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Court of Justice of the European Communities (including Court of First Instance Decisions)
You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Unilever Bestfoods (Ireland) Ltd v Commission of the European Communities [2006] EUECJ C-552/03 (28 September 2006)
URL: http://www.bailii.org/eu/cases/EUECJ/2006/C55203.html
Cite as: [2006] EUECJ C-552/03, [2007] CEC 760, [2006] EUECJ C-552/3, [2006] ECR I-9091, [2006] 5 CMLR 27
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IMPORTANT LEGAL NOTICE - The source of this judgment is the web site of the Court of Justice of the European Communities. The information in this database has been provided free of charge and is subject to a Court of Justice of the European Communities disclaimer and a copyright notice. This electronic version is not authentic and is subject to amendment.
(Appeal -" Articles 85 and 86 of the EC Treaty (now Articles 81 EC and 82 EC) -" Ice creams for immediate consumption -" Supply of freezer cabinets to retailers -" Exclusivity clause -" Right to a fair hearing -" Burden of proof)
In Case C-552/03 P,
APPEAL under Article 56 of the Statute of the Court of Justice, brought on 24 December 2003,
Unilever Bestfoods (Ireland) Ltd, formerly Van den Bergh Foods Ltd, established in Dublin (Ireland), represented by M. Nicholson and M. Rowe, Solicitors, and by M. Biesheuvel and M. De Grave, advocaten, with an address for service in Luxembourg,
applicant,
the other parties to the proceedings being:
Commission of the European Communities, represented by W. Wils, B. Doherty and A. Whelan, acting as Agents, with an address for service in Luxembourg,
defendant at first instance,
Masterfoods Ltd, established in Dublin, represented by P. Collins and M. Levitt, Solicitors,
Richmond Ice Cream Ltd, formerly Richmond Frozen Confectionery Ltd, established in Northallerton (United Kingdom), represented by I. Forrester QC, with an address for service in Luxembourg,
interveners at first instance,
composed of J. Malenovský, President of Chamber, J.-P. Puissochet (Rapporteur) and U. Lõhmus, Judges,
Advocate General: J. Kokott,
Registrar: R. Grass,
after hearing the Advocate General,
makes the following
- By its appeal, Unilever Bestfoods (Ireland) Ltd, formerly Van den Bergh Foods Ltd and previously named HB Ice Cream Ltd ('HB'), requests the setting aside of the judgment of the Court of First Instance of the European Communities in Case T-65/98 Van den Bergh Foods v Commission [2003] ECR II-4653 ('the judgment under appeal'), by which that Court dismissed its application for annulment of 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 1989 L 246, p. 1) ('the contested decision'). HB also requests the Court to annul the contested decision or, in the alternative, to refer the case back to the Court of First Instance for judgment.
- The facts of the case, together with the contested decision, the procedure and forms of order sought before the Court of First Instance are summarised in paragraphs 2 to 40 of the judgment under appeal, to which reference is made. The main points are apparent from the paragraphs of the judgment set out below:
- As a result, a dispute arose between Mars and HB and proceedings were brought before the Irish courts which gave rise inter alia to a reference for a preliminary ruling from the Supreme Court (Ireland), which was the subject of a judgment of the Court of Justice in Case C-344/98 Masterfoods and HB [2000] ECR I-11369.
- By the judgment under appeal, the Court of First Instance also held as follows:
- Paragraph 41 of the judgment under appeal states that HB raised seven pleas in law against the contested decision: 'first, manifest errors of assessment of the facts, resulting in errors of law; second, infringement of Article 85(1) of the Treaty; third, infringement of Article 85(3) of the Treaty; fourth, infringement of Article 86 of the Treaty; fifth, infringement of the right to property, by failing to observe general principles of law and Article 222 of the EC Treaty [now Article 295 EC]; sixth, infringement of Article 190 of the EC Treaty (now Article 253 EC); and, seventh, failure to observe fundamental principles of Community law and infringement of essential procedural requirements'.
- The Court of First Instance examined together the first two pleas relied on by HB, by which the latter criticised the Commission for having made a series of manifest errors in its analysis of the existence and the degree of foreclosure of the relevant market arising by virtue of the distribution agreements entered into by that company with retailers in Ireland ('the distribution agreements').
- In paragraph 80 of the judgment under appeal, the Court of First Instance held that it had, in the first place, to determine whether the Commission had adequately proved that the exclusivity clause in reality imposed purchasing exclusivity on some sales outlets and whether the Commission had correctly quantified the degree of foreclosure of the relevant market which it gave rise to. The Court of First Instance stated that it was necessary, in the second place, to determine, as appropriate, whether the degree of foreclosure is sufficiently high to constitute an infringement of Article 85(1) of the Treaty. In that regard, the Court of First Instance held in paragraph 82 of the judgment that it could not confine itself to looking at the effects of the exclusivity clause, considered in isolation, referring only to the contractual restrictions imposed by the distribution agreements. In paragraph 83 of the judgment, it held:
- Relying on unchallenged survey data on which the Commission had based its findings, the Court of First Instance held in paragraph 86 of the judgment under appeal that only 17% of the retail sales outlets for impulse ice cream had freezer cabinets belonging to the retailer, in which ice cream of any brand could therefore be stocked. In the other outlets, which represent 83% of the total, the freezers are the property of the ice cream suppliers, in which only ice cream of the supplier's brand could be stocked. Furthermore, according to the documents on which the Court of First Instance based its judgment, over 60% of the freezer cabinets belonging to a supplier come from HB.
- The Court of First Instance also held, in paragraph 87 of the judgment under appeal, that the majority of sales of impulse ice cream were made in outlets which were small in area and which, having regard to their limited space, would find it very difficult to install another freezer. The Court of First Instance rejected HB's arguments seeking to show that the Commission had overestimated the space constraints. In paragraphs 89 and 90 of the judgment, it confirmed the Commission's finding that the provision of freezers by HB 'free of charge', the popularity of its products, the breadth of its range and the benefits produced by the sale of those products did not encourage retailers which had only one or a number of freezer cabinets belonging to HB to alter their situation, emphasising in that regard the dominant position held by that company on the market.
- In order to confirm that the exclusivity clause gave rise to a restriction on competition, the Court of First Instance, in paragraphs 93 to 98 of the judgment under appeal, relied on various items of factual evidence, in particular the fact that Mars had succeeded, in the year in which retailers had paid little observance to the clause, in achieving a 42% share of the market by volume, only for it to fall to under 20% following an injunction granted against Mars by the High Court (Ireland) in 1990, prohibiting that company from inducing retailers to stock its ice creams in freezer cabinets belonging to HB. It thus stated in paragraph 98:
- In paragraphs 99 to 104 of the contested judgement, the Court of First Instance also rejected the various arguments put forward by HB seeking to show that the proportion of sales outlets foreclosed to ice cream competition from ice cream other than HB's was not 40%, as the Commission held in the contested decision, but only 6% and did not lead to an appreciable restriction of competition on the relevant market.
- In paragraph 105 of the judgment, the Court of First Instance added:
- The Court of First Instance also rejected HB's argument that no finding of an infringement of Article 85(1) of the Treaty could be made until it had been established that, applying a 'rule of reason', any restriction on the freedom of conduct of the retailers does indeed constitute a restriction on competition.
- In addition, in paragraphs 108 to 111 of the judgment under appeal, the Court of First Instance held that, over and above the identified part of the network of distribution agreements involving around 40% of all sales outlets on the market, the networks of agreements put in place on the relevant market by suppliers of ice cream other than HB also foreclose that market by imposing similar conditions on retailers, even though those suppliers do not have either the same position or the same popularity as HB on the relevant market. The Court of First Instance accordingly held that the true position is that those networks of agreements affect 83% of sales outlets in that market.
- The Court of First Instance also found in paragraphs 113 to 118 of the judgment under appeal that, as well as the degree of dependence which the networks of agreements give rise to, other evidence of the economic and legal context of those agreements, such as, in particular, the expense involved in acquiring a stock of freezer cabinets for installation in outlets which will ensure that the supplier's products can achieve stable distribution levels, and the fact that the other suppliers of impulse ice cream hold only very small shares in the relevant market, show that the distribution agreements are liable to have an appreciable effect on competition for the purposes of Article 85(1) of the Treaty and contribute significantly to a foreclosure of the relevant market.
- The Court of First Instance accordingly rejected the first two pleas relied on by HB in support of its application.
- As regards the third plea raised by HB, alleging errors of law in the application of Article 85(3) of the Treaty, the Court of First Instance held in paragraph 138 of the judgment under appeal that the Commission had analysed the distribution agreements in the light of each of the four conditions laid down by that provision.
- As regards the first of those conditions, according to which agreements capable of being exempted from the prohibition laid down by Article 85(1) of the Treaty, must contribute 'to improving the production or distribution of goods or to promoting technical or economic progress', the Court of First Instance stated in paragraph 139 of the judgment under appeal:
- The Court of First Instance held in paragraphs 140 and 141 of the judgment under appeal that the Commission had consequently rightly taken into consideration the barriers to the relevant market resulting from the exclusivity clause, and the consequent weakening of competition, when it assessed the distribution agreements in the light of the first condition laid down by Article 85(3) of the Treaty. In paragraph 142 of the judgment, the Court of First Instance stated that the benefits ensured by the agreements are the result of the provision to retailers of freezer cabinets 'free of charge' and can be achieved without the exclusivity clause.
- The Court of First Instance also held in paragraph 143 of the judgment under appeal that the Commission's analysis to the effect that, were the power to impose an exclusivity clause to be restricted, it appeared unlikely that HB would definitely cease to supply freezer cabinets to retailers, was not vitiated by a manifest error of assessment.
- The Court of First Instance accordingly held in paragraph 144 of the judgment under appeal that the first of the conditions laid down by Article 85(3) of the Treaty was not satisfied and rejected the third plea relied on by HB in support of its application.
- As regards HB's fourth plea, alleging errors of law in the application of Article 86 of the Treaty, the Court of First Instance confirmed in paragraph 156 of the judgment under appeal the Commission's analysis that that company is an unavoidable partner for many retailers on the relevant market and that it had a dominant position on that market. It accordingly noted in paragraph 158 of the judgment that HB had a special responsibility not to allow its conduct to impair genuine undistorted competition on the common market.
- In paragraph 159 of the judgment under appeal, the Court of First Instance held that, while the provision of freezer cabinets on a condition of exclusivity constitutes a standard practice on the relevant market which cannot be prohibited in the normal situation of a competitive market, the analysis is otherwise where, because of the dominant position held by one of the traders, competition is restricted on that market. It accordingly held that the Commission was right to find that HB was abusing its dominant position on the relevant market by inducing retailers to accept agreements for the provision of freezer cabinets subject to an exclusivity clause.
- In paragraph 161 of the judgment under appeal, the Court of First Instance rejected the argument based on the Opinion of Advocate General Jacobs in Case C-7/97 Bronner [1998] ECR I-7791, because the Commission did not claim in the contested decision that HB's freezer cabinets were an 'essential facility' and the decision does not require HB to transfer an asset or to conclude contracts with persons whom it has not selected.
- In paragraph 162 of the judgment under appeal, the Court of First Instance also rejected HB's argument that, in considering Article 86 of the Treaty, the Commission merely 'recycled' facts constituting an infringement of Article 85(1) of the Treaty.
- As regards the fifth plea, alleging errors of law committed by the Commission relating to respect for rights to property and infringement of Article 222 of the Treaty, the Court of First Instance held in paragraph 171 of the judgment under appeal that the contested decision does not deprive HB of its rights to property in its stock of freezer cabinets and does not prevent it from exploiting those assets by renting them out on commercial terms, and also held that the decision does not contain any undue limitation on the exercise of its rights to property.
- In addition, the Court of First Instance, in paragraph 172 of the judgment under appeal, rejected HB's argument based on the disadvantages linked to the imposition of a separate fee for the use of the freezer cabinets belonging to that company. The Court of First Instance also rejected HB's argument that it is disadvantaged in comparison with its competitors, who would be able to continue to make freezer cabinets available to retailers without charge, pointing out that, unlike the distribution agreements of its competitors, those of HB contribute significantly to the foreclosure of the relevant market and also operate in the context of a dominant position of one of the parties.
- The Court of First Instance rejected the sixth plea relied on by HB in support of its application, alleging infringement of Article 190 of the Treaty. In particular, it stated in paragraph 178 of the judgment under appeal that the Commission had given sufficient reasons in law for its decision to revise its initial favourable view contained in its notice of 15 August 1995, because the amendments proposed by HB to its distribution system had not brought about the expected results in terms of free access to sales outlets.
- The Court of First Instance also rejected the seventh plea relied on by HB in support of its application, alleging failure to respect the fundamental principles of Community law.
- In that regard, in paragraphs 193 and 194 of the judgment under appeal, the Court of First Instance first of all rejected HB's argument relating to infringement of legitimate expectations, stating in particular that the Commission had not given HB specific assurances as to the consequences of the commitments notified by the letter of 8 March 1995 and that the notice of 15 August 1995 merely indicated a preliminary position of the Commission, which was subject to change, particularly in order to take account of the observations of third parties.
- In paragraphs 197 to 200 of the judgment under appeal, the Court of First Instance also rejected HB's claims that the principles of subsidiarity, sincere cooperation and legal certainty had been infringed.
- The Court of First Instance held in paragraph 202 of the judgment under appeal that the contested decision does not contain any undue or disproportionate limitation on HB's property rights in its freezer cabinets, nor does it constitute an arbitrary or discriminatory impairment of HB's ability to compete with other suppliers. In paragraph 205 of the judgment, the Court of First Instance also rejected HB's argument that Article 4 of the contested decision, which requires that that company immediately cease the infringements established and refrain from taking any measure having the same object or effect, is disproportionate.
- Lastly, in paragraph 207 of the judgment under appeal, the Court of First Instance rejected HB's argument based on infringement of essential procedural requirements and an inadequate statement of reasons in the contested decision, as well as the argument relating to the need to extend the negotiations in order to find a solution to the breakdown in the -1995 settlement'.
- The Court of First Instance accordingly dismissed the action brought by HB in its entirety and ordered HB to pay the Commission's costs. It also ordered Mars and Richmond Ice Cream Ltd ('Richmond') to bear their own costs.
- By its appeal, HB claims that the Court should:
- The Commission contends that the appeal should be dismissed as inadmissible and unfounded and that HB should be ordered to pay the costs of these proceedings.
- Mars and Richmond also contend that the appeal should be dismissed and that HB should be ordered to pay the costs.
- Under Article 119 of the Rules of Procedure, where the appeal is, in whole or in part, clearly inadmissible or clearly unfounded, the Court may at any time, acting on a report from the Judge-Rapporteur and after hearing the Advocate General, by reasoned order dismiss the appeal.
- By its first ground of appeal, HB contests the finding of the Court of First Instance that the exclusivity clause is liable to have an appreciable effect on competition and to contribute to the foreclosure of the relevant market. The plea is divided into two parts. In the first part, HB submits that the analysis by the Court of First Instance of the effect of the exclusivity clause on competition is incorrect and that the judgment under appeal is inadequately reasoned in that regard. In the second part, it argues that the Court of First Instance erred in its analysis of the assessment of the contribution made by HB's competitors to the foreclosure of the market.
- HB contests the finding of the Court of First Instance that the exclusivity clause gives rise to a distortion of dealer choice.
- HB contends that the fact that the option given to retailers to terminate distribution agreements is rarely exercised by them in practice is irrelevant to the inquiry into the restrictive effect on competition of the exclusivity clause. It refers inter alia to Delimitis in that regard.
- HB contests the 'objective and specific evidence' on which the Court of First Instance relied in paragraphs 93 to 95 of the judgment under appeal in order to demonstrate the existence of demand in Ireland for the ice creams of other manufacturers where they are available and the fact, referred to in paragraph 97 of the judgment, that a considerable number of retailers are prepared to stock impulse ice creams from various manufacturers, provided that they may stock them in one and the same freezer. HB also claims that the reasoning in this regard is inadequate. It goes on to state that the evidence presented by Richmond at the hearing before the Court of First Instance regarding its experience on the United Kingdom market was submitted too late and, accordingly, is not only inadmissible but also inaccurate and irrelevant to the analysis of the relevant market.
- HB also claims that there is a contradiction between paragraph 92 of the judgment under appeal, which states that the retailers do stock ice creams of other brands alongside those of HB in the same freezer whenever they are free to do so, and paragraph 94 of the judgment, which refers to a survey stating that almost 40% of retailers would be prepared to stock ice creams other than those of HB if the exclusivity clause were no longer included in the distribution agreements, which means, according to HB, that 60% of retailers indicated that they would not be willing to stock ice creams from manufacturers other than HB if the exclusivity clause were not to exist.
- HB argues that the cancellation of the exclusivity clauses does not, as the Court of First Instance suggests in paragraphs 89 and 111 of the judgment under appeal, in any way imply the termination of the distribution and supply agreements entered into with the retailers concerned.
- HB also argues that the judgment under appeal is inadequately reasoned by reason of a failure to examine the system of bonuses it provides to retailers possessing their own freezer cabinet (the 'bonus scheme'). In its reply, it submits that the existence of such a bonus scheme is not presented as a separate ground of appeal, but as part of a broader plea put forward against the contested decision, namely that the Commission and the Court of First Instance wrongly failed to take proper account of the opportunities for competitors to gain access to the market. In its reply and at the hearing before the Court of First Instance, HB stressed the importance to be attached to that argument.
- The Commission, Mars and Richmond take the view that HB's arguments are purely factual and, accordingly, inadmissible, as well as being unfounded.
- Mars and Richmond observe that Delimitis provides that it is the actual duration of the distribution agreements which must be appraised under Article 85(1) of the Treaty. Richmond also states that the Court of First Instance did not find merely that it was open in theory to retailers to stock the competing products in their sales outlet, but rightly examined whether there were real and concrete opportunities for competitors to gain access to the relevant market.
- Richmond contends that the calculation of its market share in the United Kingdom is correct.
- The Commission points out that the bonus scheme has been in place since 1995 in order to meet objections on its part, because it had challenged the fact that HB invoiced the cost of a freezer cabinet to all retailers, without making any distinction as to whether they did, or did not, use a freezer cabinet belonging to that company.
- The Commission and Richmond maintain that, prior to this stage of the proceedings, HB has never put forward the bonus scheme as a justification, per se, for the annulment of the contested decision and that such an argument is accordingly inadmissible. The Commission adds that the true position is that the existence of the bonus scheme was used by HB only in support of its argument that it did not tie the supply of ice creams to the provision of freezers, an argument which was addressed by the Court of First Instance in paragraphs 113 and 114 of the judgment under appeal. Mars observes that the references made by HB to the decision and the application merely concern the factual operation of the bonus scheme and do not contain any legal arguments.
- The Commission and Richmond point out that the Court of First Instance is not required to provide a full response to every point put forward by each of the parties. The Commission refers in that regard to Case C-221/97 P Schröder and Others v Commission [1998] ECR I-8255, paragraph 24, and Case C-274/99 P Connolly v Commission [2001] ECR I-1611, paragraph 121).
- Mars also argues that the bonus scheme does not produce the result claimed by HB in terms of the opening up of the relevant market and that Delimitis does not require the Commission or the Court to consider the position in relation to outlets which are not foreclosed. Richmond also maintains that the bonus granted under that scheme was insufficient to operate as an incentive to retailers to buy their own freezer cabinet.
- The effects of an agreement on competition have to be assessed in the legal and economic context in which it occurs and where it might combine with others to have a cumulative effect on competition (see, inter alia, Case 23/67 Brasserie de Haecht [1967] ECR 407, 415, and Delimitis, paragraph 14).
- It follows that, as the Court of First Instance states in paragraph 84 of the judgment under appeal, the contractual restrictions on retailers must be examined not just in a purely formal manner from the legal point of view but also by taking into account the specific economic context in which the distribution agreements operate.
- Accordingly, the Court of First Instance did not err in law when it held in paragraph 105 of the judgment under appeal that, since the possibility of terminating the distribution agreements does not in any way preclude the effective enforcement of those agreements during the period in which that option is not used, it is necessary to take into account the actual duration of those agreements in assessing their effects on the relevant market.
- HB's argument in that regard is accordingly manifestly unfounded.
- Moreover, it is not the task of the Court of Justice in an appeal to rule on the assessment of the facts and evidence by the Court of First Instance, save where there has been a clear distortion of those facts and evidence by that Court (see, to that effect, inter alia Case C-470/00 P Parliament v Ripa di Meana and Others [2004] ECR I-4167, paragraph 40 and the case-law cited).
- By challenging the various items of factual evidence on which the Court of First Instance relied in paragraphs 93 to 95 of the judgment under appeal in order to determine the effect of the exclusivity clause on the relevant market, HB calls into question the assessment of the facts by that Court, without going on to demonstrate that it made incorrect findings in relation to those facts or distorted the evidence in that regard.
- Furthermore, the question whether the cancellation of the exclusivity clause does, or does not, mean in practice that the distribution agreements are terminated is also a question of fact.
- It follows that HB's arguments in relation to those points are manifestly inadmissible.
- Nor does HB put forward any serious grounds to support the conclusion that there is a contradiction between paragraph 92 of the judgment under appeal, which states that the retailers do stock ice creams of other brands alongside those of HB whenever they are free to do so, and paragraph 94 of the judgment, which bases that statement inter alia on the finding that a significant proportion of the retailers, namely almost 40% of them, claimed in the B & A survey that they would stock a wider range of products if the exclusivity clauses were abolished.
- It follows that that argument of HB is manifestly unfounded.
- As regards, lastly, HB's argument relating to the failure of the Court of First Instance to consider the bonus scheme, it should be noted that, as the Commission rightly observes, that Court was not obliged to respond in detail to every argument advanced by the parties, particularly if the argument was not sufficiently clear and precise and was not adequately supported by evidence (see, inter alia, Connolly v Commission, paragraph 121).
- In that regard, the documents in the case do not show that the bonus scheme constituted an essential argument on HB's part before the Court of First Instance in order to show that the exclusivity clause had no anti-competitive effect.
- Furthermore, although HB stresses the importance of the bonus scheme for retailers having their own freezer cabinet, it provides no detailed information to show that the existence of that scheme might have changed the assessment by the Court of First Instance of the effect of the exclusivity clause on the relevant market.
- The Court of First Instance cannot therefore be criticised for failing to provide a more detailed response to an argument which must be regarded as irrelevant, having regard to the analysis made by the Court of First Instance of the effect which the exclusivity clause had on the commercial freedom of the retailers to select the products made available at their sales outlets.
- That argument is accordingly manifestly inadmissible.
- It follows that the first part of the first ground of appeal must be rejected as being in part manifestly inadmissible and in part manifestly unfounded.
- HB contends that the Court of First Instance wrongly assessed the effect of the distribution agreements entered into by HB's competitors on the foreclosure of the relevant market. It argues that it was not open to the Court of First Instance to find that the network of agreements in place on that market affects 83% of the sales outlets, since 27% of them are demonstrably not foreclosed, inasmuch as the retailers have chosen to take freezer cabinets belonging to more than one manufacturer. HB also states that the Court of First Instance was not entitled to put its distribution agreements on the same footing as those of its competitors, since, in particular, the latter do not enjoy the same position or the same popularity on the market. It states that the Court of First Instance should have considered the duration, contractually and in practice, of those agreements. HB also contests the statement that it had conceded that 83% of retail shops in Ireland were foreclosed.
- In its reply, HB submits that the significant exaggeration by the Court of First Instance of the cumulative effect of foreclosure of the market resulting from the network of distribution agreements amounts to a distortion of the evidence.
- HB contests the finding of the Court of First Instance that there was no objective link between the exclusive use of freezer cabinets and the supply of impulse ice cream. It states that that finding contradicts the finding set out in paragraph 143 of the judgment under appeal that the provision of those freezer cabinets in a large number of sales outlets, covering the entire geographic market, produces an objective benefit. HB also contends that the practice of charging rent to retailers which use its freezer cabinets in Northern Ireland involves payment of a nominal sum which, more often than not, is not even collected and, accordingly, that a practice of that kind cannot support the finding of the Court of First Instance that HB could charge rent in the same way to retailers in Ireland, rent which could reimburse the costs in providing and maintaining a freezer cabinet.
- HB also contests the finding of the Court of First Instance in paragraph 113 of the judgment under appeal that, in the context of the relevant market, the supplier must be ready to offer a freezer cabinet without charge and to service it, arguing that the Court of First Instance fails to have sufficient regard, first, to the fact that in 17% of the sales outlets the retailers had their own freezer cabinets and, secondly, to the existence of the bonus scheme for the Irish retailers which stock ice creams manufactured by HB, but which do not install cabinets belonging to that company.
- Lastly, HB contends that the Court of First Instance did not establish to the requisite standard that the weak market shares held by its competitors are attributable in part to the exclusivity clause and that it also erred in law in holding that the policy of exclusive use of the freezer cabinets belonging to HB represents a barrier to the entry of those competitors into the market.
- The Commission maintains that HB's arguments are based on assessments of fact and must be considered to be inadmissible. It adds that they are, in any event, unfounded.
- It argues that the finding by the Court of First Instance in paragraph 111 of the judgment under appeal that the network of agreements in place on the relevant market affects 83% of the outlets reflects the fact that only 17% of retailers own their own freezer cabinet, which is relevant to the question whether a barrier to entry into that market exists.
- The Commission denies that there is an objective link between the exclusive use of a freezer cabinet belonging to HB and the supply of ice cream and maintains that HB's arguments are inconsistent inasmuch as HB contends that that exclusive use is crucial, while conceding that it is possible to supply ice cream without such an exclusivity clause. The Commission states that the advantages of the widespread availability of impulse ice cream are due to the provision of a freezer cabinet and not to the exclusivity clause. It also argues that it is implausible to maintain that a company such as HB cannot require its retailers to pay an economic rent for the use of its cabinets.
- The Commission considers that the contested decision established the existence of a causal link between the exclusivity clause and the weak market share of HB's competitors on the relevant market. It refers in particular in that regard to recitals 143 to 184 and 185 to 200 of the contested decision.
- Mars and Richmond essentially put forward the same arguments as the Commission.
- Mars also contends that HB fails to show that, notwithstanding the existence of networks of distribution agreements relating to the exclusive use of freezer cabinets belonging to HB, which affect 83% of the outlets on the reference market, there are real and concrete opportunities for suppliers to penetrate that market or to expand their presence there.
- Mars contests HB's argument that the existence of an objective link between the exclusivity clause and the supply of ice cream may justify the conclusion that that clause is not a barrier to the entry of competitors into that market. It argues that any possible benefit in terms of the wider availability of impulse ice cream must be assessed in the context of the overall effect of a network of distribution agreements.
- Mars considers that the finding by the Court of First Instance relating to the weak market shares held by HB's competitors is based on the analysis undertaken in the judgment under appeal of the adverse effects of the exclusivity clause.
- It maintains that HB does not put forward any legal argument in support of the contention that the Court of First Instance distorted the evidence by significantly exaggerating the degree of foreclosure of the relevant market.
- Richmond states that, contrary to what HB contends, the Court of First Instance did not find that 83% of the sales outlets on the market were 'foreclosed' to competition, but that the networks of distribution agreements in place on the market 'affect' those outlets. It accordingly contends that that argument must be rejected as being without purpose. It also maintains that the fact that suppliers other than HB are less popular than the latter on the relevant market does not necessarily mean that the level of foreclosure attributable to them will be lessened.
- The effects of an agreement on competition must be assessed in the context in which it occurs and where it might combine with others to have a cumulative effect on competition (Brasserie de Haecht, page 416, and Delimitis, paragraph 14).
- In order to assess whether a number of contracts impede access to the market in question, it is necessary to define the nature and extent of all similar contracts tying a large number of outlets to a number of national producers. The effect of those networks of contracts on access to the market depends specifically on the number of outlets thus tied to producers in relation to those which are not so tied, the duration of the commitments entered into and the quantities of goods to which those commitments relate (see, to that effect, Delimitis, paragraph 19).
- In paragraph 111 of the judgment under appeal, the Court of First Instance held that the Commission had been right to take into account, when analysing whether there might be a cumulative effect, not only the distribution agreements entered into by HB, but also the agreements relating to freezer cabinets subject to an exclusivity clause entered into by other suppliers in Ireland. According to the Court of First Instance, the fact that those suppliers make freezer cabinets available to retailers, under conditions similar to those offered by HB, and with the same constraints in terms of space, demonstrates that the difficulties encountered in the outlets equipped only with freezer cabinets belonging to HB in persuading retailers to replace those cabinets or to install additional freezer cabinets apply also to any freezer cabinet subject to a condition of exclusivity, even if the other suppliers do not have the same position or the same popularity as that company on the relevant market.
- In challenging that analysis, HB is in truth seeking to call into question the assessment of the facts undertaken by the Court of First Instance. Moreover, HB puts forward nothing to show that that Court distorted the facts or evidence relating to the characteristics of the agreements of suppliers other than HB.
- It follows that that part of the second part of the first ground of appeal put forward by HB is manifestly inadmissible.
- Furthermore, HB puts forward no clear evidence to show that the Court of First Instance erred in law in holding that the payment of a separate rental for the provision of freezer cabinets to retailers in Northern Ireland is relevant in assessing whether it would be possible to charge a rental for similar agreements entered into by HB with retailers in Ireland. It must also be pointed out that the Court of First Instance did not in fact base its findings solely on the practice followed by HB in Northern Ireland, but also held in paragraph 114 of the judgment under appeal that HB had not established to the requisite legal standard that it would be impractical to impose a separate rental in respect of the supply of freezers in Ireland, a point which HB does not contest.
- Similarly, HB fails to put forward anything which might call into question the finding by the Court of First Instance in paragraph 113 of the judgment under appeal that, in the context of the relevant market, a supplier must be ready to offer a freezer cabinet without charge and to service it. In any event, the fact, noted by HB, that retailers have their own freezer cabinet in 17% of outlets does not go to show that there has been any distortion of the facts and evidence submitted to the Court of First Instance in that regard. Furthermore, HB merely refers to the existence of the bonus scheme without putting forward anything which would show that the Court of First Instance erred in law by failing to take that scheme into consideration in its analysis in that regard.
- Lastly, the Court of First Instance gave reasons for its finding that the weak market shares held by HB's competitors are, at least in part, attributable to the latter's practice of making freezer cabinets available to retailers with an exclusivity clause, when it held that the market share held by Mars, together with those of Valley and Leadmore, fell during the years preceding the adoption of the contested decision. Furthermore, HB puts forward nothing to show that the Court of First Instance erred in law in failing to give detailed consideration to the causal relationship between the exclusivity clause and the weak market share of HB's competitors, and the other possible factors, unspecified, moreover, by HB, which might explain the small size of that market share.
- In actual fact, in making those assertions, HB is seeking to call into question the assessment of the facts by the Court of First Instance.
- It follows that the second part of the first ground of appeal relied on by HB in support of its appeal is manifestly inadmissible and, accordingly, that that ground must be rejected in its entirety.
- HB argues that the Court of First Instance erred in law in the application of the first condition laid down by Article 85(3) of the Treaty, by wrongly applying the burden of proof.
- It considers that it has demonstrated that the exclusivity clause confers an advantage on retailers, in the form of wider geographical availability of impulse ice cream, and that that advantage would no longer be realised to the same extent if the clause were to be prohibited.
- HB argues that it is for the Commission in such a case to prove that the objective benefit of the distribution agreements is outweighed by their negative effects on competition and that the Commission may rely only on proof that is sufficiently precise and coherent.
- HB contests in particular the Commission's finding that, even if the exclusivity clause were to be prohibited, it is unlikely that, save in a small number of cases, that company would cease to provide freezer cabinets to its customers. HB submits that the judgment under appeal is also inadequately reasoned in that regard.
- The Commission argues that this ground is tantamount to challenging an assessment of the facts by the Court of First Instance, namely the manner in which HB would conduct itself if the exclusivity clause were to be prohibited, and that it must accordingly be held to be inadmissible.
- The Commission submits that the plea is also unfounded. It is for the undertaking which seeks to benefit from an exemption under Article 85(3) of the Treaty to show that all of the conditions laid down by that provision have been satisfied and that it is not enough to find that certain advantages exist for an exemption to be granted, since case-law requires it to be demonstrated that the advantages conferred by the agreement outweigh the disadvantages. It refers in that regard to Consten and Grundig v Commission. According to the Commission, HB was therefore obliged to show that the restrictions imposed by the distribution agreements were a prerequisite of the benefits obtained and that those benefits outweighed the disadvantages in terms of competition. The Commission considers that HB has failed to discharge the burden of proof in that regard.
- The Commission also refers to recitals 222 to 247 of the contested decision, which contain an analysis of the various cumulative conditions laid down by Article 85(3) of the Treaty, and notes that HB has not challenged the finding that the distribution agreements do not allow consumers a fair share of the benefits arising under them.
- Mars and Richmond essentially put forward arguments similar to those of the Commission.
- As the Court of First Instance rightly pointed out in paragraph 136 of the judgment under appeal, where an exemption is being applied for under Article 85(3) of the Treaty, it is for the undertakings concerned in the first place to present to the Commission the evidence intended to establish that the agreement in question fulfils the conditions laid down by that provision (see, inter alia, Joined Cases 43/82 and 63/82 VBVB and VBBB v Commission [1984] ECR 19, paragraph 52).
- The onus was therefore on HB to prove that the exclusivity clause satisfied the cumulative conditions laid down by Article 85(3) of the Treaty. As regards the first of those conditions, HB was required in particular to establish that the exclusivity clause contributed to improving the production or distribution of the goods in question, so that, were restrictions to be imposed on the possibility of implementing that clause, such an improvement could no longer be realised.
- In paragraph 143 of the judgment under appeal, the Court of First Instance recognised that the wide availability in outlets of freezer cabinets intended for the sale of impulse ice creams, covering the entire geographic market and consisting mainly of HB's cabinets, could be considered an objective advantage in the distribution of those products. However, the Court of First Instance also held that, if the power to impose an exclusivity clause were to be restricted, it is unlikely that HB would definitely cease to supply freezer cabinets to retailers, except in a small number of cases. The Court of First Instance observed in particular that HB had not shown that the Commission committed a manifest error in taking the view that business reality for a company such as HB, which wishes to maintain its position on the relevant market, is to be present in the maximum number of outlets possible. It also observed that, contrary to what HB contends, the Commission did not merely assume continuity of provision by HB of freezer cabinets on the market, but carried out a prospective analysis of the operation of the market after the adoption of the contested decision.
- It is therefore apparent from the judgment under appeal that the Commission set out in detail why the exclusivity clause did not contribute to improving the production or distribution of impulse ice creams and that HB has failed to show that the first condition laid down by Article 85(3) of the Treaty was satisfied.
- It follows that the burden of proof was not wrongly applied by the Court of First Instance and that the ground of appeal alleging the incorrect application of Article 85(3) of the Treaty is manifestly unfounded.
- HB contends that the reasoning of the Court of First Instance is contradictory in that it recognises that the object of the exclusivity clause is not to restrict competition (paragraph 80 of the judgment under appeal), that it constitutes a standard practice on the relevant market (paragraph 159 of the judgment under appeal) and that it was adopted at the retailers' request (paragraph 160 of the judgment), but then goes on to hold that there has been an abuse of a dominant position within the meaning of Article 86 of the Treaty. HB also maintains that the Court of First Instance failed to give adequate reasons for reaching a different conclusion from that of the High Court, which accepted that the exclusivity clause had a commercial justification.
- HB also argues that the Court of First Instance erred in law in two respects in applying Article 86 of the Treaty and that its analysis is, as a result, also inadequately reasoned.
- First, HB considers that the Court of First Instance does not explain the reasons underlying its finding that the exclusivity clause distorts retailer choice and that that part of the reasoning of the Court of First Instance is 'derivative' of its findings in relation to Article 85(1) of the Treaty. HB contends that the exclusivity clause constitutes a normal business practice, which is not, per se, either restrictive of competition or abusive and was effectively challenged by the Court of First Instance only on the basis of its alleged effects of foreclosure of the relevant market. It follows that it is only Article 85 of the Treaty, and not Article 86 thereof, which should be the relevant basis for review.
- HB adds that, inasmuch as the supply of a freezer cabinet creates an opportunity for the sale of impulse ice creams which would not exist in the absence of such a supply, it is wrong to conclude that that practice constitutes an abuse.
- HB takes the view that the evidence submitted to the Court of First Instance did not warrant the inference that the distribution agreements prevented retailers from exercising their freedom of choice so as to stifle demand for competing brands.
- It submits that the judgment under appeal is contradictory in that, in paragraph 108, the Court of First Instance held that the fact that 40% of sales outlets are affected by the distribution agreements is not a sufficient basis for finding that competition is distorted, whereas that Court held in paragraph 160 of the judgment that HB had in fact distorted competition in breach of its special responsibility by tying 40% of the sales outlets.
- Secondly, HB maintains that the Court of First Instance erred in law in holding that the scope of the Bronner judgment is confined to cases of essential facilities. It essentially argues that, while the effect of that judgment is that it is only where a distribution system may be considered an essential facility that the owner may be compelled to allow third parties to have access to it, the judgment also means that, where such a system is not an essential facility, the duty on the owner to facilitate competition by allowing third parties to have access to the system should be less onerous. HB considers that the Commission therefore cannot impose on the company, whose stock of freezer cabinets is acknowledged not to constitute an essential facility, a duty to promote competition and to facilitate access by third parties that is at least commensurate to that imposed on the owners of essential facilities, by allowing its competitors to have access to a significant proportion of its stock of freezer cabinets.
- HB also contends that the Court of First Instance erred in law in paragraph 161 of the judgment under appeal, when it held that the implementation of the contested decision would not require that company to transfer assets or to enter into contracts with persons with whom it has not chosen to contract, because it is required to make assets, that is to say spaces for freezer cabinets, available to competitors which it has not selected.
- HB also argues that the contested decision is vitiated by a failure to state adequate reasons in that regard.
- The Commission replies that those arguments are partly unfounded and partly inadmissible.
- It states first of all that the role of the Court of First Instance is to review the lawfulness of the contested decision in the light of the reasons contained in it and the arguments of the parties and that it is not bound by the judgment of a national court.
- The Commission next argues that HB does not explain why the Court of First Instance erred in holding that the analysis of Article 86 of the Treaty in the contested decision did not merely 'recycle' the analysis of Article 85.
- The Commission lastly adds that, inasmuch as that argument seeks to establish that common business practices which induce foreclosure of a substantial part of the relevant market, when entered into by a dominant undertaking, can be analysed only under Article 85 of the Treaty, to the exclusion of Article 86, it represents a new plea which is accordingly both inadmissible and manifestly unfounded.
- The Commission contends that HB's arguments that, first, the provision of freezer cabinets creates sales opportunities and, secondly, the reasoning of the Court of First Instance is contradictory, are inadmissible in that they involve a review of the economic appraisal of the facts.
- It also states that the Court of First Instance did not hold that the practices of a dominant undertaking which result in the application of the exclusivity clause to 40% of sales outlets would not constitute, per se, an abuse, but that it is clearly abusive for such an undertaking to seek to establish exclusivity for its products in such a large proportion of available outlets, representing a similar proportion of the total sales of those products. In those circumstances, HB's argument is wholly unfounded.
- The Commission is of the view that HB's argument relating to 'essential facilities' is manifestly unfounded in so far as the ice creams produced by that company are distributed through independent retailers to whom HB supplies freezer cabinets in exchange for payment. In that context, the Commission states that it is not a case of HB retaining assets for its own use and that the abuse arises from the latter's attempt to control the use to which the freezers are put by those independent retailers. It adds that the Court of First Instance was right to point out that the contested decision does not require HB to transfer any assets or to enter into contracts with persons whom it has not selected.
- According to the Commission, Article 86 of the Treaty prohibits a practice which arises from the manner in which goods or services are marketed by an undertaking in a dominant position, where the practice deprives the purchaser, or restricts his possible choice, of sources of supply and has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition or where there is a risk that competitors will be eliminated. It refers in that regard in particular to Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461 and to Case C-333/94 P Tetra Pak v Commission [1996] ECR I-5951, paragraph 44.
- Mars notes that the Court of First Instance recognised in paragraph 96 of the judgment under appeal, as the Commission had also found, that the Unilever Group, which is HB's parent company, regarded the maintenance of the exclusivity clause for the use of the freezer cabinets as crucial to HB's commercial success and that its objective was to restrict competition. It refers in that regard to the documents mentioned in recitals 65 to 68 of the contested decision, which are cited by the Court of First Instance in paragraph 96 of the judgment under appeal.
- Mars also maintains that the fact that a practice is standard on the market or that the exclusivity clause is entered into at the request of retailers does not mean that no abuse exists within the meaning of Article 86 of the Treaty. It refers in that regard to Hoffmann-La Roche v Commission, paragraph 89, as well as to Case C-62/86 AKZO v Commission [1991] ECR I-3359, paragraph 149, and Case C-310/93 P BPB Industries and British Gypsum v Commission [1995] ECR I-865.
- Mars argues that the Court of First Instance provided sufficient reasons in support of its finding that the exclusivity clause distorts retailer choice and refers in particular to paragraphs 92, 102 and 160 of the judgment under appeal in that regard. It also argues that there can be no contradiction between the analysis by the Court of First Instance under Article 86 of the Treaty and paragraph 108 of the judgment, since that paragraph forms part of the self-standing and independent analysis of Article 85 of the Treaty.
- Mars and Richmond contend that Bronner is irrelevant in the present case, as the latter does not involve third party access to 'essential facilities'. Richmond also points out that the abuse established in the contested decision is different, because it relates to the practices carried out by HB in order to induce retailers to use its freezer cabinets and not to the fact that retailers who have not subscribed to the exclusivity clause cannot use those cabinets. Mars and Richmond also argue that the decision does not require HB to transfer assets or to enter into contracts with persons with whom that company would not have chosen to contract. Richmond adds that the Commission has the power to order positive action to bring an infringement to an end.
- It must be pointed out that the Community Courts cannot be bound by a finding of a national court that an exclusivity clause is compatible with Community law.
- The concept of abuse of a dominant position is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is already weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of economic operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition (Hoffmann-La Roche v Commission, paragraph 91). In that regard, the Court has held that the fact that agreements were entered into at the request of the contracting partners of the undertaking in a dominant position does not mean that there is not an abuse for the purposes of Article 86 of the Treaty (see, inter alia, Hoffmann-La Roche v Commission, paragraph 89).
- It must also be made clear that the Court of First Instance did not hold in paragraph 80 of the judgment under appeal that the object of the exclusivity clause is not to restrict competition on the relevant market, but, in fact, that that clause is not, 'in formal terms', an exclusive purchasing obligation having such an object.
- HB's contention that the judgment under appeal is vitiated by a contradiction must accordingly be rejected as manifestly unfounded.
- Furthermore, it is settled case-law that an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside, and also the legal arguments specifically advanced in support of the appeal (see, inter alia, order of 17 September 1996 in Case C-19/95 P San Marco v Commission [1996] ECR I-4435, paragraph 37).
- In that regard, HB's argument that the finding by the Court of First Instance that the distribution agreements distort retailer choice is, in truth, 'derivative' of the findings of that Court in relation to Article 85(1) of the Treaty, with the result that it is devoid of any independent meaning or purpose, does not satisfy the conditions referred to in the preceding paragraph. In particular, such an argument does not make it clear whether HB wishes to challenge an inadequacy of reasoning in the judgment under appeal, the 'recycling' of the analysis of Article 85 of the Treaty or the very principle of the application of Article 86 to the present case. Nor, as regards the last two of these possibilities, does HB put forward legal arguments specifically advanced in support of the appeal.
- That argument of HB must accordingly be held to be manifestly inadmissible.
- Furthermore, HB's argument that the exclusivity clause does not constitute an abuse for the purposes of Article 86 of the Treaty because it creates an opportunity for the sale of ice creams, which would otherwise not exist, is tantamount to requesting the Court to reassess the facts and must accordingly be held to be manifestly inadmissible.
- Furthermore, there is no contradiction between paragraphs 108 and 160 of the judgment under appeal, since they involve separate analyses, relating to Articles 85 and 86 of the Treaty respectively. In addition, the analysis of the Court of First Instance set out in paragraph 160 of the judgment under appeal must be read in its context, particularly in conjunction with paragraphs 158 and 159 of the judgment, which emphasise that an undertaking in a dominant position has a special responsibility and that competition is already restricted on the relevant market by reason of that dominant position. It follows that this argument of HB is also manifestly unfounded.
- Lastly, HB's contention that the legal principles laid down in Bronner were wrongly applied is manifestly unfounded, inasmuch as, in any event, as the Court of First Instance held in paragraph 161 of the judgment under appeal, the contested decision does not oblige HB to transfer an asset or to enter into agreements with persons with whom it has not chosen to contract. As the Commission observes, unlike the situation in Bronner, the freezer cabinets are not assets which HB retains for its own use, but their enjoyment is voluntarily transferred to independent undertakings which pay for the right to use them. Thus, HB's contention that the contested decision imposes a duty on it which is at least as onerous as that which applies to the owner of an essential facility is manifestly unfounded. Nor is it the case that the Court of First Instance based its analysis solely on the finding that no essential facility was involved or that it failed to provide adequate reasons in the judgment under appeal in that regard.
- It follows that the third ground of appeal is in part manifestly inadmissible and in part manifestly unfounded and must be rejected.
- HB argues first of all that the Court of First Instance infringed Article 48(1) of its Rules of Procedure and the right to a fair hearing by accepting that evidence relating to Richmond's experience in the United Kingdom be presented by that company at the hearing, without HB having the opportunity to comment on it and, moreover, without Richmond providing any explanation as to the reasons for its late submission of that evidence.
- HB next states that the fact that the Court of First Instance based its findings on that company's practice of charging a rental for freezer cabinets supplied to retailers in Northern Ireland infringes its right to a fair hearing, inasmuch as that argument had until then been of no particular importance either in the contested decision or in the Commission's written pleading before the Court of First Instance.
- HB lastly submits that the Court of First Instance wrongly applied the burden of proof in its analysis of the conditions for the application of Article 85(3) of the Treaty.
- With respect to the evidence presented by Richmond, the Commission submits that Article 48(1) of the Rules of Procedure of the Court of First Instance does not apply to evidence introduced by interveners. It contends that Article 116(6) of those Rules, which permits interveners to submit purely oral observations, would be deprived of its substance if interveners were unable to submit evidence as part of such observations.
- The Commission argues that, in any event, Article 48(1) of the Rules of Procedure of the Court of First Instance merely requires that reasons be given for any delay in presenting evidence and does not impose a general prohibition on new evidence being introduced. Therefore, even if that provision were to apply to interveners, it would not give rise to any irregularity in the present case, since the evidence was presented by an intervener which was addressing the Court of First Instance for the first time.
- The Commission and Mars point out that HB had the opportunity at the hearing to reply to the evidence presented by Richmond and that, in any event, the finding by the Court of First Instance that a significant number of retailers would be prepared to stock ice creams of a brand other than HB in the same freezer cabinet if they were free to do so, is adequately supported by the other evidence presented to the Court of First Instance.
- As regards the fact that HB charges a rental for the supply of freezer cabinets to retailers in Northern Ireland, the Commission argues, first, that HB did not, at any stage in the proceedings, contest the information relating to that practice set out in recital 127 of the contested decision. The Commission points out that recital 219 of the contested decision also refers to the possibility of HB's requiring retailers in Ireland to pay rental and that the general issue of the possibility of charging for freezer use was fully debated between the parties. It also maintains that there is no obligation on the Court of First Instance to intimate in advance the conclusion it is likely to reach or the specific elements of the case file on which it will rely.
- Mars takes the view that HB's practice of charging rental to retailers in Northern Ireland has no effect on the substance of the judgment under appeal, since the contested decision was fully and properly reasoned in that regard. It also maintains that HB has no basis for arguing that the rules relating to the burden of proof were infringed by the Court of First Instance in relation to Article 85(3) of the Treaty.
- Richmond submits that the evidence relating to its position on the United Kingdom market cannot be regarded as new evidence and was presented only in order to illustrate and to reinforce the argument that a significant number of retailers wish, when they are able, to stock a second brand of ice cream in the same freezer cabinet. It states that it is for the Court of First Instance to assess all the evidence submitted to it, save where that evidence has been fundamentally misconstrued, and cites in that regard Case C-7/95 P Deere v Commission [1998] ECR I-3111, paragraph 118. It considers that Article 116 of the Rules of Procedure of the Court of First Instance permits interveners to support their arguments, both in the written and the oral procedure, with evidence and that HB has not challenged the evidence presented by Richmond at the hearing.
- In accordance with the settled case-law of the Court of Justice, where one of the grounds adopted by the Court of First Instance is sufficient to sustain the operative part of its judgment, any defects that might vitiate other grounds given in the judgment concerned have, in any event, no bearing on that operative part and, accordingly, a plea relying on such defects is ineffective and must be dismissed (see, inter alia, Case C-496/99 P Commission v CAS Succhi di Frutta [2004] ECR I-3801, paragraph 68 and the case-law cited).
- In the judgment under appeal, the argument based on Richmond's experience in the United Kingdom constitutes only one argument of many intended to substantiate the finding by the Court of First Instance that a significant number of retailers stock ice creams of brands other than HB in the same freezer cabinet when they are free to do so.
- Adequate support for that statement is provided by the other factual evidence on which the Court of First Instance relied in paragraphs 93 to 97 of the judgment under appeal.
- HB's argument in that regard must accordingly be rejected as ineffective.
- Moreover, as the Commission points out, the fact that HB charges retailers in Northern Ireland rent for the use of freezer cabinets had already been referred to in recital 127 of the contested decision and the general question of whether that company had the possibility of requiring retailers using its cabinets to pay rent was the subject of a wide-ranging debate between the parties. Furthermore, as is stated in paragraph 89 of this order, the Court of First Instance did not rely solely on the practice followed by HB in Northern Ireland in order to establish that that company had the possibility of charging rent to retailers using one of its freezers on the relevant market, but also held in paragraph 114 of the judgment under appeal that HB had not established to the requisite legal standard that it would be impractical to impose a separate rental in respect of the supply of freezers in Ireland, a point which HB does not contest.
- HB's argument in that regard must accordingly be rejected as manifestly unfounded.
- Lastly, since, in paragraph 106 of this order, the Court rejected HB's argument that the burden of proof had been reversed by the Court of First Instance in relation to Article 85(3) of the Treaty, there is no need to give that argument further consideration.
- The fourth ground of appeal must therefore be rejected as manifestly unfounded.
- Since none of the grounds relied on by HB in support of its appeal can succeed, the appeal must be dismissed.
- Under Article 69(2) of the Rules of Procedure, which applies to appeal proceedings by virtue of Article 118 thereof, 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, Mars and Richmond have applied for HB to pay the costs and the latter has been unsuccessful, it must be ordered to pay the costs of these proceedings.
Facts
-2. [HB], a wholly-owned subsidiary of Unilever plc, is the principal manufacturer of ice cream products in Ireland, particularly single-wrapped ice creams for immediate consumption (hereinafter impulse ice creams-). For a number of years HB has supplied ice cream retailers with freezer cabinets, in which it retains ownership, and which are supplied free of charge or at a nominal rent, provided that they are used exclusively for HB ice creams (hereinafter the exclusivity clause-). Pursuant to the standard terms of the freezer agreements, they can be terminated at any time on two months' notice on either side. HB maintains the cabinets at no cost to the retailer, save in cases of negligence.
3. Masterfoods Ltd (hereinafter Mars-), a subsidiary of the US corporation Mars Inc., entered the Irish ice cream market in 1989.
4. In the summer of 1989 many retailers with freezer cabinets supplied by HB began to stock and display Mars products. This led to a demand by HB that they comply with the exclusivity clause.'
-9. In parallel to those proceedings before the Irish courts, on 18 September 1991 Mars lodged a complaint [against HB] with the Commission [of the European Communities] under Article 3 of Regulation No 17 [of the Council] of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition 1959-1962, p. 87). The complaint related to the provision by HB, to large numbers of retailers, of freezer cabinets to be used exclusively for HB products.
10. On 22 July 1992, Valley Ice Cream (Ireland) Ltd also lodged a complaint against HB with the Commission.
11. On 29 July 1993, the Commission issued a statement of objections to HB in which it concluded that HB's distribution arrangements infringed Articles 85 and 86 of the [EC] Treaty [now Articles 81 EC and 82 EC] ... .
12. Following negotiations with the Commission, HB, while contesting the Commission's view, proposed changes to its distribution arrangements, with a view to qualifying for an exemption under Article 85(3) of the Treaty. Those changes were notified to the Commission on 8 March 1995 and in a press release of 10 March 1995 the Commission stated that, at first sight, the new distribution arrangements might enable HB to obtain an exemption. On 15 August 1995 a notice pursuant to Article 19(3) of Regulation [No] 17 was published in the Official Journal of the European Communities (OJ 1995 C 211, p. 4).
13. On 22 January 1997 the Commission sent HB a new statement of objections in which it expressed the view that the changes had not achieved the expected results of free access to sales outlets ... . HB replied to those objections.
14. On 11 March 1998 the Commission adopted the contested decision.
...
15. In the contested decision the Commission states that HB's distribution agreements containing the exclusivity clause are incompatible with Articles 85 and 86 of the Treaty. It defines the relevant product market as the market for single-wrapped items of impulse ice cream and the relevant geographic market as Ireland (recitals 138 and 140). It states that HB's position on the relevant market is particularly strong, as is shown by its market share over many years (see paragraph 21 below). That strength is further illustrated by the degree of both numeric (79%) and weighted distribution (94%) of the relevant HB products during August and September 1995 and by the strength of the brand and the breadth and popularity of its range of products. HB's position on that market is further reinforced by the strength of Unilever's position, not only on the other ice cream markets in Ireland (take-home and catering), but also in the international ice cream markets and the markets for frozen foods and consumer products generally (recital 141).
16. The Commission observes that the network of HB's distribution agreements relating to freezer cabinets installed in outlets has the effect of restricting the ability of retailers who are parties to those agreements to stock and offer for sale in their outlets impulse products from competing suppliers, in circumstances where the only freezer cabinet or cabinets for the storage of impulse ice cream in place in their outlets have been provided by HB, where the HB freezer cabinet or cabinets is or are unlikely to be replaced by a cabinet owned by the retailer and/or supplied by a competitor, and where it is not economically viable to allocate space to the installation of an additional cabinet. It considers that the effect of this restriction is that the competing suppliers are precluded from selling their products to those outlets, thereby restricting competition between suppliers in the relevant market (recital 143). ... The assessment of this restrictive effect was made against the background of the effect of all similar networks of freezer cabinet agreements operated by other ice cream suppliers in the relevant market, as well as in the light of any further relevant market conditions (recitals 144 and 145).
17. The Commission then quantified the restrictive effect of HB's distribution agreements in order to show their significance. It observes that the restrictive effect of the networks of agreements for the supply of freezer cabinets reserved exclusively for the supplier's products are the result of the space constraints inevitably experienced by retail outlets. ...
18. The Commission states that only a small proportion of retail outlets in Ireland, 17% according to the Lansdowne survey, have freezer cabinets which are not subject to an exclusivity clause. ... As regards the other outlets, 83% according to the Lansdowne survey, in which the suppliers have installed freezer cabinets, the Commission considers that other suppliers cannot have direct access to them for sale of their products without first overcoming substantial barriers. It submits that newcomers to the outlet are foreclosed- from them and that although this foreclosure is not absolute, in the sense that the retailer is not contractually precluded from selling other suppliers' products, the outlet can be said to be foreclosed in so far as entry thereto by competing suppliers is rendered very difficult- (recital 149).
19. The Commission finds that in some 40% of all outlets in Ireland the only freezer cabinet/s for the storage of impulse ice cream in place in the outlet has or have been provided by HB (recital 156). It observes that a supplier who wishes to gain access for the sale of his impulse ice cream products to a retail outlet (that is, a new entrant to the outlet) in which at least one supplier-exclusive freezer cabinet is in place can only do so if that outlet has a non-exclusive cabinet ... or if he can persuade the retailer either to replace an in situ supplier-exclusive freezer cabinet or to install an additional freezer cabinet alongside the in situ supplier-exclusive cabinet/s- (recital 157). It considers (recitals 158 to 183), on the basis of the Lansdowne survey, that it is unlikely that retailers will adopt one or other of those measures if they have one (or more) freezers supplied by HB and concludes that 40% of the outlets in question are de facto tied to HB (recital 184). Other suppliers are therefore foreclosed from access to those outlets, contrary to Article 85(1) of the Treaty.
20. The contested decision also finds that the agreements containing the exclusivity clause cannot be exempted under Article 85(3) of the Treaty, as they do not contribute to an improvement in the distribution of the products (recitals 222 to 238), do not allow consumers a fair share of the resulting benefit (recitals 239 and 240), are not indispensable to the attainment of those benefits (recital 241) and afford HB the possibility of eliminating a substantial part of competition on the relevant market (recitals 242 to 246).
21. As regards the application of Article 86 of the Treaty, the Commission takes the view that HB has a dominant position on the relevant market, in particular because it has for a long time had a share in volume and value of over 75% of that market (recitals 259 and 261).
22. The Commission states that HB abuses its dominant position in the relevant market ... in that it induces retailers ... who do not have a freezer cabinet for the storage of impulse ice cream either procured by themselves or provided by another ice cream supplier than HB to enter into freezer-cabinet agreements subject to a condition of exclusivity- and that the inducement takes the form of an offer to supply the freezer cabinets to retailers, and to maintain them, at no direct charge to the retailer- (recital 263).'
The judgment under appeal
'... it is appropriate, in accordance with the case-law, to consider whether all the similar agreements entered into in the relevant market and the other features of the economic and legal context of the agreements at issue, show that those agreements cumulatively have the effect of denying access to that market to new competitors. If, on examination, that is found not to be the case, the individual agreements making up the bundle of agreements cannot impair competition within the meaning of Article 85(1) of the Treaty. If, on the other hand, such examination reveals that it is difficult to gain access to the market, it is then necessary to assess the extent to which the agreements at issue contribute to the cumulative effect produced, on the basis that only those agreements which make a significant contribution to any partitioning of the market are prohibited ([Case C-234/89] Delimitis [[1991] ECR I-935], paragraphs 23 and 24, and [Case T-7/93] Langnese-Iglo v Commission [[1995] ECR II-1533], paragraph 99).'
'... the Commission rightly held, having regard to the specific features of the product in question and the economic context of this case, that the network of HB's distribution agreements together with the supply of freezer cabinets without charge- subject to the condition of exclusivity, have a considerable dissuasive effect on retailers with regard to the installation of their own cabinet or that of another manufacturer and operate de facto as a tie on sales outlets that have only HB freezer cabinets, that is to say 40% of sales outlets in the relevant market. Despite the fact that it is theoretically possible for retailers who have only an HB freezer cabinet to sell the ice creams of other manufacturers, the effect of the exclusivity clause in practice is to restrict the commercial freedom of retailers to choose the products they wish to sell in their sales outlets.'
'As to HB's argument alleging that the freezer cabinet exclusivity imposed by the exclusivity clause cannot be regarded as an outlet exclusivity because the retailers have the option of terminating their distribution agreements with HB at any time, the Court considers that this possibility in no way precludes the effective enforcement of the agreements in question during the period in which that option is not used. Consequently, in assessing the effects of the distribution agreements on the relevant market, the Court must take their actual duration into consideration (see, by analogy, Langnese-Iglo v Commission, paragraph 111). ... However, as the Commission has shown, ... HB's distribution agreements are terminated on average every eight years. It follows that the argument to the effect that it is possible to terminate the HB distribution agreements is unsound, since the possibility of so doing does not in fact operate to reduce the degree of foreclosure of the relevant market.'
'... the improvement cannot be identified with all the advantages which the parties obtain from the agreement in their production or distribution activities. The improvement must in particular display appreciable objective advantages of such a character as to compensate for the disadvantages which they cause in the field of competition (Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299, at 348, and Langnese-Iglo, paragraph 180).'
Forms of order sought
-" set aside, in whole or in part, the judgment under appeal, except for paragraph 3 of the operative part of the judgment, which orders Mars and Richmond to bear their own costs;
-" annul, in whole or in part, the Commission's decision or, in the alternative, refer the case back to the Court of First Instance for judgment, and
-" order the Commission to pay the costs of both sets of proceedings.
The appeal
The first ground of appeal, alleging infringement of Article 85(1) of the Treaty
The first part of the first ground of appeal
-" Arguments of the parties
-" Findings of the Court
The second part of the first ground of appeal
-" Arguments of the parties
-" Findings of the Court
The second ground of appeal, alleging infringement of Article 85(3) of the Treaty
Arguments of the parties
Findings of the Court
The third ground of appeal, alleging infringement of Article 86 of the Treaty
Arguments of the parties
Findings of the Court
The fourth ground of appeal, alleging infringement of essential procedural requirements
Arguments of the parties
Findings of the Court
Costs
On those grounds, the Court (Sixth Chamber) hereby orders:
1. The appeal is dismissed.
2. Unilever Bestfoods (Ireland) Ltd shall pay the costs.
[Signatures]
* Language of the case: English.