result. Moreover, the ground for refusal or invalidity of registration imposed by that provision cannot be overcome by establishing that there are other shapes which allow the same technical result to be obtained.85 The referring court makes clear that consideration of the questions relating to the infringement would not be required if its interpretation of Article 3 were to be upheld by the Court of Justice. As the answer to the fourth question confirms that interpretation, there is no need to reply to the fifth, sixth and seventh questions. Decision on costs Costs86 The costs incurred by the French and United Kingdom Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Court of Appeal (England and Wales) (Civil Division) by order of 5 May 1999, hereby rules:1. There is no category of marks which is not excluded from registration by Article 3(1)(b), (c) and (d) and Article 3(3) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks which is none the less excluded from registration by Article 3(1)(a) thereof on the ground that such marks are incapable of distinguishing the goods of the proprietor of the mark from those of other undertakings.2. In order to be capable of distinguishing an article for the purposes of Article 2 of the Directive, the shape of the article in respect of which the sign is registered does not require any capricious addition, such as an embellishment which has no functional purpose.3. Where a trader has been the only supplier of particular goods to the market, extensive use of a sign which consists of the shape of those goods may be sufficient to give the sign a distinctive character for the purposes of Article 3(3) of Directive 89/104 in circumstances where, as a result of that use, a substantial proportion of the relevant class of persons associates that shape with that trader and no other undertaking or believes that goods of that shape come from that trader. However, it is for the national court to verify that the circumstances in which the requirement under that provision is satisfied are shown to exist on the basis of specific and reliable data, that the presumed expectations of an average consumer of the category of goods or services in question, who is reasonably well-informed and reasonably observant and circumspect, are taken into account and that the identification, by the relevant class of persons, of the product as originating from a given undertaking is as a result of the use of the mark as a trade mark.4. Article 3(1)(e), second indent, of Directive 89/104 must be interpreted to mean that a sign consisting exclusively of the shape of a product is unregistrable by virtue thereof if it is established that the essential functional features of that shape are attributable only to the technical result. Moreover, the ground for refusal or invalidity of registration imposed by that provision cannot be overcome by establishing that there are other shapes which allow the same technical result to be obtained.

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Travelex Financial Global Services and Interpayment Services Limited v Commission of the European Communities

«(Non-contractual liability – Directive 89/104/EEC – Trade marks – Official euro symbol)» Summary of the Judgment 1.. Procedure – Introduction of new pleas in law in the course of the proceedings – Conditions – New plea – Definition (Rules of Procedure of the Court of First Instance, Art. 48(2)) Procedure – Introduction of new pleas in law in the course of the proceedings – Conditions – New plea – Definition 2.. Actions for damages – Distinct nature – Exhaustion of domestic remedies – Exception – Impossibility of obtaining satisfaction before national courts – Infringement of a registered trade mark (Arts 235 EC and 288, second para., EC) Actions for damages – Distinct nature – Exhaustion of domestic remedies – Exception – Impossibility of obtaining satisfaction before national courts – Infringement of a registered trade mark 3.. Approximation of laws – Trade marks – Directive 89/104 – Right of the owner of a registered trade mark to contest its unlawful use – Sign identical or similar to the trade mark – Use in the course of trade – Definition – Use of the official euro symbol to designate the single currency – Not included (Council Directive 89/104, Art. 5(1)(b)) Approximation of laws – Trade marks – Directive 89/104 – Right of the owner of a registered trade mark to contest its unlawful use – Sign identical or similar to the trade mark – Use in the course of trade – Definition – Use of the official euro symbol to designate the single currency – Not included 4.. Approximation of laws – Trade marks – Directive 89/104 – Right of the owner of a registered trade mark to contest its unlawful use – Likelihood of confusion – Assessment – Likelihood of association – Insufficient (Council Directive 89/104, Art. 5(1)(b)) Approximation of laws – Trade marks – Directive 89/104 – Right of the owner of a registered trade mark to contest its unlawful use – Likelihood of confusion – Assessment – Likelihood of association – Insufficient 5.. Non-contractual liability – Conditions – Lawful act – Real damage, causal link and unusual and special damage – Cumulative nature (Art. 288, second para., EC) Non-contractual liability – Conditions – Lawful act – Real damage, causal link and unusual and special damage – Cumulative nature JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)10 April 2003 (1)((Non-contractual liability – Directive 89/104/EEC – Trade marks – Official euro symbol))applicants, vdefendant, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),having regard to the written procedure and further to the hearing on 20 June 2002,gives the followingFactsOn those grounds, THE COURT OF FIRST INSTANCE (Fifth Chamber)CookeGarcía-Valdecasas Lindh H. Jung R. García-Valdecasas RegistrarPresident 1 – Language of the case: English. Language of the case: English.

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EN

ADVOCATE GENERAL TAKES THE VIEW THAT THE PROPRIETOR OF A TRADE MARK MAY PREVENT IT BEING USED FOR COMMERCIAL PURPOSES BY A THIRD PARTY EVEN IF IT IS PERCEIVED AS A BADGE OF SUPPORT, LOYALTY OR AFFILIATION TO ITS PROPRIETOR

| 62001J0206 Judgment of the Court of 12 November 2002. - Arsenal Football Club plc v Matthew Reed. - Reference for a preliminary ruling: High Court of Justice (England & Wales), Chancery Division - United Kingdom. - Approximation of laws - Trade marks - Directive 89/104/EEC - Article 5(1)(a) - Scope of the proprietor's exclusive right to the trade mark. - Case C-206/01. European Court reports 2002 Page I-10273 Parties In Case C-206/01,REFERENCE to the Court under Article 234 EC by the High Court of Justice of England and Wales, Chancery Division, for a preliminary ruling in the proceedings pending before that court betweenArsenal Football Club plcandMatthew Reed,on the interpretation of Article 5(1)(a) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1),THE COURT,composed of: G.C. Rodríguez Iglesias, President, J.-P. Puissochet, M. Wathelet, C.W.A. Timmermans (Rapporteur) (Presidents of Chambers), C. Gulmann, D.A.O. Edward, P. Jann, V. Skouris, F. Macken, N. Colneric and S. von Bahr, Judges,Advocate General: D. Ruiz-Jarabo Colomer,Registrar: L. Hewlett, Principal Administrator,after considering the written observations submitted on behalf of:- Arsenal Football Club plc, by S. Thorley QC and T. Mitcheson, Barrister, instructed by Lawrence Jones, Solicitors,- Mr Reed, by A. Roughton, Barrister, instructed by Stunt & Son, Solicitors,- the Commission of the European Communities, by N.B. Rasmussen, acting as Agent,- the EFTA Surveillance Authority, by P. Dyrberg, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of Arsenal Football Club plc, represented by S. Thorley and T. Mitcheson; Mr Reed, represented by A. Roughton and S. Malynicz, Barrister; and the Commission, represented by N.B. Rasmussen and M. Shotter, acting as Agent, at the hearing on 14 May 2002,after hearing the Opinion of the Advocate General at the sitting on 13 June 2002,gives the followingJudgment Grounds 1 By order of 4 May 2001, received at the Court on 18 May 2001, the High Court of Justice of England and Wales, Chancery Division, referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Article 5(1)(a) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1, `the Directive').2 Those questions were raised in proceedings between Arsenal Football Club plc (`Arsenal FC') and Mr Reed concerning the selling and offering for sale by Mr Reed of scarves marked in large lettering with the word `Arsenal', a sign which is registered as a trade mark by Arsenal FC for those and other goods.Legal backgroundCommunity legislation3 The Directive states, in the first recital in its preamble, that national trade mark laws contain disparities which may impede the free movement of goods and freedom to provide services and may distort competition within the common market. According to that recital, it is therefore necessary, in view of the establishment and functioning of the internal market, to approximate the laws of the Member States. The third recital in the preamble states that it is not necessary at present to undertake full-scale approximation of national laws on trade marks.4 According to the 10th recital in the preamble to the Directive:`... the protection afforded by the registered trade mark, the function of which is in particular to guarantee the trade mark as an indication of origin, is absolute in the case of identity between the mark and the sign and goods or services ...'.5 Article 5(1) of the Directive provides:`The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.'6 Article 5(3)(a) and (b) of the Directive provides:`The following, inter alia, may be prohibited under paragraphs 1 and 2:(a) affixing the sign to the goods or to the packaging thereof;(b) offering the goods, or putting them on the market or stocking them for these purposes ...'7 Under Article 5(5) of the Directive:`Paragraphs 1 to 4 shall not affect provisions in any Member State relating to the protection against the use of a sign other than for the purposes of distinguishing goods or services, where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.'8 Article 6(1) of the Directive reads as follows:`The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade,(a) his own name or address;(b) indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services;(c) the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts;provided he uses them in accordance with honest practices in industrial or commercial matters.'National legislation9 In the United Kingdom the law of trade marks is governed by the Trade Marks Act 1994, which replaced the Trade Marks Act 1938 in order to implement the Directive.10 Section 10(1) of the Trade Marks Act 1994 provides:`A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.'11 Under Section 10(2)(b) of the Trade Marks Act 1994:`A person infringes a registered trade mark if he uses in the course of trade a sign where because -...(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered,there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trade mark.'The main proceedings and the questions referred for a preliminary ruling12 Arsenal FC is a well-known football club in the English Premier League. It is nicknamed `the Gunners' and has for a long time been associated with two emblems, a cannon device and a shield device.13 In 1989 Arsenal FC had inter alia the words `Arsenal' and `Arsenal Gunners' and the cannon and shield emblems registered as trade marks for a class of goods comprising articles of outer clothing, articles of sports clothing and footwear. Arsenal FC designs and supplies its own products or has them made and supplied by its network of approved resellers.14 Since its commercial and promotional activities in the field of sales of souvenirs and memorabilia under those marks have expanded greatly in recent years and provide it with substantial income, Arsenal FC has sought to ensure that `official' products - that is, products manufactured by Arsenal FC or with its authorisation - can be identified clearly, and has endeavoured to persuade its supporters to buy official products only. The club has also brought legal proceedings, both civil and criminal, against traders selling unofficial products.15 Since 1970 Mr Reed has sold football souvenirs and memorabilia, almost all marked with signs referring to Arsenal FC, from several stalls located outside the grounds of Arsenal FC's stadium. He was able to obtain from KT Sports, licensed by Arsenal FC to sell its products to vendors around the stadium, only very small quantities of official products. In 1991 and 1995 Arsenal FC had unofficial articles of Mr Reed's confiscated.16 The High Court states that in the main proceedings it is not in dispute that Mr Reed sold and offered for sale from one of his stalls scarves marked in large lettering with signs referring to Arsenal FC and that these were unofficial products.17 It also states that on that stall there was a large sign with the following text:`The word or logo(s) on the goods offered for sale, are used solely to adorn the product and does not imply or indicate any affiliation or relationship with the manufacturers or distributors of any other product, only goods with official Arsenal merchandise tags are official Arsenal merchandise.'18 The High Court further states that when, exceptionally, he was able to obtain official articles Mr Reed, in his dealings with his customers, clearly distinguished the official products from the unofficial ones, in particular by using a label with the word `official'. The official products were also sold at higher prices.19 Since it considered that by selling the unofficial scarves Mr Reed had both committed the tort of `passing off' - which, according to the High Court, is conduct on the part of a third party which is misleading in such a way that a large number of persons believe or are led to believe that articles sold by the third party are those of the claimant or are sold with his authorisation or have a commercial association with him - and infringed its trade marks, Arsenal FC brought proceedings against him in the High Court of Justice of England and Wales, Chancery Division.20 In view of the circumstances in the main proceedings, the High Court dismissed Arsenal FC's action in tort (`passing off'), essentially on the ground that the club had not been able to show actual confusion on the part of the relevant public and, more particularly, had not been able to show that the unofficial products sold by Mr Reed were all regarded by the public as coming from or authorised by Arsenal FC. In this respect, the High Court observed that it seemed to it that the signs referring to Arsenal FC affixed to the articles sold by Mr Reed carried no indication of origin.21 As to Arsenal FC's claim concerning infringement of its trade marks, based on section 10(1) and (2)(b) of the Trade Marks Act 1994, the High Court rejected their argument that the use by Mr Reed of the signs registered as trade marks was perceived by those to whom they were addressed as a badge of origin, so that the use was a `trade mark use'.22 According to the High Court, the signs affixed to Mr Reed's goods were in fact perceived by the public as `badges of support, loyalty or affiliation'.23 The High Court accordingly considered that Arsenal FC's infringement claim could succeed only if the protection conferred on the trade mark proprietor by section 10 of the Trade Marks Act 1994 and the provisions of the Directive implemented by that statute prohibits use by a third party other than trade mark use, which would require a wide interpretation of those provisions.24 On this point, the High Court considers that the argument that use other than trade mark use is prohibited to a third party gives rise to inconsistencies. However, the contrary argument, namely that only trade mark use is covered, comes up against a difficulty connected with the wording of the Directive and the Trade Marks Act 1994, which both define infringement as the use of a `sign', not of a `trade mark'.25 The High Court observes that it was in view of that wording in particular that the Court of Appeal of England and Wales, Civil Division, held in Philips Electronics Ltd v Remington Consumer Products ([1999] RPC 809) that the use other than trade mark use of a sign registered as a trade mark could constitute an infringement of a trade mark. The High Court observes that the state of the law on this point still remains uncertain.26 The High Court also rejected Mr Reed's argument on the alleged invalidity of the Arsenal FC trade marks.27 In those circumstances, the High Court of Justice of England and Wales, Chancery Division, decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:`1. Where a trade mark is validly registered and(a) a third party uses in the course of trade a sign identical with that trade mark in relation to goods which are identical with those for [which] the trade mark is registered; and(b) the third party has no defence to infringement by virtue of Article 6(1) of [Directive 89/104/EEC];does the third party have a defence to infringement on the ground that the use complained of does not indicate trade origin (i.e. a connection in the course of trade between the goods and the trade mark proprietor)?2. If so, is the fact that the use in question would be perceived as a badge of support, loyalty or affiliation to the trade mark proprietor a sufficient connection?'The questions referred for a preliminary ruling28 The High Court's two questions should be examined together.Observations submitted to the Court29 Arsenal FC submits that Article 5(1)(a) of the Directive allows the trade mark proprietor to prohibit the use of a sign identical to the mark and does not make exercise of that right conditional on the sign being used as a trade mark. The protection conferred by that provision therefore extends to the use of the sign by a third party even where that use does not suggest the existence of a connection between the goods and the trade mark proprietor. That interpretation is supported by Article 6(1) of the Directive, since the specific limitations on the exercise of trade mark rights there provided for show that such use falls in principle within the scope of Article 5(1)(a) of the Directive and is permitted only in the cases exhaustively listed in Article 6(1) of the Directive.30 Arsenal FC submits, in the alternative, that in the present case Mr Reed's use of the sign identical to the Arsenal trade mark must in any event be classified as trade mark use, on the ground that this use indicates the origin of the goods even though that origin does not necessarily have to designate the trade mark proprietor.31 Mr Reed contends that the commercial activities at issue in the main proceedings do not fall within Article 5(1) of the Directive, since Arsenal FC has not shown that the sign was used as a trade mark, that is, to indicate the origin of the goods, as required by the Directive, in particular Article 5. If the public do not perceive the sign as a badge of origin, the use does not constitute `trade mark use' of the sign. As to Article 6 of the Directive, nothing in that provision shows that it contains an exhaustive list of activities which do not constitute infringements.32 The Commission submits that the right which the trade mark proprietor derives from Article 5(1) of the Directive is independent of the fact that the third party does not use the sign as a trade mark, and in particular of the fact that the third party does not use it as a badge of origin and informs the public by other means that the goods do not come from the trade mark proprietor, or even that the use of the sign has not been authorised by that proprietor. The specific object of a trade mark is to guarantee that only its proprietor can give the product its identity of origin by affixing the mark. The Commission further submits that it follows from the 10th recital in the preamble to the Directive that the protection provided for in Article 5(1)(a) is absolute.33 At the hearing, the Commission added that the concept of `trade mark use' of the mark, if found to be relevant at all, refers to use which serves to distinguish goods rather than to indicate their origin. The concept also covers use by third parties which affects the interests of the trade mark proprietor, such as the reputation of the goods. In any event, public perception of the word `Arsenal', which is identical to a verbal trade mark, as a token of support for or loyalty or affiliation to the proprietor of the mark does not exclude the possibility that the goods concerned are in consequence also perceived as coming from the proprietor. Quite the contrary, such perception confirms the distinctive nature of the mark and increases the risk of the goods being perceived as coming from the proprietor. Even, therefore, if `trade mark use' of the mark is a relevant criterion, the proprietor should be entitled to prohibit the commercial activity at issue in the main proceedings.34 The EFTA Surveillance Authority submits that, for the trade mark proprietor to be able to rely on Article 5(1) of the Directive, the third party must use the sign to distinguish - as is the primary traditional function of a trade mark - goods or services, that is, use the mark as a trade mark. If that condition is not satisfied, only the provisions of national law referred to in Article 5(5) of the Directive may be relied on by the proprietor.35 However, the condition of use as a trade mark within the meaning of Article 5(1) of the Directive, which must be understood as a condition of use of a sign identical to the trade mark for the purpose of distinguishing goods or services, is a concept of Community law which should be interpreted broadly, so as to include in particular use as a badge of support for or loyalty or affiliation to the proprietor of the trade mark.36 According to the EFTA Surveillance Authority, the fact that the third party who affixes the trade mark to goods indicates that they do not come from the trade mark proprietor does not exclude the risk of confusion for a wider circle of consumers. If the proprietor were not entitled to prevent third parties from acting in that way, that could result in a generalised use of the sign. In the end, this would deprive the mark of its distinctive character, thus jeopardising its primary traditional function.The Court's reply37 Article 5 of the Directive defines the `[r]ights conferred by a trade mark' and Article 6 contains provisions on the `[l]imitation of the effects of a trade mark'.38 Under the first sentence of Article 5(1) of the Directive, the registered trade mark confers exclusive rights on its proprietor. Under Article 5(1)(a), that exclusive right entitles the proprietor to prevent all third parties, acting without his consent, from using in the course of trade any sign which is identical to the trade mark in relation to goods or services which are identical to those for which the trade mark is registered. Article 5(3) gives a non-exhaustive list of the kinds of use which the proprietor may prohibit under Article 5(1). Other provisions of the Directive, such as Article 6, define certain limitations on the effects of a trade mark.39 With respect to the situation in point in the main proceedings, it should be observed that, as is apparent in particular from point 19 of and Annex V to the order for reference, the word `Arsenal' appears in large letters on the scarves offered for sale by Mr Reed, together with other much less prominent markings including the words `The Gunners', all referring to the trade mark proprietor, namely Arsenal FC. Those scarves are intended inter alia for supporters of Arsenal FC who wear them in particular at matches in which the club plays.40 In those circumstances, as the national court stated, the use of the sign identical to the mark is indeed use in the course of trade, since it takes place in the context of commercial activity with a view to economic advantage and not as a private matter. It also falls within Article 5(1)(a) of the Directive, as use of a sign which is identical to the trade mark for goods which are identical to those for which the mark is registered.41 In particular, the use at issue in the main proceedings is `for goods' within the meaning of Article 5(1)(a) of the Directive, since it concerns the affixing to goods of a sign identical to the trade mark and the offering of goods, putting them on the market or stocking them for those purposes within the meaning of Article 5(3)(a) and (b).42 To answer the High Court's questions, it must be determined whether Article 5(1)(a) of the Directive entitles the trade mark proprietor to prohibit any use by a third party in the course of trade of a sign identical to the trade mark for goods identical to those for which the mark is registered, or whether that right of prohibition presupposes the existence of a specific interest of the proprietor as trade mark proprietor, in that use of the sign in question by a third party must affect or be liable to affect one of the functions of the mark.43 It should be recalled, first, that Article 5(1) of the Directive carries out a complete harmonisation and defines the exclusive rights of trade mark proprietors in the Community (see, to that effect, Joined Cases C-414/99 to C-416/99 Zino Davidoff and Levi Strauss [2001] ECR I-8691, paragraph 39 and the case-law there cited).44 The ninth recital of the preamble to the Directive sets out its objective of ensuring that the trade mark proprietor enjoys `the same protection under the legal systems of all the Member States' and describes that objective as `fundamental'.45 In order to prevent the protection afforded to the proprietor varying from one State to another, the Court must therefore give a uniform interpretation to Article 5(1) of the Directive, in particular the term `use' which is the subject of the questions referred for a preliminary ruling in the present case (see, to that effect, Zino Davidoff and Levi Strauss, paragraphs 42 and 43).46 Second, the Directive is intended, as the first recital of the preamble shows, to eliminate disparities between the trade mark laws of the Member States which may impede the free movement of goods and the freedom to provide services and distort competition within the common market.47 Trade mark rights constitute an essential element in the system of undistorted competition which the Treaty is intended to establish and maintain. In such a system, undertakings must be able to attract and retain customers by the quality of their goods or services, which is made possible only by distinctive signs allowing them to be identified (see, inter alia, Case C-10/89 HAG GF [1990] ECR I-3711, paragraph 13, and Case C-517/99 Merz & Krell [2001] ECR I-6959, paragraph 21).48 In that context, the essential function of a trade mark is to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin. For the trade mark to be able to fulfil its essential role in the system of undistorted competition which the Treaty seeks to establish and maintain, it must offer a guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality (see, inter alia, Case 102/77 Hoffman-La Roche [1978] ECR 1139, paragraph 7, and Case C-299/99 Philips [2002] ECR I-0000, paragraph 30).49 The Community legislature confirmed that essential function of trade marks by providing, in Article 2 of the Directive, that signs which are capable of being represented graphically may constitute a trade mark only if they are capable of distinguishing the goods or services of one undertaking from those of other undertakings (see, inter alia, Merz & Krell, paragraph 23).50 For that guarantee of origin, which constitutes the essential function of a trade mark, to be ensured, the proprietor must be protected against competitors wishing to take unfair advantage of the status and reputation of the trade mark by selling products illegally bearing it (see, inter alia, Hoffmann-La Roche, paragraph 7, and Case C-349/95 Loendersloot [1997] ECR I-6227, paragraph 22). In this respect, the 10th recital of the preamble to the Directive points out the absolute nature of the protection afforded by the trade mark in the case of identity between the mark and the sign and between the goods or services concerned and those for which the mark is registered. It states that the aim of that protection is in particular to guarantee the trade mark as an indication of origin.51 It follows that the exclusive right under Article 5(1)(a) of the Directive was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions. The exercise of that right must therefore be reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods.52 The exclusive nature of the right conferred by a registered trade mark on its proprietor under Article 5(1)(a) of the Directive can be justified only within the limits of the application of that article.53 It should be noted that Article 5(5) of the Directive provides that Article 5(1) to (4) does not affect provisions in a Member State relating to protection against the use of a sign for purposes other than that of distinguishing goods or services.54 The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark, having regard to its functions. Thus certain uses for purely descriptive purposes are excluded from the scope of Article 5(1) of the Directive because they do not affect any of the interests which that provision aims to protect, and do not therefore fall within the concept of use within the meaning of that provision (see, with respect to a use for purely descriptive purposes relating to the characteristics of the product offered, Case C-2/00 Hölterhoff [2002] ECR I-4187, paragraph 16).55 In this respect, it is clear that the situation in question in the main proceedings is fundamentally different from that in Hölterhoff. In the present case, the use of the sign takes place in the context of sales to consumers and is obviously not intended for purely descriptive purposes.56 Having regard to the presentation of the word `Arsenal' on the goods at issue in the main proceedings and the other secondary markings on them (see paragraph 39 above), the use of that sign is such as to create the impression that there is a material link in the course of trade between the goods concerned and the trade mark proprietor.57 That conclusion is not affected by the presence on Mr Reed's stall of the notice stating that the goods at issue in the main proceedings are not official Arsenal FC products (see paragraph 17 above). Even on the assumption that such a notice may be relied on by a third party as a defence to an action for trade mark infringement, there is a clear possibility in the present case that some consumers, in particular if they come across the goods after they have been sold by Mr Reed and taken away from the stall where the notice appears, may interpret the sign as designating Arsenal FC as the undertaking of origin of the goods.58 Moreover, in the present case, there is also no guarantee, as required by the Court's case-law cited in paragraph 48 above, that all the goods designated by the trade mark have been manufactured or supplied under the control of a single undertaking which is responsible for their quality.59 The goods at issue are in fact supplied outside the control of Arsenal FC as trade mark proprietor, it being common ground that they do not come from Arsenal FC or from its approved resellers.60 In those circumstances, the use of a sign which is identical to the trade mark at issue in the main proceedings is liable to jeopardise the guarantee of origin which constitutes the essential function of the mark, as is apparent from the Court's case-law cited in paragraph 48 above. It is consequently a use which the trade mark proprietor may prevent in accordance with Article 5(1) of the Directive.61 Once it has been found that, in the present case, the use of the sign in question by the third party is liable to affect the guarantee of origin of the goods and that the trade mark proprietor must be able to prevent this, it is immaterial that in the context of that use the sign is perceived as a badge of support for or loyalty or affiliation to the proprietor of the mark.62 In the light of the foregoing, the answer to the national court's questions must be that, in a situation which is not covered by Article 6(1) of the Directive, where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of the Directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor. Decision on costs Costs63 The costs incurred by the Commission and by the EFTA Surveillance Authority, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the High Court of Justice of England and Wales, Chancery Division, by order of 4 May 2001, hereby rules:In a situation which is not covered by Article 6(1) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor of the mark is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of that directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor.

4725e-714b606-4d36

EN

Deutscher Handballbund e. V. / Maros Kolpak

«(External relations – Association Agreement between the Communities and Slovakia – Article 38(1) – Freedom of movement for workers – Principle of non-discrimination – Handball – Limitation on the number of professional players having the nationality of non-member countries who may play on a team in the league of a sports federation)» Summary of the Judgment 1.. International agreements – Agreements concluded by the Community – Direct effect – Article 38(1), first indent, of the Association Agreement between the Communities and Slovakia (Association Agreement between the Communities and Slovakia, Art. 38(1), first indent) International agreements – Agreements concluded by the Community – Direct effect – Article 38(1), first indent, of the Association Agreement between the Communities and Slovakia 2.. International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Article 38(1), first indent, of the Agreement – Scope – Rule laid down by a sports federation determining the conditions under which professional sportsmen may engage in gainful employment – Included (Association Agreement between the Communities and Slovakia, Art. 38(1), first indent)International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Article 38(1), first indent, of the Agreement – Scope – Rule laid down by a sports federation determining the conditions under which professional sportsmen may engage in gainful employment – Included 3.. International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Rule laid down by a sports federation limiting the participation in certain competitions of professional players originating in non-member countries – Not permissible (Association Agreement between the Communities and Slovakia, Art. 38(1), first indent)International agreements – Association Agreement between the Communities and Slovakia – Workers – Equal treatment – Working conditions – Rule laid down by a sports federation limiting the participation in certain competitions of professional players originating in non-member countries – Not permissible JUDGMENT OF THE COURT (Fifth Chamber)8 May 2003 (1) ((External relations – Association Agreement between the Communities and Slovakia – Article 38(1) – Free movement of workers – Principle of non-discrimination – Handball – Limitation on the number of professional players having the nationality of non-member countries who may play on a team in the league of a sports federation)) andTHE COURT (Fifth Chamber),,after considering the written observations submitted on behalf of: ─ Deutscher Handballbund eV, by P. Seydel, H.J. Bodenstaff and R. Jersch, Rechtsanwälte, ─ the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents, ─ the Spanish Government, by R. Silva de Lapuerta, acting as Agent, ─ the Italian Government, by U. Leanza, acting as Agent, assisted by D. Del Gaizo, avvocato dello Stato, ─ the Commission of the European Communities, by M.-J. Jonczy, D. Martin and H. Kreppel, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Deutscher Handballbund eV, represented by R. Jersch; of Mr Kolpak, represented by M. Schlüter, Rechtsanwalt; of the Greek Government, represented by V. Pelekou and S. Spyropoulos, acting as Agents; of the Spanish Government, represented by R. Silva de Lapuerta; of the Italian Government, represented by G. Aiello, avvocato dello Stato; and of the Commission, represented by M.-J. Jonczy and H. Kreppel, at the hearing on 20 June 2002, after hearing the Opinion of the Advocate General at the sitting on 11 July 2002,gives the followingThe Association Agreement with SlovakiaOn those grounds, THE COURT (Fifth Chamber),Edward La PergolaJann von Bahr Rosas R. Grass M. Wathelet RegistrarPresident of the Fifth Chamber 1 – Language of the case: German. Language of the case: German.

eed52-13e23d9-4d7c

EN

The court of justice dismisses the application brought by the netherlands for partial annulment of the commission's decision on state aid to 633 dutch service stations located near the border between germany and the netherlands

| 61999J0382 Judgment of the Court (Fifth Chamber) of 13 June 2002. - Kingdom of the Netherlands v Commission of the European Communities. - State aid - Commission notice on the de minimis rule for State aid - Service stations - Excise duties - Risk of cumulation of aid - Legitimate expectations - Principle of legal certainty - Obligation to state reasons. - Case C-382/99. European Court reports 2002 Page I-05163 Keywords 1. State aid - Examination by the Commission - Aid of minor importance - Commission Notice on the de minimis rule for State aid - Obligation to give prior notification - None - Duty to provide all the information which would justify the application of the de minimis rule in cases where there is doubt as to compatibility - Scope(EC Treaty, Arts 5 and 93 (now Arts 10 EC and 88 EC) and Art. 92 (now, after amendment, Art. 87 EC); Commission Notice 96/C 68/06)2. State aid - Beneficiaries of aid not the recipients of subsidies - Subsidies paid to service stations linked to oil companies by price management system clauses - Aid granted to oil companies(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))3. State aid - Commission decision declaring aid to be incompatible with the common market and ordering it to be discontinued - Scope - Re-establishment of the previously existing situation(EC Treaty, Art. 93(2), first subpara. (now Art. 88(2), first subpara., EC))4. State aid - Recovery of unlawful aid - Application of national law - Conditions and limits(EC Treaty, Art. 93(2), first para. (now Art. 88(2), first para., EC))5. State aid - Recovery of unlawful aid - Calculation of the amount to be recovered and determination of the addressees of the orders for recovery - Difficulties encountered by the State - Obligation of the Commission and the Member State to cooperate - Scope(EC Treaty, Arts 5 and 93(2) (now Arts 10 EC and 88(2) EC)) Summary $$1. Although Commission Notice 96/C 68/06 on the de minimis rule for State aid permits Member States, under certain conditions, to grant small amounts of aid - determined according to objective criteria - without being subject to an obligation to make prior notification, it remains necessary for the Member State intending to grant such aid to provide the Commission with all the information which would justify the application of the de minimis rule in precisely those cases where the Commission has doubts as to the compatibility of the aid with the common market and thus also as to whether the conditions laid down in the Notice have been met. That duty to provide information follows from the general duty of Member States to cooperate with the Commission in good faith, established by Article 5 of the Treaty (now Article 10 EC).In those circumstances, if a Member States does not provide the Commission with the requested information or if it provides only partial information, the legality of the decision adopted by the Commission, in particular as regards the obligation to state reasons, is to be assessed in the light of the information available to the Commission when the decision was adopted.A Member State therefore cannot rely on information which it failed to bring to the attention of the Commission in the course of the administrative procedure when contesting the legality of such a decision. This is a fortiori the case where the Member State has refused to reply to an express request for information from the Commission.( see paras 48-49, 76 )2. For the purposes of Article 92(1) of the Treaty (now, after amendment, Article 87(1) EC), measures which, in various forms, mitigate the burdens that are normally included in the budget of an undertaking and which, without therefore being subsidies in the strict meaning of the word, are similar in character and have the same effect are considered to constitute aid. In that respect Article 92(1) does not distinguish between measures of State intervention by reference to their causes or aims but defines them in relation to their effectsThe aid granted to service stations in order to reduce the economic loss suffered as a result of the increase in duty on petroleum products constitutes aid to oil companies where the service stations are linked to the oil companies by price management system clauses aimed at avoiding service stations suffering a lower turnover as a result of increased fuel prices following on from an increase in duty. The aid paid to those service stations has the effect of mitigating the burdens which would normally have affected the budget of companies anxious to maintain their market position in the light of developments in the domestic and international markets. Such aid therefore has economic effects for the companies concerned since the effect of that aid is, in any event, to release those companies from their obligation to bear all or part of the costs of the forecourt discounts offered by dealers to prevent loss of market share.( see paras 60-63, 66 )3. The first subparagraph of Article 93(2) of the Treaty (now the first subparagraph of Article 87(2) EC) provides that where the Commission finds that aid granted by a State or through State resources is not compatible with the common market, it is to decide that the State concerned is to abolish or alter such aid within a period of time determined by it. The obligation on a State to abolish aid regarded by the Commission as being incompatible with the common market has as its purpose to re-establish the previously existing situation.( see para. 89 )4. In the absence of pertinent provisions of Community law, the recovery of aid which has been declared incompatible with the common market is to be carried out in accordance with the rules and procedures laid down by national law, in so far as those rules and procedures do not have the effect of making the recovery required by Community law practically impossible and do not undermine the principle of equivalence with procedures for deciding similar but purely national disputes.( see para. 90 )5. As regards State aid, if a Member State encounters unforeseen difficulties in implementing an order for recovery, it can submit those problems for consideration by the Commission. In such a case the Commission and the Member State concerned must, in accordance with the duty of genuine cooperation, work together in good faith with a view to overcoming the difficulties whilst fully observing the Treaty provisions, in particular the provisions on aid.In particular, the obligation on a Member State to calculate the exact amount of aid to be recovered - particularly where that calculation is dependent on information which that Member State has not provided to the Commission - forms part of the more general reciprocal obligation to cooperate in good faith in the implementation of Treaty rules concerning State aids imposed on the Commission and the Member States.Similarly, in a case where a Member State has doubts as to the identity of the addressees of the orders for recovery, it can submit those problems to the Commission for its consideration.( see paras 50, 91-92 ) Parties In Case C-382/99,Kingdom of the Netherlands, represented by M. Fierstra, acting as Agent,applicant,vCommission of the European Communities, represented by G. Rozet and H.M.H. Speyart, acting as Agents, assisted by J.C.M. van der Beek, avocat, and L. Hancher, adviser, with an address for service in Luxembourg,defendant,APPLICATION for partial annulment of Commission Decision 1999/705/EC of 20 July 1999 on the State aid implemented by the Netherlands for 633 Dutch service stations located near the German border (OJ 1999 L 280, p. 87), in so far as it states that the aid granted to certain categories of service stations is incompatible with the common market and with the functioning of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3), and requires the recovery of aid already granted,THE COURT (Fifth Chamber),composed of: S. von Bahr, President of the Fourth Chamber, acting for the President of the Chamber, D.A.O. Edward and M. Wathelet (Rapporteur), Judges,Advocate General: P. Léger,Registrar: H.A. Rühl, Principal Administrator,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 27 September 2001, at which the Kingdom of the Netherlands was represented by J.S. van den Oosterkamp and S. Terstal, acting as Agents, and the Commission was represented by G. Rozet, assisted by J.C.M. van der Beek and L. Hancher,after hearing the Opinion of the Advocate General at the sitting on 14 March 2002,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 9 October 1999, the Kingdom of the Netherlands brought an action under the first paragraph of Article 230 EC for partial annulment of Commission Decision 1999/705/EC of 20 July 1999 on the State aid implemented by the Netherlands for 633 Dutch service stations located near the German border (OJ 1999 L 280, p. 87; the Decision), in so far as it states that the aid granted to certain categories of service stations is incompatible with the common market and the functioning of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3; the EEA Agreement), and requires the recovery of aid already granted.2 Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC) provides:Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.3 Commission Notice 96/C 68/06 on the de minimis rule for State aid, published in the Official Journal of the European Communities of 6 March 1996 (OJ 1996 C 68, p. 9; the Notice), considers in more detail the meaning of the phrase affects trade between Member States used in Article 92(1) of the Treaty. According to the first paragraph of the Notice:Clearly, any financial assistance given by the State to one firm distorts or threatens to distort, to a greater or lesser extent, competition between that firm and its competitors which have received no such aid; but not all aid has an appreciable effect on trade and competition between Member States. This is particularly true where the amount of aid involved is small.4 That is the reason why, in terms of the second paragraph of the Notice, Article 92(1) may be deemed not to apply to grants of aid up to a maximum amount of ECU 100 000 (now EUR 100 000) over a three-year period beginning when the first de minimis aid is granted. That maximum amount applies to aid of all kinds, irrespective of its form or the objective pursued, with the exception of export aid, which is excluded from the benefit of the de minimis rule. De minimis aid, which need not be notified to the Commission, does not affect the possibility of the recipient obtaining other aid under schemes approved by the Commission.5 The last paragraph of the Notice also states that [t]he Commission has a duty to satisfy itself that Member States are not giving their enterprises aid which is incompatible with the common market and that the Commission reserves the right to take appropriate action against any aid which complies with the de minimis rule but infringes other provisions of the Treaty. That paragraph also states that the Member States are under an obligation to facilitate the achievement of the task entrusted to the Commission of verifying whether aid is compatible with the common market. In particular, the Member States are called on to establish a control system to ensure that, where aid is given to the same recipient under separate measures all of which are covered by the de minimis rule, the total amount of the aid does not exceed ECU 100 000 over a period of three years. Furthermore, any decision granting de minimis aid or the rules of any scheme providing for aid of that kind must include an express stipulation that any additional aid granted to the same recipient under the de minimis rule must not raise the total de minimis aid received by the enterprise to a level above the ceiling of ECU 100 000 over a period of three years. The [control system] established must also enable the Member State to answer any questions the Commission might wish to ask.The facts at issue and the Decision6 From 1 July 1997, the excise duties levied by the Netherlands on petrol, diesel and liquid gas were increased to NLG 0.11, NLG 0.05 and NLG 0.08 per litre respectively. In Article VII of the Wet tot wijziging van enkele belastingwetten c.a. (Law amending various fiscal laws, Stbl. 1996, p. 654) of 20 December 1996, the Netherlands legislature, aware that that increase would have detrimental consequences for Dutch operators of service stations located, in particular, along the German border, provided for the adoption of temporary measures intended to mitigate the disparity between the levels of excise duty payable after that increase and the amount of excise duty levied on light oils in Germany.7 Accordingly, on 21 July 1997, the Kingdom of the Netherlands adopted the Tijdelijke regeling subsidie tankstations grensstreek Duitsland (Temporary regulation on subsidies payable to service stations located near the German border, Stcrt. 1997, p. 138), as amended by Ministerial decree of 15 December 1997 (Stcrt. 1997, p. 241; the Temporary Regulation). That regulation, which came into force with retroactive effect from 1 July 1997, provided for the grant of a subsidy of NLG 0.10 per litre of petrol to operators located within 10 km of the border between the Netherlands and Germany, and of NLG 0.05 per litre of petrol to operators located between 10 and 20 km from that border. It provided that, in the event of an increase in the German excise duties, the disparity in the excise duties levied by the two countries, which was the reason for the aid scheme, would decrease. The level of the subsidies would therefore be reduced to a maximum of 10/11ths and 5/11ths respectively of the equivalent in Netherlands currency of the increase in the German excise duties. If, as the result of such a reduction, the level of the subsidies granted to operators located within 10 km of the border fell below NLG 0.025 per litre, the Temporary Regulation would lapse in its entirety.8 In order to comply with the conditions in the Notice, the Temporary Regulation set a ceiling on the subsidies equivalent to ECU 100 000 over a period of three years (from 1 July 1997 to 30 June 2000 inclusive), i.e., the ceiling laid down in the Notice. Moreover, the financial aid provided for by the Temporary Regulation was aid per applicant, which covered any natural or legal person, or successor in title thereto, on whose behalf, or at whose risk, one or more service stations were operated.9 An amendment to the Temporary Regulation was then proposed whose purpose was to provide that the subsidy no longer be granted per applicant but per service station (the Draft Amendment). The aim of the Draft Amendment was to remove the imbalance which had been created between service stations in respect of the level of subsidies received. A number of applicants owning more than one service station received only ECU 100 000 in total, while other applicants owning only one service station received the same amount.10 The Netherlands Government, wishing to verify that the Draft Amendment to the Temporary Regulation complied with the Notice, informed the Commission of that amendment by letter of 14 August 1997, stating that in the event that the Commission considers that the [proposed] scheme must nevertheless be notified pursuant to Article 93(3) of the EC Treaty, the Netherlands Government requests that this letter be deemed to be such a notification (the Conditional Notification).11 The Commission carried out a preliminary examination pursuant to Article 93(3) of the EC Treaty (now Article 88(3) EC) of both the Temporary Regulation and the Draft Amendment in order to ensure that the measures in question, either already in force or in draft form, were not such as to permit cumulations of aid of the kind prohibited by the Notice. The Commission was, in particular, concerned that the Temporary Regulation and the Draft Amendment would present large oil companies with the opportunity to profit indirectly from the aid granted to the various operators linked to them, by rendering inoperative the price management system (PMS) clauses contained in some exclusive purchasing agreements between those companies and their distributors.12 In paragraph 84 of the Decision, the Commission defines PMS clauses in the following manner:The purpose of a PMS clause is to protect the dealer's turnover against competing petrol outlets in the immediate vicinity of his service station. The clause usually stipulates that the oil company bears part of the cost of the forecourt discount granted by the dealer in so far as domestic and/or international market conditions make a temporary or long-term adjustment of these discounts desirable or necessary. Consultations between the parties are often necessary before such reductions are introduced. The actual aid provided by the supplier is determined by means of a distribution table or participation arrangements. Its amount is normally indicated on the invoice.13 In order to assess whether the aid was liable to have a cumulative effect, the Commission requested that the Netherlands authorities provide it with information on the ownership structure of the 633 service stations located near the border between Germany and the Netherlands which, owing to their location, were eligible to receive the aid in question, a list of the distribution agreements binding the service stations to their suppliers, an indication of the total number of service stations in the Netherlands, and the share of the total market held by those 633 service stations.14 Since the Commission was not satisfied with the replies given by the Netherlands authorities and feared that the Temporary Regulation and its Draft Amendment did not adequately prevent cumulations of aid of the kind prohibited by the Notice, the Commission decided, in June 1998, to initiate the procedure provided for in Article 93(2) of the Treaty (see OJ 1998 C 307, p. 10). At the end of that procedure, the Commission declared, by way of the Decision, that part of the disputed aid was incompatible with the common market and that another part of that aid was covered by the de minimis rule.15 In the Decision, the Commission classified the service stations in six categories:- dealer-owned/dealer-operated (Do/Do) service stations, where the dealer owns the service station, which he operates at his own risk, and is linked to the oil company by an exclusive purchasing agreement which does not contain a PMS clause;- company-owned/dealer-operated (Co/Do) service stations, where the dealer rents the service station, which he operates at his own risk, and is linked, as a tenant, to the oil company by an exclusive purchasing agreement without a PMS clause;- service stations in respect of which the Netherlands authorities did not provide any information or provided only partial information;- company-owned/company-operated (Co/Co) service stations, where the service station is operated by employees or subsidiaries of the oil company, who carry no business risk and are not free to chose their suppliers. The Commission divided this category into two sub-categories: pure Co/Co service stations where the service station is owned and operated by the oil company, and de facto Co/Co service stations, where the same dealer has applied for aid more than once and therefore appears several times on the list of recipients;- Do/Do service stations, linked to the oil company by a PMS clause, under which, in certain circumstances, the oil company bears part of the cost of forecourt discounts made by the operator, and finally- Co/Do service stations linked to the oil company by a PMS clause.16 As regards the first two categories, the Commission considered that there was no risk of cumulation of aid and that the de minimis rule was applicable (Article 1 of the Decision).17 For the third category, the Commission considered that a prohibited cumulation of aid could not be ruled out. Therefore, in its view, the aid granted to the service stations in question was incompatible with the common market and with the functioning of the EEA Agreement inasmuch as it could exceed EUR 100 000 per recipient over a period of three years (point (a) of the first paragraph of Article 2 of the Decision).18 As regards the fourth category, the Commission also considered that grants of aid incompatible with the common market and the functioning of the EEA Agreement to companies owning and operating more than one service station could not be ruled out, inasmuch as, given the possible cumulation of aid, that aid could exceed EUR 100 000 per recipient over a period of three years (point (b) of the first paragraph of Article 2 of the Decision).19 Finally, as regards the last two categories, the Commission also considered that, for the same reasons, there was a risk of cumulation of aid to the oil companies concerned. In its view, the supplier profited from either all or part of the aid granted to the operators since those operators were no longer able to invoke the PMS clause or could only do so to a more limited extent (points (c) and (d) of the first paragraph, and the second paragraph, of Article 2 of the Decision).20 The Commission considered that the measures taken by the Netherlands Government which were not covered by the de minimis rule constituted aid within the meaning of Article 92(1) of the Treaty (see paragraphs 88 to 93 of the Decision) and that that aid was not covered by any of the derogations provided for in Article 92(2) and (3) of the Treaty (see paragraphs 94 to 102 of the Decision). It therefore declared that aid to be incompatible with the common market (Article 2 of the Decision) and ordered its recovery (Article 3 of the Decision).Substance21 In support of its application, the Netherlands Government makes the general complaint that, by refusing to accept that the Temporary Regulation and the Draft Amendment complied with the de minimis rule, the Commission failed to respect the binding nature of the Notice. More specifically, the Netherlands Government claims that the Commission acted in breach of Article 92(1) of the Treaty, the de minimis rule, the principles of legal certainty, equal treatment and protection of legitimate expectations, the obligation to cooperate in good faith laid down in Article 5 of the EC Treaty (now Article 10 EC), the requirement under Article 189 of the EC Treaty (now Article 249 EC) that the terms of decisions be specified with sufficient particularity, and the obligation to state reasons laid down in Article 190 of the EC Treaty (now Article 253 EC):- by holding that, in cases where a single applicant operates more than one service station, the grant of de minimis aid per service station came within the scope of Article 92(1) of the Treaty and not within the scope of the Notice;- by distinguishing, without justification, between pure and de facto Co/Co service stations;- by presuming that there was indirect aid to oil companies linked to service stations by exclusive purchasing agreements containing a PMS clause;- by holding that the grant of aid to service stations in respect of which the Netherlands authorities had not provided any information or had provided only partial information came within the scope of Article 92(1) of the Treaty and not within the scope of the Notice;- by failing to take account of the environmental protection objectives pursued by the Netherlands Government in its assessment of the compatibility of the disputed measures with the common market, and- by requiring that the aid be recovered.The binding nature of the Notice22 The Netherlands Government considers that, inasmuch as the amount of aid granted to service stations near the border does not exceed the ceiling of EUR 100 000 imposed by the Notice, the Commission ought to have considered that the Temporary Regulation and the Draft Amendment were compatible with the common market. The presumption underlying the de minimis rule is irrebuttable, as, moreover, is apparent from paragraphs 68 and 69 of the Decision. In addition to disregarding the absolute nature of that rule, the Commission also failed to observe the principles of legal certainty, protection of legitimate expectations and equal treatment.23 The Commission disputes the allegation that it failed to respect the irrebuttable presumption underlying the de minimis rule since, in its view, the strict conditions laid down in the Notice governing the application of that rule were not fully met in the present case. In particular, the Commission submits that the disputed measures are capable of having cumulative effects of the kind prohibited by the Notice where either one owner possesses more than one service station or the supplier has de facto control over the dealer by virtue of an exclusive purchasing agreement (see paragraph 69 of the Decision).24 In that respect, it should be borne in mind that the Commission may adopt guidelines on the exercise of its powers of assessment, particularly in State aid matters. In so far as those guidelines do not contradict Treaty rules, the policy rules which they contain are to be followed by that institution (see Case 310/85 Deufil v Commission [1987] ECR 901, paragraph 22; Case C-313/90 CIRFS and Others v Commission [1993] ECR I-1125, paragraphs 34 and 36, and Case C-311/94 IJssel-Vliet [1996] ECR I-5023, paragraph 42).25 Accordingly, by establishing the principle that where the amount of aid involved is small it does not have an appreciable effect on trade and competition between Member States, the Notice determines the way in which the Commission is to assess the effect of an aid measure on trade between Member States. In the first indent of its second paragraph, the Notice thus sets the ceiling for aid, below which Article 92(1) of the Treaty does not apply - with the result that the aid at issue is no longer subject to the obligation of prior notification to the Commission laid down in Article 93(3) of the Treaty - at a maximum amount of EUR 100 000 over a period of three years from when the first de minimis aid is granted.26 The Notice also states, in its last paragraph, that the Member States have an obligation to facilitate the achievement of the supervisory task entrusted to the Commission and makes application of the de minimis rule subject to the condition of non-cumulation of aid, which provides that additional aid granted to an undertaking which receives de minimis aid must not bring the total amount of that type of aid to a level in excess of EUR 100 000 over a period of three years.27 In the present case, the Commission contends that the Netherlands Government did not comply with the condition of non-cumulation of aid (see, in particular, paragraphs 69 and 71 to 75 of the Decision). The Commission therefore confined itself to verifying whether the conditions for applicability of the de minimis rule had been met, and did not impose any new conditions beyond the guidelines in the Notice.28 The plea in law relating to the binding nature of the Notice thus has no factual basis and must be rejected.The risk of cumulation of aid29 The Netherlands Government complains that the Commission held that the grant of subsidies, the ceilings of which were fixed per service station, could not be covered by the de minimis rule on the ground of the risk of cumulation of aid to a single de facto recipient, particularly where the applicant operates more than one service station. The Netherlands Government also claims that the Commission acted in breach of Article 92(1) of the Treaty, the de minimis rule and the principles of legal certainty, equal treatment and protection of legitimate expectations.30 According to the Netherlands Government, where the aid is granted per service station, a single service station can never receive the de minimis aid more than once. The fact that the 633 subsidised service stations may be regarded as either separate undertakings or, in certain cases, as parts of larger economic entities has absolutely no economic impact on trade between Member States or on competition.31 The Netherlands Government submits that, at the very least, the Decision does not comply with the obligation to state reasons laid down in Article 190 of the Treaty, inasmuch as it does not include a statement of reasons or, at least, does not state clear reasons explaining why the de minimis rule cannot be applied in respect of individual service stations in cases where a service station is part of a large economic entity.32 According to the Commission, in order to verify that there is no cumulation of aid, the real recipient of the aid must be identified. In the present case, the recipient could be a service station but it could also be a larger economic entity such as an oil company, where, as a result of that aid, that company did not have to make compensatory payments or paid less compensation to service stations linked to it by a PMS clause, than if there had been no aid.33 The Commission also disputes the allegation that it failed to observe the obligation to state reasons since the Decision does specify the reasons why the Commission considered that the ceiling for de minimis aid had not been complied with.34 As to the obligation to state reasons, it is apparent from paragraph 74 of the Decision that, according to the Commission, for the purpose of applying the de minimis rule, it is necessary to determin[e] who the actual aid recipient is and whether the de minimis threshold has been complied with for each recipient. Furthermore, in paragraph 69 of the Decision, the Commission states that there is a risk of aid cumulation where one owner possesses several service stations or where the supplier has de facto control over the dealer by virtue of an exclusive purchasing agreement. It is also apparent from paragraph 82 of the Decision that aid cumulation of the kind prohibited by the Notice occurs in cases where the same company owns and operates several service stations or where the same dealer has applied for aid more than once and therefore appears several times in the list of eligible recipients.35 That statement of reasons, which clearly and unequivocally sets out the Commission's reasoning, enabled the Netherlands Government to ascertain the reasons why that institution considered that the scheme at issue, which granted aid, albeit limited, to individual service stations, was not covered by the de minimis rule, and also permits the Court to exercise its powers of review.36 The Decision therefore complies with the obligation to state reasons laid down in Article 190 of the Treaty.37 As regards the substance of the case, it should be observed that, inasmuch as the scheme at issue provides for aid to be granted per service station, by definition it provides for the owner of several service stations, all operated by him, to receive as many grants of aid as he owns service stations. Such a system thus carries a risk of exceeding the de minimis ceiling per recipient, an outcome prohibited by the Notice.38 The Commission also correctly inferred that there is a similar risk of cumulation of aid where an oil company has de facto control over service-station operators, whose freedom is limited by exclusive purchasing and lease agreements. In that case, as is apparent from paragraphs 60 to 66 of this judgment, the oil company may likewise be regarded as the real recipient of the aid granted to the service stations, inasmuch as the grant of such aid renders any PMS clause redundant.39 In those circumstances, by taking the view that, owing to the risk inherent in the scheme that the condition as to non-cumulation of aid would not be met, the scheme for granting aid up to a maximum amount per service station did not meet the necessary conditions for it to come within the scope of the Notice, the Commission did not exceed the bounds of its discretion, nor did it act in breach of the principles of legal certainty, equal treatment and protection of legitimate expectations.40 The plea in law relating to the risk of cumulation of aid must therefore be rejected as unfounded.The distinction between pure Co/Co service stations and de facto Co/Co service stations41 The Netherlands Government considers that the Commission, in applying its distinction between pure and de facto Co/Co service stations, acted in breach of Article 92(1) of the Treaty, the de minimis rule, the principles of legal certainty, equal treatment and protection of legitimate expectations, the requirement under Article 189 of the Treaty that the terms of decisions be specified with sufficient particularity, and the obligation to state reasons laid down in Article 190 of the Treaty.42 The Netherlands Government observes that, at point (a) of paragraph 82 of the Decision, the Commission found that 28 service stations fell into the pure Co/Co category, that is to say, that they belonged to, and were operated by, a single oil company, yet it failed to state the factual and legal circumstances underlying that finding, or to identify the oil companies which, in its view, owned more than one service station and were thus in a position to receive more than one de minimis aid.43 Similarly, at point (b) of paragraph 82 of the Decision, the Commission identified 21 service stations as falling within the de facto Co/Co category, that is to say, as being covered by the assumption that the operators of more than one service station applied for more than one grant of aid and thus appeared more than once in the list of recipients, yet the Commission likewise failed to state which of those recipients were, in its view, identical to each other or the factual and legal circumstances on which it relied when drawing that conclusion.44 Accordingly, the Commission failed to observe its obligation to state reasons which, moreover, made it impossible for the Netherlands Government to ascertain the sums which were to be recovered and the entities from whom those sums were to be recovered.45 The Netherlands Government adds that the obligation on Member States to provide information in respect of de minimis aid, laid down in the Notice, is necessarily less rigorous than the obligation imposed on them by Articles 92 and 93 of the Treaty. The Notice was adopted with the intention of simplifying the administration for both the Member States and the Commission's services, and an increase in the burden on Member States in respect of the information to be provided would run counter to that objective.46 According to the Commission, since the Netherlands Government failed to respond to its numerous requests for information, even to a Commission decision requesting information relating particularly to the ownership structures of the service stations, the Commission was justified in relying on the information at its disposal (see paragraphs 71 to 81 of the Decision) to carry out, inter alia, the classification in paragraph 82 of the Decision. It considers that, given that this was an aid scheme, it could not have been expected to identify the recipients in its Decision with the same precision as in the case of individual grants of aid.47 The Commission observes that it identified in the Decision the undertakings for which the aid granted under the Temporary Regulation appeared questionable since the Commission had been unable to satisfy itself that the conditions for application of the de minimis rule had been met in respect of those undertakings. The undertakings concerned are the applicants/service stations listed in Article 2 of the Decision. It is now for the Netherlands Government to determine, on the basis of, in particular, the data in the annex to the Decision, the amount of aid granted, the amount to aid to be recovered and the entities from which the aid is to be recovered.48 In that regard, while it is true that the Notice permits, under certain conditions, Member States to grant small amounts of aid - determined according to objective criteria - without being subject to an obligation to make prior notification, it remains necessary for the Member State intending to grant such aid to provide the Commission with all the information which would justify the application of the de minimis rule in precisely those cases where the Commission has doubts as to the compatibility of the aid with the common market and thus also as to whether the conditions laid down in the Notice have been met. That duty to provide information follows from the general duty of Member States to cooperate with the Commission in good faith, established by Article 5 of the Treaty.49 In those circumstances, if a Member States does not provide the Commission with the requested information or if it provides only partial information, the legality of the decision adopted by the Commission, in particular as regards the obligation to state reasons, is to be assessed in the light of the information available to the Commission when the decision was adopted (see, to that effect, in particular, Case 234/84 Belgium v Commission [1986] ECR 2263, paragraphs 16 and 22).50 If a Member State encounters unforeseen difficulties in implementing an order for recovery, it can submit those problems for consideration by the Commission. In such a case the Commission and the Member State concerned must, in accordance with the duty of genuine cooperation, work together in good faith with a view to overcoming the difficulties whilst fully observing the Treaty provisions, in particular the provisions on aid (see, in particular, Case C-303/88 Italy v Commission [1991] ECR I-1433, paragraph 58).51 In the present case, the complaints of the Netherlands Government relate to ambiguities in the Decision which allegedly prevent it from determining the precise identity of the real recipients of the aid granted to pure and de facto Co/Co service stations.52 The Decision identifies and quantifies the service stations owned and operated by a single oil company (the pure Co/Co service stations) and those operated by a single dealer who, in the Commission's view, has applied for aid more than once and thus appears more than once in the list of recipients (de facto Co/Co service stations). The Netherlands Government has not provided any concrete evidence which would call into question the classification of the service stations in the two categories referred to above, made by the Commission on the basis of the information at its disposal.53 Moreover, if the Netherlands Government encountered difficulties in implementing the Decision, in particular in determining the precise identity of the real recipients of the disputed aid, it should have made those difficulties known to the Commission, which would have been obliged to assist it in resolving them in accordance with the duty to cooperate in good faith laid down in Article 5 of the Treaty.54 In view of the foregoing, the plea in law relating to the distinction between pure and de facto Co/Co service stations must be rejected as unfounded.Indirect aid to oil companies55 The Netherlands Government submits that, by assuming that the scheme provides indirect aid to oil companies linked to service stations by exclusive purchasing agreements containing a PMS clause, the Commission acted in breach of Article 92(1) of the Treaty, the de minimis rule, the principles of legal certainty, equal treatment and protection of legitimate expectations, and the obligation to state reasons laid down in Article 190 of the Treaty.56 According to the Netherlands Government, the indirect advantages for the oil companies do not constitute State aid within the meaning of Article 92 of the Treaty but, instead, arise out of contractual relationships in which the national authorities are in no way involved, and of whose existence they are not even aware. The national authorities cannot be required to carry out continuous checks as to whether there are such indirect effects, not visible to those authorities. Even less can they be responsible for ensuring in all circumstances that such effects do not occur.57 The Netherlands Government adds that the PMS clauses differ in their content and, in the majority of cases, do not create an unconditional obligation on oil companies to contribute to forecourt discounts. The right to initiate such price reductions generally lies with those companies, who only agree to make them if their market share is threatened. The respective market positions of the oil companies active in the Netherlands market were not affected by the price differential with Germany, since those companies were all affected to the same extent.58 The Commission claims that as a result of the aid granted by the Netherlands, the oil companies did not have to apply the PMS clauses which bound them to their distributors. Since the forecourt discounts offered by operators to retain their market shares were compensated for by the aid granted by the Netherlands State, all requests to the oil companies for intervention, based on the PMS clause, were necessarily rejected by those oil companies for lack of cause (see paragraphs 84 and 85 of the Decision).59 In any event, the Commission submits that it was unable, on the basis of the information provided by the Netherlands Government, to satisfy itself that in cases where the contract between the oil company and the service station included a PMS clause, there was no risk of a cumulation of aid to a single real recipient in excess of the ceiling set by the Notice (see paragraph 83 of the Decision). In the Commission's view, it was for the Netherlands Government to establish an appropriate control mechanism which would have enabled the Commission to satisfy itself that the de minimis ceiling on aid would never be exceeded.60 In that regard, it is important to remember that Article 92(1) of the Treaty provides that any aid granted by a Member State, or through State resources in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is incompatible with the common market. In particular, measures which, in various forms, mitigate the burdens which are normally included in the budget of an undertaking and which, without therefore being subsidies in the strict meaning of the word, are similar in character and have the same effect are considered to constitute aid (see, in particular, Case C-387/92 Banco Exterior de España [1994] ECR I-877, paragraph 13; Case C-75/97 Belgium v Commission [1999] ECR I-3671, paragraph 23 and Case C-156/98 Germany v Commission [2000] ECR I-6857, paragraph 25).61 Moreover, according to settled case-law, Article 92(1) does not distinguish between measures of State intervention by reference to their causes or aims but defines them in relation to their effects (Case 173/73 Italy v Commission [1974] ECR 709, paragraph 27 and Case C-241/94 France v Commission [1996] ECR I-4551, paragraph 20).62 In the present case, the indirect advantage to oil companies stems from the aid granted under the Temporary Regulation inasmuch as that aid renders it unnecessary, in practice, to invoke the PMS clauses.63 The aid granted by the Netherlands was intended to prevent the service stations located near the German border from experiencing a drop in turnover as a result of the increase in fuel prices following the rise in excise duties in the Netherlands, given the more competitive rates in Germany. Conversely, the Temporary Regulation stated that, in the event of an increase in the German excise duties, the level of the subsidies would be reduced.64 The same purpose is also served by the PMS clauses which, as is correctly pointed out in paragraph 84 of the Decision, aim to protect the dealer's turnover from competing sales in the immediate vicinity of his service station, where domestic or international market conditions make a temporary or long-term adjustment of the forecourt discounts granted by the dealer desirable or, indeed, necessary.65 Therefore, the Temporary Regulation applied in circumstances which were such as to trigger the application of the PMS clauses.66 In those circumstances, the aid granted to service stations linked to oil companies by PMS clauses had economic effects for the companies concerned since the effect of that aid was, in any event, to release those companies from their obligation to bear all or part of the costs of the forecourt discounts offered by dealers to prevent loss of market share. That State intervention therefore constituted aid to oil companies since its effect was to mitigate the burdens which would normally have affected the budget of companies anxious to maintain their market position in the light of developments in the domestic and international markets.67 In substance, paragraph 83 et seq. of the Decision set out the foregoing points in a clear and unequivocal manner and enabled the Netherlands Government to ascertain the reasons why the Commission assumed that the scheme provided indirect aid to oil companies linked to service stations by exclusive purchasing agreements containing a PMS clause, solely on the ground that the contracts contained such clauses.68 In those circumstances, the Commission neither exceeded the bounds of its discretion nor acted in breach of its obligation to state reasons.69 The plea in law relating to the existence of indirect aid to oil companies is therefore unfounded and must be rejected.The consequences of the lack, or inadequacy, of information provided by the Member State70 The Netherlands Government claims that, by holding that the grant of aid to service stations in respect of which the Netherlands authorities did not provide any information or provided only partial information did not come within the scope of the Notice, the Commission acted in breach of Article 92(1) of the Treaty, the de minimis rule, the principles of legal certainty, equal treatment and protection of legitimate expectations, the requirement under Article 189 of the Treaty that the terms of decisions be specified with sufficient particularity, and the obligation to state reasons laid down in Article 190 of the Treaty.71 The Netherlands Government submits, first, that the Commission's assertion that no information had been provided in respect of the service stations listed in point (a) of the first paragraph of Article 2 of the Decision is incorrect as regards the service stations identified by the numbers 297, 372 and 433.72 Next, the Netherlands Government claims that the Commission made an error of assessment by considering that the information provided to it was incomplete on the sole ground that the exclusive purchasing agreements had not been supplied. Examination of that type of agreement is of no relevance when assessing a subsidy granted to service-station operators in the light of the conditions set out in the Notice. The same conclusion must be drawn in respect of the Commission's contention that it needed the exclusive purchasing agreements in order to discern whether there was any indirect aid to oil companies.73 Finally, in more general terms, the Netherlands Government claims that the lack of certain information required by the Commission was not sufficient to warrant the Commission's concerns that there was a cumulation of aid in favour of the service stations concerned. Whichever situation one considers - namely, an applicant who owns only one service station, or an applicant who owns more than one service station -, the service station receiving the aid cannot under any circumstances receive that aid more than once. Since the condition as to non-cumulation of aid was met, the Commission ought not to have applied the provisions of Article 92(1) of the Treaty.74 The Commission contends that if the Decision contains inaccuracies, those inaccuracies are attributable to the inaccurate or incomplete information provided by the Netherlands Government. As regards, more specifically, the information relating to service stations Nos 297, 372 and 433, the Commission observes that service station No 433 is not referred to in point (a) of the first paragraph of Article 2 of the Decision but in point (b) of the first paragraph of Article 2, as a pure Co/Co. As regards the two other service stations, the Commission maintains that it did not receive any information relating to them, at least not within the period prescribed by it for provision of that information.75 According to the Commission, it is not for the Member States, but for the Commission, exercising its discretion, to decide whether the requested information is relevant or not. In any event, the exclusive purchasing agreements, which were liable to contain PMS clauses, were relevant, since their application could give rise to a cumulation of aid.76 In that regard, as has already been observed in paragraph 49 of this judgment, the legality of a decision concerning State aid is to be assessed in the light of the information available to the Commission when the decision was adopted. A Member State therefore cannot rely on information which it failed to bring to the attention of the Commission in the course of the administrative procedure when contesting the legality of such a decision (Joined Cases C-278/92, C-279/92 and C-280/92 Spain v Commission [1994] ECR I-4103, paragraph 31). This is a fortiori the case where the Member State has refused to reply to an express request for information from the Commission (see France v Commission, paragraphs 36 and 37).77 In the present case, it is apparent from paragraph 64 of the Decision that no information was supplied to the Commission in respect of 59 service stations and that it received incomplete information for 191 service stations. On that matter, the Commission gave the following explanation of why it considered that the information provided was incomplete:... the information is insufficient in cases where a service station merely completed the Senter [control body designated by the Netherlands Government] questionnaire without providing copies of its exclusive purchasing agreement, with the result that its reply was not substantiated. For instance, some service stations classified themselves as falling into one of the three categories (Do/Do, Co/Do or Co/Co) without providing any supporting evidence, while others claimed to be independent but failed to substantiate this.78 With the exception of the three service stations in respect of which no evidence has been provided of the alleged error of assessment made by the Commission, the Netherlands Government does not dispute that it failed to respond to the Commission's requests for information.79 However, the information and the documentary evidence relating to the ownership structures of the service stations at issue (Do/Do, Co/Do or Co/Co) or the existence or otherwise of PMS clauses in the exclusive purchasing agreements requested by the Commission, were essential in order to determine the real recipients of the aid and, consequently, to verify that there was no cumulation of aid of the kind prohibited by the Notice.80 Therefore, the Commission neither acted in breach of the obligation to state reasons nor made a manifest error of assessment by declaring that the aid granted to service stations in respect of which it had not received information or had received only partial information was not covered by the de minimis rule. The plea in law relating to the consequences of the lack, or inadequacy, of information provided by the Member State must therefore be rejected.The failure to take account of environmental protection objectives81 The Netherlands Government claims that by failing to take account of environmental protection objectives in its assessment of the compatibility of the disputed measures with the common market, the Commission acted in breach of Article 92(3) of the Treaty and the obligation to state reasons.82 The Netherlands Government points out that the increase in the Netherlands excise duties effective from 1 July 1997 was intended to reduce the use of cars, the congestion and the emissions produced by road traffic.83 The precise purpose of the Temporary Regulation was to reduce as far as possible the detrimental effects of that increase on the competitiveness of service-station operators. According to the principles underlying the Commission's competition policy (see, to that effect, the XXIIth Report on Competition Policy, 1992, paragraph 451), aid may be compatible with the common market where it aims to prevent certain undertakings from sustaining a serious drop in competitiveness as a result of the implementation of national measures intended to promote protection of the environment and conservation of energy.84 In that regard, whether or not the increase in the Netherlands excise duties was in fact justified on environmental grounds, it is enough to observe that, as pointed out by the Commission, the Netherlands Government did not invoke such grounds during the administrative phase of the procedure and, consequently, cannot now argue that the Commission failed to consider the objective of protection of the environment when assessing the compatibility of the disputed measures with Article 92(1) of the Treaty. As the Court has already observed in paragraphs 49 and 76 of this judgment, the legality of a decision concerning State aid, particulary in regard to the obligation to state reasons, is to be assessed in the light of the information provided by the Member State at the time the decision was adopted.85 The plea in law relating to the failure to take account of environmental protection objectives must therefore be rejected.The recovery of aid86 The Netherlands Government submits that the obligation to recover aid already granted infringes Article 92(1) of the Treaty, the de minimis rule, the principles of legal certainty, equal treatment and protection of legitimate expectations, the requirement under Article 189 of the Treaty that the terms of decisions be specified with sufficient particularity, and the obligation to state reasons laid down in Article 190 of the Treaty.87 In its view, it is not possible to identify definitively, on the basis of the Decision, the sums which are to be recovered or the persons from whom those sums are to be recovered. Moreover, it will never be possible to determine those sums because it would be impossible to estimate the forecourt discount which a company would have accepted if no subsidy had been granted under the Temporary Regulation.88 The Netherlands Government also claims that the Commission was informed as early as 18 August 1997 - the date on which the letter of Conditional Notification was lodged with the Commission - of the existence of the Temporary Regulation, of the fact that it came into force on 1 July 1997, and of the opinion of the Netherlands authorities that the measures came within the scope of the Notice. According to that Government, if the Commission thought otherwise and considered that, notwithstanding the Notice, the rules already in force would have to be reviewed by the Commission pursuant to Article 93(3) of the Treaty, as was the case for the introduction of a scheme of subsidies to individual service stations, provided for in the Draft Amendment to the Temporary Regulation which was the subject of the Conditional Notification, it was for the Commission, having regard to the obligation imposed on it under Article 5 of the Treaty to cooperate in good faith with the national authorities, immediately and unequivocally to inform the Netherlands authorities of that fact.89 Article 93(2) of the Treaty provides that where the Commission finds that aid granted by a State or through State resources is not compatible with the common market, it is to decide that the State concerned is to abolish or alter such aid within a period of time determined by it. According to settled case-law, the obligation on a State to abolish aid regarded by the Commission as being incompatible with the common market has as its purpose to re-establish the previously existing situation (see, in particular, Case C-350/93 Commission v Italy [1995] ECR I-699, paragraph 21).90 In the absence of pertinent provisions of Community law, the recovery of aid which has been declared incompatible with the common market is to be carried out in accordance with the rules and procedures laid down by national law, in so far as those rules and procedures do not have the effect of making the recovery required by Community law practically impossible and do not undermine the principle of equivalence with procedures for deciding similar but purely national disputes (see Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others [1983] ECR 2633, paragraph 19 and Case 94/87 Commission v Germany [1989] ECR 175, paragraph 12).91 It should be added that the obligation on a Member State to calculate the exact amount of aid to be recovered - particularly where, as in the present case, given the large number of service stations involved, that calculation is dependent on information which that Member State has not provided to the Commission - forms part of the more general reciprocal obligation to cooperate in good faith in the implementation of Treaty rules concerning State aids imposed on the Commission and the Member States.92 As to the alleged uncertainty as to the identity of the addressees of the orders for recovery, it is clear from the Decision, in particular from paragraph 74 of its grounds, that the aid is to be recovered from the undertakings which were the real recipients of that aid. As has already been pointed out in paragraph 50 of this judgment, if the Netherlands Government had serious doubts on that matter, it could, like any Member State which encounters unforeseen difficulties in implementing an order for recovery, have submitted, and can still submit, those problems to the Commission for its consideration, with a view to overcoming them in accordance with the principle of genuine cooperation whilst fully observing the Treaty provisions on aid. Such a step would have been all the more justified since the uncertainty as to the identity of a large number of the addressees of the orders for recovery was linked to the inadequacy of the information provided to the Commission.93 Finally, it is apparent from paragraph 1 of the Decision that on 22 September 1997, only one month after the Conditional Notification, the Commission sought to obtain additional information from the Netherlands authorities to enable it to ascertain whether the Temporary Regulation and the Draft Amendment complied with the conditions laid down in the Notice. After several reminders from the Commission and requests by the Netherlands Government for an extension to the time-limit, the Commission decided to initiate the procedure under Article 93(2) of the Treaty (see paragraph 2 of the Decision).94 In those circumstances, the Commission cannot be accused of delaying the initiation of the procedure and the adoption of the Decision. It should be added in that regard that the decision to initiate the procedure already made clear the Commission's doubts as to the applicability of the Notice to the Temporary Regulation in respect of certain categories of service stations and drew attention to the fact that incompatible aid would have to be recovered. The pleas in law alleging failure to observe the principles of legal certainty and protection of legitimate expectations also do not appear to be well founded.95 It follows that the last plea in law raised by the Netherlands Government must be rejected as unfounded.96 Since none of the pleas in law raised by the Netherlands Government can be accepted, the application must be dismissed in its entirety. Decision on costs Costs97 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the Kingdom of the Netherlands has been unsuccessful, the latter must be ordered to pay the costs. Operative part On those grounds,THE COURT (Fifth Chamber)hereby:1. Dismisses the application;2. Orders the Kingdom of the Netherlands to pay the costs.

f38cd-159ba59-4578

EN

THE COURT OF FIRST INSTANCE ANNULS THE COMMISSION DECISION DECLARING THE MERGER BETWEEN AIRTOURS AND FIRST CHOICE INCOMPATIBLE WITH THE COMMON MARKET

| 61999A0342 Judgment of the Court of First Instance (Fifth Chamber, extended composition) of 6 June 2002. - Airtours plc v Commission of the European Communities. - Competition - Regulation (EEC) No 4064/89 - Decision declaring a concentration to be incompatible with the common market - Application for annulment - Relevant market - Collective dominant position - Proof. - Case T-342/99. European Court reports 2002 Page II-02585 Keywords 1. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Relevant market - Definition - Criteria - Application to the foreign package holiday market(Council Regulation No 4064/89)2. Competition - Concentrations between undertakings - Investigation by the Commission - Findings necessary for recognition of a collective dominant position significantly impeding competition in the common market - Link between the notified concentration and the collective dominant position concerned - Establishment(Council Regulation No 4064/89)3. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Existence of a collective dominant position significantly impeding effective competition in the common market - Definition(Council Regulation No 4064/89, Art. 2(3))4. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Creation of a collective dominant position significantly impeding effective competition in the common market - Conditions(Council Regulation No 4064/89, Art. 2(3))5. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Creation of a collective dominant position significantly impeding effective competition in the common market - Commission's analysis - Close examination of the circumstances relevant for assessing the effects of the concentration on competition in the reference market(Council Regulation No 4064/89)6. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Creation of a collective dominant position significantly impeding effective competition in the common market - Burden of proof(Council Regulation No 4064/89)7. Competition - Concentrations between undertakings - Investigation by the Commission - Assessments of an economic nature - Discretion - Judicial review - Limits(Council Regulation No 4064/89, Art. 2)8. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Creation of a collective dominant position significantly impeding effective competition in the common market - Need for the Commission to take into account, in the course of its examination, the level of competition obtaining in the relevant market at the time when the transaction is notified(Council Regulation No 4064/89)9. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Creation or strengthening of a collective dominant position significantly impeding effective competition in the common market - Evidence of tacit collusion between economic operators - Stability of historic market shares(Council Regulation No 4064/89)10. Competition - Concentrations between undertakings - Assessment of compatibility with the common market - Creation of a collective dominant position significantly impeding effective competition in the common market - Stable demand displaying low volatility - Relevant factor in finding collective dominant position to exist(Council Regulation No 4064/89) Summary $$1. As regards the application of Regulation No 4064/89 on the control of concentrations between undertakings, a proper definition of the relevant market is a necessary precondition for the assessment of the effects on competition of the concentration notified. In that regard, the definition of the market in the products affected by the merger must take account of the overall economic context so as to make it possible to assess the actual economic power of the undertaking or undertakings in question and, for that purpose, it is necessary first to define the products which, although incapable of being substituted for other products, are sufficiently interchangeable with the undertaking's own products, both as regards their objective characteristics and the competitive conditions and the structure of supply and demand on the market.( see paras 19-20 )2. Where, for the purposes of applying Regulation No 4064/89 on the control of concentrations between undertakings, the Commission examines a possible collective dominant position, it must ascertain whether the concentration would have the direct and immediate effect of creating or strengthening a position of that kind, which is such as significantly and lastingly to impede competition in the relevant market. If there is no substantial alteration to competition as it stands, the merger must be approved.In the case of an alleged collective dominant position, the Commission is obliged to assess, using a prospective analysis of the reference market, whether the concentration which has been referred to it leads to a situation in which effective competition in the relevant market is significantly impeded by the undertakings involved in the concentration and one or more other undertakings which together, in particular because of factors giving rise to a connection between them, are able to adopt a common policy on the market and act to a considerable extent independently of their competitors, their customers, and also of consumers.( see paras 58-59 )3. A collective dominant position significantly impeding effective competition in the common market or a substantial part of it may thus arise as the result of a concentration where, in view of the actual characteristics of the relevant market and of the alteration in its structure that the transaction would entail, the latter would make each member of the dominant oligopoly, as it becomes aware of common interests, consider it possible, economically rational, and hence preferable, to adopt on a lasting basis a common policy on the market with the aim of selling at above competitive prices, without having to enter into an agreement or resort to a concerted practice within the meaning of Article 81 EC and without any actual or potential competitors, let alone customers or consumers, being able to react effectively.The prospective analysis of the market necessary in any assessment of an alleged collective dominant position must not only view that position statically at a fixed point in time - the point when the transaction takes place and the structure of competition is altered - but must also assess it dynamically, with regard in particular to its internal equilibrium, stability, and the question as to whether any parallel anti-competitive conduct to which it might give rise is sustainable over time.( see paras 61, 192 )4. Three conditions are necessary for the creation of a collective dominant position significantly impeding effective competition in the common market or a substantial part of it:- first, each member of the dominant oligopoly must have the ability to know how the other members are behaving in order to monitor whether or not they are adopting the common policy. In that regard, it is not enough for each member of the dominant oligopoly to be aware that interdependent market conduct is profitable for all of them but each member must also have a means of knowing whether the other operators are adopting the same strategy and whether they are maintaining it. There must, therefore, be sufficient market transparency for all members of the dominant oligopoly to be aware, sufficiently precisely and quickly, of the way in which the other members' market conduct is evolving;- second, the situation of tacit coordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market. It is only if all the members of the dominant oligopoly maintain the parallel conduct that all can benefit. The notion of retaliation in respect of conduct deviating from the common policy is thus inherent in this condition. In that context, the Commission must not necessarily prove that there is a specific retaliation mechanism involving a degree of severity, but it must none the less establish that deterrents exist, which are such that it is not worth the while of any member of the dominant oligopoly to depart from the common course of conduct to the detriment of the other oligopolists. For a situation of collective dominance to be viable, there must be adequate deterrents to ensure that there is a long-term incentive in not departing from the common policy, which means that each member of the dominant oligopoly must be aware that highly competitive action on its part designed to increase its market share would provoke identical action by the others, so that it would derive no benefit from its initiative;- third, it must also be established that the foreseeable reaction of current and future competitors, as well as of consumers, would not jeopardise the results expected from the common policy.( see paras 62, 195 )5. The prospective analysis which the Commission has to carry out in its review of concentrations involving collective dominance calls for close examination in particular of the circumstances which, in each individual case, are relevant for assessing the effects of the concentration on competition in the reference market.( see para. 63 )6. Where the Commission takes the view that a concentration between undertakings should be prohibited because it will create a situation of collective dominance, it is incumbent upon it to produce convincing evidence thereof. The evidence must concern, in particular, factors playing a significant role in the assessment of whether a situation of collective dominance exists, such as, for example, the lack of effective competition between the operators alleged to be members of the dominant oligopoly and the weakness of any competitive pressure that might be exerted by other operators.( see para. 63 )7. The basic provisions of Regulation No 4064/89 on the control of concentrations between undertakings, in particular Article 2 thereof, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, when the exercise of that discretion, which is essential for defining the rules on concentrations, is under review, the Community judicature must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations.( see para. 64 )8. The level of competition obtaining in the relevant market at the time when the concentration is notified is a decisive factor in establishing whether a collective dominant position has been created for the purposes of Regulation No 4064/89 on the control of concentrations between undertakings. As regards the assessment of whether a collective dominant position exists, one of the questions which the Commission is required to address is whether the concentration referred to it would result in effective competition in the relevant market being significantly impeded. If there is no significant change in the level of competition obtaining previously, the merger should be approved because it does not restrict competition.( see para. 82 )9. For the purpose of determining whether there is a collective dominant position, the stability of historic market shares is a factor conducive to the development of tacit collusion, inasmuch as it facilitates division of the market instead of fierce competition, each operator referring to its historic market share in order to fix its production in proportion thereto.( see para. 111 )10. Economic theory regards volatility of demand as something which renders the creation of a collective dominant position more difficult. Conversely, stable demand, thus displaying low volatility, is a relevant factor indicative of the existence of a collective dominant position, in so far as it makes deviations from the common policy (that is, cheating) more easily detectable, by enabling them to be distinguished from capacity adjustments intended to respond to expansion or contraction in a volatile market.( see para. 139 ) Parties In Case T-342/99,Airtours plc, represented by J. Swift QC and R. Anderson, Barristers, M. Nicholson, J. Holland and A. Gomes da Silva, Solicitors, with an address for service in Luxembourg,applicant,vCommission of the European Communities, represented by R. Lyal, acting as Agent, with an address for service in Luxembourg,defendant,APPLICATION for annulment of Commission Decision C(1999)3022 final of 22 September 1999 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case IV/M.1524 - Airtours/First Choice), published under number 2000/276/EC (OJ 2000 L 93, p. 1),THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Fifth Chamber, Extended Composition),composed of: P. Lindh, President, R. García-Valdecasas, J.D. Cooke, M. Vilaras and N.J. Forwood, Judges,Registrar: J. Palacio González, Administrator,having regard to the written procedure and further to the hearing on 11 October 2001,gives the followingJudgment Grounds Facts and procedure1 On 29 April 1999, Airtours plc, a United Kingdom company whose main activity is as a tour operator and supplier of package holidays, announced its intention to acquire all the shares in the United Kingdom tour operator, First Choice plc, one of its competitors.2 On the same day, Airtours notified the proposed merger to the Commission pursuant to Article 4 of Council Regulation (EEC) No 4064/89/EEC of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p.1, corrected version in OJ 1990 L 257, p. 13), as most recently amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1) (hereinafter Regulation No 4064/89).3 In its decision of 3 June 1999, the Commission found that the merger gave rise to serious doubts as to its compatibility with the common market and decided to initiate the investigation procedure in accordance with Article 6(1)(c) of Regulation No 4064/89.4 On 9 July 1999, the Commission sent the applicant a statement of objections under Article 18 of Regulation No 4064/89, in which it set out the reasons why it took the view, prima facie, that the proposed merger would give rise to a collective dominant position in the United Kingdom short-haul foreign package holiday market. The applicant replied to the statement of objections on 25 July 1999.5 A hearing was held before the Commission Hearing Officer on 28 and 29 July 1999, pursuant to Articles 14, 15 and 16 of Commission Regulation (EC) No 447/98 of 1 March 1998 on the notifications, time limits and hearings provided for in Regulation No 4064/89 (OJ 1998 L 61, p. 1).6 On 7 September 1999 the applicant submitted a set of undertakings in accordance with Article 8(2) of Regulation No 4064/89 in order to allay the competition concerns which had been identified.7 On 9 September 1999 the Advisory Committee on concentrations met and delivered its opinion on the merger and on the undertakings put forward by the applicant.8 A meeting was held on 15 September 1999, which was attended by representatives of the applicant and of the Commission, following which the applicant submitted a revised set of undertakings.9 By decision of 22 September 1999 (Case IV/M.1524 - Airtours/First Choice) (Decision C(1999)3022 final, published under Number 2000/276/EC (OJ 2000 L 93, p. 1); hereinafter the Decision), the Commission declared that the concentration was incompatible with the common market and the operation of the European Economic Area under Article 8(3) of Regulation No 4064/89 on the ground that it would create a collective dominant position in the United Kingdom market for short-haul foreign package holidays, as a result of which competition would be significantly impeded in the common market. The Commission stated in the Decision that the undertakings proposed by Airtours on 7 September 1999 would not prevent the creation of a collective dominant position and that the undertakings put forward on 15 September 1999 were submitted too late to be considered at that stage in the procedure.Procedure and forms of order sought by the parties10 On 2 December 1999 the applicant brought the present action.11 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance decided to open the oral procedure and, by way of measures of organisation of procedure, the applicant and the Commission were asked to produce certain documents and reply in writing to various questions.12 By letters from the Commission of 27 July 2001 and 3 August 2001, and by letter from the applicant of 31 August 2001, the parties complied with the measures of organisation of procedure taken by the Court.13 The parties presented oral argument and replied to the questions put to them by the Court at the hearing on 11 October 2001.14 The applicant claims that the Court should:- annul the decision;- order the Commission to pay the costs.15 The Commission contends that the Court should:- dismiss the action;- order the applicant to pay the costs.Substance16 The applicant relies on four pleas in law in support of its application. The first plea alleges that there were manifest errors of assessment in the definition of the relevant product market and infringement of Article 253 EC. The second plea alleges infringement of Article 2 of Regulation No 4064/89, breach of the principle of legal certainty in so far as the Commission applied a new and incorrect definition of collective dominance in its assessment of the present case, and infringement of Article 253 EC. The third plea alleges infringement of Article 2 of Regulation No 4064/89 - in that the Commission found that the transaction created a collective dominant position - together with infringement of Article 253 EC. The fourth plea alleges infringement of Article 8(2) of Regulation No 4064/89 and breach of the principle of proportionality inasmuch as the Commission did not accept the undertakings proposed by the applicant.The first plea alleging errors in the definition of the relevant product market and infringement of Article 253 ECA - The Decision17 The definition of the relevant product market in the United Kingdom foreign package holiday industry is the only definition challenged by the applicant. The Decision identifies two separate markets, the market for package holidays to long-haul destinations (long-haul package holidays) and that for package holidays to short-haul destinations (short-haul package holidays). In that connection, it is specified in the Decision that the travel industry considers the long-haul sector to comprise all destinations involving a flight time from the United Kingdom substantially in excess of three hours, other than flights to the islands in the Eastern Mediterranean or the Canary Islands, which may take up to around four hours. As a result, all European (mainland and islands) and North African holiday destinations fall into the short-haul category, in contrast to those destinations in, for example, the Caribbean, the Americas or South-East Asia, in respect of which the flight times are substantially longer (typically twice as long or more) (paragraphs 10 to 13 of the Decision).18 At paragraphs 16 to 28, the Decision sets out the reasons which led the Commission to conclude that the differences between long and short-haul package holidays are, from the point of view of competition, more significant than the similarities and are such as to justify defining separate markets for the purposes of an appraisal of the concentration notified. Those reasons are the following:(a) first, for airlines (and, therefore, for vertically integrated tour operators) there is limited scope for substitution between long-haul and short-haul flights, given that there is little scope for using the same aircraft for both short and long-haul destinations and given the operating costs for larger as compared with smaller aircraft and the difficulties that charter airlines (including those of the parties to the merger) must overcome if they attempt substantially to reconfigure [their] fleet as between long-haul and short-haul capabilities, namely, the need to make capital investment, the time necessary to do so and the difficulty of leasing aircraft on a short-term basis, inasmuch as charter airlines (including those of the parties) own most of their aircraft or lease them on relatively long leases (typically a lease of five years) in order to reduce costs, maintain quality and ensure continuity of supply (paragraphs 16 to 18 of the Decision);(b) second, the fact that from the point of view of the ultimate consumer there are a number of significant differences between short and long-haul package holidays:(i) the image or idea of the holiday: long-haul packages seem more exotic and therefore appeal to single people or couples without children; short-haul package holidays, for example to Mediterranean resorts, are of more interest to families (paragraph 20 of the Decision);(ii) the time when holidays are taken: long-haul package holidays are less suited to the needs of United Kingdom consumers travelling en famille who, for the most part, go on foreign package holidays during the summer season (roughly, mid-July to the end of August) so as to coincide with the school holidays (and in some areas, factory closures) (paragraph 20 of the Decision);(iii) transfer time: longer flight times may deter some consumers from choosing a long-haul package holiday, even if it is comparable in other respects to a short-haul package, for example as regards weather, location, price, visas, medical requirements and the like (paragraph 21 of the Decision);(iv) lack of price substitutability between short and long-haul destinations: prices are appreciably higher for long-haul package holidays and there is only limited convergence between prices for that kind of holiday and prices for comparable short-haul package holidays. Although prices for the two kinds of holiday, particularly at certain times of the year (for example, when the weather is bad) can sometimes be the same or not very different, that very limited overlap is not sufficient to constrain prices throughout the short-haul market, since the long-haul holidays concerned are regarded as effective substitutes by only a very small proportion of customers (paragraphs 22 to 26 of the Decision).B - Definition of the relevant product market19 The Court notes, to begin with, that, as regards the application of Regulation No 4064/89 as envisaged in this case, a proper definition of the relevant market is a necessary precondition for the assessment of the effects on competition of the concentration (see, to that effect, Joined Cases C-68/94 and C-30/95 France and Others v Commission (Kali & Salz) [1998] ECR I-1375, paragraph 143).20 The definition of the market in the products affected by the merger must take account of the overall economic context so as to make it possible to assess the actual economic power of the undertaking or undertakings in question and, for that purpose, it is necessary first to define the products which, although incapable of being substituted for other products, are sufficiently interchangeable with the undertaking's own products, both as regards their objective characteristics and the competitive conditions and the structure of supply and demand on the market (see, to that effect, Case C-333/94 P Tetra Pak v Commission [1996] ECR I-5951, paragraphs 10 and 13, and Case T-83/91 Tetra Pak v Commission [1994] ECR II-755, paragraph 63).21 The applicant challenges the definition of the relevant product market given in the Decision. Rather than limiting the relevant market to that for short-haul foreign package holidays, the Commission should have defined it as the market comprising all foreign package holidays, including long-haul packages. The applicant complains that the Commission has departed from previous practice regarding the definition of the foreign package holiday market and maintains that the Commission's assessment of demand-side and supply-side substitutability is incorrect. As a result of that flaw in the Commission's reasoning the Decision is vitiated by manifest errors of assessment and thus an error of law.22 As regards the Commission's proposition that there is no demand-side substitutability between long and short-haul package holidays, the applicant submits that the Commission's arguments concerning, first, the various product characteristics and, second, the differences in average prices for long and short-haul package holidays are mistaken.23 It refers, first, to product characteristics and challenges the Commission's contention that long-haul holidays are more exotic, are less suitable for families and involve longer flight times. Thus, short-haul destinations, such as Turkey or North Africa, are more exotic than long-haul destinations, such as Florida or the Dominican Republic, which are more family destinations. Travel time to the resort can be as long for short-haul destinations as for long-haul, since what matters is total travel time, including check-in and transfers, rather than flight time in the strict sense. Finally, the applicant claims that variety in the type of holidays offered by tour operators to take account of different lifestyles (for example, family or non-family) and variety of tastes (in particular, so far as accommodation, food, activities, interests and the like are concerned) exists within both the long-haul holiday segment and the short-haul holiday segment.24 Second, regarding difference in holiday prices, the applicant argues that it is irrelevant to point out that average prices for long-haul destinations exceed those for short-haul destinations when, as in this instance, the products are clearly differentiated. The applicant also points to a price convergence between the two types of holidays, since some short-haul holidays are in the same price-range as some long-haul holidays.25 The Court notes that it is apparent from the documents before it that the Commission took account of consumer preferences, average flight time, the level of average prices and the limited interchangeability of the aircraft used for each type of destination in reaching its conclusion that short-haul package holidays belong to a separate market from that to which long-haul packages belong. The Commission came to that conclusion, while not, however, disputing that long-haul package holidays are becoming increasingly popular with consumers or that the market studies cited by the applicant in its reply to the statement of objections (see British National Travel Survey 1998, volume 4, The 1998 Holiday Market, and Mintel, Holidays: The booking procedure, 1997) illustrate the tendency of United Kingdom consumers to go further afield for their holidays and particularly to the other side of the Atlantic. Nor did it question the fact that a substantial number of short-haul holidaymakers have also taken a long-haul holiday in the last five years (36%) and that a much greater number (62%) are very or fairly likely to do so over the next five years, as the applicant has indicated in Table 2.4 in its reply to the statement of objections.26 The Court must therefore consider whether the Commission made a manifest error of assessment when it concluded that those factors were reasons for defining the relevant product market narrowly and excluding long-haul package holidays, which it did not regard as sufficiently interchangeable with short-haul package holidays.27 First, concerning the average flight time, the Commission pointed out - and was not challenged by the applicant on this point - the significant difference between the average flight time to long-haul destinations, which is over eight hours, and the average flight time to short-haul destinations, which is usually less than three hours (from the United Kingdom, flights to the islands in the Eastern Mediterranean or the Canary Islands may take up to around four hours). The applicant argues that, in practice, what matters to consumers is not the flight time but the total travel time from the home town to the resort. However, it cannot rely on that argument to play down the indisputable difference between average flight times (three hours on average for flights to short-haul destinations compared with eight hours on average for flights to long-haul destinations), since transfer time from the airport to the resort may in fact also vary, whatever the destination.28 Second, as regards the importance to be attached to the prices of the two types of holiday and their impact on consumers, the Commission found that differences between the average price of a long-haul package holiday and that of a short-haul package are such as to warrant separate market definition. It should be observed in that regard that the Commission accepts that there is a degree of convergence between prices for the two kinds of holiday. However, it contends that the convergence is not such that the two products may be regarded as substitutes or that the prices of one constrain prices of the other.29 At paragraph 23 of the Decision the Commission explains its reasons for finding that there was no price substitutability between the two kinds of holiday. It considers the prices offered to the consumer to be significantly higher for long-haul package holidays, as reflected in the information supplied by the applicant in Annex 1a to its response of 29 June 1999 to the Commission's request for information.30 First, the Commission found that there was a difference of over 100% between the average brochure price of long-haul package holidays for the 1998 summer season and that of short-haul packages. It also considered the question comparing similar packages (14 nights, 3-star, self-catering) in Florida and Spain and found that the latter cost on average about half the price of the former. A similar comparison between Florida and Greece or the Canaries gave broadly equivalent results (a difference of around 30 to 40% for catered accommodation). The Decision gives detailed examples of price comparisons between certain short and long-haul tourist destinations offered in the Airtours brochure, which show that significant price differentials exist between the two kinds of destination.31 The applicant disputes the relevance of average prices as a means of comparing the effect of prices on consumers' decisions where the products are clearly differentiated. It submits that what is significant for defining the relevant product market is the behaviour of customers at the margin and the question of whether they would be prepared to substitute long-haul package holidays for short-haul packages if the price of the latter were to rise. The Commission acknowledges that average prices do not necessarily reflect prices at the margin but is of the view that, where - as in the present case - the differences are so significant, it is unlikely that a sufficient range of genuinely comparable long-haul package holidays is available at prices which are sufficiently similar to constrain prices of short-haul packages, since the long-haul packages concerned are regarded as genuine substitutes by only a very small proportion of the customers.32 It is therefore appropriate to consider whether the Commission made a manifest error of assessment in relation to the significance of the margin, that is, the number of customers prepared to react to a price increase in short-haul package holidays by purchasing a long-haul package holiday, as compared with the total number of customers who habitually purchase a short-haul package holiday from tour operators.33 In that regard, the Court notes in limine that it is common ground between the parties that United Kingdom consumers of foreign package holidays are generally very sensitive to the prices of the products.34 The Commission's argument is set out at paragraph 24 of the Decision, in which it acknowledges that prices of some holidays at certain long-haul destinations, particularly at certain times of the year (e.g. during periods when bad weather is expected) match or come close to those at the upper end (summer peak, better quality accommodation) of the price/quality scale for short-haul ones. It nevertheless went on to conclude that it is not to be expected that this very limited overlap would suffice to constrain prices throughout the short-haul market, since the long-haul holidays concerned would not be regarded as effective substitutes - either on price or other grounds - by more than a very small proportion of customers.35 In support of that finding, the Commission points out at paragraph 25 of the Decision that none of the long-haul destinations cited by the applicant in its reply to the statement of objections (Table 2.6) in support of its view on price convergence was in the same price-range as that which it had previously supplied.36 An examination of Annexes 1a and 2 to the applicant's letter of 29 June 1999 responding to the Commission's requests for information of 15 and 21 June 1999 (documents produced by the Commission in the context of measures of organisation of procedure, see Annex 6b/7b to the first set of documents produced by the Commission) reveals that the Commission was right in holding that the differences in average prices are significant, especially if the comparison relates to the same season (summer or winter). Annex 1a in fact shows that for the summer seasons of 1996, 1997 and 1998, average prices per week for short-haul package holidays were, respectively, GBP 354, GBP 378 and GBP 369, while the corresponding figures for long-haul packages were, respectively, GBP 676, GBP 757 and GBP 781.37 Furthermore, a review of those documents establishes that the Commission's assessment at paragraph 25 of the Decision is well founded. It is apparent from Annex 2 to the applicant's letter of 29 June 1999 that, for short-haul destinations, the applicant had indicated that typical holidays, for example a week in a 3-star hotel, half board, in Majorca, in July or August 2000, cost GBP 485. The figures are appreciably lower than the figures in Table 2.6 on page 21 of the reply to the statement of objections, which is referred to at paragraph 25 of the Decision. Only the prices of holidays offered for December 1999 to Jamaica (GBP 699), Mexico (GBP 649) and Sri Lanka (GBP 699) are closer to the average figures for short-haul destinations applying for the summer season 2000.38 Likewise, the documents produced by the applicant bear out the Commission's argument. As stated at paragraph 26 of the Decision, it can be seen that in the BA Holidays advertisement for long-haul package holidays produced by the applicant at the hearing before the Commission (see paragraph 26 of the Decision, footnote 23), four destinations were offered at very competitive prices: Barbados (GBP 399), Tobago (GBP 499), Grenada (GBP 529) and St Lucia (GBP 799). However, as the Commission points out, only the package to St Lucia included food, the other holidays included only the flight and the accommodation. In addition, the prices were low-season prices valid for September and October 1999.39 It should be added that in its reply of 29 June 1999 to the Commission's enquiries of 15 and 21 June 1999 the applicant cited as an example of one of its typical products a summer holiday in Majorca in a 3-star hotel, costing approximately GBP 485, plus a flight supplement.40 Further, the applicant acknowledged at the hearing that it publishes separate brochures for short and long-haul package holidays.41 In those circumstances, the Commission's proposition that only a small proportion of the customers of the main United Kingdom tour operators regard long-haul package holidays as substitutes in terms of value for money for short-haul package holidays cannot be regarded as manifestly incorrect.42 The other arguments advanced by the applicant do not invalidate that finding.43 The applicant argues that industry-wide studies treat long-haul package holidays as part of the mainstream. It cites, in particular, Holidays - The Booking Procedure, a study by Mintel, in which the point is made that long-haul has broken into the mainstream holiday market. While based on a desire to travel further and see the world outside Europe, pricing has inevitably come into play as a key element in the consumer's choice. In addition, the Commission should have taken into account the statements of third party tour operators obtained in the course of its enquiry, which also show the growing importance of substitution between long and short-haul package holidays.44 However, in the circumstances of the present case and with reference to market definition, the fact that the Commission did not consider decisive (i) changing consumer tastes, (ii) the growing importance of substitutability between long-haul package holidays to destinations such as Florida and the Dominican Republic, and short-haul packages or (iii) the growth of the market for long-haul packages over recent years is not sufficient to support a finding that the Commission exceeded the bounds of its discretion in concluding that short-haul package holidays are not within the same product market as long-haul packages.45 Third, as to the applicant's arguments relating to supply-side substitutability and the interchangeability of the aircraft used on short and long-haul routes, the Commission cannot be criticised for having formed the view that the fact that certain dual-purpose aircraft, such as the Boeing 757, may be used to some extent both for long and short-haul destinations was not sufficiently decisive, given the other findings made concerning demand-side product substitutability, to lead it to adopt a wider market definition. In that regard, it is appropriate to refer, as the applicant itself has done, to paragraph 13 of the Commission Notice on the definition of the relevant market for the purposes of Competition Law (OJ 1997 C 372, p. 5):From an economic point of view, for the definition of the relevant market, demand substitution constitutes an immediate and effective disciplinary force on the suppliers of a given product, in particular in relation to their pricing decisions.46 Finally, the applicant cannot rely on a failure to state reasons in relation to the definition of the relevant market.47 The Commission devoted a significant part of the Decision (paragraphs 5 to 28) to explaining why it considered the relevant market to be limited to the market for short-haul package holidays. The Decision thus discloses, in a clear and unequivocal fashion, the Commission's reasoning relating to the definition of the relevant market, in such a way as to enable the Community Courts to exercise their power of review and the persons concerned to be aware of the reasons for the measure in order to defend their rights (see Case C-350/88 Delacre and Others v Commission [1990] ECR I-395, paragraph 15).48 It follows that the first plea must be rejected as unfounded.The second plea alleging infringement of Article 2 of Regulation No 4064/89, breach of the principle of legal certainty and infringement of Article 253 EC inasmuch as the Commission applied an incorrect definition of collective dominance in its appraisal of the present case49 The applicant complains that the Commission, for the purposes of the Decision, applied a new and incorrect definition of collective dominance, which is set out generally at paragraphs 51 to 56 of the Decision, departing from its previous decisions, from Community case-law and from sound economic principles, and also infringing Article 2 of Regulation No 4064/89. The Commission thereby also acted in breach of the principle of legal certainty and Article 253 EC, inasmuch as the Decision is vitiated by a defective statement of reasons.50 The Commission denies that it adopted a new approach and maintains that it applied the test for collective dominance already used by it in previous cases and approved by the Court of First Instance in its judgment in Case T-102/96 Gencor v Commission [1999] ECR II-753.51 It is appropriate to point out that the abovementioned paragraphs of the Decision (51 to 56) are in Part VA of the Decision, in which the Commission sets out, purely by way of introduction and summary, the reasons which led it to conclude that the concentration would give rise to the creation of a dominant position and in which it replies generally to observations made by the applicant during the administrative procedure concerning certain of the characteristics of a collective dominant position.52 In the introduction to its legal analysis of the concentration, the Commission merely sketches the broad outlines of its findings on the effects of the merger, which are subsequently explained and developed in detail at paragraphs 57 to 180 of the Decision.53 Since the Decision is a measure applying Article 2 of Regulation No 4064/89 to a specific concentration, the Court must, in its review of the legality of the Decision, confine itself to the position adopted by the Commission in relation to the transaction as notified, that is to say, it must examine the way in which the law has been applied to the facts and adjudicate on the merits of the Commission's findings concerning the effects of the concentration on competition. In this case, the specific findings relating to the impact of the transaction on competition, which led the Commission to conclude that the concentration should be prohibited, are stated and developed in paragraphs 57 to 180 of the Decision and are challenged by the applicant in its third plea.54 It is therefore necessary to consider, first, the merits of the arguments raised by the applicant in its third plea and, at the same time, to take into account its arguments concerning the Commission's general findings at paragraphs 51 to 56 of the Decision.The third plea alleging (i) infringement of Article 2 of Regulation No 4064/89 in that the Commission found that the concentration would create a collective dominant position, and (ii) infringement of Article 253 EC55 By this plea, the applicant seeks to show that the Commission made an error of assessment in deciding that the proposed merger should be prohibited. It claims that the Decision does not prove to the requisite legal standard that the outcome of the transaction would be the creation of a collective dominant position of such a kind as significantly to impede competition in the relevant market. In prohibiting the merger, the Commission thus infringed Article 2 of Regulation No 4064/89.A - General considerations56 Under Article 2(2) of Regulation No 4064/89, a concentration which does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it is to be declared compatible with the common market.57 Under Article 2(3) of the Regulation, a concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it is to be declared incompatible with the common market.58 Where, for the purposes of applying Regulation No 4064/89, the Commission examines a possible collective dominant position, it must ascertain whether the concentration would have the direct and immediate effect of creating or strengthening a position of that kind, which is such as significantly and lastingly to impede competition in the relevant market (see, to that effect, Gencor v Commission, paragraph 94). If there is no substantial alteration to competition as it stands, the merger must be approved (see, to that effect, Case T-2/93 Air France v Commission [1994] ECR II-323, paragraphs 78 and 79, and Gencor v Commission, paragraph 170, 180 and 193).59 It is apparent from the case law that in the case of an alleged collective dominant position, the Commission is ... obliged to assess, using a prospective analysis of the reference market, whether the concentration which has been referred to it leads to a situation in which effective competition in the relevant market is significantly impeded by the undertakings involved in the concentration and one or more other undertakings which together, in particular because of factors giving rise to a connection between them, are able to adopt a common policy on the market and act to a considerable extent independently of their competitors, their customers, and also of consumers (Kali & Salz, cited above, paragraph 221, and Gencor v Commission, paragraph 163).60 The Court of First Instance has held that: There is no reason whatsoever in legal or economic terms to exclude from the notion of economic links the relationship of interdependence existing between the parties to a tight oligopoly within which, in a market with the appropriate characteristics, in particular in terms of market concentration, transparency and product homogeneity, those parties are in a position to anticipate one another's behaviour and are therefore strongly encouraged to align their conduct in the market, in particular in such a way as to maximise their joint profits by restricting production with a view to increasing prices. In such a context, each trader is aware that highly competitive action on its part designed to increase its market share (for example a price cut) would provoke identical action by the others, so that it would derive no benefit from its initiative. All the traders would thus be affected by the reduction in price levels. (Gencor v Commission, paragraph 276).61 A collective dominant position significantly impeding effective competition in the common market or a substantial part of it may thus arise as the result of a concentration where, in view of the actual characteristics of the relevant market and of the alteration in its structure that the transaction would entail, the latter would make each member of the dominant oligopoly, as it becomes aware of common interests, consider it possible, economically rational, and hence preferable, to adopt on a lasting basis a common policy on the market with the aim of selling at above competitive prices, without having to enter into an agreement or resort to a concerted practice within the meaning of Article 81 EC (see, to that effect, Gencor v Commission, paragraph 277) and without any actual or potential competitors, let alone customers or consumers, being able to react effectively.62 As the applicant has argued and as the Commission has accepted in its pleadings, three conditions are necessary for a finding of collective dominance as defined:- first, each member of the dominant oligopoly must have the ability to know how the other members are behaving in order to monitor whether or not they are adopting the common policy. As the Commission specifically acknowledges, it is not enough for each member of the dominant oligopoly to be aware that interdependent market conduct is profitable for all of them but each member must also have a means of knowing whether the other operators are adopting the same strategy and whether they are maintaining it. There must, therefore, be sufficient market transparency for all members of the dominant oligopoly to be aware, sufficiently precisely and quickly, of the way in which the other members' market conduct is evolving;- second, the situation of tacit coordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market. As the Commission observes, it is only if all the members of the dominant oligopoly maintain the parallel conduct that all can benefit. The notion of retaliation in respect of conduct deviating from the common policy is thus inherent in this condition. In this instance, the parties concur that, for a situation of collective dominance to be viable, there must be adequate deterrents to ensure that there is a long-term incentive in not departing from the common policy, which means that each member of the dominant oligopoly must be aware that highly competitive action on its part designed to increase its market share would provoke identical action by the others, so that it would derive no benefit from its initiative (see, to that effect, Gencor v Commission, paragraph 276);- third, to prove the existence of a collective dominant position to the requisite legal standard, the Commission must also establish that the foreseeable reaction of current and future competitors, as well as of consumers, would not jeopardise the results expected from the common policy.63 The prospective analysis which the Commission has to carry out in its review of concentrations involving collective dominance calls for close examination in particular of the circumstances which, in each individual case, are relevant for assessing the effects of the concentration on competition in the reference market (Kali & Salz, paragraph 222). As the Commission itself has emphasised, at paragraph 104 of its decision of 20 May 1998 Price Waterhouse/Coopers & Lybrand (Case IV/M.1016) (OJ 1999 L 50, p. 27), it is also apparent from the judgment in Kali and Salz that, where the Commission takes the view that a merger should be prohibited because it will create a situation of collective dominance, it is incumbent upon it to produce convincing evidence thereof. The evidence must concern, in particular, factors playing a significant role in the assessment of whether a situation of collective dominance exists, such as, for example, the lack of effective competition between the operators alleged to be members of the dominant oligopoly and the weakness of any competitive pressure that might be exerted by other operators.64 Furthermore, the basic provisions of Regulation No 4064/89, in particular Article 2 thereof, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature, and, consequently, when the exercise of that discretion, which is essential for defining the rules on concentrations, is under review, the Community judicature must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations (Kali & Salz, paragraphs 223 and 224, and Gencor v Commission, paragraphs 164 and 165).65 Therefore, it is in the light of the foregoing considerations that it is necessary to examine the merits of the grounds relied on by the applicant to show that the Commission made an error of assessment in finding that the conditions for, or characteristics of, collective dominance would exist were the transaction to be approved.B - The Decision66 The Decision identifies two types of players on the relevant market (see paragraphs 72 and 75), the large tour operators on the one hand, and the secondary or small tour operators on the other:- the major tour operators are characterised by their relatively large size - each of them having a market share exceeding 10% (according to the Commission's data, Thomson accounts for 27% of sales, Airtours for 21%, Thomas Cook for 20% and First Choice for 11%, that is, overall for 79% of sales. On Airtours' figures, Thomson accounts for 30.7% of sales, Thomas Cook for 20.4%, Airtours for 19.4% and First Choice for 15%, that is, overall for 85.5% of sales). A further characteristic is that they are all integrated both upstream (operation of charter airlines) and downstream (travel agencies);- the secondary operators are smaller, none of them having a market share in excess of 5%, and in general they do not own either their own charter airlines or their own travel agencies. Apart from Cosmos (which, since it is linked to Monarch, one of the major charter airlines in the United Kingdom, is exceptional among secondary operators where there is no vertical integration), Manos and Kosmar, which are the fifth, sixth and seventh tour operators accounting respectively for 2.9%, 1.7% and 1.7% of sales, there are several hundred competing small tour operators, none of them accounting for more than 1% of sales.67 It is apparent from the Decision (see the summary of the Commission's appraisal at paragraphs 168 to 172 of the Decision) that the Commission formed the view that the proposed merger would create a dominant position in the United Kingdom market for short-haul foreign package holidays, the effect of which would be to impede competition significantly in the common market for the purposes of Article 2(3) of Regulation No 4064/89, and that it would do so for the following reasons:- the proposed merger would remove competition between the three large players remaining after the concentration (combined Airtours/First Choice, Thomson and Thomas Cook). Because of the structural features of the market and the way that it operates, which is dependent on capacity decisions, and because of the high degree of market concentration (the three remaining large tour operators would have about 80% of the market if the operation took place) (Decision, paragraph 169), they would no longer have an incentive to compete with each other;- the operation would increase the degree of transparency and interdependence which already exists, with the result that the three remaining large tour operators would have every interest in adopting parallel conduct so far as the decision as to how many package holidays to put onto the market is concerned, reducing capacity below what is required as a result of market trends (Decision, paragraph 170);- an examination of past competition bears out this conclusion, since it demonstrates that the relevant market already had a tendency towards collective dominance (Decision, paragraphs 128 to 138);- deterrents or scope for retaliation exist, which are connected with the fact that if one of the three remaining large tour operators decided not to restrict capacity, there would be a risk that the two others would do the same, which would result in oversupply and serious financial consequences for each of the operators (Decision, paragraph 170);- the smaller operators or new entrants, that is to say current and future competitors, would be further marginalised as a result of the operation, since they would lose First Choice both as a supplier of airline seats and as a potential distribution channel. In any event, those operators would not have the ability to offset any reductions in capacity brought about by the three remaining large tour operators (Decision, paragraph 171).68 So far as the effects of the merger on effective competition are concerned, the Commission found that the effect of restricting overall capacity put onto the market would be to tighten the market and bring about an increase in the prices and profits of the members of the dominant oligopoly (see, in particular, paragraph 56 and the final part of paragraph 168 of the Decision).C - The Commission's alleged errors of assessment69 The applicant argues that, contrary to the Commission's contention, the factors put forward by the Commission in the Decision to characterise the situation as one of collective dominance were not present at the time of the notification and would not occur were the merger to proceed.70 More specifically, the applicant claims, first, that, given the characteristics of the relevant market, the Commission has not proved conclusively that, were the merger to proceed, the three remaining large tour operators would have an incentive to cease competing with each other.71 Second, it argues that, even supposing that such an incentive did exist, the absence of any deterrents or adequate means of retaliation would prevent the emergence of the alleged dominant oligopoly.72 Third, and in any event, smaller operators and new entrants, namely current and future competitors, would challenge any capacity restrictions brought into effect and consumers would react as a result, so that the three remaining major operators would not be able, as a result of the concentration, to act together to any appreciable extent independently of other competitors and consumers.73 Fourth, the applicant claims that the Commission incorrectly assessed the impact of the merger on competition in the relevant market.1. Preliminary observations74 The applicant's first point is that the natural tendency of operators in the relevant market to set capacity cautiously has by no means prevented them from engaging in competition with each other in the past and that there is no reason to believe that proceeding with the proposed merger would put an end to that competition by creating a situation in which the three remaining large tour operators have a collective dominant position.75 The Decision is particularly elliptical in its description of the competitive situation at the time of the notification. However, it is not disputed that the Commission concluded that the proposed merger would create, rather than strengthen, a dominant position on the market (Decision, paragraph 194). The Commission has confirmed in its pleadings that it does not contend that that there was a situation of oligopolistic dominance at the time of the notification and that what is at issue is the creation, and not the strengthening, of a collective dominant position. Thus, it does not deny that prior to the proposed merger the major tour operators did not find it possible or profitable to restrict capacity in order to increase prices and revenues.76 It follows that in this instance the starting point for the Court's examination must be a situation in which - in the Commission's own view - the four major tour operators are not able to adopt a common policy on the market and hence do not face their competitors, their commercial associates and consumers as a single entity, and in which they thus do not enjoy the powers inherent in a collective dominant position.77 In those circumstances, it was for the Commission to prove that, in view of the characteristics of the United Kingdom market for operating short-haul package holidays and in light of the notified operation, approval of the latter would have resulted in the creation of a collective dominant position restrictive of competition, inasmuch as Airtours/First Choice, Thomson and Thomas Cook would have had the ability, which they did not previously have, to adopt a common policy on the market by setting capacity lower than would normally be the case in a competitive market already distinguished by a degree of caution in matters of capacity.78 It is therefore necessary to examine the pleas and arguments raised by the applicant in this case in the light of the foregoing considerations.2. The finding that were the merger to proceed, the three remaining large tour operators would have an incentive to cease competing with each other79 The applicant submits that the finding that if the merger proceeded, the three remaining large tour operators would have an incentive to cease competing with each other is erroneous because the Commission, first, did not take into account, as it should have done, the competition obtaining between the leading tour operators at the time of the notification and, second, made errors in its appraisal of the characteristics of the market on which it relied as evidence that a collective dominant position would be created, in particular, the past and prospective development of demand, demand volatility and the degree of market transparency.(a) The assessment of competition between the leading tour operators80 The applicant submits that the analysis of competition obtaining prior to the notification (referred to as past competition) is of fundamental importance in this instance, since the main incentives invoked by the Commission, namely alleged capacity rigidities, are inherent in the way the market normally operates, concern the industry as a whole and would not be affected were the proposed merger to proceed. The relevant market has been operating competitively in recent years and the applicant challenges the Commission's assertion that there is already a tendency towards collective dominance. In particular, it criticises the way in which the Commission took into consideration the alleged tendency towards collective dominance before examining the implementation of the proposed merger and the volatility of historic market shares.81 The Commission contends that the way in which the market previously operated and the fact that competition obtained in the past are not significant factors, since the Decision is based on the finding that a collective dominant position would be created as a result of the proposed operation, that is to say that market conditions would be altered in such a way that previously examined incentives and conduct would no longer be an appropriate guide in determining how operators would react in the new market situation. Therefore, it argues that the crucial question is whether the proposed operation would alter current market conditions in such a way that the leading operators would no longer act in the same way as they have done in the past. Thus, it does not follow that because the market was competitive with four large tour operators, it would continue to be so if the number were reduced to three. The Commission nevertheless challenges the arguments put forward by the applicant to show that competition among the main operators has been, and will continue to be, keen.82 The Court observes, however, that one of the questions which the Commission is required to address where there is alleged to be collective dominance is whether the concentration referred to it would result in effective competition in the relevant market being significantly impeded (Kali and Salz, paragraph 221, and Gencor v Commission, paragraph 163). If there is no significant change in the level of competition obtaining previously, the merger should be approved because it does not restrict competition (see paragraph 58 above). It follows that the level of competition obtaining in the relevant market at the time when the transaction is notified is a decisive factor in establishing whether a collective dominant position has been created for the purposes of Regulation No 4064/89.83 As the applicant has submitted, an analysis of competition prior to the notification is particularly important in this instance, since the purpose of the tacit coordination likely, in the Commission's submission, to follow the concentration, would be to restrict capacity put onto the market by the three remaining integrated tour operators. The restriction would involve more than their natural caution in capacity planning, which the Commission itself considers inherent in the way that the market normally operates.(i) The tendency towards collective dominance alleged to exist prior to the proposed merger84 First, it must be observed that, although the Commission devoted one section of the Decision to an examination of Past Competition (paragraphs 128 to 138), a detailed analysis of that section reveals that, in fact, the Commission does not there express an opinion on the degree of competition obtaining in the market. It confines itself to setting out (paragraphs 128 to 138) a number of circumstances or factors which have been observed in the market in the years leading up to the notification and concludes (Decision, paragraph 138) that there is evidence that there is already a tendency towards collective dominance in the market at present (most especially as regards the setting of capacity). However, those passages of the Decision make no mention of any reduced level of competition in the market prior to the notification.- The fact that the large tour operators take a cautious approach to capacity planning and take particular note of the estimates of the main competitors85 At paragraphs 135 and 136 of the Decision, the Commission explains that the large tour operators adopt a cautious approach to capacity planning and take particular note of the estimates of their main competitors (the Decision cites, at paragraph 136, certain statements made by senior executives at the leading United Kingdom integrated tour operators, which illustrate that cautious approach to planning). In the preceding paragraph (paragraph 135), the Decision describes an episode which took place in the summer of 1995, which, the Commission contends, illustrates the consequences of oversupply in the market: during the 1994 planning period, all the tour operators overestimated demand for the summer season 1995 and were left with unsold capacity, which had to be cleared by means of heavy discounting, something which led to them suffering heavy losses.86 The applicant claims that the major tour operators cannot be criticised for adopting a cautious approach to capacity planning, by taking particular note of the estimates of the other leading operators' plans, since the Community Courts have recognised that the requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors (Joined Cases 40/73, 41/73, 42/73, 43/73, 44/73, 45/73, 46/73, 47/73, 48/73, 50/73, 54/73, 55/73, 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraphs 173 and 174). It does not consider such caution to be incompatible with aggressive competition to maintain or increase its market share at the expense of its main competitors. In that respect, the applicant cites the statements made by the main tour operators describing their ambitions to grow.87 The Commission contends that the intentions ascribed to the main tour operators by the applicant reflect the situation prior to the proposed merger and thus relate to different circumstances. It does not contend that there was previously a situation of dominant oligopoly. Furthermore, the aggressive growth to which certain statements refer had in the past been, and was in the future to be, carried out through acquisitions. Lastly Thomas Cook indicated to the Commission that size was no longer its prime concern, but rather profitability (Decision, paragraph 131).88 The Court notes that the Decision acknowledges at several places that this natural tendency to cautious capacity planning is a feature of the relevant market in its current state, in which there is no collective dominant position restrictive of competition, and that it impinges upon all operators and not just the large tour operators, even though the latter are more specifically concerned (see paragraphs 60 to 66, 97 and 136 of the Decision). Thus, in paragraph 97 of the Decision, the Commission states that the volatility of demand makes it rational to limit planned capacity and then add capacity later, if demand proves to be particularly strong. In this way the suppliers protect themselves against downwards volatility in demand, and, in paragraph 136, that the large operators take a cautious approach to capacity planning, taking particular note of estimates of the other major operators' plans.89 In those circumstances and as the Commission has not denied that the relevant market was competitive prior to the notification (in particular at the time of the 1995 crisis), the episode which occurred in that year and to which the Decision attaches great weight cannot, as such, constitute evidence that a tendency towards collective dominance already existed in the industry. The fact that during the 1994 planning period operators miscalculated and suffered heavy losses after overestimating demand for the 1995 summer season can be regarded as no more than an example of the risks peculiar to this market, the distinctive operation of which is explained at paragraphs 59 to 66 of the Decision.90 It is quite apparent from the remarks cited at paragraph 136 of the Decision that senior executives at the large tour operators are aware of the risks inherent in expansionist strategies in the relevant market, particularly because of the lessons learned from the 1995 episode and because matching capacity to demand is crucial to profitability (see paragraph 60 of the Decision). However, those remarks do not give the slightest indication that there is no competition between the main tour operators.91 Finally, contrary to the Commission's contention (see paragraphs 137 and 138 of the Decision), the fact that to some extent (30 to 40% of the shares) the same institutional investors are found in Airtours, First Choice and Thomson cannot be regarded as evidence that there is already a tendency to collective dominance in the industry. It is sufficient to point out in that regard that, as the Commission itself has acknowledged in its defence (paragraph 73), there is no suggestion in the Decision that the group of institutional shareholders forms a united body controlling those quoted companies or providing a mechanism for exchange of information between the three undertakings. Furthermore, the Commission cannot contend that those shareholders are a further force for cautious capacity management, unless it has examined to what extent they are involved in the management of the companies concerned. Finally, even assuming that it were proved that they are capable of exercising some influence on the management of the undertakings, since the concerns of the common institutional investors with respect to growth (and thus capacity) merely reflect a characteristic inherent in the relevant market, the Commission would still have to establish that the fact that institutional investors hold shares in three of the four leading tour operators amounts to evidence that there is already a tendency to collective dominance.92 It is apparent from the foregoing that, since it did not deny that the market was competitive, the Commission was not entitled to treat the cautious capacity planning characteristic of the market in normal circumstances as evidence substantiating its proposition that there was already a tendency to collective dominance in the industry.- The assessment of horizontal and vertical integration characteristic of the market since publication of the Monopolies and Mergers Commission Report93 The applicant points out that the United Kingdom Monopolies and Mergers Commission (the MMC) examined the state of competition in the relevant market in 1997 and produced a report entitled Foreign Package Holidays: a report on the supply in the UK of tour operators' services and travel agents' services in relation to foreign package holidays (the MMC Report). It maintains that the MMC concluded in that report that the situation in that market was broadly competitive.94 The Commission submits that the market situation has changed significantly since the MMC Report was published in 1997, not only because of the increase in vertical integration of the main tour operators, as the applicant claims, but also because of the significant horizontal concentration that has taken place.95 At paragraphs 128 to 134 of the Decision, the Commission cites, as evidence of a tendency to collective dominance, the horizontal concentration and vertical integration which have characterised the United Kingdom foreign package holiday industry in recent years and which have accelerated since the MMC Report was published in December 1997, due in particular to the number of mid-sized operators taken over by the four major tour operators.96 The Court observes, however, that if those trends are examined closely, it can be seen that the main tour operators' acquisitions of tour operators, airline companies and travel agencies, referred to at paragraph 134 of the Decision, do not entail the kind of major alterations in the market which would invalidate in 1999 the conclusions on competition in the market reached by the MMC towards the end of 1997 and that, therefore, those acquisitions could not be regarded as evidence of a tendency to collective dominance.97 First, the Court would point out that, as the applicant has noted, the MMC found in its report published in 1997 that the foreign package holiday business was dynamic, that competition was keen and that there were no significant barriers to entry. It reached that conclusion after carrying out a particularly detailed study (over 300 pages) of the state of the travel business and the way in which it functioned. The study was carried out over 12 months of inquiry and drew on large amounts of data and a great number of views provided by all parties with a presence in the United Kingdom foreign holidays business. For the purposes of drawing up its report, the MMC commissioned four market studies from external consultants and the report was completed in November 1997, only a year and a half before the Commission examined the market in the context of the notified transaction.98 More specifically, in paragraph 1.6 of its report, the MMC expressed itself as follows:The travel trade has been far from static over the last ten years and the picture continues to change, with a trend towards more vertical integration. Of the major participants who featured in our 1986 investigation into foreign package holidays, only Thomson has retained a prominent position. We have received a great deal of evidence to the effect that competition in the trade is strong and we broadly agree with this view. While concentration has increased over the past five years, it is not at a particularly high level. Profits are not excessive taken year on year. Players come and go. There are no significant barriers to entering either the tour operator or the travel agent market.99 The Commission has not challenged that analysis in the Decision, although in several places it refers to findings made by the MMC in the report relating to other matters (paragraphs 9, 11, 47, 70, 76, 81, 114, 115, 123, 128, 129, 131, 133 and 134 of the Decision). It follows that it does not challenge the MMC's findings regarding its description of that market, in 1997, as one in which competition was strong.100 The Commission argues, however, (Decision, paragraph 123) that conditions of competition in the market have changed significantly since 1997, in particular owing to increased concentration and vertical integration, as is stated at paragraph 134 of the Decision. In that regard, the elimination of mid-sized operators represents an important change in the competitive structure and increases the scope for parallel conduct between the main tour operators.101 However, the Court finds that the horizontal and vertical integration which has occurred in the United Kingdom foreign package holiday industry since the MMC Report was published are less significant than the Commission alleges.102 As regards horizontal concentration, it is apparent from the documents before the Court (page 33a of the document, at Annex 5 to the application, notifying the Commission of the merger, paragraph 4.18 of the 1997 MMC Report and paragraph 72 of the Decision) that the development, between 1996 and 1999, of the market shares of Thomson, Airtours and First Choice does not prove that their shares of the short-haul market have increased significantly. The graph illustrating the tour operators' market shares (Annex 5 to the application, page 33a), including all destinations, shows that Thomson's sales of foreign package holidays, which accounted for 25% of sales of foreign package holidays in 1996, accounted for no more than 22% of sales in 1998, whilst Airtours' sales represented 16% in 1996 and 1998, and those of First Choice fell from 10% in 1996 to 9% in 1998. The three leading tour operators active in 1997 therefore accounted for 51% of sales of foreign package holidays in 1996 and for 47% thereof in 1998. That finding is borne out if the data relating purely to short-haul destinations are examined. It is apparent from paragraph 4.18 of the MMC Report that in 1997 the MMC had also examined the market shares of the integrated tour operators by reference to the narrow definition of the product market used in the Decision, since the advantages of also examining the market by reference to such a definition had been pointed out by Thomas Cook at that time. It is clear from a comparison of market shares in 1996 (paragraph 4.18 of the MMC Report) and 1998 (paragraph 72 of the Decision) that Thomson's share fell from 33% to 30% or 27%, depending on the source of the figures, Airtours' share moved from 20% to 19% or 21%, depending on the figures used, and First Choice from 12% to 15% or 11%, depending on the figures used. Only Thomas Cook increased its market share significantly, rising from 6% to 20%.103 It is clear from this that the key element in the consolidation that has taken place in the foreign package holiday trade since 1997 is Thomas Cook, whose status changed in the course of a few years from that of a small operator to that of a major tour operator following several transactions involving growth by acquisitions (acquisition in June 1996 of Sunworld, acquisitions in 1998 of Flying Colours, which accounted for 3% of the foreign package holiday trade, and of Carlson/Inspirations, which accounted for between 1 and 3% of the trade) (MMC Report, table 4.1, p. 76; Decision, paragraphs 131 and 134). By virtue of that growth, Thomas Cook emerged in 1998 as a fourth large tour operator, which was vertically integrated and thus better placed to compete with the other integrated tour operators. That fact cannot be interpreted as evidence of a lack of competition in the market.104 If the case of Thomas Cook is left aside, the acquisitions of tour operators referred to at paragraph 134 of the Decision essentially concern the purchase of smaller businesses which have not significantly increased the market share of the main tour operators in the foreign package holiday business. Therefore, the elimination of mid-sized operators, which the Commission contends represented an important change in the structure of competition and increased the scope for parallel conduct between the main operators, amounts to the fact that a new major tour operator has emerged - Thomas Cook, whose market share has risen from 6% to 20%.105 The Commission contends that the large tour operators' increased level of vertical integration, which has also occurred since 1997, is further evidence of the industry's tendency to collective dominance (Decision, paragraph 138). The Court observes that the Decision is inconsistent in this regard, since it is based at the same time on the premiss that a strategy of vertical integration is necessary in order to compete with the large tour operators. Thus, at paragraph 132 of the Decision, the Commission states that First Choice had adopted a policy of vertical integration into distribution in 1998, the aim of which was to protect itself against the business practices of the other large tour operators in order to avoid paying them commission and to obtain better information on market trends. That need to become vertically integrated is one of the key factors in the Commission's conclusion, the Commission taking the view that a collective dominant position would arise in the present case, in particular because the concentration would remove First Choice as a competitor at all three levels of the supply chain (paragraph 168 of the Decision).106 It follows that the Commission itself recognises in the Decision that an increased level of vertical integration is pro-competitive, inasmuch as it increases efficiency and limits the interdependence of the large tour operators, who promote their own distribution channels over those of the other main operators. The fact that vertical integration has occurred since the MMC Report was published in 1997 therefore cannot at the same time be evidence of a tendency to collective dominance. In addition, the MMC also analysed in its report the growing tendency to vertical integration and concluded that it was something that was as likely to stimulate competition as to dampen it (see paragraph 2.193 of the MMC Report). In particular, the MMC concluded that the anti-competitive effects of vertical integration were slight in 1997, account being taken of the levels of concentration in the industry.107 It follows that the Commission was wrong in taking the view that the horizontal concentration and vertical integration that has taken place since the MMC Report was published in 1997 made it necessary to disregard the latter's findings on the level of competition obtaining in the relevant market.108 It is apparent from the foregoing that the Commission erred in concluding at paragraph 138 of the Decision that the factors set out at paragraphs 128 to 137 thereof are evidence that there is already a tendency towards collective dominance in the market at present (most especially as regards the setting of capacity).(ii) The assessment of the volatility of historic market shares109 The applicant goes on to cite as proof that the market is competitive the fact that in the past the market shares of the main tour operators have been volatile, dynamic and fluctuating.110 According to the Commission, no such volatility has recently been observed in the relevant market. The changes in the large tour operators' market shares, cited by the applicant, result from acquisitions and not therefore from their performance on the market. If acquisitions are discounted, the market shares of the main operators have shown very little movement in recent years, which suggests that organic growth is difficult (Decision, paragraph 128 and footnote 86).111 It is appropriate to point out that for the purpose of determining whether there is a collective dominant position, the stability of historic market shares is a factor conducive to the development of tacit collusion, inasmuch as it facilitates division of the market instead of fierce competition, each operator referring to its historic market share in order to fix its production in proportion thereto.112 In the present case, the Commission's finding that the market shares of Thomson, Airtours, Thomas Cook and First Choice remained stable over the last five years is predicated on the assumption that growth by acquisition is to be ignored. The Commission takes the view that where changes in market share result principally from the acquisition of competitors, the quota to be allocated can be calculated by adding the market shares of the purchaser and the target and that therefore the problem of operators seeking to align their market share on peaks they have achieved in the past does not arise.113 However, there is no justification in the present case for excluding growth by acquisition when assessing the volatility of market shares, inasmuch as in the relevant market the size of the undertakings and their degree of vertical integration are significant factors in competition (see, inter alia, paragraphs 73, 75, 77, 78, 99, 100, 114 and 115 of the Decision). In such circumstances, the fact that the large operators have made numerous acquisitions in the past, either before or after the MMC Report was published, may be taken to be indicative of strong competition between those operators, which make further acquisitions to avoid being outdistanced by their main competitors in key areas in order to take full advantage of economies of scale.114 Moreover, the assumption that growth by acquisition is to be ignored is at variance here with several remarks made by the Commission itself in the Decision, which suggest, contrary to the submissions in its pleadings, that an acquisition by one of the major operators results, for the other major operators, not in the mathematical addition of the market shares of the purchaser and the target, but in a competitive reaction on their part.115 The Decision thus points out at paragraph 137: [w]hen Airtours' bid for First Choice became known in April this year, an announcement by Thomson that it would defend its market-share position led to an immediate drop in Thomson's share price of 9% on the same day as the announcement, due to "fears that the company would start a price war", and Thomson's management were obliged to make considerable efforts to convince institutional investors that the announcement had been misinterpreted and that they had no intention of adding capacity in the market but only of mopping up capacity which would be shed by Airtours/First Choice as a result of the merger.116 Similarly, the Decision states at paragraph 145 that it is apparently widely believed in the industry that all mergers lead to temporary losses of market share for the protagonists due to defection of some customers and suppliers as a result of elimination of duplication in their programmes. An examination of the documents produced by the applicant concerning the development of historic market shares (Annex 6 to the reply, page 2, see also the table on the development of market shares, page 8 of the application) shows that such concerns are well founded. Thus, following Thomson's acquisition of Horizon in 1989, the market share of the new entity should have been 32% (25% for Thomson and 7% for Horizon), whereas it quickly dropped to around 25%.117 It is appropriate to point out that an analysis of the data produced to the Court shows that, as the applicant has submitted without challenge from the Commission, if growth by acquisition is included, there is considerable variation in the major tour operators' shares of the foreign package holiday market. This can be seen from the table showing the operators' market shares, set out by the applicant in its notification (reproduced on page 8 of the application). Thus, in 1990, Thomson's market share was 21.81%, that of First Choice was 5.82%, that of Airtours was 4.27% and that of Thomas Cook was 2.13%. In 1994 Thomson's market share was 23.13%, Airtours' 15.52%, First Choice's 5.88% and Thomas Cook's 2.41%. Then, in 1998, Thomson's market share was 19.28%, Airtours' 14.26%, First Choice's 7.47% and Thomas Cook's 11.38%.118 It follows that the Commission erred in holding that market shares resulting from acquisitions should not be taken into consideration and, accordingly, in concluding that the major tour operators' market shares have remained stable over recent years.119 Finally, as regards competition obtaining in the relevant market, it should be added that the applicant has claimed, and the Commission has not disputed, that the performances of the main tour operators may vary in a given season (with winners and losers) and may also vary from one season to another. That fact must be regarded as evidence that the market is competitive and consequently militates against any finding of collective dominance.(iii) Conclusion on the assessment of competition between the leading tour operators120 It follows from the foregoing that the Commission made errors of assessment in its analysis of competition obtaining in the relevant market prior to the notification. First, it did not provide adequate evidence in support of its finding that there was already a tendency in the industry to collective dominance and, hence, to restriction of competition, particularly as regards capacity setting. Second, it did not take into account, as it should have done, the fact that the main tour operators' market shares have been volatile in the past and that such volatility is evidence that the market was competitive.(b) The assessment of past and anticipated development of demand, demand volatility and the degree of market transparency121 A section of the Decision entitled Market Characteristics (oligopolistic dominance) (paragraphs 87 to 127) sets out a number of characteristics which, according to the Commission, make the relevant market conducive to oligopolistic dominance. They include, inter alia, product homogeneity, low demand growth, low price sensitivity of demand, the similar cost structures of the main suppliers, a high degree of transparency, interdependence and commercial links between the main suppliers, substantial barriers to market entry and the insignificant buyer power of consumers. According to the Decision (paragraph 87), those characteristics are already present and would remain present if the proposed merger were to take place.122 The applicant challenges the findings which led the Commission to conclude that those characteristics are already present in the relevant market and that they would make it conducive to oligopolistic dominance if the merger were to proceed. It argues, in particular, that the rate of demand growth and the degree of demand volatility in the relevant market, as well as the degree of market transparency, are, in the present case, factors which, contrary to the Commission's contention, render creation of a collective dominant position more difficult.(i) Findings on low demand growth123 The applicant argues in essence that the Commission made an error of assessment in considering demand growth overall to be weak, whilst both the data produced in the administrative procedure and the fact that demand growth is faster than growth in gross domestic product are evidence to the contrary.124 The Commission sets out its findings about the level of demand growth in the relevant market at paragraphs 92 and 93 of the Decision.125 At paragraph 92, the Commission states that [a] recent study for a major tour operator, referred to in response to the Commission's enquiries, noted ... that the overall average annual growth rate (3 to 4% over the decade) was quite low. It is also stated that [d]emand growth for the next two years is expected to be close to zero, according to several industry estimates, but with some recovery in prospect thereafter.126 At paragraph 93, the Commission goes on to state that based on its investigation in this case, it has reached the conclusion that overall growth of demand in the market for short-haul package holidays will continue to be moderate as has been the case in the 1990s. Finally, in conclusion, the Commission finds that market growth is not likely to provide a stimulus to competition within the foreseeable future.127 The Court holds that the Commission's findings are based on an incomplete and incorrect assessment of the data submitted to it during the administrative procedure.128 First, it is appropriate to point out that, in response to a measure of organisation of procedure by which the Court called on the Commission to produce the study referred to at paragraph 92 of the Decision, the Commission stated that a full version of that study had at no point been made available to it during the administrative procedure and that all it could produce to the Court was an extract, which a tour operator had annexed to a response to a request for information. That extract consisted of a single page of a document entitled Forecasting Holiday Demand prepared by Ogilvy & Mather at an unknown date.129 According to that extract, [t]he GB market for holidays abroad has grown massively over the last 20 years. According to the British National Travel Survey, Britons took nearly 30 million holidays abroad (4-plus nights) - more than treble the number in 1978. Over the last decade the market has grown by an average of 3.7% per annum. The extract also states, in relation to demand volatility, that [w]hile underlying market growth has been persistent, annual growth rates have been far from steady. Annual growth rates of 10% or more are quickly followed by sizeable contractions; that not only is holiday demand more volatile than both gross domestic product and consumer durable spending, it is not fully coincident with the economic cycle (for example, the market grew by over 10% during the depth of the 1980/1 recession); and that [t]he volatility of demand makes forecasting volumes highly problematic.130 However, it is apparent from a cursory examination of that document that the Commission's reading of it was inaccurate. Thus, at paragraph 92 of the Decision, it states that it also noted that the overall average annual growth rate ... was quite low, whilst no statement to that effect is made in the extract sent to the Court. Conversely, the Commission ignored the emphasis placed by the author of the extract on the massive increase in foreign holiday sales that has taken place over the last 20 years. It follows that the Commission construed that document without having regard to its actual wording and overall purpose, even though it decided to include it as a document crucial to its finding that the rate of market growth was moderate in the 1990s and would continue to be so (Decision, paragraph 93).131 Second, it is apparent from these passages of the Decision (paragraphs 92 and 93) that the Commission did not take account of the rate of demand growth during the two years preceding the notification, 1997 and 1998, which, however, proved to be important points of reference inasmuch as the effects of the 1995 episode had by then been absorbed by the market. It is clear from data in volume 4 of the 1998 British National Travel Survey (dated February 1999), provided in Annex 9 to the applicant's notification of a concentration, that the foreign holiday sector enjoyed strong growth throughout the decade and, thus, also over recent years. It is apparent from page 113 (and the table on page 112) that the number of departures for foreign holidays rose from 21 million in 1989 to 29.25 million in 1998 (an increase of more than 39.2% over the last decade). After the crisis of 1995, as a result of which the number of foreign holidays fell from 26 million in 1995 to 23.25 million in 1996 (a fall of around 10.5%), the number of foreign holidays rose from 23.25 million to 27.25 million in 1997 (an increase of more than 17.2%) and from 27.25 million to 29.25 million in 1998 (an increase of more than 7.3%). It is specifically stated in relation to 1998 that what is concerned is real growth and not a difference caused by the common practice of rounding up figures where the changes from one year to another are small. The fact that those data also relate to long-haul package holidays does not undermine their probative value as regards the tendency to sustained growth, since that type of holiday has accounted for only a fifth of all holidays in recent years (see page 116 of the British National Travel Survey).132 The Commission failed to take account of those data in its estimates of the level of market growth; instead, it referred to the trend for the next two years, stating at paragraph 92 of the Decision: Demand growth for the next two years is expected to be close to zero, according to several industry estimates, but with some recovery in prospect thereafter. When it was questioned on this point at the hearing, the Commission replied that the finding was based on an econometric study produced during the administrative procedure in response to a request for information. It is noteworthy that neither the nature of that econometric study, nor its authorship, nor the context in which it was produced were mentioned in the Decision. Lastly, it should be added that the estimate of demand growth close to zero is at variance with the following paragraph of the Decision (paragraph 93), in which the Commission itself recognises that the market for short-haul foreign package holidays is likely to continue to grow and that [i]t may also be that the market will grow somewhat faster than overall GDP growth due to increases in vacation time and general wealth.133 It is clear from the foregoing that the Commission's interpretation of the data available to it concerning growth demand was inaccurate in its disregard for the fact that the market had been marked by a clear tendency to considerable growth over the last decade in general, despite the volatile nature of demand from one year to another, and that the pace of demand growth has increased during recent years in particular. In that context of growth, and having failed to produce any more specific evidence establishing that the tendency to grow would be reversed in future years, the Commission was not entitled to conclude that market development was characterised by low growth, which was, in this instance, a factor conducive to the creation of a collective dominant position by the three remaining large tour operators.(ii) Findings on demand volatility134 The applicant submits that demand volatility renders it more difficult to show that a collective dominant position exists, since volatility adds noise to the market making it more difficult to differentiate between changes in demand caused by volatility in the market and capacity increases brought about by departures from the common policy. The fact that it is so difficult to distinguish between the two types of event clearly suggests that any attempted collusion will be unstable.135 The Commission recognises in the Decision that there is a degree of demand volatility in the market (Decision, paragraphs 92 and 95). However, it argues (Decision, paragraph 97) that in the present case that volatility does not preclude the creation of a collective dominant position but rather the reverse: [it] makes the market more conducive to oligopolistic dominance. The reason is that the volatility demand in combination with the fact that it is easier to increase than to decrease capacity, means that it is rational for the major operators to adopt a conservative approach ("wait and see approach") to capacity decisions. In particular the volatility of demand makes it rational to limit planned capacity and then add capacity later, if demand proves to be particularly strong. In this way the suppliers protect themselves against downward volatility in demand.136 In any event, at paragraphs 94 to 96 of the Decision, the Commission challenges the arguments put forward by the applicant during the administrative procedure concerning demand volatility and its causes, which are linked to gross domestic product, changing consumer tastes and changing costs (the impact of low-cost airlines). The Commission contends (paragraph 95) that all tour operators are exposed to the business cycle and have to consider the macroeconomic development in their forecast. Therefore it is likely that all tour operators will have similar views as to the market development.137 The Commission recognises (Decision, paragraph 96 and footnotes 73 and 74) that certain exogenous shocks, such as terrorist attacks on tourists in Egypt or Turkey, may disrupt the planning of tour operators, but it none the less refuses to take them into consideration as a factor likely to make the market less conducive to collective dominance, since such events, which are by nature exceptional, are not peculiar to the short-haul package holiday market but may happen in any market.138 Lastly, the Commission accepts that the applicant's remarks on the difficulty that such volatility entails for the creation of collective dominance are in accordance with economic theory but asserts that they are not relevant in the present case. According to the Commission, since it is easier to add capacity than to reduce it, operators will tend to be cautious in order protect themselves against possible volatility. Moreover, it is easy to differentiate between a decline in demand and an increase in capacity by another operator, since the actions of the latter can be observed directly.139 The Court observes in limine that, as the Commission recognises, economic theory regards volatility of demand as something which renders the creation of a collective dominant position more difficult. Conversely, stable demand, thus displaying low volatility, is a relevant factor indicative of the existence of a collective dominant position, in so far as it makes deviations from the common policy (that is, cheating) more easily detectable, by enabling them to be distinguished from capacity adjustments intended to respond to expansion or contraction in a volatile market.140 In the present case, the Commission acknowledges that a certain degree of demand volatility is a characteristic of the relevant market (Decision, paragraphs 92, 95 and 97). However, several of the documents before the Court indicate that there is a considerable degree of volatility in the market. The extract from the study cited at paragraph 92 of the Decision explains that [n]ot only is holiday demand more volatile than both gross domestic product and consumer durable spending, it is not fully coincident with the economic cycle (for example, the market grew by over 10% during the depth of the 1980/81 recession) and [t]he volatility of demand makes forecasting volumes highly problematic. Likewise, there is evidence of the high volatility of the market in the figures taken from the 1998 British National Travel Survey. After the 1995 crisis, as a result of which the number of foreign holidays fell from 26 million in 1995 to 23.25 million in 1996 (a fall of around 10.5%), the number of trips abroad rose from 23.25 million to 27.25 million in 1997 (an increase of more than 17.2%) and from 27.25 to 29.25 million in 1998 (an increase of more than 7.3%).141 The Commission contends, however, that that fact is not relevant in the present case as operators tend to be cautious to protect themselves against any volatility.142 However, the Commission is not entitled to rely on the fact that tour operators, to protect themselves against sudden downward volatility in demand, plan capacity cautiously, preferring to increase it later if demand proves to be particularly strong (Decision, paragraph 97), for the purpose of denying the relevance in this instance of a factor which is significant as evidence of oligopolistic dominance, such as the degree of market stability and predictability. Although it is certainly the case that the caution inherent in the way the market normally operates means that account must be taken of the need to make the best possible estimates of the way in which demand will develop, the planning process remains difficult, because each operator must anticipate (some 18 months in advance because of the market's distinctive features) how demand will evolve - demand being distinguished by its considerable volatility and thus entailing a degree of speculation. Furthermore, the Commission did not regard either the operators' caution or demand volatility to be restrictive of competition in the pre-merger market. Caution cannot therefore be interpreted, as such, as evidence of a collective dominant position rather than as a characteristic of a competitive market of the kind that existed at the time of the notification.143 Finally, the arguments advanced by the Commission (Decision, paragraphs 94 to 96) concerning the applicant's points cannot be accepted.144 As regards volatility linked to the business cycle, the Commission cannot just conclude - as it does as at paragraph 95 of the Decision - that it is likely that all tour operators will have similar views as to the market development without producing any evidence in support of that statement, given that capacity is set initially some 18 months before the start of the season (see paragraph 63 of the Decision). At that point, it is not possible to make a precise forecast of how the main macroeconomic variables, such as growth in gross domestic product, exchange rates or consumer confidence, will develop.145 The Commission's approach to volatility related to exogenous shocks is that tour operators take data relating to market volatility into account when setting capacity (Decision, paragraph 96 and footnotes 73 and 74). That approach amounts to acting in the way that it criticises, namely treating exogenous shocks as endogenous variables by taking them into account in forecasting demand. However, tour operators apparently do not act in that way. That can be seen from the reversals suffered by Thomson in May 1999 when it made heavy losses on its package holiday sales in the Eastern Mediterranean as a result of the war in Kosovo and terrorist threats in Turkey, whilst Airtours, for its part, was not affected, a point made by the applicant, which is not disputed by the Commission.146 Finally, the Court must reject the Commission's argument that there is no difficulty in differentiating between a decline in demand and an increase in capacity by another operator because the latter can be observed directly. The Court rejects that argument on the ground that an integrated tour operator will, for the reasons set out below in the examination of market transparency, find it difficult to interpret with any accuracy capacity decisions taken by the other tour operators.147 It follows from the foregoing that the Commission has failed to establish that economic theory is inapplicable in the present case, and that it was wrong in concluding that volatility of demand was conducive to the creation of a dominant oligopoly by the three remaining major tour operators.(iii) The assessment of the degree of market transparency148 At paragraph 102 of the Decision the Commission states with regard to transparency: a distinction has to be made between the planning period and selling season, where the catalogues have been launched, [b]ut transparency of the market is high for the four major integrated operators in both periods.149 At paragraphs 103, 104 and 105, the Commission states that [i]n the planning period the crucial capacity decisions for the coming season are made and that ... the capacity decisions of the four major integrated operators will be transparent for each of these suppliers, for the following reasons:- none of the major tour operators puts out a completely new programme from one season to the next. Rather, the planning of a future season is based on sales in the previous season, increased or decreased by a forecast of demand for the coming season. Changes compared to the previous season are therefore incremental and the development of the programme of a tour operator is evolutionary. Consequently, by virtue of past experience, tour operators know already before the planning of a season to a large extent what the offerings of the other four integrated suppliers will be for the new season (Decision, paragraph 104);- each of the four major integrated tour operators has some knowledge of the changes planned by the other three during that period, given that they use the same hotels and avail themselves of the other tour operators' airline companies to obtain or supply capacity or agree swaps of seats or slots (Decision, paragraph 105);- substantial capacity additions cannot be kept secret, for example the purchase or long-term lease of additional aircraft is necessarily made public (Decision, paragraph 105).150 At paragraph 105 of the Decision, the Commission finds that for all the above reasons, each of the four major integrated operators would know if, for example, one of the other integrated operators was planning to increase the number of passengers carried and thus the number of holidays it could offer. Each of the four integrated operators is thus well able to monitor the total amount of holidays offered by each of the others.151 At paragraph 113 of the Decision, the Commission concludes from this that, given the capacity rigidities, the high degree of transparency will make it even more likely [after the merger] that the major suppliers will under-supply the market, leaving more unsatisfied demand than would be likely under a less transparent system (in which there would be more - temporary - oversupply, requiring lower prices in order to clear the products) so allowing them to raise average prices above the competitive level.152 The applicant submits that the relevant market is not transparent during the planning period. It argues, in essence, that overall capacity decisions consist of a wide range of individual planning decisions concerning each resort and each flight and that changes made to capacity planned by reference to past capacity are significant and very difficult to identify.153 Nor, in the applicant's submission, is the relevant market transparent during the selling period. It maintains in essence that capacity transparency is not possible without price transparency and that the Commission failed to appreciate the nature of the information available on the computerised holiday reservation systems.154 The Commission accepts that capacity decisions taken in the planning period are not wholly transparent. However, it recalls the various ways in which information may be obtained, referred to at paragraphs 104 and 105 of the Decision, so far as the four major tour operators are concerned.155 The Commission contends that during the selling period price transparency is of no importance, since the key determinant of competition in the relevant market is not price but capacity. However, during that period transparency in relation to overall capacity is virtually complete, since each operator is able to calculate the capacity of its competitors on the basis of what is offered in their catalogues and also on the basis of their past programmes.156 It is appropriate to observe in limine that the fact that a market is sufficiently transparent to enable each member of the oligopoly to be aware of the conduct of the others is conducive to the creation of a collective dominant position.157 First, the Court observes (i) that the Commission's argument is based on the contention that in this instance the tacit coordination instancing the collective dominant position is focused not on prices but on the capacity put onto the market and (ii) that, as the Commission states at paragraph 103 of the Decision, the crucial capacity decisions for the coming season are taken during the planning period. At paragraph 63 of the Decision, the Commission itself recognises that once the booking season has begun (for example, from about the summer of 1999 for departures in summer 2000), the scope for changes is heavily constrained, due to the inflexibility of many commitments with suppliers and the problems associated with changing dates, flights, hotels, etc. for customers who have already booked. It states (paragraph 62 of the Decision) that Airtours accepts that there is scope for an increase of capacity of up to 10% during that period.158 The approach thus taken by the Commission is borne out by its assertion (paragraph 108 of the Decision) in response to the applicant's argument that, since each of the large integrated tour operators has to deal with several thousand different prices because of the various programmes offered, tacit agreement on all those prices would be impossible: the Commission asserts that it does not consider an agreement on prices to be necessary in this instance in order to reach a collective dominant position. It adds:during the selling season, there is little incentive for any of the integrated operators to cut prices in order to gain market share, which is determined by the amount of capacity offered. Therefore, operators have no need to tacitly collude on thousands of prices. Indeed, this point was confirmed by the economic experts of Airtours: "pricing behaviour of firms after capacity has been determined is not directly relevant for joint dominance, i.e. the collective exercise of market power".159 It follows that in this instance it is appropriate to ascertain, first, whether each of the large tour operators will be able, when making its crucial capacity decisions during the planning period, to find out with any degree of certainty what those of its main competitors are. Only if there is sufficient transparency will an operator be able to estimate the total capacity decided upon by the other members of the alleged oligopoly and then be in a position to be sure that by planning its capacity in a given way it is adopting the same policy as them and hence will have an incentive to do so. The degree of transparency is also important for the purposes of permitting each member of the oligopoly subsequently to detect alterations made by the others as regards capacity, to distinguish deviations from the common policy from mere adjustments consequent upon volatility of demand and, finally, to ascertain whether it is necessary to react to any such deviations by punishing them.160 It is apparent from the applicant's responses (part B.1 and Annexes 5 to 8) to a measure of organisation of procedure taken by the Court that capacity setting for each season is not a mechanical exercise involving no more than renewing capacity from one year to the next, which would be easy for the other tour operators to predict, but instead involves each large tour operator in a very complex task, which takes historical data into account only to a limited extent and which is based principally on a subjective assessment by each operator by reference to a whole range of variables and factors.161 Specifically, an examination of the data shows that the planning cycle does not simply run from year to year. By way of example, for the summer season 1999 (Year N), running from May 1999 to October 1999, capacity planning starts some 18 months before, in October or November 1997 (Year N-2). During the main planning period, culminating with first brochure issue about April or May 1998 (Year N-1), tour operators have available to them data relating to results for the summer season 1997 (Year N-2) and some data relating to the forthcoming summer 1998 season (Year N-1). Within that time frame, overall capacity planning operates by reference to general and specific considerations which are refined over time. General considerations (top-down considerations) take account of the key factors influencing holiday demand, such as economic activity, exchange rates and consumer confidence. Specific considerations (bottom-up considerations) are based on a detailed analysis of existing product offerings, starting with, for example, consideration of gross and net margins by flight and accommodation unit for each resort. In that connection, each flight (by departure and destination airport and flight slot) is analysed, as are the available destinations and products and consumer demand for particular types of holiday, so that a comprehensive range of short-haul foreign package holidays can be prepared. That range is also supplemented by new product offerings developed by the applicant.162 The applicant has stated that, given that the products concerned are perishable, it tends during the planning stage to attach greater importance to its analysis of macro-economic factors or specific considerations concerning costs and margins than to its examination of levels of historic demand, since those factors are more likely than previous performance (sales realised and projected for Years N-2 and N-1) to affect disposable income and future demand. Previous performance is, however, also taken into account in planning for the summer season of Year N, inasmuch as it is an indicator of the strengths and weaknesses of what is currently on offer and of where what is offered can be improved.163 In statistical terms, the table submitted by the applicant (Annex 7 to its response) comparing budgeted and actual sales of its main United Kingdom subsidiary, Airtours Holidays Ltd, for the period 1996-2000 shows the differences between projected capacity for the year being planned (Year N), budgeted capacity for Year N-1 (whose selling season has already begun) and capacity sold during Year N-2 (as that season is already over). The table shows that capacity budgeted by Airtours Holidays Ltd for Year N varies significantly in comparison with either budgeted capacity for Year N-1 (from + 7.5% to + 11.2%, depending on the Year N under consideration) or with capacity sold during Year N-2 (from + 7.5% to + 18.6% depending on the Year N under consideration). By way of comparison, the variations represent a capacity increase which is two or three times greater than the overall average annual demand growth in the market (between 3 and 4%) identified by the Commission at paragraph 92 of the Decision.164 It is apparent from the foregoing that the crux of the planning process is not simply the renewal of capacity budgeted or sold in the past but is the attempt to predict how demand will develop on both a macroeconomic and microeconomic level.165 In addition to the factors set out above, it is necessary to mention the practical difficulties, to which the applicant has drawn attention, which make it very difficult to find out what capacity is projected by each of the other large tour operators during the planning period, inasmuch as their decisions on total capacity for a given season consolidate a whole range of individual decisions, taken on a resort-by-resort and flight-by-flight basis and varying from one season to the next.166 The applicant maintains, without challenge from the Commission, that it serves around 50 destinations from 21 United Kingdom airports, which represents more than 1 000 permutations, and that it varies those permutations appreciably from one season to the next. Thus, for the summer of 1999, Airtours increased its capacity to Fuerteventura by 19%, although it reduced its departures to that destination from Manchester by 13%, while departures from Cardiff were increased by 42%. Similarly, Airtours' capacity to Minorca was reduced by 9%, with departures to that destination from Manchester being reduced by 33% and departures from Scottish airports being increased by 25%. By way of example, within the 3-star/self-catering category, which according to the Decision (paragraph 90) accounts for the large majority of short-haul package holidays, there are differences as to the airport and the departure date, the length of the stay and the resort. It should be observed in this respect that the argument that little differentiation is made for the air component (Decision, paragraph 90) does not alter the fact that decisions relating to airline capacity are taken airport by airport and flight by flight.167 So, contrary to the Commission's contention, capacity decisions do not involve merely increasing or reducing overall capacity, without taking account of the differences between the various categories of package holidays, which are differentiated by destination, departure date, departure airport, aircraft model, type and quality of accommodation, length of stay and, finally, price. To be able to develop their package holidays, tour operators must take into account a series of variables, such as the availability of accommodation at the various destinations and the availability of airline seats on various dates and at different times of the year. As the applicant has argued, capacity decisions are necessarily taken on a micro level.168 The Commission's global approach (paragraphs 88 to 91 of the Decision), which regards the total number of package holidays offered by each operator as what is important, thus encounters some significant difficulties on a practical level, since, in order to ascertain total capacity - to the extent that it stems from a miscellaneous set of individual decisions - it is necessary to be able to identify those decisions.169 It follows that, on the face of it, the complexity of the capacity planning procedure, the development of the product and its marketing is a major obstacle to any attempt at tacit coordination. In a market in which demand is on the whole increasing, but is volatile from one year to the next, an integrated tour operator will have difficulty in interpreting accurately capacity decisions taken by the other operators concerning holidays to be taken a year and a half later.170 However, despite the fact that each tour operator takes capacity decisions on the basis of a miscellaneous set of factors, it is nevertheless necessary to consider whether, in practice, at the time when total capacity is set, each member of the oligopoly can know the overall level of capacity (number of holidays) offered by the individual integrated tour operators.171 The Commission alleges at paragraph 105 of the Decision that each of the four integrated operators is thus well able to monitor the total amount of holidays offered by each of the others [during the planning period] and that changes made by each individual operator at that stage may be identified by the other major tour operators as a result of their dealings with hotels or their discussions about seat requirements and availability, the purpose of which is to obtain or supply capacity or to negotiate swaps of seats and slots.172 However, the Commission fails to prove those allegations.173 First, it cannot be ascertained from the Decision how much information an integrated tour operator may obtain by virtue of the fact that several such operators may be in contact with the same hotels for the purpose of negotiating and reserving bed stocks. Even supposing that the major United Kingdom tour operators were actually offering the same hotels in their packages, it remains the case that a large number of players are involved in the holiday accommodation trade, both on the supply-side and the demand-side. There is, therefore, a strong likelihood that one of the major tour operators will be using a hotel where there is no chance of its finding that one of its competitors is doing so too. That likelihood is increased by the fact that hotel owners prefer to let their rooms to at least two tour operators, generally from different countries. That strategy, which is referred to in the notification, can be explained by the hotel owner's concern to guard against the risk of a decline in demand for holidays supplied by one of its clients or a decline in demand in one of those countries.174 It follows that the fact that several integrated tour operators may negotiate with the same hotel does not significantly increase market transparency at the time when capacity decisions are made.175 Second, the Decision gives scarcely any details as to the extent or significance of any information that may be obtained as a result of the larger tour operators discussing airline seat requirements and availability with a view to obtaining or supplying capacity or negotiating swaps of seats or slots. Since the Decision does not provide clarification on this point, it is scarcely conceivable that any useful information concerning the increase or maintenance of capacity could be gleaned by means of the exchange of airline seats or slots, since, as a general rule, those exchanges are likely to be carried out on the basis of one seat against another or one slot against another.176 In that regard, in the situation envisaged by the Commission, where significant restrictions keep capacity below estimated levels of demand, integrated tour operators would enter into contracts for fewer airline seats and hotel rooms. It is doubtless much more difficult, as a general rule, to detect and interpret decisions to reduce business than decisions to expand it and, in a context of increasing demand, such restrictive strategies would be particularly difficult to detect. Furthermore, the applicant has, without challenge from the Commission, drawn attention to the fact that decisions to increase capacity significantly and to make the corresponding investments are made public only after initial capacity has been set, with the result that they do not permit precise identification of decisions made during the planning period. Consequently, the Commission's argument at paragraph 105 of the Decision, according to which the purchase or long-term lease of additional aircraft could not be kept secret since such decisions are necessarily made public, cannot be taken into consideration for the purposes of proving that there is market transparency as between the four major tour operators at the capacity planning stage.177 In addition, decisions relating to the use of air fleets are taken at a late stage in the planning period. According to the data provided by Airtours in its reply to the statement of objections, it is only from the 12th month before the start of the season, namely at the same time as the brochure is published, that Airtours takes its first decisions relating to the use of its airline seat capacity. Decisions relating to capacity purchased from other airline companies are not taken until the following months. Therefore, information obtained in the course of negotiations between the larger tour operators is obtained later than the Decision suggests.178 Furthermore, according to the information submitted at the time of the notification, Airtours does not depend to any significant degree on the other major tour operators for the purchase of airline seats. Airtours apparently only rarely uses its main competitors' charter airlines. Thus, Airtours Holidays' main suppliers of airline seats for summer 1998 were: Spanair (27.2% of purchases); Monarch (22%); Air Europa (21%); Air 2000, First Choice's airline (9.4%); Airworld, Thomas Cook's airline (8.7%); Air Malta (3.8%), and 12 other airlines (7.9%). Thus, Airtours Holidays does not use, or does so only rarely, Britannia (Thomson's airline, which, as is well known, flies mainly for its parent company), and makes only secondary use of First Choice's and Thomas Cook's main airlines (Air 2000 and Airworld account for 18.1% of the total) (Annex 5 to the application, paragraphs 6.94; 6.119 and 6.122, MMC Report, table 3.6, page 66). The applicant's main customers for airline seats for the 1998 summer season were: First Choice (Unijet) (around 68 000 seats); Monarch (Cosmos) (around 45 000 seats); Jet Direct (around 11 500 seats); Air Travel Group (around 10 500 seats); and Manos (about 10 500 seats); the remaining seats were sold to 20 other operators. Here, too, it can be seen that Airtours Holidays is not, or is only rarely, in contact with the airlines of Thomson (Britannia) and Thomas Cook (Caledonian, Airworld, Flying Colours, Peach) (Annex 5 to the application, paragraph 6.94 and MMC Report, table 3.6, page 66).179 Therefore, contrary to the Commission's contention, the fact that the major tour operators negotiate between themselves to obtain or supply capacity or arrange swaps of seats or slots does not result in a sufficient degree of transparency at the time when capacity decisions are taken.180 It follows from all of the foregoing that the Commission wrongly formed the view, at paragraph 102 of the Decision, that market transparency is high for the four major integrated operators during the planning period. Accordingly, it appears that it wrongly concluded that the degree of market transparency was a characteristic which made the market conducive to collective dominance (Decision, paragraph 87), and it is not necessary to examine the merits of its findings concerning the degree of transparency during the selling season, since the crucial capacity decisions for the following season are taken during the planning period and thereafter the scope for increasing capacity is very limited.(iv) Conclusions on the assessment of past and anticipated development of demand, demand volatility and the degree of market transparency181 It follows from the foregoing that the Commission's examination of competition obtaining between the main tour operators at the time of the notification was inadequate, and that the Commission made errors of assessment concerning the development and predictability of demand, demand volatility and the degree of market transparency, and that it wrongly concluded that those factors were, in this instance, conducive to the creation of a collective dominant position.(c) Conclusion182 It follows from all of the foregoing that the Commission made errors of assessment when it concluded that if the transaction were to proceed, the three major tour operators remaining after the merger would have an incentive to cease competing with one another.3. The inadequate nature of the deterrents which the Commission alleges will secure unity within the alleged dominant oligopoly183 The applicant complains that the Commission has not taken account of the fact that, even if there were an incentive for the three remaining large tour operators tacitly to coordinate their capacity strategies after the merger because of the characteristics of the relevant market and the impact of the transaction on that market, the retaliation mechanism or deterrents are not adequate to secure unity within the alleged dominant oligopoly. The fact that there are no effective retaliation mechanisms within the relevant market raises the question as to whether oligopolistic dominance is feasible, inasmuch as the long-term incentive not to depart from the common policy is wanting. The applicant submits that the punishment mechanism must be credible and denies, therefore, that the mere threat of retaliation may amount to a sufficient deterrent, as the Commission appears to suggest at paragraph 151 of the Decision.184 The applicant does not consider the means allegedly available for retaliation during the season to be credible. As regards the scope for adding capacity in the period up to February prior to the summer season, capacity could be increased by only 10% and no further increases could subsequently be made. Further, in an industry characterised by demand volatility, a capacity increase of 10% is not enough to amount to a real deterrent. Moreover, the extra cost of laying on additional capacity for punitive purposes would not be offset by the benefits which those who had been cheated against would derive from imposing the punishment. In any event, any increase in capacity is extremely problematic because it might be against the interests of those called on to punish, inasmuch as late added capacity, being likely to be of low quality (inconvenient flight times, poor-quality accommodation), is difficult to sell. The applicant also denies that it is possible to use cut-price or directional selling against a competitor as a disciplinary weapon.185 Lastly, the applicant submits that the means allegedly available to retaliate during the following season are not effective. Given the 18-month period necessary to arrange a large volume of capacity, any cheating detected in the course of one selling season could be punished by large capacity additions only two seasons later. The link between the failure to observe the agreement and the punishment will thus be blurred.186 The Commission observes, first, with reference to the retaliation mechanism contemplated in the Decision, that, since it does not regard oligopolistic dominance as a cartel, it at no time imagined one of the operators simply threatening to retaliate.187 It goes on to argue that the prospect of retaliation in the same season can be understood as a real and effective threat, inasmuch as operators can assess capacity placed on the market by their competitors once the first edition of brochures is published, some 12 to 15 months before the travel season (see paragraphs 105 to 107 of the Decision). A 10% increase in capacity is likely to exert a significant downward pressure on prices and cancel out a large part of the gains expected by the deviating operator.188 As regards the means to retaliate during the following season, the Commission (unlike the applicant) takes the view that it is possible to increase capacity considerably during that season and considers it misconceived to claim that a substantial increase could be made only two seasons later.189 In response to the applicant's argument that it is irrational of the other operators to incur a risk of general overcapacity and that, therefore, one operator can cheat with impunity, the Commission argues that such reasoning is irrelevant in this case, because it implies that the only possible reaction for the other operators is to abandon market share to the cheat.190 Lastly, the Commission rejects the argument that the tactics of de-racking the brochures of a deviating competitor and engaging in directional selling designed to put its products at a disadvantage would be ineffective. Even if the Commission relies solely on the figures for sales of other operators' stock advanced by the applicant (16% of its products are sold through Thomson and Thomas Cook), a potential loss amounting to that percentage of sales constitutes a significant threat in an industry, characteristics of which are high volumes and low margins.191 The Court notes that the Commission adopted a somewhat ambiguous approach in the Decision, since it initially stated that a strict retaliation mechanism founded on coercion is not a necessary condition for collective dominance in this case (Decision, paragraph 55; see also paragraph 150), while also stating that it does not agree that there is no scope for retaliation in this market and that [r]ather there is considerable scope for retaliation, which will only increase the incentives to behave in an anti-competitive parallel way (Decision, paragraph 55; see also paragraph 151).192 The Court observes, in limine, that, as it has already pointed out (see paragraphs 61 and 62 above), the prospective analysis of the market necessary in any assessment of an alleged collective dominant position must not only view that position statically at a fixed point in time - the point when the transaction takes place and the structure of competition is altered - but must also assess it dynamically, with regard in particular to its internal equilibrium, stability, and the question as to whether any parallel anti-competitive conduct to which it might give rise is sustainable over time.193 It is thus important to ascertain whether the individual interests of each major tour operator (maximising profits while competing with the whole range of operators) outweigh the common interests of the members of the alleged dominant oligopoly (restricting capacity in order to increase prices and make supra-competitive profits). That would be the case if the absence of deterrents induced an operator to depart from the common policy, taking advantage of the absence of competition essential to that policy, so as to take competitive initiatives and derive benefit from the advantages inherent therein (see, to that effect, Gencor v Commission, cited above, paragraph 227 regarding market transparency, and paragraphs 276 and 281 concerning structural links).194 The fact that there is scope for retaliation goes some way to ensuring that the members of the oligopoly do not in the long run break ranks by deterring each of them from departing from the common course of conduct.195 In that context, the Commission must not necessarily prove that there is a specific retaliation mechanism involving a degree of severity, but it must none the less establish that deterrents exist, which are such that it is not worth the while of any member of the dominant oligopoly to depart from the common course of conduct to the detriment of the other oligopolists.196 In this instance the following deterrents are identified in the Decision:- the deterrent effect of the mere threat of returning to a situation of oversupply, the 1995 experience showing what could happen if a capacity war broke out (Decision, paragraph 151; see also paragraph 170);- the scope for increasing capacity by up to 10% during the selling season, at least until February (Decision, paragraph 152);- the scope for a tour operator to add capacity between seasons and indicate that its conduct is retaliation for a particular action so as to make clear the link between the deviation and the punishment (Decision, paragraph 152);- the scope for de-racking or directional selling during the selling season to the detriment of an operator who has broken ranks in order to force it to sell a larger share of its holidays at discount prices (Decision, paragraph 152; see also paragraph 170).197 It must first be observed that the characteristics of the relevant market and the way that it functions make it difficult for retaliatory measures to be implemented quickly and effectively enough for them to act as adequate deterrents.198 Thus, in a case of deviation or, in other words, cheating, (where, for example, during the planning period one of the main tour operators attempted to turn to its advantage the overall capacity restriction resulting from parallel anti-competitive conduct), the other members of the oligopoly would find it difficult to detect the deviation because the market is not sufficiently transparent, as the Court has already held. It is difficult to detect any deviation at the planning stage, given the difficulties that a large tour operator has in anticipating the capacity decisions of its main competitors with any precision.199 In that context, the deterrents identified by the Commission do not appear to be capable of coming into play.200 In the first place, the Court finds that the Commission was wrong in concluding that the mere threat of reverting to a situation of oversupply acts as a deterrent. The Commission refers to the 1995 crisis to illustrate the effects of oversupply on the market. However, it should be made clear that the events of 1995 took place in a context different from that of the present case: then, all operators - regardless of whether they were large or small - boosted their capacity during the 1994 planning period in order to meet the increase in overall demand, which sectoral indicators and the preceding two years' growth suggested would occur. However, in this case the Commission anticipates that there will be a situation in which the three major tour operators, acting appreciably more cautiously than normal, will have reduced capacity below forecast demand and in which cheating has occurred. It is against that background, which differs markedly from the 1995 capacity surplus, that the Court must examine whether a possible return to oversupply acts as a deterrent. Oversupply could occur only one season later and only if the other members of the oligopoly decided to increase capacity above estimates of demand growth, that is very significantly in comparison with the level of under-supply that would exist in the context of tacit coordination envisaged by the Commission.201 In the second place, the scope for increasing capacity in the selling season cannot act as a deterrent for the following reasons.202 First, as the Decision itself emphasises, the market is distinguished by an innate tendency to caution as regards capacity decisions (see paragraphs 60 to 66, 97 and 136 of the Decision), given that matching capacity to demand is critical to profitability, since package holidays are perishable goods (Decision, paragraph 60).203 Second, in this market a decision to depart from the common policy by increasing capacity in the selling season would be taken at a stage when it would be difficult to detect it in sufficient time. Furthermore, even if the other members of the oligopoly managed to expose the deviating conduct, any reaction on their part involving a retaliatory capacity increase could not be sufficiently rapid or effective, inasmuch as it could be implemented only to a very limited extent in the same season - as is implicity accepted in the Decision - and only subject to restrictions, which would become increasingly acute as the selling season progressed (in the best-case scenario, capacity for the forthcoming summer season could be increased by only 10% up until February) (see paragraphs 152 and 162 of the Decision).204 Lastly, it may be assumed that, since they know that the perpetrators of any retaliatory measures are likely to find it difficult to sell late-added package holidays because of the low quality of such products (inconvenient flight times, poor-quality accommodation), the other members of the dominant oligopoly would be cautious about increasing capacity by way of retaliation. Capacity created in that way does not appear capable of competing effectively with capacity added by the operator which has broken ranks in the planning period, since it is both late and of lower quality. The deviating operator thereby benefits from the advantages associated with having acted first.205 In the third place, as regards the possibility of increasing capacity in the following season and the fact that capacity can be added between seasons (final part of paragraph 152 of the Decision), it is appropriate to observe that increasing capacity in that way is unlikely to be effective as a retaliatory measure, given the unpredictable way in which demand evolves from one year to the next and the time needed to implement such a measure.206 In the fourth place, retaliatory action by the other members of the oligopoly at the distribution level (by de-racking or directional selling) would - if Airtours were targeted - affect only 16% of its sales (of which less than 10% are made through Lunn Poly (Thomson) and only 6% through Thomas Cook). As the applicant points out, responses at secondary sources of supply do not represent countervailing forces of significance. Moreover, such retaliation would entail economic loss for its perpetrators, who would have to give up the commission paid by Airtours in respect of sales made in its main competitors' networks of travel agencies. Thus, the deterrent effect of such retaliatory action is not as significant as the Decision suggests.207 It follows from the foregoing that the Commission erred in finding that the factors mentioned in paragraphs 151 and 152 of the Decision would, in the circumstances of the present case, be a sufficient incentive for a member of the dominant oligopoly not to depart from the common policy.4. Underestimation of the likely reaction of smaller tour operators, potential competitors and consumers as a counterbalance capable of destabilising the alleged dominant oligopoly208 The applicant claims that the Commission underestimated the likely reaction of smaller operators (also referred to as independent or secondary tour operators), potential competitors (in particular those offering long-haul foreign package holidays) and consumers as a countervailing force capable of counteracting the creation of a collective dominant position. Such a position may be created only if the major tour operators are in a position to act to an appreciable extent independently of other current or future competitors and consumers.209 The Commission's response is that in order to overcome a coordinated capacity restriction on the part of the oligopolists, a large number of very small operators would need to increase their capacity significantly, which would not be possible given their existing size. Barriers to market entry and to growth beyond a certain size prevent smaller operators and new entrants from successfully challenging the power of the integrated tour operators and their ability to set capacity at a level lower than that of competitive equilibrium. Thus, secondary operators are not in a position to supply adequate capacity to meet extra demand because they encounter substantial barriers to expansion.210 The Court observes in limine that, to prove conclusively the existence of a collective dominant position in this instance, the Commission should also have established that the foreseeable reactions of current and future competitors and consumers would not jeopardise the results expected from the large tour operators' common policy. In this case, that implies that where the large tour operators, for anti-competitive purposes, reduce available capacity to a level below what is required to adjust to anticipated trends in demand, such a reduction must not be offset by their current competitors, smaller operators, any potential competitors, tour operators with a presence in other countries or on the long-haul market, or their customers (United Kingdom consumers) reacting in such a way as to render the dominant oligopoly unviable.(a) The possible response of current competitors: smaller tour operators(i) Preliminary observations on the issue of the size of the smaller tour operators211 At paragraphs 77 and 78 of the Decision, the Commission states that the ability of the fringe of smaller suppliers to compete effectively with the four large tour operators is further constrained by their lack of vertical integration and their small size, which means inter alia that they cannot make the same economies of scale and scope as the larger operators.212 The Court must first observe in that regard that the Commission (defence, paragraph 103) accepts that, as the applicant's expert Professor Neven explained during the administrative procedure, the package holiday industry is one in which alternative business strategies may produce good results and one in which there is little room for operators of intermediate size. According to Professor Neven, undertakings may either operate on a small scale and buy on competitive markets the capacity which they need in order to supply package holidays (airline seats and hotel beds). Alternatively, they may decide to produce a large volume of package holidays. Those undertakings will nevertheless find it risky to buy in large quantities of capacity (particularly airline seats) on competitive markets, which is why it is necessary for them to become vertically integrated, at least in air transport services. That alternative business strategy does not necessarily lead to lower costs and a systematic competitive advantage over smaller undertakings. It is also intrinsically more risky than the strategy of remaining small and buying capacity on competitive markets.213 However, it must be made clear that the issue here is not whether a small tour operator can reach the size necessary for it to compete effectively with the integrated tour operators by challenging them for their places as market leaders. Rather, it is a question of whether, in the anti-competitive situation anticipated by the Commission, the hundreds of small operators already present on the market, taken as a whole, can respond effectively to a reduction in capacity put on to the market by the large tour operators to a level below estimated demand by increasing their capacity to take advantage of the opportunities inherent in a situation of overall under-supply and whether they can thereby counteract the creation of a collective dominant position.214 In those circumstances, if the Commission is to establish that smaller tour operators would be incapable of successfully countering the creation of a collective dominant position, it cannot confine itself to pointing out the fact (which is not disputed by the parties) that in the current state of the relevant market, in order to compete effectively with the integrated operators, a secondary operator must reach a minimum size enabling it to operate on a sufficiently large scale and must therefore achieve some vertical integration. The Commission's arguments seeking to stress the difficulties that smaller tour operators have in reaching the minimum size at which they are capable of competing effectively with the four large operators are thus immaterial to an assessment of the ability of smaller operators and new entrants to increase capacity in order to take advantage of the opportunities afforded by product shortages, which the Commission alleges would arise if the operation were approved.215 Furthermore, as the applicant has pointed out, despite the fact that over the last decade a number of small tour operators have been taken over by the larger ones, small operators still exist in large numbers (several hundred), with continuous regeneration by new players entering the market, and continue to account for a significant part of the market.216 It is against that background therefore that it is appropriate to ascertain whether smaller tour operators are capable in this instance of putting on sufficient additional capacity to counter any reduction in the capacity put onto the market by the large operators.(ii) The ability of smaller tour operators to put on extra capacity217 The Court notes in limine that in the present case the members of the alleged dominant oligopoly do not control individually or collectively the markets for the raw materials or services necessary for preparing and distributing the product concerned. In that connection, it is apparent from the Decision (paragraphs 5 to 42) that, as well as the market for short-haul foreign package holidays, the Commission also examined the effects of the concentration upstream, on the market for the supply of airline seats on short-haul charter flights, and downstream, on the travel agency market, but that it nevertheless did not conclude either that the merger would entail the creation of a collective dominant position by the three remaining competitors on the upstream or downstream markets or that the merged undertaking (Airtours/First Choice) would enjoy an individual dominant position.218 First, it is noteworthy that the applicant has supplied, without challenge from the Commission, several examples of small tour operators who have put on additional capacity in response to opportunities that have arisen as a result of unexpected developments in the market. In 1996 (following the difficulties associated with the 1995 crisis), the three largest tour operators at that time reduced or froze their capacity, whilst several of the smaller operators underwent significant expansion, for example Virgin Holidays (+ 28%), Kuoni Travel (+ 20%), Direct Holidays (+ 68%) and Sun Express (+ 109%).219 Second, the applicant has stated, without challenge from the Commission, that smaller tour operators tend to set capacity after the large operators have made their major capacity decisions and that they may still, to a certain extent and like any tour operator, increase their capacity subsequently.220 Third, it is also apparent from the documents before the Court that several small operators have made it clear that they intend to increase their market share, which suggests that they are, on any view, extremely keen to make the most of any opportunities afforded as a result of the leading tour operators making capacity reductions unconnected with foreseeable trends in demand.221 At paragraph 85 of the Decision, the Commission replies to the argument put forward by the applicant during the administrative procedure, to the effect that secondary operators like Cosmos and Virgin Sun should be regarded as likely future major competitors, since they intend to expand their business. The Commission replied, stating that none of these companies is likely to be able to challenge the major operators in the foreseeable future - because Cosmos/Monarch is heavily dependent on the large operators as purchasers of airline seats and is not vertically integrated into travel agencies, and because Virgin Sun's operations are at present very small and it does not have its own travel agencies either. Finally, Virgin Sun has had considerable difficulties in contracting for accommodation in key short-haul destinations.222 However, the points made by the Commission do not lend weight to its argument, in that what matters is knowing how smaller tour operators are likely to react in the future in the event of the three remaining large tour operators reducing capacity put on to the market to below competitive levels. Rather, those points show that the clear intention of those two secondary tour operators is to take advantage of any opportunity afforded by the market.223 First, the Commission is not entitled to rely on the fact that Cosmos (Monarch) currently tends to favour the large tour operators over the small ones as regards sales of airline seats in order to establish that, were capacity restricted to below a competitive level, Cosmos/Monarch would not put its own interests above those of the members of the alleged dominant oligopoly. In any event, the new managing director of Cosmos has stated that the intention is to increase the firm's market share from 3.5% to 5% in two years. To that end, Cosmos has ATOL licences to carry 1.1 million passengers (Air Travel Organisers' Licence, issued by the Civil Aviation Authority).224 Second, for the same reasons, the difficulties that Virgin Sun has encountered in contracting for accommodation at certain short-haul resorts would be resolved if the large operators reduced their demand for rooms. It is clear from a letter dated 16 August 1999 from Virgin Sun to the Commission, placed before the Court in the context of measures of organisation of procedure, that it is easy to obtain adequate numbers of beds of sufficient quality in most of the Mediterranean resorts except the most sought-after, such as the Balearics, where the large operators more and more frequently negotiate long-term contracts with hotel owners, making it difficult for smaller operators to find the places required. However, it is also apparent from that letter that tour operators like Virgin Sun remain alert to try and take advantage of any opportunities that might arise in the most sought-after markets. Therefore, if, in any attempted capacity restriction, the large operators were not to use the beds contracted for, the smaller operators would rapidly be able to enter into contracts for them in order to increase the number of package holidays put onto the market. Lastly, it is appropriate to bear in mind that Virgin Sun is the short-haul tour operator recently launched by the Virgin Travel Group and has, since 1999, been offering holidays to the most popular resorts, namely Corfu, the Costa Blanca, the Costa del Sol, Majorca, Minorca, Ibiza, Portugal, Rhodes, Gran Canaria, Tenerife and Turkey, with departure flights from London Gatwick and Manchester, and that the President of the Virgin Travel Group has said that the goal of Virgin Sun is to match Thomson's market share within the next 10 years. Virgin Travel Group has ATOL licences to carry 400 000 passengers.225 Finally, two competitors on the short-haul package holiday market with substantial financial resources at their disposal, British Airways Holidays (which held 375 000 ATOL licences in 1999) and Kuoni (which sold 230 000 package holidays in the United Kingdom in 1998), would also be capable of increasing capacity quickly if the large tour operators tried to engineer a collective dominant position.226 Fourth, it is appropriate to mention a study indicating which of a selected number (59) of smaller tour operators are also present at 12 of the most sought-after short-haul destinations served by the large tour operators, which was produced during the administrative procedure and was not challenged by the Commission. The study shows (i) that all those destinations are served by at least four small tour operators; (ii) that the most popular, such as Corfu, Rhodes, Majorca or mainland Spain, are served by a large number of them (20 to 30 small tour operators); and (iii) that several small operators (such as Cosmos, Manos or Virgin Holidays) serve practically all the destinations (see Table 1 in Annex 8 to the application, the report by the applicant's expert, Professor D. Neven, entitled Competition in the UK Foreign Package Holiday Market, an Economic Analysis, July 1999). That study also shows that the small tour operators offer similar products (as regards number of nights and services) at prices that are comparable to, or even better than, prices offered by the larger tour operators.227 Fifth, and contrary to the Commission's contention at paragraph 83 of the Decision, it is apparent from that study, which the Commission does not challenge, that the smaller tour operators normally manage to obtain accommodation at short-haul destinations on conditions similar to those of the large operators. The study examines 20 hotels in popular short-haul resorts and compares the prices paid by Airtours with those paid by Panorama and Direct, two small independent operators which were subsequently taken over by Airtours, and shows that the prices are similar and that in some cases the smaller operators obtained more favourable terms than Airtours, even though Airtours reserved many more nights than the smaller operators.228 It follows that, in the case under consideration, the smaller operators would try to put on additional capacity. However, an analysis of whether it would be possible for them to do so calls for a more specific examination of whether adequate access to the markets for airline seats and travel agencies is available to them.(iii) The small operators' access to airline seats229 The Decision states that the smaller tour operators do not have adequate access to airline seats and that the merger would make that situation worse (Decision, paragraphs 78 and 79 and the final part of paragraph 83). Their small size means that they cannot obtain the benefits of scale and scope of the large operators. For example, they cannot guarantee a charter airline a complete planeload of passengers (except, perhaps, for a few days in peak season). That increases the risk for the airline that it will have to operate the flight at less than optimum loading. Consequently, the airline is likely to charge the small operators a higher seat price than the larger ones to reflect the higher risk (Decision, paragraph 78). Small operators have stated that they already have difficulty obtaining seats at desirable times (especially weekends) and from the major tourist airports (Gatwick and Manchester). Tour operators (and airlines) have commented that they need to offer departures from both those airports in order to have access to the main customer centres and so provide a credible national operation, otherwise their prospects for expansion beyond that of a small-scale competitor are slight (Decision, paragraph 79).230 At paragraph 80 of the Decision, the Commission adds that the major operators already have considerable market strength in regard to seat sales to independent operators. For example, a tour operator has commented that Monarch, the only substantial supplier to the independent sector that would remain after the merger, already tends to satisfy the needs of the major operators (which together account for over half of its third-party sales) before considering what to offer the independents, and refused even to discuss the forthcoming year's programme with the operator concerned until it had received notice of the majors' requirements.231 The Court observes, first, that it is apparent from Table 2 in the Decision (paragraph 159), which sets out the market shares of the main suppliers of airline seats to third parties (data which include all sales to third parties, encompassing sales to and between large tour operators as well as sales to small operators), that after the merger Airtours/First Choice would be in a position to control less than a quarter of the airline seats supplied to third parties and that the three large tour operators as a whole would supply less than half, given that Thomson has only a very limited presence on that market. It follows that the essential needs of third parties for airline seats would continue to be met by players who are independent of the large tour operators. That situation offers certain safeguards to the small tour operators, since only two out of the three large operators have any significant presence on that market and third-party independents represent an important source of airline seats.232 There is no evidence that that situation would be substantially altered as a result of the concentration, contrary to the Commission's contention that the merged entity consisting of the applicant and First Choice would be likely further to rationalise airline seats and that the small operators' problems would be exacerbated by a reduction in the number of seats available. As the applicant claims, the merger would not adversely affect the availability of airline seats for third parties: if Airtours and First Choice took more of their seat capacity from within the post-concentration group (which would displace third-party tour operators currently flying on Airtours International and Air 2000), there would be a corresponding release of seats on third-party airlines previously taken up by Airtours and First Choice. The Commission itself adopted that line of argument in its decision of 8 March 1999 (Case IV/M.1341 Westdeutsche Landesbank/Carlson/Thomas Cook (OJ 1999 C 102, p. 9), paragraph 36), in which it stated that [t]o the extent that the combined entity Thomas Cook might re-orientate its strategy towards using in-house charter airline capacity (eg that available from Caledonian) rather than purchase capacity from third parties, this would liberate that capacity from third parties and render it available to customers who have hitherto purchased from Flying Colours or Caledonian. The Commission has not put forward any persuasive arguments to show that the logic underlying that argument is no longer valid in this instance.233 Similarly, as regards the points made at paragraph 80 of the Decision, it is sufficient to note that the applicant has maintained - without challenge from the Commission during the procedure before the Court - that Monarch has given evidence that it does not favour the large tour operators to the detriment of the smaller tour operators and that it has recognised that the Thomas Cook/Carlson merger in fact increased its dependence on third-party tour operators without their own charter airline, as the Airtours/First Choice merger would have done.234 Second, the Court observes that, as the applicant has submitted, the evidence of Hunt & Palmer, one of the main seat brokers, whose business it is to match supply and demand by selling to tour operators spare capacity that airline carriers wish to sell (Annex 39 to the application), shows that the small tour operators may obtain airline seats for a season (or a shorter period) with weekend departures from four sources: overseas carriers; scheduled airlines; low-cost carriers; independent charter airlines based in the United Kingdom. It should be pointed out that there are at least 15 independent seat brokers in the United Kingdom and that the Commission has not disputed the evidence concerned.235 The arguments put forward by the Commission to show that those sources of supply are not viable are not persuasive.236 The first source is overseas carriers based at the destination airport (for example, Spanair, Air Europa or Futura).237 The Commission's view is that those carriers are not a viable alternative, since they have difficulty in obtaining sufficient slots at convenient times at the major United Kingdom airports, in particular at Gatwick. Moreover, as their fleets are not based in United Kingdom airports, the aircraft must fly to the United Kingdom in the morning and make the return flight in the evening, which means that customers have to fly out late in the evening and return early in the morning. A schedule of that kind considerably reduces the time actually spent on holiday, which is not popular with consumers. However, that argument is rebutted by Hunt & Palmer's evidence, which is to the effect that rotations may be effected from Gatwick.238 In any event, what is at issue here is whether, against a background of under-supply of package holidays, the smaller tour operators could obtain additional airline seats on reasonable terms and not whether they can gain access to better departure airports and slots. In that regard, it should be observed that the Commission deemed it inappropriate to subdivide the United Kingdom markets for short-haul package holidays and for the supply of seats on charter flights to tour operators more narrowly by reference to, for example, region or departure airport. On the contrary, in that regard the Commission found in the Decision (paragraph 45) that there was relative uniformity of pricing and costs, which suggests that there is a sufficient degree of overlap between the possible regional or local markets for them to be regarded for the present purpose as constituting a single national market on the demand side (if a chain of substitution basis is adopted). The Commission reached that conclusion (paragraph 45) after having pointed out that consumers prefer to leave from an airport closer to their home and that landing fees and other related factors mean that prices for departure from some of the smaller regional airports are often higher than those from the main holiday airports (London Gatwick and Manchester), and having concluded that the premium charged (or the discount offered) is usually relatively small compared to the total holiday cost, in particular when account is taken of the additional cost of the road journey to a cheaper airport further away. The same is true on the supply side, since the Commission believes that tour operators market their products nationally (Decision, paragraph 45) and that the latter do not vary much, either in price or otherwise, for consumers in different regions. Furthermore, tour operators and air carriers can, as a general rule, easily move planes and flights between the various airports, with the exception of Gatwick where availability is limited (Decision, paragraph 46).239 The Court holds that the Commission's argument that the aircraft used by overseas carriers must usually fly to the United Kingdom in the morning and return in the evening, which is inconvenient for consumers, has no factual basis, since the average flight-time to a European destination is about two hours. Carriers based at destination airports can thus carry out several rotations in one day and can, for example, make a Spain/United Kingdom outbound flight and a United Kingdom/Spain return flight in the morning and a Spain/United Kingdom outbound flight and a United Kingdom/Spain return flight in the evening.240 Finally, it must be observed that in the course of the administrative procedure the applicant maintained, without challenge from the Commission, that carriers based at destination airports supplied over one million seats in 1998 (the last year for which figures were available at the time of the Decision) for package holidaymakers and for seat-only holidaymakers and that the number of seats supplied by destination-based carriers has grown rapidly over recent years.241 It follows that, contrary to the Commission's contention, those carriers could play a significant role if the small operators attempted to increase the number of package holidays should the opportunity arise.242 The second source is scheduled airlines (like Debonair, Flightline or Cityflyer), whose weekend loading is light in the absence of business travellers.243 The Commission regards seats supplied by scheduled airlines to be of little importance in the United Kingdom, where British Airways uses only a small proportion of its capacity for this type of flight. The reasons for that are higher prices, the fact that scheduled airlines do not have direct flights to holiday destinations, the lack of availability and the inflexibility of timetables.244 However, those factors are not significant obstacles to small tour operators who wish to increase their capacity. As regards price differentials, it should be pointed out that air transport costs account for only a small proportion of the cost of a package holiday. For example, the cost of a Liverpool-Malaga flight in August on EasyJet was GBP 108 and that of a Stansted-Malaga flight on Go was GBP 140, whilst the cost of a 14-day package holiday to Marbella, Spain, in August was GBP 1 598 from Virgin Holidays, GBP 1 698 from Bath Travel and GBP 1 738 from Airtours (application, Annex 8, Table 2, and Annex 40). The proportion accounted for by transport amounts, in any event, to less than 10% of the price of the package. In that connection, the applicant submitted a table (Table 5 in the expert economic report, Annex 8 to the application) during the administrative procedure, which compared prices charged for scheduled flights and charter flights to different destinations on various dates. That table was drawn up on the basis of data acquired from Panorama, a small tour operator recently taken over by Airtours. It is likely that similar data could be obtained from other small tour operators. It is apparent from the table that the difference in price varies from GBP 20 to GBP 30, which ultimately has only a very minor impact on the price of the package and thus on the competitiveness of smaller operators using scheduled flights. In that regard, the price differential can be accounted for in the main by the obligation to pay departure taxes in the case of scheduled flights.245 As regards the terms that may be offered by scheduled airlines, particularly as regards days and slots, it is noteworthy that two of the five examples cited by the applicant, on the basis of data obtained from Panorama for the period before it was taken over, show that it is possible to obtain departures on Saturday or Sunday. Likewise, Hunt & Palmer's statement draws attention to the fact that the whole point of a seat broker's business is its ability to find flights departing at the weekend. Furthermore, the Decision itself (footnote 38) reveals that British Airways offers some whole-plane charters at weekends from United Kingdom regional airports, using aircraft not required for scheduled services at those times. As regards departure airports, it is appropriate to refer to the Court's earlier finding in relation to overseas air carriers. Finally, as regards the question whether it is disadvantageous to buy seats in only part of an aircraft rather than a full aircraft, the Court observes that the examples of prices offered by seat brokers, which the applicant produced, show that the price differential is minimal (less than 10%) and that the price of a seat bought as part of an allocation of some of the seats on an aircraft can prove to be less than the price of a seat purchased as part of a full aircraft allocation (see Professor Neven's report at Annex 8 to the application).246 As to the fact that only a limited number of destinations are covered by scheduled airlines, it is noteworthy that apart from the main tourist destinations in Spain, the scheduled airlines cited by the applicant also fly to the south of France and to Italy. In any event, the overseas carriers appear to be in a position to offset, should the need arise, the scheduled airlines' failure to provide a service to other destinations.247 It follows from the foregoing that, contrary to the Commission's contention, scheduled airlines can be used by the small tour operators to increase their capacity effectively so as to counter any restrictions imposed by the leading tour operators.248 The third source is low-cost carriers (such as Ryanair or Go), whose capacity has increased substantially in recent years and which are in a position to offer tailor-made services. The applicant produced a map showing the main destinations to which low-cost carriers fly (application, Annex 40), from which it can be seen that the main resorts on the Spanish Mediterranean are served by at least one airline, and often by two or even three airlines: Barcelona (by Debonair from Luton, EasyJet from Liverpool and AB Airlines from Gatwick), Palma (by EasyJet from Luton and Go from Stansted), Ibiza (by Go from Stansted); Alicante (by Go from Stansted); and Malaga (by EasyJet from Liverpool and Go from Stansted).249 The fourth source is independent charter airlines based in the United Kingdom (such as Monarch but also European Air Charter, British World or Titan), which also use small aircraft with low running costs. However, given that those airlines represent over 50% of the available capacity in the market for the supply of charter airline seats to third parties (see table 2 in the Decision, paragraph 159), it must be concluded that, contrary to the Commission's contention, they must have adequate capacity to act as a credible source of supply for small operators.250 Finally, the Commission has not taken into consideration the fact that it is crucial for the integrated tour operators to make sure that their planes are full if they are to ensure that their business is viable. The fact that their fleets represent a very significant part of their fixed costs means that there will be an incentive for the large operators to offer the small operators the seats that will remain empty in the situation envisaged by the Commission, in which the large operators appreciably reduce capacity.251 It is clear from the foregoing that the Commission was wrong to conclude that smaller tour operators would not have access to airline seats on favourable enough terms to attempt to increase capacity and take advantage of the opportunities afforded by the under-supply that would occur in the anti-competitive environment anticipated by the Commission in the event of the operation being approved.(iv) Access of smaller tour operators to distribution252 At paragraphs 81 and 82 of the Decision, the Commission refers to certain difficulties encountered by smaller tour operators, such as the discriminatory conditions to which they are subject in the travel agencies owned by the large integrated tour operators, notably commission rates, directional selling of the latters' products and the way in which brochures and offers are displayed, all of which prevent them from engaging in effective competition with the large tour operators.253 The applicant challenges the Commission's proposition that access to distribution has been restricted as a result of vertical integration by the leading tour operators because, in the applicant's submission, vertical integration produces an unacceptable foreclosure effect only if horizontal market power exists at the distribution level, which is not the case here.254 The Commission contends that the main tour operators control all the large national chains of travel agents and the great majority of agency branches. In those agencies other operators are subject to directional selling, that is, preference is given to the parent company's products. That is a substantial barrier to the small operators' market entry and growth. Alternative distribution channels such as distribution via call centres and the Internet are not yet viable substitutes for travel agencies, as can be seen from the efforts made by the main tour operators, such as First Choice, to establish or acquire chains of travel agencies.255 The Court observes that what is at issue here is not how large an operator needs to be to compete with the main operators for market leadership but whether, in the anti-competitive environment anticipated by the Commission, small operators already present on the market would be able to gain access to the market for distribution on satisfactory terms and sell larger numbers of their package holidays to consumers. It is apparent from a cursory analysis of the Decision that, as the applicant maintains, that would be the case.256 First, it is noteworthy that, as the Commission has pointed out at paragraph 32 of the Decision, the merger is not likely to lead to the creation or strengthening of a dominant position in travel agency services as a whole, irrespective of whether direct sales of package holidays by tour operators or distance sales (by telephone) are included. As regards numbers of outlets, the parties' combined share of the supply of travel agency services is small (around 15%).257 Further, it is clear from the Decision (paragraph 81) that nearly 40% of all foreign package holidays sold through travel agencies are sold through independent agencies. Second, the Commission itself acknowledges (paragraph 31) that other methods of distribution exist and are developing well, such as direct sales by telephone or the Internet, and already represent around 20% of total sales of package holidays. That increases the scope for small operators to distribute their products efficiently in a situation where supply is restricted. In that regard, it is significant that Direct Holidays (an independent tour operator taken over by Airtours), which sells all its holidays by direct means, enjoyed marked growth during the period 1995-1996 (a period in which the large tour operators experienced financial difficulties) (application, paragraph 9.18). It should be added in this respect that the applicant has drawn attention to the fact, which is not disputed by the Commission, that during the administrative procedure, the Commission received the following evidence from third parties regarding the feasibility of direct sales as a means of market access (cited at paragraph 3.57 of the reply to the statement of objections at Annex 7 to the application):(i) Thomas Cook indicated that the current trend is away from traditional ways of booking a holiday through a travel agent in person. The British National Travel Survey shows that indirect booking has grown since the end of the '80s, going from 29% of total bookings in 1992 ... to 34% in 1998.(ii) Thomson expressed the view that the number of consumers who book holidays through non-traditional direct purchase methods is growing, as is the proportion of consumers who regard direct purchases as an alternative to booking through a traditional high-street travel retailer.(iii) Virgin Holidays said: as a tour operator, we do not have a distribution chain. From our own sales, we have experienced a marked increase in the number of holidays purchased via call centres. We have also seen an increase in the number of holidays that are purchased through teletext agencies.258 Even if it were established, in relation to the difficulties encountered by small tour operators (mentioned at paragraphs 81 and 82 of the Decision), that the practices concerned actually occur and are not unlawful, they would not appreciably limit the ability of small tour operators to take advantage of any opportunities afforded by the under-supply to which the Commission believes the merger would give rise. In such a situation, it may be concluded that, given consumer expectations and the need to maximise income, travel agencies could not refrain from offering the small tour operators' products on reasonable terms, even though the agencies owned by the vertically integrated tour operators would offer the group's products ahead of competing products.259 In any event, since nearly 40% of all package holidays sold are not sold in agencies controlled by the large tour operators, smaller operators are likely to gain access to distribution on favourable enough conditions to enable them to sell the capacity that they would add in the event of the main operators deciding to restrict capacity to below competitive levels.260 It follows that the Commission was wrong to conclude that smaller tour operators would not have access to a channel through which to distribute their products to consumers on favourable enough conditions to enable them to expand their capacity significantly in order to take advantage of opportunities afforded by the under-supply which, in the Commission's submission, would occur were the merger to be approved.261 It is apparent from all of the foregoing that the Commission underestimated the ability of the small operators to increase capacity in order to take advantage of opportunities afforded by a situation of general under-supply brought about by the large tour operators and thus to counteract the creation of a collective dominant position following the concentration.(b) Possible reactions of potential competitors: other tour operators262 It is also necessary to consider whether, were the large tour operators to restrict capacity put on to the market to anti-competitive levels, tour operators in other countries of the Community or in the United Kingdom long-haul foreign package holiday market would be capable of entering the United Kingdom short-haul foreign package holiday market.263 It is appropriate to recall the wording employed by the MMC in its 1997 report:Players come and go. There are no significant barriers to entering either the tour operator or the travel agent market (paragraph 1.6). ... if particular types of holidays, holidays from certain airports or holidays at particular times of year were overpriced, then tour operators would be able to move their business into each of those areas and undercut their prices (paragraph 4.15).264 It should be observed that the Commission, at paragraph 114 of the Decision, recognises, first, that a collective dominant position cannot be sustained in the long term if barriers to market entry into tour operation, charter airline operation and the travel agency business are insignificant and, second, that the MMC's 1997 report broadly concurs with the applicant's view on the lack of barriers to entry to the market concerned.265 At paragraph 115 of the Decision, the Commission nevertheless notes that since the MMC's report was completed in 1997 there has been substantial consolidation in the industry and considers that henceforth barriers to market entry will be greater (they are likely to have a more significant impact) and that they would increase still further if the proposed merger were implemented. The Commission then submits:To be sufficient to remove the threat of creation of a dominant position, entry must, clearly, be more than merely possible. Among other things, it must be sustainable, which, in markets such as this one, where scale is an important factor, means that it must be capable of being on, or quickly acquiring, a sufficient scale to offer a real competitive challenge to the dominant suppliers. In the Commission's view, this is unlikely to be the case here.266 It should nevertheless be borne in mind that, as is the case with current competitors, what is important here is not whether there is scope for potential competitors to reach a sufficient size to compete on an equal footing with the large tour operators, but simply whether there is scope for such competitors to take advantage of opportunities afforded by the large operators restricting capacity put onto the relevant market to below a competitive level. In that context, the Commission cannot contend that, merely because they would have difficulty expanding beyond a certain size, tour operators offering other products (such as long-haul foreign package holidays) or carrying on business in other countries (such as Germany or the Netherlands) could not enter the United Kingdom short-haul foreign package holiday market fast and effectively if the large tour operators decided to restrict competition significantly. In that respect, it is noteworthy that other sizeable European tour operators, such as Neckermann and TUI, are mentioned by the applicant as potential competitors likely to enter the United Kingdom quickly in the event of a capacity restriction or a price increase.267 Furthermore, in that connection, the Decision does not examine competition at the level of holiday accommodation, although the supply of capacity of that type is very important if the dynamic of the relevant market is to be understood, in particular with regard, first, to the ability of members of the alleged dominant oligopoly to act independently of hotel owners at short-haul destinations, and, second and consequently, to the ability of current and potential competitors to react to a possible reduction in the capacity supplied by the large tour operators. It is unlikely that any hotel beds becoming available following a decision by the large tour operators to restrict capacity will not be immediately booked by other operators. Documents and statements from other operators, submitted during the administrative procedure, show that they are willing to acquire accommodation capacity (see, for example, the letter from Virgin Sun referred to in paragraph 224 above).268 Therefore, each large tour operator is likely to take account of the risks involved where hotel owners react to an appreciable reduction in bed reservations which does not actually correspond to a reduction in demand but to a decision to restrict capacity for anti-competitive purposes. The large operators might find that beds were not available for subsequent seasons on satisfactory terms or in satisfactory numbers.269 It is clear from the foregoing that, although the Commission examined barriers to developing beyond a certain size in the market, it did not take account, as it should have done, of the fact that the lack of barriers to market entry is likely to allow potential competitors to gain access to, and offer their products on, the relevant market and, therefore, to take fast and effective action in the event of the large tour operators aligning their capacity strategies so as to give rise to a situation of under-supply.(c) The possible reaction of consumers270 In seeking to prove that the oligopoly emerging after the transaction would be able to act independently of consumers, it is necessary to determine what the reaction of United Kingdom consumers would be and to ascertain whether they would be prepared to look for other options if the price of short-haul package holidays were to rise significantly or if there were a dearth of such holidays.271 At paragraph 124 of the Decision, the Commission explains that consumers have no buyer power and that, if that is taken with other aspects of the market, they have difficulty in comparing competing products from the limited information available in tour operators' brochures, which limits the consumer's ability to offset any anti-competitive features on the supply side.272 According to the applicant, several market studies show that the majority of holiday makers visit more than one travel agency before making a holiday choice and that for 85% of them price is the single most important factor affecting their purchase decision. Individual consumers are therefore able to vote with their feet and look for a cheaper holiday, thus providing the tour operator with an incentive to price competitively.273 The Commission contends that it is wrong to claim that in a consumer products market such as the package holiday market consumers have any significant countervailing buyer power.274 However, it is appropriate to emphasise that the fact that consumers do not have significant buyer power because they act in isolation must not be confused with the question of whether they would be able to react to a price rise brought about by the large tour operators restricting capacity put onto the market to an anti-competitive level. As the applicant submits, it is not disputed that consumers make comparisons before purchasing a holiday. The Commission itself admits, at paragraph 98 of the Decision, that consumers are sensitive to relatively small differences in the prices of similar holidays.275 In that context, the Commission has underestimated the role that might be played by United Kingdom consumers, who are in a position to try to obtain better prices from small tour operators.276 Furthermore, it is appropriate to point out that in the context of the first plea it was found that, although the Commission, in the proper exercise of its discretion, concluded that the relevant product market should be narrowly defined, it nevertheless did not question either the fact that long-haul foreign package holidays are becoming increasingly attractive to consumers or the fact that the market studies cited by the applicant in its reply to the statement of objections (Annex 7 to the application: the British National Travel Survey and Mintel Holidays: the booking procedure, 1997) draw attention to the tendency of United Kingdom consumers to go further afield for their holidays, in particular to the other side of the Atlantic. That fact lends weight to the applicant's proposition that demand might partly switch to other types of holidays if there were sufficient price convergence, inasmuch as the studies concerned clearly show that consumer tastes are evolving and that consumers do not appear in any way to regard the Mediterranean coast as the only place to go on holiday.(d) Conclusion277 In view of the foregoing observations, the Court concludes that the Commission's assessment of the foreseeable reaction of smaller tour operators, potential competitors, consumers and hotel-owners was incorrect and that it underestimated their reaction as a countervailing force capable of counteracting the creation of a collective dominant position.5. The assessment of the impact of the transaction on competition278 The Commission sets out its findings on the effect of the transaction at paragraphs 139 to 147 of the Decision.279 First (paragraph 139), it argues that the transaction would result in increased concentration, since the combined market share of the three leading tour operators would increase substantially: 83% on the Commission's calculations (85% according to Nielsen), compared with around 70% before the merger (for Airtours, Thomson and Thomas Cook). In addition, the share of the fourth operator (Cosmos) would be less than 5%, whereas the operator currently in fourth position (First Choice) has a market share of 11%. However, it is apparent from paragraphs 139 to 147 of the Decision that the Commission did not regard the fact that the combined market share was high (above 80%) as sufficient to establish that there was a collective dominant position.280 Second, the Commission maintains (paragraphs 140 and 141 of the Decision) that as a result of the merger First Choice would be lost as a supplier/distributor for secondary operators, which would further marginalise the smaller independent and non-integrated tour operators. However, it is appropriate to point out that when consideration is given to whether a collective dominant position might be created, the assessment of the foreseeable impact of the operation on other competitors in the market must ascertain whether those competitors would be in a position to challenge the stability of the alleged dominant oligopoly. The Court has found that the Commission did not prove that they would be incapable of doing so.281 Third, the Commission contends (Decision, paragraphs 142 to 147) that the merger would increase transparency and the degree of interdependence between the large tour operators. At paragraph 143 of the Decision, it concludes that the fact that the merger would reduce the number of competitive relationships that are possible among the major operators by half, from six to three, would increase significantly the interdependence of the members of the oligopoly, which would be a further incentive to them to restrict capacity because it would be much more clear to them that competing for market share would mean depressed profits for each of them. The further marginalisation of secondary operators would increase the likelihood of that happening. At paragraph 144, the Commission points out that the reduction in the number of competitive and cooperative bilateral relationships would thus increase the transparency of the market, since it would become much easier for one of the major suppliers to detect efforts to destabilise the market involving, for example, attempts to capture market share. That greater transparency would increase the risk that competitive offensives would create oversupply, which would depress profits and consequently be counter-productive.282 Consequently, the Commission reached the conclusion (Decision, paragraph 147) that the market structure to which the operation would give rise would make it rational for the oligopolists to restrict supply.283 However, it is appropriate to bear in mind, as regards the level of market transparency foreseeable after the merger, that the Court has found that the Commission was wrong to conclude that the degree of market transparency was sufficient to allow each of the major tour operators to be aware of the conduct of the others, to detect any deviations from the common policy and to see retaliatory measures for what they are. The Commission has failed to establish that the situation would be any different if there was a move from four major tour operators to three. Although there would certainly be some increase in market transparency after the reduction in the number of competitive bilateral relationships between the major tour operators from six to three, it is nevertheless the case that each of the three remaining major tour operators would continue to find it difficult to anticipate the intentions of the other two in sufficient time and to see any deviations from the common policy for what they are.284 As regards the finding that the operation would significantly increase the interdependence of the major tour operators, it should be noted that the Commission has been inconsistent: it has argued, on the one hand, that in the relevant market it is necessary to become vertically integrated in order to be genuinely competitive and, on the other, that the fact that each of the integrated tour operators sells seats on charter flights to the others in the upstream market and sells the others' package holidays in the downstream market has an anti-competitive effect inasmuch as it increases their interdependence. In the absence of any evidence to the contrary, there must be a presumption, given the logic of the way the market operates, that vertical integration makes the large tour operators more independent from each other and thus reduces their interdependence.285 Similarly, the Commission has not explained why what it regards as commercial links (purchase of airline seats from the others and sale of its own products in agencies owned by the others) must be explained solely in terms of strong economic links between the major operators (Decision, paragraph 142) and cannot simply be explained on the ground that it is profitable to maintain those links in a competitive situation, given that the major tour operators are economic units, firmly entrenched in several markets within the industry and that it is in their interest to be profitable and to maximise their revenues in those markets as a whole.286 The Decision is not specific about the strong economic links between the major operators or the way in which they increase the interdependence of the integrated tour operators. At paragraph 57 of the Decision, the Commission states that the extent and nature of the vertical integration of the major suppliers, the extensive commercial and other links between them are among the characteristics which distinguish the conditions of competition in the relevant product market. Then, at paragraph 71, the Decision is a little more specific about the nature of the links in question. It points out that there are a number of commercial links between the integrated companies, deriving in part from their vertical integration, downstream through the use of each other's travel agency chains and upstream because they share airline capacity to some extent, both through direct purchase from each other and from swaps and consolidation arrangements whereby they maximise the use of their respective fleets. At paragraphs 102 to 113, the Commission sets out a number of considerations under the heading Transparency, interdependency and commercial links. Those paragraphs are devoted to an exposé of the Commission's view of the degree of market transparency. The Commission, in that regard, states that vertical integration and the commercial links between the main suppliers help them to obtain precise and up to date estimates of their market share and those of their competitors. However, those paragraphs explain neither the reasons for the tour operators' interdependence nor what effect is produced by the commercial links arising from vertical integration and the way the market operates in that regard (apart from the fact that there is increased transparency).287 Next, at paragraph 142, in its assessment of the impact of the merger, the Commission states that there is already a certain degree of mutual dependency between the tour operators, owing to the impact on market conditions of the overall level of capacity put on to the market for a season. The Commission adds that this creates strong economic links between the major operators. However, the kind of economic links to which that passage refers is not specified and the Decision does not explain what the strong economic links are. In any event, the Decision does not seem to be referring in that passage to the commercial links stemming from vertical integration (namely, the fact that each of the large tour operators purchases airline seats from the others and sells the other operators' holidays).288 It is clear from the foregoing that the Commission did not examine to what extent in the pre-concentration situation the commercial links stemming from vertical integration and from the way the market operates increase the interdependence of the integrated tour operators, other than to point out that they increase the degree of market transparency.289 As the Commission has not provided evidence to the contrary, there must be a presumption that in the conditions obtaining in the relevant market prior to the concentration the fact that each integrated tour operator buys airlines seats from, and sells its products to, companies owned by a competitor no more constitutes evidence of interdependence than it does of independence. It seems to be merely an aspect of the way the economy operates, where business prevails and the integrated tour operators must attempt to capitalise on capacity and business opportunities in an industry with very high fixed costs and low profit margins. As the Decision points out, the integrated tour operators are present in three markets and, therefore, in three different businesses: short-haul charter flights, short-haul package holiday operation and holiday sales in travel agencies. First Choice even carries on a fourth business, that of seat broking (see paragraph 1 of the Decision). The economic logic underlying a group of undertakings demands that each of the undertakings making up the group strives to be as successful as possible.290 In that regard, it is appropriate to observe that in its assessment of the impact of the transaction, the Commission does not appear to have considered the effect of the economic logic of the group, namely maximising income by maximising overall profits for the group as a whole. The Decision does acknowledge (paragraph 59) that tour operators' margins are fairly low, of the order of 7% in recent years, and that, by contrast, vertically integrated operators will normally also receive income from their airline and travel agency activities, areas in which (particularly so far as airlines are concerned) the margins may be higher. It also acknowledges that for that reason gross margins on the total operations of the integrated operators may be larger than those on their tour operating activities alone.291 Since that economic logic tends to favour achievement of the greatest synergies possible, the profitability of the various activities of the group (charter airlines, tour operating and travel agencies) will be correspondingly higher where the benefits of vertical integration are fully exploited.292 Finally, even if the synergies to which the merger is expected to lead did not exceed 1% of the overall costs of the combined entity (Decision, paragraph 146), there is no evidence that Airtours decided to finance the cost (usually higher in the case of a hostile takeover bid) of the shares in First Choice by relying on that large investment being made profitable by the benefits derived from a sustainable collective dominant position.293 In view of the foregoing considerations and without a more detailed assessment of the implications of the increased market transparency and interdependence of the major tour operators to which the transaction is likely to give rise, the Court finds that the Commission has failed to prove that the result of the transaction would be to alter the structure of the relevant market in such a way that the leading operators would no longer act as they have in the past and that a collective dominant position would be created.D - General conclusion294 In the light of all of the foregoing, the Court concludes that the Decision, far from basing its prospective analysis on cogent evidence, is vitiated by a series of errors of assessment as to factors fundamental to any assessment of whether a collective dominant position might be created. It follows that the Commission prohibited the transaction without having proved to the requisite legal standard that the concentration would give rise to a collective dominant position of the three major tour operators, of such a kind as significantly to impede effective competition in the relevant market.295 In those circumstances, the third plea must be declared to be well founded and, therefore, the Decision must be annulled, without it being necessary to examine the other complaints and pleas put forward by the applicant. Decision on costs Costs296 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the defendant has been unsuccessful and the applicant asked for an order for costs against the Commission, the Commission will be ordered to bear its own costs and to pay those incurred by the applicant. Operative part On those grounds,THE COURT OF FIRST INSTANCE (Fifth Chamber, Extended Composition)hereby:1. Annuls Commission Decision C(1999) 3022 final of 22 September 1999 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case IV/M.1524 - Airtours/First Choice);2. Orders the Commission to pay its own costs and those incurred by the applicant.

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THE COURT OF JUSTICE TODAY DELIVERS THREE JUDGMENTS CONCERNING "GOLDEN SHARES" IN THE CONTEXT OF THE PRIVATISATION OF UNDERTAKINGS. THE FRENCH AND PORTUGUESE PROVISIONS ARE DECLARED UNLAWFUL; THE BELGIAN RULES ARE HELD TO BE VALID

| 61998J0367 Judgment of the Court of 4 June 2002. - Commission of the European Communities v Portuguese Republic. - Failure by a Member State to fulfil its obligations - Articles 52 of the EC Treaty (now, after amendment, Article 43 EC) and 73b of the EC Treaty (now Article 56 EC) - System of administrative authorisation relating to privatised undertakings. - Case C-367/98. European Court reports 2002 Page I-04731 Keywords 1. Free movement of capital - Restrictions - Obstacles resulting from a system of administrative authorisation relating to privatised undertakings - Justification - Systems of property ownership - None(EC Treaty, Art. 222 (now Art. 295 EC))2. Free movement of capital - Restrictions - National rules prohibiting the acquisition by investors from other Member States of more than a given number of shares and providing for a system of prior authorisation for the acquisition of a holding in certain national undertakings in excess of a specified level - Not permissible - Justification on economic grounds - None(EC Treaty, Arts 73b and 73d(1) (now Arts 56 EC and 58(1) EC)) Summary $$1. Depending on the circumstances, certain concerns may justify the retention by Member States of a degree of influence within undertakings that were initially public and subsequently privatised, where those undertakings are active in fields involving the provision of services in the public interest or strategic services. However, those concerns cannot entitle Member States to plead their own systems of property ownership, referred to in Article 222 of the Treaty (now Article 295 EC), by way of justification for obstacles, resulting from a system of administrative authorisation relating to privatised undertakings, to the exercise of the freedoms provided for by the Treaty. That article does not have the effect of exempting the Member States' systems of property ownership from the fundamental rules of the Treaty.( see paras 47-48 )2. A Member State which adopts and maintains in force national rules (a) prohibiting the acquisition by investors from other Member States of more than a given number of shares in certain national undertakings and (b) requiring the grant by the State of prior authorisation for the acquisition of a holding in certain national undertakings in excess of a specified level fails to comply with its obligations under Article 73b of the Treaty (now Article 56 EC).Such rules constitute a restriction on the movement of capital within the meaning of that article which cannot be justified. In that regard, restrictions on the fundamental freedom concerned cannot be justified either by the economic policy objectives reflected in such national rules or by the objectives of choosing a strategic partner, strengthening the competitive structure of the market concerned or modernising and increasing the efficiency of means of production, inasmuch as all those grounds fall outside the ambit of the reasons set out in Article 73d(1) of the Treaty (now Article 58(1) EC).( see paras 46, 52, operative part 1 ) Parties In Case C-367/98,Commission of the European Communities, represented initially by A. Caeiro, and subsequently by F. Benyon and F. de Sousa Fialho, acting as Agents, with an address for service in Luxembourg,applicant,vPortuguese Republic, represented initially by L. Fernandes and L. Bigotte Chorão, and subsequently by L. Fernandes and J. Vasconcelos, acting as Agents, with an address for service in Luxembourg,defendant,APPLICATION for a declaration that, by adopting and maintaining in force Law No 11/90 of 5 April 1990, being the framework law on privatisations (Diário da República I, Series A, No 80, of 5 April 1990, p. 1664), in particular Article 13(3) thereof, the decree-laws on the privatisation of undertakings subsequently adopted in application of that Law and also Decree-Laws Nos 380/93 of 15 November 1993 (Diário da República I, Series A, No 267, of 15 November 1993, p. 6362) and 65/94 of 28 February 1994 (Diário da República I, Series A, No 49, of 28 February 1994, p. 993), the Portuguese Republic has failed to comply with its obligations under the EC Treaty, in particular Articles 52 (now, after amendment, Article 43 EC), 56 (now, after amendment, Article 46 EC), 58 (now Article 48 EC), 73b (now Article 56 EC) et seq. and 221 (now, after amendment, Article 294 EC) thereof, and Articles 221 and 231 of the Act concerning the conditions of accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties (OJ 1985 L 302, p. 23),THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann (Rapporteur), N. Colneric and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward, A. La Pergola, J.-P. Puissochet, R. Schintgen, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: D. Ruiz-Jarabo Colomer,Registrar: H.A. Rühl, Principal Administrator,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 2 May 2001, at which the Commission was represented by F. de Sousa Fialho and by M. Patakia, acting as Agent, and the Portuguese Republic by L. Fernandes and by C. Botelho Moniz, acting as Agent,after hearing the Opinion of the Advocate General at the sitting on 3 July 2001,gives the followingJudgment Grounds 1 By application received at the Court Registry on 14 October 1998, the Commission of the European Communities brought an action under Article 169 of the EC Treaty (now Article 226 EC) for a declaration that, by adopting and maintaining in force Law No 11/90 of 5 April 1990, being the framework law on privatisations (Diário da República I, Series A, No 80, of 5 April 1990, p. 1664, hereinafter Law No 11/90), in particular Article 13(3) thereof, the decree-laws on the privatisation of undertakings subsequently adopted in application of that Law and also Decree-Laws Nos 380/93 of 15 November 1993 (Diário da República I, Series A, No 267, of 15 November 1993, p. 6362, hereinafter Decree-Law No 380/93) and 65/94 of 28 February 1994 (Diário da República I, Series A, No 49, of 28 February 1994, p. 993, hereinafter Decree-Law No 65/94), the Portuguese Republic has failed to comply with its obligations under the EC Treaty, in particular Articles 52 (now, after amendment, Article 43 EC), 56 (now, after amendment, Article 46 EC), 58 (now Article 48 EC), 73b (now Article 56 EC) et seq. and 221 (now, after amendment, Article 294 EC) thereof, and Articles 221 and 231 of the Act concerning the conditions of accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties (OJ 1985 L 302, p. 23, hereinafter the Act of Accession).Legal frameworkCommunity law2 Article 73b(1) of the Treaty is in the following terms:Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.3 Article 73d(1)(b) of the EC Treaty (now Article 58(1)(b) EC) provides:The provisions of Article 73b shall be without prejudice to the right of Member States:...(b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security.4 Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty (OJ 1988 L 178, p. 5) contains a nomenclature of the capital movements referred to in Article 1 of that directive. In particular, it lists the following movements:I - Direct investments1. Establishment and extension of branches or new undertakings belonging solely to the person providing the capital, and the acquisition in full of existing undertakings.2. Participation in new or existing undertakings with a view to establishing or maintaining lasting economic links....5 According to the explanatory notes appearing at the end of Annex I to Directive 88/361, direct investments means:Investments of all kinds by natural persons or commercial, industrial or financial undertakings, and which serve to establish or to maintain lasting and direct links between the person providing the capital and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity. This concept must therefore be understood in its widest sense....As regards those undertakings mentioned under I-2 of the Nomenclature which have the status of companies limited by shares, there is participation in the nature of direct investment where the block of shares held by a natural person or another undertaking or any other holder enables the shareholder, either pursuant to the provisions of national laws relating to companies limited by shares or otherwise, to participate effectively in the management of the company or in its control....6 The nomenclature appearing in Annex I to Directive 88/361 also refers to the following movements:III - Operations in securities normally dealt in on the capital market...A - Transactions in securities on the capital market1. Acquisition by non-residents of domestic securities dealt in on a stock exchange...3. Acquisition by non-residents of domestic securities not dealt in on a stock exchange...7 Article 222 of the EC Treaty (now Article 295 EC) provides:This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership.8 Article 222 of the Act of Accession is in the following terms:1. Until 31 December 1989, the Portuguese Republic may maintain a system of advance authorisation for direct investments, within the meaning of the First Council Directive of 11 May 1960 for the implementation of Article 67 of the EEC Treaty, as amended and added to by Second Council Directive 63/21/EEC of 18 December 1962 and by the 1972 Act of Accession, carried out in Portugal by nationals of other Member States and connected with the exercise of the right of establishment and the freedom to provide services and whose overall value exceeds the following amounts:...2. The provisions of paragraph 1 shall not apply to direct investments concerning the credit institutions sector.3. For every investment project subject to advance authorisation pursuant to paragraph 1, the Portuguese authorities must take a decision at the latest two months after the application has been made. If no decision is taken within this time-limit, the proposed investment shall be deemed to be authorised.4. The investors covered by paragraph 1 may not be treated differently from one another nor be granted less favourable treatment than that granted to nationals of third countries.9 Article 231 of the Act of Accession provides as follows:The Portuguese Republic shall, circumstances permitting, carry out the liberalisation of capital movements and invisible transactions referred to in Articles 224 to 230 before expiry of the time-limits laid down in those articles.National law10 Article 3 of Law No 11/90 provides:Re-privatisations shall pursue the following main objectives:(a) to modernise economic entities and make them more competitive, and to contribute to strategies for restructuring the sector or undertaking concerned;(b) to strengthen national business capacity;(c) to help reduce the role played by the State in the economy;(d) to contribute to the development of the capital market;(e) to permit widespread participation by Portuguese citizens in the share capital of undertakings, by means of an adequate capital spread, with particular attention being paid to workers in the undertakings concerned and small-scale shareholders;(f) to preserve the property interests of the State and to develop other national interests;(g) to help reduce the burden of public debt in the economy.11 Article 13(3) of Law No 11/90 provides:The legislation providing for transformation may also limit the overall amount of shares which may be acquired or subscribed for by foreign entities or entities the majority of the capital of which is held by foreign entities. It may also lay down rules fixing the maximum value of their respective participations in the capital of any company and the corresponding methods of control, non-compliance with which, in the circumstances to be prescribed, will be penalised by the forced sale of any shares exceeding those limits, loss of the voting rights conferred by those shares or the nullity of those acquisitions or subscriptions.12 The possibility afforded by Article 13(3) of Law No 11/90 appears to have been used in many decree-laws regulating the privatisation of certain undertakings, specifying in each case the maximum authorised foreign participation. In its application, the Commission refers to 15 decree-laws providing for maximum foreign participations varying between 5% and 40%, in relation to undertakings operating in the banking, insurance, energy and transport sectors.13 The single article of Decree-Law No 65/94 provides as follows:For the purposes of application of Article 13(3) of Law No 11/90 of 5 April 1990, the maximum permitted participation by foreign entities in the capital of companies whose re-privatisation has been completed shall henceforth be fixed at 25%, save where a higher limit has previously been fixed by the legislation providing for their re-privatisation.14 Article 1 of Decree-Law No 380/93 provides:1. The acquisition inter vivos, with or without consideration, by a single natural or legal person, of shares representing more than 10% of the voting capital, and the acquisition of shares which, when added to those already held, exceeds that limit, in companies which are to be re-privatised, shall require the prior authorisation of the Minister for Financial Affairs.2. Subject to the conditions laid down for each privatisation procedure, the provisions of paragraph 1 shall apply only to acquisitions made following privatisation.Pre-litigation procedure15 Following fruitless contacts in 1992, 1993 and 1994, the Commission issued a formal notice to the Portuguese Government on 4 July 1994 in which it asserted that Law No 11/90 and Decree-Laws Nos 380/93 and 65/94 were contrary to Articles 52, 56, 58, 73b et seq. and 221 of the Treaty and to Articles 221 to 231 of the Act of Accession.16 The Portuguese Government replied to that formal notice by letter of 28 September 1994, in which it maintained that the special situation of Portugal since 1975 justified the restrictions in issue. At the same time, it undertook, in relation to future privatisations, no longer to impose restrictions on the acquisition of shares based on the nationality of the investors concerned.17 The Commission was not persuaded by the arguments put forward by the Portuguese Government, and therefore sent a reasoned opinion to the Portuguese Republic on 29 May 1995.18 The Portuguese Government replied to the reasoned opinion by letter of 7 September 1995, in which it again undertook not to use, in the context of future privatisations, the possibility afforded by Law No 11/90 of limiting participation by Community investors. In addition, it argued that the system established by Decree-Law No 380/93 was applicable without any discrimination based on the nationality of investors, and that it was designed to permit attainment of the objectives pursued by re-privatisation operations in accordance with Article 3 of Law No 11/90.19 The Commission was not satisfied by those responses, and therefore decided to bring the present action before the Court.Pleas and arguments of the parties20 The Commission states, as a preliminary point, that the phenomenon of widespread intra-Community investment has prompted certain Member States to adopt measures to control that situation. Those measures, most of which have been adopted in the context of privatisations, are liable, in certain circumstances, to be incompatible with Community law. For that reason, it adopted on 19 July 1997 its Communication on certain legal aspects concerning intra-EU investment (OJ 1997 C 220, p. 15, hereinafter the 1997 Communication).21 In that communication, the Commission interpreted the relevant Treaty provisions concerning the free movement of capital and freedom of establishment, inter alia in the context of procedures for the grant of general authorisation or the exercise of a right of veto by public authorities.22 Point 9 of the 1997 Communication is worded as follows:The analysis undertaken above concerning measures having a restrictive character on intra-Community investment has concluded that discriminatory measures (i.e. those applied exclusively to investors from another EU Member State) would be considered as incompatible with Articles 73b and 52 of the Treaty governing the free movement of capital and the right of establishment unless covered by one of the exceptions of the Treaty. As regards non-discriminatory measures (i.e. those applied to nationals and other EU investors alike), they are permitted in so far as they are based on a set of objective and stable criteria which have been made public and can be justified on imperative requirements in the general interest. In all cases, the principle of proportionality has to be respected.23 According to the Commission, the legislation at issue is contrary to the criteria laid down by the 1997 Communication.24 First, the prohibition precluding investors from another Member State from acquiring more than a given number of shares in certain Portuguese undertakings, pursuant to Decree-Law No 65/94 in conjunction with Law No 11/90, gives rise to discrimination between Portuguese entities and those of other Member States which is incompatible with Articles 52 and 73b of the Treaty. Such discriminatory restrictions can be accepted only if they are justified on grounds of public policy, public security or public health, which is not the position in the present case.25 Second, the obligation imposed by Decree-Law No 380/93, whereby prior authorisation must be obtained for the acquisition of an interest in a Portuguese undertaking above a certain level, is likewise incompatible with Articles 52 and 73b of the Treaty.26 Those national rules, although applicable without distinction, create obstacles to the right of establishment of nationals of other Member States and to the free movement of capital within the Community, inasmuch as they are liable to impede, or render less attractive, the exercise of those freedoms.27 According to the Commission, authorisation and opposition procedures can be held to be compatible with those freedoms only if they are covered by the exceptions contained in Article 55 of the EC Treaty (now Article 45 EC) and in Articles 56 and 73d of the Treaty, or if they are justified by overriding requirements of the general interest and qualified by stable, objective criteria which have been made public, in such a way as to restrict to the minimum the discretionary power of the national authorities.28 The provisions in issue do not meet any of those criteria and the conditions governing those exceptions are not fulfilled. Furthermore, Article 222 of the Treaty is irrelevant in the present case. That article merely signifies that each Member State may organise as it thinks fit the system of ownership of undertakings whilst at the same time respecting the fundamental freedoms enshrined in the Treaty.29 The Portuguese Republic denies the alleged failure to comply with its obligations. As regards, first, the prohibition precluding investors from other Member States from acquiring more than a given number of shares in certain Portuguese undertakings, pursuant to Decree-Law No 65/94 in conjunction with Law No 11/90, the Portuguese Government admits the alleged infringement in principle but contends that since 1994 it has undertaken, as a matter of policy, not to use the powers conferred on it by those provisions. Moreover, by virtue of the direct effect and primacy of Community law, the provisions in question must in any event be interpreted as referring solely to investors who are not Community nationals.30 As regards, second, the obligation imposed by Decree-Law No 380/93, whereby prior authorisation must be obtained for the acquisition of an interest in a Portuguese undertaking above a certain level, the scheme applies generally to all potential investors, whether they are from Portugal, elsewhere in the Community or outside the Community, and which does not give rise to any restriction or discrimination based on nationality.31 In any event, the scheme is justified by overriding requirements of the general interest. Decree-Law No 380/93 is intended to enable the Portuguese Republic, when re-privatising an undertaking in stages, to make sure, with a view to safeguarding the general interest, that the economic policy objectives pursued by the re-privatisation are not frustrated in the course of the operation. Depending on the operation in question, those objectives may involve choosing a strategic partner where the activities of the undertaking are to assume an international dimension, or strengthening the competitive structure of the market concerned, or modernising and increasing the efficiency of means of production.32 The Portuguese Government further argues that it is unacceptable for a Member State to be precluded from becoming involved in a process of re-privatisation by appropriate means whilst respecting the general rules of the Treaty, with a view to safeguarding its financial interest. Such an interest constitutes an overriding requirement of the general interest.33 The criterion of proportionality is likewise satisfied, inasmuch as an assessment of operations which alter the structure of the share ownership constitutes an appropriate means of attaining the objective pursued.34 As to the question whether the scheme in question is necessary, the Portuguese Government states that it is applicable only for as long as the re-privatisation process is continuing, and relates only to substantial holdings, namely those conferring more than 10% of the voting rights.35 Moreover, any decision taken by the Minister for Financial Affairs may be the subject of a review conducted in the context of court proceedings and, where appropriate, declared invalid.Findings of the CourtArticle 73b of the Treaty36 It must be recalled at the outset that Article 73b(1) of the Treaty gives effect to free movement of capital between Member States and between Member States and third countries. To that end it provides, within the framework of the provisions of the chapter headed Capital and payments, that all restrictions on the movement of capital between Member States and between Member States and third countries are prohibited.37 Although the Treaty does not define the terms movements of capital and payments, it is settled case-law that Directive 88/361, together with the nomenclature annexed to it, may be used for the purposes of defining what constitutes a capital movement (Case C-222/97 Trummer and Mayer [1999] ECR I-1661, paragraphs 20 and 21).38 Points I and III in the nomenclature set out in Annex I to Directive 88/361, and the explanatory notes appearing in that annex, indicate that direct investment in the form of participation in an undertaking by means of a shareholding or the acquisition of securities on the capital market constitute capital movements within the meaning of Article 73b of the Treaty. The explanatory notes state that direct investment is characterised, in particular, by the possibility of participating effectively in the management of a company or in its control.39 In the light of those considerations, it is necessary to consider whether the legislation in issue, which (a) prohibits the acquisition by investors from other Member States of more than a given number of shares in certain Portuguese undertakings and (b) requires the grant by the Portuguese Republic of prior authorisation for the acquisition of a holding in certain Portuguese undertakings in excess of a specified level, constitute a restriction on the movement of capital between Member States.40 As regards the prohibition precluding investors from other Member States from acquiring more than a given number of shares in certain Portuguese undertakings, it is common ground - and, moreover, not disputed by the Portuguese Government - that this involves unequal treatment of nationals of other Member States and restricts the free movement of capital. The Portuguese Government does not plead any justification in that regard. However, it argues that it has undertaken, as a matter of policy, not to use the powers conferred on it by the provisions in issue and that, by virtue of the direct effect and primacy of Community law, those provisions must in any event be interpreted as referring solely to investors who are not Community nationals.41 That argument cannot be accepted. The Court has consistently held that the incompatibility of provisions of national law with provisions of the Treaty, even those directly applicable, can be definitively eliminated only by means of binding domestic provisions having the same legal force as those which require to be amended. Mere administrative practices, which by their nature are alterable at will by the authorities and are not given appropriate publicity, cannot be regarded as constituting the proper fulfilment of a Member State's obligations under the Treaty, since they maintain, for the persons concerned, a state of uncertainty as regards the extent of their rights as guaranteed by the Treaty (see, in particular, Case C-151/94 Commission v Luxembourg [1995] ECR I-3685, paragraph 18, and Case C-358/98 Commission v Italy [2000] ECR I-1255, paragraph 17).42 Consequently, as regards the prohibition precluding investors from other Member States from acquiring more than a given number of shares in certain Portuguese undertakings, non-compliance with Article 73b of the Treaty is established.43 As regards the obligation to obtain prior authorisation from the Portuguese Republic for the acquisition of a holding in certain Portuguese undertakings in excess of a specified level, the Portuguese Government concedes in principle that the restrictions arising from the rules in issue fall within the scope of the free movement of capital but argues that the rules apply without distinction to national shareholders and to shareholders who are nationals of other Member States. They do not therefore involve any discriminatory or particularly restrictive treatment of nationals of other Member States.44 That argument cannot be accepted. Article 73b of the Treaty lays down a general prohibition on restrictions on the movement of capital between Member States. That prohibition goes beyond the mere elimination of unequal treatment, on grounds of nationality, as between operators on the financial markets.45 Even though the rules in issue may not give rise to unequal treatment, they are liable to impede the acquisition of shares in the undertakings concerned and to dissuade investors in other Member States from investing in the capital of those undertakings. They are therefore liable, as a result, to render the free movement of capital illusory (see, in that regard, Joined Cases C-163/94, C-165/94 and C-250/94 Sanz de Lera and Others [1995] ECR I-4821, paragraph 25, and Case C-302/97 Konle [1999] ECR I-3099, paragraph 44).46 In those circumstances, the rules in issue must be regarded as a restriction on the movement of capital within the meaning of Article 73b of the Treaty. It is therefore necessary to consider whether, and on what basis, that restriction may be justified.47 As is also apparent from the 1997 Communication, it is undeniable that, depending on the circumstances, certain concerns may justify the retention by Member States of a degree of influence within undertakings that were initially public and subsequently privatised, where those undertakings are active in fields involving the provision of services in the public interest or strategic services (see today's judgments in Case C-483/99 Commission v France, not yet published in the European Court Reports, paragraph 43, and Case C-503/99 Commission v Belgium, not yet published in the European Court Reports, paragraph 43).48 However, those concerns cannot entitle Member States to plead their own systems of property ownership, referred to in Article 222 of the Treaty, by way of justification for obstacles, resulting from privileges attaching to their position as shareholder in a privatised undertaking, to the exercise of the freedoms provided for by the Treaty. As is apparent from the Court's case-law (Konle, cited above, paragraph 38), that article does not have the effect of exempting the Member States' systems of property ownership from the fundamental rules of the Treaty.49 The free movement of capital, as a fundamental principle of the Treaty, may be restricted only by national rules which are justified by reasons referred to in Article 73d(1) of the Treaty or by overriding requirements of the general interest and which are applicable to all persons and undertakings pursuing an activity in the territory of the host Member State. Furthermore, in order to be so justified, the national legislation must be suitable for securing the objective which it pursues and must not go beyond what is necessary in order to attain it, so as to accord with the principle of proportionality (see, to that effect, Sanz de Lera, cited above, paragraph 23, and Case C-54/99 Église de scientologie [2000] ECR I-1335, paragraph 18).50 As regards a scheme of prior administrative authorisation of the kind at issue in the present case, the Court has previously held that such a scheme must be proportionate to the aim pursued, inasmuch as the same objective could not be attained by less restrictive measures, in particular a system of declarations ex post facto (see, to that effect, Sanz de Lera, paragraphs 23 to 28; Konle, paragraph 44; and Case C-205/99 Analir and Others [2001] ECR I-1271, paragraph 35). Such a scheme must be based on objective, non-discriminatory criteria which are known in advance to the undertakings concerned, and all persons affected by a restrictive measure of that type must have a legal remedy available to them (Analir, cited above, paragraph 38).51 Having regard to those considerations, it is necessary to consider the grounds of justification put forward by the Portuguese Government.52 As regards the need to safeguard the financial interest of the Portuguese Republic, it must be recalled that, save in so far as they may fall within the ambit of the reasons set out in Article 73d(1) of the Treaty, which relate in particular to tax law, the general financial interests of a Member State cannot constitute adequate justification. It is settled case-law that economic grounds can never serve as justification for obstacles prohibited by the Treaty (see, as regards the free movement of goods, Case C-265/95 Commission v France [1997] ECR I-6959, paragraph 62, and, in relation to freedom to provide services, Case C-398/95 SETTG [1997] ECR I-3091, paragraph 23). That reasoning is equally applicable to the economic policy objectives reflected in Article 3 of Law No 11/90 and the objectives mentioned by the Portuguese Government in the present proceedings, namely choosing a strategic partner, strengthening the competitive structure of the market concerned or modernising and increasing the efficiency of means of production. Such interests cannot constitute a valid justification for restrictions on the fundamental freedom concerned.53 Consequently, as regards the obligation to obtain prior authorisation from the Portuguese Republic for the acquisition of a holding in certain Portuguese undertakings in excess of a specified level, non-compliance with Article 73b of the Treaty is established.54 In view of all the foregoing considerations, it must be held that, by adopting and maintaining in force the legislation in issue, the Portuguese Republic has failed to comply with its obligations under Article 73b of the Treaty.Articles 52, 56, 58 and 221 of the Treaty55 The Commission also seeks a declaration of failure to comply with Articles 52, 56, 58 and 221 of the Treaty, namely the Treaty rules regarding freedom of establishment, in so far as they concern undertakings.56 To the extent that the legislation in issue involves restrictions on freedom of establishment, such restrictions are a direct consequence of the obstacles to the free movement of capital considered above, to which they are inextricably linked. Consequently, since an infringement of Article 73b of the Treaty has been established, there is no need for a separate examination of the measures at issue in the light of the Treaty rules concerning freedom of establishment.Articles 221 and 231 of the Act of Accession57 The Commission also seeks a declaration that the adoption and maintenance in force of the legislation in issue constitutes a failure to comply with Articles 221 and 231 of the Act of Accession. However, it does not indicate in the grounds of its application what that failure is alleged to consist of.58 It is clear that those provisions of the Act of Accession establish, in relation to direct investments, a transitional regime which came to an end on 31 December 1989. Since all of the national rules in issue were adopted after that date, they cannot be said to infringe a transitional regime which has ceased to have any effect.59 The Commission's application for a declaration of non-compliance with Articles 221 and 231 of the Act of Accession must therefore be dismissed. Decision on costs Costs60 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they have been applied for in the successful party's pleadings. Since the Commission has applied for the Portuguese Republic to be ordered to pay the costs and the latter has, in essence, been unsuccessful, it must be ordered to pay the costs. Operative part On those grounds,THE COURT,hereby:1. Declares that, by adopting and maintaining in force Law No 11/90 of 5 April 1990, being the framework law on privatisations, in particular Article 13(3) thereof, the decree-laws on the privatisation of undertakings subsequently adopted in application of that Law and also Decree-Laws Nos 380/93 of 15 November 1993 and 65/94 of 28 February 1994, the Portuguese Republic has failed to comply with its obligations under Article 73b of the EC Treaty (now Article 56 EC);2. Dismisses the remainder of the action;3. Orders the Portuguese Republic to pay the costs.

b906c-8509f2d-4367

EN

HEARING IN CASE C-318/00

«(Reference for a preliminary ruling – Freedom to provide services – Refusal to display advertisements for alcoholic drinks at a sporting event taking place in a Member State whose law allows television advertising for alcoholic drinks but being broadcast on television in another Member State whose law prohibits such advertising – Relevance of the questions for the outcome of the main proceedings)» Summary of the Judgment Preliminary rulings – Jurisdiction of the Court – Limits – Question aimed at enabling the national court to assess the compatibility with Community law of legislation of another Member State – Special vigilance on the part of the Court (Art. 234 EC)Preliminary rulings – Jurisdiction of the Court – Limits – Question aimed at enabling the national court to assess the compatibility with Community law of legislation of another Member State – Special vigilance on the part of the Court JUDGMENT OF THE COURT21 January 2003 (1) ((Reference for a preliminary ruling – Freedom to provide services – Refusal to display advertisements for alcoholic drinks at a sporting event taking place in a Member State whose law allows television advertising for alcoholic drinks but being broadcast on television in another Member State whose law prohibits such advertising – Relevance of the questions for the outcome of the main proceedings)) andTHE COURT,,after considering the written observations submitted on behalf of: ─ Bacardi-Martini SAS and Cellier des Dauphins, by N. Green QC and M. Hoskins, Barrister, instructed by Townleys and subsequently by Hammond Suddards Edge, Solicitors, ─ the United Kingdom Government, by R.V. Magrill and subsequently G. Amodeo, acting as Agents, and K. Beal, Barrister, ─ the French Government, by G. de Bergues and R. Loosli-Surrans, acting as Agents, ─ the Commission of the European Communities, by K. Banks, acting as Agent, having regard to the national court's reply to a request for clarification pursuant to Article 104(5) of the Rules of Procedure, received at the Court on 26 February 2002,having regard to the Report for the Hearing, after hearing the oral observations of Bacardi-Martini SAS and Cellier des Dauphins, represented by N. Green and M. Hoskins; the United Kingdom Government, represented by G. Amodeo and K. Beal; the French Government, represented by R. Loosli-Surrans; and the Commission, represented by H. van Lier, acting as Agent, at the hearing on 14 May 2002, after hearing the Opinion of the Advocate General at the sitting on 26 September 2002,gives the followingLegal backgroundOn those grounds, THE COURT,Rodriguez IglesiasPuissochet Wathelet GulmannEdward Jann SkourisMacken Colneric von BahrCunha Rodrigues R. Grass G.C. Rodriguez Iglesias RegistrarPresident 1 – Language of the case: English. Language of the case: English.

464c1-f65945a-46d3

EN

HEARING IN CASE C-206/01

| 62001J0206 Judgment of the Court of 12 November 2002. - Arsenal Football Club plc v Matthew Reed. - Reference for a preliminary ruling: High Court of Justice (England & Wales), Chancery Division - United Kingdom. - Approximation of laws - Trade marks - Directive 89/104/EEC - Article 5(1)(a) - Scope of the proprietor's exclusive right to the trade mark. - Case C-206/01. European Court reports 2002 Page I-10273 Parties In Case C-206/01,REFERENCE to the Court under Article 234 EC by the High Court of Justice of England and Wales, Chancery Division, for a preliminary ruling in the proceedings pending before that court betweenArsenal Football Club plcandMatthew Reed,on the interpretation of Article 5(1)(a) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1),THE COURT,composed of: G.C. Rodríguez Iglesias, President, J.-P. Puissochet, M. Wathelet, C.W.A. Timmermans (Rapporteur) (Presidents of Chambers), C. Gulmann, D.A.O. Edward, P. Jann, V. Skouris, F. Macken, N. Colneric and S. von Bahr, Judges,Advocate General: D. Ruiz-Jarabo Colomer,Registrar: L. Hewlett, Principal Administrator,after considering the written observations submitted on behalf of:- Arsenal Football Club plc, by S. Thorley QC and T. Mitcheson, Barrister, instructed by Lawrence Jones, Solicitors,- Mr Reed, by A. Roughton, Barrister, instructed by Stunt & Son, Solicitors,- the Commission of the European Communities, by N.B. Rasmussen, acting as Agent,- the EFTA Surveillance Authority, by P. Dyrberg, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of Arsenal Football Club plc, represented by S. Thorley and T. Mitcheson; Mr Reed, represented by A. Roughton and S. Malynicz, Barrister; and the Commission, represented by N.B. Rasmussen and M. Shotter, acting as Agent, at the hearing on 14 May 2002,after hearing the Opinion of the Advocate General at the sitting on 13 June 2002,gives the followingJudgment Grounds 1 By order of 4 May 2001, received at the Court on 18 May 2001, the High Court of Justice of England and Wales, Chancery Division, referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Article 5(1)(a) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1, `the Directive').2 Those questions were raised in proceedings between Arsenal Football Club plc (`Arsenal FC') and Mr Reed concerning the selling and offering for sale by Mr Reed of scarves marked in large lettering with the word `Arsenal', a sign which is registered as a trade mark by Arsenal FC for those and other goods.Legal backgroundCommunity legislation3 The Directive states, in the first recital in its preamble, that national trade mark laws contain disparities which may impede the free movement of goods and freedom to provide services and may distort competition within the common market. According to that recital, it is therefore necessary, in view of the establishment and functioning of the internal market, to approximate the laws of the Member States. The third recital in the preamble states that it is not necessary at present to undertake full-scale approximation of national laws on trade marks.4 According to the 10th recital in the preamble to the Directive:`... the protection afforded by the registered trade mark, the function of which is in particular to guarantee the trade mark as an indication of origin, is absolute in the case of identity between the mark and the sign and goods or services ...'.5 Article 5(1) of the Directive provides:`The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.'6 Article 5(3)(a) and (b) of the Directive provides:`The following, inter alia, may be prohibited under paragraphs 1 and 2:(a) affixing the sign to the goods or to the packaging thereof;(b) offering the goods, or putting them on the market or stocking them for these purposes ...'7 Under Article 5(5) of the Directive:`Paragraphs 1 to 4 shall not affect provisions in any Member State relating to the protection against the use of a sign other than for the purposes of distinguishing goods or services, where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.'8 Article 6(1) of the Directive reads as follows:`The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade,(a) his own name or address;(b) indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services;(c) the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts;provided he uses them in accordance with honest practices in industrial or commercial matters.'National legislation9 In the United Kingdom the law of trade marks is governed by the Trade Marks Act 1994, which replaced the Trade Marks Act 1938 in order to implement the Directive.10 Section 10(1) of the Trade Marks Act 1994 provides:`A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.'11 Under Section 10(2)(b) of the Trade Marks Act 1994:`A person infringes a registered trade mark if he uses in the course of trade a sign where because -...(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered,there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trade mark.'The main proceedings and the questions referred for a preliminary ruling12 Arsenal FC is a well-known football club in the English Premier League. It is nicknamed `the Gunners' and has for a long time been associated with two emblems, a cannon device and a shield device.13 In 1989 Arsenal FC had inter alia the words `Arsenal' and `Arsenal Gunners' and the cannon and shield emblems registered as trade marks for a class of goods comprising articles of outer clothing, articles of sports clothing and footwear. Arsenal FC designs and supplies its own products or has them made and supplied by its network of approved resellers.14 Since its commercial and promotional activities in the field of sales of souvenirs and memorabilia under those marks have expanded greatly in recent years and provide it with substantial income, Arsenal FC has sought to ensure that `official' products - that is, products manufactured by Arsenal FC or with its authorisation - can be identified clearly, and has endeavoured to persuade its supporters to buy official products only. The club has also brought legal proceedings, both civil and criminal, against traders selling unofficial products.15 Since 1970 Mr Reed has sold football souvenirs and memorabilia, almost all marked with signs referring to Arsenal FC, from several stalls located outside the grounds of Arsenal FC's stadium. He was able to obtain from KT Sports, licensed by Arsenal FC to sell its products to vendors around the stadium, only very small quantities of official products. In 1991 and 1995 Arsenal FC had unofficial articles of Mr Reed's confiscated.16 The High Court states that in the main proceedings it is not in dispute that Mr Reed sold and offered for sale from one of his stalls scarves marked in large lettering with signs referring to Arsenal FC and that these were unofficial products.17 It also states that on that stall there was a large sign with the following text:`The word or logo(s) on the goods offered for sale, are used solely to adorn the product and does not imply or indicate any affiliation or relationship with the manufacturers or distributors of any other product, only goods with official Arsenal merchandise tags are official Arsenal merchandise.'18 The High Court further states that when, exceptionally, he was able to obtain official articles Mr Reed, in his dealings with his customers, clearly distinguished the official products from the unofficial ones, in particular by using a label with the word `official'. The official products were also sold at higher prices.19 Since it considered that by selling the unofficial scarves Mr Reed had both committed the tort of `passing off' - which, according to the High Court, is conduct on the part of a third party which is misleading in such a way that a large number of persons believe or are led to believe that articles sold by the third party are those of the claimant or are sold with his authorisation or have a commercial association with him - and infringed its trade marks, Arsenal FC brought proceedings against him in the High Court of Justice of England and Wales, Chancery Division.20 In view of the circumstances in the main proceedings, the High Court dismissed Arsenal FC's action in tort (`passing off'), essentially on the ground that the club had not been able to show actual confusion on the part of the relevant public and, more particularly, had not been able to show that the unofficial products sold by Mr Reed were all regarded by the public as coming from or authorised by Arsenal FC. In this respect, the High Court observed that it seemed to it that the signs referring to Arsenal FC affixed to the articles sold by Mr Reed carried no indication of origin.21 As to Arsenal FC's claim concerning infringement of its trade marks, based on section 10(1) and (2)(b) of the Trade Marks Act 1994, the High Court rejected their argument that the use by Mr Reed of the signs registered as trade marks was perceived by those to whom they were addressed as a badge of origin, so that the use was a `trade mark use'.22 According to the High Court, the signs affixed to Mr Reed's goods were in fact perceived by the public as `badges of support, loyalty or affiliation'.23 The High Court accordingly considered that Arsenal FC's infringement claim could succeed only if the protection conferred on the trade mark proprietor by section 10 of the Trade Marks Act 1994 and the provisions of the Directive implemented by that statute prohibits use by a third party other than trade mark use, which would require a wide interpretation of those provisions.24 On this point, the High Court considers that the argument that use other than trade mark use is prohibited to a third party gives rise to inconsistencies. However, the contrary argument, namely that only trade mark use is covered, comes up against a difficulty connected with the wording of the Directive and the Trade Marks Act 1994, which both define infringement as the use of a `sign', not of a `trade mark'.25 The High Court observes that it was in view of that wording in particular that the Court of Appeal of England and Wales, Civil Division, held in Philips Electronics Ltd v Remington Consumer Products ([1999] RPC 809) that the use other than trade mark use of a sign registered as a trade mark could constitute an infringement of a trade mark. The High Court observes that the state of the law on this point still remains uncertain.26 The High Court also rejected Mr Reed's argument on the alleged invalidity of the Arsenal FC trade marks.27 In those circumstances, the High Court of Justice of England and Wales, Chancery Division, decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:`1. Where a trade mark is validly registered and(a) a third party uses in the course of trade a sign identical with that trade mark in relation to goods which are identical with those for [which] the trade mark is registered; and(b) the third party has no defence to infringement by virtue of Article 6(1) of [Directive 89/104/EEC];does the third party have a defence to infringement on the ground that the use complained of does not indicate trade origin (i.e. a connection in the course of trade between the goods and the trade mark proprietor)?2. If so, is the fact that the use in question would be perceived as a badge of support, loyalty or affiliation to the trade mark proprietor a sufficient connection?'The questions referred for a preliminary ruling28 The High Court's two questions should be examined together.Observations submitted to the Court29 Arsenal FC submits that Article 5(1)(a) of the Directive allows the trade mark proprietor to prohibit the use of a sign identical to the mark and does not make exercise of that right conditional on the sign being used as a trade mark. The protection conferred by that provision therefore extends to the use of the sign by a third party even where that use does not suggest the existence of a connection between the goods and the trade mark proprietor. That interpretation is supported by Article 6(1) of the Directive, since the specific limitations on the exercise of trade mark rights there provided for show that such use falls in principle within the scope of Article 5(1)(a) of the Directive and is permitted only in the cases exhaustively listed in Article 6(1) of the Directive.30 Arsenal FC submits, in the alternative, that in the present case Mr Reed's use of the sign identical to the Arsenal trade mark must in any event be classified as trade mark use, on the ground that this use indicates the origin of the goods even though that origin does not necessarily have to designate the trade mark proprietor.31 Mr Reed contends that the commercial activities at issue in the main proceedings do not fall within Article 5(1) of the Directive, since Arsenal FC has not shown that the sign was used as a trade mark, that is, to indicate the origin of the goods, as required by the Directive, in particular Article 5. If the public do not perceive the sign as a badge of origin, the use does not constitute `trade mark use' of the sign. As to Article 6 of the Directive, nothing in that provision shows that it contains an exhaustive list of activities which do not constitute infringements.32 The Commission submits that the right which the trade mark proprietor derives from Article 5(1) of the Directive is independent of the fact that the third party does not use the sign as a trade mark, and in particular of the fact that the third party does not use it as a badge of origin and informs the public by other means that the goods do not come from the trade mark proprietor, or even that the use of the sign has not been authorised by that proprietor. The specific object of a trade mark is to guarantee that only its proprietor can give the product its identity of origin by affixing the mark. The Commission further submits that it follows from the 10th recital in the preamble to the Directive that the protection provided for in Article 5(1)(a) is absolute.33 At the hearing, the Commission added that the concept of `trade mark use' of the mark, if found to be relevant at all, refers to use which serves to distinguish goods rather than to indicate their origin. The concept also covers use by third parties which affects the interests of the trade mark proprietor, such as the reputation of the goods. In any event, public perception of the word `Arsenal', which is identical to a verbal trade mark, as a token of support for or loyalty or affiliation to the proprietor of the mark does not exclude the possibility that the goods concerned are in consequence also perceived as coming from the proprietor. Quite the contrary, such perception confirms the distinctive nature of the mark and increases the risk of the goods being perceived as coming from the proprietor. Even, therefore, if `trade mark use' of the mark is a relevant criterion, the proprietor should be entitled to prohibit the commercial activity at issue in the main proceedings.34 The EFTA Surveillance Authority submits that, for the trade mark proprietor to be able to rely on Article 5(1) of the Directive, the third party must use the sign to distinguish - as is the primary traditional function of a trade mark - goods or services, that is, use the mark as a trade mark. If that condition is not satisfied, only the provisions of national law referred to in Article 5(5) of the Directive may be relied on by the proprietor.35 However, the condition of use as a trade mark within the meaning of Article 5(1) of the Directive, which must be understood as a condition of use of a sign identical to the trade mark for the purpose of distinguishing goods or services, is a concept of Community law which should be interpreted broadly, so as to include in particular use as a badge of support for or loyalty or affiliation to the proprietor of the trade mark.36 According to the EFTA Surveillance Authority, the fact that the third party who affixes the trade mark to goods indicates that they do not come from the trade mark proprietor does not exclude the risk of confusion for a wider circle of consumers. If the proprietor were not entitled to prevent third parties from acting in that way, that could result in a generalised use of the sign. In the end, this would deprive the mark of its distinctive character, thus jeopardising its primary traditional function.The Court's reply37 Article 5 of the Directive defines the `[r]ights conferred by a trade mark' and Article 6 contains provisions on the `[l]imitation of the effects of a trade mark'.38 Under the first sentence of Article 5(1) of the Directive, the registered trade mark confers exclusive rights on its proprietor. Under Article 5(1)(a), that exclusive right entitles the proprietor to prevent all third parties, acting without his consent, from using in the course of trade any sign which is identical to the trade mark in relation to goods or services which are identical to those for which the trade mark is registered. Article 5(3) gives a non-exhaustive list of the kinds of use which the proprietor may prohibit under Article 5(1). Other provisions of the Directive, such as Article 6, define certain limitations on the effects of a trade mark.39 With respect to the situation in point in the main proceedings, it should be observed that, as is apparent in particular from point 19 of and Annex V to the order for reference, the word `Arsenal' appears in large letters on the scarves offered for sale by Mr Reed, together with other much less prominent markings including the words `The Gunners', all referring to the trade mark proprietor, namely Arsenal FC. Those scarves are intended inter alia for supporters of Arsenal FC who wear them in particular at matches in which the club plays.40 In those circumstances, as the national court stated, the use of the sign identical to the mark is indeed use in the course of trade, since it takes place in the context of commercial activity with a view to economic advantage and not as a private matter. It also falls within Article 5(1)(a) of the Directive, as use of a sign which is identical to the trade mark for goods which are identical to those for which the mark is registered.41 In particular, the use at issue in the main proceedings is `for goods' within the meaning of Article 5(1)(a) of the Directive, since it concerns the affixing to goods of a sign identical to the trade mark and the offering of goods, putting them on the market or stocking them for those purposes within the meaning of Article 5(3)(a) and (b).42 To answer the High Court's questions, it must be determined whether Article 5(1)(a) of the Directive entitles the trade mark proprietor to prohibit any use by a third party in the course of trade of a sign identical to the trade mark for goods identical to those for which the mark is registered, or whether that right of prohibition presupposes the existence of a specific interest of the proprietor as trade mark proprietor, in that use of the sign in question by a third party must affect or be liable to affect one of the functions of the mark.43 It should be recalled, first, that Article 5(1) of the Directive carries out a complete harmonisation and defines the exclusive rights of trade mark proprietors in the Community (see, to that effect, Joined Cases C-414/99 to C-416/99 Zino Davidoff and Levi Strauss [2001] ECR I-8691, paragraph 39 and the case-law there cited).44 The ninth recital of the preamble to the Directive sets out its objective of ensuring that the trade mark proprietor enjoys `the same protection under the legal systems of all the Member States' and describes that objective as `fundamental'.45 In order to prevent the protection afforded to the proprietor varying from one State to another, the Court must therefore give a uniform interpretation to Article 5(1) of the Directive, in particular the term `use' which is the subject of the questions referred for a preliminary ruling in the present case (see, to that effect, Zino Davidoff and Levi Strauss, paragraphs 42 and 43).46 Second, the Directive is intended, as the first recital of the preamble shows, to eliminate disparities between the trade mark laws of the Member States which may impede the free movement of goods and the freedom to provide services and distort competition within the common market.47 Trade mark rights constitute an essential element in the system of undistorted competition which the Treaty is intended to establish and maintain. In such a system, undertakings must be able to attract and retain customers by the quality of their goods or services, which is made possible only by distinctive signs allowing them to be identified (see, inter alia, Case C-10/89 HAG GF [1990] ECR I-3711, paragraph 13, and Case C-517/99 Merz & Krell [2001] ECR I-6959, paragraph 21).48 In that context, the essential function of a trade mark is to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin. For the trade mark to be able to fulfil its essential role in the system of undistorted competition which the Treaty seeks to establish and maintain, it must offer a guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality (see, inter alia, Case 102/77 Hoffman-La Roche [1978] ECR 1139, paragraph 7, and Case C-299/99 Philips [2002] ECR I-0000, paragraph 30).49 The Community legislature confirmed that essential function of trade marks by providing, in Article 2 of the Directive, that signs which are capable of being represented graphically may constitute a trade mark only if they are capable of distinguishing the goods or services of one undertaking from those of other undertakings (see, inter alia, Merz & Krell, paragraph 23).50 For that guarantee of origin, which constitutes the essential function of a trade mark, to be ensured, the proprietor must be protected against competitors wishing to take unfair advantage of the status and reputation of the trade mark by selling products illegally bearing it (see, inter alia, Hoffmann-La Roche, paragraph 7, and Case C-349/95 Loendersloot [1997] ECR I-6227, paragraph 22). In this respect, the 10th recital of the preamble to the Directive points out the absolute nature of the protection afforded by the trade mark in the case of identity between the mark and the sign and between the goods or services concerned and those for which the mark is registered. It states that the aim of that protection is in particular to guarantee the trade mark as an indication of origin.51 It follows that the exclusive right under Article 5(1)(a) of the Directive was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions. The exercise of that right must therefore be reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods.52 The exclusive nature of the right conferred by a registered trade mark on its proprietor under Article 5(1)(a) of the Directive can be justified only within the limits of the application of that article.53 It should be noted that Article 5(5) of the Directive provides that Article 5(1) to (4) does not affect provisions in a Member State relating to protection against the use of a sign for purposes other than that of distinguishing goods or services.54 The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark, having regard to its functions. Thus certain uses for purely descriptive purposes are excluded from the scope of Article 5(1) of the Directive because they do not affect any of the interests which that provision aims to protect, and do not therefore fall within the concept of use within the meaning of that provision (see, with respect to a use for purely descriptive purposes relating to the characteristics of the product offered, Case C-2/00 Hölterhoff [2002] ECR I-4187, paragraph 16).55 In this respect, it is clear that the situation in question in the main proceedings is fundamentally different from that in Hölterhoff. In the present case, the use of the sign takes place in the context of sales to consumers and is obviously not intended for purely descriptive purposes.56 Having regard to the presentation of the word `Arsenal' on the goods at issue in the main proceedings and the other secondary markings on them (see paragraph 39 above), the use of that sign is such as to create the impression that there is a material link in the course of trade between the goods concerned and the trade mark proprietor.57 That conclusion is not affected by the presence on Mr Reed's stall of the notice stating that the goods at issue in the main proceedings are not official Arsenal FC products (see paragraph 17 above). Even on the assumption that such a notice may be relied on by a third party as a defence to an action for trade mark infringement, there is a clear possibility in the present case that some consumers, in particular if they come across the goods after they have been sold by Mr Reed and taken away from the stall where the notice appears, may interpret the sign as designating Arsenal FC as the undertaking of origin of the goods.58 Moreover, in the present case, there is also no guarantee, as required by the Court's case-law cited in paragraph 48 above, that all the goods designated by the trade mark have been manufactured or supplied under the control of a single undertaking which is responsible for their quality.59 The goods at issue are in fact supplied outside the control of Arsenal FC as trade mark proprietor, it being common ground that they do not come from Arsenal FC or from its approved resellers.60 In those circumstances, the use of a sign which is identical to the trade mark at issue in the main proceedings is liable to jeopardise the guarantee of origin which constitutes the essential function of the mark, as is apparent from the Court's case-law cited in paragraph 48 above. It is consequently a use which the trade mark proprietor may prevent in accordance with Article 5(1) of the Directive.61 Once it has been found that, in the present case, the use of the sign in question by the third party is liable to affect the guarantee of origin of the goods and that the trade mark proprietor must be able to prevent this, it is immaterial that in the context of that use the sign is perceived as a badge of support for or loyalty or affiliation to the proprietor of the mark.62 In the light of the foregoing, the answer to the national court's questions must be that, in a situation which is not covered by Article 6(1) of the Directive, where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of the Directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor. Decision on costs Costs63 The costs incurred by the Commission and by the EFTA Surveillance Authority, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the High Court of Justice of England and Wales, Chancery Division, by order of 4 May 2001, hereby rules:In a situation which is not covered by Article 6(1) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor of the mark is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of that directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor.

1a4cf-c651033-46b7

EN

THE COURT OF FIRST INSTANCE DELIVERS FOR THE FIRST TIME, IN THE FIELD OF STATE AID, A JUDGMENT USING THE EXPEDITED PROCEDURE

| 62001A0195 Judgment of the Court of First Instance (Second Chamber, extended composition) of 30 April 2002. - Government of Gibraltar v Commission of the European Communities. - State aid - Tax legislation - Existing aid or new aid - Initiation of the formal investigation procedure provided for in Article 88(2) EC. - Joined cases T-195/01 and T-207/01. European Court reports 2002 Page II-02309 Keywords 1. Actions for annulment - Actionable measures - Measures producing legal effects - Decision of the Commission to initiate a formal investigation into State aid together with provisional classification as new aid - Admissibility(Art. 88 EC; Council Regulation No 659/1999, Arts 10, 11 and 17 to 19)2. State aid - Existing and new aid - Measure altering an existing aid scheme - Alteration not affecting the substance of the scheme - Classification of the scheme in its entirety as new aid - Not permissible(Art. 88 EC; Council Regulation No 659/1999, Art. 1(c))3. State aid - Existing and new aid - No investigation of new aid for a relatively long period - Transformation into existing aid - Exclusion - Possibility of legitimate expectation on the part of recipients preventing recovery of the aid(Art. 88 EC; Council Regulation No 659/1999, Art. 15)4. State aid - Commission decision to initiate a formal investigation procedure in respect of an aid - Obligation to state reasons - Scope(Arts 88(2) and (3) EC and 253 EC; Council Regulation No 659/1999, Art. 6)5. State aid - Investigation by the Commission - Obligation to conduct an exchange of views and arguments with the complainant, the parties concerned and the Member States at the preliminary stage - None(Art. 88(2) and (3) EC; Council Regulation No 659/1999, Arts 2(2), 5(1) and (2) and 10(2)) Summary 1. Even though the classification of State aid corresponds to an objective situation which does not depend on the assessment made at the stage of the initiation of the formal investigation procedure and though the mere initiation of that procedure does not have the same immediately binding character as a suspension injunction addressed to the Member Sate concerned, the fact that the Commission chose to initiate a formal investigation procedure and provisionally classified a State measure as new aid, instead of following the procedure in respect of possible existing aid, has legal effects.First, even a final decision of the Commission declaring the aid compatible with the common market does not have the consequence of regularising ex post facto the measures implementing the unlawful measure. Second, the decision initiating the procedure may be invoked before a national court and thus expose the beneficiaries of the measure and territorial entities to the risk that the national court will order suspension of the measure and/or recovery of the payments made.It follows that the procedural choice to initiate a formal procedure, together with the provisional classification as new aid, must be amenable to judicial review. The initiation of the formal investigation procedure produces the legal effects described above, while, in the context of the examination of existing aid, the legal situation does not change until such time as the Member State concerned accepts proposals for appropriate measures or the Commission adopts a final decision.( see paras 82, 84-86 )2. Under Article 1(c) of the Regulation No 659/1999, alterations to existing aid are to be regarded as new aid. According to that unequivocal provision, it is not altered existing aid that must be regarded as new aid, but only the alteration as such that is liable to be classified as new aid.It is therefore only where the alteration affects the actual substance of the original scheme that the latter is transformed into a new aid scheme. There can be no question of such a substantive alteration where the new element is clearly severable from the initial scheme.It follows that in initiating a formal investigation procedure in respect of the whole of a State aid scheme and in provisionally classifying that scheme as new aid in its entirety, when the alterations subsequently made must be regarded as elements severable from the initial scheme, the Commission infringes Article 88 EC and Article 1 of the regulation referred to above.( see paras 109, 111, 114-115 )3. The mere fact that for a relatively long period the Commission did not open an investigation into a State measure cannot in itself confer on that measure the objective nature of existing aid, if it does constitute aid. Any uncertainty which may have existed in that regard may at most be regarded as having given rise to a legitimate expectation on the part of the recipients so as to prevent recovery of the aid paid in the past.The same applies to the limitation period provided for in Article 15 of Regulation No 659/1999, which does not in any way express a general principle whereby new aid is transformed into existing aid but merely precludes recovery of aid established more then 10 years before the Commission first intervened.( see paras 129-130 )4. According to Article 6 of Regulation No 659/1999, when the Commission decides to initiate a formal investigation procedure into State aid, its decision may be confined to summarising the relevant issues of fact and law, to including a preliminary assessment as to the character of the State measure in issue as aid and to setting out the doubts as to its compatibility with the common market. Article 6 of that regulation also provides that the decision to initiate the procedure must give the interested parties the opportunity effectively to participate in the formal investigation procedure, during which they will have the opportunity to put forward their arguments. For that purpose, it is sufficient for the parties to be aware of the reasoning which led the Commission provisionally to conclude that the measure in issue might constitute new aid incompatible with the common market.( see paras 137-138 )5. There exists no basis for the imposition of an obligation on the Commission to conduct an exchange of views and arguments with a complainant during the preliminary stage of an investigation into State aid. That also applies in respect of all the parties concerned and all the Member States, on which the applicable provisions confer no right to be involved in an exchange of views during the preliminary investigation stage preceding the decision to initiate the formal investigation procedure. Only the Commission has the power to order the Member State concerned to provide ... information (Article 2(2), Article 5(1) and (2) and Article 10(2) of Regulation No 659/1999). It follows that the Member States and the parties concerned cannot require that the Commission hear their views so that they can influence the preliminary assessment which leads the Commission to initiate the formal investigation procedure.( see para. 144 ) Parties In Joined Cases T-195/01 and T-207/01,Government of Gibraltar, represented by A. Sutton and M. Llamas, Barristers, and W. Schuster, lawyer, with an address for service in Luxembourg,applicants,vCommission of the European Communities, represented by V. Di Bucci and R. Lyal, acting as Agents, with an address for service in Luxembourg,defendant,supported byKingdom of Spain, represented by R. Silva de Lapuerta, acting as Agent, with an address for service in Luxembourg,intervener,APPLICATION for annulment of decisions SG(2001) D/289755 and SG(2001) D/289757 of the Commission of 11 July 2001 initiating the procedure provided for by Article 88(2) EC in respect of the Gibraltarian legislation on exempt companies and qualifying companies,THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Second Chamber, Extended Composition),composed of: R.M. Moura Ramos, President, V. Tiili, J. Pirrung, P. Mengozzi and A.W.H. Meij, Judges,Registrar: J. Plingers, Administrator,having regard to the written procedure and further to the hearing on 5 March 2002,gives the followingJudgment Grounds Legal frameworkCommunity provisions1 Article 87(1) EC provides that, save as otherwise provided, State aid is to be prohibited. In order to ensure the effectiveness of that prohibition, Article 88 EC places on the Commission a specific duty of monitoring aid and, on the Member States, precise obligations intended to facilitate the Commission's task and to prevent the Commission being presented with a fait accompli.2 Thus, pursuant to Article 88(1) EC, the Commission, in cooperation with Member States, is to keep under constant review all systems of aid existing in those States and, where necessary, is to propose to the latter any appropriate measures required by the progressive development or by the functioning of the common market.3 So far as concerns any plans to grant or alter aid, Article 88(3) EC requires that the Commission is to be informed in sufficient time to enable it to submit its comments. According to the second sentence of that provision, if it considers that a notified plan is not compatible with the common market, the Commission is to initiate the procedure provided for in Article 88(2) EC. Member States are required not to put their proposed measures into effect until the Commission has adopted a final decision on their compatibility with the common market.4 Article 1 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1, hereinafter the regulation on State aid procedure), which entered into force on 16 April 1999, contains the following definitions which are relevant to the present proceedings:(a) "aid" shall mean any measure fulfilling all the criteria laid down in Article [87(1) EC];(b) "existing aid" shall mean:(i) ... all aid which existed prior to the entry into force of the Treaty in the respective Member States, that is to say, aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the Treaty;...(v) aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the common market and without having been altered by the Member State. Where certain measures become aid following the liberalisation of an activity by Community law, such measures shall not be considered as existing aid after the date fixed for liberalisation;(c) "new aid" shall mean all aid, that is to say, aid schemes and individual aid, which is not existing aid, including alterations to existing aid;...(f) "unlawful aid" shall mean new aid put into effect in contravention of Article [88(3) EC];...5 According to Article 2(1) and Article 3 of the regulation on State aid procedure, any plans to grant new aid shall be notified to the Commission in sufficient time by the Member State concerned; such plans are not to be put into effect before the Commission has taken, or is deemed to have taken, a decision authorising such aid. Article 4(4) of that regulation provides that the Commission is to initiate proceedings pursuant to Article 88(2) EC (the formal investigation procedure) if doubts are raised as to the compatibility with the common market of a notified measure.6 According to Article 6(1) of that regulation, a decision to initiate the formal investigation procedure shall summarise the relevant issues of fact and law, shall include a preliminary assessment of the Commission as to the aid character of the proposed measure and shall set out the doubts as to its compatibility with the common market.7 According to Article 7(1) of the regulation on State aid procedure, the formal investigation procedure shall be closed by means of a decision as provided for in paragraphs 2 to 5 of this Article. Where the Commission finds that the notified measure does not constitute aid, it is to record that finding by way of a decision (paragraph 2 of that article). Where the Commission finds that the notified aid is not compatible with the common market, it is to decide that the aid is not to be put into effect (paragraph 5 of that article). Decisions taken pursuant to paragraphs 2, 3, 4 and 5 are to be taken as soon as the doubts referred to in Article 4(4) have been removed (paragraph 6 of that article).8 As regards non-notified measures, Article 10(1) of the regulation on State aid procedure provides that [w]here the Commission has in its possession information from whatever source regarding alleged unlawful aid, it shall examine that information without delay. Article 13(1) of that regulation provides that such examination is to result in a decision, where appropriate, to initiate the formal investigation procedure.9 Article 11(1) of the regulation on State aid procedure provides that the Commission may adopt a decision requiring the Member State to suspend any unlawful aid until the Commission has taken a decision on the compatibility of the aid with the common market. Paragraph 2 of that article authorises the Commission to adopt a decision requiring the Member State provisionally to recover any unlawful aid until the Commission has taken a decision on the compatibility of the aid with the common market provided, inter alia, that according to an established practice there are no doubts about the aid character of the measure concerned.10 So far as concerns recovery of aid, Article 14(1) of the regulation on State aid procedure provides that, where negative decisions are taken in cases of unlawful aid, the Commission is to decide that the Member State concerned is to take all necessary measures to recover the aid from the beneficiary, unless requiring such recovery would be contrary to a general principle of Community law. According to Article 15(1) of that regulation, the powers of the Commission to recover aid are to be subject to a limitation period of 10 years.11 The procedure regarding existing aid schemes is laid down in Articles 17 to 19 of the regulation on State aid procedure. According to Article 18, where the Commission concludes that the existing aid scheme is not, or is no longer, compatible with the common market, it is to issue a recommendation proposing appropriate measures to the Member State concerned. Where the Member State concerned does not accept the proposed measures, the Commission, pursuant to Article 19(2), may initiate a formal investigation procedure in accordance with Article 4(4).Status of Gibraltar and the legislation at issue12 Since Gibraltar is a European territory, within the meaning of Article 299(4) EC, for whose external relations the United Kingdom of Great Britain and Northern Ireland is responsible, the provisions of the Treaty apply to it. However, by virtue of Article 28 of the Act concerning the conditions of accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland, annexed to the Treaty relating to their accession (OJ, English Special Edition 1972 (27 March 1972), p. 5), acts of the institutions of the Community relating, in particular, to the harmonisation of legislation of Member States concerning turnover taxes, shall not apply to Gibraltar, unless the Council decides otherwise. However, it is not disputed that the rules of Community law on competition, including those relating to State aid granted by the Member States, do apply to Gibraltar.13 The present cases concern two legislative measures applicable to companies, concerning exempt companies and qualifying companies respectively. Exempt companies are not actually present in Gibraltar while qualifying companies have a bricks and mortar presence there and are active in various sectors.Exempt companies14 On 9 March 1967, the House of Assembly (hereinafter the Legislature) of Gibraltar enacted Ordinance No 2 of 1967, known by its title, the Companies (Taxation and Concessions) Ordinance. That Ordinance was amended in 1969 and 1970, and was amended on 10 further occasions following the accession of the United Kingdom of Great Britain and Northern Ireland, namely in 1974, 1977, 1978, 1983, 1984, 1985, 1987, 1988, 1990 and 1993. In the present proceedings, it is the version of that Ordinance as amended in 1978 and 1983 (hereinafter referred to as the exempt companies legislation) that is relevant.15 In order to qualify for exempt company status, a company must meet the conditions set out in Section 3 of the exempt companies legislation. Those conditions include the prohibition of carrying on or transacting any trade or business in Gibraltar, other than with other exempt companies, and also, according to the information provided at the hearing, with qualifying companies. No Gibraltarian or resident of Gibraltar may hold or be interested in holding any of the shares in an exempt company other than as a shareholder in a public company. Moreover, prior to the 1983 amendment, Section 3 of the exempt companies legislation did not allow Part IX companies, that is to say those companies which were incorporated outside Gibraltar and which establish only a place of business within Gibraltar, to acquire exempt status; those were, in particular, registered branches of foreign companies.16 According to Section 8 of the exempt companies legislation, subject to some limited exceptions, an exempt company is exempted from payment of income tax in Gibraltar; pursuant to Section 10 thereof, it is liable only to taxation at a fixed sum of GBP 225. In addition, by virtue of Section 9 of the exempt companies legislation, any shares in, loans made to, or debentures held in, an exempt company are exempt from estate duty.- The 1978 amendment17 Following the 1978 amendment, Section 9 of the exempt companies legislation provides that the exemption from estate duty extends to any life insurance policy issued by an exempt company and that the value of such policy is not to be taken into account or aggregated with any other property for the purpose of determining the rate at which estate duty is payable in respect of that property. However, life insurance policies issued on the life of any Gibraltarian or resident of Gibraltar are not exempt from estate duty and the value of such policies may be taken into account for the purpose referred to above. Section 9, as amended in 1978, provides that, notwithstanding anything contained in the Stamp Duties Ordinance, no stamp duty is payable on the issue of any life insurance policy which is exempt from estate duty, on any annuity payable by an exempt company or on any dealings by way of mortgage, sale, etc., with such policy or annuity.- The 1983 amendment18 The 1983 amendment removed the words other than Part IX thereof (see paragraph 15 above) from Section 3 of the exempt companies legislation, thereby allowing Part IX companies to acquire exempt company status.Qualifying companies19 On 14 July 1983, the House of Assembly enacted Ordinance No 24 of 1983, known by its title, the Income Tax (Amendment) Ordinance 1983. That Ordinance introduced the definition of a type of company known as a qualifying company, and also certain provisions relating to that type of company, into the text of Ordinance No 11 of 1952, known by its title, the Income Tax Ordinance. The detailed rules for the implementation of those new provisions were adopted by way of the Income Tax (Qualifying Companies) Rules of 22 September 1983. Ordinance No 24, cited above, and the 1983 Rules (hereinafter referred to as the qualifying companies legislation) constitute the legislation applicable to qualifying companies at issue in the present proceedings.20 The conditions for the grant of qualifying company status are, essentially, identical to those set out above for exempt company status.21 Under Section 41(4) of the Income Tax Ordinance, qualifying companies are liable to tax charged on profits, but the rate must not exceed the rate of corporation tax charged in Gibraltar (currently 35% of profits). There is no legislative provision laying down precisely the actual rate of tax which a qualified company must pay. According to the information in the case-file and provided at the hearing, however, all those companies pay tax at a rate negotiated with the Gibraltar tax authorities of between 2% and 10% of profits. Section 41(4)(b) and (c) of the Income Tax Ordinance also provides that fees payable by a qualifying company to a non-resident person (including directors' fees), and dividends paid to shareholders, are to be taxed at the same rate as that company's profits. Finally, the Stamp Duty Ordinance provides that stamp duty is not payable on the transfer of shares in a qualifying company, on the issue of life insurance policies or on annuities payable by such companies, or on any sale, mortgage or other dealings relating to such policies or annuities.Background to the dispute22 By letter of 12 February 1999, the Commission requested the Permanent Representative of the United Kingdom to the European Union to provide general information on, inter alia, five tax schemes in operation in Gibraltar which were already being examined by the Council under the Code of Conduct for Business Taxation (annexed to the Conclusions of the Ecofin Council meeting of 1 December 1997 concerning taxation policy, OJ 1998 C 2, p. 1) and in a group, currently chaired by Ms Primarolo (the Primarolo Group), established in 1997 by the Council, comprising national high-level tax experts and a Commission representative.23 The legislation being examined included the exempt companies legislation and the qualifying companies legislation. The United Kingdom Government provided the requested information by letter of 22 July 1999 and requested a meeting with the relevant Commission services to discuss that legislation.24 On 23 May and on 28 June 2000, the Commission sent a letter and a reminder, respectively, to the United Kingdom Permanent Representative requesting further information concerning the abovementioned legislation.25 The Permanent Representation of the United Kingdom replied by letter dated 3 July 2000, enclosing a copy of both the 1967 Ordinance on exempt companies, as amended in 1983, and the version of 1983 Ordinance on qualifying companies in force in 1984.26 By letter of 14 July 2000 to the Permanent Representative of the United Kingdom, the Commission stated that, on the basis of information which it had in its possession, the exempt companies legislation appeared to constitute an operating aid incompatible with the common market. In order to determine whether it constituted existing aid, it also requested a copy of the Ordinance in the original 1967 version and, pursuant to Article 17(2) of the regulation on State aid procedure, invited the United Kingdom to submit its comments.27 The Permanent Representation of the United Kingdom replied to the Commission by letters of 3 August and 12 September 2000. In the first of those letters, it provided a copy of the original version of the legislation together with the amendments made in 1969, 1970, 1977 and 1978 and reiterated its request for a meeting with the Commission. In the second letter, it repeated that request and forwarded to the Commission a document drawn up by the Government of Gibraltar setting out the reasons why it considered that the exempt companies legislation did not constitute State aid.28 A meeting took place in Brussels on 19 October 2000 between the representatives of the United Kingdom Government and the Commission. The United Kingdom Government also invited representatives of the Government of Gibraltar to attend that meeting. A number of replies to questions raised by the Commission during the meeting were formulated by the Government of Gibraltar and submitted to the Commission on 28 November 2000, before being formally transmitted to the Commission by the United Kingdom Government on 8 January 2001.The contested decisions29 By decisions SG(2001) D/289755 and SG(2001) D/289757 of 11 July 2001, notified to the United Kingdom Government by letters of the same date, the Commission decided to initiate a formal investigation procedure in respect of the exempt companies legislation and the qualifying companies legislation.The decision concerning exempt companies30 In the grounds of decision SG(2001) D/289755, the Commission sets out the main conditions which a company must meet in order to be granted exempt company status and states:On the basis of the information transmitted by the United Kingdom authorities, it results that the legislation on exempt companies which was introduced after the accession of the United Kingdom to the European Union appears to contain at least two changes which can be considered as notifiable events under State aid rules ....31 As regards the 1978 amendment, the Commission takes the view that that amendment freed exempt companies from their liability to tax by introducing an exemption from stamp duty on the issue of life insurance policies, on annuities payable by them and on any dealings relating to such policies or annuities. As regards the 1983 amendment, the Commission considers that it extended the tax scheme in issue to a new category of undertakings which did not meet the requisite conditions to be eligible to become exempt companies according to the original 1967 version of the exempt companies Ordinance (namely, branches of overseas companies registered under Part IX of the Gibraltar Companies Ordinance). Those undertakings, where they do become exempt companies, only pay tax at a flat rate of GBP 300 per annum. The Commission concludes that, in view of the substant[ive] modifications, relating both to the amount of the advantage granted and to the number of potential beneficiaries, the exempt companies regime cannot be regarded as an existing but [as] an illegal aid.32 After summarising the comments submitted by the United Kingdom Government and the Government of Gibraltar during its preliminary examination, the Commission states that none of those comments dispels its doubts as to their allegations regarding the nature of existing aid of the legislation in issue. Next, it analyses the compatibility of the aid and concludes that it does not appear to fall within the scope of the exceptions laid down in Article 87(3) EC. The Commission states that it hopes to receive the observations of the interested parties on the existence of possible obstacles to the recovery of the aid, in the event that [it] would be qualified as being illegal and incompatible with the common market. The Commission reminds the United Kingdom Government that the procedure provided for in Article 88(3) EC has suspensory effect and that Article 14 of the regulation on State aid procedure provides that unlawful aid may be recovered from the recipient.The decision concerning qualifying companies33 In the grounds of decision SG(2001) D/289757, the Commission states that the qualifying companies legislation does not seem to fall within the definition of existing aid set out in Article 1 of the regulation on State aid procedure and that it has to be considered at this stage as non-notified aid.34 After finding that the qualifying companies legislation appears to constitute aid within the meaning of Article 87(1) EC, the Commission concludes that it could, at this stage, be considered as an operating aid, which does not appear to fall within the exceptions provided for in Article 87(3) EC. It then requests the comments of the interested parties on the existence of possible obstacles to the recovery of the aid, in the event that [it] would be qualified as being illegal and incompatible with the common market. The United Kingdom Government is reminded of the suspensory effect of the procedure provided for in Article 88(3) EC and its attention is drawn to the fact that Article 14 of the regulation on State aid procedure provides that illegal aid may be recovered from the recipient.Procedure35 By application lodged at the Court Registry on 20 August 2001, registered as Case T-195/01, the Government of Gibraltar brought an action under the fourth paragraph of Article 230 EC for annulment of decision SG(2001) D/289755 (contested decision I) initiating a formal investigation procedure in respect of the exempt companies legislation.36 By separate document lodged at the Court Registry on the same date, the applicant brought an application for suspension of operation of contested decision I and for the adoption of interim measures ordering the Commission to refrain from making public the initiation of the abovementioned procedure.37 By application lodged at the Court Registry on 7 September 2001, registered as Case T-207/01, the applicant brought an action under the fourth paragraph of Article 230 EC for annulment of decision SG(2001) D/289755 (contested decision II) initiating a formal investigation procedure in respect of the qualifying companies legislation.38 By separate document lodged at the Court Registry on the same date, the applicant brought an application for the suspension of operation of contested decision II and for the adoption of interim measures ordering the Commission to refrain from making public the initiation of the abovementioned procedure.39 In response to a request for information sent to the United Kingdom Permanent Representative in the context of the proceedings for interim relief, the United Kingdom Government stated in a letter of 11 October 2001 (the response of the United Kingdom) that the applicant and the House of Assembly have jurisdiction to propose and enact, respectively, legislation in respect of company taxation matters, which are matters falling within defined domestic matters within the meaning of Section 55 of the Gibraltar Constitution Order 1969. Only matters not falling within that category remain the exclusive responsibility of the Governor of Gibraltar. The ministerial Despatch of 23 May 1969 provides that the Governor may intervene, on behalf of the United Kingdom Government, if such intervention proves necessary to secure compliance, in particular, with international obligations, including those arising under Community law, by the United Kingdom Government. As regards the capacity to bring proceedings in respect of company taxation, the Chief Minister may be instructed to initiate legal proceedings in the name of the applicant, which has the power to bring such actions notwithstanding the division of internal competence in that field between it and the House of Assembly.40 In its deliberations of 12 November 2001, the Second Chamber, Extended Composition, of the Court of First Instance, to which the main actions had been assigned, decided, on the basis of Article 76a of the Rules of Procedure of the Court of First Instance, as amended on 6 December 2000 (OJ 2000 L 322, p. 4), after hearing the applicant's submissions, to grant the application for an expedited procedure lodged by the Commission on 18 October 2001.41 By order of the President of the Second Chamber, Extended Composition, of the Court of First Instance of 14 November 2001, the two main actions were joined for the purposes of the remainder of the written procedure, the oral procedure and the judgment, pursuant to Article 50 of the Rules of Procedure of the Court of First Instance.42 By documents lodged on 29 November 2001, the applicant and the Commission, at the request of the Court of First Instance, submitted written observations concerning the possible consequences for the present cases of the judgment of the Court of Justice of 9 October 2001 in Case C-400/99 Italy v Commission [2001] ECR I-7303 (Tirrenia).43 By order of 19 December 2001, the President of the Court of First Instance dismissed the applicant's applications for interim relief in Cases T-195/01 R and T-207/01 R.44 By order of 21 January 2002, the President of the Second Chamber, Extended Composition, of the Court of First Instance granted the Kingdom of Spain leave to intervene in the present cases in support of the forms of order sought by the defendant and initially granted the applicant's request for certain documents in the case to be treated as confidential vis-à-vis the intervener.45 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Second Chamber, Extended Composition) decided to open the oral procedure.46 The parties submitted oral argument and answered the questions put by the Court at the hearing on 5 March 2002.Forms of order sought by the parties47 The applicant claims that the Court should:- annul contested decision I and contested decision II;- order the Commission to pay the costs.48 The Commission contends that the Court should:- dismiss the applications as inadmissible;- in the alternative, dismiss them as unfounded;- order the applicant to pay the costs.49 The Kingdom of Spain supports the form of order sought by the Commission.The admissibility of the applications50 The Commission, supported by the Kingdom of Spain, raises two objections of inadmissibility. By the first objection, it challenges the applicant's locus standi. By the second, it contends that the contested decisions do not produce legal effects and cannot therefore be challenged by an application for annulment.Locus standiArguments of the Commission and of the Kingdom of Spain51 The Commission and the Kingdom of Spain express doubts as to the applicant's locus standi and as to the Chief Minister's power to initiate the present action. They maintain that there is a certain inconsistency between the response of the United Kingdom (see paragraph 39 above) and the position which the United Kingdom adopted in Case C-298/89 Gibraltar v Council [1993] ECR I-3605, in which the United Kingdom stated that, even as regards defined domestic matters, the competence of the Council of Ministers does not extend to the application to Gibraltar of international conventions, or to the implementation in Gibraltar of international obligations arising under contract, or to the participation of Gibraltar in specialised international bodies. For such matters, a legal action on behalf of the Government of Gibraltar can only be initiated on the instructions of the Governor of Gibraltar. The Commission is content to leave it to the Court to decide whether to pursue the matter further.Findings of the Court52 First of all, the fourth paragraph of Article 230 EC provides that [a]ny natural or legal person may institute proceedings for annulment. In the present case, it is not disputed that, in British law, the applicant has legal personality and as such must be regarded as a legal person for the purposes of the abovementioned provision.53 As regards the applicant's competence to initiate the present action, it follows from the response of the United Kingdom (see paragraph 39 above) that under the relevant British law the applicant has competence in the specific field with which the present cases are concerned, namely company taxation, as a defined domestic matter. There is nothing in the documents before the Court to invalidate that response.54 In those circumstances, the reference by the Commission and by the Kingdom of Spain to Gibraltar v Council, in which the United Kingdom disputed the locus standi of the Government of Gibraltar, is irrelevant, since that case concerned air transport within the Community and was therefore fundamentally different from the present case.55 Consequently, the first objection of inadmissibility must be dismissed in the light of the documents before the Court, without there being any need for the Court to examine that question of admissibility more closely of its own motion.The legal nature of the contested decisionsArguments of the Commission and of the Kingdom of Spain56 The Commission maintains that the contested decisions have no legal effects. Unlike the decisions which formed the subject-matter of Case C-312/90 Spain v Commission [1992] ECR I-4117 (Cenemesa) and Case C-47/91 Italy v Commission [1992] ECR I-4145 (Italgrani), the contested decisions do not contain any definitive conclusions as to whether the alleged aid is new aid or existing aid and as to whether it is compatible with the common market. Consequently, they do not automatically require compliance with the obligation to suspend the relevant measures provided for in Article 88(3) EC. They merely bring to the notice of the United Kingdom the effect of that provision should it be applicable. The question as to whether the legislation at issue, should it constitute aid, must be regarded as new aid or as existing aid therefore remains open.57 The Commission further states that it has adopted no decision ordering the Member State provisionally to recover the aid, pursuant to Article 11(2) of the regulation on State aid procedure. It merely invited the United Kingdom and other interested parties to submit observations on the question whether recipients of the aid may have acquired legitimate expectations of such a kind as to prevent recovery in the event that this aid would be qualified as being illegal and incompatible.58 Although it acknowledges that the principle established in Cenemesa and Italgrani was approved by the Court of Justice in Tirrenia, the Commission considers that that judgment does not state that every decision initiating the formal investigation procedure necessarily produces legal effects. Like Cenemesa and Italgrani, Tirrenia proceeds on the basis that the Commission had classified the measure in issue as new aid. In that context, the Commission refers, in particular, to paragraph 59 of Tirrenia, which concerns a decision to initiate the procedure under Article 88(2) EC in relation to a measure in the course of implementation and classified as new aid. In the present case, conversely, the Commission has taken no such decision and has not declared the aid illegal.59 Furthermore, in Tirrenia the Commission referred in its formal letter to the Italian authorities only to the question of the existence and compatibility with Community law of the aid which had been the subject of complaints. At no time did the Commission express doubt as to whether the alleged aid was new aid. On the contrary, it clearly stated that in its view the aid in question was new aid and must be cancelled. It requested the Italian authorities to confirm within 10 days that the aid had been suspended and reminded them of the need for such a measure in order to prevent any subsequent distortion of the market. The Commission added that it could refer the matter directly to the Court of Justice, in accordance with Article 88(2) EC, if the Italian Republic did not comply with the decision to suspend the aid. In a subsequent letter, the Commission stated that it intended to adopt a decision requiring the Italian Republic to suspend the aid.60 In the present case, on the other hand, the Commission did not adopt a decision to suspend the alleged aid or state that it intended to do so: nor did it threaten to refer the matter directly to the Court of Justice if the alleged aid were not suspended. It has not taken any of those steps for the simple reason that it has still not determined whether the alleged aid was new aid or existing aid. One of the questions which the formal investigation procedure will have to answer is whether the alleged measures constitute new aid. According to the Commission, it is only when that question has been answered that it will be possible to state clearly whether Gibraltar is required to suspend the alleged aid.61 The Commission further states that, in Tirrenia, the Court of Justice held that the decision to initiate the formal investigation procedure produced autonomous legal effects, since it implied that the Commission [did] not intend to examine the aid in the context of the permanent examination of existing aid schemes (paragraph 58). Thus, according to the Court of Justice, from the Commission's point of view, the aid had been unlawfully implemented, in disregard of the suspensory effect, in relation to new aid, which follows from the last sentence of Article 88(3) EC (paragraph 58). Still according to the Court of Justice, that decision implied at the very least a significant element of doubt as to the legality of that measure which ... must lead the Member State to suspend payment (paragraph 59).62 The Commission emphasises that the decisions contested in the present case cannot be assimilated to the decision adopted in Tirrenia. In the present case, the Commission did not state, nor did it arrive at the conclusion, that the aid was implemented illegally; furthermore, the contested decisions do not mean that it does not intend to examine the aid in the context of the permanent review of existing aid schemes. The Commission has not yet arrived at a stage at which it can say with certainty that the measures in question are new or existing. If they are existing, they will then have to be examined in the context of the scheme for existing aid, while if they are new, they must be suspended. However, in order to determine the applicable scheme, it is necessary to have more complete information.63 The Commission acknowledges that the contested decisions in the present case give rise to doubt as to the legality of the measures in issue (it refers to paragraph 59 of Tirrenia). However, that doubt can logically arise at any stage of the procedure, where the question as to whether the alleged aid is new aid or existing aid is raised.64 According to the Commission, it is therefore not correct to consider, on the basis of Tirrenia, that every decision initiating the formal investigation procedure necessarily implies a decision finding that the aid under examination is new aid. Each decision must be assessed on the basis of its content. The contested decisions in the present actions do not arrive at a definitive conclusion as to whether the measures in question can be regarded as new aid or as existing aid. They merely set out the elements which tend to support the conclusion that the measures constitute new aid and invite the interested parties to submit their observations. That is the only way in which the Commission can obtain full information from as many sources as possible.65 At the hearing, the Commission stated that by initiating the formal investigation procedure, as it did by means of the contested decisions, without conferring a legal classification on the measures in question, it adopted an innovative procedural approach. That approach is no less consistent with the applicable regulations.66 The Commission maintains that to decide otherwise would amount to finding that it cannot initiate the formal investigation procedure without first determining whether the measure in issue, if it is aid at all, constitutes new or existing aid. The possibility of obtaining information from the Member State concerned is not always sufficient. The Commission may in at least some cases need information from third parties in order properly to assess this question, just as it needs such information in order to determine whether the aid is compatible with the common market. In the present case, in particular, where determination of whether the alleged aid is new aid depends on its economic effects or on developments in the market, it is economic operators who constitute the best sources of information.67 The Kingdom of Spain essentially endorses the Commission's reasoning.Findings of the Court68 It is necessary to ascertain the criteria which distinguish a decision to initiate the formal investigation procedure and to assess whether the contested decisions fulfil those criteria or whether, as the Commission claims, they must be regarded as procedural innovations which differ in nature from a classic decision initiating that procedure.69 In that regard, the initiation of the formal investigation by the Commission is provided for, pursuant to Article 88 EC and to Article 4(4) of the regulation on State aid procedure, and also to Articles 13, 16 and 19(2) of that regulation, in four possible situations which are exhaustively listed, namely: for the purpose of examining new notified aid, for the purpose of examining possible unlawful aid, in the event of misuse of aid within the meaning of Article 1(g) of that regulation, and where a Member State rejects the appropriate measures proposed by the Commission in respect of an existing aid scheme.70 In the present case, the last two possibilities must be precluded at the outset. Nor was the national legislation in issue notified in accordance with Article 88(3) EC, since its notification to the Primarolo group - set up by the Council and composed, in particular, of national experts - cannot be treated as formal notification to the Commission for the purposes of the Community rules on State aid. Consequently, the question whether the procedural approach chosen by the Commission in the present case should be classified as the initiation of the formal examination procedure, with the legal effects that step implies, can be examined solely in relation to the category of possible unlawful aid.71 Under Article 4(4) and Article 6(1) of the regulation on State aid procedure, any formal investigation procedure must be initiated by a decision which includes a preliminary assessment by the Commission as to the character of the measure in issue as aid and must set out the doubts which exist concerning its compatibility with the common market. Pursuant to Article 7 of the regulation on State aid procedure, the formal investigation procedure may be closed by a decision finding that the measure in issue does not constitute aid (paragraph 2), by a positive decision declaring the aid compatible with the common market (paragraph 3), by a conditional positive decision (paragraph 4) or by a decision declaring the aid incompatible with the common market (paragraph 5).72 Those provisions allow the Commission to examine, from all possible aspects, the character of the State measure in question which may constitute new aid or the amendment of existing aid in order to overcome its doubts as to the compatibility of the measure with the common market in the course of the formal investigation (see Tirrenia, paragraph 45). The Commission is even required to initiate that procedure, pursuant to Article 4(4) of the regulation on State aid procedure, if the initial analysis of the measures in issue has not enabled all the difficulties raised by the assessment of the measure in question to be overcome (see Case T-95/96 Gestevisión Telecinco v Commission [1998] ECR II-3407, paragraph 52, Case T-11/95 BP Chemicals v Commission [1998] ECR II-3235, paragraph 166, and Case T-73/98 Prayon-Rupel v Commission [2001] ECR II-867, paragraph 42).73 At the end of the preliminary state of the investigation into a State measure, the Commission thus has three choices: it may decide that the State measure at issue does not constitute State aid, or it may decide that that measure, although constituting aid, is compatible with the common market, or it may decide to initiate the formal investigation procedure (Gestevisión Telecinco v Commission, paragraph 55, and Case T-17/96 TF1 v Commission [1999] ECR II-1757, paragraph 28).74 It follows from the foregoing that the formal investigation procedure can only be initiated by a decision within the meaning of the fourth paragraph of Article 249 EC and that that decision must contain a preliminary assessment of the character of the State measure in issue. That assessment is an inherent element of the decision initiating the procedure.75 As to whether the acts contested in the present case satisfy those criteria, each of them states by way of introduction that the Commission has decided to initiate the procedure laid down in Article 88(2) [EC]. Furthermore, each contains a preliminary assessment of the exempt companies legislation or the qualifying companies legislation.76 Thus, in contested decision I, the Commission states that, on the basis of the information communicated by the United Kingdom authorities, it appears that the legislation in issue appears to contain at least two changes which can be considered as notifiable events (point 9). The Commission concludes that, having regard to those substant[ive] modifications, the exempt companies legislation cannot be regarded as existing aid but must be regarded as unlawful aid (point 16). It further states that the observations submitted by the United Kingdom Government and the Government of Gibraltar are not sufficient to dispel its doubts as to the nature of the legislation in issue as existing State aid (points 34 and 35) and, last, that the aid does not appear to qualify for any of the exceptions provided for in Article 87(3) EC (point 48).77 In contested decision II, the Commission states that the legislation in issue does not seem to fall within the definition of existing aid and has to be considered at this stage as a non-notified aid (point 1). The Commission notes that the legislation appears to constitute aid within the meaning of Article 87(1) EC (point 17) and concludes that it can, at this stage, be considered as an operating aid, which does not appear to qualify for the exceptions provided for in Article 87(3) EC (points 23 and 24).78 Consequently, in spite of the argument which the Commission bases on what it claims to be a procedural innovation, the contested decisions, far from being characterised by a complete absence of preliminary legal assessment, are indeed decisions initiating the formal investigation procedure within the meaning of the regulation on State aid procedure and the relevant case-law.79 The finding that the Commission provisionally concluded that the legislation in issue constitutes unlawful aid that is incompatible with the common market is not invalidated by the invitation (in point 49 and point 25 of the contested decisions, respectively) to interested parties to express their views on the possible recovery of the aid in the event that [it] would be qualified as being illegal and incompatible with the common market. That merely constitutes a precautionary reminder that a final decision, adopted at the close of the formal investigation and in the light of the observations submitted by the interested parties, might contain a different legal classification from the preliminary assessment made in the decision initiating the procedure.80 It was in regard to a decision to initiate the formal investigation procedure in respect of allegedly unlawful aid that the Court of Justice held in Tirrenia that [r]egarding aid in the course of implementation the payment of which is continuing and which the Member State regards as existing aid, the contrary classification as new aid, even if provisional, adopted by the Commission in its decision to initiate the procedure under Article 88(2) EC in relation to that aid, has independent legal effects (paragraph 57). Such a decision, according to the Court of Justice, implies that the Commission does not intend to examine the aid in the context of the permanent examination of existing aid schemes provided for by Article 88(1) EC and Articles 17 to 19 of the regulation on procedure in State aid cases (paragraph 58) and necessarily alters the legal position of the measure under consideration and that of the undertakings which are its beneficiaries, particularly as regards the pursuit of its implementation (paragraph 59). The Court of Justice further held:Whereas, until the adoption of such a decision, the Member State, the beneficiary undertakings and other economic operators may think that the measure is being lawfully carried out as an existing aid, after its adoption there is at the very least a significant element of doubt as to the legality of that measure which ... must lead the Member State to suspend payment, since the initiation of the procedure under Article 88(2) EC excludes the possibility of an immediate decision holding the measure compatible with the common market which would enable it to be lawfully pursued (paragraph 59).81 That reasoning of the Court of Justice related to a decision of the Commission to initiate the formal investigation procedure in which the Member State was neither ordered to suspend implementation of the measures referred to, in accordance with Article 11(1) of the regulation on State aid procedure (paragraph 55), nor ordered provisionally to recover the aid which had already been paid (Article 11(2) of the regulation on State aid procedure). Contrary to the Commission's argument, therefore, the fact that it did not make use of the possibilities provided for in Article 11 has no relevance to the classification of the legal nature of a decision to initiate the formal investigation procedure.82 Consequently, even though the classification of the aid corresponds to an objective situation which does not depend on the assessment made at the stage of the initiation of the formal investigation procedure and though the mere initiation of that procedure does not have the same immediately binding character as a suspension injunction addressed to the Member Sate concerned (Tirrenia, paragraphs 58 and 60), the fact that the Commission chose to initiate the formal investigation procedure and provisionally classified the legislation in issue as new aid, instead of following the procedure in respect of possible existing aid, has legal effects such as those described by the Court of Justice in Tirrenia.83 Furthermore, in spite of the provisional nature of the legal assessments which it contains, each decision to initiate the formal investigation procedure, such as the contested decisions in the present case, is definitive in so far as the Commission's choice in initiating that procedure produces effects at least until it is closed.84 First, even a final decision of the Commission which, after classifying the State measures in issue as new aid, declares the aid compatible with the common market, does not have the consequence of regularising ex post facto the implementing measures which would have to be deemed to have been adopted in breach of the prohibition laid down in the final sentence of Article 88(3) EC (Cenemesa, paragraph 23).85 Second, the decision initiating the procedure may, in any event, be invoked before a national court (Tirrenia, paragraph 59) and thus exposes the beneficiaries of the measure in issue and territorial entities such as the applicant to the risk that the national court will order suspension of the measure and/or recovery of the payments made, in order to ensure compliance with the last sentence of Article 88(3) EC, since the direct effect of the prohibition on implementation of the proposed measure laid down in that article extends to all aid which has been implemented without being notified (Case 120/73 Lorenz [1973] ECR 1471, paragraph 8, and Case C-39/94 SFEI and Others [1996] ECR I-3547, paragraph 39). Those beneficiaries and territorial entities therefore run a higher economic and financial risk than if the formal investigation procedure had not been initiated. It is particularly for that reason that the decision to initiate that procedure is liable to affect their legal situation (see, by analogy, Case T-46/93 Scottish Football v Commission [1994] ECR II-1039, paragraph 13).86 It follows that the procedural choice made by the Commission must be amenable to judicial review in a case such as this. The initiation of the formal investigation procedure produces the legal effects described above, while, in the context of the examination of existing aid, the legal situation does not change until such time as the Member State concerned accepts proposals for appropriate measures or the Commission adopts a final decision (Tirrenia, paragraph 61).87 Accordingly, the second plea of inadmissibility cannot be upheld either.88 The applications must therefore be declared admissible.Substance89 In support of its applications for annulment, the applicant raises pleas which are broadly similar in both cases. The first plea alleges breach of the duty to state reasons. The second plea alleges infringement of the rights of defence of the applicant and of the United Kingdom. By its third plea, the applicant complains that the contested decisions are incompatible with Article 88 EC and Article 1 of the regulation on State aid procedure. The fourth plea alleges breach of the principle of proportionality. The fifth plea alleges breach of the principles of legal certainty and legitimate expectations.90 In the circumstances of the present case, it is appropriate to rearrange those pleas and to begin by examining together the pleas alleging, respectively, infringement of Article 88 EC and Article 1 of the regulation on State aid procedure and breach of the principles of proportionality, legal certainty and legitimate expectations.The pleas alleging, respectively, infringement of Article 88 EC and Article 1 of the regulation on State aid procedure and breach of the principles of proportionality, legal certainty and legitimate expectationsArguments of the parties91 With regard to the exempt companies legislation, the applicant maintains that the Commission has committed a manifest error of assessment in finding that the 1978 and the 1983 amendments constituted substant[ive] modifications to a non-notified aid scheme. In thus classifying them and, as a consequence, in classifying the entire exempt companies legislation as a new aid scheme, ignoring the Community law context in which those measures were adopted at the time and without carrying out an economic analysis, the Commission has given an excessively broad and arbitrary meaning to the concept of new aid.92 As regards the 1978 amendment, the applicant claims that it merely gave legislative recognition to what was an existing common practice and did not, therefore, have any specific effect. As regards the 1983 amendment, the applicant argues that the Commission omitted to carry out an economic analysis of the impact of that amendment on competition and on trade in the single market.93 The applicant takes the view that the Commission has, in any event, infringed the principle of proportionality by classifying the exempt companies tax scheme in its entirety as new aid, despite the fact that the 1978 and 1983 amendments are separable from the 1967 scheme.94 As regards the qualifying companies legislation, the applicant maintains that the Commission erred in law in not classifying it as an existing aid scheme. According to the applicant, the legislation dates from 1983, from a period when it was far from clear either to the Commission, to Member States or, above all, to economic operators whether, and to what extent, State aid rules were to be systematically applied to national legislation on company taxation. The legislation in issue thus predates by 10 years the liberalisation of capital movements and by 15 years the clarification of the concept of State aid made by the Commission in its notice, published on 10 December 1998, on the application of State aid rules to measures relating to business taxation (OJ 1998 C 384, p. 3).95 The qualifying companies legislation was notified to the Primarolo Group by the United Kingdom Government even before the publication of the abovementioned Commission notice of 1998. According to the applicant, that notice contains the first comprehensive, albeit not exhaustive, definition of fiscal State aid and can be regarded more as a policy statement as to future Commission action in this area rather than as a clarification of the applicable legislation.96 Furthermore, the fact that the provisions of Community law applicable to State aid may evolve by virtue of the decisions of the Commission and of the Community Courts is recognised in Article 1(b)(v) of the regulation on State aid procedure (see paragraph 4 above). The qualifying companies legislation constitutes a measure, as provided for by that provision, which became aid only subsequently. By failing to regard that legislation as existing aid, the Commission is applying, with hindsight, the relatively refined State aid criteria of 2001 to the different legal and economic situation which prevailed in 1983. The applicant makes reference, in that regard, to the Irish company tax scheme which, it claims, was initially not classified as aid, although the Commission's view subsequently changed and reflected the gradual tightening of Community disciplines regarding such tax incentive schemes (see the Commission's proposal for appropriate measures concerning the International Financial Service Centre and the Shannon customs-free airport zone (OJ 1998 C 395, p. 14) and its proposal for appropriate measures concerning Irish corporation tax (OJ 1998 C 395, p. 19).97 The applicant maintains that the Commission also infringed the principle of proportionality by applying the rules provided for new aid to the qualifying companies tax legislation. Such treatment has dramatic economic consequences. That significant damage is disproportionate to any Community interest which might be served by the initiation of a procedure, particularly in view of the diminutive size of Gibraltar's economy and the necessarily insignificant impact of the legislation in issue on competition and on international trade. The Commission would have taken a more equitable approach if it had considered the qualifying company legislation either under the Code of Conduct for Business Taxation, under Articles 96 EC and 97 EC or under the procedure applicable to existing aid.98 Last, the Commission is alleged to have infringed the principles of legal certainty and legitimate expectations by waiting 18 years and 23 years respectively before challenging the legislation in issue, which was enacted in 1967 and 1983, and by not carrying out its investigation into the legislation within a reasonable time. The conformity of the legislation with Community law was never doubted by the Commission before February 1999. That prolonged failure to act on the part of the Commission gave rise to legitimate expectations on the part of Gibraltar. Furthermore, the Commission's investigations should be subject to a limitation period. Thus, pursuant to Article 15 of the regulation on State aid procedure, any individual aid granted under an aid scheme 10 years before the Commission takes action must be deemed to be existing aid. Applying that rule, the Commission should have regarded the legislation in issue as existing aid schemes. In any event, the Commission infringed the principles of legitimate expectations and of legal certainty by allowing an excessively long period to elapse after opening its investigation into the legislation. The preliminary investigation began on 12 February 1999; however, the formal investigation procedure was not initiated until two and a half years later, on 11 July 2001. In the course of the preliminary investigation, the Commission remained inactive for 10 months and then again for 12 months.99 The Commission argues, with regard to the exempt companies legislation, that the real question is whether the 1978 and the 1983 amendments are substantive, inasmuch as they concern the substance of the aid, rather than its scale (Opinion of Advocate General Fennelly in Joined Cases C-15/98 and C-105/99 Italy and Sardegna Lines v Commission [2000] ECR I-8855, at I-8859, points 62 and 63). The Commission is thus required not to carry out an economic analysis of the effect of the amendment but merely to examine the legislative provisions in question. An examination must be carried out as part of a formal investigation procedure where there are no prima facie grounds for the conclusion that the amendments referred to did not make substantive amendments to the scheme in issue.100 There were prima facie grounds, at this stage, for the conclusion that both the amendments referred to in the contested decision made substantive amendments to the scheme. The 1978 amendment freed the companies covered by the scheme from liability for a tax; even though that tax was widely evaded, the fact remains that a new exemption was granted. The 1983 amendment made access to the scheme available to a whole new and potentially very large category of undertakings. The fact that not many of those undertakings have chosen to make use of that possibility does not affect the substantive nature of the amendment. The evidence in the possession of the Commission was thus at least sufficient to justify it in initiating the procedure in order to carry out a full inquiry. Furthermore, the applicant will have the opportunity in the course of the formal investigation procedure to put forward the arguments it submitted before the Court.101 The Commission acknowledges that the applicant's arguments concerning the minor character of the amendments made to the previously existing scheme, and the possible restriction of new aid to those aspects of the scheme which have been altered, are legitimate and relevant. Those arguments should be taken into account in the assessment of the scheme, not on any ground of proportionality, but because they address the substantive nature of the amendment and its consequences. However, they do not justify preventing the Commission from actually assessing the scheme. For the remainder, the Commission submits that certain of the considerations invoked by the applicant may relate to whether recovery should be ordered and others may be relevant to the compatibility of the measure with the common market.102 As regards the qualifying companies legislation, the Commission maintains that it had no intention of making a definitive finding as to whether the alleged aid was new aid or existing aid. It is during the investigation procedure that that issue must be explored. However, there were prima facie grounds, at that stage, for the conclusion that the measure constituted aid within the meaning of Article 87 EC from the outset. The evidence in the possession of the Commission was thus at least sufficient to justify it in initiating the procedure in order to carry out a full inquiry.103 The applicant would be able to put forward its arguments in the course of the formal investigation procedure. According to the Commission, there are arguments to be made, in particular, over the extent to which the activities of undertakings benefiting from the qualifying companies scheme were open to international competition, since the undertakings concerned are active in a broad spectrum of businesses, including financial services, ship repair, motor vehicles, telecommunications and gambling. An analysis must therefore be made of the various activities carried on by those companies and of the market conditions in 1983 and subsequently. None the less, at this stage the very fact that qualifying companies must do business outside Gibraltar suggests that they are engaged in international trade.104 The Kingdom of Spain essentially supports the substantive arguments put forward by the Commission.Findings of the Court- Contested decision I concerning the exempt companies tax scheme105 As to whether the Commission was justified in initiating the formal investigation procedure or whether it should have examined the State measure in issue in the context of the permanent review of existing State aid systems provided for in Article 88(1) EC and in Articles 17 to 19 of the regulation on State aid procedure, it should be observed, first of all, that in the present case the procedure was initiated because the Commission had serious doubt as to the classification of that scheme as possible unlawful aid and as to its compatibility with the common market. Unlawful aid is defined in Article 1(f) of the regulation on State aid procedure as new aid put into effect in contravention of Article [88(3) EC].106 It is common ground that the original 1967 tax scheme - on the assumption that it can be classified as an aid scheme - in any event constituted existing aid within the meaning of Article 1(b)(i) of the regulation on State aid procedure when the United Kingdom acceded to the Community on 1 January 1973.107 Contested decision I expressly states that that original scheme was the subject of two amendments, in 1978 and in 1983. Those amendments are classified as substantive, so that the exempt companies legislation cannot be regarded as an existing but an illegal aid (point 16 of the decision). Furthermore, the decision refers to all exempt companies existing in Gibraltar and not only to the companies affected by the 1978 and 1983 amendments (point 38).108 The Commission therefore provisionally considered that both amendments, adopted after the United Kingdom's accession to the Community, changed the original tax scheme in its entirety into a system of new aid.109 Under Article 1(c) of the regulation on State aid procedure, alterations to existing aid are to be regarded as new aid. According to that unequivocal provision, it is not altered existing aid that must be regarded as new aid, but only the alteration as such that is liable to be classified as new aid.110 That analysis is confirmed by Case C-44/93 Namur-Les assurances du crédit [1994] ECR I-3829, paragraphs 13 and 16, where the Court of Justice held that measures to ... alter aid must be regarded as new aid and that plans to ... alter aid cannot be put into effect before the procedure has resulted in a final Commission decision.111 Accordingly, it is only where the alteration affects the actual substance of the original scheme that the latter is transformed into a new aid scheme. There can be no question of such a substantive alteration where the new element is clearly severable from the initial scheme.112 In the present case, the Commission itself stated, in point 12 of contested decision I, that the 1978 amendment introduced an exemption from stamp duty on the issue of life insurance policies by exempt companies, on annuities payable by exempt companies and on certain transactions relating to such policies or annuities, the advantage thus granted to exempt companies not having been available under the original legislation. In points 13 and 14 of that decision, the Commission states that the 1983 amendment extended eligibility for the tax scheme in issue to a new category of undertakings which had not previously satisfied the requirements of the original 1967 scheme.113 According to the Commission's own reasoning, therefore, the two amendments in issue are mere additions to the original 1967 scheme which, first, extended the exempt operations to a single category of additional operations, namely life insurance, and, second, added a single category of companies to the beneficiaries of the tax exemption, namely branches of certain companies. On the other hand, there is no evidence in the case-file that those developments affected the intrinsic functioning of the initial tax scheme as regards the other operations and categories of company. The 1978 and 1983 amendments must therefore be regarded as severable elements of the original 1967 tax scheme, so that - on the assumption that they may be classified as aid - they cannot alter the character of existing aid of the original scheme.114 That analysis is not contradicted by Namur-Les assurances du crédit (cited above, paragraph 28), where the Court of Justice held that whether aid may be classified as new aid or as alteration of existing aid must be determined by reference to the provisions providing for it. Although it is true that in the present case the 1978 and 1983 amendments were inserted into the original 1967 legislation, the fact remains that those amendments are severable from the original scheme. In Namur-Les assurances du crédit the question of the severable nature of the amendment was not raised and the Court of Justice did not adjudicate on that point.115 It follows from the foregoing that in initiating the formal investigation procedure in respect of the whole of the exempt companies legislation and in provisionally classifying that scheme as new aid in its entirety, the Commission infringed Article 88 EC and Article 1 of the regulation on State aid procedure. Accordingly, contested decision I must be annulled in its entirety, without there being any need to consider the other pleas and arguments put forward against it.116 Furthermore, the partial annulment of that decision, confined to the introduction of the amendments in issue into the original scheme, is precluded, since the Court cannot substitute itself for the Commission and decide that there are grounds for maintaining the formal investigation procedure in relation only to the 1978 and 1983 amendments.- Contested decision II concerning the qualifying companies tax scheme117 The qualifying companies tax scheme dates from 1983 and was therefore enacted after the accession of the United Kingdom to the Community: accordingly, it cannot be regarded as existing aid within the meaning of Article 1(b)(i) of the regulation on State aid procedure.118 Furthermore, the Commission's choice of the formal investigation procedure instead of the existing aid procedure can be criticised by the Court only on the basis of the pleas and arguments put forward by the applicant in support of the form of order which it seeks. However, none of the arguments or pleas put forward by the applicant in the present dispute is really directed against the Commission's presentation of the elements of fact and of law or against its preliminary legal assessment in contested decision II, on the basis of which it reached the provisional conclusion that the scheme in issue constitutes new aid and is incompatible with the common market.119 The applicant confines its pleadings to a description of historical developments, the uncertain legal situation existing in 1983, the subsequent liberation of movements of capital and the clarification of the concept of aid of a fiscal nature which was only provided towards the end of the 1990s. Furthermore, it merely states, generally, that the rules on State aid constitute a living law and that the concept of aid changes over time, a phenomenon which is recognised by Article 1(b)(v) of the regulation on State aid procedure. Last, it maintains that it would be sensible and fair to conclude that, in 2001, the 1983 qualifying companies legislation constitutes existing aid, while to classify it as new would be wholly illogical and contrary to the normal and usual meaning of the applicable Community provisions.120 It must be held that those general arguments are not capable of establishing that the 1983 tax scheme must, owing to its intrinsic characteristics, be classified as an existing aid scheme.121 Furthermore, the Court of Justice held in Case C-295/97 Piaggio [1999] ECR I-3753, paragraphs 45 to 48, that the answer to the question whether aid is new cannot depend on a subjective assessment by the Commission. Thus, in 1999 the Court of Justice condemned the conduct of the Commission in regard to a national law dating from 1979 which had been classified by the Commission as existing State aid for reasons of practical expediency, which included the Commission's own doubts, which had extended over 14 years, concerning the classification of that law as State aid. The Court of First Instance therefore finds whether a specific State measure is to be classified as existing aid or as new aid must be determined without reference to the time which has elapsed since the measure in question was introduced and independently of any previous administrative practice.122 In so far as the applicant maintains that the tax scheme in issue must be classified as existing aid because it was brought to the knowledge of the Primarolo group, it has already been held (paragraph 70 above) that that notification cannot be treated as formal notification to the Commission for the purposes of the Community rules on State aid.123 As regards the reference to the Commission's two proposals for appropriate measures concerning the Irish corporation tax scheme, the factual and legal situation forming the background to those proposals is quite different from the situation prevailing in the present case. Those proposals therefore do not serve as a precedent for classifying the tax scheme at issue in the present dispute as existing aid.124 The applicant further emphasises the small size of Gibraltar, and claims that the impact of the scheme in issue on competition within the common market and on trade between Member States has always been marginal, since the number of qualifying companies registered in Gibraltar after 18 years during which the scheme has been in force is only 150. Nor has the Commission, it alleges, carried out an economic analysis of that impact.125 It must be pointed out that that argument contains no figures relating to the volume of the tax measures in issue or on the size of the companies benefiting from it in terms of turnover and advantages. It is sufficient to point out, therefore, that it is settled case-law that the relatively low amount of aid or the relatively small size of the undertaking which receives it does not as such exclude the possibility that intra-Community trade may be affected (see Case T-14/96 BAI v Commission [1999] ECR II-139, paragraph 77, and the case-law cited there). Furthermore, in order for the classification as State aid to be upheld, it is sufficient that the State measures in issue threaten to distort competition and are capable of having an impact on trade between Member States.126 Consequently, in the absence of information on the part of the applicant, the finding made in contested decision II (point 14) that the qualifying companies benefiting from the scheme in issue are liable, actually or potentially, to trade with companies in other Member States, all the more so because they are not normally allowed to trade in Gibraltar, has not been validly contested.127 Moreover, the Commission correctly contended that the formal investigation procedure, in so far as it allows the economic operators concerned to be involved in the procedure leading to the adoption of the final decision, constitutes the appropriate procedural framework for the economic analysis which the applicant would have it carry out.128 As regards the argument that the initiation of the formal investigation procedure will cause irreparable harm to Gibraltar's position as an international financial centre, since the risk that the tax scheme in issue will be abolished represents a real threat to the economic viability of Gibraltar, it is sufficient to observe (see paragraphs 72 and 121 above) that the Commission is required to initiate the formal investigation procedure if, after provisionally classifying the measure in issue as new aid, it experiences serious difficulties in assessing its compatibility with the common market. The economic risks caused by the decision to initiate that procedure of which the applicant complains cannot of themselves affect the legality of such a decision. Consequently, this argument must be rejected.129 In so far as the applicant relies, last, on the principles of proportionality, legitimate expectations and legal certainty, it follows from the foregoing that the mere fact that for a relatively long period the Commission did not open an investigation into a State measure cannot in itself confer on that measure the objective nature of existing aid, if it does constitute aid (Piaggio, paragraphs 45 to 47). As the Commission correctly stated, any uncertainty which may have existed in that regard may at most be regarded as having given rise to a legitimate expectation on the part of the recipients so as to prevent recovery of the aid paid in the past (Case 223/85 RSV v Commission [1987] ECR 4617, paragraphs 16 and 17, and Case C-5/89 Commission v Germany [1990] ECR I-3437, paragraphs 16 and 17).130 The same applies to the limitation period provided for in Article 15 of the regulation on State aid procedure, which does not in any way express a general principle whereby new aid is transformed into existing aid but merely precludes recovery of aid established more then 10 years before the Commission first intervened.131 It follows from the foregoing that the pleas alleging infringement of Article 88 EC and Article 1 of the regulation on State aid procedure and breach of the principles of proportionality, legal certainty and legitimate expectations must be rejected in so far as they relate to the action against contested decision II.132 It is therefore necessary to examine the other pleas put forward in support of this action.The plea alleging breach of the obligation to state reasonsArguments of the applicant133 The applicant submits that Article 253 EC establishes the principle that acts adopted by the Community institution must be based on a sufficiently precise statement of reasons which discloses in a clear and unequivocal fashion the reasoning followed by the institution concerned. Unlike regulations, which are of general application, decisions, which are addressed to specific persons, require a detailed statement of reasons.134 Decisions of the Commission in the field of State aids have particularly important effects for Member States, regions and local authorities and also for private undertakings. They are economic by nature and therefore demand economic reasons relating to the impact of the measure on competition and on trade, in both qualitative and quantitative terms.135 The applicant maintains that, in point 1 of contested decision II, the Commission chose to express its decision in hesitant language which is far from clear and which completely fails to state why the qualifying companies legislation does not constitute an existing aid scheme. A more detailed statement of reasons was required because the legislation in issue had formed part of Gibraltar's legal order for 18 years without being challenged by the Commission and because the question whether State aid rules were to be systematically applied to the company taxation scheme was by no means resolved in 1983.Findings of the Court136 As the Commission correctly observed, the statement of reasons required by Article 253 EC must be appropriate to the act at issue and must disclose the reasoning followed by the Commission. In that regard, it is necessary to have regard not only to the wording of the measure in issue but also to its context and to all the legal rules governing the matter in question (see Case C-367/95 P Commission v Sytraval and Brink's France [1998] ECR I-1719, paragraph 63).137 In order to assess the scope of the obligation to state the reasons for a decision to initiate the formal investigation procedure, it is appropriate to recall that, according to Article 6 of the regulation on State aid procedure, when the Commission decides to initiate the formal investigation procedure, its decision may be confined to summarising the relevant issues of fact and law, to including a preliminary assessment as to the character of the State measure in issue as aid and to setting out the doubts as to its compatibility with the common market.138 Article 6 of that regulation also provides that the decision to initiate the procedure must give the interested parties the opportunity effectively to participate in the formal investigation procedure, during which they will have the opportunity to put forward their arguments. For that purpose, it is sufficient for the parties to be aware of the reasoning which led the Commission provisionally to conclude that the measure in issue might constitute new aid incompatible with the common market.139 Accordingly, the defects which, the applicant alleges, exist in the statement of reasons cannot be regarded as an infringement of Article 253 EC. The allegedly hesitant form of words used in contested decision II accurately reflects the doubts which led the Commission to initiate the formal investigation procedure. Otherwise, the decision sets out the characteristics of the tax scheme forming the subject-matter of the formal investigation procedure and states that, in the light of the evidence available to it at that stage, the Commission provisionally concludes that the scheme amounts to aid incompatible with the common market.140 Consequently, this plea must be rejectedThe plea alleging breach of the rights of defence of the applicant and of the United KingdomArguments of the applicant141 The applicant maintains that any person who may be adversely affected by the adoption of a decision must be placed in a position in which he may effectively make known his views of the evidence against him which the Commission has taken as the basis for the decision (Case T-450/93 Lisrestal and Others v Commission [1994] ECR II-1177, paragraph 42). That principle also extends to any person who is directly and individually concerned by such a decision (Case C-135/92 Fiskano v Commission [1994] ECR I-2885, paragraphs 26 and 41). The Commission has infringed the applicant's rights of defence, since it adopted contested decision II without any discussion with the applicant and without allowing it to express any views whatsoever.142 The applicant states that, since the United Kingdom's response to the Commission of 3 July 2000, the Commission discontinued its investigation into the qualified companies legislation while pursuing its parallel investigation into the exempt companies legislation. In doing so, the Commission unilaterally put an end to any possibility for an exchange of views on the status of the qualifying companies legislation. Furthermore, the Commission did not seek to involve the applicant in the administrative proceedings and refused to deal directly with it.143 The applicant maintains that the arguments put forward in relation to the infringement of its rights of defence also apply, mutatis mutandis, in respects of the rights of defence of the United Kingdom.Findings of the Court144 In that regard, it is sufficient to observe that the Court of Justice held in Commission v Sytraval and Brink's France (paragraphs 58 and 59) that there exists no basis for the imposition of an obligation on the Commission to conduct an exchange of views and arguments with a complainant during the preliminary stage of an investigation into State aid. That reasoning also applies in respect of all the parties concerned and all the Member States, on which the applicable provisions confer no right to be involved in an exchange of views during the preliminary investigation stage preceding the decision to initiate the formal investigation procedure. Only the Commission has the power to order the Member State concerned to provide ... information (Article 2(2), Article 5(1) and (2) and Article 10(2) of the regulation on State aid procedure). It follows that the Member States and the parties concerned cannot require that the Commission hear their views so that they can influence the preliminary assessment which leads the Commission to initiate the formal investigation procedure.145 Accordingly, the Commission was not required to give the applicant or the United Kingdom the opportunity to express its views during the preliminary investigation stage.146 In any event, it is apparent from the documents before the Court that the applicant and the United Kingdom were actually able to state their case during the preliminary procedure: after sending the Commission a number of letters relating to the exempt companies legislation and the qualifying companies legislation, the United Kingdom sent the Commission, on 12 September 2000, a document from the Government of Gibraltar setting out the reasons why the Government of Gibraltar considered that the exempt companies legislation did not fall within the scope of the Community rules on State aid; the applicant was also able to attend a meeting held by the Commission on 19 October 2000, at which the abovementioned document was discussed. Although the applicant's involvement was apparently limited to the exempt companies legislation, there is no reason to suppose that the United Kingdom and the applicant would have been prevented from commenting on the qualifying companies legislation too, if they had thought it appropriate.147 Accordingly, this plea must also be rejected.148 As none of the pleas directed against contested decision II has been upheld, the application in Case T-207/01 must be dismissed. Decision on costs Costs149 Under Article 87(2) of the Rules of Procedure of the Court of First Instance, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. In Case T-195/01, as the Commission has been unsuccessful in its pleadings and the applicant has applied for costs, the Commission must be ordered to pay the costs. In Case T-207/01, as the applicant has been unsuccessful in its pleadings and the Commission has also applied for costs, the applicant must be ordered to pay the costs.150 In Joined Cases T-195/01 R and T-207/01 R, as the applicant has been unsuccessful and the Commission has applied for costs, the applicant must be ordered to pay the costs.151 Contrary to the application submitted by the applicant at the hearing, it is not appropriate to apply Article 87(3) of the Rules of Procedure, since the present case cannot be classified as exceptional and since the costs which the Commission has caused the applicant to incur cannot be regarded as having been caused unreasonably or vexatiously.152 Under Article 87(4) of the Rules of Procedure, the Kingdom of Spain must be ordered to bear its own costs in both cases. Operative part On those grounds,THE COURT OF FIRST INSTANCE (Second Chamber, Extended Composition),hereby:1. In Case T-195/01:(a) Annuls decision SG (2001) D/289755 of the Commission of 11 July 2001 initiating the procedure laid down in Article 88(2) EC in respect of the Gibraltar exempt companies legislation;(b) Orders the Commission to pay the costs incurred by the Government of Gibraltar and to bear its own costs, with the exception of the costs of the interlocutory proceedings in Case T-195/01 R, which shall be paid in their entirety by the Government of Gibraltar;(c) Orders the Kingdom of Spain to bear its own costs;2. In Case T-207/01:(a) Dismisses the application;(b) Orders the Government of Gibraltar to pay the costs incurred by the Commission and to bear its own costs, including those incurred in the interlocutory proceedings in Case T-207/01 R;(c) Orders the Kingdom of Spain to bear its own costs.

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THE COURT OF JUSTICE DECLARES THAT ITALY HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE DIRECTIVE ON URBAN WASTE WATER, BECAUSE DISCHARGES FROM MILAN ARE RELEASED INTO SENSITIVE AREAS, WITHOUT BEING SUBJECTED TO SPECIFIC TREATMENT

| 62000J0396 Judgment of the Court (Sixth Chamber) of 25 April 2002. - Commission of the European Communities v Italian Republic. - Failure by a Member State to fulfil its obligations - Directive 91/271/EEC - Urban waste-water treatment - Urban waste-water of the city of Milan - Discharge in a sensitive area - Relevant catchment area. - Case C-396/00. European Court reports 2002 Page I-03949 Keywords Environment - Treatment of residual urban waste water - Directive 91/271 - Discharge into sensitive area - Concept(Art. 174(2) EC; second subpara. of Article 3(1) and Article 5(2) of Council Directive 91/271) Summary $$The second subparagraph of Article 3(1) of Directive 91/271, concerning the treatment of urban waste water, which deals with discharges of urban waste water into receiving waters considered sensitive areas, and Article 5(2) of the directive, which requires urban waste water entering collecting systems to be subjected to more stringent treatment before discharge into sensitive areas, make no distinction between direct and indirect discharges into sensitive areas.That interpretation is, moreover, supported by the objective of the directive, which is, according to Article 1, the protection of the environment, and by Article 174(2) EC, which provides that Community policy on the environment is to aim at a high level of protection.That objective would be undermined if only waste water which discharges directly into a sensitive area had to be subjected to more stringent treatment than that mentioned in Article 4 of the directive.( see paras 30-32 ) Parties In Case C-396/00,Commission of the European Communities, represented by G. Valero Jordana and R. Amorosi, acting as Agents, with an address for service in Luxembourg,applicant,vItalian Republic, represented by U. Leanza, acting as Agent, and by M. Fiorilli, avvocato dello Stato, with an address for service in Luxembourg,defendant,APPLICATION for a declaration that, by not ensuring that by 31 December 1998 at the latest the discharges of urban waste water of the city of Milan, located within a catchment area draining into areas of the delta of the River Po and the north-west coast of the Adriatic Sea defined by Decree-Law No 152 of the Italian Republic of 11 May 1999, enacting provisions on the prevention of water pollution and implementing Directive 91/271/EEC concerning urban waste-water treatment and Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution caused by nitrates from agricultural sources (GURI of 29 May 1999, ord. suppl.) as sensitive, within the meaning of Article 5 of Council Directive 91/271/EEC of 21 May 1991 concerning urban waste-water treatment (OJ 1991 L 135, p. 40), were subjected to more stringent treatment than secondary treatment or an equivalent treatment prescribed by Article 4 of that directive, the Italian Republic has failed to fulfil its obligations under Article 5(2) of the aforementioned directive, as specified in Article 5(5),THE COURT (Sixth Chamber),composed of: F. Macken (Rapporteur), President of the Chamber, N. Colneric, C. Gulmann, R. Schintgen and V. Skouris, Judges,Advocate General: F.G. Jacobs,Registrar: R. Grass,having regard to the report of the Judge-Rapporteur,after hearing the Opinion of the Advocate General at the sitting on 11 December 2001,gives the followingJudgment Grounds 1 By application lodged with the Registry of the Court on 26 October 2000, the Commission of the European Communities brought an action under Article 226 EC for a declaration that, by not ensuring that by 31 December 1998 at the latest the discharges of urban waste water of the city of Milan, located within a catchment area draining into areas of the delta of the River Po and the north-west coast of the Adriatic Sea defined by Decree-Law No 152 of the Italian Republic of 11 May 1999, enacting provisions on the prevention of water pollution and implementing Directive 91/271/EEC concerning urban waste-water treatment and Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution caused by nitrates from agricultural sources (GURI of 29 May 1999, ord. suppl., hereinafter the Decree) as sensitive, within the meaning of Article 5 of Council Directive 91/271/EEC of 21 May 1991 concerning urban waste-water treatment (OJ 1991 L 135, p. 40, hereinafter the Directive), were subjected to more stringent treatment than secondary treatment or an equivalent treatment prescribed by Article 4 of that directive, the Italian Republic has failed to fulfil its obligations under Article 5(2) of the aforementioned directive, as specified in Article 5(5).Legal background2 According to Article 1 of the directive, it concerns the collection, treatment and discharge of urban waste water and the treatment and discharge of waste water from certain industrial sectors, and has as its objective the protection of the environment from the adverse effects of waste water discharges.3 Article 2 of the directive defines urban waste water as domestic waste water or the mixture of domestic waste water with industrial waste water and/or run-off rain water.4 The second subparagraph of Article 3(1) of the directive provides that, for urban waste water discharging into receiving waters which are considered sensitive areas as defined under Article 5, Member States are to ensure that collection systems are provided at the latest by 31 December 1998 for agglomerations with a population equivalent of more than 10 000. In Article 2, the directive defines one population equivalent (hereinafter p.e.) as the organic biodegradable load having a five-day biochemical oxygen demand (BOD5) of 60 g of oxygen per day.5 The general rules applicable to urban waste water are contained in Article 4 of the directive, which provides in the first indent of Article 4(1):Member States shall ensure that urban waste water entering collecting systems shall before discharge be subjected to secondary treatment or an equivalent treatment as follows:- at the latest by 31 December 2000 for all discharges from agglomerations of more than 15 000 p.e.6 Article 5 of the directive provides:1. For the purposes of paragraph 2, Member States shall by 31 December 1993 identify sensitive areas according to the criteria laid down in Annex II.2. Member States shall ensure that urban waste water entering collecting systems shall before discharge into sensitive areas be subjected to more stringent treatment than that described in Article 4, by 31 December 1998 at the latest for all discharges from agglomerations of more than 10 000 p.e....4. Alternatively, requirements for individual plants set out in paragraphs 2 and 3 above need not apply in sensitive areas where it can be shown that the minimum percentage of reduction of the overall load entering all urban waste water treatment plants in that area is at least 75% for the total phosphorus and at least 75% for total nitrogen.5. Discharges from urban waste water treatment plants which are situated in the relevant catchment areas of sensitive areas and which contribute to the pollution of these areas shall be subjected to paragraphs 2, 3 and 4....7 Article 18(2)(b) and (c) of the Decree identify as sensitive areas the Po delta and the coastal areas of the north-west Adriatic from the mouth of the Adige to Pesaro and the water courses which flow into them over a distance of 10 kilometres from the coast.Pre-litigation procedure8 By letter of 18 November 1997, the Commission asked the Italian Government to provide it with information on progress in the collection and treatment of urban waste water for the agglomeration of Milan.9 On 29 January 1998, the Italian Government replied that there were plans to build three waste water treatment plants intended to cover 95% of discharges. It attached to its reply a note from the Ministry of the Environment and a technical report on the progress of collection and treatment of urban waste water in the Milan area.10 The Commission concluded from that reply that the agglomeration of Milan did not have a waste water treatment plant, so that the waste from a population of roughly 2.7 million was being discharged without prior treatment into the Lambro-Olona river system, a tributary of the Po, which drains into an area of the Adriatic which is very polluted and susceptible to eutrophication.11 Taking the view that the Italian Republic had not adopted any concrete measures, the Commission sent a letter of formal notice dated 30 April 1999 to that Member State, asking it to submit its observations on a possible infringement of its obligations under the directive. It drew particular attention to the fact that the failure to subject to more stringent treatment than the secondary treatment prescribed by Article 4 of the directive the urban waste water of the city of Milan, which discharges into a catchment area of an area which should have been identified, by 31 December 1998, as sensitive within the meaning of Article 5(1) of the directive, constituted a infringement of Article 5(2) of the directive.12 By letters of 9 July and 27 October 1999, the Italian authorities contested that allegation, arguing inter alia that they were not required to subject the waste in question to more stringent treatment in so far as it did not, at least not directly, discharge into an area identified as sensitive by the Decree.13 Not satisfied with that response, the Commission issued a reasoned opinion on 21 January 2000, calling upon the Italian Republic to take the measures necessary to comply with the opinion within two months of notification thereof.14 In its reply of 6 April 2000, the Italian Government maintained its position, but stated that it had asked for a state of emergency to be declared, which would allow for the adoption of a simplified procedure to enable the city of Milan to proceed rapidly with the construction of the three planned treatment plants.15 It was in those circumstances that the Commission brought the present action.Merits of the case16 The Commission is asking the Court to declare that the Italian Republic has failed to fulfil its obligations under Article 5(2) of the directive and to order it to pay the costs.17 Anticipating the arguments of the Italian Government in its defence, the Commission considers that it is contrary to the legislative content of the directive to exclude any treatment of urban waste water originating from a city such as Milan on the sole ground that it does not discharge directly into a sensitive area.18 The Commission argues that it is evident from Article 5(2) and 5(5) of the directive that all urban waste water originating from agglomerations having a p.e. of more than 10 000 and which discharges into sensitive areas was to be made subject, by 31 December 1998 at the latest, to more stringent treatment than that prescribed in Article 4 of the Directive.19 The implication of Article 5 is that if the catchment areas which discharge into sensitive areas receive urban waste water originating from agglomerations of more than 10 000 p.e., this contributes to the pollution of those areas, and they should be equipped with treatment plants whose discharges meet the same requirements as discharges which reach sensitive areas directly.20 Thus, according to the Commission, all urban waste water from agglomerations of more than 10 000 p.e. and which reaches sensitive areas, either directly or by passing through catchment areas, had to be treated using the more stringent treatment method by 31 December 1998 at the latest.21 The Italian Government asks the Court to dismiss the action and to order the Commission to pay the costs.22 Although the Italian Government indicates that it accepts responsibility for the urgency and gravity of the situation and will implement all possible measures to hasten the construction of the treatment facilities for the urban waste water of the city of Milan, it nevertheless points out that the city area is not part of either a sensitive area or a relevant catchment area of a sensitive area.23 It emphasises that the Decree has not defined all of Italy as a sensitive area. Furthermore, since the definition of sensitive areas under the Decree has not been contested by the Commission, it should be accepted as an adequate criterion by which to verify the performance of the obligations under Article 5 of the directive.24 According to the Italian Government, the area of the city of Milan is not in any of the sensitive areas identified directly by the Decree or designated as such by the Lombardy region.25 It maintains that the fact that all of the urban waste water of the city of Milan is discharged into the Lambro-Olona river system, a tributary of the Po, which drains into an area of the Adriatic which is very polluted and susceptible to eutrophication is of no relevance to the alleged infringement.26 It points out that not all of the Po has been identified as a sensitive area, but rather only the delta, more than three hundred kilometres away from Milan. Moreover, no part of the Po has been defined as a sensitive area by the Lombardy region.27 That argument cannot be accepted.28 It is clear from Article 5(2) of the directive that all urban waste water originating from agglomerations having, like Milan, a p.e. of more than 10 000, and which discharges into a sensitive area, had to be subjected to treatment more stringent than that mentioned in Article 4 of the directive, by 31 December 1998 at the latest.29 Contrary to the arguments put forward by the Italian Government, it makes no difference in this regard whether the waste water discharges directly or indirectly into a sensitive area.30 The second subparagraph of Article 3(1) of the directive, which deals with discharges of urban waste water into receiving waters considered sensitive areas, and Article 5(2) of the directive, which requires urban waste water entering collecting systems to be subjected to more stringent treatment before discharge into sensitive areas, make no distinction between direct and indirect discharges into sensitive areas.31 That interpretation is, moreover, supported by the objective of the directive, which is, according to Article 1, the protection of the environment, and by Article 174(2) EC, which provides that Community policy on the environment is to aim at a high level of protection.32 That objective would be undermined if only waste water which discharges directly into a sensitive area had to be subjected to more stringent treatment than that mentioned in Article 4 of the directive.33 With respect to the argument of the Italian Government to the effect that, since the definition of sensitive areas under the Decree has not been contested by the Commission, it should be accepted as an adequate criterion by which to verify the performance of the obligations under Article 5 of the directive, it is sufficient to note that the Commission's complaint does not concern the definition of sensitive areas applied by the Italian authorities, but rather the application of the measures provided for by the directive with respect to discharges of urban waste water in sensitive areas defined by the Italian authorities.34 In the present case, the urban waste water from the city of Milan, which, as is not contested by the Italian Government, is not subjected to more stringent treatment than that mentioned in Article 4 of the directive, passes through the Po basin and ends up in the sensitive areas of the Po delta and the north-west Adriatic coastal areas.35 In those circumstances, the action brought by the Commission must be regarded as well founded.36 Accordingly, by not ensuring that, by 31 December 1998 at the latest, the discharges of urban waste water of the city of Milan located within a relevant catchment area draining into the areas of the delta of the River Po and the north-west coast of the Adriatic Sea, defined by the Decree as sensitive within the meaning of the directive, were subjected to more stringent treatment than secondary treatment or an equivalent treatment prescribed by Article 4 of that directive, the Italian Republic has failed to fulfil its obligations under Article 5(2) of that same directive. Decision on costs Costs37 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the Italian Republic has been unsuccessful, the latter must be ordered to pay the costs. Operative part On those grounds,THE COURT (Sixth Chamber),hereby:1. Declares that, by not ensuring that, by 31 December 1998 at the latest, the discharges of urban waste water of the city of Milan, within a relevant catchment area draining into the areas of the delta of the River Po and the north-west coast of the Adriatic Sea defined by Decree-Law No 152 of the Italian Republic of 11 May 1999, enacting provisions on the prevention of water pollution and implementing Directive 91/271/EEC concerning urban waste-water treatment and Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution caused by nitrates from agricultural sources as sensitive, within the meaning of Article 5 of Council Directive 91/271/EEC of 21 May 1991 concerning urban waste-water treatment, were subjected to more stringent treatment than secondary treatment or an equivalent treatment prescribed by Article 4 of that directive, the Italian Republic has failed to fulfil its obligations under Article 5(2) of that same directive;2. Orders the Italian Republic to pay the costs.

d81ac-658b26a-428c

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ADVOCATE GENERAL ALBER GIVES HIS VIEW ON THE SCOPE OF THE PROTECTION CONFERRED BY THE DESIGNATIONS OF ORIGIN PROSCIUTTO DI PARMA AND GRANA PADANO

«(Protected designations of origin – Regulation (EEC) No 2081/92 – Regulation (EEC) No 1107/96 – Grana Padano freshly grated – Specification – Convention between two Member States – Condition that the cheese is grated and packaged in the region of production – Articles 29 EC and 30 EC – Justification – Whether the condition may be relied on against third parties – Legal certainty – Publicity)» Summary of the Judgment 1.. Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Convention between two Member States applying the condition that cheese covered by a designation of origin is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin (Arts 29 EC and 30 EC) Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Convention between two Member States applying the condition that cheese covered by a designation of origin is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin 2.. Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Use of a protected designation of origin subject to the condition that operations such as grating and packaging the product take place in the region of production – Whether permissible (Council Regulation No 2081/92) Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Use of a protected designation of origin subject to the condition that operations such as grating and packaging the product take place in the region of production – Whether permissible 3.. Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Use of the protected designation of origin Grana Padano subject, under a Community measure, to the condition that the product is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin – Whether condition may be relied on against economic operators – Not in the absence of adequate publicity – Exception (Arts 29 EC and 30 EC; Commission Regulation No 1107/96) Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Use of the protected designation of origin Grana Padano subject, under a Community measure, to the condition that the product is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin – Whether condition may be relied on against economic operators – Not in the absence of adequate publicity – Exception JUDGMENT OF THE COURT20 May 2003 (1) ((Protected designations of origin – Regulation (EEC) No 2081/92 – Regulation (EEC) No 1107/96 – Grana Padano freshly grated – Specification – Convention between two Member States – Condition that the cheese is grated and packaged in the region of production – Articles 29 EC and 30 EC – Justification – Whether the condition may be relied on against third parties – Legal certainty – Publicity))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Ravil SARL, by A. Lyon-Caen, F. Fabiani and F. Thiriez, avocats, ─ Bellon import SARL and Biraghi SpA, by M. Baffert and A. Baurand, avocats, and F. Giuggia, avvocato, ─ the French Government, by G. de Bergues and L. Bernheim, acting as Agents, ─ the Spanish Government, by R. Silva de Lapuerta, acting as Agent, ─ the Italian Government, by U. Leanza, acting as Agent, assisted by O. Fiumara, avvocato dello Stato, ─ the Commission of the European Communities, by H. van Lier and A.-M. Rouchaud, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Bellon import SARL and Biraghi SpA, the French Government, the Italian Government and the Commission at the hearing on 19 February 2002, after hearing the Opinion of the Advocate General at the sitting on 25 April 2002, gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulmann EdwardJann Skouris MackenColneric von BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: French. Language of the case: French.

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A PRODUCER'S LIABILITY FOR DEFECTIVE PRODUCTS MUST BE IDENTICAL THROUGHOUT THE MEMBER STATES

| 62000J0052 Judgment of the Court (Fifth Chamber) of 25 April 2002. - Commission of the European Communities v French Republic. - Failure by a Member State to fulfil its obligations - Directive 85/374/EEC - Product liability - Incorrect transposition. - Case C-52/00. European Court reports 2002 Page I-03827 Keywords 1. Approximation of laws - Measures for the establishment and functioning of the internal market - Legal basis - Article 100 of the Treaty (now Article 94 EC) - Possibility for the Member States to maintain or establish provisions departing from Community harmonisation measures - No such possibility(EEC Treaty, Art. 100 (amended to Art. 100 of the EC Treaty, now Art. 94 EC); EC Treaty, Art. 100a (now Art. 95 EC))2. Approximation of laws - Measures for the establishment and functioning of the internal market - Directives already adopted when Article 153 EC entered into force - Possibility for the Member States to maintain or establish more stringent consumer protection measures on the basis of Article 153 EC - No effect(Arts 94 EC, 95 EC and 153 EC)3. Approximation of laws - Liability for defective products - Directive 85/374 - Margin of discretion of the Member States - Degree of harmonisation achieved by the Directive(Council Directive 85/374)4. Approximation of laws - Liability for defective products - Directive 85/374 - Possibility of retaining a general system of product liability different from that provided for in the Directive - No such possibility(Council Directive 85/374, Art. 13)5. Action for failure to fulfil obligations - Disregard of obligations under a directive - Pleas in defence - Plea questioning the lawfulness of the directive - Not admissible(Arts 226 EC, 227 EC, 230 EC and 232 EC)6. Approximation of laws - Liability for defective products - Directive 85/374 - Scope - Different system of liability applying to the producers and victims of defective products - Whether justifiable(Council Directive 85/374, Art. 9(b))7. Action for failure to fulfil obligations - Subject-matter of the dispute - Delimited in the course of the pre-litigation procedure - Whether the subject-matter may subsequently be narrowed - Permissible(Art. 226 EC) Summary 1. Unlike Article 100a of the EC Treaty (now, after amendment, Article 95 EC), Article 100 of the EEC Treaty (amended to Article 100 of the EC Treaty, now Article 94 EC) provides no possibility for the Member States to maintain or establish provisions departing from Community harmonising measures.( see para. 14 )2. Article 153 EC is worded in the form of an instruction addressed to the Community concerning its future policy and cannot permit the Member States, owing to the direct risk that would pose for the acquis communautaire, autonomously to adopt measures contrary to the Community law contained in the directives already adopted at the time of entry into force of that law. In fact, the competence conferred in that respect on the Member States by Article 153(5) EC concerns only the measures mentioned at paragraph 3(b) of that article. That competence does not extend to the measures referred to in paragraph 3(a) of Article 153 EC, that is to say the measures adopted pursuant to Article 95 EC in the context of attainment of the internal market with which in that respect the measures adopted under Article 94 EC must be equated.( see para. 15 )3. The margin of discretion available to the Member States in order to make provision for product liability is entirely determined by Directive 85/374 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products and must be inferred from its wording, purpose and structure. The fact that the Directive provides for certain derogations or refers in certain cases to national law does not mean that in regard to the matters which it regulates harmonisation is not complete. It follows that Directive 85/374 seeks to achieve, in regard to those matters, complete harmonisation of the laws, regulations and administrative provisions of the Member States.( see paras 16, 19, 24 )4. Article 13 of Council Directive 85/374 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products cannot be interpreted as giving the Member States the possibility of maintaining a general system of product liability different from that provided for in the Directive.The reference in that provision to the rights which an injured person may rely on under the rules concerning contractual or non-contractual liability must be interpreted as meaning that the system of rules put in place by the Directive does not preclude the application of other systems of contractual or non-contractual liability based on other grounds, such as fault or a warranty in respect of latent defects. Likewise the reference in the aforementioned article to the rights which an injured person may rely on under a special liability system existing at the time when the Directive was notified must be construed as referring to a specific scheme limited to a given sector of production.( see paras 21-23 )5. The system of remedies set up by the Treaty distinguishes between the remedies provided for in Articles 226 EC and 227 EC, whereby a declaration that a Member State has failed to fulfil its obligations may be sought, and those provided for in Articles 230 EC and 232 EC, which seek judicial review of the lawfulness of measures adopted by the Community institutions or of the institutions' failure to adopt measures. Those remedies serve different purposes and are subject to different rules. In the absence of a provision of the Treaty expressly permitting it to do so, a Member State cannot, therefore, properly plead the unlawfulness of a decision addressed to it as a defence in an action for a declaration that it has failed to fulfil its obligations arising out of its failure to implement that decision.( see para. 28 )6. The limits set by the Community legislature to the scope of Council Directive 85/374 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products are the result of a complex balancing of different interests. As is apparent from the first and ninth recitals in the preamble to the Directive, those interests include guaranteeing that competition will not be distorted, facilitating trade within the common market, consumer protection and ensuring the sound administration of justice.The consequence of the choice made by the Community legislature is that, in order to avoid an excessive number of disputes, in the event of minor material damage the victims of defective products cannot rely on the rules of liability laid down in the Directive but must bring an action under the ordinary law of contractual or non-contractual liability.In those circumstances the threshold provided for in Article 9(b) of the Directive cannot be regarded as affecting victims' rights of access to the courts.Similarly, the fact that different systems of liability apply to the producers and victims of defective products does not constitute an infringement of the principle of equal treatment where the differentiation dependent on the nature and amount of the damage suffered is objectively justified.( see paras 29-32 )7. Although under the Court's case-law the complaints in the application must be identical to those in the letter of formal notice and in the reasoned opinion, that requirement cannot be carried so far as to mean that in every case the statement of complaints must be exactly the same, where the subject-matter of the proceedings has not been extended or altered.( see para. 44 ) Parties In Case C-52/00,Commission of the European Communities, represented by M. Patakia and B. Mongin, acting as Agents, with an address for service in Luxembourg,applicant,vFrench Republic, represented initially by K. Rispal-Bellanger and R. Loosli-Surrans, and subsequently by the latter and J-F. Dobelle, acting as Agents,defendant,APPLICATION for a declaration that:- by including damage of less than EUR 500 in Article 3 of Law No 98-389 of 19 May 1998 on liability for defective products (JORF of 21 May 1998, p. 7744);- by providing in Article 8 thereof that the supplier of a defective product is to be liable in all cases and on the same basis as the producer, and- by providing in Article 13 thereof that the producer must prove that he has taken appropriate steps to avert the consequences of a defective product in order to be able to rely on the grounds of exemption from liability provided for in Article 7(d) and (e) of Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products (OJ 1985 L 210, p. 29),the French Republic has failed to fulfil its obligations under Articles 9, 3(3) and 7 of the aforementioned directive,THE COURT (Fifth Chamber),composed of: P. Jann (Rapporteur), President of the Chamber, S. von Bahr and C.W.A. Timmermans, Judges,Advocate General: L.A. Geelhoed,,Registrar: H. von Holstein, Deputy Registrar,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 3 May 2001,after hearing the Opinion of the Advocate General at the sitting on 18 September 2001,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 17 February 2000, the Commission of the European Communities brought an action under Article 226 EC for a declaration that:- by including damage of less than EUR 500 in Article 3 of Law No 98-389 of 19 May 1998 on liability for defective products (JORF of 21 May 1998, p. 7744);- by providing in Article 8 thereof that the supplier of a defective product is to be liable in all cases and on the same basis as the producer, and- by providing in Article 13 thereof that the manufacturer must prove that he has taken appropriate steps to avert the consequences of a defective product in order to be able to rely on the grounds of exemption from liability provided for in Article 7(d) and (e) of Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products (OJ 1985 L 210, p. 29),the French Republic has failed to fulfil its obligations under Articles 9, 3(3) and 7 of the aforementioned directive.Legal frameworkCommunity legislation2 The Directive seeks to approximate the laws of the Member States concerning the liability of producers for damage caused by defective products. According to the first recital in the preamble thereto, approximation is necessary because legislative divergences may distort competition and affect the movement of goods within the common market and entail a differing degree of protection of the consumer against damage caused by a defective product to his health or property.3 Article 1 of the Directive provides that the producer shall be liable for damage caused by a defect in his product.4 Article 3(3) of the Directive is worded as follows:Where the producer of the product cannot be identified, each supplier of the product shall be treated as its producer unless he informs the injured person, within a reasonable time, of the identity of the producer or of the person who supplied him with the product. The same shall apply, in the case of an imported product, if this product does not indicate the identity of the importer referred to in paragraph 2, even if the name of the producer is indicated.5 Under Article 7 of the Directive the producer is not liable under the Directive if he proves:...(d) that the defect is due to compliance of the product with mandatory regulations issued by the public authorities; or(e) that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of the defect to be discovered;...6 The first paragraph of Article 9 defines damage for the purposes of Article 1 as...(b) damage to, or destruction of, any item of property other than the defective product itself, with a lower threshold of [EUR] 500, provided that the item of property:(i) is of a type ordinarily intended for private use or consumption, and(ii) was used by the injured person mainly for his own private use or consumption.7 Article 13 of the Directive provides:This Directive shall not affect any rights which an injured person may have according to the rules of the law of contractual or non-contractual liability or a special liability system existing at the moment when this Directive is notified.8 Article 15(1) of the Directive provides:Each Member State may:...(b) by way of derogation from Article 7(e), maintain or, subject to the procedure set out in paragraph 2 of this article, provide in this legislation that the producer shall be liable even if he proves that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of a defect to be discovered.9 Under Article 19(1) of the Directive, the Member States were to bring into force the laws, regulations and administrative provisions necessary to comply with the Directive by 30 July 1988 at the latest.National legislation10 Law No 98-389 inserted the following provisions into the French Civil Code (hereinafter the Civil Code):Article 1386-1:The producer shall be liable for the damage caused by a defect in his product, whether or not he is bound to the victim by contract.Article 1386-2:The provisions of the ... chapter (on liability for defective products) apply to compensation for damage resulting from injury to persons or property other than the defective product itself.Article 1386-7, first paragraph:The vendor, hirer, except a lessor under a hire-purchase agreement or a hirer assimilable thereto, or any other supplier in the course of business shall be liable for safety defects in their products on the same basis as the producer.Article 1386-11, first paragraph:The producer shall be automatically liable unless he proves:...4. that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of the defect to be discovered;5. or that the defect is due to compliance of the product with mandatory regulations.Article 1386-12, second paragraph:The producer cannot invoke the grounds of exemption from liability under subparagraphs 4 and 5 of Article 1386-11 if, in the event of a defect manifesting itself within a period of ten years after the product was put into circulation, he has failed to take appropriate measures to avert the harmful consequences thereof.Pre-litigation procedure11 Taking the view that the Directive had not been correctly transposed into French law within the period prescribed, the Commission initiated proceedings for failure to fulfil obligations. After placing the French Republic on notice to submit its observations, the Commission issued a reasoned opinion on 6 August 1999 requesting that Member State to take the measures necessary to comply with the opinion within two months of its notification. Since the Commission deemed the reply by the French Republic to be unsatisfactory, it brought this action.Substance12 The Commission puts forward three pleas, which raise the initial question whether in regard to the matters for which the Directive makes provision the result sought by it is complete, or merely a minimum, harmonisation of the laws, regulations and administrative provisions of the Member States.The degree of harmonisation achieved by the Directive13 In the French Government's view, the Directive must be interpreted in the light of the growing importance of consumer protection within the Community, as reflected in the latest version of Article 153 EC. The wording of Article 13 of the Directive, which uses the term rights, shows that it does not seek to prevent achievement of a higher national level of protection. That analysis is also borne out by the fact that the Directive itself enables the Member States to depart in certain respects from the rules which it lays down.14 In that connection it should be pointed out that the Directive was adopted by the Council by unanimity under Article 100 of the EEC Treaty (amended to Article 100 of the EC Treaty, now Article 94 EC) concerning the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the common market. Unlike Article 100a of the EC Treaty (now, after amendment, Article 95 EC), which was inserted into the Treaty after the adoption of the Directive and allows for certain derogations, that legal basis provides no possibility for the Member States to maintain or establish provisions departing from Community harmonising measures.15 Nor can Article 153 EC, likewise inserted into the Treaty after the adoption of the Directive, be relied on in order to justify interpreting the directive as seeking a minimum harmonisation of the laws of the Member States which could not preclude one of them from retaining or adopting protective measures stricter than the Community measures. In fact, the competence conferred in that respect on the Member States by Article 153(5) EC concerns only the measures mentioned at paragraph 3(b) of that article, that is to say measures supporting, supplementing and monitoring the policy pursued by the Member States. That competence does not extend to the measures referred to in paragraph 3(a) of Article 153 EC, that is to say the measures adopted pursuant to Article 95 EC in the context of attainment of the internal market with which in that respect the measures adopted under Article 94 EC must be equated. Furthermore, as the Advocate General noted at point 43 of his Opinion, Article 153 EC is worded in the form of an instruction addressed to the Community concerning its future policy and cannot permit the Member States, owing to the direct risk that would pose for the acquis communautaire, autonomously to adopt measures contrary to the Community law contained in the directives already adopted at the time of entry into force of that law.16 Accordingly, the margin of discretion available to the Member States in order to make provision for product liability is entirely determined by the Directive itself and must be inferred from its wording, purpose and structure.17 In that connection it should be pointed out first that, as is clear from the first recital thereto, the purpose of the Directive in establishing a harmonised system of civil liability on the part of producers in respect of damage caused by defective products is to ensure undistorted competition between traders, to facilitate the free movement of goods and to avoid differences in levels of consumer protection.18 Secondly, it is important to note that unlike, for example, Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29), the Directive contains no provision expressly authorising the Member States to adopt or to maintain more stringent provisions in matters in respect of which it makes provision, in order to secure a higher level of consumer protection.19 Thirdly, the fact that the Directive provides for certain derogations or refers in certain cases to national law does not mean that in regard to the matters which it regulates harmonisation is not complete.20 Although Articles 15(1)(a) and (b) and 16 of the Directive permit the Member States to depart from the rules laid down therein, the possibility of derogation applies only in regard to the matters exhaustively specified and it is narrowly defined. Moreover, it is subject inter alia to conditions as to assessment with a view to further harmonisation, to which the penultimate recital in the preamble expressly refers. An illustration of progressive harmonisation of that kind is afforded by Directive 1999/34/EC of the European Parliament and of the Council of 10 May 1999 amending Council Directive 85/374/EEC (OJ 1999 L 141, p. 20), which by bringing agricultural products within the scope of the Directive removes the option afforded by Article 15(1)(a) thereof.21 In those circumstances Article 13 of the Directive cannot be interpreted as giving the Member States the possibility of maintaining a general system of product liability different from that provided for in the Directive.22 The reference in Article 13 of the Directive to the rights which an injured person may rely on under the rules of the law of contractual or non-contractual liability must be interpreted as meaning that the system of rules put in place by the Directive, which in Article 4 enables the victim to seek compensation where he proves damage, the defect in the product and the causal link between that defect and the damage, does not preclude the application of other systems of contractual or non-contractual liability based on other grounds, such as fault or a warranty in respect of latent defects.23 Likewise the reference in Article 13 to the rights which an injured person may rely on under a special liability system existing at the time when the Directive was notified must be construed, as is clear from the third clause of the 13th recital thereto, as referring to a specific scheme limited to a given sector of production.24 It follows that, contrary to the arguments put forward by the French Republic, the Directive seeks to achieve, in the matters regulated by it, complete harmonisation of the laws, regulations and administrative provisions of the Member States (see the judgments of today in Case C-154/00 Commission v Greece [2002] ECR I-3879, paragraphs 10 to 20, and Case C-183/00 González Sánchez [2002] ECR I-3901, paragraphs 23 to 32).25 The Commission's pleas must be examined in the light of those considerations.First plea: incorrect transposition of Article 9(b) of the Directive26 The Commission points out that, unlike Article 9(b) of the Directive, Article 1386-2 of the Civil Code covers all damage to private and public property, with no lower threshold of EUR 500.27 The French Government does not deny that discrepancy but relies on four arguments in order to justify it. First, by depriving the victim of a right of action, the lower threshold infringes the fundamental right of access to the courts guaranteed by Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms of 4 November 1950. Secondly, the threshold is also contrary to the principle of equal treatment inasmuch as it creates unfair inequalities between both producers and consumers. Thirdly, it has the same effect as a rule granting total exemption from tortious liability, which under French law is contrary to public policy. Fourthly, those criticisms are borne out by the fact that in its Green Paper of 28 July 1999 on liability for defective products (COM (1999) 396 final) the Commission proposes that the threshold be abolished.28 As regards the first two arguments, which question the legality of the threshold provided for in the Directive, it should be borne in mind in the first place that the system of remedies set up by the Treaty distinguishes between the remedies provided for in Articles 226 EC and 227 EC, whereby a declaration that a Member State has failed to fulfil its obligations may be sought, and those provided for in Articles 230 EC and 232 EC, which seek judicial review of the lawfulness of measures adopted by the Community institutions or of the institutions' failure to adopt measures. Those remedies serve different purposes and are subject to different rules. In the absence of a provision of the Treaty expressly permitting it to do so, a Member State cannot, therefore, properly plead the unlawfulness of a decision addressed to it as a defence in an action for a declaration that it has failed to fulfil its obligations arising out of its failure to implement that decision. Nor can it plead the unlawfulness of a directive which the Commission alleges it to have infringed (Case C-74/91 Commission v Germany [1992] ECR I-5437, paragraph 10).29 Moreover, as the Advocate General noted at points 66 to 68 of his Opinion, the limits set by the Community legislature to the scope of the Directive are the result of a complex balancing of different interests. As is apparent from the first and ninth recitals in the preamble to the Directive, those interests include guaranteeing that competition will not be distorted, facilitating trade within the common market, consumer protection and ensuring the sound administration of justice.30 The consequence of the choice made by the Community legislature is that, in order to avoid an excessive number of disputes, in the event of minor material damage the victims of defective products cannot rely on the rules of liability laid down in the Directive but must bring an action under the ordinary law of contractual or non-contractual liability.31 In those circumstances the threshold provided for in Article 9(b) of the Directive cannot be regarded as affecting victims' rights of access to the courts (Commission v Greece, cited above, paragraph 31).32 Similarly, the fact that different systems of liability apply to the producers and victims of defective products does not constitute an infringement of the principle of equal treatment where the differentiation dependent on the nature and amount of the damage suffered is objectively justified (see in particular Case 8/57 Aciéries Belges v High Authority [1958] ECR 245, at p. 256, and Commission v Greece, cited above, paragraph 32).33 As regards the third argument raised by the French Government, alleging that the threshold provided for in Article 9(b) of the Directive is incompatible with French public policy, suffice it to state that under the Court's settled case-law recourse to provisions of domestic law to restrict the scope of the provisions of Community law would have the effect of undermining the unity and efficacy of that law and cannot consequently be accepted (see, inter alia, Case C-473/93 Commission v Luxembourg [1996] ECR I-3207, paragraph 38, and Commission v Greece, cited above, paragraph 24).34 With regard to the reference by the French Government to the Commission's Green Paper, suffice it also to recall that the fact that the Commission, with a view to a possible amendment to the Directive, decided to consult the interested parties as to the expediency of abolishing the threshold provided for in Article 9(b) of the Directive cannot dispense the Member States from the obligation to comply with the provision of Community law currently in force (see in particular Case C-236/88 Commission v France [1990] ECR I-3163, paragraph 19, and Commission v Greece, cited above, paragraph 26).35 It follows that the Commission's first plea is well founded.Second plea: incorrect transposition of Article 3(3) of the Directive36 The Commission maintains that, unlike Article 3(3) of the Directive, which renders the supplier liable only on an ancillary basis, where the producer is unknown, Article 1386-7 of the Civil Code equates the supplier with the producer.37 The French Government does not deny this discrepancy. It claims that it results from a rule of national procedure which, as such, did not come within the scope of Community competence on the date on which the Directive was adopted and which was therefore not capable of being altered by the Community legislation. Moreover, Article 1386-7 of the Civil Code achieves the result sought by the Directive since the supplier sued by the victim may join the producer as a party, who will then be liable to pay the compensation, precisely as intended by the Directive.38 Inasmuch as the French Government challenges the Council's competence to adopt Article 3(3) of the Directive, it should be noted, first of all, that, as has been pointed out at paragraph 28 hereof, a Member State cannot rely, as a defence to an action for failure to fulfil obligations, on the unlawfulness of the directive which the Commission alleges it to have infringed.39 Moreover, that argument cannot be upheld. Since the Community legislature had competence to harmonise the laws of the Member States in the field of product liability, it was also competent to determine the person who was to bear that liability and the conditions under which that person was to be sued.40 As to the alleged equivalence of result as between the system of liability provided for in the Directive and that established by Law No 98-389, it should be pointed out that the possibility afforded to the supplier under that law of joining the producer has the effect of multiplying proceedings, a result which the direct action afforded to the victim against the producer under the conditions provided for in Article 3 of the Directive is specifically intended to avoid.41 It follows that the Commission's second plea must be upheld.Third plea: incorrect transposition of Article 7 of the Directive42 The Commission claims that, unlike Article 7(d) and (e) of the Directive, which provides for grounds on which the producer may be exempted from liability which are unconditional, the first paragraph of Article 1386-11 and the second paragraph of Article 1386-12 of the Civil Code make application of those grounds of exemption subject to observance by the producer of an obligation to monitor the product.43 As a preliminary issue the French Government contests the admissibility of two arguments raised by the Commission in support of the third plea on the ground that they were not included in the reasoned opinion.44 In that connection it should be observed that, although under the Court's case-law the complaints in the application must be identical to those in the letter of formal notice and in the reasoned opinion, that requirement cannot be carried so far as to mean that in every case the statement of complaints must be exactly the same, where the subject-matter of the proceedings has not been extended or altered (Case C-365/97 Commission v Italy [1999] ECR I-7773, paragraph 25). In the present case that condition is satisfied and accordingly the plea of inadmissibility raised by the French Government cannot be upheld.45 As to the substance, the French Government points out that the third plea relates to a point which in its Green Paper the Commission itself has envisaged amending. It states that Article 15 of the Directive provides the Member States with an option concerning the derogation in connection with the state of scientific and technical knowledge at the time when the product is put into circulation, since it is possible for that derogation to be excluded. It would therefore be logical for such an exclusion to be made subject to a condition such as the requirement to monitor products, which is warranted by the obligations imposed on the Member States by Council Directive 92/59/EEC of 29 June 1992 on general product safety (OJ 1992 L 228, p. 24).46 With regard to the reference to the Commission's Green Paper it is sufficient to refer to paragraph 34 of this judgment.47 In regard to the arguments based on Article 15 of the Directive, it should be noted that whilst that provision enables the Member States to remove the exemption from liability provided for in Article 7(e) thereof, it does not authorise them to alter the conditions under which that exemption is applied. Nor does Article 15 authorise them to cancel or amend the rules governing derogations provided for in Article 7(d). That interpretation is not negated by Directive 92/59, which does not concern the producer's liability for products which he puts into circulation.48 Accordingly, the Commission's third plea is also well founded.49 In those circumstances it must be held that:- by including damage of less than EUR 500 in Article 1386-2 of the Civil Code;- by providing in the first paragraph of Article 1386-7 thereof that the supplier of a defective product is to be liable in all cases and on the same basis as the producer, and- by providing in the second paragraph of Article 1386-12 thereof that the producer must prove that he has taken appropriate steps to avert the consequences of a defective product in order to be able to rely on the grounds of exemption from liability provided for in Article 7(d) and (e) of the Directive,the French Republic has failed to fulfil its obligations under Articles 9(b), 3(3) and 7 of the aforementioned directive. Decision on costs Costs50 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for. Since the Commission applied for costs against the French Republic and the latter has been unsuccessful, the French Republic must be ordered to pay the costs. Operative part On those grounds,THE COURT (Fifth Chamber)hereby:1. Declares that- by including damage of less than EUR 500 in Article 1386-2 of the French Civil Code;- by providing in the first paragraph of Article 1386-7 thereof that the supplier of a defective product is to be liable in all cases and on the same basis as the producer, and- by providing in the second paragraph of Article 1386-12 thereof that the producer must prove that he has taken appropriate steps to avert the consequences of a defective product in order to be able to rely on the grounds of exemption from liability provided for in Article 7(d) and (e) of Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products,the French Republic has failed to fulfil its obligations under Articles 9(b), 3(3) and 7 of the aforementioned directive;2. Orders the French Republic to pay the costs.

3c6bc-38a2c03-45fe

EN

ADVOCATE GENERAL LÉGER CONSIDERS THAT, IN THIS CASE, THE COURT DOES NOT HAVE JURISDICTION TO EXAMINE THE COMPATIBILITY OF THE LUXEMBOURG LEGISLATION ON BANKING SECRECY

«(Freedom to provide services – Banking activities – Employee of a credit institution established in a Member State and canvassing for clients in another Member State – National legislation on banking secrecy – Refusal to answer questions and to give evidence in a judicial investigation)» Summary of the Judgment Preliminary rulings – Jurisdiction of the Court – Limits – Questions submitted in a context precluding a useful answer – Question based on a hypothetical interpretation of a national law other than the national court's own law – Question inadmissible unless there is a specific statement of reasons(Art. 234 EC)Preliminary rulings – Jurisdiction of the Court – Limits – Questions submitted in a context precluding a useful answer – Question based on a hypothetical interpretation of a national law other than the national court's own law – Question inadmissible unless there is a specific statement of reasonsJUDGMENT OF THE COURT10 December 2002 (1) ((Freedom to provide services – Banking activities – Employee of a credit institution established in a Member State and canvassing for clients in another Member State – National legislation on banking secrecy – Refusal to answer questions and to give evidence in a judicial investigation))THE COURT,,after considering the written observations submitted on behalf of: ─ Mr der Weduwe, by J. Mertens, advocaat, ─ the Belgian Government, by A. Snoecx, acting as Agent, and M. van der Woude, P. Callens and T. Chellingsworth, advocaten, ─ the Commission of the European Communities, by C. Tufvesson, and T. van Rijn, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Mr der Weduwe, represented by B. Poelemans, advocaat; of the Belgian Government, represented by M. van der Woude and T. Chellingsworth; of the Luxembourg Government, represented by N. Mackel, acting as Agent, and by P. Kinsch, avocat, and of the Commission, represented by C. Tufvesson and T. van Rijn, at the hearing on 29 January 2002, after hearing the Opinion of the Advocate General at the sitting on 23 April 2002,gives the followingLegal backgroundOn those grounds, THE COURT,PuissochetWathelet Schintgen TimmermansGulmann Edward La PergolaJann Skouris MackenColnericvon BahrCunha RodriguesR. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: Dutch. Language of the case: Dutch.

92abf-bd5a7c1-4227

EN

A CHANGE BY THE MEMBER STATE OF THE CONDITIONS IMPOSED WHEN STATE AID WAS APPROVED ENABLES THE COMMISSION TO REGARD IT AS UNAPPROVED AID

| 62000J0036 Judgment of the Court (Sixth Chamber) of 21 March 2002. - Kingdom of Spain v Commission of the European Communities. - State aid - Regulation (EC) No 1013/97 - Aid to publicly-owned shipyards - Declaration of compatibility of aid to the publicly-owned shipyards in Spain - Failure to comply with conditions - Recovery. - Case C-36/00. European Court reports 2002 Page I-03243 Keywords 1. State aid - General aid scheme approved by the Commission - Individual aid purporting to be covered by the approval - Scrutiny by the Commission - Failure to comply with the conditions of the decision approving the scheme - Application of the scheme of new aid(Art. 88(1) to (3) EC)2. State aid - Prohibition - Derogations - Criteria governing derogations - Incompatibility with the common market of any aid not complying with those criteria - Role of the Commission - Ensuring compliance with the criteria for derogation(Art. 87(1) and (3)(e) EC) Summary 1. The rules of special procedure, laid down by Article 88 EC, which require the Commission to keep State aid under constant review vary according to whether the aid at issue constitutes existing aid or new aid. While the former is subject to Article 88(1) and (2) EC, the latter is governed by Article 88(2) and (3) EC.Where the Commission finds that aid alleged to have been granted in pursuance of a previously authorised scheme of aid does not comply with the conditions laid down in its decision approving the scheme and is therefore not covered by it, that aid must be regarded as new aid.If, when aid is granted in pursuance of a previously authorised scheme, the Member State does not comply with the conditions to which the Commission made its decision approving the scheme subject, since the aid paid is new aid, the Commission is obliged to institute the special procedure provided for by the first subparagraph of Article 88(2) EC.( see paras 22-25 )2. Where State aid is covered by derogating rules adopted under Article 87(3)(e) EC, that aid is, as a matter of principle, at the outset incompatible with the common market and is considered to be compatible with the common market only on condition that it complies with the criteria for derogation contained in the decision approving that system.Accordingly, where the Commission finds that aid authorised under that scheme is no longer covered by it, it is not required to reassess its compatibility in relation to the criteria set out in Article 87(1) EC or to determine whether it affects trade between Member States and distorts competition.( see paras 47-48 ) Parties In Case C-36/00,Kingdom of Spain, represented by S. Ortiz Vaamonde, acting as Agent, with an address for service in Luxembourg,applicant,vCommission of the European Communities, represented by J. Guerra Fernández and K.-D. Borchardt, acting as Agents, with an address for service in Luxembourg,defendant,APPLICATION for annulment of Commission Decision 2000/131/EC of 26 October 1999 on the State aid implemented by Spain in favour of the publicly-owned shipyards (OJ 2000 L 37, p. 22),THE COURT (Sixth Chamber),composed of: F. Macken (Rapporteur), President of the Chamber, C. Gulmann, R. Schintgen, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: L.A. Geelhoed,Registrar: D. Louterman-Hubeau, Head of Division,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 31 May 2001,after hearing the Opinion of the Advocate General at the sitting on 11 October 2001,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 10 February 2000, the Kingdom of Spain applied under the first paragraph of Article 230 EC for annulment of Commission Decision 2000/131/EC of 26 October 1999 on the State aid implemented by Spain in favour of the publicly-owned shipyards (OJ 2000 L 37, p. 22; the contested decision).The relevant legislation2 Council Directive 90/684/EEC of 21 December 1990 on aid to shipbuilding (OJ 1990 L 380, p. 27), the application of which was extended by Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding (OJ 1995 L 332, p. 1), lays down specific rules applicable to aid to that sector, which constitute an exception to the general prohibition set out in Article 87(1) EC.3 By Council Regulation (EC) No 1013/97 of 2 June 1997 on aid to certain shipyards under restructuring (OJ 1997 L 148, p. 1), the Council approved aid for the restructuring of shipyards in various Member States, including the publicly-owned yards in Spain.4 Article 1 of Regulation No 1013/97 states:1. Notwithstanding the provisions of Regulation (EC) No 3094/95, for the yards under restructuring specified in paragraphs 2, 3 and 4 of this article the Commission may declare additional operating aid compatible with the common market for the specific purposes and up to the amounts specified....4. Aid for the restructuring of the publicly-owned yards in Spain may be considered compatible with the common market up to an amount of [ESP] 135 028 million in the following forms:- interest payments of up to [ESP] 62 028 million in 1988 to 1994 on loans taken on to cover unpaid previously approved aid,- tax credits in the period 1995 to 1999 of up to [ESP] 58 000 million,- capital injection in 1997 of up to [ESP] 15 000 million.All other provisions of Directive 90/684/EEC shall apply to these yards.The Spanish Government agrees to carry out, according to a timetable approved by the Commission and in any case before 31 December 1997, a genuine and irreversible reduction of capacity of 30 000 cgrt [compensated gross registered tonnes].5 In accordance with Regulation No 1013/97, on 6 August 1997 the Commission adopted a decision authorising, inter alia, aid to the publicly-owned shipyards in Spain (the authorising decision).6 Following an exchange of correspondence between the Spanish authorities and the Commission and the initiation by the Commission of the inquiry procedure under Article 93(2) of the EC Treaty (now Article 88(2) EC), on 26 October 1999 the Commission adopted the contested decision.The factual framework7 The factual framework, as outlined in paragraphs 6 to 9 of the grounds of the contested decision, is as follows:(6) Under its August 1997 decision in State aid Case C 56/95 [OJ 1997 C 354, p. 2], the Commission [approved] State aids totalling a maximum of ESP 229.008 billion in support of the restructuring of the publicly-owned yards in Spain. The package of approved aids included "special" tax credits of up to ESP 58 billion in the period 1995 to 1999.(7) The reason for the inclusion of these special tax credits was as follows. When the restructuring plan was originally drawn up, the yards were still part of the INI group (Instituto Nacional de Industria) and able to reduce by 28% after-tax losses through INI, in accordance with generally applicable Spanish national legislation, offsetting losses against profits elsewhere in the group. The financial projections under the plan assumed that such tax credits would continue to be available despite the fact that as from 1 August 1995 the yards had formed part of the loss-making State holding company Agencia Industrial del Estado (AIE). Legislation was accordingly passed (Law 13/96 of 30 December [1996, BOE No 315 of 31 December 1996, p. 38974]) allowing companies in such a position to continue, up until 31 December 1999, to receive from the State equivalent amounts to what they would have been entitled under a tax consolidation system. On the basis of the forecast losses under the restructuring plan, it was estimated that these tax credits for the publicly-owned shipyards would amount to 58 billion pesetas. ...(8) On 1 September 1997, the yards were absorbed into Sociedad Estatal de Participaciones Industriales (SEPI) which, like INI, is able to take advantage of general tax consolidation rules to offset losses against profits.(9) The aid package was approved on the condition that the total sum, as well as the amounts per category of aid were maximum amounts. ... According to the information available to the Commission within the context of its monitoring of the restructuring plan, the yards received in 1998 a special tax credit of ESP [18.451] billion, notwithstanding the fact [that] the yards also received a tax credit under general measures in 1998, corresponding to their losses in 1997, based on general Spanish tax consolidation rules, as a result of their integration [into] SEPI.8 In those circumstances, the Commission expressed doubts as to the consistency of the special tax credit of ESP 18.451 billion with the authorising decision and as to its compatibility with the common market.The contested decision9 In paragraph 57 of the grounds of the contested decision, the Commission concluded that the publicly-owned yards in Spain had received aid in the form of special tax credits of ESP 18.451 billion which cannot be legally justified. Although the overall limit on such aid payment had not been exceeded, that amount represented solely a maximum. Within that maximum the aid was to correspond only to taxable losses and was based on the assumption that the yards were unable to benefit from tax credits under Spain's general tax consolidation system (general tax credits). According to the Commission, this was an essential condition for approval of the aid and therefore for the compatibility of the aid with the common market pursuant to Article 87(3)(e) EC.10 In paragraph 58 of the grounds of the contested decision, the Commission found that, in the circumstances of the case, the special tax credit of ESP 18.451 billion accorded in 1998 was no longer compatible either with Article 87(3)(e) EC or with the common market for the purposes of Article 87(1) EC and thus decided that that sum, with interest, was to be recovered.11 The contested decision was notified to the Kingdom of Spain on 2 December 1999.The application12 The Spanish Government, which puts forward four pleas in support of its application, claims that the Court should annul the contested decision and order the Commission to pay the costs.13 The Commission contends that the application should be dismissed as unfounded and that the Kingdom of Spain should be ordered to pay the costs.The first pleaArguments of the parties14 By its first plea, the Spanish Government submits, first of all, that the contested decision is in breach of Article 88(1) EC by virtue of failure to apply that provision. According to the Government, as soon as the Commission considered the aid referred to in the contested decision to have become incompatible with the common market, it was obliged to review that aid, pursuant to Article 88(1) EC, as existing aid and not, as it did, as new aid.15 The Spanish Government claims next that the contested decision is based on an alleged failure by the Spanish authorities to comply with a condition laid down by the authorising decision, that condition being that the shipyards continue to come under a tax system which did not allow them to receive general tax credits. Accordingly, instead of waiting until after the last of the payments previously authorised before initiating the procedure provided for in Article 88(2) EC, the Commission should have informed the national authorities of this so-called infringement. Since it failed to do so, it has acted in breach of the principles of legal certainty and sound administration.16 Finally, by considering that, from the time at which the shipyards had again been entitled to general tax credits, the aid previously authorised in the form of special tax credits had become incompatible with the common market because it was no longer essential, the Commission introduced without any warning a new criterion of incompatibility of the aid which it had already expressly approved. In doing so, it acted in breach of the principles of legal certainty, the protection of legitimate expectations, cooperation and good faith. Furthermore, even though it is necessary to justify the application of aid already approved, in the present case, the complexity and inadequacy of the grounds of the authorising decision required, at the very least, that the Commission warn the Spanish authorities about it.17 The Commission disputes the premiss on which the Spanish Government bases its first plea. Fiscal aid can be regarded as authorised only if it satisfies all the conditions in the authorising decision. Where they have not been satisfied, the aid is automatically deprived of the protection bestowed by that decision and should thus be regarded as new aid. In respect of new aid, the procedure provided for in Article 88(2) EC, which was followed in the present case, is the appropriate procedure for assessing the compatibility of that aid with the common market.18 The Commission contends that, in the circumstances of the present case, it was not required to point out the consequences of the yards' absorption into SEPI when that took place. That takeover did not of itself signify an infringement of the provisions of the authorising decision. Moreover, as soon as the Commission became aware of the infringement it commenced the preliminary inquiry which led to the initiation of the procedure under Article 88(2) EC.19 In the Commission's submission, it was for the Spanish Government to inform the Commission of its decision to continue granting special tax credits to the shipyards, in spite of their takeover by SEPI. Since it failed to do so, the Government cannot invoke legitimate expectations.Findings of the Court20 At the outset, it is appropriate to recall the relevant rules of the system for reviewing State aid laid down by the Treaty.21 According to Article 87(1) EC, save as otherwise provided by the Treaty, any aid granted by a Member State or through State resources which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, insofar as it affects trade between Member States, to be incompatible with the common market.22 Article 88 EC provides for a special procedure whereby the Commission is to keep State aid under constant review.23 The rules of procedure laid down by the Treaty vary according to whether the aid at issue constitutes existing aid or new aid. While the former is subject to Article 88(1) and (2) EC, the latter is governed by Article 88(2) and (3) EC (Case C-47/91 Italy v Commission [1992] ECR I-4145, paragraph 22).24 Where the Commission finds that aid alleged to have been made in pursuance of a previously authorised scheme of aid does not comply with the conditions laid down in its decision approving the scheme and is therefore not covered by it, that aid must be regarded as new aid (see, to that effect, Case C-47/91 Italy v Commission [1994] ECR I-4635, paragraphs 24 to 26).25 If, when aid is granted in pursuance of a previously authorised scheme, the Member State does not comply with the conditions to which the Commission made its decision approving the scheme subject, since the aid paid is new aid, the Commission is obliged to institute the special procedure provided for by the first subparagraph of Article 88(2) EC (see, to that effect, Case C-294/90 British Aerospace and Rover v Commission [1992] ECR I-493, paragraph 13).26 The facts of the present case must be examined in the light of these findings.27 It is clear from the authorising decision that it was in the light of the legal and tax position of the publicly-owned shipyards in Spain, as it appeared at the time, that the Commission authorised aid in the form of special tax credits totalling ESP 58 billion. The purpose of that aid was to enable those yards which, when they were part of the INI group, were able to reduce their after-tax losses by 28% under the general tax consolidation rules applicable (general tax credits), to continue to enjoy the same treatment even after they had ceased to be part of INI.28 When they belonged to INI, the shipyards were able to offset their after-tax losses against profits made elsewhere in the group. When that offsetting of losses was no longer possible, after the yards were absorbed by AIE, Law 13/96 allowed them none the less to continue to enjoy tax treatment equivalent to that to which they had previously been entitled.29 It is not disputed that, after they were absorbed into SEPI on 1 September 1997, the yards were again able to offset their after-tax losses against profits made elsewhere within that group. They were therefore entitled to general tax credits as when they were part of INI but were also receiving special tax credits in the form of State aid authorised by the authorising decision.30 In those circumstances, the Commission was entitled to find that the conditions enabling the grant of the aid were no longer satisfied and that the Spanish Government's payment in 1998 of the sum of ESP 18.451 billion in the form of special tax credits was no longer in accordance with the authorising decision.31 It follows that the aid at issue is not covered by the authorising decision.32 Consequently, the aid granted in 1998 for the 1997 financial year in the form of special tax credits must be characterised as new aid for the purposes of Article 88(3) EC.33 The Spanish Government's argument to the effect that the Commission should have informed it, prior to the payment of the aid at issue, that that aid had become incompatible with the common market as the result of a change in circumstances cannot be accepted.34 The Commission was not under an obligation to deduce from the fact that, during 1997, the yards had again been absorbed by a holding company to which the general tax consolidation system was applicable that the Spanish Government would continue to grant them special tax credits.35 Finally, the Spanish Government's assertion that, by the contested decision, the Commission announced a new criterion of compatibility with the common market of the aid referred to in the authorising decision is unfounded.36 As is clear from paragraphs 27 to 30 above, the Commission based its assessment of the incompatibility of that aid on the failure of the Spanish authorities to comply with the authorising decision.37 In those circumstances, the Spanish Government's claims of breach of the principles of legal certainty, the protection of legitimate expectations and sound public administration, which are based on that assertion, must be rejected.38 In the light of the foregoing, the first plea must be rejected.The second pleaArguments of the parties39 By its second plea, the Spanish Government claims in the alternative that the Commission failed to state any reasons for the contested decision in respect of the existence of new State aid. The contested decision does not even mention the existence of two of the four requirements laid down in Article 87(1) EC which must be satisfied if measures are to constitute State aid, namely that those measures [affect] trade between Member States and that they [distort] or [threaten] to distort competition.40 According to the Spanish Government, even in cases where it is clear from the circumstances in which the aid was granted that it is capable of affecting trade between Member States, the Commission is not exempted from the obligation to refer to those circumstances.41 The Spanish Government asserts, contrary to the Commission's contention, that the contested decision does not make reference to earlier decisions or provisions in order to assess whether the requirement of affecting trade is satisfied.42 The Commission states that, in the present case, it was already established and accepted by all parties that the measures of support to the shipyards constituted State aid, as is clear from the authorising decision. In the contested decision, the only issue was therefore the possibility of declaring the aid compatible with the common market. In those circumstances, the Commission considers that it was not required to open a discussion on the effect on trade between Member States and the distortion of competition.43 In any event, in a sector such as that in question, which has serious structural over-capacity and where international competition is undeniable, it is obvious that any aid entails risks for competition and intra-Community trade.44 The Commission adds that the aid at issue must be regarded as not having been notified, so that it is not required to show the actual effect of that aid. Furthermore, the Commission submits that the express reference in the contested decision to Directive 90/684, Regulation No 1013/97 and, above all, the authorising decision is sufficient for the contested decision to be regarded as adequately reasoned in respect of the elements raised by the applicant.Findings of the Court45 Regulation No 1013/97, pursuant to which the Commission adopted the authorising decision, was adopted on the basis of, in particular, Article 92(3)(e) of the EC Treaty (now, after amendment, Article 87(3)(e) EC).46 Under that provision, categories of aid specified by decision of the Council may be considered to be compatible with the common market.47 As is clear from paragraphs 30 and 33 of the judgment in Joined Cases C-356/90 and C-180/91 Belgium v Commission [1993] ECR I-2323, where aid is covered by derogating rules adopted under that provision, that aid is, as a matter of principle, at the outset incompatible with the common market and is considered to be compatible with the common market only on condition that it complies with the criteria for derogation contained in the decision approving that system.48 Accordingly, where the Commission finds that aid authorised under derogating rules adopted pursuant to Article 87(3)(e) EC is no longer covered by those rules, it is not required to reassess the compatibility of the aid in relation to the criteria set out in Article 87(1) EC or to determine whether it affects trade between Member States and distorts competition.49 Such a requirement would be illogical having regard to the context of the market and the need for management in question, since it was already established and accepted by all parties that the measures of support to the shipyards constituted State aid.50 Moreover, in the case of derogating rules, it is necessarily presupposed that the aid referred to is at the outset incompatible with the common market (see, to that effect, Belgium v Commission, cited above, paragraph 33).51 It is thus evident that the validity of the contested decision cannot be undermined by an alleged failure to state reasons in respect of the existence of aid within the meaning of Article 87(1) EC.52 It follows that the second plea must be rejected.The third pleaArguments of the parties53 By its third plea, which has three limbs, the Spanish Government submits that, as to substance, the contested decision is in breach of Article 87(1) and (3)(e) EC, Regulation No 1013/97 and the principle of the protection of legitimate expectations.54 By the first limb of this plea, the Spanish Government claims that it is clear from Regulation No 1013/97 and from the authorising decision that the condition for authorisation of the aid referred to is a genuine and irreversible reduction of capacity of 30 000 cgrt. By taking an opposing view, the Commission has acted in breach of that regulation and of the legitimate expectations induced by the authorising decision. If the authorising decision was meant to make payment of part of the aid conditional on the continuation of particular circumstances, the Commission should have mentioned it, which it did not.55 The Spanish Government also submits that the amount of the reduction in after-tax losses which the shipyards would have obtained in remaining under the tax consolidation system could not be predicted, since it depends on the loss-making company's taxable amount. If, as the Commission contends, the authorising decision had authorised the grant of aid to the shipyards to offset what they were no longer receiving under the tax consolidation system, it would have stated that the yards could be repaid each year, by way of authorised State aid, a sum to be determined according to the taxable amount.56 By the second limb of the third plea, the Spanish Government claims that the Commission's interpretation of the maximum nature of the aid authorised is in breach of Article 87(3) EC and of the principles of legal certainty and the protection of legitimate expectations, since it is tantamount to negating the definitive nature of the authorising decision. If the interpretation proposed by the Commission were adopted, the authorising decision would be no more than a sort of provisional declaration of intent which, when the plan was carried out, would require the Spanish authorities to justify again the need to grant the approved aid.57 According to the Spanish Government, the Commission also infringed Article 1 of Regulation No 1013/97, which states that it may declare additional operating aid compatible with the common market for the specific purposes and up to the amounts specified. The authorising decision authorised the aids referred to in their entirety, which provides a reason for them all to be declared compatible with the common market under a definitive Commission decision.58 Finally, by the last limb of the third plea, the Spanish Government submits that, by adding to the aid authorised the sums paid under a general system, which do not constitute aid, the Commission is in breach of Article 87(1) EC. It is contradictory to assert, as does the Commission, that the aggregation of the aid authorised, namely the special tax credits paid to the yards under Law 13/96, and the general measures, namely the general tax credits to which they are entitled under the general tax consolidation rules applicable in Spain, results in the shipyards receiving unlawful State aid.59 The Commission contends that the Spanish Government's third plea misinterprets the authorising decision to the extent that it asserts that that decision made the authorisation of special tax credits subject to no condition other than compliance with the limit of ESP 58 billion and with the undertaking to make the agreed reductions of capacity. However, the authorisation was also justified by the fact that, following their absorption by AIE, the yards were no longer able to receive the general tax credits to which they had been entitled when they belonged to INI. Since that justification has ceased to exist, the authorisation has also come to an end. According to the Commission, the third plea must therefore be automatically rejected.Findings of the Court60 At the outset, it is appropriate to examine the Spanish Government's assertion that the fiscal aid was authorised as consideration for a reduction of the shipyards' capacity, so that that aid was lawful provided that it remained below the limits for aid laid down by Regulation No 1013/97.61 On that point, as is clear from paragraphs 27 and 28 above, the Commission's authorisation of aid in the form of special tax credits totalling ESP 58 billion was based on the fact that it was impossible for the yards to continue to enjoy favourable tax treatment following their move from INI to AIE.62 The fact that the Commission was required, when it adopted the authorising decision, to ensure that the amounts of aid authorised would not exceed the limits laid down by Regulation No 1013/97 does not restrict the conditions to be fulfilled when aid is granted to the shipyards in Spain in the maximum amount.63 It follows that the Spanish Government's third plea is based on an incorrect premiss.64 As regards the first limb of this plea, the Court finds that the authorising decision correctly made the grant of the aid concerned subject to the shipyards' inability to obtain the tax advantages which they enjoyed before 1 August 1995.65 It follows that the first limb is unfounded.66 As regards the second limb, according to which the contested decision negates the definitive nature of the authorising decision, it must be noted that, in that decision, the Commission found that there was new aid to the extent that the aid in the form of special tax credits had been authorised only in order to offset the exclusion of the shipyards from the benefit of general tax credits.67 The Commission does not therefore cast doubt on the definitive nature of the authorising decision, but confines itself to ensuring compliance with the conditions laid down by that decision.68 It follows that the second limb must be rejected.69 Finally, the third limb, alleging aggregation by the Commission of the aid authorised and the general measures as a basis for its finding that the aid at issue was unlawful, misinterprets the contested decision. In that decision, the analysis of that aid is not based on its aggregation with the general tax credits, but solely on the Spanish authorities' failure to comply with the condition set in the authorising decision when they granted that aid in the form of special tax credits.70 The third plea must therefore be rejected.The fourth pleaArguments of the parties71 By its fourth plea, the Spanish Government claims, in the alternative, that even if the shipyards cannot aggregate the aid granted in the form of special tax credits and general tax credits, the ESP 58 billion of aid paid is no less justified in the light of the actual losses suffered by those yards during the period when they were controlled by AIE. Accordingly, by adopting the contested decision, the Commission committed a manifest error of assessment and acted in breach of the principle of the protection of legitimate expectations.72 According to the Government, although the general tax credits received by the shipyards corresponded to 28% of the negative taxable amount in each tax year, the calculation of the aid authorised in the form of special tax credits was not made by reference to the 28% of the negative taxable amount foreseeable for the tax years 1995 to 1998. Since the aid was calculated on the basis of net results before tax, and not of the taxable amount, the calculation was always made according to the criterion of before-tax losses, or actual losses. In that case, all the aid paid, namely ESP 58 billion, is covered by the authorising decision, because the losses were greater than forecast.73 The Commission submits that the Spanish Government's fourth plea is based, like the third, on an incorrect analysis. In order to calculate the amount of the aid declared incompatible by the contested decision, the Commission took as a basis the aid authorised, since it was no longer justified or, therefore, authorised. The aid authorised did not, contrary to the applicant's assertion, represent 28% of the losses forecast during the period under consideration, but aid intended to offset the inability to continue to take advantage of general tax credits because the shipyards belonged to a holding company which was overall in profit.Findings of the Court74 As is clear from paragraphs 27 and 28 above, the grant of fiscal aid by the Spanish authorities under Law 13/96, which was authorised by the authorising decision, was justified by the loss of the possibility for the shipyards to offset their after-tax losses against profits made elsewhere in the group to which they then belonged.75 When the Commission calculated the amount of the aid granted in the form of special tax credits paid to the shipyards under Law 13/96, which it declared incompatible with the common market, it acted in accordance with the provisions of that law on the calculation of the amount of such tax credits on the basis of the taxable amount.76 Contrary to the Spanish Government's claim, when the grant of those special tax credits ceased to be justified, following SEPI's takeover of the shipyards on 1 September 1997 - again enabling those yards to offset their after-tax losses against profits made elsewhere in that group -, the unlawful aid thus granted was to be calculated having regard to the legislation under which general tax credits are granted.77 It follows that the Spanish Government's complaints about the calculation of the amount of the unlawful aid are unfounded and that it cannot be alleged that, by adopting the contested decision, the Commission acted in breach of the principle of the protection of legitimate expectations or committed a manifest error of assessment.78 The fourth plea must therefore be rejected.79 In view of all the foregoing, the application must be dismissed in its entirety. Decision on costs Costs80 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs, the Kingdom of Spain, which has been unsuccessful, must be ordered to pay the costs. Operative part On those grounds,THE COURT (Sixth Chamber)hereby:1. Dismisses the application;2. Orders the Kingdom of Spain to pay the costs.

7e173-4d72e06-4624

EN

THE FACT THAT DEUTSCHE POST POSSESSES FUNDS FOR ACQUIRING JOINT CONTROL OF DHL DOES NOT JUSTIFY PRESUMING AN ABUSE OF A DOMINANT POSITION IN THE RESERVED POSTAL MARKET

| 61999A0175 Judgment of the Court of First Instance (Fourth Chamber, extended composition) of 20 March 2002. - UPS Europe SA v Commission of the European Communities. - Competition - Abuse of a dominant position - Postal sector - Service in the general economic interest - Use of income deriving from a reserved market - Acquisition of joint control of an undertaking active in the non-reserved market - Statement of reasons. - Case T-175/99. European Court reports 2002 Page II-01915 Keywords Competition - Dominant position - Abuse - Undertaking with a statutory monopoly in the postal sector - Use of income deriving from a reserved market - Acquisition of joint control of an undertaking active in the non-reserved market - Compatibility with Article 82 EC - Conditions(Art. 82 EC) Summary $$The acquisition by an undertaking with a statutory monopoly in the postal sector of a holding in the capital of a company which is active in the non-reserved market of parcel distribution could raise problems in the light of the Community competition rules where the funds used by the undertaking holding the monopoly derived from excessive or discriminatory prices or from other unfair practices in its reserved market. In such a situation, where there are grounds for suspecting an infringement of Article 82 EC, it is necessary to examine the source of the funds used for the acquisition in question in order to determine whether that acquisition stems from an abuse of a dominant position.In the absence of any evidence to show that the funds used by the undertaking holding a monopoly for the acquisition in question derived from abusive practices on its part in the reserved letter market, the mere fact that it used those funds to acquire joint control of an undertaking active in a neighbouring market open to competition does not in itself, even if the source of those funds was the reserved market, raise any problem from the standpoint of the competition rules and cannot therefore constitute an infringement of Article 82 EC or give rise to an obligation on the Commission to examine the source of those funds in the light of that article.( see paras 55, 61 ) Parties In Case T-175/99,UPS Europe SA, established in Brussels (Belgium), represented by T.R. Ottervanger and D. Arts, lawyers, with an address for service in Luxembourg,applicant,vCommission of the European Communities, represented by B. Doherty and K. Wiedner, acting as Agents, with an address for service in Luxembourg,defendant,supported byDeutsche Post AG, established in Bonn (Germany), represented by J. Sedemund, lawyer, with an address for service in Luxembourg,intervener,APPLICATION for the annulment of Commission Decision SG (99) D/4155 of 10 June 1999 rejecting the applicant's complaint of 8 June 1998 to the extent to which it relates to Article 82 EC and to the partial acquisition of DHL International Ltd by Deutsche Post AG,THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Fourth Chamber, Extended Composition),composed of: P. Mengozzi, President, R. García-Valdecasas, V. Tiili, R.M. Moura Ramos and J.D. Cooke, Judges,Registrar: D. Christensen, Administrator,having regard to the written procedure and further to the hearing on 25 April 2001gives the followingJudgment Grounds Facts1 The applicant is one of the United Parcel Service group of companies which distributes parcels throughout the world. It has offices in all the Member States of the European Community, including Germany.2 On 11 May 1998 the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1) by which the undertaking Deutsche Post AG sought to acquire, within the meaning of Article 3(1)(b) of that regulation, joint control of DHL International Ltd (DHL) by purchasing 22.498% of its shares. Deutsche Post would thus control DHL jointly with Deutsche Lufthansa AG (Lufthansa) and Japanese Airlines Company Ltd (JAL).3 On 19 May 1998 prior notice of the proposed concentration was published (Case No IV/M.1168 - DHL/Deutsche Post, OJ 1998 C 154, p. 6) inviting third parties to submit their observations to the Commission.4 The applicant submitted its comments to the Commission on 29 May 1998. It referred inter alia to the fact that Deutsche Post could only muster sufficient resources for the acquisition of its shares in DHL through its profits on the reserved postal market. The applicant also stated that Deutsche Post was not entitled to use its exclusive rights for purposes other than complying with its obligation to provide the service of general economic interest with which it was entrusted.5 By letter of 8 June 1998 the applicant lodged with the Commission a formal complaint against the Federal Republic of Germany, Deutsche Post and DHL. The complaint alleged infringements of Articles 81 EC, 82 EC and 87 EC. The applicant requested the Commission to initiate, in particular, a procedure against Deutsche Post for abuse of a dominant position.6 On 26 June 1998 the Commission adopted a decision, of which notice was published in the Official Journal of the European Communities (OJ 1998 C 307, p. 3), declaring a concentration compatible with the common market (Case IV/M.1168 - DHL/Deutsche Post) on the basis of Regulation No 4064/89.7 By letter of 7 July 1998 the Commission asked the applicant to state whether it wished to maintain its complaint of 8 June 1998. By letter of 10 July 1998 the applicant informed the Commission that it wished to do so.8 On 21 December 1998 the applicant wrote to the Commission calling on it to take a decision on its complaint under Articles 81 EC and 82 EC.9 By letter of 8 February 1999 the Commission sent its provisional views to the applicant pursuant to Article 6 of Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in certain proceedings under Articles [81] and [82] of the EC Treaty (OJ 1998 L 354, p. 18), to the effect that the applicant's request, in so far as it was based on Articles 81 EC and 82 EC, was unfounded.10 By letter of 29 March 1999 the applicant informed the Commission that it did not agree with the Commission's views and requested it to investigate the matter further under Article 82 EC.11 By decision of 10 June 1999 the Commission rejected the complaint in so far as it was based on Articles 81 EC and 82 EC (hereinafter the contested decision).12 The contested decision stated:16. As the Commission noted in its decision of 26 June 1998, [Deutsche Post] claims that the acquisition was financed by the sale of real estate which was the capital endowment for [Deutsche Post] when it was made into a company. If this proved to be the case, the complaint would be unfounded on a point of fact.17. In its letter of 29 March 1999, UPS [Europe] correctly points out that it has not been established whether [Deutsche Post's] claim as to the origin of the funds used is correct. However, contrary to the opinion expressed by UPS [Europe] in this letter, it is not necessary for the Commission to investigate this matter. The reason for this is that the complaint would in any event be unfounded in law. Even if [Deutsche Post] should indeed have used profits which it made on the letter market and if all the other conditions set out in Article 82 were fulfilled, there would be no abuse within the meaning of that provision.18. The fact alone that a company decides to use the resources which are at its disposal in order to purchase a share in another company does not raise concerns under EC competition law as long as this acquisition does not result in the creation or strengthening of a dominant position.19. In its decision of 26 June 1998, the Commission has come to the conclusion that the notified operation did not raise serious doubts as to its compatibility with the common market.20. It is therefore necessary to examine the more specific question as to whether there is an abuse within the meaning of Article [82 EC] where an undertaking uses (always on the basis of the assumption that the allegations of UPS [Europe] are correct) profits which it derives from activities for which it enjoys a legal monopoly in order to finance the acquisition of control in a company which is active on a non-reserved market. The Commission considers that this question is to be answered in the negative. Even companies to whom member States have granted an exclusive right in a particular area are not prevented by Article 82 from expanding into other areas. This is without prejudice to the possibility that Article 82 could apply to the behaviour of these companies on the markets for which they enjoy monopoly rights.Procedure and forms of order sought13 By application lodged at the Registry of the Court of First Instance on 2 August 1999, the applicant brought the present action.14 By application lodged at the Registry on 23 December 1999, Deutsche Post sought leave to intervene in support of the defendant.15 By order of the President of the Fourth Chamber of the Court of First Instance of 8 February 2000, Deutsche Post was granted leave to intervene in support of the defendant.16 Pursuant to Article 14(1) and 51(1) of the Rules of Procedure of the Court of First Instance, the case was a referred to a Chamber of five Judges.17 Upon hearing the report of the Judge-Rapporteur, the Court (Fourth Chamber, Extended Composition) decided to open the oral procedure without any preparatory inquiry and, by way of a measure of organisation of procedure, asked the Commission to produce before publication its Decision 2001/354/EC of 20 March 2001 relating to a proceeding under Article 82 of the EC Treaty (COMP/35.141 Deutsche Post AG) (OJ 2001 L 125, p. 27).18 The parties presented oral argument and answered the questions put to them by the Court at the hearing on 25 April 2001.19 The applicant claims that the Court of First Instance should:- annul the contested decision in so far as it rejects its complaint under Article 82 EC;- order the defendant and the intervener to pay the costs;- take such further action as the Court might deem appropriate.20 The defendant contends that the Court of First Instance should:- dismiss the application;- order the applicant to pay the costs.21 The intervener claims that the Court of First Instance should:- dismiss the application;- order the applicant to pay the costs.Law22 The applicant raises two pleas in law in support of its application for annulment. The first alleges inadequacy of the statement of reasons. The second alleges infringement of Article 82 EC.The first plea: inadequate statement of reasonsArguments of the parties23 According to the applicant, the contested decision infringes Article 253 EC because, in the circumstances of this case, the Commission is not entitled to confine itself to declaring that Article 82 EC does not prevent an undertaking holding a monopoly from expanding into areas other than those covered by the monopoly.24 It contends that the contested decision does not give the reason why resources intended for use in providing a service of general economic interest may also be employed for other purposes, such as the acquisition of joint control of an undertaking active in a neighbouring market. It claims that, to its knowledge, the contested decision is the first decision in which the Commission has formally defined its position on this point. Consequently, it contends that the Commission should have carefully stated the reasons for its decision.25 The applicant states that the obligation to give reasons is underpinned by the fact that Article 82 EC constitutes an open prohibition whose meaning has evolved over time in accordance with Commission practice and the case-law of the Court of Justice. Thus, a decision explicitly stating that particular conduct is not covered by Article 82 EC is as revealing and relevant for the purposes of determining the reach of that article as a decision characterising conduct as constituting an abuse within the meaning of that article.26 The defendant, supported by the intervener, infers from the fact that Article 82 EC lays down a prohibition that no special reasoning is needed to show that certain behaviour is permitted.Findings of the Court27 As a preliminary point, it must be borne in mind that, according to settled case-law, the statement of reasons required by Article 253 EC must be appropriate to the nature of the measure in question and must show clearly and unequivocally the reasoning of the institution which enacted the measure so as to inform the persons concerned of the justification for the measure adopted and to enable the Court to exercise its powers of review (Joined Cases 67/85, 68/85 and 70/85 Van der Kooy and Others v Commission [1988] ECR 219, paragraph 71, and Case C-353/92 Greece v Council [1994] ECR I-3411, paragraph 19).28 Moreover, the requirement to state reasons must be appraised on the basis of the particular features of the case in point, such as the content of the measure in question and the nature of the reasons given (Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809, paragraph 19).29 As the Court of Justice held in Case C-367/95 P Commission v Sytraval and Brink's France [1998] ECR I-1719), it is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (paragraph 63).30 It is appropriate to set out the circumstances which give rise to the contested decision.31 By letter of 29 May 1998 the applicant responded to the invitation to submit its observations on the proposed DHL/Deutsche Post concentration. At point 3 of its reply, the applicant states, first, that the acquisition of DHL shares by Deutsche Post was financed in breach of Article 82 EC and/or of Article 87 EC, regardless of the Commission's final position on the compatibility of the proposed concentration with the common market. Second, it maintains that, on the basis of the structure of the joint venture envisaged by Deutsche Post and DHL, the future relationship between those two undertakings will infringe Article 81 EC and/or Article 82 EC and/or Article 87 EC. Finally, the applicant stated in its letter that it was considering asking the Commission to initiate a formal procedure against Deutsche Post and against the Federal Republic of Germany for infringement of the Treaty.32 By letter of 8 June 1998 the applicant lodged a complaint concerning the above matter and asked the Commission to initiate a procedure against Deutsche Post for abuse of a dominant position and against the Federal Republic of Germany for granting State aid in breach of Articles 87 EC and 88 EC. Moreover, the applicant stated that the future links between Deutsche Post would infringe Article 81 EC and/or Article 82 EC and/or Article 87 EC.33 In the contested decision, the Commission stated that even if Deutsche Post had used income from the letter market and even if the other conditions laid down in Article 82 EC were fulfilled, there would be no abuse within the meaning of that article. It added that the mere fact that an undertaking decides to use resources available to it in order to acquire a holding in another undertaking does not raise difficulties under competition law provided that the acquisition does not create or reinforce a dominant position. It stated that the applicant's complaint had no legal foundation since Article 82 EC does not prohibit companies from expanding into other areas, even if Member States have granted them an exclusive right in a particular area.34 Accordingly, it must be held that the statement of reasons for the contested decision, although succinct, was nevertheless sufficient to apprise the applicant of the factual and legal grounds relied on by the Commission in rejecting the complaint.35 It follows that the first plea must be rejected.The second plea: infringement of Article 82 ECArguments of the parties36 The applicant contends that the contested decision disregards the fact that the use of profits derived from an exclusive right, which was granted solely in order to guarantee the performance of a service of general economic interest in order to acquire control of undertakings active in neighbouring markets constitutes an abuse of a dominant position prohibited by Article 82 EC. Referring to the judgment of the Court of Justice in Case C-320/91 Corbeau [1993] ECR I-2533, paragraph 19, it argues that, since exclusivity is granted to an undertaking charged with a universal service obligation in order to preserve economic equilibrium, the undertaking concerned must not use the income flowing from the exclusivity for other purposes.37 It adds that the effect on the market is the same whether income from the reserved area is used to finance the acquisition of an undertaking active in a market which is open to competition or to subsidise activities in a liberalised market. In its view, in both cases the use of the income will distort competition.38 The applicant alleges, finally, that an undertaking which uses monopoly profits can allocate the costs of the acquisition to the monopoly activities. As a result it can offer a price exceeding the price offered by its competitors who, deprived of monopoly profits, have to finance the acquisition with resources generated in a liberalised market and take into account the expected return on investment. Therefore competition is affected not only in the non-reserved market concerned but also in the market for the acquisition of undertakings active in the non-reserved market.39 The applicant contests the Commission's interpretation to the effect that Deutsche Post would be prevented from entering or expanding into the parcels market if the conduct criticised by the applicant were condemned. The applicant contends that in such circumstances Deutsche Post could, like any other undertaking, have recourse to other financial means, for example by issuing bonds or shares, by selling a subsidiary or by entering into a loan agreement. It could also freely use for that purpose profits generated in competitive markets. It would only be prevented from entering another market by using monopoly profits.40 As regards the alleged prohibition of using certain profits, the applicant states that it has never argued that Deutsche Post was not entitled to make a profit in its monopoly market; it has only argued that Deutsche Post is not allowed to use such profits to finance activities in competitive markets. Referring to the Corbeau judgment, cited in paragraph 20 above, it maintains that the grant of exclusive rights is intended to enable undertakings rendering a universal service to achieve economic equilibrium. That judgment supports the view that the use of monopoly profits for purposes other than covering losses incurred by rendering a universal service constitutes an abuse under Article 82 EC. Consequently, Deutsche Post is not entitled to realise any profit in the letter market that is higher than the additional costs which that undertaking must bear in rendering a universal service.41 The applicant states that one of the objectives of Article 82 EC is to ensure fairness between the different companies operating in a particular market and to protect the position of competitors, thereby preventing long-term harm to consumers. Abuses are therefore those practices that are not based on normal business performance and that are contrary to the abovementioned objectives. It adds that the use of profits derived from a protected position based on a legal monopoly in order to acquire control of a company on a competitive market is not based on normal business performance and thus is unfair and distorts competition. In other words, since the universal service obligation constitutes the sole possible justification for an exclusive right, any other use of profits derived from an exclusive right inevitably constitutes an abuse.42 The applicant adds that its argument is corroborated by the Notice from the Commission on the application of the competition rules to the postal sector and on the assessment of certain State measures relating to postal services (OJ 1998 C 39, p. 2). In paragraph 17 of the preface to that notice, the Commission expressly states that [t]o guarantee the funding of the universal service, a sector may be reserved for the operators of this universal service. In paragraph 3.4 of that notice the Commission states that [t]he operators referred to in point 4.2 [that is, undertakings to which exclusive rights have been granted] should not use the income from the reserved area to cross-subsidise activities in areas open to competition. Such a practice could prevent, restrict or distort competition in the non-reserved area.43 The defendant states that there is no rule of Community law or any case-law to support the interpretation of Article 82 contended for by the applicant.44 It maintains that the result of the applicant's thesis would be that either Article 82 EC prevents Deutsche Post from expanding into the parcels market entirely or else prevents it from doing so using profits from other activities.45 With respect to the applicant's argument that Deutsche Post should not use profits generated in a reserved sector to finance activities in a non-reserved sector, the defendant contends that income deriving from an exclusive right granted in order to provide universal service can also be used for other purposes. It states that Corbeau did not establish that an exclusive right is unlawful unless it was conferred with a view to financing a universal service.46 As regards the possibility of cross-subsidisation, the defendant considers that the applicant is confusing arguments relating to Article 82 EC with arguments relating to Article 86 EC. However, they are two distinct provisions with different aims: Article 82 EC is aimed only at anti-competitive conduct engaged in by undertakings on their own initiative whereas the applicant's arguments concern State measures, which must be examined from the point of view of Article 86 EC. It adds that, in any event, there is no absolute rule prohibiting cross-subsidy. This is because, even though a cross-subsidy can be used to mask an abuse - for example, predatory pricing, excessive pricing or price discrimination - it does not in itself constitute an abuse.47 In conclusion, it contends that there is no rule in Article 82 EC which prevents a dominant undertaking, even one with exclusive rights, from making a profit. It states that the interpretation of Article 82 EC does not depend on whether a dominant position has been conferred by law or acquired otherwise. That does not mean that monopolies enjoy total freedom: every undertaking in a dominant position is subject to Article 82 EC, which prohibits predatory pricing, excessive pricing or price discrimination. It concludes that there is no positive rule in Article 82 EC preventing Deutsche Post from expanding into new areas using profits from its reserved sector or otherwise. Finally, it notes that UPS's complaint does not attribute to Deutsche Post any conduct of the kind described above.48 Deutsche Post states that a company which, in full compliance with Community law, has been granted certain exclusive rights should not be prevented from conducting normal business activities which any other company, including dominant companies, may lawfully pursue. It adds that, although Article 82 EC may prevent an undertaking in a dominant position from charging excessive prices, that provision does not interfere with the economic freedom enjoyed by all companies to use the profits they obtain lawfully from their business, in either reserved or non-reserved markets, in order to penetrate new markets.49 It states that the acquisition in question was financed by the sale of immovable property forming part of its capital when it was converted into a company limited by shares. The applicant has put forward no argument to dispute that fact.50 Deutsche Post states that the applicant has produced no evidence of abusive conduct. In its submission, the applicant has not succeeded in demonstrating that the acquisition in question would lead to the reinforcement of a dominant position to the point where the degree of domination thereby achieved would substantially hinder competition. Nor has the applicant shown that the acquisition in question would create structural conditions favouring abuse in the future. Finally, it contends that the fact that it acquired only a minority holding of 22.498% in DHL makes it unlikely that, as a minority shareholder, it would engage in cross-subsidisation.Findings of the Court51 As a preliminary observation, it should be pointed out that, as the applicant itself admits, the mere fact that an exclusive right is granted to an undertaking in order to guarantee that it provides a service of general economic interest does not preclude that undertaking from earning profits from the activities reserved to it or from extending its activities into non-reserved areas.52 Essentially, the applicant is criticising the Commission for failing to take account in the contested decision of the fact that an undertaking vested with an exclusive right in order to guarantee the provision of a service of general economic interest cannot, in principle, use income derived from its activities in the reserved market in order to acquire a holding in an undertaking active in a neighbouring market that is open to competition, without abusing the dominant position which it holds by virtue of that exclusive right, in breach of Article 82 EC.53 The applicant's case, as set out in its letters of 29 May and 8 June 1998 to the Commission, is based on two contentions:(a) the financing by Deutsche Post of the acquisition of its holding in DHL implies that it financed that acquisition from income obtained from its activities in the reserved letter market, thereby abusing its dominant position in that market; and(b) the future relationship between Deutsche Post and DHL will necessarily lead to cross-subsidisation of DHL's activities in the liberalised parcel market by income obtained by Deutsche Post from the reserved market.54 It should first be observed that the acquisition by Deutsche Post of 22.498% of the shares of DHL was effected under an agreement between Deutsche Post, Lufthansa and JAL. In the light of the provisions of that agreement concerning the composition and organisation of the management of DHL and the allocation and exercise of voting rights for strategic decisions, the Commission concluded, in its decision of 26 June 1998, adopted under Regulation No 4064/89, that Deutsche Post had acquired joint control of DHL with Lufthansa and JAL.55 Contrary to the impression given by the Commission in paragraphs 17 and 18 of the contested decision, the acquisition of a holding of that kind could raise problems in the light of the Community competition rules where the funds used by the undertaking holding the monopoly derived from excessive or discriminatory prices or from other unfair practices in its reserved market. In such a situation, where there are grounds for suspecting an infringement of Article 82 EC, it is necessary to examine the source of the funds used for the acquisition in question in order to determine whether that acquisition stems from an abuse of a dominant position.56 It should next be noted that, in its decision of 26 June 1998, which has not been challenged by the applicant, the Commission decided to raise no objections concerning the acquisition by Deutsche Post of joint control of DHL because that acquisition did not have the effect of creating or strengthening a dominant position and was not therefore incompatible with the common market.57 In those circumstances, the Court must determine whether, notwithstanding the authorisation for a concentration granted by the Decision of 26 June 1998, the applicant's two abovementioned contentions might be well founded and call for a finding that Article 82 EC has been infringed.58 As regards the applicant's first contention, namely that the use of income from activities in the reserved market to finance the acquisition of the holding in DHL necessarily implies abusive conduct by Deutsche Post on that market, it must be borne in mind, first, that the Commission did not consider it necessary to establish the source of the funds used for that acquisition because, in its opinion, even if they had been obtained from the reserved letter market and not, as contended by Deutsche Post, from real estate transactions, Article 82 EC would not preclude their use for the acquisition in question.59 In that regard, it should be noted that the applicant has not at any time, either in its letters of complaint to the Commission or in the present proceedings, pointed to any conduct whatsoever on the part of Deutsche Post in the reserved letter market that might be capable of constituting an infringement of Article 82 EC. The applicant confined itself to referring to the fact that postal charges in Germany are the highest in Europe and that the German Government had waived its entitlement to the dividends due to it as a shareholder of Deutsche Post.60 The mere fact that Deutsche Post possessed funds enabling it to effect the acquisition at issue does not justify presuming the existence of abusive conduct in the reserved market.61 In the absence of any evidence to show that the funds used by Deutsche Post for the acquisition in question derived from abusive practices on its part in the reserved letter market, the mere fact that it used those funds to acquire joint control of an undertaking active in a neighbouring market open to competition does not in itself, even if the source of those funds was the reserved market, raise any problem from the standpoint of the competition rules and cannot therefore constitute an infringement of Article 82 EC or give rise to an obligation on the Commission to examine the source of those funds in the light of that article.62 The Notice from the Commission on the application of the competition rules to the postal sector and on the assessment of certain State measures relating to postal services, cited in paragraph 42 above, does not assist the applicant's case. Whilst it is true that paragraph 3.3 of that notice states that subsidising activities open to competition by allocating their costs to reserved services is likely to distort competition and that such conduct could amount to an abuse by an undertaking holding a dominant position, the fact remains that, in the same paragraph, the Commission states that, none the less, dominant companies may compete with other undertakings on price or improve their cash flow unless the prices are predatory or conflict with the relevant national or Community rules.63 Nor can the applicant rely on the Corbeau judgment, cited in paragraph 36 above, because the question referred to the Court of Justice in that case was whether the monopoly conferred on the Belgian postal authority was contrary to the Treaty and, in particular, whether certain postal markets should be opened up to competition. The Court of Justice did not examine the question whether a body such as the Belgian postal authority was precluded from operating competitively in liberalised sectors.64 As regards the applicant's second contention, to the effect that the future relationship between Deutsche Post and DHL would necessarily involve cross-subsidisation of DHL's business in the parcels market, it need merely be observed that it is clear from the undertaking given by Deutsche Post to the Commission, in response to the requirement to that effect imposed by the decision of 26 June 1998, that Deutsche Post is prohibited from engaging in any such cross-subsidisation, with the result that, for the purposes of this case, that question is academic. Consequently, if, in the future, the applicant were able to prove such cross-subsidisation on the part of Deutsche Post, it would be entitled to apply to the Commission or, by virtue of the direct effect of Article 82 EC, to the competent national court for appropriate penalties to be imposed.65 It follows that the second plea in law must also be rejected. Decision on costs Costs66 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the applicant has been unsuccessful and the Commission and the intervener have applied for costs, the applicant must be ordered to pay their costs and to bear its own. Operative part On those grounds,THE COURT OF FIRST INSTANCE (Fourth Chamber, Extended Composition),hereby:1. Dismisses the application;2. Orders the applicant to bear its own costs and to pay those of the defendant and the intervener.

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THE COURT OF FIRST INSTANCE CONFIRMS THE EXISTENCE OF A CARTEL IN THE EUROPEAN DISTRICT HEATING MARKET.

| 61999A0009 Judgment of the Court of First Instance (Fourth Chamber) of 20 March 2002. - HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co. KG and Others v Commission of the European Communities. - Competition - Cartel - District heating pipes - Article 85 of the EC Treaty (now Article 81 EC) - Boycott - Fine - Guidelines on the method of setting fines - Non-retroactivity. - Case T-9/99. European Court reports 2002 Page II-01487 Keywords 1. Procedure - Measures of inquiry - Request for production of a document - Commission's internal documents - Disclosure excluded except in exceptional circumstances - Burden of proof falling on the applicant - Application to the report of the Hearing Officer(EC Treaty, Art. 85(1) (now Art. 81(1) EC); Rules of Procedure of the Court of First Instance, Arts 65 and 66(1))2. Competition - Agreements, decisions and concerted practices - Undertaking - Definition - Economic unit - Attribution of the infringements - Effect of the fact that the group of companies constituting the economic unit does not have its own legal personality - Joint and several liability of the companies of which that group consists(EC Treaty, Art. 85(1) (now Art. 81(1) EC))3. Competition - Community rules - Infringements - Attribution of responsibility - Legal person responsible for the operation of the undertaking at the material time - Exceptions - Economic successor responsible where the legal person responsible for the infringement has ceased to exist or for the purpose of safeguarding the effectiveness of the rules on competition(EC Treaty, Art. 85(1) (now Art. 81(1) EC))4. Competition - Agreements, decisions and concerted practices - Complex infringement comprising elements both of an agreement and of a concerted practice - Classified singly as an agreement and/or concerted practice - Whether permissible - Consequences as to the evidence required(EC Treaty, Art. 85(1) (now Art. 81(1) EC))5. Competition - Agreements, decisions and concerted practices - Agreements between undertakings - Definition - Gentlemen's agreement - Whether included - Effect of inapplicability of the penalty of nullity provided for by Article 85(2) of the Treaty (now Article 81(2) EC) - None(EC Treaty, Art. 85(1) and (2) (now Art. 81(1) and (2) EC))6. Competition - Agreements, decisions and concerted practices - Concerted practice - Definition - Need for a causal link between the concerted action as between the undertakings and their conduct on the market - Presumption that the link exists(EC Treaty, Art. 85(1) (now Art. 81(1) EC))7. Competition - Agreements, decisions and concerted practices - Participation in meetings held by undertakings for an anti-competitive purpose - Sufficient basis for concluding that, if an undertaking has not distanced itself from the decisions taken, it participated in the subsequent arrangements - Participation allegedly under pressure - Not a factor such as to justify failure by an undertaking to notify the competent authorities(EC Treaty, Art. 85(1) (now Art. 81(1) EC); Council Regulation No 17, Art. 3)8. Competition - Agreements, decisions and concerted practices - Imputed to an undertaking - Responsibility for the conduct of other undertakings in the context of the same infringement - Whether permissible - Criteria - Breach of the principle that penalties should be personal, of the rules pertaining to proof and of the rights of the defence - None(EC Treaty, Art. 85(1) (now Art. 81(1) EC))9. Competition - Administrative procedure - Rules governing languages - Annexes to the statement of objections and annexes to the answers of other undertakings being investigated to the Commission's requests for information - To be available in the original language - Breach of the right to be heard and of the principle of equality of arms - None - Justification(Council Regulations No 1, Art. 3, and No 17, Art. 19(1); Commission Regulation No 99/63, Arts 2(1) and 4)10. Competition - Administrative procedure - Business secrets - Qualifications - Limits - Protection of business secrets(Council Regulation No 17, Arts 19(2), 20(2) and 21)11. Competition - Administrative procedure - Business secrets - Disclosure of confidential information by Commission officials - Effect on the legality of the decision finding there to be an infringement - None(EC Treaty, Art. 214 (now Art. 287 EC); Council Regulation No 17, Art. 20(2))12. Competition - Administrative procedure - Inapplicability of Article 6 of the European Convention on Human Rights - Applicability of the general principles of Community law - Effects on the Commission's rights and obligations as regards the calling of witnesses for and against(Council Regulation No 17, Art. 19(2); Commission Regulation No 99/63, Arts 3(3) and 7)13. Competition - Administrative procedure - Hearings - Hearing Officer's obligation to obtain approval of the minutes of the hearing before presenting his report - None(Commission Regulation No 99/63, Art. 9(4); Commission Decision 94/810, Arts 7(4) and 8)14. Competition - Administrative procedure - Hearings - Provisional nature of the minutes submitted to the Advisory Committee and to the Commission - Procedural irregularity - None(Commission Regulation No 99/63)15. Competition - Fines - Amount - Determination thereof - Maximum amount - Calculation - Turnover to be taken into account - Cumulative turnover of all the companies constituting the economic unit acting as an undertaking(Council Regulation No 17, Art. 15(2))16. Competition - Fines - Amount - Methods of calculation - Conversion into ecu of the undertakings' turnover figure for the reference year on the basis of the average exchange rate over the same year - Whether permissible(Council Regulation No 17, Art. 15)17. Competition - Administrative procedure - Request for information - Freedom of undertakings as to whether or not to reply to questions asked under Article 11(1) of Regulation No 17 - Consequence of agreeing to reply - Obligation to provide accurate information(Council Regulation No 17, Arts 11(1) and 15(1)(b))18. Competition - Fines - Amount - Determination thereof - Criteria - Gravity of the infringements - Mitigating circumstances - Financial situation of the undertaking concerned - Excluded(Council Regulation No 17, Art. 15(2)) Summary 1. During the proceedings before the Community Courts internal Commission documents are not to be communicated to the applicants, unless the circumstances of the case are exceptional and the applicants make out a plausible case for the need to do so. That is the case as regards the expert accountant's report, whose purpose, as a purely internal Commission document solely in the nature of an opinion for the Commission, is not to set forth fresh objections or adduce fresh evidence against the undertakings involved in a proceeding under Article 85(1) of the Treaty (now Article 81(1) EC) and which does not constitute a decisive factor which must be taken into account by the Community judicature when exercising its power of review. That restriction on access to internal documents is justified by the need to ensure the proper functioning of the institution concerned when dealing with infringements of the Treaty competition rules. Thus, the application for measures of inquiry concerning production of the expert accountant's report must be rejected, since the applicants have not shown how production of that report might be relevant to the principle of respect for the rights of the defence.( see para. 40 )2. In prohibiting undertakings inter alia from entering into agreements or participating in concerted practices which may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition within the common market, Article 85(1) of the Treaty (now Article 81(1) EC) is aimed at economic units which consist of a unitary organisation of personal, tangible and intangible elements, which pursue a specific economic aim on a long-term basis and can contribute to the commission of an infringement of the kind referred to in that provision.In that connection, there is no need for the economic entity identified as a group to have legal personality. In competition law, the term undertaking must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal. In the absence of a person at its head to which, as the person responsible for coordinating the group's activities, responsibility can be imputed for the infringements committed by the various component companies of the group, the Commission is entitled to hold the component companies jointly and severally responsible for all the acts of the group, in order to ensure that the formal separation between those companies, resulting from their separate legal personality, does not prevent a finding that they have acted jointly on the market for the purposes of applying the rules on competition.( see paras 54, 66 )3. It falls, in principle, to the natural or legal person managing the undertaking in question when the infringement of the Community rules on competition was committed to answer for that infringement, even if, when the decision finding the infringement was adopted, another person had assumed responsibility for operating the undertaking. The situation would be different only where the legal person or persons responsible for running the undertaking had ceased to exist in law after the infringement has been committed. It is none the less true that in certain circumstances an infringement of the rules on competition may be imputed to the economic successor of the legal person responsible, even where the latter has not ceased to exist on the date of adoption of the decision finding the infringement, so that the effectiveness of those rules will not be compromised owing to the changes to, inter alia, the legal form of the undertakings concerned.The Commission errs in law if it holds jointly and severally liable for the fine imposed on a group of companies an undertaking which did not yet exist at the time when the infringement was committed, whilst the natural and legal persons involved in that infringement continued their commercial activities in full and whilst no evidence has been adduced of strategies adopted for the specific purpose of avoiding the penalty incurred.( see paras 103-104, 106-108 )4. In the context of a complex infringement which involves many producers seeking over a number of years to regulate the market between them, the Commission cannot be expected to classify the infringement precisely, for each undertaking and for any given moment, as an agreement or a concerted practice, as in any event both those forms of infringement are covered by Article 85 of the Treaty (now Article 81 EC). The Commission is therefore entitled to classify such a single infringement as an agreement and a concerted practice or as an agreement and/or a concerted practice, since the infringement includes elements which are to be classified as an agreement and elements which are to be classified as a concerted practice. It would be artificial to split up continuous conduct, characterised by a single purpose, by treating it as consisting of a number of separate infringements.In such a situation, the dual characterisation must be understood not as requiring, simultaneously and cumulatively, proof that each of those factual elements presents the constituent elements both of an agreement and of a concerted practice, but rather as referring to a complex whole comprising a number of factual elements some of which were characterised as agreements and others as concerted practices for the purposes of Article 85(1) of the Treaty (now Article 81(1) EC), which lays down no specific category for a complex infringement of this type.( see paras 186-187 )5. In order for there to be an agreement within the meaning of Article 85(1) of the Treaty (now Article 81(1) EC), it is sufficient that the undertakings in question should have expressed their joint intention to conduct themselves on the market in a specific way. That is the case where there is a gentlemen's agreement between a number of undertakings representing the faithful expression of such a joint intention concerning a restriction of competition. In those circumstances, the question whether the undertakings in question considered themselves bound - in law, in fact or morally - to adopt the agreed conduct is therefore irrelevant.In that regard, the opposite conclusion cannot be inferred from the provision in Article 85(2) of the Treaty (now Article 81(2) EC) that any agreement referred to in Article 85(1) is automatically void, which is intended for cases where a legal obligation is actually in issue. The fact that only binding agreements can, by their nature, be rendered void does not mean that non-binding agreements must escape the prohibition laid down in Article 85(1) of the Treaty.( see paras 199-201 )6. It follows from the actual terms of Article 85(1) of the Treaty (now Article 81(1) EC), that a concerted practice implies, besides undertakings concerting with each other, conduct on the market pursuant to those collusive practices, and a relationship of cause and effect between the two. In that regard, subject to proof to the contrary, which the economic operators concerned must adduce, the presumption must be that the undertakings taking part in the concerted arrangements and remaining active on the market take account of the information exchanged with their competitors when determining their conduct on that market.( see paras 213, 216 )7. Where an undertaking participates, even if not actively, in meetings between undertakings with an anti-competitive object and does not publicly distance itself from what was discussed at them, thus giving the impression to the other participants that it subscribes to the outcome of the meetings and will act in conformity with it, it may be concluded that it is participating in the cartel resulting from those meetings. It is irrelevant, in that regard, whether the undertaking in question attends meetings with undertakings having a dominant position or, at least, an economically superior position on the market. An undertaking which participates in meetings with an anti-competitive object, even under constraint from other participants with greater economic power, can always report the anti-competitive activities in question to the Commission rather than continue to participate in the meetings.( see paras 223-224, 226 )8. An undertaking which has participated in a single complex infringement of the rules on competition by its own conduct, which amounts to an agreement or a concerted practice with an anti-competitive object within the meaning of Article 85(1) of the Treaty (now Article 81(1) EC) and which was intended to play a part in bringing about the infringement as a whole, may also be responsible for the conduct of other undertakings followed in the context of the same infringement throughout the period of its participation in the infringement, where it is proved that the undertaking in question is aware of the unlawful conduct of the other participants, or can reasonably foresee such conduct, and is prepared to accept the risk. Such a conclusion is not at odds with the principle that responsibility for such infringements is personal in nature, nor does it neglect individual analysis of the evidence adduced, in disregard of the applicable rules of evidence, or infringe the rights of defence of the undertakings involved.( see para. 231 )9. In the context of proceedings instigated pursuant to the Community rules on competition, the annexes to the statement of objections which do not emanate from the Commission are not documents for the purposes of Article 3 of Regulation No 1 determining the languages to be used by the European Economic Community, but must be regarded as supporting documentation on which the Commission relies and must therefore be brought to the attention of the addressee of the decision as they are, so that the addressee can apprise himself of the interpretation of them which the Commission has adopted and on which it has based both its statement of objections and its decision. It follows that the Commission, in communicating those annexes in their original language, does not infringe the right to be heard of the undertakings concerned.The same considerations apply to the documents annexed by other undertakings to their replies to the Commission's requests for information without there being any grounds for complaining that the principle of equality of arms has been infringed, since the original of the documents constitutes the only relevant evidence.( see paras 327, 329-330 )10. The obligation of professional secrecy laid down in Article 20(2) of Regulation No 17 for the purposes of proceedings implementing the competition rules is mitigated in regard to third parties on whom Article 19(2) of that regulation confers the right to be heard, that is to say in regard, in particular, to a third party who has made a complaint. The Commission may communicate to such a party certain information covered by the obligation of professional secrecy in so far as it is necessary to do so for the proper conduct of the investigation. However, that power does not apply to all documents of the kind covered by the obligation of professional secrecy. Article 21 of the regulation, which provides for the publication of certain decisions, requires the Commission to have regard to the legitimate interest of undertakings in the protection of their business secrets. Although they deal with particular situations, those provisions must be regarded as the expression of a general principle which applies during the course of the administrative procedure.( see para. 364 )11. On the assumption that Commission officials are responsible, in breach of the provisions governing the obligation of professional secrecy, for leaks of confidential information used in the course of the administrative proceedings instigated for infringement of the Community competition rules, that would in any event not affect the legality of the decision, since it has not been proved that the decision would not in fact have been adopted or would have been different had the disputed statements not been made.( see para. 370 )12. Even though the Commission is not a tribunal within the meaning of Article 6 of the European Convention on Human Rights, and even though the fines imposed by the Commission are not of a criminal law nature, the Commission must nevertheless observe the general principles of Community law during the administrative procedure.In that regard, the fact that the provisions of Community competition law do not place the Commission under an obligation to call witnesses whom the undertaking concerned wishes to give evidence on its behalf but allows the Commission a reasonable margin of discretion to decide how expedient it may be to hear such persons is not contrary to those principles. Although the Commission may hear natural or legal persons where it deems it necessary to do so, it is not entitled to call witnesses to testify against the undertaking concerned without their agreement.( see paras 383, 391-392 )13. Neither Regulation No 99/63 nor Decision 94/810 on the terms of reference of Hearing Officers in competition procedures before the Commission precludes the Hearing Officer from submitting to the Director-General for competition the report provided for in Article 8 of Decision 94/810 before the minutes of the hearing have been approved, pursuant to Article 9(4) of Regulation No 99/63 and Article 7(4) of Decision 94/810, by each person heard. The purpose of Article 9(4) of Regulation No 99/63 is to assure the persons heard that the minutes contain a true record of the substance of what they have said. The minutes are therefore submitted to the parties for their approval in order to enable them to check what they said at the hearing, not for the purpose of adducing fresh evidence which the Hearing Officer would be obliged to take into account.( see paras 407-408 )14. The provisional nature of the minutes of the hearing submitted to the Advisory Committee on agreements and dominant positions and to the Commission could only amount to a defect in the administrative procedure capable of vitiating the decision which results therefrom if the document in question was drawn up in such a way as to be misleading in a material respect.( see para. 410 )15. The fact that several companies are held jointly and severally liable for a fine does not mean, as regards the application of the maximum amount of 10% of turnover laid down by Article 15(2) of Regulation No 17, that the amount of the fine is limited, for the companies held jointly and severally responsible, to 10% of the turnover achieved by each of those companies during the last financial year. The maximum amount of 10% of turnover within the meaning of that provision must be calculated on the basis of the total turnover of all the companies constituting the economic entity acting as an undertaking for the purposes of Article 85 of the Treaty (now Article 81 EC). Thus, in the case of an undertaking constituted by a group of companies acting as a single economic unit, only the total turnover of the component companies can constitute an indication of the size and economic power of the undertaking in question. Within the limit laid down by Article 15(2) of Regulation No 17, the Commission may thus choose which turnover to take in terms of territory and products in order to determine the fine.( see paras 528-529, 541 )16. In calculating a fine for infringement of the Community rules on competition on the basis of turnover in a given reference year, expressed in national currency, the Commission is correct to convert that turnover into ecu on the basis of the average exchange rate for that reference year, and not on the basis of the exchange rate in force on the date of adoption of the decision.( see para. 543 )17. Regulation No 17 places the undertaking being investigated under a duty of active cooperation, which means that it must be prepared to make any information relating to the object of the inquiry available to the Commission. Even though the undertakings are free to reply or not to reply to questions put to them under Article 11(1) of Regulation No 17, it follows from the penalty provided for in the first part of the sentence in Article 15(1)(b) of that regulation that, having agreed to reply, the undertakings are required to provide accurate information.( see para. 561 )18. The Commission is not required, when determining the amount of the fine to be imposed for an infringement of the Community rules on competition, to take into account the poor financial situation of an undertaking concerned, by way of a mitigating circumstance, since recognition of such an obligation would be tantamount to giving an unjustified competitive advantage to undertakings least well adapted to market conditions.( see paras 596-597 ) Parties In Case T-9/99,HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co. KG, established in Rosenheim (Germany),HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH, Verwaltungsgesellschaft, established in Rosenheim,Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH, established in Rosenheim,Isoplus Fernwärmetechnik Gesellschaft mbH, established in Hohenberg (Austria),Isoplus Fernwärmetechnik GmbH, established in Sondershausen (Germany),represented by P. Krömer and F. Nusterer, lawyers, with an address for service in Luxembourg,applicants,vCommission of the European Communities, represented by W. Mölls and É. Gippini Fournier, acting as Agents, with an address for service in Luxembourg,defendant,APPLICATION for, primarily, annulment of Commission Decision 1999/60/EC of 21 October 1998 relating to a proceeding under Article 85 of the EC Treaty (Case No IV/35.691/E-4: - Pre-Insulated Pipe Cartel) (OJ 1999 L 24, p. 1) or, in the alternative, reduction of the fine imposed on the applicants by that decision,THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Fourth Chamber),composed of: P. Mengozzi, President, V. Tiili and R.M. Moura Ramos, Judges,Registrar: J. Palacio González, Administrator,having regard to the written procedure and further to the hearing on 20 October 2000,gives the followingJudgment Grounds Background1 The applicants are companies governed by German and Austrian law operating in the district heating sector and are regarded by the Commission as belonging to the Henss/Isoplus group....8 On 21 October 1998, the Commission adopted Decision 1999/60/EC relating to a proceeding under Article 85 of the EC Treaty (Case No IV/35.691.E-4: - Pre-Insulated Pipe Cartel) (OJ 1999 L 24, p. 1), corrected before publication by a decision of 6 November 1998 (C(1998) 3415 final) (the Decision or the contested decision) finding that various undertakings and, in particular, certain of the applicants had participated in a series of agreements and concerted practices within the meaning of Article 85(1) of the EC Treaty (now Article 81(1) EC) (hereinafter the cartel).9 According to the Decision, at the end of 1990 an agreement was reached between the four Danish producers of district heating pipes on the principle of general cooperation on their domestic market. The parties to the agreement were ABB IC Møller A/S, the Danish subsidiary of the Swiss/Swedish group ABB Asea Brown Boveri Ltd (ABB), Dansk Rørindustri A/S, also known as Starpipe (Dansk Rørindustri), Løgstør Rør A/S (Løgstør) and Tarco Energi A/S (Tarco) (the four together being hereinafter referred to as the Danish producers). One of the first measures was to coordinate a price increase both for the Danish market and the export markets. For the purpose of sharing the Danish market, quotas were agreed upon and then implemented and monitored by a contact group consisting of the sales managers of the undertakings concerned. For each commercial project (project), the undertaking to which the contact group had assigned the project informed the other participants of the price it intended to quote and they then submitted tenders at a higher price in order to protect the supplier designated by the cartel.10 According to the Decision, two German producers, the Henss/Isoplus group and Pan-Isovit GmbH, joined in the regular meetings of the Danish producers from the autumn of 1991. In these meetings negotiations took place with a view to sharing the German market. In August 1993, these negotiations led to agreements fixing sales quotas for each participating undertaking.11 Still according to the Decision, an agreement was reached between all these producers in 1994 to fix quotas for the whole of the European market. This European cartel involved a two-tier structure. The directors' club, consisting of the chairmen or managing directors of the undertakings participating in the cartel, allocated quotas to each of these undertakings both in the market as a whole and in each of the national markets, including Germany, Austria, Denmark, Finland, Italy, the Netherlands and Sweden. For certain national markets, contact groups consisting of local sales managers were set up and given the task of administering the agreements by assigning individual projects and coordinating tender bids.12 With regard to the German market, the Decision states that following a meeting between the six main European producers (ABB, Dansk Rørindustri, the Henss/Isoplus group, Løgstør, Pan-Isovit and Tarco) and Brugg Rohrsysteme GmbH (Brugg) on 18 August 1994, a first meeting of the contact group for Germany was held on 7 October 1994. Meetings of this group continued long after the Commission carried out its investigations at the end of June 1995 although, from that time on, they were held outside the European Union, in Zurich. The Zurich meetings continued until 25 March 1996, i.e. several days after some of the undertakings had received the requests for information sent by the Commission.13 As a characteristic feature of the cartel, the Decision refers in particular to the adoption and implementation of concerted measures to eliminate Powerpipe, the only major undertaking which was not a member. The Commission states that certain members of the cartel recruited key employees of Powerpipe and gave Powerpipe to understand that it should withdraw from the German market. Following the award to Powerpipe of an important German project, a meeting is said to have taken place in Düsseldorf in March 1995, attended by the six abovementioned producers and Brugg. According to the Commission, it was decided at that meeting to organise a collective boycott of Powerpipe's customers and suppliers. The boycott was subsequently implemented.14 In the Decision, the Commission sets out the reasons why not only the express market-sharing arrangements concluded between the Danish producers at the end of 1990 but also the arrangements made after October 1991, taken as a whole, can be considered to constitute an agreement prohibited under Article 85(1) of the EC Treaty. Furthermore, the Commission stresses that the Danish and European cartels were merely the manifestation of a single cartel which originated in Denmark but which from the start had the long-term objective of extending the control of participants to the whole market. According to the Commission, the continuous agreement between the producers had an appreciable effect on trade between Member States.15 On those grounds, the operative part of the Decision is as follows:Article 1ABB Asea Brown Boveri Ltd, Brugg Rohrsysteme GmbH, Dansk Rørindustri A/S, Henss/Isoplus Group, Ke-Kelit Kunststoffwerk Ges mbH, Oy KWH Tech AB, Løgstør Rør A/S, Pan-Isovit GmbH, Sigma Tecnologie Di Rivestimento S.r.l. and Tarco Energie A/S have infringed Article 85(1) of the Treaty by participating, in the manner and to the extent set out in the reasoning, in a complex of agreements and concerted practices in the pre-insulated pipes sector which originated in about November/December 1990 among the four Danish producers, was subsequently extended to other national markets and brought in Pan-Isovit and Henss/Isoplus, and by late 1994 consisted of a comprehensive cartel covering the whole of the common market.The duration of the infringements was as follows:...- in the case of [the] Henss/Isoplus [group], from about October 1991 up to [at least March or April 1996],...The principal characteristics of the infringement consisted in:- dividing national markets and eventually the whole European market amongst themselves on the basis of quotas,- allocating national markets to particular producers and arranging the withdrawal of other producers,- agreeing prices for the product and for individual projects,- allocating individual projects to designated producers and manipulating the bidding procedure for those projects in order to ensure that the assigned producer was awarded the contract in question,- in order to protect the cartel from competition from the only substantial non-member, Powerpipe AB, agreeing and taking concerted measures to hinder its commercial activity, damage its business or drive it out of the market altogether....Article 3The following fines are hereby imposed on the undertakings named in Article 1 in respect of the infringements found therein:...(d) [the] Henss/Isoplus group, a fine of ECU 4 950 000, for which the following companies are jointly and severally liable:- HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co KG,- HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH Verwaltungsgesellschaft,- Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH (formerly Dipl-Kfm Walter Henss GmbH Rosenheim),- Isoplus Fernwärmetechnik GmbH, Sondershausen,- Isoplus Fernwärmetechnik Gesellschaft mbH - stille Gesellschaft,- Isoplus Fernwärmetechnik Ges. mbH, Hohenberg;...Article 5This Decision is addressed to:...(d) [The] Henss/Isoplus group, represented by:- HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co KG, Aisingerstrasse 12, D-83026 Rosenheim,- HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH, Verwaltungsgesellschaft, Aisingerstrasse 12, D-83026 Rosenheim,- Isoplus Fernwärmetechnik GmbH, Aisingerstrasse 12, D-83026 Rosenheim,- Isoplus Fernwärmetechnik Ges. mbH, Furthoferstraße 1A, A-3192 Hohenberg,- Isoplus Fernwärmetechnik Ges. mbH - stille Gesellschaft, Furthoferstraße 1A, A-3192 Hohenberg,- Isoplus Fernwärmetechnik GmbH, Gluckaufstraße 34, D-99706 Sondershausen;......Relations between the undertakings regarded as belonging to the Henss/Isoplus group25 Among the undertakings regarded by the Commission as belonging to the Henss/Isoplus group and involved in the present proceedings, HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co KG (HFB KG) is a limited partnership governed by German law, formed on 15 January 1997. The partner with unlimited personal liability for the partnership's debts is HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH, Verwaltungsgesellschaft (HFB GmbH), a limited liability company also formed on 15 January 1997. The limited partners of HFB KG, who are liable up to a certain amount, are Mr and Mrs Henss and Mr and Mrs Papsdorf. Mr Henss is the major partner of HFB KG and also holds the majority of the shares in HFB GmbH.26 The applicant Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH (Isoplus Rosenheim), formerly Dipl.-Kfm. Walter Henss GmbH (Henss Rosenheim) until 1 January 1997, is a company governed by German law. Following the transfer to HFB KG of the shares which Mr and Mrs Henss held in Isoplus Rosenheim and of the shares which Mr and Mrs Papsdorf held in Dipl.-Kfm. Walter Henss Fernwärmerohrleitungsbau GmbH, Berlin (Henss Berlin), HFB KG held 100% of the shares in those two companies and Henss Berlin was taken over by Isoplus Rosenheim on 3 December 1997.27 Isoplus Fernwärmetechnik Ges. mbH, Hohenberg (Isoplus Hohenberg) is an Austrian company the majority of whose shares are owned, through a trustee, by Mr Henss.28 Isoplus Fernwärmetechnik GmbH, Sondershausen (Isoplus Sondershausen) is a German company all of whose shares are held, nominally, by Isoplus Hohenberg, which to a certain extent holds them as a trustee on behalf of third parties.29 In the district heating market, Isoplus Rosenheim acts mainly as a distributor. Isoplus Hohenberg and Isoplus Sondershausen are production companies. HFB KG and HFB GmbH act only as shareholding companies.30 In the Decision, the Commission regarded Isoplus Rosenheim, Henss Berlin, Isoplus Hohenberg and Isoplus Sondershausen as a de facto Henss/Isoplus group. The Commission sent the statement of objections to those four undertakings, having established that they were all linked to Mr Henss, who had attended the meetings of the directors' club. According to the Decision, it was only after sending the statement of objections that the Commission learnt of the existence of a partnership agreement (Einbringungsvertrag) of 15 January 1997 lodged at the commercial registry, which showed that Mr and Mrs Henss and Mr and Mrs Papsdorf had transferred their shareholdings to HFB KG in January 1997.31 The Commission learnt from the same partnership agreement that Mr Henss was also the owner of a limited partnership, Isoplus Fernwärmetechnik Ges. mbH - stille Gesellschaft (Isoplus stille Gesellschaft), whose shares were held by a trustee.32 As regards Isoplus Hohenberg, the Commission learnt from the partnership agreement that Mr Henss owned shares in that company through trustees, although the applicants' legal advisers denied that throughout the administrative procedure. During the present proceedings, the parties no longer disagree as to whether Mr Henss actually held the majority of the share capital in Isoplus Hohenberg.33 As regards the shares in Isoplus Sondershausen held by Isoplus Hohenberg, the Commission learnt from the partnership agreement that one third of the capital of Isoplus Sondershausen, which was held by Isoplus Hohenberg as trustee for Mr and Mrs Papsdorf, was transferred to HFB KG. In the present proceedings, the applicants confirm that a further third of the capital of Isoplus Sondershausen was also held by Isoplus Hohenberg as trustee. The applicants accept that that information was not communicated to the Commission during the administrative procedure.The applications for measures of inquiry34 Pursuant to Article 68 of the Rules of Procedure of the Court of First Instance, the applicants have applied for Mr Boysen, Mr B. Hansen, Mr N. Hansen, Mr Hybschmann, Mr Jespersen and Mr Volandt to be called as witnesses in order to prove that neither the applicants nor the Henss/Isoplus group participated in an illegal practice or measure or in any other similar conduct for the purposes of Article 85(1) of the EC Treaty before October 1994. On that point, the applicants have stated that they are prepared to lodge security for costs.35 In addition, the applicants have requested the Court to order the Commission to lodge the entire case-file relating to the present case, including the annexes and also the report of the expert accountant relating to the present file.36 First, the Court observes that, under Article 68(1) of its Rules of Procedure, it may, either of its own motion or on application by a party, and after hearing the Advocate General and the parties, order that certain facts be proved by witnesses. According to the final subparagraph of that provision, an application by a party for the examination of a witness is to state precisely about what facts and for what reasons the witness should be examined.37 In the present case, although the applicants have referred in their pleadings, in particular in paragraphs 20, 40, 50, 66, 67, 68, 69, 70, 71, 94, 96, 125 and 142 of the application, to certain persons who could act as witnesses in relation to the facts set out in each of the paragraphs in question, the names of the six persons whom they expressly requested be called as witnesses before the Court are not to be found in those paragraphs. The Court therefore finds that, for those six persons, the applicants have failed to state the facts in respect of which proof by witnesses should be ordered.38 Consequently, and without there being any need to consider whether it is appropriate to hear the six persons in question, the Court holds that the application for witnesses to be heard should not be granted.39 Second, as regards the lodging of the case-file, the Court observes that during the litigation procedure, the Commission, of its own initiative, by letter of 26 July 1997 lodged the administrative files relating to all the cases concerned. The applicants were informed that the Commission had done so and that the files could be consulted at the Registry. In those circumstances, there is no longer any need to grant the applicants' application for the lodging of the case-file.40 In so far as the applicants have applied for the expert accountant's report to be lodged, that report is in any event a purely internal Commission document, which is solely in the nature of an opinion for the Commission, and its purpose is not to set forth fresh objections or adduce fresh evidence against the undertakings; accordingly, it does not constitute a decisive factor which must be taken into account by the Community judicature when exercising its power of review (Order in Case 212/86 R ICI v Commission, not published in the Reports of Cases before the Court, paragraphs 5 to 8; Case T-2/89 Petrofina v Commission [1991] ECR II-1087, paragraphs 53 and 54; and Case T-9/89 Hüls v Commission [1992] ECR II-499, paragraphs 86 and 87). It is settled case-law that during the proceedings before the Community Courts internal Commission documents are not to be communicated to the applicants, unless the circumstances of the case are exceptional and the applicants make out a plausible case for the need to do so (order of the Court of Justice of 18 June 1986 in Joined Cases 142/84 and 156/84 BAT and Reynolds v Commission [1986] ECR 1899, paragraph 11; judgment in Case T-35/92 Deere v Commission [1994] ECR II-957, paragraph 31; and order of the Court of First Instance of 10 December 1997 in Joined Cases T-134/94, T-136/94 to T-138/94, T-141/94, T-145/94, T-147/94, T-148/94, T-151/94, T-156/94 and T-157/94 NMH Stahlwerke and Others v Commission [1997] ECR II-2293, paragraph 35). That restriction on access to internal documents is justified by the need to ensure the proper functioning of the institution concerned when dealing with infringements of the Treaty competition rules (order in NMH Stahlwerke and Others v Commission, cited above, paragraph 36). Since the applicants have not shown how production of the expert accountant's report might be relevant to the principle of respect for the rights of the defence, the application must also be dismissed in so far as it relates to the lodging of that report.41 For those reasons, the Court is not minded to grant the applicants' application for measures of inquiry.The application for annulment of the Decision42 The pleas in law put forward by the applicants may be arranged according to their subject-matter: first, the pleas relating to the Henss/Isoplus group; second, the pleas relating to HFB KG and HFB GmbH; third, the pleas relating to Isoplus stille Gesellschaft; and, fourth, the pleas which concern all the applicants.I - The pleas in law relating to the Henss/Isoplus group43 As regards the Henss/Isoplus group, the applicants put forward three pleas in law alleging, first, misapplication of Article 85(1) of the Treaty, second, infringement of essential procedural forms and, third, breach of the obligation to state reasons.A - First plea in law, alleging misapplication of Article 85(1) of the Treaty in identifying the applicants as belonging to the Henss/Isoplus group1. Arguments of the parties44 The applicants claim that the Commission misapplied Article 85(1) of the Treaty, in so far as it regarded them as belonging to the Henss/Isoplus group, which, for having participated in an anti-competitive practice, has been ordered to pay a fine for which all the applicants are jointly and severally liable.45 The applicants submit that an undertaking within the meaning of Article 85 of the Treaty and Article 86 of the EC Treaty (now Article 82 EC) can be formed only by natural or legal persons or by companies which must be treated as though they had their own legal personality (persons said to be quasi-legal). However, what the Commission presumes to be the Henss/Isoplus group does not have its own legal or quasi-legal personality.46 In the absence of a parent company or a financing company with legal personality, the applicants can no longer be regarded as a group within the meaning of company law, or as a de facto group, as the Commission presumes in points 15 and 157 of the Decision, in the sense of legally autonomous undertakings whose economic conduct may be determined by another undertaking.47 As regards the financing companies HFB GmbH and HFB KG, the applicants state, first, that the former acts exclusively as a sleeping partner to the latter. As regards the latter, although at the time of adoption of the Decision it held 100% of the share capital of Isoplus Rosenheim, it held only one third of the share capital of Isoplus Sondershausen. Furthermore, it has never been associated, even through a trustee, with Isoplus Hohenberg, contrary to what is stated in point 159 of the Decision, and it was not a secret associate, even through a trustee, of a silent partnership of which Isoplus Hohenberg was the operating owner.48 In asserting that these undertakings regarded as belonging to the Henss/Isoplus group were all subject to the same uniform control, exercised by Mr Henss, the Commission disregarded the fact that, although Mr Henss had been the majority shareholder in Henss Rosenheim (now Isoplus Rosenheim) and, through trust companies, the majority shareholder in Isoplus Hohenberg, he had not been a partner in Henss Berlin or in Isoplus Sondershausen. Nor could Mr Henss, as a shareholder, be classified as an undertaking within the meaning of Article 85 of the Treaty.49 As regards Isoplus Sondershausen, it is inconceivable that it was controlled by Isoplus Hohenberg, since the latter was a trustee. Until 21 October 1998, Isoplus Hohenberg held only one third of the shares in Isoplus Sondershausen on its own behalf, having held a further third as trustee. It was for reasons to do with business secrecy that Isoplus Hohenberg and Isoplus Sondershausen did not inform the Commission that Isoplus Hohenberg was a trustee. Furthermore, Isoplus Hohenberg and Isoplus Sondershausen supplied the same markets, in part, which is not generally the case within a group.50 Nor can the nature of a group be inferred, as the Commission claims, from the reference to the Henss GmbH firm, Isoplus group in a memorandum of 21 April 1995 from Mr Henss (additional document No 17 to the statement of objections), since this was a statement on behalf of Henss Rosenheim in which the comma before the words Isoplus group merely meant that the undertaking Henss Rosenheim belonged to the spontaneous group in which the other parties to the cartel had placed the applicants owing to the commercial agency contracts between them. The existence of an agent or spokesman for such a spontaneous group does not suffice to make them into a group within the meaning of company law.51 Furthermore, the Decision does not refer to any evidence on the basis of which the applicants, in the absence of at the very least a de facto group, are mutually liable for the anti-competitive practices of each of them.52 The defendant observes that group designates the economic entity formed by the four undertakings participating in the cartel, namely Henss Rosenheim (now Isoplus Rosenheim), Henss Berlin, Isoplus Hohenberg and Isoplus Sondershausen, which were subject to the same uniform control, in particular as regards participation in the cartel. Mr Henss was Managing Director of Henss Berlin and Henss Rosenheim and controlled the latter company as well as Isoplus Hohenberg and Isoplus Sondershausen through direct or indirect shareholding. Furthermore, at the meetings of the directors' club, where the undertakings in the group received a single quota, Mr Henss defined and at the same time represented the interests of each of the undertakings in the group.53 Since all the personal, tangible and intangible elements which, from a technical point of view, were connected with the undertakings belonging to the Henss/Isoplus group formed part of a larger entity whose economic objectives were determined in one and the same way, there was, for the purposes of competition law, a single undertaking in the form of a group. That conclusion cannot be called into question by the fact that that entity was not directed by a financing company. Nor is it relevant whether the natural or legal person directing the group also acted as an undertaking on its own behalf.2. Findings of the Court54 In prohibiting undertakings inter alia from entering into agreements or participating in concerted practices which may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition within the common market, Article 85(1) of the Treaty is aimed at economic units which consist of a unitary organisation of personal, tangible and intangible elements, which pursue a specific economic aim on a long-term basis and can contribute to the commission of an infringement of the kind referred to in that provision (Case T-11/89 Shell v Commission [1992] ECR II-757, paragraph 311, and Case T-352/94 Mo och Domsjö v Commission [1998] ECR II-1989, paragraph 87).55 In the present case, at the time of the infringement, Henss Berlin and Henss Rosenheim (hereinafter also referred to as the Henss companies) and Isoplus Hohenberg and Isoplus Sondershausen (hereinafter also referred to as the Isoplus companies) were, in one form or another, controlled by Mr Henss.56 It is common ground that Mr Henss always held 90% of the shares in Henss Rosenheim (the remainder being held by his wife) and was Managing Director of that company until it changed its name to Isoplus Rosenheim on 1 January 1997. At that time, Mr Henss and his wife transferred their shares to HFB KG, of which Mr Henss none the less remains the majority shareholder and which itself acts as the parent of Isoplus Rosenheim since it holds all the latter's capital.57 As regards Henss Berlin, it is common ground that, when it was formed in August 1990, Mr Henss acquired 90% of its capital. When all the shares in Henss Berlin were transferred to HFB KG, on 1 January 1997, they were owned by Mr Papsdorf, the Managing Director of Isoplus Rosenheim, and his wife. Although the file does not reveal when Mr and Mrs Papsdorf acquired the shares from Mr Henss, it is common ground that Mr Henss was himself the Director of Isoplus Rosenheim from February 1994. Furthermore, it is clear that in December 1990, when Henss Berlin entered into a commercial agency contract with Isoplus Hohenberg, Mr Henss already represented Henss Berlin as sole Director.58 As regards Isoplus Hohenberg, the applicants no longer dispute in the application that, at least from October 1991, the majority of its shares were owned by Mr Henss, through a trustee.59 As regards Isoplus Sondershausen, it is clear that all its shares are nominally held by Isoplus Hohenberg. Although Isoplus Hohenberg only owns one third of the shares on its own behalf, it is common ground that a further third of the shares were held on behalf of Mr Papsdorf, then Managing Director of Isoplus Rosenheim, and his wife, their shares having been transferred under the partnership agreement of 15 January 1997 to HFB KG.60 Next, Mr Henss represented the Henss companies and the Isoplus companies at the meetings of the directors' club. It follows from the notes taken by certain participants in the discussions on the sharing of the German market that market shares were envisaged for the entity called either Isoplus (see annexes 39, 40, 44, 45 and 49 to the statement of objections) or Isoplus/Henss (see annexes 48 and 53 to the statement of objections) or both Isoplus and Henze (see annex 37 to the statement of objections). Furthermore, it is expressly stated in the invitation to the meeting of 11 August 1992 sent by ABB as president of the trade association European District Heating Pipe Manufacturers Association (EuHP) (annex 38 to the statement of objections) that Mr Henss represented Isoplus at that meeting. Last, it is common ground that when quotas were allocated by the cartel at European level, the Henss companies and the Isoplus companies were allocated a single quota.61 In those circumstances, the Commission was entitled to regard the activities within the cartel consisting of the distribution companies Henss Berlin and Henss Rosenheim (now Isoplus Rosenheim) and the production companies Isoplus Hohenberg and Isoplus Sondershausen as being the conduct of a single economic entity, under single control and pursuing a common long-term economic aim.62 Furthermore, the existence of a single economic entity pursuing common interests is confirmed by internal documents of the companies in question. Thus, the minutes of a meeting of the supervisory board of the Isoplus companies of 3 February 1994 (additional document No 21 to the statement of objections) refers to an Isoplus group, whose turnover consists, in particular, of the turnover of Hohenberg and Sondershausen together with the turnover of Henss. Similarly, it is apparent from Mr Henss's note of 21 April 1995 that he agreed to participate in a plan to purchase Powerpipe on behalf of Firma Henss GmbH, Isoplus group (additional document No 17 to the statement of objections).63 Nor can the Court accept the applicants' submission that the association of the Henss companies with the Isoplus companies may be explained by the fact that the former are the latter's trade representatives. Henss Rosenheim also acted throughout the relevant period as trade representative of the German subsidiary of ABB, i.e. ABB Isolrohr GmbH (ABB Isolrohr). Since a single quota was allocated at European level for the Henss companies and the Isoplus companies, and having regard to the role played by Mr Henss, both as representative of all those companies at the meetings of the directors and as director of or shareholder in those companies, it is clear that the Henss companies and the Isoplus companies acted together on the market as a single economic entity.64 As concerns the fact that the interests of Henss Berlin were looked after by Mr Henss in the same way as those of Henss Rosenheim, the Court further observes that, as regards the Leipzig-Lippendorf project, it is apparent from the minutes of a meeting of the cartel on 10 January 1995 at which Mr Henss was present (annex 70 to the statement of objections) that it was decided to allocate the project to ABB Isolrohr, Pan-Isovit and Henz, without its being specified whether the reference was to Henss Berlin or to Henss Rosenheim. It is common ground that the tender relating to that project was subsequently submitted by Henss Berlin and not by Henss Rosenheim, although Mr Henss was not nominally a shareholder in the former, whereas he was in the latter. What is more, in a list of projects drawn up by ABB on 22 March 1995, the three undertakings designated as favourites for the Leipzig-Lippendorf project were ABB, Pan-Isovit and Isoplus (annex 71 to the statement of objections), providing further confirmation that the Henss companies and the Isoplus companies were regarded as belonging to the same economic entity.65 The fact that Isoplus Hohenberg and Isoplus Sondershausen were active in the same market does not mean that they cannot have belonged to the same economic group. Furthermore, during the administrative procedure before the Commission, Isoplus Sondershausen still represented itself as a wholly-owned subsidiary of Isoplus Hohenberg.66 Contrary to the applicant's contention, there is no need for the economic entity identified as a group to have legal personality. In competition law, the term undertaking must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal (Case 170/83 Hydrotherm [1984] ECR 2999, paragraph 11). In the absence of a person at its head to which, as the person responsible for coordinating the group's activities, responsibility could have been imputed for the infringements committed by the various component companies of the group, the Commission was entitled to hold the component companies jointly and severally responsible for all the acts of the group, in order to ensure that the formal separation between those companies, resulting from their separate legal personality, could not prevent a finding that they had acted jointly on the market for the purposes of applying the rules on competition (see, on that point, Case 48/69 ICI v Commission [1972] ECR 619, paragraph 140).67 Since the Commission regarded the Henss/Isoplus group as the undertaking that committed the infringement in respect of which the component companies of the group were held liable, it is irrelevant whether, in the present case, Mr Henss may be personally regarded as an undertaking within the meaning of Article 85(1) of the Treaty.68 It follows from all the foregoing that the plea in law must be rejected.B - Second plea in law, alleging infringement of essential procedural forms when referring to the Henss/Isoplus group in the operative part of the Decision1. Arguments of the parties69 The applicants claim that the Commission infringed essential procedural forms, laid down, in particular, in Regulation No 17, by stating that the Henss/Isoplus group was an addressee of the Decision. In the absence of legal or quasi-legal personality, the Henss/Isoplus group did not have locus standi in proceedings brought under Article 85 of the Treaty governed by Regulation No 17, in particular before the Court of First Instance.70 In that regard, the applicants claim that the Commission states in Article 1 of the operative part of the Decision that the Henss/Isoplus group infringed Article 85(1) of the Treaty. In Article 2 of the Decision, the Commission goes on to state that the undertakings named in Article 1 are to bring the said infringement to an end forthwith, if they have not already done so. Furthermore, in Article 3 of the Decision it is stated that the fines are imposed on the undertakings named in Article 1 in respect of the infringements found therein and, in subparagraph (d): [the] Henss/Isoplus group, a fine of ECU 4 950 000, for which the following companies are jointly and severally liable: ...: Last, in Article 5(d) of the Decision it is stated that the Decision is addressed to [the] Henss/Isoplus group, represented by: .... From a procedural point of view, the Commission therefore regarded the Henss/Isoplus group as an addressee of the Decision, and not the undertakings identified in Article 5 of the Decision, which are identified only in connection with their joint obligation to pay the fine imposed on the Henss/Isoplus group.71 The applicants observe that the present action cannot amount to recognition on their part that the Decision is to be taken in the desired sense on this point, since they have brought the present court proceedings. On the contrary, in doing so each intends to rely on its own rights and, in the interests of precaution, on the rights of what the Commission regards as the Henss/Isoplus group. Their applications are therefore submitted on their own behalf and also on behalf of the Henss/Isoplus group in which the Commission has placed them.72 The defendant confirms that the addressees of the Decision are, for present purposes, the undertakings clearly identified in Article 5 of the operative part of the Decision. The applicants understood the Decision in that sense, moreover, since they brought their action on their own behalf and designated themselves as addressees of the Decision.73 As regards the use of the names Henss/Isoplus or Henss/Isoplus group in the Decision, it is necessary to differentiate the identification of the undertaking, possibly taking the form of a group, which committed an infringement, from the identification of the natural or legal person, capable of enjoying rights and being subject to duties, which is technically responsible for that infringement. Although the term Henss/Isoplus group, represented by ... in Article 5(d) of the Decision is not particularly felicitous, it cannot be inferred that the Henss/Isoplus group as such is the person liable for the fine, since the provision in question refers to the very companies identified in Article 3(d) of the Decision as jointly and severally liable for the fine.74 Last, the Decision was notified by letter addressed separately to each of the five applicants and not to the Henss/Isoplus group.2. Findings of the Court75 It was stated at paragraph 66 above that, in the absence of a person at the head of the Henss/Isoplus group to which, as the person responsible for coordinating the group's activities, responsibility could have been imputed for the infringements committed by the various component companies of the group, the Commission was entitled to hold the component companies jointly and severally responsible for all the acts of the group.76 In that regard, Article 1 of the Decision identifies the Henss/Isoplus group among the undertakings which committed the infringement described in that provision. Similarly, Article 2 of the Decision refers to the undertakings named in Article 1 in order to identify the undertakings which are to bring the infringement to an end, if they have not already done so.77 Next, in Articles 3 and 5 of the Decision, the Commission identified the legal persons that must answer for the infringement committed by the Henss/Isoplus group and which are therefore jointly and severally required to pay the fine imposed on the group.78 Since the Henss/Isoplus group lacks legal personality, Articles 3 and 5 of the Decision cannot be understood otherwise than as designating the applicants as addressees of the Decision as components of the Henss/Isoplus group. The fact that the Henss/Isoplus group is identified through its components means that it cannot be unable to protect its interests in court proceedings. It is able to defend its interests, if necessary, via its components.79 Nor can there be any doubt that the applicants were the addressees of the Decision as components of the Henss/Isoplus group, since the Decision was notified individually to each of the applicants and not to the Henss/Isoplus group, which alone was named as having committed the infringement in Article 1 of the Decision.80 Having regard to their capacity as addressees of the Decision as components of the Henss/Isoplus group, the plea in law put forward by the applicants alleging infringement of Regulation No 17 must be rejected.C - Third plea in law, alleging infringement of the obligation to state reasons1. Arguments of the parties81 According to the applicants, the Commission infringed the obligation to state reasons laid down in Article 190 of the EC Treaty (now Article 253 EC), since the Decision gives no reasons why the Henss/Isoplus group should be a party in proceedings pursuant to Regulation No 17 and thus the addressee of a decision under that regulation. The Commission's assertion in point 160 of the Decision that the statement of objections was addressed to the Henss/Isoplus group and that, in the absence of a single holding company, the four named operating companies were the representatives of the group for the purposes of service and of enforcement, is insufficient in the light of its statement in point 15 of the Decision that the Henss/Isoplus group was a de facto group without its own legal personality and without capacity to bring or defend court proceedings.82 The defendant states that it was shown in points 157 to 160 of the Decision that the undertakings brought together under the title Henss/Isoplus group acted as a de facto group, so that the applicants must be held jointly and severally liable to pay the fine. As the Henss/Isoplus group was not a party to the proceedings, no justification in that regard was necessary.2. Findings of the Court83 The applicants' argument relies on the Decision being interpreted as meaning that the Henss/Isoplus group was regarded as the person involved in the administrative procedure. That interpretation has been rejected as incorrect, since in the Decision, the companies jointly and severally liable for the fine imposed in respect of the infringement committed by the Henss/Isoplus group and thus addressees of the Decision as components of the group were identified in Articles 3 and 5 of the operative part (see paragraphs 75 to 80 above).84 As regards the infringement committed by the Henss/Isoplus group and the fact that the applicants were regarded as responsible for implementing the Decision, as components of the Henss/Isoplus group, reference should be made to points 157 to 160 of the Decision.85 First, the Commission stated in point 157 of the Decision that [t]he Henss/Isoplus undertakings acted as a de facto group. In order to support that assertion, it stated that Mr Henss was the majority shareholder of Isoplus Hohenberg, which itself held all the shares in Isoplus Sondershausen, and that he was the majority shareholder and Managing Director of Henss Rosenheim and Managing Director (but not a shareholder) of Henss Berlin, undertakings which acted as Isoplus's commercial agents in Germany. In the same point of the Decision, the Commission observes that [i]t is apparent from the fact that it was [Mr] Henss who always attended the directors' club meetings that he was the person who exercised management and control over Isoplus and that the Henss and Isoplus undertakings together formed a de facto group. Still according to the Commission, [i]t was common knowledge in the industry that Henss was the power behind Isoplus.86 In point 158 of the Decision, the Commission states that since at the time when the statement of objections was sent there was to its knowledge no holding company to which the statement of objections could be addressed, it addressed it to the Henss/Isoplus group, represented by all four of its principal undertakings in the Community, namely Isoplus Hohenberg, Isoplus Sondershausen, Henss Rosenheim, and Henss Berlin. According to the Decision, it was made clear in the statement of objections that the proceedings were being addressed to the Henss/Isoplus Group and that in the absence of a ... holding company the four named operating companies were the representatives of the group for the purposes of service and of enforcement (fourth paragraph of point 160).87 Last, the Commission states that, after learning from a partnership agreement of 15 January 1997 that holding companies, HFB GmbH and HFB KG, had been formed, to which the shares held in Isoplus Rosenheim and Isoplus Hohenberg had been transferred and that, in addition, a limited partnership, Isoplus stille Gesellschaft, had been set up, it addressed the present Decision not only to Isoplus Hohenberg, Isoplus Sondershausen and Isoplus Rosenheim, but also to HFB GmbH and HFB KG and to Isoplus stille Gesellschaft (point 160 of the Decision).88 It follows from the foregoing that the Commission stated its reasons for regarding the Henss and Isoplus undertakings as constituting a de facto group. It also stated that, in the absence of a holding company representing the group, the group must be identified via its component companies for the purposes of service and of payment of the fine.89 The present plea in law must therefore be rejected.II - The pleas in law relating to HFB GmbH and to HFB KG90 As regards HFB GmbH and HFB KG, the applicants put forward three pleas in law, alleging, first, misapplication of Article 85(1) of the Treaty, second, infringement of the rights of defence and, third, infringement of the obligation to state reasons.A - Arguments of the parties91 The applicants claim that the Commission was wrong to order HFB GmbH and HFB KG jointly and severally with the other applicants to pay the fine imposed on the Henss/Isoplus group.92 The applicants observe that, according to the Decision, the infringement came to an end no later than March or April 1996. Since HFB GmbH and HFB KG were only formed on 15 January 1997 and have existed in law only since they were entered on the commercial register, namely on 10 and 27 February 1997 respectively, they were not able to take part in the infringement. Nor, in the absence of legal existence before 1997, can they be held responsible for any anti-competitive conduct on the part of other undertakings in the Henss/Isoplus group. According to the presumption of innocence, an undertaking can be fined in a proceeding under Article 85 of the Treaty, governed by Regulation No 17, only where it has participated culpably or at least negligently in an infringement.93 It is only where an undertaking has been changed or merged into another undertaking that the latter undertaking, as universal successor in title to the former undertaking, can be held responsible for the infringement committed by the former undertaking, provided that the economic identity of the undertaking has not changed. In that regard, the applicants observe that HFB KG acquired its shares in Isoplus Rosenheim and Isoplus Sondershausen from natural persons, namely Mr and Mrs Henss, in the case of Isoplus Rosenheim, and Mr and Mrs Papsdorf in the case of Isoplus Sondershausen. An undertaking cannot be held responsible, as a successor in title to natural persons who held shares in the company which committed the infringement and who, as mere shareholders, did not themselves constitute undertakings within the meaning of Articles 85 and 86 of the Treaty.94 Contrary to the Commission's approach, it is impossible to invoke the existence of numerous manifestations of the Henss/Isoplus group directed by Mr Henss. The reason why HFB GmbH and thus HFB KG were formed was to facilitate a sale of various shareholdings in district heating undertakings as a whole. A number of increases in share capital and various measures to introduce capital were implemented for exclusively accounting reasons. Those changes in capital and those measures were implemented after the infringement came to an end and even, in certain cases, after the Decision had been adopted.95 The defendant observes that HFB GmbH and HFB KG can be held jointly liable for infringements committed by the Henss/Isoplus group independently of the fact that those undertakings had not themselves infringed the competition rules and had not assumed all the rights and obligations of undertakings that committed the infringements.96 A legal person may be made liable for infringements committed by a company of which it has taken control even if the infringements were committed before it took control (Case T-308/94 Cascades v Commission [1998] ECR II-925). As the Commission could make HFB GmbH and HFB KG jointly responsible for the infringements in question, it could also include them among the undertakings required to pay the fine (Joined Cases T-339/94 to T-342/94 Metsä-Serla and Others v Commission [1998] ECR II-1727).97 In imputing responsibility for the infringements to HFB GmbH and to HFB KG, the Commission did not in any way undermine the presumption of innocence. In the present case, the restructuring whereby HFB GmbH and HFB KG acquired certain of Mr Henss's shareholdings and thus direct control over Isoplus Rosenheim constitutes changes within a single undertaking and controlled by the unitary management of that undertaking.98 In that regard, it is immaterial that the shareholders as such were not undertakings. According to the Commission, undertakings may be constituted of various components, some of which have an operational role and others a management role. In the present case, the latter role was and continues to be played by Mr Henss, who had none the less delegated part of that role to HFB KG, which he himself controls.99 In that context, the Commission states that it was able to hold Mr Henss personally responsible for the infringements committed by Isoplus Rosenheim, since during the period of the infringements that company's policy could not be defined independently of Mr Henss, especially since other companies belonging to the Henss/Isoplus group also participated in the infringement. Since Mr Henss controls HFB GmbH by virtue of his shareholding in its capital and is still Managing Director of that company, both it and HFB KG must accept that the fact that Mr Henss was aware of the infringements committed by the transferred company is imputed to them. Furthermore, the value of the shares acquired could have been altered by the infringement.100 Last, it is necessary to take account, first, of the Commission's legitimate interest in being able, in any enforcement proceedings, to make use of the assets of the group, independently of any restructuring such as that in the present case, and, second, of the difficulties which the Commission may encounter in the event of enforcement against individuals. A restructuring such as that brought about by the formation of HFB GmbH and of HFB KG, where Mr Henss was both seller and purchaser, must not have the effect that the Commission is no longer able to take action against the new holder of the shares in question.B - Findings of the Court101 The Commission brought the Henss companies and the Isoplus companies together within a de facto group which was regarded as the undertaking which had participated in the infringement. Owing to the absence of a parent company representing the Henss/Isoplus group or a company responsible for coordinating the actions of the group, the Commission imputed responsibility for the infringement to the companies of which the group was composed on the date of adoption of the Decision, including HFB GmbH and HFB KG.102 Since HFB GmbH and HFB KG did not yet exist at the time when the infringement was committed, responsibility for the infringement cannot therefore be imputed to them on the basis of any stimulating and coordinating role, in relation to the impugned activities, vis-à-vis the other companies belonging to the Henss/Isoplus group (see, in that regard, Shell v Commission, cited above, paragraph 312).103 Similarly, responsibility for the infringement cannot be imputed to HFB GmbH and to HFB KG solely because they belonged to the Henss/Isoplus group at the time when the Decision was adopted. It falls, in principle, to the natural or legal person managing the undertaking in question when the infringement was committed to answer for that infringement, even if, when the Decision finding the infringement was adopted, another person had assumed responsibility for operating the undertaking (Case C-279/98 P Cascades v Commission [2000] ECR I-9693, paragraph 78, and Case C-297/98 P SCA Holding v Commission [2000] ECR I-10101, paragraph 27). In the present case, on the assumption that HFB GmbH and HFB KG operate as holding companies responsible in whole or in part for the Henss/Isoplus group, and that that situation came about after the infringement had taken place, they cannot be imputed with the unlawful conduct of the Henss/Isoplus group prior to the acquisition, in whole or in part, of that group (Cascades v Commission, cited above, paragraph 77).104 The situation would be different only where the legal person or persons responsible for running the undertaking have ceased to exist in law after the infringement has been committed (Case C-49/92 P Commission v Anic [1999] ECR I-4125, paragraph 145). It is common ground that the companies concerned at the time when the infringement was committed still exist.105 It is clear from the case-file that the Commission holds HFB GmbH and HFB KG jointly and severally liable for the infringement committed by the Henss/Isoplus group owing, inter alia, to the fact that they obtained from Mr Henss the control which he exercised over the undertakings in the group, in particular direct control over Isoplus Rosenheim. In that regard, it is sufficient to observe that, in so far as the Commission, in the Decision, did not hold Mr Henss personally liable for the infringement committed by the Henss/Isoplus group, HFB GmbH and HFB KG cannot be imputed, on the basis of economic succession, with liability which was intentionally not established previously.106 It is true that in certain circumstances an infringement of the rules on competition may be imputed to the economic successor of the legal person responsible, even where the latter has not ceased to exist on the date of adoption of the decision finding the infringement, so that the effectiveness of those rules will not be compromised owing to the changes to, inter alia, the legal form of the undertakings concerned (see Case T-134/94 NMH Stahlwerke v Commission [1999] ECR II-239, paragraph 127). However, NMH Stahlwerke v Commission may be distinguished, since in the present case the natural and legal persons involved in the infringement continued their commercial activities in full, while HFB GmbH and HFB KG did not yet exist at the time of the infringement.107 Furthermore, it is impossible, on the basis of the information provided to the Court during the written procedure and subsequently at the hearing, to conclude that there existed strategies adopted for the specific purpose of avoiding penalties for infringement of the competition rules (see Commission v Anic, cited above, paragraph 146).108 Consequently, it must be held that the Commission erred in law in holding HFB KG and HFB GmbH jointly and severally liable for the fine imposed in respect of the participation of the Henss/Isoplus group in the infringement. Accordingly, there is no need to adjudicate on the second and third pleas in law relating to HFB GmbH and HFB KG, alleging infringement of the rights of defence and of the obligation to state reasons.109 Articles 3(d) and 5(d) of the Decision must therefore be annulled in so far as they concern HFB KG and HFB GmbH.III - Pleas in law relating to Isoplus stille GesellschaftA - Arguments of the parties110 The applicants, and Isoplus Hohenberg in particular, criticise the Commission for having also addressed the Decision to Isoplus stille Gesellschaft, in its capacity as an undertaking in the Henss/Isoplus group. Under Austrian law, Isoplus stille Gesellschaft, as a limited partnership, was neither a legal person nor a commercial company, but merely an internal company which, as such, cannot have rights or obligations, which only the owner of the business can have. Furthermore, in September 1997, Isoplus stille Gesellschaft was dissolved without being liquidated, its assets being transferred to the founding company, Isoplus Hohenberg, in the form of an increase in capital.111 In that context, Isoplus Hohenberg puts forward, first of all, a plea in law alleging infringement of Article 85 of the Treaty, in so far as the Decision is addressed to a limited partnership, which, not having legal or quasi-legal personality, is not an undertaking within the meaning of Articles 85 and 86 of the Treaty and, accordingly, cannot be the addressee of a Commission decision in a proceeding under Article 85 of the Treaty.112 Isoplus Hohenberg also alleges breach of essential procedural requirements in so far as the Commission, in the Decision, imposed a fine on an undertaking which, as a limited partnership, did not have capacity to defend its interest in court proceedings for the purposes of Austrian law and could not therefore bring an action before the Court of First Instance. Nor could such a decision be addressed to an undertaking which, independently of its legal classification, did not exist when the Decision was adopted because it had been dissolved.113 Isoplus Hohenberg further observes that no statement of objections was sent to Isoplus stille Gesellschaft. It states in that regard that at the hearing on 24 and 25 November 1997 it was not possible to consider whether, under Austrian law, a limited partnership has legal or quasi-legal personality and thus has capacity to bring legal proceedings, or the fact that the limited partnership had been dissolved, since, in spite of an application to that effect by its counsel, the Hearing Officer did not hold a separate hearing on those points. In its reply of 30 March 1998 to the request for information of 24 February 1998 (hereinafter the letter of 30 March 1998), the applicant therefore did not comment on the problem of that limited partnership. It was only by letter of 22 October 1998 to the Commission that the problem was raised.114 Last, the Commission infringed its obligation to state reasons, since the Decision does not explain how a limited partnership governed by Austrian law may be the addressee of a Commission decision in a proceeding under Article 85 of the Treaty.115 The defendant observes that Isoplus stille Gesellschaft, as Isoplus Hohenberg itself states, had already ceased to exist when the Decision was adopted. The Decision is therefore inoperative vis-à-vis that company. None the less, no plea in law directed against the Decision can be inferred from that fact. Furthermore, it would be possible to reach the same finding if the limited partnership had still existed when the Decision was adopted. As Isoplus Hohenberg itself recognises, the company had no legal personality, so that the Decision could not have any legal effect with regard to it or, consequently, adversely affect it.B - Findings of the Court116 Having regard to the fact that Isoplus stille Gesellschaft had been dissolved when the Decision was adopted, the Decision could not produce legal effects vis-à-vis that company. Consequently, the Decision produced no legal effects in so far as it was addressed to Isoplus stille Gesellschaft.117 Nor, since Isoplus Hohenberg, which was still the person vested with all the rights and obligations capable of existing for Isoplus stille Gesellschaft, is itself an addressee of the Decision, can the fact that Isoplus stille Gesellschaft was included among the addressees of the Decision have any legal effect vis-à-vis Isoplus Hohenberg other than that resulting from the fact that the Decision was addressed to Isoplus Hohenberg and that the latter was held jointly and severally liable for the fine imposed on the Henss/Isoplus group.118 As the Decision is inoperative in so far as it is addressed to and refers to Isoplus stille Gesellschaft, the action is devoid of purpose in so far as it concerns the latter and there is therefore no need to adjudicate in that regard.IV - The pleas in law put forward in relation to all the applicants119 The applicants together put forward five pleas in law. The first plea in law alleges errors of fact and of law in applying Article 85(1) of the Treaty. The second plea alleges infringement of the rights of defence. The third plea alleges that the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3, hereinafter the new guidelines or the guidelines) are unlawful. The fourth plea alleges infringement of the rules relating to fines in competition matters and of general principles and errors of assessment in determining the amount of the fine. The fifth plea alleges breach of the obligation to state reasons.A - First plea in law, alleging errors of fact and of law in applying Article 85(1) of the Treaty1. Participation in the infringement prior to October 1994...(b ) Legal assessment182 As regards the Commission's legal assessment of the facts established before October 1994, the applicants essentially put forward six objections. First, the applicants criticise the classification of all agreements and concerted practices as an infringement. Second, the applicants claim that the conduct found should not have been classified as an agreement. Third, the applicants dispute the concept of concerted practices employed by the Commission. Fourth, the applicants claim that the Commission incorrectly assessed the legal consequences of participation in a meeting having an anti-competitive purpose. Fifth, the applicants maintain that the Commission erred in relation to the burden of proof as regards participation in an overall cartel. Sixth, the applicants accuse the Commission of having failed to assess the individual responsibility of the companies regarded as belonging to the Henss/Isoplus group.(i) The classification of all agreements and concerted practices as an infringementArguments of the parties183 The applicants dispute the Commission's assertion in points 131 and 132 of the Decision that in a complex cartel of long duration, where the various concerted practices followed and agreements concluded form part of a course of conduct adopted by the undertakings in pursuit of a common objective of preventing or distorting competition, it is entitled to find that they constitute a single continuous infringement. The Commission is incorrect to maintain that it is not necessary, in such a case, for it to categorise the infringement as exclusively an agreement or a concerted practice.184 The applicants observe that it is not necessary, either in the case of an agreement within the meaning of Article 85(1) of the Treaty or in that of a gentlemen's agreement intended to restrict competition, to demonstrate the existence of an actual restriction of competition. In the case of concerted practices, on the other hand, in the absence of the deliberate coordination of conduct with the object of restricting competition, it is for the Commission to prove that the concerted practices actually had the effect of restricting competition. Having regard to the distinction between the concepts of agreement and concerted practices, it is not possible for the Commission to find only a single infringement of Article 85(1) of the Treaty where the infringements of that provision assume different forms. Observance of the principle of the presumption of innocence requires that all the material elements of an infringement of Article 85(1) of the Treaty be specified in a decision adopted pursuant to Regulation No 17.185 The defendant observes that in the present case the agreements and concerted practices implemented during the relevant period formed part of a system of regular meetings designed to regulate the market by setting prices and quotas. Since that conduct manifested itself partly in agreements and partly in concerted practices, the Commission was justified in finding, in Article 1 of the Decision, that there was an agreement and a concerted practice. Thus it neither misconstrued the concepts of agreement and of concerted practice nor infringed general principles of law.Findings of the Court186 It is settled case-law that, in the context of a complex infringement which involves many producers seeking over a number of years to regulate the market between them, the Commission cannot be expected to classify the infringement precisely, for each undertaking and for any given moment, as an agreement or a concerted practice, as in any event both those forms of infringement are covered by Article 85 of the Treaty. The Commission is therefore entitled to classify such a single infringement as an agreement and a concerted practice or as an agreement and/or a concerted practice, since the infringement includes elements which are to be classified as an agreement and elements which are to be classified as a concerted practice (Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711, paragraph 264). It would be artificial to split up continuous conduct, characterised by a single purpose, by treating it as consisting of a number of separate infringements (Hercules Chemicals v Commission, cited above, paragraph 263).187 In such a situation, the dual characterisation must be understood not as requiring, simultaneously and cumulatively, proof that each of those factual elements presents the constituent elements both of an agreement and of a concerted practice, but rather as referring to a complex whole comprising a number of factual elements some of which were characterised as agreements and others as concerted practices for the purposes of Article 85(1) of the Treaty, which lays down no specific category for a complex infringement of this type (Hercules Chemicals v Commission, cited above, paragraph 263).188 Although Article 85 of the Treaty distinguishes between concerted practices, agreements between undertakings and decisions by associations of undertakings, the object is to bring within the prohibitions in that article different forms of coordination and collusion between undertakings (ICI v Commission, cited above, paragraph 64). It does not, however, follow that patterns of conduct having the same anti-competitive object, each of which, taken in isolation, would fall within the meaning of agreement, concerted practice or decision by an association of undertakings, cannot constitute different manifestations of a single infringement of Article 85(1) of the Treaty. A pattern of conduct by several undertakings may therefore be the expression of a single and complex infringement, corresponding partly to an agreement and partly to a concerted practice (Commission v Anic, cited above, paragraphs 112 to 114).189 Contrary to what the applicants claim, the Commission was correct to state that, in such a case, there is no need to categorise the infringement as exclusively an agreement or a concerted practice.190 A comparison between the concepts of agreement and concerted practice within the meaning of Article 85(1) of the Treaty shows that, from the subjective point of view, they are intended to catch forms of collusion having the same nature and are only distinguishable from each other by their intensity and the forms in which they manifest themselves. It follows that, whilst the concepts of an agreement and of a concerted practice have partially different elements, they are not mutually incompatible. The Commission is therefore not required to categorise either as an agreement or as a concerted practice each form of conduct found but may characterise some of those forms of conduct as principally agreements and others as concerted practices (Commission v Anic, cited above, paragraphs 131 and 132).191 Such an interpretation does not have an unacceptable effect on the question of proof. On the one hand, the Commission must still establish that each form of conduct found falls under the prohibition laid down in Article 85(1) of the Treaty as an agreement, a concerted practice or a decision by an association of undertakings. On the other hand, the undertakings charged with having participated in the infringement have the opportunity of disputing, for each form of conduct, the characterisation or the characterisations applied by the Commission by contending that the Commission has not adduced proof of the constituent elements of the various forms of infringement alleged (Commission v Anic, cited above, paragraphs 134 to 136).192 It follows that the Commission did not err in law by characterising the infringement in question, in Article 1 of the operative part of the Decision, as a complex of agreements and concerted practices, without placing it in just one of those two categories.(ii) The characterisation as an agreement of the forms of conduct foundArguments of the parties193 The applicants claim, as regards the concept of agreement within the meaning of Article 85(1) of the Treaty, that it follows from the provision in Article 85(2) of the Treaty that such an agreement is automatically void that any such agreement must be legally binding. Accordingly, what is known as a gentlemen's agreement is not an agreement. Provided that the undertakings are not agreed among themselves, their conduct can be characterised only as an attempted agreement, which is not punishable by a fine in competition law.194 According to the applicants, there was no agreement during the relevant period, since it was only in the autumn of 1994 that an agreement was reached on prices and quotas.195 As regards the system of quotas which, according to the Commission, was adopted in August or September 1993, the Commission even stated, in point 51 of the Decision, concerning the agreed targets for the German market for 1994, that a general consensus seem[ed] to have emerged, which indicates that such a consensus did not exist. According to the same point of the Decision, Tarco was said to have had reservations about the quotas. In point 52 of the Decision, the Commission further states that such an agreement never actually saw the light of day. Irrespective of the fact that the applicants never entered into such an agreement or that they never collaborated in one, the facts put forward by the Commission could at the most be characterised as an attempted agreement.196 The Commission is incorrect to state, in point 137 of the Decision, that the inchoate, loose and often fragmentary arrangements outside Denmark before 1994 in any event amounted to infringements of Article 85(1) of the Treaty. Inchoate agreements are agreements that do not yet exist: consensus ad idem has not been reached between the undertakings concerned. Consequently, such fragmentary, inchoate arrangements are merely attempted agreements, which are not punishable by fines.197 In any event, not only did Henss Rosenheim and thus the Henss/Isoplus group not abide by the outcome of the meetings referred to in the Decision, they even openly withdrew their support for those results. The fact that the undertaking's legal representative took action and that Henss Rosenheim lodged a complaint against ABB Isolrohr before an arbitration tribunal can be interpreted only as meaning that it openly distanced itself from what was agreed at the meetings within the meaning of the case-law.198 The defendant observes that, according to the case-law, it is sufficient, in order to accept the existence of an agreement, that the undertakings concerned expressed their joint intention to adopt specific conduct on the market. It is in no way necessary for the parties to have established a legal link. In that context, the price increase decided upon in October or December 1991, the system of quotas adopted in August or September 1993 and the price list adopted in May and August 1994 are by nature agreements.Findings of the Court199 It is settled case-law that in order for there to be an agreement within the meaning of Article 85(1) of the Treaty it is sufficient that the undertakings in question should have expressed their joint intention to conduct themselves on the market in a specific way (Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 112, Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck v Commission [1980] ECR 3125, paragraph 86, and Case T-1/89 Rhône-Poulenc v Commission [1991] ECR II-867, paragraph 120).200 That is the case where there is a gentlemen's agreement between a number of undertakings representing the faithful expression of such a joint intention concerning a restriction of competition (ACF Chemiefarma v Commission, cited above, paragraph 112, and Case T-141/89 Tréfileurope v Commission [1995] ECR II-791, paragraph 96). In those circumstances, the question whether the undertakings in question considered themselves bound - in law, in fact or morally - to adopt the agreed conduct is therefore irrelevant (Case T-347/94 Mayr-Melnhof v Commission [1998] ECR II-1751, paragraph 65).201 Contrary to what the applicants allege, the opposite conclusion cannot be inferred from the provision in Article 85(2) of the Treaty that any agreement referred to in Article 85(1) is automatically void, which is intended for cases where a legal obligation is actually in issue. The fact that only binding agreements can, by their nature, be rendered void does not mean that non-binding agreements must escape the prohibition laid down in Article 85(1) of the Treaty.202 In the present case, the Commission considered in point 137 of the Decision that, as regards the arrangements outside the Danish market before 1994, express agreement was reached at the latest, on the price increase for Germany, on 1 January 1992, and, for pricing and project sharing in Italy and the market-quota scheme, in August 1993. As regards the applicants' participation in the cartel before October 1994, it is common ground that the Commission found that there was an agreement, first, as to the price increase for the German market for 1992, decided in October and December 1991, second, as to the quota scheme adopted in August or September 1993 and, third, as to the price list adopted in May and August 1994.203 In that regard, reference should be made to paragraphs 137 to 181 above, where it was held that the Commission, on the basis of all the evidence it had gathered, was entitled to consider that the Henss/Isoplus group was a party to the agreement reached, at the latest, on 19 December 1991 on the increase of gross prices in Germany, an agreement to share the German market reached, at the latest, in September 1993, and an agreement on a price list, adopted at the meetings of May and August 1994.204 On that question, Henss Rosenheim's objection to the agency price increases imposed by ABB Isolrohr cannot be regarded as distancing itself from the other participants in the cartel, since its objection related only to the agency prices used in the commercial representation of Henss Rosenheim and not to the selling prices fixed by the undertakings concerned for the German market.205 As regards the agreement on sharing the German market, reached in August 1993, it cannot be maintained that the Commission found the absence of joint intention in stating, in point 51 of the Decision, that a consensus seem[ed] to have emerged on the quota scheme. At that place, the verb seem cannot be understood other than as expressing the Commission's conviction that it could be inferred from the circumstances of the case that a general consensus had been established on a quota scheme at that time. Similarly, the fact that Tarco had expressed reservations about its market share could not prevent the Commission from finding that an agreement in principle had emerged. It is clear from ABB's reply that, during the negotiations, in April and May 1993, to reach an agreement on prices, Tarco refused to participate in any agreement on prices without a parallel agreement on market-share quotas, owing to the fact that Tarco did not obtain orders when it did not engage in aggressive price competition. As stated in paragraph 153 above, Tarco's position was expressed in a request for a higher quota than the 17% envisaged on the basis of the audit, which led, in a subsequent proposal, to its being allocated a higher market share. It cannot be inferred from the fact that Tarco adopted such a position that it was opposed to the principle of sharing the German market.206 Contrary to what the applicants claim, the facts relied on by the Commission cannot be characterised as merely an attempted agreement. It is apparent from the series of meetings at which market-sharing was discussed that, at least at a certain time, the undertakings in question expressed their joint intention to conduct themselves on the market in a specific manner. As observed in paragraphs 151 to 157 above, it must be held that, even if there was not an agreement on all the matters forming the subject-matter of the negotiations, a joint intention to restrict competition on the German market by means of fixed market shares for each operator governed the negotiations during a certain period in 1993.207 In that context, the Commission's assertion in point 137 of the Decision that it may well be true that [the arrangements] were inchoate, loose and often fragmentary cannot be taken to mean that, in respect of the facts characterised as an agreement by the Commission, there was not yet a joint intention on the part of the undertakings concerned to conduct themselves on the market in a specific way. The Commission's assertion, although it states that the arrangements were not always concluded for all the matters forming the subject-matter of the negotiations or for all the foreseeable details and that they were sporadic and non-continuous, does not in any way mean that the undertakings concerned did not reach agreement on one or more matters intended to restrict competition on the market in question.208 It follows that the applicants' objection must be rejected.(iii) The concept of concerted practicesArguments of the parties209 The applicants submit that, as regards the concerted practices, in the absence of deliberate coordination of conduct intended to restrict competition, it is for the Commission to prove that the concerted practices actually had the effect of restricting competition. In the present case, however, the Commission itself recognised that, as regards the period before October 1994, outside the Danish market, prices had fallen continually since October 1990, especially in the German market.210 The defendant contends that it relied on the definition of concerted practices laid down in the case-law. In that context, it established, in point 138 of the Decision, that in the present case the exchange of normally sensitive commercial information constituted concerted practices. The fact that prices had fallen in Germany at the material time does not contradict, in legal terms, the existence of concerted practices; at the most, it suggests that the cartel was not a success. Furthermore, the Commission adduced direct evidence of the collusive contacts between the parties.Findings of the Court211 According to settled case-law, a concerted practice refers to a form of coordination between undertakings which, without having been taken to a stage where an agreement properly so-called has been concluded, knowingly substitutes for the risks of competition practical cooperation between them (see Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraph 26, and Hüls v Commission, cited above, paragraph 158).212 It follows from that case-law that the criteria of coordination and cooperation must be understood in the light of the concept inherent in the provisions of the Treaty relating to competition, according to which each economic operator must determine independently the policy which he intends to follow in the common market. Although that requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such operators capable of influencing the conduct on the market of an actual or potential competitor or of disclosing to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market, where the object or effect of such contact is to create conditions of competition which do not correspond to the normal conditions of the market in question, regard being had to the nature of the products or services offered, the size and number of the undertakings and the volume of the said market (Suiker Unie and Others v Commission, cited above, paragraphs 173 and 174, Hüls v Commission, cited above, paragraphs 159 and 160, and Rhône-Poulenc v Commission, cited above, paragraph 121).213 Furthermore, it follows from the actual terms of Article 85(1) of the Treaty, that a concerted practice implies, besides undertakings concerting with each other, conduct on the market pursuant to those collusive practices, and a relationship of cause and effect between the two (see Commission v Anic, cited above, paragraph 118, and Hüls v Commission, cited above, paragraph 161).214 In that context, it is necessary to assess the Commission's observations, in the second paragraph of point 138 of the Decision, that even if the concept of "agreement" does not apply to steps in the bargaining process leading up to comprehensive agreement, the conduct in question still falls under the prohibition of Article 85 as a concerted practice. On that point, the Commission described the regular meetings as a forum for ... the exchange of normally sensitive commercial information ... [which] must have meant reaching a certain level of understanding, reciprocity and conditional or partial agreement as to [the] conduct [of the participants] and stated that the participants could not, in any event, have failed to take into account, directly or indirectly, the information obtained in the course of those regular meetings.215 In that regard, it should be observed that, for the period before October 1994, a number of documents show that, in 1992 and 1993, the Henss/Isoplus group participated, on numerous occasions, in an exchange of information on market share. As stated in paragraphs 146, 148 and 149 above, that applies to the documents in annexes 37, 44, 49 and 53 to the statement of objections.216 However, subject to proof to the contrary, which the economic operators concerned must adduce, the presumption must be that the undertakings taking part in the concerted arrangements and remaining active on the market take account of the information exchanged with their competitors when determining their conduct on that market (Commission v Anic, cited above, paragraph 121, and Hüls v Commission, cited above, paragraph 162). That is all the more true where the undertakings concert together on a regular basis over a long period, as was the case here (Commission v Anic, cited above, paragraph 121, and Hüls v Commission, cited above, paragraph 162).217 Furthermore, it follows from the case-law that a concerted practice is caught by Article 85(1) of the Treaty, even in the absence of anti-competitive effects on the market. First, it follows from the actual text of that provision that, as in the case of agreements between undertakings and decisions by associations of undertakings, concerted practices are prohibited, regardless of their effect, when they have an anti-competitive object. Next, although the very concept of a concerted practice presupposes conduct by the participating undertakings on the market, it does not necessarily imply that that conduct should produce the specific effect of restricting, preventing or distorting competition (see Commission v Anic, paragraphs 122 to 124, and Hüls v Commission, paragraphs 123 to 125).218 It follows from the foregoing that, as regards the period before October 1994, in so far as the Commission complained that the Henss/Isoplus group participated in a complex of agreements and concerted practices, it did not err in law when, in the alternative, it characterised an exchange of commercial information as a concerted practice.219 On this point, the applicants' objection must also be rejected.(iv) The legal consequences of participation in a meeting having an anti-competitive purposeArguments of the parties220 According to the applicants, the judge-made rule that an undertaking which does not conform with what is decided at meetings having an anti-competitive purpose may be held liable for an infringement of the competition rules where it has not publicly distanced itself from what was discussed at those meetings should be given a restrictive interpretation, having regard to the judgments of the Court of First Instance in Case T-65/89 BPB Industries and British Gypsum v Commission [1993] ECR II-389 and of the Court of Justice in Case C-310/93 P BPB Industries and British Gypsum v Commission [1995] ECR I-865, which held that the Commission had been correct to be reluctant to reveal certain letters from customers of the undertaking in a dominant position which were in the file.221 In the case of cartels in which undertakings in a dominant position on the market or, at the very least, in a superior economic position, participate, the fact that other economically weaker undertakings do not publicly distance themselves from the anti-competitive outcome of a meeting does not mean that those undertakings must, in spite of everything, be held responsible for what was decided at the meeting from the point of view of competition law. It is often easier for smaller undertakings to say nothing during the meetings to which they have been summoned by the economically dominant market leader and then to refrain from acting in accordance with what was decided.222 The defendant contends that the legal assessment of a cartel is not affected by the fact that an undertaking participated in it intentionally or under constraint, since it is always open to the undertaking to report the cartel. Furthermore, the judgments referred to above rely on the concept that the Commission must, as much as possible, avoid provoking infringements of the competition rules and do not alter the principle that an undertaking which does not abide by what was decided at meetings having an anti-competitive purpose may be held liable in so far as it did not publicly distance itself from what was discussed at those meetings.Findings of the Court223 As observed at paragraph 137 above, where an undertaking participates, even if not actively, in meetings between undertakings with an anti-competitive object and does not publicly distance itself from what was discussed at them, thus giving the impression to the other participants that it subscribes to the outcome of the meetings and will act in conformity with it, it may be concluded that it is participating in the cartel resulting from those meetings.224 Contrary to what the applicants claim, it is irrelevant, in that regard, whether the undertaking in question attends meetings with undertakings having a dominant position or, at least, an economically superior position on the market.225 First, the case-law cited by the applicants relates to the Commission's obligation, in an administrative procedure concerning competition law, to observe the confidentiality of certain documents in the administrative file. In that context, it has been held that the Commission could lawfully refuse to make accessible to undertakings accused of having abused their dominant position certain correspondence with third-party undertakings by reason of their confidential nature, since an undertaking to which a statement of objections is addressed, and which occupies a dominant position in the market, may, for that very reason, adopt retaliatory measures against a competing undertaking, a supplier or a customer who has collaborated in the investigation carried out by the Commission (judgment of the Court of First Instance in BPB Industries and British Gypsum v Commission, cited above, paragraph 33, upheld on appeal by the judgment of the Court of Justice in BPB Industries and British Gypsum v Commission, cited above, paragraphs 26 and 27). Since that principle was laid down in a completely different context, relating to the Commission's obligation to provide access to the file, it casts no light on the question of the imputation of the outcome of anti-competitive meetings to the undertakings which participated in such meetings.226 Second, an undertaking which participates in meetings with an anti-competitive object, even under constraint from other participants with greater economic power, can always report the anti-competitive activities in question to the Commission rather than continue to participate in the meetings (see paragraph 178 above).227 It follows that the Commission did not err in law in so far as it relied, in the present case, on the interpretation of Article 85(1) of the Treaty that an undertaking which participates in meetings with an anti-competitive object and does not publicly distance itself from what was discussed at them may be regarded as having participated in the cartel resulting from those meetings.(v) The burden of proof in relation to participation in an overall cartelArguments of the parties228 The applicants dispute the Commission's assertion in point 134 of the Decision that it is not necessary, for the existence of an agreement, that every alleged participant participated in, gave its express consent to or was even aware of each and every individual aspect or manifestation of the cartel throughout its adherence to the common scheme .... They claim that that legal concept is not laid down in the case-law and is, in particular, contrary to Article 6(2) of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention) and to the principle of culpability as a general principle of law. Last, such a concept has the effect of reversing the burden of proof.229 In that regard, the applicants observe that an undertaking may be held responsible for an overall cartel even though it is shown that it participated directly only in one or some of the constituent elements of that cartel, if it is shown that it knew, or must have known, that the collusion in which it participated was part of an overall plan and that the overall plan included all the constituent elements of the cartel (Case T-310/94 Gruber + Weber v Commission [1998] ECR II-1043, paragraph 140). Although that principle refers essentially to agreements within the meaning of Article 85(1) of the Treaty and is not therefore readily applicable to concerted practices within the meaning of that provision, it none the less shows that the Commission decision must state precisely what the nature of the agreement was and what the undertaking concerned knew or must have known. In particular, an undertaking cannot be imputed with having participated in an overall cartel either during a period prior to that during which it took part in the infringement or in respect of a market in which it has never operated.230 The defendant observes that point 134 of the Decision concerns the single nature of the cartel and not the scope of the accusation concerning each of the undertakings. It is quite clear from the Decision that the Commission drew a distinction between the question relating to the single and continuous infringement and the question as to the extent to which each undertaking is held responsible for the infringement.Findings of the Court231 According to the case-law, an undertaking may be held responsible for an overall cartel even though it is shown that it participated directly only in one or some of the constituent elements of that cartel, if it is shown that it knew, or must have known, that the collusion in which it participated was part of an overall plan and that the overall plan included all the constituent elements of the cartel (see Case T-295/94 Buchmann v Commission [1998] ECR II-813, paragraph 121, and Gruber + Weber v Commission, cited above, paragraph 140). Similarly, an undertaking which has participated in a single complex infringement by its own conduct, which was intended to play a part in bringing about the infringement as a whole, may also be responsible for the conduct of other undertakings followed in the context of the same infringement throughout the period of its participation in the infringement, where it is proved that the undertaking in question was aware of the unlawful conduct of the other participants, or could reasonably foresee such conduct, and was prepared to accept the risk. Such a conclusion is not at odds with the principle that responsibility for such infringements is personal in nature, nor does it neglect individual analysis of the evidence adduced, in disregard of the applicable rules of evidence, or infringe the rights of defence of the undertakings involved (Commission v Anic, cited above, paragraph 203).232 According to the applicants, it follows from the sixth paragraph of point 134 of the Decision that the Commission did not observe the principles laid down in that case-law.233 However, that argument is based on an incorrect reading of point 134 of the Decision.234 The passage in question forms part of the grounds set out under the heading Agreements and concerted practices in which the Commission first set out its interpretation of the terms agreements and concerted practices (points 129 and 130 of the Decision) and then stated its reasons for considering that it was entitled to conclude that there had been a single continuous infringement, without its being necessary to categorise the infringement as exclusively one or other of those forms, namely as an agreement or as a concerted practice (points 131 to 133 of the Decision). The Commission then observed, in point 134 of the Decision, that there may not have been consensus on all the elements of the cartel, that formal agreement may never be reached on all matters and that the participants may also show varying degrees of commitment to the cartel, but that none of these elements will prevent such an arrangement from constituting an agreement or a concerted practice for the purposes of Article 85(1) of the Treaty where there is a combination of parties with a single common and continuing objective. After the final passage cited, the Commission further observes that members may join or leave the cartel from time to time without its having to be treated as a new agreement with each change in participation.235 It follows that the passage cited by the applicants cannot be understood otherwise than as clarifying the circumstances in which a cartel may in the Commission's view be regarded as a single continuous infringement, although the Commission does not deal with the issue of the imputation of responsibility for such an infringement to the undertakings that participated in it.236 That interpretation of the Decision is also confirmed by point 148(b) thereof, where it is expressly stated that [i]t is not alleged that each addressee of this Decision participated in each and every aspect of the anti-competitive arrangements set out or did so for the whole duration of the infringement and that [t]he role of each participant and the extent of its involvement is fully set out in this Decision.237 As regards the participation of the Henss/Isoplus group in the infringement found by the Commission, the applicants have not stated, in connection with that objection, to what degree the Commission imputed to them participation in an overall cartel either during a period prior to that during which they took part in the infringement or in respect of a market in which they never operated. In that regard, it has been stated above, first, that the Commission, in the Decision, properly accused the Henss/Isoplus group of participating in the infringement from October 1991 and, second, that such participation had been taken into account, for the period before October 1994, only in respect of its membership of the cartel between the Danish producers in relation to the German market.238 The objection put forward by the applicants must therefore be rejected.(vi) The individual responsibility of the companies regarded as belonging to the Henss/Isoplus groupArguments of the parties239 The applicants dispute the Commission's assertion that it is not required to prove the involvement of each of the undertakings brought together in the Henss/Isoplus group as regards their conduct in the market before October 1994. In so far as, in that regard, the applicants must be regarded as legally independent of one another, since there was no Henss/Isoplus group, the Decision says nothing about why each applicant is held responsible for the participation in the illegal cartel. Nor is it clear from the Commission's use of the name Henss in the Decision whether it was referring to Mr Henss in person, to the Henss/Isoplus group or to a Henss company, such as Henss Rosenheim or Henss Berlin.240 As regards Isoplus Hohenberg, the applicants observe that it is a company governed by Austrian law, that Austria has been a member of the European Community only since 1 January 1995 and that the competition rules laid down in Article 53 of the EEA Agreement have been applicable only since 1 July 1994. Even when the problem of the principle of territoriality in competition law is taken into account, the Decision contains no finding of fact as regards the responsibility of Isoplus Hohenberg, under Article 85 of the Treaty or Article 53 of the EEA Agreement, for anti-competitive conduct before October 1994.241 The defendant states that the four operating companies were presented as a single entity represented by Mr Henss. Their participation satisfied a manifest interest, as they were present in the German market in which prices remained low. For those reasons, the plea alleging that the Commission did not sufficiently prove that Isoplus Hohenberg, which had its registered office in Austria, participated in the cartel must be rejected.Findings of the Court242 As stated at paragraphs 54 to 66 above, the Commission correctly established that the Henss companies and the Isoplus companies participated in the cartel as a single economic entity, called in the Decision the Henss/Isoplus group or Henss/Isoplus. Consequently, it was not always relevant to state, in the Decision, whether the reference to Henss was to a Henss company or to the Henss/Isoplus group. Similarly, in so far as the Decision refers to Mr Henss, it is also in his capacity as representative of the Henss companies and the Isoplus companies as a whole, which he controlled and represented within the cartel.243 As regards the period before 1994, even though Mr Henss may have acted on behalf of Henss Rosenheim and Henss Berlin at meetings of the directors' club in connection with their commercial agency contracts in the German market, it none the less remains that at the same time he protected those two companies' own interests and the interests of Isoplus Hohenberg and Isoplus Sondershausen. As stated at paragraph 60 above, it follows from the notes taken by other participants that all the Henss companies and the Isoplus companies were brought together, in the discussions on the sharing of the German market, in a single entity called Isoplus or Isoplus/Henss.244 Consequently, the Commission established to the requisite legal standard that each of the Henss companies and the Isoplus companies was a component of the Henss/Isoplus group and, for that reason, must be held responsible for the infringement committed by the group.245 Isoplus Hohenberg was already a component of the Henss/Isoplus group before 1994. Since the Commission imputed to Isoplus Hohenberg, in that capacity, the infringement committed by the Henss/Isoplus group, consisting in a cartel covering, as regards the group, the German market, it cannot be accepted that the Commission imputed to it activities which, because of their geographical situation, fell outside the scope ratione territoriae of Article 85 of the Treaty.246 It follows that the present objection must also be rejected....B - Second plea in law, alleging breach of the rights of defence...3. Infringement of the right to be heard in connection with the translation of certain documentsArguments of the parties323 The applicants maintain that their right to be heard was infringed since the Commission did not make all the documents available to them in German. Thus, they did not receive translations of certain documents in the annexes to the statement of objections, to the further statement of objections and to the replies of other undertakings following the Commission's requests for information.324 According to the applicants, the reflections of the Court of Justice in its judgment in Case C-274/96 Bickel and Franz [1998] ECR I-7367, concerning the right of citizens of the European Union to require that criminal proceedings be conducted in the mother tongue of the person concerned, apply to a proceeding before the Commission under Regulation No 17, which must be classified as criminal proceedings for the purpose of Articles 5 and 6 of the Convention. Proceedings before the Commission are subject to the general principle of equality of arms, which requires that not only the statement of objections and the decision but also all the annexes thereto be notified in the official language of the place in which the undertaking concerned has its registered office or in any other language of procedure which it may choose. In any event, the Commission must be under an obligation to translate the documents annexed to correspondence from other undertakings and from the complainant, since the Commission itself is required to have those documents translated into the various official languages of the Community.325 The defendant observes that the procedural documents within the meaning of Regulation No 17, namely the statement of objections and the Decision, were sent to the undertakings concerned in German, pursuant to Article 3 of Regulation No 1 of the Council determining the languages to be used by the European Economic Community (OJ English Special Edition 1952-1958, p. 59). On the other hand, documents not from the Commission, which must provide information to the applicants and assist their defence, must be sent in the original version. Accordingly, there is no legal basis for the applicants' assertion that the Commission must translate those documents into the various official languages of the Community.Findings of the Court326 The applicants maintain that they should have received a translation not only of the documents annexed to the statement of objections but also of the annexes to the replies of the other undertakings to the Commission's requests for information.327 First of all, it is settled case-law that the annexes to the statement of objections which do not emanate from the Commission are not documents for the purposes of Article 3 of Regulation No 1, but must be regarded as supporting documentation on which the Commission relies and must therefore be brought to the attention of the addressee of the Decision as they are, so that the addressee can apprise himself of the interpretation of them which the Commission has adopted and on which it has based both its statement of objections and its Decision (Case T-141/89 Tréfilunion v Commission [1995] ECR II-1063, paragraph 21, and Case T-338/94 Finnboard v Commission [1998] ECR II-1617, paragraph 53). It follows that the Commission, in communicating those annexes in their original language, did not infringe the right to be heard of the undertakings concerned.328 Next, the body of the statement of objections which was sent to the applicants in German contains relevant extracts from the annexes thereto. That presentation therefore enabled them to determine precisely on what facts and legal reasoning the Commission had relied. The applicants were therefore capable of properly defending their rights (see also Tréfilunion v Commission, cited above, paragraph 21).329 Last, the same considerations apply to the documents annexed by other undertakings to their replies to the Commission's requests for information. There is no provision of Community law that obliges the Commission to provide a translation of such documents which do not emanate from it; and since those documents must provide information to the undertakings concerned and assist their defence, they must also be brought to their attention as they are, so that the undertakings concerned can themselves evaluate the interpretation of them which the Commission has adopted and on which it has based its Decision.330 Such a situation does not infringe the principle of equality of arms, since, as the Commission asserts, the original of the documents constitutes the only relevant evidence, both for the Commission and for the undertakings concerned.331 It does not avail the applicants to seek a different interpretation from the foregoing of Bickel and Franz. In that judgment, the Court of Justice ruled in favour of the non-discriminatory application of a language system which conferred the right to require that criminal proceedings be conducted in the mother tongue of the persons concerned. However, the question as to whether, on grounds relating to the rights of defence, the written evidence must be translated into the language of the case was not addressed.332 For those reasons, the objection alleging infringement of the right to be heard, in relation to the absence of a translation of those documents must be rejected.4. Infringement of the right to be heard in relation to the deadlines for submitting observationsArguments of the parties333 The applicants maintain that their rights of defence have been prejudiced in so far as the Commission did not allow them sufficient time to submit their views on the entire file.334 In that regard, they observe that, following the statement of objections, the Commission, by letter of 22 May 1997, sent numerous further documents with annexes which were not in German, while the deadline by which the addressees of the statement of objections were to submit their views was 30 June 1997. The Commission did not reply to a request from the applicants for further time and the observations on the statement of objections were submitted within the prescribed period. Then, the applicants received, by letter from the Commission of 19 September 1997, the replies to the statement of objections of other undertakings concerned and annexes, containing documents which were not translated into German, on which the Commission requested them to submit their observations by 10 October 1997. The applicants received further letters from the Commission, dated 24 September and 9 October 1997, containing documents which were also not translated. The applicants submitted their observations on 12 and 17 November 1997, while objecting to the course of action taken by the Commission. In spite of the applicants' objections at the hearing on 24 and 25 November 1997, the Hearing Officer admitted all the evidence thus communicated. Furthermore, the final written observations submitted by the other undertakings were not brought to the applicants' knowledge.335 The applicants observe that, if the Commission's notion that the annexes to the statement of objections and the further objections must not be served in the language of the place in which the undertaking has its registered office is accepted, the numerous documents in foreign languages must first, as far as the applicants are concerned, be translated into German, which takes some time.336 As regards the Commission's assertion that the applicants were none the less in a position to submit observations in respect of the documents sent subsequently, the applicants observe that in order to protect their rights they were required to submit, within the short period allowed, brief observations which could not be elaborated with the desired care and detail. Each time, none the less, they expressly criticised the inadequacy of the period allowed.337 Last, at the hearing the Commission's Agent handed counsel for Isoplus Hohenberg and Isoplus Sondershausen the partnership agreement of 15 January 1997, of which he was not aware at the time, and asked for various explanations in that regard. The applicants objected to the admission of this evidence by the Hearing Officer, when they had been given no time to comment on it.338 The defendant contends that the various deadlines were adequate. Thus, the letter of 22 May 1997 had been accompanied only by a very small number of documents and it had been perfectly possible to adopt a position in regard to them before the deadline. The same also applies to the observations on the documents not used by the Commission, which the undertakings exchanged among themselves. In so far as other undertakings submitted comments on the documents sent by the Commission, the Commission was not required to provide access to those comments to the applicants, since the Decision did not rely on them.339 In the present case, the applicants acknowledge that they returned their observations within the prescribed periods. The applicants had sufficient time to reply to the statement of objections and to examine the Commission's letters of 19 and 24 September and 9 October 1997 and also the documents referred to in those letters. During the administrative procedure, which only ended with the hearing, the applicants no longer insisted on submitting further explanations in writing. Furthermore, the hearing was postponed from 21 and 22 October 1997 to 24 and 25 November 1997, so that sufficient time was available to submit a written reply.340 As regards the partnership agreement of 15 January 1997, the applicants cannot claim that they were unable to comment adequately on that document. The Decision relies on that document only in so far as it helps to show that the applicants formed a group, managed by Mr Henss. The then operating companies were expressly questioned on that point during the written procedure and expressed their views in that regard, denying that any such group existed and, in particular, that Mr Henss held any shares in Isoplus Hohenberg or Isoplus Sondershausen. The question as to whether Mr Henss controlled those companies and, in particular, as to whether the partnership agreement dealt with that point could easily have been answered at the hearing.341 Furthermore, the passages in which the applicants dealt with the partnership agreement in their letters of 8 and 9 December 1997 only criticised the Commission for disclosing that document at the hearing and did not deal with the problem of control by Mr Henss. Consequently, even if the procedure in question had not been sufficient for the applicants to submit proper observations on the latter point, the rights of defence were protected in spite of everything.Findings of the Court342 The applicants claim that they did not have sufficient time to submit their views, first, on the documents sent before expiry of the period prescribed for submitting observations on the statement of objections, second, on the documents subsequently sent, on which the Commission requested comments by 10 October 1997, and, third, on the partnership agreement produced at the hearing, without the applicants being given time to prepare their comments.343 First, as regards the documents sent on 22 May 1997 with a letter from the Commission, these were documents which, according to that letter, could have some relevance to the facts discussed in the statement of objections of 20 March 1997. Since the Commission had set a period of 14 weeks, ie until 1 July 1997, to submit comments on the statement of objections, the applicants still had more than a month when they received the letter of 22 May 1997 to prepare their views on the additional documents in question.344 In that regard, Article 11(1) of Regulation No 99/63, which is intended to ensure that an addressee of a statement of objections has a sufficient period for the effective exercise of its rights of defence, provides that in fixing that period, which is to be at least two weeks, the Commission is to have regard both to the time required for preparation of comments and to the urgency of the case. The period set must be assessed specifically in relation to the difficulty of the particular case. Thus, the Community Courts have held, in a number of cases involving voluminous documentation, that a period of two months was sufficient for submission of observations on the statement of objections (Case 27/76 United Brands v Commission [1978] ECR 207, paragraphs 272 and 273, and Suiker Unie and Others v Commission, cited above, paragraphs 94 to 99).345 A period of more than one month must therefore have been sufficient to submit observations on the documents sent on 22 May 1997, since the number of documents was small (annexes X1 to X9) and, moreover, their relevance was explained in the covering letter. As regards Powerpipe's complaint, which, together with the annexes thereto, was also enclosed with the letter of 22 May 1997, the most incriminating passages were likewise quoted in the statement of objections.346 Second, as regards the documents subsequently sent, the applicants had a reasonable time up to the dates of the hearing. In its letter of 19 September 1997 accompanying the replies of other undertakings to the statement of objections, the Commission stated that any observations on those replies which the undertakings might wish to submit should be submitted by 10 October 1997 and that they would in any event have the opportunity to express their views at the hearing. On the other hand, when the Commission, by letter of 24 September 1997, sent certain documents found at the premises of Dansk Rørindustri, in order to provide full access to the file, it did not refer to the possibility of submitting observations or, consequently, provide a deadline for doing so. Nor, in the letter of 9 October 1997 accompanying a series of further documents to the statement of objections (Nos 1 to 28) and the replies of Løgstør, Powerpipe and DSD to the Commission's requests for information, was there any question of the possibility of submitting observations.347 Since, in any event, the applicants had the opportunity to submit their observations on the documents sent by the Commission on 19 and 24 September and 9 October 1997 by 24 and 25 November 1997, the dates of the hearing, at the latest, they had between five weeks and two months to submit their views on those documents. The Court finds that in the circumstances of the present case, such a period was sufficient for the proper exercise of the rights of defence.348 The relevance of all the documents sent on 9 October 1997 in relation to the statement of objections was clearly stated in the accompanying tables and, moreover, most of the additional documents to the statement of objections in question had, as stated in the accompanying letter, been covered in the exchange of documents between the undertakings.349 Nor can the applicants rely on the fact that when they received the documents sent on 19 and 24 September and 9 October 1997 they did not yet know that they would have until 24 and 25 November 1997 to prepare their observations. Even if the applicants prepared their observations on those documents on the assumption that they had less time, they eventually had sufficient time to prepare them more thoroughly and to make any necessary adjustments, which Isoplus Hohenberg and Isoplus Sondershausen did, moreover, by supplementing their observations of 14 October 1997 by further observations on 12 November 1997.350 Third, the applicants cannot claim that they were not in a position properly to make known their views on the partnership agreement of 15 January 1997, which was produced by the Commission at the hearing.351 It is clear from the minutes of the hearing, and also from points 159 and 160 of the Decision, that the Commission relied on that partnership agreement when Isoplus Hohenberg and Isoplus Sondershausen were being heard in order to demonstrate that Mr Henss held shares in Isoplus Hohenberg and Isoplus stille Gesellschaft and to prove that there was a parent company, HFB KG, holding shares, following the transfer of the shares held by Mr and Mrs Henss and by Mr and Mrs Papsdorf, in Isoplus Rosenheim, Isoplus Sondershausen, Isoplus Hohenberg and Isoplus stille Gesellschaft.352 Even if the applicants did not have the opportunity to prepare their observations on the partnership agreement before it was produced by the Commission at the hearing, they had already had the opportunity during the administrative procedure to submit their views on the conclusions that the Commission might draw from the information in that document. The Commission had stated in the statement of objections, when it had not yet discovered the partnership agreement, first, as regards Isoplus Hohenberg, that it appeared to be controlled by Mr Henss but that he was not mentioned as a shareholder in the local business register and, second, that there was no holding company that could be regarded as representing the Isoplus group. The applicants could therefore infer from the statement of objections, first, that the formation of HFB KG and the shareholdings in that company must be of interest to the Commission, since they would confirm its theory that the Henss companies and the Isoplus companies belonged to a single group, and, second, that the Commission was not yet aware of its formation. None the less, in their observations of 30 June 1997 on the statement of objections, Isoplus Hohenberg and Isoplus Sondershausen continued to provide the Commission with inaccurate information on that point, particularly as regards the shares which Mr Henss held in Isoplus Hohenberg.353 In any event, after the hearing, in letters of 8 and 9 December 1997 and 13 February 1998, the applicants made known their observations on that document and on the circumstances in which it was presented to them. It follows that the Commission did not prevent the applicants from properly disclosing their views on the document in question.354 It follows from all the foregoing that the applicants had the necessary time to submit their views on the facts, objections and circumstances alleged by the Commission.355 Consequently, the objection cannot be upheld as regards the time-limits for submitting observations.5. Breach of professional and business secretsArguments of the parties356 The applicants maintain that the Commission and the Hearing Officer did not ensure that professional and business secrets were respected within the meaning of Article 20 of Regulation No 17, which covers, inter alia, details on relations between companies and the economic and legal reasons for which such relations were formed.357 At the hearing, the Hearing Officer did not give the applicants the opportunity to explain, in confidence, the legal relations between, on the one hand, Isoplus Hohenberg and Isoplus Sondershausen and, on the other hand, Isoplus Rosenheim (then Henss Rosenheim and Henss Berlin). The partnership agreement of 15 January 1997 was presented in the presence of all the undertakings to which the statement of objections was addressed and of the complainant. In the absence of confidentiality, counsel for Isoplus Hohenberg and Isoplus Sondershausen and, in particular, Mr Henss, as director of Isoplus Rosenheim, had to refrain from disclosing details in that regard. The absence of confidentiality was challenged by counsel for Isoplus Hohenberg and Isoplus Sondershausen and by counsel for Isoplus Rosenheim in their letters of 8 and 9 December 1997.358 As regards the partnership agreement of 15 January 1997, the applicants state that it is a document which illegally, and following an error, reached the commercial registry of the Amtsgericht Charlottenburg and that it has since been removed from the records of that registry. It contains details of shareholdings which are covered by Article 20 of Regulation No 17. That document sets out relations of trust (Treuhandverhältnisse) which, mainly for reasons to do with competition, should not have been made public and which should always be treated confidentially as business secrets, since the owner or the real partner must not be disclosed. The applicants contend that they have shown, in their application, the precise circumstances which justify a legitimate interest in having those trust relations kept secret.359 Furthermore, the secrecy or confidentiality which must be provided during proceedings in competition matters before the Commission, including at the hearing, were not ensured in the present case, since extracts from the hearing were published in the Danish newspapers in 1998. Confidential parts of the present proceedings had appeared in the press as early as the spring of 1996, which, at the time, prompted protests on the part of the applicants, in the reply of the Henss companies and in the reply of 24 April 1996 of Isoplus Hohenberg to the request for information of 13 March 1996 (Isoplus Hohenberg's reply).360 The defendant contends that it did not infringe Article 20 of Regulation No 17 when discussing the partnership agreement of 15 January 1997, since that agreement was lodged at the commercial registry and, consequently, was available to everyone. Furthermore, Mr Henss confirmed that assessment at the hearing and also stated that only the strategies implemented to assist the structure of the group were covered by business secrecy.361 The applicants have also failed to show how the information in the partnership agreement was in the nature of business secrets. In that regard, the Commission emphasises that the interest in the non-disclosure of information which, if communicated to third parties, might harm the interests of the person who has provided it is protected only in so far as it is a legitimate interest.362 Even if the Commission had been in breach of its obligation to respect business secrecy at the hearing, that would not make the Decision illegal in itself. The alleged breach, namely the fact that other undertakings became aware of the actual structure of the shareholdings in the Henss/Isoplus group, did not have any impact on the contents of the Decision. The defendant emphasises that its officers did not allow anything to be revealed outside the hearings.Findings of the Court363 Article 214 of the Treaty (now Article 287 EC) requires officials and other servants of the institutions of the Community not to disclose information in their possession of the kind covered by the obligation of professional secrecy. Article 20 of Regulation No 17, which implements that provision in regard to the rules applicable to undertakings, contains in paragraph (2) a special provision worded as follows: Without prejudice to the provisions of Articles 19 and 21, the Commission and the competent authorities of the Member States, their officials and other servants shall not disclose information acquired by them as a result of the application of this regulation and of the kind covered by the obligation of professional secrecy.364 The provisions of Articles 19 and 21 of Regulation No 17, the application of which is thus reserved, deal with the Commission's obligations in regard to hearings and the publication of decisions. It follows that the obligation of professional secrecy laid down in Article 20(2) is mitigated in regard to third parties on whom Article 19(2) confers the right to be heard, that is to say in regard, in particular, to a third party who has made a complaint. The Commission may communicate to such a party certain information covered by the obligation of professional secrecy in so far as it is necessary to do so for the proper conduct of the investigation. However, that power does not apply to all documents of the kind covered by the obligation of professional secrecy. Article 21, which provides for the publication of certain decisions, requires the Commission to have regard to the legitimate interest of undertakings in the protection of their business secrets. Although they deal with particular situations, those provisions must be regarded as the expression of a general principle which applies during the course of the administrative procedure (Case 53/85 AKZO Chemie v Commission [1986] ECR 1965, paragraphs 27 and 28).365 As regards the conduct of the hearing, Article 9(3) of Regulation No 99/63 provides that hearings are not to be public, that persons are to be heard separately or in the presence of other persons summoned to attend and that, in the latter case, regard must be had to the legitimate interest of the undertakings in the protection of their business secrets.366 The applicants have failed to show to what extent the Commission disclosed business secrets at the hearing of Isoplus Hohenberg and Isoplus Sondershausen, in the presence of the undertaking which had submitted a complaint and of other undertakings to which the statement of objections had been addressed.367 As regards the partnership agreement of 15 January 1997, it should be observed, first, that the applicants merely claim that that document was placed on the business register following an error, without specifying to whom that error is attributable, and that its entry on the register was illegal, without adducing the slightest evidence in that regard. In those circumstances, the Commission is not to be criticised for having used such evidence. Second, as regards the public nature of the information in that agreement, at the hearing Mr Henss, who attended in his capacity as director of Isoplus Rosenheim, confirmed that it was a public document, stating that only the reasons for the operations described therein, which were connected to the strategy of the undertakings concerned, were business secrets. Neither the director of Isoplus Hohenberg and Isoplus Sondershausen nor their counsel disputed that point of view.368 Second, as regards the failure to conduct the hearing of Isoplus Hohenberg and Isoplus Sondershausen in private, the applicants have not adduced the slightest evidence that any information covered by business secrecy was communicated to third parties by the Commission at that hearing. In that regard, the Commission is not to be criticised for having passed on information which the applicants had communicated to it in confidence. It is clear from the minutes of the hearing that in its questions to Isoplus Hohenberg and Isoplus Sondershausen about their connections with the Henss companies, the Commission did not disclose any information other than the position regarding those companies which had just been described by their counsel in his opening speech at the hearing and, following the hearing, information from public registers.369 Third, as regards the disclosure in the press of confidential information used during the administrative procedure, the applicants have provided no details of the confidential information which they alleged to have been revealed in those press articles during the administrative procedure.370 Furthermore, even on the assumption that Commission officials were responsible for leaks reported in the press, which is not, however, admitted by the Commission or proved by the applicant, that would in any event not affect the legality of the Decision, since it has not been proved that the Decision would not in fact have been adopted or would have been different had the disputed statements not been made (United Brands v Commission, cited above, paragraph 286). In the present case, the applicants have adduced no evidence to support such a conclusion.371 It follows that the objection relating to breach of professional and business secrecy must be rejected.6. Infringement of the provisions relating to the hearing of witnessesArguments of the parties372 The applicants accuse the Commission of infringing Article 3(3) of Regulation No 99/63 and Article 19 of Regulation No 17 by not hearing the witnesses proposed by the applicants.373 The applicants observe that, pursuant to Article 3 of Regulation No 99/63, the undertakings concerned may propose that the Commission hear persons who may corroborate the facts on which they rely. In their observations on the statement of objections, Isoplus Hohenberg and Isoplus Sondershausen proposed, by letter of 30 June 1997, that the Commission should hear a number of persons, including Mr Henss. Isoplus Rosenheim, by letter of the same date, also proposed that certain persons be heard as witnesses. By letter of 16 September 1997, however, the Commission replied that, pursuant to Article 3(3) of Regulation No 99/63, it was for the undertakings themselves to ensure that the persons concerned attended the hearing and to call them as witnesses, pointing out that it was not a tribunal, that it had no powers to compel witnesses to attend a hearing and that it was also unable to administer an oath. In that regard, Isoplus Hohenberg or Isoplus Sondershausen again stated, by letter of 30 September 1997, that the designated witnesses were not connected to their companies but to competitors and that therefore it had not been possible to compel those witnesses to appear. Similarly, all the witnesses whom Isoplus Rosenheim had requested to be heard were not connected with the applicants' undertakings but with Powerpipe and other competitors. However, neither the officials responsible for competition within the Commission nor the Hearing Officer summoned the persons concerned as witnesses. In the absence of a summons, those persons did not appear and could not therefore be heard as witnesses by the Commission in order to establish the facts in respect of which the applicants had requested their evidence.374 As regards Mr Henss, although he had been present at the hearing, in his capacity as director of Isoplus Rosenheim, he was not heard officially, since he had not been called by the Hearing Officer. The applicants accept that a formal hearing of Mr Henss would have been rendered superfluous in part by the observations made at the hearing by counsel for Isoplus Rosenheim. None the less, in the absence of a confidential hearing, Mr Henss, in his capacity as director of Isoplus Rosenheim, had to refrain from disclosing certain details.375 The applicants observe that, if the witnesses had been summoned by the Commission and if they had then been questioned or heard, their evidence would have led the Commission to conclude that Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen or the Henss/Isoplus group had not participated in an infringement of Article 85 of the Treaty before the end of 1994 or taken part in measures to boycott Powerpipe. One witness was also requested for the purpose of confirming the fact that the 1994 European price list had not been drawn up by Mr Henss or Henss Rosenheim.376 According to the applicants, Article 3(3) of Regulation No 99/63 is connected to the general principle of the right to be heard and to the principle laid down in Article 6 of the Convention and, in particular, paragraph (3)(d), concerning a person's right to obtain the attendance and examination of witnesses on his behalf and the right to examine witnesses against him. If, in a proceeding pursuant to Regulation No 17, some of the undertakings concerned request that certain persons be called and heard within the meaning of Article 3(3) of Regulation No 99/63, the Commission is required as a matter of principle to call and hear those persons, even if it is unable to impose penalties in the event of non-appearance. Only in certain cases, where there are grounds for doing so, can the Commission refuse such requests by individual decision.377 Although it is true that the Commission is not a tribunal within the meaning of Article 6 of the Convention, that does not mean that the other guarantees laid down in that article do not apply to proceedings before it. Proceedings conducted by the Commission for the two-fold purpose of bringing an end to an infringement of the competition rules and of imposing a fine are criminal proceedings for the purposes of Article 6 of the Convention. The Commission is therefore required to observe that article in its entirety and, accordingly, paragraph (3)(d) thereof.378 The defendant states that Regulation No 99/63 does not authorise the hearing of witnesses within the legal meaning of the word. Article 3(3) of Regulation No 99/63 does not refer to witnesses, but is merely based on the right of the persons concerned in relation to the use of certain evidence. The Commission has no power and, a fortiori, is under no obligation to call any witnesses to give evidence on an undertaking's behalf whom the undertaking cannot itself persuade to give evidence. Furthermore, contrary to the applicants' submission, the Commission did not refuse to hear the persons proposed.379 As regards Article 6 of the Convention, the Commission is not a tribunal for the purpose of that provision. The Commission was carrying out the supervisory task entrusted to it by the Community competition rules, subject to review by the Court of First Instance and the Court of Justice. In any event, the fact that the relevant procedural rules, notably those laid down in Regulation No 17, make no provision for compelling witnesses to appear on the undertaking's behalf is not contrary to the concept of equality of arms expressed in Article 6(3)(d) of the Convention. Nor does the procedure before the Commission involve any witnesses against the undertaking concerned, since the essential evidence on which the Commission can base its objections consists of the documents and information it can request from the competent authorities of the Member States and from the undertakings and associations of undertakings pursuant to Article 11 of Regulation No 17.380 Furthermore, the Court of First Instance, in reviewing the Commission's performance of its task, is able to compel witnesses to appear, including witnesses on behalf of the undertaking concerned. Before the Court of First Instance, inequality of arms prevails, since the undertakings can rely on witness statements in order to refute the accusations made by the Commission in its decision, whereas the Commission cannot rely on testimony to support accusations that are not already proved by evidence in the decision and the statement of objections.Findings of the Court381 Article 19(2) of Regulation No 17 provides that, if natural or legal persons showing a sufficient interest apply to be heard, their application must be granted. According to Article 5 of Regulation No 99/63, the Commission is to afford them the opportunity of making known their views in writing within such time limit as it shall fix. Similarly, Article 7(1) of Regulation No 99/63 provides that the Commission is under an obligation to afford to persons who have so requested in their written comments the opportunity to put forward their arguments orally, if those persons show a sufficient interest or if the Commission proposes to impose on them a fine or periodic penalty payment. Under Article 7(2), the Commission may likewise afford to any other person the opportunity of expressing his views orally.382 According to Article 19(2) of Regulation No 17 and Articles 5 and 7 of Regulation No 99/63, the Commission is required to hear natural or legal persons who have a sufficient legal interest only in so far as such persons actually apply to be heard (Case 43/85 Ancides v Commission [1987] ECR 3131, paragraph 8). In the present case, the persons proposed as witnesses by the applicants did not at any time indicate a desire to be heard.383 Next, Article 3(3) of Regulation No 99/63 provides that undertakings and associations of undertakings forming the subject of a proceeding pursuant to Regulation No 17 may also propose that the Commission hear persons who may corroborate [the] facts [on which they rely]. In such a case, it appears from Article 7 of Regulation No 99/63 that the Commission has a reasonable margin of discretion to decide how expedient it may be to hear persons whose evidence may be relevant to the inquiry (Joined Cases 43/82 and 63/82 VBVB and VBBB v Commission [1984] ECR 19, paragraph 18). The guarantee of the rights of the defence does not require the Commission to hear witnesses put forward by the parties concerned, where it considers that the preliminary investigation of the case has been sufficient (Case 9/83 Eisen und Metall Aktiengesellschaft v Commission [1984] ECR 2071, paragraph 32).384 In the present case, the applicants have adduced no evidence to show that, in not hearing the persons proposed, the Commission unduly restricted the inquiry into the matter and thus limited the applicants' opportunity to provide explanations of the various aspects of the problems raised by the Commission's objections (VBVB and VBBB v Commission, paragraph 18).385 The applicants did not state in their application to what extent the testimony of the witnesses referred to would have been able to show that the Henss/Isoplus group or the applicants had not participated in a cartel at European level since 10 October 1991, but only from the end of 1994. In that regard, even if the testimony requested had confirmed that neither Mr Henss nor Isoplus Hohenberg obtained internal EuHP information from that body before being admitted to it, that would not have made it possible to refute the Commission's objections in regard to the applicants. The same applies to the question as to whether Mr Henss or Henss Rosenheim participated in drawing up the price list used within the European cartel. Furthermore, in the light of the evidence set out at paragraphs 264 to 277 above, the Commission was entitled to consider that there was no need to hear the requested testimony that Powerpipe had suggested to Isoplus Hohenberg and Isoplus Sondershausen that they should participate in an illegal cartel.386 In so far as the proposal to hear witnesses concerns Mr Henss, moreover, the latter was present at the hearing, in his capacity as director of Isoplus Rosenheim, but neither counsel for that undertaking nor counsel for Isoplus Hohenberg and Isoplus Sondershausen requested that he give evidence. It follows from the minutes of the hearing that Mr Henss spoke only during the hearing of Isoplus Hohenberg and Isoplus Sondershausen, following a question put by the Hearing Officer about the partnership agreement.387 It also follows from those minutes that at the hearing the applicants did not request that Mr Bech, connected with Løgstør, whose testimony had also been requested, be heard, in spite of the fact that he was also present at the hearing.388 It follows from all the foregoing that in not acceding to the proposals to hear witnesses the Commission correctly applied Article 19 of Regulation No 17 and the provisions of Regulation No 99/63.389 Last, the applicants rely on Article 6(3)(d) of the Convention, which provides that [e]veryone charged with a criminal offence has the following minimum rights: ... to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him.390 In that regard, it is settled case-law that the Commission is not a tribunal within the meaning of Article 6 of the Convention (Van Landewyck and Others v Commission, cited above, paragraph 81, Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983] ECR 1825, paragraph 7, and Shell v Commission, cited above, paragraph 39). Moreover, Article 15(4) of Regulation No 17 specifically provides that decisions of the Commission to impose fines for infringement of competition law are not of a criminal law nature (Case T-83/91 Tetra Pak v Commission [1994] ECR II-755, paragraph 235).391 However, even though the Commission is not a tribunal within the meaning of Article 6 of the Convention, and even though the fines imposed by the Commission are not of a criminal law nature, the Commission must nevertheless observe the general principles of Community law during the administrative procedure (Musique diffusion française and Others v Commission, paragraph 8, and Shell v Commission, paragraph 39).392 In that regard, the fact that the provisions of Community competition law do not place the Commission under an obligation to call witnesses whom the undertaking concerned wishes to give evidence on its behalf is not contrary to those principles. Although the Commission may hear natural or legal persons where it deems it necessary to do so, it is not entitled to call witnesses to testify against the undertaking concerned without their agreement.393 For all those reasons, the objection relating to the failure to hear witnesses must be rejected.7. Infringement of the provisions relating to the terms of reference of Hearing OfficersArguments of the parties394 The applicants accuse the Commission of having infringed Commission Decision 94/810/ECSC, EC of 12 December 1994 on the terms of reference of Hearing Officers in competition procedures before the Commission (OJ 1994 L 330, p. 67), since, in the present proceedings, the Hearing Officer drew up a report even though he had not been present during the greater part of the hearing.395 In that regard, the applicants state that the Hearing Officer who had prepared and directed the hearing, Mr Gilchrist, retired on 31 December 1997. Mr Daout, who took over as Hearing Officer from 1 January 1998, was present at the hearing on 24 November 1997 but did not take part in the hearing on 25 November 1997. It follows that Mr Daout only partly attended the hearing of Isoplus Rosenheim and Henss Berlin, which took place on the evening of 24 November 1997 and continued on 25 November 1997. He took no part at all in the hearing of Isoplus Hohenberg and Isoplus Sondershausen, which took place exclusively on 25 November 1997. The draft minutes of the hearing were sent by letter from the Hearing Officer, Mr Daout, of 3 April 1998. Following approval of the minutes, the Hearing Officer drew up the report of the hearing, in accordance with Article 8 of Decision 94/810.396 The applicants maintain that that course of conduct infringed their rights of defence. Although the new Hearing Officer made a report, pursuant to Article 8 of Decision 94/810, following approval of the minutes, he did so without having attended the greater part of the hearing and, more particularly, the part involving Isoplus Hohenberg and Isoplus Sondershausen. In the latter case, the Hearing Officer cannot have obtained a personal impression of the Henss/Isoplus group or of all the applicants; nor was he able, in particular, to put questions. In the absence of an objective report from the Hearing Officer, pursuant to Article 8 of Decision 94/810, the Commission's decision-making process which culminated in the adoption of the contested decision cannot have had an objective basis.397 If the retired Hearing Officer drew up the report in question, as the Commission claims, the applicants also rely, in the alternative, on breach of the essential procedural forms defined in Decision 94/810 and Regulation No 99/63, since the report was drawn up before approval of the minutes of the hearing and without the Hearing Officer having been aware of and considered the other direct observations of Isoplus Hohenberg, Isoplus Sondershausen and Isoplus Rosenheim. Nor, in those circumstances, was there a complete, accurate report, something which prevented the decision-making procedure from being objective.398 Notwithstanding the fact that the Hearing Officer's report on the hearing or on the stages of the procedure followed pursuant to Regulation No 17 does not have to be transmitted to the undertakings concerned to enable them to study it or comment on it, the report of the independent Hearing Officer is none the less of decisive importance in proceedings to establish infringements in competition matters, as acknowledged by the Commission, which recognises that the report, although not binding on it, none the less constitutes advice.399 The defendant observes that it was Mr Gilchrist who drew up the report provided for in Article 8 of Decision 94/810. The fact that the Hearing Officer did not have the approved version of the minutes of the hearing is irrelevant, since those minutes are for the information of persons who are not present at the hearing, namely the members of the Advisory Committee and of the Commission. Since, owing to his function, the Hearing Officer was required to attend the entire hearing, the minutes were not intended for his information. The Commission maintains that the Hearing Officer's report reflects the state of the discussions at the time of the hearing. Last, the report is in the nature of an opinion, which the Commission is not bound to follow.400 In that regard, the Commission further observes that the hearing is normally preceded by the submission of written observations concerning the objections and therefore constitutes an advanced stage in the procedure. Since the hearing comes to an end immediately the sitting is closed, the minutes merely set out what occurred at the sitting. The opportunity given to the parties to check the accuracy of the minutes does not in any way constitute an extension of the hearing.401 As regards the Hearing Officer's report, it is not precluded that the Commission should take account of observations submitted after the hearing. Article 8 of Decision 94/810 expressly provides that the Hearing Officer may suggest that further information be obtained if the evidence subsequently adduced makes a new hearing necessary. In the present case, that did not occur.402 As regards Mr Daout's temporary absence from the hearing, that cannot have impinged on the validity of the Decision, since at the material time he did not yet occupy the post of Hearing Officer.Findings of the Court403 Article 2(1) of Decision 94/810 provides that the Hearing Officer is to ensure that the hearing is properly conducted and thus contribute to the objectivity of the hearing itself and of any decision taken subsequently. In that context, the Hearing Officer is to ensure, in particular, that in the preparation of draft Commission decisions in competition cases, due account is taken of all the relevant facts, whether favourable or unfavourable to the parties concerned.404 Article 8 of Decision 94/810 provides that the Hearing Officer is to report to the Director-General for Competition on the hearing and the conclusions he draws from it and that he may make observations on the further progress of the proceedings; such observations may relate among other things to the need for further information, the withdrawal of certain objections, or the formulation of further objections.405 Furthermore, it follows from Article 9(4) of Regulation No 99/63 and from Article 7(4) of Decision 94/810 that the essential content of the statement made by each person heard is to be recorded in minutes which are to be read and approved by that person. Under Article 7(4) of Decision 94/810, the Hearing Officer is responsible for ensuring that that is done.406 In the present case, the report provided for in Article 8 of Decision 94/810 was drawn up by Mr Gilchrist, who submitted it to the Commission on 26 November 1997. Consequently, the applicants' complaint must be understood as meaning that they object to the fact that the Hearing Officer drew up the report before the minutes of the meeting had been approved and without being apprised of the applicants' observations on those minutes.407 First of all, neither Regulation No 99/63 nor Decision 94/810 precludes the Hearing Officer from submitting the report provided for in Article 8 of Decision 94/810 before the minutes of the hearing have been approved, pursuant to Article 9(4) of Regulation No 99/63 and Article 7(4) of Decision 94/810, by each person heard. The Hearing Officer's report constitutes a purely internal Commission document, which is not intended to supplement or correct the undertakings' arguments and which therefore does not constitute a decisive factor which the Community judicature must take into account when exercising its power of review (see paragraph 40 above).408 The purpose of Article 9(4) of Regulation No 99/63 is to assure the persons heard that the minutes contain a true record of the substance of what they have said (ICI v Commission, paragraph 29, and Case 51/69 Bayer v Commission [1972] ECR 745, paragraph 17). The minutes are therefore submitted to the parties for their approval in order to enable them to check what they said at the hearing, not for the purpose of adducing fresh evidence which the Hearing Officer would be obliged to take into account.409 The applicants do not show to what extent the provisional nature of the minutes available to the Hearing Officer when drawing up his report prevented him from reporting to the Director-General for competition in circumstances conducive to the objectivity of the procedure.410 It is settled case-law that the provisional nature of the minutes of the hearing submitted to the Advisory Committee and the Commission could only amount to a defect in the administrative procedure capable of vitiating the decision which results therefrom if the document in question was drawn up in such a way as to be misleading in a material respect (Case 44/69 Buchler v Commission [1970] ECR 733, paragraph 17). In any event, since the Commission had in its possession, in addition to the provisional minutes, the undertakings' remarks and observations on those minutes, it must be concluded that the members of the Commission were informed of all the relevant facts before adopting the decision (see Petrofina v Commission, paragraph 44). It cannot be contended that the various bodies involved in drawing up the final decision were not properly informed of the arguments put forward by the undertakings in response to the objections notified to them by the Commission and to the evidence presented by the Commission in support of those objections (see Petrofina v Commission, paragraph 53, and Hüls v Commission, paragraph 86).411 The Court of Justice has held, moreover, that an irregularity at the time the minutes were drawn up could affect the legality of the decision only if the record of statements made at the hearing were inaccurate (ICI v Commission, cited above, paragraph 31, and Bayer v Commission, cited above, paragraph 17). In the present case, the applicants have not shown how the minutes did not constitute a fair and accurate report of the hearing (see Petrofina v Commission, cited above, paragraph 45). On the other hand, it is not disputed that the corrections to the draft minutes proposed by the applicants, in particular as regards the presence of Mr Daout at the hearing, were included in the final version of the minutes.412 It follows from all the foregoing that the fact that, in the present case, the Hearing Officer drafted his report before the minutes of the hearing had been approved did not affect the lawfulness of the subsequent decision.413 Accordingly, the objection alleging infringement of the provisions on the terms of reference of Hearing Officers must be rejected.414 It follows that the plea in law alleging infringement of the rights of defence must be rejected in its entirety....D - Fourth plea in law, alleging errors of law and of assessment in setting the amount of the fine...2. Infringement of Article 15(2) of Regulation No 17 as regards the joint and several liability of the five applicantsArguments of the parties519 The applicants submit that the Commission was wrong to impose a joint fine on them. In that regard, they observe, first of all, that if the Henss/Isoplus group is not recognised as having the capacity of a group, quasi-group or de facto group, a fine should be imposed on each individual applicant. The applicants claim that their situation cannot be compared with that in Metsä-Serla and Others v Commission, where the companies were held responsible for the anti-competitive conduct of the association of undertakings Finnboard in such a way that each of them was found to have deliberately infringed Article 85 of the Treaty.520 Next, the applicants claim that it follows from Article 15(2) of Regulation No 17 that where a number of undertakings are held responsible, joint and several liability for the fine must be limited, for each of the jointly liable undertakings, to the maximum amount of 10% of its turnover during the last financial year. In the present case, the applicants were ordered, jointly and severally, to pay a sum which, for each of them, exceeds the maximum amount of 10% of its turnover. Accordingly, if one of them became insolvent, the others would necessarily have to pay a fine greater than 10% of their turnover, which would be contrary to the spirit and the letter of Article 15(2) of Regulation No 17. In that regard, the applicants observe that in Metsä-Serla and Others v Commission the amount of their joint and several liability was determined individually, with a different amount for each undertaking, so that the maximum amount of the fine was observed for each of them.521 The defendant observes that the four Henss and Isoplus companies had to be treated as a single undertaking for the purposes of Article 15 of Regulation No 17, since they participated in the infringement, during the infringement period, under a single direction, and it was impossible to ascertain the extent to which each of them participated. The Commission was therefore correct to apply the maximum amount laid down in Article 15 of Regulation No 17 to the cumulative turnover of the three operating companies remaining at the time when the decision was adopted and to impose a joint fine on them. As regards, HFB KG and HFB GmbH, the Commission considers that their liability follows from that of the operating companies, so that they, as parties to the same undertaking, could be included among the joint and several debtors.Findings of the Court522 The applicants criticise the Commission for having held them jointly and severally liable for the infringement committed by the Henss/Isoplus group.523 Since it has been held that the Decision contains, in any event, an error of law in so far as HFB KG and HFB GmbH were held jointly and severally liable for the fine imposed on the Henss/Isoplus group (see paragraphs 101 to 108 above), there is no need to consider the present plea in so far as it concerns those two companies.524 As regards Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen, it should be observed that, as held in paragraphs 54 to 68 above, the activities within the cartel of Henss Berlin and Henss Rosenheim, now Isoplus Rosenheim, and of Isoplus Hohenberg and Isoplus Sondershausen must be regarded as the conduct of a single economic entity, under single control and pursuing a long-term economic objective common to its various components.525 Since Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen must, as regards their activities in the cartel, be deemed a single economic unit, they are jointly and severally responsible for the conduct complained of (Joined Cases 6/73 and 7/73 Commercial Solvents v Commission [1974] ECR 223, paragraph 41).526 There is even more reason for holding those companies jointly and severally responsible in the present case since, at the time of the infringement, there was no person at the head of all the companies belonging to the Henss/Isoplus group to which, as the person responsible for the acts of the group, responsibility for the infringement could have been imputed. In that regard, the Court of First Instance has held that, in a situation in which, owing to the family composition of the group and the dispersal of its shareholders, it may be impossible or exceedingly difficult to identify the person at its head to which, as the person responsible for coordinating the group's activities, responsibility for the infringements committed by its various component companies may be imputed, the Commission is entitled, to hold the subsidiaries jointly and severally responsible for all the acts of the group in order to ensure that the formal separation between those companies, resulting from their separate legal personality, cannot prevent a finding that they have acted jointly on the market for the purposes of applying the competition rules. Clearly, that analysis, relating to a situation in which it was impossible or excessively difficult to identify the person at the head of a group to which the infringements committed by the various component companies might be imputed, applies a fortiori to a situation in which no such person exists.527 Furthermore, it follows from the case-law that Article 15(2) of Regulation No 17 must be interpreted as meaning that an undertaking may be declared jointly and severally liable with another undertaking for payment of a fine imposed on the latter undertaking which has committed an infringement intentionally or negligently, provided that the Commission demonstrates, in the same decision, that the infringement could also have been found to have been committed by the undertaking held jointly and severally liable for the fine (Metsä-Serla and Others v Commission, paragraphs 42 to 45, and Finnboard v Commission, paragraphs 27 to 28 and 34 to 38). The case in which those judgments were delivered involved an association of undertakings, Finnboard, on which the Commission had imposed a fine for which the member companies of the association were held jointly and severally liable. In that regard, the Community judicature considered that the Commission was correct to find each of the applicants jointly and severally liable with Finnboard, since the economic and legal links between the undertakings concerned were such that Finnboard had merely acted as an auxiliary organ of each of those companies and that it was bound to follow the instructions issued by each of the applicants and could not adopt conduct on the market independently of any of them, so that Finnboard in practice formed an economic unit with each of its member companies (Metsä-Serla and Others v Commission, paragraphs 58 to 59). In the present case, the situation was such that Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen acted as auxiliary organs of the de facto Henss/Isoplus group and were bound to follow the instructions issued by their single directorate and could not adopt conduct on the market independently. It is self-evident that in such circumstances each of the companies may be held jointly and severally responsible for the infringement found to have been committed by the Henss/Isoplus group which itself constitutes the undertaking that committed the infringement for the purposes of Article 85 of the Treaty.528 Contrary to the applicants' assertion, the fact that several companies are held jointly and severally liable for a fine does not mean, as regards the application of the maximum amount of 10% of turnover laid down by Article 15(2) of Regulation No 17, that the amount of the fine is limited, for the companies held jointly and severally responsible, to 10% of the turnover achieved by each of those companies during the last financial year. The maximum amount of 10% of turnover within the meaning of that provision must be calculated on the basis of the total turnover of all the companies constituting the economic entity acting as an undertaking for the purposes of Article 85 of the Treaty.529 In that regard, it is appropriate to affirm the settled case-law relating to infringements by associations of undertakings for which the maximum amount of 10% of turnover laid down in Article 15(2) of Regulation No 17 must be calculated, where appropriate, by reference to the turnover achieved by all the members of the associations of undertakings, at least where, by virtue of its internal rules, the association is able to bind its members (Joined Cases T-39/92 and T-40/92 CB and Europay v Commission [1994] ECR II-49, paragraph 136, and Case T-29/92 SPO and Others v Commission [1995] ECR II-289, paragraph 385). The Court of First Instance held that such an interpretation is justified by the fact that, in setting fines, regard may be had, inter alia, to the influence which an association of undertakings has been able to exert on the market, which does not depend on its own turnover, which discloses neither its size nor its economic power, but rather on the turnover of its members, which constitutes an indication of its size and economic power (CB and Europay v Commission, paragraphs 136 and 137, and SPO and Others v Commission, paragraph 385). Similarly, in the case of an undertaking constituted by a group of companies acting as a single economic unit, only the total turnover of the component companies can constitute an indication of the size and economic power of the undertaking in question.530 Thus, the Court of First Instance approved a Commission decision in so far as the Commission had imposed a fine in respect of an infringement for which the sister companies were held jointly and severally responsible and had taken specific account of their total turnover.531 In that regard, the applicants are incorrect to claim that the solution adopted in Metsä-Serla and Others v Commission, where each applicant was held jointly and severally responsible, up to a certain amount, for the fine imposed on the association of undertakings, should be applied to them. That solution may be explained by the fact that in that situation the association Finnboard formed an economic entity with each of its member companies, taken individually. In the present case, on the other hand, there was only one single economic entity to which Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen belonged.532 For those reasons, the objection relating to the joint and several responsibility of Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen must be rejected.3. Incorrect assessment of the turnover of the undertakings concernedArguments of the parties533 The applicants claim that the Commission, in adjusting the fine in order not to exceed the maximum amount of 10% of turnover laid down in Article 15(2) of Regulation No 17, could not begin with an overall turnover figure for the Henss/Isoplus group, for 1997, of ECU 49 500 000. According to the applicants, the maximum amount must be ECU 49 055 000, corresponding to the overall turnover as adjusted by deducting internal sales between Isoplus Hohenberg, Isoplus Sondershausen and Isoplus Rosenheim. It follows that the Commission was only entitled to impose a fine of ECU 4 905 000.534 In that regard, the applicants state that they are selecting the conversion rate as definitively defined by the European Central Bank in May 1998 for the ecu and the euro from 1 January 1999.535 The applicants further claim that the Commission cannot justify setting the fine at ECU 4 950 000 on the ground that, in calculating the overall turnover of the Henss/Isoplus group, it also had to take sales of steel pipes into consideration. Under Article 15(2) of Regulation No 17, the turnover achieved on a different product destined for a different market from that in which the infringement was committed cannot enter in this instance into the calculation of the overall turnover of the Henss/Isoplus group.536 The defendant observes that the applicants' argument that the fine is too high by ECU 45 000 is unfounded. First, the applicants do not apply the appropriate conversion rate, namely the average conversion rate between the national currency and the ECU for the reference year 1997; and, second, the applicants should have taken into account, for Isoplus Rosenheim, not only the turnover in respect of plastic pipes but also the overall business turnover referred to in Article 15(2) of Regulation No 17, without distinction by product category.Findings of the Court537 When reducing the amount of the fine imposed in the Henss/Isoplus group in order to take account of the maximum amount laid down in Article 15(2) of Regulation No 17, the Commission relied on a turnover of approximately ECU 49 500 000.538 The Commission stated in its defence that in doing so it relied on all the turnover figures achieved by Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen in 1997, after deducting their internal sales, as communicated by those companies during the administrative procedure. At the same place, the Commission stated that those figures, being expressed in national currencies, were converted into ecu using the average conversion rate between the national currency and the ecu for the reference year 1997.539 It must be held that the amount taken in the Decision as the overall turnover of those three companies corresponds to the figure resulting, according to the method explained by the Commission, from the figures communicated by the applicants.540 In that regard, the applicants cannot criticise the Commission, as concerns Isoplus Rosenheim, for having relied on the latter's overall turnover, without confining itself to sales of pre-insulated pipes destined for the district heating market.541 It has consistently been held that the turnover referred to in Article 15(2) of Regulation No 17 as the upper limit of a fine must be understood as referring to the total turnover of the undertaking concerned, which alone gives an approximate indication of its size and influence on the market (Musique diffusion française and Others v Commission, paragraph 119, Case T-13/89 ICI v Commission [1992] ECR II-1021, paragraph 376, and Case T-43/92 Dunlop Slazenger v Commission [1994] ECR II-441, paragraph 160). Provided it remains within the limit laid down by Article 15(2), the Commission may choose which turnover to take in terms of territory and products in order to determine the fine.542 Next, as regards the conversion into ecu of the figures expressed in national currencies, the Commission was correct to apply the average conversion rate between the national currency and the ecu for the reference year 1997.543 As the Court of First Instance has held, in calculating the fine on the basis of turnover in a given reference year, expressed in national currency, the Commission is correct to convert that turnover into ecu on the basis of the average exchange rate for that reference year, and not on the basis of the exchange rate in force on the date of adoption of the Decision (Case T-348/94 Enso Española v Commission [1998] ECR II-1875, paragraphs 336 to 341).544 For those reasons, the objection alleging incorrect assessment of the turnover figure must be rejected.4. Infringement of the rights of defence in assessing the aggravating circumstancesArguments of the parties545 The applicants claim, as regards the aggravating circumstances referred to in point 179 of the Decision, that the Commission infringed their fundamental right to defend themselves in so far as it concluded that the Henss/Isoplus group had engaged in a systematic attempt to mislead the Commission as to the true relationship between the companies of the group, which constituted a deliberate obstruction of the Commission's investigations.546 In that regard, the applicants observe that, in a procedure capable of leading to the imposition of fines, in which the question of the existence of a group, a quasi-group or a de facto group arises, the right of defence entails the right to challenge certain relationships between natural or legal persons from the perspective of company law and not to disclose certain fiduciary relationships. The very essence of a trust means that the identity of the principal is revealed only to certain authorities, such as the financial authorities and the central bank, to the exclusion of third parties to a dispute and other authorities and courts, since the reason for establishing fiduciary relationships is in most cases specifically the desire to keep a secret from third parties. Accordingly, the applicants had to require that their legal advisers observed the professional secrecy by which they are bound under the rules of the legal profession. The fact that that approach was regarded as an aggravating circumstance for the purpose of calculating the fine therefore infringed the applicants' fundamental right to defend themselves.547 Contrary to the Commission's argument, there is indeed a legitimate interest in fiduciary relationships and, thus, the identity of the majority shareholder being kept secret, particularly as regards Isoplus Hohenberg, but in part also as regards Isoplus Sondershausen. For the reasons already given to the Commission by Mr Henss at a confidential interview on 3 March 1998, and confirmed in a letter of 4 March 1998, the applicants' conduct merely constituted the exercise of the rights of defence.548 As regards the Commission's assertion that, if the deliberate obstruction had succeeded, [it] might well have allowed the undertaking to evade the appropriate penalty and/or rendered its recovery more difficult, the applicants state, first, that if the fiduciary relationships had been disclosed, various questions of law would also have had to be resolved in the course of an administrative procedure concerning the capacity of the Henss/Isoplus group as a group, quasi-group or de facto group and, accordingly, as an undertaking within the meaning of Article 85 of the Treaty. In that regard, it cannot be denied that the fact of adopting a different legal position from that adopted by the Commission forms part of the right of defence.549 Next, the Commission is incorrect to state that if the applicants' argument had been accepted that would have enabled them to obtain a significant reduction in the fine. According to the Commission's theory that the Henss/Isoplus group constitutes a group or a de facto group, the internal sales between the members of the group would have been ignored in calculating the turnover as a basis for setting the fine. In that regard, the applicants observe that the consolidated turnover for Henss/Isoplus for the reference year 1997 should be ECU 49 055 000. On the other hand, if it is accepted that the Henss/Isoplus group did not exist as such, it would be necessary to take into account the turnover of each of the undertakings concerned and to consider the sales between the applicants, in particular the sales by Isoplus Rosenheim as a distribution undertaking or commercial agent. In that situation, the basis for calculating the fine would not have finally been very different. In the latter case, it would have been necessary to add to the turnover figures of Isoplus Hohenberg and Isoplus Sondershausen the provisions and guarantee amounts set aside by Isoplus, as commercial agent, which would have resulted in an overall turnover of approximately ECU 46 000 000.550 Last, if the existence of a group is not admitted, but if it is considered, contrary to the applicants' opinion, that the legal relationships between Isoplus Hohenberg and Isoplus Sondershausen, on the one hand and Isoplus Rosenheim, on the other hand, did not constitute pure commercial agency relationships, Isoplus Rosenheim's turnover should have been added to the overall turnover used as the basis for calculating the fine. In that case, the total turnover figures of Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen, unconsolidated and with the internal business figures deleted, would have amounted to ECU 68 000 000.551 Those considerations show that the fact that the fiduciary relations were kept secret and the fact that the applicants dispute the classification of the Henss and Isoplus companies as a group, quasi-group or de facto group do not in any way constitute deceitful manoeuvres designed to secure a reduction in the fine.552 The defendant states, first, that it was deliberately misled, both by the lawyer representing the Henss companies and by the lawyer representing the Isoplus companies, on the important point as to whether Mr Henss also controlled the Isoplus companies. It maintains that the applicants' deceitful manoeuvres had no connection with the exercise of the rights of the defence. Furthermore, the obligation to respond to a request for information, laid down in Regulation No 17, does not undermine the rights of the defence. That is all the more so because the deceitful manoeuvres were aimed not so much at the existence of the infringement as at the basis for setting the fine.553 As regards the confidentiality of fiduciary relationships, the Commission contends that it does not follow from the circumstances on which the applicants rely that there was a legitimate interest in not disclosing the information it requested. In any event, the Commission is required, pursuant to Article 20 of Regulation No 17, to observe the interest in legitimate secrecy, in particular business secrecy.554 As to whether the applicant's aim in deceiving the Commission was to secure a significant reduction in the fine, the Commission states that, even taking into account certain sales between the applicants, the amount of the fine would have been lower than that actually imposed.Findings of the Court555 The Commission relied on the Henss/Isoplus group's systematic attempt to mislead the Commission as to the true relationship between the companies of the group as an aggravating circumstance which, together with the group's deliberate continuation of the cartel after the investigation and its leading role in enforcing the cartel, meant that the fine imposed on the components of the group was increased by 30% (third paragraph of point 179 of the Decision).556 In that regard, some of the information communicated by the applicants concerning the shareholders in the companies which the Commission combined in the Henss/Isoplus group and concerning the links of ownership between those companies proved to be inaccurate.557 First, following the request for information of 13 March 1996, in which the Commission asked Isoplus Hohenberg to provide full details of the meetings held with the competing companies and, in particular, as regards the participants in those meetings, their names, undertakings and positions, Isoplus Hohenberg stated, concerning the presence at those meetings of Mr Henss, that he represented the Isoplus companies only on their instructions (further reply of Isoplus Hohenberg of 10 October 1996, further reply of Isoplus Hohenberg). Next, in their observations of 30 June 1997 on the statement of objections, Isoplus Hohenberg and Isoplus Sondershausen expressly denied that the Henss companies and the Isoplus companies formed a single group or companies linked under the direction or control of Mr Henss and stated that there was no evidence in the file that Mr Henss controlled, even through an agent, Isoplus Hohenberg or the companies connected with it. As the applicants acknowledged before the Court, Mr Henss actually owned the majority of shares in Isoplus Hohenberg, at least from October 1991, until his shares were transferred to HFB KG by the partnership agreement of 15 January 1997. He therefore held, at that period, an indirect shareholding in Isoplus Sondershausen and so he also attended the meetings of the cartel as owner of Isoplus Hohenberg and, indirectly, Isoplus Sondershausen.558 Second, Isoplus Hohenberg maintained in its further reply that it held 100% of the capital of Isoplus Sondershausen, which was confirmed by the observations of Isoplus Hohenberg and Isoplus Sondershausen on the statement of objections. That information was inaccurate, since, on the one hand, the Commission learnt from the partnership agreement that one third of the share capital of Isoplus Sondershausen was held by Isoplus Hohenberg as agent for Mr and Mrs Papsdorf, who transferred it by the partnership agreement to HFB KG, and since, on the other hand, the applicants assert in their pleadings before the Court that a further third of the share capital was also held by Isoplus Hohenberg as agent.559 Contrary to the applicants' contention, their conduct during the administrative procedure cannot be regarded as merely the exercise of the right to challenge the Commission's classification of the Henss companies and Isoplus companies as a group.560 First, during the administrative procedure the applicants did not confine themselves to challenging the assessment of the facts and the legal position by the Commission, but provided the Commission, in their replies to the requests for information and also in their observations on the statement of objections, with incomplete and partly inaccurate information.561 Regulation No 17 places the undertaking being investigated under a duty of active cooperation, which means that it must be prepared to make any information relating to the object of the inquiry available to the Commission (Case 374/87 Orkem v Commission [1989] ECR 3283, paragraph 27, and Case T-34/93 Société Générale v Commission [1995] ECR II-545, paragraph 72). Even though the undertakings are free to reply or not to reply to questions put to them under Article 11(1) of Regulation No 17, it follows from the penalty provided for in the first part of the sentence in Article 15(1)(b) of Regulation No 17 that, having agreed to reply, the undertakings are required to provide accurate information.562 Nor can the applicants rely on the confidential nature of the fiduciary relationships among the shareholders of Isoplus Hohenberg and Isoplus Sondershausen, since, pursuant to Article 20(2) of Regulation No 17, the Commission is required not to disclose information acquired by it as a result of the application of that regulation and of the kind covered by the obligation of professional secrecy. Similarly, Article 20(1) of Regulation No 17 states that information acquired as a result of the application of Articles 11, 12, 13 and 14 is to be used only for the purpose for which it was requested. Having regard to the obligation imposed on the Commission to protect the confidentiality of information covered by professional secrecy, the confidentiality of the identity of the principals in fiduciary relationships was therefore not such as to justify the applicants' conduct. Nor is it precluded that the true nature of the control exercised by Mr Henss over the Isoplus companies and the links between those companies could have been disclosed to the Commission without there having been any need to disclose the identity of third parties acting as principals in the fiduciary relationships.563 Since Isoplus Hohenberg and Isoplus Sondershausen must have known that the information hidden from the Commission was necessary for the purpose of assessing the true situation regarding the relationships between the companies which the Commission had combined, from the time of its request for information of 13 March 1996, in a single group the (Henss group), the Commission was correct to classify the applicants' conduct as a systematic attempt to mislead the Commission as to the true relationship between the companies of the group, which constituted a deliberate obstruction of the Commission's investigations. The deliberate nature of that conduct is confirmed by the fact that the lawyer acting for Isoplus Hohenberg and Isoplus Sondershausen was aware that the information provided during the administrative procedure was inaccurate, given the role as agent which he himself had played, as the applicants acknowledge, in the fiduciary relationships.564 As regards the conclusion that the deliberate obstruction, had it succeeded, might well have allowed the undertaking to evade the appropriate penalty and/or rendered its recovery more difficult, it is sufficient to observe that the control exercised by Mr Henss over the Henss companies and the Isoplus companies is a factor which, in the circumstances of the case, suggests that the activities of those companies must be regarded as the acts of a de facto Henss/Isoplus group, for which Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen may be held jointly and severally responsible. Consequently, and without its being necessary to ascertain whether such a hypothesis led to a higher fine, the possibility remains that the Commission would not have been able to arrive at the amount of the fine actually imposed had it not been demonstrated that Mr Henss controlled Isoplus Hohenberg and, consequently, in part controlled Isoplus Sondershausen, which the applicants had specifically denied during the administrative procedure.565 It follows that the objection alleging that the rights of defence were infringed in the assessment of the aggravating circumstances must be rejected.5. The aggravating circumstance based on the applicants' role in the cartelArguments of the parties566 The applicants dispute the fact that the Commission takes as an aggravating circumstance on the part of Henss/Isoplus the leading role played by this undertaking in the enforcement of the cartel. In that context, they dispute the Commission's assertions in points 75, 121 and 144 of the Decision.567 In that regard, the applicants observe that the activities of Henss Rosenheim, or of Mr Henss, vis-à-vis ABB, must, especially between October 1991 and October 1994, be considered in light of the fact that they were ABB Isolrohr's commercial representative, with the contractual obligations that implies.568 As regards the assertion that Henss had consistently been one of the most zealous enforcers of the market-sharing and bid-rigging arrangements, the applicants state that they sometimes succeeded, for certain projects, in obtaining the contract instead of a favourite undertaking. Where they did so as against Tarco, for example, Tarco severely criticised the applicants and, principally, Mr Henss. Therefore it is normal that, on the contrary, when Tarco obtained contracts for which the applicants had been favourites, it was criticised by the applicants. In that context, the Commission acknowledges that it follows from the comparative tables of December 1995 on the market shares of the participants in the cartel that Tarco and Løgstør had obtained a significantly higher market share than that fixed within the cartel, to the detriment of ABB, the Henss/Isoplus group and KWH. That shows that the Henss/Isoplus group or the applicants certainly did not play a leading role.569 Nor did the applicants play a leading role in the enforcement of the cartel in relation to the measures taken against Powerpipe. They did not participate in the long-term strategy drawn up by ABB in 1992 to control the market and aimed at eliminating Powerpipe, in which Løgstør participated by collaborating in poaching members of the staff of that company. The applicants were never present on the Swedish market and first appeared on the Danish market only at the beginning of 1993, whereas Powerpipe did not extend its activities to Germany before 1994. As regards the Leipzig-Lippendorf project, neither Isoplus Rosenheim nor Mr Henss ever demanded that measures be taken to boycott Powerpipe.570 Furthermore, the applicants did not participate in sanctions in the event of non-compliance with the agreements adopted within the European cartel. It follows from annex 7 to Løgstør's observations on the statement of objections and from the plan presented by ABB in that respect that the idea of sanctions within the European cartel did not originate with either the applicants or Mr Henss.571 As regards the joint price lists known as the EU list, the Euro Price List or the Europa-Preisliste, although, following finalisation of the European cartel, those price lists were also used by the applicants, they were not conceived either by them or by Mr Henss. Løgstør's statements in that regard are unreliable.572 Furthermore, the Commission makes clear in the Decision that ABB was the leader and main instigator of the cartel and that Løgstør played an active role in planning and implementing the strategy of the cartel, since it and ABB actively participated in boycotting Powerpipe by bringing pressure to bear on their suppliers not to make deliveries to Powerpipe.573 The European rank of the Henss/Isoplus group by reference to shares of the relevant market and the fact that the group was admitted to the EuHP only in August 1995 also militate against the idea that the group played a leading role. As regards the position of Henss/Isoplus on the market, the figures set out in points 10 to 15 of the Decision show that during the period in question the Henss/Isoplus group was, at the most, the fifth largest group, in terms of market share, after ABB, Løgstør, Tarco and Pan-Isovit, and that depends on the applicants being regarded as one economic unit.574 The defendant observes that the leading role of the Henss/Isoplus group is evident, inter alia, from its activities designed to implement the project-sharing agreement and also in drawing up collusive price lists and a scheme of sanctions and also in taking action against Powerpipe. According to the Commission, the arguments which the applicants put forward on this point essentially reiterate submissions already advanced.575 The Commission disputes the notion that a commercial agent cannot play a leading role in a cartel between producers. The leading role fell to the Henss/Isoplus group as a whole, which none the less obtained 10% of the European market in the context of the market-sharing agreements within the European cartel, the highest share after ABB's and Løgstør's. It is also necessary to take into consideration, in that regard, the agreements on quotas for the German market. In any event, the Commission inferred that the Henss/Isoplus group played a leading role not from its position on the market but from its conduct in the cartel. Last, the Commission did not conclude that the Henss/Isoplus group played a leading role from what occurred during the boycotting relating to the Leipzig-Lippendorf project, although that role was evident in connection with other measures taken against Powerpipe, described in points 94 to 97 and 106 of the Decision. Points 121 and 179 of the Decision concern the enforcement of the cartel, in particular the measures taken against Powerpipe.Findings of the Court576 According to point 179 of the Decision, the leading role played by the Henss/Isoplus group in enforcing the cartel was among the aggravating circumstances on the basis of which the fine imposed on the Henss/Isoplus group was increased by 30%.577 In that regard, the case-file shows that, independently of the market share held by the Henss/Isoplus group, the latter actively ensured compliance with the agreements concluded within the cartel, as may be seen from annexes 86, 87, 88, 89, 92 and 93 to the statement of objections, described in point 75 of the Decision and confirmed by the statements of Tarco (replies of 26 April 1996 and 31 May 1996 to the request for information of 13 March 1996) and of Løgstør (observations on the statement of objections). As regards the allegation that Tarco acted at the time in the same way as the Henss/Isoplus group where the latter obtained a project intended for Tarco, it is sufficient to state that the applicants have adduced no evidence of this.578 Furthermore, even though the Henss/Isoplus group did not conceive the price lists, its role as initiator, with ABB, in concluding agreements on prices for the German market is confirmed not only by Løgstør, in its observations on the statement of objections, but also by Tarco (reply of 26 April 1996) and corroborated by the fax from the Executive Vice-President of ABB of 28 June 1994 (annex X 8 to the statement of objections) referring to the latter's approaches to the coordinator of the cartel and to Mr Henss to persuade them to follow the directions of the director of ABB IC Møller. In addition, according to Brugg, it was Mr Henss who invited it to participate in the cartel (Brugg's reply). As regards the measures taken against Powerpipe, it has already been found, at paragraphs 261 to 286 above, that the Commission correctly established that the Henss/Isoplus group played an active role, from the time when Powerpipe commenced its activities on the German market, in particular when tendering for the Neubrandenburg and Leipzig-Lippendorf projects.579 As observed at paragraphs 168 to 172 and 179 above, neither the role of commercial representative played by Henss Rosenheim nor the fact that none of the companies in the Henss/Isoplus group belonged to the EuHP before the summer of 1995 is such as to cast a different light on the Henss/Isoplus group's role in the cartel as depicted by the Commission.580 Last, the fact that both ABB and Løgstør were the instigators of the cartel is not such as to invalidate the Commission's conclusions, since in any event ABB's fine was increased by 50% because of its role in the cartel and Løgstør's fine was also increased by 30%, although it was not accused of attempting to obstruct the Commission's investigation.581 The Court considers that, in those circumstances, the Commission was correct to regard the leading role played by the Henss/Isoplus group in enforcing the cartel as an aggravating circumstance.582 This limb of the fourth plea in law must therefore be rejected.6. The failure to take mitigating circumstances into accountArguments of the parties583 The applicants put forward certain circumstances which should have been taken into account by the Commission or which, in any event, should be taken into consideration by the Court, in order to reduce the fine, even if the pleas in law also relating to those circumstances at other points in the application were to be rejected.584 First, it is necessary to take account, in assessing the effects of the cartel, of the fact that from 1990 to 1994 the price of pre-insulated pipes fell continuously on the European markets with the exception of the Danish market. For a number of undertakings, these low prices entailed significant losses. The increase in prices following the instigation of the European cartel was not dramatic, so that, from the point of view of customers using the products in question, the cartel caused no real harm. In addition, the applicants were active in markets in which, before 1994, there had been no price rises. Even during 1995 and the beginning of 1996, the prices obtained by the customers of the producers and distributors of pre-insulated pipes were always genuine and fair and never excessive.585 Second, it is necessary to take into consideration the fact that the applicants' appearance on the Danish market at the beginning of 1993, as well as other circumstances, gave rise to the dissolution of the Danish cartel and to the partial suspension of the anti-competitive agreements from 1993 until the beginning of 1994.586 Third, the applicants observe that, at the time, Henss Rosenheim (now Isoplus Rosenheim) acted as ABB Isolrohr's commercial representative. Between October 1991 and October 1994, the conduct of Henss Rosenheim should therefore be imputed, at least in part, to the ABB group. In that regard, the applicants state that the ABB group has also been fined and that, in order to comply with the principle that a penalty may not be imposed twice, that factor should be taken into consideration as leading to a reduction in the fine imposed on Isoplus Rosenheim and thus the Henss/Isoplus group. Certain sales by Henss Rosenheim were taken into account in calculating the turnover of both the Henss/Isoplus group and ABB. In setting the fine, it is in any event the principal that should be penalised, not the commercial representative. As regards the period before October 1994, the applicants state that their participation in the European cartel was provoked by the massive fall in prices, caused in particular by ABB IC Møller and by the pressure brought to bear by ABB and Løgstør.587 Fourth, to the extent to which the applicants were to be found responsible for the measures taken against Powerpipe, they always played a quite secondary role. The applicants observe that, as regards the Neubrandenburg project, the conduct of Mr Henss or Henss Rosenheim amounted to no more than an attempt, since the measures in question failed and Powerpipe obtained the project in question.588 Fifth, the applicants state that the fine imposed on them is capable of rendering them insolvent. It is necessary, as a matter of principle, to consider whether the level at which a fine is set is capable of rendering the undertaking concerned insolvent. Otherwise, imposing a fine carries the risk of eliminating the undertaking in question from the market concerned and may result in an oligopolistic situation or to a dominant position on the market. Since Pan-Isovit and Tarco have been bought by Løgstør and since KWH has also decided, more or less in the short term, to leave the pre-insulated pipes market, the elimination of the applicants would give rise to an oligopolistic situation in the pre-insulated pipes market, which would be in the hands of the two ringleaders of the present cartel, ABB and Løgstør.589 In that regard, the applicants further observe that they have already stated, in their letters of 27 and 30 March 1998 to the Commission and also at the hearing before the Commission, that setting a high fine was likely to bring about the insolvency of Isoplus Rosenheim, Isoplus Hohenberg and Isoplus Sondershausen, the consequence of which would be job losses and also the elimination of two production undertakings and a large distributor from the market. The insolvency of the applicants would have the same consequences as regards HFB GmbH and HFB KG. Their liquidity problems prompted the applicants to submit an application for interim measures to the Court on 10 February 1999, in which they explained the risk of insolvency. In that regard, the applicants rely on the report of a firm of accountants of 4 February 1999 (the report), lodged before the Court during the interim proceedings. With reference to Article 48(2) of the Rules of Procedure of the Court of First Instance, the applicants seek to admit as additional evidence the report and the annexes thereto, attached to the reply, since it constitutes fresh evidence which did not yet exist when the present application was lodged on 18 January 1999.590 To all those considerations, the applicants add that the Commission cannot claim to have taken into consideration, when it set the fine, either circumstance as a mitigating circumstance. In any event, the illegal application of the guidelines rendered such consideration impossible, since the amount of the fine imposed on the applicants constitutes the maximum amount within the meaning of Article 15(2) of Regulation No 17.591 The defendant observes, first, that it took due account of the development in prices on the relevant market between 1990 and 1996. Second, as regards the argument that the Henss/Isoplus group gave rise to the dissolution of the Danish cartel or joined the cartel owing to the pressure brought to bear by ABB and Løgstør, the Commission refers to the arguments developed elsewhere. Third, the Commission contends that the commercial relations between ABB Isolrohr and Henss Rosenheim do not mean that ABB Isolrohr and Henss/Isoplus constituted an economic unit. Fourth, the Commission reiterates that the measures taken against Powerpipe cannot be examined in isolation from the cartel. Fifth, the Commission states that the fact that an undertaking is in financial difficulties cannot be admitted as a mitigating circumstance for the purpose of setting the fine. Furthermore, the order in HFB and Others v Commission, cited above, shows that the documents submitted on that occasion, including the report, are not sufficient to establish the difficulty of the applicants' financial situation. According to the Commission, the evidence that supposedly describes that situation at the time when the Decision was adopted is irrelevant and submitted out of time. Sixth, the guidelines do not allow the precise amount of a fine to be calculated and, in any event, the limit of 10% of turnover refers to the final result of the calculation of the fine.Findings of the Court592 In determining the amount of the fine to be imposed on the Henss/Isoplus group, the Commission, after assessing the gravity and the duration of the infringement and also the aggravating circumstances, took no mitigating circumstance into account.593 The Commission was not obliged to take the development of prices on the relevant market during the period in question into account as a mitigating circumstance leading to a reduction in the fine. First, it follows from the seventh paragraph of point 166 of the Decision that, in the present case, the fines were set at a level that reflected that fact that the agreements on the German market between late 1991 and 1993 were of limited practical effect. Second, for the period between the end of 1991 and 1993, the fall in prices outside Denmark and the lower prices in the German market by comparison with the Danish market cannot give rise to a reduction in the amount of the fine imposed on the applicants, since the high prices on the Danish market were the result of collusion between the Danish producers of which the applicants were perfectly well aware. The level of prices is even less capable of constituting a mitigating circumstance when the Commission established that there had been significant price increases in the German market from the end of 1994.594 Next, it has already been stated, at paragraphs 176 and 177 above, that the applicants cannot rely on their role in the dissolution of the Danish cartel in 1993, since that was not solely due to the entry of the Henss/Isoplus group into that market. The same applies to the commercial representation of ABB IC Møller, since the participation in the cartel of the Henss/Isoplus group went far beyond its activities as ABB's distributor. In any event, an undertaking which participates with others in activities having an anti-competitive objective cannot rely on the fact that it did so under duress from the other participants, since it could have reported the pressure brought to bear on it (see paragraph 178 above).595 Similarly, the applicants' argument that their contribution to the measures taken against Powerpipe amounted to no more than attempted collusion has been refuted (see paragraphs 283 to 285 above).596 Last, without there being any need to consider the allegation that the amount of the fine imposed on the applicants is capable of rendering them insolvent or the belated production of evidence in relation to that question, it is settled case-law that the Commission is not required, when determining the amount of the fine, to take into account the poor financial situation of an undertaking concerned, since recognition of such an obligation would be tantamount to giving an unjustified competitive advantage to undertakings least well adapted to market conditions (Joined Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82 IAZ and Others v Commission [1983] ECR 3369, paragraphs 54 and 55; Case T-319/94 Fiskeby Board v Commission [1998] ECR II-1331, paragraphs 75 and 76; and Enso Española v Commission, paragraph 316).597 In the absence of circumstances which should have been taken into account as mitigating circumstances, the applicants cannot claim that in the present case the application of the guidelines prevented consideration of mitigating circumstances from leading to a reduction in the amount of the fine, a fortiori because the guidelines provide for the reduction of the fine in order to take account of mitigating circumstances (second paragraph and point 3 of the guidelines).598 For all those reasons, the applicants' present objection must be rejected....V - Conclusions639 It follows from all the foregoing that Articles 3(d) and 5(d) of the Decision must be annulled in so far as they relate to HFB GmbH and HFB KG. The remainder of the application must be dismissed. Decision on costs Costs640 Under Article 87(3) of the Rules of Procedure of the Court of First Instance, the Court may, where each party succeeds on some and fails on other heads, order that the costs be shared or that each party bears its own costs. As the action has been successful only in part, the Court considers it fair, having regard to the circumstances of the case, to order the applicant to bear its own costs, including those relating to the interlocutory proceedings, and to pay 80% of the costs incurred by the Commission, including those relating to the interlocutory proceedings and to order the Commission to bear 20% of its own costs, including those relating to the interlocutory proceedings. Operative part On those grounds,THE COURT OF FIRST INSTANCE (Fourth Chamber)hereby:1. Annuls Articles 3(d) and 5(d) of Commission Decision 1999/60/EC of 21 October 1999 relating to a proceeding under Article 85 of the EC Treaty (Case No IV/35.691.E-4: - Pre-Insulated Pipe Cartel) in so far as it relates to HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co. KG and HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH, Verwaltungsgesellschaft;2. Dismisses the remainder of the application;3. Orders the applicants jointly and severally to bear their own costs, including those relating to the interlocutory proceedings, and to pay 80% of the costs incurred by the Commission, including those relating to the interlocutory proceedings;4. Orders the Commission to bear 20% of its own costs, including those relating to the interlocutory proceedings.

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ADVOCATE GENERAL LEGER CONSIDERS THAT SUBSIDIES GRANTED BY THE MEMBER STATES TO PUBLIC PASSENGER TRANSPORT UNDERTAKINGS ARE STATE AID WHICH MUST BE NOTIFIED TO THE COMMISSION

«(Regulation (EEC) No 1191/69 – Operation of urban, suburban and regional scheduled transport services – Public subsidies – Concept of State aid – Compensation for discharging public service obligations)» Summary of the Judgment 1.. Transport – Action by the Member States concerning public service obligations – Regulation No 1191/69 – Derogation authorised for undertakings operating urban, suburban or regional scheduled transport services – Extent of the option available to Member States – Obligation to delimit clearly the use made of that option – Observance of legal certainty (Council Regulation No 1191/69, Art. 1(1), second subpara.) Transport – Action by the Member States concerning public service obligations – Regulation No 1191/69 – Derogation authorised for undertakings operating urban, suburban or regional scheduled transport services – Extent of the option available to Member States – Obligation to delimit clearly the use made of that option – Observance of legal certainty 2.. State aid – Effect on trade between Member States – Adverse effect on competition – Exclusion by the Commission of the transport sector from the de minimis rule(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC); Commission Regulation No 69/2001; Commission Notice 96/C 68/06) State aid – Effect on trade between Member States – Adverse effect on competition – Exclusion by the Commission of the transport sector from the de minimis rule 3.. State aid – Definition – Measures intended to offset the cost of public service tasks assumed by an undertaking – Not included – Conditions – Clearly defined public service obligations – Establishment in an objective and transparent manner of the parameters used to calculate the compensation – Compensation limited to covering costs – Determination of the compensation, where the undertaking is not chosen by a public procurement procedure, on the basis of an analysis of the costs of a typical undertaking in the sector concerned (EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) State aid – Definition – Measures intended to offset the cost of public service tasks assumed by an undertaking – Not included – Conditions – Clearly defined public service obligations – Establishment in an objective and transparent manner of the parameters used to calculate the compensation – Compensation limited to covering costs – Determination of the compensation, where the undertaking is not chosen by a public procurement procedure, on the basis of an analysis of the costs of a typical undertaking in the sector concerned 4.. Transport – Aid for transport – Application of Article 77 of the Treaty (now Article 73 EC) – Limitation to cases covered by secondary Community legislation (EC Treaty, Art. 77 (now Art. 73 EC); Council Regulations Nos 1191/69 and 1107/70) Transport – Aid for transport – Application of Article 77 of the Treaty (now Article 73 EC) – Limitation to cases covered by secondary Community legislation JUDGMENT OF THE COURT24 July 2003 (1) ((Regulation (EEC) No 1191/69 – Operation of urban, suburban and regional scheduled transport services – Public subsidies – Concept of State aid – Compensation for discharging public service obligations))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Altmark Trans GmbH, by M. Ronellenfitsch, Rechtsanwalt, ─ Regierungspräsidium Magdeburg, by L.-H. Rode, acting as Agent, ─ Nahverkehrsgesellschaft Altmark GmbH, by C. Heinze, Rechtsanwalt, ─ the Commission of the European Communities, by M. Wolfcarius and D. Triantafyllou, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Altmark Trans GmbH, represented by M. Ronellenfitsch; Regierungspräsidium Magdeburg, represented by L.-H. Rode; Nahverkehrsgesellschaft Altmark GmbH, represented by C. Heinze; and the Commission, represented by M. Wolfcarius and D. Triantafyllou, at the hearing on 6 November 2001, after hearing the Opinion of the Advocate General at the sitting on 19 March 2002,having regard to the order reopening the oral procedure of 18 June 2002,after hearing the oral observations of Altmark Trans GmbH, represented by M. Ronellenfitsch; Regierungspräsidium Magdeburg, represented by S. Karnop, acting as Agent; Nahverkehrsgesellschaft Altmark GmbH, represented by C. Heinze; the German Government, represented by M. Lumma, acting as Agent; the Danish Government, represented by J. Molde, acting as Agent; the Spanish Government, represented by R. Silva de Lapuerta, acting as Agent; the French Government, represented by F. Million, acting as Agent; the Netherlands Government, represented by N.A.J. Bel, acting as Agent; the United Kingdom Government, represented by J.E. Collins, acting as Agent, and E. Sharpston QC; and the Commission, represented by D. Triantafyllou, at the hearing on 15 October 2002,after hearing the Opinion of the Advocate General at the sitting on 14 January 2003, gives the followingLegal contextOn those grounds, THE COURT,Rodríguez Iglesias PuissochetWathelet Schintgen TimmermansGulmann Edward La PergolaJann Skouris MackenColneric von BahrCunha RodriguesRosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

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TOURISTS WHO HAVE SUFFERED FROM THE IMPROPER PERFORMANCE OF A PACKAGE TRAVEL CONTRACT MAY CLAIM COMPENSATION FOR THE NON-MATERIAL DAMAGE CAUSED BY LOSS OF ENJOYMENT OF THEIR HOLIDAYS

| 62000J0168 Judgment of the Court (Sixth Chamber) of 12 March 2002. - Simone Leitner v TUI Deutschland GmbH & Co. KG. - Reference for a preliminary ruling: Landesgericht Linz - Austria. - Directive 90/314/EEC - Package travel, package holidays and package tours - Compensation for non-material damage. - Case C-168/00. European Court reports 2002 Page I-02631 Keywords Approximation of laws - Package travel, package holidays and package tours - Directive 90/314 - Organiser's and/or retailer's liability vis-à-vis consumers - Duty to compensate damage resulting from the non-performance or improper performance of the contract - Non-material damage - Included(Council Directive 90/314, Art. 5(2)) Summary $$Article 5 of Directive 90/314 on package travel, package holidays and package tours must be interpreted as conferring, in principle, on consumers a right to compensation for non-material damage resulting from the non-performance or improper performance of the services constituting a package holiday.( see paras 22, 24, operative part ) Parties In Case C-168/00,REFERENCE to the Court under Article 234 EC by the Landesgericht Linz (Austria) for a preliminary ruling in the proceedings pending before that court betweenSimone LeitnerandTUI Deutschland GmbH & Co. KG,on the interpretation of Article 5 of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (OJ 1990 L 158, p. 59),THE COURT (Sixth Chamber),composed of: N. Colneric, President of the Second Chamber, acting for the President of the Sixth Chamber, C. Gulmann (Rapporteur), J.-P. Puissochet, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: A. Tizzano,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- Simone Leitner, by W. Graziani-Weiss, Rechtsanwalt,- TUI Deutschland GmbH & Co. KG, by P. Lechenauer, Rechtsanwalt,- the Austrian Government, by C. Pesendorfer, acting as Agent,- the Belgian Government, by A. Snoecx, acting as Agent,- the French Government, by R. Abraham and R. Loosli-Surrans, acting as Agents,- the Finnish Government, by T. Pynnä, acting as Agent,- the Commission of the European Communities, by J. Sack, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of TUI Deutschland GmbH & Co. KG, of the Finnish Government and of the Commission at the hearing on 14 June 2001,after hearing the Opinion of the Advocate General at the sitting on 20 September 2001,gives the followingJudgment Grounds 1 By order of 6 April 2000, received at the Court on 8 May 2000, the Landesgericht (Regional Court) Linz (Austria) referred to the Court for a preliminary ruling under Article 234 EC a question on the interpretation of Article 5 of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (OJ 1990 L 158, p. 59, the Directive).2 That question was raised in proceedings between Simone Leitner and TUI Deutschland GmbH & Co. KG (TUI) concerning compensation for non-material damage sustained during a package holiday.The relevant Community provisions3 The second recital in the preamble to the Directive states that ... the national laws of Member States concerning package travel, package holidays and package tours, hereinafter referred to as "packages", show many disparities and national practices in this field are markedly different, which gives rise to obstacles to the freedom to provide services in respect of packages and distortions of competition amongst operators established in different Member States. According to the third recital, the establishment of common rules on packages will contribute to the elimination of these obstacles and thereby to the achievement of a common market in services, thus enabling operators established in one Member State to offer their services in other Member States and Community consumers to benefit from comparable conditions when buying a package in any Member State.4 According to the eighth and ninth recitals in the preamble to the Directive, disparities in the rules protecting consumers in different Member States are a disincentive to consumers in one Member State from buying packages in another Member State, and this disincentive is particularly effective in deterring consumers from buying packages outside their own Member State.5 Article 1 provides that The purpose of [the] Directive is to approximate the laws, regulations and administrative provisions of the Member States relating to packages sold or offered for sale in the territory of the Community.6 Article 5 provides that:1. Member States shall take the necessary steps to ensure that the organiser and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract, irrespective of whether such obligations are to be performed by that organiser and/or retailer or by other suppliers of services without prejudice to the right of the organiser and/or retailer to pursue those other suppliers of services.2. With regard to the damage resulting for the consumer from the failure to perform or the improper performance of the contract, Member States shall take the necessary steps to ensure that the organiser and/or retailer is/are liable unless such failure to perform or improper performance is attributable neither to any fault of theirs nor to that of another supplier of services ......In the matter of damages arising from the non-performance or improper performance of the services involved in the package, the Member States may allow compensation to be limited in accordance with the international conventions governing such services.In the matter of damage other than personal injury resulting from the non-performance or improper performance of the services involved in the package, the Member States may allow compensation to be limited under the contract. Such limitation shall not be unreasonable.(3) Without prejudice to the fourth subparagraph of paragraph 2, there may be no exclusion by means of a contractual clause from the provisions of paragraphs 1 and 2....The dispute in the main proceedings and the question referred7 The family of Simone Leitner (who was born on 7 July 1987) booked a package holiday (all-inclusive stay) with TUI at the Pamfiliya Robinson club in Side, Turkey (the club) for the period 4 to 18 July 1997.8 On 4 July 1997 Simone Leitner and her parents arrived at the club. There they spent the entire holiday and there they took all their meals. About a week after the start of the holiday, Simone Leitner showed symptoms of salmonella poisoning. The poisoning was attributable to the food offered in the club. The illness, which lasted beyond the end of the holiday, manifested itself in a fever of up to 40 degrees over several days, circulatory difficulties, diarrhoea, vomiting and anxiety. Her parents had to look after her until the end of the holiday. Many other guests in the club also fell ill with the same illness and presented the same symptoms.9 Two to three weeks after the end of the holiday a letter of complaint concerning Simone Leitner's illness was sent to TUI. Since no reply to that letter was received, Simone Leitner, through her parents, brought an action for damages in the sum of ATS 25 000.10 The court of first instance awarded the claimant only ATS 13 000 for the physical pain and suffering (Schmerzensgeld) caused by the food poisoning and dismissed the remainder of the application, which was for compensation for the non-material damage caused by loss of enjoyment of the holidays (entgangene Urlaubsfreude). That court considered that, if the feelings of dissatisfaction and negative impressions caused by disappointment must be categorised, under Austrian law, as non-material damage, they cannot give rise to compensation because there is no express provision in any Austrian law for compensation for non-material damage of that kind.11 The claimant appealed to the Landesgericht Linz, which concurs with the court of first instance so far as regards Austrian law, but considers that application of Article 5 of the Directive could lead to a different outcome. In that connection, the Landesgericht cites Case C-355/96 Silhouette International Schmied [1998] ECR I-4799, paragraph 36, where the Court ruled that, while a directive cannot of itself impose obligations on an individual and cannot therefore be relied upon as such against an individual, a national court is required to interpret the provisions of national law in the light of the wording and the purpose of the directive so as to achieve the result it has in view.12 The national court observes in addition that the German legislature has adopted legislation expressly concerning compensation for non-material damage where a journey is prevented or significantly interfered with and that in practice German courts do award such compensation.13 Taking the view that the wording of Article 5 of the Directive is not precise enough for it to be possible to draw from it any definite conclusion as to non-material damage, the Landesgericht Linz decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:Is Article 5 of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours to be interpreted as meaning that compensation is in principle payable in respect of claims for compensation for non-material damage?The question14 By its question the national court seeks to ascertain whether Article 5 of the Directive must be interpreted as conferring, in principle, on consumers a right to compensation for non-material damage resulting from failure to perform or the improper performance of the obligations inherent in the provision of package travel.Arguments of the parties15 According to Simone Leitner, the third recital in the preamble to the Directive makes it clear that operators must be able to offer packages in all the Member States on the same conditions. The fourth subparagraph of Article 5(2) of the Directive makes it possible to set contractual limits to liability incurred in the case of non-material damage resulting from the non-performance or improper performance of the services constituting a package holiday. That provision means that, according to the Directive, non-material damage must in principle be the subject of compensation.16 TUI and the Austrian, French and Finnish Governments are, essentially, at one in arguing that the harmonisation of national laws sought by the Directive consists merely of defining a minimum level of protection for consumers of package holidays. In consequence, anything not expressly covered by the Directive in that field, and in particular the kind of damage to be compensated, remains within the competence of the national legislatures. The Directive does no more than set out a body of essential common rules concerning the content, conclusion and performance of package tour contracts without exhaustively regulating the entire subject, in particular, matters relating to civil liability. Accordingly, the existence of a right to compensation for non-material damage cannot be inferred from the absence of an express reference thereto in the Directive.17 The Belgian Government submits that the general and unrestricted use of the term damage in the first subparagraph of Article 5(2) of the Directive implies that that term is to be construed broadly, with the result that damage of every kind must in principle be covered by the legislation implementing the Directive. In those Member States which recognise liability for non-material damage under the ordinary law, the Directive provides the right to set limits to that liability in accordance with certain criteria. In those Member States in which liability for non-material damage depends on the existence of an express provision to that effect, the absence of such a provision must be deemed to exclude absolutely compensation for non-material damage, which is contrary to the Directive.18 The Commission first points out that the term damage is used in the Directive without the least restriction, and that, specifically in the field of holiday travel, damage other than physical injury is a frequent occurrence. It then notes that liability for non-material damage is recognised in most Member States, over and above compensation for physical pain and suffering traditionally provided for in all legal systems, although the extent of that liability and the conditions under which it is incurred vary in detail. Lastly, all modern legal systems attach ever greater importance to annual leave. In those circumstances, the Commission maintains that it is not possible to interpret restrictively the general concept of damage used in the Directive and to exclude from it as a matter of principle non-material damage.Findings of the Court19 The first subparagraph of Article 5(2) of the Directive requires the Member States to take the necessary steps to ensure that the holiday organiser compensates the damage resulting for the consumer from the failure to perform or the improper performance of the contract.20 In that regard, it is clear from the second and third recitals in the preamble to the Directive that it is the purpose of the Directive to eliminate the disparities between the national laws and practices of the various Member States in the area of package holidays which are liable to give rise to distortions of competition between operators established in different Member States.21 It is not in dispute that, in the field of package holidays, the existence in some Member States but not in others of an obligation to provide compensation for non-material damage would cause significant distortions of competition, given that, as the Commission has pointed out, non-material damage is a frequent occurrence in that field.22 Furthermore, the Directive, and in particular Article 5 thereof, is designed to offer protection to consumers and, in connection with tourist holidays, compensation for non-material damage arising from the loss of enjoyment of the holiday is of particular importance to consumers.23 It is in light of those considerations that Article 5 of the Directive is to be interpreted. Although the first subparagraph of Article 5(2) merely refers in a general manner to the concept of damage, the fact that the fourth subparagraph of Article 5(2) provides that Member States may, in the matter of damage other than personal injury, allow compensation to be limited under the contract provided that such limitation is not unreasonable, means that the Directive implicitly recognises the existence of a right to compensation for damage other than personal injury, including non-material damage.24 The answer to be given to the question referred must therefore be that Article 5 of the Directive is to be interpreted as conferring, in principle, on consumers a right to compensation for non-material damage resulting from the non-performance or improper performance of the services constituting a package holiday. Decision on costs Costs25 The costs incurred by the Austrian, Belgian, French and Finnish Governments, and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT (Sixth Chamber),in answer to the question referred to it by the Landesgericht Linz by order of 6 April 2000, hereby rules:Article 5 of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours is to be interpreted as conferring, in principle, on consumers a right to compensation for non-material damage resulting from the non-performance or improper performance of the services constituting a package holiday.

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ALL NATIONAL AUTHORITIES WHICH RECEIVE NOTIFICATION OF A PROPOSED SHIPMENT OF WASTE FROM ONE MEMBER STATE TO ANOTHER MEMBER STATE ARE COMPETENT TO VERIFY WHETHER THE SHIPMENT IS CLASSIFIED IN THE APPROPRIATE CATEGORY (RECOVERY OR DISPOSAL) AND MUST OBJECT TO THE SHIPMENT WHERE THE CLASSIFICATION IS INCORRECT

| 62000J0006 Judgment of the Court (Fifth Chamber) of 27 February 2002. - Abfall Service AG (ASA) v Bundesminister für Umwelt, Jugend und Familie. - Reference for a preliminary ruling: Verwaltungsgerichtshof - Austria. - Environment - Waste - Regulation (EEC) No 259/93 on shipments of waste - Competence of the authority of dispatch to scrutinise the classification of the purpose of a shipment (recovery or disposal) and to object to a shipment on the ground of an incorrect classification - Directive 75/442/EEC on waste - Classification of deposit of waste in a disused mine. - Case C-6/00. European Court reports 2002 Page I-01961 Keywords 1. Environment - Waste - Regulation No 259/93 on shipments of waste - Classification of planned shipments by the notifier - Competence of the authority of dispatch to scrutinise the classification of the purpose of a shipment (recovery or disposal) and to object to a shipment on the ground of an incorrect classification(Council Regulation No 259/93, Arts 2(c), 7(2), 26 and 30(1))2. Environment - Waste - Directive 75/442 on waste - Annexes II A and II B - Distinction between disposal and recovery operations - Deposit of waste in a disused mine - Classification on a case- by-case basis(Council Directive 75/442, Annexes II A, item D, and II B) Summary 1. It follows from the system established by Regulation No 259/93 on the supervision and control of shipments of waste within, into and out of the European Community, as amended by Commission Decision 98/368, and in particular Articles 20 and 30(1) thereof, that the competent authority of dispatch, within the meaning of Article 2(c) of that regulation, is competent to verify whether a proposed shipment classified in the notification as a shipment of waste for recovery does in fact correspond to that classification, and that, if that classification is incorrect, the authority must oppose the shipment by raising an objection founded on that misclassification within the period prescribed by Article 7(2) of that regulation.( see paras 40-41, 50, operative part 1 )2. The deposit of waste in a disused mine does not necessarily constitute a disposal operation for the purposes of D 12 of Annex II A to Directive 75/442 on waste, as amended by Directive 91/156 and by Decision 96/350. The deposit must be assessed on a case-by-case basis to determine whether the operation is a disposal or a recovery operation within the meaning of that directive since a single operation cannot be classified simultaneously as both a disposal and a recovery operation. Such a deposit constitutes a recovery if its principal objective is that the waste serve a useful purpose in replacing other materials which would have had to be used for that purpose.( see paras 63, 71, operative part 2 ) Parties In Case C-6/00,REFERENCE to the Court under Article 234 EC by the Verwaltungsgerichtshof (Austria) for a preliminary ruling in the proceedings pending before that court betweenAbfall Service AG (ASA)andBundesminister für Umwelt, Jugend und Familie,on the interpretation of Council Regulation (EEC) No 259/93 of 1 February 1993 on the supervision and control of shipments of waste within, into and out of the European Community (OJ 1993 L 30, p. 1), as amended by Commission Decision No 98/368/EC of 18 May 1998 (OJ 1998 L 165, p. 20), and Council Directive 75/442/EEC of 15 July 1975 on waste (OJ 1975 L 194, p. 39), as amended by Council Directive 91/156/EEC of 18 March 1991 (OJ 1991 L 78, p. 32) and by Commission Decision 96/350/EC of 24 May 1996 (OJ 1996 L 135, p. 32),THE COURT (Fifth Chamber),composed of: P. Jann, President of the Chamber, S. von Bahr and A. La Pergola (Rapporteur), Judges,Advocate General: F.G. Jacobs,Registrar: D. Louterman-Hubeau, Head of Division,after considering the written observations submitted on behalf of:- Abfall Service AG (ASA), by C. Onz, Rechtsanwalt,- the Austrian Government, by C. Pesendorfer, acting as Agent,- the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents,- the Netherlands Government, by M.A. Fierstra, acting as Agent,- the Commission of the European Communities, by G. zur Hausen, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of Abfall Service AG (ASA), represented by C. Onz; of the Bundesminister für Umwelt, Jugend und Familie, represented by C. Glasel and A. Moser, acting as Agents; of the German Government, represented by W.-D. Plessing; of the French Government, represented by D. Colas, acting as Agent; and of the Commission, represented by G. zur Hausen, at the hearing on 12 July 2001,after hearing the Opinion of the Advocate General at the sitting on 15 November 2001,gives the followingJudgment Grounds 1 By order of 16 December 1999, received at the Court on 11 January 2000, the Verwaltungsgerichtshof (Administrative Court) (Austria) referred to the Court for a preliminary ruling under Article 234 EC five questions on the interpretation of Council Regulation (EEC) No 259/93 of 1 February 1993 on the supervision and control of shipments of waste within, into and out of the European Community (OJ 1993 L 30, p. 1), as amended by Commission Decision No 98/368/EC of 18 May 1998 (OJ 1998 L 165, p. 20, hereinafter the Regulation), and Council Directive 75/442/EEC of 15 July 1975 on waste (OJ 1975 L 194, p. 39), as amended by Council Directive 91/156/EEC of 18 March 1991 (OJ 1991 L 78, p. 32) and Commission Decision 96/350/EC of 24 May 1996 (OJ 1996 L 135, p. 32, hereinafter the Directive).2 Those questions were raised in proceedings between Abfall Service AG (ASA) (hereinafter Abfall Service) and the Bundesminister für Umwelt, Jugend und Familie (hereinafter the BMU) concerning the legality of a decision by which the BMU had objected to a shipment of waste planned by Abfall Service.Relevant legislationThe Directive3 The essential objective of the Directive is the protection of human health and the environment against harmful effects caused by the collection, transport, treatment, storage and tipping of waste. In particular, the fourth recital of the Directive states that the recovery of waste and the use of recovered materials should be encouraged in order to conserve natural resources.4 In Article 1(e) of the Directive disposal is defined as any of the operations provided for in Annex II A and in Article 1(f) recovery is defined as any of the operations provided for in Annex II B.5 Article 3(1) states:Member States shall take appropriate measures to encourage:(a) firstly, the prevention or reduction of waste production and its harmfulness ...(b) secondly:- the recovery of waste by means of recycling, re-use or reclamation or any other process with a view to extracting secondary raw materials, or- the use of waste as a source of energy.6 Annex II A, headed Disposal operations, states:NB: This Annex is intended to list disposal operations such as they occur in practice. ...D 1 Deposit into or onto land (e.g. landfill, etc.)...D 3 Deep injection (e.g. injection of pumpable discards into wells, salt domes or naturally occurring repositories, etc.)...D 12 Permanent storage (e.g. emplacement of containers in a mine, etc.)...7 Annex II B, headed Recovery operations, states:NB: This Annex is intended to list recovery operations as they occur in practice. ......R 5 Recycling/reclamation of other inorganic materials...R 10 Land treatment resulting in benefit to agriculture or ecological improvement...The Regulation8 The Regulation lays down rules governing inter alia the monitoring and control of shipments of waste between Member States.9 According to Article 2(i) of the Regulation, disposal is as defined in Article 1(e) of Directive 75/442/EEC and, according to Article 2(k), recovery is as defined in Article 1(f) of Directive 75/442/EEC.10 Title II of the Regulation, headed Shipments of waste between Member States, contains two separate chapters, one of which concerns the procedure applicable to shipments of waste for disposal (Chapter A, Articles 3 to 5) and the other the procedure applicable to shipments of waste for recovery (Chapter B, Articles 6 to 11). The procedure prescribed for the second category of waste is less restrictive than the procedure for the first category.11 Under Article 6(1), when a waste producer or holder intends to ship waste for recovery as listed in Annex III to the Regulation (Amber list of wastes) from one Member State to another Member State and/or pass it in transit through one or several other Member States, he is to notify the competent authority of destination and send copies of the notification to the competent authorities of dispatch and transit and to the consignee.12 According to Article 6(3), notification is effected by means of the consignment note which is issued by the competent authority of dispatch. Article 6(5) specifies the information which the notifier is to supply on the consignment note, which includes inter alia information relating to the recovery operations referred to in Annex II B to the Directive (fifth indent of Article 6(5)).13 Under Article 6(6), the notifier is required to conclude a contract with the consignee for the recovery of the waste, and a copy of that contract must be supplied to the competent authority on request.14 Article 7(2) lays down the time-limits, conditions and procedures which must be observed by the competent authorities of destination, dispatch and transit to raise an objection to the notified, planned shipment of waste for recovery. That provision provides in particular that objections must be based on Article 7(4).15 Article 7(4) provides:The competent authorities of destination and dispatch may raise reasoned objections to the planned shipment:- in accordance with Directive 75/442/EEC, in particular Article 7 thereof, or- if it is not in accordance with national laws and regulations relating to environmental protection, public order, public safety or health protection, or- if the notifier or the consignee has previously been guilty of illegal trafficking. In this case, the competent authority of dispatch may refuse all shipments involving the person in question in accordance with national legislation, or- if the shipment conflicts with obligations resulting from international conventions concluded by the Member State or Member States concerned, or- if the ratio of the recoverable and non-recoverable waste, the estimated value of the materials to be finally recovered or the cost of the recovery and the cost of the disposal of the non recoverable fraction do not justify the recovery under economic and environmental considerations.16 Article 26 provides:1. Any shipment of waste effected:...(c) with consent obtained from the competent authorities concerned through falsification, misrepresentation or fraud;...shall be deemed to be illegal traffic....5. Member States shall take appropriate legal action to prohibit and punish illegal traffic.17 Article 30(1) states:Member States shall take the measures needed to ensure that waste is shipped in accordance with the provisions of this Regulation. Such measures may include inspections of establishments and undertakings, in accordance with Article 13 of Directive 75/442/EEC, and spot checks of shipments.The main proceedings and the national court's questions18 On 2 March 1998, Abfall Service, established at Graz, Austria, notified the BMU, as the competent authority of dispatch, of its intention to ship 7 000 tonnes of hazardous waste to Salzwerke AG, a company established in Germany.19 According to that notification, the waste in question was slag and ashes produced as a by-product in the operation of waste incinerators and transformed into a specific product at a waste-treatment plant in Vienna, Austria. The waste was to be deposited in a former salt-mine at Kochendorf, Germany, to secure hollow spaces (mine-sealing).20 In the notification documents, Abfall Service classified the treatment of the waste to be shipped as a recovery operation coming within the scope of the operation referred to in R5 of Annex II B to the Directive.21 The competent authority of destination, the Stuttgart Regierungspräsidium, Germany, informed Abfall Service that there appeared to be no reason for it not to approve the notification classifying the shipment as a recovery operation.22 By decision of 19 June 1998, the BMU raised an objection to the shipment under the fifth indent of Article 7(4)(a) of the Regulation. The ground for that objection was that the planned shipment in fact constituted a disposal operation, namely the operation referred to in D12 of Annex II A to the Directive.23 Abfall Service challenged the BMU's decision before the Verwaltungsgerichtshof. In particular, it claimed that the ground stated for the objection, namely that the planned operation was not a recovery operation but a disposal operation, was not in accordance with those laid down in the fifth indent of Article 7(4)(a) of the Regulation.24 In those circumstances, the Verwaltungsgerichtshof, taking the view that the outcome of the proceedings before it depended on an interpretation of Community law, decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:(1) Is the competent authority at the place of dispatch under Council Regulation No 259/93 on supervision and control of shipments of waste within, into and out of the European Community ... competent to verify the correctness of the classification by the notifier as waste for recovery under the fifth indent of Article 6(5) of Regulation No 259/93 of waste to be transported for an intended recovery operation under Annex II B to Directive 75/442/EEC and, in the event that the classification is incorrect, prohibit the transport of such waste?(2) In the reasoned objection to the transport of waste on the ground that the planned transport is not for purposes of recovery but for disposal, contrary to the classification indicated by the notifier in the accompanying notification, may the competent authority at the place of dispatch rely on the matters constituting grounds for an objection under the fifth indent of Article 7(4)(a) of Regulation No 259/93?(3) Should the reply to Question 2 be in the negative, on what provision of Regulation No 259/93 or other provisions of Community law may the competent authority at the place of dispatch rely in refusing to authorise a transport of waste, where contrary to the information given by the notifier, the transport is for purposes not of recovery but of disposal?(4) Is any delivery of waste to a mine to be regarded, irrespective of the actual circumstances of such delivery, as a disposal of waste within the meaning of Regulation No 259/93 in conjunction with Annex II A (D 12) to Directive 75/442/EEC?(5) If Question 4 is answered in the negative, according to what criteria is classification under the operations listed in Annex II to Directive 75/442 to be carried out?The first three questions25 In its first three questions, which it is appropriate to consider together, the national court is essentially asking, first, whether the competent authority of dispatch within the meaning of Article 2(c) of the Regulation is competent to verify whether a proposed shipment classified in the notification as a shipment of waste for recovery does in fact correspond to that classification and, second, that being the case, whether that authority can object to the shipment where the classification given by the notifier is erroneous and which provision of Community law must be the basis for its objection.26 Abfall Service claims that the competent authority of dispatch is not competent to verify the accuracy of the notifier's classification of the shipment as a recovery operation and that, if that classification were indeed incorrect, the authority of dispatch would not be entitled to prohibit the shipment of waste unless the notification were clearly fraudulent.27 In this respect, Abfall Service submits that only the competent authority of destination is entitled to raise an objection in the case of incorrect classification of the purpose of the shipment. It claims, in particular, that, as regards the grounds for objection set out in the fifth indent of Article 7(4)(a) of the Regulation, only the competent authority of destination is able to acquire, in sufficient time, the information relating to the recovery installation and the costs of recovery and disposal in the country of destination which would enable it to raise an objection in full knowledge of the facts.28 Abfall Service adds that, if the competent authority of dispatch and the competent authority of destination could concomitantly scrutinise the purpose of the shipment, there would be a risk that their decisions would differ.29 Furthermore, Abfall Service submits that the Regulation must be interpreted in the light of the principle of free movement of goods and in line with the principle of primacy of recovery, which together imply that the competent authority of dispatch is not entitled to raise an objection on the ground that the purpose of the shipment has been incorrectly classified. First, there is a risk that the competent authority of dispatch will use its powers to protect national economic interests and, second, the exercise of such a power constitutes an unjustified limitation to the principle of primacy of recovery.30 In contrast, the Austrian and German Governments, the French Government in its oral submissions, the Netherlands Government and the Commission consider that the competent authority of dispatch is competent to verify the accuracy of information provided by the notifier, in particular with regard to the classification of the purpose of the shipment of waste.31 As regards the question of which provision of Community law the competent authority of dispatch must use as the legal basis for an objection to a proposed shipment which is incorrectly classified as a shipment of waste for recovery, the Austrian and German Governments, reasoning by analogy, submit that the objection provided for in the fifth indent of Article 7(4)(a) of the Regulation can be used in the present case. The Netherlands Government and the Commission do not concur with that interpretation of the provision.32 The Austrian and German Governments further submit that the competent authority of dispatch can also use the first indent of Article 7(4)(a) of the Regulation as the legal basis for objecting to a shipment incorrectly classified as a shipment of waste for recovery. The German Government considers that Article 4(3)(a)(i) of the Regulation, which concerns shipments of waste for disposal, can also be used by the competent authority of dispatch, after the purpose of the shipment has been reclassified.33 The French Government, in its oral submissions, and the Netherlands Government submit that where, contrary to what the notifier has stated, a shipment is not a shipment of waste for recovery but, instead, of waste for disposal, the competent authority of dispatch may reclassify the shipment and is accordingly entitled to raise an objection under Article 4(3) of the Regulation.34 The Commission submits that, in accordance with the general principle of compliance with the law, the competent authority of dispatch must raise an objection to a shipment where its purpose has been incorrectly classified by the notifier and that, in such a case, it is not necessary for that authority to base its action on a specific provision of the Regulation.Findings of the Court35 It should be observed at the outset that the question of shipments of waste is regulated by the Regulation, in a harmonised manner, at Community level, in order to ensure the protection of the environment (Case C-324/99 DaimlerChrysler [2001] ECR I-9897, at paragraph 42).36 The cases in which Member States may object to a shipment of waste between Member States are, for shipments of waste for disposal, those exhaustively listed in Article 4(3) of the Regulation (the judgement in DaimlerChrysler, paragraph 50) and, for waste for recovery subject to the procedure laid down in Articles 6 to 8 of the Regulation, those exhaustively listed in Article 7(4) of the Regulation as provided by Article 7(2) thereof.37 However, the application of the provisions in the Regulation defining the objections to shipments of waste for disposal or recovery which may be raised by the competent authorities of dispatch, transit and destination presupposes that the purpose of the shipment has first been correctly classified in accordance with the definitions of disposal and recovery operations given in Article 1(e) and (f) of the Directive, provisions which refer, respectively, to Annex II A and II B to the Directive.38 The need to correctly classify the purpose of the shipment of waste follows not only from the provisions in the Regulation, referred to at paragraph 36 of this judgment, which specify the grounds for objecting to a shipment, but also, more generally, from the Regulation as a whole, which, as stated in its eighth recital, applies different procedures depending on the destination of the waste, including whether it is intended for disposal or recovery. One of the Regulation's aims, namely to render shipments of waste for recovery easier than shipments of waste for disposal by laying down less restrictive rules for the former type of shipment, would be jeopardised if the classification of the purpose of those shipments were not scrutinised.39 Under the Regulation, the notifier itself is responsible for classifying the purpose of the shipment of waste in the consignment note, through which notification is made to the competent authorities.40 However, it follows from the system established by the Regulation that all the competent authorities to which that notification is addressed must check that the classification by the notifier is consistent with the provisions of the Regulation and object to a shipment which is incorrectly classified.41 That obligation derives, in particular, from Article 26 of the Regulation, which requires Member States to prohibit and punish any illegal traffic, in particular cases resulting from a knowingly false classification of the purpose of the shipment by the notifier, and from Article 30(1) of the Regulation, which expressly imposes a general duty on Member States to take the requisite measures to ensure that waste is shipped in accordance with the provisions of the Regulation.42 This interpretation is not called into question by the arguments presented by Abfall Service to the effect that the authority of dispatch is not in a position to verify the accuracy of the notifier's classification of the operation as a shipment of waste for recovery.43 First of all, the authority of dispatch receives, under Article 6(1) of the Regulation, a copy of the notification of the proposed shipment of waste for recovery and thus has the same information at its disposal as is transmitted to the authority of destination. Moreover, the authority of dispatch may also, under Article 6(4) of the Regulation, request from the notifier additional information and documentation relating to the proposed shipment and, under Article 6(6) of the Regulation, it may require the notifier to supply a copy of the contract for the recovery of the waste. The authority of dispatch therefore has the means to allow it to scrutinise the accuracy of the classification of the purpose of that shipment.44 Next, the Court cannot accept Abfall Service's contention that the competent authorities of destination and the competent authorities of dispatch should not both be required to verify the accuracy of the notifier's classification of the shipment because this could lead to different classifications of the same shipment. The risk of such different classifications is inherent in the system established by the Regulation, which confers simultaneously on all the competent authorities the responsibility of ensuring that the shipments are carried out in accordance with the Regulation.45 Lastly, Abfall Service's arguments relating to the principle of freedom of movement of goods and the principle of primacy of recovery of waste cannot be accepted. First, it follows from the Regulation that the authority of dispatch may object to a shipment of waste on the ground that the classification of the purpose of the shipment is incorrect only if that classification is inconsistent with the Regulation, but not in order to restrict trade between the Member States. Second, the principle of primacy of recovery of waste, which is intended to encourage recovery, applies by definition only to waste which is in fact intended for recovery and therefore does not prohibit scrutiny of the intended use also by the competent authority of dispatch.46 As regards the provision of Community law which the competent authority of dispatch must use as the basis for an objection to a shipment which has been incorrectly classified in the notification, it must first be observed that, according to its express terms, the fifth indent of Article 7(4)(a) of the Regulation may only be applied when at least a part of the waste is to be recovered. Therefore, that provision may not be applied by the competent authority of dispatch to object to a shipment of waste which, in its view, is solely intended for disposal.47 If the competent authority of dispatch considers that the purpose of the shipment has been incorrectly classified in the notification, the ground for its objection to the shipment must be the classification error itself, without reference to one of the specific provisions of the Regulation setting out the objections which the Member States may raise against a shipment of waste. The effect of that objection is, as with the other objections provided for in the Regulation, to prevent the shipment.48 The notifier may then abstain from shipping the waste to another Member State, submit a new notification, or institute any appropriate proceedings to challenge the decision of the authority of dispatch objecting to the shipment. In any event, it is not for the competent authority ex officio to reclassify the purpose of the shipment of waste, since such a unilateral reclassification would result in one and the same shipment being examined by different competent authorities in the light of provisions falling under different chapters of the Regulation, which would be incompatible with the system established by the Regulation.49 Moreover, it should be borne in mind that the Court has held that the procedure laid down by the Regulation provides the notifier with a guarantee that the proposed shipment will be examined within the periods prescribed by the Regulation and that he will be informed, upon the expiry of those periods at the latest, whether, and on what conditions, if any, the shipment can be carried out (the DaimlerChrysler case, at paragraph 70). Therefore, any objection in respect of the incorrect classification of the notified shipment as a shipment of waste for recovery must be raised by the competent authority of dispatch within the period prescribed by Article 7(2) of the Regulation.50 In view of the foregoing, the answer to the first three questions must be that it follows from the system established by the Regulation- that the competent authority of dispatch, within the meaning of Article 2(c) thereof, is competent to verify whether a proposed shipment classified in the notification as a shipment of waste for recovery does in fact correspond to that classification, and- that, if that classification is incorrect, the authority must oppose the shipment by raising an objection founded on that misclassification within the period prescribed by Article 7(2) of the Regulation.The fourth and fifth questions51 In its fourth and fifth questions, which should be considered together, the national court is essentially asking whether the deposit of waste in a disused mine necessarily constitutes a disposal operation within the meaning of D 12 of Annex II A to the Directive or whether such deposits must be assessed on a case-by-case basis to determine whether the operation is a disposal or a recovery within the meaning of the Directive and, in that case, what criteria should be used to make the assessment.52 Abfall Service and the Austrian and German Governments consider that the deposit of waste in a disused mine must be classified as a disposal or a recovery of waste according to the individual circumstances of each case.53 As regards the criteria for that classification, Abfall Service submits that, according to the Directive, the conservation of natural resources as raw materials and the intention to reclaim waste are the objectives characterising a recovery operation. It claims that the hazardous or non-hazardous nature of the waste must also be taken into account; the fact that the waste is hazardous is an indication that the related operation is one of disposal.54 According to the Austrian and German Governments, the classification of the deposit of waste in a disused mine for the purposes of the Directive depends essentially on whether the waste in question has the relevant technical characteristics to be used as mine-fill material. The German Government adds that the Directive's objective of conserving natural resources implies that the classification of an operation should be based on the principal objective of that operation; the fact that waste is used as a substitute for natural resources prompts the conclusion that the operation constitutes a recovery of that waste.55 By contrast, the French Government in its oral submissions, the Netherlands Government and the Commission consider that any deposit of waste in a disused mine must be classified as a disposal operation because it is covered by the operation referred to in D 12 of Annex II A to the Directive. The Netherlands Government and the Commission state that that type of deposit may also in certain cases be considered to be covered by the operations set out in D 1 and D 3 of that Annex.56 The French and Netherlands Governments add that recycling, re-use and reclamation are operations which presuppose that the waste undergoes treatment in order that it may be re-used. According to those Governments, that condition is not met by the deposit of waste in a disused mine.57 Furthermore, according to the Commission, there may be uses of waste which are not expressly included in the operations described in Annexes II A and II B to the Directive, but which nevertheless fall within the scope of application of the Directive and the Regulation.Findings of the Court58 It must be observed, at the outset, that neither the Regulation nor the Directive contains a general definition of disposal or recovery of waste, but merely refers to Annexes II A and II B to the Directive, in which various operations falling within the scope of those concepts are listed.59 As is stated in the introductory note to Annexes II A and II B to the Directive, each of those annexes is intended to list disposal or recovery operations as they occur in practice. Moreover, it is clear from the wording of the operations in those annexes that some of them are described in very general terms and in fact cover categories of operations, with examples of operations sometimes provided to illustrate the relevant category of operation.60 It must therefore be concluded that the intention of Annexes II A and II B to the Directive is to list the most common disposal and recovery operations and not precisely and exhaustively to specify all the disposal and recovery operations covered by the Directive.61 It follows from the approach thus adopted by the Community legislature, first, that some methods of disposal or recovery of waste may not be expressly mentioned amongst the operations listed in Annexes II A and II B to the Directive, notably because they did not come into use until after the most recent adaptation of those Annexes to reflect scientific and technical progress, and, second, that some operations are capable of falling within the wording of operations mentioned in Annex II A and in Annex II B to the Directive.62 However, it is evident from the Directive that any treatment of waste falling within its scope of application must be classifiable either as disposal or recovery of waste, in order that the separate rules established by the Directive for those two categories of operations can be applied, in particular with regard to the authorisation system imposed on establishments and undertakings which carry out such operations. As is clear from paragraph 38 of the present judgment, the application of the Regulation also presupposes, with regard to determining the rules applicable to a shipment of waste, that the purpose of the shipment can be classified as a disposal or as a recovery.63 Therefore, for the purpose of applying the Directive and the Regulation, it must be possible to classify any waste treatment operation as either a disposal or a recovery operation, and a single operation may not be classified simultaneously as both a disposal and a recovery operation.64 Consequently, where, having regard solely to the wording of the operations in question, a waste treatment operation cannot be brought within one of the operations or categories of operations referred to in Annex II A or II B to the Directive, it must be classified on a case-by-case basis in the light of the objectives of the Directive.65 That is the case here, since the deposit of slag and ashes in a disused mine constitutes an operation which, having regard solely to the wording of the operations in question, is capable of falling within the scope of the disposal operation referred to in D 12 of Annex II A to the Directive or of the recovery operation referred to in R 5 of Annex II B to that Directive.66 In that respect, it must be observed that under Article 3(1)(b) of the Directive Member States are required to take appropriate measures to encourage the recovery of waste by means of recycling, re-use or reclamation or any other process with a view to extracting secondary raw materials and the use of waste as a source of energy.67 It should first be observed that, as the Advocate General has pointed out at paragraph 82 of his Opinion, while the term recovery operation may generally imply a prior treatment of the waste, it does not follow from Article 3(1)(b) or from any other provision of the Directive that the fact that waste has been subject to such a treatment is a necessary condition for classifying an operation as recovery within the meaning of Article 1(f) of the Directive.68 It must also be noted that, as the Advocate General has explained at paragraph 84 of his Opinion, it does not follow from Article 3(1)(b) or from any other provision of the Directive that the hazardous or non-hazardous nature of the waste is, of itself, a relevant criterion for assessing whether a waste treatment operation must be classified as recovery within the meaning of Article 1(f) of the Directive.69 However, it does follow from Article 3(1)(b) and the fourth recital of the Directive that the essential characteristic of a waste recovery operation is that its principal objective is that the waste serve a useful purpose in replacing other materials which would have had to be used for that purpose, thereby conserving natural resources.70 It is for the national judge to apply that criterion in the present case in order to classify the deposit of the waste at issue in a disused mine as either a disposal operation or a recovery operation.71 In view of the considerations set out above, the answer to the fourth and fifth questions must be that the deposit of waste in a disused mine does not necessarily constitute a disposal operation for the purposes of D 12 of Annex II A to the Directive.The deposit must be assessed on a case-by-case basis to determine whether the operation is a disposal or a recovery operation within the meaning of that Directive.Such a deposit constitutes a recovery if its principal objective is that the waste serve a useful purpose in replacing other materials which would have had to be used for that purpose. Decision on costs Costs72 The costs incurred by the Austrian, German, French and Netherlands Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT (Fifth Chamber),in answer to the questions referred to it by the Verwaltungsgerichtshof by order of 16 December 1999, hereby rules:1. It follows from the system established by Council Regulation (EEC) No 259/93 of 1 February 1993 on the supervision and control of shipments of waste within, into and out of the European Community, as amended by Commission Decision 98/368/EC of 18 May 1998,- that the competent authority of dispatch, within the meaning of Article 2(c) thereof, is competent to verify whether a proposed shipment classified in the notification as a shipment of waste for recovery does in fact correspond to that classification, and- that, if that classification is incorrect, the authority must oppose the shipment by raising an objection founded on that misclassification within the period prescribed by Article 7(2) of the Regulation.2. The deposit of waste in a disused mine does not necessarily constitute a disposal operation for the purposes of D 12 of Annex II A to Council Directive 75/442/EEC of 15 July 1975 on waste, as amended by Council Directive 91/156/EEC of 18 March 1991 and Commission Decision 96/350/EC of 24 May 1996.The deposit must be assessed on a case-by-case basis to determine whether the operation is a disposal or a recovery operation within the meaning of that Directive.Such a deposit constitutes a recovery if its principal objective is that the waste serve a useful purpose in replacing other materials which would have had to be used for that purpose.

67b72-5a79977-4b51

EN

UNFAVOURABLE RATE OF TAX LEVIED BY FRANCE ON LIGHT-TOBACCO CIGARETTES PROTECTS DOMESTIC PRODUCTION AND IS CONTRARY TO COMMUNITY LAW

| 62000J0302 Judgment of the Court (Fifth Chamber) of 27 February 2002. - Commission of the European Communities v French Republic. - Failure by a Member State to fulfil its obligations - Directives 95/59/EC and 92/79/EEC - Article 95 of the EC Treaty (now after amendment, Article 90 EC) - Taxes affecting the consumption of manufactured tobaccos - Minimum reference price for all cigarettes of the same brand - Different rates of tax on dark-tobacco and light-tobacco cigarettes. - Case C-302/00. European Court reports 2002 Page I-02055 Keywords 1. Tax provisions - Harmonisation of laws - Taxes other than turnover taxes which affect the consumption of manufactured tobacco - Directive 95/59 - Determination of minimum retail selling prices for tobacco manufactured by the public authorities - Minimum reference price on all cigarettes sold under the same brand - Not permissible(Council Directive 95/59, as amended by Directive 1999/81, Art. 9(1))2. Tax provisions - Harmonisation of laws - Taxes other than turnover taxes which affect the consumption of manufactured tobacco - Directives 92/79 and 95/59 - Different rate of tax for dark- and light-tobacco cigarettes - Not permissible(Council Directives 92/79, Art. 2, and 95/59, as amended by Directive 1999/81, Arts 8(2) and 16(5))3. Tax provisions - Internal taxation - Prohibition of discrimination between imported products and similar domestic products - Different rate of tax for dark- and light-tobacco cigarettes - Not permissible(EC Treaty, Art. 95 (now, after amendment, Art. 90 EC) Summary 1. A Member State which maintains in force a system imposing a minimum reference price on all cigarettes sold under the same brand, even if the minimum price is not directly but indirectly set by reference to the price charged for another product of the same brand, fails to fulfil its obligations under Article 9(1) of Directive 95/59 on taxes other than turnover taxes which affect the consumption of manufactured tobacco, as amended by Directive 1999/81, which provides that manufacturers and importers are free to determine the maximum retail selling prices for cigarettes. The fixing of a minimum retail selling price by the public authorities inevitably has the effect of limiting the freedom of producers and importers to determine their maximum retail selling prices since, in any event, those prices cannot be lower than the compulsory minimum price.( see paras 14-17, 35, operative part )2. A Member State which maintains in force a system imposing a different rate of tax for dark- and light-tobacco cigarettes fails to fulfil its obligations under Articles 8(2) and 16(5) of Directive 95/59 on taxes other than turnover taxes which affect the consumption of manufactured tobacco, as amended by Directive 1999/81 and under Article 2 of Directive 92/79 on the approximation of taxes on cigarettes, which require the application of a single minimum global excise duty, identical for all cigarettes.( see paras 20, 34-35, operative part )3. A Member State which maintains in force a system imposing a different rate of tax for dark-tobacco cigarettes, which are almost exclusively manufactured in that State, and light-tobacco cigarettes, which are primarily imported products, to the detriment of the latter, fails to fulfil its obligations under the first paragraph of Article 95 of the Treaty (now, after amendment, the first paragraph of Article 90 EC).( see paras 29, 34-35, operative part ) Parties In Case C-302/00,Commission of the European Communities, represented by E. Traversa and C. Giolito, acting as Agents, with an address for service in Luxembourg,applicant,vFrench Republic, represented by G. de Bergues and S. Seam, acting as Agents, with an address for service in Luxembourg,defendant,APPLICATION for a declaration that by maintaining in force:- a system imposing a minimum reference price on all cigarettes, and- a system imposing different tax rates on dark-tobacco and light-tobacco cigarettes, to the disadvantage of the latter,the French Republic has failed to fulfil its obligations under Article 9(1), Article 8(2) and Article 16(5) of Council Directive 95/59/EC of 27 November 1995 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (OJ 1995 L 291, p. 40), as amended by Council Directive 1999/81/EC of 29 July 1999 (OJ 1999 L 211, p. 47), and Article 2 of Council Directive 92/79/EEC of 19 October 1992 on the approximation of taxes on cigarettes (OJ 1992 L 316, p. 8), and under the first paragraph of Article 95 of the EC Treaty (now, after amendment, the first paragraph of Article 90 EC), or alternatively under the second paragraph of Article 95 of the EC Treaty,THE COURT (Fifth Chamber),composed of: P. Jann, President of the Chamber, S. von Bahr (Rapporteur) and A. La Pergola, Judges,Advocate General: S. Alber,Registrar: H. von Holstein, Deputy Registrar,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 21 June 2001,after hearing the Opinion of the Advocate General at the sitting on 13 September 2001,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 7 August 2000, the Commission of the European Communities brought an action under Article 226 EC for a declaration that by maintaining in force:- a system imposing a minimum reference price on all cigarettes, and- a system imposing different tax rates on dark-tobacco and light-tobacco cigarettes, to the disadvantage of the latter,the French Republic has failed to fulfil its obligations under Article 9(1), Article 8(2) and Article 16(5) of Council Directive 95/59/EC of 27 November 1995 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (OJ 1995 L 291, p. 40), as amended by Council Directive 1999/81/EC of 29 July 1999 (OJ 1999 L 211, p. 47, Directive 95/59), and Article 2 of Council Directive 92/79/EEC of 19 October 1992 on the approximation of taxes on cigarettes (OJ 1992 L 316, p. 8), and under the first paragraph of Article 95 of the EC Treaty (now, after amendment, the first paragraph of Article 90 EC), or alternatively under the second paragraph of Article 95 of the EC Treaty.The Community legislation2 Manufactured tobaccos are subject to a harmonised Community excise duty. Directive 95/59 defines the different categories of products subject to excise duties and the methods of calculating the latter. Directive 92/79 fixes the minimum rate of excise duty for each category of products.3 Article 8(1) and (2) of Directive 95/59 provides that:1. Cigarettes manufactured in the Community and those imported from third countries shall be subject to a proportional excise duty calculated on the maximum retail selling price, including customs duties, and also to a specific excise duty calculated per unit of the product.2. The rate of the proportional excise duty and the amount of the specific excise duty must be the same for all cigarettes.4 Article 9(1) of Directive 95/59 provides that:1. A natural or legal person established in the Community who converts tobacco into manufactured products prepared for retail sale shall be deemed to be a manufacturer.Manufacturers, or, where appropriate, their representatives or authorised agents in the Community and importers of tobacco from non-member countries shall be free to determine the maximum retail selling price for each of their products for each Member State for which the products in question are to be released for consumption.The second paragraph may not, however, hinder implementation of national systems of legislation regarding the control of price levels or the observance of imposed prices, provided that they are compatible with Community legislation.5 Under the fifth subparagraph of Article 16 of Directive 95/59:Member States may levy a minimum excise duty on cigarettes provided that this does not have the effect of raising the total tax to more than 90% of the total tax on the most popular price category of cigarettes.6 The wording of Article 2 of Directive 92/79 is as follows:Not later than 1 January 1993, each Member State shall apply an overall minimum excise duty (specific duty plus ad valorem duty excluding VAT) the incidence of which shall be set at 57% of the retail selling price (inclusive of all taxes) for cigarettes of the price category most in demand.The overall minimum excise duty on cigarettes shall be determined on the basis of cigarettes of the price category most in demand according to data established as at 1 January of each year, beginning on 1 January 1993.7 The first and second paragraphs of Article 95 of the EC Treaty provide that:No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.The national legislation8 Article 37 of Law No 97-1269, of 30 December 1997, on Finance Law 1998 (JORF of 31 December 1997, p. 19261, hereinafter the Finance Law 1998), in force from 1 January 1998, introduced certain amendments to Article 572 et seq. of the Code Général des Impôts (General Tax Code, hereinafter the GTC).9 Article 37(1)(2) of the Finance Law 1998 inserted a paragraph after Article 572(1) of the GTC drafted in the following terms:For the category of dark-tobacco cigarettes defined by the final paragraph of Article 575A and in respect of the category of other cigarettes, the price for 1 000 units of a category of products sold under the same brand, regardless of the other components registered with the brand may not be less, independently of the method or the unit of packaging used, than that applied to the product with the highest sales of that brand.10 Moreover, Article 37(3) of the Finance Act 1998 replaced the final paragraph of Article 575A of the GTC with the following three paragraphs:The lowest rate of tax mentioned by Article 575 is fixed at FRF 500 for cigarettes. Nevertheless, for dark-tobacco cigarettes, that rate of tax is fixed at FRF 400, and at FRF 420 from 1 January 1999.The rate is fixed at FRF 230 for fine-cut tobacco for roll-up cigarettes.Cigarettes containing a minimum of 60 per cent of natural tobaccos covered by Customs tariffs codes NC 2401.10.41, 2401.10.70, 2401.20.41 or 2401.20.70 shall be deemed to be dark-tobacco cigarettes.Pre-Litigation Procedure11 Having given the French Republic formal notice to submit its observations, the Commission sent it a reasoned opinion by letter of 26 January 1999 requesting it to take the measures necessary to comply with its obligations under Directives 95/59 and 92/79 and Article 95 of the Treaty within two months from the date of notification of the opinion. Taking the view that the response of the French authorities was not satisfactory, the Commission initiated the present action.Findings of the CourtThe first complaint12 The Commission takes the view that Article 572 of the GTC, as amended by the Finance Act 1998 (hereinafter the amended GTC), according to which the price of 1 000 units of a category of cigarettes sold under the same brand may not be inferior, regardless of the mode or unit of packaging used, to that applied to the most popular product of that brand, is contrary to Article 9(1) of Directive 95/59 which provides that producers and importers are free to determine the maximum retail prices for cigarettes.13 According to the French Government, Article 572 of the amended GTC merely imposes the obligation on producers and importers to express the retail selling price of cigarettes in a particular way, without fixing the price level. That provision has neither the effect nor the purpose of permitting the French authorities to determine unilaterally and in the exercise of its authority the maximum retail selling prices of cigarettes and it is not therefore incompatible with Article 9(1) of Directive 95/59.14 In that context, it should be observed that, by stipulating that the price of 1 000 units of a category of cigarettes sold under the same brand may not be less than the price of the most popular product of the same brand, Article 572 of the amended GTC in actual fact imposes a minimum retail selling price for cigarettes, even if that minimum price is not directly but indirectly set by reference to the price charged for another product.15 The setting of a minimum retail selling price by public authorities inevitably has the effect of limiting the freedom of producers and importers to determine their maximum retail selling prices since, in any event, those prices cannot be lower than the compulsory minimum price (Case C-216/98 Commission v Greece [2000] ECR I-8921, paragraph 21).16 Article 572 of the amended GTC therefore appears to be contrary to Article 9(1) of Directive 95/59.17 It follows, that by maintaining in force a system imposing a minimum reference price for all cigarettes sold under the same brand, the French Republic has failed to fulfil its obligations under Article 9(1) of Directive 95/59.The second complaint18 The Commission argues that Article 575A of the amended GTC which provides, for the levy of the consumption duty introduced by Article 575, a minimum tax rate higher for light-tobacco cigarettes, which are essentially imported products, than for dark-tobacco cigarettes, which are almost exclusively made in France, is contrary to Articles 8(2) and 16(5) of Directive 95/59, Article 2 of Directive 92/79 and Article 95 of the Treaty.19 The French Government does not dispute this complaint so far as it is founded on Directives 95/59 and 92/79. As far as this complaint is founded on Article 95 of the Treaty, it argues that Article 575A of the amended GTC has neither the discriminatory effect contrary to the first paragraph of that provision nor the protective effect prohibited by the second paragraph of that provision.20 Further, it must be held that the application of different minimum tax rates for dark- and light-tobacco cigarettes under Article 575A of the amended GTC infringes Article 8(2) and Article 16(5) of Directive 95/59 and Article 2 of Directive 92/79, which require the application of a single minimum global excise duty, identical for all cigarettes.21 Concerning the question of whether a different rate of taxation for dark- and light-tobacco cigarettes also infringes Article 95 of the Treaty, it should be observed that, according to the settled case-law, a system of taxation may be considered compatible with Article 95 of the Treaty only if it is such as to exclude any possibility of imported products being taxed more heavily than similar domestic products (see, in particular, Case C-265/99 Commission v France [2001] ECR I-2305, paragraph 40).22 For the purpose of examining the compatibility of the system of taxation called in question by the Commission with the first paragraph of Article 95 of the Treaty, it is necessary, first, to specify to what extent dark- and light-tobacco cigarettes can be regarded as similar products.23 According to the settled case-law of the Court, which has interpreted the concept of similarity widely, in order to determine whether products are similar it is necessary to consider whether they have similar characteristics and meet the same needs from the point of view of consumers, the test being not whether they are strictly identical but whether their use is similar and comparable (Joined Cases C-367/93 to C-377/93 Roders and Others [1995] ECR I-2229, paragraph 27).24 It is important to note as a preliminary point that dark- and light-tobacco cigarettes are manufactured from different types of the same base product, tobacco, using comparable processes. While the organoleptic characteristics of dark- and light-tobacco cigarettes, such as their taste and smell, are not identical they are nevertheless similar.25 As Article 575A of the amended GTC demonstrates, the difference between dark- and light-tobacco cigarettes is one of degree. Under this provision, cigarettes which contain a minimum of 60% of certain types of tobacco are considered to be dark-tobacco cigarettes while all the rest are considered to be light-tobacco cigarettes.26 Further, the two types of products can satisfy the same needs of consumers, given their similar properties, since they are intended for tobacco consumption in the typical form of cigarettes, that is ready-made cylinders of tobacco rolled in sheets of paper. The fact that the average age of consumers of dark-tobacco is clearly higher than the average age of consumers of light-tobacco cannot cast doubt on that finding.27 Moreover, the similarity of dark- and light-tobacco cigarettes is recognised by the Community legislature which, in Directives 95/59 and 92/79, provides for uniform tax treatment for all cigarettes.28 Dark- and light-tobacco cigarettes fall within the same sub-heading of the Combined Nomenclature contained in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1).29 Since the similarity of the two products in question for the purposes of the first paragraph of Article 95 of the Treaty has been established, it should be considered whether Article 575A of the amended GTC is discriminatory in that it fixes a minimum level of consumer tax higher for light-tobacco cigarettes, which are primarily imported products, than for dark-tobacco cigarettes, which are almost exclusively manufactured in France.30 Although Article 575A of the amended GTC does not establish any formal distinction according to the origin of the products, it adjusts the system of taxation in such a way that the cigarettes falling within the most favourable tax category come almost exclusively from domestic production whereas almost all imported products come within the least advantageous category. Those features of the system are not nullified by the fact that a very small fraction of imported cigarettes come within the most favourable category whereas, conversely, a certain proportion of domestic production comes within the same tax category as imported cigarettes. It appears, therefore, that the system of taxation is designed in such a way as to benefit a typical domestic product and handicaps imported cigarettes to the same extent (see Case 171/78 Commission v Denmark [1980] ECR 447, paragraph 36).31 In view of the preceding observations, it is not necessary to examine the compatibility of Article 575A of the amended GTC with the second paragraph of Article 95 of the Treaty.32 Without explicitly invoking Article 36 of the EC Treaty (now, after amendment, Article 30 EC), the French Government argues that Article 575A of the amended GTC is conducive to the protection of human health and life.33 In this regard, it is sufficient to point out that Article 36 of the Treaty must be interpreted strictly and thus cannot be understood as authorising measures of a different nature from the quantitative restrictions on imports and exports and measures having equivalent effect laid down by Articles 30 and 34 of the EC Treaty (now, after amendment, Articles 28 EC and 29 EC) (see Case 29/72 Marimex [1972] ECR 1309, paragraphs 4 and 5, and Case 46/76 Bauhuis [1977] ECR 5, at paragraphs 12 to 14).34 It follows that, by maintaining in force a system imposing a different rate of tax for dark- and light-tobacco cigarettes, to the detriment of the latter, the French Republic has failed to fulfil its obligations under Article 8(2) and Article 16(5) of Directive 95/59, Article 2 of Directive 92/79 and the first paragraph of Article 95 of the EC Treaty.35 Having regard to the foregoing conclusions, it must be held that, by maintaining in force:- a system imposing a minimum reference price on all cigarettes sold under the same brand and- a system imposing a different rate of tax for dark- and light-tobacco cigarettes to the detriment of the latter,the French Republic has failed to fulfil its obligations under Article 9(1), Article 8(2) and Article 16(5) of Directive 95/59, Article 2 of Directive 92/79 and the first paragraph of Article 95 of the EC Treaty. Decision on costs Costs36 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the French Republic has been unsuccessful, the latter must be ordered to pay the costs. Operative part On those grounds,THE COURT (Fifth Chamber)hereby:1. Declares that, by maintaining in force- a system imposing a minimum reference price on all cigarettes sold under the same brand and- a system imposing a different rate of tax for dark- and light-tobacco cigarettes, to the detriment of the latter,the French Republic has failed to fulfil its obligations under Article 9(1), Article 8(2) and Article 16(5) of Council Directive 95/59/EC of 27 November 1995 on taxes other than turnover taxes which affect the consumption of manufactured tobacco, as amended by Council Directive 1999/81/EC of 29 July 1999, Article 2 of Council Directive 92/79/EEC of 19 October 1992 on the approximation of taxes on cigarettes and the first paragraph of Article 95 of the EC Treaty;2. The French Republic is ordered to pay the costs.

575d2-21eaf12-433d

EN

MEMBERS OF THE EUROPEAN PARLIAMENT CANNOT OBTAIN ANNULMENT OF THE DECISION OF THE EUROPEAN PARLIAMENT MAKING THEM SUBJECT TO THE INVESTIGATORY POWER OF THE EUROPEAN ANTI- FRAUD OFFICE

| 62000A0017 Judgment of the Court of First Instance (Fifth Chamber) of 26 February 2002. - Willy Rothley and Others v European Parliament. - Measure of the Parliament - Action for annulment - Admissibility - Immunity of Members of the Parliament - European Anti-Fraud Office (OLAF) - Powers of investigation. - Case T-17/00. European Court reports 2002 Page II-00579 Keywords 1. Actions for annulment - Actionable measures - Act of the Parliament amending its Rules of Procedure concerning the internal investigations conducted by the European Anti-Fraud Office (OLAF)(Art. 230, first para., EC; Rules of Procedure of the Parliament, Rule 9a)2. Actions for annulment - Natural or legal persons - Measures of direct and individual concern to them - Act of the Parliament affecting its current and future Members without distinction - Legislative character - Inadmissibility(Art. 230, fourth para., EC; Rules of Procedure of the Parliament) Summary 1. An act of the European Parliament which on the one hand amends its internal Rules of Procedure by adding a Rule 9a concerning the internal investigations conducted by the European Anti-Fraud Office (OLAF) and on the other approves the Parliament's decision concerning the terms and conditions of internal investigations, and which is one of the measures intended to protect the Communities' financial interests and to combat fraud and any other illegal activities which might be detrimental to those interests, goes in both its object and its effects beyond the internal organisation of the work of the Parliament. It may therefore be the subject of an action for annulment under the first paragraph of Article 230 EC.( see paras 56-57 )2. An action brought by Members of the European Parliament against an act of that institution which applies without distinction to the Members of that institution in office at the time of its entry into force and to any other person subsequently coming to perform the same duties is inadmissible. Such an act applies without temporal limitation to objectively determined situations and has legal effects with respect to categories of persons envisaged generally and in the abstract. Such an act, although called a decision, therefore constitutes a measure of general application.( see paras 61-62, 78 ) Parties In Case T-17/00,Willi Rothley, residing at Rockenhausen (Germany), and the 70 other applicants whose names appear in the Annex hereto, represented by H.-J. Rabe and G. Berrisch, lawyers,applicants,vEuropean Parliament, represented by J. Schoo and H. Krück, acting as Agents, with an address for service in Luxembourg,defendant,supported byCouncil of the European Union, represented by J. Aussant, M. Bauer and I. Díez Parra, acting as Agents,byCommission of the European Communities, represented by J.-L. Dewost, H.-P. Hartvig and U. Wölker, acting as Agents, with an address for service in Luxembourg,byKingdom of the Netherlands, represented by H.G. Sevenster and J. van Bakel, acting as Agents, with an address for service in Luxembourg,and byFrench Republic, represented by G. de Bergues, S. Pailler and C. Vasak, acting as Agents, assisted by L. Bernheim, lawyer, with an address for service in Luxembourg,interveners,APPLICATION for annulment of the Parliament's decision of 18 November 1999 on the amendments to the Rules of Procedure following the Interinstitutional Agreement of 25 May 1999 between the Parliament, the Council and the Commission on the internal investigations conducted by the European Anti-Fraud Office (OLAF),THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Fifth Chamber),composed of: P. Lindh, President, R. García-Valdecasas and J.D. Cooke, Judges,Registrar: D. Christensen, Administrator,having regard to the written procedure and further to the hearing on 10 July 2001,gives the followingJudgment Grounds The relevant provisionsProtocol on the privileges and immunities of the European Communities of 8 April 19651 Articles 8 to 10 of the Protocol on the Privileges and Immunities of the European Communities are devoted to the Members of the Parliament.2 Article 9 provides that Members of the European Parliament shall not be subject to any form of inquiry, detention or legal proceedings in respect of opinions expressed or votes cast by them in the performance of their duties.3 Article 10 states:During the sessions of the European Parliament, its members shall enjoy:(a) in the territory of their own State, the immunities accorded to Members of their parliament;(b) in the territory of any other Member State, immunity from any measure of detention and from legal proceedings.Immunity shall likewise apply to Members while they are travelling to and from the place of meeting of the European Parliament.Immunity cannot be claimed when a Member is found in the act of committing an offence and shall not prevent the European Parliament from exercising its right to waive the immunity of one of its Members.Commission Decision establishing the European Anti-Fraud Office4 On 28 April 1999 the Commission adopted Decision 1999/352/EC, ECSC, Euratom, establishing the European Anti-fraud Office (OLAF) (OJ 1999 L 136, p. 20, the Decision establishing the Office). The Decision is based, in particular, on Article 218 EC, paragraph 2 of which provides that, [t]he Commission shall adopt its Rules of Procedure so as to ensure that both it and its departments operate in accordance with the provisions of [the EC] Treaty.5 It is provided in the second and third subparagraphs of Article 2(1) of the Decision establishing the Office that:The [European Anti-Fraud] Office shall be responsible for carrying out internal administrative investigations intended:(a) to combat fraud, corruption and any other illegal activity adversely affecting the Community's financial interests;(b) to investigate serious facts linked to the performance of professional activities which may constitute a breach of obligations by officials and servants of the Communities likely to lead to disciplinary and, in appropriate cases, criminal proceedings or an analogous breach of obligations by Members of the institutions and bodies, heads of the bodies or members of staff of the institutions and bodies not subject to the Staff Regulations of Officials of the European Communities and the Conditions of Employment of Other Servants of the Communities.The Office shall exercise the Commission's powers as they are defined in the provisions established in the framework of the Treaties, and subject to the limits and conditions laid down therein.6 Under Article 3, the European Anti-Fraud Office (the Office) is to exercise the powers of investigation conferred upon it in complete independence.7 Lastly, under Article 7, that decision is to take effect on the date of the entry into force of the European Parliament and Council Regulation (EC) concerning investigations carried out by the European Anti-fraud Office.Regulation No 1073/19998 Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OJ 1999 L 136, p. 1) has, as its legal basis, Article 280 EC. Article 1(1) of the Regulation is worded as follows:In order to step up the fight against fraud, corruption and any other illegal activity affecting the financial interests of the European Community, the ... Office ... shall exercise the powers of investigation conferred on the Commission by the Community rules and regulations and agreements in force in those areas.9 Article 4 of Regulation No 1073/1999 provides:1. ... These internal investigations shall be carried out subject to the rules of the Treaties, in particular the Protocol on privileges and immunities ... under the conditions and in accordance with the procedures provided for in this Regulation and in decisions adopted by each institution, body, office and agency ...2. Provided that the provisions referred to in paragraph 1 are complied with:- the Office shall have the right of immediate and unannounced access to any information held by the institutions, bodies, offices and agencies, and to their premises. The Office shall be empowered to inspect the accounts of the institutions, bodies, offices and agencies. The Office may take a copy of and obtain extracts from any document or the contents of any data medium held by the institutions, bodies, offices and agencies and, if necessary, assume custody of such documents or data to ensure that there is no danger of their disappearing,...3. ...4. The institutions, bodies, offices and agencies shall be informed whenever employees of the Office conduct an investigation on their premises or consult a document or request information held by such institutions, bodies, offices and agencies.5. ...6. Without prejudice to the rules laid down by the Treaties, in particular the Protocol on privileges and immunities ... the decision to be adopted by each institution, body, office or agency as provided for in paragraph 1 shall in particular include rules concerning:(a) a duty on the part of members ... of the institutions and bodies ... to cooperate with and supply information to the Office's servants;(b) the procedures to be observed by the Office's employees when conducting internal investigations and the guarantees of the rights of persons concerned by an internal investigation.Interinstitutional agreement of 25 May 1999 between the Parliament, the Council and the Commission10 On 25 May 1999 the Parliament, the Council and the Commission concluded an agreement concerning internal investigations carried out by the Office (OJ 1999 L 136, p. 15, the interinstitutional agreement).11 Under point 1 of that agreement, the institutions which are signatories thereto agreed to adopt common rules consisting of the implementing measures required to ensure the smooth operation of the investigations carried out by the Office within their institution.12 They also agreed to draw up [common rules] and make them immediately applicable by adopting an internal decision in accordance with the model attached to [the] Agreement and not to deviate from that model save where their own particular requirements make such deviation a technical necessity (point 2 of the Agreement).13 The date on which the Agreement and Regulation No 1073/99 were to enter into force was set at 1 June 1999.14 The model decision attached to the Agreement was transposed by the Council and the Commission on 25 May and 2 June 1999 respectively (Council Decision 1999/394/EC, Euratom and Commission Decision 1999/396/EC, ECSC, Euratom concerning the terms and conditions for internal investigations in relation to the prevention of fraud and corruption and any illegal activity detrimental to the Communities' interests, OJ 1999 L 149, p. 36 and p. 57 respectively). On 18 November 1999 the Parliament adopted the Decision on the amendments to the Rules of Procedure following the Interinstitutional Agreement (the contested measure).The contested measure15 The contested measure adds to the Rules of Procedure of the European Parliament (OJ 1999 L 202, p. 1) Rule 9a, concerning the Internal investigations conducted by the ... Office, which is worded as follows:The common rules laid down in the Interinstitutional Agreement ... comprising the measures needed to facilitate the smooth running of investigations conducted by the Office shall be applicable within Parliament, pursuant to the Parliament Decision annexed to these Rules of Procedure.16 The contested measure also approves the European Parliament Decision concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Communities' interests (the Parliament Decision concerning the terms and conditions for internal investigations), which reproduces the model decision attached to the Interinstitutional Agreement, with various adjustments required for its implementation within the Parliament.17 The second paragraph of Article 1 of that decision provides:Without prejudice to the relevant provisions of the Treaties establishing the European Communities, in particular the Protocol on privileges and immunities, and of the texts implementing them, Members shall cooperate fully with the Office.18 The fourth paragraph of Article 2 of the Decision provides:Members who acquire knowledge of facts as referred to in the first paragraph [evidence which gives rise to a presumption of the existence of possible cases of fraud, corruption or any other illegal activity detrimental to the interests of the Communities, or of serious situations relating to the discharge of professional duties which may constitute a failure to comply with the obligations of officials or servants of the Communities or staff not subject to the Staff Regulations, liable to result in disciplinary or, where appropriate, criminal proceedings] shall inform the President of Parliament or, if they consider it useful, the Office direct.19 Article 4 provides that [r]ules governing Members' parliamentary immunity and the right to refuse to testify remain unchanged.20 Article 5 is worded as follows:Where the possible implication of a Member ... emerges, the interested party shall be informed rapidly as long as this would not be harmful to the investigation. In any event, conclusions referring by name to a Member ... may not be drawn once the investigation has been completed without the interested party having been enabled to express his views on all the facts which concern him.In cases necessitating the maintenance of absolute secrecy for the purposes of theinvestigation and requiring the use of investigative procedures falling within the remit of a national judicial authority, compliance with the obligation to invite the Member ... to give his views may be deferred in agreement ... with the President ....Procedure and background to the dispute21 By application lodged at the Court Registry on 21 January 2000, Willi Rothley and 70 other Members of the Parliament (the applicants) brought an action under the fourth paragraph of Article 230 EC for annulment of the contested measure.22 By separate document lodged at the Court Registry on the same day they also brought an application under Article 242 EC for suspension of the operation of the contested measure until disposal of the case in the main proceedings.23 By letters dated 4 February 2000 and 10 February 2000 respectively, the Council and the Commission applied for leave to intervene in support of the form of order sought by the defendant in the proceedings for interim measures and in the main proceedings.24 By order of the President of the Fifth Chamber of the Court of First Instance of 9 March 2000, the Council and the Commission were granted leave to intervene in the main proceedings.25 By order of 2 May 2000 in Case T-17/00 R Rothley and Others v Parliament [2000] ECR II-2085, the President of the Court of First Instance ordered operation of Articles 1 and 2 of the contested measure to be suspended in so far as those articles require the applicants to cooperate with the Office and to provide information to the President of the Parliament or to the Office. He further ordered Parliament to inform the applicants without delay of any measure imminently to be taken against them by the Office and to grant agents of the Office access to the offices of the applicants only with the consent of the latter, pending delivery by the Court of final judgment in the main proceedings. Costs were reserved.26 The statements in intervention of the Council and the Commission were lodged at the Registry of the Court of First Instance on 13 June and 31 May 2000 respectively. The applicants lodged their observations on those statements on 5 September 2000. The Parliament waived its right to submit observations.27 By documents lodged on 21 June and 10 July 2000 respectively, the Kingdom of the Netherlands and the French Republic requested leave to intervene in support of the forms of order sought by the Parliament. Those requests were granted by order of the President of the Fifth Chamber of the Court of First Instance of 14 September 2000.28 The statements in intervention of the Kingdom of the Netherlands and the French Republic were lodged on 24 November and 6 December 2000 respectively. The applicants lodged their observations on those statement on 8 February 2001. The Parliament waived its right to submit observations.29 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Fifth Chamber) decided to open the oral procedure.30 The main parties, and the Council and the Commission, presented oral argument and their replies to the Court's questions at the hearing in open court on 10 July 2001.Forms of order sought by the parties31 The applicants claim that the Court should:- annul the contested measure;- order the Parliament to pay the costs.32 At the hearing, the applicants stated that the purpose of their action was to have the contested measure annulled in so far as it concerned the Members of the Parliament.33 The Parliament, the Council, the Commission, the Kingdom of the Netherlands and the French Republic contend that the Court should:- dismiss the action as inadmissible or, alternatively, as unfounded;- order the applicants to pay the costs.34 The Commission further contends that the Court should order the applicants to pay the costs of the proceedings for interim relief.Law35 The applicants put forward two pleas in law, alleging, first, infringement of legislative procedure and, second, breach of parliamentary immunity and of the independence of their mandate. They also raise the preliminary objection that the decision establishing the Office and Regulation No 1073/1999 are unlawful. Although not raising a formal plea of inadmissibility under Article 114 of the Rules of Procedure of the Court of First Instance, the Parliament, supported by the interveners, maintains that the action is inadmissible. In consequence, the admissibility of this action falls to be examined.Arguments of the parties36 The Parliament submits, first, that the applicants are not directly and individually concerned. The contested measure does not directly prejudice the Members' rights, because such prejudice can occur only when specific measures are implemented. In addition, that measure affects not only the elected representatives currently sitting in the Parliament but also those who will sit there in the future. Furthermore, the fact that it is possible to identify the persons to whom the measure may apply does not mean that they are individually concerned by the contested act. In the present case, since no specific investigation was conducted by the Office, the Members are only theoretically concerned.37 Secondly, it submits that the contested measure remains within the framework of the internal organisation of the Parliament and cannot therefore, under the first paragraph of Article 230 EC, be subject to judicial review (orders in Case 78/85 Group of the European Right v Parliament [1986] ECR 1753 and Case C-68/90 Blot and Front National v Parliament [1990] ECR I-2101).38 It is an internal act of the Parliament amending its Rules of Procedure and adopting new rules concerning the position of the Members. It reflects their duty, inherent in that position, to cooperate in the prevention of fraud, while respecting the Treaty provisions, Members' parliamentary immunity and the right to refuse to testify. Moreover, it does not produce legal effects going beyond the internal organisation of the Parliament, particularly since it does not adversely affect, either directly or individually, the Members' exercise of their mandate (order in Case T-222/99 R Martínez and de Gaulle v Parliament [1999] ECR II-3397, paragraph 67).39 Third, in so far as the action concerns the decision establishing the Office, the Parliament observes that the contested measure is not based on that decision, so that a plea of illegality may not be raised (Case 92/78 Simmenthal v Commission [1979] ECR 777, paragraph 36). Moreover, it points out that, in accordance with Article 7, the entry into effect of the decision is dependent on the entry into force of Regulation No 1073/1999.40 With regard to the objection that Regulation No 1073/1999 is unlawful, the Parliament points out that, from a purely formal point of view, the contested measure has as its sole basis the Treaty provisions on the adoption of the Parliament's Rules of Procedure and thus its power of independent internal organisation. In addition, in the circumstances of this case it cannot be alleged that either the decision establishing the Office or Regulation No 1073/1999 is void, since the validity of those two legal acts is not the subject-matter of the dispute.41 The Parliament adds that, even if the contested measure were based directly on Regulation No 1073/1999, the plea of illegality would fail because the action is inadmissible, inasmuch as the Members are not directly and individually concerned by that act.42 Furthermore, since the contested measure does no more than reiterate the duties imposed on the institutions and bodies, and their officials, servants and Members, as listed in Regulation No 1073/1999, and lay down the terms and conditions upon which they apply, the action brought by the applicants does not, in the Parliament's submission, seek review of a specific issue but rather an abstract review of legal rules. Regulation No 1073/99 was adopted as a codecision of the Parliament and the Council in accordance with Article 251 EC. The applicants, who are part of the legislative body which is the Parliament, cannot challenge the validity of an act adopted by that institution and the Council.43 The interveners concur with the Parliament's argument.44 The applicants submit that they are directly and individually concerned within the meaning of the fourth paragraph of Article 230 EC, inasmuch as the contested measure affects their status as Members of the Parliament.45 Their performance of their duties and their legal status as Members of the Parliament are directly limited by the contested measure. They submit that that decision represents the implementing measure required by Article 4(1) and (6) of Regulation No 1073/1999 in conjunction with point 2 of the Interinstitutional Agreement, which makes the Members directly subject to the Office's powers of investigation and requires them to comply at all times with various rules of conduct.46 The applicants maintain that the contested measure prejudices their legal status as Members of the Parliament. They claim that Members have constitutional status, being representatives directly elected by the citizens and invested with a direct democratic mandate (Article 190(1) EC).47 Furthermore, the Members of the Parliament form a closed circle of persons identifiable by name to whom the contested measure is addressed. Even though the circle of Members could change after the next elections, the Members are at present not only identifiable collectively and by name, but also clearly identified. The rules of conduct contained in the contested measure are addressed to each of the current Members of the Parliament individually, and restrict the independence of their mandate as well as their immunity.48 The applicants maintain, next, that the legal effects of the contested measure go beyond the internal organisation of the work of the Parliament, within the meaning of the judgment of the Court of Justice in Case C-69/89 Nakajima v Council [1991] ECR I-2069, paragraph 49.49 According to the applicants, the Court confirmed in Case C-314/91 Weber v Parliament [1993] ECR I-1093, paragraph 9 et seq., that the Parliament's internal rules are amenable to judicial review where they affect the personal situation, in that case financial, of Members of Parliament. The independence of the mandate and immunity are even more important attributes of the Member's personal status and may be defended by recourse to law (Martínez and de Gaulle v Parliament, paragraph 64 et seq.).50 The legal effects of the contested measure vis-à-vis the Members do not fall within the scope of the Parliamentary mandate or the political activities relating thereto. It does not relate to the internal workings of the Parliament; its essential purpose is rather to facilitate the proper conduct of the internal investigations which the Office might carry out in that institution.51 Lastly, as regards the objection that the decision establishing the Office and Regulation No 1073/99 are unlawful, the applicants argue that those measures, together with the Interinstitutional Agreement and the related implementing decisions, form a coherent whole the various constituents of which would have no legal meaning were they to be separated one from another.52 They maintain that, contrary to the Parliament's submission, those legislative acts constitute the legal basis of the contested measure and that the issue of their illegality may therefore be raised pursuant to Article 241 EC, in accordance with the judgment in Simmenthal v Commission.Findings of the Court53 The first question to be considered must be whether the contested measure may be the subject of an action for annulment. Under the first paragraph of Article 230 EC, the Community judicature is to review the legality of acts of the European Parliament intended to produce legal effects vis-à-vis third parties. In certain circumstances, the Members may be third parties within the meaning of that provision and may bring an action against an act of the Parliament, provided that that act goes beyond the internal organisation of its work (Weber v Parliament, paragraph 9).54 The Court of Justice has stated that acts concerning only the internal organisation of the work of the Parliament are measures of the Parliament which either do not have legal effects or have legal effects only within the Parliament as regards the organisation of its work and are subject to review procedures laid down in its Rules of Procedure (Weber v Parliament, paragraph 10). Furthermore, the Court has held that the purpose of the rules of procedure of a Community institution is to organise the internal functioning of its services in the interests of good administration. The rules laid down, particularly with regard to the organisation of deliberations and the adoption of decisions, have therefore as their essential purpose to ensure the smooth conduct of the procedure while fully respecting the prerogatives of each of the Members of the institution (Nakajima v Council, paragraph 49).55 It must therefore be established whether it is possible for the contested measure to have legal effects which go beyond the internal organisation of the work of the Parliament.56 The contested measure amends the Rules of Procedure of the Parliament by adding Rule 9a, concerning the internal investigations conducted by the Office, and it approves the Parliament's decision concerning the terms and conditions for internal investigations. The fifth recital in the preamble to the latter decision, and five of its eight articles, expressly refer to Members as possessing rights and being subject to duties, which include the duty to cooperate (Article 1) and the duty to supply information (Article 2) (see paragraphs 17 and 18, above). The contested measure sets out, in particular, the manner in which the duties to cooperate and to supply information imposed on the Members of the Parliament are to be complied with in order to ensure the smooth operation of those investigations. The contested measure forms part of the measures intended to protect the financial interests of the Communities and to combat fraud and any other illegal activities detrimental to those interests. It is intended to lay down the conditions upon which the Office may conduct such investigations within the Parliament.57 Accordingly, the contested measure, in both its object and its effects, goes beyond the internal organisation of the work of the Parliament. It may therefore be the subject of an action for annulment under the first paragraph of Article 230 EC.58 Secondly, it must be established whether the applicants have locus standi to bring proceedings and, more especially, whether the contested measure constitutes a decision of individual concern to them within the meaning of the fourth paragraph of Article 230 EC, it being understood that the subject of that examination must be not the form in which the measure was adopted but rather its substance (Case 60/81 IBM v Commission [1981] ECR 2639, paragraph 9). The Court has held, since the judgment in Joined Cases 16/62 and 17/62 Confédération nationale des producteurs de fruits et légumes v Council [1962] ECR 471, at p. 478, that the term decision used in the fourth paragraph of Article 230 EC has the technical meaning employed in Article 249 EC (order in Case C-168/93 Gibraltar and Gibraltar Development v Council [1993] ECR I-4009, paragraph 11).59 A decision so defined is distinct from a measure of a legislative nature. The criterion for distinguishing them lies in the general application or otherwise of the measure in question (Gibraltar and Gibraltar Development v Council, paragraph 11). An act cannot be considered to be a decision if it is applicable to objectively determined situations and produces its legal effects with respect to categories of persons envisaged in the abstract (judgments in Confédération nationale des producteurs de fruits et légumes, p. 479, and Case 307/81 Alusuisse v Council and Commission [1982] ECR 3463, paragraph 9; order of the Court of Justice in Case C-87/95 P CNPAAP v Council [1996] ECR I-2003, paragraph 33; order of the Court of First Instance in Case T-107/94 Kik v Council and Commission [1995] ECR II-1717, paragraph 35; judgment of the Court of First Instance in Case T-482/93 Weber v Commission [1996] ECR II-609, paragraph 55, and order of the Court of First Instance in Case T-114/96 Biscuiterie-Confiserie LOR and Confiserie du Tech v Commission [1999] ECR II-913, paragraph 26.60 In the present case, the contested measure was adopted on the basis of the first paragraph of Article 199 EC, Article 25 CS and Article 112 EA by a vote carried by a majority of the Members of the Parliament at the plenary session of 18 November 1999. The contested measure adds to the Parliament's Rules of Procedure Rule 9a concerning Internal investigations conducted by the Office, to the effect that the common rules laid down in the Interinstitutional Agreement ... comprising the measures needed to facilitate the smooth running of the investigations conducted by the Office shall be applicable within Parliament, pursuant to the Parliament Decision annexed to these Rules of Procedure. The last-mentioned decision essentially reproduces the model decision annexed to the Interinstitutional Agreement, adding to it Article 4 to the effect that [r]ules governing Members' parliamentary immunity and the right to refuse to testify shall remain unchanged.61 The general purpose of the contested measure is to lay down the conditions upon which the Parliament will cooperate with the Office in order to facilitate the smooth operation of investigations within that institution. In keeping with that object, it perceives the Members as having rights and duties and it lays down special provisions for them where, in particular, they are implicated in an investigation conducted by the Office or where they have acquired knowledge of facts which give rise to a presumption of the existence of possible cases of fraud, corruption or any other illegal activity detrimental to the interests of the Communities, or of serious situations relating to the discharge of professional duties which may constitute a failure to comply with obligations liable to result in disciplinary or, where appropriate, criminal proceedings. The contested measure applies without distinction to the Members of the Parliament in office at the time of its entry into force and to any other person subsequently coming to perform the same duties. Thus it applies without temporal limitation to objectively determined situations and has legal effects with respect to categories of persons envisaged generally and in the abstract.62 It follows from those considerations that the contested measure, although called a decision, constitutes a measure of general application.63 Nevertheless, it has been held that, in certain circumstances, a provision in a measure of general application may be of individual concern to some interested persons (Case C-358/89 Extramet Industrie v Council [1991] ECR I-2501, paragraph 13, and Case C-309/89 Codorniu v Council [1994] ECR I-1853, paragraph 19). In such a case, a Community measure can be of a legislative nature and, at the same time, vis-à-vis some of the individuals concerned, in the nature of a decision (Joined Cases T-481/93 and T-484/93 Vereniging van Exporteurs in Levende Varkens and Others v Commission [1995] ECR II-2941, paragraph 50). Such is the case where the measure in question affects natural or legal persons by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons (Codorniu v Council, paragraph 20).64 In light of that case-law, it must be established whether there are such circumstances in this case which make it possible to distinguish the applicants in a way similar to that in which the addressee of a decision could be identified.65 The applicants have argued that because they are Members of the Parliament holding office at the time when the contested measure was adopted they belong to a closed circle of persons identifiable by name. The mere fact, however, that the number and even the identity of the persons to whom a measure applies can be determined in no way implies that those persons must be regarded as individually concerned by that measure, where that measure applies to them as a result of an objective situation of law or fact specified by the measure at issue (see, for example, the judgment in Case 6/68 Zuckerfabrik Watenstedt v Council [1968] ECR 409, at p. 415, and the orders in Case C-10/95 P Asocarne v Council [1995] ECR I-4149, paragraph 30, and CNPAAP v Council, paragraph 34).66 As stated above, the contested measure affects the applicants only because they belong to a category of persons which is defined generally and in the abstract. The contested measure does not express the Parliament's intention to deal with a particular case, specifically that of the applicants. Furthermore, the applicants have neither claimed, nor adduced evidence to demonstrate, that adoption of the contested measure alters their legal situation or affects them, more particularly than other Members of the Parliament.67 Likewise, merely belonging to one of the two categories of persons to whom the contested measure is addressed - all the Parliament's staff, whether subject to the Staff Regulations or not, on the one hand, and its Members, on the other - is not sufficient to distinguish the applicants, since those two categories are defined generally and in the abstract. The contested measure does no more than implement and adjust, within the framework of the Parliament's Rules of Procedure, some of the provisions concerning the rights and duties of the Members of the Community institutions provided for by Regulation No 1073/1999 and the Interinstitutional Agreement. Those instruments, like the decision establishing the Office, describe the Members and all the staff of the institutions as categories of persons who are required to cooperate with the Office or who may be the subject of investigation by the Office.68 The model decision annexed to the Interinstitutional Agreement lays a number of rules for its application which are specific to the Members of the institutions. With regard to the duty to cooperate with the Office, the second paragraph of Article 1 of the model decision provides: Without prejudice to the relevant provisions of the Treaties establishing the European Communities, in particular the Protocol on privileges and immunities, and of the texts implementing them, Members shall cooperate fully with the Office. As regards the duty to supply information, the fourth paragraph of Article 2 of the model decision states: Members who acquire knowledge of facts as referred to in the first paragraph shall inform the President of the institution (or body) or, if they consider it useful, the Office direct.69 The contested measure imposes on the staff of the Parliament and its Members a duty to supply information to, and to cooperate with, the Office. The duty to supply information is subject, however, to conditions which vary according to the persons on whom the duty is imposed. Thus, staff are required to inform their Head of Service, Director-General, Secretary General or the Office, or the President of the Parliament, depending on whether the facts in question concern a member of staff or a Member of the Parliament, whereas the Members of the Parliament must declare the facts of which they have become aware to the President of the Parliament or the Office.70 None of those provisions supports the conclusion that there are any factors which may enable the applicants to be distinguished individually.71 In addition, the Court must consider whether, in the circumstances, the case-law is applicable by virtue of which actions for annulment of measures of a legislative nature are admissible where a superior rule of law required the body responsible for it to take into account the applicants' particular circumstances (see, to that effect, Case 11/82 Piraiki-Patraiki and Others v Commission [1985] ECR 207, paragraphs 11 to 32; Case C-152/88 Sofrimport v Commission [1990] ECR I-2477, paragraphs 11 to 13; Case C-390/95 P Antillean Rice Mills and Others v Commission [1999] ECR I-769, paragraphs 25 to 30, and Case T-135/96 UEAPME v Council [1998] ECR II-2335, paragraph 90).72 The applicants in the present case have argued in essence that the contested measure compromises both their independence and the immunity conferred upon them by the Protocol on privileges and immunities of the European Communities. However, the Protocol refers to Members of the Parliament only in a general fashion and contains no provision explicitly governing internal investigations in the Parliament. Moreover, the Parliament endeavoured to have special regard to the immunity enjoyed by its Members, inasmuch as the contested measure adds to the provisions of the model decision annexed to the Interinstitutional Agreement Article 4, to the effect that [r]ules governing Members' parliamentary immunity and the right to refuse to testify remain unchanged.73 As the President of the Court of First Instance was able to observe in paragraph 107 of the order in Rothley and Others v Parliament, the risk cannot be excluded a priori that, in conducting an investigation, the Office might perform an act prejudicial to the immunity enjoyed by every Member of the Parliament. However, if that were to occur, any Member of the Parliament faced with such an act could, if he considered it damaging to him, avail himself of the judicial protection and the legal remedies provided for by the Treaty.74 In any event, the existence of such a risk cannot warrant altering the system of remedies and procedures established by Articles 230 EC, 234 EC and 235 EC which is designed to give the Community judicature the power to review the legality of acts of the institutions. It cannot by any means serve to make an action for annulment brought by a natural or legal person who does not satisfy the conditions laid down by the fourth paragraph of Article 230 EC to be declared admissible (orders in Asocarne v Council, paragraph 26, and CNPAAP v Council, paragraph 38).75 Finally, the fact that the contested measure affects the applicants in the same way as any other Member of the Parliament, current or future, means that the inadmissibility of this action cannot create inequality as regards the judicial protection afforded to the applicants compared with that afforded to other Members of the Parliament.76 On this point, the facts in the case are distinguishable from those which gave rise to the Court's judgment in Case 294/83 Les Verts v Parliament [1986] ECR 1339, paragraph 36. That case dealt with unequal allocation of public moneys for the information campaign of the political groups involved in the election of the Parliament in 1984. The budget decisions under challenge concerned all the political groupings although the treatment of those groupings varied, depending on whether or not they were represented in the Assembly elected in 1979. The groupings which were represented took part in adopting the decisions concerning both their own treatment and that of the rival groupings which were not represented. The Court replied in the affirmative to the question whether the decisions were of individual concern to a political grouping which was not represented but which was likely to put up candidates for the election in 1984. The Court considered that the opposite approach would give rise to unequal judicial protection, since groupings not represented could not prevent the allocation of the budget appropriations for the election campaign before the elections took place. In the circumstances of the present case, there is no such disparity between the situation of the applicants and that of the other Members of the Parliament.77 In consequence, the applicants have not established that there exist any factors distinguishing them individually in the light of the contested measure.78 It follows that the contested measure is not of individual concern to the applicants within the meaning of Article 230 EC and, therefore, that the action must be dismissed as inadmissible, with the result that there is no need to consider whether that decision is of direct concern to the applicants within the meaning of the same article. Decision on costs Costs79 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. In this case, since the applicants have been unsuccessful, they must be ordered to pay the costs, including those of the application for interim relief, in accordance with the forms of order sought by the Parliament. Under Article 87(4) of those Rules of Procedure, the Council, the Commission, the Kingdom of the Netherlands and the French Republic, which have intervened in these proceedings, are to bear their own costs. Operative part On those grounds,THE COURT OF FIRST INSTANCE (Fifth Chamber),hereby:1. Dismisses the action as inadmissible;2. Orders the applicants to pay their own costs and those incurred by the defendant in the main proceedings and in the application for interim relief;3. Orders the interveners to bear their own costs.

033dc-230dd75-4759

EN

THE COMPULSORY TARIFFS FOR THE FEES PAYABLE TO MEMBERS OF THE ITALIAN BAR ARE NOT CONTRARY TO THE TREATY PROVISIONS ON COMPETITION

| 61999J0035 Judgment of the Court of 19 February 2002. - Criminal proceedings against Manuele Arduino, third parties: Diego Dessi, Giovanni Bertolotto and Compagnia Assicuratrice RAS SpA. - Reference for a preliminary ruling: Pretore di Pinerolo - Italy. - Compulsory tariff for fees of members of the Bar - Decision of the National Council of the Bar - Approval by the Minister for Justice - Articles 5 and 85 of the EC Treaty (now Articles 10 EC and 81 EC). - Case C-35/99. European Court reports 2002 Page I-01529 Keywords 1. Preliminary rulings - Jurisdiction of the Court - Limits - Manifestly irrelevant questions and questions regarding hypothetical problems in a context which precludes any useful answer - Questions not related to the purpose of the main proceedings(EC Treaty, Art. 177 (now Art. 234 EC))2. Competition - Community rules - Obligations of the Member States - Rules designed to reinforce the effects of preexisting agreements - Definition - Fee tariff proposed by a professional organisation and approved by the Minister - Exclusion - Conditions(EC Treaty, Arts 5 and 85 (now Arts 10 EC and 81 EC)) Summary 1. In the context of the cooperation between the Court of Justice and the national courts provided for by Article 177 of the Treaty (now Article 234 EC) it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling.Nevertheless, in exceptional circumstances, the Court can examine the conditions in which the case was referred to it by the national court, in order to assess whether it has jurisdiction. The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it.( see paras 24-25 )2. Although Article 85 of the Treaty (now Article 81 EC) is, in itself, concerned solely with the conduct of undertakings and not with laws or regulations emanating from Member States, that article, read in conjunction with Article 5 of the Treaty (now Article 10 EC), none the less requires the Member States not to introduce or maintain in force measures, even of a legislative or regulatory nature, which may render ineffective the competition rules applicable to undertakings. Articles 5 and 85 of the Treaty are infringed where a Member State requires or favours the adoption of agreements, decisions or concerted practices contrary to Article 85 or reinforces their effects, or where it divests its own rules of the character of legislation by delegating to private economic operators responsibility for taking decisions affecting the economic sphere.In that regard, a Member State cannot be said to have delegated to private economic operators responsibility for taking decisions affecting the economic sphere, which would have the effect of depriving the provisions of the character of legislation, where, first, the professional organisation concerned is responsible only for producing a draft tariff which, as such, is not compulsory, since the Minister has the power to have the draft amended by that organisation, and, second, the national legislation provides that fees are to be settled by the courts on the basis of the criteria referred to in that legislation and, moreover, in certain exceptional circumstances and by duly reasoned decision, authorises the court to depart from the maximum and minimum limits fixed. In those circumstances, nor is the Member State open to the criticism that it requires or encourages the adoption of agreements, decisions or concerted practices contrary to Article 85 of the Treaty or reinforces their effects.It follows that Articles 5 and 85 of the Treaty do not preclude a Member State from adopting, in the context of such a procedure, a law or regulation which approves, on the basis of a draft produced by a professional organisation, a tariff fixing minimum and maximum fees for members of the profession.( see paras 34-35, 41-44, operative part ) Parties In Case C-35/99,REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the Pretore di Pinerolo (Italy) for a preliminary ruling in the criminal proceedings before that court againstManuele Arduino,third parties:Diego Dessi,Giovanni Bertolotto,andCompagnia Assicuratrice RAS SpA,on the interpretation of Article 85 of the EC Treaty (now Article 81 EC),THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann, F. Macken, N. Colneric and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward, A. La Pergola, J.-P. Puissochet, M. Wathelet (Rapporteur), R. Schintgen, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: P. Léger,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- the Italian Government, by U. Leanza, acting as Agent, assisted by L. Daniele, expert in the Legal Department of the Ministry of Foreign Affairs,- the French Government, by K. Rispal-Bellanger and D. Colas, acting as Agents,- the Finnish Government, by H. Rotkirch and T. Pynnä, acting as Agents,- the Commission of the European Communities, by L. Pignataro, acting as Agent,having regard to the Report for the Hearing,after hearing the oral observations of Mr Dessi, represented by G. Scassellati Sforzolini, avvocato, of the Italian Government, represented by M. Fiorilli, avvocato dello Stato, of the German Government, represented by A. Dittrich, acting as Agent, of the French Government, represented by D. Colas, and of the Commission, represented by L. Pignataro, at the hearing on 12 December 2000,after hearing the Opinion of the Advocate General at the sitting on 10 July 2001,gives the followingJudgment Grounds 1 By order of 13 January 1999, received at the Court on 9 February 1999, the Pretore di Pinerolo (Magistrate, Pinerolo) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) two questions on the interpretation of Article 85 of the EC Treaty (now Article 81 EC).2 Those questions have been raised in connection with the settlement of the costs relating to criminal proceedings against Mr Arduino.The relevant national provisions3 The basic text governing the profession of avvocati and procuratori in Italy is Royal Decree-Law No 1578 of 27 November 1933 (GURI No 281 of 5 December 1933) which was converted into Law No 36 of 22 January 1934 (GURI No 24 of 30 January 1934), as subsequently amended (the Royal Decree-Law).4 Avvocati and procuratori (members of the Bar) are self-employed professionals who provide legal representation and advice in civil, criminal and administrative proceedings. In Italy, that activity is reserved to members of the Bar whose intervention is, as a general rule, mandatory (Article 82 of the Italian Code of Civil Procedure).5 The Consiglio nazionale forense (National Council of the Bar, the CNF) is governed by Articles 52 to 55 of the Royal Decree-Law. It is composed of members of the Bar elected by their fellow members, with one representative for each appeal court district, and is established under the auspices of the Minister for Justice (the Minister).6 Article 57 of the Royal Decree-Law provides that the criteria for determining fees and emoluments payable to members of the Bar in respect of civil and criminal proceedings and out-of-court work are to be set every two years by decision of the CNF. When the CNF has decided upon the tariff, it must be approved by the Minister after he has obtained the opinion of the Comitato interministeriale dei prezzi (Interministerial Committee on Prices, the CIP) under Article 14.20 of Law No 887 of 22 December 1984 (GURI, Ordinary Supplement, No 356 of 29 December 1984) and consulted the Consiglio di Stato (Council of State) under Article 17(3) of Law No 400 of 23 August 1988 (GURI, Ordinary Supplement, No 214 of 12 September 1988).7 Article 58 of the Royal Decree-Law specifies that the criteria referred to in Article 57 are to be based on the monetary value of disputes, the level of the court seised and, in criminal matters, the duration of the proceedings. For each procedural step, or series of steps, maximum and minimum limits must be set.8 Under Article 60 of the Royal Decree-Law, fees are settled by the court on the basis of the criteria referred to in Article 57 of that decree-law, having regard to the seriousness and number of the issues dealt with.9 That settlement must remain within the maximum and minimum limits mentioned in Article 58 of the Royal Decree-Law. However, in cases of exceptional importance, taking account of the special nature of the disputes and where the inherent value of the service justifies it, the court may exceed the maximum limit. Conversely, where the case is easy to deal with, the court may fix fees below the minimum limit. In both cases, the court must give reasons for its decision.10 The tariff of fees for members of the Bar at issue in the main proceedings was adopted by decision of the CNF of 12 June 1993, amended on 29 September 1994 (the CNF decision), and was approved by Ministerial Decree No 585 of 5 October 1994 (GURI No 247 of 21 October 1994). Article 2 of that decree provides that the increases set out in the fee scales in the annex shall apply with effect from 1 October 1994 as to 50%, and as to the remaining 50% with effect from 1 April 1995. That staggered increase originated in the comments made by the CIP which had taken particular account of the rise in inflation. Before approving the tariff, the Minister had consulted the CNF a second time, which, at its meeting of 29 September 1994, had accepted the proposal to postpone the application of the tariff.11 Article 4(1) of the CNF decision prohibits derogation from the minimum limits for the fees of avvocati and the fees and disbursements of procuratori. However, in cases where, because of the particular circumstances of the case, there is a clear disproportion between the services of the avvocato or procuratore and the fees prescribed in the tariff, Article 4(2) of that decision permits fees in excess of the maximum limits (even to the extent of more than doubling the maximum envisaged in Article 5(2) of the CNF decision) or below the minimum limits, provided that the party who has an interest in the matter produces an opinion from the Council of the competent Bar.12 Article 5 of the CNF decision lays down the general rules on settlement. Article 5(1) provides that fixing of the fees payable by the unsuccessful party must take account of the nature and monetary value of the dispute, the importance and number of the issues dealt with and the level of the court seised. Particular attention must be given to the services performed by the lawyer before the court. Article 5(2) states that in cases which are of particular importance because of the legal issues dealt with, fixing of the fees payable by the unsuccessful party may reach double the maximum limits. Article 5(3) adds that, in addition to the rules set out in the preceding paragraphs, fixing of the fees payable by the client may take account of the outcome of the proceedings and the advantage derived, including non-pecuniary advantage, as well as the urgency of any steps taken. In cases of extraordinary importance, fees may be fixed at up to four times the maximum limits.The main proceedings13 Proceedings were brought against Mr Arduino before the Pretore di Pinerolo for having, in breach of the road traffic legislation, negligently, carelessly or through lack of judgment overtaken on a stretch of road where that manoeuvre was not permitted and collided with Mr Dessi's vehicle. Mr Dessi claimed damages. When the Pretore made the order fixing the costs incurred by Mr Dessi and payable by Mr Arduino, he did not apply the tariff approved by Ministerial Decree No 585/94.14 On appeal, the Corte suprema di cassazione (Supreme Court of Cassation) held that it was unlawful not to apply that tariff. By judgment 1363 of 29 April/6 July 1998, it set aside the judgment of the Pretore di Pinerolo in respect of the costs and referred the case back to that court on this point.15 The Pretore di Pinerolo states that, in Italian law, there are two conflicting lines of case-law as to whether the tariff for fees payable to members of the Bar, approved by Ministerial Decree No 585/94, constitutes an agreement restricting competition under Article 85 of the Treaty.16 According to the first line of case-law, that national legislation is comparable to the legislation on the tariff for customs agents which was the subject of the judgment in Case C-35/96 Commission v Italy [1998] ECR I-3851. The CNF is an association of undertakings within the meaning of Article 85(1) of the Treaty and no statutory provision requires that public-interest criteria be taken into account in the determination of the tariff for fees payable to members of the Bar. Consequently, the national court must disapply that tariff.17 According to the second line of case-law, the tariff is not the result of a discretionary decision of the professional organisation in question. The State plays a decisive role both in drawing up and approving the tariff, so that there is no delegation to private economic operators of the power to fix the tariff for themselves, in breach of Article 85 of the Treaty.18 In those circumstances, the Pretore di Pinerolo decided to stay proceedings and to refer to the Court for a preliminary ruling the following questions:(1) Does the decision of the CNF, approved by Ministerial Decree No 585/94, fixing binding tariffs for the professional activity of members of the Bar, come within the scope of the prohibition in Article 85(1) of the EC Treaty?If the answer to (1) is in the affirmative:(2) Does the case none the less correspond to one of the situations envisaged in Article 85(3) of the Treaty to which that prohibition does not apply?Admissibility19 The Italian Government expresses doubts as to the admissibility of the present reference for a preliminary ruling.20 First, it questions the genuineness of the dispute in the main proceedings.21 It explains that, following the judgment of the Corte suprema di cassazione, Mr Arduino's insurance company paid the costs incurred by Mr Dessi. In the light of this payment, Mr Dessi withdrew from the remainder of the proceedings and Mr Arduino's lawyer requested the Pretore di Pinerolo to order that the case should not proceed to judgment. As the proceedings now stand, the main dispute is therefore devoid of purpose.22 In those circumstances, the Italian Government fails to understand the referring court's insistence on determining the compatibility of the tariff at issue in the main proceedings with Community law. In its submission, the Pretore di Pinerolo has seized the opportunity to settle an issue which is controversial in Italy.23 Second, the Italian Government considers that the order for reference inadequately sets out the legal and factual context in which the questions have arisen. The Pretore di Pinerolo has not stated the reasons for which he did not apply the tariff at issue in the main proceedings.24 It is settled case-law that in the context of the cooperation between the Court of Justice and the national courts provided for by Article 177 of the Treaty it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraph 59; and Case C-379/98 PreussenElektra [2001] ECR I-2099, paragraph 38).25 Nevertheless, the Court has also stated that, in exceptional circumstances, it can examine the conditions in which the case was referred to it by the national court, in order to assess whether it has jurisdiction (see, to that effect, Case 244/80 Foglia [1981] ECR 3045, paragraph 21). The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Bosman, paragraph 61; and PreussenElektra, paragraph 39).26 That is not true of the dispute in the main proceedings.27 On the basis of the documents in the case file, it is clear that the case is still pending before the national court. The Italian Government has not produced evidence of an agreement between the parties on the question of costs such as to bring the case to a close.28 The observations submitted by the governments of the Member States and the Commission, pursuant to Article 20 of the EC Statute of the Court of Justice, show that the information supplied in the order for reference enabled them effectively to state their views on the questions referred to the Court.29 Furthermore, the information in the order for reference was supplemented by the written observations lodged before the Court. All that information, which was included in the Report for the Hearing, was brought to the notice of the governments of the Member States and the other interested parties for the purposes of the hearing, at which they had an opportunity, if necessary, to amplify their observations (see, to that effect, Case C-67/96 Albany [1999] ECR I-5751, paragraph 43; and Joined Cases C-115/97 to C-117/97 Brentjens' [1999] ECR I-6025, paragraph 42).30 Finally, the information provided by the national court, supplemented where necessary by the abovementioned material, gives the Court sufficient knowledge of the factual and legislative background to the dispute in the main proceedings to enable it to interpret the relevant rules of the Treaty.31 It follows from the foregoing that the questions referred by the Pretore di Pinerolo are admissible.The questions32 By its questions, which it is appropriate to examine together, the national court seeks essentially to ascertain whether Article 5 of the EC Treaty (now Article 10 EC) and Article 85 of the Treaty preclude a Member State from adopting a law or regulation which approves, on the basis of a draft produced by a professional body of members of the Bar, a tariff fixing minimum and maximum fees for members of the profession, where that State measure forms part of a procedure such as that laid down in the Italian legislation.33 As a preliminary point, the Court observes that, since that State measure extends to the whole of the territory of a Member State, it may affect trade between Member States within the meaning of Article 85(1) of the Treaty (see, to that effect, Commission v Italy, cited above, paragraph 48).34 Although Article 85 of the Treaty is, in itself, concerned solely with the conduct of undertakings and not with laws or regulations emanating from Member States, that article, read in conjunction with Article 5 of the Treaty, none the less requires the Member States not to introduce or maintain in force measures, even of a legislative or regulatory nature, which may render ineffective the competition rules applicable to undertakings (Case 267/86 Van Eycke [1988] ECR 4769, paragraph 16; Case C-185/91 Reiff [1993] ECR I-5801, paragraph 14; Case C-153/93 Delta Schiffahrts- und Speditionsgesellschaft [1994] ECR I-2517, paragraph 14; Case C-96/94 Centro Servizi Spediporto [1995] ECR I-2883, paragraph 20; and Commission v Italy, cited above, paragraph 53; as to Article 86 of the EC Treaty (now Article 82 EC), see also Case 13/77 GB-Inno-BM [1977] ECR 2115, paragraph 31).35 The Court has held that Articles 5 and 85 of the Treaty are infringed where a Member State requires or favours the adoption of agreements, decisions or concerted practices contrary to Article 85 or reinforces their effects, or where it divests its own rules of the character of legislation by delegating to private economic operators responsibility for taking decisions affecting the economic sphere (Van Eycke, paragraph 16; Reiff, paragraph 14; Delta Schiffahrts- und Speditionsgesellschaft, paragraph 14; Centro Servizi Spediporto, paragraph 21; and Commission v Italy, paragraph 54).36 In that regard, the fact that a Member State requires a professional organisation to produce a draft tariff for services does not automatically divest the tariff finally adopted of the character of legislation.37 That would be the case where the members of the professional organisation can be characterised as experts who are independent of the economic operators concerned and they are required, under the law, to set tariffs taking into account not only the interests of the undertakings or associations of undertakings in the sector which has appointed them but also the public interest and the interests of undertakings in other sectors or users of the services in question (see, to that effect, Reiff, paragraphs 17 to 19 and 24; Delta Schiffahrts- und Speditionsgesellschaft, paragraphs 16 to 18 and 23; Joined Cases C-140/94 to C-142/94 DIP and Others [1995] ECR I-3257, paragraphs 18 and 19; and Commission v Italy, paragraph 44).38 In the main proceedings, it is clear from the description of the national legislation that the Italian State obliges the CNF, composed exclusively of members of the Bar elected by their fellow members, to present every two years a draft tariff for fees payable to members of the Bar including minimum and maximum limits. Although, under Article 58 of the Royal Decree-Law, fees and emoluments must be fixed on the basis of the monetary value of disputes, the level of the court seised and, in criminal matters, the duration of the proceedings, the Royal Decree-Law does not lay down public-interest criteria, properly so-called, which the CNF must take into account.39 In those circumstances, the national legislation at issue in the main proceedings does not contain either procedural arrangements or substantive requirements capable of ensuring, with reasonable probability, that, when producing the draft tariff, the CNF conducts itself like an arm of the State working in the public interest.40 That said, it does not appear that the Italian State has waived its power to make decisions of last resort or to review implementation of the tariff. This is confirmed by the circumstances mentioned in paragraph 10 above.41 First, the CNF is responsible only for producing a draft tariff which, as such, is not compulsory. Without the Minister's approval, the draft tariff does not enter into force and the earlier approved tariff remains applicable. Accordingly, the Minister has the power to have the draft amended by the CNF. Furthermore, the Minister is assisted by two public bodies, the Consiglio di Stato and the CIP whose opinions he must obtain before the tariff can be approved.42 Second, Article 60 of the Royal Decree-Law provides that fees are to be settled by the courts on the basis of the criteria referred to in Article 57 of that decree-law, having regard to the seriousness and number of the issues dealt with. Moreover, in certain exceptional circumstances and by duly reasoned decision, the court may depart from the maximum and minimum limits fixed pursuant to Article 58 of the Royal Decree-Law.43 In those circumstances, the Italian State cannot be said to have delegated to private economic operators responsibility for taking decisions affecting the economic sphere, which would have the effect of depriving the provisions at issue in the main proceedings of the character of legislation. Nor, for the reasons set out in paragraphs 41 and 42 above, is the Italian State open to the criticism that it requires or encourages the adoption of agreements, decisions or concerted practices contrary to Article 85 of the Treaty or reinforces their effects.44 The answer to the questions referred for a preliminary ruling must therefore be that Articles 5 and 85 of the Treaty do not preclude a Member State from adopting a law or regulation which approves, on the basis of a draft produced by a professional body of members of the Bar, a tariff fixing minimum and maximum fees for members of the profession, where that State measure forms part of a procedure such as that laid down in the Italian legislation. Decision on costs Costs45 The costs incurred by the Italian, German, French and Finnish Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Pretore di Pinerolo by order of 13 January 1999, hereby rules:Articles 5 and 85 of the EC Treaty (now Articles 10 EC and 81 EC) do not preclude a Member State from adopting a law or regulation which approves, on the basis of a draft produced by a professional body of members of the Bar, a tariff fixing minimum and maximum fees for members of the profession, where that State measure forms part of a procedure such as that laid down in Royal Decree-Law No 1578 of 27 November 1933, as amended.

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THE NETHERLANDS RULES PROHIBITING MULTI-DISCIPLINARY PARTNERSHIPS BETWEEN MEMBERS OF THE BAR AND ACCOUNTANTS ARE COMPATIBLE WITH THE TREATY

| 61999J0309 Judgment of the Court of 19 February 2002. - J. C. J. Wouters, J. W. Savelbergh and Price Waterhouse Belastingadviseurs BV v Algemene Raad van de Nederlandse Orde van Advocaten, intervener: Raad van de Balies van de Europese Gemeenschap. - Reference for a preliminary ruling: Raad van State - Netherlands. - Professional body - National Bar - Regulation by the Bar of the exercise of the profession - Prohibition of multi-disciplinary partnerships between members of the Bar and accountants - Article 85 of the EC Treaty (now Article 81 EC) - Association of undertakings - Restriction of competition - Justification - Article 86 of the Treaty (now Article 82 EC) - Undertaking or group of undertakings - Articles 52 and 59 of the EC Treaty (now, after amendment, Articles 43 and 49 EC) - Applicability - Restrictions - Justification. - Case C-309/99. European Court reports 2002 Page I-01577 Keywords 1. Competition - Community rules - Undertaking - Definition - Members of the Bar - Included(EC Treaty, Arts 85, 86 and 90 (now Arts 81 EC, 82 EC and 86 EC))2. Competition - Agreements, decisions and concerted practices - Decisions taken by associations of undertakings - Definition - Regulation applicable to professional partnerships of members of the Bar with other professions adopted by the Bar of a Member State - Included(EC Treaty, Art. 85 (now Art. 81 EC))3. Competition - Agreements, decisions and concerted practices - Prejudicial to competition - Partnerships of Members of the Bar with accountants prohibited by the Bar of a Member State - Assessed with regard to the overall context of the prohibition - Justification - Proper practice of the legal profession(EC Treaty, Art. 85(1) (now Art. 81(1) EC))4. Competition - Dominant position - Collective dominant position - Definition - Bar of a Member State - Excluded(EC Treaty, Art. 86 (now Art. 82 EC))5. Freedom of movement for persons - Freedom of establishment - Freedom to provide services - Treaty provisions - Scope - Rules which are not public in nature designed to regulate collectively self-employment and the provision of services - Included(EC Treaty, Arts 52 and 59 (now, after amendment, Art. 43 EC and 49 EC))6. Freedom of movement for persons - Freedom of establishment - Freedom to provide services - Restrictions - Prohibition of partnerships of members of the Bar with accountants laid down by the Bar of a Member State - Justification - Proper practice of the legal profession(EC Treaty, Arts 52 and 59 (now, after amendment, Arts 43 EC and 49 EC)) Summary 1. Members of the Bar carry on an economic activity and are, therefore, undertakings for the purposes of Articles 85, 86 and 90 of the Treaty (now Articles 81 EC, 82 EC and 86 EC), and the complexity and technical nature of the services they provide and the fact that the practice of their profession is regulated cannot alter that conclusion. Members of the Bar offer, for a fee, services in the form of legal assistance consisting in the drafting of opinions, contracts and other documents and representation of clients in legal proceedings. In addition, they bear the financial risks attaching to the performance of those activities since, if there should be an imbalance between expenditure and receipts, they must bear the deficit themselves.( see paras 48-49 )2. When it adopts a regulation concerning partnerships between Members of the Bar and members of other professions, the Bar of a Member State is neither fulfilling a social function based on the principle of solidarity, unlike certain social security bodies, nor exercising powers which are typically those of a public authority. It acts as the regulatory body of a profession, the practice of which constitutes an economic activity.The fact that the governing bodies of a Bar are composed exclusively of members of the Bar elected solely by members of the profession, and that in adopting acts such as that regulation, the Bar is not required to do so by reference to specified public-interest criteria, supports the conclusion that such a professional organisation with regulatory powers cannot escape the application of Article 85 of the Treaty (now Article 81 EC).Moreover, having regard to its influence on the conduct of the members of the Bar on the market in legal services, as a result of its prohibition of certain multi-disciplinary partnerships, that regulation does not fall outside the sphere of economic activity.It is, moreover, immaterial that the constitution of the Bar is regulated by public law. According to its very wording, Article 85 of the Treaty applies to agreements between undertakings and decisions by associations of undertakings. The legal framework within which such agreements are concluded and such decisions taken, and the classification given to that framework by the various national legal systems, are irrelevant as far as the applicability of the Community rules on competition, and in particular Article 85 of the Treaty, are concerned.It follows that a regulation concerning partnerships between members of the Bar and members of other liberal professions, adopted by a body such as the Bar, must be regarded as a decision adopted by an association of undertakings within the meaning of Article 85(1) of the Treaty.( see paras 58, 60-63, 65-66, 71, operative part 1 )3. Prohibition of multi-disciplinary partnerships of members of the Bar and accountants, such as that laid down in a regulation adopted by the Bar of a Member State, is therefore liable to limit production and technical development within the meaning of Article 85(1)(b) of the Treaty (now Article 81(1)(b) EC).However, not every agreement between undertakings or any decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 85(1) of the Treaty. For the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects, and more particularly of its objectives, which are here connected with the need to make rules relating to organisation, qualifications, professional ethics, supervision and liability, in order to ensure that the ultimate consumers of legal services and the sound administration of justice are provided with the necessary guarantees in relation to integrity and experience. It has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives.Account must be taken of the legal framework applicable in the Member State concerned, on the one hand, to members of the Bar and to the Bar which comprises all the registered members of the Bar in that Member State, and on the other hand, to accountants.A regulation concerning partnerships of members of the Bar with members of other liberal professions adopted by a body such as the Bar of a Member State thus does not infringe Article 85(1) of the Treaty, since that body could reasonably have considered that that regulation, despite the effects restrictive of competition that are inherent in it, is necessary for the proper practice of the legal profession, as organised in the Member State concerned.( see paras 90, 97-98, 110, operative part 2 )4. Since it does not carry on any economic activity, the Bar of a Member State is not an undertaking within the meaning of Article 86 of the Treaty (now Article 82 EC). Nor can it be categorised as a group of undertakings for the purposes of that provision, inasmuch as registered members of the Bar of a Member State are not sufficiently linked to each other to adopt the same conduct on the market with the result that competition between them is eliminated. The legal profession is not concentrated to any significant degree, is highly heterogenous and characterised by a high degree of internal competition. In the absence of sufficient structural links between them, members of the Bar cannot be regarded as occupying a collective dominant position for the purposes of Article 86 of the Treaty.( see paras 112-114 )5. Compliance with Articles 52 and 59 of the Treaty (now, after amendment, Articles 43 EC and 49 EC) is also required in the case of rules which are not public in nature but which are designed to regulate, collectively, self-employment and the provision of services. The abolition, as between Member States, of obstacles to freedom of movement for persons would be compromised if the abolition of State barriers could be neutralised by obstacles resulting from the exercise of their legal autonomy by associations or organisations not governed by public law.( see para. 120 )6. It is not contrary to Articles 52 and 59 of the Treaty (now, after amendment, Articles 43 EC and 49 EC) for a national regulation concerning partnerships of members of the Bar with members of other liberal professions to prohibit any multi-disciplinary partnership between members of the Bar and accountants, since that regulation could reasonably be considered to be necessary for the proper practice of the legal profession, as organised in the country concerned.( see para. 123, operative part 4 ) Parties In Case C-309/99,REFERENCE to the Court under Article 234 EC by the Raad van State for a preliminary ruling in the proceedings pending before that court betweenJ.C.J. Wouters,J.W. Savelbergh,Price Waterhouse Belastingadviseurs BVandAlgemene Raad van de Nederlandse Orde van Advocaten,intervener:Raad van de Balies van de Europese Gemeenschap,on the interpretation of Articles 3(g) of the EC Treaty (now, after amendment, Article 3(1)(g) EC), 5 of the EC Treaty (now Article 10 EC), 52 and 59 of the EC Treaty (now, after amendment, Articles 43 EC and 49 EC), and 85, 86 and 90 of the EC Treaty (now Articles 81 EC, 82 EC and 86 EC),THE COURT,composed of: G.C. Rodríguez Iglesias, President, P. Jann, F. Macken, N. Colneric, and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward, A. La Pergola, J.-P. Puissochet, M. Wathelet (Rapporteur), R. Schintgen, V. Skouris and J.N. Cunha Rodrigues, Judges,Advocate General: P. Léger,Registrar: H. von Holstein, Deputy Registrar,after considering the written observations submitted on behalf of:- Mr Wouters, by H. Gilliams and M. Wladimiroff, advocaten,- Mr Savelbergh and Price Waterhouse Belastingadviseurs BV, by D. van Liedekerke and G.J. Kemper, advocaten,- the Algemene Raad van de Nederlandse Orde van Advocaten, by O.W. Brouwer, F.P. Louis and S.C. van Es, advocaten,- the Raad van de Balies van de Europese Gemeenschap, by P. Glazener, advocaat,- the Netherlands Government, by M.A. Fierstra, acting as Agent,- the Danish Government, by J. Molde, acting as Agent,- the German Government, by A. Dittrich and W.-D. Plessing, acting as Agents,- the French Government, by K. Rispal-Bellanger, R. Loosli-Surrans and F. Million, acting as Agents,- the Austrian Government, by C. Stix-Hackl, acting as Agent,- the Portuguese Government, by L. Fernandes, acting as Agent,- the Swedish Government, by A. Kruse, acting as Agent,- the Government of the Principality of Liechtenstein, by C. Büchel, acting as Agent,- the Commission of the European Communities, by W. Wils and B. Mongin, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Mr Wouters, represented by H. Gilliams, of Mr Savelbergh and Price Waterhouse Belastingadviseurs BV, represented by D. van Liedekerke and G.J. Kemper, of the Algemene Raad van de Nederlandse Orde van Advocaten, represented by O.W. Brouwer and W. Knibbeler, advocaat, of the Raad van de Balies van de Europese Gemeenschap, represented by P. Glazener, of the Netherlands Government, represented by J.S. van den Oosterkamp, acting as Agent, of the German Government, represented by A. Dittrich, of the French Government, represented by F. Million, of the Luxembourg Government, represented by N. Mackel, acting as Agent, assisted by J. Welter, avocat, of the Swedish Government, represented by I. Simfors, acting as Agent, and of the Commission, represented by W. Wils, at the hearing on 12 December 2000,after hearing the Opinion of the Advocate General at the sitting on 10 July 2001,gives the followingJudgment Grounds 1 By judgment of 10 August 1999, received at the Court on 13 August 1999, the Raad van State (Netherlands Council of State) referred to the Court for a preliminary ruling under Article 234 EC nine questions on the interpretation of Articles 3(g) of the EC Treaty (now, after amendment, Article 3(1)(g) EC), 5 of the EC Treaty (now Article 10 EC), 52 and 59 of the EC Treaty (now, after amendment, Articles 43 EC and 49 EC), and 85, 86 and 90 of the EC Treaty (now Articles 81 EC, 82 EC and 86 EC).2 Those questions were raised in proceedings brought by members of the Bar, among others, against the refusal of the Arrondissementsrechtbank te Amsterdam (Amsterdam District Court, the Rechtbank) to set aside the decisions of the Nederlandse Orde van Advocaten (Bar of the Netherlands) refusing to set aside the decisions of the Supervisory Boards of the Amsterdam and Rotterdam Bars prohibiting them from practising as members of the Bar in full partnership with accountants.The relevant national legislation3 Article 134 of the Constitution of the Kingdom of the Netherlands deals with the establishment of, and the legal rules governing, public bodies. It provides that:(1) Public professional bodies and other public bodies may be established and dissolved by or under statute.(2) The duties and organisation of such public bodies, the composition and powers of the governing bodies and public access to their meetings shall be governed by statute. Powers to adopt regulations may be granted to the governing bodies by or under statute.(3) Supervision of the governing bodies shall be governed by statute. Their decisions may be annulled only where they are contrary to law or to the public interest.The Advocatenwet4 Pursuant to that provision, a law was adopted on 23 June 1952 establishing the Bar of the Netherlands and laying down the internal regulations and the disciplinary rules applicable to advocaten and procureurs (the Advocatenwet, the Law on the Bar).5 Article 17 of the Advocatenwet provides that:(1) The Bar of the Netherlands, based in The Hague, shall be composed of all members of the Bar registered in the Netherlands and shall be a public body within the meaning of Article 134 of the Constitution.(2) All members of the Bar registered with the same court shall form the Bar of the district concerned.6 Articles 18(1) and 22(1) of the Advocatenwet provide that the governing bodies of the Bar of the Netherlands and the District Bars are to be the Algemene Raad van de Nederlandse Orde van Advocaten (General Council of the Bar of the Netherlands, the General Council) and the Raden van Toezicht van de Orden in de Arrondissementen (Supervisory Boards of the District Bars, the Supervisory Boards) respectively.7 Articles 19 and 20 of the Advocatenwet regulate the election of the members of the General Council. They are elected by the College van Afgevaardigen (College of Delegates), who are themselves elected at meetings of the various District Bars.8 Article 26 of the Advocatenwet states that:[T]he General Council and the Supervisory Boards shall ensure the proper practice of the profession and have the power to adopt any measures which may contribute to that end. They shall defend the rights and interests of members of the Bar as such, ensure that the obligations of the latter are fulfilled and discharge the duties imposed on them by regulation.9 Article 28 of the Advocatenwet provides:(1) The College of Delegates may adopt regulations in the interests of the proper practice of the profession, including regulations concerning provision for members of the Bar affected by old age or total or partial incapacity for work, and provision for the next-of-kin of deceased members. Furthermore, the College shall adopt the necessary regulations concerning the administration and organisation of the Bar.(2) Draft regulations shall be submitted to the College of Delegates by the General Council or by at least five delegates. The General Council may invite the Supervisory Boards to state their views on a draft regulation before submitting it to the delegates.(3) As soon as they have been adopted, regulations shall be communicated to the Ministry of Justice and published in the Official Gazette.10 Article 29 of the Advocatenwet states that:(1) Regulations shall be binding on the members of the Bar of the Netherlands and on visiting lawyers ...(2) They may not contain any provision relating to matters governed by or under statute, nor may they concern matters which, on account of the differing situations in each district, do not lend themselves to uniform regulation.(3) Any provision in a regulation which applies to a matter governed by or under statute shall by operation of law cease to be valid.11 According to Article 16b and 16c of the Advocatenwet, the term visiting lawyers means persons who are not registered as members of the Bar in the Netherlands but who are authorised to carry on their professional activity in another Member State of the European Union under the title of advocate or an equivalent title.12 Article 30 of the Advocatenwet provides:(1) Decisions adopted by the College of Delegates, the General Council or any other organs of the Bar of the Netherlands may be suspended or annulled by royal decree in so far as they are contrary to law or to the public interest.(2) Such suspension or annulment shall be effected within six months of the communication referred to in Article 28(3) or, where the decision was adopted by the General Council or another body of the Bar of the Netherlands, within six months of its notification to the Minister for Justice, by reasoned decree prescribing, where relevant, the duration of the suspension.(3) Suspension shall immediately cause the effects of the suspended provisions to lapse. The duration of the suspension may not be greater than one year, even after extension.(4) If the suspended decision is not annulled by royal decree within the period prescribed it shall be deemed to be valid.(5) Annulment shall entail annulment of all annullable effects of the annulled provisions, save as otherwise decided by royal decree.The Samenwerkingsverordening 199313 Pursuant to Article 28 of the Advocatenwet, the College of Delegates adopted the Samenwerkingsverordening 1993 (Regulation on Joint Professional Activity 1993, the 1993 Regulation).14 Article 1 of the 1993 Regulation defines professional partnership (samenwerkingsverband) as being any joint activity in which the participants practise their respective professions for their joint account and at their joint risk or by sharing control or final responsibility for that purpose.15 Article 2 of the 1993 Regulation provides:(1) Members of the Bar shall not be authorised to assume or maintain any obligations which might jeopardise the free and independent exercise of their profession, including the partisan defence of clients' interests and the corresponding relationship of trust between lawyer and client.(2) The provision contained in subparagraph (1) shall also apply where members of the Bar do not work in professional partnership with colleagues or third parties.16 Under Article 3 of the 1993 Regulation:Members of the Bar shall not be authorised to enter into or maintain any professional partnership unless the primary purpose of each partner's respective profession is the practice of the law.17 Article 4 of the 1993 Regulation provides:Members of the Bar may enter into or maintain professional partnerships only with:(a) other members of the Bar registered in the Netherlands;(b) other lawyers not registered in the Netherlands, if the conditions laid down in Article 5 are satisfied;(c) members of another professional category accredited for that purpose by the General Council in accordance with Article 6.18 According to Article 6 of the 1993 Regulation:(1) The authorisation referred to in Article 4(c) may be granted on condition that:(a) the members of that other professional category practise a profession, and(b) the exercise of that profession is conditional upon possession of a university degree or an equivalent qualification; and(c) the members of that professional category are subject to disciplinary rules comparable to those imposed on members of the Bar; and(d) entering into partnership with members of that other professional partnership is not contrary to Articles 2 or 3.(2) Accreditation may also be granted to a specific branch of a professional category. In that case, the conditions set out in (a) to (d) above shall be applicable, without prejudice to the General Council's power to lay down further conditions.(3) The General Council shall consult the College of Delegates before adopting any decision as mentioned in the preceding subparagraphs of this Article.19 Article 7(1) of the 1993 Regulation provides:In their communications with other persons members of the Bar shall avoid giving any inaccurate, misleading or incomplete impression as to the nature of any form of joint activity in which they participate, including any professional partnership.20 In accordance with Article 8 of the 1993 Regulation:(1) Every professional partnership must have a collective name for all communications with other persons.(2) The collective name must not be misleading.(3) Members of the Bar who are members of professional partnerships shall be required to supply, on request, a list of the partners' names, their respective professions and place of establishment.(4) Any written document produced by a professional partnership must include the name, status and place of establishment of the person who signs the document.21 Finally, Article 9(2) of the 1993 Regulation provides:Members of the Bar shall not set up, or alter the constitution, of a professional partnership until the Supervisory Board has decided whether the conditions on which that partnership is formed or its constitution is altered, including the way in which it presents itself to other parties, satisfy the requirements imposed by or under this Regulation.22 According to the recitals of the 1993 Regulation, members of the Bar have already been authorised to enter into partnership with notaries, tax consultants and patent agents and authorisation for those three professional categories remains valid. On the other hand, accountants are mentioned as an example of a professional category with which members of the Bar are not authorised to enter into partnership.The directives concerning professional partnerships between members of the Bar and other (authorised) practitioners23 In addition to the 1993 Regulation, the Bar of the Netherlands has adopted directives concerning professional partnerships between members of the Bar and other (accredited) practitioners. Those directives are worded as follows:1. Compliance with the rules of ethics and professional conductRule No 1Members of the Bar may not, as a result of participating in a professional partnership with a practitioner of another profession, limit or compromise compliance with the rules of ethics and professional practice applicable to them.2. Separate files and separate management of files and archivesRule No 2Members of the Bar participating in a professional partnership with a practitioner of another profession are required, in respect of every case in which they act with that other practitioner, to open a separate file and to ensure, in relation to the professional partnership as such:- that the management of the case file is kept separate from financial management;- that files are kept in separate archives from those of practitioners of other professions.3. Conflicts of interestRule No 3Members of the Bar participating in a professional partnership with a practitioner of another profession may not defend the interests of a party where those interests are in conflict with those of a party who has been, or is being, assisted by that other practitioner or where there is a risk that such a conflict of interests may arise.4. Professional secrecy and registration of documentsRule No 4Members of the Bar participating in a professional partnership with a practitioner of another profession are required, in respect of every case in which they act with that other practitioner, to keep an accurate register of all letters and documents which they bring to the attention of the practitioner of the other profession.The disputes in the main proceedings24 Mr Wouters, a member of the Amsterdam Bar, became a partner in the partnership Arthur Andersen & Co. Belastingadviseurs (tax consultants) in 1991. Late in 1994 Mr Wouters informed the Supervisory Board of the Rotterdam Bar of his intention to enrol at the Rotterdam Bar and to practise in that city under the name of Arthur Andersen & Co., advocaten en belastingadviseurs.25 By decision of 27 July 1995, that Supervisory Board found that the members of the partnership Arthur Andersen & Co. Belastingadviseurs were in professional partnership, within the meaning of the 1993 Regulation, with the members of the partnership Arthur Andersen & Co. Accountants, that is to say with members of the profession of accountants. Accordingly, Mr Wouters was in breach of Article 4 of the 1993 Regulation. In addition, the Supervisory Board considered that Mr Wouters would contravene Article 8 of the 1993 Regulation if he entered into a partnership the collective name of which included the name of the natural person Arthur Andersen.26 By decision of 29 November 1995 the General Council dismissed as unfounded the administrative appeals brought by Mr Wouters, Arthur Andersen & Co. Belastingadviseurs and Arthur Andersen & Co. Accountants against the decision of 27 July 1995.27 At the beginning of 1995 Mr Savelbergh, a member of the Amsterdam Bar, informed the Supervisory Board of the Amsterdam Bar of his intention to enter into partnership with the private company Price Waterhouse Belastingadviseurs BV, a subsidiary of the international undertaking Price Waterhouse, which includes both tax consultants and accountants.28 By decision of 5 July 1995 the Supervisory Board declared that the proposed partnership was contrary to Article 4 of the 1993 Regulation.29 By decision of 21 November 1995, the General Council dismissed the administrative appeal brought by Mr Savelbergh and Price Waterhouse Belastingadviseurs BV against that decision.30 Mr Wouters, Arthur Andersen & Co. Belastingadviseurs and Arthur Andersen & Co. Accountants, on the one hand, and Mr Savelbergh and Price Waterhouse Belastingadviseurs BV, on the other, then appealed to the Rechtbank. They claimed, inter alia, that the decisions of the General Council of 21 and 29 November 1995 were incompatible with the Treaty provisions on competition, right of establishment and freedom to provide services.31 By judgment of 7 February 1997 the Rechtbank declared inadmissible the appeals brought by Arthur Andersen & Co. Belastingadviseurs and Arthur Andersen & Co. Accountants, and dismissed as unfounded those brought by Mr Wouters, Mr Savelbergh and Price Waterhouse Belastingadviseurs BV.32 The Rechtbank considered that the Treaty provisions on competition did not apply to the cases. It pointed out that the Bar of the Netherlands is a body governed by public law, established by statute in order to further a public interest. For that purpose it makes use of the regulatory power conferred on it by Article 28 of the Advocatenwet. The Bar of the Netherlands is required to guarantee, in the public interest, the independence and loyalty to the client of members of the Bar who provide legal assistance. In the Rechtbank's view, the Bar of the Netherlands is not, therefore, an association of undertakings within the meaning of Article 85 of the Treaty, nor can it be regarded either as an undertaking or as an association of undertakings occupying a collective dominant position contrary to Article 86 of the Treaty.33 Furthermore, according to the Rechtbank, Article 28 of the Advocatenwet does not transfer any powers to private operators in such a manner as to undermine the effectiveness of Articles 85 and 86 of the Treaty. As a result, that provision is not incompatible with the second paragraph of Article 5 of the Treaty, read in conjunction with Articles 3(g), 85 and 86 of the Treaty.34 The Rechtbank also rejected the appellants' argument that the 1993 Regulation is incompatible with the right of establishment and the freedom to provide services enshrined in Articles 52 and 59 of the Treaty. In its view, there is no cross-border element in the cases in point, so that those provisions are not applicable. In any event, the prohibition on partnerships of members of the Bar and accountants is justified by overriding reasons relating to the public interest and is not disproportionately restrictive. In the absence of specific Community provisions in that field, it is open to the Kingdom of the Netherlands to make the exercise of the legal profession on its territory subject to rules intended to guarantee the independence and loyalty to the client of members of the Bar who provide legal assistance.35 The five appellants appealed against the decision of the Rechtbank to the Raad van State.36 The Raad van de Balies van de Europese Gemeenschap (the Council of the Bars and Law Societies of the European Community, the CCBE), an association established under Belgian law, was granted leave to intervene in support of the forms of order sought by the General Council.37 By judgment given on 10 August 1999, the Raad van State confirmed that the appeals brought by Arthur Andersen & Co. Belastingadviseurs and Arthur Andersen & Co. Accountants were inadmissible. As regards the other appeals, it considered that the outcome of the dispute in the main proceedings depended on the interpretation of several provisions of Community law.38 The Raad van State questions, first, whether by adopting the 1993 Regulation under its powers pursuant to Article 28 of the Advocatenwet, the College of Delegates has infringed Articles 85 and 86 of the Treaty and, second, whether by empowering that College under Article 28 of the Advocatenwet to adopt regulations, the national legislature has infringed Articles 5, 85 and 86 of the Treaty. In addition, it enquires whether the Regulation is compatible with the right of establishment laid down in Article 52 of the Treaty and with the freedom to provide services in Article 59 of the Treaty.39 Consequently, the Raad van State decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:1 (a) Is the term "association of undertakings" in Article 85(1) of the EC Treaty (now Article 81(1) EC) to be interpreted as meaning that there is such an association only if and in so far as it acts in the undertakings' interest, so that in applying that provision a distinction must be drawn between activities of the association carried out in the public interest and other activities, or is the mere fact that an association can also act in the undertakings' interest sufficient for it to be regarded as an association of undertakings within the meaning of the provision in respect of all its actions? Is the fact that the universally binding rules adopted by the relevant institution are adopted under a statutory power and in its capacity as a special legislature relevant as regards the application of Community competition law?(b) If the answer to Question 1(a) is that there is an association of undertakings only if and in so far as it acts in the undertakings' interest, is the question of when the public interest is being pursued also governed by Community law?(c) If the answer to Question 1(b) is that Community law is relevant, can the adoption under a statutory power by an institution such as the Bar of the Netherlands of universally binding rules, designed to safeguard the independence and loyalty to the client of members of the Bar who provide legal assistance, on the formation of multi-disciplinary partnerships between members of the Bar and members of other professions be regarded for the purposes of Community law as pursuing the public interest?2. If the answers to the first question indicate that a rule such as [the 1993 Regulation] is to be regarded as a decision of an association of undertakings within the meaning of Article 85(1) of the EC Treaty (now Article 81(1) EC), is such a decision, in so far as it adopts universally binding rules, designed to safeguard the independence and loyalty to the client of members of the Bar who provide legal assistance, on the formation of multi-disciplinary partnerships such as the one in question to be regarded as having as its object or effect the restriction of competition within the common market and in that respect affecting trade between the Member States? What criteria of Community law are relevant to the determination of that issue?3. Is the term "undertaking" in Article 86 of the EC Treaty (now Article 82 EC) to be interpreted as meaning that where an institution such as the Bar of the Netherlands must be regarded as an association of undertakings, that institution must also be considered to be an undertaking or group of undertakings for the purposes of that provision, even though it pursues no economic activity itself?4. If the previous question is answered in the affirmative and it must be held that an institution such as the Bar of the Netherlands enjoys a dominant position, does such an institution abuse that position if it regulates the relationships between its members and others on the market in legal services in a manner which restricts competition?5. If an institution such as the Bar of the Netherlands is to be regarded in its entirety as an association of undertakings for the purposes of Community competition law, is Article 90(2) of the EC Treaty (now Article 86(2) EC) to be interpreted as extending to an institution such as the Bar of the Netherlands which lays down universally binding rules, designed to safeguard the independence and loyalty to the client of its members who provide legal assistance, on cooperation between its members and members of other professions?6. If an institution such as the Bar of the Netherlands is to be regarded as an association of undertakings or an undertaking or group of undertakings, do Article 3(g) (now, after amendment, Article 3(1)(g) EC), the second paragraph of Article 5 and Articles 85 and 86 of the EC Treaty (now Articles 10 EC, 81 EC and 82 EC) preclude a Member State from providing that that institution (or one of its agencies) may adopt rules concerning inter alia cooperation between its members and members of other professions when review by the relevant public authority of such rules is limited to the power to annul such a rule without the authority's being able to adopt a rule in its stead?7. Are both the Treaty provisions on the right of establishment and those on the freedom to provide services applicable to a prohibition on cooperation between members of the Bar and accountants such as that in question, or is the EC Treaty to be interpreted as meaning that such a prohibition must comply, depending for example on the way in which those concerned actually wish to model their cooperation, with either the provisions on the right of establishment or with those relating to the freedom to provide services?8. Does a prohibition on multi-disciplinary partnerships including members of the Bar and accountants such as the one in question constitute a restriction of the right of establishment or the freedom to provide services, or both?9. If it follows from the answer to the previous question that one or both of the abovementioned restrictions exists, is the restriction in question justified on the ground that it constitutes merely a "selling arrangement" within the meaning of the judgment in Joined Cases C-267/91 and C-268/91 Keck and Mithouard [1993] ECR I-6097, and that therefore there is no discrimination, or on the ground that it satisfies the criteria that have been developed in that respect by the Court of Justice in other judgments, in particular Case C-55/94 Gebhard [1995] ECR I-4165?Request for reopening of the oral procedure40 By document lodged at the Court Registry on 3 December 2001, the appellants in the main proceedings requested the Court to order the reopening of the oral procedure pursuant to Article 61 of the Rules of Procedure.41 In support of that request, the appellants in the main proceedings claim that in paragraphs 170 to 201 of his Opinion, delivered on 10 July 2001, the Advocate General gave his opinion on a question which had not been expressly raised by the national court.42 The Court may, of its own motion, on a proposal from the Advocate General or at the request of the parties, reopen the oral procedure, in accordance with Article 61 of its Rules of Procedure, if it considers that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see order in Case C-17/98 Emesa Sugar [2000] ECR I-665, paragraph 18).43 In the circumstances of this case, however, the Court, after hearing the Advocate General, considers that it is in possession of all the facts necessary for it to answer the questions referred by the national court and observes that those facts were the subject of argument presented to it at the hearing.Question 1(a)44 By Question 1(a) the national court is in substance asking whether a regulation concerning partnerships between members of the Bar and other professionals, such as the 1993 Regulation, adopted by a body such as the Bar of the Netherlands, is to be regarded as a decision taken by an association of undertakings within the meaning of Article 85(1) of the Treaty. It seeks in particular to ascertain whether the fact that power was conferred by statute on the Bar of the Netherlands to adopt rules universally binding both on registered members of the Bar in the Netherlands and lawyers who are authorised to practise in other Member States and come to the Netherlands in order to provide services there has any bearing on the application of Community competition law. It also asks whether the mere fact that the Bar of the Netherlands may act in the interests of its members is sufficient for it to be regarded as an association of undertakings in respect of all its activities or whether, for Article 85(1) of the Treaty to be applicable, special treatment must be reserved for the Bar's public-interest activities.45 In order to establish whether a regulation such as the 1993 Regulation is to be regarded as a decision of an association of undertakings within the meaning of Article 85(1) of the Treaty, the first matter to be considered is whether members of the Bar are undertakings for the purposes of Community competition law.46 According to settled case-law, in the field of competition law, the concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed (Case C-41/90 Höfner and Elser [1991] ECR I-1979, paragraph 21; Case C-244/94 Fédération française des sociétés d'assurances and Others [1995] ECR I-4013, paragraph 14; and Case C-55/96 Job Centre [1997] ECR I-7119, Job Centre II, paragraph 21).47 It is also settled case-law that any activity consisting of offering goods and services on a given market is an economic activity (Case 118/85 Commission v Italy [1987] ECR 2599, paragraph 7; Case C-35/96 Commission v Italy [1998] ECR I-3851, CNSD, paragraph 36).48 Members of the Bar offer, for a fee, services in the form of legal assistance consisting in the drafting of opinions, contracts and other documents and representation of clients in legal proceedings. In addition, they bear the financial risks attaching to the performance of those activities since, if there should be an imbalance between expenditure and receipts, they must bear the deficit themselves.49 That being so, registered members of the Bar in the Netherlands carry on an economic activity and are, therefore, undertakings for the purposes of Articles 85, 86 and 90 of the Treaty. The complexity and technical nature of the services they provide and the fact that the practice of their profession is regulated cannot alter that conclusion (see, to that effect, with regard to medical practitioners, Joined Cases C-180/98 to C-184/98 Pavlov and Others [2000] ECR I-6451, paragraph 77).50 The second point to be considered is the extent to which a professional body such as the Bar of the Netherlands is to be regarded as an association of undertakings, within the meaning of Article 85(1) of the Treaty, where it adopts a regulation such as the 1993 Regulation (see, to that effect, with regard to a professional body of customs agents, CNSD, paragraph 39).51 The respondent in the main proceedings claims that, inasmuch as the Netherlands legislature created the Bar of the Netherlands as a body governed by public law and gave it regulatory powers in order to perform a task in the public interest, the Bar cannot be regarded as an association of undertakings within the meaning of Article 85 of the Treaty, particularly in connection with the exercise of its regulatory powers.52 The intervener in the main proceedings and the German, Austrian and Portuguese Governments add that a body such as the Bar of the Netherlands exercises public authority and cannot, in consequence, fall within the scope of Article 85(1) of the Treaty.53 According to the intervener in the main proceedings, a body may be treated as comparable to a public authority where the activity which it carries on constitutes a task in the public interest forming part of the essential functions of the State. The Netherlands have made the Bar of the Netherlands responsible for ensuring that individuals have proper access to the law and to justice, which is indeed one of the essential functions of the State.54 The German Government, for its part, points out that it is for the competent legislative bodies of a Member State to decide, within the framework of national sovereignty, how they organise the exercise of their rights and powers. Delegation of the power to adopt universally binding rules to a body possessing democratic legitimacy, such as a professional body, falls within the limits of that principle of institutional autonomy.55 According to the German Government, were bodies entrusted with such regulatory duties to be treated as associations of undertakings within the meaning of Article 85 of the Treaty, this would frustrate the operation of that principle. The idea that national legislation is valid only if it is exempted by the Commission pursuant to Article 85(3) of the Treaty is a contradiction in terms. The consequence would be that the whole corpus of professional regulations would be called in question.56 The question to be determined is whether, when it adopts a regulation such as the 1993 Regulation, a professional body is to be treated as an association of undertakings or, on the contrary, as a public authority.57 According to the case-law of the Court, the Treaty rules on competition do not apply to activity which, by its nature, its aim and the rules to which it is subject does not belong to the sphere of economic activity (see, to that effect, Joined Cases C-159/91, C-160/91 Poucet and Pistre [1993] ECR I-637, paragraphs 18 and 19, concerning the management of the public social security system), or which is connected with the exercise of the powers of a public authority (see, to that effect, Case C-364/92 Sat Fluggesellschaft [1994] ECR I-43, paragraph 30, concerning the control and supervision of air space, and Case C-343/95 Diego Calì & Figli [1997] ECR I-1547, paragraphs 22 and 23, concerning anti-pollution surveillance of the maritime environment).58 When it adopts a regulation such as the 1993 Regulation, a professional body such as the Bar of the Netherlands is neither fulfilling a social function based on the principle of solidarity, unlike certain social security bodies (Poucet and Pistre, cited above, paragraph 18), nor exercising powers which are typically those of a public authority (Sat Fluggesellschaft, cited above, paragraph 30). It acts as the regulatory body of a profession, the practice of which constitutes an economic activity.59 In that respect, the fact that Article 26 of the Advocatenwet also entrusts the General Council with the task of protecting the rights and interests of members of the Bar cannot a priori exclude that professional organisation from the scope of application of Article 85 of the Treaty, even where it performs its role of regulating the practice of the profession of the Bar (see, to that effect, with regard to medical practitioners, Pavlov, cited above, paragraph 86).60 Next, other indications support the conclusion that a professional organisation with regulatory powers, such as the Bar of the Netherlands, cannot escape the application of Article 85 of the Treaty.61 First, it is clear from the Advocatenwet that the governing bodies of the Bar are composed exclusively of members of the Bar elected solely by members of the profession. The national authorities may not intervene in the appointment of the members of the Supervisory Boards, College of Delegates or the General Council (see, as regards a professional organisation of customs agents, CNSD, cited above, paragraph 42, and as regards a professional organisation of medical practitioners, Pavlov, paragraph 88).62 Second, when it adopts measures such as the 1993 Regulation, the Bar of the Netherlands is not required to do so by reference to specified public-interest criteria. Article 28 of the Advocatenwet, which authorises it to adopt regulations, does no more than require that they should be in the interest of the proper practice of the profession (see, as regards a professional organisation of customs agents, CNSD, paragraph 43).63 Lastly, having regard to its influence on the conduct of the members of the Bar of the Netherlands on the market in legal services, as a result of its prohibition of certain multi-disciplinary partnerships, the 1993 Regulation does not fall outside the sphere of economic activity.64 In light of the foregoing considerations, it appears that a professional organisation such as the Bar of the Netherlands must be regarded as an association of undertakings within the meaning of Article 85(1) of the Treaty where it adopts a regulation such as the 1993 Regulation. Such a regulation constitutes the expression of the intention of the delegates of the members of a profession that they should act in a particular manner in carrying on their economic activity.65 It is, moreover, immaterial that the constitution of the Bar of the Netherlands is regulated by public law.66 According to its very wording, Article 85 of the Treaty applies to agreements between undertakings and decisions by associations of undertakings. The legal framework within which such agreements are concluded and such decisions taken, and the classification given to that framework by the various national legal systems, are irrelevant as far as the applicability of the Community rules on competition, and in particular Article 85 of the Treaty, are concerned (Case 123/83 BNIC v Clair [1985] ECR 391, paragraph 17, and CNSD, paragraph 40).67 That interpretation of Article 85(1) of the Treaty does not entail any breach of the principle of institutional autonomy as argued by the German Government (see paragraphs 54 and 55 above). On this point a distinction must be drawn between two approaches.68 The first is that a Member State, when it grants regulatory powers to a professional association, is careful to define the public-interest criteria and the essential principles with which its rules must comply and also retains its power to adopt decisions in the last resort. In that case the rules adopted by the professional association remain State measures and are not covered by the Treaty rules applicable to undertakings.69 The second approach is that the rules adopted by the professional association are attributable to it alone. Certainly, in so far as Article 85(1) of the Treaty applies, the association must notify those rules to the Commission. That obligation is not, however, such as unduly to paralyse the regulatory activity of professional associations, as the German Government submits, since it is always open to the Commission inter alia to issue a block exemption regulation pursuant to Article 85(3) of the Treaty.70 The fact that the two systems described in paragraphs 68 and 69 above produce different results with respect to Community law in no way circumscribes the freedom of the Member States to choose one in preference to the other.71 In light of the foregoing considerations, the answer to be given to Question 1(a) must be that a regulation concerning partnerships between members of the Bar and other members of liberal professions, such as the 1993 Regulation, adopted by a body such as the Bar of the Netherlands, must be regarded as a decision adopted by an association of undertakings within the meaning of Article 85(1) of the Treaty.Question 1(b) and (c)72 Having regard to the answer given to Question 1(a), there is no need to consider Question 1(b) and (c).Question 273 By its second question the national court seeks, essentially, to ascertain whether a regulation such as the 1993 Regulation which, in order to guarantee the independence and loyalty to the client of members of the Bar who provide legal assistance in conjunction with members of other liberal professions, adopts universally binding rules governing the formation of multi-disciplinary partnerships, has the object or effect of restricting competition within the common market and is likely to affect trade between Member States.74 By describing the successive versions of the rules on partnerships, the appellants in the main proceedings have set out to establish that the 1993 Regulation had the object of restricting competition.75 Initially, the Samenwerkingsverordening 1972 (the 1972 Regulation) authorised members of the Bar to enter into multi-disciplinary partnerships subject to three conditions. First, the partners had to be members of other liberal professions with a university education or education of an equivalent standard. Next, they had to belong to an association or group the members of which were subject to disciplinary rules comparable to those applicable to members of the Bar. Finally, the proportion of members of the Bar belonging to that professional partnership and the size of their contributions to it had to be at least equivalent to that of the partners belonging to other professions, so far as both mutual relations between the partners and their relations with third parties were concerned.76 In 1973 the General Council accredited the members of both the Netherlands association of patent agents and of the Netherlands association of tax consultants for the purposes of creating multi-disciplinary professional partnerships with members of the Bar. Subsequently, notaries were also accredited. According to the appellants in the main proceedings, although, at the material time, members of the Netherlands institute of accountants were not formally accredited by the General Council, there was in principle no objection to this.77 In 1991, faced for the first time with a request for authorisation of a partnership with an accountant, the Bar of the Netherlands, following an expedited procedure, amended the 1972 Regulation for the sole purpose, according to the appellants, of having a legal basis on which to prohibit professional partnerships between members of the Bar and accountants. Members of the Bar were thenceforth authorised to enter into multi-disciplinary partnerships only where the free and independent exercise of their profession, including the defence of their clients' interests, and the corresponding relationship of trust between lawyer and client cannot be jeopardised.78 The refusal to authorise partnerships between members of the Bar and accountants is, in the appellants' submission, based on the finding that firms of accountants had evolved and had in the meantime become gigantic organisations, so that a partnership of a law-firm with a firm of accountants would, as the then Algemene Deken (General Dean) of the Bar expressed it, have more resembled the marriage of a mouse and an elephant than a union of partners of equal stature.79 The Bar of the Netherlands then adopted the 1993 Regulation. That measure recapitulated the amendment made in 1991 and added a further requirement to the effect that members of the Bar were no longer authorised to form part of a professional partnership unless the primary purpose of each partner's respective profession is the practice of the law (Article 3 of the 1993 Regulation), which, in the appellants' submission, demonstrates the anticompetitive object of the national rules at issue in the main proceedings.80 In the alternative, the appellants in the main proceedings claim that, irrespective of its object, the 1993 Regulation produces effects that are restrictive of competition.81 They maintain that multi-disciplinary partnerships of members of the Bar and accountants would make it possible to respond better to the needs of clients operating in an ever more complex and international economic environment.82 Members of the Bar, having a reputation as experts in many fields, would be best placed to offer their clients a wide range of legal services and would, as partners in a multi-disciplinary partnership, be especially attractive to other persons active on the market in legal services.83 Conversely, accountants would be attractive partners for members of the Bar in a professional partnership. They are experts in fields such as legislation on company accounts, the tax system, the organisation and restructuring of undertakings, and management consultancy. There would be many clients interested in an integrated service, supplied by a single provider and covering the legal as well as financial, tax and accountancy aspects of a particular matter.84 The prohibition at issue in the main proceedings prohibits all contractual arrangements between members of the Bar and accountants which provide in any way for shared decision-making, profit-sharing or for the use of a common name, and this makes any form of effective partnership difficult.85 By contrast, the Luxembourg Government claimed at the hearing that a prohibition of multi-disciplinary partnerships such as that laid down in the 1993 Regulation had a positive effect on competition. It pointed out that, by forbidding members of the Bar to enter into partnership with accountants, the national rules in issue in the main proceedings made it possible to prevent the legal services offered by members of the Bar from being concentrated in the hands of a few large international firms and, consequently, to maintain a large number of operators on the market.86 It appears to the Court that the national legislation in issue in the main proceedings has an adverse effect on competition and may affect trade between Member States.87 As regards the adverse effect on competition, the areas of expertise of members of the Bar and of accountants may be complementary. Since legal services, especially in business law, more and more frequently require recourse to an accountant, a multi-disciplinary partnership of members of the Bar and accountants would make it possible to offer a wider range of services, and indeed to propose new ones. Clients would thus be able to turn to a single structure for a large part of the services necessary for the organisation, management and operation of their business (the one-stop shop advantage).88 Furthermore, a multi-disciplinary partnership of members of the Bar and accountants would be capable of satisfying the needs created by the increasing interpenetration of national markets and the consequent necessity for continuous adaptation to national and international legislation.89 Nor, finally, is it inconceivable that the economies of scale resulting from such multi-disciplinary partnerships might have positive effects on the cost of services.90 A prohibition of multi-disciplinary partnerships of members of the Bar and accountants, such as that laid down in the 1993 Regulation, is therefore liable to limit production and technical development within the meaning of Article 85(1)(b) of the Treaty.91 It is true that the accountancy market is highly concentrated, to the extent that the firms dominating it are at present known as the big five and the proposed merger between two of them, Price Waterhouse and Coopers & Lybrand, gave rise to Commission Decision 1999/152/EC of 20 May 1998 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case IV/M.1016 - Price Waterhouse/Coopers & Lybrand) (OJ 1999 L 50, p. 27), adopted pursuant to Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1), as amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1).92 On the other hand, the prohibition of conflicts of interest with which members of the Bar in all Member States are required to comply may constitute a structural limit to extensive concentration of law-firms and so reduce their opportunities of benefiting from economies of scale or of entering into structural associations with practitioners of highly concentrated professions.93 In those circumstances, unreserved and unlimited authorisation of multi-disciplinary partnerships between the legal profession, the generally decentralised nature of which is closely linked to some of its fundamental features, and a profession as concentrated as accountancy, could lead to an overall decrease in the degree of competition prevailing on the market in legal services, as a result of the substantial reduction in the number of undertakings present on that market.94 Nevertheless, in so far as the preservation of a sufficient degree of competition on the market in legal services could be guaranteed by less extreme measures than national rules such as the 1993 Regulation, which prohibits absolutely any form of multi-disciplinary partnership, whatever the respective sizes of the firms of lawyers and accountants concerned, those rules restrict competition.95 As regards the question whether intra-Community trade is affected, it is sufficient to observe that an agreement, decision or concerted practice extending over the whole of the territory of a Member State has, by its very nature, the effect of reinforcing the partitioning of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about (Case 8/72 Vereeniging van Cementhandelaren v Commission [1972] ECR 977, paragraph 29; Case 42/84 Remia and Others v Commission [1985] ECR 2545, paragraph 22; and CNSD, paragraph 48).96 That effect is all the more appreciable in the present case because the 1993 Regulation applies equally to visiting lawyers who are registered members of the Bar of another Member State, because economic and commercial law more and more frequently regulates transnational transactions and, lastly, because the firms of accountants looking for lawyers as partners are generally international groups present in several Member States.97 However, not every agreement between undertakings or every decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 85(1) of the Treaty. For the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects. More particularly, account must be taken of its objectives, which are here connected with the need to make rules relating to organisation, qualifications, professional ethics, supervision and liability, in order to ensure that the ultimate consumers of legal services and the sound administration of justice are provided with the necessary guarantees in relation to integrity and experience (see, to that effect, Case C-3/95 Reisebüro Broede [1996] ECR I-6511, paragraph 38). It has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives.98 Account must be taken of the legal framework applicable in the Netherlands, on the one hand, to members of the Bar and to the Bar of the Netherlands, which comprises all the registered members of the Bar in that Member State, and on the other hand, to accountants.99 As regards members of the Bar, it has consistently been held that, in the absence of specific Community rules in the field, each Member State is in principle free to regulate the exercise of the legal profession in its territory (Case 107/83 Klopp [1984] ECR 2971, paragraph 17, and Reisebüro, paragraph 37). For that reason, the rules applicable to that profession may differ greatly from one Member State to another.100 The current approach of the Netherlands, where Article 28 of the Advocatenwet entrusts the Bar of the Netherlands with responsibility for adopting regulations designed to ensure the proper practice of the profession, is that the essential rules adopted for that purpose are, in particular, the duty to act for clients in complete independence and in their sole interest, the duty, mentioned above, to avoid all risk of conflict of interest and the duty to observe strict professional secrecy.101 Those obligations of professional conduct have not inconsiderable implications for the structure of the market in legal services, and more particularly for the possibilities for the practice of law jointly with other liberal professions which are active on that market.102 Thus, they require of members of the Bar that they should be in a situation of independence vis-à-vis the public authorities, other operators and third parties, by whom they must never be influenced. They must furnish, in that respect, guarantees that all steps taken in a case are taken in the sole interest of the client.103 By contrast, the profession of accountant is not subject, in general, and more particularly, in the Netherlands, to comparable requirements of professional conduct.104 As the Advocate General has rightly pointed out in paragraphs 185 and 186 of his Opinion, there may be a degree of incompatibility between the advisory activities carried out by a member of the Bar and the supervisory activities carried out by an accountant. The written observations submitted by the respondent in the main proceedings show that accountants in the Netherlands perform a task of certification of accounts. They undertake an objective examination and audit of their clients' accounts, so as to be able to impart to interested third parties their personal opinion concerning the reliability of those accounts. It follows that in the Member State concerned accountants are not bound by a rule of professional secrecy comparable to that of members of the Bar, unlike the position under German law, for example.105 The aim of the 1993 Regulation is therefore to ensure that, in the Member State concerned, the rules of professional conduct for members of the Bar are complied with, having regard to the prevailing perceptions of the profession in that State. The Bar of the Netherlands was entitled to consider that members of the Bar might no longer be in a position to advise and represent their clients independently and in the observance of strict professional secrecy if they belonged to an organisation which is also responsible for producing an account of the financial results of the transactions in respect of which their services were called upon and for certifying those accounts.106 Moreover, the concurrent pursuit of the activities of statutory auditor and of adviser, in particular legal adviser, also raises questions within the accountancy profession itself, as may be seen from the Commission Green Paper 96/C/321/01 The role, the position and the liability of the statutory auditor within the European Union (OJ 1996 C 321, p. 1; see, in particular, paragraphs 4.12 to 4.14).107 A regulation such as the 1993 Regulation could therefore reasonably be considered to be necessary in order to ensure the proper practice of the legal profession, as it is organised in the Member State concerned.108 Furthermore, the fact that different rules may be applicable in another Member State does not mean that the rules in force in the former State are incompatible with Community law (see, to that effect, Case C-108/96 Mac Quen and Others [2001] ECR I-837, paragraph 33). Even if multi-disciplinary partnerships of lawyers and accountants are allowed in some Member States, the Bar of the Netherlands is entitled to consider that the objectives pursued by the 1993 Regulation cannot, having regard in particular to the legal regimes by which members of the Bar and accountants are respectively governed in the Netherlands, be attained by less restrictive means (see, to that effect, with regard to a law reserving judicial debt-recovery activity to lawyers, Reisebüro, paragraph 41).109 In light of those considerations, it does not appear that the effects restrictive of competition such as those resulting for members of the Bar practising in the Netherlands from a regulation such as the 1993 Regulation go beyond what is necessary in order to ensure the proper practice of the legal profession (see, to that effect, Case C-250/92 DLG [1994] ECR I-5641, paragraph 35).110 Having regard to all the foregoing considerations, the answer to be given to the second question must be that a national regulation such as the 1993 Regulation adopted by a body such as the Bar of the Netherlands does not infringe Article 85(1) of the Treaty, since that body could reasonably have considered that that regulation, despite the effects restrictive of competition that are inherent in it, is necessary for the proper practice of the legal profession, as organised in the Member State concerned.Question 3111 By its third question the national court is asking, essentially, whether a body such as the Bar of the Netherlands is to be treated as an undertaking or group of undertakings for the purposes of Article 86 of the Treaty.112 First, since it does not carry on any economic activity, the Bar of the Netherlands is not an undertaking within the meaning of Article 86 of the Treaty.113 Second, it cannot be categorised as a group of undertakings for the purposes of that provision, inasmuch as registered members of the Bar of the Netherlands are not sufficiently linked to each other to adopt the same conduct on the market with the result that competition between them is eliminated (Case C-96/94 Centro Servizi Spediporto [1995] ECR I-2883, paragraphs 33 and 34).114 The legal profession is not concentrated to any significant degree. It is highly heterogenous and is characterised by a high degree of internal competition. In the absence of sufficient structural links between them, members of the Bar cannot be regarded as occupying a collective dominant position for the purposes of Article 86 of the Treaty (see, to that effect, Joined Cases C-68/94 and C-30/95 France and Others v Commission [1998] ECR I-1375, paragraph 227, and Joined Cases C-395/96 P and C-396/96 P Compagnie maritime belge transports and Others v Commission [2000] ECR I-1365, paragraphs 36 and 42). Furthermore, as is clear from the documents before the Court, members of the Bar account for only 60% of turnover in the legal services sector in the Netherlands, a market share which, having regard to the large number of law firms, cannot of itself constitute conclusive evidence of the existence of a collective dominant position on the part of those undertakings (see, to that effect, France and Others v Commission, paragraph 226, and Compagnie maritime belge, paragraph 42).115 In light of the foregoing considerations, the answer to be given to the third question must be that a body such as the Bar of the Netherlands does not constitute either an undertaking or group of undertakings for the purposes of Article 86 of the Treaty.Question 4116 Having regard to the answer given to the third question, there is no need to consider the fourth question.Question 5117 Having regard to the answer given to the second question, there is no need to consider the fifth question.Question 6118 Having regard to the answers given to the second and third questions, there is no need to consider the sixth question.Questions 7, 8 and 9119 By its seventh question, the national court seeks, essentially, to ascertain whether the compatibility with Community law of a prohibition of multi-disciplinary partnerships of members of the Bar and accountants, such as that laid down in the 1993 Regulation, must be assessed in light of both the Treaty provisions relating to the right of establishment and those relating to freedom to provide services. By its eighth and ninth questions, that court is asking, essentially, whether such a prohibition constitutes a restriction of the right of establishment and/or freedom to provide services and, if so, whether that restriction is justified.120 It should be observed at the outset that compliance with Articles 52 and 59 of the Treaty is also required in the case of rules which are not public in nature but which are designed to regulate, collectively, self-employment and the provision of services. The abolition, as between Member States, of obstacles to freedom of movement for persons would be compromised if the abolition of State barriers could be neutralised by obstacles resulting from the exercise of their legal autonomy by associations or organisations not governed by public law (Case 36/74 Walrave and Koch [1974] ECR 1405, paragraphs 17, 23 and 24; Case 13/76 Donà [1976] ECR 1333, paragraphs 17 and 18; Case C-415/93 Bosman [1995] ECR I-4921, paragraphs 83 and 84, and Case C-281/98 Angonese [2000] ECR I-4139, paragraph 32).121 In those circumstances, the Court may be called upon to determine whether the Treaty provisions concerning the right of establishment and freedom to provide services are applicable to a regulation such as the 1993 Regulation.122 On the assumption that the provisions concerning the right of establishment and/or freedom to provide services are applicable to a prohibition of any multi-disciplinary partnerships between members of the Bar and accountants such as that laid down in the 1993 Regulation and that that regulation constitutes a restriction on one or both of those freedoms, that restriction would in any event appear to be justified for the reasons set out in paragraphs 97 to 109 above.123 The answer to be given to the seventh, eighth and ninth questions must therefore be that it is not contrary to Articles 52 and 59 of the Treaty for a national regulation such as the 1993 Regulation to prohibit any multi-disciplinary partnership between members of the Bar and accountants, since that regulation could reasonably be considered to be necessary for the proper practice of the legal profession, as organised in the country concerned. Decision on costs Costs124 The costs incurred by the Netherlands, Danish, German, French, Luxembourg, Austrian, Portuguese and Swedish Governments, by the Government of the Principality of Liechtenstein and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the actions pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Raad van State by judgment of 10 August 1999, hereby rules:1. A regulation concerning partnerships between members of the Bar and other professionals, such as the Samenwerkingsverordening 1993 (1993 regulation on joint professional activity), adopted by a body such as the Nederlandse Orde van Advocaten (the Bar of the Netherlands), is to be treated as a decision adopted by an association of undertakings within the meaning of Article 85(1) of the EC Treaty (now Article 81 EC).2. A national regulation such as the 1993 Regulation adopted by a body such as the Bar of the Netherlands does not infringe Article 85(1) of the Treaty, since that body could reasonably have considered that that regulation, despite effects restrictive of competition, that are inherent in it, is necessary for the proper practice of the legal profession, as organised in the Member State concerned.3. A body such as the Bar of the Netherlands does not constitute either an undertaking or a group of undertakings for the purposes of Article 86 of the EC Treaty (now Article 82 EC).4. It is not contrary to Articles 52 and 59 of the EC Treaty (now, after amendment, Articles 43 EC and 49 EC) for a national regulation such as the 1993 Regulation to prohibit any multi-disciplinary partnerships between members of the Bar and accountants, since that regulation could reasonably be considered to be necessary for the proper practice of the legal profession, as organised in the country concerned.

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EN

Grana Padano and Prosciutto di Parma

«(Protected designations of origin – Regulation (EEC) No 2081/92 – Regulation (EEC) No 1107/96 – Grana Padano freshly grated – Specification – Convention between two Member States – Condition that the cheese is grated and packaged in the region of production – Articles 29 EC and 30 EC – Justification – Whether the condition may be relied on against third parties – Legal certainty – Publicity)» Summary of the Judgment 1.. Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Convention between two Member States applying the condition that cheese covered by a designation of origin is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin (Arts 29 EC and 30 EC) Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Convention between two Member States applying the condition that cheese covered by a designation of origin is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin 2.. Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Use of a protected designation of origin subject to the condition that operations such as grating and packaging the product take place in the region of production – Whether permissible (Council Regulation No 2081/92) Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Use of a protected designation of origin subject to the condition that operations such as grating and packaging the product take place in the region of production – Whether permissible 3.. Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Use of the protected designation of origin Grana Padano subject, under a Community measure, to the condition that the product is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin – Whether condition may be relied on against economic operators – Not in the absence of adequate publicity – Exception (Arts 29 EC and 30 EC; Commission Regulation No 1107/96) Free movement of goods – Quantitative restrictions of exports – Measures having equivalent effect – Use of the protected designation of origin Grana Padano subject, under a Community measure, to the condition that the product is grated and packaged in the region of production – Justification – Protection of industrial and commercial property – Measure that is necessary and proportionate and capable of upholding the reputation of the designation of origin – Whether condition may be relied on against economic operators – Not in the absence of adequate publicity – Exception JUDGMENT OF THE COURT20 May 2003 (1) ((Protected designations of origin – Regulation (EEC) No 2081/92 – Regulation (EEC) No 1107/96 – Grana Padano freshly grated – Specification – Convention between two Member States – Condition that the cheese is grated and packaged in the region of production – Articles 29 EC and 30 EC – Justification – Whether the condition may be relied on against third parties – Legal certainty – Publicity))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Ravil SARL, by A. Lyon-Caen, F. Fabiani and F. Thiriez, avocats, ─ Bellon import SARL and Biraghi SpA, by M. Baffert and A. Baurand, avocats, and F. Giuggia, avvocato, ─ the French Government, by G. de Bergues and L. Bernheim, acting as Agents, ─ the Spanish Government, by R. Silva de Lapuerta, acting as Agent, ─ the Italian Government, by U. Leanza, acting as Agent, assisted by O. Fiumara, avvocato dello Stato, ─ the Commission of the European Communities, by H. van Lier and A.-M. Rouchaud, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Bellon import SARL and Biraghi SpA, the French Government, the Italian Government and the Commission at the hearing on 19 February 2002, after hearing the Opinion of the Advocate General at the sitting on 25 April 2002, gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulmann EdwardJann Skouris MackenColneric von BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: French. Language of the case: French.

4f2b1-234ab4b-42ec

EN

ENTITLEMENT TO BENEFITS ACQUIRED BY A MIGRANT WORKER WHO IS A NATIONAL OF A COUNTRY THAT IS PARTY TO A BILATERAL AGREEMENT ON SOCIAL SECURITY MATTERS MUST BE PRESERVED, EVEN IF THE WORKER EXERCISED HIS OR HER RIGHT TO FREE MOVEMENT BEFORE THE ENTRY INTO FORCE OF A COMMUNITY REGULATION, AND BEFORE THE TREATY BECAME APPLICABLE, IN HIS OR HER COUNTRY OF ORIGIN.

| 61999J0277 Judgment of the Court (Sixth Chamber) of 5 February 2002. - Doris Kaske v Landesgeschäftsstelle des Arbeitsmarktservice Wien. - Reference for a preliminary ruling: Verwaltungsgerichtshof - Austria. - Social security for migrant workers - Unemployment insurance - Replacing social security conventions concluded between Member States with Regulation (EEC) No 1408/71 - Preservation of advantages enjoyed previously as a result of a combination of domestic law and the law of the relevant convention - Free movement of workers. - Case C-277/99. European Court reports 2002 Page I-01261 Keywords 1. Preliminary rulings - Jurisdiction of the Court - Limits - Manifestly irrelevant questions and questions regarding hypothetical problems in a context which precludes any useful answer - Questions not related to the purpose of the main proceedings(Art. 234 EC)2. Social security for migrant workers - Community rules - Replacing social security conventions concluded between Member States - Limit - Retention, solely in favour of workers who exercised their right to freedom of movement before the entry into force of Regulation No 1408/71 and before the Treaty became applicable in their State of origin, of the advantages previously provided by a combination of domestic law and the law of the relevant convention - Detailed rules(Articles 48(2) and 51 of the EC Treaty (now, after amendment, Arts 39(2) EC and 42 EC); Council Regulation No 1408/71, Arts 6 and 7)3. Freedom of movement for persons - Workers - Equal treatment - Rule in a Member State which, for the purposes of the criteria for entitlement to unemployment benefit, favours workers who have spent a certain period in that Member State - Incompatibility(Art. 48 of the EC Treaty (now, after amendment, Art. 39 EC)) Summary 1. In the context of the cooperation between the Court of Justice and the national courts provided for by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling.However, in exceptional circumstances the Court of Justice can examine the conditions in which the case was referred to it by the national court, in order to determine whether it has jurisdiction. The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it.( see paras 18-19 )2. The principles laid down by the Court in Rönfeldt (Case C-277/89) permitting non-application of the provisions of Regulation No 1408/71 of the Council on the application of social security schemes to employed persons and their families moving within the Community, to allow for continued application of a bilateral convention which that regulation would otherwise have replaced to a worker who is a national of a Member State also apply where the worker exercised the right to freedom of movement before the regulation entered into force and before the Treaty became applicable in his Member State of origin.If periods of insurance or employment that entitle a worker who is a national of a Member State to the unemployment benefit claimed by him began to run before the entry into force of Regulation No 1408/71, his situation must be assessed in the light of the provisions of the bilateral convention for the entire period during which he was exercising his right to freedom of movement, and taking into account all the periods of insurance or employment completed by him regardless of whether those periods preceded or succeeded the entry into force of the Treaty and of Regulation No 1408/71 in his Member State of origin. If, however, after having exhausted all his rights under the convention, he exercises his right to freedom of movement anew, and if he completes further periods of insurance or employment entirely after the entry into force of Regulation No 1408/71, his new situation is governed by that regulation.( see paras 28, 35, operative part 1-2 )3. National law may contain more favourable rules than Community law provided that they comply with the principles of Community law. A rule in a Member State which, for the purposes of the criteria for entitlement to unemployment benefit, favours workers who spent 15 years in that Member State before their last employment abroad is incompatible with Article 48 of the Treaty (now, after amendment, Article 39 EC).( see para. 39, operative part 3 ) Parties In Case C-277/99,REFERENCE to the Court under Article 234 EC by the Verwaltungsgerichtshof (Austria) for a preliminary ruling in the proceedings pending before that court betweenDoris KaskeandLandesgeschäftsstelle des Arbeitsmarktservice Wien,on the possible application of a convention relating to unemployment insurance concluded between the Federal Republic of Germany and the Republic of Austria on unemployment benefit, in place of Articles 3, 6, 67 and 71 of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community (OJ, English Special Edition 1971 (II), p. 416), by extending the decision in Rönfeldt (Case C-227/89 [1991] ECR I-323, hereinafter Rönfeldt) to unemployment benefit and, secondly, the interpretation of Articles 48 and 51 of the EC Treaty (now, after amendment, Articles 39 EC and 42 EC),THE COURT (Sixth Chamber),composed of: F. Macken, President of the Chamber, N. Colneric, J.-P. Puissochet (Rapporteur), R. Schintgen and V. Skouris, Judges,Advocate General: J. Mischo,Registrar: R. Grass,after considering the written observations submitted on behalf of:- Ms Kaske, by F.C. Sladek, Rechtsanwalt,- the Austrian Government, by C. Pesendorfer, acting as Agent,- the Spanish Government, by S. Ortiz Vaamonde, acting as Agent,- the Portuguese Government, by L. Fernandes and S. Pizarro, acting as Agents,- the Commission of the European Communities, by P. Hillenkamp and G. Braun, acting as Agents,having regard to the report of the Judge-Rapporteur,after hearing the Opinion of the Advocate General at the sitting on 18 October 2001,gives the followingJudgment Grounds 1 By an order of 29 June 1999, lodged at the Court on 26 July 1999, the Verwaltungsgerichtshof (Administrative Court) (Austria) referred for a preliminary ruling under Article 234 EC four questions on, firstly, the possible application of a convention relating to unemployment insurance concluded between the Federal Republic of Germany and the Republic of Austria (hereinafter the Austro-German Convention) in place of Articles 3, 6, 67 and 71 of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community (OJ, English Special Edition 1971 (II), p. 416), by extending the decision in Rönfeldt (Case C-277/89 [1991] ECR I-323) to unemployment benefit and, secondly, the interpretation of Articles 48 and 51 of the EC Treaty (now, after amendment, Articles 39 EC and 42 EC).2 Those questions were raised in appeal proceedings brought by Ms Kaske against a decision of 28 November 1996 by which the Landesgeschäftsstelle des Arbeitsmarktservice Wien (regional bureau of the Vienna Labour and Employment Office), pursuant to a resolution of the Ausschuss für Leistungsangelegenheiten (Benefits Agency), rejected her application for unemployment benefit on the basis of Article 14(5) of the Arbeitslosenversicherungsgesetz (Law on unemployment insurance, hereinafter the AlVG).Community law3 Regulation No 1408/71 entered into force in regard to the Republic of Austria upon Austria's accession to the European Economic area on 1 January 1994.4 Article 3(1) of Regulation No 1408/71 provides:Subject to the special provisions of this regulation, persons resident in the territory of one of the Member States to whom this regulation applies shall be subject to the same obligations and enjoy the same benefits under the legislation of any Member State as the nationals of that State.5 Article 6 of Regulation No 1408/71 provides:Subject to the provisions of Articles 7, 8 and 46(4) this regulation shall, as regards persons and matters which it covers, replace the provisions of any social security convention binding either:(a) two or more Member States exclusively ....6 Article 67 of Regulation No 1408/71, entitled Aggregation of periods of insurance or employment, provides as follows:1. The competent institution of a Member State whose legislation makes the acquisition, retention or recovery of the right to benefits subject to the completion of insurance periods shall take into account, to the extent necessary, periods of insurance or employment completed under the legislation of any other Member State, as though they were periods completed under the legislation which it administers, provided, however, that the periods of employment would have been counted as insurance periods had they been completed under that legislation.2. The competent institution of a Member State whose legislation makes the acquisition, retention or recovery of the right to benefits subject to the completion of periods of employment shall take into account, to the extent necessary, periods of insurance or employment completed under the legislation of any other Member State, as though they were periods of employment completed under the legislation which it administers.3. Except in the cases referred to in Article 71(1)(a)(ii) and (b)(ii), application of the provisions of paragraphs 1 and 2 shall be subject to the condition that the person concerned should have completed lastly:- in the case of paragraph 1, periods of insurance,- in the case of paragraph 2, periods of employment,in accordance with the provisions of the legislation under which the benefits are claimed.4. Where the length of the period during which benefits may be granted depends on the length of periods of insurance or employment, the provisions of paragraph 1 or 2 shall apply, as appropriate.7 Article 71 of Regulation No 1408/71 provides:1. An unemployed person who, during his last employment, was residing in the territory of a Member State other the competent State shall receive benefits in accordance with the following provisions:...(b) ...(ii) a worker, other than a frontier worker, who is wholly unemployed and who makes himself available for work to the employment services in the territory of the Member State in which he resides, or who returns to that territory, shall receive benefits in accordance with the legislation of that State as if he had last been employed there; the institution of the place of residence shall provide such benefits at its own expense. However, if such worker has become entitled to benefits at the expense of the competent institution of the Member State to whose legislation he was last subject, he shall receive benefits under the provisions of Article 69. Receipt of benefits under the legislation of the State in which he resides shall be suspended for any period during which the unemployed person may, under Article 69, make a claim for benefits under the legislation to which he was last subject.National law8 Paragraph 14 of the AlVG provides:Acquisition of the right1. A right to unemployment insurance is acquired for the first time when the unemployed person has been employed in a job subject to compulsory unemployment insurance in Austria for a total of 52 weeks in the last 24 months before bringing the claim (the reference period)....5. Periods of employment or insurance completed abroad shall be taken into account for acquisition of the right in so far as this is governed by conventions between States or international treaties. When thus taking account of periods of employment or insurance abroad, completion of a minimum period of employment in Austria before making the claim for unemployment benefit is not required if the unemployed person1. has resided or habitually stayed in Austria for a total of at least 15 years before his last employment abroad, or2. has moved to Austria for the purpose of reuniting a family and his spouse is resident or habitually resident in Austria for a total of at least 15 years,and in either case registers as unemployed in Austria within three months of the end of the employment or the insurance obligation abroad.6. In order to determine when the right was acquired, the periods mentioned in subparagraphs 4 and 5 shall be taken into account once only.The Austro-German Convention9 The Austro-German Convention entered into force on 1 October 1979 and is still applicable. Article 7 of the Convention provides:Inclusion of periods of employment subject to compulsory contributions completed in accordance with the legislation of the other contracting State(1) Periods of employment subject to compulsory contributions which have been completed in accordance with the legislation of the other contracting State shall be taken into account when assessing whether the qualifying period for acquisition of the right has been completed and when determining the duration of entitlement, where the claimant possesses the nationality of the contracting State in which the claim is made and has his habitual place of stay in the territory of that contracting State. The same applies if the claimant has moved to the contracting State in which the claim is made for the purpose of reuniting a family and his spouse already living there possesses the nationality of that contracting State.(2) For other unemployed persons, periods of employment subject to compulsory contributions which have been completed in accordance with the legislation of the other contracting State shall be taken into account only if the unemployed person, after he last entered the territory of the contracting State in which he makes the claim, has been employed there for at least four weeks without infringing the provisions on the employment of foreigners.The main proceedings and the questions referred10 Ms Kaske, a German national by birth, has also been an Austrian national since 1968. From 1972 to 31 December 1982 she was an employee in Austria subject to compulsory pension, sickness, accident and unemployment insurance. In 1983 she moved to Germany, where she was an employee until April 1995 and made, inter alia, unemployment insurance contributions. She was in receipt of unemployment benefit there for the period from 1 May 1995 to 14 February 1996. From 15 February 1996 to 31 May 1996 she was once more employed subject to compulsory unemployment insurance. She then returned to Austria and on 12 June 1996 applied to the regional bureau of the Arbeitsmarktservice (Labour and Employment Office, hereinafter the Office) for unemployment benefit.11 By decision of 8 August 1996 the Office rejected her application on the ground that she had not completed a period of insurance or employment in Austria immediately prior to making her application for unemployment benefit, as required by Article 67(3) of Regulation No 1408/71. Accordingly, the periods of insurance and/or employment completed in another Member State could not be counted under that regulation. As a result, she had not completed the period necessary to qualify for unemployment benefit.12 Ms Kaske appealed against that decision of 8 August 1996; her appeal was dismissed as unfounded by a decision of the Office of 28 November 1996. In the grounds for its decision, the authority stated first of all that Ms Kaske did not fall within the scope of Paragraph 14(1) of the AlVG, which it took to apply Article 67 of Regulation No 1408/71, since she was not able to demonstrate that she had completed a period of employment subject to unemployment insurance in Austria during the 24 months prior to making her application. It also ruled out the applicability of Paragraph 14(5) of the AlVG since Ms Kaske had neither resided in Austria for 15 years before the acquisition of the German periods of insurance, nor moved to Austria for the purpose of reuniting a family. Accordingly, the periods of employment completed abroad could not be taken into account for the purpose of acquisition of the right to unemployment benefit.13 That decision of 28 November 1996 was challenged before the Verwaltungsgerichtshof. Taking the view that Ms Kaske might be entitled to unemployment benefit if the periods of employment she completed in Germany were taken into account for the purposes of the acquisition by her of a right to such benefit, and that she might be entitled to have those periods credited to her if the provisions of the Austro-German Convention were applied to her, the Verwaltungsgerichtshof decided to refer the following questions to the Court for a preliminary ruling:1. Does the Court of Justice's decision in Rönfeldt apply also to a case in which a migrant worker has made use of "freedom of movement" (or more precisely, has anticipated it) before the entry into force of Regulation (EEC) No 1408/71, but also before the EC Treaty came into effect in her home State, that is, at a time when she could not yet rely on Article 39 et seq. EC (formerly Article 48 et seq.) in the State of employment?2. If the answer to Question 1 is affirmative:Does application of the Rönfeldt judgment to the insured risk of unemployment mean that a migrant worker may rely on a legal position more favourable than Regulation No 1408/71 which derives from a bilateral convention between two Member States of the European Union (in this case, the Austro-German Convention on unemployment insurance) for the further duration of each period of exercise of freedom of movement within the meaning of Article 39 et seq. EC (formerly Article 48 et seq.), and thus in particular also for claims which are raised after the return from the State of employment to the home State?3. If the answer to Question 2 is affirmative:Must such claims be assessed in accordance with the (more favourable) convention only in so far as they are based on periods of insurance under compulsory unemployment insurance which were acquired before the entry into force of Regulation No 1408/71 in the State of employment (in this case, 1 January 1994)?4. If the answer to either Question 1 or Question 2 is negative or if the answer to Question 3 is affirmative:Is it permissible from the point of view of the prohibition of discrimination under Article 39 EC (formerly Article 42 of the EC Treaty) in conjunction with Article 3(1) of Regulation No 1408/71 if a Member State provides in its legal system, as regards the inclusion of periods of insurance completed in another Member State, a provision more favourable than Regulation No 1408/71 (in this case, waiver of the requirement of immediately preceding insurance within the meaning of Article 67(3) of Regulation No 1408/71), but makes its application dependent - apart from the case of reuniting a family - on 15 years' residence in that State before the acquisition of the periods of insurance in the other Member State?The first question14 By its first question the national court is essentially asking whether the principles established by the Court in Case C-227/89 Rönfeldt [1991] ECR I-323 permitting non-application of the provisions of Regulation No 1408/71 to allow for continued application to a worker who is a national of a Member State of a bilateral convention which that regulation would otherwise have replaced, also apply where the worker exercised the right to freedom of movement before the regulation entered into force, and before the Treaty became applicable, in his Member State of origin.15 The Court held at paragraph 29 of the judgment in Rönfeldt that Articles 48 and 51 of the Treaty preclude the loss of social security advantages for workers who have exercised their right to freedom of movement which would result from the inapplicability, following the entry into force of Regulation No 1408/71, of conventions operating between two or more Member States and incorporated in their national law.16 In the main proceedings, Ms Kaske worked in Austria and then Germany, before becoming unemployed in Germany. She returned to Austria immediately after becoming unemployed, and claims to be entitled to unemployment benefit in her new country of residence, relying inter alia on the periods of employment she completed in Germany. She considers that the effect of application of the Austro-German Convention is that those periods may be taken into account under Austrian unemployment legislation, thus entitling her to be paid unemployment benefit by the Austrian authorities.Admissibility of the questions17 The Austrian Government argues primarily that it is immaterial to the outcome of the main proceedings whether the periods of employment completed by Ms Kaske in Germany are taken into account, because the total of the periods eligible to be taken into account since her earlier period of unemployment, when she was covered by the German State, came to an end is not sufficient to entitle her to unemployment benefit, owing to the requirements concerning length of employment laid down by the AlVG. The Austrian Government therefore argues, at least impliedly, that the question whether the Austro-German Convention may be applied to Ms Kaske's situation is immaterial to the outcome of the main proceedings.18 It should be remembered that it is settled case-law that in the context of the cooperation between the Court of Justice and the national courts provided for by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, inter alia, Case C-379/98 PreussenElektra [2001] ECR I-2099, paragraph 38).19 The Court has also stated that, in exceptional circumstances, it can examine the conditions in which the case was referred to it by the national court, in order to determine whether it has jurisdiction. The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, the judgment in PreussenElektra, cited above, paragraph 39).20 The questions raised by the national court in this case relate to the interpretation of Community law. The period of employment necessary to establish entitlement to unemployment benefit is a question of domestic law which it is not for the Court to determine. None of the possible reasons for dismissing the question as inadmissible referred to in the preceding paragraph is present in this case.21 It is therefore necessary to reply to the questions referred.Substance22 The Austrian Government argues that the principles laid down in Rönfeldt do not apply to Ms Kaske's situation for two reasons. First of all, she has already been subject to application of Regulation No 1408/71 since she received benefit in Germany in respect of an earlier period of unemployment on the basis of that regulation. She therefore falls definitively within the scope of Regulation No 1408/71, since to allow a migrant worker to request application of whichever rule is most favourable whenever he becomes unemployed in his working life would lead to considerable administrative difficulties. Secondly, the Austrian Government argues that the judgment in Rönfeldt was delivered in the context of pension rights, which differ significantly from the unemployment benefit at issue in the main proceedings.23 The Spanish Government also advances that argument. It claims that, unlike retirement and invalidity benefits, to which a national of a Member State may be entitled irrespective of the Member State where the event giving rise to entitlement occurred, the right to unemployment benefit is, under Regulation No 1408/71, subject to the requirement that the last period of insurance or employment was completed in the Member State where the benefit is applied for. That distinction is by no means arbitrary; it is, rather, a consequence of the nature of unemployment benefit, which is undeniably linked to a person's last job and ceases to be payable if he finds a new job.24 It must first of all be determined whether the principles established in Rönfeldt apply to unemployment benefit since that is the benefit at issue in the main proceedings.25 The Court held at paragraph 21 of the judgment in Rönfeldt that the question referred by the national court in that case had to be construed as asking whether the loss of social security advantages which the workers concerned incurred because conventions between Member States had been rendered inoperative by the entry into force of Regulation No 1408/71 was compatible with Articles 48 and 51 of the Treaty. The reply given in that case accordingly relates to all social security advantages covered by Regulation No 1408/71, whether they are acquired once and for all or whether they cover the insured for a temporary period. In that connection it must be observed that, whilst the principles laid down in Rönfeldt relate to retirement benefits, which are undoubtedly characterised by immutability, they also apply to invalidity benefits which, like unemployment benefit, can vary and, in certain cases, be temporary (see to that effect Case C-475/93 Thévenon [1995] ECR I-3813, paragraphs 2, 26 and 27, and Joined Cases C-31/96, C-32/96 and C-33/96 Naranjo Arjona and Others [1997] ECR I-5501, paragraphs 2 and 29). There is therefore no real qualitative difference between those various benefits in terms of their classification in Rönfeldt as social security advantages.26 As regards the main proceedings, the principles established by the Court in Rönfeldt imply that an Austrian national who was entitled to benefit from the provisions of the Austro-German Convention, which was concluded before the entry into force in Austria of Regulation No 1408/71, has an established right to continued application of that convention after entry into force of the regulation. In any event, in order to fall within the scope of that convention before the regulation enters into force, he must already have been employed in Germany.27 The sole purpose of the principles laid down in Röndfeldt is to perpetuate entitlement to an established social right not enshrined in Community law at the time when the national of a Member State relying on it enjoyed that right. Accordingly, the fact that Regulation No 1408/71 became applicable in a national's Member State of origin on the date when that Member State acceded to the European Community does not affect his established right to benefit from a bilateral rule which was the only one applicable to him when he exercised his right to freedom of movement. Indeed, as the Commission maintains, that approach is derived from the notion that the person concerned was entitled to entertain a legitimate expectation that he would benefit from the provisions of the bilateral convention.28 Accordingly the answer to the first question must be that the principles laid down by the Court in Rönfeldt permitting non-application of the provisions of Regulation No 1408/71 to allow for continued application of a bilateral convention which that regulation would otherwise have replaced to a worker who is a national of a Member State also apply where the worker exercised the right to freedom of movement before the regulation entered into force and before the Treaty became applicable in his Member State of origin.The second and third questions29 By its second and third questions the national court is asking first of all whether an Austrian national's established right to have the Austro-German Convention, rather than Regulation No 1408/71, apply to him relates to the entire period during which he was exercising his right to free movement, and, secondly, whether all periods of unemployment insurance completed by the person concerned may serve as the basis for that right or whether only such periods as were completed before the entry into force in Austria of Regulation No 1408/71 may serve as its basis.30 As the Court held at paragraph 29 of the judgment in Rönfeldt, and reiterates at paragraph 15 above, Articles 48 and 51 of the Treaty preclude the loss of social security advantages for workers who have exercised their right to freedom of movement which would result from the inapplicability, following the entry into force of Regulation No 1408/71, of conventions operating between two or more Member States and incorporated in their national law.31 In other words, if, as regards a social security advantage, a national of a Member State can benefit from a right under a convention entered into between two Member States, and if that convention is more favourable to him than a rule of Community law which became applicable to him subsequently, the right derived by him under the convention is acquired by him once and for all, so that any restrictions on that right are incompatible with the provisions of Articles 48 and 51 of the Treaty.32 Accordingly, as regards unemployment benefit, where periods of insurance or employment which form the basis of the worker's rights have been completed, at least partially, during a period when only the bilateral convention was applicable, the worker's overall situation must be assessed by reference to the provisions of that convention if it is favourable to him. In that regard there should be no differentiation either between the periods during which he was exercising his right to freedom of movement, or between the periods of insurance or employment, according to whether those periods preceded or succeeded the entry into force of the Treaty and of Regulation No 1408/71 in the worker's Member State of origin.33 On the other hand, if the basis for the worker's rights arose entirely after the entry into force of Regulation No 1408/71, that is to say, as the Austrian Government puts it, if he has exhausted all the rights accrued on the basis of an earlier period of insurance or employment, which was followed by a period of unemployment during which he was in receipt of unemployment benefit, he is in a new situation which must be assessed in the light of the provisions of that regulation (see Thévenon, cited above).34 Regulation No 1408/71 therefore only becomes applicable if any rights acquired under the bilateral convention have been wholly exhausted during the first period of unemployment. If they have not, the person concerned remains subject to the more favourable regime under the convention, even for subsequent periods of unemployment.35 The reply to the second and third questions must therefore be that if periods of insurance or employment that entitle a worker who is a national of a Member State to the unemployment benefit claimed by him began to run before the entry into force of Regulation No 1408/71, his situation must be assessed in the light of the provisions of the bilateral convention for the entire period during which he was exercising his right to freedom of movement, and taking into account all the periods of insurance or employment completed by him regardless of whether those periods preceded or succeeded the entry into force of the Treaty and of Regulation No 1408/71 in his Member State of origin. If, however, after having exhausted all his rights under the convention, he exercises his right to freedom of movement anew, and if he completes further periods of insurance or employment entirely after the entry into force of Regulation No 1408/71, his new situation is governed by that regulation.The fourth question36 By its fourth question the national court is essentially asking whether a provision such as Paragraph 14(5) of the AlVG, which derogates from Article 67(3) of Regulation No 1408/71 in providing that in two situations, namely a stay of at least 15 years in Austria and unification of the family, the application for unemployment benefit need not necessarily be made in the last State where the worker completed a period of insurance or employment but may be made in Austria, is compatible with the principle of non-discrimination laid down by Article 48 of the Treaty.37 It is settled case-law that Community law does not preclude more favourable rules under national law than those under Community law itself provided that such rules are compatible with Community law (see Case 34/69 Duffy [1969] ECR 597, paragraph 9; Case 100/78 Rossi [1979] ECR 831, paragraph 14; Case 733/79 Laterza [1980] ECR 1915, paragraph 8; Case 807/79 Gravina and Others [1980] ECR 2205, paragraph 7; Rönfeldt, cited above, paragraph 26, and Case C-370/90 Singh [1992] ECR I-4265, paragraph 23).38 In the main proceedings, the advantage which Paragraph 14(5) of the AlVG confers on unemployed persons who have spent 15 years in Austria before their last employment abroad primarily benefits settled Austrian nationals to the detriment of Austrian nationals who have exercised their right to freedom of movement and of most nationals of other Member States. Such a provision must therefore be regarded as a restriction on the right to freedom of movement and as discriminating on grounds of nationality.39 The reply to the fourth question must therefore be that national law may contain more favourable rules than Community law provided that they comply with the principles of Community law. A rule in a Member State which, for the purposes of the criteria for entitlement to unemployment benefit, favours workers who spent 15 years in that Member State before their last employment abroad is incompatible with Article 48 of the Treaty. Decision on costs Costs40 The costs incurred by the Austrian, Spanish and Portuguese Governments and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT (Sixth Chamber),in answer to the questions referred to it by the Verwaltungsgerichtshof by order of 29 June 1999, hereby rules:1. The principles laid down by the Court in Rönfeldt (Case C-277/89) permitting non-application of the provisions of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community, to allow for continued application of a bilateral convention which that regulation would otherwise have replaced to a worker who is a national of a Member State also apply where the worker exercised the right to freedom of movement before the regulation entered into force and before the EC Treaty became applicable in his Member State of origin.2. If periods of insurance or employment that entitle a worker who is a national of a Member State to the unemployment benefit claimed by him began to run before the entry into force of Regulation No 1408/71, his situation must be assessed in the light of the provisions of the bilateral convention for the entire period during which he was exercising his right to freedom of movement, and taking into account all the periods of insurance or employment completed by him regardless of whether those periods preceded or succeeded the entry into force of the Treaty and of Regulation No 1408/71 in his Member State of origin. If, however, after having exhausted all his rights under the convention, he exercises his right to freedom of movement anew, and if he completes further periods of insurance or employment entirely after the entry into force of Regulation No 1408/71, his new situation is governed by that regulation.3. National law may contain more favourable rules than Community law provided that they comply with the principles of Community law. A rule in a Member State which, for the purposes of the criteria for entitlement to unemployment benefit, favours workers who spent 15 years in that Member State before their last employment abroad is incompatible with Article 48 of the Treaty.

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EN

THE CHILD OF DIVORCED PARENTS MAY OBTAIN AN ADVANCE ON MAINTENANCE PAYMENTS FROM THE STATE IN WHICH THE DEFAULTING PARENT IS RESIDENT EVEN IF THE CHILD IS NOT ALSO RESIDENT IN THAT MEMBER STATE

| 61999J0255 Judgment of the Court of 5 February 2002. - Anna Humer. - Reference for a preliminary ruling: Oberster Gerichtshof - Austria. - Regulation (EEC) No 1408/71 - Definition of 'family benefits - Payment of advances on maintenance payments - Condition that the minor child must be resident within the national territory - Entitlement to benefits abroad. - Case C-255/99. European Court reports 2002 Page I-01205 Keywords 1. Social security for migrant workers - Community rules - Scope ratione materiae - Benefit paid in the form of an advance on maintenance payments for minor children - Included(Council Regulation No 1408/71, Art. 4(1)(h))2. Social security for migrant workers - Community rules - Scope ratione personae - Members of a worker's family - Person one or both of whose parents is an employed person or is out of work - Included(Council Regulation No 1408/71, Arts 1(f)(i) and 2(1))3. Social security for migrant workers - Family benefits - Minor child residing with one parent in a Member State other than the Member State providing the benefit - Other parent working or unemployed in the Member State providing the benefit - Right of the child to claim the advance on maintenance payments(Council Regulation No 1408/71, Arts 73 and 74) Summary 1. A benefit such as the advance on maintenance payments provided for by the Österreichische Bundesgesetz über die Gewährung von Vorschüssen auf den Unterhalt von Kindern (Unterhaltsvorschussgesetz) (Austrian Federal Law on the Grant of Advances for the Maintenance of Children) is a family benefit within the meaning of Article 4(1)(h) of Regulation No 1408/71.( see paras 33, 54, operative part 1 )2. A person, one or other of whose parents is an employed person or is out of work, comes within the scope ratione personae of Regulation No 1408/71 as a member of the family of a worker within the meaning of Article 2(1) of Regulation No 1408/71, read in the light of Article 1(f)(i) thereof.( see paras 36, 37, 54, operative part 2 )3. While it is true that Regulation No 1408/71 does not expressly cover family situations following a divorce, there is nothing to justify the exclusion of such situations from the scope of that regulation.Articles 73 and 74 of Regulation No 1408/71, which are intended to guarantee members of the family residing in a Member State other than the competent State the grant of the family benefits provided for by the applicable legislation and to prevent Member States from making entitlement to and the amount of family benefits dependent on residence of the members of the worker's family in the Member State providing the benefits, so that Community workers are not deterred from exercising their right to freedom of movement, must be construed as meaning that a minor child residing with the parent having custody in a Member State other than the Member State providing the benefit and whose other parent, who is under an obligation to pay maintenance, works or is unemployed in the Member State providing the benefit is entitled to receive a family benefit such as the advance on maintenance payments provided for by the Austrian Bundesgesetz über die Gewährung von Vorschüssen auf den Unterhalt von Kindern (Unterhaltsvorschussgesetz) (Austrian Federal Law on the Grant of Advances for the Maintenance of Children).It follows that a member of the family of a worker, including a minor child, may directly invoke Articles 73 and 74 of Regulation No 1408/71 in order to apply, without the intervention of the worker himself, for the grant of a family benefit in circumstances where the conditions governing application of those articles are otherwise satisfied.( see paras 39-40, 42, 52, 54, operative part 3 ) Parties In Case C-255/99,REFERENCE to the Court under Article 234 EC by the Oberster Gerichtshof (Austria) for a preliminary ruling in the proceedings pending before that court concerning the minorAnna Humer,on the interpretation of Articles 3, 4(1)(h), 73 and 74 of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EC) No 118/97 of 2 December 1996 (OJ 1997 L 28, p. 1), and of Articles 3(1) and 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475),THE COURT,composed of: P. Jann, President of the First and Fifth Chambers, acting for the President, F. Macken and N. Colneric (Presidents of Chambers), C. Gulmann, D.A.O. Edward (Rapporteur), A. La Pergola, M. Wathelet, R. Schintgen and V. Skouris, Judges,Advocate General: S. Alber,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- Ms Humer, by A. Frischenschlager, Rechtsanwalt,- the Austrian Government, by C. Pesendorfer, acting as Agent,- the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents,- the Swedish Government, by A. Kruse, acting as Agent,- the Commission of the European Communities, by P. Hillenkamp and W. Bogensberger, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Ms Humer, represented by A. Frischenschlager; of the Austrian Government, represented by C. Pesendorfer; of the Danish Government, represented by J. Molde, acting as Agent; of the Swedish Government, represented by A.-K. Holland, acting as Agent; and of the Commission, represented by W. Bogensberger, at the hearing on 5 December 2000,after hearing the Opinion of the Advocate General at the sitting on 8 February 2001,gives the followingJudgment Grounds 1 By order of 23 June 1999, received at the Court on 8 July 1999, the Oberster Gerichtshof (Supreme Court) (Austria) referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Articles 3, 4(1)(h), 73 and 74 of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EC) No 118/97 of 2 December 1996 (OJ 1997 L 28, p. 1) (Regulation No 1408/71), and of Articles 3(1) and 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475).2 Those questions have been raised in proceedings brought by Anna Humer (hereinafter the applicant), a minor child of divorced parents who is represented by her mother, seeking payment from the Familienlastenausgleichsfonds (Family Costs Contribution Fund) of advances on outstanding maintenance payments due from her father.Community legislation3 Article 48(1), (2) and (3)(b) of the EC Treaty (now, after amendment, Article 39(1), (2) and (3)(b) EC) states:1. Freedom of movement for workers shall be secured within the Community by the end of the transitional period at the latest.2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment.3. It shall entail the right, subject to limitations justified on grounds of public policy, public security or public health:...(b) to move freely within the territory of Member States for this purpose.4 The purpose of Regulation No 1408/71 is to coordinate, within the framework of the free movement of persons, national social security legislation in accordance with the objectives of Article 51 of the EC Treaty (now, after amendment, Article 42 EC).5 Article 1 of Regulation No 1408/71, entitled Definitions, provides:For the purpose of this Regulation:...(f) (i) member of the family means any person defined or recognised as a member of the family or designated as a member of the household by the legislation under which benefits are provided or, in the cases referred to in Articles 22(1)(a) and 31, by the legislation of the Member State in whose territory such person resides; .........(u) (i) the term family benefits means all benefits in kind or in cash intended to meet family expenses under the legislation provided for in Article 4(1)(h), excluding the special childbirth or adoption allowances referred to in Annex II;.......6 Article 2(1) of Regulation No 1408/71, defining the persons covered by the Regulation, provides:This Regulation shall apply to employed or self-employed persons who are or have been subject to the legislation of one or more Member States and who are nationals of one of the Member States or who are stateless persons or refugees residing within the territory of one of the Member States, as well as to the members of their families and their survivors.7 Article 3 of Regulation No 1408/71, dealing with equality of treatment, provides as follows:1. Subject to the special provisions of this Regulation, persons resident in the territory of one of the Member States to whom this Regulation applies shall be subject to the same obligations and enjoy the same benefits under the legislation of any Member State as the nationals of the State.2. ...3. Save as provided in Annex III, the provisions of social security conventions which remain in force pursuant to Article 7(2)(c) and the provisions of conventions concluded pursuant to Article 8(1) shall apply to all persons to whom this Regulation applies.8 Article 4 of Regulation No 1408/71, which defines the matters covered by the Regulation, provides in paragraph (1)(h):This Regulation shall apply to all legislation concerning the following branches of social security:...(h) family benefits.9 Article 73 of Regulation No 1408/71, entitled Employed or self-employed persons the members of whose families reside in a Member State other than the competent Member State, is worded as follows:An employed or self-employed person subject to the legislation of a Member State shall be entitled, in respect of the members of his family who are residing in another Member State, to the family benefits provided for by the legislation of the former State, as if they were residing in that State, subject to the provisions of Annex VI.10 Article 74 of Regulation No 1408/71, entitled Unemployed persons the members of whose families reside in a Member State other than the competent Member State, provides as follows:An unemployed person who was formerly employed or self-employed and who draws unemployment benefits under the legislation of a Member State shall be entitled, in respect of the members of his family residing in another Member State, to the family benefits provided for by the legislation of the former State, as if they were residing in that State, subject to the provisions of Annex VI.National legislation11 The Österreichische Bundesgesetz über die Gewährung von Vorschüssen auf den Unterhalt von Kindern (Unterhaltsvorschussgesetz) (Austrian Federal Law on the Grant of Advances for the Maintenance of Children), adopted in 1985 (BGBl. 1985, No 451) (the UVG), provides for the grant by the State, subject to the conditions which it lays down, of advances on maintenance payments.12 Article 2(1) of the UVG provides:Minor children who are ordinarily resident in Austria and are either Austrian nationals or stateless shall be entitled to advances ....13 Article 3 of the UVG provides:Advances shall be granted where:1. a writ of execution enforceable in Austria exists in respect of the legal right to maintenance payments and2. execution in respect of current maintenance payments ... or, where the person in default of payment of maintenance clearly has no income or other form of regular remuneration, execution ... has not covered in full, over the six months immediately prior to the submission of that application for the grant of an advance, even one of the maintenance payments due. In that respect, maintenance arrears when recovered shall be set off against the current maintenance debt.14 Article 4 of the UVG provides that, in certain circumstances, advances are to be granted even where execution appears to have no prospect of success or where no entitlement to maintenance has been determined.15 Articles 30 and 31 of the UVG provide that the public authorities are to be subrogated to a child's claims for maintenance on which advances have been made. Where the person in default of payment of maintenance makes no payments, the debt may be recovered by distraint.16 The grant of an advance on maintenance does not depend on the recipient being in a state of indigence and involves no exercise of discretion in the assessment of the particular case.17 The UVG was adopted pursuant to Article 10(1), point 6, of the Austrian Constitution, which confers competence in civil matters on the Austrian Federal State.The dispute in the main proceedings and the questions submitted for preliminary ruling18 The applicant in the main proceedings, Anna Humer, is a minor born on 10 September 1987 and, like her parents, is an Austrian national. Her parents divorced on 9 March 1989 and the mother obtained sole custody of her daughter.19 The two parents at first continued to reside in Austria. In 1992 the mother moved to France with her daughter and, since then, both have been ordinarily resident there. The father is said to have continued to reside in Austria up to the time of his death on 13 March 1999.20 On 2 November 1993 the father assumed an obligation under a court settlement to pay monthly maintenance payments of ATS 4 800 for his daughter. The father was at that time employed in a commercial capacity and continued in that occupation until at least 31 January 1998. According to the information provided to the Court, it would appear that he was unemployed from that date, although his professional situation at the time of his death remains unknown.21 While still resident in Austria, the child's mother was a religious studies teacher. In reply to a question put by the Court, counsel for the applicant in the main proceedings indicated that the mother taught pursuant to a certificate of teaching proficiency issued to her by the Catholic Church and recognised pursuant to the Concordat in force in Austria.22 After transferring her residence to France, the applicant's mother was faced with the problem that her certificate of proficiency was not recognised in France. She was, however, able to teach German in private schools and at the same time followed a course of studies at the University of Nantes, on completion of which, in 1994, she obtained a diploma allowing her to teach German as a modern foreign language.23 On 24 July 1998 the applicant, represented by her mother, applied to the Austrian State for advances on maintenance payments at the rate of ATS 4 800 per month from 1 July 1998 for a period of three years. Her counsel claimed that, despite repeated enforcement measures, her father's maintenance payments were several months in arrears and that current monthly payments had not been made at all.24 Basing itself on Article 2(1) of the UVG, the court of first instance in Austria dismissed that application on the ground that the child and her mother, who had custody of her, were ordinarily resident in France. The appeal court set that decision aside and, pursuant to Article 3 of the UVG, awarded the applicant advances on maintenance payments at the rate of ATS 4 800 per month from 1 July 1998 to 30 June 2001. That court took the view that Articles 6, first paragraph, and 52 of the EC Treaty (now, after amendment, Articles 12 EC, first paragraph, and 43 EC) precluded application of a discriminatory rule such as the condition of residence in Austria laid down by the UVG.25 An appeal on a point of law (Revision) was brought before the Oberster Gerichtshof, which decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:I. (a) Do advances on maintenance payments to the minor children of working persons, or unemployed persons drawing unemployment benefit under Austrian legislation, which are payable in respect of children under the Austrian federal law on the grant of advances on maintenance (Unterhaltsvorschussgesetz 1985 [Law on Advances on Maintenance Payments 1985], hereinafter UVG - current version in BGBl., p. 451) constitute family benefits for the purposes of Article 4(1)(h) of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 and amended by Council Regulation (EEC) No 3427/89 of 30 October 1989, and is Article 3 of the regulation, on equality of treatment, therefore also applicable in such a case?(b) Do Articles 73 and 74 of Regulation No 1408/71 entitle a child of a marriage who is resident with his or her mother in a Member State other than Austria and whose father is resident in Austria and is working there, or unemployed and drawing unemployment benefit under Austrian legislation, to the award of an advance on maintenance payments under the Unterhaltsvorschussgesetz referred to in paragraph (a) above?II. If the answer to one of the questions under I is in the negative:(a) Are advances on maintenance payments under the Unterhaltsvorschussgesetz referred to in Question I(a) social advantages within the meaning of Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community?(b) Does the fact that the child has to be resident in Austria in order to be awarded advances on maintenance payments constitute a prohibited limiting provision under the second indent of Article 3(1) of Regulation (EEC) No 1612/68 in the light of the right to freedom of movement for workers enshrined in Article 48 of the EC Treaty?(c) Do the provisions of Regulation No 1612/68 give rise to an entitlement, in the person of the child of a worker, to the award of advances on maintenance payments?Findings of the Court26 Having regard to the date of the facts in the main proceedings, the applicable version of Regulation No 1408/71 appears to be that amended and updated by Regulation No 118/97, with the result that it is this latter version which requires to be interpreted. However, the relevant provisions of Regulation No 1408/71 have in substance remained the same.27 Further, there is no need to examine the issue, raised in part (a) of the first question, of whether Article 3(1) of Regulation No 1408/71 applies, given that the applicant in the main proceedings is an Austrian national.The first question28 In the two limbs of its first question, which it is appropriate to examine together, the national court seeks to ascertain, first, whether a benefit such as the advance on maintenance payments provided for by the UVG is a family benefit within the meaning of Regulation No 1408/71, second, whether a minor child in a situation identical to that of the applicant comes within the scope ratione personae of that regulation, and, third, whether such a minor child may invoke Articles 73 and 74 of Regulation No 1408/71 in order to claim entitlement to a benefit of that kind.The definition of a family benefit29 In essence the question is, first, whether a benefit such as the advance on maintenance payments provided for by the UVG is a family benefit within the meaning of Article 4(1)(h) of Regulation No 1408/71.30 This question is identical to that posed by the Oberster Gerichtshof in proceedings which also concerned the compatibility of the UVG with Community law and which resulted in the Court's judgment of 15 March 2001 in Case C-85/99 Offermanns [2001] ECR I-2261.31 In paragraph 41 of that judgment, the Court ruled that the expression to meet family expenses in Article 1(u)(i) of Regulation No 1408/71 is to be interpreted as referring, in particular, to a public contribution to a family's budget to alleviate the financial burdens involved in the maintenance (Unterhalt) of children.32 In paragraphs 42 to 46 of Offermanns, the Court examined the constituent elements of the advance on maintenance payments provided for by the UVG, in particular its purposes and the conditions under which it may be granted. The Court noted in particular that the reasons given by the Austrian legislature when adopting the UVG were to ensure the maintenance of minor children in cases where their mothers are left to cope alone with their children and, in addition to the heavy burden of raising their children, find themselves faced with the additional difficulty of obtaining maintenance for them from the father. The Court further pointed out that, according to the Oberster Gerichtshof, attenuating such a situation is the reason for which the State must step in and take the place of the person in default of payment of maintenance, pay advances on maintenance and seek recovery from the person in default.33 The Court accordingly ruled, in paragraph 49 of Offermanns, that a benefit such as an advance on maintenance payments provided for by the UVG does constitute a family benefit within the meaning of Article 4(1)(h) of Regulation No 1408/71.The scope ratione personae of Regulation No 1408/7134 Second, the question posed by the national court seeks implicitly to ascertain whether a minor child in the situation of the applicant comes within the scope ratione personae of Regulation No 1408/71.35 In order to reply to that question, it is necessary to examine whether such a child is a member of the family of an employed or self-employed person within the meaning of Article 2 of Regulation No 1408/71, read in the light of Article 1(f)(i) thereof.36 In casu, it follows from paragraphs 20 to 22 of the present judgment that both the father and the mother of the applicant were, at the date on which the latter applied for advances on her maintenance payments, either employed or out of work. Further, it is common ground that, at the material time, the applicant was a member of the family of each of her parents.37 It follows that a child in the same situation as the applicant comes within the scope ratione personae of Regulation No 1408/71.Is it possible for a minor child in a situation such as that of the applicant to enforce a right to the advance on maintenance payments under Articles 73 and 74 of Regulation No 1408/71?38 Third, the national court seeks more specifically to determine whether Articles 73 and 74 of Regulation No 1408/71 are to be construed as founding the entitlement of a minor child in the position of the applicant to an advance on maintenance payments under legislation such as the UVG.39 In this regard, the purpose of Articles 73 and 74 of Regulation No 1408/71 is precisely to guarantee members of the family residing in a Member State other than the competent State the grant of the family benefits provided for by the applicable legislation (see, with regard to Article 73 of Regulation No 1408/71, Joined Cases C-245/94 and C-312/94 Hoever and Zachow [1996] ECR I-4895, paragraph 32).40 More particularly, those articles are intended to prevent Member States from making entitlement to and the amount of family benefits dependent on residence of the members of the worker's family in the Member State providing the benefits, so that Community workers are not deterred from exercising their right to freedom of movement (see, inter alia, Case C-12/89 Gatto [1990] ECR I-557, summary publication, and Hoever and Zachow, cited above, paragraph 34).41 As has been held in paragraphs 33 and 36 above, the benefit at issue here has the characteristics of a family benefit within the meaning of Article 4(1)(h) of Regulation No 1408/71 and there is nothing to prevent the applicant having the status of a member of the family of a worker or former worker for the purposes of Article 2(1) of Regulation No 1408/71, read in the light of Article 1(f)(i) thereof.42 Admittedly, as the Swedish Government has pointed out, Regulation No 1408/71 does not expressly cover family situations following a divorce. However, contrary to that Government's argument, there is nothing to justify the exclusion of such situations from the scope of Regulation No 1408/71.43 One of the normal consequences of a divorce is that custody of children is granted to one of the parents, with whom those children will reside. It is possible, for a variety of reasons (in this case as the result of a divorce), that the parent with custody of a child will leave his or her Member State of origin and become established in another Member State in order to work there. In such a case, the residence of the minor child will also be transferred to that other Member State.44 In the present case, it is common ground that the applicant would have been entitled to the advance on maintenance payments had she continued to reside in Austria. The only reason for her exclusion from the benefit of that advance lies in the fact that her mother, who has custody of her, has exercised her right of free movement, which activated the residence clause contained in the UVG.45 Two objections have been raised by the Austrian and Swedish Governments and by the Commission against application of Articles 73 and 74 of Regulation No 1408/71 in the present case, both of which rest on the fact that the UVG establishes an original right vested in the child herself.46 It is contended, first, that, in a situation such as the present, no one is exercising the right of free movement for workers conferred by the Treaty. The parent subject to the legislation of the Member State providing the benefit, in casu the father, has not exercised that right, while the transfer to another Member State of the minor child, who is the beneficiary of the benefit, does not result from the exercise by that child of the right of free movement enjoyed by workers.47 Second, Articles 73 and 74 of Regulation No 1408/71 provide that it is the parent working in the Member State providing the benefit who must apply for family benefits on behalf of the members of his or her family. In a situation such as the present it is the minor child who, in order to overcome the failure by that parent to comply with his maintenance obligations, seeks directly to invoke those provisions.48 With regard to the first objection, it follows from the title of Regulation No 1408/71 and from Article 2 thereof that this regulation governs the application of social security schemes to members of the family of employed persons or self-employed persons moving within the Community, with the result that, if a member of the family of a worker resides in a Member State other than that in which the worker resides, the provisions of Regulation No 1408/71 are, in principle, applicable (see, along these lines, Case 115/77 Laumann [1978] ECR 805, paragraph 5, and Case C-194/96 Kulzer [1998] ECR I-895, paragraph 30).49 A fortiori, the same holds true where, as in the present case, the transfer of the worker's child, a member of the worker's family, results from the exercise by that worker's former spouse of her right of free movement.50 With regard to the second objection, it is true that the UVG establishes an original right vested in the child. That said, family benefits by their nature cannot be regarded as payable to an individual in isolation from his or her family circumstances (see Hoever and Zachow, paragraph 37). It follows, as regards application of Articles 73 and 74 of Regulation No 1408/71, first, that the legal classification of the benefit under domestic law has no bearing on their interpretation and, second, that it is irrelevant that the person to whom that benefit is to be awarded is a member of the worker's family rather than the worker himself.51 According to the Court's case-law, the spouse of an employed person can directly claim a right to family benefits under Article 73 of Regulation No 1408/71 provided that he or she is a member of the family of a worker who fulfils the conditions laid down in Article 73 and provided also that under national legislation the family benefits concerned are provided for family members (see Case C-78/91 Hughes [1992] ECR I-4839, paragraph 26, and Hoever and Zachow, paragraphs 30 and 38). There is nothing to prevent that reasoning from being extended to all family members.52 It follows from all of the foregoing that a member of the family of a worker, including a minor child such as the applicant, may directly invoke Articles 73 and 74 of Regulation No 1408/71 in order to apply, without the intervention of the worker himself, for the grant of a family benefit in circumstances where the conditions governing application of those articles are otherwise satisfied.53 This conclusion is valid a fortiori where, as in the present case, entitlement to the benefit in question arises precisely because of the worker's failure to meet his maintenance obligations towards his family.54 In light of the foregoing, the answer to the first question must be that:- a benefit such as the advance on maintenance payments provided for by the UVG is a family benefit within the meaning of Article 4(1)(h) of Regulation No 1408/71;- a person, one or other of whose parents is an employed person or is out of work, comes within the scope ratione personae of Regulation No 1408/71 as a member of the family of a worker within the meaning of Article 2(1) of Regulation No 1408/71, read in the light of Article 1(f)(i) thereof;- Articles 73 and 74 of Regulation No 1408/71 are to be construed as meaning that, where a minor child resides with the parent who has custody in a Member State other than the Member State providing the benefit, and where the other parent, who is under an obligation to pay maintenance, works or is unemployed in the Member State providing the benefit, that child is entitled to receive a family benefit such as the advance on maintenance payments provided for by the UVG.The second question55 As the answer to the first question is in the affirmative, there is no need to reply to the second question. Decision on costs Costs56 The costs incurred by the Austrian, Danish, German and Swedish Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the questions referred to it by the Oberster Gerichtshof by order of 23 June 1999, hereby rules:1. A benefit such as the advance on maintenance payments provided for by the Österreichische Bundesgesetz über die Gewährung von Vorschüssen auf den Unterhalt von Kindern (Unterhaltsvorschussgesetz) (Austrian Federal Law on the Grant of Advances for the Maintenance of Children), adopted in 1985, is a family benefit within the meaning of Article 4(1)(h) of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EC) No 118/97 of 2 December 1996.2. A person, one or other of whose parents is an employed person or is out of work, comes within the scope ratione personae of Regulation No 1408/71, as amended, as a member of the family of a worker within the meaning of Article 2(1) of Regulation No 1408/71, read in the light of Article 1(f)(i) thereof.3. Articles 73 and 74 of Regulation No 1408/71 are to be construed as meaning that, where a minor child resides with the parent who has custody in a Member State other than the Member State providing the benefit, and where the other parent, who is under an obligation to pay maintenance, works or is unemployed in the Member State providing the benefit, that child is entitled to receive a family benefit such as the advance on maintenance payments provided for by the Unterhaltsvorschussgesetz.

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ADVOCATE GENERAL TIZZANO PROPOSES THAT THE COURT OF JUSTICE SHOULD DECLARE THAT THE "OPEN SKIES" AGREEMENTS ARE CONTRARY TO COMMUNITY LAW AS REGARDS FARES OF UNITED STATES AIR CARRIERS ON INTRA-COMMUNITY ROUTES, COMPUTERISED RESERVATION SYSTEMS AND NATIONALITY CLAUSES

| 61998J0466 Judgment of the Court of 5 November 2002. - Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland. - Failure by a Member State to fulfil its obligations - Conclusion and application by a Member State of a bilateral agreement with the United States of America - Agreement authorising the United States of America to revoke, suspend or limit the traffic rights of air carriers designated by the United Kingdom which are not owned by the latter or its nationals - Article 52 of the EC Treaty (now, after amendment, Article 43 EC). - Case C-466/98. European Court reports 2002 Page I-09427 Parties In Case C-466/98,Commission of the European Communities, represented by F. Benyon, acting as Agent, with an address for service in Luxembourg,applicant,vUnited Kingdom of Great Britain and Northern Ireland, represented by J.E. Collins, acting as Agent, assisted by D. Anderson QC, with an address for service in Luxembourg,defendant,supported byKingdom of the Netherlands, represented by M.A. Fierstra and J. van Bakel, acting as Agents,intervener,APPLICATION for a declaration that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which provides for the revocation, suspension or limitation of traffic rights in cases where air carriers designated by the United Kingdom of Great Britain and Northern Ireland are not owned by the United Kingdom or United Kingdom nationals, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 52 of the EC Treaty (now, after amendment, Article 43 EC),THE COURT,composed of: J.-P. Puissochet, President of the Sixth Chamber, acting for the President, R. Schintgen (President of Chamber), C. Gulmann, D.A.O. Edward, A. La Pergola, P. Jann, V. Skouris (Rapporteur), F. Macken, N. Colneric, S. von Bahr and J.N. Cunha Rodrigues, Judges,Advocate General: A. Tizzano,Registrar: H. von Holstein, Deputy Registrar, and D. Louterman-Hubeau, Head of Division,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 8 May 2001, during which the Commission was represented by F. Benyon, the United Kingdom by J.E. Collins, assisted by D. Anderson, and the Kingdom of the Netherlands by J. van Bakel, H.G. Sevenster and J. van Haersolte, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 31 January 2002,gives the followingJudgment Grounds 1 By application lodged at the Court Registry on 18 December 1998, the Commission of the European Communities brought an action under Article 169 of the EC Treaty (now Article 226 EC) for a declaration that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which provides for the revocation, suspension or limitation of traffic rights in cases where air carriers designated by the United Kingdom of Great Britain and Northern Ireland are not owned by the United Kingdom or United Kingdom nationals, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 52 of the EC Treaty (now, after amendment, Article 43 EC).2 By order of the President of the Court of 8 July 1999, the Kingdom of the Netherlands was granted leave to intervene in support of the form of order sought by the United Kingdom.Background to the dispute3 Towards the end of the Second World War or shortly thereafter, several States which subsequently became Members of the Community, including the United Kingdom, concluded bilateral agreements on air transport with the United States of America.4 One such bilateral agreement, the first of the Bermuda Agreements (hereinafter `the Bermuda I Agreement'), was concluded between the United Kingdom and the United States in 1946. Under Article 6 of that agreement, `[e]ach Contracting Party reserves the right to withhold or revoke the exercise of the rights specified in the Annex to this Agreement by a carrier designated by the other Contracting Party in the event that it is not satisfied that substantial ownership and effective control of such carrier are vested in nationals of either Contracting Party ...'.5 Subsequently, another agreement, the second of the Bermuda Agreements (hereinafter `the Bermuda II Agreement'), replaced the Bermuda I Agreement with effect from 23 July 1977, the date upon which it was signed and entered into force. Article 5 of the Bermuda II Agreement provides:`(1) Each Contracting Party shall have the right to revoke, suspend, limit or impose conditions on the operating authorisations or technical permissions of an airline designated by the other Contracting Party where:(a) substantial ownership and effective control of that airline are not vested in the Contracting Party designating the airline or in nationals of such Contracting Party;...(2) ... such rights shall be exercised only after consultation with the other Contracting Party.'6 Furthermore, according to Article 3(6) of the Bermuda II Agreement, each Contracting Party is required to grant the appropriate operating authorisations and technical permissions to an airline when certain conditions are satisfied, including the condition that substantial ownership and effective control of that airline be vested in the Contracting Party designating the airline or in its nationals.7 The documents before the Court show that, in 1992, the United States of America took the initiative of offering to individual European States the possibility of concluding a bilateral `open skies' agreement. In 1993 and 1994, the United States of America strengthened its efforts to conclude such agreements with the largest possible number of European States.8 In a letter of 17 November 1994, addressed to the Member States, the Commission drew their attention to the negative effects that such bilateral agreements could have on the Community and stated its position to the effect that that type of agreement was likely to affect internal Community legislation. It added that negotiation of such agreements could be carried out effectively, and in a legally valid manner, only at Community level.9 In the light of that correspondence, by letter of 20 April 1995, the Commission sought an assurance from the Government of the United Kingdom that it would not negotiate, initial, conclude or ratify a bilateral agreement with the United States of America. However, the United Kingdom continued to negotiate an agreement with the United States and concluded that agreement on 5 June 1995.Facts and pre-litigation procedure10 On 17 July 1995, the Commission sent a letter of formal notice to the United Kingdom, stating inter alia that, as far as it was aware, the traffic rights accorded to the United Kingdom by the United States of America under their agreement were to be granted solely on the basis of the nationality of the carrier. According to the Commission, that constituted an infringement of Article 52 of the EC Treaty because, under the terms of that agreement, amongst the air carriers which had obtained a licence from the United Kingdom in accordance with Council Regulation (EEC) No 2407/92 on licensing of air carriers (OJ 1992 L 240, p. 1), those established in the United Kingdom which were owned and controlled by nationals of another Member State would have traffic rights in the United States of America refused to them, whereas those owned and controlled by United Kingdom nationals would be granted those rights.11 The United Kingdom replied to the Commission's letter of formal notice by letter of 13 September 1995. It is apparent from that letter that the United Kingdom and the United States of America agreed to amend the Bermuda II Agreement by the agreement concluded on 5 June 1995. In relation to Article 52 of the Treaty, the United Kingdom indicated that the clause in the Bermuda II Agreement on the ownership and control of air carriers had not been amended by the agreement of 5 June 1995. In its view, that provision did not prohibit the designation by the United Kingdom authorities of air carriers which were not owned or controlled by United Kingdom nationals, but only gave the United States of America the opportunity to refuse to accept such a designation whilst allowing the United Kingdom to seek consultations in the event of such a refusal.12 In reply, the Commission sent the United Kingdom a reasoned opinion on 16 March 1998, in which it stated that, by concluding the Bermuda II Agreement with the United States of America and by applying that agreement, which provides for the revocation, suspension or limitation of traffic rights in cases where air carriers designated by the United Kingdom are not owned by the United Kingdom or United Kingdom nationals, the United Kingdom had failed to fulfil its obligations under Article 52 of the Treaty. It called upon the United Kingdom to comply with the reasoned opinion within two months of notification thereof.13 The United Kingdom replied, by letter of 19 June 1998, that the disputed provision of the Bermuda II Agreement merely repeated a clause in the Bermuda I Agreement, which was concluded before the accession of the United Kingdom to the European Communities. In its view, therefore, the disputed right enjoyed by the United States of America under the Bermuda II Agreement had its origin in the Bermuda I Agreement and was maintained by virtue of Article 234 of the EC Treaty (now, after amendment, Article 307 EC).14 Since it was not convinced by the United Kingdom's arguments, the Commission brought the present action.The action15 In its action, the Commission charges the United Kingdom with having infringed its obligations under Article 52 of the Treaty by concluding and applying the Bermuda II Agreement, which includes the abovementioned clause concerning the ownership and control of air carriers.16 In its defence, the United Kingdom begins by arguing that the right granted to the United States of America to revoke, suspend or limit traffic rights in cases where air carriers designated by the United Kingdom are not owned by the latter or its nationals is covered and therefore maintained by Article 234 of the Treaty. It then contends that Article 52 of the Treaty does not apply in this case or, if it does, that that article has not been infringed. Finally, it argues that the clause on the ownership and control of air carriers is, in any event, justified under Article 56 of the EC Treaty (now, after amendment, Article 46 EC).The applicability of Article 234 of the TreatyArguments of the parties17 The United Kingdom submits that the protection afforded by Article 234 of the Treaty is not limited to agreements which were concluded by Member States before the Treaty entered into force in their territory, but extends to the rights and obligations arising from such agreements. According to the United Kingdom, the question whether a pre-accession agreement has been amended or even replaced since the accession of the Member State concerned to the Community is of only secondary importance. Thus, Article 234 of the Treaty does not apply to rights and obligations contained in an agreement after the expiry of the latter, save in circumstances where substantially similar rights and obligations are carried over, without interruption, into a new agreement.18 That, the United Kingdom submits, is the case here. Although the Bermuda II Agreement was concluded in 1977, four years after the EEC Treaty entered into force in the United Kingdom, the right granted to the United States by Article 5 of that agreement was originally conferred in relation to scheduled services by Article 6 of the Bermuda I Agreement and has not, in substance, changed. Even though their wording is not in all respects the same, reflecting the different structure of the two Bermuda agreements, Article 6 of the Bermuda I Agreement and Article 5 of the Bermuda II Agreement are in substance identical in their application to scheduled air services, which illustrates the continuity of the right in question between the two agreements. Although there is a substantive difference between the effects of the Bermuda I Agreement and those of the Bermuda II Agreement, in that the latter also applies to charter flights, that is not a difference in principle between the two agreements but an amendment made in order to adapt to the growing importance of charter flights.19 The Netherlands Government, which also argues that Article 234 of the Treaty applies in this case, submits that the amendments that the United Kingdom made to the Bermuda II Agreement by the agreement of 5 June 1995 cannot be considered to be a new agreement, because it is apparent that only the amendments to Annex I to the Bermuda II Agreement in regard to traffic rights are substantial amendments.20 The Commission disputes the United Kingdom's line of argument. It maintains that Article 234 of the Treaty applies only to agreements concluded, in the case of the United Kingdom, before its accession to the Community in 1973, whereas the Bermuda II Agreement was concluded later, namely in 1977. According to the Commission, Article 234 must, as an exception to the Treaty provisions, be interpreted strictly. In particular, it does not follow from that provision that it must apply to the rights and obligations which formed part of agreements in force at a given moment, without taking account of the fact that those agreements have since expired. Even if those rights and obligations are repeated in another agreement, that cannot justify the claim that the initial agreement is in some way perpetuated.21 In this case, the final recital in the preamble to the Bermuda II Agreement clearly states that that agreement was concluded `for the purpose of replacing' the Bermuda I Agreement and therefore any possible application of Article 234 of the Treaty disappeared along with the Bermuda I Agreement. Consequently, the Commission argues, it is impossible to bring within that article a clause of the Bermuda I Agreement the formulation of which, moreover, was altered when introduced into the Bermuda II Agreement.Findings of the Court22 The first paragraph of Article 234 of the Treaty provides that the rights and obligations arising from agreements concluded before the entry into force of the Treaty between one or more Member States, on the one hand, and one or more non-member countries, on the other, are not to be affected by the provisions of the Treaty. However, the second paragraph of that article requires Member States to take all appropriate steps to eliminate any incompatibilities between such agreements and the Treaty.23 Article 234 of the Treaty is of general scope and applies to any international agreement, irrespective of subject-matter, which is capable of affecting application of the Treaty (Case 812/79 Attorney General v Burgoa [1980] ECR 2787, paragraph 6; Case C-158/91 Levy [1993] ECR I-4287, paragraph 11; Case C-62/98 Commission v Portugal [2000] ECR I-5171, paragraph 43).24 As is clear from paragraph 8 of the judgment in Burgoa, the purpose of the first paragraph of Article 234 of the Treaty is to make it clear, in accordance with the principles of international law [see, in that connection, Article 30(4)(b) of the Convention on the Law of Treaties signed in Vienna on 23 May 1969] that application of the Treaty does not affect the duty of the Member State concerned to respect the rights of non-member countries under a prior agreement and to perform its obligations thereunder.25 According to Article 5 of the Act concerning the conditions of accession to the European Communities of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland and the adjustments to the Treaties (OJ, English Special Edition 1972 (27 March)), Article 234 of the Treaty applies to agreements concluded by the United Kingdom before its accession, that is to say before 1 January 1973.26 However, the rights and obligations which flow for the United States of America and the United Kingdom respectively from the clause on the ownership and control of air carriers arise, not from an agreement before, but from an agreement after the accession of the United Kingdom to the European Communities, namely the Bermuda II Agreement, which was concluded in 1977.27 As a result, Article 234 of the Treaty cannot apply in this case.28 That finding cannot be called into question by the fact that a clause drafted in similar terms already appeared in the Bermuda I Agreement, which, having been concluded before the accession of the United Kingdom to the European Communities, remained in force until 1977.29 As the final recital in its preamble states, the Bermuda II Agreement was concluded `for the purpose of replacing' the Bermuda I Agreement, in particular in order to take into account the development of traffic rights between the Contracting Parties. It thus gave rise to new rights and obligations between those parties. In those circumstances, it is not possible to attach to the Bermuda I Agreement the rights and obligations which, for the United Kingdom and the United States of America, have flowed from the clause in the Bermuda II Agreement concerning the ownership and control of air carriers since the entry into force of that latter agreement.30 It is therefore necessary to consider whether, as the Commission maintains, the content of that clause infringes Article 52 of the Treaty.Infringement of Article 52 of the TreatyArguments of the parties31 The Commission submits that, unlike Article 59 of the EC Treaty (now, after amendment, Article 49 EC), on the freedom to provide services within the Community, application of which to the transport sector was expressly excluded by Article 61 of the EC Treaty (now, after amendment, Article 51 EC), application of Article 52 of the Treaty is neither suspended nor excluded in relation to that sector. Article 52 applies in all sectors, including air transport, and, as a basic provision of the Treaty, also applies to the other areas falling within the competence of Member States (Case C-221/89 Factortame and Others [1991] ECR I-3905; Case C-151/96 Commission v Ireland [1997] ECR I-3327; Case C-336/96 Gilly [1998] ECR I-2793; Case C-274/96 Bickel and Franz [1998] ECR I-7637 and Case C-212/97 Centros [1999] ECR I-1459).32 In this case, the Commission argues, Article 5 of the Bermuda II Agreement is contrary to Article 52 of the Treaty in that it permits the United States of America to refuse to issue operating authorisations or technical permissions to airlines designated by the United Kingdom but of which a substantial part of the ownership and effective control is not vested in the United Kingdom or United Kingdom nationals, or to revoke, suspend or limit operating authorisations or technical permissions already granted to such airlines. Under Article 5 of that agreement, an airline owned or controlled by a Member State other than the United Kingdom or by nationals of such a Member State, established in the United Kingdom, is prevented from receiving the same treatment as that reserved for airlines owned and controlled by the United Kingdom or by United Kingdom nationals.33 Contrary to what the United Kingdom maintains, the conduct of the United States of America is not relevant in this action, since infringement of Article 52 of the Treaty consists in the granting by the United Kingdom to the United States of America of the right contained in Article 5 of the Bermuda II Agreement which it negotiated and concluded.34 The United Kingdom submits, to begin with, that Article 52 of the Treaty cannot cover a type of trade with non-member countries, namely air transport outside the Community, in respect of which the Community has never exercised a legislative power. Moreover, the only economic activity which has the potential to be affected by Article 5 of the Bermuda II Agreement is largely located outside the Community.35 It then maintains that, even if Article 52 of the Treaty were applicable, the United Kingdom has not in any way infringed it. First, Article 5 of the Bermuda II Agreement grants the United Kingdom no power to discriminate in any way against other Community airlines on the basis of their ownership or control, or in relation to their establishment in the United Kingdom or their designation. Second, the power to refuse traffic rights to airlines not controlled or owned by United Kingdom nationals is a sovereign choice of the United States of America, which the United Kingdom is in no position to influence or prevent. The power of the United States of America to discriminate in that way does not originate in the Bermuda I and II Agreements, so that the United Kingdom cannot be held responsible for the signature and application of an agreement permitting that discrimination. Possible discrimination against Community nationals by the authorities of a non-member country lies outside the categories of mischief which Article 52 of the Treaty was designed to prohibit.36 At the hearing, the United Kingdom relied in that respect on the judgment in Case C-307/97 Saint-Gobain v Finanzamt Aachen-Innenstadt [1999] ECR I-6161, paragraphs 59 and 60, which shows, in its submission, that, although Article 52 of the Treaty may require a Member State to amend its legislation unilaterally so as not to discriminate against an undertaking of another Member State established in its territory, that provision cannot require it to amend agreements already concluded with non-member countries in order to impose new obligations upon them. This, the United Kingdom submits, is what the Commission is asking it to do in this case in relation to authorisations issued by the United States of America, which, moreover, concern the use of the United States' own airspace.37 Finally, the United Kingdom submits that the Commission has not given any example of a Community airline that has been harmed by the application of the clause concerning the ownership and control of air carriers.38 The Netherlands Government also contends that there has been no infringement of Article 52 of the Treaty by the United Kingdom.Findings of the Court39 As regards the applicability of Article 52 of the Treaty in this case, it should be pointed out that that provision, which the United Kingdom is charged with infringing, applies in the field of air transport.40 Whereas Article 61 of the EC Treaty (now, after amendment, Article 51 EC) precludes the Treaty provisions on the freedom to provide services from applying to transport services, the latter being governed by the provisions of the title concerning transport, there is no article in the Treaty which precludes its provisions on freedom of establishment from applying to transport.41 It is to be observed, next, that the application of Article 52 of the Treaty in a given case depends, not on the question whether the Community has legislated in the area concerned by the business which is carried on, but on the question whether the situation under consideration is governed by Community law. Even if a matter falls within the power of the Member States, the fact remains that the latter must exercise that power consistently with Community law (Factortame and Others, paragraph 14; Case C-124/95 Centro-Com [1997] ECR I-81, paragraph 25; Case C-264/96 ICI v Colmer [1998] ECR I-4695, paragraph 19).42 Consequently, the claim by the United Kingdom that the Community has not legislated on air transport outside the Community, even if substantiated, is not capable of rendering Article 52 of the Treaty inapplicable in that sector.43 The same applies to the United Kingdom's claim that the only economic activity capable of being affected by Article 5 of the Bermuda II Agreement is largely located outside the Community. All companies established in a Member State within the meaning of Article 52 of the Treaty are covered by that provision, even if the subject-matter of their business in that State consists in services directed towards non-member countries.44 As regards the question whether the United Kingdom has infringed Article 52 of the Treaty, it should be borne in mind that, under that article, freedom of establishment includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 58 of the EC Treaty (now the second paragraph of Article 48 EC) under the conditions laid down for its own nationals by the legislation of the Member State in which establishment is effected.45 Articles 52 and 58 of the Treaty thus guarantee nationals of Member States of the Community who have exercised their freedom of establishment and companies or firms which are assimilated to them the same treatment in the host Member State as that accorded to nationals of that Member State (Saint-Gobain, paragraph 35), both as regards access to an occupational activity on first establishment and as regards the exercise of that activity by the person established in the host Member State.46 The Court has thus held that the principle of national treatment requires a Member State which is a party to a bilateral international treaty with a non-member country for the avoidance of double taxation to grant to permanent establishments of companies resident in another Member State the advantages provided for by that treaty on the same conditions as those which apply to companies resident in the Member State that is party to the treaty (see Saint-Gobain, paragraph 59, and judgment of 15 January 2002 in Case C-55/00 Gottardo v INPS [2002] ECR I-413, paragraph 32).47 In this case, Article 5 of the Bermuda II Agreement permits the United States of America, inter alia, to revoke, suspend or limit the operating authorisations or technical permissions of an airline designated by the United Kingdom but of which a substantial part of the ownership and effective control is not vested in that Member State or its nationals.48 There can be no doubt that airlines established in the United Kingdom of which a substantial part of the ownership and effective control is vested either in a Member State other than the United Kingdom or in nationals of such a Member State (`Community airlines') are capable of being affected by that clause.49 By contrast, it is clear from Article 3(6) of the Bermuda II Agreement that the United States of America is in principle under an obligation to grant the appropriate operating authorisations and the required technical permissions to airlines of which a substantial part of the ownership and effective control is vested in the United Kingdom or its nationals (`United Kingdom airlines').50 It follows that Community airlines may always be excluded from the benefit of the Bermuda II Agreement, while that benefit is assured to United Kingdom airlines. Consequently, Community airlines suffer discrimination which prevents them from benefiting from the treatment which the host Member State, namely the United Kingdom, accords to its own nationals.51 Contrary to what the United Kingdom maintains, the direct source of that discrimination is not the possible conduct of the United States of America but Article 5 of the Bermuda II Agreement, which specifically acknowledges the right of the United States of America to act in that way.52 Consequently, by concluding and applying that agreement, the United Kingdom has failed to fulfil its obligations under Article 52 of the Treaty.53 That finding cannot be disturbed by the argument which the United Kingdom derives from the Court's reasoning in paragraphs 59 and 60 of the Saint-Gobain judgment.54 In those paragraphs, the Court merely held that the extension to permanent establishments of companies having their seat in a Member State other than the Federal Republic of Germany of a tax advantage provided for by a bilateral international agreement concluded by the Federal Republic of Germany with a non-member country could be decided upon unilaterally by the former without in any way affecting the rights of the non-member country arising from that agreement and without imposing any new obligations on that non-member country. That does not mean, however, that, where the infringement of Community law results directly from a provision of a bilateral international agreement concluded by a Member State after its accession to the Community, the Court is prevented from holding that that infringement exists so as not to compromise the rights which non-member countries derive from the very provision which infringes Community law.Justification under Article 56 of the TreatyArguments of the parties55 The United Kingdom submits that, even if there was discrimination prima facie contrary to Article 52 of the Treaty, it is justified on grounds of public policy under Article 56 of the Treaty. In particular, the United Kingdom asserts a public-policy interest in retaining the right to revoke, suspend, limit or impose conditions on the operating authorisations or technical permissions of airlines designated by the United States of America but owned and effectively controlled by other non-member countries or their nationals. If the Commission's view were to be accepted, Member States would lose their power to restrict the access of any airline which the United States of America chose to designate. The implications of such a loss of power go beyond the purely economic aspects and encompass foreign policy, safety and security considerations.56 The Commission contends that the public-policy exception in Article 56 of the Treaty is a derogation from a fundamental freedom and must therefore be construed narrowly (see Case 79/85 Segers [1986] ECR 2375). According to the Commission, that exception may never be relied on in order to pursue economic aims (Case 352/85 Bond van Adverteerders and Others v Netherlands State [1988] ECR 2085). Moreover, the Commission maintains that in the light of the provisions of Council Directive 64/221/EEC of 25 February 1964 on the coordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ, English Special Edition 1963-1964, p. 117), which require public-policy considerations to relate to the conduct of a particular individual and not to be based simply on general conduct, it is not clear how Article 5 of the Bermuda II Agreement, which discriminates against an entire class of operators, can be justified as a measure of public policy under Article 56 of the Treaty.Findings of the Court57 It should be recalled that, according to settled case-law, recourse to justification on grounds of public policy under Article 56 of the Treaty presupposes the need to maintain a discriminatory measure in order to deal with a genuine and sufficiently serious threat affecting one of the fundamental interests of society (see, to that effect, Case 30/77 R v Bouchereau [1977] ECR I-1999, paragraph 35; Case C-114/97 Commission v Spain [1998] ECR I-6717, paragraph 46; Case C-348/96 Calfa [1999] ECR I-11, paragraph 21). It follows that there must be a direct link between that threat, which must, moreover, be current, and the discriminatory measure adopted to deal with it (see, to that effect, Case 352/85 Bond van Adverteerders and Others, paragraph 36; and Calfa, paragraph 24).58 In this case, Article 5 of the Bermuda II Agreement does not limit the power to refuse operating authorisations or the necessary technical permissions to an airline designated by the other party solely to circumstances where that airline represents a threat to the public policy of the party granting those authorisations and permissions.59 In any event, there is no direct link between such (purely hypothetical) threat to the public policy of the United Kingdom as might be represented by the designation of an airline by the United States of America and generalised discrimination against Community airlines.60 The justification put forward by the United Kingdom on the basis of Article 56 of the Treaty must therefore be rejected.61 Having regard to all the foregoing considerations, it must be held that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which allows that non-member country to revoke, suspend or limit traffic rights in cases where air carriers designated by the United Kingdom are not owned by the United Kingdom or its nationals, the United Kingdom has failed to fulfil its obligations under Article 52 of the Treaty. Decision on costs Costs62 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the United Kingdom has been unsuccessful, the latter must be ordered to pay the costs.P63 Pursuant to Article 69(4) of the Rules of Procedure, the Kingdom of the Netherlands is to bear its own costs. Operative part On those grounds,THE COURThereby:1. Declares that, by concluding and applying an Air Services Agreement signed on 23 July 1977 with the United States of America which allows that non-member country to revoke, suspend or limit traffic rights in cases where air carriers designated by the United Kingdom of Great Britain and Northern Ireland are not owned by it or its nationals, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 52 of the EC Treaty (now, after amendment, Article 43 EC);2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs;3. Orders the Kingdom of the Netherlands to bear its own costs.

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A MEMBER STATE MAY REQUIRE AN UNDERTAKING IN THE CONSTRUCTION INDUSTRY ESTABLISHED IN ANOTHER MEMBER STATE WHICH POSTS SOME OF ITS WORKERS TO APPLY MINIMUM WAGE RULES IF THESE ARE TO THE ADVANTAGE OF THE POSTED WORKERS

| 61999J0164 Judgment of the Court (Fifth Chamber) of 24 January 2002. - Portugaia Construções Ldª. - Reference for a preliminary ruling: Amtsgericht Tauberbischofsheim - Germany. - Freedom to provide services - Construction undertakings - Directive 96/71/EC - Posting of workers - Minimum wage. - Case C-164/99. European Court reports 2002 Page I-00787 Keywords 1. Freedom to provide services - Restrictions - Requirement that undertakings providing services pay the minimum remuneration laid down by the national rules of the host Member State - Whether permissible - Conditions - Assessment by national authorities or national courts - Declared intention of the legislature - Effect(EC Treaty, Art. 59 (now, after amendment, Art. 49 EC) and Art. 60 (now Art. 50 EC))2. Freedom to provide services - Restrictions - Entitlement, by concluding a collective agreement specific to one undertaking, to pay wages lower than the minimum wage laid down in a collective agreement declared to be of general application - Right reserved to national employers - Not permissible(EC Treaty, Art. 59 (now, after amendment, Art. 49 EC)) Summary 1. In principle Community law does not preclude a Member State from requiring an undertaking established in another Member State which provides services in the territory of the first State to pay its workers the minimum remuneration laid down by the national rules of that State.In assessing whether the application by the host Member State to service providers established in another Member State of domestic legislation laying down a minimum wage is compatible with Article 59 of the Treaty (now, after amendment, Article 49 EC) and Article 60 of the Treaty (now Article 50 EC), it is for the national authorities or, as the case may be, the national courts to determine whether, considered objectively, that legislation provides for the protection of posted workers. In that regard, although the declared intention of the legislature cannot be conclusive, it may nevertheless constitute an indication as to the objective pursued by the legislation.( see paras 21, 30, and operative part 1 )2. The fact that, in concluding a collective agreement specific to one undertaking, an employer established in one Member State can pay wages lower than the minimum wage laid down in a collective agreement declared to be generally applicable, whilst an employer established in another Member State cannot do so, gives rise to unequal treatment and constitutes an unjustified restriction on the freedom to provide services.( see paras 34-35, and operative part 2 ) Parties In Case C-164/99,REFERENCE to the Court under Article 234 EC by the Amtsgericht Tauberbischofsheim (Germany) for a preliminary ruling in the infringement proceedings brought before that court againstPortugaia Construções Lda,on the interpretation of Article 59 of the EC Treaty (now, after amendment, Article 49 EC) and Article 60 of the EC Treaty (now Article 50 EC) and of Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (OJ 1997 L 18, p. 1),THE COURT (Fifth Chamber),composed of: P. Jann, President of the Chamber, D.A.O. Edward (Rapporteur) and A. La Pergola, Judges,Advocate General: J. Mischo,Registrar: H.A. Rühl, Principal Administrator,after considering the written observations submitted on behalf of:- Portugaia Construções Lda, by B. Buchberger, Rechtsanwalt,- the German Government, by W.-D. Plessing and C.-D. Quassowski, acting as Agents,- the French Government, by K. Rispal-Bellanger and C. Bergeot, acting as Agents,- the Netherlands Government, by M.A. Fierstra, acting as Agent,- the Portuguese Government, by L. Fernandes and S. Emídio de Almeida, acting as Agents,- the Commission of the European Communities, by P. Hillenkamp and M. Patakia, acting as Agents, assisted by R. Karpenstein, Rechtsanwalt,having regard to the Report for the Hearing,after hearing the oral observations of Portugaia Construções Lda, of the German Government and of the Commission at the hearing on 15 March 2001,after hearing the Opinion of the Advocate General at the sitting on 3 May 2001,gives the followingJudgment Grounds 1 By order of 13 April 1999, received at the Court on 4 May 1999, the Amtsgericht (District Court) Tauberbischofsheim (Germany) referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Article 59 of the EC Treaty (now, after amendment, Article 49 EC) and Article 60 of the EC Treaty (now Article 50 EC) and of Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (OJ 1997 L 18, p. 1).2 The questions have been raised in proceedings between the Tauberbischofsheim Employment Office and Portugaia Construções Lda (hereinafter Portugaia), which lodged an objection against a notice which it received for recovery of a sum of DEM 138 018.52.Law applicable3 The Arbeitnehmer-Entsendegesetz (Law on the Posting of Employees, hereinafter the AEntG), in the version of 26 February 1996 applicable to the instant case, applies to the construction industry.4 The first sentence of Paragraph 1(1) of the AEntG extends the applicability of certain collective agreements having binding general application to employers having their seat abroad and to their workers posted to Germany. That provision is worded as follows:The legal provisions laid down in a collective agreement in the construction industry declared to be of binding general application within the meaning of Paragraphs 1 and 2 of the Baubetriebe-Verordnung (Regulation on the Building Industry) ... , shall also apply in so far as the undertaking is principally engaged in providing building services within the meaning of Paragraph 75(1), point 2, of the Arbeitsförderungsgesetz (Law on the Promotion of Employment) ... and German law is not in any event determinative for the employment relationship, to an employment relationship binding an employer established abroad and his employee working within the territorial scope of that collective agreement, where and to the extent to which(1) the collective agreement lays down a single minimum wage for all workers within its scope of application and(2) domestic employers established outside the territorial scope of application of that collective agreement must also guarantee their employees working within the territorial scope of application of the collective agreement at the very least the collectively agreed work terms in force at the place of work.5 According to the third and fourth sentences of Paragraph 1(1) of the AEntG, an employer, within the meaning of the first sentence, is required to guarantee his posted workers the work terms provided for in the first sentence of that paragraph.6 Under Paragraph 5 of the AEntG, a breach of the binding provisions of Paragraph 1 of that Law is punishable as an offence. Under Paragraph 29 of the Gesetz über Ordnungswidrigkeiten (Law on Regulatory Offences), the court may order recovery of any pecuniary advantages obtained through punishable conduct.7 On 2 September 1996, the social partners in the German construction industry concluded, with effect from 1 October 1996 but at the earliest from the date of entry into force of its general applicability, a collective agreement laying down a minimum wage in the construction sector in the Federal Republic of Germany (hereinafter the collective agreement).8 The collective agreement was declared generally applicable on 12 November 1996, but its applicability did not take effect until 1 January 1997.9 The national court also points out that, under German law governing collective agreements, the social partners may conclude collective agreements at various levels, at the federal level as well as at the level of an undertaking. In this regard, collective agreements specific to an undertaking in principle take precedence over general collective agreements.The main proceedings and the questions referred for a preliminary ruling10 Portugaia is a company established in Portugal. Between March and July 1997, it carried out structural building work in Tauberbischofsheim. In order to carry out that work, it posted a number of its workers to that building site.11 In March and May 1997, the Arbeitsamt (Employment Office) in Tauberbischofsheim carried out an investigation into the employment conditions on that building site. On the basis of the documentation submitted by Portugaia, it concluded that Portugaia was paying the workers who had been the object of the inspection a wage lower than the minimum wage payable under the collective agreement. It accordingly ordered payment of the sum outstanding, that is to say the difference between the hourly wage payable and that actually paid, multiplied by the total number of hours worked, making a total sum of DEM 138 018.52.12 The national court before which Portugaia lodged an objection against the recovery notice for payment of that sum has doubts about the compatibility of the German legislation with Articles 59 and 60 of the Treaty. It points out that, according to the stated grounds of the AEntG, its objective is to protect the national labour market - in particular against social dumping resulting from an influx of low-wage labour -, to reduce national unemployment and to enable German undertakings to adapt to the internal market. Unlike German employers, employers from other Member States do not have the possibility of concluding more specific collective agreements with a German trade union in order to avoid application of collective agreements.13 Taking the view that the case depended on an interpretation of the relevant Community rules, the Amtsgericht Tauberbischofsheim decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:1. Is an interpretation of Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services ... or, if that directive is not applicable, an interpretation of Article 59 et seq. of the EC Treaty, under which overriding requirements of public interest capable of justifying a restriction on the freedom to provide services in cases involving the posting of employees can lie not only in the social protection of the employees posted but also in the protection of the national construction industry and the reduction in national unemployment for the purpose of preventing social tension, consistent with Community law?2. Does it amount to an unjustified restriction on the freedom to provide services under the EC Treaty if a domestic employer can pay less than the minimum wage laid down in a collective agreement declared to be generally binding by concluding a collective agreement specific to one undertaking (and enjoying precedence), whereas this is - at least in fact - not possible for any non-German EC employer when he plans to post workers to the Federal Republic of Germany?The first question14 As the Netherlands Government rightly points out, the first question does not have to be considered with reference to Directive 96/71 since the time-limit for transposition of that directive, fixed for 16 December 1999, had not expired at the time of the events in question.15 It follows that the legislation in question in the main proceedings must be examined in the light of Articles 59 and 60 of the Treaty alone.16 It is settled case-law that Article 59 of the Treaty requires not only the elimination of all discrimination on grounds of nationality against providers of services who are established in another Member State, but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, which is liable to prohibit, impede or render less attractive the activities of a provider of services established in another Member State in which he lawfully provides similar services (see Case C-76/90 Säger [1991] ECR I-4221, paragraph 12; Case C-43/93 Vander Elst [1994] ECR I-3803, paragraph 14; Case C-272/94 Guiot [1996] ECR I-1905, paragraph 10; Joined Cases C-369/96 and C-376/96 Arblade and Others [1999] ECR I-8453, paragraph 33; and Case C-165/98 Mazzoleni and ISA [2001] ECR I-2189, paragraph 22).17 In particular, a Member State may not make the provision of services in its territory subject to compliance with all the conditions required for establishment, thereby depriving of all practical effectiveness the provisions of the Treaty whose object is, precisely, to guarantee the freedom to provide services (see Säger, paragraph 13).18 In that regard, the application of the host Member State's domestic legislation to service providers is liable to prohibit, impede or render less attractive the provision of services by persons or undertakings established in other Member States to the extent that it involves expenses and additional administrative and economic burdens (Mazzoleni and ISA, paragraph 24).19 However, it clear from settled case-law that, where such domestic legislation is applicable to all persons and undertakings operating in the territory of the Member State in which the service is provided, it may be justified where it meets overriding requirements relating to the public interest in so far as that interest is not safeguarded by the rules to which the provider of such a service is subject in the Member State in which he is established and in so far as it is appropriate for securing the attainment of the objective which it pursues and does not go beyond what is necessary in order to attain it (see, in particular, Case 279/80 Webb [1981] ECR 3305, paragraph 17; Case C-205/99 Analir and Others [2001] ECR I-1271, paragraph 25, and Mazzoleni and ISA, cited above, paragraph 25).20 Overriding reasons relating to the public interest which have been recognised by the Court include the protection of workers (see, in particular, Webb, paragraph 19, Arblade and Others, paragraph 36, and Mazzoleni and ISA, paragraph 27).21 As regards, more specifically, national provisions relating to minimum wages, such as those at issue in the main proceedings, it is clear from the case-law of the Court that in principle Community law does not preclude a Member State from requiring an undertaking established in another Member State which provides services in the territory of the first State to pay its workers the minimum remuneration laid down by the national rules of that State (Joined Cases 62/81 and 63/81 Seco and Desquenne & Giral [1982] ECR 223, paragraph 14; Guiot, paragraph 12; Arblade and Others, paragraph 33; and Mazzoleni and ISA, paragraphs 28 and 29).22 In other words, it may be acknowledged that, in principle, the application by the host Member State of its minimum-wage legislation to providers of services established in another Member State pursues an objective of public interest, namely the protection of employees.23 However, there may be circumstances in which the application of such rules would not be in conformity with Articles 59 and 60 of the Treaty (see, to this effect, Mazzoleni and ISA, paragraph 30).24 It is therefore for the national authorities or, as the case may be, the courts of the host Member State, before applying the minimum-wage legislation to service providers established in another Member State, to determine whether that legislation does indeed pursue an objective of public interest and by appropriate means.25 In the present case, the national court points out that, according to the stated grounds of the AEntG, the purpose of that Law is to protect the domestic construction industry and to reduce unemployment in order to avoid social tensions.26 However, according to settled case-law, measures forming a restriction on the freedom to provide services cannot be justified by economic aims, such as the protection of domestic businesses (see, most recently, the judgment of 25 October 2001 in Joined Cases C-49/98, C-50/98, C-52/98 to C-54/98 and C-68/98 to C-71/98 Finalarte and Others [2001] ECR I-7831, paragraph 39).27 Whilst the intention of the legislature, as apparent from the statement of the grounds on which a Law was adopted, may be an indication of the aim of that Law, that declared intention is not conclusive (see Finalarte and Others, paragraph 40).28 It is, however, for the national court to determine whether, viewed objectively, the rules in question in the main proceedings promote the protection of posted workers (Finalarte and Others, paragraph 41).29 As the Court has already held, it is necessary to determine whether those rules confer a genuine benefit on the workers concerned, which significantly augments their social protection. In this context, the stated intention of the legislature may lead to a more careful assessment of the alleged benefits conferred on workers by the measures which it has adopted (Finalarte and Others, paragraph 42).30 It follows from the foregoing considerations that the answer to be given to the first question must be that, in assessing whether the application by the host Member State to service providers established in another Member State of domestic legislation laying down a minimum wage is compatible with Articles 59 and 60 of the Treaty, it is for the national authorities or, as the case may be, the national courts to determine whether, considered objectively, that legislation provides for the protection of posted workers. In that regard, although the declared intention of the legislature cannot be conclusive, it may nevertheless constitute an indication as to the objective pursued by the legislation.The second question31 By its second question, the national court asks essentially whether the fact that a domestic employer may, in concluding a collective agreement specific to one undertaking, pay wages lower than the minimum wage laid down by a collective agreement declared to be generally binding, whilst an employer established in another Member State cannot do so, constitutes an unjustified restriction on the freedom to provide services.32 The German Government submits that this question is inadmissible on the ground that it is purely hypothetical and that the answer is clearly irrelevant to the determination of the case. In particular, the German Government points out that, as far as it is aware, in the economic sectors in which foreign employees must respect collective agreements relating to minimum wages, there is no collective agreement specific to one undertaking providing that the German employers concerned may apply terms of employment less favourable for workers than those to be observed under the AEntG.33 That submission cannot be upheld. It is sufficient to recall that according to settled case-law it is solely for the national courts before which actions are brought, and which must bear the responsibility for the subsequent judicial decision, to determine in the light of the particular aspects of each case both the need for a preliminary ruling in order to enable them to deliver judgment and the relevance of the questions which they submit to the Court. Dismissal of a request from a national court is possible only where it is clear that the interpretation of Community law requested by that court has no bearing on the real situation or on the subject-matter of the case (see Joined Cases C-332/92, C-333/92 and C-335/92 Eurico Italia and Others [1994] ECR I-711, paragraph 17). However, that is not the case here.34 As regards the substance of the matter, the fact that, unlike an employer from the host Member State, an employer established in another Member State has no possibility of avoiding the obligation to pay the minimum wage laid down by the collective agreement governing the economic sector concerned creates unequal treatment contrary to Article 59 of the Treaty. It must be emphasised in this regard that no ground of justification provided for by the Treaty has been invoked.35 The reply to be given to the second question must therefore be that the fact that, in concluding a collective agreement specific to one undertaking, a domestic employer can pay wages lower than the minimum wage laid down in a collective agreement declared to be generally applicable, whilst an employer established in another Member State cannot do so, constitutes an unjustified restriction on the freedom to provide services. Decision on costs Costs36 The costs incurred by the German, French, Dutch and Portuguese Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT (Fifth Chamber),in answer to the questions referred to it by the Amtsgericht Tauberbischofsheim by order of 13 April 1999, hereby rules:1. In assessing whether the application by the host Member State to service providers established in another Member State of domestic legislation laying down a minimum wage is compatible with Article 59 of the EC Treaty (now, after amendment, Article 49 EC) and Article 60 of the EC Treaty (now Article 50 EC), it is for the national authorities or, as the case may be, the national courts to determine whether, considered objectively, that legislation provides for the protection of posted workers. In that regard, although the declared intention of the legislature cannot be conclusive, it may nevertheless constitute an indication as to the objective pursued by the legislation.2. The fact that, in concluding a collective agreement specific to one undertaking, a domestic employer can pay wages lower than the minimum wage laid down in a collective agreement declared to be generally applicable, whilst an employer established in another Member State cannot do so, constitutes an unjustified restriction on the freedom to provide services.

5fbdf-0545bad-4889

EN

THE ADVANTAGES ARISING UNDER A BILATERAL CONVENTION CONCLUDED BETWEEN A MEMBER STATE AND A NON-MEMBER COUNTRY MUST, IN PRINCIPLE, BE CONFERRED ON WORKERS FROM OTHER MEMBER STATES THAT ARE NOT PARTIES TO THAT CONVENTION.

| 62000J0055 Judgment of the Court of 15 January 2002. - Elide Gottardo v Istituto nazionale della previdenza sociale (INPS). - Reference for a preliminary ruling: Tribunale ordinario di Roma - Italy. - Reference for a preliminary ruling - Articles 12 EC and 39(2) EC - Old-age benefits - Social security convention concluded between the Italian Republic and the Swiss Confederation - Refusal to take account of periods of insurance completed by a French national in Switzerland. - Case C-55/00. European Court reports 2002 Page I-00413 Keywords 1. International agreements - Agreements concluded by Member States - Bilateral convention concluded between a Member State and a non-member country - Obligations on the Member State to implement undertakings which it has assumed - Compliance with the fundamental principle that Community nationals should be treated equally(Art. 307 EC)2. Social security for migrant workers - Insurance relating to old age and death - Calculation of insurance periods - Bilateral convention concluded between a Member State and a non-member country recognising, for the purpose of acquiring the right to benefits in the Member State, that account may be taken of periods of insurance completed under the legislation of the non-member country by nationals of that Member State - Obligation on the Member State to take account of such periods completed by a national of another Member State - Prohibition of discrimination on grounds of nationality(Art. 39 EC; Council Regulation No 1408/71, Art. 1(j)) Summary 1. When a Member State concludes a bilateral international convention with a non-member country, the fundamental principle of equal treatment requires that Member State to grant nationals of other Member States the same advantages as those which its own nationals enjoy under that convention unless it can provide objective justification for refusing to do so. When giving effect to commitments assumed under international agreements, be it an agreement between Member States or an agreement between a Member State and one or more non-member countries, Member States are required, subject to the provisions of Article 307 EC, to comply with the obligations that Community law imposes on them. The fact that non-member countries, for their part, are not obliged to comply with any Community-law obligation is of no relevance in this respect.( see paras 33-34 )2. The competent social security authorities of one Member State are required, pursuant to their Community obligations under Article 39 EC, to take account, for purposes of the acquisition of rights to old-age benefits, of periods of insurance completed in a non-member country by a national of a second Member State in circumstances where, under identical conditions of contribution, those competent authorities will take such periods into account where they have been completed by nationals of the first Member State pursuant to a bilateral international convention concluded between that Member State and the non-member country.( see para. 39 and operative part ) Parties In Case C-55/00,REFERENCE to the Court under Article 234 EC by the Tribunale ordinario di Roma (Italy) for a preliminary ruling in the proceedings pending before that court betweenElide GottardoandIstituto nazionale della previdenza sociale (INPS)on the interpretation of Articles 12 EC and 39(2) EC,THE COURT,composed of: G.C. Rodríguez Iglesias, President, F. Macken and S. von Bahr (Presidents of Chambers), C. Gulmann, D.A.O. Edward (Rapporteur), A. La Pergola, L. Sevón, M. Wathelet, V. Skouris, J.N. Cunha Rodrigues and C.W.A. Timmermans, Judges,Advocate General: D. Ruiz-Jarabo Colomer,Registrar: L. Hewlett, Administrator,after considering the written observations submitted on behalf of:- Mrs Gottardo, by R. Ciancaglini and M. Rossi, avvocatesse,- the Istituto nazionale della previdenza sociale (INPS), by C. De Angelis and M. Di Lullo, avvocati,- the Italian Government, by U. Leanza, acting as Agent, assisted by D. Del Gaizo, avvocato dello Stato,- the Austrian Government, by C. Pesendorfer, acting as Agent,- the Commission of the European Communities, by P. Hillenkamp, E. Traversa and N. Yerrel, acting as Agents,having regard to the Report for the Hearing,after hearing the oral observations of Mrs Gottardo, the Istituto nazionale della previdenza sociale (INPS), the Italian Government and the Commission at the hearing on 6 March 2001,after hearing the Opinion of the Advocate General at the sitting on 5 April 2001,gives the followingJudgment Grounds 1 By order of 1 February 2000, received at the Court on 21 February 2000, the Tribunale ordinario di Roma (Rome District Court) referred for a preliminary ruling under Article 234 EC a question concerning the interpretation of Articles 12 EC and 39(2) EC.2 That question has arisen in a dispute between Mrs Gottardo, a French national, and the Istituto nazionale della previdenza sociale (the Italian National Social Security Institute) (the INPS) concerning Mrs Gottardo's entitlement to an Italian old-age pension.Community law3 Article 12 EC provides:Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.The Council, acting in accordance with the procedure referred to in Article 251, may adopt rules designed to prohibit such discrimination.4 Article 39(1) and (2) EC provides:1. Freedom of movement for workers shall be secured within the Community.2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment.5 The coordination of national social security legislation comes within the framework of the free movement of persons and is the subject of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 (OJ 1983 L 230, p. 6), as amended by Council Regulation (EC) No 3096/95 of 22 December 1995 (OJ 1995 L 335, p. 10) (Regulation No 1408/71).6 Article 3 of Regulation No 1408/71 provides:1. Subject to the special provisions of this Regulation, persons resident in the territory of one of the Member States to whom this Regulation applies shall be subject to the same obligations and enjoy the same benefits under the legislation of any Member State as the nationals of that State.2. ...3. Save as provided in Annex III, the provisions of social security conventions which remain in force pursuant to Article 7(2)(c) and the provisions of conventions concluded pursuant to Article 8(1) shall apply to all persons to whom this Regulation applies.7 Article 1(j), first subparagraph, and 1(k) of Regulation No 1408/71 provides:For the purposes of this Regulation:...(j) legislation means in respect of each Member State statutes, regulations and other provisions and all other implementing measures, present or future, relating to the branches and schemes of social security covered by Article 4(1) and (2) or those special non-contributory benefits covered by Article 4(2a)....(k) social security convention means any bilateral or multilateral instrument which binds or will bind two or more Member States exclusively, and any other multilateral instrument which binds or will bind at least two Member States and one or more other States in the field of social security, for all or part of the branches and schemes set out in Article 4(1) and (2), together with agreements, of whatever kind, concluded pursuant to the said instruments.National legislation8 On 14 December 1962 the Italian Republic and the Swiss Confederation signed in Rome a bilateral social security convention, together with its final protocol and joint declarations (the Italo-Swiss Convention). In the case of the Italian Republic, that convention was ratified by Law No 1781 of 31 October 1963 (GURI No 326 of 17 December 1963) and entered into force on 10 September 1964.9 Article 1(1) of the Italo-Swiss Convention provides:This Convention shall apply:(a) In Switzerland:...(b) In Italy:(i) to legislation on invalidity insurance, old-age insurance and survivors' insurance, including the special schemes replacing the general scheme for specified categories of workers;....10 Article 2 of the Italo-Swiss Convention provides that Swiss and Italian nationals shall enjoy equal treatment with regard to the rights and obligations flowing from the legislation referred to in Article 1.11 Article 9, which features in Chapter 1 of the third part of the Italo-Swiss Convention, entitled Invalidity insurance, old-age insurance and survivors' insurance, establishes what may be termed the aggregation principle. Article 9(1) provides:Where, solely on the basis of periods of insurance and periods treated as such completed in accordance with Italian legislation, an insured person is unable to enforce a right to an invalidity benefit, an old-age benefit or a death benefit under the terms of that legislation, periods completed under Swiss old-age insurance and survivors' insurance (periods of contribution and periods so treated) shall be aggregated with periods completed under Italian insurance in order to create entitlement to those benefits, in so far as those periods do not overlap.12 On 2 April 1980 the two Contracting States signed an amendment to the Italo-Swiss Convention, which the Italian Republic ratified by Law No 668 of 7 October 1981 (GURI No 324 of 25 November 1981) and which entered into force on 10 February 1982. Article 3 of that amendment is designed to extend the scope of the aggregation principle, as defined in the preceding paragraph of the present judgment, by adding the following subparagraph to Article 9(1) of the Italo-Swiss Convention:In the case where an insured person is unable to enforce a right to benefits even in the light of the preceding subparagraph, periods of insurance completed in third countries linked to both Switzerland and Italy by social security conventions relating to old-age insurance, survivors' insurance and invalidity insurance shall also be aggregated.13 When that amendment entered into force, the countries for which aggregation of insurance periods was possible were the following: the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Republic of Austria, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland, the Principality of Liechtenstein, the United States of America and the Federal Republic of Yugoslavia. In view of the fact that the French Republic has not concluded a convention with the Swiss Confederation, periods of insurance completed in France cannot, under the Italo-Swiss Convention, be taken into account for acquisition of entitlement to old-age, survivors' or invalidity benefits.The dispute in the main proceedings and the question submitted14 Mrs Gottardo, who is an Italian national by birth, renounced that nationality in favour of French nationality following her marriage in France on 7 February 1953 to a French national. According to the information on the case-file, Mrs Gottardo was required at that time to assume the nationality of her husband.15 Mrs Gottardo worked successively in Italy, Switzerland and France, where she paid social security contributions as follows: 100 weekly contributions in Italy, 252 weekly contributions in Switzerland, and 429 weekly contributions in France. She is in receipt of Swiss and French old-age pensions, which were granted to her without any need for aggregation of periods of insurance.16 According to the information before the Court, Mrs Gottardo wishes to obtain an Italian old-age pension pursuant to Italian social security legislation. However, even if the Italian authorities took into account the periods of insurance completed in France, in accordance with Article 45 of Regulation No 1408/71, aggregation of the Italian and French periods would not enable her to achieve the minimum period of contributions required under Italian legislation for entitlement to an Italian pension. Mrs Gottardo would be entitled to an Italian old-age pension only if account were also taken of the periods of insurance completed in Switzerland pursuant to the aggregation principle referred to in Article 9(1) of the Italo-Swiss Convention.17 Mrs Gottardo's application on 3 September 1996 for an old-age pension was rejected by the INPS, by decision of 14 November 1997, on the ground that she was a French national and that the Italo-Swiss Convention therefore did not apply to her. The administrative appeal which Mrs Gottardo lodged against that decision was dismissed on the same grounds by decision of the INPS of 9 June 1998.18 Mrs Gottardo thereupon brought the matter before the Tribunale ordinario di Roma, arguing that, since she was a national of a Member State, the INPS was required to recognise her entitlement to a pension under the same conditions as it applied to Italian nationals.19 Since it was unsure whether the rejection by the INPS of Mrs Gottardo's application solely on the ground of her French nationality was contrary to either Article 12 EC or Article 39 EC, the Tribunale ordinario di Roma decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:[Is] a worker who is a citizen of a Member State with a record of payments of social security contributions to the competent institution of another Member State ... entitled to be awarded an old-age pension on the basis of aggregation of the contributions paid to the institution of a State outside the Union under the convention which the Member State has concluded with the latter and which it applies to its own citizens[?]Findings of the Court20 The essence of the national court's question is whether the competent social security authorities of one Member State (in casu the Italian Republic) are required, pursuant to their Community obligations under Article 12 EC or Article 39 EC, to take into account, for the purpose of entitlement to old-age benefits, periods of insurance completed in a non-member country (in casu the Swiss Confederation) by a national of a second Member State (in casu the French Republic) in circumstances where, under identical conditions of contribution, those competent authorities will take into account such periods where they have been completed by nationals of the first Member State pursuant to a bilateral international convention concluded between that Member State and the non-member country.21 Under Article 12 EC, the principle of non-discrimination applies [w]ithin the scope of application of this Treaty and without prejudice to any special provisions contained therein. By this latter expression, Article 12 EC refers in particular to other Treaty provisions in which the general principle which it sets out is given concrete form in respect of specific situations. Such is the case, inter alia, with regard to the provisions on the free movement of workers (see, in this connection, Case 186/87 Cowan [1989] ECR 195, paragraph 14).The principle of equal treatment provided for by the Treaty22 Having been employed as a teacher in two different Member States, Mrs Gottardo has exercised her right of free movement. Her application for an old-age pension on the basis of aggregation of the periods of insurance she has completed comes within the scope both ratione personae and ratione materiae of Article 39 EC.23 According to the order for reference, the competent Italian authorities recognise the right of Italian nationals who have paid social security contributions to both the Italian and Swiss social security systems, and who are thus in a situation identical to that of Mrs Gottardo, to receive payment of their old-age pensions through aggregation of the Italian and Swiss periods of insurance.24 As the INPS acknowledged in its observations, if Mrs Gottardo had retained Italian nationality she would satisfy the conditions of entitlement to an Italian old-age pension. The INPS does not dispute that the sole ground of refusal of Mrs Gottardo's application was that she is a French national. It is thus common ground that the dispute concerns a difference in treatment on the sole ground of nationality.25 However, according to the Italian Government and the INPS, the latter's refusal to grant Mrs Gottardo an old-age pension on the basis of aggregation of the periods of insurance which she completed in Italy and France, as well as in Switzerland, is justified by the fact that the conclusion by a single Member State - in casu, the Italian Republic - of a bilateral international convention with a non-member country, namely the Swiss Confederation, does not come within the scope of Community competence.26 The Italian Government refers in this regard to the wording of Article 3 of Regulation No 1408/71, read in the light of the definitions contained in Article 1(j) and (k) thereof, as interpreted by the Court in Case C-23/92 Grana-Novoa [1993] ECR I-4505.27 In Grana-Novoa, cited above, the applicant, who was a Spanish national, had performed work subject to compulsory social insurance, first in Switzerland and subsequently in Germany. The German authorities had refused her a German invalidity pension on the ground that she had worked for an insufficient number of years in Germany. In exactly the same way as Mrs Gottardo in the main proceedings in the present case, Mrs Grana-Novoa sought to rely on the provisions of a convention concluded between the Federal Republic of Germany and the Swiss Confederation, application of which was limited to German and Swiss citizens, in order to have account taken of the periods of insurance which she had completed in Switzerland.28 The first question submitted by the Bundessozialgericht (Federal Social Court, Germany) asked the Court to rule on the interpretation of the term legislation in Article 1(j) of Regulation No 1408/71. The Court ruled that a convention concluded between a single Member State and one or more non-member countries does not come within the concept of legislation, as that term is used in Regulation No 1408/71. The Bundessozialgericht's second question, which concerned the principle of equal treatment, was posed only in the event that the first question should be answered in the affirmative and was for that reason not addressed by the Court.29 The question submitted in the present case is based on application of the principles flowing directly from the provisions of the Treaty, so it is appropriate to recall the Court's case-law on bilateral international conventions.30 With regard to a cultural agreement concluded between two Member States which reserved entitlement to study scholarships exclusively to nationals of those two States, the Court has ruled that Article 7 of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475) obliged the authorities of those two Member States to extend the benefit of the training bursaries provided for by that bilateral agreement to Community workers established within their territory (Case 235/87 Matteucci [1988] ECR 5589, paragraph 16).31 The Court has also ruled that if application of a provision of Community law is liable to be impeded by a measure adopted pursuant to the implementation of a bilateral agreement, even where the agreement falls outside the field of application of the Treaty, every Member State is under a duty to facilitate application of that provision and, to that end, to assist every other Member State which is under an obligation under Community law (Matteucci, cited above, paragraph 19).32 With regard to a bilateral international treaty concluded between a Member State and a non-member country for the avoidance of double taxation, the Court has pointed out that, although direct taxation is a matter falling within the competence of the Member States alone, the latter may not disregard Community rules but must exercise their powers in a manner consistent with Community law. The Court accordingly ruled that the national treatment principle requires the Member State that is party to such a treaty to grant to permanent establishments of companies resident in another Member State the advantages provided for by the agreement on the same conditions as those which apply to companies resident in the Member State that is party to the treaty (see, in this connection, Case C-307/97 Saint-Gobain ZN [1999] ECR I-6161, paragraphs 57 to 59).33 It follows from that case-law that, when giving effect to commitments assumed under international agreements, be it an agreement between Member States or an agreement between a Member State and one or more non-member countries, Member States are required, subject to the provisions of Article 307 EC, to comply with the obligations that Community law imposes on them. The fact that non-member countries, for their part, are not obliged to comply with any Community-law obligation is of no relevance in this respect.34 It follows from all of the foregoing that, when a Member State concludes a bilateral international convention on social security with a non-member country which provides for account to be taken of periods of insurance completed in that non-member country for acquisition of entitlement to old-age benefits, the fundamental principle of equal treatment requires that that Member State grant nationals of other Member States the same advantages as those which its own nationals enjoy under that convention unless it can provide objective justification for refusing to do so.35 It also follows that the Court's interpretation of the term legislation in Article 1(j) of Regulation No 1408/71 cannot affect the obligation of every Member State to comply with the principle of equal treatment laid down in Article 39 EC.The existence of objective justification36 Disturbing the balance and reciprocity of a bilateral international convention concluded between a Member State and a non-member country may, it is true, constitute an objective justification for the refusal by a Member State party to that convention to extend to nationals of other Member States the advantages which its own nationals derive from that convention (see, to that effect, Saint-Gobain ZN, cited above, paragraph 60).37 However, the INPS and the Italian Government have failed to establish that, in the case in the main proceedings, the obligations which Community law imposes on them would compromise those resulting from the commitments which the Italian Republic has entered into vis-à-vis the Swiss Confederation. The unilateral extension by the Italian Republic, to workers who are nationals of other Member States, of the benefit of having insurance periods which they completed in Switzerland taken into account for the purpose of acquiring entitlement to Italian old-age benefits would in no way compromise the rights which the Swiss Confederation derives from the Italo-Swiss Convention and would not impose any new obligations on that country.38 The only objections which the INPS and the Italian Government have put forward to justify refusal to allow aggregation of the insurance periods completed by Mrs Gottardo relate to a possible increase in their financial burden and administrative difficulties in liaising with the competent authorities of the Swiss Confederation. Those grounds cannot justify the Italian Republic's failure to comply with its Treaty obligations.39 The answer to the question submitted by the national court must therefore be that the competent social security authorities of one Member State are required, pursuant to their Community obligations under Article 39 EC, to take account, for purposes of acquiring the right to old-age benefits, of periods of insurance completed in a non-member country by a national of a second Member State in circumstances where, under identical conditions of contribution, those competent authorities will take into account such periods where they have been completed by nationals of the first Member State pursuant to a bilateral international convention concluded between that Member State and the non-member country. Decision on costs Costs40 The costs incurred by the Italian and Austrian Governments and the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds,THE COURT,in answer to the question referred to it by the Tribunale ordinario di Roma by order of 1 February 2000, hereby rules:The competent social security authorities of one Member State are required, pursuant to their Community obligations under Article 39 EC, to take account, for purposes of acquiring the right to old-age benefits, of periods of insurance completed in a non-member country by a national of a second Member State in circumstances where, under identical conditions of contribution, those competent authorities will take into account such periods where they have been completed by nationals of the first Member State pursuant to a bilateral international convention concluded between that Member State and the non-member country.

0b6d2-f7e1942-4d9d

EN

THE COURT OF FIRST INSTANCE UPHOLDS THE RULING AGAINST BRITISH AIRWAYS FOR ABUSE OF A DOMINANT POSITION

«(Competition – Abuse of a dominant position – Competence of the Commission – Discrimination between airlines – Relevant product and geographic market – Nexus between the product markets allegedly affected – Legal basis of the contested decision – Existence of a dominant position – Abuse of the dominant position – Proportionality of the amount of the fine)» Summary of the Judgment 1.. Commission – Simultaneous voluntary individual resignation of all Commissioners – Inapplicability of Article 201 EC – Application of Article 215 EC – Resigned Commissioners remaining in office, with full powers, until their replacement (Arts 201 EC and 215 EC) Commission – Simultaneous voluntary individual resignation of all Commissioners – Inapplicability of Article 201 EC – Application of Article 215 EC – Resigned Commissioners remaining in office, with full powers, until their replacement 2.. Competition – Administrative procedure – Examination of complaints – Determination of priorities by the Commission – Power to give differing degrees of priority to complaints – Principle of non-discrimination – Infringement – None Competition – Administrative procedure – Examination of complaints – Determination of priorities by the Commission – Power to give differing degrees of priority to complaints – Principle of non-discrimination – Infringement – None 3.. Competition – Dominant position – Market in question – Determination – Criteria – Services provided by travel agents to airlines – Market distinct from that of air transport (Art. 82 EC) Competition – Dominant position – Market in question – Determination – Criteria – Services provided by travel agents to airlines – Market distinct from that of air transport 4.. Competition – Dominant position – Definition – Position held by the undertaking in its capacity as a buyer – Included (Art. 82 EC) Competition – Dominant position – Definition – Position held by the undertaking in its capacity as a buyer – Included 5.. Competition – Dominant position – Market in question – Geographical definition – Criteria (Art. 82 EC) Competition – Dominant position – Market in question – Geographical definition – Criteria 6.. Competition – Dominant position – Conduct on the dominated market having effects on a neighbouring market – Application of Article 82 EC – Condition – Nexus between the two markets (Art. 82 EC) Competition – Dominant position – Conduct on the dominated market having effects on a neighbouring market – Application of Article 82 EC – Condition – Nexus between the two markets 7.. Competition – Transport – Rules on competition – Air transport – Regulation No 3975/87 – Scope – Activities directly relating to the provision of air transport services – Service provided by travel agents to airlines – Excluded (Council Regulations Nos 17, 141 and 3975/87) Competition – Transport – Rules on competition – Air transport – Regulation No 3975/87 – Scope – Activities directly relating to the provision of air transport services – Service provided by travel agents to airlines – Excluded 8.. Competition – Dominant position – Abuse – Meaning – Objective concept referring to conduct likely to influence the structure of the market and with the effect of hindering the maintenance or development of competition – Obligations on dominant undertakings (Art. 82 EC) Competition – Dominant position – Abuse – Meaning – Objective concept referring to conduct likely to influence the structure of the market and with the effect of hindering the maintenance or development of competition – Obligations on dominant undertakings 9.. Competition – Dominant position – Abuse – Quantity rebates – Whether permissible – Conditions – System of result bonuses applied by an airline to commissions paid to travel agents – Abusive nature of the system – Criteria for assessment (Art. 82 EC) Competition – Dominant position – Abuse – Quantity rebates – Whether permissible – Conditions – System of result bonuses applied by an airline to commissions paid to travel agents – Abusive nature of the system – Criteria for assessment 10.. Competition – Dominant position – Abuse – Meaning – Conduct having either the effect or the object of hindering the maintenance or development of competition (Art. 82 EC) Competition – Dominant position – Abuse – Meaning – Conduct having either the effect or the object of hindering the maintenance or development of competition 11.. Competition – Fines – Amount – Determination – Criteria – Damage caused to consumers – Not relevant in relation to abuse of a dominant position (Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination – Criteria – Damage caused to consumers – Not relevant in relation to abuse of a dominant position JUDGMENT OF THE COURT OF FIRST INSTANCE (First Chamber)17 December 2003 (1)((Competition – Abuse of a dominant position – Competence of the Commission – Discrimination between airlines – Relevant product and geographic market – Nexus between the product markets allegedly affected – Legal basis of the contested decision – Existence of a dominant position – Abuse of the dominant position – Proportionality of the amount of the fine))applicant, vdefendant, intervener, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (First Chamber),having regard to the written procedure and further to the hearing on 26 February 2003,gives the followingBackground to the disputeOn those grounds, THE COURT OF FIRST INSTANCE (First Chamber)VesterdorfJaeger Legal H. Jung B. Vesterdorf RegistrarPresident 1 – Language of the case: English. Language of the case: English.

ee453-9c6fb45-48c5

EN

THE COURT OF FIRST INSTANCE CONFIRMS THE SUBSTANCE OF THE COMMISSION'S DECISION SANCTIONING ANTI-COMPETITIVE CARTELS IN THE GREECE-ITALY SHIPPING SECTOR

«(Competition – Article 85(1) of the EC Treaty (now Article 81(1) EC) – Price fixing – Proof of participation in a cartel – Duration – Error of assessment as to the facts)» Summary of the Judgment 1.. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Meaning (EC Treaty, Art. 85(1) (now Art. 81(1) EC)) Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Meaning 2.. Competition – Community rules – Undertakings – Infringements of Articles 85 or 86 of the Treaty (now Articles 81 EC and 82 EC) – Evidence – Correspondence between third parties (EC Treaty, Arts 85 and 86 (now Arts 81 EC and 82 EC)) Competition – Community rules – Undertakings – Infringements of Articles 85 or 86 of the Treaty (now Articles 81 EC and 82 EC) – Evidence – Correspondence between third parties 3.. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Proof of an undertaking's participation – Perception by other undertakings of its importance for establishing a common position (EC Treaty, Art. 85(1) (now Art. 81(1) EC)) Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Proof of an undertaking's participation – Perception by other undertakings of its importance for establishing a common position 4.. Competition – Agreements, decisions and concerted practices – Undertaking – Meaning – Economic unit – Attribution of the infringements (EC Treaty, Art. 85 (now Art. 81 EC)) Competition – Agreements, decisions and concerted practices – Undertaking – Meaning – Economic unit – Attribution of the infringements 5.. Competition – Agreements, decisions and concerted practices – Participation in meetings held by undertakings for an anti-competitive purpose – Sufficient basis for concluding that, if an undertaking has not distanced itself from the decisions taken, it participated in the subsequent arrangements (EC Treaty, Art. 85(1) (now Art. 81(1) EC)) Competition – Agreements, decisions and concerted practices – Participation in meetings held by undertakings for an anti-competitive purpose – Sufficient basis for concluding that, if an undertaking has not distanced itself from the decisions taken, it participated in the subsequent arrangements JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)11 December 2003 (1)((Competition – Article 85(1) of the EC Treaty (now Article 81(1) EC) – Price fixing – Proof of participation in a cartel – Duration – Error of assessment as to the facts))applicant, vdefendant, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),having regard to the written procedure and further to the hearing on 2 July 2002,gives the followingFactsOn those grounds, THE COURT OF FIRST INSTANCE (Fifth Chamber)CookeGarcía-Valdecasas Lindh H. Jung P. Lindh RegistrarPresident 1 – Language of the case: Greek. Language of the case: Greek.

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EN

A NATIONAL PROHIBITION ON THE SALE OF MEDICINAL PRODUCTS BY MAIL ORDER IS CONTRARY TO COMMUNITY LAW WHERE IT APPLIES TO NON-PRESCRIPTION MEDICINES WHICH HAVE BEEN AUTHORISED FOR SALE ON THE GERMAN MARKET.

«(Articles 28 EC and 30 EC – Directives 92/28/EEC and 2000/31/EC – National legislation restricting internet sales of medicinal products for human use by pharmacies established in another Member State – Doctor's prescription required for supply – Prohibition on advertising the sale of medicinal products by mail order)» Summary of the Judgment 1.. Free movement of goods – Quantitative restrictions – Measures having equivalent effect – Definition – Prohibition on the sale by mail order of medicinal products the sale of which is restricted to pharmacies – Whether included – Justification limited to medicinal products subject to prescription – Reimportation of medicinal products into the Member State concerned – Not relevant( Arts 28 EC and 30 EC ) Free movement of goods – Quantitative restrictions – Measures having equivalent effect – Definition – Prohibition on the sale by mail order of medicinal products the sale of which is restricted to pharmacies – Whether included – Justification limited to medicinal products subject to prescription – Reimportation of medicinal products into the Member State concerned – Not relevant 2.. Approximation of laws – Proprietary medicinal products – Advertising – Prohibition on advertising the sale by mail order of medicinal products the sale of which is restricted to pharmacies – Permissible only in respect of medicinal products subject to prescription( Directive 2001/83/EC of the European Parliament and of the Council, Art. 88 ) Approximation of laws – Proprietary medicinal products – Advertising – Prohibition on advertising the sale by mail order of medicinal products the sale of which is restricted to pharmacies – Permissible only in respect of medicinal products subject to prescriptionJUDGMENT OF THE COURT11 December 2003 (1) ((Articles 28 EC and 30 EC – Directives 92/28/EEC and 2000/31/EC – National legislation restricting internet sales of medicinal products for human use by pharmacies established in another Member State – Doctor's prescription required for supply – Prohibition on advertising the sale of medicinal products by mail order)) andTHE COURT,,after considering the written observations submitted on behalf of: ─ Deutscher Apothekerverband eV, by C. Dechamps, Rechtsanwalt, assisted by J. Schwarze, ─ 0800 DocMorris NV and J. Waterval, by Professor C. Koenig, ─ the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents, ─ the Greek Government, by F. Georgakopoulos, D. Kalogiros and E.-M. Mamouna, acting as Agents, ─ the French Government, by G. de Bergues and R. Loosli-Surrans, acting as Agents, ─ the Irish Government, by D.J. O'Hagan, acting as Agent, and N. Hyland, Barrister, ─ the Austrian Government, by C. Pesendorfer, acting as Agent, ─ the Commission of the European Communities, by J.-C. Schieferer, acting as Agent, assisted by M. Núñez Müller, Rechtsanwalt, having regard to the Report for the Hearing,after hearing the oral observations of Deutscher Apothekerverband eV, represented by C. Dechamps, assisted by J. Schwarze, 0800 DocMorris NV and J. Waterval, represented by C. Koenig, the German Government, represented by W.-D. Plessing, the Greek Government, represented by D. Kalogiros and M. Apessos, acting as Agent, the French Government, represented by R. Loosli-Surrans, and the Commission, represented by J.-C. Schieferer, at the hearing on 10 December 2002, after hearing the Opinion of the Advocate General at the sitting on 11 March 2003,gives the followingLegal backgroundOn those grounds, THE COURT,SkourisJann Timmermans GulmannCunha Rodrigues Rosas EdwardLa Pergola Puissochet SchintgenMacken Colneric von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: German. Language of the case: German.

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EN

THE ITALIAN ADMINISTRATIVE PRACTICE AND JUDICIAL DOCTRINE RELATING TO THE REIMBURSEMENT OF TAXES IMPOSED IN VIOLATION OF COMMUNITY LAW, INFRINGE ITALY'S OBLIGATIONS UNDER THE EC TREATY

«(Failure of a Member State to fulfil obligations – Construction contrary to Community law of national legislation by case-law and administrative practice – Conditions for the recovery of sums paid though not due)» Summary of the Judgment 1.. Member States – Obligations – Failure to fulfil obligations – Liability – Extent – Constitutionally independent institutions (Art. 226 EC) Member States – Obligations – Failure to fulfil obligations – Liability – Extent – Constitutionally independent institutions 2.. Actions for failure to fulfil obligations – Examination of the merits by the Court – Assessment of the scope of the provisions impugned – Taking into account of the interpretation by the courts of the Member State in question – Criteria (Art. 226 EC) Actions for failure to fulfil obligations – Examination of the merits by the Court – Assessment of the scope of the provisions impugned – Taking into account of the interpretation by the courts of the Member State in question – Criteria 3.. Community law – Direct effect – National charges incompatible with Community law – Repayment – Arrangements – Application of national law – Maintenance by a Member State of legislation whose construction by case-law and administrative practice makes exercise of the right to repayment excessively difficult – Failure to fulfil obligations Community law – Direct effect – National charges incompatible with Community law – Repayment – Arrangements – Application of national law – Maintenance by a Member State of legislation whose construction by case-law and administrative practice makes exercise of the right to repayment excessively difficult – Failure to fulfil obligations JUDGMENT OF THE COURT (Full Court)9 December 2003 (1) ((Failure of a Member State to fulfil obligations – Construction contrary to Community law of national legislation by case-law and administrative practice – Conditions for the recovery of sums paid though not due))applicant, vdefendant, THE COURT (Full Court),,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 3 June 2003, gives the followingNational lawOn those grounds, THE COURT (Full Court)SkourisJann Timmermans GulmannCunha Rodrigues Rosas EdwardLa Pergola Puissochet SchintgenMacken Colneric von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: Italian. Language of the case: Italian.

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EN

THE COURT OF FIRST INSTANCE ANNULS THE COMMISSION'S DECISION DECLARING VOLKSWAGEN'S COMMERCIAL PRACTICES WITH REGARD TO ITS GERMAN DEALERS UNLAWFUL

«(Competition – Distribution of motor vehicles – Article 81(1) EC – Price agreement – Meaning of agreement – Proof of the existence of an agreement)» Summary of the Judgment Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Meaning – Joint intention to adopt conduct in the market – Anti-competitive request by a manufacturer to its dealers who are party to a dealership agreement which complies with competition law – Excluded in the absence of proof of acquiescence by the dealers (Art. 81(1) EC)Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Meaning – Joint intention to adopt conduct in the market – Anti-competitive request by a manufacturer to its dealers who are party to a dealership agreement which complies with competition law – Excluded in the absence of proof of acquiescence by the dealers JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber)3 December 2003 (1)((Competition – Distribution of motor vehicles – Article 81(1) EC – Price agreement – Meaning of agreement – Proof of the existence of an agreement))applicant, vdefendant, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fourth Chamber),having regard to the written procedure and further to the hearing on 18 June 2003,gives the followingFactsOn those grounds, THE COURT OF FIRST INSTANCE (Fourth Chamber)TiiliMengozzi Vilaras H. Jung V. Tiili RegistrarPresident 1 – Language of the case: German. Language of the case: German.

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EN

THE COURT OF FIRST INSTANCE DISMISSES THE ACTION BROUGHT BY AUDI AGAINST THE DECISION OF OHIM NOT TO REGISTER THE MARK "TDI" AS A COMMUNITY TRADE MARK

«(Community trade mark – Regulation (EC) No 40/94 – Absolute grounds for refusal – Descriptive mark – Distinctive character acquired through use – Word mark TDI – Right to be heard – Scope of the duty to state reasons – Consequences of a breach of the duty to state reasons)» Summary of the Judgment 1.. Community trade mark – Definition and acquisition of the Community trade mark – Absolute grounds for refusal – Marks composed exclusively of signs or indications which may serve to designate the characteristics of a product – Word mark TDI(Council Regulation No 40/94, Art. 7(1)(c)) Community trade mark – Definition and acquisition of the Community trade mark – Absolute grounds for refusal – Marks composed exclusively of signs or indications which may serve to designate the characteristics of a product – Word mark TDI 2.. Community trade mark – Definition and acquisition of the Community trade mark – Absolute grounds for refusal – Lack of distinctive character – Exception – Acquisition through use – Conditions (Council Regulation No 40/94, Art. 7(3)) Community trade mark – Definition and acquisition of the Community trade mark – Absolute grounds for refusal – Lack of distinctive character – Exception – Acquisition through use – Conditions 3.. Community trade mark – Appeals procedure – Appeals before the Community judicature – Legality of decisions of the Boards of Appeal – Challenged by adducing new facts – Condition of admissibility (Council Regulation No 40/94, Art. 63(2)) Community trade mark – Appeals procedure – Appeals before the Community judicature – Legality of decisions of the Boards of Appeal – Challenged by adducing new facts – Condition of admissibility 4.. Community trade mark – Decisions of the Office – Compliance with defence rights – Scope of the principle (Council Regulation No 40/94, Art. 73) Community trade mark – Decisions of the Office – Compliance with defence rights – Scope of the principle 5.. Community trade mark – Appeals procedure – Appeals against a decision of a department of the Office ruling at first instance and submitted to the Board of Appeal – Continuity in terms of functions between these two authorities – Duties falling on the Board of Appeal – Scope (Council Regulation No 40/94, Art. 74(2)) Community trade mark – Appeals procedure – Appeals against a decision of a department of the Office ruling at first instance and submitted to the Board of Appeal – Continuity in terms of functions between these two authorities – Duties falling on the Board of Appeal – Scope 6.. Community trade mark – Appeals procedure – Appeals before the Community judicature – Legal interest in bringing proceedings – Plea concerning the infringement of essential procedural requirements – Circumscribed powers of the Office – No interest in bringing proceedings (Council Regulation No 40/94, Art. 63) Community trade mark – Appeals procedure – Appeals before the Community judicature – Legal interest in bringing proceedings – Plea concerning the infringement of essential procedural requirements – Circumscribed powers of the Office – No interest in bringing proceedings JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)3 December 2003 (1)((Community trade mark – Regulation (EC) No 40/94 – Absolute grounds for refusal – Descriptive mark – Distinctive character acquired through use – Word mark TDI – Right to be heard – Scope of the duty to state reasons – Consequences of a breach of the duty to state reasons))applicant, vdefendant, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber),having regard to the application lodged at the Registry of the Court of First Instance on 30 January 2002,having regard to the response of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) lodged at the Registry of the Court of First Instance on 21 May 2002,further to the hearing on 13 May 2003, gives the followingProcedure and the forms of order soughtOn those grounds, THE COURT OF FIRST INSTANCE (Second Chamber)ForwoodPirrung Meij H. Jung J. Pirrung RegistrarPresident 1 – Language of the case: German. Language of the case: German.

4d5e5-89b6418-4412

EN

FOR THE SECOND TIME THE COURT IMPOSES A FINE ON A MEMBER STATE FOR NONCOMPLIANCE WITH ONE OF ITS JUDGMENTS.

«(Failure of a Member State to fulfil obligations – Judgment of the Court establishing such failure – Non-compliance – Article 228 EC – Financial penalties – Penalty payment – Quality of bathing water – Directive 76/160/EEC)» Summary of the Judgment 1.. Actions for failure to fulfil obligations – Judgment of the Court establishing such failure – Period allowed for compliance (Art. 228 EC) Actions for failure to fulfil obligations – Judgment of the Court establishing such failure – Period allowed for compliance 2.. Actions for failure to fulfil obligations – Judgment of the Court establishing such failure – Breach of the obligation to comply with the judgment – Financial penalties – Periodic penalty payment – Determination of the amount – Criteria (Art. 228(2) EC) Actions for failure to fulfil obligations – Judgment of the Court establishing such failure – Breach of the obligation to comply with the judgment – Financial penalties – Periodic penalty payment – Determination of the amount – Criteria 3.. Actions for failure to fulfil obligations – Judgment of the Court establishing such failure – Breach of the obligation to comply with the judgment – Financial penalties – Periodic penalty payment – Determination of the amount – Failure to comply with Directive 76/160 concerning the quality of bathing water (Art. 228(2) EC) Actions for failure to fulfil obligations – Judgment of the Court establishing such failure – Breach of the obligation to comply with the judgment – Financial penalties – Periodic penalty payment – Determination of the amount – Failure to comply with Directive 76/160 concerning the quality of bathing water JUDGMENT OF THE COURT (Full Court)25 November 2003 (1) ((Failure of a Member State to fulfil obligations – Judgment of the Court establishing such failure – Non-compliance – Article 228 EC – Financial penalties – Penalty payment – Quality of bathing water – Directive 76/160/EEC))In Case C-278/01, applicant, vdefendant, THE COURT (Full Court),,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 12 June 2003, gives the followingCommunity legislationOn those grounds, THE COURT (Full Court),SkourisTimmermans GulmannCunha Rodrigues Edward La PergolaPuissochet Schintgen MackenColneric von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: Spanish. Language of the case: Spanish.

8ad63-14073b5-44e3

EN

IN THE VIEW OF THE ADVOCATE GENERAL, NONE OF THE DIRECTIVES CONCERNING BANKING LAW CONFERS ON INDIVIDUALS THE RIGHT TO DEMAND THAT THE BANKING SUPERVISORY BODY TAKE APPROPRIATE SUPERVISORY MEASURES AND THE RIGHT TO COMPENSATION IN THE EVENT OF MISCONDUCT BY IT.

Peter Paul and OthersvBundesrepublik Deutschland(Reference for a preliminary ruling from the Bundesgerichtshof)(Credit institutions – Deposit-guarantee schemes – Directive 94/19/EC – Directives 77/780/EEC, 89/299/EEC and 89/646/EEC – Supervisory measures by the competent authority for the purposes of protecting depositors – Liability of the supervisory authorities for losses resulting from defective supervision)Summary of the Judgment1.        Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Credit institutions – Deposit-guarantee schemes – National rules limiting the functions of the national supervisory authority to the public interest and precluding compensation for damage resulting from defective supervision – Compliance with Directive 94/19 – Condition – Compensation of depositors under the conditions prescribed in the directive (European Parliament and Council Directive 94/19, Art. 3(2) to (5))2.        Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Credit institutions – Supervision of credit institutions – National rules limiting the functions of the national supervisory authority to the public interest and precluding compensation for damage resulting from defective supervision – Compliance with Directives 77/780, 89/299 and 89/646(Council Directives 77/780, 89/299 and 89/646)1.        If the compensation of depositors prescribed by Directive 94/19 on deposit-guarantee schemes is ensured, Article 3(2) to (5) of that directive cannot be interpreted as precluding a national rule to the effect that the functions of the national authority responsible for supervising credit institutions are to be fulfilled only in the public interest, which under national law precludes individuals from claiming compensation for damage resulting from defective supervision on the part of that authority. The purpose of those provisions is to guarantee to depositors that the credit institution in which they make their deposits belongs to a deposit-guarantee scheme, in order to ensure protection of their right to compensation in the event that their deposits are unavailable, in accordance with the rules laid down in that directive, and they thus relate only to the introduction and proper functioning of the deposit-guarantee scheme as provided for by the directive. On the other hand, and if that compensation is ensured, those provisions do not confer on depositors a right to have the competent authorities take supervisory measures in their interest. (see paras 29-30, 32, operative part 1)2.        First Directive 77/780 on the coordination of the laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions, Directive 89/299 on the own funds of credit institutions and Second Directive 89/646 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions do not preclude a national rule to the effect that the functions of the national authority responsible for supervising credit institutions are to be fulfilled only in the public interest, which under national law precludes individuals from claiming compensation for damage resulting from defective supervision on the part of that authority. Although the directives in question impose on the national authorities a number of supervisory obligations vis-à-vis credit institutions, it does not necessarily follow from that, or from the fact that the objectives pursued by those directives also include the protection of depositors, that those directives seek to confer rights on depositors in the event that their deposits are unavailable as a result of defective supervision on the part of the competent national authorities. (see paras 39-40, 47, operative part 2)JUDGMENT OF THE COURT (sitting as a full Court )12 October 2004(1)THE COURT (sitting as a full Court ),,after hearing the Opinion of the Advocate General at the sitting on 25 November 2003,gives the followingLegal backgroundIf the compensation of depositors prescribed by Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes is ensured, Article 3(2) to (5) of that directive cannot be interpreted as precluding a national rule to the effect that the functions of the national authority responsible for supervising credit institutions are to be fulfilled only in the public interest, which under national law precludes individuals from claiming compensation for damage resulting from defective supervision on the part of that authority. First Council Directive 77/780/EEC of 12 December 1977 on the coordination of the laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions, Council Directive 89/299/EEC of 17 April 1989 on the own funds of credit institutions and Second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780 do not preclude a national rule to the effect that the functions of the national authority responsible for supervising credit institutions are to be fulfilled only in the public interest, which under national law precludes individuals from claiming compensation for damage resulting from defective supervision on the part of that authority. 1 – Language of the case: German. Language of the case: German.

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EN

AUSTRIA'S ACTION CHALLENGING THE DISTRIBUTION OF ECOPOINTS FOR 2001 IS DISMISSED

«(System of ecopoints for heavy goods vehicles transiting through Austria – Refusal by the Commission to reduce the number of ecopoints for 2001 – Legality)» Summary of the Judgment Transport – Road transport – Special rules for the traffic of goods by road through Austria – Ecopoints system for heavy goods vehicles – Transit journeys – Burden of proof borne by the Austrian authorities – Driver setting the ecotag upon entry into Austrian territory – Relevance – Limits(Protocol No 9 to the 1994 Act of Accession, Article 11(2)(c); Commission Regulation No 3298/94, Art. 2(2) and (5))Transport – Road transport – Special rules for the traffic of goods by road through Austria – Ecopoints system for heavy goods vehicles – Transit journeys – Burden of proof borne by the Austrian authorities – Driver setting the ecotag upon entry into Austrian territory – Relevance – LimitsJUDGMENT OF THE COURT (Sixth Chamber)20 November 2003 (1) ((System of ecopoints for heavy goods vehicles transiting through Austria – Refusal by the Commission to reduce the number of ecopoints for 2001 – Legality))In Case C-356/01, applicant, vdefendant, intervener, THE COURT (Sixth Chamber),,having regard to the Report for the Hearing,gives the followingLegal frameworkOn those grounds, THE COURT (Sixth Chamber)SkourisCunha Rodrigues Puissochet SchintgenMacken R. Grass V. Skouris RegistrarPresident 1 – Language of the case: German. Language of the case: German.

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EN

A TAX FINANCING A FREE PUBLIC SERVICE ONLY FOR CERTAIN UNDERTAKINGS FORMS PART OF AN ARRANGEMENT CONSTITUTING STATE AID

«(State aid – System of financing a public carcass disposal service by a meat purchase tax – Interpretation of Article 92 of the EC Treaty (now, after amendment, Article 87 EC))» Summary of the Judgment 1.. State aid – Definition – Payment of costs of disposal of animal carcasses and slaughterhouse waste inherent in the economic activities of farmers and slaughterhouses – Included (EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) State aid – Definition – Payment of costs of disposal of animal carcasses and slaughterhouse waste inherent in the economic activities of farmers and slaughterhouses – Included 2.. State aid – Definition – Selective nature of the measure (EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) State aid – Definition – Selective nature of the measure 3.. State aid – Effect on trade between Member States – Assessment criteria (EC Treaty, Art. 92 (now, after amendment, Art. 87 EC)) State aid – Effect on trade between Member States – Assessment criteria JUDGMENT OF THE COURT (Sixth Chamber)20 November 2003 (1) ((State aid – System of financing a public carcass disposal service by a meat purchase tax – Interpretation of Article 92 of the EC Treaty (now, after amendment, Article 87 EC)))In Case C-126/01, andTHE COURT (Sixth Chamber),,after considering the written observations submitted on behalf of: ─ GEMO SA, by M. Jacquot and O. Prost, avocats, ─ the French Government, by G. de Bergues and F. Million, acting as Agents, ─ the Commission of the European Communities, by D. Triantafyllou, acting as Agent, having regard to the Report for the Hearing,after hearing the oral observations of GEMO SA, represented by M. Jacquot and O. Prost, of the French Government, represented by F. Million, of the United Kingdom Government, represented by J.E. Collins, acting as Agent, and of the Commission, represented by D. Triantafyllou, at the hearing on 17 January 2002, after hearing the Opinion of the Advocate General at the sitting on 30 April 2002,gives the followingLegal backgroundOn those grounds, THE COURT (Sixth Chamber),SkourisCunha Rodrigues Schintgen MackenColneric R. Grass V. Skouris RegistrarPresident 1 – Language of the case: French. Language of the case: French.

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EN

THE ABSOLUTE PROTECTION WHICH THE AUSTRO-CZECH BILATERAL CONVENTION ACCORDS TO THE NAME "BUD" FOR BEER PRODUCED AND EXPORTED BY THE CZECH BREWERY IS SUBJECT TO THE CONDITION THAT IT DIRECTLY OR INDIRECTLY DESIGNATES A REGION OR A PLACE IN THE CZECH REPUBLIC

«(Protection of geographical indications and designations of origin – Bilateral convention between a Member State and a non-member country protecting indications of geographical source from that non-member country – Articles 28 EC and 30 EC – Regulation (EEC) No 2081/92 – Article 307 EC – Succession of States in respect of treaties)» Summary of the Judgment 1.. Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Matters covered by Regulation No 2081/92 – Provision of a bilateral agreement between a Member State and a non-member country protecting a simple and indirect indication of geographical origin – Not covered ( Council Regulation No 2081/92, Art. 2(2)(b)) Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Matters covered by Regulation No 2081/92 – Provision of a bilateral agreement between a Member State and a non-member country protecting a simple and indirect indication of geographical origin – Not covered 2.. Free movement of goods – Quantitative restrictions – Measures having equivalent effect – Provision of a bilateral agreement between a Member State and a non-member country protecting a simple and indirect indication of geographical origin – Justification – Condition – Lack of generic nature ( Arts 28 EC and 30 EC) Free movement of goods – Quantitative restrictions – Measures having equivalent effect – Provision of a bilateral agreement between a Member State and a non-member country protecting a simple and indirect indication of geographical origin – Justification – Condition – Lack of generic nature 3.. Free movement of goods – Quantitative restrictions – Measures having equivalent effect – Provision of a bilateral agreement between a Member State and a non-member country protecting a name without direct or indirect connection to the country of geographical origin – Not permissible (Art. 28 EC) Free movement of goods – Quantitative restrictions – Measures having equivalent effect – Provision of a bilateral agreement between a Member State and a non-member country protecting a name without direct or indirect connection to the country of geographical origin – Not permissible 4.. International agreements – Agreements concluded by Member States – Agreements predating the EC Treaty – Provision of bilateral agreements concluded between a Member State and a non-member country contrary to the Treaty – Application by the court of the Member State – Whether permissible – Obligation to eliminate any incompatibilities between a prior agreement and the Treaty (Art. 307, first and second paras, EC) International agreements – Agreements concluded by Member States – Agreements predating the EC Treaty – Provision of bilateral agreements concluded between a Member State and a non-member country contrary to the Treaty – Application by the court of the Member State – Whether permissible – Obligation to eliminate any incompatibilities between a prior agreement and the TreatyJUDGMENT OF THE COURT18 November 2003 (1) ((Protection of geographical indications and designations of origin – Bilateral convention between a Member State and a non-member country protecting indications of geographical source from that non-member country – Articles 28 EC and 30 EC – Regulation (EEC) No 2081/92 – Article 307 EC – Succession of States in respect of treaties)) In Case C-216/01, andTHE COURT,,after considering the written observations submitted on behalf of: ─ Budějovický Budvar, národní podnik, by S. Kommar, Rechtsanwalt, ─ Rudolf Ammersin GmbH, by C. Hauer, Rechtsanwalt, ─ the Austrian Government, by C. Pesendorfer, acting as Agent, ─ the German Government, by W.-D. Plessing and A. Dittrich, acting as Agents, ─ the French Government, by G. de Bergues and L. Bernheim, acting as Agents, ─ the Commission of the European Communities, by A.-M. Rouchaud, acting as Agent, and B. Wägenbaur, Rechtsanwalt, having regard to the Report for the Hearing,after hearing the oral observations of Budějovický Budvar, národní podnik, represented by S. Kommar; Rudolf Ammersin GmbH, represented by C. Hauer, D. Ohlgart and B. Goebel, Rechtsanwälte; and the Commission, represented by A.-M. Rouchaud and B. Wägenbaur, at the hearing on 19 November 2002, after hearing the Opinion of the Advocate General at the sitting on 22 May 2003,gives the followingLegal backgroundOn those grounds, THE COURT,SkourisJann Timmermans GulmannCunha Rodrigues Edward La PergolaPuissochet Schintgen Colnericvon Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: German. Language of the case: German.

0959c-5bbc49b-47ba

EN

THE ITALIAN AUTHORITIES CANNOT REFUSE ENROLMENT IN THE REGISTER OF "PRATICANTI" TO THE HOLDER OF A "MAITRISE EN DROIT" ISSUED IN ANOTHER MEMBER STATE

«(Freedom of establishment – Enrolment in the register of praticanti – Recognition of diplomas – Access to regulated professions)» Summary of the Judgment 1.. Freedom of movement for persons – Freedom of establishment – Lawyers – Practice of the profession on a permanent basis in a Member State other than that in which the qualification was acquired – Directive 98/5 – Scope – Trainee lawyer – Not included (Directive 98/5 of the European Parliament and the Council) Freedom of movement for persons – Freedom of establishment – Lawyers – Practice of the profession on a permanent basis in a Member State other than that in which the qualification was acquired – Directive 98/5 – Scope – Trainee lawyer – Not included 2.. Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Scope of Directive 89/48 – Concept of regulated profession – Trainee lawyer – Not included (Council Directive 89/48) Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Scope of Directive 89/48 – Concept of regulated profession – Trainee lawyer – Not included 3.. Freedom of movement for persons – Freedom of establishment – Lawyers – Access to the profession – Enrolment of trainee lawyers in the professional register – Requirement of a law degree issued, confirmed or recognised as equivalent by the authorities of the Member State concerned – Not permissible (Arts 39 EC and 43 EC) Freedom of movement for persons – Freedom of establishment – Lawyers – Access to the profession – Enrolment of trainee lawyers in the professional register – Requirement of a law degree issued, confirmed or recognised as equivalent by the authorities of the Member State concerned – Not permissible JUDGMENT OF THE COURT (Fifth Chamber)13 November 2003 (1) ((Freedom of establishment – Enrolment in the register of praticanti – Recognition of diplomas – Access to regulated professions))In Case C-313/01, andTHE COURT (Fifth Chamber),,after considering the written observations submitted on behalf of: ─ Ms Morgenbesser, by G. Borneto, avvocato, ─ the Italian Government, by I.M. Braguglia, assisted by G. Fiengo, avvocato dello Stato, ─ the Danish Government, by J. Molde, acting as Agent, ─ the Commission of the European Communities, by E. Traversa and M. Patakia, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Ms Morgenbesser, represented by G. Conte, avvocato, and G. Borneto, of the Consiglio dell'Ordine degli avvocati di Genova, represented by M. Condinanzi, avvocato, of the Italian Government, represented by A. Cingolo, avvocato dello Stato, and of the Commission, represented by E. Traversa, at the hearing on 16 January 2003, after hearing the Opinion of the Advocate General at the sitting on 20 March 2003, gives the followingLegal backgroundOn those grounds, THE COURT (Fifth Chamber),EdwardLa Pergola von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: Italian. Language of the case: Italian.

971e9-a9dd9c6-4b2c

EN

LAWS WHICH RESERVE THE COLLECTION OF BETS TO THE STATE OR ITS LICENSEES MUST BE JUSTIFIED

«(Right of establishment – Freedom to provide services – Collection of bets on sporting events in one Member State and transmission by internet to another Member State – Prohibition enforced by criminal penalties – Legislation in a Member State which reserves the right to collect bets to certain bodies)» Summary of the Judgment Freedom of establishment – Freedom to provide services – Restrictions – National legislation prohibiting, on pain of criminal penalty, the collection of bets without a licence or authorisation – Not permissible – Justification in the public interest – Compliance with the principles of proportionality and non-discrimination – Investigation by the national courts(Arts 43 EC and 49 EC)Freedom of establishment – Freedom to provide services – Restrictions – National legislation prohibiting, on pain of criminal penalty, the collection of bets without a licence or authorisation – Not permissible – Justification in the public interest – Compliance with the principles of proportionality and non-discrimination – Investigation by the national courtsJUDGMENT OF THE COURT6 November 2003 (1) ((Right of establishment – Freedom to provide services – Collection of bets on sporting events in one Member State and transmission by internet to another Member State – Prohibition enforced by criminal penalties – Legislation in a Member State which reserves the right to collect bets to certain bodies))In Case C-243/01, THE COURT,,after considering the written observations submitted on behalf of: ─ Mr Gambelli and Others, by D. Agnello, avvocato, ─ Mr Garrisi, by R.A. Jacchia, A. Terranova and I. Picciano, avvocati, ─ the Italian Government, by I.M. Braguglia, acting as Agent, assisted by D. Del Gaizo, avvocato dello Stato, ─ the Belgian Government, by F. van de Craen, acting as Agent, assisted by P. Vlaemminck, avocat, ─ the Greek Government, by M. Apessos and D. Tsagkaraki, acting as Agent, ─ the Spanish Government, by L. Fraguas Gadea, acting as Agent, ─ the Luxembourg Government, by N. Mackel, acting as Agent, ─ the Portuguese Government, by L. Fernandes and A. Barros, acting as Agents, ─ the Finnish Government, by E. Bygglin, acting as Agent, ─ the Swedish Government, by B. Hernqvist, acting as Agent, ─ the Commission of the European Communities, by A. Aresu and M. Patakia, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Mr Gambelli and others, represented by D. Agnello; of Mr Garrisi, represented by R.A. Jacchia and A. Terranova; of the Italian Government, represented by A. Cingolo, avvocato dello Stato; of the Belgian Government, represented by P. Vlaemminck; of the Greek Government, represented by M. Apessos; of the Spanish Government, represented by L. Fraguas Gadea; of the French Government, represented by P. Boussaroque, acting as Agent; of the Portuguese Government, represented by A. Barros; of the Finnish Government, represented by E. Bygglin; and of the Commission, represented by A. Aresu and M. Patakia, at the hearing on 22 October 2003, after hearing the Opinion of the Advocate General at the sitting on 13 March 2003, gives the followingLegal backgroundOn those grounds, THE COURT,SkourisJann Timmermans Cunha RodgriguesEdward Schintgen MackenColneric von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: Italian. Language of the case: Italian.

e3875-d8c9dc3-45a2

EN

COMMUNITY LAW IS INFRINGED BY THE REFUSAL TO ALLOW FRONTIER WORKERS TO RETAIN THEIR ENTITLEMENT TO UNEMPLOYMENT BENEFIT WHEN THEY GO TO ANOTHER MEMBER STATE TO SEEK EMPLOYMENT

«(Failure of a Member State to fulfil obligations – Social security – Articles 69 and 71 of Regulation (EEC) No 1408/71 – Unemployment benefit – Frontier workers  – Retention of benefit entitlement when seeking employment in another Member State)» Summary of the Judgment Social security for migrant workers – Unemployment – Wholly unemployed frontier worker – Search for employment in one or more other Member States – Retention of benefit entitlement in the Member State of residence(Council Regulation No 1408/71, Arts 69 and 71(1)(a)(ii))Social security for migrant workers – Unemployment – Wholly unemployed frontier worker – Search for employment in one or more other Member States – Retention of benefit entitlement in the Member State of residenceJUDGMENT OF THE COURT (Fifth Chamber)6 November 2003 (1) ((Failure of a Member State to fulfil obligations – Social security – Articles 69 and 71 of Regulation (EEC) No 1408/71 – Unemployment benefit – Frontier workers  – Retention of benefit entitlement when seeking employment in another Member State))In Case C-311/01, applicant, vdefendant, THE COURT (Fifth Chamber),,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 27 February 2003,gives the followingLegal contextOn those grounds, THE COURT (Fifth Chamber)La PergolaJann von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: Dutch. Language of the case: Dutch.

b2967-5324a94-4179

EN

A SIGN MAY NOT BE REGISTERED AS A COMMUNITY TRADE MARK IF ONE OF ITS POSSIBLE MEANINGS CAN DESIGNATE A CHARACTERISTIC OF THE GOODS CONCERNED

«(Appeal – Community trade mark – Regulation (EC) No 40/94 – Absolute ground for refusal to register – Distinctive character – Marks consisting exclusively of descriptive signs or indications – DOUBLEMINT)» Summary of the Judgment Community trade mark – Definition and acquisition of a Community trade mark – Absolute grounds for refusal – Trade marks which consist exclusively of signs or indications which may serve to designate the characteristics of the goods – Concept(Council Regulation No 40/94, Art. 7(1)(c))Community trade mark – Definition and acquisition of a Community trade mark – Absolute grounds for refusal – Trade marks which consist exclusively of signs or indications which may serve to designate the characteristics of the goods – ConceptJUDGMENT OF THE COURT23 October 2003 (1) ((Appeal – Community trade mark – Regulation (EC) No 40/94 – Absolute ground for refusal to register – Distinctive character – Marks consisting exclusively of descriptive signs or indications – DOUBLEMINT))appellant, interveners in the appeal, THE COURT,,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 10 April 2003, gives the followingRegulation (EC) No 40/94On those grounds, THE COURT,Skouris JannTimmermans Gulmann Cunha RodriguesRosas Edward La PergolaPuissochet Schintgen MackenColneric von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: English. Language of the case: English.

87250-0230ada-460a

EN

THE PROPRIETOR OF A TRADE MARK WITH A REPUTATION CANNOT PREVENT THE USE OF A SIMILAR SIGN VIEWED PURELY AS A DECORATIVE MOTIF

«(Directive 89/104/EEC – Article 5(2) – Trade marks with a reputation – Protection against use of a sign in relation to identical or similar goods or services – Degree of similarity between the mark and the sign – Effect on the public – Sign viewed as an embellishment)» Summary of the Judgment 1.. Approximation of laws – Trade marks – Directive 89/104 – Trade mark with a reputation – Option of providing protection for extending to non-similar goods or services (Article 5(2) of the directive) – Obligation on Member States exercising this option to also provide that protection in case of use of a sign for goods or services which are identical or similar (Council Directive 89/104, Art. 5(2)) Approximation of laws – Trade marks – Directive 89/104 – Trade mark with a reputation – Option of providing protection for extending to non-similar goods or services (Article 5(2) of the directive) – Obligation on Member States exercising this option to also provide that protection in case of use of a sign for goods or services which are identical or similar 2.. Approximation of laws – Trade marks – Directive 89/104 – Trade mark with a reputation – Protection of the trade mark extended to non-similar goods or services (Article 5(2) of the directive) – Degree of similarity between the mark and the later sign (Council Directive 89/104, Art. 5(2)) Approximation of laws – Trade marks – Directive 89/104 – Trade mark with a reputation – Protection of the trade mark extended to non-similar goods or services (Article 5(2) of the directive) – Degree of similarity between the mark and the later sign 3.. Approximation of laws – Trade marks – Directive 89/104 – Trade mark with a reputation – Protection of the trade mark extended to non-similar goods or services (Article 5(2) of the directive) – Perception of the later sign by the relevant section of the public as an embellishment – Effect (Council Directive 89/104, Art. 5(2)) Approximation of laws – Trade marks – Directive 89/104 – Trade mark with a reputation – Protection of the trade mark extended to non-similar goods or services (Article 5(2) of the directive) – Perception of the later sign by the relevant section of the public as an embellishment – Effect JUDGMENT OF THE COURT (Sixth Chamber)23 October 2003 (1) ((Directive 89/104/EEC – Article 5(2) – Trade marks with a reputation – Protection against use of a sign in relation to identical or similar goods or services – Degree of similarity between the mark and the sign – Effect on the public – Sign viewed as an embellishment))andTHE COURT (Sixth Chamber),,after considering the written observations submitted on behalf of: ─ Adidas Salomon AG and Adidas Benelux BV, by C. Gielen, advocaat, ─ Fitnessworld Trading Ltd, by J.J. Brinkhof and D.J.G. Visser, advocaten, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the United Kingdom Government, by G.J.A. Amodeo, acting as Agent, and M. Tappin, barrister, ─ the Commission of the European Communities, by H.M.H. Speyart and N.B. Rasmussen, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Adidas Salomon AG and Adidas Benelux BV, represented by C. Gielen; Fitnessworld Trading Ltd, represented by D.J.G. Visser; the United Kingdom Government, represented by K. Manji, acting as Agent, and M. Tappin, and the Commission, represented by N.B. Rasmussen and F. Tuytschaever, advocaat, at the hearing on 3 April 2003, after hearing the Opinion of the Advocate General at the sitting on 10 July 2003,gives the followingThe legal backgroundOn those grounds, THE COURT (Sixth Chamber),PuissochetGulmann Macken ColnericCunha Rodrigues R. Grass V. Skouris RegistrarPresident 1 – Language of the case: Dutch. Language of the case: Dutch.

5dec1-25a0755-4e55

EN

THE COURT OF FIRST INSTANCE CONFIRMS THE COMMISSION'S DECISION IN REGARD TO VAN DEN BERGH FOODS

«(Action for annulment – Competition – Articles 85 and 86 of the EC Treaty (now Articles 81 EC and 82 EC) – Ice creams intended for immediate consumption – Supply of freezer cabinets to retailers – Exclusivity clause – Barriers to entry to the market – Property rights – Article 222 of the EC Treaty (now Article 295 EC))» Summary of the Judgment 1.. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Distribution agreements containing an exclusivity clause – Criteria for assessment – Accessibility of the market – Agreements whose cumulative effect is to partition the market – Specific economic context of the agreements taken into account – Distribution agreements for ice cream for immediate consumption under which the manufacturer supplies a freezer cabinet exclusively for storage of its products (EC Treaty, Art. 85(1) (now Art. 81(1) EC)) Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Distribution agreements containing an exclusivity clause – Criteria for assessment – Accessibility of the market – Agreements whose cumulative effect is to partition the market – Specific economic context of the agreements taken into account – Distribution agreements for ice cream for immediate consumption under which the manufacturer supplies a freezer cabinet exclusively for storage of its products 2.. Competition – Agreements, decisions and concerted practices – Prohibition – No rule of reason in Community competition law (EC Treaty, Art. 85(1) and (3) (now Art. 81(1) and (3) EC)) Competition – Agreements, decisions and concerted practices – Prohibition – No rule of reason in Community competition law 3.. Competition – Agreements, decisions and concerted practices – Prohibition – Exemption – Conditions – Improvement in the production or distribution of goods – Appraisal by reference to the public interest, not the interests of the parties to the agreement (EC Treaty, Art. 85(3) (now Art. 81(3) EC)) Competition – Agreements, decisions and concerted practices – Prohibition – Exemption – Conditions – Improvement in the production or distribution of goods – Appraisal by reference to the public interest, not the interests of the parties to the agreement 4.. Competition – Dominant position – Characterised by the holding of extremely large market shares (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Characterised by the holding of extremely large market shares 5.. Competition – Dominant position – Meaning (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Meaning 6.. Competition – Dominant position – Abuse – Meaning – Objective concept referring to conduct likely to influence the structure of the market and with the effect of hindering the maintenance or development of competition – Obligations on dominant undertakings – Exercise of competition only on the merits (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Abuse – Meaning – Objective concept referring to conduct likely to influence the structure of the market and with the effect of hindering the maintenance or development of competition – Obligations on dominant undertakings – Exercise of competition only on the merits 7.. Competition – Dominant position – Abuse – Undertaking in a dominant position binding retailers by distribution agreements comtaining an exclusivity clause – Distribution system constituting an abuse (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Abuse – Undertaking in a dominant position binding retailers by distribution agreements comtaining an exclusivity clause – Distribution system constituting an abuse 8.. Community law – Principles – Fundamental rights – Right to property – Restrictions – Permissibility – Conditions – Restrictions imposed pursuant to the competition rules (EC Treaty, Art. 3(g) (now, after amendment, Art. 3(1)(g) EC) and Arts 85, 86 and 222 (now Arts 81 EC, 82 EC and 295 EC)) Community law – Principles – Fundamental rights – Right to property – Restrictions – Permissibility – Conditions – Restrictions imposed pursuant to the competition rules 9.. Acts of the institutions – Statement of reasons – Obligation – Scope – Taking the context into account (EC Treaty, Art. 190 (now Art. 253 EC)) Acts of the institutions – Statement of reasons – Obligation – Scope – Taking the context into account 10.. Community law – Principles – Protection of legitimate expectations – Conditions – Notice under Article 19(3) of Regulation No 17 – Legitimate expectation of the future grant of an exemption – None (Council Regulation No 17, Art. 19(3)) Community law – Principles – Protection of legitimate expectations – Conditions – Notice under Article 19(3) of Regulation No 17 – Legitimate expectation of the future grant of an exemption – None 11.. Competition – Community rules – Application by the national courts – Proceedings before national courts concerning the same case or a case similar to that concerned by the administrative procedure before the Commission – Commission decision finding an infringement of the Community rules – Breach of the principles of subsidiarity, sincere cooperation and legal certainty – None (EC Treaty, Arts 85 and 86 (now Arts 81 EC and 82 EC)) Competition – Community rules – Application by the national courts – Proceedings before national courts concerning the same case or a case similar to that concerned by the administrative procedure before the Commission – Commission decision finding an infringement of the Community rules – Breach of the principles of subsidiarity, sincere cooperation and legal certainty – None 12.. Community law – Principles – Proportionality – Equal treatment – Scope – Decision finding a network of agreements to be incompatible with the competition rules and declaring the exclusivity clause in them to be invalid – Appraisal of anti-competitive effects of the network as a whole – Infringement – None Community law – Principles – Proportionality – Equal treatment – Scope – Decision finding a network of agreements to be incompatible with the competition rules and declaring the exclusivity clause in them to be invalid – Appraisal of anti-competitive effects of the network as a whole – Infringement – None JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)23 October 2003 (1)((Action for annulment – Competition – Articles 85 and 86 of the EC Treaty (now Articles 81 EC and 82 EC) – Ice creams intended for immediate consumption – Supply of freezer cabinets to retailers – Exclusivity clause – Barriers to entry to the market – Property rights – Article 222 of the EC Treaty (now Article 295 EC)))applicant, vdefendant, interveners, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),having regard to the written procedure and further to the hearing on 3 October 2002,gives the followingFactsOn those grounds, THE COURT OF FIRST INSTANCE (Fifth Chamber)R. García-ValdecasasP. Lindh J.D. Cooke H. Jung RegistrarPresident 1 – Language of the case: English. Language of the case: English.Confidential data omitted.

e54b9-c9c465f-4832

EN

THE WORK PERMIT REQUIREMENT IMPOSED ON TURKISH DRIVERS OF LORRIES REGISTERED IN GERMANY WHO DRIVE BETWEEN TURKEY AND GERMANY FOR AN UNDERTAKING ESTABLISHED IN TURKEY CONSTITUTES AN OBSTACLE TO THE FREEDOM TO PROVIDE SERVICES

«(EEC-Turkey Association – Interpretation of Article 41(1) of the Additional Protocol and Article 13 of Decision No 1/80 of the Association Council – Abolition of restrictions on freedom of movement for workers, on freedom of establishment and on freedom to provide services – Standstill clauses – Direct effect – Scope – Legislation of a Member State requiring a work permit in the international road haulage sector)» Summary of the Judgment 1.. International agreements – EEC-Turkey Association Agreement – Freedom of movement for persons – Freedom of establishment – Workers – Standstill rules in Article 41(1) of the Additional Protocol and Article 13 of Decision No 1/80 of the Association Council – Direct effect (Additional Protocol to the EEC-Turkey Association Agreement, Art. 41(1); Decision No 1/80 of the EEC-Turkey Association Council, Art. 13) International agreements – EEC-Turkey Association Agreement – Freedom of movement for persons – Freedom of establishment – Workers – Standstill rules in Article 41(1) of the Additional Protocol and Article 13 of Decision No 1/80 of the Association Council – Direct effect 2.. International agreements – EEC-Turkey Association Agreement – Freedom of movement for persons – Workers – Standstill rule in Article 13 of Decision No 1/80 of the Association Council – Condition for application – Legal residence in the host Member State (Decision No 1/80 of the EEC-Turkey Association Council, Art. 13) International agreements – EEC-Turkey Association Agreement – Freedom of movement for persons – Workers – Standstill rule in Article 13 of Decision No 1/80 of the Association Council – Condition for application – Legal residence in the host Member State 3.. International agreements – EEC-Turkey Association Agreement – Freedom of movement for persons – Freedom of establishment – Workers – Standstill rules in Article 41(1) of the Additional Protocol and Article 13 of Decision No 1/80 of the Association Council – Scope (Additional Protocol to the EEC-Turkey Association Agreement, Art. 41(1); Decision No 1/80 of the EEC-Turkey Association Council, Art. 13) International agreements – EEC-Turkey Association Agreement – Freedom of movement for persons – Freedom of establishment – Workers – Standstill rules in Article 41(1) of the Additional Protocol and Article 13 of Decision No 1/80 of the Association Council – Scope JUDGMENT OF THE COURT21 October 2003 (1) ((EEC-Turkey Association – Interpretation of Article 41(1) of the Additional Protocol and Article 13 of Decision No 1/80 – Abolition of restrictions on the freedom of movement for workers, on the freedom of establishment and on the freedom to provide services – Standstill clauses – Direct effect – Scope – Legislation of a Member State requiring a work permit in the international road haulage sector)) andTHE COURT,,after considering the written observations submitted on behalf of: ─ Mr Abatay and Others, by T. Helbing, Rechtsanwalt, ─ Mr Sahin, by R. Gutmann, Rechtsanwalt, ─ the German Government, by W.-D. Plessing and R. Stüwe, acting as Agents, ─ the French Government, by G. de Bergues and S. Pailler, acting as Agents, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the Commission of the European Communities, by D. Martin and H. Kreppel, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Mr Abatay and Others, of Mr Sahin, of the German Government and of the Commission at the hearing on 14 January 2001, after hearing the Opinion of the Advocate General at the sitting on 13 May 2003,gives the followingLegal backgroundOn those grounds, THE COURT,SkourisJann Timmermans GulmannCunha Rodrigues Rosas EdwardLa Pergola Puissochet SchintgenMacken Colneric von Bahr R. Grass V. Skouris RegistrarPresident 1 – Language of the case: German. Language of the case: German.

74c66-b3b92c4-4eaf

EN

THE COURT OF FIRST INSTANCE ESSENTIALLY CONFIRMS THE COMMISSION'S DECISION CONCERNING THE EXISTENCE OF AN OBSTACLE TO FREE COMPETITION

«(Competition – Distribution of motor vehicles – Article 81 EC – Regulations (EEC) No 123/85 and (EC) No 1475/95 – Partitioning of the market – General strategy aimed at restricting exports – Restriction of supply – Restrictive bonus policy – Ban on exports – Fine – Gravity and duration of the infringement – Proportionality – Guidelines for the calculation of fines)» Summary of the Judgment 1.. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Meaning – Unilateral conduct – Not included – Individual measures applied to dealers and accepted by them – Included (Art. 81(1) EC) Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Meaning – Unilateral conduct – Not included – Individual measures applied to dealers and accepted by them – Included 2.. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Onus on the Commission to prove the duration of the infringement (Art. 81(1) EC) Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Onus on the Commission to prove the duration of the infringement 3.. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Dealership agreements for sales of motor vehicles – Exclusion of export sales from the system of bonuses granted to dealers (Art. 81(1) EC) Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Dealership agreements for sales of motor vehicles – Exclusion of export sales from the system of bonuses granted to dealers 4.. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Criteria of assessment – Anti-competitive object – Sufficient finding (Art. 81(1) EC) Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Criteria of assessment – Anti-competitive object – Sufficient finding 5.. Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Factors to be taken into account (Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Factors to be taken into account 6.. Competition – Fines – Amount – Discretion of the Commission – Judicial review (Art. 229 EC; Council Regulation No 17, Art. 17) Competition – Fines – Amount – Discretion of the Commission – Judicial review JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)21 October 2003 (1)((Competition – Distribution of motor vehicles – Article 81 EC – Regulations (EEC) No 123/85 and (EC) No 1475/95 – Partitioning of the market – General strategy aimed at restricting exports – Restriction of supply – Restrictive bonus policy – Ban on exports – Fine – Gravity and duration of the infringement – Proportionality – Guidelines for the calculation of fines))applicants, vdefendant, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber),having regard to the written procedure and further to the hearing on 10 December 2002,gives the followingProcedure and forms of order soughtOn those grounds, THE COURT OF FIRST INSTANCE (Second Chamber),ForwoodPirrung Meij H. Jung N.J. Forwood RegistrarPresident 1 – Language of the case: English. Language of the case: English.

98441-af51366-4142

EN

A MEMBER STATE MAY, UNDER CERTAIN CONDITIONS, DEROGATE FROM PROVISIONS SETTING THE OPENING AND CLOSING DATES FOR THE HUNTING OF WILD BIRDS

«(Directive 79/409/EEC – Conservation of wild birds – Opening and closing dates for hunting – Derogations)» Summary of the Judgment 1.. Environment – Conservation of wild birds – Directive 79/409 – Opening and closing dates for hunting – Derogations – Judicious use of certain birds in small numbers – Hunting of wild birds for recreational purposes – Included (Council Directive 79/409, Arts 7(4) and 9(1)(c)) Environment – Conservation of wild birds – Directive 79/409 – Opening and closing dates for hunting – Derogations – Judicious use of certain birds in small numbers – Hunting of wild birds for recreational purposes – Included 2.. Environment – Conservation of wild birds – Directive 79/409 – Opening and closing dates for hunting – Derogations – Judicious use of certain birds in small numbers – Conditions (Council Directive 79/409, Art. 9(1)(c)) Environment – Conservation of wild birds – Directive 79/409 – Opening and closing dates for hunting – Derogations – Judicious use of certain birds in small numbers – Conditions JUDGMENT OF THE COURT (Sixth Chamber)16 October 2003 (1) ((Directive 79/409/EEC – Conservation of wild birds – Opening and closing dates for hunting – Derogations))andTHE COURT (Sixth Chamber),,after considering the written observations submitted on behalf of: ─ Ligue pour la protection des oiseaux, by A. Bougrain-Dubourg, president, ─ Rassemblement des opposants à la chasse, by C. Xavier, avocat, ─ Union nationale des fédérations départementales de chasseurs, by H. Farge, avocat, ─ the French Government, by G. de Bergues and E. Puisais, acting as Agents, ─ the Greek Government, by V.N. Kontolaimos and I. Khalkias, acting as Agents, ─ the Commission of the European Communities, by G. Valero Jordana and X. Lewis, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of the Ligue pour la protection des oiseaux, the Union nationale des fédérations départementales de chasseurs, the French and Greek Governments and the Commission at the hearing on 3 April 2003, after hearing the Opinion of the Advocate General at the sitting on 6 May 2003,gives the followingLegal frameworkOn those grounds, THE COURT (Sixth Chamber),PuissochetSchintgen Gulmann SkourisColneric R. Grass V. Skouris RegistrarPresident 1 – Language of the case: French. Language of the case: French.

c42e2-d841588-42e8

EN

AUSTRIA MUST SUSPEND UNTIL 30 APRIL 2004 THE SECTORAL BAN IMPOSED BY THE REGULATION OF THE FIRST MINISTER OF THE TYROL LIMITING USE OF THE A 12 MOTORWAY IN THE INN VALLEY

Commission of the European CommunitiesvRepublic of Austria(Failure by a Member State to fulfil its obligations – Articles 28 EC to 30 EC – Free movement of goods – Articles 1 and 3 of Regulation (EEC) No 881/92 – Articles 1 and 6 of Regulation (EEC) No 3118/93 – Transport – Sectoral prohibition on the movement of lorries of more than 7.5 tonnes carrying certain goods – Air quality – Protection of health and the environment – Proportionality principle)Opinion of Advocate General Geelhoed delivered on 14 July 2005 Judgment of the Court (Grand Chamber), 15 November 2005 Summary of the JudgmentFree movement of goods – Quantitative restrictions – Measures having equivalent effect – Sectoral prohibition on the movement of lorries of more than 7.5 tonnes carrying certain goods – Not permissible – Justification – Protection of the environment (Arts 28 EC and 29 EC)A Member State which, in order to ensure the quality of ambient air in the zone concerned, adopts legislation prohibiting lorries of over 7.5 tonnes, carrying certain goods, from driving on a road section of paramount importance, constituting one of the main routes of land communication between certain Member States fails to fulfil its obligations under Articles 28 EC and 29 EC. Such a prohibition obstructs the free movement of goods and, in particular, their free transit, and must be regarded as constituting a measure having equivalent effect to quantitative restrictions, incompatible with Community law obligations under Articles 28 EC and 29 EC, unless that measure can be objectively justified. Such legislation cannot be justified by imperative requirements in the interests of environmental protection where it has not been demonstrated that the aim pursued could not be achieved by other means less restrictive of freedom of movement. (see paras 66, 69, 71, 87, 89, 95, operative part)JUDGMENT OF THE COURT (Grand Chamber)15 November 2005 (*) In Case C-320/03,Action under Article 226 EC for failure to fulfil obligations, brought on 24 July 2003,Commission of the European Communities, represented by C. Schmidt, W. Wils and G. Braun, acting as Agents, with an address for service in Luxembourg, applicant,supported by:Federal Republic of Germany, represented by W.-D. Plessing and A. Tiemann, acting as Agents, assisted by T. Lübbig, lawyer, Italian Republic, represented by I.M. Braguglia, acting as Agent, assisted by G. De Bellis, Avvocato dello Stato, with an address for service in Luxembourg, Kingdom of the Netherlands, represented by H.G. Sevenster, acting as Agent, interveners,Republic of Austria, represented by E. Riedl and H. Dossi, acting as Agents, with an address for service in Luxembourg, defendant,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and K. Schiemann, Presidents of Chambers, R. Schintgen (Rapporteur), J.N. Cunha Rodrigues, R. Silva de Lapuerta, K. Lenaerts, P. Kūris, E. Juhász, G. Arestis and A. Borg Barthet, Judges, Advocate General: L.A. Geelhoed,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 24 May 2005,having heard the Opinion of the Advocate General at the sitting on 14 July 2005,gives the followingJudgment1       By its application, the Commission of the European Communities is asking the Court to hold that, by prohibiting lorries of more than 7.5 tonnes, carrying certain goods, from being driven on a section of the A 12 motorway in the Inn valley (Austria), following the adoption of a regulation by the Landeshauptmann (First Minister) of the Tyrol limiting transport on the A 12 motorway in the Inn valley (sectoral prohibition on road transport) [Verordnung des Landeshauptmanns von Tirol, mit der auf der A 12 Inntalautobahn verkehrsbeschränkende Maßnahmen erlassen werden (sektorales Fahrverbot)], of 27 May 2003 (BGBl. II, 279/2003; ‘the contested regulation’), the Republic of Austria has failed to fulfil its obligations under Articles 1 and 3 of Council Regulation (EEC) No 881/92 of 26 March 1992 on access to the market in the carriage of goods by road within the Community to or from the territory of a Member State or passing across the territory of one or more Member States (OJ 1992 L 95, p. 1), as amended by Regulation (EC) No 484/2002 of the European Parliament and of the Council of 1 March 2002 (OJ 2002 L 76, p. 1; ‘Regulation No 881/92’), under Articles 1 and 6 of Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State (OJ 1993 L 279, p. 1), as amended by Regulation No 484/2002 (‘Regulation No 3118/93’), and under Articles 28 EC to 30 EC.  Legal and factual background Community legislation on the internal road transport market2       Regulations Nos 881/92 and 3118/93 govern the transport of goods by road in Community territory.3       Regulation No 881/92, which, in accordance with Article 1(1) thereof, applies to the international carriage of goods by road for hire or reward for journeys carried out within the territory of the Community, provides in Article 3 that Member States are to issue Community authorisation to hauliers established in their territory and entitled to carry out the international carriage of goods by road. 4       Under Article 1(1) of Regulation No 3118/93::‘1. Any road haulage carrier for hire or reward who is a holder of the Community authorisation provided for in Regulation (EEC) No 881/92 and whose driver, if he is a national of a non-member country, holds a driver attestation in accordance with the conditions laid down in the said Regulation, shall be entitled, under the conditions laid down in this Regulation, to operate on a temporary basis national road haulage services for hire or reward in another Member State, hereinafter referred to respectively as “cabotage” and as the “host Member State”, without having a registered office or other establishment therein.’ 5       Under Article 6 of Regulation No 3118/93, the performance of cabotage transport operations is to be subject, save as otherwise provided in Community Regulations, to the laws, regulations and administrative provisions in force in the host Member State in the zones referred to in Article 6(1) and those provisions are to be applied to non-resident transport operators on the same conditions as those which that Member State imposes on its own nationals, so as to prevent any open or hidden discrimination on grounds of nationality or place of establishment.  Community directives on the protection of ambient air quality6       Community legislation on the protection of ambient air quality consists in particular of Council Directive 96/62/EC of 27 September 1996 on ambient air quality assessment and management (OJ 1996 L 296, p. 55) and Council Directive 1999/30/EC of 22 April 1999 relating to limit values for sulphur dioxide, nitrogen dioxide and oxides of nitrogen, particulate matter and lead in ambient air (OJ 1999 L 163, p. 41), as amended by Commission Decision 2001/744/EC of 17 October 2001 (OJ 2001 L 278, p. 35; ‘Directive 1999/30’). 7       According to Article 1 of Directive 96/62, the aim of that directive is to define the basic principles of a common strategy to: –       define and establish objectives for ambient air quality in the Community designed to avoid, prevent or reduce harmful effects on human health and the environment as a whole, –       assess the ambient air quality in Member States on the basis of common methods and criteria,–       obtain adequate information on ambient air quality and ensure that it is made available to the public, inter alia by means of alert thresholds, –       maintain ambient air quality where it is good and improve it in other cases.8       Article 4 of Directive 96/62 provides that the Council of the European Union, on a proposal by the Commission, is responsible for setting limit values for the pollutants listed in Annex I to that directive. 9       Article 7 of Directive 96/62 provides: ‘Improvement of ambient air qualityGeneral requirements1.      Member States shall take the necessary measures to ensure compliance with the limit values.…3.      Member States shall draw up action plans indicating the measures to be taken in the short term where there is a risk of the limit values and/or alert thresholds being exceeded, in order to reduce that risk and to limit the duration of such an occurrence. Such plans may, depending on the individual case, provide for measures to control and, where necessary, suspend activities, including motor-vehicle traffic, which contribute to the limit values being exceeded.’ 10     Article 8(3) of Directive 96/62 goes on to provide: ‘In the zones and agglomerations [in which the levels of one or more pollutants are higher than the limit value plus the margin of tolerance], Member States shall take measures to ensure that a plan or programme is prepared or implemented for attaining the limit value within the specific time limit. The said plan or programme, which must be made available to the public, shall incorporate at least the information listed in Annex IV.’ 11     Limit values for nitrogen dioxide (NO2) are laid down in Directive 1999/30. 12     According to Article 4 of Directive 1999/30: ‘Nitrogen dioxide and oxides of nitrogen1.      Member States shall take the measures necessary to ensure that concentrations of nitrogen dioxide and, where applicable, of oxides of nitrogen, in ambient air, as assessed in accordance with Article 7, do not exceed the limit values laid down in Section I of Annex II as from the dates specified therein. The margins of tolerance laid down in Section I of Annex II shall apply in accordance with Article 8 of Directive 96/62/EC.2.      The alert threshold for concentrations of nitrogen dioxide in ambient air shall be that laid down in Section II of Annex II.’13     Section I of Annex II to Directive 1999/30 shows that, in relation to nitrogen dioxide:–       the hourly limit value is fixed at 200 μg/m3 ‘not to be exceeded more than 18 times per calendar year’, increased by a degressive percentage tolerance until 1 January 2010; –       the annual limit value is fixed at 40 μg/m3, likewise increased by the same degressive percentage tolerance until 1 January 2010, giving 56 μg/m3 for the year 2002. 14     Section I also provides that the abovementioned limit values must be complied with on 1 January 2010.15     According to the fourth recital of Directive 1999/30, the limit values laid down in that directive are minimum requirements and, in accordance with Article 176 EC, Member States may maintain or introduce more stringent protective measures and in particular introduce stricter limit values.  National law and the facts of the dispute16     Directives 96/62 and 1999/30 were transposed into Austrian law by means of amendments to the Law on Air Pollution (Immissionsschutzgesetz-Luft BGBl. I, 115/1997; ‘the IG-L’). 17     Article 10 of the IG-L provides that a catalogue is to be published of measures to be taken in the event of a limit value being exceeded. Article 11 of that law sets out the principles to be observed in that event, such as the principle that the polluter pays and the principle of proportionality. Article 14 of the law contains provisions particularly applicable to the transport industry. 18     On 1 October 2002, having noted that the limit value for nitrogen dioxide, as defined in Section I of Annex II to Directive 1999/30, had been exceeded, the Tyrol authorities imposed a temporary night traffic ban on lorries on a section of the A 12 motorway in the Inn valley. 19     During 2002, the annual limit value fixed at 56 μg/m3 by Annex II was again exceeded at the Vomp/Raststätte measuring point on that section of motorway, the annual average registered being 61 μg/m3. 20     The temporary night traffic ban was then extended and subsequently replaced, from 1 June 2003, by a permanent night traffic ban on the transportation of goods by lorries over 7.5 tonnes, that prohibition being applicable for the whole year. 21     On 27 May 2003, on the basis of the IG-L, the Landeshauptmann of the Tirol adopted the contested regulation, prohibiting a category of lorries carrying certain goods from using the relevant section of the A 12 motorway for an indeterminate period from 1 August 2003. 22     According to Article 1 of the contested regulation, its aim is to reduce emissions of pollutants linked to human activities, thereby improving air quality so as to ensure lasting protection of human, animal and plant health. 23     Article 2 of the contested regulation defines a ‘sanitary zone’, consisting of a 46 km section of the A 12 motorway, between the municipalities of Kundl and Ampass. 24     Article 3 of the contested regulation prohibits lorries or semi-trailers with a maximum authorised weight of over 7.5 tonnes, and lorries with trailers whose combined maximum authorised weights exceed 7.5 tonnes, from driving on that section while transporting the following goods: all types of waste listed in the European Waste Catalogue [appearing in Commission Decision 2000/532/EC of 3 May 2000 replacing Decision 94/3/EC establishing a list of wastes pursuant to Article 1(a) of Council Directive 75/442/EEC on waste and Council Decision 94/904/EC establishing a list of hazardous waste pursuant to Article 1(4) of Council Directive 91/689/EEC on hazardous waste (OJ 2000 L 226, p. 3), as amended by Council Decision 2001/573/EC of 23 July 2001 amending Commission Decision 2000/532/EC as regards the list of wastes (OJ 2001 L 203, p. 18)], cereals, timber and cork, ferrous and non-ferrous minerals, stone, soil, rubble, motor vehicles and trailers or building steel. The prohibition was to apply immediately, as from 1 August 2003, without the need for any further action by the competent authorities. 25     Article 4 of the regulation exempts from the prohibition under Article 3 lorries beginning or ending their journey on the territory of the city of Innsbruck or in the districts of Kufstein, Schwaz or Innsbruck-Land. In addition, the IG-L itself includes other derogations: it excludes various categories of vehicle from the traffic ban, including highway maintenance vehicles, refuse vehicles and agricultural and forestry vehicles. Special derogation may, in addition, be sought for other categories of vehicles when justified in the public interest or for important private reasons.  Pre-litigation procedure26     Following an initial exchange of letters with the Republic of Austria, the Commission sent that Member State a letter of formal notice on 25 June 2003, requesting a reply within one week. The Austrian Government replied by letter of 3 July 2003. 27     On 9 July 2003, the Commission sent the Republic of Austria a reasoned opinion under Article 226 EC, likewise laying down a period of one week for compliance. The Republic of Austria replied to the reasoned opinion by letter of 18 July 2003. 28     The Commission, finding the explanations given by the Republic of Austria in its reply to the reasoned opinion unsatisfactory, decided to bring this action.  Suspension of operation of the sectoral traffic ban29     By order of 30 July 2003, Commission v Austria (C-320/03 R [2003] ECR I‑7929), as an interim measure, the President of the Court of Justice ordered the Republic of Austria to suspend operation of the traffic ban in the contested regulation until pronouncement of the order terminating the interim measure proceedings. 30     By order of 2 October 2003, Commission v Austria (C-320/03 R [2003] ECR I‑11665), the measure suspending operation of the traffic ban was extended until 30 April 2004, and, by order of 27 April 2004 (C‑320/03 R [2004] ECR I‑3593), that extension was maintained until the Court’s judgment in the main proceedings.  Admissibility of the action31     The Republic of Austria challenges the admissibility of the action by reason of the extremely short time-limits it was set during the pre-litigation procedure for preparing its replies to the letter of formal notice and the reasoned opinion which it was sent by the Commission. It considers that its defence rights and the right to a fair procedure have been infringed, and questions whether the Commission’s officials seriously examined the observations of the Austrian authorities at that stage of the procedure. 32     The Republic of Austria adds that the Commission should have used the procedure under Council Regulation (EC) No 2679/98 of 7 December 1998 on the functioning of the internal market in relation to the free movement of goods among the Member States (OJ 1998 L 337, p. 8). 33     In that respect, this Court finds that the very short deadlines which the Commission set the Republic of Austria for replying to the letter of formal notice and complying with the reasoned opinion were made necessary by the date, fixed by the Austrian authorities themselves, on which the contested regulation was to take effect. Moreover, it is undisputed that those authorities knew the Commission’s position before the opening of the pre-litigation procedure and even before the contested regulation was adopted, since, as the documents before the Court show, the Commission, having received a complaint, had asked those authorities by letter of 6 May 2003 for information on the text which was in the course of being drafted. 34     In those circumstances, the Commission, which has the responsibility under Article 211 EC for ensuring that Member States comply with their obligations under Community law, cannot be blamed for fixing deadlines which took account of the specific circumstances of the case, and particularly its urgency (see, to that effect, Case 293/85 Commission v Belgium [1988] ECR 305, paragraph 14; Case C‑328/96 Commission v Austria [1999] ECR I-7479, paragraphs 34 and 51, and Case C-1/00 Commission v France [2001] ECR I-9989, paragraphs 64 and 65). 35     As for the procedure under Regulation No 2679/98, which is designed to bring as speedy an end as possible to obstacles to the free movement of goods between Member States, as defined in Article 1 of that regulation, the Court finds, as the Advocate General has pointed out in paragraph 35 of his Opinion, that engaging such a procedure is in no way a precondition which the Commission must satisfy before commencing the pre-litigation procedure under Article 226 EC, and that that regulation does not in any way restrict the Commission’s powers under Article 226 EC (see, to that effect, Case C‑394/02 Commission v Greece [2005] ECR I-0000, paragraphs 27 and 28, and the case-law cited therein). 36     This action must therefore be declared admissible. Substance Arguments of the Commission and the intervening Member States37     The Commission argues that the contested regulation infringes the Community provisions on the freedom to provide transport services, contained in Regulations Nos 881/92 and 3118/93, and obstructs the free movement of goods, guaranteed by Articles 28 EC to 30 EC. 38     De facto, the prohibition imposed by the contested regulation mainly affects the international transit of goods. Transit traffic, affected by such a measure, is carried out as to more than 80% by non-Austrian undertakings, whereas over 80% of the transport not affected by that measure is carried out by Austrian undertakings. The regulation is therefore, at least indirectly, discriminatory, contrary to Regulations Nos 881/92 and 3118/93 and Articles 28 EC to 30 EC. 39     Being discriminatory in its application, such a measure cannot be justified on environmental protection grounds. Although the Republic of Austria seeks to justify the contested regulation on grounds relating both to public health and environmental protection, it is obvious, the Commission and the intervening Member States argue, that the latter is the primary objective. Justification on public health grounds under Article 30 EC is possible, they argue, only where the goods concerned present a direct and demonstrable threat to human health. That is clearly not the case here. 40     Should the Court take the view that, although applying in a discriminatory way, the contested regulation might validly be based on considerations of environmental protection, the Commission considers, in the alternative, that that regulation cannot be justified on the basis of Directives 96/62 and 1999/30. In the first place, a sectoral ban on traffic for an unlimited duration cannot be based on Article 7(3) of Directive 96/62, which concerns only urgent and temporary measures. Moreover, even if the limit value under that directive for nitrogen dioxide, increased by the margin of tolerance, was clearly exceeded in 2002, the catalogue of measures contained in Article 10 of the IG-L does not contain the elements required by Article 8(3) and by Annex IV to Directive 96/62. 41     The intervening Member States also criticise the method used in Austria for measuring pollution levels and in reaching the conclusion that nitrogen dioxide emissions must particularly be ascribed to one category of heavy vehicles. The German Government in particular argues that, according to Section I of Annex II to Directive 1999/30, the annual limit value for the protection of human health does not become binding until after 1 January 2010. Before that date, it argues, an exceeding of the limit values fixed for the various years does not justify Member States taking immediate measures. They are authorised to do so only if the ‘alert threshold’ referred to in Article 2(6) of, and Section II of Annex II to, Directive 1999/30 is exceeded, which the Republic of Austria has not argued or even alleged. Moreover, the German and Italian Governments argue, the exceeding of the limit value for nitrogen dioxide on which the contested regulation is based has not been established in accordance with the requirements under Annexes V and VI to Directive 1999/30. The German Government further points to a number of methodological weaknesses in the Austrian authorities’ sampling. The use of longer detours, it adds, would cause more air pollution and only displace the problem. 42     In any event, the interveners argue, the contested regulation does not comply with the principle of proportionality.43     In that respect, the Commission states that in 2002, according to the statistics of the Tyrol authorities, an average of 5 200 heavy goods vehicles used the A 12 motorway between the agglomerations of Wörgl (close to the German border) and Hall (10 km from Innsbruck) daily. The effect of the contested regulation is to deny international transit to all heavy vehicles carrying the goods specified in the regulation, other possible itineraries involving large detours for the operators concerned. 44     The Commission and the intervening Member States further stress that rail transport does not constitute a realistic alternative solution in the short term for the undertakings concerned, given the restricted capacity of the Brenner rail route and also having regard to the technical limitations, delays and lack of reliability of rail transport in general, whichever possibility of transferring the goods concerned to rail were used. 45     The Commission further points to the considerable economic consequences which would result from implementation of the prohibition laid down by the contested regulation, not only for the transport industry but also for the manufacturers of the goods concerned, who would be confronted with higher transport costs, German and Italian undertakings being the first affected. The Commission and the intervening Member States indicate that small and medium-sized transport companies in particular, many of which specialise in carrying some of the goods concerned, are threatened. 46     The Commission, supported by the intervening Member States, mentions various measures which, according to those parties, would be likely to hinder the free movement of goods and the freedom to provide transport services to a lesser degree, while still being suitable for attaining the objective envisaged by the contested regulation, namely: –       the possibility of gradually introducing the traffic ban for the various EURO classes of heavy goods vehicles;–       the system of ecopoints laid down in Protocol No 9 on road, rail and combined transport in Austria (‘Protocol No 9’) to the Act concerning the conditions of Accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden to the European Union and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1), that protocol having already contributed significantly to reconciling heavy vehicle traffic with requirements of environmental protection; –       restriction of heavy vehicle traffic at peak hours;–       a night ban of heavy vehicle traffic;–       the introduction of toll systems based on the quantity of pollutants emitted, or –       speed limits. 47     Those various measures, which would be more in line with the principle of rectifying environmental damage at source and the polluter pays principle, would include local traffic and reduce pollution from vehicles not targeted by the contested regulation. In any event, these parties submit that, without an assessment of the effects on the nitrogen dioxide concentration of the night traffic ban imposed some months before the adoption of the contested regulation, the contested regulation is premature. 48     The German Government adds that the choice of goods covered is arbitrary and unfair. The Netherlands Government adds that the measure applies only to one of the various sources of pollution in the zone concerned and even restricts the use of heavy goods vehicles that are relatively clean, falling into class EURO-3. The Italian Government argues that the regulation also infringes the right of transit conferred by Community law to vehicles to which ecopoints have been allocated. 49     Finally, the German Government argues that Article 10 EC required the Republic of Austria to consult with the Member States concerned and the Commission before adopting such a drastic measure as the sectoral traffic ban. According to the Commission, such a measure should, at the very least, have been introduced gradually so as to allow the industries concerned to prepare for the change in circumstances resulting from its implementation.  Arguments of the Republic of Austria50     The Republic of Austria considers that the contested regulation complies with Community law. It was adopted in compliance with the directives on the protection of ambient air quality and, in particular, with Articles 7 and 8 of Directive 96/62, as transposed into the Austrian legal system. 51     That latter directive, combined with Directive 1999/30, placed an obligation on the Member State concerned to act where the annual limit value for nitrogen dioxide was exceeded. In this case, the Commission does not deny that in 2002 the limit value, increased by the margin of tolerance, of 56 μg/m3 was exceeded at the measuring point of Vomp/Raststätte, and that in 2003 it was again exceeded by a large margin with nitrogen dioxide concentrations in ambient air reaching 68 μg/m3. It was in that situation that the contested regulation was adopted. 52     The Republic of Austria recognises that Protocol No 9, which lays down the rules on ecopoints, explicitly provides for derogations from secondary Community law. It argues, however, that those derogations are exhaustively listed and do not include Directives 96/62 and 1999/30. 53     Since scientific studies clearly demonstrate that emissions of nitrogen dioxyde by heavy vehicle traffic are a major source of air pollution in the zone covered by the contested measure, the Government argues that there is an obvious need to limit the number of transports carried out by those vehicles. For that purpose, the Austrian authorities selected goods for which transport by rail was a feasible alternative from a technical and economic point of view. The Republic of Austria refers in that regard to documents emanating from various public and private rail companies, both from inside and outside Austria, demonstrating that there is sufficient capacity to deal with the increased demand as a result of the introduction of the contested regulation. It also argues that there are alternative routes by road, almost half the heavy vehicle traffic in transit through the Brenner corridor having a shorter, or at least equivalent, route at its disposal. 54     Given those alternative solutions, the Commission’s alarmist concerns, based on the assumption that all the foreign heavy vehicle transit traffic concerned would have to be diverted either through Switzerland or via the Tauern route in Austria, are, it maintains, unfounded. 55     The Republic of Austria also challenges the arguments based on the economic effects of the contested regulation on the transport industry, which, it maintains, is characterised by structural overcapacity and extremely low profit margins. The fact that the regulation might exacerbate those problems is not, the Government submits, a reason for regarding it as illegal. 56     As for the allegedly discriminatory character of the contested regulation, the Republic of Austria argues that the traffic ban also affects Austrian vehicles and that the choice of goods made in the regulation was based on the possibility of their transportation being easily transferred to rail. 57     The fact that transport operations having their origin or destination in the designated zone are excluded from the ban is, the Government argues, not sufficient to establish the existence of discrimination against non-Austrian operators. The derogation in favour of local traffic is inherent in the system established, since transferring that type of traffic to rail, ex hypothesi within the zone itself, would involve longer trips to rail terminals, which would have an effect contrary to the objective sought by the contested regulation. 58     In any event, even if the Court were to hold the contested regulation indirectly discriminatory, the Republic of Austria argues that the traffic ban is justified on grounds of protecting both human health and the environment. The limit values in Directives 96/62 and 1999/30 were fixed on the basis of scientific criteria at a level presumed to be necessary for the durable protection of human health and the protection of ecosystems and vegetation. It is therefore unnecessary, it submits, to prove that every instance of the limit values being exceeded threatens public health or the environment as a whole. 59     The ban contained in the contested regulation is, the Government argues, appropriate, necessary and proportionate for attaining its objective. The Commission did not challenge the appropriateness of the measure, at least until the reply stage of the proceedings, or its necessity, having regard to the fact that the annual limit values were exceeded. By contrast, the Republic of Austria challenges the appropriateness of the alternative solutions proposed by the Commission and the intervening Member States. Banning certain classes of EURO vehicles would be either insufficient (banning classes 0 and 1), or disproportionate (banning classes 0, 1 and 2). The latter prohibition would affect 50% of heavy goods traffic and does not take its transferability to rail into account. The Republic of Austria further points out that the limit values were exceeded despite the operation of the ecopoints system and that, in preparing the regulation, the ban on night traffic of heavy goods vehicles was taken into account. 60     Moreover, the sectoral traffic ban on heavy vehicles was not an isolated measure, other structural measures having also been undertaken, such as extension of the rail infrastructure and improvement in the public transportation of local and regional passengers. 61     Finally, the Republic of Austria considers that the Commission’s argument in support of its plea of infringement of Regulations Nos 881/92 and 3118/93 is unclear and excessively brief. More particularly, the Commission did not explain in what way those regulations were infringed, with the result that the conditions under Article 38(1)(c) of the Rules of Procedure of the Court of Justice have not been fulfilled.  Findings of the Court62     The action by the Commission is, in a general way, seeking a declaration by the Court that, by prohibiting lorries of more than 7.5 tonnes, carrying certain goods, from driving on a section of the A 12 motorway in the Inn valley, the contested regulation introduces an obstacle that is incompatible with the free movement of goods guaranteed by the EC treaty and infringes Regulations Nos 881/92 and 3118/93. Those two complaints should therefore be examined in order. The alleged infringement of the Treaty rules on the free movement of goods–       The existence of an obstacle to the free movement of goods63     It should be stated at the outset that the free movement of goods is one of the fundamental principles of the Treaty (Case C-265/95 Commission v France [1997] ECR I-6959, paragraph 24). 64     Thus, Article 3 EC, inserted in the first part of the Treaty, headed ‘Principles’, provides in paragraph 1(c) that, for the purposes set out in Article 2 of the Treaty, the activities of the Community are to include an internal market characterised by the abolition, as between Member States, of obstacles to, inter alia, the free movement of goods. Similarly, Article 14(2) EC provides that ‘the internal market is to comprise an area without internal frontiers in which the free movement of goods is ensured in accordance with the provisions of the Treaty’, such provisions being found primarily in Articles 28 EC and 29 EC. 65     Such freedom of movement entails the existence of a general principle of free transit of goods within the Community (see Case 266/81 SIOT [1983] ECR 731, paragraph 16). 66     Clearly, by prohibiting heavy vehicles of more than 7.5 tonnes carrying certain categories of goods from travelling along a road section of paramount importance, constituting one of the main routes of land communication between southern Germany and northern Italy, the contested regulation obstructs the free movement of goods and, in particular, their free transit. 67     The fact that, as the Republic of Austria argues, there are alternative routes or other means of transport capable of allowing the goods in question to be transported does not negate the existence of an obstacle. It has been established in the case-law since the judgment of 11 July 1974 in Case 8/74 Dassonville [1974] ECR 837, paragraph 5, that Articles 28 EC and 29 EC, taken in their context, must be understood as being intended to eliminate all barriers, whether direct or indirect, actual or potential, to trade flows in intra-Community trade (see Case C‑112/00 Schmidberger [2003] ECR I-5659, paragraph 56). 68     In this case, it cannot be denied that the prohibition on traffic laid down by the contested regulation, by forcing the undertakings concerned, at very short notice moreover, to seek viable alternative solutions for the transport of goods covered by that regulation, is capable of limiting trading opportunities between northern Europe and the north of Italy. 69     The contested regulation must therefore be regarded as constituting a measure having equivalent effect to quantitative restrictions, which in principle are incompatible with the Community law obligations under Articles 28 EC and 29 EC, unless that measure can be objectively justified. –       Possible justification of the obstacle70     It is settled case-law that national measures capable of obstructing intra-Community trade may be justified by overriding requirements relating to protection of the environment provided that the measures in question are proportionate to the aim pursued (see, in particular, Case C-463/01 Commission v Germany [2004] ECR I-11705, paragraph 75, and Case C-309/02 Radberger Getränkegesellschaft and S. Spitz [2004] ECR I-11763, paragraph 75). 71     In this case, it is undisputed that the contested regulation was adopted in order to ensure the quality of ambient air in the zone concerned and is therefore justified on environmental protection grounds. 72     In the first place, protection of the environment constitutes one of the essential objectives of the Community (Case 240/83 ADBHU [1985] ECR 531, paragraph 13; Case 302/86 Commission v Denmark [1988] ECR 4607, paragraph 8; Case C‑213/96 Outokumpu [1998] ECR I-1777, paragraph 32; and Case C‑176/03 Commission v Council [2005] ECR I-0000, paragraph 41). With that objective in mind, Article 2 EC states that the Community shall have as its task to promote a ‘high level of protection and improvement of the quality of the environment’, and, for that purpose, Article 3(1)(l) EC provides for the establishment of a ‘policy in the sphere of the environment’. 73     Furthermore, in the words of Article 6 EC ‘[e]nvironmental protection requirements must be integrated into the definition and implementation of the Community policies and activities’, a provision which emphasises the fundamental nature of that objective and its extension across the range of those policies and activities (Commission v Council, cited above, paragraph 42). 74     Secondly, more particularly concerning the protection of ambient air quality, it should be noted that, in Annex II, Directive 1999/30 lays down limit values for nitrogen dioxide and oxides of nitrogen for the purpose of assessing that quality and determining at what point a preventive or corrective measure must be taken. 75     In that context, Directive 96/62 makes a distinction between the situation where there is a ‘risk of the limit values being exceeded’ and that where they have in fact been exceeded. 76     In respect of the first situation, Article 7(3) of that directive provides that Member States ‘shall draw up action plans … in order to reduce that risk’. Those plans, the provision continues, may ‘provide for measures to … suspend activities, including motor-vehicle traffic, which contribute to the limit values being exceeded’. 77     In the second situation, namely where it has been established that the levels of one or more pollutants exceed the limit values, increased by the margin of tolerance, Article 8(3) of Directive 96/62 provides that Member States ‘shall take measures to ensure that a plan or programme is prepared or implemented for attaining the limit value within the specific time limit’. Those plans or programmes are to be made available to the public and contain the information listed in Annex IV to that directive. 78     In so far as the Republic of Austria is arguing that the contested regulation, based on the IG-L which transposes Directives 96/62 and 1999/30 into national law, is designed precisely to implement the provisions of Articles 7 and 8 of Directive 96/62, the Court must as a preliminary step examine whether that regulation does indeed have such a purpose. 79     In that regard, although the method used for measuring the level of nitrogen dioxide in ambiant air has been criticised by the Federal Republic of Germany and the Italian Republic, the Commission itself does not deny that, in 2002 and 2003, the annual limit value fixed for that pollutant, increased by the margin of tolerance, was exceeded at the Vomp/Raststätte measuring point. 80     In those circumstances, having regard to the provisions of Article 8(3) of Directive 96/62, the Republic of Austria was under a duty to act. It is true that, in accordance with Section I of Annex II to Directive 1999/30, the limit values established for nitrogen dioxide do not have to be complied with until after 1 January 2010. The fact remains, however, that, where limit values are exceeded, a Member State cannot be censured for acting in accordance with Article 8(3), before the deadline, in order progressively to bring about the result prescribed by the latter directive and thereby attain the objective it sets within the prescribed period. 81     Article 8(3) of Directive 96/62 requires more particularly that, where limit values are exceeded, the Member State concerned must prepare or implement a plan or programme, which must contain the information listed in Annex IV to that directive, concerning such matters as the place where the values were exceeded, the principal sources of emissions responsible for the pollution and measures existing or envisaged. By definition, such a plan or programme must contain a series of appropriate and coherent measures designed to reduce the pollution level in the specific circumstances of the zone concerned. 82     However, the measures under Article 10 of the IG‑L, the principles set out in Article 11 of that law and the specific provisions concerning the transport industry, contained in Article 14 of the IG-L, cannot be described as a ‘plan’ or ‘programme’ within the meaning of Article 8(3) of Directive 96/62, since they are not in any way connected to a specific situation in which limit values have been exceeded. As for the contested regulation itself, adopted on the basis of the abovementioned provisions of the IG-L, even if it could be described as a plan or programme, it does not, as the Commission has pointed out, contain all the information listed in Annex IV to Directive 96/62 and, in particular, that referred to in points 7 to 10 of that annex. 83     In those circumstances, even if one were to concede that the contested regulation is based on Article 8(3) of Directive 92/62, it cannot be regarded as constituting a correct and full implementation of that provision. 84     The above finding does not, however, preclude the possibility that the obstacle to the free movement of goods arising from the traffic ban laid down by the contested regulation might be justified by one of the imperative requirements in the public interest endorsed by the case-law of the Court of Justice. 85     In order to establish whether such a restriction is proportionate having regard to the legitimate aim pursued in this case, namely the protection of the environment, it needs to be determined whether it is necessary and appropriate in order to secure the authorised objective. 86     On that point, the Commission and the intervening Member States stress both the lack of any genuine alternative means of transporting the goods in question and the existence of many other measures, such as speed limits, or toll systems linked to different classes of heavy vehicles, or the ecopoints system, which would have been capable of reducing nitrogen dioxide emissions to acceptable levels. 87     Without the need for the Court itself to give a ruling on the existence of alternative means, by rail or road, of transporting the goods covered by the contested regulation under economically acceptable conditions, or to determine whether other measures, combined or not, could have been adopted in order to attain the objective of reducing emissions of pollutants in the zone concerned, it suffices to say in this respect that, before adopting a measure so radical as a total traffic ban on a section of motorway constituting a vital route of communication between certain Member States, the Austrian authorities were under a duty to examine carefully the possibility of using measures less restrictive of freedom of movement, and discount them only if their inadequacy, in relation to the objective pursued, was clearly established. 88     More particularly, given the declared objective of transferring transportation of the goods concerned from road to rail, those authorities were required to ensure that there was sufficient and appropriate rail capacity to allow such a transfer before deciding to implement a measure such as that laid down by the contested regulation. 89     As the Advocate General has pointed out in paragraph 113 of his Opinion, it has not been conclusively established in this case that the Austrian authorities, in preparing the contested regulation, sufficiently studied the question whether the aim of reducing pollutant emissions could be achieved by other means less restrictive of the freedom of movement and whether there actually was a realistic alternative for the transportation of the affected goods by other means of transport or via other road routes. 90     Moreover, a transition period of only two months between the date on which the contested regulation was adopted and the date fixed by the Austrian authorities for implementation of the sectoral traffic ban was clearly insufficient reasonably to allow the operators concerned to adapt to the new circumstances (see, to that effect, the judgments referred to above in Commission v Germany, paragraphs 79 and 80, and Radlberger Getränkegesellschaft and S. Spitz, paragraphs 80 and 81). 91     In the light of the above, it must be concluded that, because it infringes the principle of proportionality, the contested regulation cannot validly be justified by reasons concerning the protection of air quality. Therefore, that regulation is incompatible with Articles 28 EC and 29 EC. Infringement of Regulations Nos 881/92 and 3118/9392     According to the Commission, the contested regulation also infringes Articles 1 and 3 of Regulation No 881/92 and Articles 1 and 6 of Regulation No 3118/93. 93     Suffice it to say in that respect that the Commission has not, in its application, in its reply or at the hearing, put forward any specific argument in support of such a plea. 94     That plea must therefore be dismissed.95     In view of the above considerations as a whole, the Court holds that, by prohibiting lorries of over 7.5 tonnes, carrying certain goods, from driving on a section of the A 12 motorway in the Inn valley, following the adoption of the constested regulation, the Republic of Austria has failed to fulfil its obligations under Articles 28 EC and 29 EC.  Costs96     Under Article 69(2) of the Rules of Procedure, an unsuccessful party is to be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Commission has applied for costs against the Republic of Austria, and the latter has been essentially unsuccessful in its pleadings, it must be ordered to pay the costs. Under Article 69(4) of the Rules of Procedure, Member States who intervene in support of the Commission are to bear their own costs. On those grounds, the Court (Grand Chamber) hereby rules:1.      By prohibiting lorries of over 7.5 tonnes, carrying certain goods, from driving on a section of the A 12 motorway in the Inn valley, following the adoption of the Regulation of the First Minister of the Tyrol limiting transport on the A 12 motorway in the Inn valley (sectoral prohibition on road transport) [Verordnung des Landeshauptmanns von Tirol, mit der auf der A 12 Inntalautobahn verkehrsbeschränkende Maßnahmen erlassen werden (sektorales Fahrverbot)], of 27 May 2003, the Republic of Austria has failed to fulfil its obligations under Articles 28 EC and 29 EC.2.      The remainder of the application is dismissed.3.      The Republic of Austria is ordered to pay the costs.4.      The Federal Republic of Germany, the Italian Republic and the Kingdom of the Netherlands are ordered to bear their own costs.[Signatures]* Language of the case: German.

28a1c-0ede7fa-40d3

EN

BELGIAN RULES THAT REQUIRE RESIDENTS' MOTOR VEHICLES TO BE REGISTERED IN BELGIUM ARE CONTRARY TO THE PRINCIPLE OF FREEDOM OF MOVEMENT FOR WORKERS

«(Freedom of movement for workers – Vehicle leasing – Obligation to register vehicle in worker's Member State of residence)» Summary of the Judgment Freedom of movement for persons – Workers – Restrictions – Prohibition on workers domiciled in national territory using rental vehicles leased from an undertaking established in another Member State and made available by the employer who is also established in the other Member State – Not permissible (Art. 39 EC)Freedom of movement for persons – Workers – Restrictions – Prohibition on workers domiciled in national territory using rental vehicles leased from an undertaking established in another Member State and made available by the employer who is also established in the other Member State – Not permissible JUDGMENT OF THE COURT (Fifth Chamber)2 October 2003 (1) ((Freedom of movement for workers – Vehicle leasing – Obligation to register vehicle in worker's Member State of residence))THE COURT (Fifth Chamber),,after considering the written observations submitted on behalf of: ─ the Belgian Government, initially by F. van de Craen, and, subsequently, A. Snoecx, acting as Agents, ─ the Danish Government, by J. Molde and J. Bering Liisberg, acting as Agents, ─ the Finnish Government, by E. Bygglin, acting as Agent, ─ the United Kingdom Government, by G. Amodeo, acting as Agent, and P. Whipple, barrister, ─ the Commission of the European Communities, by H. van Lier and M. Patakia, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of the Danish Government, represented by J. Bering Liisberg, of the Finnish Government, represented by T. Pynnä, acting as Agent, of the United Kingdom Government, represented by P. Whipple, and of the Commission, represented by H. van Lier, at the hearing on 10 October 2002, after hearing the Opinion of the Advocate General at the sitting on 5 December 2002,gives the followingFactual and legal backgroundOn those grounds, THE COURT (Fifth Chamber),WatheletEdward Jann von BahrRosas R. Grass M. Wathelet RegistrarPresident of the Fifth Chamber 1 – Language of the case: Dutch. Language of the case: Dutch.

297d6-4bbab76-474d

EN

THE COURT DISMISSES SIX OF THE EIGHT APPEALS BROUGHT BY STEEL UNDERTAKINGS AND THEIR TRADE ASSOCIATION EUROFER WHICH HAD BEEN FOUND GUILTY OF ENGAGING IN A CARTEL

«(Appeal – Agreements and concerted practices – European producers of beams – Notification of the statement of objections)» Summary of the Judgment ECSC – Agreements, decisions and concerted practices – Prohibited – Decision imposing a fine on a company which was not the addressee of the statement of objections following a procedure conducted exclusively against one of its subsidiaries – Infringement of the rights of the defence – Annulment ( ECSC Treaty, Arts 36 and 65(1) and (5)) ECSC – Agreements, decisions and concerted practices – Prohibited – Decision imposing a fine on a company which was not the addressee of the statement of objections following a procedure conducted exclusively against one of its subsidiaries – Infringement of the rights of the defence – Annulment JUDGMENT OF THE COURT (Fifth Chamber)2 October 2003 (1) ((Appeal – Agreements and concerted practices – European producers of beams – Notification of the statement of objections))appellant, THE COURT (Fifth Chamber),,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 26 September 2002,gives the followingFacts and the contested decisionOn those grounds, THE COURT (Fifth Chamber)WatheletEdward La Pergola Jannvon Bahr R. Grass M. Wathelet RegistrarPresident of the Fifth Chamber 1 – Language of the case: French. Language of the case: French.

15645-f33864b-463a

EN

A MEMBER STATE IS LIABLE FOR THE DAMAGE CAUSED TO AN INDIVIDUAL BY AN INFRINGEMENT OF COMMUNITY LAW ATTRIBUTABLE TO A SUPREME COURT IF THE INFRINGEMENT IS MANIFEST

«(Equal treatment – Remuneration of university professors – Indirect discrimination – Length-of-service increment – Liability of a Member State for damage caused to individuals by infringements of Community law for which it is responsible – Infringements attributable to a national court)» Summary of the Judgment 1.. Community law – Rights conferred on individuals – Infringement by a Member State – Obligation to make good damage caused to individuals – Infringement attributable to a supreme court – No effect – Court competent to decide a case relating to such compensation – Application of national law Community law – Rights conferred on individuals – Infringement by a Member State – Obligation to make good damage caused to individuals – Infringement attributable to a supreme court – No effect – Court competent to decide a case relating to such compensation – Application of national law 2.. Community law – Rights conferred on individuals – Infringement by a Member State – Obligation to make good damage caused to individuals – Conditions in the event of infringement attributable to a supreme court – Manifest character of the infringement – Criteria Community law – Rights conferred on individuals – Infringement by a Member State – Obligation to make good damage caused to individuals – Conditions in the event of infringement attributable to a supreme court – Manifest character of the infringement – Criteria 3.. Freedom of movement for persons – Workers – Equal treatment – Remuneration of university professors – Indirect discrimination – Length-of-service increment which takes into account only the length of service in the universities of the Member State concerned – Not permissible – Whether justifiable – No justification (EC Treaty, Art. 48 (now, after amendment, Art. 39 EC); Council Regulation No 1612/68, Art. 7(1))Freedom of movement for persons – Workers – Equal treatment – Remuneration of university professors – Indirect discrimination – Length-of-service increment which takes into account only the length of service in the universities of the Member State concerned – Not permissible – Whether justifiable – No justification 4.. Community law – Infringement by a Member State – Obligation to make good damage caused to individuals – Infringement attributable to a supreme court – Particular circumstances – Lack of manifest character of the infringement Community law – Infringement by a Member State – Obligation to make good damage caused to individuals – Infringement attributable to a supreme court – Particular circumstances – Lack of manifest character of the infringement JUDGMENT OF THE COURT30 September 2003 (1) ((Equal treatment – Remuneration of university professors – Indirect discrimination – Length-of-service increment – Liability of a Member State for damage caused to individuals by infringements of Community law for which it is responsible – Infringements attributable to a national court))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Mr Köbler, by A. König, Rechtsanwalt, ─ the Republic of Austria, by M. Windisch, acting as Agent, ─ the Austrian Government, by H. Dossi, acting as Agent, ─ the German Government, by A. Dittrich and W.-D. Plessing, acting as Agents, ─ the French Government, by R. Abraham and G. de Bergues, and by C. Isidoro, acting as Agents, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the United Kingdom Government, by J.E. Collins, acting as Agent, and D. Andersen QC and M. Hoskins, Barrister, ─ the Commission of the European Communities, by J. Sack and H. Kreppel, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Mr Köbler, represented by A. König, the Austrian Government, represented by E. Riedl, acting as Agent, the German Government, represented by A. Dittrich, the French Government, represented by R. Abraham, the Netherlands Government, represented by H.G. Sevenster, the United Kingdom Government, represented by J.E. Collins, and by D. Andersen and M. Hoskins, and the Commission, represented by J. Sack and H. Kreppel, at the hearing on 8 October 2002, after hearing the Opinion of the Advocate General at the sitting on 8 April 2003, gives the followingLegal frameworkOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulmann EdwardLa Pergola Jann SkourisMacken Colneric von BahrCunha Rodrigues Rosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

a4828-114cdce-46a7

EN

THE COURT HAS SET ASIDE RECORD FINES TOTALLING EUR 273 MILLION IMPOSED BY THE COMMISSION FOR ABUSE OF A COLLECTIVE DOMINANT POSITION ON SHIPPING COMPANIES FORMING A CONFERENCE

«(Competition – Liner conferences – Regulation (EEC) No 4056/86 – Block exemption – Individual exemption – Collective dominant position – Abuse – Service contracts – Accession to the conference – Alteration of the competition structure – Withdrawal of block exemption – Fines – Rights of the defence)» Summary of the Judgment 1.. Procedure – Grounds of judgments – Scope Procedure – Grounds of judgments – Scope 2.. Competition – Administrative procedure – Statement of objections – Preparatory document capable of amendment by the Commission – Power of the Commission to request further information – Limits Competition – Administrative procedure – Statement of objections – Preparatory document capable of amendment by the Commission – Power of the Commission to request further information – Limits 3.. Competition – Administrative procedure – Statement of objections – Necessary content – Observance of the rights of the defence (Council Regulation No 17, Art. 19(1); Commission Regulation No 99/63, Art. 4) Competition – Administrative procedure – Statement of objections – Necessary content – Observance of the rights of the defence 4.. Competition – Administrative procedure – Commission decision finding an infringement – Evidence which may be used Competition – Administrative procedure – Commission decision finding an infringement – Evidence which may be used 5.. Competition – Administrative procedure – Access to the file – Obligation on the Commission to adduce inculpatory evidence Competition – Administrative procedure – Access to the file – Obligation on the Commission to adduce inculpatory evidence 6.. Competition – Administrative procedure – Commission decision finding an infringement – Exclusion of evidence in documents not disclosed to the parties – Consequences – Relevant objection may not be proved by reference to those documents Competition – Administrative procedure – Commission decision finding an infringement – Exclusion of evidence in documents not disclosed to the parties – Consequences – Relevant objection may not be proved by reference to those documents 7.. Competition – Administrative procedure – Commission decision finding an infringement – Decision not identical to the statement of objections – Infringement of the rights of the defence – Condition – Demonstration by the undertaking concerned that further complaints have been raised Competition – Administrative procedure – Commission decision finding an infringement – Decision not identical to the statement of objections – Infringement of the rights of the defence – Condition – Demonstration by the undertaking concerned that further complaints have been raised 8.. Competition – Administrative procedure – Observance of the rights of the defence – Introduction of new allegations at the stage of the decision finding the infringement – Sanction – Condition Competition – Administrative procedure – Observance of the rights of the defence – Introduction of new allegations at the stage of the decision finding the infringement – Sanction – Condition 9.. Procedure – Application initiating proceedings – Procedural requirements – Subject-matter of the dispute to be indicated – Pleas in law relied upon to be briefly stated – Clear statement of the pleas in law (EC Treaty, Art. 173 (now, after amendment, Art. 230 EC); Statute of the Court of Justice, Arts 21, first para., and 53, first para.; Rules of Procedure of the Court of First Instance, Art. 44(1)(c) and (d)) Procedure – Application initiating proceedings – Procedural requirements – Subject-matter of the dispute to be indicated – Pleas in law relied upon to be briefly stated – Clear statement of the pleas in law 10.. Competition – Administrative procedure – Access to the file – Purpose – Observance of the rights of the defence – Scope – Inculpatory evidence – Exclusion of evidence in documents not disclosed – Exculpatory evidence – Assessment of the utility of disclosure by the Commission alone – Not permissible (EC Treaty, Arts 85(1) and 86 (now Arts 81(1) EC and 82 EC); Council Regulations Nos 17, 1017/68 and 4056/86) Competition – Administrative procedure – Access to the file – Purpose – Observance of the rights of the defence – Scope – Inculpatory evidence – Exclusion of evidence in documents not disclosed – Exculpatory evidence – Assessment of the utility of disclosure by the Commission alone – Not permissible 11.. Competition – Administrative procedure – Access to the file – Documents not contained in the investigation file – Documents which may be of use to the defence – Infringement of the rights of the defence – Conditions Competition – Administrative procedure – Access to the file – Documents not contained in the investigation file – Documents which may be of use to the defence – Infringement of the rights of the defence – Conditions 12.. Competition – Administrative procedure – Access to the file – Documents not contained in the investigation file and which the Commission does not intend to use as inculpatory evidence – Commission's obligation to make those documents accessible to the parties on its own initiative – None Competition – Administrative procedure – Access to the file – Documents not contained in the investigation file and which the Commission does not intend to use as inculpatory evidence – Commission's obligation to make those documents accessible to the parties on its own initiative – None 13.. Competition – Administrative procedure – Access to the file – Limits – Undertaking in a dominant position and able to adopt retaliatory measures towards Commission informants Competition – Administrative procedure – Access to the file – Limits – Undertaking in a dominant position and able to adopt retaliatory measures towards Commission informants 14.. Actions for annulment – Actionable measures – Definition – Statement of objections – Exclusion (EC Treaty, Art. 173 (now, after amendment, Art. 230 EC) Actions for annulment – Actionable measures – Definition – Statement of objections – Exclusion 15.. Competition – Administrative procedure – Communication by the Commission to the undertakings concerned of a large number of requests for information after the adoption of a statement of objections – Limit of that burden – Observance of the rights of the defence Competition – Administrative procedure – Communication by the Commission to the undertakings concerned of a large number of requests for information after the adoption of a statement of objections – Limit of that burden – Observance of the rights of the defence 16.. Transport – Maritime transport – Competition rules – Block exemptions – Strict interpretation – Services which are not maritime transport services within the scope of Regulation No 4056/86 – Exclusion (EC Treaty, Art. 85(1) (now Art. 81(1) EC); Council Regulation No 4056/86, Arts 1(2) and 3) Transport – Maritime transport – Competition rules – Block exemptions – Strict interpretation – Services which are not maritime transport services within the scope of Regulation No 4056/86 – Exclusion 17.. Competition – Community rules – Application by reference to the national practices of the Member States or of certain non-member States – Not permissible (EC Treaty, Art. 85 (now Art. 81 EC)) Competition – Community rules – Application by reference to the national practices of the Member States or of certain non-member States – Not permissible 18.. Competition – Dominant position – Collective dominant position – Definition – Liner conference (EC Treaty, Art. 86 (now Art. 82 EC); Council Regulation No 4056/86, Art. 1(3)(b)) Competition – Dominant position – Collective dominant position – Definition – Liner conference 19.. Competition – Dominant position – Collective dominant position – Existence – Means of identification – Taking into consideration an agreement even though prohibited by Article 85(1) of the Treaty (now Article 81(1) EC)(EC Treaty, Arts 85(1) and 86 (now Arts 81(1) EC and 82 EC); Council Regulation No 4056/86, Art. 1(3)(b)) Competition – Dominant position – Collective dominant position – Existence – Means of identification – Taking into consideration an agreement even though prohibited by Article 85(1) of the Treaty (now Article 81(1) EC) 20.. Competition – Dominant position – Collective dominant position – Definition – Requirement that all competition between undertakings be eliminated – None (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Collective dominant position – Definition – Requirement that all competition between undertakings be eliminated – None 21.. Competition – Dominant position – Collective dominant position – Definition – Liner conference – Exclusion in the case of substantial internal competition (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Collective dominant position – Definition – Liner conference – Exclusion in the case of substantial internal competition 22.. Competition – Dominant position – Collective dominant position – Definition – Liner conference – Irrelevance, in principle, of other forms of competition when faced with a common price strategy (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Collective dominant position – Definition – Liner conference – Irrelevance, in principle, of other forms of competition when faced with a common price strategy 23.. Competition – Dominant position – Relevant market – Delimitation – Criteria (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Relevant market – Delimitation – Criteria 24.. Competition – Dominant position – Existence – Holding of extremely large market shares – Generally sufficient evidence (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Existence – Holding of extremely large market shares – Generally sufficient evidence 25.. Competition – Dominant position – Meaning – Presumption of dominance when holding more than half of the market share (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Meaning – Presumption of dominance when holding more than half of the market share 26.. Competition – Maritime transport – Dominant position – Holding of large market shares – Generally sufficient evidence (EC Treaty, Art. 86 (now Art. 82 EC); Council Regulation No 4056/86, Art. 8) Competition – Maritime transport – Dominant position – Holding of large market shares – Generally sufficient evidence 27.. Competition – Dominant position – Meaning – Ability to impose regular price increases – Not an essential factor (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Meaning – Ability to impose regular price increases – Not an essential factor 28.. Competition – Dominant position – Abuse – Exemption – Exclusion – Obligations incumbent upon dominant undertakings – Ability of the dominant undertaking to protect its commercial interests provided that it does not reinforce its dominant position or abuse it (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Abuse – Exemption – Exclusion – Obligations incumbent upon dominant undertakings – Ability of the dominant undertaking to protect its commercial interests provided that it does not reinforce its dominant position or abuse it 29.. Competition – Community rules – Scope ratione materiae – Conduct imposed by State measures – Precluded – Conditions (EC Treaty, Arts 85 and 86 (now Arts 81 EC and 82 EC)) Competition – Community rules – Scope ratione materiae – Conduct imposed by State measures – Precluded – Conditions 30.. Competition – Dominant position – Abuse – Meaning – Creation or strengthening of a dominant position – Liner conference – Acceptance of new members – Factor capable of constituting an abuse (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Abuse – Meaning – Creation or strengthening of a dominant position – Liner conference – Acceptance of new members – Factor capable of constituting an abuse 31.. Transport – Maritime transport – Competition rules – Block exemptions – Regulation No 4056/86 on maritime transport – Strict interpretation (EC Treaty, Art. 85(1) (now Art. 81(1) EC); Council Regulation No 4056/86, Arts 1(3)(b) and 3) Transport – Maritime transport – Competition rules – Block exemptions – Regulation No 4056/86 on maritime transport – Strict interpretation 32.. Competition – Agreements, decisions and concerted practices – Notification – Effects – Benefit of immunity from fines – Need for express provision – Immunity not provided for in Regulation No 1017/68 (EC Treaty, Arts 85 and 86 (now Arts 81 EC and 82 EC); Council Regulation No 1017/68) Competition – Agreements, decisions and concerted practices – Notification – Effects – Benefit of immunity from fines – Need for express provision – Immunity not provided for in Regulation No 1017/68 33.. Competition – Agreements, decisions and concerted practices – Notification – Effects – Immunity from fines under the second paragraph of Article 19(4) of Regulation No 4056/86 on maritime transport – Scope – Infringement of Articles 85 and 86 of the Treaty (now Articles 81 EC and 82 EC)(EC Treaty, Arts 85 and 86 (now Arts 81 EC and 82 EC); Council Regulation No 4056/86, Art. 19(2)(a) and 4(2)) Competition – Agreements, decisions and concerted practices – Notification – Effects – Immunity from fines under the second paragraph of Article 19(4) of Regulation No 4056/86 on maritime transport – Scope – Infringement of Articles 85 and 86 of the Treaty (now Articles 81 EC and 82 EC) 34.. Competition – Fines – Amount – Determination thereof – Division of an overall amount between different groups of undertakings constituted on the basis of size of undertakings which participated in the infringement – Whether permissible – Conditions (Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination thereof – Division of an overall amount between different groups of undertakings constituted on the basis of size of undertakings which participated in the infringement – Whether permissible – Conditions 35.. Competition – Fines – Decision imposing fines – Obligation to state reasons – Scope – Statement of the factors by which the Commission assessed the gravity and duration of the infringement – Sufficient statement (EC Treaty, Art. 190 (now Art. 253 EC); Council Regulation No 17, Art. 15(2)) Competition – Fines – Decision imposing fines – Obligation to state reasons – Scope – Statement of the factors by which the Commission assessed the gravity and duration of the infringement – Sufficient statement 36.. Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringement – Undertaking a member of a liner conference – Assessment on the basis of total turnover of the undertaking – Whether permissible – Taking into account of other factors specific to each member undertaking – No obligation (Council Regulations Nos 17, Art. 15(2) and 4056/86, Art. 19) Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringement – Undertaking a member of a liner conference – Assessment on the basis of total turnover of the undertaking – Whether permissible – Taking into account of other factors specific to each member undertaking – No obligation 37.. Competition – Fines – Amount – Determination – Commission's margin of discretion – Economic operators precluded from relying on a legitimate expectation that an existing situation will be maintained – Raising of the general level of fines – Whether permissible – Conditions (Council Regulations Nos 17, 1017/68 and 4056/86) Competition – Fines – Amount – Determination – Commission's margin of discretion – Economic operators precluded from relying on a legitimate expectation that an existing situation will be maintained – Raising of the general level of fines – Whether permissible – Conditions 38.. Competition – Fines – Amount – Determination – Mitigating circumstances – Notification of an agreement which facilitated the finding that the practices stipulated by that agreement were abusive (Council Regulation No 17) Competition – Fines – Amount – Determination – Mitigating circumstances – Notification of an agreement which facilitated the finding that the practices stipulated by that agreement were abusive 39.. Competition – Dominant position – Abuse – Meaning – Practices arising in contracts for services between a shipper and a liner conference or a carrier (EC Treaty, Art. 86 (now Art. 82 EC)) Competition – Dominant position – Abuse – Meaning – Practices arising in contracts for services between a shipper and a liner conference or a carrier 40.. Non-contractual liability – Conditions – Damage – Causal link – Burden of proof (EC Treaty, Arts 178 and 215 (now Art. 235 EC and 288 EC)) Non-contractual liability – Conditions – Damage – Causal link – Burden of proof JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber)30 September 2003 (*) « Competition - Liner conferences - Regulation (EEC) No 4056/86 - Block exemption - Individual exemption - Collective dominant position - Abuse - Service contracts - Accession to the conference - Alteration of the competition structure - Withdrawal of block exemption - Fines - Rights of the defence» In Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB, established in Gothenburg (Sweden), Cho Yang Shipping Co. Ltd, established in Seoul (South Korea), DSR-Senator Lines GmbH, established in Bremen (Germany), Hanjin Shipping Co. Ltd, established in Seoul (South Korea), Hapag-Lloyd AG, established in Hamburg (Germany), Hyundai Merchant Marine Co. Ltd, established in Seoul (South Korea), A.P. Møller-Mærsk Line, established in Copenhagen (Denmark), Mediterranean Shipping Co. SA, established in Geneva (Switzerland), Orient Overseas Container Line (UK) Ltd, established in London (United Kingdom), Polish Ocean Lines (POL), established in Gdynia (Poland), P & O Nedlloyd BV, established in London (United Kingdom), Sea-Land Service Inc., established in Jersey City, New Jersey (United States of America), Neptune Orient Lines Ltd, established in Singapore (Singapore), Nippon Yusen Kaisha, established in Tokyo (Japan), Transportación Marítima Mexicana SA de CV, established in Mexico City (Mexico), Tecomar SA de CV, established in Mexico City (Mexico), represented by J. Pheasant, N. Bromfield, M. Levitt, D. Waelbroeck, U. Zinsmeister, A. Bentley, C. Thomas, A. Nourry, M. Van Kerckhove, P. Ruttley and A. Merckx, lawyers, with an address for service in Luxembourg, applicants,vCommission of the European Communities, represented by R. Lyal, acting as Agent, and J. Flynn, Barrister, with an address for service in Luxembourg, defendant,supported by European Council of Transport Users ASBL, represented by M. Clough QC, Solicitor-Advocate, with an address for service in Luxembourg, intervener,APPLICATION for the annulment of Commission Decision 1999/243/EC of 16 September 1998 relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty (Case No IV/35.134 - Trans-Atlantic Conference Agreement) (OJ 1999 L 95, p. 1),partie requérante, THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Third Chamber),composed of: K. Lenaerts, President, J. Azizi and M. Jaeger, Judges, Registrar: J. Plingers, Administrator, having regard to the written procedure and further to the hearing on 26 and 27 March 2003, gives the followingJudgment Legal background 1       Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition 1959-1962, p. 87), initially applied to all activities covered by the EEC Treaty. However, in view of the common transport policy and the distinctive features of the transport sector, it proved necessary to lay down rules governing competition different from those applicable for other sectors of the economy, and the Council therefore adopted Regulation No 141 of 26 November 1962 exempting transport from the application of Council Regulation No 17 (OJ, English Special Edition 1959-1962, p. 291). 2       On 19 July 1968 the Council adopted Regulation (EEC) No 1017/68 applying rules of competition to transport by rail, road and inland waterway (OJ, English Special Edition 1968 (I), p. 302). 3       In accordance with Article 2 of Regulation No 1017/68, agreements, decisions and concerted practices which, for the three modes of transport just mentioned, are liable to affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market are prohibited. The prohibition applies inter alia to agreements, decisions and concerted practices which consist in: (a) directly or indirectly fixing transport rates and conditions or any other trading conditions; (b) limiting or controlling the supply of transport, markets, technical development or investment; (c) sharing transport markets; (d) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) making the conclusion of contracts subject to acceptance by the other parties of additional obligations which, by their nature or according to commercial usage, have no connection with the provision of transport services. 4       Article 5 of Regulation No 1017/68 provides for the exemption of agreements, decisions and concerted practices which contribute towards improving the quality of transport services, or promoting greater continuity and stability in the satisfaction of transport needs on markets where supply and demand are subject to considerable temporal fluctuation, or increasing productivity, or furthering technical or economic progress, if the interests of transport users are taken into account and provided that they do not impose on transport undertakings any restrictions not essential to the attainment of those objectives and do not make it possible for such undertakings to eliminate competition in respect of a substantial part of the transport market concerned. 5       On 22 December 1986 the Council adopted Regulation (EEC) No 4056/86 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport (OJ 1986 L 378, p. 4). 6       Article 3 of Regulation No 4056/86 provides that: Agreements, decisions and concerted practices of all or part of the members of one or more liner conferences are hereby exempted from the prohibition in Article 85(1) of the Treaty, subject to the condition imposed by Article 4 of this Regulation, when they have as their objective the fixing of rates and conditions of carriage, and, as the case may be, one or more of the following objectives: (a) the coordination of shipping timetables, sailing dates or dates of calls; (b) the determination of the frequency of sailings or calls; (c) the coordination or allocation of sailings or calls among members of the conference; (d) the regulation of the carrying capacity offered by each member; (e) the allocation of cargo or revenue among members. 7       A liner conference is defined in Article 1(3)(b) of Regulation No 4056/86 as a group of two or more vessel-operating carriers which provides international liner services for the carriage of cargo on a particular route or routes within specified geographical limits and which has an agreement or arrangement, whatever its nature, within the framework of which they operate under uniform or common freight rates and any other agreed conditions with respect to the provision of liner services. 8       The eighth recital in the preamble to Regulation No 4056/86 states in this connection that: ... provision should be made for block exemption of liner conferences; ... liner conferences have a stabilising effect, assuring shippers of reliable services; ... they contribute generally to providing adequate efficient scheduled maritime transport services and give fair consideration to the interests of users; ... such results cannot be obtained without the cooperation that shipping companies promote within conferences in relation to rates and, where appropriate, availability of capacity or allocation of cargo for shipment, and income; ... in most cases conferences continue to be subject to effective competition from both non-conference scheduled services and, in certain circumstances, from tramp services and from other modes of transport; ... the mobility of fleets, which is a characteristic feature of the structure of availability in the shipping field, subjects conferences to constant competition which they are unable as a rule to eliminate as far as a substantial proportion of the shipping services in question is concerned. 9       In order to prevent liner conferences engaging in practices incompatible with Article 85(3) of the Treaty (now Article 81(3) EC) and, in particular, restricting competition in a way that is not indispensable for attaining the objectives which justify any exemption granted, Regulation No 4056/86 attaches a number of conditions and obligations to block exemption. Article 4 provides that exemption is granted subject to the absolute condition that the agreement in question does not cause detriment to certain ports, transport users or carriers as a result of the application of differential terms, failing which the agreement, or the relevant part of it, will be automatically void. Article 5 of Regulation No 4056/86 attaches obligations to exemption which relate, inter alia, to loyalty agreements, services not covered by freight charges and the availability of tariffs. 10     Furthermore, the 13th recital in the preamble states that there can be no exemption if the conditions set out in Article 85(3) are not satisfied; ... the Commission must therefore have power to take ... appropriate measures where an agreement or concerted practice proves, owing to special circumstances, to have certain effects incompatible with that article. 11     To that end, Article 7 of Regulation No 4056/86 introduces a mechanism for monitoring exempt agreements. It provides as follows: 1. Breach of an obligation Where the persons concerned are in breach of an obligation which, pursuant to Article 5, attaches to the exemption provided for in Article 3, the Commission may, in order to put an end to such breach and under the conditions laid down in Section II: –       address recommendations to the persons concerned; –       in the event of failure by such persons to observe those recommendations and depending upon the gravity of the breach concerned, adopt a decision that either prohibits them from carrying out or requires them to perform specific acts or, while withdrawing the benefit of the block exemption which they enjoyed, grants them an individual exemption according to Article 11(4) or withdraws the benefit of the block exemption which they enjoyed. 2. Effects incompatible with Article 85(3) (a) Where, owing to special circumstances as described below, agreements, decisions and concerted practices which qualify for the exemption provided for in Articles 3 and 6 have nevertheless effects which are incompatible with the conditions laid down in Article 85(3) of the Treaty, the Commission, on receipt of a complaint or on its own initiative, under the conditions laid down in Section II, shall take the measures described in (c) below. The severity of these measures must be in proportion to the gravity of the situation. (b) Special circumstances are, inter alia, created by: (i) acts of conferences or a change of market conditions in a given trade resulting in the absence or elimination of actual or potential competition such as restrictive practices whereby the trade is not available to competition; or (ii) acts of conferences which may prevent technical or economic progress or user participation in the benefits; (iii) acts of third countries which: –       prevent the operation of outsiders in a trade, –       impose unfair tariffs on conference members, –       impose arrangements which otherwise impede technical or economic progress (cargo-sharing, limitations on types of vessels). (c) (i) If actual or potential competition is absent or may be eliminated as a result of action by a third country, the Commission shall enter into consultations with the competent authorities of the third country concerned, followed if necessary by negotiations under directives to be given by the Council, in order to remedy the situation. If the special circumstances result in the absence or elimination of actual or potential competition contrary to Article 85(3)(b) of the Treaty the Commission shall withdraw the benefit of the block exemption. At the same time it shall rule on whether and, if so, under what additional conditions and obligations an individual exemption should be granted to the relevant conference agreement with a view, inter alia, to obtaining access to the market for non-conference lines. (ii) If, as a result of special circumstances as set out in (b), there are effects other than those referred to in (i) hereof, the Commission shall take one or more of the measures described in paragraph 1. 12     Article 8 of Regulation No 4056/86 provides: 1. The abuse of a dominant position within the meaning of Article 86 of the [EC] Treaty (now Article 82 EC) shall be prohibited, no prior decision to that effect being required. 2. Where the Commission, either on its own initiative or at the request of a Member State or of natural or legal persons claiming a legitimate interest, finds that in any particular case the conduct of conferences benefiting from the exemption laid down in Article 3 nevertheless has effects which are incompatible with Article 86 of the Treaty, it may withdraw the benefit of the block exemption and take, pursuant to Article 10, all appropriate measures for the purpose of bringing to an end infringements of Article 86 of the Treaty. 3. Before taking a decision under paragraph 2, the Commission may address to the conference concerned recommendations for termination of the infringement. 13     Article 9(1) of Regulation No 4056/86 provides that where the application of that regulation is liable to conflict with the law of certain third countries, which would compromise important Community trading and shipping interests, the Commission must at the earliest opportunity undertake consultations with the competent authorities of the third countries aimed at reconciling the abovementioned interests as far as possible with Community law. Under Article 9(2) of the regulation, where agreements with third countries need to be negotiated, the Commission is to make recommendations to the Council, which is to authorise the Commission to open the necessary negotiations. The Commission must conduct those negotiations in consultation with the Advisory Committee on agreements and dominant positions in maritime transport, in the framework of such directives as the Council may issue to it. 14     The first paragraph of Article 10 of Regulation No 4056/86 provides: Acting on receipt of a complaint or on its own initiative, the Commission shall initiate procedures to terminate any infringement of the provisions of Articles 85(1) or 86 of the Treaty or to enforce Article 7 of this Regulation. 15     Article 15(3) of the same regulation provides that an Advisory Committee on agreements and dominant positions in maritime transport is to be consulted prior to the taking of any decision following upon a procedure under Article 10. 16     As regards individual application of Article 85(3) of the Treaty, the 18th recital in the preamble to Regulation No 4056/86 states that in view of the special characteristics of maritime transport, it is primarily the responsibility of undertakings to see to it that their agreements, decisions and concerted practices conform to the rules on competition, and consequently their notification to the Commission need not be made compulsory. 17     Thus, Article 11(4) of Regulation No 4056/86 provides: If the Commission, whether acting on a complaint received or on its own initiative, concludes that an agreement, decision or concerted practice satisfies the provisions both of Article 85(1) and of Article 85(3) of the Treaty, it shall issue a decision applying Article 85(3). Such decision shall indicate the date from which it is to take effect. This date may be prior to that of the decision. 18     However, under Article 12(1) of Regulation No 4056/86, undertakings may submit applications to the Commission seeking application of Article 85(3) of the Treaty in respect of agreements, decisions and concerted practices falling within Article 85(1) of the Treaty to which they are parties. Those applications will be considered in accordance with the opposition procedure laid down by that provision. 19     Under Article 19 of Regulation No 4056/86: 2. The Commission may by decision impose on undertakings or associations of undertakings fines of from 1 000 to one million ECU, or a sum in excess thereof but not exceeding 10% of the turnover in the preceding business year of each of the undertakings participating in the infringement, where either intentionally or negligently: (a) they infringe Article 85(1) or Article 86 of the Treaty, or do not comply with an obligation imposed under Article 7 of this Regulation; (b) they commit a breach of any obligation imposed pursuant to Article 5 or to Article 13(1). In fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement. ... 4. Decisions taken pursuant to paragraphs 1 and 2 shall not be of criminal law nature. The fines provided for in paragraph 2(a) shall not be imposed in respect of acts taking place after notification to the Commission and before its Decision in application of Article 85(3) of the Treaty, provided they fall within the limits of the activity described in the notification. However, this provision shall not have effect where the Commission has informed the undertakings concerned that after preliminary examination it is of the opinion that Article 85(1) of the Treaty applies and that application of Article 85(3) is not justified. 20     Article 23(1) of Regulation No 4056/86 provides that before taking a decision the Commission is to give the undertakings or associations of undertakings concerned the opportunity of being heard on the matters to which the Commission has taken objection. Commission Regulation No 4260/88 of 16 December 1988 on the communications, complaints and applications and the hearings provided for by Council Regulation No 4056/86 (OJ 1988 L 376, p. 1), which was in force at the time of the facts in the present case, sets out the procedural requirements governing such hearings.  Facts I.      The Transatlantic Agreement (TAA) 21     All but one of the applicants in this action are shipping companies which were party to the TAA. 22     The TAA was an agreement relating to transatlantic liner services between northern Europe and the United States of America which was notified to the Commission on 28 August 1992 and came into force on 31 August 1992. 23     The TAA set, amongst other things, the rates applicable to maritime transport and intermodal transport. In the case of maritime transport there were at least two rate levels. The rates applicable to intermodal transport included, in addition to maritime transport, the inland haulage of goods to or from the coast, from or to a point inland. The rates applicable to intermodal transport thus covered both the maritime and the inland part. The TAA also contained provisions governing other aspects of container liner transport, in particular the chartering of slots or space, equipment exchange, the fixing of rates for cargo-handling activities in port and the joint management of maritime transport capacity. 24     On 19 October 1994 the Commission issued Decision 94/980/EC relating to a proceeding pursuant to Article 85 of the Treaty (IV/34.446 - Trans-Atlantic Agreement) (OJ 1994 L 376, p. 1). 25     Decision 94/980 (the TAA decision) states that the agreements fixing prices, capacity non-utilisation in maritime transport and the price of inland container transport in or via the Community as part of intermodal transport operations infringe Article 85(1) of the Treaty (Article 1 of the TAA decision). 26     As regards the application of Article 85(3) of the Treaty, the TAA decision concludes that the block exemption laid down by Article 3 of Regulation No 4056/86 in respect of certain liner conference agreements does not apply to the provisions of the TAA agreement, on the ground that the TAA is not a liner conference applying uniform or common freight rates within the meaning of Article 1(3)(b) of Regulation No 4056/86 because it establishes at least two maritime rate levels. In any event, even if the TAA were a liner conference, the Commission considers that the TAA provisions as to capacity non-utilisation and price fixing in respect of inland transport services provided as part of intermodal transport operations could not qualify for block exemption because freezing transport capacity cannot be regarded as the regulation of the carrying capacity offered by each member within the meaning of Article 3(d) of Regulation No 4056/86 and price fixing for inland transport services, even as part of intermodal transport, does not fall within the scope of Regulation No 4056/86, which applies only to port-to-port maritime transport. Furthermore, the Commission refuses to grant individual exemption for those provisions under Article 85(3) of the Treaty and Article 5 of Regulation No 1017/68 (Article 2 of the TAA decision). 27     Article 4 of the TAA decision prohibits the parties to whom it is addressed from engaging in price-fixing activities whose object or effect is the same as or comparable to that of the provisions of the TAA. 28     Lastly, Article 5 of the TAA decision requires the undertakings to which it is addressed to inform customers with whom they have concluded service contracts and other contractual relations in the context of the TAA that such customers are entitled, if they so wish, to renegotiate the terms of those contracts or to terminate them forthwith. 29     By order of 10 March 1995 the President of the Court of First Instance granted the application for suspension of the operation of Articles 1, 2, 3 and 4 of the TAA decision until delivery of the judgment of the Court of First Instance in the main action, in so far as those articles prohibited the TAA parties from jointly exercising rate-making authority in respect of the inland parts within the Community of through intermodal transport services (order of the President of the Court of First Instance of 10 March 1995 in Case T-395/94 R Atlantic Container Line and Others v Commission [1995] ECR II-595). The Commission's appeal against that order was dismissed by order of the President of the Court of Justice of 19 July 1995 (Case C-149/95 P(R) Commission v Atlantic Container Line and Others [1995] ECR I-2165). 30     By judgment of 28 February 2002, the Court of First Instance dismissed the application to annul the TAA decision subject to Article 5 thereof (Case T-395/94 Atlantic Container Line and Others v Commission [2002] ECR II-875, the TAA judgment). No appeal was lodged against that judgment. II.    The Trans-Atlantic Conference Agreement (TACA) 31     Following discussions between the parties to the TAA and the Commission, that agreement was amended and replaced by the TACA. 32     Like the TAA, the TACA covers eastbound and westbound shipping routes between ports in northern Europe and points served by them on the one hand, and ports in the United States of America and points served by them on the other. 33     It is not in dispute that the TACA contains provisions identical to those of the TAA on the fixing of prices for inland transport services provided within the Community. The TACA also contains a number of rules concerning other aspects of transport, in particular as regards the conclusion of service contracts and the remuneration of freight forwarders.  TACA notifications 34     On 5 July 1994 the TACA was notified to the Commission pursuant to Article 12(1) of Regulation No 4056/86 with a view to obtaining exemption under Article 85(3) of the Treaty and Article 53(3) of the Agreement on the European Economic Area (EEA). 35     The original parties to the TACA were the following 15 shipping companies: A.P. Møller-Mærsk Line (Mærsk), Atlantic Container Line AB (ACL), Hapag-Lloyd AG (Hapag-Lloyd), Nedlloyd Lijnen BV (Nedlloyd), P&O Containers Ltd (P&O), Sea-Land Service, Inc. (Sea-Land), Mediterranean Shipping Co. (MSC), Orient Overseas Container Line (UK) Ltd (OOCL), Polish Ocean Lines (POL), DSR-Senator Lines GmbH (DSR-Senator), Cho Yang Shipping Co. Ltd (Cho Yang), Neptune Orient Lines Ltd (NOL), Nippon Yusen Kaisha (NYK), Transportación Marítima Mexicana SA de CV (TMM) and Tecomar SA de CV (Tecomar). Hanjin Shipping Co. Ltd (Hanjin) subsequently became a party to the TACA on 31 August 1994. Hyundai Merchant Marine Co. Ltd (Hyundai) became a party to the TACA on 11 September 1995. Hyundai is the only one of those shipping companies never to have been a party to the TAA. 36     By letter of 15 July 1994 the Commission informed the TACA parties that, pursuant to Article 4(8) of Regulation No 4260/88, it also intended to examine the application for individual exemption under Regulation No 1017/68, on the ground that some of the activities notified fell outside the scope of Regulation No 4056/86. 37     The TACA came into force on 24 October 1994. As a result of successive amendments, several new versions of that agreement were notified to the Commission after 5 July 1994. 38     On 29 November 1995, following various discussions and exchanges of correspondence with the Commission, the TACA parties notified the European Inland Equipment Interchange Arrangement (the EIEIA), a cooperation agreement in respect of the inland part of through intermodal transport. 39     On 10 January 1997 the TACA parties notified to the Commission a hub and spoke system of cooperation with a view to obtaining exemption for the collective fixing of prices for all inland transport services. 40     The TACA gave rise to two separate procedures: the procedure withdrawing immunity from fines and the procedure for infringement of Articles 85 and 86 of the Treaty. These proceedings concern the latter procedure.  Administrative procedure withdrawing immunity from fines 41     On 21 June 1995 the Commission adopted a statement of objections addressed to the TACA parties (with the exception of Hyundai, which was not a party to the TACA at that time), stating that it was disposed to adopt a decision withdrawing immunity from the fines which might result from the notification of the TACA in respect of the agreement between the parties to fix prices for inland transport services supplied within the territory of the Community. 42     On 1 March 1996 the Commission addressed a supplementary statement of objections to the TACA parties in which it stated that the EIEIA in no way altered its assessment of 21 June 1995. 43     On 26 November 1996 the Commission adopted Decision C (96) 3414 (final) relating to a proceeding pursuant to Article 85 of the Treaty (IV/35.134 - Trans-Atlantic Conference Agreement, unpublished, the decision withdrawing immunity) by which it withdrew from the TACA parties immunity from fines in respect of the TACA provisions fixing inland rates, given that, according to the Commission's preliminary opinion, those provisions did not satisfy the requirements of Article 85(3) of the Treaty, Article 5 of Regulation No 1017/68 and Article 53(3) of the EEA Agreement. 44     By judgment of 28 February 2002, the Court of First Instance held that the TACA parties' action challenging that decision was inadmissible (Case T-18/97 Atlantic Container Line and Others v Commission [2002] ECR II-1125). No appeal was lodged against that judgment.  Administrative procedure for infringement of Articles 85 and 86 of the Treaty 45     On 24 May 1996 the Commission addressed a statement of objections on the merits to the TACA parties, adopted on the basis of Regulations Nos 17, 1017/68 and 4056/86. In that statement the Commission declared, inter alia, that it considered that the TACA fell within the prohibition in Article 85(1) of the Treaty and that it contained a number of elements which did not fall within the scope of Article 85(3) of the Treaty. The Commission stated that it was disposed to adopt a decision finding the TACA parties to be in breach of Article 85(1) and requiring them to bring to an end the practices which fell outside the scope of Article 85(3). The statement of objections also indicated that the TACA parties had abused their dominant position, contrary to Article 86 of the Treaty, and that the Commission intended to impose fines on them in that regard. Lastly, the statement of objections announced that the Commission was disposed to withdraw the benefit of the block exemption laid down by Regulation No 4056/86 pursuant to Articles 7 and/or 8 of that regulation. 46     On 6 September 1996 the applicants replied to the Commission's statement of objections of 24 May 1996. The TACA parties set out their position orally at a hearing on 25 October 1996. 47     A supplementary statement of objections was adopted by the Commission on 11 April 1997 in which it stated that, notwithstanding the notification of the hub and spoke system, it remained disposed to adopt a decision prohibiting, inter alia, the practice of fixing prices for carrier haulage services supplied within the Community which fall outside the scope of the TACA hub and spoke system. 48     On 16 September 1998 the Commission adopted Decision 1999/243/EC relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty (Case No IV/35.134 - Trans-Atlantic Conference Agreement, OJ 1999 L 95, p. 1, the contested decision). In adopting that decision the Commission followed the procedures laid down by Regulations Nos 17, 1017/68 and 4056/86. 49     The Commission concluded in the contested decision that certain provisions of the TACA were contrary to Article 85(1) of the Treaty, Article 53(1) of the EEA Agreement and Article 2 of Regulation No 1017/68 and that the conditions for the grant of individual exemption laid down by Article 85(3) of the Treaty, Article 53(3) of the EEA Agreement and Article 5 of Regulation No 1017/68 were not fulfilled. The Commission further concluded that the applicants had infringed the provisions of Article 86 of the Treaty and Article 54 of the EEA Agreement and, on that ground, imposed fines on all of the applicants.  The contested decision III. The relevant provisions of the TACA 50     The relevant provisions of the TACA which are the subject of the contested decision concern the fixing of transport rates, the conclusion of service contracts and the remuneration of freight forwarders.  The collective fixing of transport rates 51     The contested decision states that the TACA members collectively fix a five-part tariff showing separate rates for each of the following services: inland transport to the port, cargo handling in the port (transfer from the inland transport mode to the vessel), maritime transport (transport from one port to another), cargo handling in the port of destination (transfer from the vessel to the inland transport mode) and inland transport from the port of destination to the place of final destination (paragraph 96). 52     The contested decision further states that: –       - the common tariff contains a matrix of prices for the carriage of cargo between defined points: 26 classes of cargo are defined and a rate is specified for each class (paragraph 13); –       - the tariff is published by the TACA and is available to all shippers (paragraph 13); –       - the conference tariff sets out a number of different rates: standard rates, time/volume rates (TVRs) and loyalty contract rates (paragraph 103); –       - under US law, any member of a conference has the right to depart from the conference tariff in respect of a particular class of goods, provided that the other members of the conference are notified (paragraph 104).  Service contracts 53     Service contracts are contracts by which a shipper undertakes to provide a minimum quantity of cargo to be transported by the conference (conference service contracts) or by an individual carrier (individual service contracts) over a fixed period of time and the carrier or the conference commits to a certain rate or rate schedule as well as a defined service level (paragraph 110). 54     Individual service contracts are referred to as being joint where they are entered into by several individual carriers. It is not in dispute that the term joint service contracts in the contested decision covers both conference service contracts and individual joint service contracts. 55     It is common ground between the parties that, on the transatlantic trade, some 50% to 60% of cargo travels under service contracts (paragraph 122). 56     In the contested decision, the Commission states that the TACA sought to regulate the negotiation and the conclusion of both conference and individual service contracts. 57     First, as regards conference service contracts (or TACA service contracts), Article 14(3) of the TACA provides that these must be negotiated on behalf of the TACA parties by the TACA secretariat. Service contracts negotiated by the TACA secretariat are then put to the TACA voting procedure. Any TACA party which does not wish to participate in that service contract may take unilateral action, the scope of which is limited in accordance with Article 14(2)(j) of the TACA (paragraphs 132 to 148). 58     The contested decision states that Article 14(2) of the TACA also imposes a number of binding guidelines concerning the content of service contracts and the circumstances in which they may be concluded (paragraph 149). The relevant restrictions relate to the following matters: –       - duration: under Article 14(2)(a) of the TACA, service contracts must be concluded for a maximum period of one calendar year; that period was subsequently increased to two and then three years (paragraphs 17(f) and 491); –       - conditional clauses (or contingency clauses): under Article 14(2)(c) of the TACA, there is a prohibition on the inclusion in service contracts of any clause providing for a reduction in the rate payable under those service contracts by reference to terms agreed with other shippers under other arrangements (paragraphs 17(g) and 489); –       - multiple contracts: under Article 14(2)(c) of the TACA, none of the parties to it may participate, individually or with any other party to the TACA, in more than one service contract at a time with any particular shipper in respect of cargo to be carried on the trade (paragraphs 17(f) and 493); –       - the level of liquidated damages for non-performance of the contract: under Article 14(2)(d) of the TACA, the TACA parties agree on the level of liquidated damages included in service contracts entered into by them (paragraph 495); according to the contested decision, the level of liquidated damages has been set by the TACA parties at USD 250 per Twenty Foot Equivalent Unit (TEU) (paragraph 226); –       - confidentiality: the contested decision states that the TACA parties require the disclosure to each other of the terms of all service contracts to which they are party and make this information available to carriers which become party to the TACA (paragraph 496). 59     Second, the TACA prohibited the conclusion of individual service contracts until 1995. The TACA permitted such contracts in 1994 and 1995. The contested decision states: 32       On 9 March 1995, the TACA parties informed the Commission that the FMC [the US Federal Maritime Commission] had imposed a further condition on the TACA parties. This condition required the TACA parties to amend the TACA so as to allow the various signatories to enter into 1996 service contracts without having received the approval of the other TACA parties, provided that those contracts complied with the provisions of Article 14(2) of the TACA.  Remuneration of freight forwarders 60     Under Article 5(1)(c) of the TACA, the TACA parties agree on the amounts, levels or rates of brokerage and freight forwarder remuneration including the terms and conditions for the payment of such sums and the designation of persons eligible to act as brokers (paragraph 164). IV.    The definition of the relevant market 61     The contested decision states, on the basis of the analysis set out in paragraphs 60 to 84, that the market for maritime transport services to which the TACA relates is that for scheduled containerised liner shipping between ports in northern Europe and ports in the United States and Canada. 62     At paragraph 519, the Commission states in relation to the application of Article 86 of the Treaty: The relevant market for maritime transport services is described at paragraphs 60 to 75. The geographic market [consists] of the area in which the maritime transport services defined above are marketed, that is, in this case, the catchment areas of the ports in northern Europe. Such a geographic market is commensurate with the scope of the TACA's inland tariff and constitutes a substantial part of the common market. V.      Legal assessment 63     The contested decision finds that the TACA's rules and practices in question fall within Article 85 and Article 86 of the Treaty.  Application of Article 85 of the Treaty 64     With regard to the application of Article 85 of the Treaty, the Commission states that the following aspects of the TACA have the object or effect of restricting or distorting competition within the meaning of paragraph 1 thereof: –       - the price agreement between the parties relating to maritime transport (paragraphs 379 and 380); –       - the price agreement between the parties relating to inland transport services supplied within the territory of the Community to shippers in combination with other services as part of an intermodal transport operation for the carriage of containerised cargo (carrier haulage services) between northern Europe and the United States of America (paragraphs 379 and 380); –       - the agreement between the parties as to the conditions under which they may enter into service contracts with shippers (paragraphs 379, 380 and 442 to 448); and –       - the agreement between the parties relating to the fixing of maximum levels of freight forwarder compensation (paragraphs 379, 380 and 505 to 508). 65     The Commission considers, by contrast, that it is unclear at this stage whether the equipment interchange agreement set out in the EIEIA affects competition to any appreciable degree. The applicability of Article 85 of the Treaty to that agreement is therefore not addressed in the contested decision (paragraphs 384, 399 and 426). 66     As regards the grant of an exemption, the Commission concludes that with the exception of the agreement relating to the price of maritime transport, the other agreements restricting competition do not fall within the block exemption provided for by Article 3 of Regulation No 4056/86 (paragraphs 397 to 399). As regards the possibility of individual exemption, the Commission considers that none of the agreements concerned fulfils the conditions laid down by Article 85(3) of the Treaty and Article 5 of Regulation No 1017/68 (paragraphs 409 to 441).  Application of Article 86 of the Treaty 67     As regards the application of Article 86 of the Treaty, the contested decision finds that the TACA members hold a collective dominant position on the relevant market (paragraphs 519 to 576) and that they abused that collective dominant position between 1994 and 1996, first, by entering into an agreement to place restrictions on the availability and content of service contracts (the first abuse) and secondly by altering the competitive structure of the market so as to reinforce the TACA's dominant position (the second abuse) (paragraphs 550 to 576). 68     As regards the first abuse (paragraphs 551 to 558), the Commission considers that this arose, in particular, in relation to the terms imposed by the TACA parties ... concerning contingency clauses, the duration of service contracts, the ban on multiple contracts and liquidated damages and to the prohibition of individual service contracts in 1995 (paragraphs 556 and 557). 69     As regards the second abuse (paragraphs 559 to 567), the Commission states that the intention of the TACA parties was ... to ensure that if a potential competitor wished to enter the market it would only do [so] after it had become a party of the TACA (paragraph 562). The steps taken by the TACA parties to induce potential competitors to enter the market as parties to the TACA include also, according to the contested decision, specific steps in favour of Hanjin (disclosure of confidential information and the allocation of market share) and Hyundai (immediate access to service contracts), the conclusion of a large number of dual-rate service contracts and the fact that the former structured TAA members did not compete for certain service contracts with non-vessel operating common carriers (NVOCCs).  Fines 70     The contested decision imposes fines on each of the TACA parties for their infringement of Article 86 of the Treaty. No fine is imposed for the infringement of Article 85 of the Treaty. 71     The contested decision states that the duration of those two infringements covers part of 1994 and the whole of 1995 and 1996 (paragraphs 592 and 594).  The operative part 72     The operative part of the contested decision provides as follows: Article 1The undertakings listed in Annex I have infringed the provisions of Article 85(1) of the EC Treaty, Article 53(1) of the EEA Agreement and Article 2 of Regulation (EEC) No 1017/68 by agreeing prices for inland transport services supplied within the territory of the European Community to shippers in combination with other services as part of a multimodal transport operation for the carriage of containerised cargo between northern Europe and the United States of America. The conditions of Article 85(3) of the EC Treaty, Article 53(3) of the EEA Agreement and of Article 5 of Regulation (EEC) No 1017/68 are not fulfilled. Article 2The undertakings listed in Annex I have infringed the provisions of Article 85(1) of the EC Treaty and Article 53(1) of the EEA Agreement by fixing the amounts, levels or rates of brokerage and freight forwarder remuneration, the terms and conditions for the payment of such sums and the designation of persons eligible to act as brokers. The conditions of Article 85(3) of the EC Treaty and Article 53(3) of the EEA Agreement are not fulfilled. Article 3The undertakings listed in Annex I have infringed the provisions of Article 85(1) of the EC Treaty and Article 53(1) of the EEA Agreement by agreeing the terms and conditions on and under which they may enter into service contracts with shippers. The conditions of Article 85(3) of the EC Treaty and Article 53(3) of the EEA Agreement are not fulfilled. Article 4The undertakings listed in Annex I are hereby required to put an end forthwith to the infringements referred to in Articles 1, 2 and 3 and are hereby required to refrain in future from any agreement or concerted practice having the same or a similar object or effect to the agreements referred to in Articles 1, 2 and 3. Article 5The undertakings listed in Annex I have infringed the provisions of Article 86 of the EC Treaty and Article 54 of the EEA Agreement by altering the competitive structure of the market so as to reinforce the dominant position of the Transatlantic Conference Agreement. Article 6The undertakings listed in Annex I have infringed the provisions of Article 86 of the EC Treaty and Article 54 of the EEA Agreement by placing restrictions on the availability and contents of service contracts. Article 7The undertakings listed in Annex I are hereby required to put an end forthwith to the infringements referred to in Articles 5 and 6 and are hereby required to refrain in future from any action having the same or a similar object or effect to the infringements referred to in Articles 5 and 6. Article 8In respect of the infringement of the provisions of Article 86 of the EC Treaty and Article 54 of the EEA Agreement referred to in Articles 5 and 6, the following fines are imposed: A.P. Møller-Mærsk Line ECU 27 500 000 Atlantic Container Line AB ECU 6 880 000 Hapag Lloyd Container Linie GmbH ECU 20 630 000 P&O Nedlloyd Container Line Limited ECU 41 260 000 Sea-Land Service, Inc. ECU 27 500 000 Mediterranean Shipping Co. ECU 13 750 000 Orient Overseas Container Line (UK) Ltd ECU 20 630 000 Polish Ocean Lines ECU 6 880 000 DSR-Senator Lines ECU 13 750 000 Cho Yang Shipping Co., Ltd ECU 13 750 000 Neptune Orient Lines Ltd ECU 13 750 000 Nippon Yusen Kaisha ECU 20 630 000 Transportación Marítima Mexicana SA de CV/Tecomar SA de CV ECU 6 880 000 Hanjin Shipping Co. Ltd ECU 20 630 000 Hyundai Merchant Marine Co. Ltd ECU 18 560 000 Article 9The undertakings listed in Annex I are hereby required, within a period of two months of the date of notification of this decision, to inform customers with whom they have concluded joint service contracts that those customers are entitled to renegotiate the terms of those contracts or to terminate them forthwith. Article 10The fines imposed under Article 8 shall be paid, in ECU, within three months of the date of notification of this Decision, into bank account No 310-0933000-43 of the European Commission, Banque Bruxelles Lambert, Agence Européenne, Rond-Point Schuman 5, B-1040 Brussels. After expiry of that period, interest shall be automatically payable on the fine at the rate charged by the European Central Bank for transactions in ECU on the first working day of the month in which this Decision is adopted, plus 3.5 percentage points, namely 7.5%. Article 11This Decision is addressed to the undertakings listed in Annex I. This Decision shall be enforceable pursuant to Article 192 of the EC Treaty.  Procedure 73     By application lodged at the Registry of the Court of First Instance on 7 December 1998, 12 of the 17 shipping companies to whom the contested decision was addressed, namely ACL, Cho Yang, DSR-Senator, Hanjin, Hapag-Lloyd, Hyundai, Mærsk, MSC, OOCL, POL, P&O Nedlloyd (P&O Nedlloyd is the result of the merger in January 1997 of Nedlloyd and P&O, to both of which the contested decision had been addressed when it was adopted) and Sea-Land, lodged an application at the Registry of the Court of First Instance for annulment of that decision pursuant to Article 173 of the EC Treaty (now, after amendment, Article 230 EC). That application was registered as Case T-191/98 Atlantic Container Line and Others v Commission. 74     By separate application lodged on 29 December 1998, NOL brought an action for annulment of the contested decision. That application was registered as Case T-212/98 Neptune Orient Lines v Commission. On the same day NYK also lodged an application for annulment of the contested decision, which was registered as Case T-213/98 Nippon Yusen Kaisha v Commission. Finally, on 30 December 1998, TMM and Tecomar also lodged an application for annulment of the contested decision, which was registered as Case T-214/98 Transportación Marítima Mexicana and Tecomar v Commission. 75     On 18 January 1999, on the initiative of the Registrar, the Judge Rapporteur, Judge Jaeger, held an informal meeting with the applicants at which they were requested to put their applications, which run to about 2 000 pages (excluding annexes), in order, to consider the possibility of summarising them, to sort the relevant documents contained in approximately 100 loose-leaf files annexed to the applications and to resolve the confidentiality issues arising in respect of some of those documents. Only some of those confidentiality issues were able to be resolved at that meeting. 76     By order of 22 February 1999 the President of the Third Chamber of the Court of First Instance ordered that Cases T-191/98, T-212/98, T-213/98 and T-214/98 be joined for the purposes of the written and the oral procedure and judgment. 77     On 21 June 1999 the European Council of Transport Users ASBL (the ECTU, comprising the European Shippers' Council, ESC) sought leave to intervene in support of the form of order sought by the Commission in Cases T-191/98, T-212/98, T-213/98 and T-214/98. 78     By order of 21 July 1999, the President of the Court of First Instance dismissed the application lodged by DSR-Senator to suspend enforcement of the contested decision (Case T-191/98 R DSR-Senator Lines v Commission [1999] ECR II-2531). The appeal lodged against that order was dismissed by the President of the Court of Justice on 14 December 1999 (Case C-364/99 P(R) DSR-Senator Lines v Commission [1999] ECR I-8733). 79     On 17 August 1999 the applicants requested that certain documents be treated as confidential vis-à-vis the intervener. That request was further particularised in a fax of 23 August 1999. The Commission raised various objections to that request by letters of 10 September and 8 October 1999. 80     By order of 15 November 1999, the President of the Third Chamber of the Court of First Instance granted the ECTU leave to intervene and granted in part the application for confidentiality. In addition confidentiality was provisionally accorded to certain appendices to the application in Case T-191/98. 81     By letter of 8 December 1999 the applicants informed the Registrar that they intended to withdraw from the case-file all but one of the appendices referred to in the order of 15 November 1999. By letter of 10 December 1999 the applicants further requested confidentiality in respect of certain information contained in the rejoinder and the annexes thereto. By letter of 17 January 2000 the Commission objected to that request. 82     By order of 14 March 2000 the President of the Third Chamber of the Court of First Instance granted in part the applicants' request for confidentiality in respect of certain information contained in the application and the rejoinder. 83     By order of 28 June 2000, the President of the Court of First Instance dismissed the application to suspend enforcement of the contested decision lodged by Cho Yang (Case T-191/98 R II Cho Yang Shipping v Commission [2000] ECR II-2551). The appeal lodged against that order was dismissed by the President of the Court of Justice on 15 December 2000 (Case C-361/00 P(R) Cho Yang Shipping v Commission [2000] ECR I-11657). 84     On 27 September 2000 in the covering letter accompanying its observations on the ECTU's statement in intervention, the applicant in Case T-213/98 requested that the Court of First Instance accord confidentiality to certain figures set out in its observations. That request was repeated in a letter of 20 October 2000. The Commission objected to the request in a letter of 17 November 2000. By order of 20 June 2002 the President of the Third Chamber of the Court of First Instance granted the applicant's request. 85     Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Third Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure, requested the parties to produce certain documents and answer written questions. The parties complied with those requests within the prescribed time-limit. 86     The oral arguments of the parties and their answers to the oral questions were heard at the hearing on 26 and 27 March 2003.  Forms of order sought 87     The applicants claim that the Court should: –       - annul the contested decision; –       - in the alternative, annul or reduce the fines imposed by Article 8 of the contested decision; –       - order the Commission to pay the costs; –       - order the Commission to pay the costs incurred by each applicant in providing a bank guarantee in lieu of payment of the fines pending judgment by the Court. 88     The Commission, supported by the intervener, the ECTU, contends that the Court should: –       dismiss the application; –       order the applicants to pay the costs.  Law 89     In support of their application for annulment the applicants essentially raise seven groups of pleas. The first comprises those alleging infringement of the rights of the defence. The second concerns those alleging that there is no infringement of Article 85 of the Treaty. The third relates to those alleging that there is no infringement of Article 86 of the Treaty. The fourth relates to failure to comply with the procedure laid down by Regulation No 4056/86. The fifth relates to the pleas alleging various failures to state reasons. The sixth comprises the pleas on the fines. Finally, the seventh concerns infringement of the second paragraph of Article 215 of the EC Treaty (now the second paragraph of Article 288 EC). 90     The Court observes at the outset that the applications lodged by the applicants, and the annexes thereto, are exceptionally long: each application comprises some 500 pages whilst the annexes make up about 100 files, and there are almost 100 different pleas. Attention must be drawn to the fact that the Court of Justice has held that the requirement for the Court of First Instance to give reasons for its decisions must not be interpreted as meaning that it is obliged to respond in detail to each argument advanced by a party, particularly if the argument is not sufficiently clear and precise and is not supported by adequate evidence (Case C-374/99 P Connolly v Commission [2001] ECR I-1611, paragraph 121, and Case C-197/99 P Belgium v Commission [2003] ECR I-8461, paragraph 81). The numerous pleas put forward by the applicants in support of their actions must be considered in the light of that case-law. I.      The pleas alleging infringement of the rights of the defence 91     There are essentially three separate parts to the applicants' pleas alleging infringement of the rights of the defence. The first part alleges infringement of the right to be heard. The second part alleges infringement of the right of access to the file. The third and final part alleges infringement of the principles of sound administration, objectivity and impartiality.  Part one: infringement of the right to be heard 92     In their application, the applicants divided this part into three sections. In the first, the applicants allege that the statement of objections is invalid because it was not adopted at the conclusion of the Commission's investigation and was therefore premature. In the second, they claim that the allegation that they abusively altered the competitive structure of the market is a new complaint which is, moreover, based on fresh evidence. In the third and final section, the applicants claim that the contested decision contains new allegations of fact and law not contained in the statement of objections. 93     It is, however, apparent from consideration of the application that the present part in fact comprises two different kinds of plea concerning the Commission's conduct of the administrative procedure. First, by a plea which appears in the first part of their argument, the applicants challenge the legality of the statement of objections as such on the ground that it is premature. Second, by pleas appearing in all three parts of their argument, they criticise the presence of new allegations of fact or law in the contested decision. A –  The plea alleging that the statement of objections is unlawful because it is premature  Arguments of the parties 94     The applicants allege that the statement of objections which the Commission sent them on 24 May 1996 is invalid because it was not adopted at the conclusion of the Commission's investigation. 95     The applicants refer to the case-law to the effect that the statement of objections must set out clearly the facts upon which the Commission relies and its classification of those facts (Case C-62/86 AKZO v Commission [1991] ECR I-3359, paragraph 29; Joined Cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85 Ahlström and Others v Commission (Woodpulp II) [1993] ECR I-1307, paragraphs 40 to 54 and 152 to 154; and Joined Cases T-10/92 to T-12/92 and T-15/92 Cimenteries CBR and Others v Commission [1992] ECR II-2667, paragraph 33). Accordingly, as the Court of First Instance held in Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711, paragraph 51, regard for the rights of the defence requires that an applicant must have been put in a position to express, as it sees fit, its views on all the objections raised against it by the Commission in the statement of objections addressed to it and on the evidence which is to be used to support those objections and is mentioned by the Commission in the statement of objections or annexed to it (see also Case T-334/94 Sarrió v Commission [1998] ECR II-1439, paragraph 39). 96     The applicants infer from this that the Commission may not rely in its decision on evidence obtained after the adoption of the statement of objections and upon which the undertaking concerned has had no opportunity to comment. As the Court held in Case 60/81 IBM v Commission [1981] ECR 2639, at paragraph 15: ... in accordance with Article 19(1) of Regulation No 17 and in order to guarantee observance of the rights of the defence, it is necessary to ensure that the undertaking concerned has the right to submit its observations on conclusion of the inquiry on all the objections which the Commission intends to raise against it in its decision .... 97     The applicants point out that in this case the Commission sent them a request for information two days before the statement of objections was issued and some 30 requests for further information after the statement of objections was issued, both during the period prescribed for replying to the statement of objections and after the response was made. According to the applicants, it follows that, contrary to the principle of sound administration and the case-law cited above, the statement of objections was sent to the addressees prematurely. 98     The applicants claim that the premature adoption of the statement of objections in the present case had the following consequences: –       - the statement of objections did not state all of the factual matters regarded by the Commission as relevant to its appraisal of the TACA notification; –       - the legal assessment in the statement of objections was not based on all of the factual matters regarded by the Commission as relevant to its appraisal of the notification; –       - the statement of objections cannot be regarded as reflecting the Commission's position on the notification and its compatibility with Community law; –       - the applicants could not effectively exercise the rights of the defence by replying to the statement of objections. 99     Therefore, the applicants claim, the statement of objections of 24 May 1996 did not fulfil the role ascribed to it, namely to provide the undertaking under investigation with an opportunity to comment on the Commission's case prior to the adoption of the final decision, in accordance with the rights of the defence. 100   The applicants observe that whilst some of the requests for further information concern matters covered by the statement of objections, others concerned entirely new matters. 101   The applicants claim that there is therefore a legal and procedural incompatibility between the position adopted by the Commission in the statement of objections and the continuation of its fact-finding after the adoption of the statement of objections. Thus, whilst the Commission claimed that it required the information requested on 11 July 1996 in order to enable it to assess the parties' application for individual exemption in its full economic and legal context , the statement of objections of 24 May 1996 stated that there was no possibility of the TACA being granted exemption (paragraph 249 of the statement of objections). 102   In response to the Commission's claims that the TACA's practices were continuously evolving, or that the applicants adopted an obstructive manner, they observe that the Commission does not specify which practices of the TACA members were taken to be continuously evolving so as to justify the requests for further information, and they deny ever having obstructed the inquiry. 103   The applicants claim that since no valid statement of objections was adopted the Commission did not validly initiate formal proceedings against them, so that the contested decision does not deal with any objections on which the applicants have been afforded an opportunity of commenting. The decision should therefore be annulled in its entirety for infringement of the rights of the defence. 104   The Commission submits that it is perfectly entitled to carry out fact-finding after issuing the statement of objections. It therefore contends that the Court should reject this plea of the applicants.  Findings of the Court 105   It is common ground that in the present case the Commission sent the TACA parties a request for information two days before issuing the statement of objections and about 30 further requests for information after it had been issued, including after the applicants' response to the statement of objections and the hearing before the Commission, up to March 1998. 106   In the applicants' view, those facts show that because it was premature, the statement of objections did not fulfil the role normally ascribed to it, namely to provide the undertaking under investigation with an opportunity to comment effectively on all allegations of fact and law made against it by the Commission. 107   As stated above at paragraph 93, in so far as the applicants allege by the present plea that the Commission used the responses to the requests for further information to formulate new allegations of fact or law in the contested decision without giving them the opportunity to comment thereon, this plea coincides with those alleging the presence of new allegations of fact or law in the contested decision and therefore will be considered in the section dealing with those pleas. 108   At this stage it is thus necessary to consider the present plea only in so far as it alleges that the statement of objections is unlawful because it is premature. 109   The applicants' argument in that regard rests on the premiss that before the Commission issues a statement of objections it must have completed its preparatory investigation. In order to determine the merits of this plea it is therefore necessary to consider whether the Commission is under such an obligation. 110   It is true that according to the case-law the rules necessary for the application of Articles 85 and 86 of the Treaty, introduced by the Council in Regulation No 17, Regulation No 1017/68 and Regulation No 4056/86, upon which the contested decision was based, prescribe two successive but clearly separate procedures: first, a preparatory investigation procedure, and secondly, a procedure involving submissions by both parties initiated by the statement of objections (Case 374/87 Orkem v Commission [1989] ECR 3283, paragraph 20, and Cimenteries CBR, cited at paragraph 95 above, paragraph 45). 111   It follows that, in principle, the statement of objections is issued after a preparatory investigation by the Commission following a notification or a complaint or on its own initiative, as the case may be, in order to assess whether the practices in question are compatible with Articles 85 and 86 of the Treaty. Only after having carried out such an investigation can the Commission be sufficiently informed, both in fact and in law, as to the lawfulness of those practices and therefore be able to decide whether or not to initiate the infringement procedure by issuing the statement of objections. 112   Contrary to the applicants' submission, it does not, however, follow that after issuing the statement of objections the Commission is prevented from continuing with its investigation, inter alia by sending requests for further information. 113   Under Article 19(1) of Regulation No 17, Article 26(1) of Regulation No 1017/68 and Article 23(1) of Regulation No 4056/86, the purpose of the statement of objections is to afford the undertakings concerned, before the Commission adopts a decision establishing an infringement of Articles 85 and 86 of the Treaty, the opportunity of making known their views on the complaints made against them. Under Article 4 of Regulation No 99/63/EEC of the Commission of 25 July 1963 on the hearings provided for in Article 19(1) and (2) of Council Regulation No 17 (OJ, English Special Edition 1963-1964 (I), p. 47), Article 4 of Regulation (EEC) No 1630/69 of the Commission of 8 August 1969 on the hearings provided for in Article 26(1) and (2) of Council Regulation No 1017/68 (OJ, English Special Edition 1969 (II), p. 381) and Article 8 of Regulation No 4260/88, the Commission can only deal in its decision with objections upon which the recipient undertakings have been afforded the opportunity of making known their views. According to the case-law, that requirement is observed where the decision does not allege that the persons concerned have committed infringements other than those referred to in the statement of objections and only takes into consideration facts on which the persons concerned have had the opportunity of making known their views (Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 94). 114   The statement of objections is thus a procedural measure adopted preparatory to the decision which represents the culmination of the administrative procedure (IBM, cited at paragraph 96 above, paragraph 21). 115   Consequently, until a final decision has been adopted, the Commission may, in view, in particular, of the written or oral observations of the parties, abandon some or even all of the objections initially made against them and thus alter its position in their favour (IBM, cited at paragraph 96 above, paragraph 18, and Cimenteries CBR, cited at paragraph 95 above, paragraph 47) or, conversely, decide to add new complaints, provided that it affords the undertakings concerned the opportunity of making known their views in that respect (Case 107/82 AEG v Commission [1983] ECR 3151, paragraph 29; order of the Court of 5 June 2002 in Case C-217/00 P Buzzi Unicem v Commission, not published in the ECR, paragraph 65; and Case T-16/99 Lögstör Rör v Commission [2002] ECR II-1633, paragraph 168). 116   Far from being a measure recording the Commission's final assessment of the lawfulness of the practices in question, the statement of objections is, on the contrary, a purely preparatory measure setting out the Commission's provisional findings, which it may revisit in the final decision. The Commission is therefore perfectly entitled, in order in particular to take account of the arguments or other evidence put forward by the undertakings concerned, to continue with its fact-finding after the adoption of the statement of objections with a view to withdrawing certain complaints or adding others as appropriate. That is all the more so where, as in the present case, the Commission must decide whether the arguments and evidence put forward by the addressees of the statement of objections justify the grant of an individual exemption under Article 85(3) of the Treaty in respect of the practices referred to in the statement of objections. 117   The requests for information provided for by Article 11 of Regulation No 17, Article 19 of Regulation No 1017/68 and Article 16 of Regulation No 4056/86 are manifestly appropriate measures of inquiry for that purpose. According to the first paragraph of those provisions, the Commission may obtain all necessary information from the undertakings and associations of undertakings by such requests, provided that it states the legal bases and the purpose of the request and also the penalties for supplying incorrect information, pursuant to the third paragraph of those provisions. A request for information thus enables the Commission to obtain all necessary clarification of the arguments and the evidence put forward by the undertakings concerned in their response to the statement of objections. 118   Subject to the rules on limitation, the provisions of the applicable regulations cited above do not impose any restriction on the Commission as to the timing of requests for information. In particular, provided that the information requested is relevant, those provisions do not restrict the power of the Commission to send requests for information after the statement of objections has been issued. 119   Thus, even if the Commission already has evidence, or indeed proof, of the existence of an infringement, it may legitimately take the view that it is necessary to request further information to enable it better to define the scope of the infringement, to determine its duration or to identify the circle of undertakings involved (Orkem, cited at paragraph 110 above, paragraph 15). The Court has held that requests for information enable the Commission both to bring to light infringements of the competition rules (Orkem, cited above, paragraph 15) and to investigate putative infringements (Case T-39/90 SEP v Commission [1991] ECR II-1497, paragraph 25). 120   Accordingly, the mere fact that the Commission continues its investigation after issuing the statement of objections by sending requests for further information cannot in itself affect the validity of the statement of objections. 121   On the contrary, given the preliminary nature of the statement of objections, which reflects the adversarial nature of the administrative procedure applying the competition rules of the Treaty, the Commission must logically be able to send supplementary requests for information after issuing the statement of objections in order to be able, if necessary, to withdraw complaints or add new ones. 122   Contrary to the applicants' assertions, it is irrelevant in this regard that those requests for further information raise fresh issues not addressed in the statement of objections. It is true that that might show that when it adopted the statement of objections the Commission had not completed its administrative investigation into the practices in question. However, as stated above, since the statement of objections is a preliminary document which may be amended by the Commission, in particular so as to take account of the response to the statement of objections, there is no requirement that the Commission must have finally completed its administrative investigation by the time it adopts the statement of objections. Consequently, the Commission cannot be restricted as to the questions it seeks to raise in the requests for information sent after the statement of objections, provided however that (i) in accordance with the applicable regulations, those questions enable it to obtain information necessary for the investigation and (ii) the Commission gives the undertakings concerned the opportunity to comment on fresh matters of fact or law arising from the responses of the undertakings concerned to those questions. Those last two issues fall, however, within separate pleas which will be examined in the context of the applicants' pleas alleging infringement of the principles of sound administration, objectivity and impartiality and the presence of new allegations of fact or law in the decision. 123   The plea alleging that the statement of objections is unlawful because it is premature must therefore be rejected. B –  The pleas alleging the presence of new allegations of fact or law in the contested decision 124   By these pleas the applicants submit that they were given no opportunity to comment, first, on the case in respect of the second abuse alleging alteration of the competitive structure of the market and, second, on certain matters of fact and law on which the other allegations in the contested decision were based.  1. The purportedly new allegations of fact or law concerning the second abuse  a) Arguments of the parties 125   The applicants allege, first, that in dealing with the second abuse of a dominant position, described in paragraphs 559 to 567 of the contested decision, the Commission changed its case from that first set out in the statement of objections. 126   The applicants claim in that regard that they were given no opportunity to comment, first, on the finding that they had induced Hanjin and Hyundai to join the conference (paragraphs 563 to 566) and, second, as to the steps they were said to have taken for that purpose (paragraphs 561 and 563 to 565). Neither of those points appears in the statement of objections, in particular at paragraphs 107 to 115 dealing with the allegation of abusive alteration of the structure of the market. In particular, the statement of objections does not criticise the TACA parties for having taken measures to assist those potential competitors successfully to enter the market as parties to the TACA, as paragraph 563 of the contested decision states. 127   The applicants claim that paragraph 112 of the statement of objections refers essentially to a structural abuse based on the fact that there were four companies independent of the TACA which were not present on the transatlantic route but were linked with TACA parties on other trades, that various arrangements had allowed NYK, NOL, Hanjin and Hyundai to enter the market and that the TACA's ability to neutralise potential competition was demonstrated by dual-rate service contracts and by the fact that the majority of TACA members did not participate in service contracts with NVOCCs. By contrast, in referring to measures adopted by the applicants to induce Hyundai and Hanjin to join the TACA, the contested decision complains that the applicants' abuse lies essentially in their conduct. 128   Furthermore, the position adopted by the Commission in the defence differs from the positions set out in the statement of objections and in the contested decision. According to the applicants, the Commission now alleges in the defence that the abuse lies not in inducing Hanjin and Hyundai to join the conference, but in adopting a prior policy to neutralise potential competition and to prevent the emergence of actual competition. That allegation does not appear in the statement of objections. The same applies to the allegation at paragraph 557 of the defence that, in reserving business linked to service contracts with NVOCCs to independent shipping companies, the applicants induced those companies to remain in the trade as TACA members and not as independent competitors. 129   Second, the applicants claim that the fresh allegation of abuse made in the contested decision is based on evidence upon which the applicants were given no opportunity to comment, namely: –       - Hanjin's letter to the TACA of 19 August 1994 requesting that it be provided with relevant conference documents and statistics (paragraphs 229 and 563); –       - the minutes of the meeting of the TACA directors (TACA PWSC meeting No 95/8) on which the Commission bases the allegation that the applicants allowed Hyundai immediate access to conference service contracts (paragraphs 230 and 564); –       - the letter from the Chairman of the TACA to Hanjin dated 30 January 1996 (paragraphs 292 and 561); –       - the briefing paper of 15 February 1996 in which the secretariat of the conference suggests that the Chairman should encourage and persuade all carriers to collectively find a way to enable Hanjin to build up a market share consistent with its slot capacity in the trade (paragraphs 239 and 564). 130   The applicants allege that none of those documents was referred to in or annexed to the statement of objections. Furthermore, the Commission gave the applicants no indication at all that it proposed to rely on those documents. The applicants claim in that respect that, contrary to the Commission's assertion, it does not matter whether the documents in question were provided by them. In so far as those documents were used against them, the applicants claim that the Commission ought to have stated the importance it intended to attach to them. Since they were unaware of the use the Commission intended to make of those documents, they were given no reasonable opportunity to comment on their relevance in the exercise of the rights of the defence. 131   The Commission claims, first, that the contested decision did not change the position set out in the statement of objections. It stresses the fact that the statement of objections alleged that the applicants had adopted measures to neutralise potential competition (paragraphs 107 to 115, 345 and 346), in particular by the conclusion of slot-chartering agreements (paragraph 110) and service contracts (paragraph 112) with Hanjin and Hyundai. 132   The Commission claims that the use in the contested decision of the word inducements does not alter the fact that what the TACA parties are found to have done is to have facilitated the entry of Hanjin and Hyundai to the trade as TACA members, precisely the criticism made in the statement of objections. All that is added in the contested decision to what was contained in the statement of objections is a matter of detail, namely that the applicants provided Hanjin with sensitive information and allowed Hyundai to participate immediately in service contracts. The other components of the second abuse, namely dual-rate service contracts and contracts with NVOCCs, are, the Commission maintains, described in the statement of objections. 133   The Commission therefore rejects the applicants' argument that the abuse at issue in the contested decision lies in conduct whereas in the statement of objections it is structural. The Commission considers it hard to imagine what a structural abuse might be. In the present case the abuse consisted in the adoption of a policy of neutralising competition, in part by offering inducements facilitating entry to the trade as members of the conference. 134   Furthermore, the Commission denies that the defence sets out a new allegation which did not appear in the statement of objections and in the contested decision. It stresses that the measures referred to in the statement of objections to induce Hyundai and Hanjin to join the TACA were merely illustrations of the applicants' policy of neutralising competition. The argument that the contracts with NVOCCs were reserved for non-traditional conference members is not a new one. Moreover, there is no logical distinction between an inducement to enter the conference and an inducement to remain. 135   Second, as regards the four new documents used in the contested decision, the Commission points out that they were disclosed by the applicants. Consequently, the complaint that the applicants did not have an opportunity to comment on those documents is unfounded.  b) Findings of the Court 136   By the present pleas the applicants essentially allege, first, that the Commission altered the nature of its case in respect of the second abuse recorded in the contested decision when compared with that recorded in the statement of objections and, second, that the Commission based its finding on documentary evidence upon which they were afforded no opportunity to comment. 1.     The change of case in relation to the second abuse in the contested decision 137   The applicants submit essentially that in the contested decision the Commission changed its case from that set out in the statement of objections concerning the second abuse in that the contested decision alleged that the applicants had committed an abuse of conduct by taking certain measures to induce potential competitors to join the TACA, whilst the statement of objections alleged that their abuse was purely structural, arising from certain structural links between the potential competitors and the TACA parties. 138   The Court has held that the statement of objections must be couched in terms that, albeit succinct, are sufficiently clear to enable the parties concerned properly to identify the conduct complained of by the Commission (Case T-352/94 Mo och Domsjö v Commission [1998] ECR II-1989, paragraph 63). Due observance of the rights of the defence in a proceeding in which sanctions such as those in question may be imposed requires that the undertakings and associations of undertakings concerned must have been afforded the opportunity during the administrative procedure to make known their views effectively on the truth and relevance of the facts and circumstances alleged and objections raised by the Commission (Cimenteries CBR, cited at paragraph 95 above, paragraph 39). That requirement is satisfied if the decision does not allege that those concerned have committed infringements other than those referred to in the notice of complaints and only takes into consideration facts on which they have had the opportunity of making known their views (ACF Chemiefarma, cited at paragraph 113 above, paragraph 94). It follows that the Commission may adopt only objections on which those undertakings and associations have had the opportunity to make known their views (Joined Cases T-39/92 and T-40/92 CB and Europay v Commission [1994] ECR II-49, paragraph 47). 139   In assessing the merits of the present plea, it is therefore necessary to consider whether the statement of objections sets out sufficiently clearly and precisely the complaints relating to the second abuse recorded in the contested decision. To this end, it is necessary first to note the nature of the complaints made in that decision on that point and then to determine the extent to which those complaints already appear in the statement of objections. 140   It should be noted, first, that there is a dispute between the parties arising from the pleas concerning the application of Article 86 of the Treaty as to the nature of the complaints relating to the second abuse recorded in the contested decision. For the reasons set out below at paragraphs 1255 to 1257 and 1261 to 1265, however, it is apparent from Article 5 of the operative part of the contested decision and the grounds in support thereof as set out at paragraphs 559 to 567 that, by the second abuse, the Commission complains that the applicants abusively altered the competitive structure of the market so as to reinforce the TACA's dominant position by adopting certain measures intended to induce potential competitors to enter the transatlantic trade not as independent carriers but as TACA parties. 141   The contested decision distinguishes between specific measures intended to induce Hanjin and Hyundai and general measures intended to induce all potential competitors. As for the specific measures, it is apparent from paragraphs 563 and 564 of the contested decision that, in the case of Hanjin, they consisted in the disclosure of confidential information concerning the TACA and in the collective willingness to allow that shipping company to build up a market share consistent with its slot capacity on the trade and that, in the case of Hyundai, they consisted in that company's immediate participation in the TACA service contracts. As for the general measures, paragraph 565 of the contested decision indicates that they consisted in the conclusion of a large number of dual-rate service contracts and in the fact that the former structured TAA members did not compete for certain service contracts with NVOCCs. 142   Next, as regards the nature of the complaints in the statement of objections, at paragraph 340 of that statement the Commission criticised the TACA parties for abusing their dominant position by altering the competitive structure of the market so as to reinforce the dominant position of the TACA. In that regard, the Commission states at paragraph 346: Paragraphs 107 to 115 above demonstrate the ways in which the TACA has taken steps to neutralise potential competition. The steps in question include the accession of new parties, the agreement of the TACA parties to allow dual rate service contracts and the fact that the former structured TAA members did not compete for certain service contracts with NVOCCs. The Commission considers that such behaviour, which was not disclosed in the application for individual exemption, has damaged the competitive structure of the market and amounts to an abuse of a dominant position. The Commission considers that the purpose of the members of the TACA was to eliminate price competition by damaging the structure of the market and limiting the supply of transport. It should be noted in this context that an undertaking in a dominant position has a special responsibility not to allow its conduct to impair genuine undistorted competition. 143   Further, at paragraphs 107 to 115 of the statement of objections, to which paragraph 346 refers, the Commission states in particular: 108       The Commission's general observations on the mobility of fleets, and the contestability of the liner shipping markets, are set out below at paragraphs 126 to 168. Nevertheless, it is possible to demonstrate that in the case of the TACA, potential competition in the form of mobility of fleets is unlikely to be effective. A chronology of TACA party membership shows that every significant potential competitor that has entered the transatlantic trade since the inception of the TAA has done so by joining the TAA/TACA. Version I (28/8/92) - 11 lines Version II (12/3/93) - 12 lines ACL NYK Hapag Lloyd P&O Version III (31/3/93) - 13 lines Nedlloyd NOL Sealand Mærsk Version IV (7/4/93) - 15 lines MSC TMM OOCL Tecomar POL DSR-Senator Version V (26/8/94) - 16 lines Cho Yang Hanjin Version VI (31/8/95) - 17 lines Hyundai 109 It is especially significant that not one of the four Asian carriers which has entered the trade since 1992 (NYK, NOL, Hanjin and Hyundai) has done so as an independent carrier operating in competition to the TACA parties. Furthermore, various arrangements with TACA parties have allowed each of these carriers to enter and obtain a foothold in the market without facing the competition normally to be expected in such circumstances. 110 In particular, Hanjin and Hyundai have been able to enter the market on a slot charter basis without having had to make any investment in vessels for the trade. The TAA/TACA had argued that these carriers were significant potential competitors to the TAA/TACA: in fact the TAA has been able to ensure that they did not enter the transatlantic trade as independent lines but as parties to the TACA. It was reported in Lloyd's List on 11 September 1995 that Hyundai, as part of its arrangements to enter the trade on a slot charter basis, agreed not to introduce its own tonnage on the trade for a three year period. 111 This is not intended to suggest that entry to a particular trade on the basis of slot charter arrangements without putting actual tonnage in place is necessarily anticompetitive. The question here is whether any benefits of such cooperation are accompanied by changes in the structure of the market such as the elimination of potential competition. 112 This ability to neutralise potential competition has come about in part by the practice of the TACA to offer shippers service contracts which contain a dual rate price structure and by the fact that the majority of the TACA parties do not compete to participate in service contracts with NVOCCs (see paragraphs 88 to 93 above). In relation to dual rate tariffs and the elimination of competition, this has substantially the same effects as those described in the TAA decision at paragraphs 341 to 343. 144   Lastly, at paragraphs 113 to 115 the statement of objections mentions too that four potential competitors (APL, Mitsui, Yangming and K Line) are linked to the TACA on other trades and that the potential competition from the Canadian ports is limited. 145   In the light of the passages in the statement of objections cited above, it should be noted as a preliminary point that, like Article 5 of the operative part of the contested decision, paragraph 340 of the statement of objections states that the abuse alleged against the TACA parties consists in having altered the competitive structure of the market so as to reinforce the dominant position of the TACA. 146   Next, again like the contested decision, the statement of objections alleges that the TACA parties altered the competitive structure of the market by adopting certain measures intended to induce potential competitors to enter the transatlantic trade not as independent carriers but as TACA parties. Paragraph 346 of the statement of objections states, with reference to paragraphs 107 to 115, that the TACA took steps to neutralise potential competition, including the accession of new members, dual-rate service contracts and not competing for certain service contracts with NVOCCs. With regard to the accession of new members, it is apparent from paragraphs 109 and 110 of the statement of objections that the Commission expressly alleges that the TACA parties entered into arrangements with potential competitors enabling them to ensure that they did not enter the transatlantic trade as independent lines but as parties to the TACA. Furthermore, with regard to the two other practices in question, paragraph 112 of the statement of objections emphasises that they enabled the TACA to neutralise potential competition, referring in that regard, in particular, to paragraph 341 of the TAA decision, in which the Commission found that the real purpose of the introduction of differentiated [tariff] rates in a case such as that of the TAA is to bring independents inside the agreement: if they were not allowed to quote prices lower than those of the old conference members, these independents would continue as outsiders competing against the conference, notably in terms of price. 147   Lastly, like paragraphs 563 to 565 of the contested decision the statement of objections distinguishes, as is apparent from the foregoing, between specific measures addressed to Hanjin and Hyundai and general measures addressed to all potential competitors. It is apparent from a combined reading of paragraphs 109, 110 and 346 of the statement of objections that, as in paragraphs 563 and 564 of the contested decision, the Commission finds that specific measures were addressed to Hanjin and Hyundai to enable them to enter the relevant market. Furthermore, it is apparent from paragraphs 112 and 346 of the statement of objections that the Commission finds, as in paragraph 565 of the contested decision, that measures were addressed by the TACA to all potential competitors in order to neutralise potential competition both in the form of the conclusion of dual-rate service contracts and in the fact that the majority of the former structured TAA members did not compete for certain service contracts with NVOCCs. 148   In those circumstances, the applicants were able, upon reading the statement of objections, to comprehend that the Commission was alleging that they had altered the competitive structure of the market by adopting measures to induce potential competitors to join the TACA. 149   None of the arguments put forward by the applicants is capable of undermining that conclusion. 150   As regards, first, the allegedly structural nature of the abuse recorded in the statement of objections, having regard to the passages of the statement of objections cited above the applicants cannot seriously argue, as they did at length at the hearing, that the statement of objections criticised them merely for the objective fact that they were structurally linked to the potential competitors and not for certain conduct towards the latter. Since the statement of objections finds that the potential competitors were induced to join the TACA by the conclusion of certain agreements with the TACA parties, the dual-rate service contracts offered by the TACA and the fact that the majority of the TACA parties did not compete for certain service contracts with NVOCCs, it clearly criticises them for certain conduct, since all the contested measures involve the TACA parties. 151   Furthermore, that the abuse is one of conduct appears expressly from the wording of the passages from the statement of objections cited above. Thus, paragraph 346 of the statement of objections expressly sets out the various steps taken by the TACA. Moreover, the same paragraph continues by noting that such steps constitute behaviour amounting to an abuse of a dominant position. Next, paragraph 109 of the statement of objections, concerning the accession of new members to the TACA, refers to arrangements with TACA allowing new members to enter the trade without facing the competition normally to be expected in such circumstances. Finally, paragraph 112 of the statement of objections, in relation to dual-rate service contracts and the fact that the majority of former structured TAA members did not compete for certain service contracts with NVOCCs, expressly states that these are practices of the TACA reflecting its ability to neutralise potential competition. 152   It is irrelevant in this regard that the contested decision, in finding the second abuse, no longer refers to certain structural links between the TACA parties and the potential competitors identified in the statement of objections. According to the case-law, the decision is not necessarily required to be an exact replica of the statement of objections (Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 68). Thus, as long as it does not alter the nature of its case, the Commission may alter its assessment and withdraw certain complaints if necessary, in particular in the light of the responses to the statement of objections (see, to that effect, Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969, paragraphs 34 and 36, and CB and Europay, cited at paragraph 138 above, paragraphs 49 to 52). In the present case, the Commission was therefore perfectly entitled to withdraw its allegations as to the structural links between the TACA parties and potential competitors since that withdrawal did not result in the alteration of the nature of the case, the fact that the abuse was one of conduct being apparent from other evidence set out clearly and precisely in the statement of objections. 153   Second, as to whether the steps in question served as inducements, it is true that, as the applicants point out in their written pleadings, the Commission does not expressly state in the passages of the statement of objections cited above that the TACA parties took steps to induce potential competitors, to use the terminology of the contested decision. However, since it is apparent from the statement of objections that the Commission alleges that the applicants took steps to enable potential competitors, including Hanjin and Hyundai, to join the conference rather than enter the transatlantic trade as independent competitors, it impliedly, though necessarily, finds that the TACA parties induced those potential competitors to act in that way. 154   That finding is further apparent from the express wording of the statement of objections. Thus paragraph 109 of that statement refers to arrangements with the TACA which have allowed new members to enter the transatlantic trade. More particularly, paragraph 110 of the statement of objections states that by the conclusion of slot-chartering agreements the TAA/TACA has been able to ensure that Hyundai and Hanjin do not enter the market as independent lines. Similarly, in relation to dual-rate service contracts and the fact that the majority of former structured TAA members did not compete for certain service contracts with NVOCCs, paragraph 112 of the statement of objections states that those practices constitute the TACA's ability to neutralise potential competition. In those terms the statement of objections, like the contested decision, manifestly criticises the TACA parties precisely for having adopted measures to induce potential competitors to join the TACA rather than enter the trade in question as independent competitors. 155   Third, as regards the fact that the specific measures addressed to Hanjin and Hyundai relied on in the contested decision no longer consist in the conclusion of certain agreements, but in the disclosure of confidential information to Hanjin on the TACA, the collective willingness of the TACA to enable Hanjin to build up a market share consistent with its slot capacity and in the fact that Hyundai obtained immediate access to service contracts, it suffices to state that that fact does not entail any alteration of the nature of the complaints alleged against the applicants, since the Commission continues to allege that the TACA parties induced potential competitors, including Hanjin and Hyundai, to enter the market in question by joining the TACA rather than as independent competitors. At most, that fact raises the separate question whether the applicants ought to have been given the opportunity to comment on that new evidence intended to support the complaint in the statement of objections, which is the subject of a separate plea considered below at paragraphs 159 to 188. 156   In the light of the foregoing, it must therefore be concluded that the complaints relating to the second abuse recorded in the contested decision were already set out clearly and precisely in the statement of objections, so that the applicants were in a position, upon notification of the statement of objections, to understand the extent of those complaints. Therefore, it cannot be held that there was an infringement of the rights of the defence in that regard. 157   As for the allegation, in relation to the nature of the second abuse, that the Commission's position in the defence differs from that set out in the statement of objections and in the contested decision, it suffices to observe that, even if that were true, it does not affect the assessment of the legality of the contested decision. Even if the Commission ventured in the pleadings it lodged with the Court to alter the nature of the abuse alleged in the contested decision, the review of legality carried out by the Court in the context of the present action for annulment on the basis of Article 173 of the Treaty concerns solely the allegation of abuse as set out in the contested decision and not as set out in the defence lodged by the Commission. Consequently, the applicants' argument on that point must be rejected without its being necessary to decide whether in the defence the Commission did in fact alter the position it set out in the contested decision, as alleged. 158   For those reasons, the applicants' plea alleging infringement of the rights of the defence in relation to the nature of the case in respect of the second abuse recorded in the contested decision must be rejected. 2.     The documentary evidence relied upon in support of the second abuse recorded in the contested decision 159   In assessing the merits of the applicants' plea alleging infringement of the rights of the defence with regard to the documentary evidence relied upon in support of the second abuse, it must be observed at the outset that the documents upon which the applicants allege they were not afforded the opportunity to comment, namely the minutes of the meeting of 5 October 1995 of the TACA directors (PWSC 95/8, the PWSC 95/8 minutes), Hanjin's letter to the TACA of 19 August 1994 (Hanjin's letter of 19 August 1994), the letter from Mr Rakkenes, the Chairman of the TACA and ACL, to Mr Rhee of Hanjin dated 30 January 1996 (the TACA letter of 30 January 1996) and the TACA briefing paper of 15 February 1996 are reproduced, at least in part, in the section of the contested decision setting out the facts, at paragraphs 229, 230, 239 and 292, and then in the section containing the legal assessment in relation to Article 86, at paragraphs 561, 563 and 564. 160   It is apparent from paragraphs 561, 563 and 564 of the contested decision that those documents were used by the Commission for the purposes of the finding of the second abuse in support of the complaint, at paragraph 562, that the intention of the TACA parties was ... to ensure that if a potential competitor wished to enter the market it would only do [so] after it had become a party of the TACA. 161   Thus: –       - the PWSC 95/8 minutes are cited to show that the immediate access to service contracts was a powerful inducement to Hyundai to enter the transatlantic trade as a TACA member (paragraphs 230 and 564 of the contested decision); –       - Hanjin's letter of 19 August 1994 is cited to show that the disclosure of confidential information was a powerful inducement to Hanjin to enter the transatlantic trade as a TACA party and not as an independent carrier (paragraphs 229 and 563 of the contested decision); –       - the TACA letter of 30 January 1996 is cited to show that the TACA intended to help potential competitors to enter the market as TACA members (paragraphs 292, 561 and 562) and –       - the TACA briefing paper of 15 February 1996 is cited to show that the TACA's willingness to enable Hanjin to build up a market share consistent with its slot capacity in the trade reduced the commercial risks inherent in the entry to a new market and, accordingly, was a factor inducing Hanjin to enter the transatlantic trade as a TACA party (paragraphs 239 and 564 of the contested decision). 162   According to the case-law, regard for the rights of the defence requires that the undertaking concerned shall have been able to make known effectively its point of view on the documents relied upon by the Commission in making the findings on which its decision is based (Joined Cases 43/82 and 63/82 VBVB and VBBB v Commission [1984] ECR 19, paragraph 25). Consequently, in principle only the documents cited or mentioned in the statement of objections are admissible evidence as against the addressee of the statement of objections (AKZO, cited at paragraph 95 above, paragraph 21; Case T-11/89 Shell v Commission [1992] ECR II-757, paragraph 55; and Case T-13/89 ICI v Commission [1992] ECR II-1021, paragraph 34). Moreover, as far as the documents appended to the statement of objections but not mentioned therein are concerned, they may, according to the case-law, be used in the decision as against the addressee of the statement of objections only if that person could reasonably infer from the statement of objections the conclusions which the Commission intended to draw from them (Shell, cited above, paragraph 56, and ICI, cited above, paragraph 35). 163   In the present case, none of the documents in question is cited or mentioned in the statement of objections dated 24 May 1996, nor were they appended thereto. The Commission expressly confirmed this to be the case in reply to a question from the Court. 164   Three of the documents in question were disclosed by the applicants in response to requests for information sent by the Commission after the hearing of 25 October 1996, and, therefore, after the statement of objections. Thus Hanjin's letter of 19 August 1994, the TACA letter of 30 January 1996 and the TACA briefing paper of 15 February 1996 were sent by letter of 24 December 1996 in response to a request for information of 15 November 1996. The TACA letter of 30 January 1996 was also sent subsequently by letter of 7 February 1997 in response to a request for information of 24 January 1997. Although an extract of the PWSC 95/8 minutes was sent by the applicants by letter of 9 May 1996 in response to a request for information of 8 March 1996, so that the Commission was in possession of that extract when it issued the statement of objections, it is not in dispute that a full copy of those minutes was provided by the applicants after that statement was issued, by letter of 4 June 1996 in response to a request for information of 22 May 1996. 165   Whilst there is nothing to prevent the Commission from using new documents which it considers support its argument and which were obtained after the statement of objections was issued, the Commission must afford the undertakings concerned the opportunity of making known their views in that respect (AEG, cited at paragraph 115 above, paragraph 29; Buzzi Unicem, cited at paragraph 115 above, paragraph 65; Lögstör Rör, cited at paragraph 115 above, paragraph 168). 166   It is not in dispute that, in the present case, the Commission did not expressly give the applicants the opportunity of making known their views on the four documents in question before using them in support of its complaints in the contested decision. In particular, it is not in dispute that the Commission did not inform the applicants of its intention to use those documents in support of its complaints and, therefore, that it did not inform the applicants of how it intended to use those documents or request the applicants to provide explanations as to their probative value. 167   As was stated above at paragraph 156, it is true that the statement of objections already set out the complaint that the applicants induced Hanjin and Hyundai to enter the transatlantic trade as TACA parties rather than as independent undertakings. Paragraphs 109 and 110 of the statement of objections were based in this respect on the slot-chartering agreements entered into by those two lines with the TACA parties. According to the Commission, those agreements enabled Hanjin and Hyundai to enter the market without having to face the competition which they would normally have had to face. The applicants were therefore in a position, in their response to the statement of objections, to reply to the Commission's complaint in that regard. 168   However, to the extent that, following the applicants' explanations in relation to paragraphs 192 to 206 of the statement of objections, the Commission chose to base this complaint no longer on the slot-chartering arrangements but on three of the four documents in question, namely the PWSC 95/8 minutes, Hanjin's letter of 19 August 1994 and the TACA briefing paper of 15 February 1996, it should, in principle, have allowed the applicants to comment on the relevance and probative value of those documents in support of that complaint. Whilst the Commission is perfectly entitled to redraft and supplement its arguments both of fact and of law in support of the complaints (Irish Sugar, cited at paragraph 152 above, paragraph 34), it cannot substitute three sources of evidence for one other, which it withdraws, without giving the undertakings concerned the opportunity to comment in a situation where, without those new sources of evidence, the complaint would not be made out. 169   The same is true of the complaint that the TACA induced potential competitors to join the TACA. It is true that that complaint appeared in the statement of objections, so that the applicants had the opportunity to make known their views in that regard. However, since the Commission abandoned certain evidence set out in the statement of objections and replaced it with one of the four documents in question, namely the TACA letter of 30 January 1996, it should, if it intended to rely on that evidence in support of the complaint, have given the applicants the opportunity to comment on its probative value in support of that complaint. 170   However, all the documents in question were provided by the applicants themselves and they all consist of written material generated either by the TACA itself or by the parties thereto, so that the content of those documents must be deemed to have been known to the applicants. 171   In those circumstances, it is apparent from the case-law that the documents in question must be regarded as evidence which may not be relied upon as against the applicants unless it is shown that the latter must have known the risk that the Commission might use the documents as evidence against them (Shell, cited at paragraph 162 above, paragraph 59). It is necessary to ascertain in that regard whether the applicants could reasonably infer the conclusions which the Commission intended to draw from them (see, to that effect, Shell, cited above, paragraph 56, and ICI, cited at paragraph 162 above, paragraph 35). It is apparent from the case-law that it is not the documents as such which are important but the conclusions which the Commission drew from them. If certain documents were not mentioned in the statement of objections, the undertaking concerned was entitled to consider that they were of no importance for the purposes of the case. By not informing an undertaking that certain documents would be used in the decision, the Commission prevents it from putting forward at the appropriate time its view of the probative value of such documents (see to that effect AEG, cited at paragraph 115 above, paragraph 27, and AKZO, cited at paragraph 95 above, paragraph 21). 172   It is true that the Court of First Instance has already held that the rights of the defence are not infringed by the Commission's failure to disclose to an applicant a document which might contain exculpatory evidence where that document emanates from that applicant or was manifestly in its possession during the administrative procedure (Joined Cases T-25/95, T-26/95, T-30/95 to T-32/95, T-34/95 to T-39/95, T-42/95 to T-46/95, T-48/95, T-50/95 to T-65/95, T-68/95 to T-71/95, T-87/95, T-88/95, T-103/95 and T-104/95 Cimenteries CBR and Others v Commission [2000] ECR II-491, paragraph 248). However, that can in no circumstances apply to inculpatory documents. Whilst it is for the applicants to put forward upon their own initiative any exculpatory document, it is the Commission which bears the burden of proving infringements and must adduce evidence sufficient to establish the facts constituting the infringement (Case T-43/92 Dunlop Slazenger v Commission [1994] ECR II-441, paragraph 79). 173   In order to ascertain whether the applicants could reasonably infer the conclusions which the Commission drew from the four documents in question in the contested decision, it is necessary to take account not only of the content of the statement of objections but also of subsequent circumstances from which such conclusions could be inferred - in the present case, the terms of the requests for information which led to the disclosure of the documents in question and the content of those documents. 174   First, as regards the contents of the statement of objections, whilst paragraph 109 thereof alleges that the TACA implemented certain arrangements enabling, inter alia, Hanjin and Hyundai to enter the market without having to face the competition which those lines would normally have had to face, paragraph 110 merely states that Hanjin and Hyundai had been able to enter the market on a slot charter basis. On the other hand, the statement of objections is silent in that regard as to the TACA's having given Hyundai immediate access to service contracts or disclosed confidential information to Hanjin or as to its being willing to build up a market share for it compatible with its slot capacity on the trade. 175   In that context it must be held that the statement of objections did not contain any indication that immediate access to service contracts, the disclosure of confidential information and the willingness to build up a market share compatible with slot capacity on the trade were capable of amounting to measures which induced Hanjin and Hyundai to join the TACA. 176   Second, as regards the terms of the requests for information which led to the production of the documents in question, in the case of the PWSC 95/8 minutes, the extract of that document cited at paragraphs 230 and 564 of the contested decision was disclosed in response to a request for information of 8 March 1996, by which the Commission sought, inter alia, the disclosure of any document of the TACA or of one of the parties thereto concerning (a) the issue of sharing vessels or space between TACA parties, on the one hand, and independent, non-conference carriers in the transatlantic trade on the other, (b) Hyundai's decision to join the TACA ... in order to assist us to assess ... [the] application for individual exemption of the TACA in its full economic and legal context. 177   The express terms of the request for information in question make it plain that its purpose was to enable the Commission not to find any infringement of Article 86 of the Treaty but to consider the possibility of granting an individual exemption under Article 85(3) of the Treaty. It is apparent in that regard from the wording of that request that the question of Hyundai's joining the TACA was raised in the context of the Commission's assessment of the issue of slot-chartering arrangements between the TACA parties and the independent shipping lines. It is not in dispute that Hyundai joined the TACA in 1995 on the basis of such an arrangement. It appears in that context that the disclosure by TACA of information concerning Hyundai's accession was intended to enable the Commission to assess the internal competition within the TACA, having regard to the requirement, for the grant of an individual exemption under Article 85(3) of the Treaty, that the agreement in question must not permit the elimination of competition. 178   It is not in dispute that after the TACA sent its response to that request for information on 9 May 1996 the Commission, by a request for information of 22 May 1996, requested the TACA, in the light of that reply, to disclose complete copies of the Minutes of the TACA Principals' Meetings held on 31 August 1995 and 5 October 1995. Given the express reference to the TACA's reply to the previous request for information, and in the absence of any evidence to the contrary in the request for information of 22 May 1996, the latter request must have had the same purpose as the former, namely to enable the Commission to assess the internal competition within the TACA in the context of considering the conditions for granting an individual exemption laid down by Article 85(3) of the Treaty. 179   In those circumstances, it is not apparent from the wording of the requests for information which led to the disclosure of the PWSC 95/8 minutes that the Commission intended to use that document in support of the complaint that the TACA parties had infringed Article 86 of the Treaty, inter alia by inducing Hyundai to join the TACA. A fortiori it is not apparent from the wording of the requests for information in question that the Commission intended to use the document in question to support the finding that the TACA's giving Hyundai immediate access to service contracts served as an inducement to that shipping line to join the TACA. 180   Next, Hanjin's letter of 19 August 1994, the TACA letter of 30 January 1996 and the TACA briefing paper of 15 February 1996 were disclosed to the Commission in response to a request for information of 15 November 1996, by which the Commission sought the disclosure of any agreement between the TACA parties on Hanjin's accession to the TACA, and any document relating to independent action, TVRs, individual service contracts and other service contracts concluded by Hanjin in order to assist us to assess ... [the] application for individual exemption of the TACA in its full economic and legal context and in particular to assist us in our examination of your client's reply to the statement of objections (in particular paragraphs 195 to 200 and 216 to 217). 181   It is thus apparent, again from the express terms of the request for information in question, that its purpose was to enable the Commission not to find any infringement of Article 86 of the Treaty but to consider the possibility of granting an individual exemption under Article 85(3) of the Treaty. At paragraphs 195 to 200, 216 and 217 of their response to the statement of objections, to which the request for information referred in stating its purpose, the TACA parties presented the Commission with certain evidence intended to show that Hanjin's entry to the transatlantic trade increased internal price competition within the TACA, given Hanjin's initiatives in relation to independent action, TVRs and individual service contracts. It is apparent from paragraphs 192 to 194 of the response to the statement of objections and from the title of that part of the response, Price competition within vessel sharing agreements (VSAs), that the TACA parties sought by that evidence, by reference in particular to Hanjin's situation on the trade in question, to rebut the Commission's argument at paragraphs 106, 235 and 238 of the statement of objections that the slot-chartering arrangements entered into between the TACA parties and the independent shipping lines, in particular the one to which Hanjin was a party, had the effect of restricting price competition between the parties to such agreements and therefore between the conference members. At paragraphs 235 to 238 of the statement of objections the Commission considers whether the conditions for the withdrawal of block exemption laid down by Article 7 of Regulation No 4056/86, where the effects of an exempted conference are incompatible with Article 85(3) of the Treaty, in particular the lack of potential external competition, are met in the present case. It appears in that context that by asking the TACA parties to disclose to it any agreement entered into between them concerning the accession of Hanjin and any document concerning price initiatives by Hanjin, the Commission's request for information sought to ascertain whether the TACA continued to qualify for block exemption under Regulation No 4056/86 and/or individual exemption, having regard in particular to the requirement in Article 85(3) of the Treaty that competition not be eliminated. 182   It is not in dispute that the TACA letter of 30 January 1996 was also disclosed in response to a request for information of 24 January 1997. According to the wording of that request, the Commission sought in the light of the TACA letter of 30 January 1996 previously disclosed to obtain copies of the correspondence between Mr Rhee and Mr Rakkenes concerning the TACA's pricing practices and the correspondence between Mr Rakkenes and the TACA or its members or any other document relating to pricing malpractices which were the subject of the letter in question, in order to assess the TACA's response to the statement of objections and, in particular, their comments concerning the degree of internal competition within the TACA. It is therefore apparent from the express wording of that request that, in common with the request of 15 November 1996, its sole purpose was to enable the Commission to assess whether the TACA qualified for individual exemption under Article 85(3) of the Treaty and, in particular, whether the requirement under Article 85(3) of the Treaty that competition not be eliminated was met. 183   In those circumstances, it must be held that it is not apparent from the wording of the requests for information which led to the disclosure of Hanjin's letter of 19 August 1994, the TACA letter of 30 January 1996 and the TACA briefing note of 15 February 1996 that the Commission intended to use those documents in support of the complaint that the TACA parties had infringed Article 86 of the Treaty, in the case of the first and the third of those documents, by inducing Hanjin to join the TACA, and in the case of the second of those documents, by inducing potential competitors to join the TACA. A fortiori it is not apparent from the wording of the requests for information in question that the Commission intended to use those documents to support the finding, first, that the disclosure of confidential information and the willingness to build up a market share compatible with slot capacity on the trade were measures which induced Hanjin to join the TACA and, second, that the TACA had always intended to help potential competitors to enter the market as TACA members. 184   Third and finally, with regard to the content of the documents in question, for the reasons set out below at paragraphs 1279 to 1304 and 1311 to 1326, on the assessment of the merits of the pleas relating to the allegation of abuse of a dominant position, the conclusions which the Commission drew from those documents in the contested decision are not made out to the requisite legal standard by that content. 185   Clearly the applicants cannot be criticised for not having been able to draw from the content of the documents which they disclosed to the Commission conclusions which prove to be erroneous. 186   It follows from all the foregoing that neither the content of the statement of objections nor the terms of the requests for information which led to the production of the documents in question nor the content thereof enabled the applicants reasonably to infer the conclusions which the Commission drew from them to the detriment of the applicants in the contested decision. 187   In those circumstances it must be held that by relying on the four documents in question in support of the second abuse alleged against the applicants in the contested decision the Commission infringed the rights of the defence. Therefore those documents must be excluded as inculpatory evidence. 188   However, it is apparent from the case-law that, far from entailing the annulment of the entire decision, the exclusion of those documents is significant only if the objection made by the Commission in that respect could be proved only by reference to those documents (Case T-37/91 ICI v Commission [1995] ECR II-1901, paragraph 71, and Cimenteries CBR, cited at paragraph 172 above, paragraph 364). That question falls within the assessment of the pleas concerning the merits of the Commission's findings in support of the allegation of abuse of a dominant position arising from the alteration of the structure of the market, which will be considered in the context of the third group of pleas concerning the allegation of infringement of Article 86 of the Treaty.  2. The purportedly new allegations of fact or law other than those relating to the second abuse 189   The applicants also allege that the Commission based allegations other than those relating to the second abuse on points of fact or law upon which they were not given the opportunity to comment. 190   They submit, first, in that regard that the contested decision contains new allegations concerning the lawfulness of joint service contracts, the fact that the TACA parties held a collective position and the fact that that position was a dominant one. Next, at the hearing, they submitted in response to a question from the Court on that point that the contested decision contains new allegations which arise from evidence disclosed in response to certain requests for information after the statement of objections was issued.  a) Preliminary observations 191   According to the case-law, the decision is not necessarily required to be an exact replica of the statement of objections (Van Landewyck, cited at paragraph 152 above, paragraph 68). The Commission must be permitted in its decision to take account of the responses of the undertakings concerned to the statement of objections. It must be able not only to accept or reject the arguments of the undertakings concerned, but also to carry out its own assessment of the facts put forward by those undertakings in order either to abandon such complaints as have been shown to be unfounded or to supplement and redraft its arguments, both in fact and in law, in support of the complaints which it maintains (ACF Chemiefarma, cited at paragraph 113 above, paragraph 92; Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraphs 437 and 438; and Irish Sugar, cited at paragraph 152 above, paragraphs 34 and 36). Thus it is only if the final decision alleges that the undertakings concerned have committed infringements other than those referred to in the statement of objections or takes into consideration different facts that there will be an infringement of the rights of the defence (ACF Chemiefarma, cited at paragraph 113 above, paragraphs 26 and 94; and CB and Europay, cited at paragraph 138 above, paragraphs 49 to 52). That is not the case where the alleged differences between the statement of objections and the final decision do not concern any conduct other than that in respect of which the undertakings concerned had already submitted observations and are therefore unrelated to any new complaint (Joined Cases T-305/94 to T-307/94, T-313/94 to T-316/94, T-318/94, T-325/94, T-328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappij and Others v Commission (PVC II), [1999] ECR II-931, paragraph 103). 192   In asserting that there was an infringement of the rights of the defence with regard to the complaints made in the contested decision, it is not sufficient for the undertakings concerned to point to the mere existence of differences between the statement of objections and the contested decision without explaining precisely and specifically why each of those differences constitutes, in the circumstances, a new complaint upon which they were not given the opportunity to comment (see, to that effect, Irish Sugar, cited at paragraph 152 above, paragraph 33). According to the case-law, an infringement of the rights of the defence must be examined in relation to the specific circumstances of each particular case, since it depends essentially on the objections raised by the Commission in order to prove the infringement which the undertakings concerned are alleged to have committed (Case T-36/91 ICI v Commission [1995] ECR II-1847, paragraph 70). 193   Furthermore, in order to determine whether the differences alleged are new complaints upon which the undertakings concerned should have been given the opportunity to comment, it is necessary to distinguish between differences which directly affect the legal assessments set out in the contested decision and those which affect the presentation of the facts therein. 194   In the first case, according to the case-law cited above, an infringement of the right to be heard can only be made out if the alleged differences between the statement of objections and the contested decision show that the latter contains allegations of fact or law which did not already appear in the statement of objections. On the other hand, if it is apparent from an examination of the statement of objections that the supposed new allegations of fact or law are in fact merely the restatement, redrafting or development, as the case may be, of a point already made in the statement of objections so as to respond to the observations of the undertakings concerned in their response to the statement of objections, there is no infringement of the right to be heard (ACF Chemiefarma, cited at paragraph 113 above, paragraph 92, Suiker Unie, cited at paragraph 191 above, paragraphs 437 and 438, and Irish Sugar, cited at paragraph 152 above, paragraphs 34 and 36). 195   In the second case, mere differences in the presentation of the facts between the statement of objections and the contested decision do not in principle show that the undertakings concerned have not had an opportunity to comment on the complaints made against them unless in the course of its legal assessment the Commission refers to them expressly, or even impliedly but obviously, in such a way that the factual matters in question may be regarded as the necessary basis for the legal assessment. The evidence mentioned in the contested decision in order to describe a fact or conduct but not used subsequently in order to make a finding of an infringement cannot be regarded as incriminating evidence against the undertakings in question (Cimenteries CBR, cited at paragraph 172 above, paragraph 387). 196   Finally, in any event, even if the decision contains new allegations of fact or law on which the undertakings concerned have not been given the opportunity to comment, the defect will only entail the annulment of the decision in that respect if the allegations concerned cannot be substantiated to the requisite legal standard on the basis of other evidence in the decision on which the undertakings concerned were given the opportunity to comment (Case T-86/95 Compagnie générale maritime and Others v Commission (FEFC) [2002] ECR II-1011, paragraph 447). 197   It is in the light of those principles that the applicants' arguments should be considered.  b) The new allegations of fact or law concerning the lawfulness of joint service contracts, the fact that the TACA parties held a collective position and the fact that that position was a dominant one 1.     Arguments of the parties 198   The applicants criticise the Commission for having based certain allegations in the contested decision on matters of fact or of law upon which they did not have an opportunity to comment. The allegations concern the compatibility of conference service contracts with Regulation No 4056/86 and Article 85(1) and (3) of the Treaty, the possibility of considering the applicants' position collectively and the actual holding of a collective dominant position by the applicants. 199   According to the applicants, the contested decision contains new findings of fact with regard to those allegations, including new construction of, or inferences from, facts and new findings of law which do not appear in the statement of objections. 200   The Commission points out that, according to the case-law, the final decision need not be a copy of the statement of objections (Van Landewyck, cited at paragraph 152 above, paragraph 68). Consequently, it contends that the Court should reject the applicants' argument on this point. 2.     Findings of the Court 201   It should be noted as a preliminary point that in order to challenge the contested decision the applicants merely list in their applications the paragraphs of the contested decision which, in their view, were not already set out in the statement of objections, before going on to claim that they were not afforded the opportunity to comment on the assessments or findings made in those paragraphs. 202   It is plain that in so doing the applicants have failed to state why, in the light of the specific circumstances of the present case, the alleged differences between the contested decision and the statement of objections constitute new complaints, with the result that the rights of the defence were infringed. At most the listing in the application shows that the contested decision is not an exact replica of the statement of objections as regards the aspects of that decision in issue. According to the case-law, the contested decision need not necessarily be an exact replica of the statement of objections as the Commission can change its argument in support of the complaints. Therefore, in order to prove an infringement of the rights of the defence, as stated at paragraph 192 above, the burden is on the applicants to explain specifically how the assessments and findings in the contested decision in this case adversely affected them. In the absence of such explanations the Court can make no finding of infringement of the rights of the defence. 203   Even though this ground suffices for the applicants' arguments alleging that the Commission made new assessments or findings in the contested decision to be rejected, it must also be observed that in any event the examination of the differences alleged by the applicants does not reveal any infringement of the rights of the defence.  (i) The allegations concerning the lawfulness of joint service contracts 204   The applicants claim that several findings in the contested decision relating to joint service contracts are based on points of fact not referred to in the statement of objections. 205   First, in relation to the application of Regulation No 4056/86 to joint service contracts, the applicants submit first that the differences between the tariff and contractual arrangements set out at paragraphs 104 to 108 of the contested decision do not appear in the statement of objections. 206   Contrary to the applicants' submissions, however, two of the alleged differences, namely the right of members of an exempted conference under US law to take independent action on tariff rates (paragraph 104 of the contested decision) and the fact that in the case of contractual arrangements, unlike in tariff arrangements, the price is not set out in the tariff (paragraph 108), already appeared in the statement of objections in footnote 3 at paragraph 12, and in paragraphs 64 and 58. On these points therefore the applicants' complaints have no factual basis. 207   It follows that the only new point in the contested decision upon which the applicants were given no opportunity to comment is the finding, at paragraph 106, that carriers operating under tariff arrangements are expected to hold themselves out to the public as common carriers. 208   Paragraph 106, like the other paragraphs in question, appears solely in the section of the contested decision setting out the facts and is purely descriptive. Furthermore, that paragraph does not, any more than the other paragraphs in question, form the necessary basis for the finding at paragraphs 454 to 462 of the contested decision that, in contrast to the tariff, joint service contracts do not fall within the meaning of uniform or common freight rates for the purposes of Article 1(3)(b) of Regulation No 4056/86 and, therefore, do not qualify for block exemption under Article 3 of that regulation. That latter finding is not based on differences between the tariff and contractual arrangements set out at paragraphs 104 to 108 of the contested decision but on other points which were set out in paragraphs 206 to 208 of the statement of objections. 209   Next, the applicants allege that the analysis of loyalty arrangements set out in paragraphs 113 to 119 of the contested decision is new in several respects when compared with the statement of objections. 210   Contrary to the applicants' submissions, however, two of the four points set out in paragraphs 113 to 119 of the contested decision, namely, first, the fact that the definition of a service contract used by the US Shipping Act does not extend to contracts for a percentage or portion of a shipper's cargo (paragraph 113 of the contested decision) and, second, the fact that loyalty arrangements are specifically referred to in Article 5(2) of Regulation No 4056/86 (paragraph 114 of the contested decision), were already set out in the statement of objections in footnote 15 at paragraph 60 and in paragraph 211. On these points therefore the applicants' complaints have no factual basis. 211   Furthermore, a third point made in this part of the contested decision, namely the fact that the Code of the United Nations Conference on Trade and Development (Unctad) recognises no form of contract between shippers and conferences other than loyalty contracts (paragraph 115 of the contested decision) was developed so as to take account of the arguments put forward by the applicants at paragraphs 281 to 283 of the response to the statement of objections. 212   It follows that the only new point in the contested decision upon which the applicants were given no opportunity to comment is the finding at paragraph 116 of the contested decision that there are three types of loyalty arrangement and the description of each of them at paragraphs 117 to 119. 213   Like the other paragraphs in question, those paragraphs appear in the section of the contested decision setting out the facts and are purely descriptive. Furthermore, those paragraphs do not form the necessary basis for the finding, at paragraph 463 of the contested decision, that, in contrast to loyalty contracts, service contracts do not qualify for block exemption under Article 3 of Regulation No 4056/86. That finding is based not on the points referred to in paragraphs 116 to 119 but on other points which were already set out in paragraph 211 of the statement of objections which was essentially reproduced in paragraph 463 of the contested decision. 214   Second, as regards the application of Article 85 of the Treaty to joint service contracts, the applicants consider, first, that the finding at paragraph 443 of the contested decision that, essentially, joint service contracts may restrict competition where there is an express or implied agreement not to enter into individual service contracts is a new complaint. 215   However, paragraph 202 of the statement of objections states that the TACA's prohibition of individual service contracts is contrary to Article 85(1) of the Treaty. Furthermore, paragraphs 200 and 201 of the statement of objections state that joint service contracts of the kind entered into by the TACA parties also fall within that provision. Paragraph 82 of the statement of objections states that the TACA prohibited individual service contracts in 1994 and 1995. In the light of those statements in the statement of objections, the applicants were perfectly able to understand the complaint alleged against them on that point. 216   In any event, in so far as the applicants complain that the Commission based its assessments in the contested decision on reasoning which does not appear in the statement of objections, it suffices to point out that such reasoning does not form part of any new complaint since it does not refer to conduct other than that upon which the undertakings had already commented. 217   Next, the applicants submit that the application of Article 85(1) of the Treaty to joint service contracts of the kind they entered into is based on two allegations of fact made for the first time at paragraph 444 of the contested decision, namely, first, the proportion of individual service contracts entered into by former members of the TAA's Contract Committee and, second, the large number of slot-chartering arrangements. 218   It is clear, however, that the sole purpose of those allegations of fact is to support the conclusion at paragraph 443 that joint service contracts may restrict competition where there is an express or implied agreement not to enter into individual service contracts. It has been held at paragraph 215 above that, in the light of the statements at paragraphs 200 to 202 of the statement of objections, the applicants were perfectly able to understand the complaint alleged against them on that point. Consequently the fact that the applicants were not given the opportunity to comment on the factual allegations set out in paragraph 444 does not undermine the conclusion in paragraph 443 that those allegations were intended to support. 219   Finally, the applicants allege that the finding, at paragraphs 500 and 501 of the contested decision, that the prohibition of independent action on service contracts does not satisfy the requirements of Article 85(3) of the Treaty is new. 220   However, paragraph 203 of the statement of objections expressly states that that prohibition is not authorised by Regulation No 4056/86, so that, in the absence of individual exemption, it is prohibited by Article 85(1) of the Treaty. That paragraph of the statement of objections is the exact equivalent of paragraph 449 of the contested decision. Whilst it is true that the statement of objections does not address the grant of an individual exemption in favour of that prohibition, it is for the applicants to adduce the evidence to justify the grant of an individual exemption under Article 85(3) of the Treaty (see, inter alia, VBVB and VBBB, cited at paragraph 162 above, paragraph 52). 221   Consequently, since the statement of objections expressly referred to the fact that the prohibition of independent action restricted competition within the meaning of Article 85(1) of the EC Treaty, the applicants were able to understand the nature of the complaints made against them by the Commission and therefore the burden was on them to adduce evidence in their response to the statement of objections proving that that prohibition did qualify for individual exemption under Article 85(3) of the EC Treaty. 222   It follows from the foregoing that the applicants' complaints alleging infringement of the rights of the defence with regard to the allegations concerning the lawfulness of joint service contracts must be rejected in their entirety.  (ii) The allegations that the TACA parties held a collective position 223   The applicants submit that in finding that there was a collective dominant position, the Commission relies on several points demonstrating the absence of internal competition which were not referred to in the statement of objections. 224   First, the applicants point out that the contested decision contains fresh allegations when compared with the statement of objections in that it describes the NVOCCs (paragraphs 158 to 161), finds that the US Shipping Act requires the TACA parties to publish their tariffs (paragraphs 174 to 176), states that TVRs are discounts on the tariff (paragraph 120) and asserts that there is no independent action on service contracts (paragraph 131). 225   It should be noted in that regard that those paragraphs of the contested decision appear in the section of the contested decision setting out the facts and are purely descriptive. 226   Furthermore, as to whether those paragraphs are the necessary basis for the legal assessments concerning the collective nature of the dominant position held by the TACA parties it should be noted that, as will be set out in more detail in the course of examining the pleas concerning the application of Article 86 of the Treaty, at paragraphs 521 to 531 of the contested decision the Commission considered that the position of the TACA parties should be assessed collectively on the basis of five factors, namely the TACA tariff (paragraph 526), the enforcement provisions adopted by the TACA (paragraph 527), the annual business plan published by the TACA (paragraphs 528 and 530), the TACA secretariat (paragraphs 528 and 529) and the consortia arrangements linking certain TACA parties (paragraph 531). 227   It follows that, of the points put forward by the applicants, only the fact that US law requires the publication of the tariff contributes to the necessary basis for the legal assessment in that, according to that assessment, the Commission relies on the tariff as being an economic link between the TACA parties. On the other hand, it is clear that the other factors put forward by the applicants are purely descriptive and form no part of the economic links referred to in paragraphs 521 to 531 of the contested decision. 228   On the question of the tariff, the Commission had already stated at paragraph 318 of the statement of objections that the enforcement provisions adopted by the TACA were intended to eliminate price competition between the parties to the conference, referring in this regard to paragraphs 16 and 17 of the statement of objections, in which it pointed out that the enforcement provisions adopted by the TACA enabled it, inter alia, to impose substantial fines on its members for infringement of the collective price-fixing arrangements. In those circumstances, the applicants were perfectly able to understand the extent of the complaint made against them in this regard. 229   Accordingly, this complaint must be rejected. 230   Second, the applicants claim that the contested decision contains fresh allegations at paragraphs 177 and 178 concerning the enforcement provisions adopted by the TACA. 231   It is true that paragraph 527 of the contested decision refers to enforcement provisions for the purposes of the finding of a collective dominant position. However, as stated above, that point is expressly mentioned as an economic link between the TACA parties at paragraph 318 of the statement of objections and is the subject of a detailed description at paragraphs 16 and 17 of the statement of objections. 232   The applicants' arguments on that point must therefore be rejected. 233   Third, the applicants claim that the contested decision contains fresh allegations at paragraphs 181 to 198 concerning restrictive agreements affecting the transatlantic trade, namely the consortia arrangements. 234   It is true that consortia arrangements are referred to at paragraph 531 of the contested decision for the purposes of the finding of a collective dominant position. However, those arrangements are expressly referred to as economic links between the TACA parties at paragraph 322 of the statement of objections and are the subject of a detailed description at paragraphs 94 to 106 of the statement of objections. 235   Furthermore, in so far as the applicants allege that the Commission referred in the contested decision to more arrangements of that type at paragraphs 182, 188 (Table 4), 190 and 191, or identified, at paragraphs 181, 192, 194, 220 (Table 5) and 221, additional effects on internal competition not mentioned in the statement of objections, the applicants' criticisms are irrelevant. Since the statement of objections expressly states that consortia arrangements reinforce the economic links between the TACA parties, the applicants were perfectly able to understand the scope of the complaint made against them by the Commission. Thus, at paragraphs 192 to 196 of their response to the statement of objections, the TACA parties put forward various arguments to show that the consortia arrangements do not restrict internal competition. In those circumstances, the applicants cannot submit that the statement of complaints was not sufficiently clear on that point. 236   Moreover, it is not true to say that, in the contested decision, the Commission identified additional restrictive effects caused by the consortia arrangements entered into by the TACA parties. 237   Thus, first, at paragraph 181 of the contested decision the Commission states in general terms that consortia arrangements are likely to reduce competitive pressure within the TACA. The same idea is set out not only in the title itself of the relevant section of the statement of objections (VII. Other restrictive arrangements affecting the Trans-Atlantic Trade), but also in paragraph 101 which states that those arrangements contribute to coordination and discipline between their parties. The same finding also appears at paragraph 226 of the statement of objections. 238   Next, at paragraph 193 of the contested decision the Commission states: thus the effect of these agreements has been to restrict intra-TACA competition, particularly by their achievement of curtailment of independent action. The same conclusion appears at paragraph 101 of the statement of objections. 239   Furthermore, at paragraphs 220 and 221 of the contested decision, the Commission compares the transatlantic trade with other trades to demonstrate how little independent action there is on the former. Paragraph 101 and footnote 69 at paragraph 224 of the statement of objections had already made such a comparison and it is in response to the applicants' arguments in paragraphs 168 to 191 of their response to the statement of objections that the examples cited in the statement of objections were developed in the contested decision. 240   Lastly, at paragraphs 193 and 194 of the contested decision, the Commission notes that consortia arrangements, because of the extensive use of space on other TACA parties' vessels, have the effect of restricting non-price competition between the TACA parties. The same idea is expressed at paragraphs 102 and 103 of the statement of objections. 241   In any event, paragraphs 526 to 530 refer to other links between the TACA parties, on which they stated their views, which already establish to the requisite legal standard, for reasons which will be set out in the course of considering the first part of the pleas relating to the application of Article 86 of the Treaty, that the TACA parties must be considered collectively for the purposes of applying Article 86 of the Treaty. 242   In those circumstances, the applicants' arguments alleging infringement of the rights of the defence on that point must be rejected. 243   Fourth, the applicants allege that the contested decision states for the first time, at paragraphs 214 to 219, that independent action is not proof of internal competition. 244   However, the statement of objections expressly states at paragraph 223 that the reduction in the notice time before independent action can be taken is unlikely to have a significant effect on internal competition. Furthermore, paragraph 224 of the statement of objections notes that there was no significant independent action on the trade in question in 1994 and 1995. Lastly, if the Commission developed that point further in the contested decision it was in response to the information supplied by the TACA parties at paragraphs 168 to 191 of the response to the statement of objections in order to prove that independent action demonstrates the existence of significant internal competition. 245   The applicants' arguments on that point must therefore be rejected. 246   Fifth and finally, the applicants submit that the Commission relies on two items of evidence, namely a letter from POL to Hanjin of 28 December 1995 and the TACA briefing paper of 15 February 1996, which are not referred to in the statement of objections. 247   The contents of the letter from POL to Hanjin are reproduced in part at paragraph 180 of the contested decision in the section setting out the facts in order to illustrate the spirit of cooperation within TACA. As for the TACA briefing paper of 15 February 1996, the applicants allege in the context of the present pleas that the Commission did not afford them the opportunity to comment on the part of that paper cited at paragraph 129 of the contested decision, which states that independent action is a tool of last resort. 248   Whilst those documents are not expressly relied upon by the Commission in support of its legal assessment in paragraphs 521 to 531 of the contested decision for the purposes of concluding that there was a collective dominant position, they are capable of supporting the finding, at paragraph 528, that the tariff and the enforcement provisions adopted by the TACA had the purpose of substantially eliminating price competition between the TACA parties. 249   However, it is apparent from the contested decision that that finding is also based upon many other factors, in particular those set out at paragraphs 199 to 222, upon which the applicants did comment. For the reasons set out below at paragraphs 697 to 712, those factors suffice to show that the tariff and the enforcement provisions adopted by the TACA had the purpose of substantially eliminating price competition between the TACA parties. 250   Therefore, the applicants' arguments on that point must be rejected.  (iii) The allegations concerning the dominant nature of the TACA parties' position 251   First, the applicants submit that the correspondence cited at paragraph 271 and the conclusions drawn from it at paragraphs 271 and 273 of the contested decision were not referred to in the statement of objections. 252   At paragraphs 265 to 273 of the contested decision the Commission examines the actual external competition from operators of shipping lines transporting containerised cargo originating in or destined for the American mid-west to or from northern Europe via Canadian ports (the Canadian Gateway). At paragraph 271 of the contested decision, the Commission reproduces extracts of correspondence from the Canadian conference secretariat to members of the Joint Inland Committee of those conferences which, in its view, demonstrates in particular that the members of the Canadian conferences had detailed knowledge of the pricing practices of the TACA parties. At paragraph 273 of the contested decision the Commission concludes that for the reasons set out in the preceding paragraphs, the market share of the TACA parties for services provided through the Canadian Gateway should be aggregated with the market share of the TACA parties for direct services and not treated as a distinct competitor. 253   It is true, as the applicants claim, that the statement of objections does not refer to the extracts of the correspondence cited at paragraph 271 of the contested decision. 254   In so far as the market share of the TACA parties for cargo passing through the Canadian Gateway was taken into account in determining the applicants' share of the relevant market, paragraphs 271 to 273 of the contested decision constitute the necessary basis for the legal assessment, at paragraph 533, that the market share of the TACA parties during the relevant period gives rise to a strong presumption of a dominant position. 255   However, at paragraph 50 of the statement of objections, the Commission had already clearly stated that: In the TAA decision, the Commission found that containerised cargo travelling between the United States and Northern Europe via Canadian ports (the Canadian Gateway) formed part of the same market as the direct trade. The Commission continues to hold that view. 256   Furthermore, at paragraphs 51 to 55 of the statement of objections, the Commission sets out the reasons in support of that position. 257   Next, in response to those allegations in the statement of objections, the applicants submitted at paragraphs 15 to 17 of their response to the statement of objections that the competition faced by the TACA members' direct trade services from their transport services via the Canadian Gateway was demonstrated by the price data for the two types of transport and by a shipper's invitation to tender. 258   In those circumstances, the applicants were perfectly able upon notification of the statement of objections to understand the scope of the Commission's complaint in relation to the actual external competition from cargo passing via the Canadian Gateway since the extracts of the correspondence cited at paragraph 271 of the contested decision were intended solely to support the Commission's position following the applicants' criticisms in their response to the statement of objections. 259   Therefore, the applicants' arguments on that point must be rejected. 260   Second, the applicants allege that paragraphs 207 to 213 of the contested decision contain fresh allegations concerning the TACA's discriminatory pricing practices. 261   The assessments set out in paragraphs 207 to 213 of the contested decision clearly constitute the necessary basis for the legal assessment that the TACA parties held a dominant position. At paragraph 534 of the contested decision, the Commission considered that the presumption of a dominant position arising from the TACA parties' market share was confirmed by the fact that those parties succeeded in maintaining a discriminatory price structure. 262   However, that assessment appears in full at paragraph 326 of the statement of objections. 263   In any event, paragraphs 207 to 213 of the contested decision, far from containing fresh allegations, merely clarify the extent to which the applicants are able to discriminate on price, in particular having regard to their submissions at the hearing before the Commission. This is so at paragraphs 209 and 210 of the contested decision, which are based on the comments of Mr Jeffries, the TACA General Manager, in response to a question from the Commission at that hearing. 264   In those circumstances, the applicants cannot maintain that the Commission infringed the rights of the defence on that point. 265   Third, and finally, the applicants allege that the Commission relied, at paragraphs 324 to 328 of the contested decision, on a fresh analysis of the TACA's prices in concluding, for the purposes of Article 86 of the Treaty, that the TACA was able regularly to increase prices between 1994 and 1996. 266   The assessments set out in paragraphs 224 to 328 of the contested decision constitute the necessary basis for the legal assessment that the TACA parties held a dominant position. At paragraph 543 of the contested decision, the Commission considered that the ability of the TACA parties to impose price increases was one factor demonstrating the existence of a dominant position. 267   Paragraphs 118 and 119 of the statement of objections had already stated, on the basis of the data provided by the ESC, that the TACA had increased prices significantly between 1993 and 1995. It is true that that factor is not set out as such in the statement of objections as evidence of the existence of a dominant position but appears in the section of that statement setting out the facts to describe the effects of the TACA. However, paragraph 243 of the statement of objections expressly states, in the course of examining the possible withdrawal of the block exemption pursuant to Article 7 of Regulation No 4056/86, that the fact that the TACA was able to maintain its market share between 1994 and 1996 in spite of significantly increasing prices suggests that the actual external competition was limited. Furthermore, in their response to the statement of objections, the TACA parties set out, at paragraphs 224 to 245 of that response, detailed figures showing the TACA prices for the period from 1994 to 1996. 268   In those circumstances, the applicants were perfectly able to understand the scope of the Commission's complaints on that point since the price analysis in the decision is a direct response to the allegations they made during the administrative procedure. 269   Therefore, the Commission did not infringe the rights of the defence on that point. 270   Examination of the alleged differences between the contested decision and the statement of objections thus reveals that the contested decision does not contain any new complaints and is not based on any new points upon which the applicants were not given the opportunity to comment in the response to the statement of objections. Consequently, the applicants' arguments on that point must be rejected in their entirety.  c) The new allegations of fact and law arising from the applicants' responses to certain requests for information after the statement of objections was issued 271   The applicants observe that whilst some of the requests for further information after the statement of objections was issued concerned matters covered by the statement of objections, others concerned entirely new matters. That is so in the case of the requests for information sent during the period for responding to the statement of objections and those sent after the response had been made. 272   Save for the statement of objections adopted on 11 April 1997, which was concerned solely with the notification of the hub and spoke system, the Commission adopted no supplementary statement of objections and provided them with no opportunity to comment on the probative value of the information given to, or on the conclusions drawn from it by, the Commission (Sarrió, cited at paragraph 95 above, paragraphs 36 and 41). The applicants maintain that requests for information can never properly take the place of the adoption of a statement of objections. 273   Consequently, the applicants assert that the rights of the defence were infringed on that point. 274   The Commission submits that the contested decision is not based on any information or document provided by the applicants in reply to the requests for information in question. The Court should therefore reject the applicants' arguments on that point. 275   By the present argument, the applicants allege that after the statement of objections was issued the Commission sent them requests for information raising new questions not covered by that statement and that it relied on information supplied in response to those requests to adduce new documentary evidence and to make new allegations against them in the contested decision.  (i) The admissibility of the plea 276   The present argument appears in the part of the application in which the applicants allege that the Commission sent them the statement of objections prematurely. It has already been stated at paragraph 122 above that, contrary to the applicants' argument, the fact that certain requests for information raised new questions and that the information provided in response thereto was used in the contested decision, even if that were established, in no way demonstrates that the statement of objections is unlawful. 277   However, it is apparent from the terms of the application on that point that the applicants also allege that the Commission infringed the rights of the defence by using in the contested decision documents and information disclosed in response to requests for information after the statement of objections was issued which raise new questions, without having given them the opportunity to comment on the probative value of those documents and that information. After listing and describing the contents of the requests for information sent after the statement of objections was issued and comparing the latter with certain paragraphs of the contested decision, the applicants stress not only that some of the requests for information listed raise new questions not covered by the statement of objections, but also that save for the statement of objections adopted on 11 April 1997, which was concerned solely with the notified hub and spoke system, the Commission adopted no supplementary or revised statement of objections and provided the applicants with no opportunity to comment on the probative value of the information provided to, or on the conclusions drawn from it, by the Commission. 278   In so far as that plea refers at least in part to the requests for information which gave rise to the applicants' disclosure of the four documents referred to at paragraph 159 above, it coincides with the pleas alleging infringement of the rights of the defence with regard to the allegedly new matters of fact or law relating to the second abuse which must be upheld for the reasons set out at paragraphs 163 to 187 above. 279   For present purposes, it is therefore necessary to consider that plea only in so far as it seeks a declaration that the rights of the defence were infringed in the case of information other than those four documents, disclosed in response to the requests for information in question. 280   In reply to a question from the Court seeking clarification of their application on this point, the applicants stated at the hearing that the purpose of this argument was thus not only to support the plea alleging that the statement of objections was premature, but also to raise a separate plea alleging infringement of the right to be heard on certain evidence disclosed in response to requests for information which the applicants claim was used by the Commission in the contested decision. 281   Under the first paragraph of Article 21 of the Statute of the Court of Justice, applicable to proceedings before the Court of First Instance by virtue of the first paragraph of Article 53 thereof, and under Article 44(1)(c) and (d) of the Rules of Procedure of the Court of First Instance, the application must contain, amongst other things, the subject-matter of the dispute, the forms of order sought and a brief statement of the pleas. Those particulars must be sufficiently clear and precise to enable the defendant to prepare the defence, and the Court of First Instance to rule on the application without further information, as the case may be. In order to guarantee respect for the adversarial system, legal certainty and sound administration of justice it is necessary, for an action to be admissible, that the basic matters of law and fact relied on be indicated, at least in summary form, coherently and intelligibly in the application itself (order in Case T-85/92 de Hoe v Commission [1993] ECR II-523, paragraph 20; judgment in Case T-277/97 Ismeri Europa v Court of Auditors [1999] ECR II-1825, paragraph 29; and the order of 12 March 2003 in Case T-382/02 Partido Latinoamericano v Council, not published in the ECR, paragraph 6). 282   As a preliminary point it should be noted that, in the present case, the four applications lodged by the applicants and the annexes thereto are unusually voluminous. Whilst there is as yet no restriction on the length of the pleadings or on the number of documents which may be lodged by applicants in support of an action for annulment under Article 173 of the Treaty, the burden is nevertheless upon applicants, having regard in particular to the formal requirements set out above, to confine their application to a reasonable length and, in any event, to set out clearly the pleas they raise in support of the form of order they are seeking as distinct from the points of fact and law put forward in support of that form of order which are not in themselves pleas. 283   The present plea appears in a single paragraph of the application, in the sub-section entitled Factual background of the section setting out the allegation that the statement of objections was premature. There is no corresponding paragraph in the sub-section entitled Submissions of law of that section of the application. Thus, in the concluding paragraph of that section, the applicants themselves summarise that section of their application by submitting that the Commission has committed a breach of essential procedural requirements in the administrative procedure leading to the adoption of the [contested] decision in that [it] did not address a valid statement of objections to [them], thus referring to the fact that the statement of objections was premature. On the other hand, they make no reference whatsoever in that conclusion to the infringement of their right to be heard on the evidence disclosed in response to requests for information. 284   Next, no other part of the application contains the plea in question. It does not appear in any event in the list of pleas (submissions) which the applicants themselves drew up at the start of each of the relevant sections of the application to summarise the legal arguments developed therein. Above all, it does not appear in the list of pleas summarised in the introductory part of the section of the application concerning the infringement of the right to be heard. 285   In those circumstances, it must be found that the plea is not made in accordance with the first paragraph of Article 21 of the Statute of the Court of Justice and Article 44(1)(c) and (d) of the Rules of Procedure of the Court of First Instance, as interpreted by the case-law, and therefore is inadmissible.  (ii) The substance of the plea 286   For the sake of completeness, it is observed that the plea is unfounded. 287   According to the case-law, whilst the Commission is entitled, after issuing the statement of objections, to make fresh allegations in support of its complaints, it must give the undertakings concerned the opportunity of making known their views in that regard (AEG, cited at paragraph 115 above, paragraph 29). As already stated above, the same applies where the fresh allegations in question are based on evidence disclosed by the undertakings concerned in response to requests for information sent to them by the Commission, at least where those undertakings could not reasonably infer the conclusions which the Commission intended to draw from it (Shell, cited at paragraph 162 above, paragraph 56). 288   However, in the present case, in so far as the present plea may be inferred from the application, it appears merely to compare the subject of each request for information after the statement of objections was issued with the paragraphs of the contested decision relating to that subject in order to allege that the evidence disclosed in response to some of those requests for information, namely those raising new questions as compared with the statement of objections, was used in the contested decision without their being given the opportunity to comment thereon. In so doing the applicants manifestly do no more than advert, in general and imprecise terms, to the possibility that some of the evidence disclosed in response to the requests for information in question engendered new complaints in the contested decision, without at any stage explaining precisely how that evidence adversely affected them. 289   Although that ground alone already suffices to justify rejecting the present plea, it should also be stated that none of the arguments put forward by the applicants demonstrates that evidence disclosed in response to the requests for information in question was used in the contested decision in infringement of the rights of the defence. Indeed, the Commission has not used in the contested decision documents or information disclosed in response to the requests for information after the statement of objections was issued which they consider raise new questions, namely those of 22 May, 11 July, 17 July, 8 August, 12 September, and 8 November 1996 and 12 February, 13 February, 15 May, 19 June and 2 October 1997. The request for information of 22 May 1996 290   As the applicants rightly state, it is apparent from the request for information of 22 May 1996 that its purpose was to elicit information concerning the meetings of the TACA Principals, the TACA code of conduct, Transatlantic Associated Freight Conferences and the correspondence between MSC and Hyundai. 291   Apart from the PWSC 95/8 minutes discussed above in the assessment of the specific pleas concerning the second abuse, it does not appear that other evidence disclosed in response to the request for information of 22 May 1996 was used by the Commission in infringement of the rights of the defence in support of its complaints in the contested decision. 292   Therefore, the applicants' arguments on that point must be rejected. The request for information of 11 July 1996 293   It is apparent from the request for information of 22 May 1996 that it sought information about service contracts, market conditions, the EIEIA and the extra capacity introduced on the market. 294   With regard, first, to service contracts, the applicants' responses to that request provided the Commission with detailed information concerning the TACA service contracts and individual service contracts for 1996, in particular on price, unilateral action, minimum quantity requirements and the transfer of cargo to TVRs by shippers party to service contracts. 295   The applicants submit first that the Commission used some of that information at paragraphs 127 to 155 of the contested decision. 296   Those paragraphs however, which appear in the section of the contested decision setting out the facts, merely describe the mechanism of service contracts. Since that description does not in any case constitute the necessary basis of the complaints referred to in the legal assessment of the contested decision, it cannot in itself adversely affect the applicants. 297   Next, the applicants point out that paragraphs 551 to 558 of the contested decision allege, in the context of the first abuse, that they abused their dominant position by imposing restrictions on access to and the contents of service contracts. They also point to the fact that the contested decision states, at paragraph 540, that service contracts constitute a barrier to entry for the purposes of concluding that the TACA holds a dominant position and, at paragraph 564, that the TACA abused its dominant position, in the context of the second abuse, by according Hyundai immediate access to service contracts. 298   First, in relation to the first abuse, it is not apparent from paragraphs 551 to 558 of the contested decision, which contain the Commission's legal assessment on that point, that the evidence disclosed in response to the request for information of 11 July 1996 was used in support of that complaint. The Commission's analysis is essentially based on the terms of the TACA agreement concerning service contracts, which were notified to the Commission as possible restrictions on competition within the meaning of Article 85(1) of the Treaty, and the scope of which was clarified in response to various requests for information which are not challenged under the present complaint. Finally, it should be noted that the statement of objections already set out clearly, at paragraphs 73 to 87, 341 and 342, the abuse alleged in respect of service contracts so that the applicants were in a position to comment in that regard. 299   Next, with regard to the barriers to entry constituted by service contracts, it suffices to note that the statement of objections expressly mentions that point, at paragraph 331, amongst those establishing the existence of the TACA's dominant position. The applicants cannot therefore maintain that there was an infringement of the rights of the defence on that point. 300   Finally, as regards Hyundai's immediate access to service contracts, paragraph 564 of the contested decision shows that, as already stated above, the Commission did not use any evidence other than the PWSC 95/8 minutes in support of that complaint. It is not in dispute that that document was disclosed by the applicants not in response to the request for information of 11 July 1996, but in response to those of 9 and 22 May 1996, discussed in the above assessment of the specific pleas concerning the second abuse. 301   Second, with regard to market conditions, the applicants submit that their responses to the request for information of 11 July 1996 were used in the contested decision at paragraphs 85 to 88 on the shares of the relevant market for maritime transport, at paragraph 533 concerning the TACA's collective dominant position and at paragraphs 217 to 221 concerning internal price competition within the TACA. 302   It is true that the data on market shares mentioned in paragraphs 85 to 88 of the section of the contested decision setting out the facts led the Commission to find, at paragraph 533, that the market shares held by the TACA in 1994, 1995 and 1996 on the trade in question gave rise to a strong presumption of a dominant position. However, paragraph 325 of the statement of objections already stated that the TACA holds a dominant position having regard to its market share on the transatlantic trade. Furthermore, the data on market share disclosed in response to the request of 11 July 1996 merely update the data previously disclosed, in response to requests for information which have not been challenged. 303   As for the analysis of internal competition set out in paragraphs 217 to 222, in the course of which the Commission states that independent action on the trade in question is insignificant, it was noted above at paragraph 244 that the statement of objections already intimated at paragraphs 223 and 224 that independent action did not constitute proof of internal competition and that the contested decision did not infringe the rights of the defence on that point. 304   Third, as regards the EIEIA, the applicants point out that the Commission describes that agreement at paragraphs 35 to 46 of the contested decision and concludes, at paragraphs 425 to 436, that it does not enable an exemption to be granted for the collective fixing of inland rates. 305   Paragraphs 425 to 436 of the contested decision correspond exactly to paragraphs 269 to 277 of the statement of objections. Thus, only the documents cited by the contested decision in footnote 124 at paragraphs 430, 434 and 435 in support of the findings in relation to the EIEIA, namely the Interim Report of the Multimodal Group and the comments of the TACA Chairman and of a member of the executive board of Hapag Lloyd, are referred to in footnote 70 at paragraph 271 and in paragraphs 275 and 276 of the statement of objections. 306   Moreover, it is apparent from paragraph 426 that the contested decision makes no finding on whether the EIEIA restricts competition, so that the applicants' responses to the request for information in question cannot be relied upon against them in this regard. It is true that the contested decision concludes that the EIEIA does not enable exemption to be granted for the collective fixing of prices for inland transport provided as part of intermodal transport. However, according to the case-law, it is for the applicants to show that an agreement meets the requirements of Article 85(3) of the Treaty (VBVB and VBBB, cited at paragraph 162 above, paragraph 52) and therefore to adduce all necessary evidence in support of their request. Accordingly, even if the Commission had used a document supplied in response to a request for information in order to reject their application for individual exemption, they cannot maintain that there has been an infringement of the rights of the defence. In any event it does not appear that paragraphs 425 to 436 of the contested decision use any of the evidence disclosed by the applicants in response to the request for information in question. 307   Fourth, with regard to the extra capacity introduced on the market, it suffices to state that the applicants themselves acknowledge that the contested decision does not refer expressly to the responses they gave. The applicants are content to cite paragraphs 364 and 367 which, on their own admission, merely contain a general assertion that Regulation No 4056/86 is not intended to deal with problems brought about by liner shipping operators as a result of uneconomic investment decisions. 308   On those grounds the applicants' arguments concerning the request for information of 11 July 1996 must be rejected in their entirety. The requests for information of 17 July and 8 August 1996 309   The requests for information of 17 July and 8 August 1996 concerned potential contracts between the TACA and the UASC and APL lines with a view to their joining the TACA. 310   The applicants' responses to those requests for information were manifestly not used by the Commission in the contested decision, however. The applicants admit as much themselves in any case, since in the context of the pleas concerning the application of Article 86 of the Treaty, they complain precisely that the Commission did not take into account their responses on that point whereas in their view those responses contradict the Commission's allegation that the TACA induced potential competitors to join the TACA. Clearly, if the Commission chooses not to take account of the applicants' responses in the contested decision, that cannot be a case of infringement of the rights of the defence; it can only - if anything - be insufficient proof of the infringements alleged, which goes to the substance of the contested decision. 311   Therefore the applicants' arguments on that point must be rejected. The request for information of 12 September 1996 312   The request for information of 12 September 1996 was sent not to the TACA but to members of the Canadian conferences, to elicit information concerning the functioning of those conferences. The applicants allege that the evidence disclosed in response to that request for information was used at paragraphs 265 to 273 of the contested decision, in which the Commission concludes that the market share of the TACA parties for services provided through the Canadian Gateway should be aggregated with the market share of the TACA parties for direct services and not treated as that of a competitor. 313   If those considerations were taken into account in determining the TACA's market share and therefore adversely affect the applicants by contributing to the finding that they held a dominant position, which the applicants do not claim, it suffices to point out that paragraphs 324 to 338 of the statement of objections explain fully why the TACA holds a dominant position. The statement of objections emphasises the TACA's market share of the relevant trade at the outset in paragraph 325. Paragraphs 51 to 53 of the statement of objections expressly state that the TACA's market share via the Canadian ports must be taken into account in determining the TACA's market share of the transatlantic trade. 314   It should also be noted that it was in response to the arguments put forward at paragraphs 9 to 26 of the response to the statement of objections, namely that the TACA parties which are members of the Canadian conferences compete with the TACA, that the Commission sent that request for information and set out its arguments in that regard at paragraphs 265 to 273 of the contested decision. According to the case-law, taking account of an argument put forward by an undertaking during the administrative procedure, without having given it the opportunity to express an opinion in that respect before the adoption of the final decision, cannot as such constitute an infringement of defence rights, especially where taking account of the argument does not alter the nature of the complaints against it (Irish Sugar, cited at paragraph 152 above, paragraph 34). 315   For all of these reasons, the applicants' arguments concerning the request for information of 12 September 1996 must be rejected. The request for information of 8 November 1996 316   By the request for information of 8 November 1996, the Commission sought to obtain a copy of the service contracts relating to the transatlantic trade for 1992, 1993, 1996 and 1997. 317   It suffices to note in this regard that the applicants merely refer in the application to the purpose of that request without even comparing it with the relevant paragraphs of the contested decision or setting out other observations as to the complaints they make. 318   In those circumstances, it cannot be found that there was an infringement of the rights of the defence on that point. The request for information of 12 February 1997 319   By the request for information of 12 February 1997, the Commission sought information concerning the costs borne by the applicants with regard to port-to-port maritime services. 320   It suffices to note in this regard that, as with the previous request for information of 8 November 1996, the applicants merely refer in the application to the purpose of that request without even comparing it with the relevant paragraphs of the contested decision or setting out other observations as to the complaints they make in that regard. It is furthermore not apparent from an examination of the contested decision that the information disclosed in response to that request was used. 321   In those circumstances, it cannot be found that there was an infringement of the rights of the defence on that point. The request for information of 13 February 1997 322   By the request for information of 13 February 1997, the Commission sought to elicit the applicants' average revenues per TEU for the period from 1992 to 1996. The applicants submit that that data was used at paragraphs 316 to 319 of the contested decision, in which the Commission found that a number of the TACA parties were able to increase average revenue per TEU without suffering any loss in market share. 323   It is true that the data supplied in response to the request for information in question was used, as the applicants point out, at paragraphs 316 to 319 in the section of the contested decision setting out the facts. However, even if it were shown (and the applicants do not submit this) that the observations as to the applicants' average revenue per TEU support the complaint, at paragraph 543, that the TACA parties were able to impose regular, albeit modest, price increases thus demonstrating, according to the Commission, that they hold a dominant position on the relevant market, it is apparent from paragraphs 307 and 308 that those observations were intended to answer the TACA parties' allegation, in their response to the statement of objections, that the service contract rates for 1996 were lower than those for 1994 and that tariff rates were reduced in August 1996. 324   In those circumstances, the applicants cannot maintain that there has been an infringement of the rights of the defence on that point. The request for information of 15 May 1997 325   The request for information of 15 May 1997 sought information on agreements between the TACA parties, especially consortia arrangements. The applicants note that the contested decision deals with those arrangements at paragraphs 181 to 198, which refer to Annex IV of the contested decision, which lists all the agreements in force. They submit that paragraph 531 of the contested decision relies on those agreements to establish the existence of further economic links between the TACA parties justifying the assessment of their market position collectively for the purposes of Article 86 of the Treaty. 326   Paragraph 322 of the statement of objections already expressly stated, in the context of the assessment of the collective dominant position held by the TACA, that the economic links between the TACA parties are reinforced by the consortia arrangements, referring in that regard to the description of those agreements set out in paragraphs 94 to 106. Those paragraphs of the statement of objections, and Annex 2 to which they refer, correspond essentially to paragraphs 181 to 198 and Annex IV of the contested decision. 327   In those circumstances, the applicants cannot submit that they did not have an opportunity to comment on the complaint made against them in the contested decision. The request for information of 19 June 1997 328   Since the request for information of 19 June 1997 had the same purpose as that of 13 February 1997, for the reasons set out above at paragraphs 322 to 324, the applicants cannot maintain that there has been an infringement of the rights of the defence on that point. The request for information of 2 October 1997 329   By the request for information of 2 October 1997, the Commission sought to obtain a copy of the TACA tariff. 330   It suffices to note in this regard that the applicants merely refer in the application to the purpose of that request without even comparing it with the relevant paragraphs of the contested decision or setting out other observations as to the complaints they make. Furthermore, since the tariff constitutes the very essence of the conference system established by the applicants in respect of which they qualify for block exemption under Article 3 of Regulation No 4056/86, it cannot as such adversely affect them. 331   Therefore, the applicants cannot maintain that there has been an infringement of the rights of the defence on that point.  d) Conclusion 332   It follows from the foregoing that the applicants' pleas seeking to prove that there were new allegations in the contested decision can be upheld only to the extent that they allege that the Commission based the second abuse on documents on which they were not afforded the opportunity to comment. The remainder of the applicants' pleas must be rejected. Part two: infringement of the right of access to the file 333   In the second part of their pleas alleging infringement of the rights of the defence, the applicants advance three pleas by which they submit that the Commission has infringed their right of access to the file. The first plea alleges failure to disclose the minutes of meetings between the Commission and the complainants. The second plea alleges failure to disclose the minutes or any other record of a meeting between the member of the Commission responsible for competition matters and the ESC. Finally, the third plea alleges that the file is incomplete. A –  Preliminary observations 334   According to the case-law, the right of access to the file in competition cases is intended to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission's file so that, on the basis of that evidence, they can express their views effectively on the conclusions reached by the Commission in its statement of objections (see, inter alia, Case C-185/95 P Baustahlgewebe v Commission [1998] ECR I-8417, paragraph 89; Case C-51/92 P Hercules Chemicals v Commission [1999] ECR I-4235, paragraph 75; Cimenteries CBR, cited at paragraph 95 above, paragraph 38; Case T-30/91 Solvay v Commission [1995] ECR II-1775, paragraph 59; Case T-221/95 Endemol v Commission [1999] ECR II-1299, paragraph 65; Cimenteries CBR, cited at paragraph 172 above, paragraph 142; and Case T-23/99 LR AF 1998 v Commission [2002] ECR II-1705, paragraph 169). Access to the file is thus one of the procedural safeguards intended to protect the rights of the defence and to ensure, in particular, that the right to be heard can be exercised effectively (Case T-65/89 BPB Industries and British Gypsum v Commission [1993] ECR II-389, paragraph 30, and LR AF 1998, cited above, paragraph 169). 335   The Commission thus has an obligation to make available to the undertakings involved in proceedings under Article 85(1) or Article 86 of the Treaty all documents, whether in their favour or otherwise, which it has obtained during the course of the investigation, save where the business secrets of other undertakings, the internal documents of the Commission or other confidential information are involved (Case T-175/95 BASF v Commission [1999] ECR II-1581, point 45). 336   It is, however, apparent from the case-law of the Court of Justice and the Court of First Instance that, in order to determine the exact scope of the Commission's obligation and the legal consequences of an infringement thereof, a distinction must be drawn between inculpatory evidence and exculpatory evidence. 337   With regard to inculpatory evidence, observance of the rights of the defence requires, according to the case-law, that the undertaking concerned must have been able to express its views effectively on the evidence used by the Commission to support its allegation of infringement (Case 322/81 Michelin v Commission [1983] ECR 3461, paragraph 7; VBVB and VBBB, cited at paragraph 162 above, paragraph 25; and AKZO, cited at paragraph 95 above, paragraphs 21 and 24). In that regard the obligation to allow access to the file relates merely to the evidence ultimately relied on in the decision and not to all the complaints which the Commission may have expressed at any stage of the administrative procedure. 338   According to the case-law, if the Commission is found to have relied in the contested decision on documents that were not in the investigation file and were not communicated to the applicants, those documents should be excluded as evidence (Cimenteries CBR, cited at paragraph 172 above, paragraph 382). In that case it is necessary therefore to check whether the complaint made in the final decision is sufficiently made out by the other inculpatory evidence relied on to which the applicants did have access. 339   With regard to exculpatory evidence, it is apparent from the case-law that in the inter partes procedure laid down by the regulations on the application of Articles 85 and 86 of the Treaty, in particular Regulation No 17, Regulation No 1017/68 and Regulation No 4056/86, it cannot be for the Commission alone to decide which documents are of use for the defence of the parties involved in a proceeding for infringement of the competition rules (Solvay, cited at paragraph 334 above, paragraph 81). In particular, having regard to the general principle of equality of arms, it is not acceptable for the Commission alone to decide whether or not to use against the applicants documents to which they did not have access, so that they were unable to decide whether or not to use them in their defence (Solvay, cited at paragraph 334 above, paragraph 83, and Case T-36/91 ICI, cited at paragraph 192 above, paragraph 111). 340   According to the case-law, where it is established that during the administrative procedure the Commission did not disclose to the applicants documents which might have contained exculpatory evidence, there will be an infringement of the rights of the defence only if it is shown that the administrative procedure would have had a different outcome if the applicant had had access to the documents in question during that procedure (see, inter alia, Case T-7/89 Hercules, cited at paragraph 95 above, paragraph 56, and Solvay, cited at paragraph 334 above, paragraph 98). Where those documents are in the Commission's investigation file, such an infringement of the rights of the defence is unconnected with the manner in which the undertaking concerned conducted itself during the administrative procedure (Solvay, cited above, paragraph 96). By contrast, where the exculpatory documents in question are not in the Commission's investigation file, an infringement of the rights of the defence may be found only if the applicant had expressly asked the Commission for access to those documents. If the applicant does not do so, his right in that respect is barred in any action for annulment brought against the final decision (Cimenteries CBR, cited at paragraph 172 above, paragraph 383). 341   It is in the light of those principles that the applicants' pleas under this part must be examined. B –  The plea alleging failure to disclose the minutes of the meetings between the Commission and the complainants 342   The applicants submit that the Commission infringed the rights of the defence in refusing to provide them with any information regarding the occurrence or subject-matter of oral exchanges between the Commission's staff and the complainants. 343   They state that, following their request to place on the file a telephone attendance note recording a conversation between the Commission's staff and the complainants' legal advisers concerning the confidentiality of certain information contained in the statement of objections, together with any other notes recording telephone conversations with the complainants, the Commission informed them in a letter dated 7 August 1996 that no attendance note had been made of the telephone conversation in question and that, in any event, the Commission was under no obligation under the case-law to make available that type of note, which constituted a document purely internal to that institution. 344   The applicants maintain that the Commission had a duty to give them access to all documents concerning discussions between the Commission and the complainants regarding substantive or procedural matters. They consider in this context that the medium through which the Commission receives information or arguments from complainants should not determine the scope of their right to be informed about such matters. If such information or documentation was obtained in written form, the correspondence with the complainants would have been placed on the file and made available to the applicants. It is likely that such correspondence would contain exculpatory material or at least be relevant to the applicants' defence. In a letter of 21 October 1996, the Commission's Hearing Officer confirmed that the applicants would have a formal right to comment should the intervening parties introduce new evidence or raise new issues or facts upon which the defendants have had no previous opportunity to comment. 345   The applicants consider that it cannot be claimed that an attendance note recording a conversation between the Commission and the complainants constitutes a non-disclosable internal document. In so far as such a note records the existence of the conversation, the contents of the complainants' comments, the contents of comments by staff of the Commission and any conclusions drawn by them from those contacts, only the last item could fall within the category of confidential internal documents. The remainder of the note would constitute a purely factual record of matters which should therefore be disclosed to the applicants. 346   The applicants consider that the judgments in Case C-310/93 P BPB Industries and British Gypsum v Commission [1995] ECR I-865 and BPB Industries and British Gypsum, cited at paragraph 334 above, relied on by the Commission in its letter of 7 August 1996 are irrelevant since they do not address the issue whether the Commission is required to place on the file attendance notes recording conversations between its staff and the complainants. 347   Consequently, the applicants consider that the rights of the defence were infringed since the file to which they were given access was incomplete. 348   The Commission considers that it did not infringe the applicants' right of access to the file and therefore that the Court should reject the complaint. 349   In a letter of 7 August 1996 sent in reply to a letter from the TACA's representative of 1 August 1996, the Commission informed the latter that it had not drawn up any minutes of the discussions that it had had with the complainants during the administrative procedure, and the applicants did not contradict that. 350   Accordingly, the present plea amounts to a claim that, in competition matters, the right of access to the file for the undertakings concerned requires the Commission to draw up such minutes. 351   According to the case-law cited at paragraph 334 above, the right of access to the file in competition cases is intended to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission's file. There is by contrast no general duty on the part of the Commission to draw up minutes of discussions in meetings or telephone conversations with the complainants which take place in the course of the application of the Treaty's competition rules. 352   It is true that if the Commission intends to use in its decision inculpatory evidence provided orally by a complainant it must make it available to the undertakings to which the statement of objections is addressed by creating a written document to be placed in the file (see, to that effect, Endemol, cited at paragraph 334 above, paragraphs 83 to 91). The practice of using information provided orally by third parties cannot be permitted to infringe the rights of the defence. 353   However, in the present case, the applicants merely require access, in a general and abstract way, to the minutes of discussions between the Commission and third parties without stating how the inculpatory evidence relied upon by the Commission in the contested decision was determined by those discussions. 354   According to the case-law, an infringement of the rights of the defence cannot be founded on a general argument but must be examined in relation to the specific circumstances of each particular case (Solvay, cited at paragraph 334 above, paragraph 60). As already stated at paragraph 334 above, the right of access to the file in competition cases is recognised solely so that the undertakings concerned can express their views effectively on the conclusions reached by the Commission in its statement of objections. Since the applicants have not, subject to the specific plea considered below, identified any complaint set out in the statement of objections and subsequently in the contested decision which was based on evidence provided orally by the complainants and to which they did not have access, they cannot maintain that the Commission infringed the rights of the defence on that point. 355   The only discussion mentioned by the applicants in support of the present complaint, which gave rise during the administrative procedure to the request for access contained in the letter of 1 August 1996, concerns a telephone conversation between Commission staff and the representative of the ESC which, it is not in dispute, was initiated by the applicants so that the Commission could check whether information contained in the statement of objections was confidential. Given its purpose, such a telephone conversation manifestly does not infringe the rights of defence, a fortiori since it was initiated by the applicants themselves. 356   In those circumstances, the applicants have adduced no evidence to show that the discussions with the complainants enabled the Commission to substantiate certain complaints against them in the contested decision. Therefore, the fact that there is no minute of those discussions in the file to which the applicants had access during the administrative procedure does not amount to an infringement of the rights of the defence. 357   Contrary to the applicants' claim, it is not true that if the Commission had communicated with the complainants exclusively in writing, that correspondence would necessarily have been in the file to which they had access. Where the Commission decides on the basis of a complaint to initiate infringement proceedings, the undertakings concerned must respond not to the complaint but to the statement of objections. According to the case-law cited at paragraph 337 above, matters put forward by the complainants which are not used in the statement of objections do not constitute complaints to which the applicants have to respond. The rights of the defence cannot therefore be infringed if the applicants were not given the opportunity to respond to them. 358   Furthermore, in so far as the applicants submit that certain exculpatory evidence was not disclosed to them, whilst they refer in general terms to the possibility that such exculpatory evidence was provided to the Commission by third parties, at no time, whether during the administrative procedure or in the course of the present action, have they specified the exculpatory evidence sought or adduced the slightest indication that such evidence existed and therefore of its relevance for the purposes of the present case. In those circumstances, since according to the case-law infringements of the rights of the defence must be examined in relation to the specific circumstances of each particular case (Case T-36/91 ICI, cited at paragraph 192 above, paragraph 70), there can be no finding of infringement of the right of access to the file on that point (see, to that effect, Baustahlgewebe, cited at paragraph 334 above, paragraph 93). 359   It follows from the foregoing that the present plea alleging failure to disclose the minutes of meetings between the Commission and the complainants must be rejected. C –  The plea alleging failure to disclose the minutes or any other record of a meeting between the member of the Commission responsible for competition matters and the ESC 360   The applicants allege that the Commission infringed the rights of the defence during the procedure by refusing to disclose to them the existence or subject-matter of contacts between it and the complainants and, in particular, by refusing to confirm or deny a press report of a meeting between the complainants and the member of the Commission responsible for competition matters which took place in December 1995 and at which the possibility of the TACA obtaining exemption for inland rate-fixing was reportedly discussed. The applicants consider that that meeting may have had a material influence on the Commission's position in that respect, and in particular on its decision to adopt a supplementary statement of objections on the withdrawal of immunity. It was therefore vital to their defence to know what was discussed. 361   The applicants claim that, before that meeting was held in December 1995, the Commission had admitted in principle that an agreement on equipment interchange would enable it to exempt their practice of inland transport price fixing as part of the TACA. In the Maritime Transport Report it presented to the Council on 8 June 1994, the Commission took the view that a flexible arrangement between shipowners for the exchange of containers would bring benefits for shippers and could render intermodal rate-making authority eligible for individual exemption. The Commission even invited liner conferences to notify such arrangements to it. The applicants therefore drafted an agreement on equipment interchange, the EIEIA, with the express intention of promoting and facilitating the interchange of empty containers. The EIEIA is the kind of arrangement described in the report, and at several meetings the Commission intimated that the EIEIA could in principle, and provided that the conditions for exemption contained in Article 85(3) of the Treaty were satisfied, justify the grant of individual exemption for intermodal transport price fixing. Similarly, during the interlocutory proceedings resulting in the order of the President of the Court of First Instance of 22 November 1995 in Case T-395/94 R II Atlantic Container Line and Others v Commission [1995] ECR II-2893, the Commission, referring to the EIEIA, stated that the notification and implementation of arrangements consistent with Article 85(3) of the Treaty and with the report of June 1994 would clearly render unnecessary any further proceedings and that it had therefore taken no steps to prepare a decision withdrawing immunity. 362   On the other hand, in the supplementary statement of objections dated 1 March 1996 on withdrawal of indemnity, and without the reasons for the change in the Commission's position being apparent from either the supplementary statement of objections or the file, the Commission claims that the EIEIA could never, regardless of the benefits it could actually bring, make the exercise of authority to fix intermodal transport rates eligible for exemption. The applicants state that, in response to specific questions they put to the Commission asking whether the services and/or members of the Commission had held meetings with shippers' organisations or their representatives in relation to the notification of the EIEIA or matters relating to the change in the Commission's policy, the Commission merely indicated, by letters of 21 March and 10 April 1996, that no meetings or formal discussions [had] taken place between officials of the Directorate-General for Competition and individual shippers, shippers' organisations or their representatives, or indeed other third parties, in relation to the notification of the EIEIA. However, the applicants point out that an article which appeared in the press in June 1996 reported a meeting held in December 1995, that is, after notification of the EIEIA but before the supplementary statement of objections, between the member of the Commission responsible for competition matters and one of the complainants, namely the ESC. There was discussion of the ESC's document Liner Shipping - Time for Change, which referred to the TAA and the TACA and called for the withdrawal of the exemption for liner conferences. The applicants explain that they put a number of specific questions to the Commission because in the file there was no copy of the ESC's document and no indication that the meeting had taken place. They stress that the Commission did not answer their questions, neither confirming nor denying that the meeting had taken place, and merely indicated that the ESC document had not been placed on the file because it was a lobbying document and was publicly available. 363   The applicants point out that the Commission is under an obligation to make available to the undertaking concerned copies of all documents which are or might be relevant to its defence, whether or not they are relied upon by the Commission as inculpatory and whether or not they are clearly exculpatory (Solvay, cited at paragraph 334 above, Case T-36/91 ICI, cited at paragraph 192 above, and Case T-37/91 ICI, cited at paragraph 188 above). In accordance with the general principle that documents received from third parties must be disclosed to the defence (BPB Industries and British Gypsum, cited at paragraph 346 above), the Commission must disclose to the undertaking concerned any information received by it from complainants whether or not it relies on that information. Similarly, the audi alteram partem principle and the principle of equality of arms cannot be observed unless the undertaking is in a position to defend itself against the whole of the case developed by the Commission and unless it has genuine access to the same information. Having regard to the Commission's decision-making process, it cannot be maintained that discussions between the complainants and the member of the Commission responsible for competition matters, who has a central role in determining competition policy and who was actively involved in the progress of the present case, are of no interest to the defence. 364   The applicants submit that if a discussion concerning any of the issues in this case took place between the member of the Commission responsible for competition matters and one of the complainants, information about such a discussion might be relevant to their defence. According to the minutes, such a discussion took place in the course of the administrative procedure and the ESC's position was that exemption ought not to be granted for intermodal authority under any circumstances. Moreover, that meeting is the only occurrence which might have explained the change in the Commission's policy. It was therefore an infringement of the applicants' rights of defence that the Commission refused to provide them with any of this information. As a general point, it is not permissible for the Commission, including the member of the Commission responsible for competition matters, not to be required to disclose to the undertakings concerned the fact that a meeting with the complainants took place, its subject-matter and any documents or other information provided by the complainants. 365   The applicants maintain that it follows from admissions made by the Commission in its defence in Case T-18/97 concerning the fact that a meeting between the member of the Commission responsible for competition matters and the ESC took place and the subject-matter of that meeting that, as a matter of law, there was a clear infringement of the rights of the defence. 366   The applicants state that it is apparent from the case-law (Solvay, cited at paragraph 334 above, and Case T-36/91 ICI, cited at paragraph 192 above) that the defendant undertakings have a right of access to all relevant documents in the Commission's possession, subject only to the protection of legitimate confidential information, and that relevance is for the undertakings, and not the Commission, to determine. The notion of inculpatory or exculpatory documents cannot help to define the scope of a defendant's right of access to the file. 367   The applicants claim that, contrary to the Commission's submission, they are therefore entitled to have access to information received from third parties which has prompted the Commission to take a position against the applicants, even if it is not expressly relied upon by the Commission in so doing. 368   Seen in that light, the information in the present case about the meeting was manifestly relevant to the applicants' defence. First, it is apparent that the ESC sought to persuade the Commission to end inland rate-fixing. Second, it could be inferred from the statements made by the member of the Commission responsible for competition that he was sympathetic to those representations. Third, the adoption of the supplementary statement of objections after the meeting constituted a change in the Commission's policy. Fourth, the supplementary statement of objections disregarded the agreement with the Commission concerning the method of notification of the EIEIA and the encouragement given by the Commission to the introduction and development of the EIEIA. The implication that the Commission was prompted (see the defence in Case T-18/97, paragraph 57) by the ESC at this meeting to adopt the supplementary statement of objections confirms the importance of these issues to the rights of the defence. 369   The applicants point out that they would have had access to the ESC's representations had they been made in writing in the normal way. The fact that the representations were made orally should not defeat their defence. It is also inconceivable that the Commission does not have in its possession any notes or record of the meeting. 370   The applicants therefore maintain that the Commission should make available all notes and minutes of the meeting between the Commission and the ESC and all notes and minutes of any other meetings or contacts between (i) any member of the Commission's staff, the member of the Commission responsible for competition matters, members of his or her office, any other members or member of any other member's office and (ii) any third party concerning any of the issues in the present case. 371   The Commission considers that it has not infringed the applicants' right of access to the file and therefore that the Court should reject the present complaint. 372   In so far as by the present plea the applicants allege in general terms that the Commission failed to disclose the minutes of meetings between the Commission and third parties it must be rejected for the reasons set out in paragraphs 349 to 359 above. 373   It is necessary at this stage therefore to examine the present plea only in so far as it alleges that the Commission failed to disclose to the applicants any information concerning a meeting between Mr Van Miert, the member of the Commission responsible for competition matters at the time of the relevant facts, and the ESC, the shippers' association and intervening party in the present action, during which the ESC gave the Commission a document entitled Liner Shipping - Time for Change (the meeting in question). 374   According to the applicants, even if the information about the contested meeting, in particular the fact that it was held, its purpose, the minutes drawn up on that occasion and the notes thereon, does not expressly support the Commission's complaints, it is useful for their defence, having regard to the fact that that meeting influenced the Commission's decision not to grant them an individual exemption in respect of the collective price-fixing agreement for inland transport services provided as part of intermodal transport. In that regard, the applicants point out that shortly after that meeting, on 1 March 1996, the Commission adopted a supplementary statement of objections withdrawing immunity from fines in respect of that agreement, whereas before that meeting, following the notification of the EIEIA agreement, the Commission was favourably inclined in that regard. 375   By the present plea, the applicants thus submit essentially that the Commission should have given them access to evidence which, even if it is not expressly used to support the complaints relating to the collective price-fixing agreement for inland transport services provided as part of intermodal transport, led it to raise those complaints against them, that evidence being useful for their defence since it is likely to show the reasons for which the Commission raised those complaints. 376   As a preliminary point, it must be remembered that access to the file is not an end in itself but is intended to protect the rights of the defence (Cimenteries CBR, cited at paragraph 172 above, paragraph 156). In particular, with regard to access to inculpatory evidence, it is apparent from the case-law cited at paragraph 337 above that observance of the rights of the defence requires only that the undertaking concerned must have been able to express its views effectively on the evidence used by the Commission in the decision to support its allegation of infringement. The right of access to the file is therefore observed if the undertaking concerned was given the opportunity to comment on the complaints made against it after becoming acquainted with the inculpatory evidence used by the Commission in support of those complaints, and that evidence must appear in the Commission's investigation file. 377   It follows that, in determining whether the right of access to inculpatory evidence in the file has been observed, the relevant question is not why the Commission raised a complaint or what underlies that complaint but solely whether the complaint in the final decision is based on inculpatory evidence which was disclosed to the undertakings which are the subject of the infringement procedure. The right of access to the file cannot therefore be understood as intended to enable the undertakings concerned to examine the process by which the Commission arrived at its conclusions (see, to that effect, the order in Joined Cases 142/84 and 156/84 BAT and Reynolds v Commission [1986] ECR 1899, paragraph 16). Since the right of access to the file is not an end in itself, but is intended to protect the rights of the defence, the Commission is under no obligation to disclose to the undertakings concerned the inculpatory evidence upon which it does not rely in its decision in support of the complaints. 378   It is in the light of those principles that the arguments put forward by the applicants in the context of the present plea should be examined. 379   In so far, first, as the applicants allege that the Commission did not disclose to them even that the meeting in question took place and its purpose, it should be noted that during the administrative procedure, notwithstanding the applicants' repeated requests, the Commission systematically refused to confirm or deny, as is apparent from its letters of 15 March, 21 March, 10 April and 26 April 1996 to the TACA's representatives, that the meeting in question took place. However, in the context of the present action, it asserts in its defence that it is no secret that that meeting took place, so that it is now not in dispute between the parties that the meeting in question took place on 4 December 1995. 380   In response to the applicants' requests for information on that point, the Commission sent the TACA on 16 and 24 July 1996 two requests for information requiring the production of the document Liner Shipping - Time for Change cited by the applicants in their requests for access to the file. However, it is not in dispute that the ESC handed over that document to Mr Van Miert during the meeting in question, so that the Commission was in possession of that document when those two requests for information were sent. 381   However, in the context of the present plea alleging infringement of the right of access to the file it is necessary merely to check whether the applicants were able to express their views effectively on the evidence used by the Commission to support its complaints - in the present case, the evidence leading to the refusal to grant an individual exemption for the collective price-fixing agreement for inland transport services provided as part of intermodal transport. 382   Neither the fact that the meeting in question took place nor its purpose is such as to constitute evidence capable of substantiating the complaints made in the contested decision. For the reasons set out above it is irrelevant, as regards access to the inculpatory evidence contained in the Commission file, that disclosure of the fact that such a meeting had taken place and of its purpose might have been useful for the applicants' defence during the administrative procedure. In any event, the applicants do not maintain that the existence of the meeting or its purpose could have been used by them as exculpatory evidence. 383   Therefore observance of the TACA parties' right of access to the file did not require the Commission to inform the applicants of the existence of the meeting in question and the purpose thereof. 384   Second, in so far as the applicants allege that the Commission did not disclose the minutes of the meeting in question and any notes thereon, it should be noted at the outset that in response to a written question from the Court on that point the Commission stated, without being contradicted by the applicants during the hearing, that its staff had kept no minutes or notes of the meeting in question. 385   As stated above at paragraph 351, the right of access to the file in competition cases is intended solely to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission's file. There is by contrast no general duty on the part of the Commission to draw up minutes of meetings with the complainants which take place in the course of the application of the Treaty's competition rules. 386   It is true that if the Commission intends to use in its decision inculpatory evidence disclosed by a complainant, even oral, it must, as stated above at paragraph 352, make it available to the undertakings to which the statement of objections is addressed by creating a written document to be placed in the file (see, to that effect, Endemol, cited at paragraph 334 above, paragraphs 83 to 91). However, in the present case, the applicants do not allege that the Commission did not disclose to them evidence substantiating the complaints, but merely that it did not disclose evidence which might have led it to raise certain complaints against them. 387   It suffices to point out that the right of access to the file is intended solely to enable the undertakings concerned to express their views effectively on the evidence used by the Commission to support its complaints in the contested decision, in the present case the evidence which led to the refusal to grant an individual exemption for the collective price-fixing agreement for inland transport services provided as part of intermodal transport. Consequently, the inculpatory evidence supplied by the ESC, which might have led the Commission to refuse to grant such an exemption, only had to be disclosed to the TACA parties in the exercise of their right of access to the file if that evidence was in fact relied upon by the Commission in support of the complaints on that point in the contested decision. 388   However, that is not the case. 389   First, the only document which has been shown to have been handed over in the course of the contested meeting is that entitled Liner Shipping - Time for Change. It is not in dispute between the parties that the applicants had access to that document during the exercise of their right of access to the file. Furthermore, it is not apparent from paragraphs 425 to 436 of the contested decision, by which the Commission refuses to grant an individual exemption for the collective price-fixing agreement for inland transport services provided as part of an intermodal transport operation, that that document was used in support of the Commission's complaints. Furthermore, that document was a lobbying document, in which the complainant essentially claims that the block exemption scheme for liner conferences laid down by Regulation No 4056/86 should be abolished. There can be no doubt, and indeed it is not in dispute, that such a document does not per se contain any inculpatory evidence which could have been used in any relevant way by the Commission in support of the refusal to grant an individual exemption for the price-fixing agreement for inland transport services provided as part of intermodal transport. 390   Next, it is not apparent from paragraphs 425 to 436 of the contested decision that the refusal to grant an individual exemption for the agreement in question is based, even in part, on inculpatory evidence which was provided perhaps orally by the ESC to the Commission during the meeting in question and to which the applicants did not have access. According to paragraph 433 of the contested decision, the applicants made no attempt to show that joint price-fixing was indispensable to the EIEIA or to any benefits which may flow from that arrangement. It is apparent from the contested decision that the Commission based that finding on the Interim Report of the Multimodal Group presented to Mr Van Miert on 6 February 1996 (footnote 124 at paragraph 430), the comments of Mr Rakkenes, Chairman of the TACA and ACL, in the October 1995 edition of American Shipper (paragraph 434) and the comments of Mr Casjens, executive board member of Hapag Lloyd, reported in the Journal of Commerce of 6 December 1995 (paragraph 435). First, the applicants do not claim that that inculpatory evidence was provided by the ESC to the Commission during the meeting in question, and second, they do not deny that they had access to that evidence in the exercise of their right of access to the file, so that even if the Commission had relied on inculpatory evidence supplied by the ESC at that meeting in support of the complaints in question, those complaints would continue to be based on other evidence to which the applicants do not deny they were given access and the merits of which they do not dispute. 391   Furthermore, in so far as the applicants allege that the Commission was influenced by inculpatory evidence put forward by the ESC during the meeting in question, without however relying upon it expressly in the statement of objections and then in the contested decision, it must be observed that the applicants adduce no specific evidence whatsoever to show that such evidence was put forward. Moreover, the rights of the defence were sufficiently protected by the fact that the applicants were given the opportunity to comment on the inculpatory evidence mentioned in the statement of objections. The inculpatory matters put forward by a complainant before the adoption of the statement of objections, whether mere arguments or documentary evidence, if not relied on in the statement of objections do not constitute complaints to which the undertakings concerned have to respond, so that they do not have to be disclosed to them in the exercise of their right of access to the file. 392   Contrary to the applicants' claim, it is not true that if the evidence provided by the ESC had been presented in writing rather than orally at a meeting, it would necessarily have been in the file to which they had access. As already stated above at paragraph 357, where the Commission decides on the basis of a complaint to initiate infringement proceedings the undertakings concerned must respond not to the complaint but to the statement of objections. Matters set out in the complaint but not used in the statement of objections do not constitute complaints to which the applicants have to respond. The rights of the defence cannot therefore be infringed by the fact that the applicants were not given the opportunity to comment thereon. 393   Furthermore, according to the case-law, in a proceeding under Article 86 of the Treaty the Commission may in any event refuse access to the correspondence with third parties by reason of its confidential nature, since an undertaking to which a statement of objections has been addressed, and which occupies a dominant position in the market, may adopt retaliatory measures against a competing undertaking, a supplier or a customer who has collaborated in the investigation carried out by the Commission (Case T-65/89 BPB Industries and British Gypsum, cited at paragraph 334 above, paragraph 33, confirmed in Case C-310/93 P BPB Industries and British Gypsum, cited at paragraph 346 above, paragraph 26). 394   Finally, and in any event, the minutes or notes which the Commission may have made of the meeting with the complainant - quod non - would be internal documents which, according to settled case-law, do not in principle have to be disclosed to third parties exercising their right of access to the file (Case T-65/89 BPB Industries and British Gypsum, cited at paragraph 334 above, paragraph 33; BASF, cited at paragraph 335 above, paragraph 45; Joined Cases T-45/98 and T-47/98 Krupp Thyssen Stainless and Acciai Speciali Terni v Commission [2001] ECR II-3757, paragraphs 46 and 47; Cimenteries CBR, cited at paragraph 172 above, paragraphs 196 and 420; and LR AF 1998, cited at paragraph 334 above, paragraph 170). That restriction on access to internal documents is justified by the need to ensure the proper functioning of the institution concerned when dealing with infringements of the Treaty competition rules. 395   In the light of the foregoing, it must be held that the Commission's failure to draw up minutes of the meeting in question did not deprive the applicants of the opportunity to acquaint themselves, in the exercise of their right of access to the file, with the inculpatory evidence on which the complaints made by the Commission in the contested decision are based. 396   Furthermore, the applicants do not claim that certain evidence relating to the meeting in question could have been used by them as exculpatory evidence. In any event, even if the plea were to be interpreted in that way, the applicants do not identify the exculpatory evidence in question and have not adduced any evidence of its existence and therefore of its usefulness for the purposes of the present case. In those circumstances, since according to the case-law infringements of the rights of the defence must be examined in relation to the specific circumstances of each particular case (Case T-36/91 ICI, cited at paragraph 192 above, paragraph 70), there can be no infringement of the right of access to the file on that point (see, to that effect, Baustahlgewebe, cited at paragraph 334 above, paragraph 93). 397   In those circumstances, the present plea alleging infringement of the right of access to the file must be rejected. D –  The plea alleging that the file is incomplete 398   Lastly, the applicants submit that the contested decision should be annulled for the sole reason that they have raised serious doubt as to the completeness of the file, in so far as the materials absent from the file might explain the Commission's approach in the contested decision. 399   The Commission considers that the present plea is generalised and contends that the Court should reject it for the same reasons as it rejects the preceding pleas. 400   As is apparent from the analysis of the preceding pleas, the applicants' submission that the Commission did not disclose to them certain inculpatory evidence relied upon in support of the complaints mentioned in the contested decision, which was provided to it orally by third parties in the course of meetings, is wrong. Accordingly, the applicants have failed to establish that there is a serious doubt that the Commission's file is complete. 401   In any event, contrary to what the applicants claim, the Commission's reliance in the contested decision on inculpatory documents that were not in the investigation file and were not disclosed to them does not in itself entail the annulment of that decision as a whole. According to the case-law cited at paragraph 338 above, it is still necessary in that case to verify the extent to which the complaints made in the final decision are sufficiently made out by the other inculpatory evidence relied on to which the applicants did have access. 402   Therefore, the present plea must be rejected. Part three: infringement of the principles of sound administration, objectivity and impartiality 403   Under the third part of the pleas alleging infringement of the rights of the defence, the applicants allege that the Commission infringed the principles of sound administration, objectivity and impartiality, first, with regard to the conduct of the administrative procedure, second, with regard to the assessment of the facts, evidence and relevant questions and third, with regard to the assessment of the fines. The applicants claim that for these reasons the contested decision should be annulled. 404   As a preliminary point it should be noted that the guarantees afforded by the Community legal order in administrative proceedings include, in particular, the principle of sound administration, which entails the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case (Case T-44/90 La Cinq v Commission [1992] ECR II-1, paragraph 86; Case T-7/92 Asia Motor France and Others v Commission [1993] ECR II-669, paragraph 34; Joined Cases T-528/93, T-542/93, T-543/93 and T-546/93 Métropole Télévision and Others v Commission [1996] ECR II-649, paragraph 93; and Case T-31/99 ABB Asea Brown Boveri v Commission [2002] ECR II-1881, paragraph 99). 405   It is therefore necessary in the present case to consider whether the applicants' complaints show that the Commission infringed that principle. E –  The conduct of the administrative procedure 406   The applicants consider that the conduct of the fact-finding procedure shows that the Commission prejudged the outcome of its administrative investigation. In support of that complaint they point, first, to the fact that the Commission's statement of objections was sent prematurely, and second, to the fact that the Commission began to draft the contested decision before the conclusion of the fact-finding procedure. The applicants rely in that respect on the letter addressed to them by the Hearing Officer two years before the adoption of the contested decision, on 12 November 1996, in which it was stated that members of the Commission's staff were working on the draft decision. 407   The applicants point out that this prejudice of the outcome of the investigation is apparent from the threats of fines the Commission made throughout the administrative procedure. In support of that complaint, the applicants refer first to the Commission's statements, reported in the press, concerning the procedure for the withdrawal of immunity from fines in respect of collective price-fixing for inland transport services as part of intermodal transport. The applicants claim that it is apparent from those statements that the Commission had already shown at the time that it intended to impose fines on the applicants in the TACA case, notwithstanding the suspension order of 10 March 1995 in Case T-395/94 R. Thus, in the press release issued on the adoption of the statement of objections concerning the withdrawal of immunity, the Commission stated that the TACA parties have chosen to notify an arrangement which, they clearly know, is unlawful following the decisions of the Commission. Furthermore, as regards the allegations of abuse of a dominant position, the applicants refer to various articles and press releases which show that the Commission regarded the imposition of fines under Article 86 of the Treaty as a means of circumventing the immunity from the imposition of fines under Article 85 of the Treaty for which the applicants qualified as a result of notifying the TACA. 408   The Commission contends that the Court should reject the applicants' arguments on that point. 409   The applicants consider that the conduct of the administrative procedure shows that the Commission prejudged the outcome of its investigation. They rely on the argument that the statement of objections was premature, on the fact that the drafting of the contested decision began prior to the hearing before the Commission and on the threats of fines made by the Commission during the administrative procedure.  a) The prematurity of the statement of objections 410   The applicants allege essentially that the further requests for information sent shortly before and after the adoption of the statement of objections (the relevant requests for information) show that in the statement of objections the Commission prejudged the final outcome of the investigation. They also point in this context to the large number of those requests and of the questions contained therein. 411   First, as regards the applicants' allegation that the very fact of sending the relevant requests for information shows that in the statement of objections the Commission prejudged the final outcome of the investigation, it has already been held above at paragraph 116, in the course of examining the first part of the present pleas alleging infringement of the rights of the defence, that since the statement of objections is not a measure recording the Commission's final assessment of the lawfulness of the practices in question but a purely preparatory measure setting out the Commission's provisional findings, which it may revisit in the final decision, the Commission is perfectly entitled, in order in particular to take account of the arguments or other evidence put forward by the undertakings concerned, to continue with its factual investigation after the adoption of the statement of objections by sending further requests for information with a view to withdrawing certain complaints or adding others if appropriate. 412   Therefore, far from providing evidence of any prejudice on the part of the Commission against the applicants, the sending by the Commission of the relevant requests for information constitutes conduct inherent in the adversarial nature of the administrative procedure under the Treaty's competition rules, attesting, on the contrary, to the Commission's willingness to examine carefully and impartially all the relevant aspects of the individual case in order, in particular, to be able to adopt a decision on the applicants' application for exemption in full knowledge of the facts. 413   Consequently, the mere fact that in the present case the Commission sent the TACA parties numerous further requests for information shortly before and after the adoption of the statement of objections does not demonstrate that the Commission infringed the principles of sound administration, objectivity and impartiality. 414   Furthermore, the review of legality carried out by the Court in the context of an action for annulment on the basis of Article 173 of the Treaty is not of the statement of objections but of the final decision adopted thereafter. According to the case-law, the statement of objections may not in any case be the subject of an action for annulment (IBM, cited at paragraph 96 above, paragraph 21). Therefore, even if the Commission had shown in the statement of objections that it was prejudiced against the applicants, such prejudice could only vitiate the contested decision if it was manifested in that decision. The applicants do not show that to be the case here (see, to that effect, ABB Asea Brown Boveri, cited at paragraph 404 above, paragraph 105). 415   Finally, and in any event, even if the prejudice alleged by the applicants were manifested in the contested decision, such prejudice does not constitute an infringement of the rights of the defence capable of leading to annulment of the contested decision but must be examined in connection with the review of the assessment of the evidence or of the statement of reasons for the decision (see, to that effect, ICI, cited at paragraph 188 above, paragraph 72). 416   For those reasons, the applicants' arguments alleging that in the statement of objections the Commission prejudged the final outcome of the investigation must be rejected. 417   Second, as regards the large number of requests for information, it is common ground between the parties that between 22 May 1996, two days before the adoption of the statement of objections, and 16 September 1998, when the contested decision was adopted, the Commission sent 32 requests for information containing more than 100 questions to the TACA parties. It is also common ground that several of those requests for information were sent during the period allotted to the TACA parties to reply to the statement of objections, namely between 24 May 1996, when the statement of objections was adopted, and 6 September 1996, when the TACA parties sent their response to the statement of objections. 418   The sending of a large number of requests for information after the adoption of the statement of objections may affect the effective exercise by the undertakings concerned of their right to comment on the complaints made against them. According to the case-law cited at paragraph 404 above, it is for the Commission to ensure that the administrative procedure is conducted with due care. It has been held that the Commission's requests for information must comply with the principle of proportionality and the obligation imposed on an undertaking to supply information should not be a burden on that undertaking which is disproportionate to the needs of the inquiry (SEP, cited at paragraph 119 above, paragraph 51). 419   Therefore it is necessary to consider whether in the present case the sending of the relevant requests for information imposed a disproportionate burden on the applicants such as to infringe the rights of the defence. It is necessary in that regard to take account of the content of those requests for information, the context in which they were sent and their purpose. 420   It is apparent from an analysis of the relevant requests for information that they can be grouped essentially into eight categories. 421   First, one request for information, that of 22 May 1996, was sent two days before the statement of objections. However, that request sought to obtain mere clarification and further information in respect of the information disclosed by the applicants on 9 May 1996 in response to a request for information of 8 March 1996, so that it cannot reasonably be considered to have placed a disproportionate burden on the applicants. Furthermore, it is apparent that the fact that the request at issue was sent two days before the adoption of the statement of objections arose from the applicants' own conduct since the information which formed the subject of the questions in the relevant request should, according to the request for information of 8 March 1996, have been provided by 25 March 1996, but, because of various extensions of time sought by the applicants, was only finally disclosed on 9 May 1996, two months after the Commission's initial request. 422   Second, four requests for information dated 16 October 1996 and 12 February, 2 June and 19 June 1997 sought information requested but not provided in response to earlier requests or further details of information provided earlier, whilst four other requests for information dated 27 January, 13 February, 15 May and 2 October 1997 sought an update of information provided earlier, before the statement of objections was sent. In so far as the requests for information in question sought information requested earlier, but not provided, it should be remembered that under Article 16(5) of Regulation No 4056/86 and the equivalent provisions of Regulation No 17 and Regulation No 1017/68 the undertakings concerned are required to disclose fully the information requested within the time-limit fixed by the Commission. Thus, in so far as those requests for information were the result of the applicants' own failure to fulfil that obligation, the Commission was not at fault in sending them. Moreover, in so far as they merely seek to clarify and update information previously supplied, such requests for information must be considered to be justified by the needs of the inquiry and did not place a disproportionate burden on the applicants. 423   Third, nine requests for information dated 12 September, 16 September, 18 September, 9 October, 8 November and 15 November 1996 and 22 April, 26 May and 30 September 1997 respectively were intended to enable the Commission to examine the merits of the arguments put forward by the applicants in their response to the statement of objections. Clearly, such requests for information were justified by the needs of the inquiry, since they enabled the Commission to take account of the arguments and information put forward by the applicants in response to the statement of objections in order to amend the complaints made against them, if appropriate. 424   Fourth, five requests for information, those dated 11 July, 17 July and 8 August 1996 and 24 January and 19 June 1997, sought, at least in part, information which was not the subject of requests for information before the adoption of the statement of objections. Those requests for information concerned, inter alia, certain aspects of service contracts, contacts between the TACA on the one hand and UASC and APL on the other with a view to their possible accession to the TACA, Hanjin's pricing practices and the complaints of certain shippers in Ireland. However, and this is not challenged by the applicants, the information sought by those requests for information was relevant to the assessment of the TACA practices in question, in particular so as to verify the merits of the allegation of abuse of a dominant position appearing in the statement of objections. Those requests for information were therefore justified by the needs of the inquiry. 425   Fifth, two requests for information dated 16 and 24 July 1996, sent in response to the allegations of infringement of the right of access to the file, sought information about the document Liner Shipping - Time for Change. As has already been stated above at paragraph 380, it is apparent from the Court file that the Commission was in possession of that document when it sent the two requests for information in question. In those circumstances, those requests for information were not justified by the needs of the inquiry. 426   Sixth, one request for information dated 5 December 1996 sought responses to questions asked at the hearing on 25 October 1996. There can be no dispute that such a request, intended to give the applicants the opportunity to continue in writing the discussion initiated at the hearing, was justified by the needs of the inquiry. 427   Seventh, three requests for information dated 21 October 1997, 24 November 1997 and 18 March 1998 sought information relating to the TACA parties' turnover. Since those requests for information were intended to enable the Commission to check that the fines it intended to impose on those undertakings did not exceed the maximum amount permitted under Article 15(2) of Regulation No 17, Article 22(2) of Regulation No 1017/68 and Article 19(2) of Regulation No 4056/86, they were in principle justified by the needs of the inquiry (Case T-213/00 CMA CGM and Others v Commission [2003 ECR II-913, paragraph 490). In the present case, the applicants do not deny in any case that the Commission used the information supplied in response in order to ensure that the fines imposed in the contested decision did not exceed the maximum permitted amount. 428   Eighth, three requests for information dated 17 January, 17 February and 11 March 1997 concerned the hub and spoke system notified on 10 January 1997 after the statement of objections was issued. There can be no question but that such requests for information, which sought clarification of the agreements notified by the applicants with a view to obtaining individual exemption under Article 85(3) of the Treaty, were justified by the needs of the inquiry since they enabled the Commission to check whether the requirements laid down by that provision were met. 429   It follows from the foregoing that only two of the relevant requests for information, namely those dated 16 and 24 July 1996, were not justified by the needs of the inquiry. However, that two requests for information out of a total of 32 sent over a period of 22 months were not justified cannot have imposed a disproportionate burden on the applicants such as to affect the effective exercise of their right to be heard. 430   Lastly, and in any event, even if the Commission had infringed the rights of the defence, that infringement would only entail the annulment of the decision if, had the relevant requests for information not been sent, there was even a small chance that the applicants could have brought about a different outcome to the administrative procedure (see, to that effect, Hercules Chemicals, cited at paragraph 95 above, paragraph 56, and Cimenteries CBR, cited at paragraph 172 above, paragraph 383). The applicants do not claim that that may have been the position in the present case and adduce no evidence to that effect. 431   For those reasons, the applicants' arguments in support of the complaint that the Commission sent them a large number of requests for information after the adoption of the statement of objections must be rejected. 432   It follows from all of the foregoing considerations that the applicants' plea alleging infringement of the principle of sound administration on that point is unfounded.  b) The drafting of the contested decision 433   The applicants allege essentially that the Commission began to draft the contested decision before the completion of the administrative investigation procedure. 434   It is common ground between the parties that the Commission began to draft the contested decision shortly after the hearing with the TACA parties on 25 October 1996. In its letter of 12 November 1996, the Commission Hearing Officer informed the TACA parties as follows: As I understand it, the relevant Directorate is now drafting the proposed decision in the TACA case and the normal procedure will apply. 435   Furthermore, it is true that, as the applicants point out, the Commission continued with the administrative investigation procedure after the hearing with the TACA parties by sending further requests for information until March 1998. Since the contested decision was adopted on 16 September 1998, it is clear that the Commission did begin to draft the contested decision before the completion of the administrative investigation procedure. 436   However, contrary to the applicants' submission, such conduct does not infringe the principle of sound administration. On the contrary, observance of that principle, which requires, inter alia, diligence on the part of the Commission in dealing with the cases for which it is responsible, may mean that it must begin drafting its final decision before the end of the administrative investigation procedure in order to ensure that the decision is adopted within a reasonable period having regard to the particular circumstances of the case, and in particular its context, the conduct of the parties in the course of the procedure, the importance of the case for the various undertakings involved and its complexity (PVC II, cited at paragraph 191 above, paragraphs 187 and 188; Joined Cases T-213/95 and T-18/96 SCK and FNK v Commission [1997] ECR II-1739, paragraph 56; and Case T-127/98 UPS Europe v Commission [1999] ECR II-2633, paragraph 38). 437   In the present case, it is not in dispute that the aspects of the TACA which were the subject of the administrative procedure before the Commission raise complex factual and legal questions which meant that the Commission had to examine a large amount of information provided by the TACA parties in their various notifications as well as in their response to the statement of objections and in their replies to the requests for information. 438   In those circumstances, since the Commission received the TACA parties' response to the statement of objections on 6 September 1996, following 26 months of investigation after the notification of the TACA agreement on 5 July 1994, and had heard those parties at the hearing on 25 October 1996, it had sufficient information at that time to begin drafting the contested decision, especially in view of the fact that, of the requests for information sent after the hearing, only those dated 24 January, 15 May and 19 June 1997 concerning, respectively, some of Hanjin's pricing policies, consortia links between the TACA parties, and the complaints of certain shippers in Ireland, sought information which had not been the subject of earlier requests for information. 439   In any event, the applicants do not state how the requests for information sent after the hearing show that the Commission was not in a position to begin drafting its final decision after the hearing. 440   Therefore, the applicants' arguments on that point must be rejected.  c) The threats of fines 441   The applicants submit first that certain statements made in the course of the procedure surrounding the adoption, on 26 November 1996, of the decision withdrawing from the TACA parties immunity from fines in respect of collective price-fixing for inland transport services as part of intermodal transport show that, from that time, the Commission intended to impose high fines on them. 442   The applicants point out first in this regard that when the President of the Court of First Instance ordered that the TAA decision be suspended in so far as it prohibited collective price-fixing (order of 10 March 1995 in Atlantic Container Line, cited at paragraph 29 above, confirmed by the order of 19 July 1995 in Commission v Atlantic Container Line, cited at paragraph 29 above), the Commission stated in a press release dated 14 March 1995 that if the members of the TACA lose their action on the merits, they risk facing heavy fines for continuing that practice. 443   Far from prejudging its final decision as to the imposition of fines on the TACA parties, the Commission by that statement merely highlights, rightly, the legal effects attaching to an order of the President of the Court of First Instance making a ruling in application of Articles 185 and 186 of the EC Treaty (now Articles 242 and 243 EC) in the context of an application for the suspension of a Commission decision. 444   The purpose of the order of the Court of First Instance of 10 March 1995 in the TAA case (the order in Atlantic Container Line, cited at paragraph 29 above) was not to determine the legality of the TAA decision's prohibition of the collective price-fixing agreement for inland transport services provided as part of intermodal transport, since that assessment falls exclusively within the competence of the court deciding the case on the merits, but to suspend that prohibition. Consequently, until the Court of First Instance had pronounced judgment on the merits, on 28 February 2002, the TAA decision's prohibition of the agreement in question still stood, since only the enforcement of that prohibition was suspended. 445   In so far as it is not in dispute that the agreement between the TACA parties is essentially the same as the one which was the subject of the order of 10 March 1995 in Atlantic Container Line, cited at paragraph 29 above, and that it was entered into, at least at first, between the same parties, the Commission was right to point in the statement in question to the risk which the TACA parties faced of being fined for entering into that agreement. As for the allusion in that statement to the large amount of the fines, it suffices to state that the Commission merely pointed to a risk and not to a final decision in that regard. Furthermore, in so far as the threat made in the statement in question of large fines is reflected in the contested decision, the fines imposed therein being said to be excessive, the applicants' complaint must be assessed on its merits in the course of the Court's assessment of the amount of the fines in the context of the exercise of its unlimited jurisdiction. 446   Next, the applicants refer to the statements of the member of the Commission responsible for competition matters, Mr Van Miert, on 21 June 1995 at the time the statement of objections was issued, informing the TACA parties of the Commission's intention to withdraw immunity from fines in respect of the agreement between the TACA parties providing for collective price-fixing for inland transport services provided as part of intermodal transport. 447   It is true that Mr Van Miert stated there that the proposed decision should be a clear and unambiguous signal that the TACA agreement is not acceptable to the Commission and that the longer the applicants took to find a solution to the problems identified by the Commission, the higher the fines will be. 448   However, far from prejudging in those statements the Commission's final decision as to the imposition of fines on the TACA parties, Mr Van Miert was merely highlighting, rightly, the legal effects attaching to a decision withdrawing immunity from fines. 449   The purpose of the Commission's decision withdrawing immunity in the present case was not to impose fines on the TACA parties or to commit the Commission to adopting a decision to that effect, but merely to enable it, by way of a precaution, to keep that option open notwithstanding the TACA parties' notification, should the applicants qualify for immunity from fines in respect of agreements falling within Regulation No 1017/68. It thus appears that the Commission's decision was largely motivated by the fact that the successive notifications made by the applicants ought not to deprive it of the option to impose fines for past conduct should it decide that one of the amended versions of the TACA could qualify for exemption. 450   Since under Article 22(2) of Regulation No 1017/68 the amount of the fines is based inter alia on the duration of the infringement, the Commission was entitled to inform the TACA parties that any delay in adopting a solution to the problems identified by it would result in an increase in the amount of the fines. 451   In any event, given that Regulation No 1017/68 does not provide for immunity from fines in respect of agreements covered by it and that there is no general principle of Community law according to which notification of an agreement confers immunity from fines on the notifying undertaking even where there is no express legislative provision for such immunity (Atlantic Container Line, cited at paragraph 44 above, paragraphs 48 and 53), the decision withdrawing immunity in the present case could in no way affect the legal position of the TACA parties since, whether or not the Commission adopts a decision withdrawing immunity, it has the power in any event to impose fines notwithstanding the TACA parties' notification of the collective price-fixing agreement for inland transport services provided as part of intermodal transport. 452   On those grounds, the applicants' arguments on that point must be rejected. 453   Second, the applicants submit that it is apparent from various articles and press releases that the Commission regarded the application of Article 86 of the Treaty to various TACA practices as a way of circumventing the immunity from fines which they enjoyed under Article 85 of the Treaty. 454   However, whilst it is true that the articles and press releases referred to by the applicants show that the Commission may have intended to impose fines on the TACA parties in respect of agreements notified by the applicants with a view to obtaining individual exemption under Article 85(3) of the Treaty, it cannot be inferred from this that the Commission applied Article 86 of the Treaty to various TACA practices for the sole purpose of circumventing the immunity which its members enjoyed under Article 85 of the Treaty. Since the applicants adduce no other specific evidence in support of their argument they have not established the facts on which they base their complaint on that point. 455   In any event, even if the alleged aim of circumvention could be inferred from the various articles and press releases referred to by the applicants, the question whether the Commission was entitled to impose fines on undertakings, which had notified an agreement with a view to obtaining individual exemption under Article 85(3) of the Treaty, for an infringement of Article 86 of the Treaty goes to the merits of the application of Article 86 of the Treaty and of the fines imposed in respect thereof. The applicants' argument is based on the premiss that any party which infringes Article 86 of the Treaty cannot qualify for immunity from fines. However, if that premiss, which is in fact challenged by the applicants in their pleas relating to the fines, is incorrect, the question of circumventing that immunity does not arise, since immunity under Article 86 of the Treaty would have prevented any fines being imposed for an infringement of that provision. If, on the contrary, that premiss is correct, the question whether the Commission was entitled to impose fines depends solely on whether there was an infringement of Article 86 of the Treaty, which is denied by the applicants in their pleas relating to that provision. Either the infringement of Article 86 of the Treaty is made out to the requisite legal standard, in which case the Commission was entitled to impose fines, or the infringement of Article 86 of the Treaty is not so made out, in which case the fines imposed under Article 86 of the Treaty must be set aside for that reason alone. The allegation of circumventing immunity under Article 85 of the Treaty is therefore irrelevant. 456   Therefore, the applicants' arguments on that point must be rejected. F –  The assessment of the facts, evidence and relevant questions 457   The applicants claim, first, that the Commission based numerous findings of fact and law in the contested decision on speculation, supposition and presumption, rather than evidence or analysis. The contested decision used the words likely or unlikely on 47 occasions in connection with the examination of the relevant market (paragraphs 66 and 67), internal competition (paragraph 193), external competition (paragraphs 249, 252 and 258), potential competition (paragraph 290), the contents of service contracts (paragraphs 490 and 494), the remuneration of freight forwarders (paragraph 510) and the dominant position (paragraphs 540 and 541). Those various passages in the contested decision are not based on any evidence. Whilst it may, in certain circumstances, be legitimate for the Commission to balance the relevant considerations and determine an issue accordingly, the examples cited in the application demonstrate no such balancing. 458   Second, the applicants claim that the Commission's rejection of their evidence and arguments demonstrates that it did not address itself to the case with a mind open to all the evidence (Opinion of Advocate General Slynn in Case 86/82 Hasselblad v Commission [1984] ECR 883, 913). 459   They set out a number of examples from the contested decision in support of that complaint. First, as regards the examination of internal competition (paragraphs 201 and 202), the applicants consider that the statement that the mere fact that there are prices other than those laid down in the tariff is no more evidence of the existence of competition than it is of the absence of competition shows that the Commission was not prepared to accept evidence of price competition. Second, as regards non-price competition (paragraphs 242 and 522), the applicants criticise the Commission for not having explained why it did not accept the evidence adduced by them. Third, as regards supply-side substitutability (paragraphs 280 to 282), the applicants claim that the Commission applied a presumption of invalidity of the evidence adduced by them on the ground that the findings of the Dynamar Report were coloured by the instructions given to the expert. The applicants observe that in the defence the Commission does not seek to explain the grounds for its suspicion with regard to the Dynamar Report by reference to the correspondence between the applicants and Dynamar concerning the preparation of that report, which is annexed to the application. Fourth, regarding the allegations relating to price (paragraphs 308, 325, 543 and 589), the applicants criticise the Commission for having carried out a fresh analysis of service contract rates in the contested decision without reference to the allegations in the statement of objections and without replying to the arguments set out in their response to the statement of objections. In particular, the contested decision does not address the question whether the Commission's own findings (that between 1993 and 1997 maritime rates increased by 8% and EC inland rates fell by 4%, unadjusted for inflation) were consistent with a finding of a dominant position. The Commission's lack of confidence in its own analysis is apparent from the description of the contested decision in the 1998 competition policy report (XXVIIIth Report on Competition Policy - 1998, paragraph 107), in which the Commission refers to the discredited allegations of the complainants rather than to its own price analysis. Fifth, regarding dual-rate service contracts (paragraph 154), the applicants criticise the Commission for failing to ask them to supply information on the allegation that the initiative for that type of contract came from shippers party to such contracts. As regards this key aspect of the finding of abuse, it was not open to the Commission to try to place the burden of proof on the applicants. Sixth, and last, as regards the history of conference contracts (paragraphs 469 to 471), the applicants claim that the Commission upheld only one item of evidence adduced by them, without addressing the others. They also observe that it is only in the defence, and not in the contested decision, that the Commission has sought to explain the reasons for the wholesale rejection of that material. 460   Third, the applicants criticise the Commission for failing to take account in the contested decision of certain facts subsequent to the statement of objections even though they disproved the contentions essential to the Commission's reasoning at the time the statement of objections was adopted. In particular, the Commission maintained in the contested decision (paragraphs 296, 562, 566 and 567) the allegation in the statement of objections (paragraphs 108, 113, 229, 235 and 236) that the applicants are not faced with significant potential competition, even though during the administrative procedure China Ocean Shipping Co. (Cosco), Yangming, K Line (in February 1997) and Norasia Line (in June 1998) entered the transatlantic trade as independent operators, whilst NOL (in May 1998) withdrew from the TACA in order to begin new business trading as APL. The applicants claim that the Commission based its finding that the applicants abusively altered the structure of the market on the allegation that potential competitors were induced to become members of the TACA. 461   The Commission contends that the Court should reject the applicants' arguments on that point. 462   By the present complaints, the applicants allege first that the Commission based numerous findings of fact and law in the contested decision on speculation, supposition and presumption, rather than evidence or analysis. Next they allege that it rejected their evidence and arguments without an open mind. Finally, they allege that it failed to take account in the contested decision of certain facts subsequent to the statement of objections even though they disproved the contentions essential to the Commission's reasoning at the time the statement of objections was adopted. 463   The applicants thus claim essentially that the Commission lacked objectivity in assessing the facts, evidence and questions relevant for the present case. 464   The lack of objectivity allegedly shown by the Commission on these various points, even if it were proven, does not constitute an infringement of the rights of the defence capable of leading to annulment of the contested decision but must be placed in the context of the review of the assessment of the evidence or of the statement of reasons for the decision (Case T-37/91 ICI, cited at paragraph 188 above, paragraph 72). 465   Most of the applicants' allegations amount to a complaint that there is insufficient evidence in support of the Commission's allegations. That is so of the allegations concerning the use on 47 occasions of the words likely or unlikely in the decision, the fact that the Commission was not prepared to accept evidence of price competition between the TACA parties, the failure to take account of the findings of the Dynamar Report, the fact that the Commission carried out a fresh analysis of service contract rates in the contested decision without further reference to the allegations in the statement of objections, the failure to question the applicants about the fact that dual-rate service contracts were requested by the shippers, the fact that the Commission upheld only one item of evidence concerning the history of conferences adduced by the applicants for the purposes of determining the intention of the legislature on service contracts and the fact that recent entries to the transatlantic trade contradict the Commission's allegations of the lack of potential competition. 466   The allegations to the effect that the Commission did not explain why it rejected the evidence of price competition and the history of conferences adduced by the TACA parties challenge in effect the statement of reasons in the contested decision on those points. 467   For those reasons, the applicants' arguments are not germane in the context of the present pleas alleging infringement of the rights of the defence and must therefore be rejected. G –  The assessment of the fines 468   The applicants allege that the circumstances in which fines were imposed in the present case reveal a lack of objectivity on the part of the Commission. They point to the press coverage on that issue which refers to the existence of some opposition within the Commission and on the part of certain Member States in view of the amount of the fines proposed by the Directorate-General for Competition. The applicants also refer to the comments of a shipper to the effect that the fines are excessive. The applicants state that they do not know whether, and if so to what extent, those factors were taken into account by the Commission before the adoption of the contested decision. 469   The Commission contends that the Court should reject the applicants' arguments on that point. 470   The applicants allege by the present complaint essentially that the circumstances in which fines were imposed on the TACA parties reveal a lack of objectivity on the part of the Directorate-General for Competition. 471   First, as regards the alleged opposition of the Commission to the imposition of fines proposed by the Directorate-General for Competition, even if the latter did infringe the principles of sound administration, objectivity and impartiality the contested decision was adopted not by that directorate-general but by the College of Commissioners (see, to that effect, ABB Asea Brown Boveri, cited at paragraph 404 above, paragraph 104). 472   Next, as regards the opposition shown by some Member States to the amount of the fines proposed by the Directorate-General for Competition, in application of the relevant provisions of the regulations applying Articles 85 and 86 of the Treaty concerning co-operation with authorities of the Member States, the representatives of those Member States are consulted before the adoption of any decision imposing fines for infringement of the competition rules by means of the consultative committees on agreements and dominant positions set up by those regulations. In the present case, since the Commission adopted its decision on the basis of Regulations No 17, No 1017/68 and No 4056/68, the three consultative committees set up by those regulations were consulted. It is inherent in the decision-making process that where appropriate the Member States express reservations or raise objections in respect of the Commission's decisions. In any event, in so far as those consultative committees simply issue opinions, the Commission cannot infringe the principle of sound administration merely by departing from those opinions. 473   Furthermore, the opinion of a shipper as such is clearly irrelevant in assessing whether the Commission lacked objectivity. It cannot be deduced from the opinion of a third party that the Commission was prejudiced against the applicants. The press article cited by the applicants reports moreover that according to another shipper the TACA parties are perfectly able to pay the fine imposed on them, given the profits they made over the last five years. 474   Lastly, the lack of objectivity allegedly shown by the Commission or the Directorate-General for Competition in assessing the amount of the fines, even if it were proven, does not in any event constitute an infringement of the rights of the defence capable of leading to annulment of the contested decision but must be placed in the context of the review of the assessment of the amount of the fines and therefore will be examined with the pleas relating to that (see, to that effect, Case T-37/91 ICI, cited at paragraph 188 above, paragraph 72). 475   Consequently, the third plea concerning the assessment of the fines must be rejected in its entirety. H –  Conclusion on the third part 476   It follows from the foregoing considerations that the third part of the present group of pleas must be rejected in its entirety. Conclusion on the pleas alleging infringement of the rights of the defence 477   It follows from all the foregoing that the first part of the present group of pleas alleging infringement of the rights of the defence, concerning the infringement of the right to be heard, must be upheld in so far as the applicants allege that the Commission based the second abuse recorded in the contested decision on four documents on which they were not afforded the opportunity to comment. The consequences to be drawn from that infringement in respect of the legality of the contested decision depend however on the assessment of the merits of the Commission's findings in respect of the second abuse, which are the subject of the applicants' pleas in relation to the allegation of infringement of Article 86 of the Treaty. 478   The remainder of the first part of the present group of pleas must be rejected. Furthermore, the second and third parts of the present group of pleas alleging infringement of the rights of the defence relating to, respectively, infringement of the right of access to the file and infringement of the principles of sound administration, objectivity and impartiality must be rejected in their entirety. II.    The pleas alleging that there is no infringement of Article 85 of the Treaty and of Article 2 of Regulation No 1017/68 and various failures to state reasons in that regard 479   The pleas advanced by the applicants in this context may be divided essentially into three separate parts. The first part concerns the assessments made in the contested decision concerning the price-fixing agreement for inland transport services. The second part concerns the assessments made in the contested decision concerning the rules on service contracts. The third and final part concerns the assessments made in the contested decision concerning the rules on the remuneration of freight forwarders. Part one: the assessments made in the contested decision concerning the price-fixing agreement for inland transport 480   By the pleas advanced under the present part the applicants submit, first, that the prohibition by Article 1 of the contested decision of the agreement between the TACA parties fixing prices for inland transport services supplied within the territory of the European Community to shippers in combination with other services as part of a multimodal transport operation for the carriage of containerised cargo between northern Europe and the United States of America is incompatible with the order of 10 March 1995 in Atlantic Container Line, cited at paragraph 29 above. Second, the applicants submit that in the light inter alia of the cooperation agreements that they concluded in order to improve the supply of inland transport services to shippers, namely the EIEIA agreement and the hub and spoke system, the agreement in question satisfies the conditions for individual exemption under Article 85(3) of the Treaty. 481   In reply to a question from the Court on that point, the applicants stated at the hearing however that having regard inter alia to the FEFC judgment (cited at paragraph 196 above) and Commission Decision 2003/68/EC of 14 November 2002 relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/37.396/D2 - Revised TACA) (OJ 2003 L 26, p. 53), they do not persist in the pleas advanced under the present part. 482   Therefore, it is no longer necessary to make a finding on the first part of the present group of pleas alleging that there is no infringement of Article 85 of the Treaty and Article 2 of Regulation No 1017/68 and various failures to state reasons in that regard. Part two: the assessments in the contested decision concerning the rules relating to service contracts 483   The applicants' pleas under the second part are essentially of two types. By the first, they complain that by Article 3 of the contested decision the Commission prohibited them from entering into conference service contracts, jointly within the conference, with shippers, according to the voting procedures defined by the TACA agreement, referred to in the application as conference service contract authority. By the second type of plea, the applicants complain that by Article 3 of the contested decision the Commission prohibited certain rules set out in the TACA agreement relating to service contracts. A –   The TACA parties' conference service contract authority 484   The applicants essentially advance two pleas relating to conference service contract authority. By the first, they submit that the Commission was wrong to find in the contested decision that that power does not qualify for block exemption under Article 3 of Regulation No 4056/86, whereas it is one of the traditional activities of conferences and is compatible with the concept of uniform or common freight rates within the meaning of Article 1(3)(b) of Regulation No 4056/86. By the second plea, the applicants complain that the Commission failed to take a decision under Article 85(3) of the Treaty on their application for individual exemption for conference service contract authority. 1.     The block exemption under Article 3 of Regulation No 4056/86 485   The applicants claim first that, contrary to the Commission's assertion at paragraph 464 of the contested decision, conference service contract authority is a traditional activity of liner conferences, consistent with the concept of uniform or common freight rates, which therefore qualifies for block exemption under Article 3 of Regulation No 4056/86. Since conference service contract authority enjoys block exemption, the agreement as to the terms on which the conference members may exercise that authority must also benefit from block exemption under Regulation No 4056/86. In the TAA decision, moreover, the Commission did not discuss the application of the block exemption to joint service contracts. 486   The applicants point out that contractual arrangements between shippers and conferences for the carriage of cargo over a period of time at a rate other than the conference rate form part of the traditional practices of liner conferences and the term service contract was used by the US Federal Maritime Board as early as 1961. 487   The applicants gave details of such conference contracts in their response to the statement of objections (Part II, at pages 164 to 181) and they describe the traditional practices of liner conferences in their application. Those factors demonstrate that there is no foundation for the Commission's argument that service contracts were only introduced on the entry into force of the US Shipping Act and are not a traditional conference activity. 488   Second, the applicants submit that, contrary to the findings at paragraph 462 of the contested decision, conference service contract authority is consistent with the existence of uniform or common freight rates within the meaning of Regulation No 4056/86. 489   According to the applicants it is clear from Regulation No 4056/86 that either (i) the definition of uniform or common freight rates is sufficiently broad to encompass loyalty arrangements, TVRs and independent action, or (ii) the regulation permits conference members to enter into various additional pricing arrangements with shippers, such as loyalty arrangements, TVRs and independent action. 490   The applicants submit that the Commission advances no coherent theory as to the meaning of uniform or common freight rates. It adopts a narrow definition of uniform or common which excludes conference service contract authority and puts forward artificial arguments as to why loyalty arrangements, TVRs and independent action are to be distinguished from service contracts. 491   Furthermore, the applicants allege that the contested decision does not explain whether the services supplied under loyalty arrangements, TVRs, independent action and individual service contracts constitute services which are materially different from those normally provided to shippers paying the conference tariff rates within the meaning of paragraph 450 of the contested decision. 492   The applicants argue first in this respect that the Commission accepts that conference members depart from conference tariffs in certain circumstances, but does not reconcile that position with its definition of uniform or common freight rates. In particular, it does not explain whether the services provided under loyalty arrangements, TVRs and independent action constitute services which are materially different from those normally provided to shippers paying the conference tariff rates. 493   Next, the contested decision does not make it clear whether the services provided under individual service contracts - which the Commission believes conferences should allow - are (or need to be) materially different from those normally provided to shippers paying the conference tariff rates. If they are, the contested decision does not explain how the services provided under conference service contracts are not. If, on the other hand, the services provided under individual service contracts are not of the kind envisaged in paragraph 450 of the contested decision, that decision does not explain how individual service contracts are compatible with the Commission's definition of uniform or common freight rates. 494   The Commission, supported by the ECTU, claims that it is unable to understand precisely what the applicants mean by the phrase conference service contract authority. If what the applicants mean is that conference members may collectively enter into service contracts with shippers, the contested decision does not find that possibility in itself to be restrictive of competition, so the problem raised by the applicants does not arise. 495   The applicants submit essentially that the contested decision wrongly finds that the power of the TACA parties to enter into conference service contracts, jointly within the conference and according to the voting procedures defined by the TACA, does not qualify for block exemption under Article 3 of Regulation No 4056/86. 496   Before examining that question, however, it is necessary to determine whether the contested decision found that that authority is in itself a restriction of competition within the meaning of Article 85(1) of the Treaty. 497   At paragraph 449 of the contested decision, the Commission states that the block exemption under Article 3 of Regulation No 4056/86 does not authorise ... joint service contracts, but the Commission accepted in the defence that the term joint service contracts in the contested decision covers both conference service contracts and individual service contracts entered into jointly by several carriers. 498   As the applicants claim, it could be inferred from that paragraph of the contested decision that the Commission considers that the mere fact that a shipping conference enters into conference service contracts is in itself a restriction of competition within the meaning of Article 85(1) of the Treaty which does not fall within the block exemption under Article 3 of Regulation No 4056/86 and which, therefore, in the absence of individual exemption under Article 85(3) of the Treaty, is prohibited by the first paragraph of that provision. That is all the more so given that the conclusion of conference service contracts is in essence the conclusion of a horizontal price-fixing agreement. Such agreements, apart from being expressly prohibited by Article 85(1)(a) of the Treaty, are clear infringements of Community competition law (Case T-14/89 Montedipe v Commission [1992] ECR II-1155, paragraph 265, and Case T-148/89 Tréfilunion v Commission [1995] ECR II-1063, paragraph 109), including in the maritime transport sector which falls within the scope of Regulation No 4056/86 (CMA CGM, cited at paragraph 427 above, paragraphs 100 and 210). 499   However, the exact scope of the contested decision on that point must be determined having regard to its operative part and also to the grounds which constitute its essential basis (Case T-138/89 NBV and NVB v Commission [1992] ECR II-2181, paragraph 31). 500   In Article 3 of the operative part of the contested decision, the Commission finds that the TACA parties infringed Article 85(1) of the Treaty by agreeing the terms and conditions on and under which they may enter into service contracts with shippers. Similarly, in the grounds of the contested decision, the Commission states in equivalent terms, at paragraphs 379(c) and 607(b), that it is the agreement as to the terms and conditions on and under which they may enter into service contracts with shippers which has the object or effect of preventing, restricting or distorting competition within the meaning of Article 85(1) of the Treaty. 501   The first observation to be made is that it is apparent from paragraphs 477 to 501 of the contested decision, concerning the application of Article 85(3) of the Treaty to the TACA rules on service contracts, that the only terms and conditions examined by the Commission are, first, the prohibition in 1994 and 1995 on entering into individual service contracts and, second, the restrictions as to the availability and contents of service contracts, that is, according to paragraphs 489 to 501 of the contested decision, the ban on contingency clauses, the ban on contracts lasting for more than a year (which was subsequently extended to two and then three years), the ban on multiple contracts, liquidated damages, the confidentiality of service contracts and the ban on independent action over service contracts. From its analysis the Commission concludes, at paragraph 502 of the contested decision, that those terms and conditions do not qualify for individual exemption under Article 85(3) of the Treaty. Similarly, it must be noted that at paragraph 149 of the contested decision the Commission lists as restrictions imposed by the TACA parties on the contents of service contracts and the circumstances under which they may be concluded restrictions as to duration, bans on contingency clauses and multiple contracts, obligations as to non-confidentiality and agreement as to the level of liquidated damages for non-performance of the contract. 502   By contrast, the mere fact that conference service contracts are entered into jointly within the conference according to the voting procedures defined by the TACA does not appear in the terms and conditions set out in paragraphs 477 to 501 of the contested decision, even though the relevant provisions of the TACA agreement laying down those procedures for the conclusion of conference service contracts were notified in the same way as most of the terms and conditions set out in paragraphs 477 to 501 of the contested decision in order to obtain individual exemption under Article 85(3) of the Treaty. 503   Second, at paragraph 445 of the contested decision the Commission states expressly in any event, in the course of its examination of the service contracts in the light of Article 85(1) of the Treaty, that joint service contracts subject to the prohibition laid down by that provision are those of the kind entered into by the TACA parties. In the preceding paragraphs, after noting at paragraph 442 that in 1994 and 1995 the TACA parties banned the conclusion of individual service contracts, the Commission states at paragraph 443 that joint service contracts to which two or more carriers are party may restrict competition inter alia where there is an express or implied agreement between those carriers not individually to enter into a service contract with that shipper. 504   In such a case the Commission considers, as it states at paragraph 445, that joint service contracts ... [have as] their object or effect ... to restrict competition on price and other terms between competitors supplying the same service rather than to offer a new service to shippers. It points out in particular in this regard at paragraph 446 that where the service being supplied is capable of being supplied by an individual shipping line, in the absence of a joint service contract carriers might offer such additional services as increased free time, extended credit and free documentation or discounts on services provided in other trades. The Commission states however at paragraph 445 that the TACA have supplied no evidence that joint service contracts result in additional benefits for shippers in comparison with the services that could be offered by individual lines. On the contrary, at paragraphs 127 and 128 and paragraphs 145 to 148, in the section of the contested decision setting out the facts where it describes the conference service contracts concluded by the TACA parties, the Commission refers at length to the effects of the ban imposed by the TACA in 1994 and 1995 on the conclusion of individual service contracts and in particular the fact that the conference service contracts entered into by the TACA offered few individualised services, contrary to the situation prevailing prior to the entry into force of the TAA/TACA when the conclusion of individual service contracts was possible. 505   Thus it is apparent from paragraphs 442 to 446 of the contested decision read together that the Commission considered that the mere fact that the TACA parties entered into conference service contracts, jointly within the conference according to the voting procedures defined by the TACA, restricts competition within the meaning of Article 85(1) of the Treaty only to the extent that the same TACA parties were also prohibited from entering into individual service contracts, so that they could only enter into conference service contracts, individual service contracts being wholly excluded. 506   Consequently, in the light of Article 3 of the operative part as interpreted in the light of the grounds set out at paragraphs 442 to 502, it is clear that where the contested decision states, at paragraph 449, that joint service contracts do not qualify for block exemption under Article 3 of Regulation No 4056/86 and therefore, in the absence of individual exemption under Article 85(3) of the Treaty, are prohibited by Article 85(1), it refers solely to the TACA parties' ban on individual service contracts. 507   Hence in the contested decision the Commission does not consider that the power of the TACA parties to enter into conference service contracts according to the voting procedures defined by the TACA constitutes in itself a restriction of competition within the meaning of Article 85(1) of the Treaty, and therefore it does not prohibit that power. In any case the Commission expressly confirmed, both in the defence and in its replies to the Court's written questions and at the hearing, that the contested decision does not prohibit the TACA parties from entering into such conference service contracts. It should also be noted that Decision 2003/68 on the revised TACA, in particular paragraph 66, indicates that the TACA parties continued to offer conference service contracts after the contested decision was adopted. 508   Therefore, the present plea must be rejected as being devoid of purpose. 2.     Individual exemption under Article 85(3) of the Treaty 509   The applicants allege that in their application for exemption of 5 July 1994 they requested individual exemption for the exercise of conference service contract authority. Whilst that authority was found to be contrary to Article 85(1) of the Treaty and not to fall within the block exemption under Article 3 of Regulation No 4056/86, the Commission did not consider the possibility of individual exemption and Article 3 of the contested decision does not refer to their application for exemption. 510   The Commission, supported by the ECTU, repeats that it does not understand the term conference service contract authority used by the applicants and contends that in any event the plea is unfounded. 511   In reply to a written question from the Court on that point, the applicants stated that having regard inter alia to Decision 2003/68, they do not persist with the present plea. It is no longer necessary therefore to rule on it. B –  The TACA rules on service contracts 512   By the present pleas, the applicants challenge the Commission's findings in the contested decision concerning (i) the rules as to the content of conference service contracts, (ii) the rules on the availability and contents of individual service contracts and (iii) the prohibition on independent action on service contracts. 1.     The rules as to the content of conference service contracts 513   The applicants allege first that because conference service contract authority is covered by the block exemption under Article 3 of Regulation No 4056/86 the TACA parties are necessarily entitled to agree upon the terms on which they may, as a conference, enter into conference service contracts. Accordingly, the agreement of such terms by the TACA also falls within the scope of the block exemption. 514   The applicants point out that the Commission does not address that issue in the contested decision. Consequently, they seek the annulment of the contested decision on the ground that the finding that the block exemption does not apply to conference service contract rules is predicated on the erroneous view that conference service contract authority is not covered by the block exemption. 515   Next, the applicants point out that the Commission does not consider whether conference service contract authority satisfies the conditions for the grant of individual exemption. The Commission cannot refuse to grant individual exemption for the TACA rules governing the terms of individual service contracts without first carrying out that assessment. 516   The applicants therefore seek the annulment of the contested decision for lack of reasoning in so far as it refuses to grant individual exemption for the TACA service contract rules. 517   In reply to the ECTU's assertion that it is difficult to conceive of circumstances where an individual exemption would be available for joint service contracts, in any event, the applicants submit that that does not reflect the Commission's position in the defence, which is that it is disposed to allow members of liner conferences to enter into joint service contracts. 518   The Commission, supported by the ECTU, submits that it does not understand what the applicants mean by conference service contract authority and the rules governing conference service contracts. It contends that the Court should reject the present plea. 519   By the present pleas, the applicants submit essentially, as they stated in reply to a written question from the Court on the scope of their pleas concerning the infringement of Article 85 of the Treaty, that the power of the TACA parties to enter into conference service contracts, jointly within the conference and according to the voting procedures defined by the TACA, necessarily gives them the power to determine the content of those contracts. They consider that the contested decision does not recognise that they have such a power. 520   It has already been stated above that, contrary to what the applicants claim, the contested decision does not prohibit the TACA parties under Article 85 of the Treaty from entering into such conference service contracts. Nevertheless it is necessary to determine whether, as the applicants claim, the contested decision prohibits them under that provision from freely determining the content of those contracts within the context of the conference. 521   In Article 3 of the operative part of the contested decision the Commission finds that the TACA parties infringed Article 85(1) of the Treaty by agreeing the terms and conditions on and under which they may enter into service contracts with shippers. As stated above, it is apparent from paragraphs 477 to 501 of the contested decision, concerning the application of Article 85(3) of the Treaty to the TACA rules on service contracts, that those terms and conditions include, besides the ban in 1994 and 1995 on entering into individual service contracts, certain restrictions as to the availability and contents of service contracts, namely, according to paragraphs 489 to 501 of the contested decision, the ban on contingency clauses, the ban on contracts lasting for more than a year (subsequently extended to two and then three years), the ban on multiple contracts, liquidated damages, the confidentiality of service contracts and the ban on independent action over service contracts. 522   With regard to those last restrictions, paragraphs 472 to 502 of the contested decision do not distinguish between restrictions in relation to individual service contracts and those in relation to conference service contracts. On the contrary, at paragraph 442 of the contested decision the Commission expressly states with regard to the application of Article 85(1) of the Treaty that the terms and conditions laid down by the TACA rules continued to apply, notwithstanding the changes made to those rules, to all service contracts entered into by the TACA parties (whether joint or individual). One of the restrictions identified in paragraphs 487 to 501, the prohibition on independent action, is in any case, as is apparent from paragraphs 131 to 139 and 449, only likely to affect conference service contracts and not individual service contracts. Furthermore, when the Commission finds, at paragraph 493, that the ban on multiple contracts means that a party to a joint service contract cannot enter into individual service contracts, it expressly refers to a restriction on conference service contracts. Finally, paragraphs 472 to 502 form part of the section of the contested decision dealing with the application of Article 85(3) of the Treaty to joint service contracts (XX. Joint service contracts - Application of Article 85(3). 523   In the light of those paragraphs and given that the term joint service contracts in the contested decision is, as the Commission stated in its defence, capable of covering conference service contracts, the applicants are correct in saying that it may be inferred from the contested decision that that decision prevents the TACA from freely determining the content of conference service contracts. 524   However, the contested decision must be read as a whole. With regard to the application of Article 85(1) of the Treaty to service contracts, the Commission - after stating at paragraph 445 that that provision applies to joint service contracts of the kind entered into by the TACA parties, thereby, as held at paragraph 506 above, referring to the prohibition of individual service contracts - states at paragraph 447 that Article 85(1) of the Treaty further applies to the agreement between the TACA parties to place restrictions on the conditions under which individual service contracts may be entered into. Similarly, with regard to the application of Article 85(3) of the Treaty, after finding that the block exemption laid down by Regulation No 4056/86 does not apply to joint service contracts of the type entered into by the TACA parties, the Commission states at paragraph 464 of the contested decision that it follows that that block exemption does not apply to restrictions on the availability or content of individual service contracts. 525   It follows that, according to the contested decision, the restrictions as to the contents of service contracts identified at paragraphs 487 to 501 only fall within Article 85(1) of the Treaty - and, failing application of the block exemption laid down by Article 3 of Regulation No 4056/86, only require individual exemption under Article 85(3) of the Treaty - in so far as they affect the terms and conditions of individual service contracts, either by determining the content of those contracts, or by determining the conditions under which they are available. 526   Thus, with regard to the content of individual service contracts, it is apparent from paragraphs 487 to 501 of the contested decision that it prohibits the TACA parties from imposing terms in those contracts providing for the ban on contingency clauses, the ban on contracts lasting for more than a year (subsequently extended to two and then three years) and the amount of liquidated damages. Similarly, with regard to the conditions under which individual service contracts may be entered into, it is apparent from the same paragraphs that the contested decision prohibits the TACA parties, in applying the TACA rules on service contracts, from requiring that the terms and conditions of individual service contracts be disclosed and, given the ban on multiple contracts and independent action, from preventing the parties to a conference service contract from entering into individual service contracts and carrying out independent action on conference service contracts. 527   By contrast, in so far as the terms of conference service contracts entered into by the TACA parties do not affect the content or availability of individual service contracts, the contested decision does not prohibit those parties, without prejudice to the application of Article 86 of the Treaty, from freely determining the content of those contracts within the context of the conference, especially as to their duration or the amount of liquidated damages. It is true that some of the restrictions identified at paragraphs 487 to 501 of the contested decision apply to the TACA parties which have entered into conference service contracts; nevertheless, as stated above, those restrictions do not determine the content of such contracts, but, at most, indirectly determine the conditions for the availability of individual service contracts or for the carrying out of independent action. 528   Consequently, as the Commission stated, both in its written pleadings and in reply to the Court's written questions and at the hearing in reply to specific questions on that point, just as the contested decision does not prohibit the TACA parties under Article 85 of the Treaty from entering into conference service contracts, it does not prohibit them under that article from freely determining the content of those contracts, since the Commission considers in the contested decision that the power to enter into conference service contracts necessarily implies, subject to the application of Article 86 of the Treaty, the power freely to determine the content of such contracts. 529   Therefore, the present pleas must be rejected as being devoid of purpose. 2.     The rules on the availability and content of individual service contracts 530   The applicants submit that the Commission's statement at paragraph 464 of the contested decision that because joint service contracts of the kind entered into by the TACA parties do not qualify for block exemption, neither does an agreement restricting individual service contracts lacks reasoning and is illogical. The Commission does not explain why the exemption under Article 3 of Regulation No 4056/86 does not apply to the restrictions on the availability and content of individual service contracts. 531   The applicants note that the only apparent reason given in support of the Commission's position is that because Article 3 of Regulation No 4056/86 does not apply to conference service contract authority, an agreement restricting the content of individual service contracts must also not qualify for block exemption. The applicants claim, however, that even if the block exemption does not apply to conference service contract authority, the members of a liner conference are entitled to agree not to enter into individual service contracts and to impose restrictions on the content of such contracts. 532   Furthermore, since the members of a conference are entitled to prohibit individual service contracts, it follows that any relaxation of that prohibition does not constitute an unacceptable restriction of competition. Consequently, the applicants consider that the finding that the block exemption does not apply to the rules on the availability and content of individual service contracts is based on the erroneous view that the prohibition of such contracts is not covered by the block exemption. 533   The Commission, supported by the ECTU, considers that these pleas are unfounded. 534   By the present pleas, the applicants challenge the assessments made by the Commission concerning the application of the block exemption laid down by Article 3 of Regulation No 4056/86 to the TACA rules on the availability and contents of individual service contracts. 535   They claim, first, that the reasoning in paragraph 464 of the contested decision is illogical as regards the absence of block exemption for the ban on individual service contracts and the restrictions on the availability and contents of such contracts. 536   The Court notes that at paragraph 464 of the contested decision the Commission found that since joint service contracts of the kind entered into by the TACA parties are not one of the traditional conference activities which have been group-exempted, since they were only introduced following the implementation of the US Shipping Act ... it also follows that restrictions on the availability or content of individual service contracts are not group-exempted and must be shown to satisfy the conditions of Article 85(3) of the ... Treaty ... if they are to qualify for individual exemption. 537   It is plain that, as the applicants maintain, there is no logic in the Commission's reasoning on this point. The fact that joint service contracts entered into by the TACA are not traditional for the TACA cannot logically justify excluding restrictions on the availability of individual contracts, including the outright ban on them in 1994 and 1995, and restrictions on their contents, from the block exemption. 538   However, whilst the reasoning relied on in the contested decision in this respect is thus erroneous, the Court finds that, for the reasons set out in paragraphs 1381 to 1385, in the context of the examination of the pleas concerning the alleged failure to comply with the procedure laid down by Regulation No 4056/86, the Commission was entitled to find, in paragraph 464 of the contested decision, that the ban on individual service contracts in 1994 and 1995 and the restrictions on the availability and contents of individual service contracts applied from 1996 are not covered by the block exemption. 539   This plea must therefore be rejected. 540   Secondly, the applicants submit that since the ban on individual service contracts enjoys block exemption any mitigation of the ban must likewise enjoy that exemption. 541   The Court finds that, for the reasons set out below at paragraphs 1381 to 1385, in the examination of the pleas concerning the alleged failure to comply with the procedure laid down by Regulation No 4056/86, the ban on individual service contracts is not covered by the block exemption. 542   Consequently, as this plea is based on a false premiss it must be rejected on that ground. 3.     The prohibition of independent action on service contracts 543   The applicants submit that the contested decision contains no reasoning to support the Commission's contention that the prohibition of independent action on conference service contracts does not qualify for block exemption under Regulation No 4056/86 or for individual exemption. 544   The Commission, supported by the ECTU, contends that that plea is unfounded. 545   As the applicants point out, paragraph 449 of the contested decision merely states that the prohibition of independent action on conference service contracts does not qualify for block exemption under Article 3 of Regulation No 4056/86, without providing any specific explanation. 546   However, in paragraphs 451 to 471 of the contested decision the Commission explained in detail why conference service contracts are not covered by that exemption. Since the Commission found that conference service contracts do not fall within the block exemption laid down by Article 3 of Regulation No 4056/86 because contract rates vary depending on the shipper and therefore do not reflect common or uniform freight rates, it must follow that the ancillary prohibition on independent action on those contracts which serves to ensure compliance with the rates to be applied in conference service contracts cannot qualify for that block exemption for the same reason. 547   As for the grant of individual exemption under Article 85(3) of the Treaty, it suffices to note that at paragraph 500 the contested decision states, first, that the applicants have not explained why this prohibition fulfils the conditions for the grant of individual exemption and, second, why independent action on service contracts was allowed in the past. Furthermore, paragraph 501 of the contested decision states that the prohibition of independent action on service contracts does not appear to be indispensable given the existence of independent action on the tariff itself and the failure of that prohibition to accord any benefit to consumers. 548   It follows that the contested decision provides the applicants with an adequate indication as to whether the contested decision is well founded as regards the application of Regulation No 4056/86 and Article 85(3) of the Treaty to the prohibition of independent action on service contracts or, on the contrary, whether it may be vitiated by a defect enabling its validity to be challenged (Case T-49/95 Van Megen Sports v Commission [1996] ECR II-1799, paragraph 51). 549   The findings on these points in the contested decision are thus supported by an adequate statement of reasons and the present plea alleging failure to state reasons must therefore be rejected. Part three: the assessments in the contested decision in relation to the rules on the remuneration of freight forwarders A –  Arguments of the parties 550   The applicants claim first that the contested decision does not take into account the significance, in legal terms, of the history of the agreements between the conference members on maximum levels of freight-forwarder remuneration and the way in which US law treats those agreements and for this reason, and because of the failure to provide an adequate statement of reasons which is its corollary, Articles 2 and 4 of the contested decision should be annulled. 551   The Commission adopts a narrow interpretation of the phrase the fixing of rates and conditions of carriage in Article 3 of Regulation No 4056/86 and its approach differs from that used by it elsewhere, in particular with regard to service contracts. The practice of agreements fixing a ceiling for the remuneration of freight forwarders dates back to the beginning of the 20th century, not only in the United States but in other countries as well. In the United States conference members may agree on the amount, level and terms of remuneration to be paid to freight forwarders. 552   Second, the applicants assert that there is a direct and necessary link between the freight rates and the amounts paid to freight forwarders, so that the agreement on the maximum levels of freight-forwarder remuneration should be regarded as a necessary and ancillary corollary of the agreement on freight rates which enjoys block exemption under Article 3 of Regulation No 4056/86. 553   Third, the applicant in Case T-213/98 submits that the Commission has misunderstood the status of freight forwarders and their contractual relationship with the carrier and his client (the shipper). The freight forwarder generally does not supply any services directly to the shipping line; there is no contract between the forwarder and the line for the provision of any such services and the freight forwarders' remuneration is not a payment for such services. Consequently, the Commission's assessment of the agreement in question under Article 85(1) and Article 85(3) of the Treaty is flawed. 554   The applicant considers that the description in the contested decision of the modus operandi of freight forwarders in the market is inaccurate in one respect. In continental Europe the general rule is that, whilst the freight forwarder acts as agent for his client (the shipper), he acts as principal for the carrier. The freight forwarder's remuneration is therefore, in reality, a reduction in the freight rate in the form of a discount on the sum owed by the shipper to the carrier under the contract of carriage. The TACA, which fixes the levels of freight-forwarder remuneration in continental Europe, is thus an agreement setting the rates and conditions of carriage within the meaning of Article 3 of Regulation No 4056/86. 555   The Commission's assessment is based on the idea that freight forwarders are paid by the TACA members as the price of services rendered by the former to the shipping companies. That is incorrect. 556   In the United Kingdom and Ireland the precise status of the freight forwarder varies from case to case. He may act purely as agent, in which case the contract of carriage is between the shipping company and the shipper. In certain circumstances he may undertake obligations to the shipping company. 557   In any event, the same errors of analysis apply, mutatis mutandis, to the Commission's assessment of the situation in the United Kingdom and Ireland. In particular, the fact that in those countries no sums are paid to the freight forwarders confirms that the latter do not provide a distinct service to the shipping companies and that the only services they do provide are to their clients (the shippers), who are the only ones to pay them. It follows that in the United Kingdom and Ireland the rule against payment of a commission to freight forwarders is no more than a rule prohibiting discounts on freight rates. 558   Fourth and finally, the applicant in Case T-213/98 adds that the contested decision lacks reasoning in that: –       - the only intermediary services provided by freight forwarders in the situation under consideration are those supplied by them to their clients (the shippers), whose agent they are; –       - the contested decision contains no description of the services that freight forwarders supposedly provide for lines and does not explain how those services differ from those provided to the shippers; –       - the contested decision does not identify the contractual or other relationship between the lines and the freight forwarders under which such services are supposed to be provided for the lines, since there is in fact no separate contract for such services and the only contractual relationship between the freight forwarder and the line is the one in which, in continental Europe, the freight forwarder acts as principal in relation to the contract of carriage with the line concerned. 559   The Commission, supported by the ECTU, contends that none of those pleas is well founded. B –  Findings of the Court 560   By the present pleas, the applicants, who do not deny that the agreement in question restricts competition within the meaning of Article 85(1) of the Treaty, claim essentially that the contested decision is flawed in several respects in that it finds at paragraphs 509 to 511 that the agreement in question does not fall within the block exemption laid down by Article 3 of Regulation No 4056/86. 561   The block exemption laid down by Article 3 of Regulation No 4056/86 applies to agreements fixing the rates and conditions of carriage in the maritime sector which must, under Article 1(3)(b) of that regulation, apply uniform or common freight rates ... with respect to the provision of liner services. 562   It follows that in order to qualify for block exemption under Article 3 of Regulation No 4056/86, rate-fixing agreements between members of a maritime conference must establish a uniform or common freight rate (TAA, paragraphs 138 to 143). 563   In the present case, as is apparent from paragraph 164 of the contested decision, the agreement in question consists in the fact that, under Article 5(1)(c) of the TACA, the TACA parties agree on the amounts, levels or rates of brokerage and freight-forwarder remuneration, including the terms and conditions for the payment of such sums and the designation of persons eligible to act as brokers. 564   Such an agreement does not establish a freight rate within the meaning of Article 1(3)(b) of Regulation No 4056/86, but merely fixes the levels of commission paid by the conference members to freight forwarders in consideration for the intermediary transport services they provide as agents of the shippers. Such services, which according to paragraph 163 of the contested decision consist in arranging the transport of goods and negotiating the terms and conditions on which the transport takes place, together with completion of administrative formalities such as the preparation of documentation and customs clearance, cannot be equated with maritime transport services as such, which are the subject of the freight rates falling within the block exemption. Thus unlike the freight rate, which is paid by the shippers to the shipping companies, the commissions with which the agreement in question is concerned are paid by the shipping companies to the shippers' agents. 565   In those circumstances, the Commission was entitled not to apply the block exemption laid down by Article 3 of Regulation No 4056/86 to the agreement in question. 566   None of the pleas put forward by the applicants undermines that conclusion. 567   First, as regards the plea that there is a direct and necessary link between the freight rates and the amounts paid to freight forwarders, whilst the applicants claim that such a link exists they do not explain what it consists of. As the Commission rightly points out at paragraph 517 of the contested decision, the fact emphasised by the applicant in Case T-213/98 that in the United Kingdom and Ireland the carriers do not pay commission to the freight forwarders suggests on the contrary that the agreement in question is not indispensable for the fixing of freight rates. 568   Furthermore, and in any event, even if such a direct and necessary link were shown to exist, the agreement in question would not fall within the block exemption laid down by Article 3 of Regulation No 4056/86. It is settled case-law that, having regard to the general principle laid down by Article 85(1) of the Treaty that agreements restricting competition are prohibited, provisions derogating therefrom in a regulation conferring block exemption must, by their nature, be strictly interpreted (Case T-9/92 Peugeot v Commission [1993] ECR II-493, paragraph 37, and Joined Cases T-24/93 to T-26/93 and T-28/93 Compagnie maritime belge transports and Others v Commission [1996] ECR II-1201 (CEWAL I), paragraph 48). The scope of Regulation No 4056/86 is restricted by Article 1(2) thereof to maritime transport services from or to ports. Consequently, the block exemption provided for under Article 3 of that regulation cannot be extended to services which, even if they could be considered to be ancillary to or necessary for maritime transport from or to ports, are not maritime transport services as such falling within the scope of Regulation No 4056/86. That is all the more so in the present case where those services constitute a separate market on which the freight forwarders are, as is apparent from paragraph 156 of the contested decision, in competition with other economic operators such as the NVOCCs (see, to that effect, FEFC, cited at paragraph 196 above, paragraph 261). 569   Next, as regards the plea that the agreement in question reflects a traditional practice amongst conferences in the United States and other countries as well, the application of the block exemption laid down by Article 3 of Regulation No 4056/86 to a particular agreement cannot depend on whether it is traditional, but depends above all on whether that agreement falls within the scope of that block exemption. Furthermore, according to the case-law, national practices, even if common to all the Member States, cannot be allowed to prevail in the application of the competition rules set out in the Treaty (VBVB and VBBB, cited at paragraph 162 above, paragraph 40). A fortiori, therefore, the practices of certain non-member States cannot dictate the application of Community law (FEFC, cited at paragraph 196 above, paragraph 341). 570   It follows that the fact alleged by the applicants that the agreement in question reflects a traditional practice amongst conferences in the United States and other countries as well cannot, by itself, show that the Commission was wrong to refuse to apply the block exemption laid down by Article 3 of Regulation No 4056/86 to that agreement. 571   In so far as the applicants further allege failure to state reasons on that point, the present plea coincides with the specific plea alleging failure to state reasons in respect of the failure to have regard to US law, which is the subject of separate consideration at paragraphs 1396 to 1411 below. 572   As regards the plea made only by the applicant in Case T-213/98 that the remuneration paid to freight forwarders by carriers constitutes not the price paid for services rendered but a discount on the freight rate, it suffices to note that that plea is based on the false premiss that freight forwarders do not provide any services to the carriers. The Commission states at paragraph 163 of the contested decision, without being contradicted by the applicant, that where the freight forwarders act as agents of the shippers, their task consists in arranging the transport of goods and negotiating the terms and conditions on which the transport takes place, together with completion of the administrative formalities. Such services clearly benefit not only the shippers but also the carriers, since their purpose is to facilitate the conclusion and performance of the contract of maritime transport. 573   The fact that in the United Kingdom and Ireland no commission is paid to freight forwarders by carriers, far from demonstrating that freight forwarders provide no services to carriers, tends rather, as the applicant itself seems to recognise, to indicate the existence in those Member States of an agreement prohibiting the payment of any commission which, in terms of Article 85(1) of the Treaty, may be more restrictive of competition than the agreement at issue. 574   Finally, as regards the same applicant's plea alleging failure to state reasons, its criticisms seek in fact to challenge the merits of the Commission's findings in the contested decision in relation to the services provided by freight forwarders and their legal status in relation to carriers and shippers. Such arguments, which for the reasons given above must be rejected, are not germane to the issue of whether the Commission has complied with its obligation to state reasons (PVC II, cited at paragraph 191 above, paragraph 389). 575   In any event, even if the arguments put forward by the applicants in the present plea may be regarded as seeking to challenge the statement of reasons in the contested decision, it should be borne in mind that it is settled case-law that although, pursuant to Article 190 of the EC Treaty (now Article 253 EC), the Commission is bound to state the legal reasons on which its decisions are based, mentioning the facts, law and considerations which have led it to adopt them, it is not required to discuss all the issues of fact and law which have been raised during the administrative procedure (see, in particular, Case 42/84 Remia and Others v Commission [1985] ECR 2545, paragraphs 26 and 44). At most the Commission is under an obligation, with regard to Article 190 of the Treaty, to reply specifically only to the applicants' primary allegations made in the course of the administrative procedure (FEFC, cited at paragraph 196 above, paragraph 426). 576   In the present case, during the administrative procedure, and in particular in the response to the statement of objections, the applicant did not put forward any evidence to challenge the Commission's findings in the statement of objections in respect of the services provided by the freight forwarders and their legal status in relation to the carriers and shippers. Clearly the Commission cannot be criticised in terms of its obligation to state reasons for not having adopted a position in the contested decision based on evidence which was not submitted to it before that decision was adopted. 577   For all of those reasons, the applicants' pleas in relation to the Commission's findings concerning the agreement relating to the remuneration of freight forwarders must be rejected in their entirety. Conclusion on the pleas alleging that there is no infringement of Article 85 of the Treaty and of Article 2 of Regulation No 1017/68 and various failures to state reasons in that regard 578   It follows from the foregoing that the present pleas must be rejected in their entirety. III. Pleas alleging absence of infringement of Article 86 of the Treaty and various failures to state reasons in that regard 579   These pleas are essentially developed in three parts. In the first part, the applicants deny that their position can be assessed collectively. In the second part, they claim that the TACA members do not hold a collective dominant position. Last, in the third part, they deny the two abuses of a dominant position of which the Commission accuses them in the contested decision. Preliminary observation on the admissibility of these pleas 580   As a preliminary point, the Commission contends that the part of the applications devoted to Article 86 of the Treaty is inadmissible, in that it seeks annulment of the findings of fact set out in the grounds of the contested decision (NBV and NVB, cited at paragraph 499 above). 581   It is clear, however, that by these pleas the applicants are not seeking annulment of the findings of fact set out in the grounds of the contested decision but are challenging those findings in so far as they constitute the necessary support for Articles 5 to 7 of the operative part of the contested decision, which they seek to have annulled and in which the Commission found that the TACA parties had abused their dominant position by altering the competitive structure of the market so as to reinforce the dominant position of the TACA and by placing restrictions on the availability and contents of service contracts, and ordered them to put an end to the abuses. 582   The Commission's objection of inadmissibility of the application on this point must therefore be rejected as unfounded. Part one: the absence of a dominant position held collectively by the TACA parties 583   The applicants deny that the position held by the TACA members can be assessed collectively. In support of this part of their pleas, they claim that the Commission made errors of assessment as regards the economic links between the TACA parties and the internal competition between those parties. A –  Pleas alleging incorrect assessment of the economic links between the TACA parties 584   The applicants observe that at paragraphs 526 to 531 the contested decision identifies five links, namely the tariff, the TACA enforcement provisions, the TACA secretariat, the publication of business plans and consortia arrangements. They submit that those factors, whether taken individually or collectively, do not suffice to justify a collective assessment of their position on the relevant market. 585   First, as regards the tariff, the applicants allege that the obligation in US law (under the United States Shipping Act) to adhere to the tariff does not constitute an economic link such as to lead the applicants to adopt the same conduct on the market, since US law permits members of a conference to depart from the tariff by taking independent action. A tariff comprises both ordinary rates and various exceptions to those rates. The mechanisms for those exceptions are as lawful as the rates themselves. The Commission's position comes down to saying that the members of every liner conference and price cartel should be assessed collectively under Article 86 of the Treaty, which would entail recycling the evidence relevant to an assessment under Article 85 of the Treaty for the purposes of drawing conclusions on the application of Article 86 of the Treaty. 586   Second, enforcement measures are normal within liner conferences and are viewed favourably by the United States Federal Maritime Commission (the FMC) as a means of protecting competition because they are intended to prevent discrimination on the part of conference members against shippers. Furthermore, provided that those measures do no more than ensure compliance with the obligations laid down by the TACA, they cannot logically be considered to be a link in their own right. Last, and in any event, that type of measure does not restrict competition between the TACA members. 587   Third, as regards the role of the TACA secretariat, the applicants point out, first, that it acts on the instructions of the conference members in negotiating service contracts. It is not correct to say, as the Commission does, that the secretariat participates in the negotiation of individual service contracts against the wishes of the shipper. Even where a shipper chooses to involve the secretariat in the negotiation of individual service contracts, it very rarely participates in the negotiation of commercial terms. Next, the applicants consider that the secretariat's role in enforcing service contracts is purely administrative and has no bearing on the competitive position of the members. Similarly, the issuing of press releases is a routine administrative function enabling conferences to communicate with shippers. 588   Fourth, the purpose of publishing a business plan is to announce changes to the tariff and conference service contract rates. Since conference members are required to agree on a tariff, that periodic announcement cannot constitute a link in itself and serve to present the conference members as having a common commercial strategy (paragraph 530 of the contested decision). The applicants also assert that the business plan is a measure intended to contribute to the consultation process with the shippers required by Article 5(1) of Regulation No 4056/86. 589   Fifth, the applicants do not participate in the same consortium. Furthermore, consortium agreements provide operational and technical efficiencies which, as recognised in the fourth and sixth recitals in the preamble to Council Regulation (EEC) No 479/92 of 25 February 1992 on the application of Article 85(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) (OJ 1992 L 55, p. 3), contribute to improving the competitiveness of liner transport. As the Commission noted in its decision on the merger between P&O and Nedlloyd (Decision of 19 December 1996 declaring a concentration to be compatible with the common market (Case No IV/M.831 - P&O/Royal Nedlloyd), according to Council Regulation (EEC) No 4064/89 (OJ 1997 C 110, p. 7), paragraph 65) competition takes place between the lines within the consortia which compete by, firstly, marketing their services separately and, secondly, in the quality of their service e.g. the availability of specialist equipment; the provision of logistic (e.g. container packing) and intermodal services and by the speed and quality of documentation including data processing. Membership of consortium agreements is only relevant as an economic link if the parties to the agreements adopt the same conduct on the market. That is not so in this case. On the contrary, the TACA parties' membership of different consortia serves to increase internal competition between them. 590   Last, the applicant in Case T-212/98 claims that the Commission's finding that the links between itself and the other TACA members are sufficiently strong to show collective dominance is based on a flawed assessment of the economic links between them. The applicant's market share of the trade in question (less than 0.1%) and its turnover on that trade in 1996 compared with that of other TACA members (only 1.2% of its turnover arose from that trade) show that it cannot have acted as a single economic entity with the other applicants on the relevant market. 591   The Commission, supported by the ECTU, contends that the economic links identified in the contested decision demonstrate to the requisite legal standard the collective nature of the position held by the TACA parties. 592   By these pleas, the parties allege in substance that the economic links between the TACA parties identified in the contested decision, whether taken individually or collectively, are not sufficient to justify a collective assessment of their position on the relevant market. 593   By the subsequent pleas alleging incorrect assessment of the internal competition, which are examined below, the applicants criticise the Commission for not having taken into account the significant competition between the TACA parties within the conference, especially as regards prices. In those circumstances, these pleas must be taken as intended solely to criticise the Commission for having considered that the links resulting from the existence of the conference are as such capable of justifying a collective assessment of the position held by the TACA parties. 594   It has consistently been held that Article 86 of the Treaty is capable of applying to situations in which several undertakings together hold a dominant position on the relevant market (Case C-393/92 Almelo and Others [1994] ECR I-1477, paragraph 43; Case C-96/94 Centro Servizi Spediporto [1995] ECR I-2883, paragraphs 32 and 33; Joined Cases C-140/94 to C-142/94 DIP and Others [1995] ECR I-3257, paragraphs 25 and 26; Joined Cases T-68/89, T-77/89 and T-78/89 SIV and Others v Commission (Flat glass) [1992] ECR II-1403, paragraph 358; and CEWAL I, cited at paragraph 568 above, paragraph 60). 595   In order to conclude that such a dominant position exists, the undertakings concerned must, according to the case-law, be sufficiently linked between themselves to adopt the same line of action on the market (Centro Servizi Spediporto, cited at paragraph 594 above, paragraph 33; DIP and Others, cited at paragraph 594 above, paragraph 26; Joined Cases C-68/94 and C-30/95 France and Others v Commission (Kali und Salz) [1998] ECR I-1375, paragraph 221; Case C-309/99 Wouters and Others [2002] ECR I-1577, paragraph 113; and CEWAL I, cited at paragraph 568 above, paragraph 62). In that regard, it is necessary to examine the links or factors of economic correlation between the undertakings concerned and to ascertain whether those links or factors allow them to act together independently of their competitors, their customers and consumers (Almelo, cited at paragraph 594 above, paragraph 43; Kali und Salz, cited above, paragraph 221; Joined Cases C-395/96 P and C-396/96 P Compagnie maritime belge transports and Others v Commission (CEWAL II) [2000] ECR I-1365, paragraphs 41 and 42; and Wouters, cited above, paragraph 114). 596   At paragraph 525 of the contested decision, the Commission stated that the members of the TACA collectively enjoy a dominant position by reason of the fact that they are bound together by a considerable number of economic links which has led to a significant diminution of their ability to act independently of each other. The parties are agreed that at paragraphs 526 to 531 of the contested decision, the Commission relied on the following five economic links: the tariff (paragraph 526), the enforcement provisions and penalties (paragraph 527), the secretariat (paragraphs 528 and 529), the annual business plans (paragraphs 528 and 530) and the consortia arrangements (paragraph 531). Paragraph 528 of the contested decision states that in the Commission's view the tariff and the enforcement provisions and penalties constitute restrictions on the TACA parties' ability to act independently of each other [which] are intended to eliminate substantially price competition between them. The Commission further stated at paragraph 528 of the contested decision that the TACA secretariat and the annual business plans were measures which allowed the TACA parties to present [themselves] as a single united body and so diminish pressure for price reductions from customers. 597   With the exception of the consortia arrangements, the links identified by the Commission, namely the tariff, the enforcement provisions and penalties, the secretariat and the annual business plans, are the direct consequences of the activities carried out by the applicants within the TACA and, accordingly, of their membership of it. 598   It is common ground that the TACA is a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86. In order to constitute a liner conference within the meaning of that provision, the undertakings concerned must necessarily establish a certain number of links between them. 599   Article 1(3)(b) of Regulation No 4056/86 defines a liner conference as a group of two or more vessel-operating carriers which provides international liner services for the carriage of cargo on a particular route or routes within specified geographical limits and which has an agreement or arrangement, whatever its nature, within the framework of which they operate under uniform or common freight rates and any other agreed conditions with respect to the provision of liner services. 600   The eighth recital in the preamble to that regulation states that such conferences have a stabilising effect, assuring shippers of reliable services; ... they contribute generally to providing adequate efficient scheduled maritime transport services and give fair consideration to the interests of users; ... such results cannot be obtained without the cooperation that shipping companies promote within conferences in relation to rates and, where appropriate, availability of capacity or allocation of cargo for shipment, and income; ... in most cases conferences continue to be subject to effective competition from both non-conference scheduled services and, in certain circumstances, from tramp services and from other modes of transport; ... the mobility of fleets, which is a characteristic feature of the structure of availability in the shipping field, subjects conferences to constant competition which they are unable as a rule to eliminate as far as a substantial proportion of the shipping services in question is concerned. 601   As the Court of Justice and the Court of First Instance have already held (CEWAL II, cited at paragraph 595 above, paragraphs 48 and 49; Flat glass, cited at paragraph 594 above, paragraph 359; and CEWAL I, cited at paragraph 568 above, paragraphs 63 to 66), it follows from those provisions that both by its nature and in the light of its objectives, a liner conference, as defined by the Council for the purposes of qualification for block exemption under Regulation No 4056/86, may be described as a collective entity which presents itself as such on the market vis-à-vis both users and competitors. Furthermore, the Council has laid down in Regulation No 4056/86 the provisions necessary to avoid a liner conference having effects incompatible with Article 86 of the Treaty. That does not in any way prejudge the question whether, in a given situation, a liner conference has a dominant position on a particular market or, a fortiori, has abused that position. As is clear from Article 8(2) of Regulation No 4056/86, it is by its conduct that a conference holding a dominant position may produce effects which are incompatible with Article 86 of the Treaty. 602   In the light of the foregoing, it is appropriate to regard the links resulting from the existence of a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86 as being, in principle, capable of justifying a collective assessment of the position on the relevant market of the members of that conference for the purposes of the application of Article 86 of the Treaty, in so far as those links are such as to allow them to adopt together, as a single entity which presents itself as such on the market vis-à-vis users and competitors, the same line of conduct on that market. 603   None of the arguments put forward by the applicants in the context of these pleas is capable of upsetting that conclusion. 604   First, as regards the TACA's tariff, the applicants claim that the obligation in US law to comply with the tariff does not constitute an economic link of such a kind as to lead them to adopt the same conduct on the market, since US law allows the members of a conference to depart from the tariff in the context of independent action. The applicants further state that a tariff has both ordinary rates and various exceptions to those rates. 605   In order to examine the merits of this plea, it is appropriate to recall that at paragraph 526 of the contested decision the Commission expressed the view that the tariff constituted the first of the economic links between the TACA parties. It observed that the TACA parties not only agreed to adhere to a tariff but were also required to do so by US law, failing which they might be fined up to USD 25 000 for each violation. The Commission thus considers, according to paragraph 528 of the contested decision, that the tariff is a restriction on the TACA members' ability to act independently of each other and is intended to eliminate substantially price competition between them. 606   The very existence of a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86, such as the TACA, requires the application of a tariff providing for uniform or common freight rates. 607   Such a liner conference therefore presents itself as a single entity on the market since it fixes uniform or common freight rates for all its members, in the sense that the same price will be charged for the carriage of the same cargo from point A to point B, regardless of which shipowning member of the conference is responsible for carriage (TAA, paragraph 157). 608   The fact that the tariff provides for certain special rates, such as TVRs, in addition to the ordinary rates, is irrelevant, since, as the Commission stated in respect of the special rates at paragraph 120 of the contested decision, and as the applicants themselves accept, these special rates are also uniform or common rates forming an integral part of the tariff. 609   As regards the applicants' claim that US legislation requires that members of a liner conference be permitted to carry out independent actions on the tariff rates, it should be emphasised that those independent actions constitute exceptions to the principle of joint price-fixing (TAA, paragraph 307), so that they cannot, in principle, affect the uniform nature of the tariff rates and, accordingly, call in question the collective assessment of the conference as resulting, together with other factors, from the tariff. As stated above, the question whether in this case the independent actions and the other specific pricing practices of the TACA parties are of such a kind as to call such an assessment in question is, as stated above, the subject of separate pleas. 610   Last, contrary to what the applicants claim, the fact that an agreement is prohibited by Article 85(1) of the Treaty does not prevent the Commission from taking such an agreement into consideration in order to conclude, in the context of the application of Article 86 of the Treaty, that the position of the undertakings concerned on the relevant market is a collective one. As the Court of Justice has already held, an agreement, decision or concerted practice (whether or not covered by an exemption under Article 85(3)) may, where it is implemented, result in the undertakings concerned being so linked as to their conduct on a particular market that they present themselves on that market as a collective entity vis-à-vis their competitors, their trading partners and consumers. The existence of a collective dominant position may therefore flow from the nature of the terms of an agreement, from the way in which it is implemented and, consequently, from the links or factors which give rise to a connection between undertakings which result from it (CEWAL II, cited at paragraph 595 above, paragraphs 44 and 45). As observed at paragraph 601 above that applies, according to the case-law, to a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86. It is common ground in this case that the TACA is such a liner conference. Accordingly, the Commission was entitled to rely on such an agreement in order to conclude, in the context of the application of Article 86 of the Treaty, that the position of the TACA parties on the relevant market was a collective position. 611   It must therefore be concluded that the Commission was entitled to rely in particular on the TACA tariff in order to make a collective assessment of the position of the TACA parties on the relevant market. The applicants' arguments on this point must therefore be rejected. 612   Second, the applicants submit that the TACA enforcement provisions and penalties are normal within liner conferences and that they are looked on favourably by the FMC as a means of protecting competition, since they are intended to prevent discriminatory practices on the part of conference members vis-à-vis shippers. Furthermore, in so far as those measures serve merely to ensure compliance with obligations laid down by the TACA, they cannot logically be regarded as a link in their own right. 613   It should be noted that at paragraph 527 of the contested decision the Commission stated that adherence to the TACA is ensured by extensive enforcement provisions. Paragraph 21 of the contested decision states that Article 10 of the TACA provides for the setting up of an Enforcement Authority which is responsible, acting on its own initiative or following a complaint, for investigating any alleged breach of the agreement. The Commission observes at paragraph 22 of the contested decision that the Enforcement Authority has unfettered access to all documents related to a carrier's activities in the trade and is authorised to impose substantial fines for any breach of the agreement, in particular the price-fixing arrangements, and for any refusal to allow access requested during an investigation. The Commission thus states at paragraph 527 of the contested decision that these provisions are the most extensive policing arrangements ever seen by the Commission in the liner shipping sector. 614   Clearly, such enforcement provisions and penalties, intended primarily to ensure compliance with the tariff adopted by a liner conference, are likely to reinforce the link established by that tariff, particularly when, as stated at paragraph 599 above, the very existence of a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86 requires the application of a tariff providing for uniform or common freight rates, so that the existence of enforcement provisions and penalties to ensure compliance therewith by the parties to the liner conference constitute measures necessary and, therefore, ancillary to any liner conference within the meaning of that provision. 615   Contrary to what the applicants claim, it is immaterial in this regard that the FMC takes a positive view of the enforcement provisions adopted by liner conferences. Those measures are singled out in the contested decision not as constituting an infringement of the Treaty competition rules but as a factor likely to reinforce the link between the parties to the TACA resulting from the tariff adopted by it. The existence of such a link, which may induce the Commission to make a collective assessment of the position of the TACA parties, does not in itself imply any infringement of the Treaty competition rules. Only the abuse of that position is capable of constituting such an infringement, at least when the position held collectively assumes dominance on the relevant market (CEWAL II, cited at paragraph 595 above, paragraphs 37 to 39). 616   The fact, alleged by the applicants, that the enforcement provisions and penalties do not in themselves constitute a link is irrelevant, since it has been found above that those measures were likely to reinforce the link established by the tariff. 617   The Commission was therefore entitled to rely in particular on the existence of enforcement provisions and penalties to make a collective assessment of the position held by the TACA members on the relevant market. 618   Third, as regards the TACA secretariat the applicants emphasise, first of all, that for the purpose of negotiating service contracts the secretariat acts on the instructions of the members of the conference and that even when a shipping agent chooses to involve the secretariat in negotiating individual service contracts, the secretariat very rarely participates in the negotiation of the trade terms. Furthermore, the secretariat's role in implementing the service contracts is purely administrative and is not relevant as regards the members' competitive position. 619   At paragraph 528, however, the Commission stated that the TACA secretariat enabled the liner conference to present itself on the market as a single united body. At paragraph 529, it pointed out that the TACA secretariat had extensive administrative and financial functions, that it was authorised to act as agent for the TACA members by entering into transport contracts on their behalf, that it had the right to attend service contract negotiations between shippers and members and that it issued press notices on behalf of the parties. 620   Without there being any need to inquire into the precise role of the TACA secretariat in negotiating and implementing service contracts, it is clear that the mere undisputed existence of a common administrative body having the capacity to represent the TACA parties, in particular vis-à-vis shippers, is a factor capable of demonstrating that the TACA is in a position to present itself as a single united body on the market, thus reflecting the links existing between the TACA parties as a result of their activities as members of a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86. It is also apparent from the file before the Court that correspondence from shippers concerning the conclusion of service contracts with the conference is addressed to the TACA secretariat. 621   The Commission was therefore entitled to rely on the existence of the TACA secretariat to make a collective assessment of the TACA parties' position on the relevant market. The applicants' arguments on this point must therefore be rejected. 622   Fourth, as regards the TACA's annual business plans, the applicants maintain that, as they are intended to announce changes in the tariff, they cannot in themselves constitute a link and serve to present the conference as having a common trading strategy. Furthermore, the annual business plan is intended to contribute to the consultation process with the shippers required by Article 5(1) of Regulation No 4056/86. 623   However, the Commission stated at paragraphs 528 and 530 of the contested decision that publication by the TACA of annual business plans showed that the TACA parties were seen by shippers as having a single trading strategy on the market and thus permitted the TACA to present itself on the market as a single united body. 624   It is clear that publication by the TACA of annual business plans, drawn up jointly by its members in the context of their activities as a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86, is a factor manifestly capable of showing the TACA as a single body vis-à-vis third parties, thus reflecting the existence of the links existing between the members of a liner conference within the meaning of that regulation. Contrary to the applicants' contentions, the annual business plans therefore constitute in themselves a link which, owing precisely to the fact that they are published by the TACA, is capable of presenting the TACA as a collective entity on the relevant market vis-à-vis its competitors and shippers. 625   That is borne out by the fact that, as the applicants themselves point out, the annual business plans are intended to contribute to the process of consultation with shippers required by Article 5(1) of Regulation No 4056/86. According to that provision, the purpose of those consultations is to seek solutions on general issues of principle concerning the rates, conditions and quality of scheduled maritime transport services arising between users and the liner conference as a whole. Therefore, far from contradicting the Commission's finding that publication of the annual business plans serves to enable the TACA to present itself as a collective entity on the relevant market, the fact that publication is the consequence of an obligation imposed on liner conferences by Regulation No 4056/86 is, on the contrary, likely to reinforce it. 626   In that regard, it should also be observed that publication of those annual business plans is identified in the contested decision not as constituting a breach of the Treaty competition rules but as a factor likely to present the TACA as a collective entity on the relevant market. The existence of such a collective entity does not in itself imply any breach of the Treaty competition rules. Only the abuse by that collective entity of its position on the relevant market is susceptible of constituting such an infringement, at least when the position thus held is a dominant position on the relevant market (CEWAL II, cited at paragraph 595 above, paragraphs 37 to 39). 627   The Commission was therefore entitled to rely in particular on the publication of the TACA's annual business plans in order to make a collective assessment of the position held by the TACA parties on the relevant market. The applicants' arguments on this point must therefore be rejected. 628   All those considerations show clearly that, in accordance with the case-law cited at paragraph 601 above, the tariff, the enforcement provisions and penalties, the secretariat and the annual business plans of the TACA demonstrate to the requisite legal standard the existence of substantial links between the TACA parties of such a kind as to justify a collective assessment of their position on the relevant market. 629   Consequently, without there being any need to rule on the relevance of other links between the applicants resulting from the conclusion of other agreements, such as consortia agreements, it must be concluded that the Commission was entitled to rely on those factors, which result from the applicants' activities as parties to the TACA and, accordingly, from their membership of a liner conference within the meaning of Article 1(3)(b) of Regulation No 4056/86, in order to make a collective assessment of the TACA parties' position on the relevant market. 630   In the case of the applicant in Case T-212/98, that conclusion is not affected by the minimal nature of its market share or of its turnover on the trade in question. Provided that the links serving to justify the collective assessment of the position of the TACA parties result from their membership of the TACA, the position of each party to the TACA must, by the simple fact of that membership, be assessed with that of the other parties to the TACA, since by that membership the applicant has bound itself, as regards its conduct on a specific market, to the other parties which have joined the TACA, in such a way that they present themselves on the market as a collective entity vis-à-vis their competitors, their trading partners and consumers (CEWAL II, cited at paragraph 595 above, paragraph 44). In this case, the applicant does not dispute that it was a party to the TACA during the relevant period. 631   Furthermore, it has been held that in order for the position of a number of undertakings to be assessed collectively on the relevant market it is sufficient that they are able to adopt a common policy on that market. On the other hand, there is no need to show that those undertakings have in fact all adopted that common policy in all circumstances (see, to that effect, Kali und Salz, cited at paragraph 595 above, paragraph 221). 632   In those circumstances, the fact that, owing to its minimal position on the market, not every act carried out by the TACA can be imputed to the applicant is of no relevance in the context of these pleas relating to the collective nature of the position held by the TACA parties. 633   At most, the fact that one party to the TACA did not follow the conduct adopted by the other TACA parties might show that that party to the TACA did not participate in an infringement of Article 86 of the Treaty, should it transpire that the conduct adopted by the other TACA parties constituted an abuse for the purposes of that provision. Although the existence of a collective dominant position may be deduced from the position which the economic entities concerned together hold on the market in question, the abuse does not necessarily have to be the action of all the undertakings in question. It need only be capable of being identified as one of the manifestations of such a joint dominant position (Irish Sugar, cited at paragraph 152 above, paragraph 66). 634   Accordingly, even if the applicant's market share or turnover on the trade in question was minimal during that period, it must be considered that, regard being had to the tariff, the enforcement provisions and penalties, the secretariat and the annual business plans of the TACA, that applicant was capable of forming together with the other TACA parties a single entity on the relevant market. 635   It follows from all of those considerations that the pleas, complaints and arguments alleging incorrect assessment of the economic links between the TACA parties must be rejected in their entirety. 636   The Court must none the less ascertain whether, as the applicants claim in the subsequent pleas, the evidence relating to internal competition which they have adduced can show that the links identified in the contested decision do not in this case justify a collective assessment of the dominant position held by the TACA parties. B –  Pleas alleging errors of assessment concerning internal competition between the parties to the TACA 637   As regards internal competition between the TACA parties, the applicants claim, first of all, that in the contested decision the Commission applied the wrong legal test. They go on to claim that the Commission incorrectly assessed internal price and non-price competition between the TACA parties. Last, the applicants rely on various failures to state reasons in the contested decision in those respects. 1.     Application in the contested decision of the wrong legal test a)     Arguments of the parties 638   First of all, the applicants complain that the Commission did not consider whether the links between the TACA members led to the existence of a single body operating on the market. In particular, they submit that the Commission did not define [those links] by reference to their result, namely the establishment of a situation where a group of independent undertakings performs as a single market entity (Opinion of Advocate General Fennelly in CEWAL II [2000] ECR I-1371, point 28). 639   In support of this complaint, the applicants claim that the Commission thus refers at paragraphs 528 and 530 of the contested decision to their intentions and to the appearance of their actions, without proving the effect of those links on their conduct on the market. 640   Second, they challenge the Commission's assertion at paragraph 522 of the contested decision that it follows from the judgment in Flat glass, cited at paragraph 594 above, that the continued existence of a possible degree of competition between the parties does not rule out the finding of a collective dominant position. 641   The applicants contend that the judgment in Flat glass does not contain that argument. The Court of First Instance merely held there that there is nothing, in principle, to prevent two or more independent economic entities from being, on a specific market, united by such economic links that, by virtue of that fact, together they hold a dominant position vis-à-vis the other operators on the same market (paragraph 358 of the judgment). The applicants submit that that passage gives no indication of the degree of competition that would be compatible with a finding of collective dominance. 642   The applicants claim that the Commission is seeking by its argument to develop a new test which makes the common tariff the predominant factor justifying a finding of collective dominance, so that if the undertakings in question adopt the same general approach, evidence of independent conduct on the market, including independent pricing, does not mean that there is no collective dominant position. Since under Article 3 of Regulation No 4056/86 any liner conference must be based on a uniform or common tariff, the Commission has applied a virtually irrebuttable presumption that the members of any liner conference, including the TACA, are capable of having a collective dominant position. That argument also explains the Commission's reluctance to address the evidence of actual competition. 643   The applicants assert that, on the contrary, it is apparent from Community case-law that the existence of a collective dominant position presupposes a lack of competition between the undertakings concerned. At paragraph 34 of the judgment in Centro Servizi Spediporto, cited at paragraph 594 above, the Court of Justice held that national legislation which provides for the fixing of road-haulage tariffs by the public authorities cannot be regarded as placing economic agents in a collective dominant position characterised by the absence of competition between them (see also DIP, cited at paragraph 594 above, paragraph 27, and, as regards the Commission's practice, the Notice on the application of the competition rules to access agreements in the telecommunications sector - framework, relevant markets and principles, OJ 1998 C 265, p. 2, paragraphs 78 and 79). In his Opinion in CEWAL II, cited at paragraph 638 above, Advocate General Fennelly concluded that it emerges clearly from the case-law discussed above, particularly Centro Servizi Spediporto, DIP and [KaliundSalz], that absence of competition between a number of putatively collective dominant undertakings is a salient feature of collective dominance (point 34). That case-law is, moreover, consistent with generally accepted economic theories on collective dominance. 644   The applicants claim that it follows that, in order to determine whether there is a collective dominant position, it is necessary to consider first whether the undertakings concerned have adopted a mutual pricing strategy and, if so, secondly whether the extent and intensity of non-price competition are such as to negate a finding of collective dominance based on the existence of a mutual pricing strategy (Opinion of Advocate General Fennelly in CEWAL II, cited at paragraph 638 above, paragraph 34). In this case, the applicants claim, the contested decision does not make that twofold assessment. 645   Third, the applicants allege that the Commission failed to assess the main question, namely whether the applicants adopted the same conduct on the market (Almelo, cited at paragraph 594 above, paragraph 42) and whether they constitute a single market entity (Opinion of Advocate General Fennelly in CEWAL II, cited at paragraph 638 above, paragraph 28). The only conclusion drawn on this issue in the contested decision, at paragraph 525, is that the economic links between the TACA members have led to a significant diminution of [their] ability to act independently of each other. That does not justify a finding that the applicants are capable of occupying a collective dominant position. Contrary to the requirements of the case-law and the economic theories on the matter, the Commission does not purport to characterise the effect of those links as the adoption of the same conduct on the market for all relevant aspects of competition on the market. The claim in the defence that it was sufficient that the TACA members adopted substantially the same conduct cannot therefore be upheld. 646   The applicants also observe, by way of conclusion, that the Commission's approach in diluting the same conduct test blurs the distinction between Article 85 and Article 86 of the Treaty and in effect gives the Commission a discretion to determine the circumstances in which Article 86 of the Treaty is to apply to the conduct of two or more undertakings. Whilst the Commission has refused to define the scope of that discretion, it appears to consider that horizontal collusion may be worse than dominance by a single undertaking and must, for that reason, fall within Article 86 of the Treaty. 647   The applicant in Case T-212/98 further claims that even if it could be regarded as occupying a collective dominant position with the other TACA members for the sole reason that it is a TACA member, it does not follow that any action taken by one or more TACA parties in relation to the transatlantic trade must necessarily be attributed to all TACA parties at any time. Notwithstanding the fact that the abuses with which the applicants are charged fall wholly or partly outside the scope of the TACA agreement, the Commission has failed to show that all of the TACA parties adopted the same conduct on the market in relation to the issues addressed by the contested decision. The applicant claims that its weak position on the market at the time of the facts makes it unlikely that there was the same conduct since it would have derived few advantages from that. It emphasises, moreover, that as a new TACA member, it agreed to be bound by the clauses of the conference agreement as they stood at the time of its joining. 648   The Commission, supported by the ECTU, claims that this plea should be rejected. b)      Findings of the Court 649   By the arguments which they put forward in support of this plea, the applicants are essentially criticising the Commission for having failed to establish to the requisite legal standard that the TACA members formed a single body which had adopted the same conduct on the market, leading to the elimination of any competitive relationship between them. 650   The applicants correctly observe that the Commission did not establish in the contested decision that the TACA parties had adopted the same conduct on the market in question, but only, as stated at paragraph 525, that the numerous economic links identified at paragraphs 526 to 531, resulting on the one hand from the tariff, the enforcement provisions and penalties, the secretariat and the TACA annual business plans and from the consortia agreements on the other had led to a significant diminution of their ability to act independently of each other. The Commission also expressly stated, at paragraph 528 of the contested decision, that the restrictions on the ability of the TACA members to act independently of each other as a result of the tariff and the TACA enforcement provisions and penalties were intended to eliminate substantially price competition between them. The Commission concludes in paragraph 522 of the contested decision that the continued existence of a possible degree of competition between the parties does not rule out the finding of a collective dominant position. 651   It is therefore necessary to consider whether, as the applicants maintain, in order to assess collectively the position held by a number of undertakings in the context of the application of Article 86 of the Treaty, the Commission is required to establish that the undertakings concerned have adopted the same conduct leading to the elimination of any competitive relationship between them. 652   It has been held that, in order for the position of a number of undertakings to be the subject of a collective assessment on the relevant market, it must be shown that the undertakings concerned are together, in particular because of factors giving rise to a connection between them, able to adopt a common policy on the market (Kali und Salz, cited at paragraph 595 above, paragraph 221). That is so if the undertakings are in a position to anticipate one another's behaviour and are therefore strongly encouraged to align their conduct in the market, in particular in such a way as to maximise their joint profits by restricting production with a view to increasing prices (Case T-102/96 Gencor v Commission [1999] ECR II-753, paragraph 276, and Case T-342/99 Airtours v Commission [2002] ECR II-2585, paragraph 60). 653   Although the possibility that one undertaking may align its conduct with that of one or more competitors necessarily implies that competition between them is significantly restricted, such a possibility to align competitive conduct in no way implies that competition between the undertakings concerned is completely eliminated. Furthermore, the existence of a collective dominant position within the meaning of Article 86 of the Treaty presupposes the existence of economic links between two or more economic entities which are, by definition, independent and, accordingly, capable of competing with one another, and not the existence between the undertakings concerned of institutional links comparable to those existing between a parent company and its subsidiaries (see, to that effect, Flat glass, cited at paragraph 594 above, paragraphs 357 and 358). 654   Consequently, although the lack of effective competition between operators alleged to be members of a dominant oligopoly is a significant factor among those that must play a role in determining the existence of a collective dominant position (Airtours, cited at paragraph 652 above, paragraph 63; see also, to that effect, Centro Servizi Spediporto, cited at paragraph 594 above, paragraph 34, and DIP, cited at paragraph 594 above, paragraph 27), there can be no requirement, for the purpose of establishing the existence of such a dominant position, that the elimination of effective competition must result in the elimination of all competition between the undertakings concerned. 655   The applicants are therefore wrong to maintain that the existence of a collective dominant position within the meaning of Article 86 of the Treaty essentially precludes any competition between the undertakings holding such a position and requires the adoption by those undertakings of the same conduct for all aspects of competition on the relevant market. 656   The arguments whereby the applicant in Case T-212/98 alleges that, even if it could be regarded as holding together with the other members of the TACA a dominant position solely by reason of its membership of the TACA, it does not follow that every act carried out by two or more parties to the TACA concerning transatlantic traffic must necessarily be attributed to all the parties of the TACA at any time have already been answered at paragraphs 630 to 634 above in the context of the preceding pleas. 657   It follows from all the foregoing that this plea, alleging application of the wrong legal test must be rejected. 2.     Pleas alleging incorrect assessment of internal price and non-price competition 658   The applicants put forward two pleas. The first alleges incorrect assessment of internal price competition and the second alleges incorrect assessment of internal non-price competition. 659   As regards, first, price competition, the applicants submit that the Commission's analysis of the evidence they adduced regarding their individual pricing strategy is on economic and legal grounds inconsistent with a finding of a collective dominant position. 660   As a preliminary point, the applicants argue that it is necessary to distinguish between conference rates and independent action rates. They explain that confe rence rates include tariff rates and conference service contract rates. Tariff rates in turn comprise both ordinary rates, applicable for the transport of commodities falling within certain classes regardless of quantity (class tariff rates), and TVRs, which relate to the transport of a given volume over a particular period. All those rates are set by the members of the conference acting together. Independent action rates, by contrast, include independent action both on ordinary rates or by way of TVR (time/volume rates, independent action, or TVRIA) and individual service contract rates. They are negotiated directly between the shipper and one or (in the case of joint individual service contracts) more conference members. 661   The applicants emphasise that both conference rates and independent action rates reflect competition in the market. Thus, in agreeing on conference rates, the applicants must take account of competition from non-conference carriers, operators on alternative routes, independent action and other modes of transport and of customer purchasing power. As a result of that competition, the prevailing rates on the transatlantic trade are low, as the conclusions of the Drewry Report and the Mercer Report show. 662   The applicants submit that in the case of liner conferences a finding that there is a common pricing strategy requires that all or practically all cargo is carried by the conference at conference ordinary rates or conference service contract rates. In this case, however, the applicants adopted an independent pricing policy in response to both internal and external competition. The existence of internal competition is demonstrated by the existence of independent action, individual and joint service contracts and contracts with NVOCCs. The applicants claim that to deny that internal competition exists is to find, as the Commission implicitly does, that the members of a shipping conference must by definition be considered collectively, regardless of evidence of price- or non-price competition between them. The applicants consider that the evidence described below shows that they did not adopt the same price fixing behaviour on the market. The Commission has adduced no evidence to the contrary. 663   First, the applicants submit that, whilst it is true that independent action is often very short-term or provides a temporary solution pending the negotiation of service contracts, such actions are evidence of internal price competition in that recourse to independent actions, even for a short period, is an independent pricing decision. The applicants stress in particular the possibility for each conference member to adopt the independent action taken by another member (by means of a me too). The applicants claim that such actions are evidence of internal competition since they attest to the willingness of the member electing to me too to compete with the member initiating the independent action. The right to me too is guaranteed by the US Shipping Act. 664   The applicants further stress that the procedure governing independent action gives conferences a wide margin of discretion to respond to internal and external competition. They point out in that respect that independent action on ordinary rates must be notified to the conference secretariat, which in turn notifies all conference members and publishes it in the new conference tariff, so that any shipper may benefit from that rate throughout its period of validity without having to ship cargo with the member who took the initiative. The applicants stress that any conference member may offer its services at the TVRIA provided it does so before that rate becomes effective and provided it obtains the consent of the initiator. The applicants also observe that under the FMC regulations once a shipper accepts the rate it can no longer be revised, even if subsequently the conference rate falls. 665   In this case, the applicants explain, there were numerous examples of independent action by the TACA members from 1994 to 1997 and they claim, on the basis of TVRIA data for 1996, that (i) in 1996, 8.3% of total cargo transported on the transatlantic trade was at TVRIA rates; (ii) the applicants pursued different strategies on the subject (for example, whilst two TACA members carried no cargo at TVRIA rates, two other members carried more than 20% of their total cargo at such rates; (iii) even if they are unable to identify the volume of cargo carried in the context of an independent action on the ordinary rates, it is clear that the total volume of cargo carried in that context is greater than that carried at TVRIA rates alone. 666   The applicants also state, relying on the statistics for 1996, that competition between the members of each of the consortia to which the TACA members are party is characterised by independent action and me toos, which contradicts the assertion at paragraph 198 of the contested decision that vessel-sharing agreements have the effect of reducing the number of independent actions entered into by their members. The statement by an FMC official set out at paragraph 197 of the contested decision, and on which the former assertion was based, does not represent the FMC's official position. The fact that a high number of vessel-sharing agreements have been accepted by the FMC shows, however, that that body makes no link between the existence of that type of agreement and the level of independent action activity engaged in by its members. The applicants take note of the fact that in the defence this is considered to be a minor part of the contested decision, but maintain that the Commission has adduced no evidence in support of that finding. 667   Lastly, the applicants challenge the relevance of the comparison, in Table 4 of the contested decision, between independent actions on the transpacific trade and independent actions on transatlantic trades. They point out (i) that the Commission provides no information as to the relative size of the two trades; (ii) that the Commission does not take account of the fact that, in the TACA, each notification of independent action is counted as one independent action, regardless of the number of tariff line items affected (in terms of commodities and routings), whilst on the Asia-bound transpacific trade independent actions are recorded for each commodity and each routing affected; (iii) that in the case of the TACA, which contains ordinary rates, independent action taken for one class may affect several commodities, whilst in the case of the transpacific trade, which has one tariff per commodity, independent actions are generally undertaken with respect to a single commodity; and (iv) that the Commission has not given the source for the data quoted. In support of their challenge, the applicants attach a statement from Mr Conrad, the Deputy Executive Director of the Transpacific Stabilisation Agreement and former General Manager and Managing Director of the Asia North America Eastbound Rate Agreement, explaining why Table 5 of the contested decision does not bear the conclusions the Commission seeks to draw from it. 668   Second, the applicants point out that in 1996 they entered into a total of 92 individual and joint service contracts, representing 17.8% of all service contracts entered into by them and 15.3% of the total cargo transported by them in 1996. The applicants also point out that the participation in joint service contracts demonstrates the different commercial policies followed by each of the TACA members. Thus, whilst some members did not participate in any such contracts, seven participated in at least one, and eight participated in more than 70. They point out that those service contracts do not need to be put to the vote of the conference. Since almost all of the applicants entered into individual or joint service contracts, and did so to varying degrees, the applicants claim that they do not understand the significance of the Commission's observation that slightly fewer than half of the contracts were with proprietary shippers. The fact, highlighted by the Commission, that almost all service contracts stipulate different prices is the product of individual strategies of individual carriers. Similarly, the fact that certain shippers also ship part of their cargo under conference service contracts is a reflection of the willingness of the individual carriers to pursue business as individual operators competing against the conference as a whole, other conference members and companies outside the conference. 669   The applicants submit that the conclusion of those service contracts resulted in a reduction in the conference tariff. Thus, the individual service contract entered into in 1996 by Hanjin with Wittwer Schwelm concerning the transport of vehicle spare parts and chemicals, after prompting a me-too on the part of Ocean World Lines, an NVOCC, resulted in a reduction in ordinary rates for various commodities of up to 17.7%. The applicants submitted this evidence to the Commission in the comments on the statement of objections but the Commission disregarded it in the contested decision with no explanation. 670   Third, the applicants allege that the individual strategies adopted by the TACA members in relation to competition for the transport of NVOCC cargo show that there was no collective dominant position. Thus it is apparent from figures given in the application that (i) in 1994 seven of the then 16 members of the TACA competed for the carriage of NVOCC cargoes; (ii) in 1995, nine of the then 17 TACA members competed for the carriage of NVOCC cargoes; (iii) in 1996, 15 of the 17 TACA members competed for the carriage of NVOCC cargoes; and (iv) in 1997, 16 of the 17 TACA members competed for the carriage of NVOCC cargoes. Furthermore, the same data show that the share of each of the applicants of the total NVOCC cargo carried by the conference varied considerably over the period in question, which again demonstrates the different policies pursued by each of the TACA members in this area. Thus, for example, Hapag-Lloyd's share of total NVOCC cargo carried by the conference increased between 1994 and 1997 from 0.9% to 9.6%, at the expense of the companies traditionally dealing with that type of cargo. The explanation was given by the applicants' legal adviser in a letter to the Commission dated 3 May 1995, which states that: In relation to full container load (FCL) cargo, however, some TACA parties have elected, as part of their overall corporate business policy, planning, marketing and investment strategy, not to maintain large sales forces and/or extensive agency networks to solicit cargo from the numerically great number of small and medium-sized proprietary shippers of FCL cargo. As a consequence, such carriers tend to utilise and depend to a greater extent upon the [NVOCCs] to solicit and aggregate significant volumes of FCL cargo. In distinction to such TACA parties, others have elected to maintain, and bear the fixed costs of, extensive internal sales forces, customer service functions and agency networks. These carriers tend to deal to a much greater extent directly with FCL proprietary shippers and therefore tend to view NVOCCs as competitive and rival carriers (since they too are competing for proprietary shipper FCL cargo). 671   Those adopting the former approach include, for example, Cho Yang, whose share of the conference's NVOCC cargo fell from 19.5% in 1994 to 8.3% in 1997. In the reply the applicants explain that these are former independent lines which do not possess the marketing and sales infrastructures to compete effectively for proprietary shippers' business, and which relied on the NVOCCs to provide that marketing and sales infrastructure. The applicants consider that those divergent policies in relation to NVOCC cargo resulted in genuine competition between the TACA members, with members losing a significant share of that business to other members. 672   In the light of those factors, the applicants challenge the allegation at paragraph 296 of the contested decision that the majority of the TACA parties do not compete to participate in service contracts with NVOCCs. They point out that although the Commission reproduces the letter of 3 May 1995 in footnote 55 at paragraph 151 of the contested decision, it ignored their explanation. Furthermore, they criticise the Commission for basing its allegation on the data for 1995 alone without examining the trends and developments in the market which reflect the individual strategies of each of the TACA parties. Finally, the Commission appears to limit its allegation to NVOCC service contracts. As the data in the application show, Hapag-Lloyd carried all of its NVOCC cargo in 1994, 1995 and 1996 under TVRs and was the only line to do so in 1994. In 1995 and 1996, several applicants carried NVOCC cargo on the same basis. Since 1994, all NVOCC cargo carried by way of TVRs has been transported not at a jointly-agreed rate but at a rate fixed by the lines acting individually under TVRIAs. 673   As for the Commission's critical observation that four TACA members carried the bulk of NVOCC cargo, this amounts to a claim that the TACA members would only have sufficiently different strategies if they all did the same thing. The relevant issue is rather whether the TACA members pursued different strategies in relation to NVOCC cargo, which they did. The foregoing evidence shows that the carriage of NVOCC cargo changed considerably over time. Whether it was performed under service contracts or by way of TVR is immaterial. It is the competition for such business which is relevant. 674   Second, the assessment of the evidence adduced by the applicants in relation to their individual strategies towards non-price competition is incompatible on economic and legal grounds with a finding of a collective dominant position. In particular, the applicants challenge the Commission's finding at paragraph 194 of the contested decision that the product on offer from each carrier becomes indistinguishable from the others, notwithstanding the weight of evidence of non-price competition adduced by them during the administrative procedure. 675   The applicants observe, as a preliminary point, that the services offered by carriers are not limited to the services expressly included in service contracts but must also be understood to include value-added services, namely those governing the shipper's selection, at the pre-contractual stage, of carriers to tender for the carriage of a particular cargo, of a particular carrier to contract with, and of a specific carrier in the context of a conference or jointly agreed individual service contract. The applicants consider that those competitive factors are reflected in conference service contracts, the demand of shippers for specific services and value-added services. 676   First, the applicants stress that when a conference service contract is signed it is for the shipper to allocate its cargoes between the participating carriers in accordance with its commercial judgment. Relying on the data given in the application, the applicants claim that in the majority of cases the identity of the lead carrier changed from one year to the next and that the proportion of cargo carried by the lead carrier varies considerably from one year to the next. It is not correct to say, as the Commission claims on the basis of Annex V to the contested decision, that most of the switching of carriers takes place within groups of carriers which are party to the same agreement. On the contrary, it is apparent from that annex that the shippers' respective shares of the cargo carried by the lines belonging to each group changed considerably over the years from 1994 to 1996. Since the conference service contract rates have been agreed pursuant to conference procedures, those changes must be attributable to non-price competition. 677   Second, as regards the shippers' demand for specific services, the applicants claim that the shippers select carriers on the basis of the specialised value-added services provided by them. There is, moreover, a wide range of services which, taken in isolation or in combination with others, determine the shipper's choice of carrier. 678   In support of those claims the applicants refer, first, to the shippers' comments when they negotiated conference service contracts with the conference secretariat. It is apparent in particular from the shippers' requests for a reduced rate from carriers who, in their opinion, offer lower quality services that the shippers attach considerable importance to differences in the levels of service provided by the carriers. The factors which influence differentiation relate to transit times, equipment availability, slot availability, port calls, scope of service, sales service, and speed of loading. Second, the applicants refer to the shippers' requirements in their invitations to tender, and to the carriers' responses to those invitations. Those documents also show the range of specific services required of each individual carrier. The applicants stress that the fact that, in the course of the administrative procedure, they sought to protect the confidentiality of those invitations to tender so that the Commission could not ascertain the shippers' opinion does not in the least prevent the Commission from making general enquiries. Third, the conference service contracts contain, in most cases, standard terms which require the carriers to give collective service commitments as to the regularity of sailings, space aboard those sailings, port calls, transit time and containers, and individual service commitments as regards advertised sailing schedules, safety and special services or equipment. Furthermore, a significant number of service contracts concluded in 1995 contain service provisions which were negotiated individually with the shippers. The application refers to 16 different clauses of that type. The statement at paragraph 146 of the contested decision that the Commission has been told that sales representatives of the lines claim they are not allowed under the terms of the TAA/TACA to offer anything other than a standard service contract, namely a volume-related contract without additional services is therefore unfounded. In any event, it should be recognised that factors taken into account by a shipper when selecting a carrier do not generally take the form of terms of the contract since the shipper will generally select on the basis of the value-added elements described above. Fourth, the applicants explain that in the case of conference service contracts, the conference members compete on the basis of individual service offers. Thus, each shipper will select a carrier for its own reasons. In reply to the Commission's criticism that the application sets out the applicants' opinion on this point and not that of the shippers, the applicants claim that the Commission did not try to obtain evidence from the shippers and that it also rejects the statements of the shippers, cited in the application. Fifth, and finally, the applicants underline the existence of global cooperation contracts between carriers and shippers. 679   Thirdly, the applicants maintain that they pursue different individual strategies to meet the shippers' service requirements. First, in the case of ocean services the TACA members compete on transit times and port calls, waiting and pick-up times, particularly in the case of intermodal transport, and also on expected arrival times and demurrage notices. The figures show conclusively the flaw in the Commission's argument that the TACA parties sought to determine the ports at which they would or would not call. Second, the TACA members have made individual investments in specialised equipment and non-standardised containers. Third, as regards port and inland services, the TACA members compete in terms of logistics, in particular with regard to their ability to reposition containers in specific ports in response to shipper demand, and also as regards the possibility of offering weekend services and special services in the case of late booking or delivery. Fourth, as regards information technology, the applicants point out that they had to take individual steps to meet the shippers' requirements in relation to electronic data interchange and internet services, particularly to provide them with immediate shipping information. Fifth, the applicants offer different services in respect of customs clearance. Sixth, the applicants do not all offer the same quality assurance. In particular, not all shipping lines have obtained ISO 9002 (quality management) certification. Seventh, and lastly, the applicants emphasise the fact that they market their services by both traditional and electronic media on an individual basis and that they do not advertise collectively as a conference or within consortia. Furthermore, their marketing policy is intended to differentiate the services which each offers from those provided by other lines. 680   For all those reasons the applicants conclude that they provide distinct services and compete with each other to satisfy the shippers' specific requirements. It is accordingly wrong to say that they have adopted the same conduct on the market and present themselves on the market as a single entity. 681   The applicant in Case T-213/98 states that the particular facts in its individual case, which are not challenged by the Commission, confirm that there is no collective dominant position. It claims that its commercial policy, and in particular the reasons for which it joined the TACA in 1993, show that it acts autonomously in competition with the other TACA members, and so cannot be regarded as forming a single economic entity with the other TACA members. 682   The applicant explains as a preliminary point that, contrary to the Commission's assertion at paragraph 293 of the contested decision, its decision to become a member of the TACA was justified on commercial grounds. As a traditional carrier operating on the transpacific and Europe-Asia trades, it had to become a global carrier in order to adapt to the increasing tendency for customers to centralise their purchasing decisions at a regional level (North America, Europe) or even at the global level. In the circumstances the applicant decided to develop its transport business on the transatlantic trade in order to supply its existing customers with a single network (a one-stop shop) for the transport of their cargo around the world. 683   Given the losses incurred by the TACA members on that trade (see paragraph 590(b) of the contested decision), NYK took the view that the introduction of an independent service would entail unreasonable risk. It therefore chose to enter the trade by means of a consortium agreement with Hapag-Lloyd and NOL (Pacific Atlantic Express) to provide both a transpacific and a transatlantic service. It acknowledges that its presence on the transatlantic trade remained limited. That was justified, however, by the fact that its existing customers essentially required the transport of cargo on the transpacific trade and it was difficult to anticipate the extent to which customers would be prepared to entrust it with the carriage of their cargo on the transatlantic trade. 684   The applicant claims that the reason it then became a member of TAA/TACA is that its target customers in Europe and North America used that conference for the transport of their cargo. It also emphasises that it traditionally operated from within conferences and that its membership of the TACA was liable to promote stability on the trade in question in accordance with the objective stated in the eighth recital in the preamble to Regulation No 4056/86. Finally, in so far as US law requires that membership of a conference cannot be refused and results in access to all conference service contracts on the same conditions as those enjoyed by other members, NYK simply took advantage of the opportunities open to it under US law to increase the cargo transported on the trade in question as part of a new global service. 685   The factors which led it to become a member of the TACA also determined the independent commercial policy it pursued thereafter. Hence, its commercial policy on the transatlantic trade was to concentrate on its existing customers on other trades. It claims that the commercial benefits it could offer its customers were, first, the option of an all water service across the Atlantic to the United States West Coast and the transpacific lines (via the Panama Canal) and, second, a non-conference Canadian ports service. 686   Contrary to the Commission's insinuations (in paragraphs 293 et seq.) in the contested decision, TACA membership gives a carrier no guarantee of success in entering a new trade. In the first place immediate access to TACA service contracts is no guarantee of obtaining the cargo covered by those contracts since each carrier must persuade the shippers to entrust it with their cargo. The Commission therefore wrongly concluded, at paragraph 564, that it was immediate access to conference service contracts that induced Hyundai to become a member of TACA. The applicant stresses, however, that whilst its various commercial initiatives enabled it to win some new customers and to enter new markets (for example, the personal effects market in the United Kingdom) it also lost customers or was forced to withdraw from some markets for logistical reasons. The applicant points out that its market share on the trade in question fell from 0.9% in 1994 to 0.6% in 1995 and 1996. 687   In those circumstances the applicant considers that the Commission cannot claim that the market share of TACA members did not fluctuate over the period in question and that the absence of such fluctuation proves a lack of competition. In any event, stable market shares do not necessarily imply that there is a lack of competition. In the shipping sector there is a natural tendency for market share to reflect a line's capacity on a particular route. Furthermore, stable market shares may also be explained by customer loyalty or customer switching. The applicant points out that the academic opinion quoted by the Commission in the defence supports that argument since Scherer & Ross (Industrial Market Structure and Economic Performance, Houghton Mifflin, 1990) acknowledge the existence of frequent brand switching arising from absence of consumer preference. In those circumstances, the applicant says, it matters little that maritime carriers engage in inefficient attempts to differentiate products, as those authors claim. 688   The applicant further claims that at no time did it choose not to compete for cargo so that it would be easier for Hanjin and Hyundai to establish themselves on the trade. There was no commercial justification for adopting such behaviour since a refusal to supply customers would have risked losing their custom on other trades. 689   It adds that since entry to the conference cannot be refused and since there are no arrangements within the TACA framework that effectively limit the capacity offered by each individual carrier, the conference cannot control capacity, particularly that offered by independent carriers. It follows that, as regards a vital aspect of the relationship between supply and demand, the TACA parties are unable to act as a single economic entity or eliminate potential competition. 690   As regards price competition in particular, the applicant states that, by comparison with the other TACA members, the relatively small number of independent actions in relation to price that it has engaged in, including under TVRs and joint and individual service contracts as set out in the tables in the common part of the application, should not be interpreted as evidence that it has not exercised its freedom to compete independently on price. First, account should be taken of the fact that the figures, which are expressed in absolute terms, should be understood in the context of its limited market share on the trade in question. Second, those figures do not take account of its actions on the Canadian ports trade, on which it operates outside of any conference. Similarly, whilst the amount of NVOCC cargo it transported may appear to be small, one of its main customers was an NVOCC, and 25% of the westbound cargo which it carried in 1995 was from that customer. The applicant emphasises that more than 30% of the westbound cargo it carried, including to the Canadian ports, was NVOCC cargo. 691   The Commission's reliance on the fact that the applicants form part of a shipping conference qualifying for block exemption for maritime tariff fixing is irrelevant since the applicants have proved the existence of competition on other grounds. Indeed the Commission has in any event acknowledged the existence of such competition within a consortium (see the P&O/Nedlloyd decision, cited above). The applicants stress the fact that the TACA includes various consortia. Similarly, the Commission expressly acknowledged the possibility, in the context of Commission Regulation (EC) No 870/95 of 20 April 1995 on the application of Article 85(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) pursuant to Regulation No 479/92 (OJ 1995 L 89, p. 7, see the eighth recital of the preamble and the second indent of Article 5), that there was effective competition between the conference members in terms of the services provided, the existence of such competition being a precondition for the applicability of the block exemption regulation. 692   Finally, the contested decision does not address the issue of whether its involvement in the TACA has had an appreciable effect on the relevant market so as to justify treating it as contributing to an abuse by a group of undertakings collectively holding a dominant position. 693   The Commission, supported by the ECTU, contends that the arguments put forward by the applicants in support of these pleas are unfounded and must therefore be rejected. b)     Findings of the Court 694   By the arguments put forward in support of these pleas the applicants maintain, in essence, that the significant internal competition between the TACA parties contradicts the finding of a collective dominant position. 695   Without prejudice to the question whether the existence of significant internal competition within a liner conference, within the meaning of Regulation No 4056/86, is capable of affecting the stability of trade which justifies the application of the block exemption provided for in that regulation and, accordingly, of leading the Commission to withdraw that exemption, the applicants are right to argue that significant internal competition may also be capable of showing that in spite of the various links or factors of correlation existing between the members of a liner conference they are not in a position to adopt the same course of conduct on the market such as to give third parties the impression that they are a single entity and thus justify a collective assessment of their position on the market under Article 86 of the Treaty. 696   In this case, the applicants adduce evidence relating to both price competition and non-price competition. In addition, the applicant in Case T-213/98 puts forward a number of specific arguments.  1. Internal price competition 697   The applicants claim that the independent actions, service contracts and carriage of NVOCC cargo testify to the price competition between TACA members. Essentially, they claim that the independent actions and individual service contracts lead to the application of prices lower than the tariff, while the conference service contracts and the carriage of NVOCC cargo represent individual commercial strategies, which some TACA members employ more than others. 698   As regards first the independent actions, namely the right under the US legislation for any member of a liner conference to offer a price lower than the conference tariff, that option, imposed by the legislation of a non-member State, of derogating, subject to certain conditions, from the tariff discipline of the price-fixing agreements for maritime transport constitutes an exception to the principle of joint price-fixing by a conference (TAA, paragraph 307). 699   Next, it is clear from Article 13 of the TACA Agreement that in spite of its name independent action is, as the Commission points out at paragraph 104 of the contested decision without being contradicted on that point by the applicants, supervised and restricted by the rules of the conference, in the sense that the TACA secretariat must be informed before it is taken, which affords the other members the opportunity to follow or to persuade the member concerned not to take that action. Independent action is thus not part of normal competition, by virtue of which each operator must determine independently the policy which he intends to adopt on the market, which strictly precludes any direct or indirect contact between economic operators the object or effect of which is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market (TAA, paragraph 307). 700   It is common ground between the parties, moreover, that, as the Commission stated at paragraphs 215 and 216 of the contested decision, independent action may be exercised for very short periods and may be used as a stop-gap measure while service contract negotiations are taking place. 701   Nor do the data provided by the applicants themselves belie the assertion at paragraph 221 of the contested decision that the incidence of independent action remained insignificant on the transatlantic trade. Whilst the data show the number of independent actions taken by TACA members on tariff prices, including TVRIAs, in 1994, 1995 and 1996, they do not show, for the first two years, the quantities of freight carried in the context of those actions, so that they cannot be recognised as having any probative value for the purpose of demonstrating the existence of significant internal competition. Quite to the contrary, it is apparent from the data relating to 1996, the only data to indicate, as regards TVRIAs, the quantities of freight carried in the context of independent actions, that during that year freight concerned by TVRIAs represented only 8.3% of total freight carried by the TACA parties, a relatively marginal quantity of that total. 702   Furthermore, the Commission established in Table 5 at paragraph 220 of the contested decision that the number of independent actions on the transatlantic trade is insignificant compared with the number of independent actions on the transpacific trade. Although the applicants dispute the method used by the Commission in calculating and comparing the number of independent actions on the two trades concerned, and claim that the contested decision does not explain the lack of data on the respective size of the two trades, they adduce no evidence capable of contradicting the conclusion drawn by the Commission that the number of independent actions on the transatlantic trade is insignificant. 703   The arguments whereby the applicants seek to establish the existence of significant internal competition as a result of independent actions must therefore be rejected. 704   Second, as regards service contracts, the Commission was right to observe at paragraph 224 of the contested decision that such contracts cannot be relied on in order to demonstrate the existence of internal price competition. As conference service contracts are concluded by joint agreement within the conference according to the voting procedures defined in the TACA, they necessarily entail the collective fixing of a common price by all the members of the conference participating in the contract. The applicants allege that certain TACA members participate in conference service contracts more often than others, but that is immaterial because the shippers party to such contracts are in any event charged a common price for the carriage of their freight regardless of which participating TACA member actually carries it. 705   Next, individual service contracts are admittedly a source of internal price competition but they were banned by the TACA in 1994 and 1995. Consequently, they can be relied on by the applicants as evidence of the existence of internal competition in respect of only one of the three years covered by the contested decision, 1996. Furthermore, it is apparent from the data supplied by the applicants that in 1996 individual service contracts represented only 15.3% of the total freight carried by the TACA. Those figures also make it clear that most of those individual service contracts were concluded jointly by a number of carriers, with the consequence that internal price competition did not affect all the TACA parties. Lastly, as with independent actions the conclusion and the negotiation of individual service contracts were regulated by Article 14 of the TACA, which, as stated at paragraph 149 of the contested decision, placed certain restrictions on the contents of service contracts and on the circumstances in which they might be concluded. At paragraph 447 of the contested decision the Commission stated, without being contradicted by the applicants on this point, that such restrictions fell within Article 85(1) of the Treaty. It follows that even where the individual service contracts were authorised by the TACA they did not represent normal competition. 706   As regards the applicants' allegation that the individual service contracts led to a reduction in the tariff, the applicants have not established, for the commodities which they identify in their application, the existence of a causal link between the individual service contracts and the reductions in the tariff decided on by the TACA, so that the facts on which that allegation is based are not made out. Furthermore, the fact that the TACA decided to reduce the tariff in order to bring it into line with the rates of the individual service contracts, far from casting doubt on the existence of a collective position, tends to confirm it, since it reflects the ability of the TACA parties to react collectively to individual initiatives taken by some of them with a view to extending to the whole conference the lower rates offered by them. 707   The arguments whereby the applicants seek to establish the existence of significant internal competition as a result of the service contracts must therefore be rejected. 708   Last, as regards the carriage of NVOCC cargo, it is clear from the figures provided by the applicants for 1994, 1995 and 1996 that all NVOCC cargo was carried by the TACA parties either under TVRs or under service contracts. In response to a written question put by the Court concerning TVRs, the applicants gave support for the assertion in their application that all cargo covered by TVRs was in fact carried within the framework of independent actions and therefore constituted TVRIAs. Even though it is established, however, that sole fact is insufficient to demonstrate the existence of significant internal price competition within the TACA. First, in 1994, 1995 and 1996 NVOCC cargo represented only 12.5%, 14.5% and 15.1% of total cargo carried by the TACA in those three years. Furthermore, the proportion of NVOCC cargo carried under TVRIAs represented only 1%, 4.5% and 15.5% of total NVOCC cargo carried by the TACA parties in each of those years, the bulk of that cargo therefore being carried under service contracts. It will be recalled that in 1994 and 1995 the TACA did not permit conclusion of individual service contracts, so that during those two years NVOCC cargo carried under service contracts, which represented 99% and 94.5% respectively of total NVOCC cargo in those two years, was carried under conference service contracts, which necessarily entail the setting of common prices. The Commission states, moreover, without being contradicted by the parties on this point, that 70% of the NVOCC cargo carried under service contracts in 1996 was also carried under conference service contracts. 709   It is thus clear from the data provided by the applicants themselves that during the period covered by the contested decision NVOCC cargo was essentially carried at common prices fixed by the conference. In that regard it is irrelevant, for the purpose of demonstrating the existence of significant internal price competition, that certain TACA parties carry more NVOCC cargo than others, since for virtually all their freight the NVOCCs are charged a price fixed in common by the conference. 710   The arguments whereby the applicants seek to establish the existence of significant internal competition as a result of the carriage of NVOCC cargo must therefore be rejected. 711   It follows from the foregoing that none of the evidence adduced by the applicants, whether the taking of independent actions on the tariff, the conclusion of conference service contracts or individual service contracts or the carriage of NVOCC cargo, is capable of establishing the existence of significant internal price competition within the TACA. Even taken together, they attest to competition far too marginal to refute the absence of internal price competition resulting from the common or uniform tariff prices constituting the liner conference agreement within the meaning of Regulation No 4056/86. 712   However, it must still be ascertained whether the evidence adduced by the applicants in regard to internal non-price competition is capable of upsetting that conclusion.  2. Internal non-price competition 713   For the purpose of demonstrating the existence of significant internal non-price competition the applicants claim essentially first, that in conference service contracts the lead carrier and the proportion of freight carried by it each year vary from year to year. Next, they allege that shippers have specific service requirements which lead them to select carriers on the basis of the specialised services which they offer. Last, they maintain that the TACA parties pursue different individual strategies in order to meet shippers' service requirements. 714   As a preliminary point, it should be noted that the existence of non-price competition between the members of a liner conference, such as competition regarding the quality of service provided, is not in principle sufficient to negate the existence of a collective dominant position based on links inferred from their common strategy on price-setting, unless the extent and intensity of those alternative forms of competition is such as to preclude reasonable reliance on their common pricing policy as the basis for establishing a single market entity (Opinion of Advocate General Fennelly in CEWAL II, cited at paragraph 638 above, point 34). 715   In this case, therefore, the applicants must adduce evidence not only of the fact that there is internal non-price competition within the TACA but, especially, of the fact that any such internal competition is of such extent and intensity as to preclude the TACA parties from being assessed collectively. 716   It is in the light of those considerations that the Court will consider the probative value of the evidence adduced on this point by the applicants. 717   As regards first of all the arguments relating to conference service contracts, it should be observed that in order to determine whether there is internal non-price competition the mere fact that the identity of the lead carrier carrying the shippers' cargo varies from year to year is as such irrelevant unless account is also taken of the fact that each carrier is also a party to the consortia agreements on the trade in question. As the Commission rightly observes at paragraph 232 of the contested decision without being contradicted by the applicants on this point, where a carrier is party to a consortium agreement, such as the VSA agreement between P&O, Nedlloyd, Sea-Land, Mærsk and OOCL, competition on service quality is excluded, since the parties to such agreements share vessels and operate to a joint schedule. As consortia agreements are intended to standardise the services offered by the shipping companies which are members of those consortia, the existence of internal competition on services within the TACA is necessarily limited to the competition existing between the various consortia of which the TACA is made up. Consequently, in order to demonstrate the existence of internal service quality competition within the TACA, as the Commission states at paragraph 233 of the contested decision, the applicants must show that shippers moved their cargo not just within one consortium but from one consortium to the other. 718   The Commission stated at that paragraph that the data provided by the applicants in their response to the statement of objections and set out in part at Annex V to the contested decision revealed that the shares enjoyed by the groupings of carriers have remained largely stable and ... , except in [a] few cases, the switching that has taken place has not been between groupings. 719   Although the applicants dispute that assessment, it must be observed that, apart from the fact that they first do so in the reply, the data they provided in these actions to show changes in the lead carrier for some specific shippers, and also the annual variations in the proportion of freight carried by those carriers, are essentially the same as those submitted to the Commission in their response to the statement of objections. The data show clearly that, as the Commission stated at paragraph 233 of the contested decision, in most cases the changes in lead carrier took place within the same consortium. As for the fact that the proportion of the freight of each of the shippers carried by each lead carrier varies from year to year, it is sufficient to observe that in the absence of any indication as to the identity of the shipping companies carrying the remainder of the freight, the data provided by the applicants do not make it possible to determine which consortium carried that freight. In those circumstances, the data submitted by the applicants do not cast doubt on the finding in the contested decision that changes in lead carrier take place as between shipping companies who are parties to the same consortium. 720   It follows that the evidence adduced by the applicants is not of such a kind as to demonstrate the existence of significant internal service-quality competition in the context of conference service contracts. 721   The applicants' arguments on this point must therefore be rejected. 722   As regards, second, the arguments relating to shippers' requirements, it cannot be disputed that shippers demand a certain level of quality in the transport services which the TACA parties supply. However, that sole fact is in itself not relevant for the purpose of demonstrating the existence of internal non-price competition between the TACA parties, unless it is proved that the shippers switch freight from one carrier to another specifically because of the different services offered by them. However, the applicants do not provide such proof but merely produce a list of services required by shippers. 723   Furthermore, although the applicants assert, without evidence in support, that conference service contracts propose, in addition to collective service undertakings by all the participating shipping companies, individual service undertakings by each of those companies, they do not show that those individual undertakings are reflected in freight being switched from one shipping line to another. 724   Lastly, the only examples of negotiated clauses submitted in the context of the application are all clauses negotiated by the TACA which provide for collective undertakings capable of being offered by all the participating shipping lines. The Commission was therefore right to state, at paragraph 242 of the contested decision, that few service contracts contained individually tailored provisions relating to the type of services offered. Admittedly, the individual service contracts contain more special clauses than the conference service contracts. However, individual service contracts were not authorised by the TACA until 1996. It is also clear from the data provided by the applicants, moreover, that in 1996 the freight carried by the TACA parties under individual service contracts, including those made jointly by several carriers, represented only 15.3% of total freight carried by the TACA, and that only a minority of those contracts were concluded individually by a single carrier. 725   In those circumstances, the data provided by the applicants are clearly incapable of upsetting the findings in the contested decision on this point. 726   The applicants' arguments relating to the shippers' requirements must therefore be rejected. 727   As regards, third, the arguments relating to the individual strategy pursued by each TACA party, none of the data provided by the applicants is capable of proving that the differences between the services offered to shippers had a significant effect on the choice of shipping line chosen to carry their freight. 728   The applicants' arguments on this point are therefore irrelevant and must be rejected. 729   It thus follows from the foregoing that the evidence adduced by the applicants, in so far as it establishes the existence of internal non-price competition, fails to show that that competition is of such extent and intensity as to be capable of compensating for the absence of price competition resulting from the existence of uniform or common freight tariff rates.  3.The specific arguments put forward by the applicant in Case T-213/98 730   As regards, first, the argument that the applicant joined the TACA for its own commercial reasons and pursued an independent policy within the TACA, the data it provided shows that its market share on the trade in question during the period covered by the infringements found in the contested decision never exceeded 1%. Consequently, even if its allegations (for which, incidentally, little evidence is provided) are correct as regards the independence of its commercial policy, the competition which that shipping line brings to bear on the other TACA parties is not sufficient to represent a source of internal competition of such extent and intensity as to be capable of casting doubt on the collective nature of the position held by the TACA parties on the trade in question resulting from the links identified at paragraphs 525 to 531 of the contested decision. 731   As regards, second, the argument that stable market shares do not necessarily imply the complete absence of competition, as they may also be explained by customer loyalty or compensatory customer transfers, it is sufficient to observe that the applicant has put forward no evidence capable of demonstrating the existence of real competition. Quite the contrary: the fact emphasised by the applicants in this argument that in the maritime sector there is a natural tendency for market shares to reflect the capacities offered by the companies on each line is apt to confirm the absence of internal competition between the members of a liner conference. In the light of the common tariff established by the conference, the applicants have no incentive to introduce capacity in order to gain market share by adopting an aggressive pricing policy, since the introduction of new capacity has no impact on prices. In those circumstances, the Commission was right to note, at paragraphs 233 and 239 of the contested decision, that the fact that the shares of the TACA parties remained stable during the relevant period indicated an absence of significant internal competition. 732   As regards, third, the argument that, in so far as access to the conference cannot be refused and there is no agreement within the TACA to limit the capacity offered by each individual carrier, the TACA is not in a position to act as a collective entity with regard to a vital aspect of the relationship between supply and demand, it must be observed that the mere fact that the TACA has not concluded an agreement among its members dealing collectively with certain aspects of the commercial relations between its members is irrelevant, since such a collective agreement exists in respect of other aspects of those commercial relations and establishes to the requisite legal standard that the position of the TACA parties must be assessed collectively under Article 86 of the Treaty. Hence, even in the absence of common rules on capacity any new member of the TACA must, by virtue of its membership, comply with the collective rules fixed by the TACA, in particular as regards the tariff. In any event, owing to the tariff introduced by the conference, the TACA has little interest in regulating capacity, since each member is aware that any increase in or withdrawal of capacity will, in principle, have no effect on prices and therefore on its market share. 733   As regards, fourth, the other arguments put forward by the applicant, it is sufficient to state that those arguments seek to challenge not the collective assessment of the position held by the TACA parties but the existence of the abusive conduct of which those parties are accused in the contested decision. 734   Those arguments are therefore of no relevance in the context of these pleas and, accordingly, must be rejected.  4.Conclusion on the extent of internal competition 735   In the light of all the foregoing, it must be concluded that the evidence adduced by the applicants in relation to internal price and non-price competition does not show that the Commission made an error of assessment in relying on the existence of a uniform or common tariff to find that price competition between the TACA parties was largely eliminated, so that those parties are likely to adopt the same course of conduct on the market and their market position must therefore be assessed collectively under Article 86 of the Treaty. 736   Consequently, all the arguments put forward by the applicants on this point must be rejected. 3.     Pleas alleging failure to state reasons 737   The applicants observe, first, that at paragraph 531 of the contested decision the Commission infers from the existence of very close economic links between the TACA members that they are capable of occupying a collective dominant position, without first establishing that the undertakings in question adopted the same conduct on the market. The applicants submit that the defect is not made good by the references in the defence to the assessment of internal competition given at paragraphs 174 to 242 of the contested decision. The description of the facts given there does not support the proposition that the applicants adopted the same conduct or that there was insufficient competition on price or in other respects. 738   Second, the applicants claim that, at paragraph 522 of the contested decision, the Commission does not seek to quantify or explain the degree of internal competition which would be compatible with the finding of a collective dominant position. During the administrative procedure the applicants adduced evidence of internal competition. In the absence of clear criteria there is nothing in paragraph 522 which enables either the applicants or the Court of First Instance to know the Commission's reasons for rejecting that evidence and to determine whether it is true that the maintenance of some competition does not preclude the existence of a collective dominant position. They also claim that the Commission fails to identify the aspects of competition which are relevant in determining whether a collective assessment is justified. The contested decision did not take into account forms of non-price competition. 739   Third, the applicants consider that the Commission's analysis of competition between the TACA members lacks reasoning as regards (i) its finding at paragraph 198 that consortia such as the vessel-sharing agreements of which the TACA parties are members have the effect of reducing the number of independent actions entered into by their members; (ii) the absence of information at paragraph 221 as to the respective sizes of the transpacific and transatlantic trades; and (iii) its decision to use the data for a single year as the basis for concluding at paragraph 296 that the majority of TACA members do not compete to participate in service contracts with NVOCCs. 740   The Commission, supported by the ECTU, contends that these pleas and arguments should be rejected. 741   As regards, first, the plea criticising the Commission for not having found in the contested decision that the TACA parties adopted the same conduct on the market in question, it is sufficient to observe that the applicants' arguments seek, in reality, to challenge the merits of the assessments made by the Commission in that regard in the contested decision. Such arguments, which must be rejected for the reasons stated at paragraphs 649 to 655 above, are irrelevant in the context of verification of compliance with the obligation to state reasons (PVC II, cited at paragraph 191 above, paragraph 389). 742   In any event, the contested decision sets out at paragraphs 525 to 531 the grounds on which the Commission considered that the TACA parties are together, because of factors giving rise to a connection between them, able to adopt a common policy on the market (Kali und Salz, cited at paragraph 595 above, paragraph 221). In the same paragraphs the Commission sets out each of the five economic links between the TACA parties which in its view justify a collective assessment of the position held by the TACA parties on the market in question. Furthermore, in the context of that assessment, the Commission states expressly, at paragraph 525 of the contested decision, that those links led to a significant diminution of the ability of the TACA parties to act independently of each other. In that regard, it states at paragraph 528 of the contested decision, first, that the tariff and the enforcement provisions and penalties were intended to eliminate substantially price competition between [the TACA parties], thus referring by implication but without question to paragraphs 174 to 242, in which it examines the extent of internal competition between the TACA parties, and, second, that the secretariat and the publication of annual business plans allowed the TACA parties to present themselves on the market as a single united body. Those grounds give sufficient indication of the elements of fact or of law on which the legal justification of the contested decision depends and of the considerations which led the Commission to adopt it (see, in particular, Remia, cited at paragraph 575 above, paragraphs 26 and 44). 743   Furthermore, during the administrative procedure, and in particular in the response to the statement of objections, the applicants did not claim that the collective assessment of the TACA parties' position on the relevant market under Article 86 of the Treaty required the absence of any competitive relationship between them. In terms of compliance with the obligation to state reasons, the Commission clearly cannot be criticised for not having replied in the contested decision to arguments which were not raised before it was adopted (see, to that effect, FEFC, cited at paragraph 196 above, paragraph 427). 744   As regards, second, the plea alleging that the Commission did not quantify or explain in the contested decision the degree of internal competition that would be compatible with the finding of a collective dominant position, the Commission examined in detail at paragraphs 174 to 242 of the contested decision the degree of internal competition between the TACA parties. It follows from those paragraphs of the contested decision that the Commission found that internal competition between the TACA parties was limited, or indeed insignificant. In that regard, after examining the scope of the rules introduced by the US Shipping Act (paragraphs 175 to 180), the Commission emphasised the effect produced by the other restrictive agreements affecting transatlantic trade, in particular the consortia agreements (paragraphs 181 to 198). Then, at paragraphs 199 to 242, it examined each piece of evidence of internal competition adduced by the applicants during the administrative procedure relating to the independent actions, the service contracts, the unilateral actions concerning service contracts, the TVRs, the TVRIAs and competition on the services offered. The Commission then studied in turn the price discrimination practices (paragraphs 203 to 213), the independent actions (paragraphs 214 to 222), the service contracts (paragraphs 223 to 233), the fluctuation of market shares (paragraphs 234 to 239) and competition on quality (paragraphs 240 to 242). It was in this context that, at the stage of the legal assessment, the Commission established at paragraph 525 of the contested decision that it was necessary to make a collective assessment of the position held by the TACA parties under Article 86 of the Treaty, since their ability to act independently of each other had been diminished. 745   It follows from the foregoing that in response to the evidence adduced by the TACA parties during the administrative procedure, the Commission stated in the contested decision the reasons why in this case internal competition between the TACA parties was insufficient to preclude a collective assessment of their position. In so doing, the Commission responded specifically to the principal allegations made by the applicants in the course of the administrative procedure (FEFC, cited at paragraph 196 above, paragraph 426). Furthermore, contrary to the applicants' contention, the Commission examined each of the aspects of internal competition that might be relevant, including not only the forms of price competition, at paragraphs 199 to 222 of the contested decision, but also, at paragraphs 213 to 233 and 240 to 242, the forms of non-price internal competition. 746   Admittedly, the Commission did not state in the contested decision what degree of internal competition might have made it possible to preclude a collective assessment of the position held by the TACA parties. However, in order to state reasons for its decision to the requisite legal standard, the Commission is only required to state clearly and precisely the reasons on which its decision is based (Remia, cited at paragraph 575 above, paragraphs 26 and 44). On the other hand, it cannot be required to state the reasons which it has not used and which are therefore purely hypothetical (see, to that effect, Case C-367/95 P Commission v Sytraval and Brink's France [1998] ECR I-1719, paragraph 64). 747   Consequently, as the Commission did not find in this case that internal competition within the TACA was sufficient to preclude a collective assessment of the TACA, it was not required to state what degree of competition was required in order to preclude such an assessment. 748   The plea alleging failure to state reasons in the contested decision on this point must therefore be rejected. 749   As regards, third, the plea alleging that the Commission did not provide sufficient reasons for the assertion at paragraph 198 of the contested decision that the consortia agreements of which the TACA parties are members have the effect of reducing the number of independent actions entered into by the parties to those agreements, it is sufficient to observe that, according to the actual wording of that paragraph, the assertion in question was made not by the Commission but by one of the TACA parties. Compliance with the obligation to state reasons laid down in Article 190 of the Treaty cannot place the Commission under an obligation to state reasons for the assertions of third parties, a fortiori when there is no indication in the contested decision that the Commission relied on that assertion in reaching its conclusion that there was a collective dominant position. 750   The plea alleging failure to state reasons on this point must therefore be rejected. 751   As regards, fourth, the plea alleging the absence of data, at paragraph 221 of the contested decision, relating to the size of the transpacific trade compared with the transatlantic trade, it is sufficient to observe that, in so far as the applicants maintain that in the absence of those data the Commission was not entitled to find that the number of independent actions on the transatlantic trade was comparatively insignificant compared with the number of independent actions on the transpacific trade, they are in reality seeking to challenge the validity of the assessments made in the contested decision on this point. Such an argument, which must be rejected for the reasons stated at paragraphs 698 to 703, is irrelevant in the context of verification of compliance with the obligation to state reasons (PVC II, cited at paragraph 191 above, paragraph 389). 752   In any event, paragraphs 221 and 222 of the contested decision refer to the figures on which the Commission's analysis and the conclusion drawn therefrom are based and therefore provide the applicants with an adequate indication as to whether the contested decision is well founded or whether it may be vitiated by some defect enabling its validity to be challenged and the Community judicature to review the legality of the decision (see, in particular, Van Megen Sports, cited at paragraph 548 above, paragraph 51). 753   The applicants' plea alleging failure to state reasons on this point must therefore be rejected. 754   As regards, fifth, the plea alleging that the Commission did not state at paragraph 150 of the contested decision its reasons for choosing to rely on the service contracts for a single year in order to support its finding that a very large number of service contracts with the NVOCCs had been concluded by the TACA parties which had formerly been unstructured members of the TAA, the Commission was under no obligation to state its reasons for making that choice. For the purpose of complying with the obligation to state reasons, provided that the Commission refers in the contested decision to the evidence on which its analysis is based and also to the conclusions which it has drawn from that evidence, it provides the applicants, and that is not disputed by them, with an adequate indication as to whether the contested decision is well founded or whether it may be vitiated by some defect enabling its validity to be challenged and the Community judicature to review the legality of the decision (see, in particular, Van Megen Sports, cited at paragraph 548 above, paragraph 51). 755   Furthermore, if the data relating to other years which the applicants put forward in the context of these actions were capable of contradicting the conclusions drawn by the Commission on the basis of the single year used in the contested decision, it would be for the Court to draw the consequences, not in terms of compliance with the obligation to state reasons but with regard to the substance. 756   For those reasons, the plea alleging failure to state reasons on this point must be rejected. C –  Conclusion on the first part 757   It follows from the foregoing that all the pleas put forward in the context of the first part relating to the absence of a dominant position held collectively by the TACA parties must be rejected. Part two: the dominant nature of the position held by the TACA parties 758   In this part of their pleas alleging that there was no infringement of Article 86 of the Treaty, the applicants first dispute the definition of the relevant market used in the contested decision as the basis for the application of that provision. Next, they deny that their position on the market is dominant. Last, they invoke a number of failures to state reasons on those points. D –  Definition of the relevant market 759   The applicants put forward a number of pleas and complaints concerning both the definition of the relevant market for services and the definition of the relevant geographic market used in the contested decision as the basis for the application of Article 86 of the Treaty. 1.     The relevant market for services 760   At paragraph 519 of the contested decision, the Commission states that the relevant market for services for the purpose of the application of Article 86 of the contested decision is described at paragraphs 60 to 75. After examining in those paragraphs the various possibilities for substitution put forward by the applicants, the Commission concludes at paragraph 84 that the relevant market for sea-transport services is the market for containerised liner shipping ... between ports in northern Europe and ports in the United States and Canada. 761   The applicants put forward two types of pleas and complaints to challenge that definition. First, they deny that containerised liner shipping constitutes the relevant market for services; and, second, they claim that the market includes, in addition to the ports of northern Europe, the Mediterranean ports of southern Europe.  a) The relevant transport services  (1) Arguments of the parties 762   The applicants challenge at the outset the Commission's reliance on the decision of the Court of Justice in Case C-333/94 P Tetra Pak v Commission (Tetra Pak II) [1996] ECR I-5951 as authority for the proposition in the contested decision that stability of demand is the appropriate basis for defining the relevant market. The Commission explains at paragraph 61 of the contested decision that in that judgment the Court of Justice stated that the stability of demand for a certain product is the appropriate basis for defining a relevant market and that the fact that different products are, to a marginal extent, interchangeable does not preclude the conclusion that those products belong to separate product markets. 763   Firstly, the Court referred to a relevant criterion, which means that other criteria must also be taken into account in order to determine the degree of substitution. Secondly, the Court did not hold in that judgment that stability of demand constituted the appropriate basis for determining the relevant market, but assessed the question of stability of demand in the context of product substitutability. Third, and finally, it is apparent from the Commission's findings at paragraph 69 of the contested decision that, unlike the situation in Tetra Pak II, cited at paragraph 762 above, the volumes of cargo transported by container and bulk carriers respectively changed substantially over time and that the interchangeability between bulk and container transport is not marginal in terms of volume. 764   In the context of this plea, the applicants complain essentially that the Commission decided, at paragraphs 62 to 75 and 84 of the contested decision, that the relevant market for services was that for containerised liner shipping excluding conventional break bulk transport, refrigerated transport, air transport and transport by NVOCCs. They consider that the Commission's analysis does not conform to the guidelines it adopted in the Notice on the definition of relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5) as to demand-side and supply-side substitutability. 765   In the first place, the Commission erred in its analysis of demand-side substitution. In Case 85/76 Hoffman-La Roche v Commission [1979] ECR 461, paragraph 28, the Court held that the concept of the relevant market in fact implies that there can be effective competition between the products which form part of it and this presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market in so far as a specific use of such products is concerned. 766   The applicants complain first in general terms that the Commission failed to take account of the cumulative impact of the various sources of competition in finding that each of those sources could be substituted for containerised transport only in exceptional circumstances or for a limited range of goods. The applicants consider that for two products to be substitutable they cannot be required to be interchangeable in the majority of cases. Such an argument would not take account of the wide range of products and users with which the applicants deal. An operator carrying 50 different products, all of different value, and thus facing competition from one or more other carriers, faces competition in respect of each such product. 767   Next, the applicants criticise the Commission for having relied on the notion of one-way substitutability in its assessment of traditional transport (paragraphs 65, 68 and 74 and footnote 29) and refrigerated transport (paragraph 73), instead of having regard to the sensitivity of the relative volumes of cargo carried by the two modes to their relative price as required by the Notice on the definition of relevant market for the purposes of Community competition law, referred to above, and economic doctrine. According to generally accepted economic principles, substitutability requires a symmetric (or two-way) relationship. For example, if customers are switching from bulk to container transport at the existing relative price, an increase in the relative price of the container mode would tend to slow down the rate of switching or would even, if the price change were large enough, reverse the switching. The existence of bulk services is therefore a constraining factor in the pricing of container services. The applicants therefore dispute the Commission's finding, at paragraph 67 of the contested decision, that once a type of cargo regularly becomes containerised it is unlikely ever to be transported again as non-containerised cargo. The applicants claim that a rigorous economic approach would require the Commission's statement to be qualified by the additional words if containerisation continues to offer the same net benefits as it has in the past. Such an approach would require an analysis of the sensitivity of demand to changes in the net benefits which shippers find attractive. The decision contains no such analysis. 768   More specifically, the applicants allege that, in any event, the assessment of substitutability between container transport and the other forms of transport referred to above is factually inaccurate. 769   Firstly, break bulk transport is substitutable for containerised transport and therefore forms part of the same market. That substitutability was confirmed in an article published in August 1996 in the journal American Shipper quoting the comments of a manager of Mead Corporation, an American exporter of paper. On the eastbound transatlantic trade, switching between bulk transport and container transport generally involves large volume products from specific regions of the United States (for example, coffee, peanuts, apples and pears, lemons, etc). That substitution is particularly marked in the case of low-value cargoes owing to the reduced rates offered by the operators of the different types of vessel. The applicants note that, at paragraphs 217 and 218 of the contested decision, the Commission expressly accepts that substitutability in the cases of coffee and peanuts. The applicants consider that their argument is confirmed by the Dynamar report (Appendix 25), which establishes such substitutability by reference to figures in the case of certain iron and steel and forestry products. Contrary to the Commission's argument, the substitution of bulk transport remains possible even in the case of a shortage of container capacity on the transatlantic trade. 770   The applicants conclude by criticising the Commission for not having taken account of events or shocks, as mentioned at paragraph 38 of the Notice on the definition of relevant market for the purposes of Community competition law, cited above, which requires the Commission to analyse recent examples of actual substitution on the market. The applicants claim that the examples of mutual substitution between break bulk and containerised transport constitute such examples, but were ignored by the Commission. 771   Second, the applicants allege that bulk refrigerated transport is also in direct competition with containerised transport, as evidenced by the statements of break bulk providers of refrigerated services. Next, they point out that competition between the two modes of transport further increases with the decision of certain container carriers such as Mærsk to increase their refrigerated capacity. In support of that argument, the applicants cite a study by Drewry (World Reefer Market Prospects and Modal Competition - pallets v containers v break bulk, 1997) which, they say, confirms that on the trade between Europe and the United States of America some American fruit is carried by container whilst some is carried by conventional refrigerated vessels. On that basis, the applicants conclude that for at least some commodities containerised transport and bulk refrigerated transport are substitutable. 772   Third, the applicants claim that air transport is a possible alternative to sea transport for certain commodities. They rely in that respect on a statement of the President of the Campbell Aviation Group acknowledging such substitution, in particular as regards high-value, low-weight items. Similarly, in May 1998 the Journal of Commerce reported that about 10% to 15% of ocean freight volume transported by freight forwarders was being transferred to air transport. 773   Fourth, the applicants submit that NVOCCs represent a significant source of competition which should be taken into account in defining the relevant market. They explain that they are referring solely to NVOCCs which do not operate vessels either on the transatlantic trade or on other trades, as referred to at paragraph 159 of the contested decision. The applicants claim that from the shipper's point of view there is no difference between NVOCCs and sea carriers, since both compete at the retail level for the carriage of cargo of proprietary shippers (or freight forwarders). The applicants emphasise that NVOCCs are able to exercise considerable bargaining power over the sea carriers. This is because of the considerable purchasing power arising from the accumulation of volumes from individual shippers and because of the advantageous rates and services (port calls, transit times, customs requirements etc.) they can obtain from sea carriers (whether conference members or not) in the form of service contracts or TVRs. Given the NVOCCs' purchasing power, those rates are inevitably lower than those offered to individual shippers by sea carriers for low-volume shipments. 774   The applicants argue that competition operates at three levels: first, carriers compete inter se for the NVOCCs' cargo on the basis of the rates and conditions they offer; second, the NVOCCs select the most competitive carrier or carriers on the basis of the services and rates they offer; and third and finally the carriers also compete with the NVOCCs for the cargo business of shippers or freight forwarders. It follows that the carriers and the NVOCCs are in direct competition with each other. That competition is acknowledged by the NVOCCs themselves. 775   The applicants give a number of examples of the switching of cargo between the TACA members and the NVOCCs in support of their argument. They also observe that the calculations as to the size of the market include sales by NVOCCs which consequently reduce the applicants' sales. Thus, the volume of NVOCC cargo carried by TACA members under service contracts and TVRs increased from 11.8% in 1994 to 14.4% in 1997. 776   The Commission's argument that because NVOCCs buy their ocean capacity from vessel operators they do not provide any service different from the latter and must therefore be excluded from the relevant market confuses the intermediate market (sales to NVOCCs) with the end-user market (sales to proprietary shippers). From the point of view of the end-user there is no doubt that the services offered by the vessel operators and NVOCCs are similar and have a high degree of substitutability. The applicants draw an analogy in this regard with the case of cable TV operators who buy some of their programmes from satellite TV companies with whom they also compete in the supply of pay TV. The applicants add that in the case of intermodal transport, the transport comprises different segments and levels of service. Accordingly, just as individual carriers buy in elements of the complete intermodal service (such as inland transport and port services) from external suppliers, so the NVOCCs supply some elements of the intermodal transport service themselves and buy in others. 777   Last, the applicants point out that the Commission fails to explain why it considers that the NVOCCs are not part of the relevant market when at paragraph 22 of Commission Decision of 21 December 1994 relating to a proceeding pursuant to Article 85 of the EC Treaty, IV/33.218 - Far Eastern Freight Conference, OJ 1994 L 378, p. 17), the Commission found that NVOCCs offer the same services as liner shipping companies which offer multimodal services, but instead of operating vessels they charter slots from vessel-operating carriers. 778   In the second place, the applicants complain that the Commission did not take account of supply-side substitution, contrary to point 20 of its Notice on the definition of relevant market for the purposes of Community competition law, cited above. At paragraph 75 of the contested decision, the Commission refers, for its treatment of that issue, to paragraphs 278 to 282. Those paragraphs of the contested decision are not concerned with supply-side substitution, however, but with potential competition. The applicants claim that those two questions are economically and legally distinct and should not be confused. Moreover, the statement at paragraph 305 of the contested decision that the Commission does not accept that the vast majority of customers of the TACA parties regard bulk transport as substitutable for carriage on a fully-containerised vessel is based on a single piece of evidence. That evidence, an advertisement for ACL which describes the special equipment available on its vessels, also demonstrates the existence of supply-side substitutability as a container operator would only advertise in this way if it was seeking to encourage switching to its services. 779   The applicants submit that fleet mobility, referred to in the eighth recital of the preamble to Regulation No 4056/86, is compatible with a high degree of supply-side substitutability. It is in any case apparent from the Dynamar report that in 1996 non-containerised operators on the transatlantic trade via the Canadian Gateway were potentially able to increase their carriage of containers by about 200 000 TEU for minimal cost, both westbound and eastbound. This represented 15% of the applicants' capacity and was available without the need to adapt or modify their vessels. In Case 6/72 Europemballage and Continental Can v Commission [1973] ECR 215, the Court annulled the Commission decision for failing to take supply-side substitution into account, noting that 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 (paragraph 33). 780   The Commission, supported by the ECTU, contends that the applicants' pleas are unfounded.  (2) Findings of the Court 781   The applicants maintain that the definition of the relevant market for services used by the Commission in the contested decision is the consequence of an incorrect assessment of both demand-side substitution and supply-side substitution.  (i) Demand-side substitution 782   The applicants claim that air transport, traditional liner transport (break bulk) and the NVOCCs are substitutable for container shipping transport. They also criticise the Commission for having failed to take account of the cumulative effect of those sources of competition. Air transport services 783   Although the applicants did not maintain in their response to the statement of objections that air transport services are substitutable for container liner services, they now claim that for certain goods air transport services are a possible alternative to sea transport. They rely in that regard on a statement by the President of the Campbell Aviation Group and on an extract from the Journal of Commerce of May 1998. 784   In the contested decision, the Commission states at paragraph 62 that air transport forms a separate market from containerised liner shipping for the reason, inter alia, that it has not been shown that a substantial proportion of the goods carried by container could easily be switched to air transport. The Commission observed (in the same paragraph) that on the North Atlantic, air transport for cargo is up to 20 times more expensive than maritime transport and up to nine times faster. 785   The evidence put forward by the applicants in this action is clearly not capable of showing that those statements are inaccurate. 786   Thus, far from contradicting the Commission's conclusions, the statement of the President of the Campbell Aviation Group, made by a representative of the aeronautics industry, expressly asserts that the alleged substitution concerns lightweight high-value items, such as computer components. 787   The article in the Journal of Commerce of May 1998, apart from being anecdotal, merely states the fact, not otherwise supported, that some forwarding agents have switched 10% to 15% of their ocean freight to air transport for an unspecified category of products. In those circumstances, no particular probative value can be placed on that document. 788   Therefore the evidence put forward by the applicants does not show that the Commission made an error of assessment in concluding that demand for air transport concerned limited quantities of high-value-added lightweight goods and that air transport was a separate market from containerised liner shipping (see, to that effect, TAA, paragraph 279). 789   The arguments put forward by the applicants on this point must therefore be rejected.  Break bulk shipping 790   As regards, first, break bulk shipping transport, the applicants maintain first of all that the exclusion of this transport from the relevant market is wrongly based on the concept of one-way substitutability. 791   In that regard, the Court notes that at paragraph 65 of the contested decision the Commission considered that, in order to determine the competitive conditions on the relevant market, it was necessary to consider the effect of substitutability from carriage in container to carriage in bulk, substitution from bulk to container being irrelevant. The same reasoning is followed at paragraph 73 in respect of refrigerated services: the Commission observes that although refrigerated containers may be substitutable for bulk refrigerated services, that does not mean that bulk refrigerated services are substitutable for refrigerated container services. The Commission stated at paragraph 68 that as the degree of containerisation increases, shippers of non-containerised cargoes turn towards containerised services but once those shippers have become accustomed to shipping in containers they do not revert to non-containerised shipping. Such examples of one-way substitutability are not uncommon. 792   It is apparent from the contested decision that that situation is due to the fact that shippers become accustomed to shipping in smaller but more frequent quantities and realise that once cargo has been loaded into a container, it is easier to ship onwards from the port of delivery to the ultimate consignee using multimodal transport (paragraph 67). Smaller shipments lead to reduced inventory costs and reduce the risks of damage and pilferage (paragraph 70). Almost all cargo can be shipped in containers; thus, in mature markets, such as the northern Europe/USA or the northern Europe/Far East markets, the process of change towards containerised shipping is more or less complete and few, if any, non-containerised cargoes are left which are capable of being shipped in containers (paragraph 66). 793   In this case, although the applicants dispute the Commission's conclusions at paragraphs 65 and 73 of the contested decision on one-way substitutability, they do not dispute the factual findings at paragraphs 66 to 70 on the underlying phenomenon of gradual freight containerisation. They do no more than claim that an increase in the cost of transport by container will tend to slow down the rate at which shippers switch to that mode of transport or even, if the change in price is sufficiently great, will reverse the trend. They maintain that the existence of bulk transport services will then be a constraining factor when fixing the price of container transport services. However, while it is true that a significant change in the price of container transport might, at least in theory, encourage some shippers to use bulk transport instead, the applicants adduce no firm evidence to support their allegation. 794   In those circumstances, the Court finds that the substitution of containerised transport for break bulk transport, once put into effect, is definitive (see, to that effect, TAA, paragraph 281). 795   The Commission was therefore entitled to conclude that that substitution was irrelevant for the purpose of defining the relevant market. The substitution does not show that, from the shippers' point of view, the two modes of transport in question are substitutable for each other but merely reflects a phenomenon of cargo containerisation, leading to the emergence of a separate new market in which break bulk transport is not regarded as substitutable for the services provided by container transporters. Consequently, it must be concluded that the Commission did not make an error of assessment in basing its analysis of the relevant market on the concept of one-way substitutability. 796   Second, the applicants maintain that bulk transport, including refrigerated bulk transport, is substitutable for containerised transport. 797   As regards, first, non-refrigerated bulk transport, the applicants support their argument by reference to the existence of such substitution on the eastbound transatlantic trade for goods transported in large quantities originating in specific regions of the United States of America, such as, for example, coffee, peanuts, apples, pears or lemons. The applicants rely in that regard on the findings of a Dynamar report, which establishes, on the basis of figures, the existence of such substitution in the case of certain iron and steel products and forestry products. They also refer to an article published in August 1996 by the magazine American Shipper, quoting a manager of Mead Corporation, a United States paper exporter. 798   According to the case-law, the market to be taken into consideration comprises all the products which, with respect to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited extent interchangeable with other products (Michelin, cited at paragraph 337 above, paragraph 37). 799   As the Court of Justice has already held, stability of demand for a particular product is therefore a relevant criterion for defining a relevant market, so that the mere fact that different products are, to a marginal extent, interchangeable does not preclude the conclusion that those products belong to separate product markets (Tetra Pak II, cited at paragraph 762 above, paragraphs 13 to 15; see also TAA, paragraph 273). 800   In this case, the Commission was therefore correct to rely at paragraph 68 of the contested decision on that decision of the Court of Justice in order to find, at paragraphs 64 to 74 of the contested decision, that the fact that other forms of sea transport may, for a limited number of cargoes, provide marginal competition on the market for transport services by container does not mean that they can be regarded as belonging to the same market. 801   Contrary to the applicants' contention, the reference to a relevant criterion at paragraph 15 of Tetra Pak II, cited at paragraph 762 above, means not that other criteria must also be taken into account in order to determine the degree of substitution, but that the Commission is entitled to rely on that criterion in order to conclude that separate markets exist. In any event, in this case it is apparent from paragraph 75 of the contested decision that the Commission did not confine itself to studying demand-side substitution but that it also ascertained whether the examples of supply-side substitution given by the applicants were capable of calling its analysis in question. The Commission therefore did not base its assessments on a single criterion. 802   However, it is still necessary to ascertain whether the Commission was correct to find in this case that bulk transport provided only marginal competition for transport by container. 803   In that regard, it is apparent that, in the context of these actions, the applicants are in essence merely reiterating the arguments developed during the administrative procedure in their response to the statement of objections. They have not really challenged the grounds on which those arguments were rejected by the Commission at paragraphs 64 to 74 of the contested decision. It follows from those paragraphs, first, that for the great majority of categories of cargoes and users of containerised liner services, the other forms of break bulk liner services do not represent a foreseeable replacement solution on the trade in question and, second, that once a type of cargo is regularly containerised, there is virtually no prospect of its ever being carried in any other form. In that context, the Commission concludes, at paragraph 74, that while it is possible that in exceptional circumstances some substitution may occur between break bulk and container transport, it has not been demonstrated that there is any lasting changeover from container towards bulk for the vast majority of cases. 804   None of the evidence put forward by the applicants in these actions is capable of showing that those findings are incorrect. 805   Thus, the statement of a manager of a shipper concerning a specific product, paper, cannot reasonably establish the existence of a high degree of substitution between the two transport services for a wide category of goods. In their written submissions, moreover, the applicants expressly recognise that the alleged substitution is significant only in respect of low-value cargoes owing to the reduced rates offered by the operators of the various types of vessels. 806   Next, the data set out in the application for the purpose of showing that certain cargoes, such as fertilisers and certain iron and steel products, are carried by both types of transport, do not prove that shippers switch their cargoes between those two types of transport. In that regard, the Commission stated at paragraph 71, without being contradicted by the applicants, that: In this context, it is not important that certain commodities may still travel by either means: the essential question for determining demand substitutability is whether the choice of mode is made on the basis of the characteristics of the mode. Thus, the fact that some steel products may travel by bulk and others by container does not show that the two modes are substitutable, since it does not take into account the diverse nature (and value) of steel products [or] the delivery requirements of customers. 807   Furthermore, at paragraphs 217 and 219 of the contested decision the Commission observed, again without being contradicted by the applicants, that the existence of a certain substitution for products such as coffee, peanuts and paper, for which it accepts that there is some residual competition from bulk carriers, was the result of independent action by TACA members. The Commission was right to conclude, at paragraph 72, that, far from showing that bulk transport should be included in the relevant market, those examples demonstrated the ability of the TACA parties to discriminate on price so as to attract marginal products away from bulk carriers without affecting freight rates generally, and that there was no evidence that bulk carriers were likewise able to discriminate as between customers. 808   With reference to the applicants' allegation that paragraph 69 of the contested decision, where the Commission states that, according to Drewry (Global container Markets - Prospects and Profitability in a High Growth Era, London, 1996), the proportion of containerised freight rose substantially between 1980 and 1994, going from 20.7% to 41.6%, and is forecast to reach 53.8% by 2000, demonstrates the instability of demand, it is sufficient to recall that, as the Commission correctly concluded at paragraph 65 of the contested decision, that substitution is irrelevant in determining the relevant market: the sole question is not to what extent containerised freight can be substituted for other forms of transport but, on the contrary, to what extent, once that substitution has been effected, the other forms of transport can be substituted for containerised freight if the price of containerised freight rises significantly. 809   Having regard to the foregoing, none of the evidence put forward by the applicants is capable of calling in question the Commission's finding that, for the great majority of categories of cargoes and customers of the companies providing containerised services, bulk transport is not a reasonable replacement solution for containerised transport (see, to that effect, TAA, paragraph 273). 810   As regards, second, bulk refrigerated transport services, the applicants observe that that substitution is borne out by the statements of the traditional operators of refrigerated transport services, by the fact that competition between the two forms of transport is increasing even more with the decision of certain container shippers, such as Mærsk, to increase their refrigerated capacity and by the fact that, on trade between Europe and the United States of America, some American fruit is carried both by containers and by traditional refrigerated vessels. 811   It is thus apparent that in these proceedings the applicants are merely repeating, in essence, the evidence put forward during the administrative procedure in their response to the statement of objections. They have not really challenged the grounds on which that evidence was rejected by the Commission at paragraph 73 of the contested decision, where it is stated that although that evidence shows that refrigerated containers are substitutable for bulk refrigerated services, it does not show that bulk refrigerated services are substitutable for refrigerated container services. Furthermore, the Commission found at that part of the contested decision, first, that containerised refrigerated transport services offer some advantages, such as reduced volume and speed of transfer to other modes of transport, and, second, that a wider range of products can travel in containerised refrigerated transport than can travel as bulk refrigerated cargoes. 812   The evidence adduced by the applicants in the context of these actions does not show that those findings are incorrect. 813   As the Commission rightly observes at paragraph 73 of the contested decision, the evidence in question at the most confirms the phenomenon of the gradual containerisation of refrigerated transport and in no way shows that bulk refrigerated services are substitutable for refrigerated container services. As stated at paragraph 795 above, only proof of such substitution would be capable of demonstrating that both types of refrigerated transport belong to the same market. 814   Thus, the statements of the operators of bulk refrigerated transport services cited by the applicants merely emphasise that containerisation [is] the biggest threat to the traditional refrigerated cargo trades, but make no mention of the fact that bulk refrigerated transport services are substitutable for refrigerated container transport services. In any event, even if those statements might be so interpreted, they cannot seriously be regarded as proof of the existence of a significant substitution. 815   Likewise, the fact that container carriers are installing containerised refrigerated capacity proves not that bulk refrigerated transport services are substitutable for containerised refrigerated transport services but only that there is a phenomenon of containerisation of refrigerated transport services. 816   Last, the fact that certain products are carried both in containers and in bulk does not establish that shippers switch between those two modes of transport and therefore does not prove that bulk refrigerated transport services are for a significant part substitutable for containerised refrigerated transport services: at the most, it highlights the phenomenon that refrigerated freight is becoming containerised. 817   On those grounds, it must therefore be concluded that the applicants have not adduced evidence capable of calling in question the Commission's findings that bulk refrigerated transport services are substitutable for containerised transport services.  NVOCCs 818   The applicants maintain that the NVOCCs which do not operate vessels on any trade represent a significant source of competition which must be taken into account for the purposes of defining the relevant market. They also maintain that the decision is not reasoned to the requisite standard on this point, since it does not state why the NVOCCs are not part of the relevant market. 819   It is common ground that the NVOCCs which do not operate vessels on any trade obtain their maritime transport services, as the Commission states at paragraph 159 of the contested decision, from the TACA parties in the same way as shippers, that is, either at tariff rates or, more usually, on the basis of a conference service contract. 820   As those operators do not themselves provide any maritime transport services of their own, but obtain services from the TACA parties, they do not, as the Commission points out at paragraphs 160 and 161 of the contested decision, compete with maritime carriers as regards the quality and price of the maritime transport service provided. It is true that the NVOCCs in question may have a certain purchasing power and may therefore obtain lower prices in the service contracts than those paid by other shippers. However, as the Commission states at paragraph 161 of the contested decision, those prices are in any event still fixed by the TACA parties. 821   Furthermore, since they do not themselves provide maritime transport services on the trade in question, NVOCCs which do not operate vessels on any trade do not bring any capacity of their own to the market, but, like the shippers, merely obtain capacity provided by the maritime carriers. 822   Consequently, the Commission was entitled to conclude that NVOCCs which did not operate vessels on any trade were not part of the same market as the TACA parties. The grounds set out at paragraphs 159 to 161 of the contested decision also containing sufficient reasoning on that point. 823   The parties' arguments on that point must therefore be rejected.  Consideration of the cumulative effect of sources of competition 824   Last, the applicants complain that the Commission ignored the cumulative effect of the various sources of competition when it considered that each of the sources could be substituted for containerised transport only in exceptional circumstances and for a limited number of products. Thus, according to the applicants, an operator carrying 50 different products, each of a different value, and therefore facing competition from one or another alternative shipper, faces competition for all of its products. 825   However, as the Commission rightly observes at paragraphs 72, 203 to 213 and 534 to 537 of the contested decision, shippers which discriminate between the various categories of cargo by applying significantly different prices (since transport costs vary, depending on the goods, from one to five for the same transport service) are capable of limiting the effects of marginal competition for the transport of specific categories of cargo. Furthermore, the applicants' argument that since they face a different source of competition for each category of goods, they face competition for all their services, does not stand up. Not only have the applicants failed to establish that they faced competition from other forms of transport in respect of each category of cargo and therefore for the entire range of their services, but, moreover, it follows from the foregoing that the Commission established to the requisite legal standard that, for the great majority of categories of cargoes and users, the other transport services were not substitutable for containerised maritime transport services (see, to that effect, TAA, paragraph 282). 826   The complaint alleging failure to take into account the cumulative effect of the various sources of competition must therefore be rejected.  (ii) Supply-side substitution 827   The applicants submit that the Commission did not examine the possibility of supply-side substitution, but only the separate issue of whether the TACA parties were subject to certain potential competition. They further maintain that the mobility of fleets, which is recognised in the eighth recital of the preamble to Regulation No 4056/86, is compatible with a high degree of supply-side substitution. It is also apparent from the Dynamar report that in 1996 non-containerised operators active on the transatlantic trade via Canadian ports were potentially capable of increasing at a minimal cost their transport of containers by approximately 200 000 TEU on both westbound and eastbound trades, representing 15% of the applicants' capacity, without any need to adapt or alter their vessels. 828   As regards, first, the allegation that the Commission failed to examine in the contested decision the question of supply-side substitution, it has been held that in order to be able to be regarded as constituting a separate market, the products in question must be distinguishable not only by the mere fact of their use but also by specific production characteristics which render them particularly appropriate for that purpose (Europemballage and Continental Can, cited at paragraph 779 above, paragraph 33). 829   Accordingly, in this case, for the purpose of defining the relevant market, the Commission was required to ascertain whether operators of vessels other than container carriers could, by a mere technical adaptation, convert their vessels to carry containers or increase the number of containers carried and thus present themselves on the container freight market with sufficient weight to constitute a serious counterbalance to container freight carriers (supply-side substitution). 830   In that regard, at paragraph 75 of the contested decision, the Commission refers for examination of the question of supply-side substitution to paragraphs 278 to 282. 831   That reference is incorrect. At those paragraphs, which form the first part of the section of the contested decision devoted to potential competition, the Commission does not examine the possibilities of supply-side substitution, but merely makes certain preliminary observations about the probative value of the Dynamar report (The Transatlantic Trade - An overview of the carrying capacity/potential of non-TACA members, 1996) on which the TACA parties relied in support of their response to the statement of objections on that point. Essentially, the Commission states that, the TACA parties not having provided it with the instructions given to Dynamar concerning the preparation of the report, it infers that the conclusions of the report were coloured by those instructions. 832   Later in the same section of the contested decision devoted to potential competition, however, at paragraphs 300 to 305, the Commission examines the competition from non-container vessels, so that paragraph 75 must be taken to refer to those paragraphs. 833   The Court agrees with the applicants that none of those paragraphs deals expressly with the question of supply-side substitution. At that point in the contested decision, the Commission does not examine the capacity of non-container vessels to be adapted to carry containers or to increase the number of containers carried but, as expressly stated at paragraph 301, only studies the question whether the operators of those vessels have the potential to compete to a significant extent with fully containerised vessels in the sense, first, that they are capable of competing economically and on even terms with the TACA parties and, second, that customers regard carriage by those operators as being functionally interchangeable with carriage on a fully containerised vessel. Following its analysis, the Commission concludes that such significant potential competition does not exist. On the first point, it emphasises at paragraphs 302 to 304 of the contested decision that the technical characteristics and performance of non-fully containerised vessels are significantly different from those of fully containerised vessels and that the operators of such vessels do not possess the same fleets of containers as operators of fully containerised vessels and generally do not have the same land-side facilities. On the second point, it states at paragraph 305 of the contested decision that, from the customers' point of view, bulk or neo-bulk vessels are not substitutable for container vessels. 834   Although potential competition and supply-side substitution are conceptually different issues, as the Commission expressly accepts in the defence, those issues overlap in part, as the distinction lies primarily in whether the restriction of competition is immediate or not. It follows that most of the evidence at paragraphs 302 to 304 of the contested decision is capable of justifying both the absence of significant potential competition and the absence of supply-side substitution. Thus, as regards the technical characteristics of non-fully containerised vessels, the Commission expressly states at paragraph 303 that some of those vessels militate against supply-side conversion, owing to the additional expenditure required to carry containers on vessels which were not specifically built as container vessels. Nor can it be disputed that the absence of a significant container fleet or sufficient land-side facilities are significant obstacles to the rapid conversion of non-fully containerised vessels to fully containerised vessels. 835   It is also apparent from paragraph 300 of the contested decision that the purpose of the assessments made by the Commission at paragraphs 302 to 304 is to reject the applicants' argument based on the Dynamar report, which they also use to support these complaints, that operators of non-fully containerised vessels could adapt those vessels in order to carry containers or increase the number of containers carried. 836   In those circumstances, it must be accepted that the question of supply-side substitution is examined by implication, but unquestionably, at paragraphs 302 to 304 of the contested decision. The applicants' complaint on that point must therefore be rejected. 837   As regards, second, the evidence adduced by the applicants in order to demonstrate the existence of supply-side substitution, it must be emphasised, as stated above, that in the context of these proceedings the applicants essentially confine themselves to reiterating the arguments taken from the Dynamar report which they developed during the administrative procedure in their response to the statement of objections. The applicants have not challenged the grounds on which those arguments were rejected by the Commission at paragraphs 302 to 304 of the contested decision. 838   At the very most, the applicants claim that the assertion at paragraph 305 of the contested decision that the vast majority of customers of the TACA parties do not regard carriage in bulk as substitutable for container transport is supported by only one piece of evidence, an advertisement for ACL which is reproduced in that paragraph. 839   However, that criticism is irrelevant in the context of the examination of these complaints concerning the assessment of supply-side substitution. The assertion at paragraph 305 of the contested decision does not concern supply-side substitution but demand-side substitution. 840   In any event, contrary to the applicants' allegation, that assertion is not based solely on an advertisement for ACL. It is apparent from paragraph 69 of the contested decision that the Commission's assessments concerning the possibilities of substitution between containerised transport and bulk transport are essentially based on the Drewry report (Global Container Markets - Prospects and Profitability in a High Growth Era, London, 1996). Furthermore, as stated at paragraph 803 above, the applicants have not really challenged the arguments which the Commission sets out at paragraphs 64 to 74 to demonstrate that lack of substitution. 841   As regards the argument derived from the fact that the mobility of fleets is recognised in the eighth recital of the preamble to Regulation No 4056/86, in that recital the Council states that conferences continue to be subject to effective competition from both non-conference scheduled services and, in certain circumstances, from tramp services and from other modes of transport; ... the mobility of fleets, which is a characteristic feature of the structure of availability in the shipping field, subjects conferences to constant competition which they are unable as a rule to eliminate as far as a substantial proportion of the shipping services in question is concerned. Thus, it is clear from the wording of that recital that the Council relies on fleet mobility not in order to establish that non-containerised vessels may increase their container capacity but in order to show that the liner operators which are parties to a liner conference on a given trade are, in principle, subject to potential competition from containerised vessels active on other trades. Furthermore, and in any event, the Commission stated at paragraphs 289 to 299 of the contested decision, without being contradicted by the applicants on that point, that fleet mobility had scarcely any prospect of being effective on the transatlantic trade. In those circumstances, the applicants cannot derive any argument from the fact that fleet mobility is recognised by Regulation No 4056/86 as a ground for challenging the definition of the relevant market for services employed in the contested decision. 842   The applicants' arguments concerning supply-side substitution must therefore be rejected.  b) Geographical scope of the services in question 843   The applicants maintain that the definition of the relevant geographic market at paragraph 84 of the contested decision as being the market for sea-transport services between northern Europe and the United States and Canada is inaccurate in that it excludes the Mediterranean ports of southern Europe (paragraphs 76 to 83 of the contested decision). 844   They make the preliminary observation that, contrary to what is suggested at paragraph 77 of the contested decision, they did not claim during the administrative procedure that the ports of Turkey, Lebanon, Israel, Cyprus, Egypt, Libya, Tunisia, Algeria and Morocco are substitutable for northern European ports. They go on to plead as follows. 845   First, they repeat that their criticism of the Commission is founded on its rejection, at paragraph 76 of the contested decision, of the proposition that the Mediterranean ports are substitutable on the basis of one-way substitutability. They refer to the criticisms put forward in connection with the definition of the relevant service market, but stress in particular that the Commission has not shown how the evidence that the northern European ports were substitutable for the southern European ports did not also demonstrate that ports in both regions were substitutes for each other. The applicants consider that in dismissing the evidence of substitutability presented by them in their response to the statement of objections, the Commission places on them the burden of proving that the ports of southern Europe are substitutable for the ports of northern Europe, even though the correct definition of the relevant market is a precondition for a finding of a dominant position. It was for the Commission to send the necessary requests for information to the shippers, since the applicants are not able to obtain the relevant evidence. 846   Secondly, the applicants allege that the Commission's findings at paragraphs 80 and 82 that Mediterranean ports are inadequate and subject to infrastructural limitations are inconsistent with the facts. 847   First, it is apparent from the specialist press that southern European ports are increasingly perceived to be substitutable for those of northern Europe. Thus, it has been reported that many carriers believe that it makes more sense to stop in Mediterranean ports to link the Europe/Asia services with those of Europe/North America. Furthermore, the Mediterranean ports themselves consider that their services compete with the northern European ports and put forward as evidence in support an advertisement for the Port of Marseilles Authority. The applicants also claim that the volume of cargo on the Europe/US trade handled by the southern European ports increased substantially between 1994 and 1997. 848   Second, the attitude of the sea carriers also shows that the ports of southern Europe are substitutable for those of northern Europe. One applicant carried out a survey which concludes that the ports of southern Europe compete favourably with those of northern Europe in terms of efficiency, that conferences have traditionally existed (SEAC and USSEC) on the trade between southern Europe and the United States of America and that independent lines such as Lykes and Evergreen have increased their services from southern European ports. 849   Third, and finally, it is apparent from the behaviour of the shippers that the southern European ports are substitutable for those of northern Europe. Thus, in one invitation to tender the shipper expressly states that the Mediterranean ports can be considered as loading ports without any preference from our side. Furthermore, a number of shippers switched part of their cargo from northern European ports to those of southern Europe. There is no basis for the claim in the defence that evidence was submitted belatedly. 850   The Commission, supported by the ECTU, contends that the definition of the relevant geographic market in the contested decision is correct and supported by adequate reasoning. It therefore concludes that the applicants' pleas and arguments on this point should be rejected. 851   The applicants criticise the Commission for having excluded the Mediterranean ports from its definition of the relevant market for services at paragraph 84 of the contested decision, whereas transport services on the transatlantic route provided from the ports of northern Europe and those provided from the Mediterranean ports of southern Europe are substitutable. 852   By that argument, the applicants are disputing the geographical component of the transport services constituting the relevant market. That component refers to the question of the determination of the points of origin and of destination of the transport services concerning the transatlantic route (TAA, paragraph 293). 853   As the Commission rightly observes, that question is separate from the question of the definition of the relevant geographic market, which in this case is given at paragraph 519 of the contested decision and which is intended to determine the territory on which the undertakings concerned are engaged in the supply of the services in question, on which conditions of competition are also sufficiently homogeneous and which may be distinguished from neighbouring geographical areas because, in particular, the conditions of competition there are significantly different (see, to that effect, Case 27/76 United Brands v Commission [1978] ECR 207, paragraph 11, and Case T-65/96 Kish Glass v Commission [2000] ECR II-1885, paragraph 81). 854   First, the applicants criticise the Commission for having determined the geographical component of the relevant market by wrongly relying on the concept of one-way substitutability, in the sense that it took the view that the ports of northern Europe were substitutable for those of southern Europe but not vice versa. They claim that the Commission has failed to demonstrate how the evidence showing that the ports of northern Europe were substitutable for the ports of southern Europe did not at the same time show that the ports of both regions were substitutable for each other. 855   It should be noted that at paragraphs 76 to 83 of the contested decision, the Commission excluded the Mediterranean ports of southern Europe from the geographical component of the relevant market for services because, as stated at paragraph 76, while northern European ports are for some shippers substitutable for some Mediterranean ports, very few, if any, shippers find that Mediterranean ports are substitutable for northern European ports. 856   It is thus quite clear from paragraph 76 of the contested decision that, contrary to what the applicants suggest, the Commission did not find that the ports of northern Europe were substitutable for the Mediterranean ports of southern Europe but only that for some shippers northern European ports were substitutable for some Mediterranean ports of southern Europe. 857   Although that in itself provides sufficient ground to reject this complaint, it must also be emphasised that even if the Commission had established that the ports of northern Europe were substitutable for the Mediterranean ports of southern Europe, it would not have been required, in order to justify the exclusion of the Mediterranean ports of southern Europe from the relevant market, to establish the reasons for which the evidence proving that substitutability did not show that the Mediterranean ports of southern Europe were substitutable for those of northern Europe. 858   The TACA is an agreement governing the conditions of maritime container transport to the United States not from the European ports on the Mediterranean but from the ports of northern Europe and, more particularly, as stated at paragraph 14 of the contested decision, from the ports situated in latitudes between Bayonne and the Cape of Norway and points in Europe served via those ports, apart from Spain and Portugal. For the purpose of determining the geographical component of the relevant market for services, with a view to examining such an agreement from the aspect of competition law, the only relevant question is therefore whether a shipper consigning freight from northern Europe to the United States of America could easily substitute for the services offered from the ports of northern Europe the services offered from the Mediterranean ports of southern Europe to the United States of America. The reasons for which a shipper consigning freight from the Mediterranean ports of southern Europe to the United States of America might substitute the ports of northern Europe are manifestly irrelevant. 859   Contrary to what the applicants claim, that does not constitute a reversal of the burden of proof. It follows from the contested decision that, in order to exclude the Mediterranean ports of southern Europe from the relevant market on the ground that no shipper consigned from northern Europe to the European ports of the Mediterranean significant quantities of freight whose final destination was North America, the Commission relies on evidence in a number of respects, namely: –       - the fact that the TACA parties which are also VSA parties operate two to three round-trip rail shuttles a week between Milan and Rotterdam (paragraph 80); –       - the fact that, according to the Drewry report (Global Container Markets, London, 1996), even for Europe/Far East services, Mediterranean ports do not appear to be substitutable (paragraph 82); –       - the fact that, for certain categories of goods, the TACA parties may limit the effect of marginal competition from other means of transport by offering lower prices without affecting prices generally (paragraph 83). 860   According to paragraph 80 of the contested decision, the Commission considers that this evidence outweighs the evidence put forward by the TACA parties, which claimed, essentially, that shippers transferred some 8 000 to 10 000 TEU of freight from northern Europe to the European ports of the Mediterranean. 861   It follows from the foregoing that the Commission did indeed assume the burden of proof which it must bear in connection with the prior definition of the relevant market for the purpose of applying Article 86 of the Treaty. 862   For those reasons, these complaints alleging incorrect reliance on the concept of one-way substitutability must be rejected. 863   Second, the applicants claim that the Commission's assertions at paragraphs 80 and 82 of the contested decision concerning the inadequacy and the infrastructural limitations of the Mediterranean ports of southern Europe are contradicted by the facts. They maintain that the evidence which they adduce in the application shows that the Mediterranean ports of southern Europe are increasingly seen as substitutable for the ports of northern Europe. 864   It cannot be denied that there is a certain substitutability between the maritime transport services provided under the TACA and the regular container transport services on the transatlantic line offered from or to the Mediterranean ports of southern Europe (TAA, paragraph 296). However, it is not the complete absence of substitutability that justifies excluding the latter services from the services of the relevant market but the fact that that substitutability is extremely limited. 865   At paragraph 80 of the contested decision, the Commission states that the TACA parties have provided no evidence that any shipper has sent material quantities of cargo to Mediterranean ports from northern Europe with North America as the ultimate destination. The Commission observes at paragraph 79 of the contested decision that the alleged substitution of 8 000 to 10 000 TEU of freight from the northern European ports to the Mediterranean ports of southern Europe asserted by the applicants during the administrative procedure would, according to the applicants' own figures, have the effect only of increasing the total market by 2%, with the consequence that the TACA parties' market share would be reduced by approximately 1%. 866   As stated at paragraph 799 above, it is settled case-law that the existence of marginal substitutability does not prevent the conclusion that there are separate markets (Tetra Pak II, cited at paragraph 762 above, paragraphs 13 to 15, and TAA, paragraph 273). 867   The applicants have manifestly failed to provide evidence in these actions capable of showing that, for shippers in northern Europe, which constitutes the target area for the services provided by the TACA members, the services offered by the Mediterranean ports of southern Europe represent a reasonable alternative solution. 868   First, the applicants rely on the existence of transfers of freight from the ports of northern Europe to the Mediterranean ports of southern Europe. They rely in that regard on transfers by 13 shippers between 1996 and 1998, on the call for bids from one shipper in which the shipper states that it has no preference between the ports of northern Europe and the European Mediterranean ports and on the data provided by P&O Nedlloyd on the ports from which it provides services to its customers. 869   However, although the applicants claim, on the basis of those data, that there are transfers of freight from the ports of northern Europe to the Mediterranean ports of southern Europe, they do not at any point contend that those transfers are substantial. As stated above, it was not the complete absence of transfers that led the Commission, at paragraph 80 of the contested decision, to exclude the European ports of the Mediterranean from the relevant market but the fact that those transfers do not relate to significant quantities. 870   Furthermore, it is clear upon examining the data provided by the applicants that they do not establish the existence of substantial transfers. 871   Thus, as regards, first of all, the examples of transfers made by 13 shippers, the data provided by the applicants reveal, at the most, transfers relating to a volume of 7 900 TEU over three years. It is apparent from Table 2 at paragraph 85 of the contested decision that in 1996 alone the TACA transported 1 429 090 TEU on the trade between northern Europe and the United States of America, so that the alleged transfers represent a minute quantity of the relevant market. Nor is it possible to draw the slightest relevant conclusion from the data in question, since they do not indicate either the place of establishment of the shipper or, in particular, the destination of the goods. Second, as regards the call for bids referred to in the application, it is sufficient to state that it relates to a single contract for services made by a single shipper and it cannot therefore be considered to have any particular probative value. As regards, last, the data from Nedlloyd concerning a single carrier, it must be observed that, as the Commission rightly observes, they have no probative value, since they merely indicate, for certain shippers who are customers of P&O Nedlloyd, the variations in the freight carried from the European ports of the Mediterranean between 1995 and 1996, without specifying the variations in total freight carried from the ports of northern Europe and from the Mediterranean ports of southern Europe. In those circumstances, it is impossible to establish on the basis of those data whether the variations in freight result from transfers from the ports of northern Europe or from a variation in volumes of exports to the United States of America. 872   Second, the applicants claim that the volume of freight relating to the trade between Europe and the United States of America which is handled in the Mediterranean ports of southern Europe increased substantially over the period from 1994 to 1997. 873   In that regard, it should be pointed out that although the data provided by the applicants on that point indisputably show such an increase, they do not prove that the increase was the result of transfers of freight from the northern Europe ports and not of other factors, such as an increase in exports to the United States (TAA, paragraph 297). 874   Third, the applicants submit that a study prepared by one of them concludes that the ports of southern Europe compete favourably with those of northern Europe in terms of efficiency. In that connection, they also claim that conferences have traditionally existed on the trade between southern Europe and the United States of America and that independent lines such as Lykes and Evergreen have increased their services from southern European Mediterranean ports. 875   However, those data fail to show that, from the shippers' point of view, the Mediterranean ports of southern Europe are substitutable to a significant extent for the ports of northern Europe. Thus, the study produced by the applicants merely examines the productivity of the European ports on the Mediterranean and that of the ports of northern Europe, without at any point examining their substitutability. Such a study is therefore of no relevance for the purpose of challenging the definition of the relevant market in the contested decision. Although the other evidence adduced by the applicants does indeed show that a certain quantity of freight for destinations in the United States of America is carried from the Mediterranean ports of southern Europe, it does not in any way prove the existence of transfers of freight by shippers from the ports of northern Europe to the Mediterranean ports of southern Europe. 876   Fourth, and last, the applicants refer to certain articles from the specialist press which state, first, that many carriers believe it makes more sense to stop in the Mediterranean ports of southern Europe in order to link Europe/Asia services with Europe/North America services and, second, that the operators of the Mediterranean ports of southern Europe consider that their services are competitive with the ports of northern Europe. 877   However, the impressions of shippers, as reported in the specialist press, concerning the Far East/North American link cannot reasonably serve to undermine the opposite conclusions drawn by the Drewry report (Global Container Markets, London, 1996), reproduced at paragraph 82 of the contested decision, to the effect that Mediterranean ports [of southern Europe] do not appear to be substitutable for northern European ports even for Europe/Far East services. In any event, the press articles quoted by the applicants merely describe the increase in the trade in the Mediterranean ports of southern Europe, without in any way demonstrating that that increase is due to transfers of freight by shippers from northern Europe. 878   As regards the fact that the Mediterranean ports of southern Europe claim to be competitive with the ports of northern Europe, it is sufficient to observe that the only supporting evidence adduced by the applicants is an advertisement for the Port of Marseilles Authority, the terms of which, having regard to its purpose, clearly cannot undermine the conclusions drawn by the Commission on the basis of the Drewry report. 879   It follows from the foregoing that the applicants have not established the existence of significant freight transfers from the ports of northern Europe to the Mediterranean ports of southern Europe. 880   Furthermore, the Commission stated in the contested decision, without being contradicted by the applicants, first, at paragraph 80, that the TACA parties which are also VSA parties operated two to three round-trip rail shuttles a week between Milan and Rotterdam and, second, at paragraph 83, that for certain categories of goods the TACA parties could limit the effect of marginal competition from other means of transport by offering lower prices without necessarily affecting prices generally. In its written submissions before the Court, the Commission also made the relevant point that the TACA's land tariff extends to Croatia. Such circumstances amount to serious evidence, as the Commission rightly states, of the inadequacy of the Mediterranean ports in southern Europe for shipments to North America and that they are therefore not substitutable for northern European ports. 881   Last, and in any event, as stated above, the applicants submitted during the administrative procedure that if the freight transported from the European Mediterranean ports were included in the relevant market, that would have the effect of increasing the total market by 2%. However, at paragraph 79 of the contested decision the Commission stated, without being contradicted by the applicants, that since they do not include in the TACA market share cargo carried by the TACA parties on trades falling outside the geographic scope of the TACA, this would decrease the TACA parties' share of the relevant market by approximately 1%. To that extent, in so far as these complaints seek, by disputing the definition of the relevant market, to call in question the dominant nature of the position held by the TACA parties on that market, they are invalid. 882   For all those reasons, the applicants' arguments concerning the geographical scope of the relevant market in the contested decision must therefore be rejected.  c) Conclusion on the relevant market for services 883   It follows from all of the foregoing that the complaints raised by the applicants in respect of the definition of the relevant market for services in the contested decision must be rejected in their entirety.  2. The relevant geographic market 884   The applicants submit that the Commission's position with regard to the definition of the relevant geographic market is inconsistent. The Commission defined the geographic market at paragraph 84 of the contested decision as the sea routes between the ports of northern Europe and those of the United States of America and Canada, whereas at paragraph 519 it states that the geographic market consists of the area in which the maritime transport services are marketed, that is, in this case the catchment areas of the ports in northern Europe and that such a geographic market is commensurate with the scope of the TACA's inland tariff. In those circumstances the applicants do not understand the conclusion at paragraph 91 that inland transport services between northern Europe and the United States as part of intermodal transport do not form part of the market for maritime transport services. If the relevant market includes those inland transport services it is undeniable that the applicants did not occupy a dominant position. 885   The Commission, supported by the ECTU, contends that this plea is unfounded.  b)Findings of the Court 886   As a preliminary point, contrary to the applicants' contention, the definition of the relevant geographic market accepted by the Commission in this case is set out not at paragraph 84 but at paragraph 519 of the contested decision. As stated at paragraphs 851 to 852 above, at paragraph 84 of the contested decision the Commission does not define the relevant geographic market but only the geographical component of the relevant maritime services. 887   At paragraph 519 of the contested decision, the Commission states that the relevant geographic market for the maritime transport services [consists] of the area in which the maritime transport services defined above are marketed, that is, in this case, the catchment areas of the ports in northern Europe and specifies that such a geographic market is commensurate with the scope of the TACA's inland tariff. 888   It is true, as the applicants observe, that at paragraph 91 of the contested decision the Commission states that the land transport services in question, namely those undertaken within the territory of the Community which shippers acquire together with other services as part of a multimodal transport operation for the carriage of containerised cargo between northern Europe and the United States of America ... do not form part of the market for maritime transport services. 889   Contrary to what the applicants maintain, however, there is no inconsistency there. Paragraphs 91 and 519 of the contested decision relate to different markets for services, namely the relevant market for land transport services and the relevant market for maritime transport services. The fact that the geographic markets for these services overlap in part, since they both cover the geographical area in which the TACA's land transport services are provided, cannot logically mean that the relevant land and maritime services are substitutable for one another and therefore belong to the same market for services. There is nothing to prevent the same geographical area from covering two separate markets for services. 890   As the reasoning in the contested decision is not inconsistent on this point, this complaint must be rejected. As a preliminary point, contrary to the applicants' contention, the definition of the relevant geographic market accepted by the Commission in this case is set out not at paragraph 84 but at paragraph 519 of the contested decision. As stated at paragraphs 851 to 852 above, at paragraph 84 of the contested decision the Commission does not define the relevant geographic market but only the geographical component of the relevant maritime services.  3. Conclusion on the definition of the relevant market 891   It follows from all the foregoing that the applicants' pleas and arguments concerning the definition of the relevant market for services in the contested decision for the purposes of the application of Article 86 of the Treaty must be rejected in their entirety. E –  The existence of a dominant position on the relevant market 892   In this part of their pleas alleging that there has been no infringement of Article 86 of the Treaty, the applicants deny that the TACA parties held a dominant position on the relevant market during the period covered by the contested decision. In that regard, they maintain that the Commission made an incorrect analysis not only of their market shares but also of effective external competition, potential competition, internal competition and developments in rates on the relevant trade. The applicants further allege that there are certain defects in the reasoning on the last point.  1. The market share held by the TACA parties  (a) Arguments of the parties 893   The applicants' first plea is that the Commission made an error of law in finding, at paragraph 533 of the contested decision, that a market share of some 60% in 1994, 1995 and 1996 gives rise to a strong presumption of a dominant position. They maintain that the Commission's analysis of the data on the TACA parties' market shares is inaccurate and incomplete. 894   First, the applicants allege that the market share data used by the Commission do not cover a sufficiently long period (only three years). The Court has recognised the importance of the persistence of a significant market share over time before a finding of a dominant position can be made (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 41). Although the Court has not specified the required time it is apparent from the legal literature (Bellamy and Child, Common Market Law of Competition, 4th edition, paragraph 9 024) that a period of five years would probably be sufficient, but that a period of less than three years, especially in a dynamic market, might be considered too short for a high market share to be indicative of a dominant position. 895   Second, the applicants submit that the Commission has not compared the position of the parties to that of the independent companies. Where an undertaking with a small market share is able to meet the demands of those clients who wish to break away from the undertaking with the largest share, the latter will not be an unavoidable trading partner within the meaning of the judgment in Hoffman-La Roche (cited at paragraph 765 above) and therefore in a dominant position. The judgment states that an undertaking which has a very large market share and holds it for some time, by means of the volume of production and the scale of the supply which it stands for - without those having much smaller market shares being able to meet rapidly the demand from those who would like to break away from the undertaking which has the largest market share - is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which, already because of this, secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position (paragraph 41). The applicants also stress that assessment of market shares in isolation without considering the market shares of principal competitors results in ignoring, first, the constraints of potential competition (even though they have adduced considerable evidence of the existence of such competition) and, second, the nature of the competitive dynamics in the market. 896   Third, the applicants submit that the Commission cannot base the conclusion that there is a dominant position solely on the existence of a market share in excess of 50%. That presumption, based on paragraph 60 of AKZO, cited at paragraph 95 above, for the purposes of a finding of individual dominance is irrelevant in the case of collective dominance. In the latter case an assessment of the applicants' total market share should also take account of the existence of internal competition between the undertakings concerned. The AKZO presumption would only be legitimate where there is no such internal competition. The Court of Justice has upheld this point of view, in the context of Community merger control, in Kali und Salz (cited at paragraph 595 above), paragraph 226, where it held that a market share of approximately 60% [divided between the individual undertakings as 23% and 37% respectively] cannot of itself point conclusively to the existence of a collective dominant position on the part of those undertakings. Furthermore, in making decisions on merger control the Commission has itself considered that asymmetrical market shares and output levels make the adoption of a common market strategy unlikely. In this case, the market shares of the applicants in 1996 varied from 9.6% in the case of Sea-Land to 0.1% in the case of NOL and their individual capacity utilisation differed considerably. 897   Fourth, the applicants stress that according to the Commission's practice in relation to both the law on agreements (Commission Decision 87/500/EEC of 29 July 1987 relating to a proceeding under Article 86 of the EEC Treaty, IV/32.279 - BBI/Boosey & Hawkes: Interim measures, OJ 1987 L 286, p. 36, paragraph 18) and the law on merger control (Commission Decision 91/251/EEC of 12 April 1991 declaring the compatibility with the common market of a concentration, Case No IV/MO42 - Alcatel/Telettra, OJ 1991 L 122, p. 48) a high market share does not create a presumption of dominance. Furthermore, liner conferences typically have a relatively high market share in order to exercise the stabilising role accorded to them by Regulation No 4056/86. The applicants consider in this respect that, because Regulation No 4056/86 contains a provision under which the Commission may apply Article 86 of the Treaty to liner conferences, it is not legitimate to presume, on the basis of a relatively high total market share, that a liner conference has a dominant position. 898   The applicants' second plea is that even if the Commission was entitled to consider the TACA parties collectively the applicants' collective market share is inconsistent with a finding of collective dominance. 899   First, the applicants allege that as TACA parties their market share for the years from 1994 to 1997 on the relevant market as defined by the Commission was, contrary to what was indicated in paragraph 85 and Table 2 of the contested decision, 58.1%, 57.6%, 56.2% and 54.3%. The applicants explain that the difference between the market shares relied on in the contested decision and those given by the applicants is accounted for by the different approach to transport via the Canadian ports. The applicants claim that transport by individual TACA members via the Canadian Gateway falls outside the scope of the TACA and is not therefore to be aggregated with cargo transported by the applicants on the direct trades. 900   Second, the applicants allege that on the correctly defined relevant market, the market share of the TACA parties is substantially below that stated in the contested decision. The market share of the TACA parties on that market is 47.2%, 46.4% or even less than 40% depending on the case, once account is taken on the demand side of break bulk and refrigerated services respectively, the Mediterranean ports and the NVOCCs. The data relating to air transport are not available but if they had been, the applicants' market share would have been still less than those figures. Furthermore, if account were taken of the possibility of supply-side substitution, their market share would be 43.3% (including NVOCC cargo). Those figures are based on their own data for 1995 in respect of demand-side substitutability and for 1996 in respect of supply-side substitutability. The applicants claim that the imperfections due to the limited nature of those data operate in any case to their disadvantage, since more information on cargo transported in containers and in break bulk would diminish their market share still more. 901   The applicant in Case T-213/98 further submits that the Commission cannot dismiss as irrelevant the fact that the TACA's market share fell in 1997 (paragraph 533 of the contested decision) without examining the reasons for the fall. If it was due to pressure of competition on the TACA that fact would be relevant in assessing the TACA's position on the relevant market. 902   The Commission, supported by the ECTU, contends that these pleas are unfounded.  (b) Findings of the Court 903   In essence, by these pleas and complaints the applicants deny that their market share on the transatlantic trade is of such a kind as to give it a dominant position on that market. 904   However, it must be stated at the outset that it is apparent from the contested decision that the Commission did not rely solely on the fact that the applicants had such a market share to support its finding of a dominant position. At paragraph 533 of the contested decision the Commission states expressly that the TACA parties' market share gives rise to a strong presumption of a dominant position. Furthermore, according to paragraphs 534 to 549 of the contested decision, the Commission finds that this presumption is borne out by other factors, namely: –       - the fact that the TACA maintains a discriminatory price structure, since the Commission considers at paragraphs 534 to 537 that the system of pricing differentiated, in particular, according to the value of the products or quantities, the purpose of which is to maximise revenues, is normally found only in market situations where one or more undertakings has a substantial degree of market power; –       - the limited possibilities for customers to switch to other providers, since the Commission considers that that situation is the consequence of the capacities held by the TACA (paragraph 539), the existence of service contracts (paragraph 540), the price leadership of the TACA (paragraphs 541 and 548), the role of follower of competitors on prices (paragraphs 541 and 544), the TACA's capacity to impose regular, albeit modest, price increases during the relevant period (paragraph 543) and the substantial barriers to entry on the trade (paragraphs 545 to 547). 905   Consequently, as the Commission did not base its finding that the TACA parties hold a dominant position on the relevant trade solely on their market shares on that trade, the applicants' present pleas and complaints must be taken to criticise the Commission for having inferred a strong presumption of a dominant position from such market shares. 906   In this case, the Commission stated in the contested decision, at paragraph 533, that the TACA parties had approximately 60% of the relevant market in 1994, 1995 and 1996, that is, as stated at paragraphs 592 and 594, during the period covered by the infringements of Article 86 of the Treaty established in the contested decision. The Commission also observed that this market share reached 70% in the most important segment of the market, namely, as indicated in Table 3 at paragraph 86, to which paragraph 533 makes reference, the segment of trade between northern Europe and the east coast of the United States of America, and in the segment of trade between northern Europe and the west coast of the United States of America. 907   As the Commission has rightly observed, such a market share is likely to give the TACA parties the power to prevent the maintenance of effective competition on the relevant market by providing them with the possibility of engaging in independent conduct to a significant extent vis-à-vis their competitors and shippers, thus conferring on them a dominant position within the meaning of Article 86 of the Treaty (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 38). It has been held that although the existence of a dominant position may be the outcome of a number of factors which, considered separately, would not necessarily be determinative, in the absence of exceptional circumstances extremely large market shares are in themselves evidence of the existence of a dominant position (CEWAL I, cited at paragraph 568 above, paragraph 76 and the case-law cited there). Market shares of more than 50% have been held to constitute extremely large market shares (AKZO, cited at paragraph 95 above, paragraph 60; Case T-30/89 Hilti v Commission [1991] ECR II-1439, paragraph 89; and Case T-83/91 Tetra Pak v Commission [1994] ECR II-755, paragraph 109). Thus, the Court of First Instance has already held that a market share of between 70% and 80% is in itself a clear indication of the existence of a dominant position (Hilti, cited above, paragraph 92). 908   In those circumstances, it must be held that the Commission was entitled to conclude, at paragraph 533 of the contested decision, that the fact that the TACA parties held a market share of 60% on the trade in question gave rise to a strong presumption of a dominant position. 909   None of the pleas and arguments put forward by the applicants in these proceedings is capable of upsetting that conclusion. 910   As regards, first, the allegation that the data relating to market shares relied on in the contested decision are inaccurate, the applicants begin by criticising the Commission for having wrongly included the shipments made by the TACA parties via the Canadian ports. 911   In that regard, the Court observes that at paragraphs 265 to 273 of the contested decision the Commission considered that the TACA parties' market share for services provided via the Canadian ports should be added to the share they held for direct services and not treated as though it belonged to a competitor. Consequently, for the purpose of determining the TACA parties' share of the relevant market during the period covered by the contested decision, the Commission took account, as indicated at paragraphs 85 and 533 of the contested decision, of the TACA parties' freight passing through the Canadian ports. 912   Without its being necessary at this stage to decide whether the Commission was wrong to take account of the freight passing through the Canadian ports in order to determine the TACA parties' share of the relevant market, since that question is the subject of separate pleas examined later in the context of the examination of external competition, it should be observed that in any event the TACA parties' market share between 1994 and 1996, as calculated by the applicants and omitting that freight, is only slightly less than that indicated in the contested decision, since it comes to 58.1%, 57.6% and 56.2% for the years in question, instead of 60.6%, 61.5% and 59.8%. 913   A market share of 56% is quite clearly still an extremely high market share which, as held in the case-law cited above, is in itself, in the absence of exceptional circumstances, proof of the existence of a dominant position. 914   In those circumstances, even on the assumption that it is well founded, the applicants' complaint must be regarded as irrelevant. 915   Next, the complaint that on the relevant market as defined by the applicants the TACA parties' market share is below 50%, and indeed below 40%, is entirely unfounded, as the applicants' complaints concerning the definition of the relevant market have been rejected above. 916   The plea alleging that the calculation of the TACA parties' market share is inaccurate must therefore be rejected. 917   As regards, second, the plea alleging that the analysis of the TACA parties' market share is incomplete and incorrect, the applicants begin by complaining that the Commission did not examine those market shares over a sufficiently long period. 918   The Court observes that at paragraph 533 of the contested decision, the Commission states that the TACA parties held a market share of some 60% in 1994, 1995 and 1996, that is, as may be seen from paragraphs 592 and 594 of the contested decision, during the three years corresponding to the period covered by the infringements of Article 86 of the Treaty established in the contested decision. At the same paragraph, the Commission states that the contested decision does not consider whether that market share was maintained in 1997. 919   Admittedly, a high market share held over a very short period may not, in certain circumstances, suffice to give rise to a presumption of a dominant position. 920   In this case, however, the holding of a market share in the order of 60% over a period of three years, corresponding to the first three years of the operation of the TACA agreement, cannot be regarded as prima facie insufficient to give rise to a presumption of a dominant position. Furthermore, although the applicants maintain generally that a period of three years is insufficient, they do not explain how that is so in this case. 921   Contrary to the applicants' contention, moreover, the TACA parties did not hold a market share as large as that established in the contested decision for just three years. As the Court held in TAA (paragraph 326), the TAA, to which the TACA succeeded in 1994, had, on the transatlantic trade between northern Europe and the United States of America, a market share of some 75% in 1992 and 65% to 70% in 1993. Since in 1992 and 1993 the TAA consisted of most of the TACA parties, the TAA/TACA parties held a market share in excess of 60% for at least five years. In their written submissions to the Court, the applicants themselves have accepted that holding a high market share for five years was sufficient to give rise to a presumption of a dominant position. 922   It follows that the applicants are wrong to maintain that the presumption of a dominant position referred to in the contested decision was based on data relating to too short a period. 923   Furthermore, in so far as by this complaint the applicants are criticising the Commission for not having taken account of the reduction in the market share held by the TACA parties after 1996, that complaint coincides with the pleas and arguments relating to the examination of potential competition examined later. A significant reduction in the TACA parties' market share after 1996 might indicate the existence of significant potential competition between 1994 and 1996 which might in appropriate circumstances call in question the existence of a dominant position during that period. That question is dealt with later, at paragraphs 1009 to 1037. 924   Next, as regards the complaint that the Commission failed to examine the position of the TACA parties' competitors, it should be observed that at paragraphs 538 to 544 of the contested decision the Commission stated that the presumption of a dominant position resulting from the market share held by the TACA parties during the relevant period was confirmed by the limited opportunities which their customers had of switching to alternative suppliers. The Commission observed at paragraph 539 of the contested decision that between 1993 and 1995 the TACA parties held over 70% of available capacity on the direct northern Europe/United States of America trades, while their largest competitor, Evergreen, held 11% of available capacity, and that there was no reason why those figures should change in 1996. As regards the other main competitors, the Commission referred at the same paragraph to the analysis made at paragraphs 244 to 264 of the contested decision. 925   Whilst that shows that for the purpose of establishing that the TACA parties held a dominant position on the relevant market the Commission assessed the position of their competitors by reference not to their market shares but to the share of available capacity on the relevant market held by those competitors, it cannot be inferred on that ground alone that the Commission failed, as the applicants maintain, to consider the position of the TACA parties' competitors by comparison with the TACA parties. 926   The applicants themselves have stated in their written submissions to the Court that on the maritime transport market, market shares in principle reflect capacity. 927   Furthermore, at paragraphs 244 to 264, to which paragraph 539 makes express reference, the Commission studies in detail the competitive position of each of the TACA's competitors with a market share of over 1%, namely, in addition to Evergreen, Lykes, Atlantic Cargo Service, Independent Container Line and Carol Line. In that context, the Commission considers not only the market share of each of those competitors but also all other relevant matters, in particular their capacity and the other agreements by which they are bound, in order to assess the intensity of the competition from that source. 928   The Commission also emphasised, at paragraphs 540 to 544 and 548 of the contested decision, the foreclosing effect caused by the contracts for services and the fact that the TACA parties' competitors set their rates by reference to the TACA and are therefore price takers. 929   Contrary to the applicants' claims, it follows that the Commission did indeed examine in the contested decision the position of the TACA parties' competitors and that it was therefore in a position to assess, in accordance with the case-law (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 48) whether those competitors were in a position to provide effective competition for the TACA parties. 930   The complaint alleging failure to examine the position of the TACA parties' competitors must therefore be rejected. 931   As regards the complaint that, unlike the situation prevailing in the case of an individual dominant position, a market share in excess of 50% cannot suffice to found a presumption of a collective dominant position, it has been held that the concept of a dominant position relates to a position of economic strength which enables the entity holding that position to prevent effective competition on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of consumers (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 38). 932   It is quite clear that an entity which holds more than 50% of the market, whether it is an individual entity or a collective entity, is capable of enjoying such independence. 933   As the applicants rightly observe, a collective entity is of course composed of undertakings between which a certain amount of competition may subsist and whose market shares may be somewhat asymmetrical. However, although such a circumstance is capable where appropriate of precluding a collective assessment of the position of those undertakings on the relevant market (see, to that effect, Kali und Salz, cited at paragraph 595 above, paragraphs 226 and 233), it is of no relevance for the purpose of determining whether that collective position is dominant. The dominant nature of a market position is to be assessed by reference to the degree of dependence vis-à-vis competitors, customers and suppliers, so that only the latter factors relating to external competition must be taken into account. 934   In any event, in this case the market share held by the TACA throughout the relevant period was significantly in excess of the market share threshold of 50%. In the contested decision, the Commission established that the TACA parties had a market share of approximately 60%. Furthermore, at paragraph 533 of the contested decision, the Commission stated that on the most important segment of the relevant market the TACA's market share was approximately 70% during the relevant period. Last, as stated above, according to the data supplied by the applicants themselves in support of their actions the TACA's market share is still more than 56%. 935   In those circumstances, it must be held that, even accepting the applicants' misplaced argument that the market share threshold from which the existence of a collective dominant position may be inferred is higher than in the case of a simple individual dominant position, that would be so in this case. 936   The applicants' complaint on this point must therefore be rejected. 937   As regards, last, the argument that liner conferences must have high market shares in order to play the stabilising role imputed to them by Regulation No 4056/86, it is clear that a liner conference by its nature restricts competition between its members and can attain the stabilising objective imputed to it by Regulation No 4056/86 only if it has an appreciable market share. The fact that Regulation No 4056/86 provides for a block exemption for liner conferences does not therefore justify the automatic conclusion that any liner conference holding a 50% market share does not satisfy the fourth condition of Article 85(3) of the Treaty, namely the elimination of competition (TAA, paragraph 324). 938   It cannot be inferred, however, that in the area of maritime transport the fact that a liner conference holds a high market share is not an indication of the existence of a dominant position. 939   Although eliminating competition may preclude the application of the block exemption provided for by Regulation No 4056/86, the mere holding of a dominant position has no effect in that regard. As the concept of eliminating competition is narrower than that of the existence or acquisition of a dominant position, an undertaking holding such a position is capable of benefiting from an exemption (United Brands, cited at paragraph 853 above, paragraph 113; Hoffmann-La Roche, cited at paragraph 765 above, paragraph 39; and TAA, paragraph 330). Thus, under Article 8 of Regulation No 4056/86, it is only where a liner conference abuses its dominant position that the Commission may withdraw the benefit of the block exemption provided for in that regulation. Furthermore, unlike the possibility of eliminating competition, the mere holding of a dominant position is not in itself prohibited by the competition rules laid down in the Treaty, since only the abuse of that position is prohibited. 940   It follows that, even in the area of maritime transport, the fact of holding a high market share is capable of indicating the existence of a dominant position within the meaning of Article 86 of the Treaty. 941   This argument based on Regulation No 4056/86 must therefore be rejected. 942   It follows from the foregoing that the pleas and complaints relating to the market share held by the TACA parties must be rejected in their entirety.  2. Effective external competition 943   By this plea, the applicants allege that the contested decision, at paragraphs 243 to 275 (Section X: External competition) and paragraphs 543 and 566 (Section XXIII: Assessment under Article 86), erroneously concludes that they eliminated actual external competition. In the alternative the applicants claim that as the Commission stated during the written procedure that the second abuse identified by the contested decision did not eliminate actual external competition, that should be borne in mind in assessing the proportionality of the fines imposed. 944   The applicants submit first that in finding that the TACA parties' aggregate market share was relatively stable the Commission failed to recognise that a small numerical change in market share could give rise to a substantial change in freight movement. Thus, when Evergreen increased its market share by 1.2% from 1994 to 1995, this represented an increase in freight of 36 466 TEU. The applicants add that there are more than 20 independent operators of containerised vessels on the northern Europe-USA trade which cumulatively exert competitive pressure on the TACA parties. 945   Second, the rate of increase in cargo transported by other carriers from 1994 to 1996 and from 1994 to 1997 exceeded theirs. For example, on the westbound trade for the period 1994 to 1996 cargo transported by the TACA fell by 8.3% whilst that of other carriers increased by 6.7%. The applicants also point out that newcomers to the market have significantly increased their share in the carriage of certain commodities. Furthermore, the capacity offered by independent carriers on that trade increased by 41% between July 1996 and July 1997, and between July 1995 and July 1997 the increase was 47%. That increase is accounted for by the arrival in the market in February 1997 of Cosco, K Line and Yangming. 946   Third, the applicants stress the significance of competition from the independent container carriers Evergreen and Lykes on the direct transatlantic trade. 947   Competition between the applicants and Evergreen is evidenced by the switching by shippers of all or part of their cargo from the TACA to Evergreen and by the gain in market share of the latter between 1994 and 1996 from 10.8% to 12%. Furthermore, in October 1997 Evergreen announced plans to invest in the construction of 25 new vessels. That answers the allegation at paragraph 251 of the contested decision that the pressure from Evergreen is limited by the fact that given the current high capacity-utilisation levels in the transatlantic trade, Evergreen could only compete to win market share by introducing new vessels. In any event, the applicants claim, even if it were not to invest in any new capacity, Evergreen has the potential to increase its capacity on the transatlantic trade at no extra cost simply by transferring vessels from other trades. 948   The applicants consider that competition against the TACA from Lykes is also evidenced by the switching of cargo from the applicants to Lykes and the volume of cargo carried by Lykes on that trade between 1994 and 1996. In response to the Commission's allegation that many of the examples of switching do not relate to all of the shippers' requirements, the applicants argue that such switching shows that shippers regard non-TACA lines as offering effective competition against the conference since shippers often split their requirements in this way precisely in order to exert greater pressure when negotiating rates. 949   Third, the applicants stress the existence of competition from cargo transported via the Canadian ports, whether by TACA members operating on that trade (ACL, DSR-Senator, Hapag-Lloyd, MSC, Mærsk, NOL, NYK, OOCL, P&O Nedlloyd, POL and Sea-Land) or by non-members (CAST and Canadia Maritime, Bolt Canada Line and Norasia). The cargo passing through the Canadian ports to destinations in the United States is not subject to collective rate-fixing authority, so that the TACA members operating on that line do so as independent carriers. The applicants claim that the competition from carriers operating through the Canadian ports is recognised by industry commentators and is demonstrated by the examples of shippers who elected between 1993 and 1998 to switch cargo from TACA members to other carriers operating via the Canadian ports. 950   The competition from TACA members is evidenced by the fact that the rates charged on the trade via the Canadian ports and the rates charged on the direct trades are different. Moreover, the shippers themselves confirm the existence of that competition since they treat the TACA carriers operating via the Canadian ports as independent carriers. The applicants claim that those factors contradict the findings at paragraphs 269 and 270 of the contested decision. 951   As regards competition from non-member carriers, the applicants claim that, contrary to the suggestion at paragraph 268 of the contested decision, the Canadian authorities are in no way preoccupied with competitive conditions on the northern Europe/Canada trade. In an order relating to the merger between CAST and CP Ships, the Canadian Federal Court of Appeal found that competition would not be reduced by that merger because of the intensity of competition on the trade, as evidenced by the announcement by Sea-Land, Mærsk and P&O Nedlloyd that they would also enter the trade. The applicants go on to stress the strong competition exerted by the group made up of CP Ships, Bolt Canada Line and Norasia. The CP Ships group has a capacity of 85 000 TEU and a fleet of 46 ships, and is a powerful competitor on the trade via the Canadian ports. Cargo moved to the US also represents a significant proportion of the total volume of freight carried by it. Moreover, Canada Maritime intends to increase its presence on the trade following the acquisition of new containers. Bolt Canada Line operates three ships on the trade. Finally, Norasia, which is based in Switzerland, launched a new service between northern Europe and Canada in June 1998. Norasia's ships have a capacity of 1 388 TEU and its aim is to differentiate itself from the competition by calling at just three ports. 952   The Commission, supported by the ECTU, contends that these pleas and complaints are unfounded. 953   The applicants deny that the TACA eliminated effective external competition. They claim that the TACA has a significant number of competitors whose market share increased during the relevant period, that the market share of those competitors increased more than the TACA's did and that the capacity offered by independent shipping lines increased following the entry on to the market of Cosco, K Line and Yangming. Furthermore, some shippers switched all or some of their freight from the TACA to Evergreen and Lykes and Evergreen is in a position to increase its capacity in the future. The applicant in Case T-213/98 denies that the TACA leadership in pricing matters is capable of being an indication of a dominant position in the area of maritime transport. The applicants further maintain that the Commission incorrectly assessed the competition from the freight shipped via the Canadian ports. 954   As a preliminary point, it should be observed that the Commission did not find in the contested decision that effective external competition for the TACA was eliminated, but only that it was limited. At paragraph 538 of the contested decision, the Commission states that one of the factors demonstrating TACA's dominant position is the limited ability of its customers to switch to alternative suppliers, making the TACA an unavoidable trading partner even for its disaffected customers. The Commission mentions the following factors in relation to external competition: the fact that the TACA has 70% of available capacity on the direct trade between northern Europe and the United States of America, while its main competitor has 11%, the foreclosing effect created by the contracts for services, the leadership of the TACA and the role of taker played by its competitors in pricing matters and the regular, albeit modest, price increases imposed by the TACA between 1994 and 1996. 955   It follows that it is not the complete absence of competition that led the Commission to conclude that a dominant position existed but the weakness of external competition. It must be further borne in mind that, according to the case-law, a dominant position does not necessarily preclude some competition, but enables the undertaking which profits by it, if not to determine, at least to have an appreciable influence on the conditions under which the competition will develop, and in any case to act largely in disregard of it so long as such conduct does not operate to its detriment (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 39). 956   In that context, it is therefore necessary to consider whether the pleas and complaints raised by the applicants in respect of the analysis of external competition in the contested decision show not only that external competition exists but also that it is significant.  (1) The number of competitors of the TACA parties and the increase in their market share 957   The applicants claim that the TACA faced cumulative competition from some 20 shipping lines and that the increase in their market share, albeit modest, reflected high quantities in terms of volume. 958   As regards, first, the number of competitors, it has already been stated at paragraphs 927 to 929 that at paragraphs 244 to 262 of the contested decision the Commission examined the competitive position of five carriers independent of the TACA, namely Evergreen, Lykes, Atlantic Cargo Service, Independent Container Line and Carol Line. The Commission considered that these undertakings were the TACA's five main competitors. At paragraph 244 of the contested decision, the Commission states that the individual market shares of these competitors in 1995 were 10.2%, 5.7%, 3.2%, 2.7% and 1%. 959   It is true, as the applicants observe, that the Commission did not examine the position held by the other 12 competitors active on the relevant market. 960   However, it is common ground between the parties that during the relevant period none of the other competitors held a market share higher than 1%. It cannot seriously be denied that a shipping line with a market share of below 1% is not in a position to offer significant competition to the TACA parties. Nor do the applicants dispute the Commission's findings at paragraphs 253 to 263 of the contested decision that the applicants faced no effective competition from Atlantic Cargo Service, Independent Container Line and Carol Line, although those undertakings held market shares of between 2% and 3%. Furthermore, it has consistently been held that the weaker and smaller the competitors, the less they are in a position to provide real competition for the dominant undertaking (United Brands, cited at paragraph 853 above, paragraphs 111 and 112, Hoffmann-La Roche, cited at paragraph 765 above, paragraphs 51 to 58, and TAA, paragraph 341). As regards the relevant market, the Court of First Instance has thus already held that none of the independent companies was able, on account of smaller market shares and more limited resources than Evergreen, to supply sufficient services to subject TAA members to real competition (TAA, paragraph 343). 961   Furthermore, even taking into account the cumulative position held by the competitors in question, the data provided by the applicants themselves show that those competitors taken together represented at the most 2.3% of the relevant market in 1996. Such a market share is clearly not capable of providing significant competition for an entity holding 60% of the market. Nor do the applicants explain how the alleged cumulative pressure from the competitors in question actually affected the position held by the TACA parties. 962   It follows that the Commission was therefore right not to take account of competitors whose market share was below 1% in determining whether the TACA parties held a dominant position on the relevant market. The applicants' complaint on this point must therefore be rejected. 963   Second, the allegation that a modest increase in market share reflects large quantities in terms of volume is manifestly unfounded. The fact that an undertaking increases its sales volumes is in itself of no relevance for the purpose of assessing its competitive position by comparison with the other operators active on the market in question if the increase in sales volume is not compared with the overall volume of the market in order to determine the share which it represents in that market. 964   The applicants' complaint on this point must therefore be rejected.  (2) The rate of increase in the volume of freight carried by the TACA's competitors 965   The applicants maintain that the TACA parties' competitors succeeded in taking a significant part of the increase in demand between 1994 and 1996. Between 1994 and 1996 the volume of freight carried by the TACA rose by 2%, whereas that carried by its competitors rose by 11%. 966   It must be observed, however, that in spite of that the TACA's market share remained essentially at the same level during the three years covered by the contested decision. Accordingly, even if the TACA parties' competitors increased the volume of freight carried, they were not in a position to gain significant market shares to the detriment of the TACA parties. 967   It must be borne in mind, moreover, that, as stated above, the market share held by the TACA parties remained high. Thus, even on the applicants' estimates, the TACA parties' market share between 1994 and 1996 remained at over 56%, while the market share of Evergreen, the TACA parties' largest competitor, did not exceed 12%. Such a gap between the market share held by the TACA parties and that held by its main competitor is clearly a significant indication of the existence of a dominant position (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 48), particularly when the nearest competitors held marginal market shares (United Brands, cited at paragraph 853 above, paragraphs 111 and 112, Hoffmann-La Roche, cited at paragraph 765 above, paragraphs 51 to 58, and TAA, paragraph 341). 968   As regards the alleged circumstance that the capacities offered by the TACA parties' competitors increased following the entry on to the market of Cosco, K Line and Yangming, it is sufficient to observe that, since those independent shipping lines entered the market after the period covered by the contested decision, it is of no relevance when considering the existence of effective external competition. 969   For those reasons, the applicants' complaints on this point must be rejected.  (3) The effective competition from Evergreen and Lykes 970   In order to demonstrate the external competition which they faced from Evergreen and Lykes the applicants submit first that freight was switched to those shipping lines and second that Evergreen is in a position to increase its capacity. 971   It should be observed that Evergreen is the only independent company with a relatively high market share - 10.5% in 1995, according to paragraph 244 of the contested decision. However, as may be seen from paragraphs 249, 250, 539 and 544 of the contested decision, a number of factors are likely to result in a significant reduction in the competition which Evergreen was able to provide for the TACA members. Thus, Evergreen's market share is five times lower than the market share of the TACA parties. It follows from paragraph 539 of the contested decision, moreover, that between 1993 and 1995 Evergreen had 11% of the capacity available on the direct trade between northern Europe and the United Sates of America, while the TACA parties held more than 70%. It is also common ground that Evergreen was a party to the Eurocorde agreement, to the Southern Europe America Conference and to agreements on the non-utilisation of capacity such as the Transpacific Stabilisation Agreement and the Europe Asia Trades Agreement, to which certain TACA parties were also party, which indicates a community of interests with the applicants. It should also be borne in mind that Evergreen was initially supposed to participate in the TAA, the TACA's predecessor, and that even though it remained independent the Court of First Instance has already found that it none the less maintained regular contacts with certain TAA members and was very well informed of the TAA's price policy, which enabled it to modify its tariff schedule in order to follow, with a slight difference, the changes made by the parties to the TAA (TAA, paragraph 342). At paragraph 249 of the contested decision the Commission thus found, and the applicants have adduced no firm evidence capable of upsetting that finding, that Evergreen had announced price rises identical to the TACA's for 1996 and that it had therefore to be regarded as a follower of the TACA on price matters. 972   In those circumstances, it is apparent that Evergreen, which was the only independent company with a certain power on the market for scheduled transport services on the transatlantic route, was not in fact able to exert real competitive pressure on the TACA members (see, to that effect, TAA, paragraph 342). 973   As regards Lykes, the second largest independent operator on the relevant market, it is apparent from paragraph 244 of the contested decision that its share of the relevant market in 1995 was only 5.7%. Furthermore, at paragraph 252 the Commission stated, without being contradicted by the applicants on that point, that Lykes had filed for bankruptcy protection under US law in 1995, thereby inhibiting its commercial freedom on the relevant market. 974   It follows that neither Evergreen nor Lykes was capable of bringing significant external competition to bear on the TACA parties. 975   None of the evidence adduced by the applicants in these proceedings is capable of upsetting that finding. 976   As regards the allegation that certain shippers switched freight to Evergreen and Lykes, it is sufficient to observe that although the data provided by the applicants unquestionably show that some competition was provided by those independent shipping lines, a fact which, moreover, is not disputed by the Commission, they do not show that that competition related to significant quantities of freight. Furthermore, at paragraph 544 of the contested decision, the Commission stated, without being contradicted by the applicants on that point, that examination of the examples chosen by the TACA parties in their response to the statement of objections, most of which are identical to those submitted in these proceedings, showed that the switching to Evergreen which occurred represented only a portion, and sometimes only a very small portion, of that shipper's requirements. 977   As regards the possibility that Evergreen would increase its capacities in 1997, the fact that Evergreen envisaged increasing its capacities after the period covered by the contested decision does not prove the existence of effective external competition over the period covered by the decision, but at most, should it do so, the existence of some potential competition. The applicants' argument is therefore irrelevant for the purpose of challenging the findings in the contested decision concerning effective external competition. In any event, the data provided by the applicants do not make it possible to determine the share represented by the increases in capacity decided on by Evergreen compared with all capacity available on the relevant market and, accordingly, have no probative value. 978   Consequently, the applicants' complaints relating to the effective external competition brought to bear by Evergreen and Lykes must be rejected.  (4) The TACA's leadership in pricing matters and the role of follower played by the independent competitors 979   Although the applicants do not really dispute the TACA's leadership in pricing matters established at paragraphs 249, 541 and 548 of the contested decision, the applicant in Case T-213/98 submits that the Commission cannot infer that that situation points to a dominant position, since the fact that the non-conference shipping lines tend to follow the TACA by using the uniform tariff as a reference point is one of the aspects of the stability to which the conferences contribute in maritime transport. 980   It is indeed true, as the applicants observe, that the leadership held by liner conferences in pricing matters can allow them to ensure the objective of trade stability envisaged by Regulation No 4056/86. However, it cannot be inferred that the TACA's leadership in pricing matters does not for that reason point to the existence of a dominant position within the meaning of Article 86 of the Treaty. 981   As stated at paragraphs 937 to 940 above, in the context of the examination of the market shares held by the TACA parties, holding a dominant position is not in itself prohibited by Article 86 of the Treaty and does not prevent the grant of an exemption under Article 85(3) of the Treaty. Furthermore, it has consistently been held that the existence of a dominant position may be inferred from any objective factor showing that the undertaking in question has the capacity to behave independently of its customers, competitors and suppliers, including factors positive in themselves, such as the existence of effective research and development programmes (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 48). Therefore, the fact that TACA's leadership in pricing matters contributes to the objective of stabilisation of the trade cannot prevent the Commission from relying on it in order to establish the existence of a dominant position. 982   The applicants' complaints on these points must therefore be rejected.  (5) Competition from the Canadian Gateway 983   The applicants maintain that freight shipped via the Canadian ports, either by the TACA parties operating on that trade or by shipping lines which are not parties to the TACA, provides significant external competition for the TACA parties. They maintain that freight passing through the Canadian ports for destinations in the United States of America is not subject to joint tariff setting, so that the TACA parties operating on that trade do so as independent carriers. They also claim that the competition from freight passing through the Canadian ports is recognised by the specialist press and demonstrated by the incidences between 1993 and 1998 of freight being switched by shippers from TACA parties to other carriers operating on the trade via the Canadian ports. 984   Before examining these arguments, it should be observed that in the contested decision the Commission did not find that freight to or from the United States of America passing through the Canadian ports did not provide the TACA parties with any competition, but only that the competition was relatively limited. At paragraph 265 of the contested decision the Commission concedes that freight originating in or destined for the mid-west of the United States of America may travel to and from northern Europe either by United States ports or by Canadian ports, mainly Montreal and Halifax. The Commission also notes that Canadian Gateway freight does not fall within the scope of either United States or Canadian antitrust exemptions. Consequently, it accepts at paragraph 266 of the contested decision that for certain shippers the Canadian Gateway may be substitutable for United States east coast ports. 985   However, as may be seen from paragraphs 269 to 272 of the contested decision, the Commission is of the view that this competition remains limited because, first, a number of members of the Canadian conferences, namely OOCL, Hapag Lloyd, ACL and POL, are also TACA parties and, second, the members of the Canadian conferences are informed of the TACA parties' price-setting practices. It therefore concludes, at paragraph 273 of the contested decision, that the market share of the TACA parties for services provided through the Canadian Gateway should be aggregated with the market share of the TACA parties for direct services and not treated as a distinct competitor. Accordingly, paragraphs 85 and 533 of the contested decision indicate that the data relating to market share on which the Commission based its presumption of a dominant position include freight passing through the Canadian ports. 986   It must be emphasised that none of the evidence adduced by the applicants in the context of these proceedings is capable of upsetting those findings by demonstrating the existence of significant competition from freight passing through the Canadian ports. 987   As regards, first, the competition from the TACA members operating via the Canadian Gateway, the applicants submit data intended to show that the rates charged by those members on the direct trade are different from those applicable on the trade via the Canadian ports. 988   However, those data are irrelevant, since the different rates charged on the direct trade and on the trade via the Canadian ports may be explained by other reasons, to do with the nature of the services provided on the two routes. As the Commission rightly states at paragraph 270 of the contested decision, it is a question of the cross-price elasticity between the two services and not the level of price ...; the TACA parties have provided no evidence of the degree of cross-price elasticity between the two routes. Furthermore, at paragraph 269 of the contested decision the Commission stated, without being contradicted by the applicants, that Hapag Lloyd, ACL and POL did not offer separate services on the Canadian Gateway, since the same slots were used for direct shipments and for shipments via the Canadian ports. As the Commission rightly observes at the same paragraph, it is unrealistic to believe that one line will compete with itself to sell the same slot depending on the inland route of the cargo. Although some competition may exist, that competition is likely to be diminished because some of the TACA parties also have a significant influence on competitive conditions on the trades between northern Europe and Canada. 989   The Commission was therefore right to consider that the TACA parties operating via the Canadian Gateway did not provide significant external competition for the TACA parties operating on the direct trade in question. 990   As regards, second, the competition from the shipping lines which are not TACA members, the applicants submit that CP Ships carries significant quantities of freight via the Canadian Gateway and that it intends to increase its presence in the future. Bolt Canada Line is also active on that trade, with three vessels, and Norasia began a new service between northern Europe and Canada in 1998. 991   It is clear that although those factors unquestionably attest to the existence of a degree of competition from the Canadian Gateway for the direct trade to the United States of America, which, moreover, is not disputed, they are not capable of invalidating the Commission's conclusion that that competition is limited. 992   First of all, even though the freight passing through the Canadian Gateway was included by the Commission in the relevant market, it represents a relatively modest part of the total freight shipped between northern Europe and the United States of America. It is apparent from the data set out at paragraph 85 of the contested decision that the freight passing through the Canadian ports to the United States of America or to northern Europe represents between 15% and 17% of all freight carried between northern Europe and the United States of America. In those circumstances, the competition which the Canadian conferences, which have only a part of the freight passing through the Canadian Gateway, provide for the carriers operating on the direct trade is necessarily limited. 993   Next, the applicants did not deny that the Canadian conferences, even though they do not enjoy exemption on collective price fixing, follow the pricing practices of the TACA on the transatlantic trade, as the Commission states at paragraphs 271 and 272 of the contested decision. Therefore, even if the Canadian conferences were capable of bringing significant competitive pressure to bear on the TACA, it is clear that they essentially declined to do so. 994   Last, none of the evidence adduced by the applicants is conclusive. Thus, the increased capacity envisaged by CP Ships and that introduced by Norasia in 1998 do not show that there was real external competition during the period covered by the contested decision. Moreover, the presence of three vessels owned by Bolt Canada Line, in the absence of any details of its market share, is purely anecdotal. As regards the freight carried by CP Ships, the applicants merely provide a range of disparate data intended to emphasise the importance of that shipping line, without its being possible to infer therefrom the volume of freight which it carries on the segment in question and the market share which that volume represents. 995   Consequently, the Commission was entitled to consider that the non-TACA shipping lines operating via the Canadian Gateway did not provide significant external competition for the TACA parties on the trade in question. 996   As regards, third, the fact that freight was switched from the TACA to members of the Canadian conferences, the majority of examples given by the applicants relate to years before or after the period covered by the contested decision. Furthermore, although those data establish that certain shippers switched part of their cargo to the Canadian conferences, thus demonstrating the existence - which is not disputed - of some competition from the Canadian Gateway, they do not establish that that competition is significant. Quite to the contrary, it follows from a comparison of those data with the data set out at paragraph 85 of the contested decision that the examples of cargo-switching provided by the applicants represent marginal quantities not exceeding 0.8%, 0.9% and 2.3% of all freight passing through the Canadian ports in 1994, 1995 and 1996. 997   The applicants' complaints relating to the failure to take the effective external competition from the Canadian Gateway into account must therefore be rejected.  (6) Conclusion on effective external competition 998   It follows from the foregoing that all the pleas and arguments put forward by the applicants concerning the assessment of external competition must be rejected.  3. Potential competition 999   The applicants allege that the Commission erred in finding, at paragraphs 276 to 306 of the contested decision, that the TACA members eliminated effective potential competition. In the alternative, in so far as the Commission now recognises that potential competition has not been eliminated, the applicants claim that that fact should be taken into account in assessing the gravity of the second abuse identified by the contested decision and the proportionality of the fines imposed. 1000 The applicants allege first that the entry costs to the transatlantic trade are not as high as the Commission claims. The Commission's conclusions at paragraphs 288 and 545 are contradicted by the Dynamar Report, according to which the initial investment in establishing an operating service is about USD 355 million, whilst a niche service would only require an investment of USD 100 million, in either case considerably less than the USD 500 million claimed in the contested decision. According to the same report, by space-chartering a newly-established carrier could commence service as a niche operator for an investment of USD 21 million. Furthermore, the necessary investment could also be reduced by the redeployment of vessels from other trades or by leasing. The Commission's allegation that the figures cited in the contested decision concern the situation where the entrant wishes to offer a level of service comparable to that of the TACA parties disregards the fact that several of the TACA members do not own the vessels they operate but charter space from other operators (see paragraph 182 of the contested decision). Consequently, the comparability of the service does not depend on the fact of vessel ownership. 1001 Secondly, the applicants submit that the recent entry into the market of several shipping lines operating independently demonstrates that the TACA members were subject to potential competition during the period covered by the contested decision. The applicants refer in this respect to the appearance of K Line, Yangming and Cosco in February 1997 and of APL and Mitsui in March 1998 by chartering space from Lykes, and to the new service from Compagnie Générale Maritime from Philadelphia from 2 December 1997. The applicants claim that those events show that the Commission made an error of fact in finding at paragraph 113 of the statement of objections that the TACA parties do not face any effective potential competition on the ground that APL, Mitsui, Yangming and K Line will probably enter the route in question by joining the TACA. It is irrelevant in that respect that APL and Mitsui are members of New World Alliance since that fact does not affect their competition with the TACA. 1002 Thirdly, the applicants deny that service contracts form a barrier to entry to the market (paragraphs 135, 225 and 564 of the contested decision). The evidence they put forward shows that the majority of shippers do not satisfy all of their requirements under a single service contract. Shippers often exceed the minimum quantity commitments laid down by service contracts by more than 60%, which proves that they retain the option to ship cargo with other carriers at competitive rates. The applicants also deny that the foreclosing effect of service contracts is greater at the beginning of the year. Furthermore, Cosco, K Line and Yangming successfully entered the market in February 1997 and rapidly built up market share. 1003 Fourthly, the applicants point out that since 1997 a number of them (Hanjin, NOL, Cho Yang, DSR-Senator, TMM, Tecomar and Hyundai) have resigned from the TACA to operate as independents on the transatlantic trade. 1004 The applicant in Case T-213/98 also claims, separately, that the TACA parties are not capable of eliminating competition. 1005 It is clear from the provisions of Regulation No 4056/86 (see the eighth recital) that as long as some competition, either actual or potential, is present, the benefits of conferences for shippers and consumers justify the restrictions inherent in conference agreements and that any excess of market power could be controlled through the Commission's powers under Article 7(2)(b)(i). In those circumstances it would be illogical for the Commission to be able to categorise as an abuse the mere enlargement of an existing conference by the addition of new member lines so long as competition in the relevant market is not eliminated. The Commission confuses the elimination of competition with the elimination of a source of potential competition (Hanjin and Hyundai). The facts show that after Hanjin and Hyundai joined the TACA, competition in the market prevented the TACA from exercising any market power. 1006 The applicant in Case T-213/98 further submits that the lines operating on other trades can enter the transatlantic trade by achieving economies of scale. They stress that lines may use their operational and administrative infrastructures on other trades, take over lines operating on the transatlantic trade or merge with them and that most of the major carriers are engaged in a process of network expansion, completing their main east-west trades and extending into north-south ones. 1007 The applicant concludes that in those circumstances the TACA parties are not able to eliminate competition. An illustration of that is that the market shares of the TACA and non-TACA lines on the trade fluctuated continuously between 1996 and 1998 and that independent lines entered the market (Cosco, Yangming and K Line). The applicant also refers to the competition from the Mediterranean ports for the carriage of goods originating in or destined for Spain, Italy, southern and central France and other regions of southern Europe (Switzerland, Austria, the Czech Republic etc.). It claims that in such cases the longer sea haul is compensated for by a shorter inland haul. It also stresses the competition from the Canadian Gateway. Contrary to the assertion in paragraph 269 of the contested decision it is not unusual for undertakings to position themselves on the market in such a way that their products compete with each other. The applicant also notes that the proceedings before the Canadian authorities concerning the acquisition of CAST referred to at paragraph 268 of the contested decision say nothing about the competition of CP Ships, CAST and OOCL on the US market. Furthermore, entry to the transatlantic trade does not necessarily require vessels of 4 000 TEU, as asserted by paragraph 287, since that is a relatively short route. 1008 The Commission, supported by the ECTU, contends that this plea is unfounded. 1009 The applicants contend that the Commission erred in finding that the TACA members eliminated potential competition. First, they allege that the costs of entry on to the transatlantic trade are not as high as the Commission claims. Second, they maintain that a number of shipping lines have recently entered the trade in question as lines independent of the TACA. Third, they deny that service contracts constitute an obstacle to entry on to the market. Fourth, and last, they claim that a number of them resigned from the TACA after 1997. At the hearing the applicants stated, however, in response to a question put by the Court on the last point, that they were not claiming that those withdrawals were evidence of the existence of significant potential competition for the TACA parties and, accordingly, there is no need to examine that complaint. 1010 It should be observed, as a preliminary point, that, contrary to what the applicants allege, the Commission did not find in the contested decision that the potential competition faced by the TACA parties was eliminated, but only that it was limited. At paragraph 538 of the contested decision, the Commission states that one of the elements demonstrating TACA's dominant position is the limited ability of its customers to switch to alternative suppliers, which makes the TACA an unavoidable trading partner even for its disaffected customers. The Commission states in regard to potential competition that the barriers to entry are substantial, owing to the high costs of market entry (paragraph 545), the reduced mobility of the fleets on the trade in question - that is, the reduced opportunities for actual competitors to increase their capacity or for potential competitors to enter the trade (paragraph 546) - and the specialised nature of the vessels (paragraph 547). 1011 It follows that it is not the complete absence of potential competition that led the Commission to conclude that a dominant position existed but rather the fact that it is weak. 1012 In that context, it is appropriate to consider whether the pleas and arguments put forward by the applicants in respect of the analysis of potential competition in the contested decision demonstrate, in addition to the existence of such potential competition, that it was significant.  (1) The costs of market entry 1013 At paragraph 545 of the contested decision the Commission states that the investment necessary to enter the market may vary between USD 400 million and USD 2 billion. Thus, at paragraph 288 the Commission states that an investment in the region of USD 500 million is necessary in order to be able to provide a fixed-day weekly service calling at three or four ports in northern Europe and the same in the United States; such a service requires a fleet of five vessels of similar speed and capacity together with a complement of containers of three times the capacity of the fleet. 1014 It must be held that none of the arguments put forward by the applicants in these proceedings is capable of upsetting those findings in the contested decision. 1015 As regards, first, the argument that the Dynamar report concludes that the initial investment to set up an operational service by a shipowner is approximately USD 355 million, it is sufficient to observe that such an amount, although lower than the estimates in the contested decision, is none the less still considerable. Furthermore, the Commission has indicated, without being contradicted on this point by the applicants, that the estimates made in the Dynamar report did not take account of the sunk costs which do not accrue until the second year. 1016 Nor, contrary to the contention of the applicant in Case T-213/98, does the Commission assert that entry on to the transatlantic trade requires vessels of 4 000 TEU. At paragraph 287 of the contested decision, the Commission merely observes that the costs savings per slot are 30% to 40% for a 4 000 TEU ship as against a 2 500 TEU ship. 1017 As regards, next, the other estimates, all below USD 355 million, submitted by the applicants on the basis of the Dynamar report, those estimates concern the setting up of niche services on the basis of vessel-leasing agreements. In order to assess the importance of the barriers to entry on the relevant market, it is necessary to determine the essential costs of setting up a service of a level comparable with that of the TACA parties. Only in such a situation might a newcomer be in a position to subject the TACA parties to significant competition. Since it is common ground that the TACA parties do not confine their activities to niche services but are active globally on all the trade in question, the data provided by the applicants are irrelevant. Furthermore, although it is true, as the applicants emphasise, that certain TACA parties operate their liner services by chartering space on vessels belonging to other TACA parties, new independent entrants who do not wish to join the TACA cannot avail themselves of that opportunity to the same extent as TACA parties, since competition external to the TACA is limited. In any event, the applicants stated at the hearing that it was not possible to determine the cost of entering the market by means of space chartering, since that cost depended on the terms negotiated with the charterer. 1018 As regards, last, the argument that a new entrant could reduce the necessary investment by redeploying vessels operating on other trades, the Commission stated in the contested decision that the mobility of fleets recognised by Regulation No 4056/86 was limited on the trade in question. First, the Commission observed at paragraph 287 of the contested decision that the special features of the transatlantic trade substantially reduced the likelihood of potential competition, emphasising in that regard that this trade was a high-volume trade and needed regular, high-capacity services, which meant a large number of big, modern vessels providing a weekly service, calling at a sufficient number of ports. Second, the Commission stated at paragraph 290 of the contested decision that almost all of the major liner shipping companies were already present on the transatlantic trade. Third, it stated at paragraphs 291 to 298 that between 1993 and 1995 every significant potential competitor had entered this trade by joining the TACA. Fourth, the Commission stated at paragraph 299 that the cost of withdrawing from the transatlantic trade, with the resultant damage to reputation and to competitive positions elsewhere, and lower prospects of returning to the trade, reduced the incentive to enter. Fifth, and last, it observed at paragraph 547 that it was necessary to deploy vessels of a relatively high standard and specialised in the carriage of containers. 1019 As the applicants have not challenged any of those assessments in the contested decision it must be taken as established that fleet mobility is limited on the trade in question. 1020 The argument that a new entrant could reduce the costs of entry on to the market by deploying vessels active on other trades must therefore be rejected. 1021 On those grounds, all the applicants' arguments relating to the costs of entry on to the market must be rejected.  (2) Recent non-TACA entries to the relevant market 1022 The applicants state that a number of shipping lines entered the transatlantic trade between 1997 and 1998 without joining the TACA. 1023 It is common ground between the parties that K Line, Yangming and Cosco entered the trade in question on 16 February 1997 under consortium agreements. Likewise, it is not disputed that APL and Mitsui entered the trade in March 1998 on the basis of space-chartering agreements with Lykes, while Compagnie Générale Maritime introduced a new service from Philadelphia on 2 December 1997. 1024 It is clear that these entries on to the market directly contradict the Commission's finding in the statement of objections - or in the course of the period during which, according to the contested decision, the TACA parties held a dominant position on the relevant market - that, in view of the links existing between the TACA parties on other trades, it was probable that if those shipping lines entered the transatlantic trade, they would do so by becoming members of the TACA. 1025 Contrary to what the Commission maintains, the fact that all these entries took place after the period covered by the contested decision is irrelevant. Potential competition must not be confused with actual external competition. By definition, potential competition refers to a competitive pressure which has not materialised at the time of the events in question but which may be foreseen in the short or medium term, on the basis of precise and consistent indicia, with some degree of certainty at the time of those events. In fact, during the administrative procedure, the applicants produced various articles from the specialist press stating that APL and Cosco intended to enter the market in the short term. 1026 However, the fact that a number of shipping lines, in spite of their links with the TACA parties on other trades, entered the transatlantic trade outside the TACA between 1997 and 1998 does not necessarily show that those lines represented significant potential competition during the period covered by the contested decision. 1027 In that regard, the Commission stated at paragraph 264 of the contested decision, without being contradicted by the parties on that point, that on the basis of the capacity on the trade in mid-1995, the new capacity represented by the Cosco-K Line-Yangming consortium would have given Cosco a 2.8% share of eastbound capacity and 2.7% of westbound capacity on the direct trades and 2.3% and 2.2% respectively on the trades including Canadian trades, while the other lines would each have had exactly half that capacity. As regards the entry of Mitsui and APL, the Commission stated at paragraph 244 of the contested decision, again without being contradicted by the applicants, that these two new operators entered the transatlantic trade without introducing any new capacity. 1028 Furthermore, the Commission stated at paragraph 249 of the contested decision, without being contradicted by the applicants on this point, that the independent competitors were likely to follow the TACA's leadership on prices. In its written submissions, the applicant in Case T-213/98 itself stated, moreover, that this tendency to follow the prices fixed by the TACA was one of the aspects of the stability recognised by Regulation No 4056/86 to which liner conferences contribute in the area of maritime transport. 1029 In those circumstances, the Commission was entitled to consider that K Line, Yangming, Cosco, APL and Mitisui were not likely to constitute a source of significant potential competition for the TACA parties. 1030 The applicants' arguments on this point must therefore be rejected.  (3) Service contracts 1031 The applicants deny that service contracts form a barrier to entry to the market. They claim that the majority of shippers do not satisfy all of their requirements under a single service contract. Shippers often exceed the minimum quantity commitments laid down by service contracts by more than 60%, which proves that they retain the flexibility to ship cargo with other carriers at competitive rates. 1032 It is common ground between the parties that a service contract, whether individual or joint, is a contract in which a shipper makes a commitment to provide a certain minimum quantity of cargo over a fixed period and the conference or carrier commits to a certain rate and to a defined service level. The Commission stated at paragraph 135 of the contested decision that shippers would normally seek a service contract for as great a volume as they thought they were reasonably likely to acquire, since that allowed them to get a bigger discount from the tariff rate. For that reason, the Commission considers, at paragraph 540 of the contested decision, that shippers who require regular maritime transport services over a period of one year or more are unlikely to switch part of their requirements to smaller carriers, since this would reduce their minimum volume commitment under a service contract with the conference and lead to a smaller discount. 1033 Far from invalidating those assertions, the figures submitted by the applicants in these proceedings confirm them on all points. It follows from those data that, during the three years covered by the contested decision, the volumes of freight forming the subject-matter of a minimum commitment under a service contract represented, respectively, 59.2% (1994), 60.6% (1995) and 61.2% (1996) of the total freight carried by the shippers indicated by the applicants. Even if those data do not concern all the shippers and do not appear to be limited to the relevant market, in so far as the applicants submit them as being representative of the conduct of all shippers, it may be inferred that approximately 60% of the freight carried on the relevant market was covered by an obligation for a carrier to carry minimum quantities under a service contract. Having regard to the market share of approximately 60% held by the TACA parties on the trade in question during the period covered by the contested decision, it may be inferred that approximately 36% of that freight was linked with the TACA parties. 1034 It must be held that such a threshold of dependence is capable of significantly restricting access by competitors to the relevant market (see, to that effect, Case T-9/93 Schöller v Commission [1995] ECR II-1611, paragraph 81). Admittedly, as the service contracts do not, in legal terms, impose an exclusive service obligation, a shipper is in principle free to switch the quantities covered by such a contract to another carrier. However, in so far as compliance with the obligation to carry minimum quantities is sanctioned by the payment of significant standard compensation, the service contracts are manifestly capable of providing an incentive for shippers to give priority to having the quantities concerned carried by the carrier with which they have entered into a contract. 1035 For those reasons, the Commission was entitled to consider that the service contracts constituted a barrier to significant entry by potential competitors. 1036 The applicants' arguments on this point must therefore be rejected.  (4) Conclusion on potential competition 1037 It follows from all of the above considerations that the applicants' pleas and arguments relating to potential competition must be rejected.  4. Internal competition within the TACA 1038 The applicants complain that the Commission failed to take into account competition between the TACA members when analysing their collective power on the relevant market. 1039 They assert that even if it were legitimate to assess the undertakings in question collectively, evidence of internal competition on pricing or otherwise is relevant in assessing their capacity for collective action independently of competitors (whether internal or external), customers and consumers. The applicants consider that internal competition acts as a restraint on the collective action of the undertakings concerned. For example, internal price competition inhibits the undertakings from collectively setting prices at abnormally high levels. The Commission has admitted that the collective dominance of the TACA members does not exclude the possibility of individual departures from the common commercial strategy. It should therefore take account of such departures in assessing whether the undertakings in question hold a dominant position. The applicants here refer to the evidence adduced above at the stage of assessing collective dominance. 1040 The Commission, supported by the ECTU, claims that this plea should be rejected. 1041 It was stated at paragraph 735 above that the degree of internal competition between the TACA parties did not make it possible to preclude a collective assessment of the position held by those parties on the relevant market. By these pleas, the applicants none the less contend that internal competition between the TACA parties was sufficient to negate their dominant position on that market. 1042 In that regard, it is sufficient to observe that, in accordance with the case-law (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 38), the question whether the TACA parties together hold a dominant position on the transatlantic trade depends solely on the capacity of those parties to conduct themselves independently by reference to the external competitive pressure resulting, in particular, from the activities of their non-conference competitors and of shippers. Therefore, although the degree of internal competition between the undertakings in question is capable, where it exists, of precluding a collective assessment of their position on the relevant market (Kali und Salz, cited at paragraph 595 above, paragraph 233), it is of no relevance when determining whether that collective position is a dominant one. 1043 As the applicants maintain, internal competition among undertakings whose position has been the subject of a collective assessment may have the effect of restricting the extent of the price increases decided by those undertakings. None the less if such price increases are decided by those undertakings in complete independence without having to take account of external competitive pressure, they must be regarded as constituting the act of undertakings together holding a dominant position. At the most, if the internal competition in question should have the effect of restricting the extent of those price increases, the prices thus set might prove not to be excessive and therefore not to constitute an abuse within the meaning of Article 86 of the Treaty. The applicants' argument therefore shows that they are confusing the existence of a dominant position with its abuse. 1044 The applicants' arguments relating to internal competition between the TACA parties must therefore be rejected.  5. The development of rates on the trade in question 1045 The applicants allege that the development of rates on the transatlantic trade is inconsistent with a finding of dominance. 1046 First, the applicants claim that if they had not faced external competition they would have had no incentive to carry cargo otherwise than at the conference's ordinary tariff under TVRs or service contracts. The volume and proportion of cargo carried by the TACA at ordinary rates fell consistently between 1994 and 1997. Conversely, the volume and proportion of cargo carried at TVRs and under all service contracts (conference, joint and individual contracts) increased during that period. Furthermore, the volume and proportion of cargo carried under conference service contracts fell in 1996 and 1997 by comparison with 1994, whilst the volume of cargo carried under joint and individual service contracts increased. The applicants also stress the fact that service contract rates payable in 1996 and 1997 represented a larger discount on the ordinary tariff than that payable in 1994. They infer from this that conference service contract rates decreased between 1994 and 1997. 1047 The applicants note that the Commission confines itself to claiming that TVRs and service contracts are not in themselves evidence of external competition. The Commission does not explain, however, why the volume and proportion of cargo carried under the ordinary tariff decreased or why the volume and proportion of cargo moving under TVRIAs and individual service contracts increased in the relevant period. 1048 The Commission confines itself in the defence to criticising the Mercer Report for concluding that rate cutting in a competitive liner shipping trade may occur in advance of actual cost reductions. However, the Commission does not deny the existence of anticipatory rate cutting, but nevertheless rejects the inference that there is intense price competition on the market. The rejection of this inference is based on a hypothesis for which there is no support, namely that the applicants' rates were excessive. 1049 The Commission's finding that in the first quarter of 1995 40% of all TACA cargo moved at the tariff rate does not distinguish between conference class tariff rates and other rates which appear in the tariff, namely TVRs and independent action. 1050 Second, the applicants claim that analysis of the rates in 75% of their service contracts demonstrates that between 1993 and 1998 westbound rates in European currencies fell on average by over 15% (when adjusted for inflation). 1051 As for the method they used, contrary to the Commission's allegation the results of that analysis are expressed not only in national currencies but also in US dollars. The figures have also been weighted according to the minimum quantity commitment in each contract to reflect the relative significance of each service contract to the overall assessment. Contrary to the Commission's criticisms, that weighting does not disguise the effect of their market power on smaller shippers. Finally, the applicants have rightly adjusted the rate data in order to reflect the general level of inflation and deflation in the value of the relevant currencies to which they and the shippers were subject during the relevant period. 1052 The downward trend identified in their analysis confirms the pressure on rates exerted between 1983 and 1993. The report by Drewry Shipping Consultants (Global Container Markets, Prospects and Profitability in a High Growth Era, London, 1996) states in this connection that transatlantic rates had fallen in real terms. 1053 In the contested decision (paragraph 324 and Table 11), the Commission concludes as a result of its analysis of the evolution of rates that over a five-year period (1993 to 1997) maritime transport rates increased by 8% whilst those for inland transport in the Community fell by 4%. The Commission does not provide any explanation, however, for the discrepancy between that finding and the allegation made by the complainant (the ESC) and mentioned in paragraphs 118 and 119 of the statement of objections that the increases imposed in 1995 give an overall increase over a period of three years in excess of 80%. Furthermore, the applicants point to the contrast between the conclusions at paragraph 324 and Table 11, on the one hand, and those in paragraphs 325 and 328, on the other, which refer to the most market dominance and substantial rate rises on both ... routes. 1054 In the defence the Commission questions whether price comparisons serve any useful purpose in the case of undertakings in a monopoly position unless it is shown that in a competitive market the rates would have been lower than those of the undertakings in question. However, in the contested decision, the Commission relies on an analysis of rate changes to support its finding of dominance but at the same time fails to show that in a competitive market rates would have been lower. 1055 The applicants also consider that the method adopted in the rate analysis at paragraphs 320 to 328 of the contested decision is flawed for several reasons. First, the sample of service contracts was too small: the service contracts examined concerned 10 shippers out of a total of 500 and the largest number of shippers surveyed for any one period was eight. Furthermore, the Commission does not explain the basis on which it selected those 10 shippers as opposed to any other shippers which might have satisfied its selection criteria. Second, the volume of cargo carried under the service contracts analysed represents a relatively small quantity of the total cargo carried by the applicants (the volume of cargo of the 10 shippers chosen represents 6.4% of the total cargo carried by the applicants under service contracts in 1993, 5.1% in 1994 and 7% in 1995). Third, the percentage increases are not weighted to take account of the relative importance (in terms of volume) of the service contracts examined. Fourth, the choice of 1992 as the base year lacks objectivity since that was the year in which rates on the transatlantic trade fell dramatically. Fifth, the analysis does not take account of ancillary freight charges. 1056 In any event, even if the Commission's study were reliable, the applicants consider that it does not demonstrate the existence of a dominant position. For example, the Commission finds that from 1993 to 1997 ocean rates increased by 8% (Table 11 in the contested decision) and inland rates fell by 4%. Those movements take no account of inflation, however. 1057 The Commission's analysis of rate developments based on the data supplied by the applicants as part of their study of 75 TACA member service contracts is also flawed because the data are not adjusted for inflation, are not weighted by reference to volume and exclude surcharges and terminal handling charges. Furthermore, contrary to the Commission's own methodology, it omits the shippers which had entered into service contracts in 1993 and service contracts or TVRs in 1996. 1058 The applicants also complain that the Commission has not disclosed the arithmetical method or the raw data used to calculate the rate increases for service contracts at paragraphs 320 to 328 (Annex VI to the decision contains only the results of those calculations). Next, they complain that the Commission's analysis of price variations in TAA/TACA service contracts at paragraph 320 of the contested decision is based on a small fraction of the conference's service contracts and takes no account of inflation. 1059 The applicant in Case T-213/98 submits a number of further pleas alleging error of assessment and/or in the reasoning. 1060 First, the Commission cannot use price differentiation based on the value of the goods to support a presumption of dominance (paragraph 534 of the contested decision) since this is a long-established practice in the maritime sector which is expressly required by the Unctad Code (Article 12(b)). Similarly, the Commission's statement that in a less concentrated market transport rates are fixed on the basis of the actual costs, in line with market forces (paragraph 535) is incorrect because varying prices may be justified on the basis of customers' ability to pay, as is frequently the case in the air transport sector. In any event, the lack of a link between differentiated prices and dominance is shown by the fact that almost all lines, on all trades, offer tariffs which differ according to the value of the commodity. 1061 Second, the Commission relied on the fact that the currency adjustment factor (CAF) adopted by the TACA discriminated on the basis of the port of destination or embarkation (paragraph 536 of the contested decision). The applicant points out first that the Commission's reasoning is confused and contradictory, since after stating that the differences in CAF cannot be economically justified, the Commission nevertheless states that the contested decision does not address the issue whether the TACA parties' agreement on CAF meets the conditions of Article 4 of Regulation No 4056/86, which is precisely the provision dealing with the issue of whether there is economic justification for different CAFs. The applicant further criticises the Commission for not explaining why an alleged discrimination in 1997 is relevant in determining whether there was a dominant position between 1994 and 1996. 1062 Third, the applicant criticises the Commission for relying on the fact that the TACA was able to exercise price leadership (paragraphs 541 and 542 of the contested decision). As the Commission acknowledged at paragraph 329 of the contested decision, the fact that the lines which are not members of a conference tend to follow the conference by adopting the uniform rate which serves as a reference point for the market constitutes a source of stability to which conferences contribute in the maritime transport sector. In those circumstances, the fact that the TACA agreement was one of the most restrictive or that the TACA acquired a reputation as a price leader are irrelevant in determining whether the TACA is in a dominant position. The same is true of the statement at paragraph 548 that, because of that leadership, it is unlikely that any competitor would risk destabilising the market by competing aggressively against the TACA on price. 1063 The Commission, supported by the ECTU, contends that these pleas are unfounded. 1064 By these pleas, the applicants claim that the development of rates on the transatlantic trade is incompatible with the existence of a dominant position. In that regard they state, first, that the quantity of freight carried at the ordinary rates provided for in the tariff has consistently fallen in favour of TVRs and service contracts and, second, that the rates charged by the TACA fell during the relevant period.  (1) The proportion represented by freight carried at the ordinary rates compared with freight carried under TVRs and service contracts 1065 It is not disputed that, during the period covered by the contested decision, some 60% of the freight carried by the TACA was shipped under TVRs and service contracts. In its written submissions to the Court, the Commission itself recognised that this amounted to a considerable share. It is common ground that TVRs and service contracts allow the members of a liner conference to grant their customers reductions on the ordinary tariff rates. As stated at paragraphs 457 and 459 of the contested decision, although the TVRs result in all shippers being granted a reduction on a common and uniform basis according to volumes and quantities carried, service contracts are capable of leading to such reductions being granted on an individual basis according to the terms negotiated between the conference and the shipper concerned. 1066 It may be taken as established, therefore, that during the period covered by the contested decision more than half the freight carried by the TACA parties was carried at reduced rates compared with the highest rates of the TACA tariff. 1067 Contrary to what the applicants claim, however, that circumstance does not in itself show that the TACA parties did not hold a dominant position during the period in question. The fact that an undertaking grants rebates to its customers does not in any event indicate that it does not enjoy a dominant position on the relevant market. As the Commission rightly stated at the hearing in response to a question put by the Court on this point, it is often the case that an undertaking holding a dominant position on a given market grants rebates to its customers, for example, in order to pass on savings in efficiency and economies of scale or in order to ensure their loyalty (see, in particular, Hoffmann-La Roche, cited at paragraph 765 above, paragraphs 90 and 91, and Michelin, cited at paragraph 337 above, paragraph 71). The existence of a dominant position has more to do with an undertaking's ability to fix its prices in complete independence, without having to take external competitive pressure into account, than with the ability to fix the highest prices. 1068 In the present case, therefore, without its being necessary to adjudicate on the precise nature of the rebates granted by the TACA parties, it must be held that, in order to challenge the dominant nature of their position on the relevant market, the applicants cannot rely on the fact that the TACA parties grant rebates to shippers under TVRs or service contracts. 1069 On the contrary, in the contested decision the Commission established that the rebates granted under TVRs and service contracts confirmed the dominant position held by the TACA parties, because they reflected their ability to discriminate between shippers on prices. 1070 Thus, at paragraphs 203 to 213 of the contested decision, the Commission stated that the TACA parties aimed to charge what each different shipper would bear, in order to enhance revenues without increasing costs. In that regard, the Commission observed that the TACA parties practised three degrees of discrimination. Under the first, according to paragraph 206, a customer pays a specific price for a specific unit or service and a different price for subsequent units or services. According to paragraph 207, the second, which takes the form of TVRs and service contracts, involves setting prices on the basis of the quantity purchased. Last, the third, under which the tariff is divided into codes and independent actions are taken, consists, according to paragraphs 208 to 213, in separating customers into several classes and in setting a different price for each customer class. 1071 At paragraph 534 of the contested decision, the Commission expressed the view that that ability to discriminate was capable of confirming the dominant position inferred from the market shares of the TACA parties. The Commission observes first of all that the TACA tariff for maritime transport services sets different rates for different products on a basis related to their value, that although the range of tariffs is considerably narrower than the range of commodity values, prices can vary as much as five-fold and that in other words, although the cost of transporting a container is almost entirely unrelated to the type of goods transported, freight rates are up to five times higher for high value commodities than for low value commodities. As stated at paragraph 535 of the contested decision: This system of differentiated pricing, the purpose of which is to maximise revenues, is normally only found in market situations where one or more undertakings has a substantial degree of market power. In transport markets where there was no significant concentration of market power, the transport price would probably be fixed by reference to the type of service on offer and not by reference to the goods transported, on the basis of the actual costs in line with market forces. 1072 Next, at paragraphs 536 and 537, the Commission states that a further example of discrimination imposed by the TACA relates to CAFs, which vary considerably according to the ports of destination and of origin. 1073 Those findings are not called in question by the circumstance underlined by the applicant in Case T-213/98 that almost all liner companies offer on all trades prices which vary according to the value of the goods. The applicant itself stated that one of the aspects of the stability envisaged by Regulation No 4056/86 to which the liner conferences contribute in the area of maritime transport was the fact that shipping lines which are not members of a conference tended to follow the conference by using the uniform tariff as a market reference point. Thus, on the trade in question, the Commission states at paragraph 548 of the contested decision, without being contradicted by the applicants on that point, that the fact that the TACA is the price leader makes it unlikely that any competitor would wish to risk destabilising the market by competing aggressively against the TACA on price. 1074 In those circumstances, the fact that on other trades shipping companies not in a dominant position adopt, like the dominant companies, a discriminatory tariff policy vis-à-vis shippers does not show that price discrimination is not a relevant criterion on which to establish the existence of a dominant position on a given market, but at the most reveals that the non-dominant companies tend to follow the tariff policy of the dominant companies. 1075 The circumstance, alleged by the same applicant, that the discriminatory nature of the CAF referred to at paragraph 536 of the contested decision is based on figures relating to 1997, a year which came after the period covered by the contested decision, is irrelevant. Since the Commission does not state in the operative part of the contested decision that that discrimination is prohibited, but merely refers to it as an example of the TACA parties' ability to discriminate on prices, an ability which is not disputed by the parties, the Commission was at liberty to rely on figures subsequent to the period covered by the contested decision to illustrate its argument. 1076 In so far as the applicant alleges that the contested decision is incorrectly reasoned, moreover, it is sufficient to observe that the allegations on that point coincide with the pleas alleging error of assessment and that they therefore seek to challenge the merits of the assessment made in the contested decision (Commission v Sytraval and Brink's France, cited at paragraph 746 above, paragraph 67). Those allegations are therefore of no relevance in the context of the assessment of compliance with the obligation to state reasons (FEFC, cited at paragraph 196 above, paragraphs 425 and 431). 1077 It follows that none of the evidence adduced by the applicants based on the existence of discounts on the highest tariff rates is capable of upsetting the Commission's finding that the position held on the relevant market by the TACA parties was a dominant one.  (2) The increase in the rates charged by the TACA parties 1078 By these pleas, the applicants dispute the results of a survey of price movements in the maritime and Community inland legs of TAA/TACA service contracts from 1992 to 1997, which are set out at paragraphs 320 to 328 of the contested decision (the service contract rates survey). At paragraph 324 of the contested decision, the Commission states that the clearest conclusion to be drawn from the survey is that the price increases from 1993 to 1996 in the maritime legs of the journey are 10.4 percentage points greater than increases for the Community inland legs. 1079 It follows from the contested decision that the Commission relied on those results for its assertion, at paragraph 543, that the limited opportunities for shippers to switch to the TACA's competitors were demonstrated by the fact that the TACA had been in a position to impose regular, albeit, modest price increases over the period 1994 to 1996, in stark contrast to the two other world arterial trades. 1080 The Court agrees with the applicants that the results of the service contract price survey are somewhat inconclusive. While it is true that, for the period 1993 to 1996, the survey finds an increase in the maritime rate of 15.5 percentage points against an increase of only 5.1 percentage points in the inland rate, it does not emerge from the contested decision that the survey specifically examines price movements during the period covered by the contested decision, namely 1994 to 1996. It cannot be inferred from the other results presented by the survey that price movements during that period were the same as between 1993 and 1996. Thus, for the period 1992 to 1996, the survey finds that the maritime tariff rose less than the inland tariff, whereas for the period 1992 to 1997 the increase in the maritime tariff is slightly higher than the increase in the inland tariff. It is clear that no conclusions can be drawn from these varying results for the purpose of establishing the existence of a dominant position. 1081 However, whatever the flaws in that survey, it must be noted that the Commission's finding at paragraph 543 of the contested decision that the TACA parties imposed regular price increases is also based on the results of another survey set out at paragraphs 307 to 319 of the contested decision, before those of the service contracts price survey. Following that survey, of movements in average TACA revenue per TEU between 1992 and 1996 (the average revenue survey), the Commission concludes, as stated at paragraphs 318 and 319, first, that taken as an average, the TACA parties increased their revenues per TEU (that is, the average price paid by shippers for the maritime transport of 1 TEU) between 1992 and 1996 by 8% eastbound and 18% westbound and, second, that a number of TACA parties have been able to increase average revenues per TEU substantially without suffering any loss in market share. Furthermore, paragraphs 314, 315 and 317 of the contested decision indicate that the increase in average revenue would have been even more substantial if the TACA parties had not been forced by the FMC to reduce their 1995 tariff and service contract rates to 1994 levels. 1082 It is significant that the applicants do not dispute the results of the average revenue survey. In those circumstances, it must be taken as established that the finding at paragraph 543 of the contested decision that the TACA parties imposed regular price increases is sufficiently supported in the contested decision by the average revenue survey. 1083 Consequently, the fact that the results of the service contract rate survey do not support the finding at paragraph 543, if established, is irrelevant. 1084 In any event, the finding at paragraph 543 of the contested decision that the TACA parties imposed regular price increases is only one of the many factors used at paragraphs 532 to 549 of the contested decision to demonstrate the existence of a dominant position. Although the ability to impose regular price increases unquestionably constitutes a factor capable of pointing to the existence of a dominant position, it is by no means an indispensable factor, as the independence which a dominant undertaking enjoys in pricing matters has more to do with the ability to set prices without having to take account of the reaction of competitors, customers and suppliers than with the ability to increase prices (see, to that effect, AKZO, cited at paragraph 95 above, paragraphs 70 to 72). 1085 In this case, it must be held that it follows from an examination of the foregoing pleas and arguments that the dominant position of the TACA parties is sufficiently made out by the other evidence relied on in the contested decision, which relates not only to their extremely high market share but also to their ability to discriminate on prices and to the absence of effective external competition as evidenced by their share of available capacity on the trade in question, by the foreclosure effect created by the service contracts, by the TACA's leadership in pricing matters and by the role of follower played by their competitors in pricing matters. 1086 On those grounds, the applicants' pleas and arguments relating to movements in rates on the trade in question must be rejected.  6. Conclusion on the pleas relating to the existence of a dominant position on the relevant market 1087 It follows from all of the foregoing considerations that the applicants' pleas relating to the existence of a dominant position held by the TACA parties must be rejected in their entirety.  C - Conclusion on the second part 1088 For the reasons set out above, all of the pleas and arguments relating to the second part, concerning the dominant nature of the position held by the TACA parties, must be rejected.  Part three: no abuse 1089 By their pleas under the present part, the applicants challenge the Commission's two findings of abuse recorded in the contested decision, namely, the placing of restrictions on the availability and content of service contracts and the alteration of the competitive structure of the market.  A - The first abuse: placing restrictions on the availability and content of service contracts 1090 The applicants' pleas and arguments against the contested decision in respect of the first abuse are of two types. First, the applicants allege that each of the practices constituting that abuse is objectively justified. Second, they submit that the contested decision does not contain an adequate statement of reasons in various regards.  1. Objective justification of the practices constituting the first abuse 1091 The applicants allege first in relation to conference service contracts that the terms imposed by the TACA relating to contingency clauses, the duration of service contracts, the prohibition of multiple contracts and the level of liquidated damages, referred to in paragraph 556 of the contested decision, are justified on objective grounds. They deny that those terms are justified simply because they are in their own interests. They consider that their objective nature is shown by the numerous references to the situation in US law. The fact that the TACA parties notified a revised version of their agreement no longer containing the unfair conditions and other restrictions of competition identified by the contested decision in relation to service contracts reflects not a lack of belief on the part of the applicants in the validity of their agreement, but their desire to bring the dispute with the Commission to an end. 1092 First, in relation to contingency clauses, the applicants state that that type of clause generally provides that if the tariff rate drops below the shipper's service contract rate, or if the conference enters into another service contract with a smaller volume commitment and a lower rate, the shipper which signed the first contract is automatically entitled to the lower rate. 1093 The applicants claim that the prohibition of contingency clauses is justified by the need to preserve stable rates and services. Contingency clauses are liable to undermine the stabilising role of liner conferences which is precisely the objective of block exemption under Regulation No 4056/86. Thus, during a dispute between Lykes and a shippers' association in 1995, the US authorities recognised that contingency clauses could be anti-competitive in that they might encourage Lykes not to grant favourable rates to competitors of the shippers' association in question. It is also clear from the settled case-law of the US authorities that most-favoured nation clauses are anti-competitive. It is therefore inaccurate to claim that it is an exception for that type of clause to be held to be anti-competitive. 1094 Second, as regards the duration of contracts, the applicants state first that the provision in the TACA is that the TACA members undertake to maintain a stable price for at least one calendar year, enabling both carrier and shipper to plan forward and to budget revenue and expenditure. That benefit is consistent with those described by paragraph 473 of the contested decision. Next, the clause in question results in administrative efficiency for the carriers and contributes to equality of treatment between shippers in the same position. Furthermore, the period of one year imposed by the TACA is in line with the usual practice in relation to service contracts, due to the fact that, given the changing conditions in international liner trades and the trend towards lower rates, shippers are reluctant to commit to a specific minimum volume at a stated rate for more than one year. Finally, the Commission has not shown that terms of one, two or three years under the TACA have had any appreciable restrictive effect on competition. The Commission claims at paragraphs 225 and 564 of the contested decision that service contracts act as effective barriers to entry, and this would be even more so were carriers and shippers at liberty to enter into service contracts for a duration exceeding that permitted under the TACA. 1095 Third, in relation to multiple contracts, the applicants point out that the TACA prohibits a carrier from entering into several service contracts with the same shipper only where those contracts cover, in whole or in part, the transportation of the same cargo over the same route or any segment of the same route. The applicants claim that that prohibition accords with general commercial practice. First, they point out that if such contracts were permitted it would in fact amount to allowing the TACA parties to amend conference contracts unilaterally. Next, a conflict of interest would arise if a party were permitted to negotiate and agree on a conference contract and subsequently to breach that contract by entering into its own contract with the same shipper for the same cargo but on different terms. It is the applicants' view that conference carriers should be required to choose whether to participate in a conference contract or to establish a TVR or to take independent action or (since 1996) to conclude their own individual (or joint individual) service contract. Lastly, the applicants note that service contracts (whether conference or individual) may be amended, so that a term imposed by the TACA does not irrevocably bind the parties. For example, the parties could decide to add further commodities or destinations. 1096 Fourth, as regards liquidated damages the applicants consider that it is inherent in the right to enter into conference service contracts that the parties be permitted to provide for the legal consequences of any breach of obligations under such contracts. They stress that liquidated damages clauses are a pre-estimate of the loss suffered by the carrier in the case of non-performance by the shipper of its minimum quantity commitment under the service contract. The reasonableness of such clauses is borne out by the 10th recital to Regulation No 4056/86, which provides that conference members may agree to impose penalties on users who seek by improper means to evade the obligations of loyalty required in exchange for the rebates, reduced freight rates or commission granted to them by the conference. The applicants further claim that liquidated damages clauses are lawful under US law. In particular, FMC Circular 1-89 states that damages should be meaningful so as to prevent the use of service contracts to avoid the tariff. Lastly, the applicants observe that if a contract does not provide for liquidated damages, a carrier has no option in the event of a breach by the shipper but to re-rate the cargo moving under the contract at the conference tariff, which would represent a higher amount than the liquidated damages provided for in the TACA. 1097 Second, the applicants submit that the prohibition of individual service contracts is an objectively justifiable conference practice. 1098 In the first place, the requirement under Regulation No 4056/86 that a liner conference operate under uniform or common freight rates (Article 1(3)(b)), and to fix rates and conditions of carriage (Article 3), entitles (but does not require) the members of the liner conference to prohibit individual service contracts. The applicants consider that the prohibition of individual service contracts is a traditional conference mechanism to preserve the integrity and uniformity of the tariff. Thus, since 1 January 1999, when confidential individual service contracts were introduced by the TACA parties, rates on the transatlantic trade fell sharply (by 21% eastbound and by 14% westbound compared with the year before). The Commission does not explain how an unfettered right to enter into individual service contracts would be compatible with the requirement to operate uniform or common freight rates. 1099 Secondly, the applicants note that conferences operating on the transatlantic trade have traditionally prohibited their members from entering into individual service contracts. Thus, paragraph 126 of the contested decision acknowledged that those conferences never openly permitted individual service contracts until their introduction by the TACA parties in 1996. Restrictions on entering into individual service contracts remain the rule rather than the exception on other trades. 1100 Thirdly, the applicants consider that the prohibition of individual service contracts is consistent with US law. Section 4(a)(7) of the US Shipping Act permits the prohibition of the use of service contracts by conference members. That situation was not altered by the settlement agreement of 1995, in which the FMC did not provide that as a matter of US law conferences must permit individual service contracts; rather it required the TACA parties to permit individual service contracts in 1996. It did not, on the other hand, require that such contracts be permitted in 1997 and subsequent years, so that the applicants would have been entitled in accordance with the terms of the settlement agreement to prohibit individual service contracts. 1101 Third, as regards the application of the conference rules on service contracts to individual service contracts, the applicants allege that when they authorised individual service contracts in 1996 they were permitted under the terms of the US Shipping Act (section 4(a)(7)) to regulate or prohibit their use. The application of the TACA rules on individual service contracts was therefore lawful under US law. Furthermore, the application of the TACA service contract rules to individual service contracts was a requirement of the settlement agreement with the FMC in 1995. The FMC's order required that the TACA permit individual service contracts for 1996 and provided that such contracts must be made subject to the TACA rules (namely, Article 14.2 of the TACA). 1102 Fourth, as regards the confidentiality of individual service contracts, the applicants claim that the disclosure of the essential terms of individual service contracts (including those agreed jointly) is obligatory under US law (section 8(c) of the US Shipping Act). Although the essential terms listed in the US legislation do not include the name of the shipper, any well-informed operator in the maritime carrier trade would be able to deduce the shipper's identity from the published terms (that is, from the distances moved, the commodity involved, the minimum volume, the line-haul rate, the duration, service commitments and the liquidated damages for non-performance). In those circumstances, the applicants consider that the mutual disclosure of information on individual service contracts may be reasonable given the conditions of transparency arising from the US Shipping Act. 1103 The applicant in Case T-213/98 submits that a dominant undertaking does not, in the absence of some additional factor, commit an abuse by adopting commercial practices that could be adopted by non-dominant undertakings (Hoffmann-La Roche, cited at paragraph 765) unless those practices have the effect of reinforcing its dominance or reducing the level of competition on the market. The practices in question in relation to service contracts are also adopted by independent lines, and further, the Commission has not shown that those practices reinforced the alleged dominance of the TACA parties. Moreover, as regards the prohibition on individual service contracts, the applicant points to its initiatives on tariffs during the relevant period, in the form of independent action, TVRs and Canadian Gateway services. 1104 The Commission, supported by the ECTU, considers that those pleas and arguments are unfounded. 1105 In order to assess the present pleas and arguments, by which the applicants submit that the practices constituting the first abuse are objectively justified, it should be recalled that, under Article 6 of the operative part of the contested decision, the Commission found that the TACA parties abused their collective dominant position by entering into an agreement placing restrictions on the availability and content of service contracts. 1106 It is apparent from paragraphs 551 to 558 of the contested decision, as the Commission confirmed at the hearing in reply to questions from the Court, that the first abuse is made up of the following practices: –       - the outright prohibition of individual service contracts in 1994 and 1995 (paragraphs 554 and 557) and, where they were authorised with effect from 1996, the application of certain terms and conditions collectively agreed by the TACA (paragraphs 554 to 556) and the mutual disclosure of their terms (paragraph 552); –       - the application in conference service contracts of certain terms collectively agreed by the TACA (paragraphs 554 to 556). 1107 It is apparent from paragraph 556 of the contested decision that the terms in question collectively agreed by the TACA are those concerning the prohibition of contingency clauses, the duration of service contracts, the ban on multiple contracts and the amount of liquidated damages. Those terms are laid down by Article 14(2) of the TACA. 1108 The applicants claim that each of those practices is objectively justified in the light of Article 86 of the Treaty. They put forward essentially three types of justification concerning, respectively, the need for those practices in order to meet certain objectives, their conformity with standard practice in the maritime transport sector and their conformity with US law. 1109 Before considering those grounds for justification, it must be noted at the outset that there is no exception to the principle in Community competition law prohibiting abuse of a dominant position. Unlike Article 85 of the Treaty, Article 86 of the Treaty does not allow undertakings in a dominant position to seek to obtain exemption for their abusive practices (Case 66/86 Ahmed Saeed Flugreisen and Silver Line Reisebüro [1989] ECR 803, paragraph 32, and CEWAL I, cited at paragraph 568 above, paragraph 152). Furthermore, according to the case-law, dominant undertakings have a special responsibility not to allow their conduct to impair genuine undistorted competition on the common market (Michelin, cited at paragraph 337 above, paragraph 57, and Irish Sugar, cited at paragraph 152 above, paragraph 112). Consequently, there can be no exceptions to the prohibition of abuse by dominant undertakings. 1110 It is in the light of those principles that the grounds for justification put forward by the applicants in the present actions must be assessed.  (1) Justifications on the basis of the necessity of certain of the practices in question 1111 The applicants submit that the prohibition of individual service contracts, restrictions as to duration and the prohibition of contingency clauses are necessary to maintain the stability of uniform or common freight rates qualifying for block exemption under Article 3 of Regulation No 4056/86. They also submit that the restrictions as to duration are necessary to ensure equality between shippers and to improve administrative efficiency. Finally, the applicants consider that the prohibition on multiple contracts and the liquidated damages clause are necessary, essentially, to preserve the integrity of conference service contracts. 1112 However, because Article 86 of the Treaty does not provide for any exemption, abusive practices are prohibited regardless of the advantages which may accrue to the perpetrators of such practices or to third parties. 1113 It is true that, according to the case-law, the fact that an undertaking is in a dominant position cannot disentitle it from protecting its own commercial interests if they are attacked, and that such an undertaking must be conceded the right to take such reasonable steps as it deems appropriate to protect its interests, provided however that the purpose of such behaviour is not to strengthen this dominant position and abuse it (see, for example, United Brands, cited at paragraph 853 above, paragraph 189; CEWAL I, cited at paragraph 568 above, paragraphs 107 and 146; and Irish Sugar, cited at paragraph 152 above, paragraph 112). It follows therefore that a dominant undertaking may seek to rely on grounds to justify the practices it adopts. 1114 However, the justifications permitted by the case-law in respect of Article 86 of the Treaty cannot result in creating exemptions from the application of that provision. The sole purpose of those grounds of justification is to enable a dominant undertaking to show not that the practices in question should be permitted because they confer certain advantages, but only that the purpose of those practices is reasonably to protect its commercial interests in the face of action taken by certain third parties and that they do not therefore in fact constitute an abuse. 1115 In the present case the justifications put forward by the applicants seek to demonstrate not that the practices in question concerning service contracts do not constitute an abuse, but only that those practices are necessary in order to achieve certain benefits, namely preserving the stability of uniform or common freight rates and the integrity of conference service contracts, maintaining equality between shippers and improving administrative efficiency. According to the applicants, the need for the conference practices in question relates not to the action of third parties threatening the TACA's commercial interests, but to the risk that the TACA's own members may, by their conduct, infringe the rules adopted by the conference, such as the collective price-fixing agreement setting a uniform or common freight rate and conference service contracts, or the efficient functioning thereof. 1116 It follows that, by the present justifications, the applicants thus seek in fact to obtain an exemption for the abuse in question on the ground that those practices are necessary to achieve certain advantages resulting from the conference system. 1117 Although that is sufficient reason to reject all of the justifications alleging that the rules in question are necessary, it must also be stated that even if such justifications could be upheld under Article 86 of the Treaty, the applicants fail to show why the practices in question are necessary to bring about the alleged advantages. 1118 Thus, with regard to the alleged need to maintain the stability of the uniform or common freight rates, the mere fact that the collective agreement of those rates qualifies for block exemption under Article 3 of Regulation No 4056/86 cannot by itself justify the practices in question with regard to Article 86 of the Treaty. First, Article 8(2) of Regulation No 4056/86 expressly provides that Article 86 of the Treaty applies to the conduct of maritime conferences qualifying for block exemption laid down by Article 3 of that regulation (CEWAL I, cited at paragraph 568 above, paragraph 64). Second, having regard to the wholly exceptional nature of the block exemption provided for by Article 3 of that regulation, it cannot be applied beyond its sphere of application (see, to that effect, FEFC, cited at paragraph 196 above, paragraph 254). 1119 A fortiori, with regard to the alleged necessity not to infringe conference service contracts, the applicants cannot rely on that objective to justify the restrictive practices in question under Article 86 of the Treaty when conference service contracts are not, for the reasons set out below at paragraphs 1381 to 1385, covered by the block exemption provided for in Article 3 of Regulation No 4056/86. It should also be noted, as regards the liquidated damages clause, that whilst, as the applicants rightly point out, the 10th recital in the preamble to Regulation No 4056/86 states that conference members may agree to impose penalties on [shippers] who seek by improper means to evade the obligations of loyalty required in exchange for the rebates, reduced freight rates or commission granted to them by the conference, nothing in the regulation lays down the amount of those penalties that the conference may impose. It is apparent from paragraph 556 of the contested decision that only the penalty as set by the TACA parties, namely USD 250 per TEU, is regarded as abusive in that decision. 1120 As for the alleged need to ensure equality between shippers and to improve administrative efficiency, it suffices to note that in the light of their special responsibility not to allow their conduct to impair competition, the onus is on the dominant undertakings to behave in a way which is proportionate to the objectives they seek to achieve. Clearly, no ground based on the TACA's internal administrative organisation can justify an infringement of Article 86 of the Treaty. Similarly, in relation to the alleged need to ensure equality between shippers, the applicants cannot rely on their desire to avoid infringing Article 86(c) of the Treaty, which prohibits dominant undertakings from imposing discriminatory terms on their commercial partners, in order to justify another infringement of Article 86 of the Treaty. 1121 Finally, and in any event, the applicants cannot rely on the fact that certain TACA parties might fail to fulfil the obligations arising from the agreement fixing uniform or common freight rates or conference service contracts to justify under Article 86 of the Treaty practices intended to prevent such failures. The simple fact that compliance with the agreement fixing rates and conference service contracts deprives the practices on service contracts in question of all practical effect suffices to show that those practices are not necessary (see, to that effect, FEFC, cited at paragraph 196 above, paragraph 389). 1122 The justifications based on the alleged advantages produced by the practices on service contracts in question must therefore be rejected.  (2) Justifications based on the conformity of certain practices in question with standard practice in the maritime transport sector 1123 The applicants submit that the prohibition of individual service contracts and the restrictions on duration conform to standard practice in the sector. 1124 However, conduct cannot cease to be abusive merely because it is the standard practice in a particular sector; to hold otherwise would deprive Article 86 of the Treaty of any effect. Dominant undertakings within the meaning of Article 86 of the Treaty have a special responsibility not to allow their conduct to impair genuine undistorted competition on the relevant market (Michelin, cited at paragraph 337 above, paragraph 57). Contrary to the submission of the applicant in Case T-213/98, that responsibility is not limited solely to conduct likely to reinforce the dominance of the undertaking concerned or reduce the level of competition on the market, since Article 86 of the Treaty concerns not only practices which hinder effective competition but also those which, as in this case, may cause damage to consumers directly (Europemballage and Continental Can, cited at paragraph 779 above, paragraph 26). 1125 Even if the practices on service contracts in question represent the standard practice of maritime carriers, therefore, Article 86 of the Treaty prevented the TACA parties, given their special responsibility as a collective dominant unit on the transatlantic trade, from adopting such practices, notwithstanding the fact that they were adopted by most, if not all, of their competitors. 1126 That conclusion cannot be undermined by the fact that under Article 86(d) of the Treaty making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations is only prohibited where those obligations by their nature or according to commercial usage have no connection with the subject of those contracts. The need to take account of commercial usage in that context comes from the analysis of tied sales, since the finding that such sales exist necessarily requires that the circumstances be determined in which commercial sales are not tied. For the reasons set out above however, reference to commercial usage in that context cannot be extended to other abuses in order to justify them, particularly where their purpose is precisely to strengthen a dominant position and abuse it (United Brands, cited at paragraph 853 above, paragraph 189). 1127 Consequently, the justifications based on commercial usage must be rejected.  (3) Justifications based on the conformity of some of the practices in question with US law 1128 The applicants submit that the liquidated damages clause, the prohibition of contingency clauses, the prohibition of individual service contracts, the application of collectively agreed terms by the conference to individual service contracts and the mutual disclosure of the terms of service contracts are practices which comply with US law. 1129 It must be noted at the outset that the TACA, as a liner conference operating on the transatlantic trade, is governed both by Community competition law under Articles 85 and 86 of the Treaty and by US law, in particular the US Shipping Act. It follows that the TACA parties must ensure that their conduct on the market in question complies not only with Community competition law but also with US law. 1130 According to the case-law, Articles 85 and 86 of the Treaty apply only to anti-competitive conduct in which undertakings engage on their own initiative. If anti-competitive conduct is required of undertakings by national law or if the latter creates a legal framework eliminating any possibility of competitive conduct on their part, Articles 85 and 86 of the Treaty do not apply. In such a situation, the restriction of competition is not attributable, as is implied by those provisions, to the autonomous conduct of the undertakings. Articles 85 and 86 of the Treaty may apply, by contrast, if it is found that the national legislation does not preclude undertakings from engaging in autonomous conduct which prevents, restricts or distorts competition (Joined Cases C-359/95 P and C-379/95 P Commission and France v Ladbroke Racing [1997] ECR I-6265, paragraph 33; Case C-198/01 Consorzia Industrie Fiammiferi 2003] ECR I-8055, paragraphs 52 to 55, and Case C-207/01 Altair Chimica [2003] ECR I-8875, paragraphs 30, 35 and 36; Case T-111/96 ITT Promédia v Commission [1998] ECR II-2937, paragraph 96; Irish Sugar, cited at paragraph 152 above, paragraph 130; Case T-513/93 Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II-1807, paragraphs 58 and 59; and Case T-154/98 Asia Motor France and Others v Commission [2000] ECR II-3453, paragraphs 78 to 91). Consequently, if a national law merely allows, encourages or makes it easier for undertakings to engage in autonomous anti-competitive conduct, those undertakings remain subject to the Treaty competition rules (see inter alia Joined Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85 Ahlström v Commission [1988] ECR 5193, paragraph 20, and Consorzia Industrie Fiammiferi, cited above, paragraph 56). 1131 In this case, in so far as the applicants point out that certain of the practices mentioned are permitted or even made easier by US law, it is therefore to be observed that that circumstance alone has no bearing on the application of Article 86 of the Treaty to those practices, since in such a case it remains possible for the TACA parties to adapt their conduct to comply with both Community competition law and US law. 1132 Thus, with regard to the liquidated damages clause, the fact that such clauses are permissible in US law cannot serve to justify them for the purposes of Article 86 of the Treaty, especially as it is apparent from paragraph 556 of the contested decision that only the amount of the liquidated damages as fixed by the TACA parties, rather than the inclusion of such a clause itself, is regarded as an abuse in that decision. 1133 Similarly, with regard to the prohibition of contingency clauses, it is sufficient to observe that the applicants' complaint may be rejected in view of the fact that they merely allege that, according to US case-law, contingency clauses are likely to be anti-competitive, so that prohibiting them is permitted; they do not submit however that the prohibition is required. 1134 Finally, as regards the practices on individual service contracts, it is not in dispute between the parties that the lifting of the ban on individual service contracts in 1996 gives effect to the FMC's order of 4 April 1995 terminating the proceedings instituted in the United States against the TACA practices, in particular the excessive level of its tariff rates, after the TACA parties undertook to reduce the 1995 tariff rates to 1994 levels. That order states inter alia that: ... the proposed settlement agreement ... is approved on the condition that the TACA agreement is amended by adding a new Article 14.4 reading as follows: Notwithstanding the provisions of Article 14.3 any Party, either individually or jointly with another Party or Parties, may enter into an individual Contract with any shipper or shipper's association for the transportation of cargo within the trade; provided that such Contract [must]:  (i) commence no sooner than January 1, 1996, and terminate on or before December 31, 1996 ...  (ii) comply with the Contract Guidelines contained in Article 14.2(a) - (h). 1135 The applicants submit that the FMC order does not show that the prohibition of individual service contracts in 1994 and 1995 is contrary to US law, since the order did not prevent the TACA parties from reintroducing the prohibition with effect from 1997. 1136 It is true, as the applicants submit, that it is apparent from the terms of the FMC order that it only provided for the lifting of the ban on individual service contracts in respect of 1996. 1137 That fact is however irrelevant for the purposes of the present plea. At most, it shows that US law permitted the TACA parties to prohibit individual service contracts in 1994 and 1995 or to reintroduce that prohibition from 1997. In accordance with the case-law cited above at paragraph 1130, such a fact does not show that the practice in question is lawful under Article 86 of the Treaty, since nothing prevented the TACA parties from laying down such a prohibition in 1994 and 1995 or from not proceeding to reintroduce it with effect from 1997. 1138 Furthermore, it is not in dispute that the TACA parties did not re-introduce the prohibition of individual service contracts after 1996, which is sufficient to show that that prohibition was not necessary in order to comply with US law. 1139 Consequently, the applicants cannot rely on the FMC order as objective justification for the prohibition of individual service contracts from 1996. 1140 In so far as the applicants allege that some of the practices concerned are required by US law, it may be remarked that having regard to the fact, emphasised above, that the TACA parties are subject as regards their activities on the transatlantic trade to both Community competition law and US law it is possible that conduct prohibited by Community law is required by US law, so that in order to comply with Community law the TACA parties have no other choice than to infringe US law. Article 9 of Regulation No 4056/86 expressly envisages such situations of conflict with the law of a third country, moreover. According to that provision, in such a case it is for the Commission to undertake negotiations with the third country concerned in order to reconcile as far as possible the interests involved. 1141 In this case, however, it must first be determined to what extent the practices in question are in fact the result of legal obligations imposed on the TACA. 1142 As regards the application to individual service contracts of the rules collectively agreed by the conference, the applicants are right to point out that the FMC order referred to at paragraph 1134 above stated expressly in its operative part that the TACA parties could enter into individual service contracts provided that they comply with Article 14(2) of the TACA, from which it is apparent that the application of those rules to individual service contracts was not only permitted but also required by the FMC. 1143 In order to assess the scope of the FMC order in that regard, however, it is necessary to consider its nature and purpose. 1144 As regards, first, the nature of the FMC order, it must be emphasised that it is not an abstract legislative measure of general application, but a judicial decision the purpose of which is to approve a draft agreement concluded between the TACA parties and the FMC in order to bring an end to dispute proceedings commenced by the FMC. 1145 It follows that the obligations laid down by that order are not wholly attributable to circumstances external to the applicants. First, the order originates in the TACA parties' own conduct, in the present case the fact that they charged excessive prices to the detriment of the shippers, and second, its terms result, as is apparent from the documents produced by the applicants in reply to a written question from the Court on that point, from negotiations with the FMC in which the TACA parties were involved. 1146 It is true that it is apparent from the Court's file that the application of Article 14(2) of the TACA to individual service contracts was added by the FMC in the final stage of the proceedings as a condition for approval of the draft settlement agreement submitted to it. The Commission was therefore wrong to submit at the hearing that the application of the rules collectively agreed by the TACA to individual service contracts was negotiated between the TACA parties and the FMC. 1147 However, it remains apparent from the grounds of the order that whilst that condition of approval was not negotiated between the TACA parties and the FMC it was not unilaterally imposed by the latter. The FMC expressly made that condition subject to acceptance by the TACA parties, which occurred on 9 March 1995 by the notification to the FMC of an amended version of the TACA. Although the refusal to accept that condition within the allotted period would, according to the order, have resulted in the draft settlement agreement lapsing, the TACA parties accepted it on their own initiative, taking account of the various interests involved. It should be noted moreover that in any event the lapsing of the draft settlement agreement would not have prejudiced the outcome of the FMC's proceedings as to the legality of the TACA practices in question. 1148 Next, as regards the purpose of the FMC order, the condition of approval imposed by the FMC was essentially intended not to apply the TACA rules to individual service contracts, but to remove the TACA's ban on entering into such contracts, and thereby responded to the fear expressed by shippers following the publication of the draft settlement agreement that the TACA parties would compensate for the reduction in the 1995 tariff rates by excessive increases in the 1996 tariff rates. According to the FMC, the increased competition resulting from the introduction of individual service contracts on the trade deprived the TACA parties of any such possibility. 1149 In the light of that objective, it appears that, rather than being a considered objective, the application of the TACA rules to individual service contracts was inserted by the FMC in order to enable the TACA's customers to enter into individual service contracts on the same basis as conference service contracts. Moreover, none of the grounds of the order indicates that the FMC considered that the application of the rules collectively agreed by the TACA on individual service contracts was indispensable for achieving the objective sought and, therefore, that failure by the TACA parties to apply such rules necessarily would have constituted an infringement of that order. As the intervener rightly observed at the hearing, Decision 2003/68, in particular paragraphs 24(2) and 64, makes it clear that the revised TACA in no way now restricts the freedom of the TACA parties to enter into individual service contracts with shippers on terms freely agreed by the parties to such contracts. 1150 For all of those reasons, the Court finds that the FMC order in no way required the applicants to apply the TACA rules to individual service contracts from 1996. Consequently, the applicants' complaint in that respect being based on a false premiss, it must be rejected. 1151 As regards the mutual disclosure of the terms of service contracts, it is apparent from paragraph 498, to which paragraph 551 refers, and paragraph 552 of the contested decision that the abuse of which the Commission complains concerns the fact that the TACA parties disclosed the existence of individual service contracts and the content of those contracts to shipping companies that were not party thereto. 1152 However, it is not in dispute between the parties that the US Shipping Act requires the TACA parties to notify their individual service contracts to the FMC, which must also be given a summary of the essential terms of those contracts, that is, according to the legislation in force at the time of the relevant facts, the clauses on the origin and destination port ranges or geographic areas, the commodity or commodities involved, the minimum volume, the line-haul rate, the duration, the service commitments and the liquidated damages for non-performance, if any. The summary is then published by the FMC. The Commission does not deny that the summary includes all the relevant information contained in the essential terms, so that, since it is published, it is available to the public, including not only the shippers but also all TACA parties. As the Commission pointed out at paragraph 112 of the contested decision, the TACA parties are required by US law to offer the same terms to all shippers in the same situation. 1153 In those circumstances, therefore, the Court finds that, contrary to what the applicants have maintained, the practice in question is not required by US law. The US legislation does not require the TACA parties to mutually disclose the availability and content of their individual service contracts; it merely requires them to notify such contracts to the FMC, which then publishes a summary of their essential terms. 1154 Nevertheless, it should be noted that the result of the publication in the United States of such a summary is that the content of the essential terms of individual service contracts is in the public domain. That being so, the Commission was wrong to take the TACA parties to task, in paragraph 552 of the contested decision, for having agreed to disclose such information to each other. Since the content of the essential terms is published, communication between the TACA parties of the availability and content of their individual service contracts constitutes an exchange of public information. It has been held that such a system for exchanging information cannot infringe the Treaty competition rules (see inter alia Case T-35/92 John Deere v Commission [1994] ECR II-957, paragraph 81, upheld on appeal in Case C-7/95 P John Deere v Commission [1998] ECR I-3111, paragraphs 89 and 90). 1155 In response to the written questions from the Court on that point the Commission argued, however, that the TACA parties mutually disclosed additional information over and above that to be published under the US Shipping Act. Pressed on that point at the hearing, however, the Commission admitted that the only clause of individual service contracts which does not need to be published as an essential term under US law is that concerning the identity of the shipper or shippers concerned. 1156 However, as the applicants rightly pointed out in their written pleadings, the identity of the shipper or shippers concerned may easily be inferred by the TACA parties from the essential terms published in accordance with US law. Since the TACA parties have access, in respect of each individual service contract concluded by one of them, to information such as the port ranges or geographic areas, the commodities involved and the service commitments, it may reasonably be considered that, given the numerous links between them within the shipping conference, they are able to determine the identity of the shipper or shippers bound by the service contracts in question. The Commission moreover did not challenge that fact, going only so far as to claim that the identity of the shipper or shippers concerned was disclosed by the TACA parties prior to the publication of the essential terms. That claim, put forward for the first time at the hearing, is unsupported by any evidence in the file, and so cannot be held to have been made out. 1157 It follows therefore that during the period covered by the contested decision each of the TACA parties was in a position, owing to the publication provided for under US law of the essential terms of individual service contracts, to know of the existence of the individual service contracts entered into by one of their members and all the relevant terms of those contracts. 1158 In those circumstances, the contested decision wrongly found that the applicants agreed on the mutual disclosure of the availability and content of individual service contracts. 1159 Consequently, the applicants' complaints on that point must be upheld.  2. The statement of reasons in the contested decision with regard to the first abuse 1160 The applicants make four criticisms of the reasoning in the contested decision concerning conference service contracts. 1161 The first is that the contested decision does not explain why the members of a conference should not be permitted to determine the terms on which they exercise the power to enter into conference service contracts (conference service contract authority), when the exercise of that power is itself compatible with Community law. 1162 The applicants point out that whilst the Commission finds that conference service contract authority does not fall within the scope of Regulation No 4056/86 it does not rule out the possibility of individual exemption for such authority. The applicants refer here to paragraph 582 of the contested decision, which states that this Decision does not require shippers to renegotiate their joint service contracts, nor does it impose any deadline within which any re-negotiation should take place. Since the members of a conference may together agree to enter into conference service contracts, they must also be permitted to determine the terms on which they may enter into such contracts. If this is not the Commission's position it should explain why the applicants' agreement on those terms constitutes an abuse of a dominant position. 1163 In their reply the applicants note the Commission's assertion in the defence that the first finding of abuse in the contested decision relates not to the agreement on the terms on which conference service contract authority was exercised but to the restrictions on entering into individual service contracts (or joint individual service contracts) either at all or except on terms collectively agreed. 1164 The second criticism is that there is no reasoning in the contested decision to support the statement that the terms imposed by Article 14.2 of the TACA, to which paragraph 556 of the contested decision refers (namely, contingency clauses, the duration of service contracts, the prohibition of multiple contracts and the amount of liquidated damages), are unfair within the meaning of Article 86(a) of the Treaty. The Commission does not explain why an agreement as to the terms of conference service contracts is an abuse of a dominant position. Furthermore, there is no analysis of those terms and there is no consideration of the commercial or economic context in which the terms have been agreed. In any case, the Commission does not explain the relevance of the appraisal made under Article 85(3) of the Treaty, referred to in paragraph 551 of the contested decision. 1165 The third criticism concerns the fact that the contested decision does not explain why the terms on which the applicants supplied services were unreasonable. It has been held that a refusal to deal is only abusive if it is not objectively justified. The contested decision contains no such analysis but merely states at paragraphs 553 and 554 that, as a result of the rules contained in Article 14 of the TACA, service contracts were not available other than in accordance with those rules. 1166 The applicants' fourth criticism is that, contrary to what was indicated in the judgment in Flat glass, cited at paragraph 594 above, paragraph 360, the Commission has recycled findings made under Article 85 of the Treaty for the purposes of a finding of abuse under Article 86 of the Treaty. As the contested decision acknowledges at paragraph 551, the first abuse found consists in the same conduct alleged to constitute the infringement of Article 85 of the Treaty which is more fully described at paragraphs 487 to 502. It is apparent from this reference that, from the Commission's point of view, because the service contract terms do not have sufficient positive benefits, in terms of improving the production or distribution of services or promoting technical or economic progress, to satisfy the conditions for individual exemption set out at paragraphs 487 to 502, those terms are also abusive and unreasonable within the meaning of Article 86 of the Treaty. 1167 The applicants argue, in the reply, that that reasoning constitutes an error of law. They submit that an assessment of a practice with respect to the conditions for the grant of individual exemption under Article 85(3) of the Treaty cannot, without more, constitute reasoning sufficient to justify the conclusion that that practice is also an abuse within the meaning of Article 86 of the Treaty. Given that the legal tests for the application of Articles 85 and 86 of the Treaty are different and serve different economic goals, a mere reference to the reasoning used in relation to Article 85 of the Treaty cannot constitute sufficient reasoning for a finding of abuse under Article 86 of the Treaty. The contested decision does not, any more than the defence, contain any reasoned explanation as to why those restrictions on competition amount to an abuse within the meaning of Article 86(a) and (b) of the Treaty. 1168 The applicants consider that the Advocate General's Opinion in CEWAL II, cited at paragraph 595 above, is irrelevant here. At points 28 and 35 of the Opinion, the Advocate General addressed not the issue of reliance on the reasoning used in relation to Article 85(3) of the Treaty in finding an abuse under Article 86, but the separate issue of whether, in order to establish the economic links necessary for the purpose of a collective assessment, the Commission may rely on facts capable of amounting to an agreement or a concerted practice under Article 85 of the Treaty. 1169 The Commission, supported by the ECTU, considers that the contested decision contains a sufficient statement of reasons on all of those points and therefore contends that the Court should reject the applicants' pleas and arguments on this point. 1170 By the present pleas and complaints the applicants submit that the contested decision does not explain why the conditions for the exercise of conference service contract authority are contrary to Article 86 of the Treaty. Furthermore, they allege essentially that the Commission does not explain to the required legal standard why the practices constituting the first abuse are an abuse within the meaning of Article 86 of the Treaty and are not objectively justified. 1171 As regards first the complaint alleging failure to explain why the conditions for the exercise of conference service contract authority constitute an abuse, it has already been stated above at paragraphs 1106 and 1107 that, in respect of conference service contracts, the first abuse according to the contested decision consisted in the fact that the TACA parties applied to those service contracts certain terms laid down by Article 14(2) of the TACA, namely, according to paragraph 556 of the contested decision, those concerning the prohibition of contingency clauses, the duration of service contracts, the ban on multiple contracts and the amount of liquidated damages. 1172 It follows that, contrary to the applicants' submission, the contested decision does not state that the mere fact of collectively agreeing the conditions for the exercise of conference service contract authority is in itself an abuse, but only that the application of some of those conditions laid down by the TACA is abusive. 1173 The applicants' complaint in that regard is thus without purpose. 1174 Second, with regard to the complaint alleging failure to state reasons as to why the practices constituting the first abuse are an abuse, the applicants complain that in the contested decision the Commission did not explain why those practices fall within Article 86 of the Treaty, but recycled the reasoning adopted to exclude those practices from Article 85(3) of the Treaty. 1175 As a preliminary point it should be noted that, as is apparent from the express terms of their application, the applicants are merely relying on infringement of Article 190 of the Treaty, in the sense that the contested decision is vitiated by a failure to state any or adequate reasons. Contrary to the applicants' suggestion at the hearing in reply to a question from the Court, it cannot therefore be accepted that by the present complaint the applicants also seek to criticise the Commission for having erred in its reasoning in that regard. Such a plea, which goes to the substantive legality of the contested decision and as such is concerned with infringement of a rule of law relating to the application of the Treaty, should not be confused with the separate plea alleging absence of reasons or inadequacy of the reasons stated, which concerns the infringement of essential procedural requirements (Commission v Sytraval and Brink's France, cited at paragraph 746 above, paragraph 67). Therefore, if a plea alleging an error of reasoning is to be inferred from the terms of the reply, it must be declared inadmissible, as a new plea, under Article 48(2) of the Rules of Procedure. 1176 In the present case, in order to assess the merits of the applicants' complaint it is therefore only necessary to consider whether the contested decision contains an adequate statement of reasons as to why the practices constituting the first abuse are an abuse. 1177 According to Article 6 of the operative part of the contested decision, the first abuse consisted in the fact that the TACA parties entered into an agreement placing restrictions on the availability of service contracts and their content. As was stated above at paragraphs 1106 and 1107, it is apparent from paragraphs 551 to 558 of the contested decision that the first abuse consists in the outright prohibition of individual service contracts in 1994 and 1995 and, when they were authorised with effect from 1996, in the application therein of certain terms and conditions collectively agreed by the TACA and the mutual disclosure of their terms, and in the application of certain terms collectively agreed by the TACA to conference service contracts. 1178 Contrary to the applicants' submission, the contested decision does not recycle the grounds set out at paragraphs 487 to 502 justifying the refusal to grant individual exemption under Article 85(3) of the Treaty to those practices as the reasoning for finding that those practices are an abuse. Under paragraph 551 of the contested decision, on which the applicants base their recycling allegation, the Commission merely states: The importance to shippers of service contracts is examined in some detail in recitals (122) to (126) and recitals (472) to (476). The TACA parties have an agreement between themselves to impose a number of restrictions on the contents of the service contracts and, in the past, have agreed that they will not enter into individual service contracts. One of the purposes of imposing these restrictions has been to prevent price competition (see recital (479)). These restrictions are more fully described in recitals (487) to (502). 1179 It is thus apparent from the express wording of the last sentence of that paragraph that the reference to paragraphs 487 to 502 concerns not the grounds justifying the refusal to grant individual exemption but the full description given therein of the restrictions on the content of service contracts imposed by the TACA rules. The applicants' allegations of recycling are therefore unfounded on that ground alone. 1180 However, it is still necessary to consider whether the contested decision contains an adequate statement of reasons as to why the practices in question constitute an abuse. 1181 In paragraph 553 of the contested decision, the Commission states that an agreement to place restrictions on the availability and content of service contracts amounts to a refusal to supply services other than in accordance with unfair terms and a restriction on the supply of transport products so that such an agreement falls within Article 86(a) and (b) of the Treaty. Next, in paragraph 554 of the contested decision, the Commission states with regard to the prohibition of individual service contracts that the effect of the prohibition was that the TACA parties refused in 1995 to supply services adapted to the needs of individual customers, in accordance with the individual capabilities of individual carriers, since this refusal deprives the shippers of any additional services which individual TACA parties may have been in a position to offer. As regards the application to individual service contracts (from 1996) and conference service contracts of certain conditions collectively agreed by the TACA parties, the Commission states in the same paragraph that the TACA parties have refused to supply shippers with maritime and inland transport services pursuant to a service contract except on the basis of certain terms which have been chosen by the TACA parties collectively. A similar point appears in paragraph 555 of the contested decision. 1182 It is thus apparent from the terms of the contested decision that the Commission considered, in that decision, that the practices constituting the first abuse are an abuse within the meaning of Article 86 of the Treaty because they are unfair and restrict the supply of transport products to the extent that the purpose of those practices was, for the reasons set out at paragraphs 554 and 555 of the contested decision, to restrict the availability and content of service contracts. 1183 Such a statement of reasons, which mentions the type of abuse prohibited by Article 86 of the Treaty, which includes the practices in question, and gives specific reasons as to why those practices constitute such an abuse clearly provides the applicants with an adequate indication as to whether the decision is well founded or whether it may be vitiated by some defect enabling its validity to be challenged, and enables the Community judicature to review the legality of the contested decision (Van Megen Sports, cited at paragraph 548 above, paragraph 51). 1184 Consequently, the contested decision is supported by an adequate statement of reasons on that point. 1185 The present plea must therefore be rejected. 1186 Finally, as regards the statement of reasons as to whether the practices constituting the first abuse are objectively justifiable, it has been held that where the Commission finds that an undertaking has abused its dominant position it is for the undertaking in question to justify by reference to objective factors, if it may, the abuses alleged against it (Case 395/87 Tournier [1989] ECR 2521, paragraph 38). 1187 In their response to the statement of objections the applicants did not put forward any evidence to justify the abuse alleged against them by the Commission in the statement of objections in relation to service contracts. 1188 Clearly the Commission cannot be criticised in terms of its obligation to state reasons for not having adopted a position in the contested decision based on evidence which was not submitted to it before that decision was adopted, but which is put forward for the first time during the present proceedings (FEFC, cited at paragraph 196 above, paragraphs 426 and 427). 1189 Consequently, the applicants' complaint on that point must be rejected.  3. Conclusion on the first abuse 1190 It follows from all those considerations that the applicants' pleas and complaints in relation to the first abuse must be upheld only in so far as they concern the mutual disclosure by the TACA parties of the availability and content of service contracts. The remainder of the present pleas and complaints must be rejected. 1191 As a result, Article 6 of the operative part of the contested decision in so far as it applies to the mutual disclosure by the TACA parties of the availability and content of service contracts and, consequently, Article 7 thereof in so far as it requires the applicants to put an end forthwith to, and to refrain in the future from, any action having the same object or effect should be annulled.  B - The second abuse: the abusive alteration of the competitive structure of the market 1192 The applicants put forward four types of pleas and complaints against the findings of the contested decision in relation to the second abuse. The first concerns the evidence of the practices constituting the second abuse. The second concerns the appreciable effect of those practices. The third concerns their duration. The fourth and final type concerns the question whether Hanjin and Hyundai may be held responsible for those practices.  1. The evidence for the practices constituting the second abuse  (1) Preliminary observations 1193 As a preliminary point, the applicants note that the second abuse identified in the contested decision is based entirely on the finding that the conference actively induced two lines, Hanjin and Hyundai, to join the TACA. 1194 The applicants claim, however, that the Commission advances a new argument in the defence to the effect that in addition to the events surrounding the admission to the TACA of Hanjin and Hyundai (which are only illustrations), the applicants adopted a policy to neutralise competition and expressed a willingness to provide inducements in order to alter the structure of the market. 1195 The applicants submit that Article 86 of the Treaty does not apply in such circumstances and that Europemballage and Continental Can (cited at paragraph 779 above), on which the Commission relies at paragraphs 559 and 560 of the contested decision, is not authority for the application of Article 86 of the Treaty to the policy or willingness of the TACA members. In the absence of evidence of improper coercion of the new member to join the conference, it should be concluded that the new member joined the conference on the basis of its assessment of its commercial interests. In contrast to a merger situation (as in the judgment just cited), the parties to a liner conference remain free to compete on price and other matters and to leave the conference upon expiry of the agreed notice period. If the structure of competition is seriously impeded by the admission of new members to the conference, the Commission is empowered to withdraw the benefit of the block exemption pursuant to Article 7 and/or Article 8 of Regulation No 4056/86. 1196 The Commission does not explain how the policy to neutralise competition or the supposed willingness to offer inducements to the carriers to enter the transatlantic trade as parties to the TACA had any adverse consequences on the market. As the Court of Justice has made clear, abuse is an objective concept which envisages practices which may cause damage to consumers or to the competitive structure of the market (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 91, Europemballage and Continental Can, cited at paragraph 779 above, paragraph 26, and BPB Industries and British Gypsum, cited at paragraph 346 above, paragraph 70). In any event the applicants consider that the Commission has not demonstrated that the TACA policy to neutralise competition had any effect on the structure of competition. 1197 The applicant in Case T-213/98 observes that admission to and departure from liner conference membership is not at all exceptional. The Commission's analysis in the present case could have the effect of freezing the existing membership, contrary to the objectives of Regulation No 4056/86. Furthermore, open conferences governed by US law are obliged to admit new members whilst closed conferences must also admit new members provided they fulfil certain objective criteria, pursuant to Article 1(1) of the Unctad Code. 1198 The applicant in Case T-213/98 essentially criticises the Commission for failing to identify clearly in the contested decision the conduct alleged to have constituted the abuse. It claims that Article 5 of the contested decision may be read as suggesting that the abuse complained of consists either in the admission of Hanjin and Hyundai as TACA members or in the measures taken by the applicants to induce those two lines to join the TACA, or in both. 1199 The first case is unsound in principle: conferences cannot be legally required to admit any new applicant and be found to have committed an abuse in doing so. In order to fulfil their function of providing stability pursuant to Regulation No 4056/86, the conferences must hold a sufficient level of market share. On the facts, the admission of lines such as Hanjin and Hyundai could not have appreciably affected competition since their combined market share barely exceeds 1%. Furthermore, the Commission cannot infer from the fact that the admission of those two lines eliminated this source of competition (paragraph 566) that the TACA intended to eliminate price competition. The applicant points out that independent lines entered the market subsequently. 1200 The second case logically implies that the admission of Hyundai and Hanjin to the TACA does not in itself constitute a prerequisite for the finding of abuse. The Commission has not explained how the alleged inducements in the second case altered the structure of the market. Indeed the Commission attaches no significance to the form which the inducement took. In any event, if the inducements given by the liner conferences to encourage admissions amount to an abuse, the applicant wonders how the conferences could increase their membership whilst also providing the benefits foreseen in Regulation No 4056/86 for their members and for the trade in general. 1201 The applicant in Case T-213/98 states that its observations in relation to the first and second cases apply equally to the third case. 1202 In the reply the applicant in Case T-213/98 adopts the arguments of the other applicants concerning the Commission's new case as to the nature of the second abuse. It claims that the Commission provides no details of the policy or the willingness of the TACA parties to eliminate competition and does not produce a single document in support of its case. The applicant asserts that it had no such policy or willingness and points out that its admission to the TACA occurred shortly before that of Hanjin. In any event, the Commission's new case must be rejected for the simple reason that it is not the abuse identified in Article 5 of the contested decision. 1203 The Commission stresses that the second abuse which it alleges the applicants committed is extremely serious in that it seeks to eliminate potential competition by inducing potential competitors to enter the market as TACA parties. The events surrounding the admission of Hanjin and Hyundai to the conference are only illustrations of the TACA parties' policy. The contested decision gives other examples of inducements offered by the TACA to potential competitors, not confined to Hanjin and Hyundai, such as dual-rate contracts and the fact that the former structured members of the TAA refrained from competing for NVOCC service contracts (paragraph 565). Accordingly, even if the applicants succeeded in proving that the conference did not induce Hyundai and Hanjin to join the TACA, that would not be sufficient to counter the second abuse identified by the contested decision. 1204 The Commission submits that the open conferences doctrine does not prevent conference members from seeking dispensation from the FMC from the obligation to accept any new member where a carrier is not proposing to use its own vessels on the trade. Furthermore, in the light of the Unctad Liner Code, the Commission interprets Regulation No 4056/86 as permitting (without requiring) closed liner conferences. One of the grounds for refusing a new member permitted by the Code is that the new member is not introducing its own vessels. To the extent that Article 7.1 of the TACA expressly borrows from the wording of the Unctad Code in describing the conditions under which new members may be admitted, the Commission considers that it is pertinent to point out that new TACA parties such as Hyundai and Hanjin have entered the trade without introducing their own tonnage. 1205 In any event, the Commission considers that the open conferences doctrine is irrelevant in the present case as the contested decision does not find that the TACA parties committed an abuse in admitting new members. There may well be circumstances in which a conference occupies so strong a position that any addition to its numbers may constitute an abuse. That is not so in the present case, however. The contested decision finds only that the TACA parties embarked on a course of conduct specifically designed to subvert potential competition by inducing lines to join TACA which would otherwise have acted independently. That strategy echoed the two-tier tariff structure in issue in the TAA case. 1206 The ECTU submits that to prevent or delay the entry of independent competitors is one of the most serious abuses of a dominant position as it is likely to undermine the structure of competition by preventing the emergence of effective competition. 1207 The ECTU submits that the Commission's approach is in line with the case-law of the Court of Justice. The Court has already held in Europemballage and Continental Can, cited at paragraph 779, that conduct which leads to the strengthening of a dominant position is caught by Article 86 of the Treaty because it is capable of having an adverse effect on the structure of actual competition. The Court considers that the means and procedure used for that purpose by the dominant undertaking are unimportant. In the CEWAL judgments, cited above, the Court of Justice also upheld those principles in applying the competition rules to the maritime transport sector (CEWAL I, cited at paragraph 568 above, paragraphs 106 and 107, and CEWAL II, cited at paragraph 595 above, paragraphs 112 to 114). 1208 The ECTU argues that it does not matter that the behaviour in question does not lead to a further increase, or leads to a decline, in market share of the dominant undertaking (CEWAL I, cited at paragraph 568 above, paragraph 77). Indeed, in the absence of the TACA's abusive conduct, competition would have been more effective and the TACA's dominance would have been reduced. Similarly, the ECTU considers that it is immaterial that the shippers had requested some of the allegedly abusive practices (such as dual-rate contracts). Besides the point that that allegation has no factual basis, it is established that it is no defence that anti-competitive pricing policies were negotiated by dominant undertakings in response to customers' demands where there is evidence of intent to commit an abuse (Commission Decision 91/300/EEC of 19 December 1990 relating to a proceeding under Article 86 of the EEC Treaty, IV/33.133-D, Soda-ash - ICI, OJ 1991 L 152, p. 40). 1209 The exemption laid down in Article 3 of Regulation No 4056/86 is far-reaching in that it permits collective price fixing for an indefinite period. In those circumstances it is for the Commission to examine carefully the conduct of the parties to such legalised cartels in order to establish that the conditions for such an exemption are satisfied at all times and that the parties do not abuse a position of dominance.  (2) The measures specifically addressed to Hanjin and Hyundai 1210 The applicants' first complaint is that, contrary to the findings at paragraphs 563 and 564 of the contested decision, the facts concerning the entry by Hanjin and Hyundai to the transatlantic trade and the contacts between the TACA and other operators concerning the possible entry of those operators into the trade are inconsistent with a finding of abuse in that they show that the TACA members did not induce potential competitors to enter the transatlantic trade by joining the TACA. 1211 The applicants stress that in admitting Hanjin and Hyundai to the conference the TACA members acted strictly in accordance with their obligations under US law. Under section 5(b) of the US Shipping Act the TACA is an open conference which admits new members on the basis of the reasonable and equal terms set out in Article 7(1) of the TACA. In support of their assertions, the applicants attach a statement of Mr Benner, a former General Counsel to the FMC, in which he states that he is unaware of any support or precedent for the Commission's claim in the defence that the applicants could have applied to the FMC for permission not to admit an ocean carrier as a member of the conference where the applicant carrier was not proposing to use its own vessels on the trade covered by the conference. 1212 As regards, first, Hanjin's membership, the applicants dispute the findings in paragraphs 563 and 564 of the contested decision to the effect that before it became a party to the TACA, Hanjin requested details of all relevant documents and statistics by TACA (including tariff, service contracts, port call, lifting and performance) (letter from Hanjin to the TACA dated 19 August 1994) and that the statement of the TACA secretariat demonstrates a collective willingness to enable Hanjin to build up a market share consistent with its slot capacity in the trade (TACA secretariat briefing of 15 February 1996). 1213 The first contact between Hanjin and the TACA was on 23 August 1994, the date of that line's application for membership. It is apparent from that document that (i) Hanjin's application for membership was made following discussions with its partners in the Tricon consortium (DSR-Senator and Cho Yang Shipping) and not with the TACA members; (ii) its application for admission was made pursuant to the open conference doctrine of US law; (iii) Hanjin's request for information was motivated by the need to prepare its commercial activity; and (iv) much of the information requested was publicly available. The applicants point out that in its letter in reply dated 24 August 1994 the TACA secretariat stated that the information requested by Hanjin would not be made available to it until after it had joined the conference on 31 August 1994. It is also clear from that document that the TACA was aware of its obligations under the open conference doctrine in US law. Following that exchange of correspondence Hanjin joined the TACA with effect from 31 August 1994. On 1 September 1994 the TACA sent it a copy of the eastbound tariff, as well as further information over the following days. 1214 On the basis of that information the applicants submit that the Commission wrongly concluded at paragraph 563 of the contested decision that the disclosure of information to Hanjin constituted a powerful inducement to Hanjin to enter the transatlantic trade. It is apparent from Hanjin's letter of 23 August 1994 that it had already decided to join the conference. Indeed, it is illogical for the Commission to find that a request by Hanjin for information can have served as an inducement to it to join the TACA without considering when and in what context the conference responded to that request. 1215 Furthermore, the applicants submit that under the open conference doctrine, US law required the conference to supply Hanjin with information concerning the tariff and service contracts. The applicants attach the statement of Mr Benner in that connection in which he states that there is no lawful basis in US law for a new conference member to be precluded from participating in existing conference service contracts. It was therefore entirely legitimate for a new member to seek the kind of information Hanjin requested in its membership application. 1216 The Commission appears to concede that the conference did not provide Hanjin with the information requested by it before it became a party to the conference when it states in the defence that the letter of 24 August 1994 indicated that the information desired by Hanjin would not be provided unless and until Hanjin became a party to the TACA. 1217 The applicants point out that since the letter dated 30 January 1996 from the Chairman of TACA to Hanjin, reproduced in part at paragraph 561 of the contested decision, was written 17 months after Hanjin had joined the conference in August 1994 it could not logically have been concerned with the issue of Hanjin's entry to the transatlantic trade. The applicants claim that the letter addresses the steps proposed by Hanjin, as a TACA member already present on the transatlantic trade, which were perceived to constitute a threat to the conference's stabilising role. The letter in question is thus more concerned with Hanjin's expansion as an operator on the relevant trade. 1218 It is in that context that the secretariat briefing paper of 15 February 1996 should be understood. The applicants explain that it follows the letter of 30 January 1996 from the TACA Chairman. It was drafted by the British secretariat for a meeting which took place on 29 February 1996 between the Chairman and Managing Director of the conference and Hanjin's executives. The purpose of the paper was to respond to Hanjin's price policy by setting out the possible options for fixing its competing prices within the conference structure without undermining the stabilising role of the conference. In any event the applicants do not see how that statement of the TACA secretariat, drafted some 17 months after Hanjin joined the TACA, could have induced Hanjin to take that step. 1219 Second, as regards the admission of Hyundai, the applicants dispute the finding at paragraph 564 of the contested decision that Hyundai's ability to participate immediately in conference service contracts would have acted as a powerful inducement to Hyundai to enter the transatlantic trade as a party to the TACA. 1220 The applicants maintain that the first contact from Hyundai concerning its entry to the transatlantic trade took place with an independent line, concerning a proposed vessel space-chartering arrangement in a three-way partnership also involving another independent line. However, those negotiations broke down. Shortly before that breakdown Hyundai also contacted MSC in May 1995 with a view to entering into a chartering arrangement. It was in the course of those negotiations that, in June 1995, the question of Hyundai's membership of the conference arose (letter of 19 June 1995). The applicants claim that the first contact between Hyundai and the conference was in a telephone call in late July 1995. On 30 August 1995 Hyundai enquired about the possibility of participating in existing conference service contracts for the remainder of 1995. With effect from 11 September 1995 Hyundai became a member of the conference. It is apparent from the TACA internal communication of 29 September 1995 that Hyundai chose to be included in all 1995 conference service contracts. 1221 The applicants submit that it is apparent from those documents that (i) Hyundai's first choice was to enter the transatlantic trade through an arrangement with an independent line, not with the TACA; (ii) the discussions to that end fell through for reasons unrelated to the conference; (iii) following that breakdown, Hyundai entered into discussions with MSC, a TACA member, with a view to entering into a space-charter arrangement; (iv) once the terms of the arrangement with MSC were clear, Hyundai contacted the conference in late July 1995 with a view to joining the TACA; (v) Hyundai's arrangement with MSC was signed a month before it became a member of the conference; (vi) although the membership application was lodged in July 1995, it was not until 30 August 1995 that Hyundai first raised the question of its participation in 1995 conference service contracts and (vii) in response to that enquiry, Hyundai was informed that it was entitled to participate in those contracts. 1222 The applicants claim that there is therefore no evidence that the conference encouraged Hyundai to join the TACA or that the latter induced it to do so by permitting it to participate in conference service contracts. On the contrary, it is apparent from the foregoing that the first contacts concerning membership were initiated by Hyundai and that it was on Hyundai's instructions that the TACA included it in conference service contracts. 1223 The applicants further submit that US law requires the TACA parties to admit Hyundai to existing conference service contracts. Under the open conference doctrine, the TACA had no ground for opposing Hyundai's decision to participate in service contracts on the same terms as other conference members from the date of its membership. The applicants refer here to the statement of Mr Benner mentioned above. 1224 Thirdly, as regards the admission of other potential competitors, the applicants claim, first, that although United Arab Shipping Company (UASC) had some contact with the TACA in June 1996 with a view to possible membership, it did not join the TACA and did not enter the transatlantic trade, and, second, APL had no contact with the TACA about membership. In 1998, NOL resigned from the conference and purchased APL. NOL now operates as a non-conference carrier under APL's name. Lastly, in February 1997 Cosco, Yangming and K Line entered the transatlantic trade not as TACA parties but as independents. 1225 Finally, the applicant in Case T-213/98 denies that it was party to, or had any knowledge of, any inducements to encourage Hanjin or Hyundai to join the TACA. The applicant only became a TACA member in 1993, shortly before Hanjin in 1994. More specifically, it rejects the allegation at paragraph 293 that it was allowed by certain arrangements with the TACA parties to enter and obtain a foothold in the market without facing the competition which would normally be expected in such circumstances. 1226 It also alleges that the Commission's argument in the defence is flawed because it makes it practically impossible for any conference to increase its membership without committing an abuse. It is standard commercial practice in the course of membership negotiations for the partners to offer inducements. The applicant fails to understand why the Commission now seeks to prohibit conferences from persuading non-member lines to become members even though Regulation No 4056/86 recognises the advantages of liner conferences. It stresses that in the present case, the market share of the TACA is less than that of many other conferences and it repeats that the admission of Hanjin and Hyundai resulted in only a slight increase in that market share. In reply to the allegation that the TACA ceded market share to Hanjin (paragraphs 533 and 535 of the contested decision), the applicant again points out that, even if such behaviour were proven, it could not be held to be an abuse since Regulation No 4056/86 permits freight-sharing arrangements; there is no reason why that type of inducement could not be offered to a candidate member prior to its admission, as it can be after admission. The applicant claims that such an approach would ruin the negotiation process. 1227 In reply to the ECTU's submissions, the applicants repeat that there is no evidence that the TACA attempted to persuade independent lines to join the conference. They also note that the ECTU refers to a document from 1992 as evidence of the TACA's alleged intention to eliminate independent competitors. They consider that the contested decision contains no finding to the effect that the TACA maintained its dominant position. 1228 The Commission maintains as regards, first, Hanjin's membership that it is clear that that line was able to enter the relevant market independently, since it was not a party to any conference agreements. Contrary to the applicants' submission, Hanjin's letter of 19 August 1994 makes it clear not that it had decided to join the TACA but merely that it had decided to enter the trade in question. 1229 The Commission considers that the letter from the TACA of 24 August 1994 confirms that Hanjin had not made up its mind at the time of its request for information and that further discussions concerning [Hanjin's] membership can be held. The letter also makes it clear that the information desired by Hanjin will not be provided unless and until Hanjin becomes a party to the TACA. Some of the information concerned the contents of existing service contracts, the volumes carried and the performance of the TACA parties, which is confidential and commercially sensitive information the disclosure of which would have enabled Hanjin to identify a significant part of the customer base of the TACA parties. The Commission considers that that information exceeds what was necessary for a shipping line wishing to become a conference member. It maintains that knowledge of the willingness of the TACA parties to disclose such information to Hanjin on its entry to the TACA operated as an additional inducement to Hanjin to join the conference. 1230 The Commission considers that the secretariat briefing paper of 15 February 1996 demonstrates that there was a collective willingness on the part of the TACA members to cede market share to Hanjin. That collective willingness was an inducement to Hanjin to join the TACA. The same attitude is apparent from the letter from the Chairman of the TACA on 30 January 1996. Although that letter dates from 1996 it remains relevant in that it records the situation as it then was. The Commission points out that, contrary to the applicants' explanation, the statement of the TACA Chairman offering help to every line concerned trying to enter the market is hard to read as not applying to lines wishing to enter the trade. 1231 The Commission takes the view that even in the context of a block-exempted liner conference, it cannot be considered normal commercial behaviour for members of the conference to work together to ensure that new entrants are able to obtain a level of market share sufficient to sustain their operations at the expense of the members of the conference. In the context of the TACA, such a guarantee can only have made sense if the view was that the benefits of elimination of potential competition would outweigh the loss of market share. 1232 Second, as regards Hyundai's admission the Commission considers that the fact that Hyundai considered entering into partnership with an independent line cannot disprove the suggestion that the willingness of the TACA parties to admit Hyundai to service contracts would have acted as a powerful inducement to it in weighing up its options. As far as the contacts with MSC are concerned, the applicants admitted in their response to the statement of objections that Hyundai's decision to charter space from MSC was related to its decision to join the TACA. Furthermore, the Commission denies the suggestion that US law requires the immediate admission of all new members of a conference to service contracts. 1233 Third, as regards the admission of other operators, the Commission considers that UASC and APL were not in any way comparable to Hanjin and Hyundai as potential competitors. Furthermore, in the first place it would have been surprising if the UASC and APL had joined the TACA after the adoption of the statement of objections in May 1996, and secondly the evidence the applicants presented concerning contacts between UASC, APL and the conference would appear to be incomplete since it does not deal with the discussions which took place within the TACA secretariat or between the TACA secretariat and the TACA parties.  (3) The general measures addressed to all potential competitors  (i) Dual-rate service contracts 1234 The applicants' second complaint is that the Commission's finding at paragraph 565 of the contested decision that the applicants' dual-rate service contracts acted as an inducement to new entrants to join the conference is vitiated by errors of fact and assessment. 1235 The applicants submit that in each case the dual-rate service contract has been at the shipper's request, based on its perception of the different service capabilities of the carriers concerned. It is apparent from paragraph 450 of the contested decision that the Commission itself accepted that the shippers may be offered different rates where varying qualities of service are provided. Contrary to the Commission's assertion at paragraph 154 of the contested decision, the applicants consider that the exchanges of correspondence between the shippers and carriers at the time the service contracts were negotiated are evidence for their allegations. The Commission did not ask the applicants to furnish such evidence. The applicants cannot be criticised for not having done so on their own initiative since they had no reason to suppose that the Commission had any concerns as to the way in which the service contracts were negotiated. The applicants point out that that question was the subject of a meeting with the Commission on 3 May 1995 (six months before the admission of Hyundai), when the Commission raised no objections on that point. 1236 In any event, the applicants deny that dual-rate contracts induced potential competitors to join the conference. They point out that a minority of conference service contracts contained dual-rate tariffs, that there was no prior agreement between the applicants as to the identity of the parties to whom shippers would pay lower rates and that there was no prior agreement as to the size of any rate differential. 1237 The applicants note that in the infringement period, only Hanjin and Hyundai joined the conference. There is no evidence in the contested decision that dual-rate conference service contracts acted as an inducement to those two companies to join the TACA. 1238 In Hanjin's case, the correspondence referred to above contains no indication of any such inducement. Furthermore, of all the cargo carried by Hanjin under service contracts in 1995 and 1996 only 5.5% and 6.9% respectively was carried by it under dual-rate service contracts. 1239 In the case of Hyundai, the evidence shows that when that line was informed of the existence of dual-rate tariff structures in service contracts prior to joining the conference, it was told clearly that all carriers had the same status within the conference, with the same rights and obligations (letter of 8 September 1995). Furthermore, it is clear from an e-mail of 2 October 1995 from the TACA secretariat at the time of Hyundai's joining that whenever a service contract contained a dual rate, Hyundai would join at the higher rate. Lastly, the applicants point out that of all the cargo carried by Hyundai under service contracts in 1995 and 1996 only 7% and 14.7% respectively was carried by it under dual-rate service contracts. 1240 The applicants also find it surprising that the ECTU makes no observation on the evidence adduced by the applicants to show that dual-rate contracts were requested by shippers. 1241 The Commission maintains its findings at paragraphs 565 and 152 of the contested decision that in 1995 almost a third of the TACA's service contracts contained a dual rate structure. 1242 The Commission observes that the applicants attempt to minimise the incidence of such dual-rate service contracts by including in their calculations service contracts with NVOCCs. The traditional members of the conference were rarely party to service contracts with NVOCCs in 1996 (and not at all in 1995). It was not therefore necessary for such contracts to contain dual rates. In any event, the fact that a minority of conference service contracts contain a dual rate is irrelevant, according to the Commission. Shippers might have one service contract with one (or more) member(s) at one rate and another contract with one (or more) other member(s) at another rate. In such circumstances there was no need for dual-rate contracts. 1243 The Commission's review of service contracts for 1995 also shows that the differential between the dual rates was in most cases either USD 50 or USD 100. Since the contracts were put to the vote of the conference, the Commission considers that the applicants' contention that there was no prior agreement as to the size of the differential has no force. 1244 The Commission repeats that no evidence has been provided that the initiative for dual-rate contracts came from the shippers. The continuation of dual rates only emerged after the Commission had asked for copies of the service contracts. In any event, most of the requests the applicants cite appear to be for the continuation of dual-rate contracts from the previous year and not for the insertion of such a provision in a new contract. It would be extraordinary if the prevalence of dual-rate contracts could result solely from the shippers' independent perceptions of the different service qualities offered by the TACA parties. 1245 As for the applicants' allegation that neither Hyundai nor Hanjin was induced to join the TACA by such contracts, the Commission observes that those contracts were just one of the inducements offered by the TACA. It claims that in 1995, 68.5% of Hanjin's total carriage under service contracts was carried pursuant either to a dual-rate contract or to a contract with an NVOCC. In the same year, the equivalent figure for Hyundai was 73%.  (ii) Service contracts with NVOCCs 1246 The applicants' third complaint is that the Commission's finding at paragraphs 150 and 565 of the contested decision that the former structured TAA members did not compete for service contracts with NVOCCs is unsupported by the facts. 1247 The applicants make the preliminary observation that the Commission does not explain the basis for the view expressed in footnote 53 to the contested decision that Cho Yang, DSR-Senator, MSC, Hanjin, POL, Tecomar and TMM were former unstructured members of the TAA. 1248 Moreover, there is no evidence in the contested decision of any agreement or concerted practice between the traditional conference parties to reserve NVOCC service contract business to traditional independent lines. The Commission merely relies on a comparison of the carriage effected by former independent TACA parties under NVOCC service contracts with that of the traditional TACA parties. The applicants consider that the letter from POL to Hanjin dated 28 December 1995 does not prove that service contracts with NVOCCs were reserved by the traditional conference members to new entrants and traditional independent lines since it is a letter from a former independent to a new entrant. 1249 The applicants stress that the decision to carry NVOCC cargo is a unilateral one made independently by each applicant. They point here to the explanation they gave to the Commission during the administrative procedure, reproduced at footnote 55 to the contested decision. 1250 The applicants observe that whilst in 1994 and 1995 the traditional conference members (with the exception of Hapag-Lloyd) concentrated on the carriage of the cargo of proprietary shippers, from 1996 almost all of the applicants carried NVOCC cargo. Thus, in 1996 and 1997 the traditional conference members carried 22% and 29% respectively of all NVOCC cargo. In those circumstances the applicants consider that the Commission has not adduced a firm, precise and consistent body of evidence of the existence of a prior concertation and has not established that that concertation constitutes the only plausible explanation of the applicants' NVOCC carriage. 1251 The Commission, supported by the ECTU, observes that the applicants conceded by implication in their application that the traditional conference members did not compete for NVOCC service contracts in 1994 and 1995. 1252 The Commission adds that the applicants attempt to conflate the NVOCC service contracts in question in the contested decision with NVOCC cargo carried under the tariff. The evidence shows that in 1996 the formerly independent members of the TACA carried 94.7% of all NVOCC goods carried pursuant to a TACA service contract. Since the value of the transatlantic NVOCC market in 1995 was in excess of USD 300 million it is not a plausible explanation that the traditional conference members decided unilaterally that that business was not worth pursuing. The Commission considers that those factors show that contracts with NVOCCs were reserved to the non-traditional members and to new entrants to the market. 1253 As regards the commercial reasons cited by the applicants, the Commission understands that the traditional TACA conference members did not compete for NVOCC cargo because they regarded the NVOCCs as competitors. The applicants do not explain, however, why those same members now convey a substantial part of all cargo carried under service contracts with NVOCCs. The applicants' explanations are thus not credible. The Commission considers that the change in business strategy of the traditional TACA conference members has come about because of the measures taken by the Commission to reduce the effect of the anti-competitive practices of the TACA parties. 1254 Lastly, the Commission points to the terms of the letter from POL to Hanjin dated 28 December 1995 concerning service contracts with NVOCCs, which is set out at paragraph 180 of the contested decision. Far from addressing a purely bilateral issue between POL and Hanjin, the letter stresses that the whole issue of NVOCCs was very delicate and sensitive and required handling with full harmony in the TACA, collectively and without individualism, so as to maintain the position so carefully built up by the group throughout the years. That is far from suggesting an issue which was of no concern to the conference as a whole. 1255 Before examining the present pleas concerning the evidence of the practices constituting the second abuse, it should be noted that in Article 5 of the operative part of the contested decision the Commission found that the TACA abused its dominant position by altering the competitive structure of the market so as to reinforce the dominant position of the [TACA]. 1256 It is apparent from paragraph 562 of the contested decision that, in the Commission's view, the intention of the TACA parties was ... to ensure that if a potential competitor wished to enter the market it would only do [so] after it had become a party of the TACA. The Commission states at paragraph 563 of the contested decision that the TACA parties actively took measures to assist those potential competitors successfully to enter the market as parties to the TACA. In paragraph 566 of the contested decision, the Commission states that: Each of these acts would have constituted inducements to potential competitors to enter the transatlantic trade, not as independent carriers but as parties to the TACA. In so far as the existence of potential competition may have worked as a restraint on the TACA's market power (theory of contestable markets), the elimination of this source of competition would have worked in two ways: the elimination of potential competition and the anticipatory elimination of actual competition. The Commission considers that such behaviour, which was not disclosed in the Application for Exemption, has damaged the competitive structure of the market and amounted to an abuse of the TACA parties' collective dominant position in 1994, 1995 and 1996. 1257 It is apparent in this connection from paragraphs 563 to 565 of the contested decision that the Commission identifies specific measures intended to induce Hanjin and Hyundai and general measures intended to induce all potential competitors. According to paragraphs 563 and 564, the first consist in the disclosure to Hanjin of confidential information concerning the TACA, the collective willingness of the TACA parties to allow Hanjin to build up a market share consistent with its slot capacity on the trade and the immediate participation of Hyundai in conference service contracts. As for the general measures, it is apparent from paragraph 565 that they consist in the conclusion of a large number of dual-rate service contracts and in the fact that the former structured TAA members did not compete for certain service contracts with NVOCCs. 1258 By the present pleas, the applicants challenge both the specific measures to induce Hanjin and Hyundai and the general measures to induce all potential competitors.  (1) The specific measures to induce Hanjin and Hyundai 1259 The applicants consider essentially that the Commission misread the facts surrounding the accession of Hanjin and Hyundai to the TACA. They submit first that US law required the TACA parties to admit Hanjin and Hyundai. Next, they submit that they did not induce Hanjin and Hyundai to enter the TACA but that they freely chose to apply for membership.  (i) The obligations under US law 1260 The applicants stress that in admitting Hanjin and Hyundai to the conference the TACA acted strictly in accordance with its obligations under US law. They submit that under section 5(b) of the US Shipping Act the TACA is an open conference which admits new members on the basis of the reasonable and equal terms set out in Article 7(1) of the TACA. 1261 The present plea is based on the premiss that the contested decision alleges that the TACA parties abused their collective dominant position by admitting new members to the conference. 1262 It is true that, according to the case-law, abuse of a dominant position within the meaning of Article 86 of the Treaty may occur if an undertaking in a dominant position strengthens that position in such a way that the degree of dominance reached substantially fetters competition, so that only undertakings remain in the market whose behaviour depends on the dominant one (Europemballage and Continental Can, cited at paragraph 779 above, paragraph 26). It is thus possible in certain circumstances, as the Commission rightly points out in its pleadings, for the fact that a liner conference in a dominant position accepts new members to constitute an abuse in itself. 1263 However, that is not the abuse recorded in the contested decision in the present case. As already stated above, it is apparent from paragraphs 562 to 566 of the contested decision, as the Commission confirmed in its written pleadings and at the hearing in reply to a question from the Court in that regard, that the second abuse recorded in that decision consisted not in the fact that certain potential competitors joined the TACA between 1994 and 1996, but in the fact that the TACA parties took certain measures to induce those potential competitors to join the TACA, the contested decision finding solely that the TACA embarked on a course of conduct specifically designed to subvert potential competition by inducing lines to join the TACA which would otherwise have entered the market as independent lines in competition with the conference. 1264 Furthermore, in paragraph 576 of the contested decision the Commission expressly states that whilst the contested decision addresses certain steps taken by the TACA parties to induce potential competitors to enter the market as parties to the TACA, it does not address and therefore does not prejudice the ability of liner conferences whose activities fall within the scope of the group exemption contained in Article 3 of Regulation (EEC) No 4056/86 to admit new members on the same terms as existing members or the ability of the members of such liner conferences to exchange information necessary for the purposes of the activities falling within the scope of that group exemption. 1265 It follows that the contested decision does not criticise the TACA parties for accepting new conference members, but solely for adopting certain measures with a view to inducing such new membership. 1266 Whilst the applicants submit by the present plea that US law requires them to accept any new member of the conference, they do not submit that it requires them to adopt measures inducing parties to join. 1267 Consequently, the arguments advanced under the present plea relating to US law are irrelevant and must therefore be rejected.  (ii) Evidence of the measures addressed to Hanjin and Hyundai 1268 The applicants allege that the TACA parties did not induce Hanjin and Hyundai to enter the conference. They consider that the abuse recorded on that point has not been proved to the requisite legal standard. 1269 It is common ground that Hanjin and Hyundai joined the TACA with effect from 31 August 1994 and 11 September 1995 respectively. 1270 It is not in dispute that before joining the TACA Hanjin and Hyundai did not operate on the transatlantic trade and that their maritime transport activities were carried out on other trades, not as members of liner conferences, but as independent lines. At paragraph 563 of the contested decision the Commission thus stated, without being contradicted by the applicants, that in their reply to the statement of objections in the TAA case the applicants portrayed Hanjin and Hyundai as independent shipowners which exerted significant competitive pressure on the TAA parties because they threatened to enter that trade. 1271 It follows that the Commission was entitled to consider in the contested decision that Hanjin and Hyundai represented a source of potential competition for the TACA parties, to the extent that those lines, as independent lines on other trades, were likely to enter the transatlantic trade without joining the TACA. Since Hanjin and Hyundai did join the TACA, however, it must be found that the source of potential competition which they represented was thereby eliminated. 1272 However, as stated above at paragraph 1265, the second abuse recorded in that decision consisted not in the fact that Hanjin and Hyundai joined the TACA, but in the fact that the TACA parties took measures to induce them to become members of the conference rather than entering transatlantic trade as independent lines. 1273 Consequently, in order to determine whether the Commission was right to find that the elimination of potential competition resulting from the admission of Hanjin and Hyundai to the TACA was the result of abusive conduct on the part of the TACA parties, it is necessary to consider whether in the contested decision the Commission established to the requisite legal standard that those TACA parties adopted measures to induce Hanjin and Hyundai to join the conference.  Hanjin's accession to the TACA 1274 In the contested decision the Commission considered that Hanjin was induced by the TACA parties to join the conference, first, according to paragraph 563, by the disclosure of confidential information contained in the documents and statistics produced by the TACA and, second, according to paragraph 564, by the collective willingness of the TACA parties to enable it to build up a market share consistent with its slot capacity on the trade. It is apparent from those paragraphs that the Commission considers that those measures of inducement are demonstrated by Hanjin's letter to the TACA of 19 August 1994 and by the TACA briefing paper of 15 February 1996 respectively. 1275 It has already been held, at the end of the discussion of the pleas alleging infringement of the rights of the defence at paragraph 187 above, that Hanjin's letter of 19 August 1994 and the TACA briefing paper of 15 February 1996 were used by the Commission in contravention of the applicants' rights of defence and that consequently those inculpatory documents must be excluded as evidence. 1276 In so far as the allegation that the TACA induced Hanjin to join the conference by the abovementioned measures is based entirely on those two documents, which the Commission confirmed to be the case at the hearing in reply to a question from the Court in that regard, that allegation in the contested decision must therefore be regarded as unsubstantiated by any evidence. 1277 Furthermore, in so far as the Commission seeks to use the letter of 30 January 1996 from the TACA to prove those measures of inducement addressed to Hanjin, to which the contested decision refers in general terms at paragraph 561, it must also be found that for the reasons set out in relation to the pleas alleging infringement of the rights of the defence, since that letter was used in breach of the rights of the defence it must likewise be excluded as evidence. 1278 It follows that in so far as the second abuse consists in the fact that the TACA parties adopted specific measures to induce Hanjin to join the conference it has not been proved to the requisite legal standard. 1279 In any event, it must be held that, contrary to the Commission's submission, neither Hanjin's letter of 19 August 1994 nor the TACA briefing paper of 15 February 1996 shows that Hanjin's accession to the TACA is not the result of an autonomous decision but was induced by the abovementioned measures adopted by the TACA parties. 1280 First, as regards the letter of 19 August 1994, the Commission found at paragraph 563 of the contested decision that in that letter Hanjin requested details of all relevant documents and statistics by TACA (including tariff, service contracts, port call, lifting and performance). In paragraph 563 of the contested decision the Commission considers that the disclosure of [such] information, much of which constitutes confidential business secrets of significant value (customer identities, prices, transport patterns) and is not necessary for enabling a shipping line to become a member of a liner shipping conference engaged in activities falling within the scope of the group exemption, would have acted as a powerful inducement to Hanjin to enter the transatlantic trade as a party to the TACA and not as an independent carrier. 1281 Before considering the merits of those assessments in the contested decision, it must first be observed that Hanjin's letter of 19 August 1994 contains that company's application to join the TACA. In that letter Hanjin informs the TACA that a slot-chartering agreement with DSR-Senator and Cho Yang, its partners in the Tricon consortium, was entered into for that purpose, so that Hanjin will be able to use the capacity already available on the trade rather than using its own vessels. Hanjin therefore proposes to the TACA to continue with its required notification of the Commission and the FMC, whilst raising certain questions pertaining to its admission. 1282 The Commission cannot validly maintain that that letter merely states Hanjin's intention not to join the TACA, but to enter the transatlantic trade. Whilst it is true that the slot-chartering agreement entered into with DSR-Senator and Cho Yang did not perhaps prejudice Hanjin's capacity to operate on the transatlantic trade as an independent line, the terms of the correspondence produced by the applicants concerning Hanjin's admission to the TACA do not justify the conclusion that that option was the one chosen by Hanjin when the letter of 19 August 1994 was sent. Thus, Hanjin expressly states in the letter that it is applying for membership of the [TACA] as filed with the FMC and the European Commission. Furthermore, Hanjin concludes the letter by stating that it hopes to receive a positive response to the questions raised in its membership application. It should also be noted that Hanjin's letter was interpreted in that way by the TACA. By a fax of 24 August 1994 the TACA acknowledged receipt of Hanjin's application for membership, whilst by letter of the same date the TACA informed Hanjin of the admission procedure. In addition, by fax of 24 August 1994 the TACA Chairman congratulated Hanjin on its decision to join the TACA and asked it to contact its legal adviser in order for its admission to be notified to the appropriate authorities. Furthermore, since the letter of 19 August 1994 was addressed to the TACA, it is difficult to believe that its purpose could have been to inform the latter that Hanjin wished to enter the market as an independent line. 1283 It is therefore established that the letter of 19 August 1994 constitutes Hanjin's application for membership of the TACA. 1284 The Commission adduces no evidence to show that the TACA made any approach to Hanjin before 19 August 1994. Thus, the Court's file does not contain any correspondence prior to that date regarding Hanjin's admission and the content of the subsequent correspondence contains no evidence that Hanjin's application for membership was induced by the TACA. 1285 In those circumstances, it does not appear that Hanjin's decision to become a member of the TACA was induced by the TACA parties. 1286 It is true, as the Commission points out at paragraph 563 of the contested decision, that by the letter of 19 August 1994 Hanjin requested details of all relevant documents and statistics by TACA relating to the tariff, service contracts, port call, lifting and performance. 1287 However, it must be remembered that the Commission stated at paragraph 576 that the contested decision did not prejudice the ability of liner conferences whose activities fell within the scope of the group exemption contained in Article 3 of Regulation No 4056/86 to admit new members on the same terms as existing members or the ability of the members of such liner conferences to exchange information necessary for the purposes of the activities falling within the scope of that exemption. Indeed, as the Commission confirmed at the hearing, the contested decision does not challenge the new admissions to the TACA per se but the fact that the TACA parties adopted certain measures to induce potential competitors to become conference members. If the disclosure of the information necessary for the exercise of the activities falling within Article 3 of Regulation No 4056/86 was considered to constitute an inducement to join the TACA, the assumption would be that it is the admission to the TACA itself which constitutes the abuse. In such a case the measure of inducement imputed to the TACA would reside in the very fact that the new TACA members qualified for the block exemption laid down by Regulation No 4056/86, which authorises restrictions on competition the exceptional nature of which has already been emphasised by the Court of First Instance (TAA, paragraph 146). 1288 In the present case, it is not in dispute that Hanjin obtained the information sought in the letter of 19 August 1994 after it joined the conference. It is apparent from the letter from the TACA to Hanjin of 24 August 1994, the terms of which are not challenged by the Commission, that the information in question was made available to Hanjin during the meeting which took place after 1 September 1994. 1289 Under Article 3 of Regulation No 4056/86 the members of a liner conference qualify for block exemption in respect of agreements fixing uniform or common freight rates and in respect of agreements on the coordination of shipping timetables, sailing dates or dates of calls, determination of the frequency of sailings or calls, coordination or allocation of sailings or calls, regulation of the carrying capacity offered by each member and allocation of cargo or revenue among members. 1290 The Commission does not explain why disclosure of the information sought by Hanjin in the present case concerning the tariff, service contracts, port call, lifting and performance was not necessary for the exercise of those activities falling within Article 3 of Regulation No 4056/86 and therefore was not required to enable Hanjin to join on the same conditions as the existing members. The disclosure of information relating to the tariff seems inherent in the conclusion of any agreement fixing uniform or common freight rates. It is not in dispute that, as the contested decision states at paragraph 99, the tariff is published. Similarly, the conclusion of agreements coordinating timetables and the frequency of port calls or their allocation requires a priori the communication by conference members of certain information on port calls. As for the disclosure of information on service contracts, lifting and performance, it may appear prima facie necessary for the conclusion of agreements regulating capacity or the allocation of cargo or revenue. 1291 Again in respect of service contracts, as the Commission confirmed at the hearing, the contested decision does not prohibit the TACA parties from entering into conference service contracts. In order to take part in such contracts, all new TACA members must be party to information concerning them. 1292 Accordingly, the Commission has not established to the requisite legal standard that the disclosure by the TACA parties of confidential information to Hanjin was a measure intended to induce that line to join the conference, by allowing it access to information which is not necessary for the exercise of activities covered by the block exemption. 1293 Consequently, the applicants' complaints on that point must be upheld. 1294 Second, as regards the TACA briefing paper of 15 February 1996, the Commission states at paragraph 564 of the contested decision that that paper demonstrated a collective willingness to enable Hanjin to build up a market share consistent with its slot capacity in the trade .... According to the Commission, such a willingness on the part of the other TACA parties would have substantially reduced the commercial risks of entering a new market and thereby acted as an inducement to Hanjin to enter the transatlantic trade as a party to the TACA. 1295 However, the TACA briefing paper of 15 February 1996, which postdates by more than 17 months Hanjin's admission to the TACA, does not relate to that admission, but concerns the solutions to be applied to a dispute between the TACA and Hanjin as a conference member. 1296 It is apparent from the Court's file that that briefing paper follows the letter of 30 January 1996 from the TACA, in which the conference Chairman, Mr Rakkenes, expressed concern to Hanjin about recent price initiatives taken by that TACA party on the transatlantic trade. In the letter the TACA Chairman informed Hanjin that a price war would be likely to destroy the foundation upon which the TACA was built. For that reason he proposed to call a meeting shortly of the Hanjin directors, before concluding, in a passage of the letter cited at paragraphs 292 and 561 of the contested decision, As I have said to every line concerned trying to enter the market, please come and talk to me and we will do everything we can to help you succeed with that goal. 1297 It is apparent from the Court's file that a meeting thus took place between Hanjin and the TACA on 13 February 1996. 1298 The TACA briefing paper of 15 February 1996 stated that its purpose was also to prepare for another meeting with Hanjin on 29 February 1996. In that paper the British secretariat of the TACA states that Hanjin, whose market share on the transatlantic trade was restricted in 1995, engaged in a significant amount of independent action which had to be restrained in order to maintain price stability on the relevant trade. In order to achieve that objective, the British secretariat of the TACA puts forward inter alia the following recommendations to the conference: 1 Encourage Hanjin, giving the assurance that other Carriers are similarly being encouraged, to bring commercial problems to the table for joint discussion and collective resolution. In this way, [independent action] becomes a tool of last resort rather than one of first action. 2 Encourage and persuade all Carriers to collectively find a way to enable Hanjin to build up a market share consistent with its slot capacity in the trade, which does not have a negative knock-on effect. 3 If [independent actions] continue to be required, Hanjin should be encouraged to find ways and means [of] structuring them on a narrower basis, thus minimising the fall-out effect, and to separately indicate Inlands and Accessorial Charges. 4 Indicate to Hanjin that if it persists with [independent actions], it will only add pressure on other Carriers who are competing at the same service level, and are concentrating on the same market segments, to do the same by stepping up their activity. This will lead to a complete collapse of TACA's Tariff. 1299 It is clear from the foregoing that the collective willingness of the TACA parties to allow Hanjin to build up a market share consistent with its slot capacity on the trade had no bearing at all on its admission to the conference. Questioned on this point at the hearing, the Commission admitted moreover that the TACA briefing paper of 15 February 1996 was unrelated to Hanjin's admission. 1300 Furthermore, the TACA briefing paper of 15 February 1996 cannot be interpreted as demonstrating a permanent collective willingness on the part of the TACA parties to allocate a certain market share to Hanjin after its admission to the conference. The fact that the willingness to enable Hanjin to build up a market share was asserted more than 17 months after it joined in order to resolve an internal conflict within the TACA suffices to show that no such measure existed prior to that dispute and, in any event, that it did not exist when Hanjin joined the conference. The Commission cannot therefore submit, as it did at the hearing, that the TACA briefing paper of 15 February 1996 illustrates the general context in which Hanjin's letter of 19 August 1994 applying for membership of the conference was sent. 1301 The same considerations apply in respect of the TACA letter of 30 January 1996. As stated above, that letter was sent in the same context as that in which the briefing paper of 15 February 1996 was drafted. Accordingly, even if the general terms of an isolated passage of that letter might perhaps lead one to suppose that the TACA Chairman was inclined to help third parties to join the conference, it cannot reasonably be inferred therefrom, in the absence of any other specific evidence to that effect, that the TACA parties systematically induced potential competitors, including Hanjin, to join the TACA by measures allowing them to become conference members on terms other than those proposed to existing members. The mere fact that the TACA Chairman declared a desire to help third parties to become conference members in no way demonstrates that the TACA parties in fact collectively adopted inducements within the meaning of the contested decision to make potential competitors join the TACA. 1302 Finally, and in any event, in the context of the system of competition instituted by Regulation No 4056/86, market sharing agreements entered into between the members of a liner conference are not necessarily prohibited. Article 3 of Regulation No 4056/86 expressly provides that the block exemption also applies to agreements which have as their objective the regulation of carrying capacity offered by each member and the allocation of cargo or revenue among members. 1303 The contested decision fails to explain why the TACA'S collective willingness to allow Hanjin to build up a particular market share on the relevant trade does not constitute such an agreement to enable that line to join the conference on the same basis as existing members. In paragraph 576 of the contested decision the Commission itself stated that the contested decision did not prejudice that ability since it did not prohibit, as the Commission confirmed at the hearing, the admission of new members to the TACA per se. As stated above, if participation in agreements falling within the block exemption was considered to constitute the inducement to join the TACA, the assumption would be that it is the admission to the TACA itself which constituted the abuse since in that case the measure of inducement imputed to the TACA would reside in the very fact that Hanjin qualifies for the block exemption laid down by Regulation No 4056/86, which authorises restrictions on competition the exceptional nature of which has already been emphasised by the Court. 1304 In the light of the foregoing it must be held that the Commission has not established to the requisite legal standard that the collective willingness of the TACA parties to allow Hanjin to build up a particular market share on the trade in question constituted a measure to induce that line to become a member of the conference. 1305 Consequently, the applicants' complaints on that point must be upheld.  Hyundai's accession to the TACA 1306 In paragraph 564 of the contested decision the Commission found that Hyundai was induced by the TACA parties to become a member of the conference by the fact that it was included as a party in the [conference] service contracts in which it wished to be included with effect from its first sailing on the trade. It is apparent from that paragraph that, according to the Commission, that measure of inducement is demonstrated by the PWSC 95/8 minutes. 1307 It has already been held, at the end of the discussion of the pleas alleging infringement of the rights of the defence at paragraph 187 above, that those minutes were used by the Commission in breach of the applicants' rights of defence and that consequently that inculpatory document must be excluded as evidence. 1308 In so far as the allegation that the TACA induced Hyundai to join the conference by the immediate availability of conference service contracts is based entirely on that document alone, which the Commission confirmed to be the case at the hearing in reply to a question from the Court in that regard, that allegation in the contested decision must be regarded as unsubstantiated by any evidence. 1309 Furthermore, in so far as the Commission seeks to use the letter of 30 January 1996 from the TACA, to which the contested decision refers in general terms at paragraph 561, to prove that measure of inducement it must also be found that for the reasons set out in relation to the pleas alleging infringement of the rights of the defence, since that letter was used in breach of the rights of the defence it must likewise be excluded as evidence. 1310 It follows that in so far as the second abuse consists in the fact that the TACA parties adopted specific measures to induce Hyundai to join the conference it has not been proved to the requisite legal standard. 1311 In any event, it must be held that, contrary to the Commission's submission, the PWSC 95/8 minutes do not demonstrate that Hyundai's admission to the TACA was not the result of an autonomous decision but was induced by the abovementioned measure adopted by the TACA parties. 1312 The minutes as set out at paragraph 230 of the contested decision state that Hyundai had sought inclusion in 1995 service contracts, in which three or more members currently participate eastbound, three or more members currently participate westbound, and three or more members currently participate in joint eastbound/westbound service contracts, at the rate levels applicable to the majority of members in such contracts. In this regard, [it is] confirmed that steps were in hand to so notify service contract shipper parties of such inclusion effective coincidentally with Hyundai's first transatlantic sailings. The Commission states in paragraph 564 of the contested decision that in the light of the fact that the widespread existence of service contracts can act as a barrier to entry, the immediate access to such [service] contracts would have acted as a powerful inducement to Hyundai to enter the transatlantic trade as a party to the TACA. 1313 It is apparent from the Court's file, in particular from the correspondence concerning Hyundai's admission to the TACA, that first of all, during February 1995, Hyundai planned to enter the transatlantic trade not by joining the TACA, but by entering into a slot-chartering agreement with an independent line competing with the TACA. Those negotiations having failed in the course of May 1995, Hyundai then entered into negotiations with MSC, a member of the TACA, with a view to entering into a slot-chartering agreement. 1314 It is therefore necessary to ascertain whether, as the Commission submits, the failure of the negotiations with that independent line was due to the fact that the TACA offered Hyundai immediate availability of conference service contracts should it join the conference. 1315 It is not in dispute that Hyundai asked the TACA about the possibility of immediate access to conference service contracts for the first time on 30 August 1995. It is apparent from the minutes of the TACA meeting of 31 August 1995 (PWSC 95/7) that that proposal, which was said to be discussed at Hyundai's request, was accepted on that date by the TACA. Hyundai took note of that acceptance by fax of 5 September 1995 addressed to the TACA. 1316 It is therefore established that, following discussions with the TACA prior to joining, Hyundai was informed by the TACA that if it joined it would be included in the conference service contracts for 1995. 1317 However, that fact alone is not sufficient to show that it was that which induced Hyundai to join the TACA. 1318 It is not in dispute that Hyundai had signed a slot-chartering agreement with MSC with effect from 17 August 1995 following negotiations with that TACA party in May 1995. It is apparent from the file that on the same date a final draft of the notification of that agreement to the FMC had already been drawn up. In their response to the request for information of 8 March 1996, the TACA parties explained, without being challenged by the Commission, that Hyundai's decision to enter into a slot-chartering agreement with MSC was connected to its decision to join the TACA. Contrary to what the Commission argues, far from contradicting the applicants' argument such a fact, on the contrary, confirms it, since it shows that Hyundai had decided to join the conference as early as May 1995. 1319 Furthermore, the applicants stated, without being contradicted by the Commission on the point, that they contacted the TACA with a view to joining in July 1995 when the terms of the slot-chartering agreement with MSC had been clearly defined. 1320 Finally, it is apparent from the subsequent correspondence with MSC that as early as 22 August 1995 Hyundai stated to that conference member that its application for membership ought to be sent to the TACA around 30 August 1995, MSC for its part undertaking to notify that decision to the TACA, so that the conference Chairman could instruct its legal adviser in Europe to effect the requisite notifications to the Commission. 1321 It is apparent from this evidence that Hyundai decided to join the TACA as the result of an autonomous decision well before the question of the immediate availability of conference contracts was raised. When Hyundai asked to have immediate access to conference service contracts, it had already signed the slot-chartering agreement with MSC enabling it to enter the trade in question without adding new capacity and taken all the steps necessary to join the TACA. 1322 In those circumstances it is not apparent that Hyundai's accession to the TACA was determined by immediate access to conference service contracts. 1323 Furthermore, the Commission itself stated at paragraph 576 that the contested decision did not prejudice the ability of liner conferences whose activities fell within the scope of the group exemption contained in Article 3 of Regulation No 4056/86 to admit new members on the same terms as existing members. Therefore, as the Commission confirmed at the hearing, since the contested decision does not prohibit the TACA parties from entering into conference service contracts, the Commission fails to explain why the admission of new members on the same terms as existing members did not enable Hyundai to require that it become immediately party to all conference service contracts, and in particular to enjoy the same terms as those offered to MSC, with which Hyundai had entered into a slot-chartering agreement to enter the trade in question. Moreover, according to the letter of 19 August 1994 Hanjin made a request similar to that of Hyundai, which the Commission did not consider to be a measure intended to induce Hanjin to join the TACA. 1324 When questioned at the hearing, the Commission submitted that Hyundai's admission to the TACA should also be interpreted in the light of the TACA letter of 30 January 1996. However, it has already been found above at paragraph 1301 that, in the absence of any other specific evidence to that effect, the Commission could not reasonably infer from the general terms of an isolated passage from that letter, which was sent by the TACA Chairman in the course of a dispute with Hanjin which occurred 17 months after its admission to the TACA, that the TACA parties systematically induced potential competitors including Hyundai to join the TACA by measures allowing them to become conference members on terms other than those proposed to existing members. 1325 In the light of the foregoing it must be held therefore that the Commission has not established to the requisite legal standard that the TACA parties induced Hyundai to join the conference by granting it immediate access to conference service contracts from the time of its admission. 1326 It follows from all the foregoing that in so far as the second abuse consists in the fact that the TACA parties adopted specific measures to induce Hanjin and Hyundai to join the conference it has not been proved to the requisite legal standard.  (2) The general measures to induce potential competitors 1327 By the present pleas and arguments, the applicants challenge the findings in the contested decision concerning the general measures of inducement adopted by the TACA parties, namely the conclusion of a large number of dual-rate service contracts and the fact that the former structured TAA members did not compete for certain service contracts with NVOCCs. 1328 Essentially, the applicants deny that Hanjin and Hyundai were induced to join the TACA by dual-rate service contracts. In support of their argument, they submit first that that measure was requested by the shippers. Next, they point out that the decision contains no proof that that measure induced Hanjin and Hyundai to join the TACA. Finally, they stress that Hanjin and Hyundai were parties to a minority of service contracts of that type. 1329 At paragraph 565 of the contested decision, the Commission stated that as [it] found in the TAA case ..., the purpose and effect of offering a two-tier rate structure was to limit competition from independent shipowners by bringing them inside the conference. Following the prohibition of the TAA in 1994, the TACA parties abandoned their two-tier tariff but nevertheless have continued to offer service contracts with higher prices for the traditional conference members and lower prices for the traditional independents and for the new entrants. The Commission considers that the effect of this would have been to induce potential competitors which wished to enter the market to do so as parties to the TACA. 1330 The Commission bases its allegation on the fact referred to in paragraph 152 of the contested decision that: ... it is ... apparent from a review of TACA's 1995 service contracts that a significant number (approximately one third) contain a dual-rate structure whereby the former unstructured members of the TAA charge lower rates within the same service contract than the former structured members of the TAA. The reduction varies between USD 50 and USD 100 per TEU although in at least one case it is as much as USD 150. These dual-rate structures are also found in TACA's 1996 and 1997 service contracts. 1331 Whilst the applicants deny that the dual rate in conference service contracts was adopted on their own initiative or that it represents a significant proportion of the service contracts entered into by Hanjin and Hyundai, they do not deny that many conference service contracts entered into by the TACA parties during the period in question in the contested decision contained a dual rate. 1332 In the TAA judgment (paragraph 163), the Court has already held that the purpose of introducing differentiated rates in the TAA tariff was to bring inside the agreement independent carriers which, if they were not thus allowed to quote prices lower than those of the old conference members, would continue as outsiders competing against the conference, especially in terms of price. The Court pointed out that that objective was apparent to the requisite legal standard from the minutes of a meeting between all the future members of the TAA in Geneva (Switzerland) on 13 January 1992. 1333 In those circumstances, it is therefore necessary to consider whether, as the Commission contends, the dual rate in conference service contracts also induced potential competitors to join the TACA in the course of the period covered by the contested decision, by allowing them to offer shippers lower rates than those offered by former structured members of the conference. 1334 In order to constitute a measure inducing potential competitors to join the conference, the effect of dual-rate service contracts must necessarily have been to lead potential competitors to become TACA members. The fact that a measure described as an inducement to join the conference did not lead to any new membership would show that that measure was not in fact an inducement to join the conference. 1335 It is apparent that the alteration of the competitive structure of the market constituting the second abuse recorded in Article 5 of the operative part of the contested decision results from the fact that the measures of inducement adopted by the TACA parties, including dual-rate service contracts, had the effect of leading potential competitors to become conference members, eliminating at the same time the source of potential competition which they represented. The Commission does not identify in the contested decision any other effect flowing from the measures in question. 1336 However, at the hearing the Commission submitted that dual-rate service contracts had other effects upon the competitive structure. It submitted first of all that that measure contributed, on the same basis as the other measures in question, to establishing a favourable permanent environment in the conference in order not only to induce third parties to join the conference rather than to enter the market as independent lines, but also to induce former independent carriers to remain members of the conference. Furthermore, it stressed that, by the measures of inducement in question, the TACA parties neutralised potential competition. 1337 As regards the creation of a permanent favourable environment, it should be noted again, however, that unless dual-rate service contracts induce potential competitors to become members of the TACA they cannot be regarded as having induced those competitors to join the conference. Consequently, if no potential competitor joined the conference, it must follow that that measure did not establish a favourable environment for them. Furthermore, in so far as the Commission alleges that the measures in question created a favourable environment to ensure that the TACA parties remain conference members, it suffices to observe that that is clearly not the abuse recorded in the contested decision, which refers merely, in paragraphs 562 to 566, to measures intended to induce potential competitors to join the TACA and not measures intended to induce the TACA parties to remain members of the conference. 1338 As regards the neutralisation of potential competition, the fact that a liner conference adopts measures in order to restrict the ability of potential competitors to enter the market as independent carriers might constitute an abusive alteration of the competitive structure of the market. It is true that in that case the mere fact that potential competitors enter the market in any event does not necessarily mean that the conference's conduct is not abusive. The fact that potential competitors entered the market would not mean that those measures had no effect, inasmuch as without such measures the entry to the market might have occurred under different conditions. In such a case, the fact that the result sought is not achieved is not enough to negate the existence of an abuse of a dominant position (see to that effect CEWAL I, cited at paragraph 568 above, paragraph 149). 1339 However, the neutralisation of potential competition found in the contested decision results not from measures intended to restrict the ability of potential competitors to enter the market but, conversely, from measures described as inducements to enter the market as TACA parties. In such a case the fact that the result sought is not achieved suffices to show that the measure in question does not constitute an inducement to join the conference and, therefore, that there is no abuse of a dominant position as recorded in the contested decision. 1340 It is therefore necessary to consider whether the dual-rate conference service contracts in fact induced potential competitors to join the TACA. 1341 Notwithstanding the fact that the TACA parties entered into a large number of dual-rate service contracts, only Hanjin and Hyundai joined the TACA during the period covered by the contested decision. 1342 It follows that most of the conference's potential competitors were not induced to join the TACA by the measure in question. However, one potential competitor, UASC, decided not to become a member of the conference, even though it took steps to do so in 1996. Similarly, it has been stated above that lines such as Cosco, Yangming, K Line, Mitsui and APL, which however subsequently entered the trade in question, did not join the TACA during the period covered by the contested decision. 1343 Furthermore, as regards Hanjin and Hyundai the Commission does not mention in the contested decision any evidence to show that those lines joined the TACA because of the inducement represented by dual-rate service contracts. 1344 On the contrary, it has already been stated above that the evidence in the Court's file does not support the conclusion that the admission of Hanjin and Hyundai to the TACA did not arise from an autonomous decision on the part of those lines. In Hanjin's case, it should be stressed that the correspondence between that line and the TACA concerning its admission does not at any point address the question of dual-rate service contracts. As for Hyundai, whilst that question was in fact addressed in a TACA briefing paper of 2 October 1995, it is apparent from that paper that Hyundai asked, in the case of a dual-rate service contract, to be able to apply the higher rate, which directly contradicts the Commission's argument that the former independent carriers were induced to join the TACA by the chance to offer the lower rates laid down by the service contracts. At the hearing the Commission admitted that it had no evidence to challenge the 2 October 1995 briefing paper. 1345 Moreover, it is not in dispute between the parties that Hanjin and Hyundai were party to a small number of dual-rate service contracts. Whilst the Commission points out that Hanjin and Hyundai carried the bulk of their cargo pursuant to dual-rate service contracts or service contracts with NVOCCs, it does not deny that the former type of contract represented a marginal part of the service contracts to which those lines were party. 1346 In those circumstances it is apparent that Hanjin and Hyundai were not induced to become conference members by the fact that the TACA parties entered into a large number of dual-rate service contracts. 1347 Therefore the Commission has not proved to the requisite legal standard that dual-rate conference service contracts constituted a measure which induced potential competitors to join the TACA during the relevant period. 1348 The applicants' pleas and arguments on that point must therefore be upheld. 1349 The applicants deny that the TACA parties induced potential competitors to join the TACA by refraining from competing for certain service contracts with NVOCCs. 1350 At paragraph 565 of the contested decision the Commission stated that the former structured members of the TAA, namely ACL, Hapag Lloyd, P&O, Nedlloyd, Sea-Land, Mærsk, NYK and OOCL, did not compete for certain service contracts with NVOCCs, thereby reserving certain cargoes for the traditional independents and for the new entrants. The Commission considers that the effect of this would have been to induce potential competitors which wished to enter the market to do so as parties to the TACA. 1351 In order to determine the merits of those assessments in the contested decision, it is first necessary to ascertain whether the Commission established to the requisite legal standard the existence of an agreement or at least of a concerted practice seeking to reserve service contracts with NVOCCs to traditional independent lines which were not structured members of the TAA and to new members of the TACA. 1352 According to the letter dated 28 December 1995, cited at paragraph 180 of the contested decision, POL stated to Hanjin that: ... all NVOCC issues are very delicate and sensitive. This can be handled properly only with full harmony within TACA, collectively, without any individualism, as any independence may totally destroy this part of the market, so carefully built by the group throughout the years ... We therefore kindly ask you to settle this problem with POL in the spirit of avoiding mutual competition within TACA .... 1353 The Commission was therefore entitled to infer from the wording of that letter, at paragraph 180 of the contested decision, that there was a spirit of cooperation within the TACA concerning the carriage of cargo by NVOCCs. Contrary to the applicants' submission, it is clearly irrelevant in that respect that that letter was sent by a traditional independent carrier and not by a former structured member of the conference since that letter reflects the existence of an agreement or at least a concerted practice between the TACA parties seeking to reserve the carriage of NVOCC cargo to certain of those parties. 1354 Furthermore, the Commission stated at paragraph 150 of the contested decision that: It is apparent from a review of TACA's 1995 service contracts that a very large number of service contracts with NVOCCs have been entered into only by those TACA parties which were formerly unstructured members of the TAA. These lines were the former independent, non-conference lines operating on the transatlantic routes. 1355 Far from contradicting that finding in the contested decision, the evidence put forward by the applicants in the present action tends to confirm it. It is apparent from the data set out in the application that in 1994 and 1995 none of the structured members of the TAA carried cargo under service contracts with NVOCCs, apart from Hapag-Lloyd which carried a negligible amount in 1994. Furthermore, whilst Nedlloyd, NYK, OOCL and P&O carried cargo under service contracts with NVOCCs in 1996, it is apparent from the same data that that cargo represented only 8.3% of the cargo carried by the TACA members under that type of contract. 1356 In a letter of 3 May 1995 addressed to the Commission, the TACA's legal adviser explained that the lack of interest on the part of the former structured members of the TAA for NVOCC cargo was the result of an independent commercial policy on the part of the lines with large sales staffs, substantial customer service and an extensive network of agencies. 1357 Whilst such an explanation may of course justify the fact that most of the service contracts with NVOCCs were entered into with former unstructured members of the TAA, which are in fact modest-sized competitors on the trade in question, it cannot justify the total or near total absence over three years of service contracts between the NVOCCs and the former structured members of the TAA. Given the commercial value of that cargo, such a lack of interest on the part of the former structured members of the TAA points undeniably to the existence of an agreement or at least of a concerted practice seeking to reserve service contracts with NVOCCs to certain TACA members. 1358 On that basis the Commission was therefore entitled to consider that there was an agreement or at least a concerted practice amongst the TACA parties seeking to reserve service contracts with NVOCCs to traditional independent lines which were not structured members of the TAA and to new members of the TACA. 1359 However, it is still necessary to consider whether that agreement or concerted practice did in fact induce potential competitors to join the TACA in the course of the period covered by the contested decision. As stated above at paragraphs 1334 to 1339, the fact that a measure described as an inducement to join the conference did not lead to any new membership of the TACA would show that that measure was not in fact an inducement to join the conference. 1360 Notwithstanding the fact that the TACA parties reserved service contracts with the NVOCCs to new members of the conference, only Hanjin and Hyundai joined the TACA during the period covered by the contested decision. 1361 It follows that most of the conference's potential competitors were not induced to join the TACA by the measure in question. It has already been stated above at paragraph 1342 that one potential competitor, UASC, decided not to become a member of the conference, even though it took steps to do so in 1996. Similarly, it has been stated above that lines such as Cosco, Yangming, K Line, Mitsui and APL, which however subsequently entered the trade in question, did not join the TACA during the period covered by the contested decision. 1362 Furthermore, as regards Hanjin and Hyundai the Commission does not refer in the contested decision to any evidence to show that those lines joined the TACA as a result of the inducement represented by the fact that the former structured members of the TAA did not compete to enter into service contracts with NVOCCs. 1363 On the contrary, it has already been stated above that the evidence in the Court's file did not support the conclusion that the admission of Hanjin and Hyundai to the TACA did not arise from an autonomous decision on the part of those lines. The question of participation in service contracts with NVOCCs is not addressed in any document concerning the admission of Hanjin and Hyundai to the conference. 1364 Finally, and in any event, in the context of the system of competition instituted by Regulation No 4056/86, market sharing agreements entered into between the members of a liner conference are not necessarily prohibited. Article 3 of Regulation No 4056/86 expressly provides that the block exemption also applies to agreements which have as their objective the regulation of carrying capacity offered by each member and the allocation of cargo or revenue among members. 1365 The contested decision does not explain why the fact that the former structured members of the TAA did not compete to enter into service contracts with NVOCCs, thereby reserving that type of cargo for the traditional independent unstructured members of the TAA and for new members, does not constitute such an agreement, enabling that line to join the conference on the same basis as existing members. In paragraph 576 of the contested decision the Commission itself stated that the decision did not prejudice that ability since it did not prohibit, as the Commission confirmed at the hearing, the admission of new members to the TACA per se. As stated above, if participation in agreements falling within the block exemption was considered to constitute the inducement to join the TACA, the assumption would be that it is the admission to the TACA itself which constituted the abuse since in that case the measure of inducement imputed to the TACA would reside in the very fact that the new members qualify for the block exemption laid down by Regulation No 4056/86, which authorises restrictions on competition the exceptional nature of which has already been emphasised by the Court. 1366 It follows that the Commission has not established to the requisite legal standard that the reservation of service contracts with NVOCCs to certain TACA parties constitutes a measure which induced potential competitors to join the conference during the period in question. 1367 The applicants' pleas and arguments on that point must therefore be upheld.  (3) Conclusion on the evidence for the measures constituting the second abuse 1368 It follows from all the foregoing that the Commission has failed to demonstrate to the requisite legal standard that the TACA parties induced potential competitors to join the TACA by the measures referred to in the contested decision. 1369 On that ground alone, therefore, without its being necessary to examine the applicants' other pleas in respect of the second abuse, Article 5 of the operative part of the contested decision, and consequently Article 7 of the operative part in so far as it requires the applicants to put an end forthwith to the second abuse and to refrain in the future from any action having the same object or effect, must be annulled. IV.    IV - The pleas alleging failure to comply with the procedural requirements laid down by Regulation No 4056/86 1370 The applicant in Case T-213/98 alleges, first, that the Commission infringed the procedural requirements in Article 9 of Regulation No 4056/86. It is clear that the TACA is governed by both US law and Community law. In particular, the admission of Hanjin and Hyundai resulted directly from the open conference requirements of US law. Accordingly, since the second abuse consists in the compliance by the TACA with the obligation laid down by US law to admit Hanjin and Hyundai to the TACA, the Commission was under an obligation to follow the procedure under Article 9 of the regulation before taking any initiative based on that regulation - in the present case, adopting a decision finding that certain conduct was abusive and imposing fines - which was likely to conflict with US law. 1371 Second, that applicant submits that the Commission infringed the procedural requirements laid down by Articles 7 and 8 of Regulation No 4056/86. In so far as the abuse found consists solely in the conduct of conferences benefiting from the block exemption the Commission should, before finding that Article 86 of the Treaty had been infringed and a fortiori before imposing a fine, have followed the procedure for withdrawing exemption set out in Article 7 of the regulation. The applicant relies on the wording of Article 8(2) of the regulation, which provides that where the conduct of conferences benefiting from the exemption has effects which are incompatible with Article 86 of the Treaty, the Commission may withdraw the benefit of the exemption and take all appropriate measures to bring an end to the infringement of Article 86 of the Treaty. 1372 The Commission considers that those pleas are unfounded. 1373 As regards the plea alleging infringement of Article 9 of Regulation No 4056/86, according to the express wording of the application the applicant merely relies on infringement of that provision with regard to the second abuse recorded in the contested decision, but not the first. 1374 In those circumstances, to the extent that it was found above that the contested decision must be annulled with regard to the finding of the second abuse, it is no longer necessary to rule on this plea. 1375 As regards the plea alleging infringement of Articles 7 and 8 of Regulation No 4056/86, the applicant submits essentially that since the practices regarded as abusive in the contested decision fall within the block exemption laid down by Regulation No 4056/86 the Commission was required to withdraw that exemption before finding that there were infringements of Article 86 of the Treaty. 1376 In so far as it was found above that the contested decision must be annulled with regard to the finding of the second abuse, it is necessary to consider the present plea solely with regard to the finding in respect of the first abuse in the contested decision, with the exception, however, of the mutual disclosure of the availability and content of individual service contracts, that finding having been annulled for the reasons set out in paragraphs 1151 to 1159. 1377 The Commission is entitled to withdraw the benefit of the block exemption laid down by Article 3 of Regulation No 4056/86 where it finds in a particular case either, under Article 7(2) of that regulation, that agreements qualifying for that exemption have effects which are incompatible with Article 85(3) of the Treaty or, under Article 8(2) of that regulation, that the conduct of conferences benefiting from the exemption has effects which are incompatible with Article 86 of the Treaty. 1378 It is true, as the Commission pointed out at the hearing, that in its judgment in CEWAL II, cited at paragraph 595 above, paragraph 136, the Court held that Article 8(2) of Regulation No 4056/86 does not and cannot restrict the Commission's power to impose fines for infringement of Article 86 of the Treaty. 1379 However, the approach adopted in that judgment, in addition to not concerning the withdrawal laid down by Article 7(2) of Regulation No 4056/86, related to practices clearly not qualifying for the block exemption laid down by Article 3 of Regulation No 4056/86, so that it is not necessarily relevant where the practices in question fall within the scope of that exemption (see to that effect the Opinion of Advocate General Fennelly in CEWAL II, cited at paragraph 638 above, paragraphs 163 and 165). 1380 It is not necessary to rule on that question, but it should be noted that in the present case none of the practices in relation to service contracts constituting the first abuse (apart from the mutual disclosure of the availability and content of individual service contracts) is capable of qualifying for block exemption, contrary to the applicant's contention. 1381 The practices in relation to service contracts in question, be it the prohibition of individual service contracts or other restrictions on the availability and content of such contracts, are not referred to in Article 3 of Regulation No 4056/86 among the agreements or practices qualifying for block exemption. It is settled case-law that, having regard to the general principle of the prohibition of agreements restricting competition laid down by Article 85(1) of the Treaty, provisions derogating therefrom in an exempting regulation must, by their nature, be strictly interpreted (Peugeot, cited at paragraph 568 above, paragraph 37, and CEWAL I, cited at paragraph 568 above, paragraph 48). That applies a fortiori to the provisions of Regulation No 4056/86 by virtue of its unlimited duration and the exceptional nature of the restrictions on competition authorised, so that the block exemption provided for by Article 3 of Regulation No 4056/86 cannot be interpreted broadly and progressively so as to cover all the agreements which shipping companies deem it useful, or even necessary, to adopt in order to adapt to market conditions (TAA, paragraph 146). 1382 Furthermore, although as the Commission confirmed in reply to the Court's written questions the fixing of rates for service contracts is not mentioned among the restrictions on competition prohibited by the contested decision pursuant to Article 85 of the Treaty, contrary to the applicants' submission service contracts cannot be treated as agreements which have as their objective the fixing of rates and conditions of carriage as referred to in Article 3 of Regulation No 4056/86. It is apparent from that provision that in order to qualify for the block exemption the agreements fixing rates and conditions of carriage between the members of a maritime conference must establish uniform or common freight rates within the meaning of Article 1(3)(b) of the regulation (TAA, paragraphs 138 to 143), which requires the application of the same freight rate for all conference members vis-à-vis all shippers (TAA, paragraphs 144, 151 and 155). 1383 The rates fixed by service contracts are not the same for all shippers, but divide them into categories. As the Commission stresses at paragraph 457 of the contested decision, without being contradicted by the parties on the point: ... under service contracts the rate is not part of the standard published tariff but is determined more or less ad hoc by the bargaining process between supplier and consumer. The result of that bargaining process is that shippers shipping goods of the same description do not necessarily pay the same service contract rate as one another. Service contract rates are different from tariff rates but do not differ uniformly. This means that although each TACA party may be charging the same rate to a shipper, different shippers (of the same category of goods) are paying different rates .... 1384 Furthermore, in the present case, the rates fixed by conference service contracts entered into by the TACA during the period covered by the contested decision were not the same for all members of the conference. It is not in dispute between the parties, as stated above at paragraph 1331, that the service contracts laid down a dual-rate structure whereby the former unstructured members of the TAA charged lower rates within the same service contract than the former structured members of the TAA. The Court has already held that the block exemption provided for by Article 3 of Regulation No 4056/86 does not apply to agreements between carriers providing for a variable scheme of tariffs (TAA, paragraph 167). 1385 In those circumstances, since the rates fixed by service contracts are not the same for all shippers, or even, in the present case, for all conference members, those rates cannot constitute rate-fixing agreements qualifying for block exemption. 1386 Consequently, since the present plea is based on a false premiss it must be rejected in its entirety. V.      The plea alleging failure to state reasons in respect of the failure to have regard to US law 1387 The applicants submit that the obligation under Article 190 of the Treaty to state reasons requires the Commission to explain why its appraisal of certain important issues differs from that of US law as enshrined in the US Shipping Act. In support of that complaint the applicants refer to the judgment in Case C-360/92 P Publishers Association v Commission [1995] ECR I-23, paragraph 44). In that judgment, the Court annulled a Commission decision on the ground that it did not contain any explanation of why the conclusions of [the UK Restrictive Practices Court] and the documents produced by [Publishers Association] in support of its arguments are of no relevance. 1388 In this case, the applicants observe, the TACA is governed by both Community and US competition law. On several essential respects of the TACA the contested decision adopts a position at odds with that under US law. Contrary to US law, the contested decision finds that the following are not eligible for exemption, either individually or collectively, and are therefore prohibited: (i) collective rate-fixing by conference members for inland services as part of multimodal transport (paragraphs 400 to 441); (ii) conference service contract powers (paragraphs 442 to 471); (iii) restrictions under the conference rules on the conclusion of service contracts and their terms, in particular with regard to the duration of contracts, contingency clauses, the prohibition of multiple contracts, the level of liquidated damages and the prohibition of independent action on service contracts (paragraphs 464, 487 to 502 and 551 to 558); (iv) the prohibition of individual service contracts and their submission, where permitted, to conference rules (paragraphs 477 to 486 and 551 to 558) and the disclosure of their terms (paragraphs 496 and 551 to 558) and (v) the collective fixing of freight-forwarder compensation (paragraphs 505 to 518). Furthermore, the contested decision relies, in finding that there is a collective dominant position, on the fact that the TACA ensures compliance with its rules by numerous enforcement measures (paragraph 527), lays down a variable tariff structure (paragraphs 534 and 535) and induced Hanjin and Hyundai to enter the trade in question as members of the conference rather than as independents (paragraphs 563 and 564) whereas US law, by contrast, permits conference authority, has never declared variable tariff structures to be unlawful and requires entry to conferences to be open to any undertaking without discrimination and subject to reasonable criteria. 1389 Contrary to what the Commission claims, the applicants do not argue that the Commission is bound by US law or prevented from applying Community law. The applicants' case is that the Commission should have taken account of the position under US law in assessing the lawfulness of the practices in question and, to the extent that it adopts a different position, explain why the assessment of those practices under US law is not relevant. 1390 That obligation applies with particular force in the present case for the following four reasons. 1391 First, the contested decision represents the first case of the application of Community law to service contracts, the agreement of rates of compensation for freight forwarders, and the obligations of liner conferences with respect to the admission of new members (Case 73/74 Papiers peints v Commission [1975] ECR 1491, paragraph 31). By analogy with the order of the President of the Court of First Instance in Case T-65/98 R Van den Bergh Foods v Commission [1998] ECR II-2641, which concerns the application of Articles 85 and 86 of the Treaty to a practice applied by both the national competition authorities and the Commission, a contradictory application of Community law and US law should be avoided in the circumstances of the present case. 1392 Second, there is a significant disagreement in this case between the Commission and the undertakings concerned as to material issues of assessment by the Commission of the agreement in question (Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services and Others v Commission [1998] ECR II-3141, paragraph 97). Furthermore, the applicants had challenged the Commission's analysis by reference to US law on numerous occasions. 1393 Third, the applicants observe that the Commission's failure to address the differences between its assessment and that of US law is at odds with the duties of cooperation and positive comity established by the cooperation agreements between the United States of America and the Community. Even if those agreements are not intended to harmonise the substantive law of the parties, their mere existence, as they seek the avoidance of contradictory decisions, makes it all the more incumbent on the Commission to explain why, in the present case, its assessment of the practices and issues raised is different from that of the United States. In the present case the applicants' compliance with the contested decision puts them in conflict with their obligations under US law. The applicants point out that the FMC not only permitted but required them to make individual service contracts subject to the rules of Article 14.2 of the TACA as a condition of the 1995 order conditionally approving settlement. Furthermore, they were also requested to publish the various essential terms of the service contracts specified at section 8(c) of the US Shipping Act, whereas in the contested decision (paragraphs 496 and 551 to 558) the Commission states that such mutual disclosure is an infringement of Articles 85 and 86 of the Treaty. 1394 Fourth and finally, the applicants submit that Regulation No 4056/86 itself acknowledges, in paragraph 15 of the preamble, that account should be taken of the fact that its application to certain agreements may give rise to conflicts with the laws of certain third countries. They point out that Article 9 of that regulation lays down a procedure to prevent such conflicts. 1395 The Commission considers that that plea is unfounded. 1396 By the present plea, the applicants submit that the obligation to state reasons under Article 190 of the Treaty requires the Commission to explain why its appraisal of several important issues differs from that of US law as enshrined in the US Shipping Act. 1397 It should be remembered that the Court has held that although pursuant to Article 190 of the Treaty the Commission is bound to mention the facts, law and considerations which have led it to adopt them, it is not required to discuss all the issues of fact and law which have been raised during the administrative procedure (see, in particular, Remia, cited at paragraph 575 above, paragraph 26). At most Article 190 requires the Commission to reply specifically only to the primary allegations made by the applicants in the course of the administrative procedure (FEFC, cited at paragraph 196 above, paragraph 426). 1398 In the present case, although the applicants do not state in their application the extent to which they relied on the alleged differences between Community law and US law in the course of the administrative procedure, it is apparent from the TACA parties' response to the statement of objections that they relied on US law in respect of only four specific points, namely TVRIAs, the competition from the Canadian Gateway, conference service contracts and the collective setting of freight-forwarder remuneration. 1399 Therefore, in so far as the applicants complain that the Commission failed in the contested decision to address the possible differences between US law and Community law on other points, their arguments are manifestly unfounded. Clearly the Commission cannot be criticised for not having set out the reasons in its decision for its position on allegations which are made for the first time in these proceedings against that decision. Consequently, the applicants' assertion that in disputing the Commission's assessments they relied to a considerable extent on US law cannot be upheld. 1400 In so far as the alleged differences concern the four points referred to above it is to be noted, with regard first to TVRIAs, that the TACA parties merely stated in their response to the statement of objections that according to FMC rules, TVRs cannot be amended once they have been notified. Such a statement is clearly purely descriptive since the applicants do not base any specific allegation thereon. Consequently, the Commission was under no obligation to give a reasoned response to that statement in the contested decision. 1401 Next, as regards the competition from the Canadian Gateway, it is apparent that the TACA parties stressed in their response to the statement of objections that the antitrust immunity provided by the US Shipping Act did not apply to cargo carried via the Canadian ports to or from the United States. However, the Commission answers that allegation at paragraphs 265 to 273 of the contested decision, in which it sets out to the requisite legal standard the reasons why the Canadian Gateway, notwithstanding the lack of antitrust immunity, did not substantially compete with the TACA parties, pointing out in that regard that there were other factors restricting that competition. There is therefore no failure to state reasons in the contested decision in that regard. 1402 As regards conference service contracts, it is apparent from the response to the statement of objections that the TACA parties submitted, in support of their application for individual exemption, that US law regarded conference service contracts as a traditional practice of liner conferences. However, the Commission answered that allegation at paragraphs 464 to 471 of the contested decision by setting out to the requisite legal standard the reasons why those service contracts were not a traditional conference practice. In particular the Commission stated that the TACA parties' argument failed to account for the findings of fact contained in one of the US law documents to which they referred. Accordingly, the contested decision is not vitiated by a failure to state reasons in that regard. 1403 Finally, as regards the collective fixing of freight-forwarder remuneration, it is apparent from the TACA parties' response to the statement of objections that they relied on US case-law and legislation in support of the contention that US law allowed shipping lines collectively to fix freight-forwarder remuneration. However, at paragraph 512 of the contested decision the Commission expressly stated that the TACA parties' argument on that point based on US law, namely that the conferences operating on the trade in question collectively fixed the levels of commission to be paid to European freight forwarders since the early 1970s, did not justify the fixing of maximum rates of freight-forwarder remuneration. The Commission set out in the following paragraphs the reasons for which that practice did not satisfy the conditions for individual exemption laid down by Article 85(3) of the Treaty. 1404 It is true that in the contested decision the Commission did not address the relevance or merits of the legal position in US legislation and case-law on that point and, therefore, did not explain why that position was not also justified in Community law. 1405 However, Article 190 of the Treaty does not and cannot require that the Commission discuss such questions, since the obligation to state reasons requires it at most to state why it considers it must reject not US law as such, but the arguments or allegations which the applicants base on US law, at least where they are essential. The Commission cannot be required, as part of its obligation to state reasons, to set out the grounds legally justifying its position with regard to the law of a non-member State; it need only set out the reasons which justify its position in Community law. 1406 According to the case-law, the statement of reasons must enable the parties concerned to obtain adequate indications as to whether the decision is well founded or whether it may be vitiated by some defect enabling its validity to be challenged (Van Megen Sports, cited at paragraph 548 above, paragraph 51). The Court has held that national practices, even if common to all the Member States, cannot be allowed to prevail in the application of the competition rules set out in the Treaty (VBVB and VBBB, cited at paragraph 162 above, paragraph 40). That is all the more so in the case of the national practices of non-member States (FEFC, cited at paragraph 196 above, paragraph 341). 1407 Consequently, since an infringement of US law does not constitute as such a defect resulting in the illegality of a decision adopted under Community law, the Commission cannot be required in its decision to explain why it departs from the legal position adopted under US law. If the Commission were so required it would need to examine the merits in the light of the relevant provisions of US law, since in such a case it would have to explain why the legal approach taken in that jurisdiction does not apply in Community law even though the position adopted by US law cannot take precedence over that adopted by Community law. 1408 Contrary to the applicants' submission, the judgment of the Court in Publishers Association, cited at paragraph 1387 above, does not undermine that analysis. Whilst it is true that in that judgment the Court considered that the Commission had not provided a sufficient statement of reasons for its decision in respect of certain aspects of national law relied upon by Publishers Association, it is apparent that the Court found there to be a lack of reasoning solely in so far as the Commission had not set out in its decision the reasons why the findings of fact in the relevant national decisions had no evidential value for the purposes of the exemption procedure before the Commission. In support of its application for individual exemption the applicant in that case had submitted to the Commission decisions of the UK Restrictive Practices Court as essential evidence of the benefits of their agreement laying down uniform standard conditions for the sale of books at a fixed price, where the publisher chooses to market a book as a net book. In particular, it submitted that it was apparent from those national decisions that the abolition of the net book agreement would bring about a decrease in the number and facilities of stockholding booksellers, a rise in book prices and a fall in the number of titles published. In its view, those findings also applied to intra-Community trade, given the single language market in books between Ireland and the United Kingdom. 1409 It follows that, far from undermining the preceding analysis, the Publishers Association judgment on the contrary confirms that where an applicant refers to the approach adopted in national law, the Commission is, at most, required under its obligation to state reasons to explain why it rejects the arguments which the applicant bases on that approach (see, to that effect, FEFC, cited at paragraph 196 above, paragraphs 427 and 428). 1410 In the present case, it is apparent for the reasons set out above that in the contested decision the Commission set out to the requisite legal standard the reasons for which the arguments derived by the applicants from US law had to be rejected. 1411 Therefore, the present plea alleging failure to state reasons must be rejected as unfounded. VI.    The pleas concerning the amount of the fines and various failures to state reasons in that regard 1412 In support of the present pleas, the applicants submit in the first part that the first abuse, consisting in placing restrictions on the availability and content of service contracts, qualified for immunity from fines in the light of the notification of the TACA agreement with a view to obtaining individual exemption. In the second part they also challenge the amount of the fines imposed by the Commission in the contested decision. They also rely on various failures to state reasons on those points. 1413 As a preliminary point it should be noted that in Article 8 of the operative part of the contested decision the Commission imposed fines on each of the TACA parties solely for the infringements of Article 86 of the Treaty. 1414 In so far as it was found above, in the assessment of the pleas alleging that there was no infringement of Article 86 of the Treaty, that the second abuse, consisting in the abusive alteration of the competitive structure of the market, has not been proved to the requisite legal standard, the part of the fines imposed in respect of that abuse must be annulled for that reason alone. 1415 Furthermore, since it was found above, in assessing the pleas alleging that there was no infringement of Article 86 of the Treaty, that the first abuse, resulting from the imposition of restrictions on the availability and content of service contracts, is not founded in so far as it lies in the mutual disclosure of the availability and content of individual service contracts, the part of the fines imposed in that respect must also be annulled for that reason alone. 1416 Consequently, the applicants' present pleas must be examined solely in so far as they relate to the fine imposed in respect of the first abuse, apart from the mutual disclosure of the availability and content of individual service contracts.  Part one: immunity from fines  A - Arguments of the parties 1417 The applicants allege that the Commission has unlawfully disregarded the applicants' immunity from fines in respect of restrictions on the availability of service contracts. 1418 Contrary to what is stated in paragraph 584 of the contested decision, the Commission could not impose fines for infringement of Article 86 of the Treaty as regards the restrictions on the availability of service contracts where such acts fell within the limits of the activity described in the notification and took place after notification. 1419 The applicants claim that Article 19(2)(a) and Article 19(4) of Regulation No 4056/86 give immunity from fines both for infringements of Article 85(1) of the Treaty and for infringements of Article 86 of the Treaty in so far as the infringement constitutes activity notified for exemption under Article 85(3) of the Treaty. Article 19(4) of Regulation No 4056/86, which lays down the rules on immunity from fines, refers to the fines provided for in paragraph 2(a), which covers those imposed for infringement of Article 85(1) or Article 86. They stress that this reference is in no sense limited to the fines provided for in Article 19(2)(a) of Regulation No 4056/86 for infringement of Article 85(1). Contrary to the Commission's submission, that interpretation certainly does not result in absolute immunity from fines under Article 86 for undertakings in a dominant position. When notification is made and a decision denying exemption under Article 85(3) is taken, immunity is lost both for infringements of Article 85(1) and for infringements of Article 86. 1420 The Court confirmed that interpretation in United Brands, cited at paragraph 853 above, in which no fines were imposed under Article 86 in respect of activities which had been notified to the Commission for exemption on the ground that no intentional or negligent infringement had been committed during the exemption procedure. They also refer to the Opinion of Judge Kirschner, acting as Advocate General, in Case T-51/89 Tetra Pak Rausing v Commission (Tetra Pak I) [1990] ECR II-309, II-312, point 39, in which he observed that Article 15(5) of Regulation No 17 ... indirectly governs the application of Article 86 during the exemption procedure and that where an agreement, decision or concerted practice is notified pursuant to Article 4 of the regulation, a fine may not be imposed on the conduct notified on account of either an infringement of Article 85(1) or an infringement of Article 86. That approach is also consistent with academic opinion. 1421 The applicants also allege that their argument is justified on general policy grounds in that the immunity from fines for infringement of both Article 85(1) and Article 86 is likely to encourage undertakings to notify the Commission. They point to the statement in the sixth recital to Regulation No 17 that it may be in the interest of undertakings to know whether any agreements, decisions or practices to which they are party, or propose to become party, may lead to action on the part of the Commission pursuant to Article 85(1) or Article 86. Similarly, Advocate General Jacobs stated that [the purposes of Regulation No 17] include encouraging the notification of agreements, decisions and practices and generally facilitating approaches by undertakings to the Commission (Opinion in Case C-67/91 Asociación Española de Banca Privada and Others [1992] ECR I-4785, I-4806, paragraph 23). 1422 The applicants claim that if immunity were restricted to fines imposed for breach of Article 85(1), the notification system would serve no purpose in the case of dominant undertakings. The Court has acknowledged that where an undertaking takes the risk of reporting the agreement or concerted practice itself, it should enjoy immunity from fines (Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983] ECR 1825, paragraph 93). In addition to the risk of the Commission's finding that the agreement or practice infringes Article 85(1) and does not qualify for exemption under Article 85(3), and the risk of fines for conduct prior to notification, the undertakings also run the risk, according to the Commission's argument, of the agreement which has been notified for exemption being relied upon by the Commission to justify a finding that the undertakings are collectively dominant or the conclusion that the agreement or practice notified infringes Article 86. The Commission's approach disturbs the balance necessary for the proper functioning of the notification system by reducing the advantages and increasing the risks of notification. 1423 The applicants do not consider that the Commission's distinction between an individual dominant position and a collective dominant position is relevant in that respect. In the case of an undertaking in a putative dominant position entering into a contract with a non-dominant undertaking, the dominant undertaking would have immunity from fines under Article 85 but might have no immunity if the contract itself were considered by the Commission to give rise to abusive conduct. The applicants consider that the undertaking in an individual dominant position is entitled to protection against fines under both Article 85 and Article 86. 1424 Furthermore, without immunity from fines in respect of infringements under Article 86, the Commission would be able to circumvent the immunity from fines under Article 85 and impose fines in respect of notified activities without following the special procedure for the withdrawal of immunity under Article 19(4) of Regulation No 4056/86. Notwithstanding the fact that the undertakings concerned would not have been able to exercise their procedural rights to object to the withdrawal of immunity, the Commission would be entitled to impose fines with retroactive effect in respect of agreements notified and activities undertaken to implement such agreements in accordance with the terms notified. That result runs contrary to the procedural safeguards described in the judgment in Joined Cases 8/66 to 11/66 Cimenteries CBR and Others v Commission [1967] ECR 75, which declares that the effect [of measures withdrawing immunity from fines] was that the undertakings ceased to be protected by Article 15(5) which exempted them from fines, and came under the contrary rules of Article 15(2) which thenceforth exposed them to the risk of fines. This measure deprived them of the advantages of a legal situation which Article 15(5) attached to the notification of the agreement, and exposed them to a grave financial risk (p. 91). The applicants claim that it follows that if the Commission considered that the TACA parties' service contracts constituted an abuse of a collective dominant position for which no exemption could be granted, it could, even before the initiation of the substantive procedure, have withdrawn the applicants' immunity from fines. They note that the Commission did not do so in the present case. 1425 Lastly, the applicants maintain that the Commission does not give reasons as to why it considers that notification confers no immunity from fines for infringements of Article 86, when that is the first time it takes that approach, which runs counter to its practice in decisions, to the case-law of the Court (Papiers peints, cited at paragraph 1391 above), to the terms of Regulation No 4056/86 and to academic opinion. 1426 The Commission points out that the second subparagraph of Article 19(4) of Regulation No 4056/86 confers immunity from fines for the period between notification and the adoption of the Commission decision in application of Article 85(3). That strongly suggests that immunity is granted only in respect of the prohibition from which exemption may be granted, that is to say Article 85(1). The Commission is of the opinion that that interpretation is confirmed by the third paragraph of Article 19(4), which provides that the Commission may withdraw immunity where it considers that the requirements for the application of Article 85(1) are met and the application of Article 85(3) is not justified. If the intention of the legislature had been to include immunity from fines under Article 86, it would certainly have also provided for withdrawal of such immunity. The applicants' interpretation would have the result of making immunity from fines under Article 86 absolute. 1427 The Commission also underlines the fact that since the purpose of immunity is to provide an incentive to undertakings to notify agreements which may infringe Article 85(1), they must be protected solely against the risk of fines which would arise in the event that the Commission found that their agreements did not fulfil the criteria of Article 85(3). In relation to Article 86, no such balance of interests, no such need for protection and thus no such function for immunity exists. 1428 The Commission draws attention to the fact that if the question of immunity under Article 86 arises in the present case, it is because of the collective dominance of the applicants. In such a case Article 85 may render unlawful the collective nature of the activity, whereas Article 86 relates to the abusive character of the conduct in question. Undertakings which have collectively abused their dominant position should not be in a better position than a single dominant undertaking, which would not have the possibility of notifying its conduct and obtaining immunity. 1429 Finally, as regards the argument based on withdrawal of immunity, the Commission argues that if Article 19(2) of Regulation No 4056/86 does not provide immunity in respect of infringements of Article 86, the Commission cannot be accused of having sought to avoid the procedural safeguards laid down by Article 19(4) for withdrawal of immunity. 1430 As regards compliance with the obligation to state reasons, the Commission asserts that it is unaware of any existence of 30 years or so of practice enshrining such immunity and it stresses that the applicants fail to cite any case in which the Commission decided that notification of an agreement or practice confers immunity from the imposition of fines under Article 86. On the contrary, in United Brands, cited at paragraph 853 above, the Commission merely considered it inappropriate to impose a fine, which implies that there was no obstacle to imposing fines.  B - Findings of the Court 1431 By the first plea the applicants allege essentially that the fine imposed in respect of the first abuse, consisting in the abusive imposition of restrictions on the availability and content of service contracts, should be annulled on the ground that it was covered by the immunity from fines laid down by Regulation No 4056/86. They also claim that there was a failure to state reasons in that regard. 1432 It should be noted at the outset, however, that according to paragraph 583 of the contested decision the Commission imposed fines on the TACA parties not only under Article 19(2) of Regulation No 4056/86 but also, in so far as the first abuse also falls within Regulation No 1017/68, under Article 22(2) of Regulation No 1017/68. 1433 The Court has already held that Article 22 of Regulation No 1017/68 does not provide any immunity from fines in respect of notified agreements falling within its scope, whether fines imposed under Article 85 or fines imposed under Article 86 (Atlantic Container Line, cited at paragraph 44 above, paragraph 48). 1434 It follows that the applicants cannot rely on immunity for the part of the fines imposed in respect of the first abuse under Article 22 of Regulation No 1017/68. 1435 Therefore, contrary to the applicants' submission, even if the present plea were well founded, it would not result in the annulment of all of the fines imposed in respect of the first abuse, but only of the part of those fines imposed under Regulation No 4056/86. 1436 In assessing the present plea, it is therefore necessary to consider whether the part of the fines imposed under Article 86 of the Treaty pursuant to Regulation No 4056/86 was covered by the immunity laid down by that regulation. 1437 Under Article 19(2)(a) of Regulation No 4056/86, the Commission may impose fines on undertakings which infringe Article 85(1) or Article 86 of the Treaty. However, the second subparagraph of Article 19(4) of the same regulation provides that the fines provided for in paragraph 2(a) shall not be imposed in respect of acts taking place after notification to the Commission and before its decision in application of Article 85(3) of the Treaty, provided they fall within the limits of the activity described in the notification. The third subparagraph of Article 19(4) provides however that that provision shall not have effect where the Commission has informed the undertakings concerned that after preliminary examination it is of the opinion that Article 85(1) of the Treaty applies and that application of Article 85(3) is not justified. 1438 The Commission considered in paragraph 584 that the above-cited provisions did not provide for immunity for fines with respect to infringements of Article 86 of the Treaty. Consequently, it imposed fines on the TACA parties on the basis of that provision, notwithstanding the notification of the TACA. 1439 In order to decide whether the Commission was entitled to exclude immunity for the first abuse, it is necessary first to determine the scope of the immunity provided for by Regulation No 4056/86 and then the extent, if any, to which the practices constituting the first abuse are covered by that immunity.  1. The scope of the immunity provided for by Regulation No 4056/86 1440 In order to determine the scope of the immunity laid down by Regulation No 4056/86, it is necessary to have regard to the wording of the relevant provisions of that regulation as well as to their purpose and general structure. 1441 As regards first the wording of the relevant provisions of Regulation No 4056/86, it should be noted as a preliminary point that the Court has already held (Atlantic Container Line, cited at paragraph 44 above, paragraphs 50 to 52) that the immunity from fines represents a derogation. Consequently, the relevant terms of the second subparagraph of Article 19(4) of Regulation No 4056/86 providing for immunity from fines in the case of notification must be strictly interpreted and cannot be interpreted so that its effects extend to cases not expressly provided for. 1442 However, the immunity provided for by the second paragraph of Article 19(4) refers expressly to the fines provided for in paragraph 2(a). The fines laid down by that provision are those which are imposed not only for taking part in an agreement restricting competition, but also for abuses. Article 19(2)(a) expressly refers to fines for infringement of Article 85(1) or Article 86 of the Treaty. 1443 It thus follows that that reference to the express wording of Article 19(4) of Regulation No 4056/86, far from restricting immunity from fines to infringements of Article 85 of the Treaty, expressly provides on the contrary that abuses under Article 86 of the Treaty may also qualify for that immunity. 1444 It is true, as the Commission points out, that the second subparagraph of Article 19(4) of Regulation No 4056/86 envisages acts after notification to the Commission and before its decision in application of Article 85(3) of the Treaty and which fall within the limits of the activity described in the notification. Only agreements falling within Article 85(1) of the Treaty may be notified with a view to obtaining exemption under Article 85(3), since abuse of a dominant position is prohibited without exception (Ahmed Saeed Flugreisen, cited at paragraph 1109 above, paragraph 32). 1445 However, contrary to the Commission's submission, it does not follow from this that the immunity only applies to fines imposed for infringement of Article 85(1) of the Treaty. 1446 In the first place, according to the express wording of the passages from the second subparagraph of Article 19(4) cited above, the immunity from fines does not cover agreements between undertakings, decisions by associations of undertakings and concerted practices contrary to Article 85(1) of the Treaty, but acts, a generic term which may include, without distorting its meaning, unilateral practices falling within Article 86 of the Treaty. As for the requirement that those acts must occur after notification, it clearly does not concern the material scope of the immunity, which concerns acts, but its temporal scope. As the Court has already held, that provision is a temporary derogation benefiting undertakings that notify an agreement in respect of acts taking place after notification and before the final decision on that notification (Atlantic Container Line, cited at paragraph 44 above, paragraph 46). 1447 In the second place, whilst the requirement that the acts must remain within the limits of the activity described in the notification necessarily means that only activities in fact notified qualify for exemption (Joined Cases 240/82 to 242/82, 261/82, 262/82, 268/82 and 269/82 Stichting Sigarettenindustrie and Others v Commission [1985] ECR 3831, paragraph 74), it in no way has the effect of restricting immunity to infringements of Article 85(1) of the Treaty to the exclusion of those of Article 86 of the Treaty. Even though the abuses cannot be notified with a view to obtaining an exemption, certain activities or agreements notified may be regarded as constituting abuses since, according to the case-law, the Commission is entitled to consider that an agreement restricting competition within the meaning of Article 85(1) of the Treaty also constitutes an abuse under Article 86 of the Treaty if it is the act of an undertaking in a dominant position (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 116, and Ahmed Saeed Flugreisen, cited at paragraph 1109 above, paragraph 34 et seq.). Thus an agreement notified by an undertaking in a dominant position, such as an exclusive supply agreement, may constitute not only an agreement prohibited by Article 85(1) of the Treaty but also an abuse prohibited by Article 86 of the Treaty. Such an abuse clearly amounts to acts which remain within the limits of the activity described in the notification within the meaning of the second subparagraph of Article 19(4) since it consists in the notified agreements themselves. 1448 The Commission is wrong to argue that the third subparagraph of Article 19(4) of Regulation No 4056/96, which enables the Commission to withdraw immunity where it considers after a preliminary examination that Article 85(1) of the Treaty applies and that application of Article 85(3) is not justified, necessarily prevents infringements of Article 86 of the Treaty from qualifying for immunity since otherwise such infringements would qualify for absolute immunity. 1449 That argument is based on the false premiss that the third subparagraph of Article 19(4) of Regulation No 4056/86 does not permit the withdrawal of immunity from fines imposed in respect of Article 86 of the Treaty. Whilst it is true that the third subparagraph of Article 19(4) of Regulation No 4056/86 provides that the withdrawal of immunity can only occur where after a preliminary examination the Commission considers that the notified agreements cannot be exempted under Article 85(3) of the Treaty, it does not in any case provide that immunity may only be withdrawn for infringements of Article 85 of the Treaty. It is perfectly apparent from the wording of that provision that the requirement that there be an agreement prohibited by Article 85 of the Treaty refers not to the purpose of the withdrawal of immunity, but to the circumstances in which that may be decided. Thus, where an abuse consists in an agreement notified with a view to obtaining an exemption, if the Commission considers at the end of a preliminary examination that that agreement is prohibited by Article 85(1) and cannot qualify for such an exemption and decides to withdraw immunity, that withdrawal will concern not only the infringement of Article 85(1) of the Treaty but also the infringement, if any, of Article 86 of the Treaty. 1450 It thus follows that not only does the second subparagraph of Article 19(4) of Regulation No 4056/86 expressly provide that abuses contrary to Article 86 of the Treaty may qualify for immunity from fines, but also that there is nothing in the wording of the second and third subparagraphs of that provision which prevents that immunity from applying to infringements of Article 86 of the Treaty. 1451 In those circumstances, the Commission cannot argue in the context of these proceedings that the applicants' argument misconstrues the wording of Article 19(4) of Regulation No 4056/86 and that the wording strongly suggests that the immunity only applies to infringements of Article 85(1) of the Treaty. 1452 That conclusion in no way results in a broad interpretation of Article 19(4) of Regulation No 4056/86 incompatible with the principle of interpretation applicable in the present case, since it flows directly from the express wording of that provision without distorting its meaning or even simply supplementing it. Moreover, the immunity from fines does not apply to all abuses contrary to Article 86 of the Treaty but merely, according to the express wording of the second subparagraph of Article 19(4) of Regulation No 4056/86, to those which remain within the limits of the activity described in the notification. 1453 Furthermore, the scope of the second subparagraph of Article 19(4) of Regulation No 4056/86, as is apparent from its terms, is compatible with the objective pursued by that provision and its general structure. 1454 The Court has already held with regard to the similar provisions of Regulation No 17 that the benefit of immunity for undertakings which have notified an agreement or a concerted practice constitutes the quid pro quo for the risk run by the undertaking in taking the initiative to give notice of the agreement or concerted practice. The undertaking risks not only a finding that the agreement or practice is in breach of Article 85(1) of the Treaty and refusal of the application of Article 85(3) but also the imposition of a fine for its actions prior to the notification (Musique diffusion française, cited at paragraph 1422 above, paragraph 93, and Asociación Española de Banca Privada, cited at paragraph 1421 above, paragraph 52). The Court also emphasised that if the Community legislature wished to reserve the benefit of the immunity to undertakings which notify their agreements, it is because by divulging them they run the risk of being obliged to terminate them and at the same time correspondingly reduce the Commission's investigation workload (Stichting Sigarettenindustrie, cited at paragraph 1447 above, paragraph 76). 1455 Whilst it is true that unlike agreements falling within Article 85 of the Treaty abuses contrary to Article 86 of the Treaty are prohibited without exception, where an undertaking holding a dominant position notifies agreements to the Commission with a view to obtaining an exemption under Article 85(3) of the Treaty, it runs the risk not only that the Commission considers that that agreement does not qualify for that exemption and is prohibited, but also, if the Commission takes the view that the agreement constitutes an abuse, of its being prohibited under Article 86 of the Treaty and of incurring fines on that basis. As noted above, according to the case-law the Commission is entitled to consider that an agreement restricting competition also constitutes an abuse if it is the act of an undertaking in a dominant position (Hoffmann-La Roche, cited at paragraph 765 above, paragraph 116, and Ahmed Saeed Flugreisen, cited at paragraph 1109 above, paragraph 44). 1456 Furthermore, where the Commission grants an individual exemption pursuant to Article 85(3) of the Treaty in respect of agreements notified by undertakings holding a dominant position it indirectly bars itself, in the absence of a change in the facts or the law, from considering that the same agreements constitute abuses contrary to Article 86 of the Treaty (see to that effect Tetra Pak I, cited at paragraph 1420 above, paragraph 28). Before granting exemption to an undertaking in a dominant position the Commission must check that all the conditions laid down in Article 85(3) of the Treaty, that is to say in particular the consumers' share of the benefit of the cartel, the proportionality of the restrictions imposed and the maintenance of competition in respect of a substantial part of the products or services in question, are met. Therefore, if the Commission makes a positive finding - granting exemption - in respect of a given agreement, the same agreement cannot be held in a second set of proceedings brought for infringement of Article 86 of the Treaty to be an abuse of a dominant position. That provision thus has effects within the ambit of Article 85(3) in so far as the latter precludes exemption in respect of conduct which constitutes an abuse of a dominant position (Opinion of Judge Kirschner acting as Advocate General in Tetra Pak I, cited at paragraph 1420 above, paragraphs 40 and 45). 1457 It follows that in terms of the risk involved, an undertaking in a dominant position is in a position similar to that of a non-dominant undertaking which has notified an agreement with a view to obtaining exemption. If the Commission refuses to grant an exemption under Article 85(3) of the Treaty that undertaking loses the certainty that, if there is no change in the circumstances of fact or law, the Commission will not intervene under Article 86 of the Treaty in respect of the agreement notified and moreover risks being fined for an agreement which it has itself disclosed, thereby facilitating the Commission's investigative workload. It is also clear that the immunity from fines in respect of the risk of infringement of Article 85(1) of the Treaty for which an undertaking in a dominant position qualifies in respect of notified agreements would be largely meaningless if that undertaking could be fined for infringing Article 86 of the Treaty on the basis of having entered into those same agreements. 1458 That is all the more so where, under the competition rules established by Regulation No 4056/86, the grant of an individual exemption under that regulation does not require that an agreement be notified first. Under Article 11(4) of that regulation, the Commission is required to grant an exemption even on its own initiative or following a complaint. In those circumstances, where a shipping line nevertheless chooses voluntarily to notify an agreement with a view to obtaining individual exemption, it must be conceded that it is entitled a fortiori to protection against the risk of fines which might be imposed under Article 86 of the Treaty in respect of the agreement. 1459 It is thus in keeping with the purpose and general structure of the scheme for the immunity laid down by Regulation No 4056/86 to apply also to infringements of Article 86 of the Treaty which consist in notified agreements. 1460 That conclusion cannot be undermined by the fact that dominant undertakings have a special responsibility not to allow their conduct to impair genuine undistorted competition on a market where competition is already restricted by the fact of their dominant position (Michelin, cited at paragraph 337 above, paragraph 57). That special responsibility means only that a dominant undertaking may be prohibited from conduct which is legitimate where it is carried out by non-dominant undertakings. It cannot on the other hand deprive dominant undertakings of immunity from fines where they have taken the risk of disclosing to the Commission agreements restricting competition which could be qualified as an abuse should exemption be refused. Such conduct shows precisely that a dominant undertaking is assuming the special responsibility placed upon it. If the Commission is possibly entitled to qualify such conduct as a restriction of competition and abuse of a dominant position and, if so, to impose fines in respect of each of those infringements, it is for it to assume all the legal consequences of that as regards observance of the immunity from fines. 1461 Furthermore, contrary to what the Commission maintains, applying immunity from fines for infringements of Article 86 of the Treaty in no way confers an advantage on undertakings in a collective dominant position when compared with undertakings holding an individual dominant position. An undertaking holding an individual dominant position is equally capable of qualifying for immunity from fines in respect of infringements of Article 86 of the Treaty where the latter consist in notified agreements. 1462 On those grounds it must be concluded that both the wording of the second subparagraph of Article 19(4) of Regulation No 4056/86 and its aim and general structure justify application of the immunity laid down by that provision not only for infringements of Article 85(1) of the Treaty but also for those of Article 86 of the Treaty where the abuse results from notified agreements. 1463 In those circumstances, it remains in the present case to assess the extent to which the applicants' first abuse consists in notified agreements which may qualify for immunity from fines under Regulation No 4056/86.  2. The application of the immunity from fines to the first abuse 1464 It is apparent from paragraphs 551 to 558 of the contested decision that the first abuse lies in the outright ban on individual service contracts in 1994 and 1995 and, where they were authorised with effect from 1996, in the application thereto of certain conditions collectively agreed by the TACA and the mutual disclosure of their terms, and in the application of certain terms collectively agreed by the TACA to conference service contracts. 1465 It is apparent from paragraph 556 of the contested decision that the terms in question collectively agreed by the TACA are those concerning the prohibition of contingency clauses, the duration of service contracts, the ban on multiple contracts and the amount of liquidated damages. 1466 It has already been found above that the first abuse was not founded in so far as it concerns the mutual disclosure of the availability and contents of individual service contracts. 1467 In those circumstances it is therefore only necessary to consider whether the other abusive practices constituting the first abuse consist in agreements notified to the Commission. 1468 The TACA rules on service contracts are laid down by Article 14 of the TACA which was notified to the Commission with a view to obtaining individual exemption under Article 12 of Regulation No 4056/86. 1469 All the abusive practices which are the subject of the present plea are set out in Article 14 of the TACA. Article 14(3)(a) of the TACA expressly prohibits individual service contracts, whilst Article 14(2)(a), (c), (d) and (e) lay down the maximum duration of service contracts, the prohibition of contingency clauses, the amount of liquidated damages and the prohibition of multiple contracts respectively. Furthermore, as is apparent from paragraph 32 of the contested decision, the TACA parties expressly informed the Commission on 9 March 1995 that the FMC had required them to amend their agreement so as to allow the conclusion of individual service contracts in 1996 provided that those contracts complied with the provisions of Article 14 of the TACA. On 21 March 1995, the TACA parties thus sent the Commission an amended version of Article 14 of the TACA notified in 1994. 1470 Consequently, the abusive rules on service contracts at issue in this plea fell within the scope of the immunity from fines laid down by the second subparagraph of Article 19(4) since they were in fact notified to the Commission with a view to obtaining exemption. 1471 Since the initial notification of the TACA took place on 5 July 1994 and the period of the infringement recorded in the contested decision covered, according to paragraph 592 thereof, part of 1994 and the whole of 1995 and 1996, all the fines imposed on the TACA parties in the contested decision in respect of the abusive rules in question concern acts which occurred after the notification of the TACA and before the adoption of the contested decision. 1472 The part of the fines imposed under Regulation No 4056/86 in respect of the abusive rules on service contracts laid down by Article 14 of the TACA was therefore covered by the immunity from fines laid down by that regulation. 1473 Consequently, without its being necessary to ascertain whether there is an adequate statement of reasons in the contested decision on that point, this plea of the applicants must be upheld, inasmuch as by imposing fines in respect of the rules on service contracts laid down by Article 14 of the TACA the Commission breached the immunity from fines laid down by Regulation No 4056/86 which the applicants qualified for by reason of the notification of the TACA. That part of the fines must therefore be annulled. 1474 For the remainder, that is, the part of the fines imposed under Regulation No 1017/68, the applicants' plea must be rejected for the reasons given at paragraphs 1432 to 1434 above.  Part two: calculation of the fines 1475 Under the third part of the present pleas relating to the amount of the fines and the various failures to state reasons in that regard, the applicants challenge, first, the method adopted by the Commission to determine the amount of the fines. Second, they submit that the infringements punished by the fines were not committed deliberately or negligently. Third, they submit that the Commission erred in its assessment of the effect, gravity and duration of the infringements as well as the mitigating circumstances. Fourth, they refer to certain specific individual factors which the Commission failed to take into account. Fifth and finally, they challenge the interest rate adopted in the contested decision for late payment of the fines.  A - The method adopted by the Commission to determine the amount of the fines  1. Arguments of the parties 1476 The applicants claim that the Commission adopted an irrational and incoherent approach in calculating the fines, in breach of the fundamental principles of Community law. 1477 Any fine imposed by the Commission in application of its Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (the Guidelines) (OJ 1998 C 9, p. 3) must observe the principles laid down by the Court. It follows that, even if the Commission's new approach is that a fine should reflect principally the seriousness of the infringement as such, independently of the size and turnover of the undertaking which has committed it, the principles developed by the Court require that other factors also be taken into account. In particular, the applicants consider that the overriding principle derived from the case-law of the Court is that in assessing the seriousness of an infringement the Commission must have regard to all the relevant factors: the total turnover of the undertaking concerned, the proportion of that total turnover accounted for by its turnover on the market where the infringement was committed, the profit derived by it from the unlawful practices, the size of the undertaking and the value of the goods or services concerned (see, for example, Musique diffusion française, cited at paragraph 1422 above, paragraphs 120 and 121). 1478 That case-law shows, first, that all the relevant factors must be taken into account by the Commission when it determines the seriousness of the infringement and the amount of the fines and, second, that failure to take one or more factors into account means that disproportionate importance is attached to those factors which are taken into account. 1479 In the present case, the applicants allege, the contested decision does not comply with the requirements laid down by the case-law for several reasons. 1480 First, the Commission lacked impartiality and infringed the principle of non-discrimination and equal treatment enshrined in the case-law (Case T-143/89 Ferriere Nord v Commission [1995] ECR II-917, paragraph 55) by fining the applicants on the basis of artificial categories and not on the basis of the individual applicant's size. 1481 The Commission fails to provide any explanation or justification for the division of the undertakings into four groups, or for the criteria identifying those groups. Moreover, the categories of fines in Table 13 do not reflect the differences in size in the four groups of carriers identified in Table 12. Thus, small carriers, whose worldwide containerised shipping turnover is only 6% to 12% of the highest turnover, each receive a fine which is 25% of that of the applicant receiving the highest fine. The level of individual fines was differentiated only on the basis of worldwide turnover and only to the extent that the Commission placed the applicants into four groups on the basis of their worldwide turnover. Consequently, the applicants' size played little part in the calculation of fines. If the applicants' size had been taken into account in determining the fines they would have been lower. 1482 DSR-Senator points out on its own behalf in this context that the fine imposed on it is half of that imposed on the large carriers falling within the first group whereas its worldwide turnover from the carriage of containerised cargo is about a quarter of that of the large carriers. 1483 Similarly, the applicant in Case T-212/98 notes that whilst the average size of the undertakings in the third category of small to medium carriers in which it was placed is less than a quarter of that of the largest TACA members, the applicant received a fine which is half the amount imposed on the large TACA members. Furthermore, although in 1996 it held the lowest turnover of the TACA parties on the transatlantic trade, the fine imposed on it was double that imposed on three other applicants whose transatlantic turnover was 400% higher than the applicant's, and the same as that imposed on three applicants whose transatlantic turnover was 800% or more of that of the applicant. 1484 The applicant in Case T-213/98 alleges that the fine infringes the principle of equal treatment in that it has received the second highest fine and yet its turnover on the relevant market is the second lowest. Consequently, notwithstanding an average share of the relevant market in the period from 1994 to 1996 of 0.7%, the amount of the fine imposed on it represents 7.76% of the total amount of the fine imposed on the conference as a whole. 1485 Finally, the applicants in Case T-214/98 submit that the Commission has infringed the principle of equal treatment by failing to carry out an individual assessment of each of the applicants on the relevant market. 1486 Second, the Commission failed to carry out an individual assessment of each applicant in setting the fines (Musique diffusion française, cited at paragraph 1422 above, paragraphs 129 to 134). 1487 That is demonstrated by the fact that it placed the applicants, arbitrarily and without any explanation, into four groups and fined the groups rather than the individual applicants which comprise them. Furthermore, the Commission has not taken account of any other factors, such as turnover on the relevant trade or profit derived from the infringement. 1488 The applicant in Case T-213/98 submits that the Commission did not carry out an individual assessment of its position as the smallest line (bar one) on the transatlantic trade. It points out that it received a fine equivalent to 98% of its turnover in 1996 on the transatlantic trade. 1489 Third, the Commission calculated the fines on the basis of total worldwide turnover in respect of transport services relating to the carriage of containerised cargo with no reference to turnover on the relevant market. 1490 The applicants consider that, in accordance with the case-law (Musique diffusion française, cited at paragraph 1422 above, paragraphs 120 and 121; Case 183/83 Krupp v Commission [1985] ECR 3609, paragraph 37; Case T-77/92 Parker Pen v Commission [1994] ECR II-549, paragraph 94; CEWAL I, cited at paragraph 568 above, paragraph 233; Opinion of Advocate General Slynn in Musique diffusion française, cited above, p. 1914, at p. 1950), the Commission should have taken account of the turnover of the parties from the provision of services on the market to which the infringement relates, that is, from the provision of transatlantic transport services, and the proportion of that turnover in worldwide containerised shipping turnover. Furthermore, at paragraph 588 of the contested decision the Commission states that transatlantic turnover is relevant in assessing the impact of the infringements. 1491 The applicants stress that for many of them the turnover accounted for by their transatlantic services represents a small proportion of their worldwide turnover. The amount of the fines is thus manifestly disproportionate to the turnover on the transatlantic trade. They note that Advocate General Fennelly stated (Opinion in CEWAL II, cited at paragraph 638 above) that an infringement by an undertaking in relation to only a small sector of its business will usually be less serious than an infringement in relation to the whole of its business. The disproportion is emphasised in the present case by the fact that only 60% (or less) of their turnover on the transatlantic trade is derived from the service contracts which are the subject of the first abuse and partly that of the second abuse. 1492 As a result, the applicants claim, the Commission has failed to assess the scale of the infringements (Musique diffusion française, cited at paragraph 1422 above, paragraph 120) correctly and the fine is the result of a simple calculation based on the total turnover (Musique diffusion française, cited at paragraph 1422 above, paragraph 121). 1493 Fourth, the applicants submit that the Commission failed to have regard to all the factors relevant to an assessment of gravity in setting the fines (Musique diffusion française, cited at paragraph 1422 above, paragraph 129, and Case T-229/94 Deutsche Bahn v Commission [1997] ECR II-1689, paragraph 127). 1494 Since the only factor taken into account by the Commission was the worldwide turnover from containerised shipping services, disproportionate importance is inevitably attached to that factor. The applicants submit that the relevant factors to be taken into account should have included the position of the parties on the relevant market, any profits from the supply of transatlantic services under service contracts and the turnover from service contracts compared with total turnover. 1495 Fifth, the applicants claim that the Commission failed to consider any profits from the relevant market, with the consequence that the fines are disproportionate. 1496 The applicants observe that in the Guidelines (p. 5) the Commission points to the need to relate fines in particular to any economic or financial benefit derived by the offenders (see also the XXIst Report on Competition Policy, 1992, paragraph 139). Accordingly, the applicants claim, the amount of the fines should not be greater than any profits made from the infringement on the relevant market because it is on that market that the infringement was committed. In the present case, the Commission did not take account of the applicant's net results on the transatlantic trade in 1996 in determining the amount of the fines. 1497 Sixth, the applicants consider that the Commission failed to observe the principle of proportionality. They refer to the foregoing arguments in that regard. 1498 Seventh, the applicants in Cases T-213/98 and T-214/98 consider that the Commission infringed the principle of legitimate expectations. 1499 The applicant in Case T-213/98 alleges that the Commission did not apply in the present case the principles governing the calculation of fines derived from earlier case-law. 1500 The applicants in Case T-214/98 also criticise the Commission for failing to follow its Guidelines in setting the fines. Since the basic amount of the fine was fixed for groups of undertakings and not for each undertaking separately there was no connection between the basic amount of the fine and the turnover (total or relative to the relevant market) of the undertakings in question. Moreover, the Commission made findings as to the seriousness of the abuses without demonstrating their actual impact on the relevant market. It also failed to take account of the size of the geographic market affected by the alleged infringements. 1501 The applicants in Case T-214/98 consider that by not applying the criteria set out in the Guidelines for setting fines the Commission infringed the principle of legitimate expectations. The Guidelines give rise to a legitimate expectation on the part of the undertakings that the Commission will exercise its discretion to set fines in each particular case in accordance with the approach set out in the Guidelines and having regard to all the criteria mentioned therein. The Guidelines themselves state that the principles outlined therein should ensure the transparency and impartiality of the Commission's decisions, in the eyes of the undertakings and of the Court of Justice alike, and that the new method of determining the amount of a fine will adhere to the rules [they set out]. In any event the Commission cannot amend a measure of general application such as the Guidelines by an individual decision (Case C-313/90 CIRFS and Others v Commission [1993] ECR I-1125, paragraphs 44 and 45). 1502 Eighth, the contested decision contains no explanation of the calculation of the fines. The approach adopted by the Commission infringes the principle of transparency, contrary to Article 190 of the Treaty and the case-law (Tréfilunion, cited at paragraph 498 above, paragraph 142; Case T-147/89 Société métallurgique de Normandie v Commission [1995] ECR II-1057; Case T-151/89 Société des treillis et panneaux soudés v Commission [1995] ECR II-1191; Case T-327/94 SCA Holding v Commission [1998] ECR II-1373, paragraph 206). 1503 In this regard the applicants point out that the contested decision explains neither the reasons for which the Commission divided the applicants into four categories (Table 12 of the contested decision) nor the criteria adopted by the Commission for making that division. The decision thus explains neither the relationship between Table 12 and Table 13 (which sets out the amount of the fines imposed), nor the way in which the figures in Table 13 have been calculated. Furthermore, the applicants consider that in setting the fines at a level which represents such a significant proportion of their turnover on the relevant trade, the Commission has departed from its own practice in the past (Commission Decision 94/815/EC of 30 November 1994 relating to a proceeding under Article 85 of the EC Treaty, Cases IV/33.126 and 33.322 - Cement, OJ 1994 L 343, p. 1; and Commission Decision 98/273/EC of 28 January 1998 relating to a proceeding under Article 85 of the EC Treaty, Case IV/35.733 - VW, OJ 1998 L 124, p. 60), without giving reasons to the requisite legal standard for that change, contrary to the requirements set out in Papiers peints, cited at paragraph 1391 above. 1504 Furthermore, the applicant in Case T-212/98 submits in addition that the Commission does not explain in the contested decision why it imposes a fine on it equivalent to double its relative size but refers solely to its worldwide turnover, contrary to its previous practice in such matters (Musique diffusion française, cited at paragraph 1422 above, paragraph 129; Deutsche Bahn, cited at paragraph 1493 above, paragraph 127). Nowhere does the Commission explain why it chose not to take into account other factors, such as its position on the market, its profits and its position as a new entrant to the trade and new member of the TACA. Moreover, as regards the role played by the applicants in the alleged infringements, the Commission does not show that the TACA members acted together to induce third parties to join the TACA, nor does it show that the applicant itself participated in those inducements. In Musique diffusion française, cited at paragraph 1422 above, the Advocate General observed that an infringement committed by an undertaking in only a small sector of its activities is, in ordinary circumstances, less grave than one committed in the whole of its activities. 1505 It is only in the defence that the Commission explains in general terms why it chose to calculate the level of fines by reference to worldwide turnover. It fails to explain, however, why that method is justified with respect to the applicant despite the fact that it results in a disproportionately high fine in its case, even when compared with the other applicants by reference to worldwide turnover alone. In PVC II, cited at paragraph 191 above, the Court of First Instance reduced the fines on the ground that the Commission overestimated the market share of the undertakings concerned on the relevant market when apportioning the total fine between them. 1506 Finally, the applicants in Case T-214/98 claim for their part that, contrary to the requirements of the case-law, the contested decision does not explain the method used for calculating the amount of the fines, so that the applicants are unable to ascertain whether the Commission applied that method correctly (Tréfilunion, cited at paragraph 498 above, paragraph 142, and Mo och Domsjö, cited at paragraph 138 above, paragraph 278). In particular, the Commission failed to explain in the contested decision the criterion used to divide the TACA parties into four groups. 1507 The Commission considers that none of these pleas is well founded.  2. Findings of the Court 1508 By the present pleas and complaints, the applicants essentially criticise the Commission for having divided the TACA parties into four groups in order to determine the amount of the fines. They rely on three kinds of argument in that regard. The first kind concerns the lack of individual assessment and breach of the principle of proportionality, as well as failure to state reasons in that regard. The second concerns infringement of the principle of equal treatment and failure to state reasons in that regard. The third group concerns infringement of the principle of the protection of legitimate expectations and failure to state reasons in that regard. 1509 It is not in dispute that the fines imposed in the present case were determined by the Commission on the basis of the method set out in its Guidelines. 1510 In paragraph 595 of the contested decision the Commission stated, after determining, at paragraphs 591 to 594 of the contested decision, the inherent seriousness of the infringements, that in order to take account of the effective capacity of the undertakings concerned to cause significant damage and the need to ensure that the amount of the fine had a sufficiently deterrent effect larger fines should be imposed on the larger TACA parties than on the smaller ones because of the considerable disparity between their sizes. 1511 The Commission therefore divided the TACA parties into four groups according to their size relative to that of Mærsk, the largest of the TACA parties. It is apparent from paragraph 596 of the contested decision that the relative size of each of the TACA parties was calculated on the basis of their turnover in respect of worldwide maritime transport of containerised cargo in 1996. The Commission considered that that turnover provided an indication of the resources and actual size of the undertakings concerned. 1512 Table 12 at paragraph 596 of the contested decision sets out the four groups thus determined and the size of each of the TACA parties in 1996 relative to that of Mærsk. It is apparent from that table that the four groups and the relative size of the TACA parties which make up those groups are calculated as follows: the large carriers (Mærsk (1.00) and Sea-Land (0.89)), the medium to large carriers (P&O (0.50), OOCL (0.44), NYK (0.41), Nedlloyd (0.39), Hanjin (0.33), Hapag Lloyd (0.32) and Hyundai (0.31)), the small to medium carriers (DSR-Senator (0.24), NOL (0.22), MSC (0.21), Cho-Yang (0.18)) and the small carriers (TMM-Tecomar (0.12), ACL (0.06) and POL (0.06)). 1513 Table 13 in paragraph 598 of the contested decision sets out the calculation of the amount of fines for each of those groups, taking into account the nature of the infringements and their duration. Those amounts are ECU 27.5 million for the large carriers, ECU 20.63 million for the medium to large carriers (apart from Hyundai, for which the amount of the fine is reduced on account of the duration of its participation to ECU 18.56 million), ECU 13.75 million for the small to medium carriers and ECU 6.88 million for the small carriers. 1514 It is necessary to consider whether, as the applicants allege, that method of determining the amount of the fines infringes the principles of individual assessment, equal treatment and proportionality, and the protection of legitimate expectations.  (a) The principle of individual assessment 1515 The applicants allege first that the Commission failed to examine individually the situation of each of them in determining the amount of the fines. Next, they allege that dividing the TACA parties into four groups meant that in this case the Commission only took into account in calculating the fines the worldwide turnover in respect of maritime transport of containerised cargo, to the exclusion of other criteria relevant to the assessment of the seriousness of the infringement, in particular turnover on the relevant market, the ratio of that turnover to worldwide turnover, profits made on the relevant market and the actual effect of the infringements on the relevant market. They also refer to various failures to state reasons with regard to those points. 1516 By their first complaint, the applicants thus challenge the adoption of a fixed rate for the basic amount of the fines for each group of undertakings, as shown in Table 13 at paragraph 598 of the contested decision. It is that fixed rate which led the Commission to ignore the differences which might exist between individual undertakings belonging to the same group. 1517 As regards the merits of the contested decision on that point, it is apparent from paragraph 595 of the contested decision that in order to determine the seriousness of the infringements and in view of the considerable disparity between the sizes of the TACA parties, the Commission divided them into four groups so as to impose larger fines on the larger TACA parties. 1518 The Court has already held in CMA CGM, cited at paragraph 427 above, paragraph 384, that the Commission did not exceed its powers regarding the imposition of fines by dividing the undertakings concerned into groups according to their size, since by ensuring that undertakings in the groups of larger undertakings incur higher fines than those imposed on undertakings in the groups of the smaller undertakings, that division contributes to the aim of penalising the large undertakings more severely. 1519 The Court emphasised in particular in this regard that the Commission was not required, when determining fines on the basis of the gravity of the infringement in question, to ensure, where fines are imposed on a number of undertakings involved in the same infringement, that the final amounts of the fines resulting from its calculations for the undertakings concerned reflect any distinction between them in terms of their overall turnover (CMA CGM, cited at paragraph 427 above, paragraph 385). 1520 Consequently, the Court finds that the Commission did not err in fact or in law in dividing the applicants into groups when determining the gravity of the infringement (CMA CGM, cited at paragraph 427 above, paragraph 386). 1521 As regards the obligation to state reasons in that regard, the Court has held that the essential procedural requirement to state reasons is satisfied where the Commission indicates in its decision the factors which enabled it to determine the gravity of the infringement and its duration (Case C-291/98 P Sarrió v Commission [2000] ECR I-9991, paragraph 73). 1522 In the present case it is apparent to the requisite legal standard from paragraph 595 of the contested decision that, first, in order to take account of the effective capacity of the undertakings concerned to cause significant damage and the need to ensure that the amount of the fine has a sufficiently deterrent effect, the inherent seriousness of the infringement was adjusted according to the size of the undertaking in question and, second, in order to impose higher fines on the larger undertakings the Commission divided the TACA parties into four groups. Since the rate of the fines was the result of that division, it must be found that the contested decision does contain a sufficient statement of reasons in that regard. 1523 The applicants' complaints on that point must therefore be rejected. 1524 By the second set of complaints, the applicants criticise the Commission for not having made separate calculations of the fine for each party taking account of criteria other than turnover. They criticise the Commission in particular in this regard for not taking account of their turnover on the relevant market or their share of that market. 1525 As regards the merits of the decision on that point, according to the case-law the gravity of infringements is to be determined by reference to numerous factors, such as the particular circumstances of the case, its context and the dissuasive effect of fines; moreover, no binding or exhaustive list of the criteria which must be applied has been drawn up (order in Case C-137/95 P SPO and Others v Commission [1996] ECR I-1611, paragraph 54). It has been consistently held that the factors on the basis of which the gravity of an infringement may be assessed may, depending on the circumstances, include the volume and value of the goods in respect of which the infringement was committed and the size and economic power of the undertaking (Musique diffusion française, cited at paragraph 1422 above, paragraph 120, and Joined Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82 IAZ and Others v Commission [1983] ECR 3369, paragraph 52). 1526 In the present case, it is apparent from paragraph 598 of the contested decision that the basic amounts of the fines set out at Table 13 were fixed on the basis of the nature of the infringements and their duration for each of the four groups identified at Table 12 in paragraph 596. It is apparent from the latter paragraph that that division into four groups was carried out by the Commission on the basis of the size of each of the TACA parties relative to that of Mærsk, according to their worldwide turnover in respect of the maritime transport of containerised cargo. Therefore, the basic amounts set out in Table 13 result indirectly from the reference to the applicants' turnover. 1527 The Court has already held that such a method, in which the turnover of the undertakings in question is used not to calculate directly the level of fine as a proportion of that turnover but to adjust, when determining the gravity of the infringement, the basic amount calculated on the basis of the nature of the infringement and its duration in order to take account of the difference in size between the undertakings concerned, is in accordance with the legal framework of the sanctions as defined by Article 15(2) of Regulation No 17 and the equivalent provisions of Regulations No 1017/68 and No 4056/86 (CMA CGM, cited at paragraph 427 above, paragraphs 395 and 397). 1528 In that regard, contrary to what the applicants maintain, the Commission is entitled when determining the size of the undertakings concerned to refer to the total turnover rather than to their turnover on the relevant market(s). Indeed it has already been held that the total turnover of the undertaking concerned constitutes an indication, albeit approximate and imperfect, of its size and economic power (Musique diffusion française, cited at paragraph 1422 above, paragraph 121). Thus, in the maritime transport sector, the Court of First Instance has already held that in taking the total turnover of the undertaking concerned for maritime transport of containerised cargo as the basis for calculating the fines, the Commission did not infringe Article 19 of Regulation No 4056/86 (CEWAL I, cited at paragraph 568 above, paragraph 233, and CMA CGM, cited at paragraph 427 above, paragraph 399). 1529 Furthermore, the applicants err in maintaining that the Commission should have taken account of the fact that only 60% of the turnover of the TACA parties on the trade in question is derived from the service contracts which are the subject of the first abuse. The turnover in respect of service contracts alone does not reflect the effective capacity of the TACA parties to cause damage, since such turnover does not take account of their resources and actual size. In so far as, in fixing the amount of the fines in the present case, the Commission sought precisely to take account of the real capacity of the undertakings concerned to cause damage, it was therefore entitled not to determine the size of the TACA parties on the basis of their turnover in respect of service contracts alone. 1530 Finally, contrary to what the applicants maintain, that method does not lead to the Commission setting the level of the fine by means of a calculation based only on total turnover, without taking account of factors peculiar to each applicant. It is apparent from the contested decision as well as from the Guidelines, the principles of which were applied in that decision, that whilst the gravity of the infringement is initially assessed on the basis of the particular characteristics of the infringement, such as its nature and impact on the market, that assessment is subsequently adjusted according to the individual circumstances of the undertaking, so that the Commission takes into consideration, besides the size and capacities of the undertakings, both aggravating and mitigating circumstances, as the case may be (Joined Cases T-202/98, T-204/98 and T-207/98 Tate & Lyle and Others v Commission [2001] ECR II-2035, paragraph 109, and CMA CGM, cited at paragraph 427 above, paragraph 401). 1531 In those circumstances, the Commission was entitled when setting the fines on the basis of the gravity of the infringement to disregard the factors peculiar to each applicant other than their total turnover from maritime transport of containerised cargo. 1532 As regards compliance with the obligation to state reasons in that regard, it has been held that the essential procedural requirement to state reasons is satisfied where the Commission indicates in its decision the factors which enabled it to determine the gravity of the infringement and its duration (Sarrió, cited at paragraph 1521 above, paragraph 73). Furthermore, the scope of the obligation to state reasons must be determined in the light of the fact that the gravity of infringements must be determined by reference to numerous factors; moreover, no binding or exhaustive list of the criteria which must be applied has been drawn up (order in SPO, cited at paragraph 1525 above, paragraph 54, and LR AF 1998, cited at paragraph 334 above, paragraph 378). 1533 In the present case, it is apparent to the requisite legal standard from the contested decision, in particular paragraphs 591 to 596 thereof, that the gravity of the infringements was determined on the basis of their nature and adjusted according to the relative size of the TACA parties expressed in terms of their worldwide turnover in respect of maritime transport of containerised cargo in order to take account of the considerable differences in size between those parties, so that higher fines could be imposed on the larger parties. 1534 Since the decision contains a statement of reasons to the requisite legal standard of the factors used by it to determine the gravity of the infringements and the list of relevant criteria for determining the gravity of the infringements is not binding on the Commission, it cannot be criticised for not stating why it does not rely on other grounds. 1535 As for the alleged fact that in setting fines at a level which represents a significant proportion of turnover on the relevant market the Commission altered its practice in fixing fines, it suffices to state that that complaint amounts to a denial that the Commission can use the turnover of the undertakings in question not to calculate directly the level of fines, but indirectly, to adjust the inherent gravity of the infringement in order to take account of the difference in size between the undertakings concerned. The statement of reasons on this point appears at paragraph 595 of the contested decision and at paragraph 1.A of the Guidelines which the Commission is, in principle required to apply since their publication (LR AF 1998, cited at paragraph 334 above, paragraph 390). 1536 Similarly, as regards the fact that the Commission altered its practice by referring to worldwide turnover, it suffices to state that at paragraph 598 it set out the reasons for that choice, namely to take account of the resources and actual size of the undertakings concerned. It is true, as noted by the applicant in Case T-212/98 in particular, that that method can result in a proportionately higher fine for certain applicants. However, the Commission is not required to explain why it applies that method to each of the applicants. Since the Commission explained in its decision why it took account of worldwide turnover, it provided each of the applicants with all the data necessary to enable it to know whether the decision is well founded in its particular case or whether it may be vitiated by some defect enabling its validity to be challenged. 1537 The analogy drawn by the applicant in Case T-212/98 with the PVC II judgment (cited at paragraph 191 above) is false. It is true that in that judgment the Court of First Instance reduced the fine imposed on certain PVC producers on the ground that the Commission wrongly calculated their market share in the PVC sector. However, in its decision, the Commission had apportioned the total fine between the undertakings on the basis of the criterion of the importance of each of them on the PVC market, calculated by reference to their average market share between 1980 and 1984 on that market (paragraph 1191). By contrast, the Commission did not fix the amount of the fines in the present case by taking account of the market share of the undertakings in question. The analogy with the Court's judgment in PVC II is therefore groundless. 1538 Consequently, the contested decision contains a sufficient statement of reasons for the criteria adopted to determine the gravity of the infringements. The complaint alleging failure to state reasons on that point must therefore be rejected. 1539 It follows from the foregoing that the complaints alleging infringement of the principle of individual assessment and failures to state reasons in that regard must be rejected in their entirety.  (b) The principles of equal treatment and proportionality 1540 The applicants criticise the Commission for having divided the TACA parties into four groups artificially, without any explanation of the criterion used for that purpose. They challenge both the definition of the four groups and the basic amounts applied to each of those groups. 1541 First, as regards the definition of the four groups, it should be noted that, in terms of the merits of the contested decision on that point, the Court held in CMA CGM, cited at paragraph 427 above, paragraphs 416 to 418, that the Commission is entitled to divide the undertakings concerned into groups for the purpose of setting the amount of the fines, provided however that that division is coherent and objectively justified. 1542 Thus, if the Court considered in that judgment that the division into four groups was defective in substance, it was only to the extent that the coherency of that division was not apparent either from the decision, since the logic underpinning the division was not apparent from a review of it and the decision did not explain the criteria used for that purpose, or from the explanations subsequently given by the Commission, which did not justify the division carried out in the decision. 1543 In the present case by contrast, the coherency of the division into four groups in Table 12 in paragraph 596 of the contested decision is clearly apparent from that table. It reveals that the thresholds dividing each group were fixed starting with the size of the largest of the TACA parties, with successive reductions by half of that size, that is, 50%, 25% and 12.5% of the size of Mærsk. 1544 Such a division is clearly one of the methods enabling the undertakings concerned to be divided into groups in a coherent and objectively justified way. Further, the applicants have put forward no evidence to cast doubt on the coherency of a division using that method. 1545 Contrary to what the applicants argued at the hearing, the Court in its judgment in CMA CGM, cited at paragraph 427 above, paragraphs 420 to 422, did not lay down the principle that the Commission was required in dividing the undertakings concerned into groups for the purposes of fixing the amount of the fines to set the thresholds for each of the groups where the relative differences in size were most pronounced, but merely held that in that case the Commission could not maintain, as it had done in reply to written questions from the Court, that the division into groups had been carried out according to that method, since the relative differences in size between the groups adopted in the contested decision were not the most pronounced of those between the undertakings in question. Since the Commission was unable to justify the choice of thresholds between the four groups adopted in the decision, the Court considered that that division infringed the principle of equal treatment. 1546 In IAZ, cited at paragraph 1525 above, paragraph 53, the Court held to be lawful a calculation whereby the Commission first determined the amount of the fines to be imposed and then spread that total among the undertakings concerned by dividing them into three groups according to the size of their activities (determined on the basis of the number of conformity labels ordered from the association in question, namely less than 10 000 labels, 10 000 to 50 000 labels and more than 50 000 labels). 1547 Consequently, the applicants erred in their argument at the hearing that the approach adopted by the Court in CMA CGM, cited at paragraph 427 above, must also result in a finding that the division into groups in the present case was similarly flawed. 1548 As for compliance with the obligation to state reasons, it suffices to state that since the logic underlying the division in the present case is apparent from Table 12 in paragraph 596 of the contested decision, the applicants were in a position on that basis alone to know whether the decision was well founded or whether it might be vitiated by some defect enabling its validity to be challenged, whilst on the same basis the Court is able to review its legality (Van Megen Sports, cited at paragraph 548 above, paragraph 51). 1549 Consequently, the division into four groups in the present case does not infringe the principles of equal treatment and proportionality and is supported by a sufficient statement of reasons. 1550 Second, as regards the basic amounts of the fines imposed on each of the groups, it is apparent from Table 13 in paragraph 598 of the contested decision that the basic amounts imposed on each group according to the gravity and duration of the infringements were fixed by successive reductions of 25% of the basic amount imposed on the largest undertaking. 1551 As regards the merits of the contested decision on that point, the Court has already held in CMA CGM, cited at paragraph 427 above, paragraph 431, that the method of fixing the basic amounts of the fines by making successive reductions of 25% of the basic amount imposed on the largest carrier did not exceed the Commission's margin of discretion in fixing fines. Since the Commission defined four groups on the basis of the applicants' relative size, the successive reduction in steps of 25% of the basic amount used for the group containing the largest applicant may be regarded as a coherent method which may be objectively justified. 1552 As for the alleged fact that in such a system the same basic amount is imposed within each group on undertakings of different sizes, that is an integral feature of any system of division into groups. It has already been held at paragraph 1520 above that that division represents an accurate assessment of the gravity of the infringement. 1553 Therefore, even if the effect of the division into groups is that certain applicants are allocated the same basic amount even though they differ in size, that difference in treatment is objectively justified by the importance attached to the nature of the infringement in comparison with the size of the undertakings in the assessment of the gravity of the infringement (CMA CGM, cited at paragraph 427 above, paragraph 411). 1554 Consequently, the Commission was entitled in this case to set the same basic amount for undertakings in the same group and did not thereby infringe the principle of equal treatment. 1555 As regards compliance with the obligation to state reasons on that point, it suffices to state that the logic underlying the determination of the basic amounts of the fines set out in Table 13 in paragraph 598 of the contested decision is apparent from that table, and all the more so since those basic amounts of the fines translate precisely into figures the division into four groups carried out in the contested decision. 1556 In those circumstances the applicants were manifestly in a position on that basis alone to know whether the decision was well founded or whether it might be vitiated by some defect enabling its validity to be challenged, whilst on the same basis the Court is able to review its legality (Van Megen Sports, cited at paragraph 548 above, paragraph 51). 1557 It is true that the contested decision does not set out the method or the calculation whereby the Commission determined, in assessing the gravity of the infringement, the amount of EUR 2 million chosen for the large carrier group, on the basis of which the other amounts were determined, any more than its relationship with the other groups identified in Table 12. 1558 However, according to the case-law, the essential procedural requirement to state reasons does not require the Commission to set out in its decision the figures showing the method of calculating the fines, but only requires it to indicate the factors which enabled it to determine the gravity of the infringement and its duration (Sarrió, cited at paragraph 1521 above, paragraphs 73 and 76). 1559 Those factors are apparent to the requisite legal standard from paragraphs 591 to 596 of the contested decision. 1560 Thus, in terms of the gravity of the infringement, the Commission states at paragraph 591 that in so far as the first abuse sought to restrict price competition that abuse must, given its nature, be regarded as a serious infringement within the meaning of the Guidelines, which provide in such a case that the amount which may be imposed in respect of the gravity of the infringement may vary from EUR 1 million to 20 million. Furthermore, it is apparent from paragraphs 595 and 596 of the contested decision that the Commission's intention was to adjust the amount calculated on the basis of the nature of the infringement according to the size of the undertakings in question in order to take account, in the light of the considerable disparity between their sizes, of the TACA parties' effective capacity to cause damage and the need to ensure that the amount of the fine has a sufficiently deterrent effect. 1561 In those circumstances, the applicants cannot rely, as they sought to at the hearing, on the judgment in CMA CGM, cited at paragraph 427 above, in support of the complaint that the Commission did not explain why it imposed on the large carriers an amount higher than the minimum laid down by the Guidelines for serious infringements. Whilst the Court found in that judgment that the statement of reasons was defective in that regard, it was not because the Commission used a basic amount higher than the minimum amount laid down by the Guidelines for serious infringements but because, after expressly stating in its decision that the basic level of fine [should] be set at the very lowest end of the scale of fines appropriate for a serious infringement, the Commission, without giving any explanation, ultimately adopted another amount. In the present case, by contrast, the Commission at no point in the contested decision stated that it intended to impose the lowest amount laid down by the Guidelines for serious infringements. 1562 Next, as regards the duration of the infringement, the Commission states at paragraph 597 of the contested decision that since the duration of the infringement was two to three years, the level of the fines imposed on the basis of gravity should be increased by 25%. 1563 Consequently, the contested decision contains a sufficient statement of reasons for the determination of the basic amounts appearing in Table 13. Therefore, the applicants' complaints in that regard must be rejected. 1564 It follows from the foregoing that the applicants' complaints relating to the determination of the basic amount of the fines must be rejected in their entirety.  (c) The principle of the protection of legitimate expectations 1565 The applicant in Case T-213/98 considers that the Commission has infringed the principle of the protection of legitimate expectations by not applying the principles established in previous practice for calculating the fines. Furthermore, the applicant in Case T-214/98 criticises the Commission for not having applied the criteria set out in the Guidelines. 1566 As regards, first, the complaint alleging failure to apply previous practice, the applicant in Case T-213/98 essentially criticises the Commission for having altered its practice in applying the Guidelines. 1567 As regards the setting of fines for infringements of the competition rules, the Commission exercises its powers within the limits of the discretion conferred on it by Regulation No 17, Regulation No 1017/68 and Regulation No 4056/86. It is settled case-law that traders cannot have a legitimate expectation that an existing situation which is capable of being altered by the Community institutions in the exercise of their discretion will be maintained (Case 245/81 Edeka [1982] ECR 2745, paragraph 27, Case C-350/88 Delacre and Others v Commission [1990] ECR I-395, paragraph 33, and LR AF 1998, cited at paragraph 334 above, paragraph 241). 1568 Thus, it has already been held that the Commission was entitled to raise the general level of fines, within the limits laid down in Regulation No 17, if that was necessary to ensure the implementation of the Community competition policy (Musique diffusion française, cited at paragraph 1422 above, paragraph 109). 1569 In the present case, whilst it is true that the Commission applied the Guidelines to facts which occurred prior to their publication, it has already been held above that the method for fixing the amount of the fines laid down by the Guidelines respects the legal framework defined by Regulation No 17, Regulation No 1017/68 and Regulation No 4056/86. 1570 It follows that the Commission has not infringed the applicant's legitimate expectations in following the method defined in the Guidelines for fixing the fines imposed in the contested decision. 1571 In any event, in so far as the applicant criticises the Commission for not calculating the amount of the fines on the basis of an individual assessment of the undertakings concerned and for not taking account of all the relevant factors, it is apparent from the case-law prior to the adoption of the Guidelines that the criteria for determining the gravity of the infringement are neither exhaustive nor binding (order in SPO, cited at paragraph 1525 above, paragraph 54). 1572 Thus, well before the adoption of the Guidelines, the Community judicature had already upheld the lawfulness of a calculation method whereby the Commission first determines the overall amount of the fines to be imposed and then divides that total among the undertakings concerned according to their activities in the relevant sector (IAZ, cited at paragraph 1525 above, paragraph 53). 1573 Since the Commission's previous practice did not consist solely in using a method based on an individual assessment of the undertakings concerned on the basis of all the relevant criteria, the applicant could not legitimately expect that such a method would be applied to it in the contested decision. 1574 Therefore the applicant's complaints on that point must be rejected. 1575 Second, as regards the complaint made by the applicant in Case T-214/98 alleging failure to apply the criteria set out in the Guidelines, it is apparent from the foregoing that in determining the amount of the fines on the basis, first, of the inherent gravity of the infringements, adjusted according to the size of the undertaking, and, second, of the duration of the infringements, the Commission in the present case accurately applied the criteria set out in the Guidelines, which is incidentally alleged against it by the other applicants in the complaints examined above. 1576 Further, the Guidelines expressly include the possibility of adjusting the inherent gravity of the infringement on the basis of the size of the undertakings concerned. In the sixth paragraph of section 1.A of those guidelines, the Commission states that for infringements involving more than one undertaking it may be necessary in some cases to apply weightings to the amounts of the fines determined in order to take account of the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition, particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same type. The Commission states in the seventh paragraph of section 1.A that the principle of equal punishment for the same conduct may, if the circumstances so warrant, lead to different fines being imposed on the undertakings concerned without this differentiation being governed by arithmetical calculation. 1577 Therefore the complaints of the applicants in Cases T-213/98 and T-214/98 alleging infringement of the principle of the protection of legitimate expectations must be rejected.  (d) Conclusion on the method adopted by the Commission to determine the amount of the fines 1578 It follows from all the foregoing that the applicants' pleas and complaints in respect of the Commission's method in the present case for fixing the amount of the fines must be rejected in their entirety.  B - The assessment of the mitigating circumstances 1579 The applicants allege that the Commission failed to adjust the level of the fines to reflect mitigating factors. 1580 The first mitigating factor put forward by the applicants is that, in accordance with its practice in other cases (Commission Decision 88/518/EEC of 18 July 1988 relating to a proceeding under Article 86 of the EEC Treaty, Case No IV/30.178 Napier Brown - British Sugar, OJ 1988 L 284, p. 41, paragraph 87; Commission Decision 94/985, paragraph 159), the Commission should have taken account of the fact that Community law has not been sufficiently developed in certain respects. 1581 First, they refer to the fact that, as the Commission admits in other contexts (see, for example, the Commission Notice on the application of the competition rules to access agreements in the telecommunications sector, OJ 1998 C 265, p. 2, paragraph 76), the conditions for the existence of a collective dominant position in the case of liner conferences were not clearly defined. Contrary to its statement at paragraph 522 of the contested decision, the Commission earlier expressed the view that a collective dominant position requires there to be no competition at all between the companies on the relevant market (Notice, cited above, paragraphs 78 and 79). The applicants also deny that they have known since at least 10 December 1993 that the Commission has considered that the TAA parties were in a dominant position (paragraph 603 of the contested decision). The applicants stress that that assertion, formulated in the statement of objections in the TAA case, was not repeated in the TAA decision. They add that market conditions have changed since then. 1582 Second, the contested decision is the first case in which the Commission has addressed the obligations of members of a conference with respect to new members in a case in which the conference is also governed by US law. 1583 Third, the contested decision is the first application of competition law to agreements between the members of a liner conference on service contracts. Accordingly, even if the parties were aware from October 1994 that the Commission considered the ban on individual service contracts to be a serious restriction of competition (paragraph 603), it should have imposed no fine, or only a low one (see Commission Decision 87/1/EEC of 2 December 1986 relating to a proceeding under Article 85 of the EEC Treaty, IV/31.128 - Fatty Acids, OJ 1987 L 3, p. 17, paragraphs 34, 35, 58 and 59). The TAA decision makes no finding as to the lawfulness of prohibiting individual service contracts in the light of Articles 85 and 86. As for the Commission's letter of 15 December 1994, referred to at paragraph 604 of the contested decision, it could not in any case have put the parties on notice that the Commission intended to impose fines under Article 86. Lastly, contrary to the assertion at paragraph 601, it is apparent from the letter from the applicants' lawyers set out at paragraph 153 that they did not receive legal advice to the effect that dual rates were contrary to the TAA decision where they are requested by the shipper. 1584 Fourth, the contested decision is the first case in which a fine has been imposed under Article 86 in respect of an agreement notified to the Commission. Judge Kirschner, acting as Advocate General, has concluded (in his Opinion in Tetra Pak I, cited at paragraph 1420 above) that a fine could not be imposed in such a case. The applicants also note that in other cases of that type the Commission has not imposed fines (Commission Decision 76/353/EEC of 17 December 1975 relating to a procedure under Article 86 of the EEC Treaty, IV/26.699 - Chiquita, OJ 1976 L 95, p. 1, paragraph 119; Commission Decision 89/113/EEC of 21 December 1988 relating to a proceeding under Articles 85 and 86 of the EEC Treaty, IV/30.979 and 31.394, Decca Navigator System, OJ 1989 L 43, p. 27). 1585 Fifth, the applicants repeat that the activities to which the Commission objects in the contested decision are permitted or required by US law. 1586 The applicant in Case T-212/98 considers that uncertainty as to the state of Community law and, in particular, the lack of clarity concerning the concept of collective dominant position apply a fortiori in its case, as a non-Community carrier with a weak position on the Community market. Furthermore, the Commission failed, contrary to its previous practice (Commission Decision of 15 March 1994 declaring a concentration to be compatible with the common market (Case No IV/M.422 - Unilever France / Ortiz Miko (II) according to Council Regulation (EEC) No 4064/89, paragraph 19), to take account of the imbalance between the market shares of the undertakings concerned. It also points out that when it became a member of the conference the TAA agreement had just been amended to take account of the Commission's requirements. Since the modified agreement, that is, the TACA, had been notified, it was legitimate for the applicant to assume that its admission to the TACA was compatible with Article 86. Lastly, in the light of the foregoing factors the applicant considers that it had a legitimate expectation that the Commission would not impose a fine in its case. 1587 The applicant in Case T-213/98 does not understand the significance that the Commission seems to attach to the opinions it expressed during the administrative procedure in the TAA and TACA cases, and to which it refers at paragraphs 603 and 604 of the contested decision. If the Commission intended to take these into account in calculating the fine, the applicant considers that, given the uncertain state of Community law during the period in question, the Commission's opinions should not affect the position of the parties adversely, in particular as regards the amount of the fines. The applicant submits that any undertaking to which a statement of objections is addressed is entitled to continue to believe in good faith in the lawfulness of the conduct under review and in the possibility of having the Commission's final decision annulled. 1588 In any event the Commission should have taken account of the novelty of the legal situation addressed by the contested decision as a mitigating factor. The applicant stresses the particularity of the competition rules established by Regulation No 4056/86. It submits that it is because of that particularity that well-established notions of competition law such as the prohibition of horizontal price agreements, market sharing arrangements and capacity control agreements do not apply in the maritime transport sector. In those circumstances, and in the absence of authority from the Court on the scope of the block exemption, the applicant considers that the amount of the fine should have taken account of the fact that it was reasonable for the applicants to believe that their practices complied with competition law. 1589 The second mitigating factor advanced by the applicants is the degree of cooperation with the Commission. The applicants stress first that they notified the TACA in July 1994, and other agreements on inland cooperation, namely the EIEIA and the hub and spoke system, after that date. They consider that such notification informs the Commission of all material facts and potential infringements of which it was previously unaware, so that, by analogy with the Commission Notice on the non-imposition or reduction of fines in cartel cases (OJ 1996 C 207, p. 4) and in accordance with its previous practice (Decision 89/113; Commission Decision 79/68/EEC of 12 December 1978 relating to a proceeding under Article 85 of the EEC Treaty, IV/29.430 - Kawasaki, OJ 1979 L 16, p. 9; Commission Decision 96/438/EC of 5 June 1996 relating to a proceeding pursuant to Article 85 of the EC Treaty, IV/34.983 - Fenex, OJ 1996 L 181, p. 28, paragraph 89), the Commission should not have imposed a fine or should have reduced the amount of it. The applicants point next to the lengthy correspondence and the meetings which took place on the subject of service contracts and the fixing of tariffs for inland transport. Lastly, they observe that the TACA is a modification of the TAA agreement following the TAA decision and that the TACA was modified on numerous occasions in the course of the procedure to take account of the Commission's objections. 1590 The applicant in Case T-213/98 stresses that, far from being a hidden cartel, the TACA conference has at all times acted openly and transparently, filing its tariffs with the US authorities and making them publicly available as required by Article 5 of Regulation No 4056/86. The applicant also refers to the fact that the Commission was kept continually informed of the TACA practices, which were notified in detailed applications for individual exemption. The applicant points out that under Regulation No 1017/68 and Regulation No 4056/86, notification was not obligatory. Finally, the applicant has always entered into open discussion with the Commission with a desire to arrive at a solution which complied with Community law and was at the same time commercially satisfactory. 1591 The third mitigating factor put forward by the applicants concerns the difficult market conditions and the financial losses made by the TACA parties. The applicants allege that they incurred losses of about USD 600 million in 1991 and 1992, and following the entry into force of the TACA many of them continued to make losses or only small profits. In its earlier decisions (Commission Decision 83/546/EEC of 17 October 1983 relating to a proceeding under Article 85 of the EEC Treaty, IV/30.064 - Cast iron and steel rolls, OJ 1983 L 317, p. 1, paragraphs 72 and 74) the Commission took that type of factor into account in order to reduce the amount of the fine. Moreover, the Community legislature has recognised the importance of liner conferences for Community industry (see the third and fifth recitals of the preamble to Regulation No 479/92). 1592 The applicant in Case T-212/98 further submits that because of its weak position on the relevant market and its status as a new entrant it could not have played a significant role in the alleged infringements, nor could it have committed the infringement deliberately or negligently. 1593 The Commission observes first as regards the state of Community law that in the present case there is no new factor justifying the reduction of the fines. There is nothing new in the idea that the members of a conference may occupy a dominant position or in the idea that the measures taken in a concerted effort to subvert or eliminate potential competition can constitute an abuse of a dominant position. The fact that the TACA is also subject to the requirements of US law adds nothing to the debate. As regards the application of the competition rules to service contracts, the Commission stresses that the abuse in question is a classic one consisting in the imposition of unfair trading conditions on customers and the refusal to supply users except on the conference's own terms. As for the lack of immunity from fines for an infringement of Article 86, the Commission observes that this is not a case of a new development in the substantive law relating to abuse of a dominant position. Lastly, since there is no obligation under US law to carry out the activities giving rise to the infringements, that is not a factor justifying a reduction of the fines. 1594 Second, as regards cooperation with the Commission, the applicants cannot rely on the Notice on the non-imposition or reduction of fines in cartel cases, cited above, since the present case is not one in which a cartel was denounced. On the contrary, in the course of the procedure the applicants contested the Commission's view of the law and the facts. 1595 Third, as regards the difficult market conditions, the Commission points out that the applicants' claim of unfavourable conditions relates to a period well before both the abuses in question and the contested decision. 1596 In Case T-213/98 the Commission repeats that the issues raised in the present case are not new. The Commission cannot accept that since Regulation No 4056/86 creates in certain respects a favourable competition regime for shipping lines, they were entitled to believe that none of the established rules of Community competition law applied to them. 1597 As a preliminary point, it must be remembered that the result of the consideration of the pleas prior to this one was that the fines imposed by Article 8 of the operative part of the contested decision must be annulled inasmuch as they relate to the second abuse and, where they relate to the first abuse, in so far as they concern the mutual disclosure of the availability and content of individual service contracts and, for the other practices constituting the first abuse, namely the practices in issue relating to service contracts laid down by Article 14 of the TACA, in so far as they were imposed pursuant to Regulation No 4056/86. 1598 Consequently, the present plea must be considered solely in respect of that part of the fines which was imposed in respect of those practices pursuant to Regulation No 1017/68. 1599 It is apparent from paragraph 92 of the contested decision that the carrier haulage services within the territory of the Community which fall within Regulation No 1017/68 represented some 48% of the cargo that the TACA parties carried on the transatlantic trade in 1995. 1600 Since it is apparent from Table 13 in paragraph 598 of the contested decision that the amount of the fines imposed for the first abuse is about 9% of the total fines imposed by the contested decision, the part of the fines imposed pursuant to Regulation No 1017/68 represents about 5% of that amount. 1601 It is therefore necessary to determine whether that part of the fine remains justified notwithstanding the mitigating circumstances put forward by the applicants. 1602 In paragraphs 601 to 606 of the contested decision, the Commission excluded the existence of mitigating circumstances essentially on the grounds that no reason was put forward to explain why the TACA parties should be considered to have acted as a follower as opposed to a leader and that the TACA parties could not have been unaware that their activities had as their object the restriction of competition and did not fall within the block exemption laid down by Regulation No 4056/86, and could have had no doubt as to the possibility that fines would be imposed on them under Article 86 of the Treaty notwithstanding the notification of the rules in respect of service contracts. 1603 First, as already held above at paragraphs 1468 and 1469, the abusive practices laid down by Article 14 of the TACA were all notified to the Commission with a view to obtaining individual exemption. Although the TACA parties made that notification under Regulation No 4056/86, the Commission itself informed them by letter dated 15 July 1994 that their application for individual exemption would also be examined in the light of Regulation No 1017/68 as some of the notified activities did not fall within the ambit of Regulation No 4056/86. 1604 Furthermore, the TACA parties expressly informed the Commission on 9 March 1995 that the FMC had required them to amend their agreement so as to allow the conclusion of individual service contracts in 1996 provided that those contracts complied with the provisions of Article 14 of the TACA. On 21 March 1995, the TACA parties thus sent the Commission an amended version of Article 14 of the TACA notified in 1994. 1605 It is clear that in so doing the applicants on their own initiative revealed the practices regarded by the Commission as constituting an abuse contrary to Article 86 of the Treaty. 1606 That is all the more so since neither Regulation No 4056/86 nor Regulation No 1017/68 establishes a system of compulsory notification for the grant of individual exemption, so that the applicants notified the TACA voluntarily. 1607 In those circumstances, the notification of the TACA enabled the Commission to establish more easily that the practices provided for in that agreement relating to service contracts were an abuse, and thus facilitated the Commission's task of establishing infringements of the Community competition rules and bringing them to an end which, according to the case-law, is a factor justifying a reduction in the fine (Case C-297/98 P SCA Holding v Commission [2000] ECR I-10101, paragraph 36; see also, to that effect, Case C-338/00 P Volkswagen v Commission [2003] ECR I-9189, paragraph 179). 1608 It is apparent that in the contested decision the Commission did not consider in assessing whether there were any mitigating circumstances in the TACA parties' case the extent to which they cooperated during the administrative procedure. Neither in its written pleadings nor at the hearing did the Commission deny that the notification of the TACA amounted to cooperation, however. It merely submitted in the defence that during the administrative procedure the applicants persistently contested the facts and the legal assessment thereof, so that it could not be said that there was any cooperation within the meaning of the Notice on the non-imposition or reduction of fines in cartel cases. 1609 However, the applicants do not claim that they did not dispute the facts or the infringements recorded in the contested decision, but merely that they enabled the Commission to establish the existence of those facts and infringements more easily. That being the case, the applicants do not rely on that notice at all, which concerns cooperation with the Commission in relation to the exposure of secret cartels, which is not the situation in the present case. They rely rather on the cooperation to which the Commission must have regard in any proceedings applying the Community competition rules where the conduct of the undertakings in question during the administrative procedure facilitates the Commission's task within the meaning of the case-law cited above. In any event, under the sixth indent of section 3 of the Guidelines, the Commission itself provides for the possibility of reducing fines in order to take account of effective cooperation by the undertaking in the proceedings, outside the scope of the Notice ... on the non-imposition or reduction of fines. 1610 Finally, it is irrelevant that the abusive practices in question were disclosed for the purpose of obtaining individual exemption under Article 85(3) of the Treaty. Since, by their notification, the TACA parties enabled the Commission to detect and more easily prove the existence of the relevant practices constituting the first abuse, they necessarily facilitated the Commission's task within the meaning of the case-law cited above. 1611 Second, the contested decision is the first decision in which the Commission directly assessed the lawfulness, in the light of the Community competition rules, of the practices on service contracts adopted by shipping conferences. 1612 As regards in the first place the application of Article 85 of the Treaty, the Commission errs in relying on paragraph 410 of the TAA decision in order to claim at paragraph 603 of the contested decision that the applicants have known since October 1994 that the Commission considered the banning of individual service contracts to be a serious restriction of competition. Under that paragraph of the TAA decision, the Commission does not in the least find that the prohibition of individual service contracts constitutes a restriction of competition within the meaning of Article 85(1) of the Treaty; it merely finds that the agreement fixing maritime transport rates entered into by the TAA members does not satisfy the first condition for the grant of individual exemption laid down by Article 85(3) of the Treaty, in particular on the ground that by prohibiting direct and individual business negotiations between structured members of the TAA and shippers ... the TAA limits the opportunities for direct cooperation and partnership in the medium or long term between suppliers and clients. 1613 Furthermore, in so far as, given the reference in paragraph 286 of the TAA decision to paragraphs 13 to 15 thereof, that decision may be interpreted as prohibiting the rules and conditions laid down by the TAA on service contracts described in those paragraphs, namely those concerning their duration, the minimum quantities to which they must apply and the procedures for entering into individual service contracts (an interpretation not advocated by the Commission either in the present proceedings or in the TAA case), it is clear that since, according to the TAA decision, the TAA was not a shipping conference, that decision cannot be regarded as having already assessed the lawfulness of the rules adopted by shipping conferences on service contracts. In any event, the TAA decision merely assesses the lawfulness of two of the five practices considered to be abusive in the contested decision. By contrast, the TAA notified in 1992 also contained rules for the prohibition of contingency clauses, the prohibition of multiple contracts and the amount of liquidated damages, which were considered to be abusive in the contested decision. 1614 Next, as regards the application of Article 86 of the Treaty, whilst it is true, as the Commission states at paragraph 602 of the contested decision, that in the statement of objections in the TAA case it informed the TAA parties that it intended to impose fines for abuse of a dominant position in relation to service contracts, in the final decision the Commission did not find that there had been an infringement of Article 86 of the Treaty on that point. In those circumstances, given the provisional nature of the statement of objections, the applicants were entitled to believe that the Commission had withdrawn its complaints concerning the application of Article 86 of the Treaty to the rules on service contracts. 1615 Third, it cannot seriously be denied that the legal treatment that should be reserved for the practices of shipping conferences on service contracts, particularly because of their close links with agreements which are the subject of block exemption pursuant to a wholly specific and exceptional set of rules under competition law, was not at all straightforward and, in particular, raised complex legal issues (see by analogy FEFC, cited at paragraph 196 above, paragraph 484). 1616 In the present case, as is apparent from paragraphs 496 to 507 and 520 to 528 above, although the grounds of the contested decision are set out in 611 paragraphs, it was only at the hearing that the Commission explained the extent to which the TACA practices on service contracts were, according to that decision, contrary to Articles 85 and 86 of the Treaty, and the Commission itself admitted at the hearing and in reply to the Court's written questions on that point that both the operative part and certain paragraphs of the contested decision could, taken separately, be interpreted otherwise. In particular, the contested decision contains several contradictory passages concerning the question whether the TACA parties were entitled to enter into conference service contracts and whether those parties were free to determine the content of such contracts even though, as is apparent from paragraphs 421 to 423 of the TAA judgment, the TAA decision already gave rise to difficulties of interpretation on that point. 1617 Fourth, the abuse resulting from the practices on service contracts do not constitute a classic abuse within the meaning of Article 86 of the Treaty. 1618 Contrary to the Commission's submission, the practices in question can certainly not be likened to cases of an outright refusal to supply, which have already been held to be abusive by the case-law relating to, inter alia, ceasing to deliver to an existing customer where there is nothing unusual about that customer's orders (United Brands, cited at paragraph 853 above, paragraph 186), refusing to supply a customer so as to reserve for oneself a derivative market (Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano and Commercial Solvents v Commission [1974] ECR 223, paragraph 24) or the refusal to supply a customer so as to protect exclusive rights (Case C-238/87 Volvo [1988] ECR 6211, paragraph 9, and Joined Cases C-241/91 P and C-242/91 P RTE and ITP v Commission [1995] ECR I-743, paragraph 54). In the present case, whilst it is true that by the practices in question the TACA parties restricted the availability and content of service contracts, they in no way deprived shippers of the possibility to have their cargo carried by conference members on the trade in question, whether under service contracts or at tariff rates. The Commission itself stated at paragraph 553 of the contested decision that the practices in question did not constitute an outright refusal to supply but, in its own words, a refusal to supply other than on the basis of unfair conditions. 1619 Furthermore, whilst the relevant restrictions in relation to service contracts may be qualified, at paragraph 592 of the contested decision, as a serious infringement within the meaning of the Guidelines, given their objective of seeking to restrict price competition, which the applicants cannot seriously deny since they justify those rules by the need to preserve the stability of tariff rates, it is not manifestly clear that such rules constitute an abuse within the meaning of Article 86 of the Treaty. 1620 In addition to the fact that in the TAA decision the Commission abandoned the complaints of abuse initially formulated on that point, in the present case it was only in the statement of objections, after three years of examining the rules in question, that the Commission informed the TACA parties for the first time that it intended to apply Article 86 of the Treaty to the practices even though it is apparent from the exchange of correspondence during the administrative procedure that it had already examined them in detail at the end of 1994 and at the beginning of 1995. At that stage, however, the Commission at no time alluded to a possible application of Article 86 of the Treaty. Thus, in its letter of 15 December 1994 the Commission merely emphasised that the practices on service contracts did not fall within the block exemption laid down by Regulation No 4056/86 and that they should be amended in order to qualify for individual exemption. Similarly, when the Commission was informed by the TACA parties, following the intervention of the FMC, of the application of the rules laid down by Article 14 of the TACA to individual service contracts, it merely informed them, in its letter of 16 May 1995, that that application appeared to restrict competition and was unlikely to qualify for individual exemption. 1621 In those circumstances, the TACA parties could, notwithstanding the case-law to the effect that agreements entered into by a dominant undertaking are liable to constitute an abuse, legitimately have been unaware that their practices on service contracts were likely to be regarded as such. It was only at the hearing that the Commission explained for the first time that, whilst the contested decision found that the rules laid down by Article 14 of the TACA were contrary to Article 85 of the Treaty only in so far as they applied to individual service contracts, but not in so far as they applied to conference service contracts, the decision established that those rules were in any event contrary to Article 86 of the Treaty, including in their application to conference service contracts. 1622 Fifth, the applicants had every reason to believe during the administrative procedure in question that the Commission would not fine them in respect of their practices on service contracts. 1623 First, in so far as those practices fall within the ambit of Regulation No 4056/86, it has already been held above that the TACA parties enjoyed immunity from fines under that regulation for the infringements of Article 86 of the Treaty. Although the part of the fines imposed pursuant to Regulation No 4056/86 need no longer be considered in the context of the present pleas, the Commission was thus wrong to find against the applicants at paragraph 604 of the contested decision that all of the TACA parties had access to sufficient legal advice to know of the possibility of fines for breaches of Article 86 notwithstanding the notification of the TACA. 1624 Furthermore, in so far as the practices in question fall within Regulation No 1017/68, there existed at that time genuine uncertainty as to whether there was any immunity from fines under that regulation. Although the Court held in Atlantic Container Line, cited at paragraph 44 above, that there was no immunity from fines under Regulation No 1017/68 and that such immunity could not be inferred from general principles, it cannot be denied that there was a serious doubt in that regard, since, according to the decision at issue in that judgment, the Commission itself had considered it necessary by way of a precaution to withdraw from the TACA parties the immunity from fines in respect of the TACA provisions fixing inland rates, should those parties have qualified for immunity under Regulation No 1017/68. It follows that the complaint set out at paragraph 604 of the contested decision, to the effect that the TACA parties could not have been unaware of the risk that they would be fined under Article 86 of the Treaty in respect of the notified agreements, likewise cannot be upheld in respect of the part of the fines imposed pursuant to Regulation No 1017/68, which is the only one still to be examined for the purposes of the present pleas. 1625 Therefore, even if the Commission informed the TACA parties by letter of 15 December 1994 that in its view the TACA practices on service contracts did not fall within the block exemption laid down by Regulation No 4056/86, which admittedly suggested that it had reservations in that regard, it was nevertheless legitimate for the TACA parties to believe that they were protected from the risk of fines under Articles 85 and 86 of the Treaty by the fact of notifying those rules. The Commission could not therefore, at paragraph 604 of the contested decision, hold that letter against the applicants so as to exclude the existence of mitigating circumstances. 1626 Second, notwithstanding the continuous exchange of correspondence with the TACA parties during the administrative procedure in the present case, the Commission did not inform them prior to issuing the statement of objections that it intended to treat the practices in question not only as restrictions of competition within the meaning of Article 85 of the Treaty, but also as an abuse of a dominant position under Article 86 of the Treaty. 1627 It must be remembered, however, that all the fines imposed by the contested decision were in respect of the period between the notification of the TACA and the issue of the statement of objections. 1628 It follows that even if the TACA parties considered that the notification of the practices on service contracts did not give them immunity from fines for infringements of Article 86 of the Treaty, they had no reason to amend them in order to escape fines under that provision since, at that time, they were unaware that the Commission considered them to be an abuse. 1629 For that reason too, the complaint in paragraph 604 of the contested decision that all of the TACA parties had access to sufficient legal advice to know of the possibility of fines for breaches of Article 86 notwithstanding the notification of the TACA cannot be upheld. 1630 Third and finally, as the applicants submitted in their written pleadings, the Commission has already conceded in earlier decisions that where the same conduct was contrary to Articles 85 and 86 of the Treaty, no fines should be imposed where that conduct had been notified with a view to obtaining individual exemption under Article 85(3) of the Treaty. Thus it is apparent from Decision 89/113, in which the Commission found that Racal Decca had infringed Articles 85 and 86 of the Treaty in respect of certain agreements notified for the purposes of an exemption, that no fine was imposed on that undertaking, either under Article 85 or under Article 86, inter alia on the ground that from the beginning Racal Decca had brought the abusive practices to the Commission's attention. Similarly, the Court has already held that in Decision 76/353 the Commission did not impose a fine on United Brands under Article 86 of the Treaty for having prohibited its ripener/distributors from reselling its bananas while still green, as that prohibition appeared in the general conditions of sale notified by United Brands with a view to obtaining an exemption (United Brands, cited at paragraph 853 above, paragraphs 291 and 292). 1631 At the hearing the applicants also pointed out rightly that in the Van den Bergh Foods case (Commission Decision 98/531/EC of 11 March 1998 relating to a proceeding under Articles 85 and 86 of the EC Treaty, Case Nos IV/34.073, IV/34.395 and IV/35.436 - Van den Bergh Foods Limited, OJ 1998 L 246, p. 1) the agreements notified by the dominant undertaking in question with a view to obtaining individual exemption, which made provision for the supply of freezers to sales points distributing that undertaking's ice cream, on condition that they be used exclusively for those products, were regarded as being both a restriction of competition and an abuse, but were not penalised with fines. 1632 The Commission has not put forward any other decisions in which a fine was imposed for infringement of Article 86 of the Treaty in respect of conduct notified under Article 85(3) of the Treaty. 1633 In the light of all of those factors, without there being any need to make a finding in respect of the other pleas and complaints raised by the applicants, the Court in the exercise of its unlimited jurisdiction considers that there is justification for not imposing a fine in the present case in respect of the abusive practices provided for in Article 14 of the TACA in so far as they fall within the ambit of Regulation No 1017/68. 1634 Consequently, Article 8 of the operative part of the contested decision must be annulled. VII. The plea alleging infringement of the second paragraph of Article 215 of the Treaty 1635 The applicant in Case T-213/98 submits that the Commission caused it unlawful injury in requiring it to provide a bank guarantee for the fine imposed on it. 1636 The Commission considers that that plea is inadmissible and unfounded. 1637 Under the first paragraph of Article 21 of the Statute of the Court of Justice, applicable to proceedings before the Court of First Instance by virtue of the first paragraph of Article 53 thereof, and under Article 44(1)(c) and (d) of the Rules of Procedure, the application must include the subject-matter of the dispute, the forms of order sought and a brief statement of the pleas in law. Those particulars must be sufficiently clear and precise to enable the defendant to prepare the defence and the Court of First Instance to rule on the application without further information, as the case may be. In order to guarantee respect for the adversarial system, legal certainty and sound administration of justice it is necessary, for an action to be admissible, that the basic matters of law and fact relied on be indicated, at least in summary form, coherently and intelligibly in the application itself (order in de Hoe, cited at paragraph 281 above, paragraph 20; Ismeri Europa, cited at paragraph 281 above, paragraph 29; and order in Partido Latinoamericano, cited at paragraph 281 above, paragraph 6). 1638 It is apparent from the case-law that in the light of those requirements it is first and foremost for the party seeking to establish the Community's liability to adduce proof as to the existence or extent of the damage it alleges and to establish the causal link between that damage and the conduct complained of on the part of the Community institutions (Case 26/74 Roquette Frères v Commission [1976] ECR 677, paragraphs 22 and 23, and Case C-401/96 P Somaco v Commission [1998] ECR I-2587, paragraph 71). 1639 In the present case, as the Commission rightly pointed out at the hearing, the application does not adequately identify the conduct on the part of the Commission alleged to be defective. 1640 In its written pleadings the applicant merely points out that the Commission's insistence on a bank guarantee placed NYK in the undesirable position of having to arrange such an instrument at considerable cost and that given the wholly exceptional nature of the case, characterised as it is by almost unprecedented examples of maladministration on the part of the Commission, NYK respectfully submits that the Commission has caused it unlawful injury. Similarly, at the hearing, the applicant merely submitted that the illegalities alleged in the context of the pleas seeking annulment are so serious that they justify compensation under Article 215 of the Treaty. 1641 The passages from the application cited above and the evidence submitted at the hearing do not enable the Court to identify the alleged fault of the Commission, or even whether that conduct is distinct from the illegality of the contested decision (Joined Cases T-185/96, T-189/96 and T-190/96 Riviera Auto Service and Others v Commission [1999] ECR II-93, paragraph 90; in the sector of the ECSC Treaty: Case T-171/99 Corus UK v Commission [2001] ECR II-2967, paragraph 45). In particular, the application does not clearly indicate whether the alleged fault is the adoption of the contested decision, the fact that the Commission required a bank guarantee, or both. 1642 It follows that the forms of order seeking compensation set out in the application must, for that reason alone, be rejected as inadmissible. 1643 Furthermore, in so far as at the hearing the applicant submitted in the context of its claim for compensation under Article 215 of the Treaty that the enforcement of the Court's judgment setting aside that aspect of the decision would require the Commission to reimburse the costs in connection with providing the bank guarantee pursuant to Article 176 of the EC Treaty (now Article 233 EC), it suffices to recall that, according to the case-law, a request such as that, made independently of the application for costs, must be rejected as inadmissible because it in fact concerns enforcement of the judgment. Under Article 176 of the Treaty it is for the Commission to take the measures necessary to comply with the judgment (Cimenteries CBR, cited at paragraph 172 above, paragraph 5118, and Case T-224/00 Archer Daniels Midland and Others v Commission [2003] ECR II-2597, paragraph 356). In any event, in the present case it should be noted that such a plea alleging infringement of Article 176 of the Treaty, since it does not appear in the application and is not based on any evidence adduced during the proceedings, constitutes a new plea within the meaning of Article 48(2) of the Rules of Procedure. 1644 For all those reasons, the forms of order seeking compensation must be rejected as being inadmissible in any event.  Costs 1645 Under Article 87(3) of the Rules of Procedure the Court may order that the costs be shared or that the parties bear their own costs where each party succeeds on some and fails on other heads, or where the circumstances are exceptional. 1646 In the present case, it is true that the contested decision is one of the longest ever adopted by the Commission in application of Articles 85 and 86 of the Treaty, that that decision raises relatively complex issues of fact and law in respect of which, when the actions were brought, there was no relevant case-law and that as Community law stands at present there is no provision limiting the length of the written pleadings or the number of documents lodged in support of an action for annulment under Article 173 of the Treaty. However, the four applications lodged by the applicants and the annexes thereto are unusually long - each application is some 500 pages long whilst the annexes make up approximately 100 files - and even if some of the pleas they contain have been upheld they are for the most part unfounded, and their number is so great as to amount to an abuse. 1647 In those circumstances, and notwithstanding the fact that some heads of the application have been upheld, since by their conduct the applicants have substantially added to the burden of dealing with this case, thus needlessly adding in particular to the costs of the Commission, the Court considers it fair, having regard to the circumstances of the case, to order each party to bear its own costs. 1648 As regards the ECTU, the intervener, the Court considers it fair, having regard to Article 87(4) of the Rules of Procedure of the Court of First Instance, to order it to bear its own costs. On those grounds, THE COURT OF FIRST INSTANCE (Third Chamber),hereby: 1)      Annuls Article 5 of Commission Decision 1999/243/EC of 16 September 1998 relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty (Case No IV/35.134 - Trans-Atlantic Conference Agreement); 2)      Annuls Article 6 of Decision 1999/243 in so far as it applies to mutual disclosure by the applicants of the availability and content of their individual service contracts; 3)      Annuls Article 7 of Decision 1999/243 to the extent required by the annulment of Articles 5 and 6; 4)      Annuls Article 8 of Decision 1999/243; 5)      Dismisses the remainder of the applications; 6)      Orders the applicants and the Commission each to bear their own costs; 7)      Orders the European Council of Transport Users ASBL to bear its own costs. Lenaerts AziziJaegerDelivered in open court in Luxembourg on 30 September 2003. H. Jung       K. LenaertsRegistrar       PresidentTable des matièresLegal backgroundFactsI.     The Transatlantic Agreement (TAA)II.   The Trans-Atlantic Conference Agreement (TACA)TACA notificationsAdministrative procedure withdrawing immunity from finesAdministrative procedure for infringement of Articles 85 and 86 of the TreatyThe contested decisionIII. The relevant provisions of the TACAThe collective fixing of transport ratesService contractsRemuneration of freight forwardersIV.   The definition of the relevant marketV.     Legal assessmentApplication of Article 85 of the TreatyApplication of Article 86 of the TreatyFinesThe operative partProcedureForms of order soughtLawI.     The pleas alleging infringement of the rights of the defencePart one: infringement of the right to be heardA –  The plea alleging that the statement of objections is unlawful because it is prematureArguments of the partiesFindings of the CourtB –  The pleas alleging the presence of new allegations of fact or law in the contested decision1. The purportedly new allegations of fact or law concerning the second abusea) Arguments of the partiesb) Findings of the Court1.  The change of case in relation to the second abuse in the contested decision2.  The documentary evidence relied upon in support of the second abuse recorded in the contested decision2. The purportedly new allegations of fact or law other than those relating to the second abusea) Preliminary observationsb) The new allegations of fact or law concerning the lawfulness of joint service contracts, the fact that the TACA parties held a collective position and the fact that that position was a dominant one 1.  Arguments of the parties2.  Findings of the Court(i) The allegations concerning the lawfulness of joint service contracts(ii) The allegations that the TACA parties held a collective position(iii) The allegations concerning the dominant nature of the TACA parties' positionc) The new allegations of fact and law arising from the applicants' responses to certain requests for information after the statement of objections was issued (i) The admissibility of the plea(ii) The substance of the plead) ConclusionA –  Preliminary observationsB –  The plea alleging failure to disclose the minutes of the meetings between the Commission and the complainantsC –  The plea alleging failure to disclose the minutes or any other record of a meeting between the member of the Commission responsible for competition matters and the ESC D –  The plea alleging that the file is incompleteE –  The conduct of the administrative procedurea) The prematurity of the statement of objectionsb) The drafting of the contested decisionc) The threats of finesF –  The assessment of the facts, evidence and relevant questionsG –  The assessment of the finesH –  Conclusion on the third partII.   The pleas alleging that there is no infringement of Article 85 of the Treaty and of Article 2 of Regulation No 1017/68 and various failures to state reasons in that regard A –  The TACA parties' conference service contract authority1.  The block exemption under Article 3 of Regulation No 4056/862.  Individual exemption under Article 85(3) of the TreatyB –  The TACA rules on service contracts1.  The rules as to the content of conference service contracts2.  The rules on the availability and content of individual service contracts3.  The prohibition of independent action on service contractsA –  Arguments of the partiesB –  Findings of the CourtIII. Pleas alleging absence of infringement of Article 86 of the Treaty and various failures to state reasons in that regardA –  Pleas alleging incorrect assessment of the economic links between the TACA partiesB –  Pleas alleging errors of assessment concerning internal competition between the parties to the TACA1.  Application in the contested decision of the wrong legal testa)  Arguments of the partiesb)  Findings of the Court2.  Pleas alleging incorrect assessment of internal price and non-price competition1. Internal price competition2. Internal non-price competition3.The specific arguments put forward by the applicant in Case T-213/984.Conclusion on the extent of internal competition3.  Pleas alleging failure to state reasonsC –  Conclusion on the first partD –  Definition of the relevant market1.  The relevant market for servicesa) The relevant transport services(1) Arguments of the parties(2) Findings of the Court(i) Demand-side substitutionBreak bulk shippingNVOCCsConsideration of the cumulative effect of sources of competition(ii) Supply-side substitutionb) Geographical scope of the services in questionc) Conclusion on the relevant market for services2. The relevant geographic marketb)Findings of the Court3. Conclusion on the definition of the relevant marketE –  The existence of a dominant position on the relevant market1. The market share held by the TACA parties(a) Arguments of the parties(b) Findings of the Court2. Effective external competition(1) The number of competitors of the TACA parties and the increase in their market share(2) The rate of increase in the volume of freight carried by the TACA's competitors(3) The effective competition from Evergreen and Lykes(4) The TACA's leadership in pricing matters and the role of follower played by the independent competitors(5) Competition from the Canadian Gateway(6) Conclusion on effective external competition3. Potential competition(1) The costs of market entry(2) Recent non-TACA entries to the relevant market(3) Service contracts(4) Conclusion on potential competition4. Internal competition within the TACA5. The development of rates on the trade in question(1) The proportion represented by freight carried at the ordinary rates compared with freight carried under TVRs and service contracts (2) The increase in the rates charged by the TACA parties6. Conclusion on the pleas relating to the existence of a dominant position on the relevant marketC - Conclusion on the second partPart three: no abuseA - The first abuse: placing restrictions on the availability and content of service contracts1. Objective justification of the practices constituting the first abuse(1) Justifications on the basis of the necessity of certain of the practices in question(2) Justifications based on the conformity of certain practices in question with standard practice in the maritime transport sector (3) Justifications based on the conformity of some of the practices in question with US law(i) commence no sooner than January 1, 1996, and terminate on or before December 31, 1996 ...(ii) comply with the Contract Guidelines contained in Article 14.2(a) - (h).2. The statement of reasons in the contested decision with regard to the first abuse3. Conclusion on the first abuseB - The second abuse: the abusive alteration of the competitive structure of the market1. The evidence for the practices constituting the second abuse(1) Preliminary observations(2) The measures specifically addressed to Hanjin and Hyundai(3) The general measures addressed to all potential competitors(i) Dual-rate service contracts(ii) Service contracts with NVOCCs(1) The specific measures to induce Hanjin and Hyundai(i) The obligations under US law(ii) Evidence of the measures addressed to Hanjin and HyundaiHanjin's accession to the TACAHyundai's accession to the TACA(2) The general measures to induce potential competitors(3) Conclusion on the evidence for the measures constituting the second abuseIV.   IV - The pleas alleging failure to comply with the procedural requirements laid down by Regulation No 4056/86V.     The plea alleging failure to state reasons in respect of the failure to have regard to US lawVI.   The pleas concerning the amount of the fines and various failures to state reasons in that regardPart one: immunity from finesA - Arguments of the partiesB - Findings of the Court1. The scope of the immunity provided for by Regulation No 4056/862. The application of the immunity from fines to the first abusePart two: calculation of the finesA - The method adopted by the Commission to determine the amount of the fines1. Arguments of the parties2. Findings of the Court(a) The principle of individual assessment(b) The principles of equal treatment and proportionality(c) The principle of the protection of legitimate expectations(d) Conclusion on the method adopted by the Commission to determine the amount of the finesB - The assessment of the mitigating circumstancesVII. The plea alleging infringement of the second paragraph of Article 215 of the TreatyCosts* Langue de procédure : l'anglais.

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THE FREE MOVEMENT OF CAPITAL DOES NOT PRECLUDE ACQUISITION OF AGRICULTURAL LAND BEING MADE SUBJECT TO THE GRANTING OF A PRIOR AUTHORISATION SUCH AS THAT INTRODUCED BY THE VORARLBERGER GRUNDVERKEHRSGESETZ

«(Free movement of capital – Article 73b of the EC Treaty (now Article 56 EC) – Article 40 of and Annex XII to the EEA Agreement – Prior authorisation procedure for the acquisition of agricultural and forestry plots – Permissibility – Conditions)» Summary of the Judgment 1.. Free movement of capital – Restrictions on the acquisition of agricultural and forestry plots placed on nationals of Member States of the European Economic Area – Assessment in the light of the Agreement on the European Economic Area – Legal scope identical to that of Community provisions (EC Treaty, Art. 73b (now Art. 56 EC); EEA Agreement, Art. 40 and Annex XII) Free movement of capital – Restrictions on the acquisition of agricultural and forestry plots placed on nationals of Member States of the European Economic Area – Assessment in the light of the Agreement on the European Economic Area – Legal scope identical to that of Community provisions 2.. Free movement of capital – Restrictions on the acquisition of immovable property – System of prior authorisation for the acquisition of farmland – Whether permissible – Limits – Conditions as to residence and involvement in farming not permissible (Arts 73b, 73c, 73d, 73f, and 73g of the EC Treaty (now Arts 56 EC, 57 EC, 58 EC, 59 EC and 60 EC)) Free movement of capital – Restrictions on the acquisition of immovable property – System of prior authorisation for the acquisition of farmland – Whether permissible – Limits – Conditions as to residence and involvement in farming not permissible JUDGMENT OF THE COURT23 September 2003 (1) ((Free movement of capital – Article 73b of the EC Treaty (now Article 56 EC) – Article 40 of and Annex XII to the EEA Agreement – Prior authorisation procedure for the acquisition of agricultural and forestry plots – Permissibility – Conditions))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Ms Ospelt and Schlössle Weissenberg Familienstiftung, by C. Hopp, Rechtsanwalt, ─ the Austrian Government, by H. Dossi, acting as Agent, ─ the Government of the Principality of Liechtenstein, by A. Entner-Koch, acting as Agent, ─ the Norwegian Government, by I. Holten, acting as Agent, ─ the Commission of the European Communities, by G. Braun and M. Patakia, acting as Agents, ─ the EFTA Surveillance Authority, by E. Wright and D. Sif Tynes, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of: Ms Ospelt and Schlössle Weissenberg Familienstiftung, represented by C. Hopp; the Austrian Government, represented by P. Kustor and H. Kraft, acting as Agents; the Norwegian Government, represented by I. Holten; the Commission, represented by G. Braun and M. Patakia; and the EFTA Surveillance Authority, represented by E. Wright and D. Sif Tynes, at the hearing on 7 January 2003, after hearing the Opinion of the Advocate General at the sitting on 10 April 2003, gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulmann EdwardLa Pergola Jann SkourisMacken Colneric von BahrCunha Rodrigues Rosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

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A NATIONAL OF A NON-EU STATE WHO IS MARRIED TO A EU CITIZEN MAY RESIDE IN THE CITIZEN'S STATE OF ORIGIN WHEN THAT CITIZEN, AFTER MAKING USE OF THEIR RIGHT TO FREEDOM OF MOVEMENT, RETURNS TO THEIR HOME COUNTRY WITH THEIR SPOUSE IN ORDER TO WORK, PROVIDED THAT THE SPOUSE HAS LAWFULLY RESIDED IN ANOTHER MEMBER STATE

«(Freedom of movement for workers – National of a non-Member State who is the spouse of a national of a Member State – Spouse under a prohibition on entering and remaining in that Member State – Temporary establishment of the couple in another Member State – Establishment with a view to acquisition by spouse of a right under Community law to enter and remain in the first Member State – Abuse)» Summary of the Judgment 1.. Freedom of movement for persons – Workers – Right of residence of family members – Right of residence of spouse who is a national of a non-Member State – Conditions – Lawful residence in the territory of a Member State (Council Regulation No 1612/68, Art. 10) Freedom of movement for persons – Workers – Right of residence of family members – Right of residence of spouse who is a national of a non-Member State – Conditions – Lawful residence in the territory of a Member State 2.. Freedom of movement for persons – Workers – Right of residence of family members – Right of residence of spouse who is a national of a non-Member State – Couple exercising right to freedom of movement then returning to the State of origin – Objectives pursued – Not relevant – Limits – Marriages of convenience to circumvent national rules on entry and residence in the case of nationals of non-Member States (Council Regulation No 1612/68, Art. 10) Freedom of movement for persons – Workers – Right of residence of family members – Right of residence of spouse who is a national of a non-Member State – Couple exercising right to freedom of movement then returning to the State of origin – Objectives pursued – Not relevant – Limits – Marriages of convenience to circumvent national rules on entry and residence in the case of nationals of non-Member States 3.. Freedom of movement for persons – Workers – Right of residence of family members – Right of residence of spouse who is a national of a non-Member State – Couple exercising right to freedom of movement then returning to the State of origin – Refusal of entry and residence in the absence of lawful residence in a Member State – Regard paid to the European Convention on Human Rights – Right to respect for family life (European Convention for the Protection of Human Rights and Fundamental Freedoms, Art. 8; Council Regulation No 1612/68, Art. 10) Freedom of movement for persons – Workers – Right of residence of family members – Right of residence of spouse who is a national of a non-Member State – Couple exercising right to freedom of movement then returning to the State of origin – Refusal of entry and residence in the absence of lawful residence in a Member State – Regard paid to the European Convention on Human Rights – Right to respect for family life JUDGMENT OF THE COURT23 September 2003 (1) ((Freedom of movement for workers – National of a non-Member State who is the spouse of a national of a Member State – Spouse under a prohibition on entering and remaining in that Member State – Temporary establishment of the couple in another Member State – Establishment with a view to acquisition by spouse of a right under Community law to enter and remain in the first Member State – Abuse)) andTHE COURT,,after considering the written observations submitted on behalf of: ─ Mr Akrich, by T. Eicke, Barrister, instructed by D. Flynn, of the Joint Council for the Welfare of Immigrants and D. Betts, Solicitor, ─ the United Kingdom Government, by J.E. Collins, acting as Agent, and E. Sharpston QC and T.R. Tam, Barrister, ─ the Greek Government, by I. Galani-Maragkoudaki and S. Vodina, acting as Agents, ─ the Commission of the European Communities, by C. O'Reilly, acting as Agent, having regard to the Report for the Hearing,after hearing the oral observations of Mr H. Akrich, represented by T. Eicke, the United Kingdom Government, represented by J.E. Collins, and by E. Sharpston QC, and the Greek Government, represented by I. Galani-Maragkoudaki and E.-M. Mamouna, acting as Agents, and the Commission, represented by C. O'Reilly, at the hearing on 5 November 2002, after hearing the Opinion of the Advocate General at the sitting on 27 February 2003, gives the followingLegislationOn those grounds, THE COURT,Rodríguez Iglesias PuissochetWathelet SchintgenTimmermansEdward La PergolaJannMacken Colnericvon Bahr R. Grass G. C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: English. Language of the case: English.

1c8f6-cf59ad2-4df8

EN

DUTCH TAX PROVISIONS WHICH PLACE PARENT COMPANIES WITH SUBSIDIARIES IN OTHER MEMBER STATES AT A DISADVANTAGE ARE INCOMPATIBLE WITH COMMUNITY LAW

«(Freedom of establishment – Taxation – Taxes on company profits – Limitation of the deductibility in one Member State of costs connected with holdings of a parent company in its subsidiaries established in other Member States – Coherence of the tax system)» Summary of the Judgment Approximation of laws – Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States – Directive 90/435 – Costs of a parent company established in one Member State incurred in connection with its holding in the capital of its subsidiaries established in other Member States – Deductibility subject to the condition that such costs contribute to making profits taxable in the first Member State – Not permissible having regard to Article 52 of the Treaty (now, after amendment, Article 43 EC) (EC Treaty, Art. 52 (now, after amendment, Art. 43 EC); Council Directive 90/435)Approximation of laws – Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States – Directive 90/435 – Costs of a parent company established in one Member State incurred in connection with its holding in the capital of its subsidiaries established in other Member States – Deductibility subject to the condition that such costs contribute to making profits taxable in the first Member State – Not permissible having regard to Article 52 of the Treaty (now, after amendment, Article 43 EC) JUDGMENT OF THE COURT (Fifth Chamber)18 September 2003 (1) ((Freedom of establishment – Taxation – Taxes on company profits – Limitation of the deductibility in one Member State of costs connected with holdings of a parent company in its subsidiaries established in other Member States – Coherence of the tax system)) andTHE COURT (Fifth Chamber),,after considering the written observations submitted on behalf of: ─ Bosal Holding BV, by F.C. de Hosson, advocaat, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the United Kingdom Government, by J.E. Collins, acting as Agent, and R. Singh QC, ─ the Commission of the European Communities, by R. Lyal and H. van Vliet, acting as Agents having regard to the Report for the Hearing,after hearing the oral observations of Bosal Holding BV, represented by F.C. de Hosson, of the Netherlands Government, represented by H.G. Sevenster, of the United Kingdom Government, represented by J.E. Collins, R. Singh and M. Hoskins, Barrister, and of the Commission, represented by R. Lyal and H. van Vliet, at the hearing on 11 July 2002, after hearing the Opinion of the Advocate General at the sitting on 24 September 2002, gives the followingLegal backgroundOn those grounds, THE COURT (Fifth Chamber),WatheletTimmermans Edward Jannvon Bahr R. Grass M. Wathelet RegistrarPresident of the Fifth Chamber 1 – Language of the case: Dutch. Language of the case: Dutch.

a047b-cd6f0a3-4aa9

EN

COMMUNITY RULES IN THE TELECOMMUNICATIONS SECTOR PROHIBIT MEMBER STATES FROM IMPOSING FINANCIAL CHARGES ON LICENCE HOLDERS WHICH ARE CALCULATED ON THE BASIS OF THEIR TURNOVER

«(Telecommunications services – General authorisations and individual licences – Directive 97/13/EC – Fees and charges for individual licences)» Summary of the Judgment Approximation of laws – Telecommunications services – Common framework for general authorisations and individual licences – Directive 97/13 – Fees and charges for undertakings holding individual licences – Imposition of financial charges beyond those authorised by the Directive – Not permissible(Directive of the European Parliament and of the Council 97/13, Art. 11)Approximation of laws – Telecommunications services – Common framework for general authorisations and individual licences – Directive 97/13 – Fees and charges for undertakings holding individual licences – Imposition of financial charges beyond those authorised by the Directive – Not permissibleJUDGMENT OF THE COURT (Fifth Chamber)18 September 2003 (1) ((Telecommunications services – General authorisations and individual licences – Directive 97/13/EC – Fees and charges for individual licences))andTHE COURT (Fifth Chamber),,after considering the written observations submitted on behalf of: ─ Albacom SpA, by R. Caiazzo and G. Pesce, avvocati, ─ Infostrada SpA, by F.G. Scoca, M. Clarich, G. Pizzonia and F. Macaluso, avvocati, ─ the Italian Government, by I.M. Braguglia, acting as Agent, assisted by M. Fiorilli, avvocato dello Stato, ─ Commission of the European Communities, by H. van Lier and E. Traversa, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of of Albacom SpA, represented by R. Caiazzo and A. Santa Maria, avvocato; of Infostrada SpA, represented by F.G. Scoca and G. Pizzonia; of the Italian Government, represented by M. Fiorilli; and of the Commission, represented by E. Traversa, at the hearing on 21 November 2002, after hearing the Opinion of the Advocate General at the sitting on 12 December 2002, gives the followingCommunity legislationOn those grounds, THE COURT (Fifth Chamber),WatheletTimmermans La Pergola Jannvon Bahr R. Grass M. Wathelet RegistrarPresident of the Fifth Chamber 1 – Language of the case: Italian. Language of the case: Italian.

5f640-f0f6062-4a24

EN

PORTUGUESE LEGISLATION WHICH RESTRICTS GAMES OF CHANCE TO CASINOS IS NOT CONTRARY TO COMMUNITY RULES ON FREEDOM TO PROVIDE SERVICES

«(Freedom to provide services – Operation of games of chance or gambling – Gaming machines)» Summary of the Judgment 1.. Freedom to provide services – Treaty provisions – Scope – Activity of operating games of chance or gambling machines – Whether included – Monopoly in the operation of those games – Article 31 EC not applicable(Arts 2 EC, 28 EC, 29 EC, 31 EC and 49 EC)Freedom to provide services – Treaty provisions – Scope – Activity of operating games of chance or gambling machines – Whether included – Monopoly in the operation of those games – Article 31 EC not applicable 2.. Freedom to provide services – Restrictions – National legislation restricting the right to operate games of chance or gambling to casinos – Justification – Maintenance of order in society and prevention of fraud – Existence of less stringent conditions in other Member States – Not relevant – Methods of organisation and control – Discretion of national authorities(Art. 49 EC)Freedom to provide services – Restrictions – National legislation restricting the right to operate games of chance or gambling to casinos – Justification – Maintenance of order in society and prevention of fraud – Existence of less stringent conditions in other Member States – Not relevant – Methods of organisation and control – Discretion of national authoritiesJUDGMENT OF THE COURT (Third Chamber)11 september 2003 (*) (Freedom to provide services - Operation of games of chance or gambling - Gaming machinesIn Case C-6/01, REFERENCE to the Court under Article 234 EC by the Tribunal Cível da Comarca de Lisboa (Portugal) for a preliminary ruling in the proceedings pending before that court between Associação Nacional de Operadores de Máquinas Recreativas (Anomar) and Others andEstado português, on the interpretation of Articles 2 EC, 28 EC, 29 EC, 31 EC and 49 EC, THE COURT (Third Chamber),composed of: J.-P. Puissochet (Rapporteur), President of the Chamber, C. Gulmann and F. Macken, Judges, Advocate General: A. Tizzano, Registrar: L. Hewlett, Principal Administrator, after considering the written observations submitted on behalf of: - Associação Nacional de Operadores de Máquinas Recreativas (Anomar) and Others, by R. Francês, advogado, - the Portuguese Government, by L. Fernandes and J. Ramos Alexandre and by M.L. Duarte, acting as Agents, - the Belgian Government, by F. Van de Craen, acting as Agent, assisted by P. Vlaemminck, avocat, - the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents, - the Spanish Government, by M. López-Monís Gallego, acting as Agent, - the Finnish Government, by E. Bygglin, acting as Agent, - the Commission of the European Communities, by A. Caeiros and M. Patakia, acting as Agents, having regard to the Report for the Hearing, after hearing the oral observations of: Associação Nacional de Operadores de Máquinas Recreativas (Anomar) and Others, represented by R. Francês; the Portuguese Government, represented by M.L. Duarte; the Belgian Government, represented by P. De Wael and P. Vlaemminck, acting as Agents; the Spanish Government, represented by L. Fraguas Gadea, acting as Agent; the French Government, represented by P. Boussaroque, acting as Agent; and the Commission, represented by A. Caeiros and M. Patakia, at the hearing on 26 September 2002, after hearing the Opinion of the Advocate General at the sitting on 11 February 2003, gives the following Judgment1       By order of 25 May 2000, which was received at the Court on 8 January 2001, the Tribunal Cível da Comarca (Civil Court of First Instance), Lisbon, referred to the Court for a preliminary ruling under Article 234 EC 13 questions on the interpretation of Articles 2 EC, 28 EC, 29 EC, 31 EC and 49 EC. 2       Those questions were raised in the context of proceedings between the Associação Nacional de Operadores de Máquinas Recreativas (hereinafter Anomar), established in Lisbon, and eight Portuguese companies involved in the marketing and operation of gaming machines (hereinafter together referred to as the applicants in the main action) and the Portuguese State. The questions concern Portuguese legislation relating to the operation and playing of games of chance or gambling under Decreto-Lei (Decree-Law) No 422/89 of 2 December 1989 (Diário da República, I , No 2777, of 2 December 1989), as amended by Decreto-Lei No 10/95 of 19 January 1995 (Diário da República, I, Series A, No 16, of 19 January 1995, hereinafter Decree-Law No 422/89), and whether it complies with Community law.  Community law 3       Article 2 EC provides that [t]he Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing common policies or activities ... to promote throughout the Community a harmonious, balanced and sustainable development of economic activities. 4       Under Articles 28 EC and 29 EC, quantitative restrictions on imports and exports and all measures having equivalent effect are to be prohibited between Member States. 5       According to Article 31 EC: 1. Member States shall adjust any State monopolies of a commercial character so as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States. The provisions of this Article shall apply to any body through which a Member State, in law or in fact, either directly or indirectly supervises, determines or appreciably influences imports or exports between Member States. These provisions shall likewise apply to monopolies delegated by the State to others. 2. Member States shall refrain from introducing any new measure which is contrary to the principles laid down in paragraph 1 or which restricts the scope of the Articles dealing with the prohibition of customs duties and quantitative restrictions between Member States. 3. If a State monopoly of a commercial character has rules which are designed to make it easier to dispose of agricultural products or obtain for them the best return, steps should be taken in applying the rules contained in this Article to ensure equivalent safeguards for the employment and standard of living of the producers concerned. 6       Article 49 EC provides: ... restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended. The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Community.  National law 7       Decree-Law No 422/89 governs, in particular, the operation and playing of games of chance or gambling and combinations of games of chance and other forms of gaming and makes the operation and playing thereof outside duly authorised areas an offence punishable by a period of imprisonment. The general principle underpinning the statutory scheme is laid down in Article 9 of Decree-Law No 422/89, which provides that [t]he right to operate games of chance or gambling is reserved to the State. Although the State alone is entitled to that right, it may be exercised, other than by the State or another public body, subject to authorisation in the form of an administrative licensing agreement. 8       Decree-Law No 422/89, which forms part of a consistent legislative policy concerning the granting of licences in respect of gaming areas which may be traced back to Decree-Law No 14643 of 3 December 1937, provides that the operation and playing of games of chance or gambling are to be restricted to the games rooms of casinos located in permanent or temporary gaming areas created by decree-law. 9       Portuguese law distinguishes between various kinds of game arranged in four categories, according to the criteria laid down in the relevant provisions of Decree-Law No 422/89, governed by different legal rules. 10     The first category contains games of chance or gambling. Under Article 1 of Decree-Law No 422/89, games of chance or gambling are those whose result is uncertain because it depends exclusively or fundamentally on chance. 11     That category makes provision for two types of gaming involving the use of machines. One is play on machines paying out tokens or cash and the other play on machines which do not pay out either tokens or cash but involve matters proper to games of chance or gambling, or display a result in the form of points depending exclusively or essentially on chance (Article 4(1)(f) and (g) of Decree-Law No 422/89). 12     The right to operate games of chance or gambling is reserved to the State and may be exercised only by undertakings incorporated as public limited companies, to which the Government grants the relevant licence by way of an administrative contract (Article 9 of Decree-Law No 422/89). The operating licence is granted on the basis of a tender procedure (Article 10 of Decree-Law No 422/89) which does not discriminate on grounds of nationality. 13     The only places where the operation and playing of games of chance or gambling are authorised are in casinos located in permanent or temporary gaming areas established under decree-law and, exceptionally and subject to ministerial authorisation, ships, aircraft, bingo halls and in halls reserved for major tourist events (Article 3(1), (6), (7) and (8) of Decree-Law No 422/89). 14     The second category covers combinations of games of chance or gambling and other forms of gaming, statutorily defined as transactions offered to the public in which the expectation of winning depends on either a combination of chance and the skill of the player or on chance only and where the winnings are in the form of goods having commercial value (Article 159(1) of Decree-Law No 422/89). It includes, in particular, lotteries, tombolas, prize draws, promotional competitions, quizzes and contests (Article 159(2) Decree-Law No 422/89). 15     Operation of such combinations of games of chance or gambling and other forms of gaming is subject to authorisation of the Minster for Interior Affairs who is to lay down, for each case, the conditions he considers appropriate and establish the relevant monitoring system (Article 160(1) of Decree-Law No 422/89). In principle, such combinations of games of chance or gambling and other forms of gaming may not be operated by profit-making organisations (Article 161(1) of Decree-Law No 422/89). Nor may they concern matters inherent to games of chance or gambling (poker, fruit machines, roulette, dice, bingo, lottery draws, instant lottery, pools (totobola and totoloto)), or replace prizes with cash or tokens (Article 161(3) of Decree-Law No 422/89). 16     The third category includes games of skill offering prizes in cash, tokens or goods with commercial value (Article 162(1) of Decree-Law No 422/89). 17     It is not permitted to operate machines on which play depends exclusively or essentially on the skill of the player and which provide winnings in cash, tokens or goods having commercial of even little value other than free extended play won on points scored (Article 162(2) of Decree-Law No 422/89). 18     The fourth category, amusement machines, is subject to a special set of rules, laid down by Decree-Law No 316/95 of 28 November 1995 (Diário da República, I, Series A, No 275, 28 November 1995, hereinafter Decree-Law No 316/95). 19     Amusement machines are defined as machines which: − while paying out prizes directly in tokens or goods with a commercial value, run games the result of which depends exclusively or essentially on the player's skill, enabling the latter to extend the time he can play the machine free of charge on the basis of the points he has obtained (Article 16(1)(a) of the annex to Decree-Law No 316/95); − possess the characteristics described in paragraph (a) above and make it possible to obtain items the commercial value of which is no more than three times the sum the player wagers (Article 16(1)(b) of the annex to Decree-Law No 316/95). 20     The importation, manufacture, assembly and sale of amusement machines entails the categorisation of the kinds of game concerned, which is a matter for the Inspecção-Geral de Jogos (Inspectorate-General for Gaming and Betting) (Article 19 of the annex to Decree-Law No 316/95). 21     The operation of machines in that category - be they automatic, mechanical, electrical or electronic - is subject to a registration and licensing system, irrespective of whether they are imported, manufactured or assembled in the country (Article 17(1) of the annex to Decree-Law No 316/95). 22     The proprietor of the machine must apply to the civil governor of the district in which the machine is located or where it may be operated in order to register it (Article 17(2) of the annex to Decree-Law No 316/95). 23     Before the machine may be operated, an operating licence must also be issued, either annually or biannually, by the civil governor of the district in which the machine is located or where it may be operated in order to register it (Article 20(1) and (2) of the annex to Decree-Law No 316/95). 24     A licence may be refused, by reasoned decision, where such a protective measure is justified on grounds of protection of children and young persons, prevention of crime and the maintenance or restoration of public peace, order and security (Article 20(3) of the annex to Decree-Law No 316/95). 25     Amusement machines may be operated within a zone or an establishment holding a licence for the playing of legal games on amusement machines which may not be located near an educational establishment (Article 21(2) of the annex to Decree-Law No 316/95). If more than three amusement machines are to be operated together, the establishment concerned must hold a licence exclusively for the operation of games (Article 21(1) of the annex to Decree-Law No 316/95). 26     Machines which do not pay out either tokens or cash but involve matters proper to games of chance or gambling or display a result in the form of points depending exclusively or essentially on chance are not deemed to be amusement machines. That type of equipment falls within the category of games of chance or gambling (Article 4(1)(g) of Decree-Law No 422/89) and is governed by Decree-Law No 422/89 (Article 16(2) of the annex to Decree-Law No 316/95). 27     The rules governing the operation and playing of games are legally classified as public-policy rules justified in the public interest under Article 95(2) of Decree-Law No 422/89.  The main proceedings and the questions referred for a preliminary ruling 28     The applicants in the main action brought an action against the Portuguese State under Article 4(1) and (2) of the Portuguese Code of Civil Procedure seeking a declaration that certain provisions of Portuguese law in the field of gaming do not comply with Community law, and claimed that the court should: − acknowledge the right to operate and manage games of chance or gambling outside the prescribed gaming areas, and extinguish the monopoly held by the casinos and, accordingly, repeal Articles 1, 3(1) and (2) and 4(1)(f) and (g) of Decree-Law No 422/89, in view of the primacy of the rules and principles of Community law referred to in the application initiating proceedings; − as a result of the repeal of the abovementioned provisions, also repeal the rules deriving from them, namely the criminal provisions defined in Articles 108, 110, 111 and 115 of that decree-law, as well as all provisions, whether substantive or procedural, laid down in any statute, prohibiting and restricting such activities. 29     The applicants in the main action base their claims, first, on the incompatibility of the abovementioned provisions of Portuguese legislation with Community law and, secondly, on the primacy of Community law over ordinary domestic law in accordance with Article 8(2) of the Portuguese Constitution. 30     The Portuguese State raised a preliminary objection to the admissibility of the application claiming, in particular, that none of the applicants in the main action has standing to bring proceedings in so far as they lack a direct interest linked to their claims, and that Anomar has no standing to bring proceedings in that a finding that the application is well founded can be of no benefit to it. 31     On the merits, the Portuguese State contends that the rules and principles of Community law on which the applicants in the main action rely were inapplicable to the purely internal circumstances in point and that the operation of gaming machines cannot in any event fall within the scope of the rules on the free movement of goods. 32     The preliminary plea of lack of standing of Anomar and the absence of interest in bringing proceedings of all the applicants in the main proceedings was upheld at first instance. 33     However, the Tribunal de Relação de Lisboa overturned the decision of the lower court and found that the applicant Anomar did have standing and that all the applicants in the main action had an interest in bringing proceedings. 34     Taking the view that, in light of the arguments of the parties, the interpretation of Community law was essential to enable it to settle the dispute before it, the Tribunal Cível da Comarca de Lisboa decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling: 1. Do games of chance or gambling constitute an economic activity within the meaning of Article 2 EC? 2. Do games of chance or gambling constitute an activity relating to goods which is covered, as such, by Article 28 EC? 3. Are activities relating to the manufacture, importation and distribution of gaming machines separate from the operation of such machines and, therefore, is the principle of the free movement of goods laid down by Articles 28 EC and 29 EC applicable to such activities? 4. Are the operation of and engagement in games of chance or gambling excluded from the scope of Article 31 EC, in view of the fact that that provision does not cover monopolies in the provision of services? 5. Does the operation of gaming machines constitute a provision of services and, as such, is it covered by Article 49 EC et seq.? 6. Does a body of legal rules (such as that established in Articles 3(1) and 4(1) of Decree-Law No 422 of 2 December 1989) according to which the operation of and engagement in games of chance or gambling (defined by Article 1 of that instrument as those whose result is uncertain since it depends exclusively or fundamentally on chance) - which include (see Article 4(1)(f) and (g) of Decree-Law No 422/89) games played on machines which pay out prizes directly in tokens or money and games on machines which, while not paying out directly prizes in tokens or money, involve matters proper to games of chance or gambling or display the number of points awarded depending exclusively and fundamentally on chance - is authorised only in casinos in permanent or temporary gaming areas created by decree-law, constitute a barrier to the freedom to provide services, within the meaning of Article 49 EC? 7. Even if the restrictive rules described in question 6 constitute a barrier to freedom to provide services, within the meaning of Article 49 EC, are they compatible with Community law, given that they are applicable without distinction to Portuguese nationals and undertakings and to nationals and undertakings of other Member States and are, moreover, based on overriding reasons relating to the public interest (consumer protection, crime prevention, protection of public morality, restriction of demand for gambling and the financing of public-interest activities)? 8. Is the activity of operation of games of chance or gambling subject to the principles of freedom of access to and pursuit of any economic activity whatever and, consequently, does the possible existence of legislation in other Member States which lays down less restrictive conditions for the operation of gaming machines sufficient of itself to render invalid the Portuguese legal regime described in Question 6? 9. Do the restrictions laid down in the Portuguese legislation on the activity of operation of games of chance or gambling comply with the principle of proportionality? 10. Do the Portuguese rules making authorisation subject to conditions which are legal (conclusion of an administrative contract with the State following a tendering procedure: Article 9 of the abovementioned Decree-Law No 422/89) and logistical (operation and engagement in games of chance or gambling restricted to gaming areas: Article 3 of the abovementioned decree-law) in nature constitute a requirement which is appropriate and necessary for the attainment of the objectives pursued? 11. Does the use by the Portuguese legislation (Articles 1, 4(1)(g) and [162] of the abovementioned Decree-Law No 422/89 and Article 16(1)(a) of Decree-Law No 316/95 of 28 November 1995) of the word fundamentally, in conjunction with the word exclusively, in order to define games of chance or gambling and to draw a legal distinction between gaming machines and amusement machines, affect the possibility of defining the concept in issue according to the rules of legal construction? 12. Do the imprecise legal concepts to which the Portuguese legislation resorts in defining games of chance or gambling (Articles 1 and 162 of Decree-Law No 422/89, cited above) and amusement machines (Article 16 of Decree-Law No 316/95, cited above) require an interpretation, for the purpose of categorising the various types of amusement machines, which must also take account of the margin of discretion which the national authorities enjoy? 13. Even if it were considered that the Portuguese legislation at issue does not lay down objective criteria to distinguish between gaming machines and amusement machines, does the conferring on the Inspecção-Geral de Jogos of a discretionary power to categorise games infringe any principle or rule of Community law?  Admissibility 35     The Portuguese Government submits, first, that the questions referred for a preliminary ruling are inadmissible since they concern not the interpretation of the Treaty but the interpretation or assessment of the validity of the provisions of Portuguese legislation governing the operation and playing of games of chance or gambling, which are matters for the national court alone. 36     Secondly, it considers that the main proceedings, which concern only the conditions for the operation of games of chance or gambling in Portugal, by Portuguese undertakings, in pursuance of Portuguese legislation, have no connection with Community law and relate to a purely internal situation. 37     As regards the first objection, although the Court has no jurisdiction under Article 234 EC to apply a rule of Community law to a particular case and thus to judge a provision of national law by reference to such a rule it may, in the framework of the judicial cooperation provided for by that article and on the basis of the material presented to it, provide the national court with an interpretation of Community law which may be useful to it in assessing the effects of that provision (Case 20/87 Gauchard [1987] ECR 4879, paragraph 5, and Joined Cases C-515/99, C-519/99 to C-524/99 and C-526/99 to C-540/99 Reisch and Others [2002] ECR I-2157, paragraph 22). 38     However, in the main proceedings, the referring court asks the Court to interpret Treaty provisions solely for the purpose of determining whether those provisions are capable of having any bearing on the application of the relevant national rules in those proceedings. It cannot therefore be maintained that the purpose of the questions referred for a preliminary ruling in the main proceedings is anything other than the interpretation of provisions of the Treaty. 39     As for the second objection, it must be acknowledged that all the facts in the main proceedings are confined to a single Member State. However, national legislation such as Decree-Law No 422/89, which applies without distinction to Portuguese nationals and to nationals of other Member States, may generally fall within the scope of the provisions on the fundamental freedoms established by the Treaty only to the extent that it applies to situations related to intra-Community trade (see, to that effect, Case 286/81 Oosthoek's Uitgeversmaatschappij [1982] ECR 4575, paragraph 9, and Case 98/86 Mathot [1987] ECR 809, paragraphs 8 and 9, and Reisch and Others, cited above, paragraph 24). 40     That finding does not, however, mean that there is no need to reply to the questions referred to the Court for a preliminary ruling in this case. In principle, it is for the national courts alone to determine, having regard to the particular features of each case, both the need for a preliminary ruling in order to enable them to give their judgment and the relevance of the questions which they refer to the Court (Case C-448/98 Guimont [2000] ECR I-10663, paragraph 22). A reference for a preliminary ruling from a national court may be rejected by the Court only if it is quite obvious that the interpretation of Community law sought by that court bears no relation to the actual nature of the case or the subject-matter of the main action (Case C-281/98 Angonese [2000] ECR I-4139, paragraph 18, and Reisch and Others, cited above, paragraph 25). 41     In this case, it is not obvious that the interpretation of Community law requested is not necessary for the referring court. Such a reply might be useful to it if its national law were to require that a Portuguese national must be allowed to enjoy the same rights as those which a national of another Member State would derive from Community law in the same situation (Guimont, cited above, paragraph 23, and Reisch and Others, cited above, paragraph 26). 42     Accordingly, it is necessary to consider whether the provisions of the Treaty, interpretation of which is sought, preclude the application of national legislation such as that in issue in the main proceedings to the extent that it is applied to persons resident in other Member States.  The questions referred for a preliminary ruling Question 1 43     By its first question, the national court is asking whether games of chance or gambling constitute an economic activity within the meaning of Article 2 EC. 44     The applicants in the main action, the governments which submitted observations and the Commission agree that games of chance or gambling are to be deemed an economic activity within the meaning of Article 2 EC, that is to say a for-profit activity which gives rise to a specific remuneration and which falls within the framework of the commercial freedoms enshrined in the Treaty. 45     The German Government submits that neither the chance nature of the winnings nor the use to which is put the profit made on games of chance or gambling prevent the latter from constituting an economic activity. 46     As the Portuguese Government in particular points out, the Court has already held that lotteries constitute an economic activity, within the meaning of the Treaty, inasmuch as they consist in the importation of goods or the provision of services for remuneration (Case C-275/92 Schindler [1994] ECR I-1039, paragraph 19). With particular regard to the activities in issue in the main proceedings, the Court has held that games consisting in the use, in return for a money payment, of slot machines must be regarded as gambling which is comparable to the lotteries forming the subject of the Schindler judgment (Case C-124/97 Läärä and Others [1999] ECR I-6067, paragraph 18). 47     That assessment must be confirmed and all games of chance or gambling must be deemed to be economic activities within the meaning of Article 2 EC, since they fulfil the two criteria laid down by the Court in its case-law, namely provision of a particular service for remuneration and the intention to make a cash profit. 48     The answer to the first question must therefore be that games of chance and gambling constitute economic activities within the meaning of Article 2 EC. Questions 2, 3 and 5 49     By its second, third and fifth questions, the national court is asking in essence whether games of chance or gambling constitute an activity relating to goods or, on the contrary, provision of services, within the meaning of the Treaty and, if so, whether activities relating to the manufacture, importation and distribution of gaming machines are separable from the operation of such machines in order to determine whether the principle of free movement of goods as defined in Articles 28 EC and 29 EC is to be applied to those activities, which are indivisible, as a whole. 50     In contrast to the applicants in the main action, the governments which submitted observations and the Commission take the view that gaming activities do not come under the rules applicable to goods. 51     They draw a distinction between gaming machines and gaming activities, as the Court itself did at paragraph 20 of Läärä and Others, pointing out expressly that slot machines constitute goods in themselves which may fall within the scope of Article 30 of the EC Treaty (now, after amendment, Article 28 EC). As regards gaming, that is to say the operation of gaming machines, those governments and the Commission, relying on Schindler, cited above, submit that they are not activities relating to goods but must instead be regarded as services. 52     The Court indeed held, in paragraphs 24 and 25 of Schindler, cited above, that lottery activities are not activities relating to goods, falling, as such, under Article 30 of the Treaty, but are however to be regarded as services within the meaning of the Treaty. 53     As regards the difference between activities relating, on the one hand, to the manufacture, importation and distribution of gaming machines which is within the scope of the free movement of goods and, on the other, the activity of operating gaming machines, which is within the scope of the freedom to provide services, the Portuguese, Belgian and German Governments submit that those various activities are not independent of each other. Since the manufacture and distribution of gaming machines cannot be considered independently from the operation of such machines - given that the latter, being manufactured for the purpose of organising games of chance or gambling, cannot serve for any other purpose - all the governments which submitted observations request the application of the maxim accessorium sequitur principale. 54     In connection to the similar activity of lotteries, the Court has held that the importation and distribution of advertisements and application forms, and possibly tickets, which are specific steps in the organisation or operation of a lottery, cannot, under the Treaty, be considered independently of the lottery to which they relate. Such activities are not ends in themselves; rather, their sole purpose is to enable residents of the Member States where those objects are imported and distributed to participate in the lottery (Schindler, cited above, paragraph 22). 55     However, without there being any need, by approximate analogy with that reasoning, to regard the importation of slot machines as ancillary to the operation thereof, it suffices to state, as the Court did in paragraphs 20 to 29 of Läärä and Others, cited above, that, even though the operation of slot machines is linked to operations to import them, the former activity comes under the provisions of the Treaty relating to the freedom to provide services and the latter under those relating to the free movement of goods. 56     The answer to the second, third and fifth questions must therefore be that the activity of operating gaming machines must, irrespective of whether or not it is separable from activities relating to the manufacture, importation and distribution of such machines, be considered a service within the meaning of the Treaty and, accordingly, it cannot come within the scope of Articles 28 EC and 29 EC relating to the free movement of goods. Question 4 57     By its fourth question, the national court is asking whether a monopoly in the operation of games of chance or gambling falls within the scope of Article 31 EC. 58     Article 31 EC requires the Member States to adjust any State monopolies of a commercial character so as to ensure that there is no discrimination between nationals of Member States. 59     It follows both from the place of this provision in the chapter relating to the prohibition of quantitative restrictions and from the use of the words imports and exports in the second subparagraph of Article 31(1) and of the word products in Article 31(3) that it refers to trade in goods and cannot relate to a monopoly in the provision of services (see Case 155/73 Sacchi [1974] ECR 409, paragraph 10). 60     Given that games of chance or gambling constitute services, within the meaning of the Treaty, as held at paragraph 56 above, any monopoly in the operation of games of chance or gambling falls outside the scope of Article 31 EC. 61     The answer to the fourth question must therefore be that a monopoly in the operation of games of chance or gambling does not fall within the scope of Article 31 EC. Questions 6, 7, 9 and 10 62     By its 6th, 7th, 9th and 10th questions, the national court is essentially asking whether, first, national legislation, such as the Portuguese provisions on games of chance or gambling, which restricts the operation and playing of such games to specific areas and applies without distinction to Portuguese nationals and nationals of other Member States, constitutes a barrier to the freedom to provide services and, secondly, whether such legislation may be justified by overriding public-interest reasons relating, in particular, to consumer protection and to concerns over public morality and crime prevention, which justify it. 63     So far as concerns whether national legislation such as the Portuguese provisions in issue in the main proceedings constitutes a barrier to the freedom to provide services, both the applicants in the main action, the governments which submitted observations and the Commission consider that such legislation may constitute a barrier to the freedom to provide services, even where the restrictions it entails apply without discrimination on the grounds of nationality and are thus applicable without distinction to Portuguese nationals and nationals of other Member States. 64     The applicants in the main action submit, in particular, that in Portugal the betting and gaming industry is monopolised by the casinos, which is manifestly contrary to the economic principles and freedoms enshrined in the Treaty. The Finnish Government, for its part, is of the view that the legal provisions at issue in the main proceedings prevent, at least indirectly, operators established in another Member State from offering the services in question in Portugal. 65     It is common ground that national legislation may fall within the ambit of Article 49 EC, even if it is applicable without distinction, when it is liable to prohibit or otherwise impede the activities of a provider of services established in another Member State where he lawfully provides similar services (Schindler, cited above, paragraph 43). 66     That is the case of national legislation, such as the Portuguese provisions, which restricts the right to operate games of chance or gambling solely to casinos in permanent or temporary gaming areas created by decree-law. 67     Any justification of the Portuguese legislation relies on two elements. The first is based on the fact that the legal regime which it establishes is applicable without distinction to Portuguese nationals and nationals of other Member States, and the second on the fact that that regime is justified by the overriding reasons relating to the public interest on which it is based. 68     As the national court states in its order for reference, the Portuguese legislation does not discriminate between the nationals of the various Member States. That legislation must therefore be regarded as applying without distinction. 69     It is appropriate to inquire whether Article 49 EC precludes legislation such as that in issue in the main proceedings which, although it does not discriminate on grounds of nationality, restricts the freedom to provide services. 70     All the governments which submitted observations maintain that such legislation is compatible with Article 49 EC. According to them, it must be regarded as being justified by overriding reasons relating to the public interest such as the protection of consumers, prevention of fraud and crime, protection of public morality and the financing of public-interest activities. 71     By contrast, the applicants in the main action take the view that the restrictions referred to in Article 30 EC by way of exception are clearly derogations and cannot be applied in general, without any criteria. They also claim that the Portuguese State, although required to state precisely the sphere and the grounds prompting it to avail itself of Article 30 EC, has not given satisfactory reasons for resorting to a legal regime such as that which it has laid down. The applicants in the main action are of the view that Portugal has not put forward any reservations of a moral or public-order nature such as to justify such a legal regime. 72     According to the information provided by the national court, the provisions of Portuguese law governing games of chance or gambling are legally classified as public-policy rules justified in the public interest. That legal regime has primacy, is highly symbolic and is designed to attain objectives of public interest and legitimate social purposes such as fair play and the possibility of obtaining some benefit for the public sector. 73     The various considerations leading to the adoption of such legislation to govern games of chance or gambling must be taken together, as the Court pointed out in paragraph 58 of the judgment in Schindler, cited above. In the present case, those considerations concern the protection of consumers, who are the recipients of the service, and the maintenance of order in society. The Court has already held that those objectives may justify restrictions on freedom to provide services (Case 220/83 Commission v France [1986] ECR 3663, paragraph 20; Schindler, cited above, paragraph 58; and Läärä and Others, cited above, paragraph 33). 74     Furthermore, as the Commission points out, the Portuguese legislation in issue in the main proceedings is substantially similar to the Finnish legislation on slot machines, in issue in Läärä and Others, in respect of which the Court found that it was not disproportionate, in view of the objectives which justified it (Läärä and Others, cited above, paragraph 42). Moreover, the Court considered that limited authorisation of gambling on the basis of special or exclusive rights granted or assigned to certain bodies, falls within the ambit of such public-interest objectives (Case C-67/98 Zenatti [1999] ECR I-7289, paragraph 35). 75     Accordingly, the answer to the 6th, 7th, 9th and 10th questions must be that national legislation, such as the Portuguese legislation, which authorises the operation and playing of games of chance or gambling solely in casinos in permanent or temporary gaming areas created by decree-law and which is applicable without distinction to its own nationals and nationals of other Member States constitutes a barrier to the freedom to provide services. However, Articles 49 EC et seq. do not preclude such national legislation, in view of the concerns of social policy and the prevention of fraud which justify it. Question 8 76     By its eighth question, the national court is asking in essence whether the mere fact that the operation and playing of games of chance or gambling are subject, in other Member States, to legislation which is less restrictive than the Portuguese legislation in issue in the main proceedings is sufficient to render the latter incompatible with the Treaty. 77     The applicants in the main action point out that legislation in other Member States is less restrictive than the Portuguese legislation and submit that there is no social or economic reason nor any reservations from a moral or public-order angle to justify the Portuguese legislation being more restrictive. 78     On the other hand, all the governments which submitted observations point out that the level of protection which a Member State intends providing in its territory in relation to games of chance or gambling falls within the discretion recognised as being enjoyed by the national authorities. It is therefore a matter for each Member State to arrange for the appropriate legislation to govern gaming, in particular in the light of the specific social and cultural features of each Member State, and in accordance with the principles deemed best to suit the society concerned. The Portuguese Government points out that the special nature of gaming calls for and justifies a legal framework in keeping with the scale of fundamental values of each Member State. 79     It is common ground that it is for national authorities to consider whether, in the context of the aim pursued, it is necessary to prohibit activities of that kind, totally or partially, or only to restrict them and to lay down more or less rigorous procedures for controlling them (Läärä and Others, cited above, paragraph 35, and Zenatti, cited above, paragraph 33). 80     Accordingly, the mere fact that a Member State has chosen a system of protection different from that adopted by another Member State cannot affect the appraisal as to the need for and proportionality of the provisions adopted. They must be assessed solely in the light of the objectives pursued by the national authorities of the Member State concerned and of the level of protection which they seek to ensure (Läärä and Others, cited above, paragraph 36, and Zenatti, cited above, paragraph 34). 81     The answer to the national court's eighth question must therefore be that the possible existence, in other Member States, of legislation laying down conditions for the operation and playing of games of chance or gambling which are less restrictive than those provided for by the Portuguese legislation has no bearing on the compatibility of the latter with Community law. Questions 11, 12 and 13 82     By its 11th, 12th and 13th questions, the national court seeks to ascertain in essence whether legislation which makes the operation and playing of games of chance or gambling subject to legal and logistical conditions such as conclusion of an administrative licensing contract with the State following a tendering procedure and restriction of gaming areas solely to casinos, which uses imprecise legal concepts in order to categorise different sorts of games and which confers on the Inspecção-Geral de Jogos a discretionary power to categorise games by theme is compatible with the Treaty, in particular Article 49 EC. 83     The Portuguese, Belgian, Spanish and Finnish Governments agree that the Treaty does not preclude the provisions of Decree-Law No 422/89 governing the operation and playing of games of chance or gambling provided such provisions meet conditions as to proportionality and necessity. 84     The applicants in the main action, for their part, submit that the restrictions on operation of games laid down in the Portuguese legislation do not comply with the principle of proportionality by virtue of the lack of precision regarding the reasons and aims pursued by that legislation, since no justification regarding public order or social protection has been advanced. They also challenge the conferring on the Inspecção-Geral de Jogos of a discretionary power to categorise types of gaming, gaming machines and games by theme. Such power, when it lacks objective and transparent rules, is arbitrary and thus contrary to the Treaty. 85     The Commission points out that measures restricting the operation and playing of games of chance or gambling must be proportionate and appropriate for ensuring achievement of the intended aim and proposes that the Court should declare those questions inadmissible. It submits that, in the absence of a definition, at Community level, of the various sorts of games and the various types of machines to play them on, it is for the national court to rule on the interpretation of the national provisions in issue in the main proceedings. Moreover, the national court alone is competent to determine whether conferring on the Inspecção-Geral de Jogos the power to characterise and categorise is likely to affect adversely the freedom to provide services. 86     As the Portuguese Government points out, the Court has held that national measures which restrict the freedom to provide services, which are applicable without distinction and are justified by overriding reasons relating to the public interest - as is the case here, as is evident from paragraphs 68 and 72 to 75 of this judgment - must, nevertheless, be such as to guarantee the achievement of the intended aim and must not go beyond what is necessary in order to achieve it (Case C-288/89 Collectieve Antennevoorziening Gouda [1991] ECR I-4007, paragraphs 13 to 15, and Läärä and Others, cited above, paragraph 31). 87     None the less, it is a matter for the national authorities alone, in the context of their power of assessment, to define the objectives which they intend to protect, to determine the means which they consider most suited to achieve them and to establish rules for the operation and playing of games, which may be more or less strict (see, to that effect, Schindler, cited above, paragraph 61; Läärä and Others, cited above, paragraph 35, and Zenatti, cited above, paragraph 33) and which have been deemed compatible with the Treaty. 88     The answer to the 11th, 12th and 13th questions should therefore be that, in the context of legislation which is compatible with the EC Treaty, the choice of methods for organising and controlling the operation and playing of games of chance or gambling, such as the conclusion with the State of an administrative licensing contract or the restriction of the operation and playing of certain games to places duly licensed for that purpose, falls within the margin of discretion which the national authorities enjoy.  Costs 89     The costs incurred by the Portuguese, Belgian, German, Spanish, French and Finnish Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. On those grounds, in answer to the questions referred to it by the Tribunal Cível da Comarca de Lisboa by order of 25 May 2000, hereby rules: 1)      Games of chance and gambling constitute economic activities within the meaning of Article 2 EC. 2)      The activity of operating gaming machines must, irrespective of whether or not it is separable from activities relating to the manufacture, importation and distribution of such machines, be considered a service within the meaning of the Treaty and, accordingly, it cannot come within the scope of Articles 28 EC and 29 EC relating to the free movement of goods. 3)      A monopoly in the operation of games of chance or gambling does not fall within the scope of Article 31 EC. 4)      National legislation such as the Portuguese legislation which authorises the operation and playing of games of chance or gambling solely in casinos in permanent or temporary gaming areas created by decree-law and which is applicable without distinction to its own nationals and nationals of other Member States constitutes a barrier to the freedom to provide services. However, Articles 49 EC et seq. do not preclude such national legislation, in view of the concerns of social policy and the prevention of fraud which justify it. 5)      The fact that there might exist, in other Member States, legislation laying down conditions for the operation and playing of games of chance or gambling which are less restrictive than those provided for by the Portuguese legislation has no bearing on the compatibility of the latter with Community law. 6)      In the context of legislation which is compatible with the EC Treaty, the choice of methods for organising and controlling the operation and playing of games of chance or gambling, such as the conclusion with the State of an administrative licensing contract or the restriction of the operation and playing of certain games to places duly licensed for that purpose, falls within the margin of discretion which the national authorities enjoy. Puissochet GulmannMackenDelivered in open court in Luxembourg on 11 September 2003. R. Grass       J.-P. PuissochetRegistrar       President of the Third Chamber * Original language: English.

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THE ECOPOINTS REGULATION 2000 IS TO REMAIN IN FORCE SAVE FOR THE PROVISION INTRODUCING A PRINCIPLE THAT REDUCTIONS IN ECOPOINTS BE SPREAD OVER SEVERAL YEARS

«(System of ecopoints for heavy goods vehicles transiting through Austria – Amendment by Regulation (EC) No 2012/2000 – Illegality)» Summary of the Judgment 1.. Actions for annulment – Plea calling into question the conduct of an institution other than the defendant institution – Whether admissible – Procedural status of an institution implicated in that way – Mere option to intervene(Art. 230 EC)Actions for annulment – Plea calling into question the conduct of an institution other than the defendant institution – Whether admissible – Procedural status of an institution implicated in that way – Mere option to intervene 2.. Accession of new Member States to the Communities – Protocols and annexes to acts of accession – Subject to the legal rules governing provisions of primary lawAccession of new Member States to the Communities – Protocols and annexes to acts of accession – Subject to the legal rules governing provisions of primary law 3.. Transport – Road transport – Special rules for the traffic of goods by road through Austria – System of ecopoints for heavy goods vehicles – Reduction in the number of ecopoints in the event of that the threshold for journeys is exceeded – Staggering of the reduction over several years – Invalid(Protocol No 9 to the 1994 Act of Accession, Art. 11(2)(c), and point 3 of Annex 5; Council Regulation No 2012/2000, Arts 1 and 2(1) and (4))Transport – Road transport – Special rules for the traffic of goods by road through Austria – System of ecopoints for heavy goods vehicles – Reduction in the number of ecopoints in the event of that the threshold for journeys is exceeded – Staggering of the reduction over several years – Invalid 4.. Transport – Road transport – Special rules for the traffic of goods by road through Austria – System of ecopoints for heavy goods vehicles – Reduction in the number of ecopoints in the event of that the threshold for journeys is exceeded – Proportional distribution between the Member States according to their contribution to exceeding the threshold – Whether permissible(Protocol No 9 to the 1994 Act of Accession, Arts 11(6) and 16)Transport – Road transport – Special rules for the traffic of goods by road through Austria – System of ecopoints for heavy goods vehicles – Reduction in the number of ecopoints in the event of that the threshold for journeys is exceeded – Proportional distribution between the Member States according to their contribution to exceeding the threshold – Whether permissible 5.. Transport – Road transport – Special rules for the traffic of goods by road through Austria – System of ecopoints for heavy goods vehicles – Reduction in the number of ecopoints in the event that the threshold for journeys is exceeded – Method of calculation laid down by Regulation No 2012/2000 – Whether valid – Method of calculation based on the average use of ecopoints – Not permissible(Protocol No 9 to the 1994 Act of Accession, points 2 and 3 of Annex 5; Council Regulation No 2012/2000)Transport – Road transport – Special rules for the traffic of goods by road through Austria – System of ecopoints for heavy goods vehicles – Reduction in the number of ecopoints in the event that the threshold for journeys is exceeded – Method of calculation laid down by Regulation No 2012/2000 – Whether valid – Method of calculation based on the average use of ecopoints – Not permissibleJUDGMENT OF THE COURT11 September 2003 (1) ((System of ecopoints for heavy goods vehicles transiting through Austria – Amendment by Regulation (EC) No 2012/2000 – Illegality))applicant, vdefendant, interveners, THE COURT,,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 13 February 2003,gives the followingFacts and legal backgroundOn those grounds, THE COURTRodríguez IglesiasPuissochet WatheletSchintgen Gulmann EdwardLa Pergola Jann SkourisMacken Colneric von BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

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A COMMUNITY NATIONAL SEEKING ADMISSION TO THE FRENCH PUBLIC HOSPITAL SERVICE CANNOT BE REQUIRED TO PASS THE ENTRANCE EXAMINATION FOR THE FRENCH NATIONAL SCHOOL OF PUBLIC HEALTH IF HE CAN SHOW THAT HE HAS RECEIVED EQUIVALENT TRAINING IN ANOTHER MEMBER STATE

«(Recognition of diplomas – Hospital managers in the public service – Directive 89/48/EEC – Definition of diploma – Entrance examination – Article 48 of the EC Treaty (now, after amendment, Article 39 EC))» Summary of the Judgment 1.. Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Scope of Directive 89/48 – Employment in the public service – Included (EC Treaty, Art. 48(4) (now, after amendment, Art. 39(4) EC); Council Directive 89/48) Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Scope of Directive 89/48 – Employment in the public service – Included 2.. Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Scope of Directive 89/48 – Definition of regulated profession – National legal classifications not relevant (Council Directive 89/48) Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Scope of Directive 89/48 – Definition of regulated profession – National legal classifications not relevant 3.. Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Directive 89/48 – Definition of diploma – Passing the final examination of a national public health college of a Member State – Included – Equivalence of such a diploma and a diploma obtained in another Member State – Assessment to be made by the national court (Council Directive 89/48, Art. 3, first para., point (a)) Freedom of movement for persons – Freedom of establishment – Workers – Recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration – Directive 89/48 – Definition of diploma – Passing the final examination of a national public health college of a Member State – Included – Equivalence of such a diploma and a diploma obtained in another Member State – Assessment to be made by the national court 4.. Freedom of movement for persons – Workers – Access to hospital public service conditional, for persons holding a diploma obtained in a Member State and equivalent to that required in the host Member State, on passing an entrance examination for a national public health college – Not permissible (EC Treaty, Art. 48 (now, after amendment, Art. 39 EC) Freedom of movement for persons – Workers – Access to hospital public service conditional, for persons holding a diploma obtained in a Member State and equivalent to that required in the host Member State, on passing an entrance examination for a national public health college – Not permissible JUDGMENT OF THE COURT9 September 2003 (1) ((Recognition of diplomas – Hospital managers in the public service – Directive 89/48/EEC – Definition of diploma – Entrance examination – Article 48 of the EC Treaty (now, after amendment, Article 39 EC)))andTHE COURT,,after considering the written observations submitted on behalf of: ─ the French Government, by C. Bergeot-Nunes and G. de Bergues, acting as Agents; ─ the Italian Government, by U. Leanza, acting as Agent, and M. Massella Ducci Tieri, avvocato dello Stato; ─ the Swedish Government, by A. Kruse, acting as Agent; ─ the Commission of the European Communities, by M. Patakia, acting as Agent, having regard to the Report for the Hearing,after hearing the oral observations of Ms Burbaud, of the French Government, represented by C. Bergeot-Nunes and G. de Bergues, and of the Commission, represented by M. Patakia and D. Martin, acting as Agent, at the hearing on 26 June 2002, after hearing the Opinion of the Advocate General at the sitting on 12 September 2002,having regard to the order of 19 November 2002 reopening the oral procedure,after hearing the oral observations of Ms Burbaud, of the French Government, represented by G. de Bergues and R. Abraham, acting as Agent, of the Swedish Government, represented by A. Kruse, and of the Commission, represented by M. Patakia and D. Martin, at the hearing on 7 January 2003,after hearing the Opinion of the Advocate General at the sitting on 11 February 2003, gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulmann EdwardLa Pergola Jann SkourisMacken Colneric von BahrCunha Rodrigues Rosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: French. Language of the case: French.

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EN

ON-CALL DUTY PERFORMED IN A PLACE DETERMINED BY THE EMPLOYER CONSTITUTES IN ITS TOTALITY WORKING TIME EVEN WHERE THE DOCTOR IS PERMITTED TO REST AT HIS PLACE OF WORK WHEN HIS SERVICES ARE NOT REQUIRED

«(Social policy – Protection of the safety and health of workers – Directive 93/104/EC – Concepts of working time and rest period – On-call service (Bereitschaftsdienst) provided by doctors in hospitals)» Summary of the Judgment 1.. Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Concepts of working time and rest period(Council Directive 93/104, Art. 2(1) and (2)) Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Concepts of working time and rest period 2.. Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Working time – Definition – Doctors – On-call service where physical presence in the hospital is required – Included (Council Directive 93/104, Art. 2(1)) Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Working time – Definition – Doctors – On-call service where physical presence in the hospital is required – Included 3.. Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Doctors – On-call service where physical presence in the hospital is required – National legislation allowing an offset only in respect of periods of activity carried out during the on-call service – Not permissible (Council Directive 93/104) Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Doctors – On-call service where physical presence in the hospital is required – National legislation allowing an offset only in respect of periods of activity carried out during the on-call service – Not permissible 4.. Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Derogations provided for in Article 17 – On-call service in hospitals and similar establishments – Reduction in the daily rest period – Condition – Equivalent compensating rest periods – Limits (Council Directive 93/104, Art. 17(2)) Social policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time – Derogations provided for in Article 17 – On-call service in hospitals and similar establishments – Reduction in the daily rest period – Condition – Equivalent compensating rest periods – Limits JUDGMENT OF THE COURT9 September 2003 (1) ((Social policy – Protection of the safety and health of workers – Directive 93/104/EC – Concepts of working time and rest period – On-call service (Bereitschaftsdienst) provided by doctors in hospitals))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Landeshauptstadt Kiel, by W. Weißleder, Rechtsanwalt, ─ Mr Jaeger, by F. Schramm, Rechtsanwalt, ─ the German Government, by W.-D. Plessing and M. Lumma, acting as Agents, ─ the Danish Government, by J. Molde, acting as Agent, ─ the Netherlands Government, by H.G. Sevenster, acting as Agent, ─ the United Kingdom Government, by P. Ormond, acting as Agent, assisted by K. Smith, Barrister, ─ Commission of the European Communities, by A. Aresu and H. Kreppel, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Landeshauptstadt Kiel, represented by W. Weißleder, M. Bechtold and D. Seckler, Rechtsanwälte, of Mr Jaeger, represented by F. Schramm, of the German Government, represented by W.-D. Plessing, of the French Government, represented by C. Lemaire, acting as Agent, of the Netherlands Government, represented by N.A.J. Bel, acting as Agent, of the United Kingdom Government, represented by P. Ormond, and K. Smith, and of the Commission, represented by H. Kreppel and F. Hoffmeister, acting as Agent, at the hearing on 25 February 2003, after hearing the Opinion of the Advocate General at the sitting on 8 April 2003, gives the followingLegal backgroundOn those grounds, THE COURT,Rodríguez IglesiasWathelet Schintgen TimmermansGulmann EdwardJannSkouris MackenColnericvon Bahr Cunha Rodrigues Rosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

6b2db-a78b580-4fbc

EN

THE COURT CONFIRMS THE CFI'S ANNULMENT OF THE COMMISSION'S DECISIONS ORDERING THE WITHDRAWAL OF MARKETING AUTHORISATIONS FOR ANTI-OBESITY DRUGS

«(Appeal – Directives 65/65/EEC and 75/319/EEC – Medicinal products for human use – Anorectics: amfepramone, clobenzorex, fenproporex, norpseudoephedrine, phentermine – Withdrawal of a marketing authorisation – Competence of the Commission – Conditions for withdrawal)» Summary of the Judgment Approximation of laws – Proprietary medicinal products – Marketing authorisation – Withdrawal of authorisation – Authorisations granted in accordance with the mutual recognition procedure, coupled with arbitration procedures – Competence of the Commission with regard to authorisation initially granted under national procedures – None (Council Directive 75/319, Art. 15a)Approximation of laws – Proprietary medicinal products – Marketing authorisation – Withdrawal of authorisation – Authorisations granted in accordance with the mutual recognition procedure, coupled with arbitration procedures – Competence of the Commission with regard to authorisation initially granted under national procedures – None JUDGMENT OF THE COURT (Full Court)24 July 2003 (1) ((Appeal – Directives 65/65/EEC and 75/319/EEC – Medicinal products for human use – Anorectics: amfepramone, clobenzorex, fenproporex, norpseudoephedrine, phentermine – Withdrawal of a marketing authorisation – Competence of the Commission – Conditions for withdrawal))appellant, THE COURT (Full Court),,having regard to the decision of the President of the Court that the appeal was to be determined pursuant to an expedited procedure in accordance with Article 62a of the Rules of Procedure, after hearing the Advocate General,gives the followingLegal backgroundOn those grounds, THE COURT (Full Court),Rodríguez IglesiasPuissochet Wathelet SchintgenTimmermans Gulman EdwardLa Pergola Jann SkourisMacken Colneric von BahrCunha Rodrigues Rosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Languages of the case: German,Englishand French. Languages of the case: German,Englishand French.

cee28-89824a9-464a

EN

THE COURT RULES THAT FINANCIAL SUPPORT WHICH MERELY REPRESENTS COMPENSATION FOR PUBLIC SERVICE OBLIGATIONS IMPOSED BY THE MEMBER STATES DOES NOT HAVE THE CHARACTERISTICS OF STATE AID

«(Regulation (EEC) No 1191/69 – Operation of urban, suburban and regional scheduled transport services – Public subsidies – Concept of State aid – Compensation for discharging public service obligations)» Summary of the Judgment 1.. Transport – Action by the Member States concerning public service obligations – Regulation No 1191/69 – Derogation authorised for undertakings operating urban, suburban or regional scheduled transport services – Extent of the option available to Member States – Obligation to delimit clearly the use made of that option – Observance of legal certainty (Council Regulation No 1191/69, Art. 1(1), second subpara.) Transport – Action by the Member States concerning public service obligations – Regulation No 1191/69 – Derogation authorised for undertakings operating urban, suburban or regional scheduled transport services – Extent of the option available to Member States – Obligation to delimit clearly the use made of that option – Observance of legal certainty 2.. State aid – Effect on trade between Member States – Adverse effect on competition – Exclusion by the Commission of the transport sector from the de minimis rule(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC); Commission Regulation No 69/2001; Commission Notice 96/C 68/06) State aid – Effect on trade between Member States – Adverse effect on competition – Exclusion by the Commission of the transport sector from the de minimis rule 3.. State aid – Definition – Measures intended to offset the cost of public service tasks assumed by an undertaking – Not included – Conditions – Clearly defined public service obligations – Establishment in an objective and transparent manner of the parameters used to calculate the compensation – Compensation limited to covering costs – Determination of the compensation, where the undertaking is not chosen by a public procurement procedure, on the basis of an analysis of the costs of a typical undertaking in the sector concerned (EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) State aid – Definition – Measures intended to offset the cost of public service tasks assumed by an undertaking – Not included – Conditions – Clearly defined public service obligations – Establishment in an objective and transparent manner of the parameters used to calculate the compensation – Compensation limited to covering costs – Determination of the compensation, where the undertaking is not chosen by a public procurement procedure, on the basis of an analysis of the costs of a typical undertaking in the sector concerned 4.. Transport – Aid for transport – Application of Article 77 of the Treaty (now Article 73 EC) – Limitation to cases covered by secondary Community legislation (EC Treaty, Art. 77 (now Art. 73 EC); Council Regulations Nos 1191/69 and 1107/70) Transport – Aid for transport – Application of Article 77 of the Treaty (now Article 73 EC) – Limitation to cases covered by secondary Community legislation JUDGMENT OF THE COURT24 July 2003 (1) ((Regulation (EEC) No 1191/69 – Operation of urban, suburban and regional scheduled transport services – Public subsidies – Concept of State aid – Compensation for discharging public service obligations))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Altmark Trans GmbH, by M. Ronellenfitsch, Rechtsanwalt, ─ Regierungspräsidium Magdeburg, by L.-H. Rode, acting as Agent, ─ Nahverkehrsgesellschaft Altmark GmbH, by C. Heinze, Rechtsanwalt, ─ the Commission of the European Communities, by M. Wolfcarius and D. Triantafyllou, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Altmark Trans GmbH, represented by M. Ronellenfitsch; Regierungspräsidium Magdeburg, represented by L.-H. Rode; Nahverkehrsgesellschaft Altmark GmbH, represented by C. Heinze; and the Commission, represented by M. Wolfcarius and D. Triantafyllou, at the hearing on 6 November 2001, after hearing the Opinion of the Advocate General at the sitting on 19 March 2002,having regard to the order reopening the oral procedure of 18 June 2002,after hearing the oral observations of Altmark Trans GmbH, represented by M. Ronellenfitsch; Regierungspräsidium Magdeburg, represented by S. Karnop, acting as Agent; Nahverkehrsgesellschaft Altmark GmbH, represented by C. Heinze; the German Government, represented by M. Lumma, acting as Agent; the Danish Government, represented by J. Molde, acting as Agent; the Spanish Government, represented by R. Silva de Lapuerta, acting as Agent; the French Government, represented by F. Million, acting as Agent; the Netherlands Government, represented by N.A.J. Bel, acting as Agent; the United Kingdom Government, represented by J.E. Collins, acting as Agent, and E. Sharpston QC; and the Commission, represented by D. Triantafyllou, at the hearing on 15 October 2002,after hearing the Opinion of the Advocate General at the sitting on 14 January 2003, gives the followingLegal contextOn those grounds, THE COURT,Rodríguez Iglesias PuissochetWathelet Schintgen TimmermansGulmann Edward La PergolaJann Skouris MackenColneric von BahrCunha RodriguesRosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: German. Language of the case: German.

bab35-29440fa-4153

EN

THE ADVOCATE GENERAL CONCLUDES THAT COMMUNITY LAW AS IT STANDS DOES NOT REQUIRE PAYMENT OF A SOCIAL SECURITY BENEFIT TO A UNION CITIZEN WHO SEEKS WORK IN A MEMBER STATE IN WHICH HE HAS NO ROOTS AND WITH WHOSE EMPLOYMENT MARKET HE HAS NO CONNECTION

Brian Francis CollinsvSecretary of State for Work and Pensions(Reference for a preliminary ruling from the Social Security Commissioner)(Freedom of movement for persons – Article 48 of the EC Treaty (now, after amendment, Article 39 EC) – Concept of ‘worker’ – Social security allowance paid to jobseekers – Residence requirement – Citizenship of the European Union)Summary of the Judgment1.        Freedom of movement for persons – Worker – Definition – National of a Member State seeking paid employment in the territory of another Member State having worked there 17 years earlier – Not a ‘worker’ for the purposes of Title II of Part I of Regulation No 1612/68(Council Regulation No 1612/68)2.        Freedom of movement for persons – Right of entry and residence of nationals of Member States – National of a Member State seeking paid employment in the territory of another Member State having worked there 17 years earlier – Right of residence solely on the basis of Directive 68/360 – Excluded(Council Directive 68/360, Arts 4 and 8)3.        Freedom of movement for persons – Workers – Equal treatment – European citizenship – Jobseeker’s allowance – Residence requirement – Permissibility – Conditions(EC Treaty, Arts 6, 8 and 48(2) (now, after amendment, Arts 12 EC, 17 EC and 39(2) EC))1.        A national of a Member State who enters the territory of another Member State, in which he worked 17 years earlier, with the intention of seeking paid employment there and applies for a jobseeker’s allowance is not a worker for the purposes of Title II of Part I of Regulation No 1612/68 on freedom of movement for workers within the Community, as amended by Regulation No 2434/92. In that title of Regulation No 1612/68, the term ‘worker’ covers only persons who have already entered the employment market and who therefore may, on the basis of Article 7(2) of the regulation, claim the same social and tax advantages as national workers. In the absence of a sufficiently close connection with the employment market in the host Member State, the position of the abovementioned person must be compared with that of any national of a Member State looking for his first job in another Member State without having yet entered into an employment relationship there, who benefits from the principle of equal treatment only as regards access to employment. Where national legislation makes grant of such an allowance to a person conditional on his being a worker for the purposes of Regulation No 1612/68, it is, however, for the national court or tribunal to establish whether the term ‘worker’ referred to by the legislation is to be understood in the sense of Title II of Part I to the regulation. (see paras 29-33, operative part 1)2.        A national of a Member State who enters the territory of another Member State, in which he worked 17 years earlier, with the intention of seeking paid employment there does not have a right to reside in the host Member State solely on the basis of Directive 68/360 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families. The right of residence in a Member State referred to in Articles 4 and 8 of Directive 68/360 is accorded only to nationals of a Member State who are already in employment in the first Member State, to the exclusion of persons seeking employment, who can rely solely on the provisions of that directive concerning their movement within the Community. (see paras 43-44, operative part 2)3.        The right to equal treatment laid down in Article 48(2) of the Treaty (now, after amendment, Article 39(2) EC), read in conjunction with Articles 6 and 8 of the Treaty (now, after amendment, Articles 12 EC and 17 EC), does not preclude national legislation which makes entitlement to a jobseeker’s allowance conditional on a residence requirement, in so far as that requirement may be justified on the basis of objective considerations that are independent of the nationality of the persons concerned and proportionate to the legitimate aim of the national provisions. (see para. 73, operative part 3)JUDGMENT OF THE COURT (Full Court)23 March 2004(1)andTHE COURT (Full Court),after considering the written observations submitted on behalf of: – Mr Collins, by R. Drabble QC, instructed by P. Eden, solicitor, – the United Kingdom Government, by J.E. Collins, acting as Agent, assisted by E. Sharpston QC, – the German Government, by W.-D. Plessing, acting as Agent, – the Commission of the European Communities, by N. Yerrell and D. Martin, acting as Agents, after hearing the oral observations of Mr Collins, represented by R. Drabble, of the United Kingdom Government, represented by  R. Caudwell, acting as Agent, and E. Sharpston, and of the Commission, represented by  N. Yerrell and D. Martin, at the hearing on 17 June 2003, after hearing the Opinion of the Advocate General at the sitting on 10 July 2003,gives the followingRelevant provisionsto accept offers of employment actually made;to move freely within the territory of Member States for this purpose;the document with which he entered their territory;a confirmation of engagement from the employer or a certificate of employment’.a worker for the purposes of Council Regulation (EEC) No 1612/68 or (EEC) No 1251/70 or a person with a right to reside in the United Kingdom pursuant to Council Directive No 68/360/EEC or No 73/148/EEC; Is a person in the circumstances of the claimant in the present case a worker for the purposes of Regulation No 1612/68 of the Council of 15 October 1968? If the answer to question 1 is not in the affirmative, does a person in the circumstances of the claimant in the present case have a right to reside in the United Kingdom pursuant to Directive No 68/360 of the Council of 15 October 1968? If the answers to both questions 1 and 2 are not in the affirmative, do any provisions or principles of European Community law require the payment of a social security benefit with conditions of entitlement like those for income-based jobseeker’s allowance to a person in the circumstances of the claimant in the present case?’ On those grounds,THE COURTA person in the circumstances of the appellant in the main proceedings is not a worker for the purposes of Title II of Part I of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community, as amended by Council Regulation (EEC) No 2434/92 of 27 July 1992. It is, however, for the national court or tribunal to establish whether the term ‘worker’ as referred to by the national legislation at issue is to be understood in that sense. A person in the circumstances of the appellant in the main proceedings does not have a right to reside in the United Kingdom solely on the basis of Council Directive 68/360/EEC of 15 October 1968 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families. The right to equal treatment laid down in Article 48(2) of the EC Treaty (now, after amendment, Article 39(2) EC), read in conjunction with Articles 6 and 8 of the EC Treaty (now, after amendment, Articles 12 EC and 17 EC), does not preclude national legislation which makes entitlement to a jobseeker’s allowance conditional on a residence requirement, in so far as that requirement may be justified on the basis of objective considerations that are independent of the nationality of the persons concerned and proportionate to the legitimate aim of the national provisions. SkourisJannTimmermansGulmannCunha RodriguesRosasLa PergolaPuissochet Schintgen Colnericvon BahrR. GrassV. SkourisRegistrarPresident 1 – Language of the case: English. Language of the case: English.

d30f6-3c9f358-49de

EN

THE COURT CONSIDERS THAT IT IS CONTRARY TO COMMUNITY LAW FOR NETHERLANDS LEGISLATION TO REQUIRE MANDATORY REGISTRATION OF A DRIVING LICENCE ISSUED BY ANOTHER MEMBER STATE AFTER THE ESTABLISHMENT OF THE HOLDER OF SUCH A LICENCE IN THE NETHERLANDS

«(Failure of a Member State to fulfil obligations – Directive 91/439/EEC – Driving licences – Mutual recognition – Compulsory registration – Calculation of the duration of validity)» Summary of the Judgment 1.. Freedom of movement for persons – Freedom of establishment – Driving licence – Directive 91/439 – Mutual recognition of driving licences (Council Directive 91/439, Art. 1(2)) Freedom of movement for persons – Freedom of establishment – Driving licence – Directive 91/439 – Mutual recognition of driving licences 2.. Freedom of movement for persons – Freedom of establishment – Driving licence – Directive 91/439 – Possibility for a Member State which did not issue the licence to apply some of its national rules – Limits (Council Directive 91/439, Art. 1(3)) Freedom of movement for persons – Freedom of establishment – Driving licence – Directive 91/439 – Possibility for a Member State which did not issue the licence to apply some of its national rules – Limits JUDGMENT OF THE COURT (Sixth Chamber)10 July 2003 (1) ((Failure by a Member State to comply with its obligations – Directive 91/439/EEC – Driving licences – Mutual recognition – Compulsory registration – Calculation of the duration of validity))applicant, vdefendant, intervener, THE COURT (Sixth Chamber),,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 21 November 2002, gives the followingLegal backgroundOn those grounds, THE COURT (Sixth Chamber)SchintgenGulmann Skouris MackenColneric R. Grass J.-P. Puissochet RegistrarPresident of the Sixth Chamber 1 – Language of the case: Dutch. Language of the case: Dutch.

90085-72cb0a4-46c1

EN

NO AUTOMATIC COMPENSATION FOR FISH FARMERS WHO ARE REQUIRED BY COMMUNITY LAW TO DESTROY THEIR STOCKS WHICH ARE INFECTED BY A CONTAGIOUS DISEASE

«(Directive 93/53/EEC – Destruction of fish stocks infected by viral haemorrhagic septicaemia (VHS) and infectious salmon anaemia (ISA) – Compensation – Obligations of the Member State – Protection of fundamental rights, particularly of the right to property – Validity of Directive 93/53)» Summary of the Judgment Community law – Principles – Fundamental rights – Right to property – Restrictions – Whether permissible – Conditions – Minimum measures for the control of certain fish diseases – Directive 93/53 – Compensation for affected owners – None – Compatibility with the right to property – Fish owner's fault – Not relevant(Council Directives 91/67, as amended by Annex A to Directive 93/54, and 93/53)Community law – Principles – Fundamental rights – Right to property – Restrictions – Whether permissible – Conditions – Minimum measures for the control of certain fish diseases – Directive 93/53 – Compensation for affected owners – None – Compatibility with the right to property – Fish owner's fault – Not relevantJUDGMENT OF THE COURT10 July 2003 (1) ((Directive 93/53/EEC – Destruction of fish stocks infected by viral haemorrhagic septicaemia (VHS) and infectious salmon anaemia (ISA) – Compensation – Obligations of the Member State – Protection of fundamental rights, particularly of the right to property – Validity of Directive 93/53))andTHE COURT,,after considering the written observations submitted on behalf of: ─ Booker Aquaculture Ltd, by P.S. Hodge QC and J. Mure, advocate, instructed by Steedman Ramage, solicitors, ─ Hydro Seafood GSP Ltd, by A. O'Neill QC and E. Creally, advocate, instructed by McClure Naismith, solicitors, ─ The Scottish Ministers, by R. Magrill, acting as Agent, and by the Lord Advocate, C. Boyd QC assisted by N. Paines QC and L. Dunlop, advocate, ─ the United Kingdom Government, by R. Magrill, acting as Agent, assisted by N. Paines QC, ─ the French Government, by C. Vasak and K. Rispal-Bellanger, acting as Agents, ─ the Italian Government, by U. Leanza, acting as Agent, assisted by F. Quadri, avvocato dello Stato, ─ the Netherlands Government, by M.A. Fierstra, acting as Agent, ─ the Norwegian Government, by M. Djupesland, acting as Agent, ─ the Council of the European Union, by J. Carbery, acting as Agent, ─ the Commission of the European Communities, by G. Berscheid and K. Fitch, acting as Agents, having regard to the Report for the Hearing,after hearing the oral observations of Booker Aquaculture Ltd, represented by P.S. Hodge QC and J. Mure, Hydro Seafood GSP Ltd, represented by A. O'Neill QC and E. Creally, The Scottish Ministers, represented by N. Paines QC and L. Dunlop, the United Kingdom Government, represented by G. Amodeo, acting as Agent, assisted by N. Paines QC, the Italian Government, represented by F. Quadri, the Council, represented by J. Carbery, and the Commission, represented by K. Fitch, at the hearing on 15 May 2001, after hearing the Opinion of the Advocate General at the sitting on 20 September 2001, gives the followingLegal frameworkOn those grounds, THE COURT,Rodríguez IglesiasPuissochet Schintgen TimmermansGulmann Edward La PergolaMacken Colneric von BahrCunha Rodrigues R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: English. Language of the case: English.

50e22-e4d4322-4c9b

EN

THE COURT ANNULS DECISIONS OF THE EUROPEAN CENTRAL BANK (ECB) AND THE EUROPEAN INVESTMENT BANK (EIB) CONCERNING FRAUD PREVENTION AND COOPERATION WITH THE EUROPEAN ANTI-FRAUD OFFICE (OLAF)

«(European Central Bank (ECB) – Decision 1999/726/EC on fraud prevention – Protection of the Communities' financial interests – European Anti-Fraud Office (OLAF) – Regulation (EC) No 1073/1999 – Applicability to the ECB – Plea of illegality – Admissibility – Independence of the ECB – Article 108 EC – Legal basis – Article 280 EC – Consultation of the ECB – Article 105(4) EC – Proportionality)» Summary of the Judgment 1.. European Anti-Fraud Office (OLAF) – Regulation No 1073/1999 concerning investigations conducted by OLAF – Scope – European Central Bank – Whether included (European Parliament and Council Regulation No 1073/1999, Art. 1(3)) European Anti-Fraud Office (OLAF) – Regulation No 1073/1999 concerning investigations conducted by OLAF – Scope – European Central Bank – Whether included 2.. Plea of illegality – Measures in respect of which a plea of illegality may be raised – Regulation No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) – Community legislative act whose addressee is not the Community body alleging its illegality – Admissibility (Arts 230 EC and 241 EC) Plea of illegality – Measures in respect of which a plea of illegality may be raised – Regulation No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) – Community legislative act whose addressee is not the Community body alleging its illegality – Admissibility 3.. Financial provisions – Community's financial interests – Definition – Resources and expenditure of the European Central Bank – Whether included (Art. 280 EC) Financial provisions – Community's financial interests – Definition – Resources and expenditure of the European Central Bank – Whether included 4.. Financial provisions – Protection of the Community's financial interests – Article 280 EC – Purpose – Scope – Adoption of legislative measures applicable within Community institutions, bodies, offices and agencies – Whether included (Art. 280 EC) Financial provisions – Protection of the Community's financial interests – Article 280 EC – Purpose – Scope – Adoption of legislative measures applicable within Community institutions, bodies, offices and agencies – Whether included 5.. European Central Bank – Obligation to consult the Bank before adoption of an act in its field of competence – Scope – Measures intended to combat fraud adversely affecting the Community's financial interests – Excluded (Art. 105(4) EC; European Parliament and Council Regulation No 1073/1999) European Central Bank – Obligation to consult the Bank before adoption of an act in its field of competence – Scope – Measures intended to combat fraud adversely affecting the Community's financial interests – Excluded 6.. European Central Bank – Independence – Scope – Community legislative measures capable of applying to the Bank – Whether permissible – Conditions (Art. 108 EC; Statute of the European System of Central Banks) European Central Bank – Independence – Scope – Community legislative measures capable of applying to the Bank – Whether permissible – Conditions 7.. European Central Bank – Independence – Application of Regulation No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) – Whether compatible (European Parliament and Council Regulation No 1073/1999; Commission Decision 1999/352) European Central Bank – Independence – Application of Regulation No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) – Whether compatible 8.. European Anti-Fraud Office (OLAF) – Regulation No 1073/1999 concerning investigations conducted by OLAF – Breach of the principle of proportionality in relation to the inclusion of the European Central Bank within its scope – None (European Parliament and Council Regulation No 1073/1999) European Anti-Fraud Office (OLAF) – Regulation No 1073/1999 concerning investigations conducted by OLAF – Breach of the principle of proportionality in relation to the inclusion of the European Central Bank within its scope – None 9.. European Anti-Fraud Office (OLAF) – Regulation (EC) No 1073/1999 concerning investigations conducted by OLAF – Infringement by Decision 1999/726 of the European Central Bank on fraud prevention (European Parliament and Council Regulation No 1073/1999; European Central Bank Decision 1999/726) European Anti-Fraud Office (OLAF) – Regulation (EC) No 1073/1999 concerning investigations conducted by OLAF – Infringement by Decision 1999/726 of the European Central Bank on fraud prevention JUDGMENT OF THE COURT10 July 2003 (1) ((European Central Bank (ECB) – Decision 1999/726/EC on fraud prevention – Protection of the Communities' financial interests – European Anti-Fraud Office (OLAF) – Regulation (EC) No 1073/1999 – Applicability to the ECB – Plea of illegality – Admissibility – Independence of the ECB – Article 108 EC – Legal basis – Article 280 EC – Consultation of the ECB – Article 105(4) EC – Proportionality))applicant, interveners, vdefendant, THE COURT,,having regard to the Report for the Hearing,after hearing the Opinion of the Advocate General at the sitting on 3 October 2002,gives the followingLegal frameworkOn those grounds, THE COURTRodríguez IglesiasPuissochet Wathelet SchintgenGulmann Edward La PergolaJann Skouris MackenColneric von BahrRosas R. Grass G.C. Rodríguez Iglesias RegistrarPresident 1 – Language of the case: French. Language of the case: French.

4daa6-8e2b368-4d5a

EN

A CARTEL ON THE LYSINE MARKET GIVES THE COURT OF FIRST INSTANCE AN OPPORTUNITY TO CLARIFY THE CRITERIA FOR FIXING THE AMOUNT OF FINES

«(Competition – Cartel – Lysine – Guidelines for calculating the amount of fines – Applicability – Seriousness and duration of the infringement – Turnover – Mitigating circumstances)» Summary of the Judgment 1.. Community law – Principles – Protection of legitimate expectations – Conditions – Protection against exercise by the Commission of its power to raise the level of fines penalising infringements of the competition rules – None (Council Regulation No 17) Community law – Principles – Protection of legitimate expectations – Conditions – Protection against exercise by the Commission of its power to raise the level of fines penalising infringements of the competition rules – None 2.. Community law – General principles of law – Non-retroactivity of criminal provisions – Scope – Fines imposed for infringements of the competition rules – Included – Infringement by reason of the application of the Guidelines for the calculation of fines to an infringement prior to their introduction – None (European Convention for the Protection of Human Rights and Fundamental Freedoms, Art. 7; Council Regulation No 17, Art. 15(2)) Community law – General principles of law – Non-retroactivity of criminal provisions – Scope – Fines imposed for infringements of the competition rules – Included – Infringement by reason of the application of the Guidelines for the calculation of fines to an infringement prior to their introduction – None 3.. Competition – Fines – Amount – Commission's margin of discretion – Possibility of increasing the fines in order to strengthen their deterrent effect (Council Regulation No 17, Art. 15) Competition – Fines – Amount – Commission's margin of discretion – Possibility of increasing the fines in order to strengthen their deterrent effect 4.. Competition – Fines – Amount – Determination thereof – Guidelines adopted by the Commission – Obligation on the Commission to comply with them (Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination thereof – Guidelines adopted by the Commission – Obligation on the Commission to comply with them 5.. Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Taking into account of the total turnover of the undertaking concerned and the turnover achieved by sales of goods which were the subject-matter of the infringement – Limits (Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Taking into account of the total turnover of the undertaking concerned and the turnover achieved by sales of goods which were the subject-matter of the infringement – Limits 6.. Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Measure of the effective capacity to cause damage on the relevant market – Relevance of the market share held by the undertaking concerned (Art. 81(1) EC; Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Measure of the effective capacity to cause damage on the relevant market – Relevance of the market share held by the undertaking concerned 7.. Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Measure of the actual impact on competition of the infringing conduct of each undertaking – Relevance of the turnover achieved with the products forming the subject-matter of a restrictive practice (Art. 81(1) EC; Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Measure of the actual impact on competition of the infringing conduct of each undertaking – Relevance of the turnover achieved with the products forming the subject-matter of a restrictive practice 8.. Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Mitigating circumstances – Passive or follow-my-leader role of the undertaking (Council Regulation No 17, Art. 15) Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Mitigating circumstances – Passive or follow-my-leader role of the undertaking 9.. Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Mitigating circumstances – Agreement not implemented in practice – Assessment at the level of the individual conduct of each undertaking (Council Regulation No 17, Art. 15) Competition – Fines – Amount – Determination thereof – Criteria – Seriousness of the infringements – Mitigating circumstances – Agreement not implemented in practice – Assessment at the level of the individual conduct of each undertaking 10.. Competition – Fines – Amount – Appropriateness – Review by the Court – Factors which may be taken into account by the Community judicature – Information not contained in the decision imposing the fine and not required in the statement of reasons – Included (Arts 229 EC, 230 EC and 253 EC; Council Regulation No 17, Art. 17) Competition – Fines – Amount – Appropriateness – Review by the Court – Factors which may be taken into account by the Community judicature – Information not contained in the decision imposing the fine and not required in the statement of reasons – Included 11.. Acts of the institutions – Statement of reasons – Obligation – Scope – Decision imposing fines – Indication of the factors by which the Commission assessed the seriousness and duration of the infringement – Sufficient indication (Art. 253 EC; Council Regulation No 17, Art 15(2), second subpara.) Acts of the institutions – Statement of reasons – Obligation – Scope – Decision imposing fines – Indication of the factors by which the Commission assessed the seriousness and duration of the infringement – Sufficient indication 12.. Competition – Fines – Amount – Determination thereof – Method of calculation defined by guidelines laid down by the Commission – Application of percentages to the basic amount of the fine (Council Regulation No 17, Art. 15(2)) Competition – Fines – Amount – Determination thereof – Method of calculation defined by guidelines laid down by the Commission – Application of percentages to the basic amount of the fine JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber)9 July 2003 (1)((Competition – Cartel – Lysine – Guidelines on the method of setting fines – Applicability – Gravity and duration of the infringement – Turnover – Mitigating circumstances))applicant, vdefendant, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fourth Chamber),having regard to the written procedure and further to the hearing on 24 April 2002,gives the followingFactsOn those grounds, THE COURT OF FIRST INSTANCE (Fourth Chamber)VilarasTiili Mengozzi H. Jung M. Vilaras RegistrarPresident 1 – Language of the case: English. Language of the case: English.

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