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Cite as: [2007] ECR II-110, [2007] EUECJ T-36/05, [2007] EUECJ T-36/5

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JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)

See also: addition

12 September 2007 (*)

(Competition - Cartels - European haberdashery market (needles) - Product market sharing - Geographic market sharing - Assessment of evidence - Participation in meetings - Tripartite agreement - Fine - Gravity and duration of the infringement - Attenuating circumstances)

In Case T-36/05,

Coats Holdings Ltd, established in Uxbridge, Middlesex (United Kingdom),

J & P Coats Ltd, established in Uxbridge,

represented by W. Sibree and C. Jeffs, Solicitors,

applicants,

Commission of the European Communities, represented by F. Castillo de la Torre and K. Mojzesowicz, acting as Agents,

defendant,

APPLICATION, principally, for annulment of Commission Decision C (2004) 4221 final of 26 October 2004 relating to a proceeding under Article 81 [EC] (Case COMP/F-1/38.338 - PO/Needles) and, in the alternative, for annulment or reduction of the fine imposed on the applicants,

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber),

composed of J. Pirrung, President, N.J. Forwood and S. Papasavvas, Judges,

Registrar: C. Kristensen, Administrator,

having regard to the written procedure and further to the hearing on 22 November 2006,

gives the following

Judgment

Subject-matter and facts

I - Subject-matter

1 By Decision C (2004) 4221 final of 26 October 2004 relating to a proceeding under Article 81 [EC] (Case COMP/F-1/38.338 - PO/Needles; 'the Decision') the Commission found that, during the period from 10 September 1994 to 31 December 1999, Coats Holdings Ltd and J & P Coats Ltd (together 'the applicants' or 'Coats') participated in a series of agreements - within the meaning of Article 81(1) EC - in the needles sector in conjunction with two other undertakings and their respective subsidiaries, namely, first, William Prym GmbH & Co. KG ('Prym') and Prym Consumer GmbH & Co. KG and, second, Entaco Group Ltd and Entaco Ltd.

2 On the basis of the findings of fact and legal assessments in the Decision, the Commission imposed a fine of EUR 30 million on the applicants.

II - Applicants and other undertakings concerned

A - Coats Holdings and J & P Coats

3 Until February 1991, Coats Viyella plc (currently known as 'Coats Holdings') was a needle manufacturer through its wholly-owned subsidiary, Needles Industries Ltd ('NIL'). In April 1991, Coats Viyella sold NIL in a buy-out by former employees of NIL (first management buy-out) to a new company, Entaco. Entaco acquired NIL's manufacturing assets and packaging materials, while Coats Viyella retained NIL's needle finishing and packaging business. Coats Viyella remained active in that sector until its finishing and packaging business was also acquired by Entaco, on 10 September 1994, in a second management buy-out.

4 Coats Holdings has been a distributor of needles in the wholesale and retail business sectors since 1994. In 2002, the last year of published accounts available to the Commission, Coats Holdings' turnover amounted to GBP 1 156 million.

5 J & P Coats is a wholly-owned subsidiary of Coats Holdings, which operates in the United Kingdom market and handles all of Coats Holdings' activities in the metal and plastic haberdashery products market ('hard haberdashery products') in the European Economic Area (EEA).

B - Prym and Prym Consumer

6 Prym is a German company which claims to be one of Europe's leading brands of hard haberdashery and sewing products. It has three main divisions, namely Prym Tec GmbH & Co. KG, Prym Fashion GmbH & Co. KG and Prym Consumer. In 2003, Prym had a turnover of EUR 337 million. In 2002, Prym Consumer's share of the turnover amounted to approximately EUR 126 million.

7 In January 1977, Coats Patons Ltd (Coats Holdings' predecessor in title) acquired a 24.9% holding in William Prym-Werke KG (Prym's predecessor in title). Coats Holdings retained that stake until 1994.

8 Prym Consumer markets a range of hand sewing needles, knitting pins, safety pins and consumer haberdashery. Prym Consumer is the parent company of Newey Group plc, its wholly-owned English subsidiary. Between September 1994 and March 1997, Prym Consumer held 10.1% of the share capital of Entaco via that subsidiary.

C - Entaco and Entaco Group

9 Entaco's main business activities are the manufacture of hand sewing needles, medical devices, commercial fishing systems and associated wire products.

10 Entaco Group became the parent company of Entaco as of March 1997 and owns 100% of the share capital of Entaco.

III - Administrative procedure

11 On 7 and 8 November 2001, the Commission carried out investigations pursuant to Article 14(3) of Council Regulation No 17: First Regulation implementing Articles [81] and [82] of the Treaty of 6 February 1962 (OJ, English Special Edition (I) (1959-1962), p. 87) at the premises of several Community producers and distributors of haberdashery products (including Entaco, Coats and Prym). Those investigations followed the provision of information by Mr E, Entaco's Director of Marketing and Sales at the material time, between 23 August 2000 and 6 August 2001. The Commission regarded the provision of that information as a leniency application by Entaco.

12 On 14 April and 15 May 2003, the Commission sent requests for information under Article 11 of Regulation No 17 to the undertakings concerned. On 15 March 2004, the Commission sent a statement of objections to Prym, Entaco and Coats, whose replies to that statement of objections were lodged within the prescribed time-limit. The Commission gave them access to the file in electronic form. A hearing took place on 18 June 2004.

13 On 26 October 2004, the Commission adopted the Decision.

IV - The Decision

14 According to the Decision, between 10 September 1994 and 31 December 1999, the three undertakings in question and their respective subsidiaries entered into a series of written agreements that were formally bilateral but amounted in practice to tripartite agreements, under which those undertakings shared or contributed to sharing product markets (by segmenting the European market for hard haberdashery products) and geographic markets (by segmenting the European market for needles).

A - Relevant markets

15 The industry concerned is the manufacturing and packaging of needles and other hard haberdashery products.

16 According to the Decision, Prym, Entaco and Coats are the main suppliers of needles in Europe. Prym Consumer and Entaco dominate the needle manufacturing sector in the European Union and in the world-wide market. Furthermore, the distribution of needles and pins in Europe is dominated by Coats, and comprehensive agreements exist between Coats and Prym concerning the distribution of hard haberdashery products throughout the European Union.

1. Relevant product markets

17 The Commission takes the view that hand sewing needles and craft needles form part of the same market, and that machine needles can be distinguished. In conclusion, for the purposes of the Decision, the Commission identified three relevant product markets:

- the European market for hand sewing needles and craft needles (including, in particular, special needles);

- the European market for 'other sewing and knitting products, including pins and knitting pins/knitting needles';

- the European market for other hard haberdashery products, including zips and other fasteners.

In the first of those markets, the Commission found that the product and geographic market sharing took place between 10 September 1994 and 31 December 1999, whereas the last two were the subject of product market sharing between 10 September 1994 and 13 March 1997.

2. Relevant geographic market

18 The Commission explains that, unlike fasteners, needles and pins have very low transport costs. However, needles and pins sold in Europe are mainly produced in the European Union by European manufacturers. The Commission concludes that the market for needles is at least Europe-wide.

3. Size of the relevant markets in economic terms

19 According to the Commission's findings, in 2002 the turnover of the market for needles in the European Union amounted to approximately EUR 30 million. It takes the view that, as far as the wholesale business is concerned, the market for needles must be regarded as being worth close to EUR 30 million. As for the retail business, the value of the market for hand sewing needles alone must also be estimated as approximately EUR 30 million. However, in the present case, according to the Commission, it is necessary to take into consideration a larger market than the hand sewing needle market. It therefore took into consideration the markets for accessories, fasteners other than zips, and for other sewing and knitting products, including pins and knitting pins/knitting needles. The European Union turnover in the latter market amounts also to EUR 30 million. In the Commission's opinion, a conservative estimate of the total market for other fasteners in the European Union must be between EUR 1 billion and EUR 1.5 billion.

B - Description of events

20 The Commission notes that, as early as 1975, the predecessors of Prym and of Coats Holdings had entered into Principles of Agreement which contained market-sharing clauses. Those Principles are not, however, the subject-matter of the Decision.

1. Meetings and agreements between 1993 and 1994

21 The events at issue in the present action occurred mainly in 1993 and 1994.

(a) Meetings and correspondence

22 In the Decision, the Commission identifies five tripartite meetings between Prym, Coats (or NIL) and Entaco, four of which took place in 1993 and one in 1995. The minutes of the first meeting, held on 11 February 1993, which Prym sent to Entaco by fax of 18 February 1993, state:

'background of the Coats/Prym relationship - Prym seem to be responsible for hard haberdashery. [Prym] believed that there was a moral obligation on Coats to tidy up the present [NIL] situation, so that the original intention of Coats controlling the manufacture of soft haberdashery and Prym being the supplier of hard haberdashery could finally be achieved'.

23 In a letter of 10 May 1993 addressed to Prym, Entaco explained why the three undertakings had an interest in sharing the European market and set out the following initial proposals:

'The main objective of Prym really is to remove or neutralise Entaco's entry into the haberdashery market. We would propose the following which we consider takes this objective into account: -�'

24 In a letter of 30 June 1993 addressed to Coats, Prym stated why Entaco, Prym and Coats had an interest in a common involvement:

'A further competitor in the hard haberdashery market in Europe is the last thing we need! It would seem sensible therefore for the three parties involved - Coats/NIL, Entaco and Prym - to cooperate to ensure that the European needle market does not suffer from further self-inflicted wounds!'

25 At a meeting between Coats, Prym and Entaco on 6 October 1993, concerning the possible acquisition of the NIL packaging business, Prym informed Coats that the initial plan for a Prym/Entaco joint venture had been abandoned and that Entaco would prefer Prym to make a direct investment in Entaco, as it was of the view that it would be more acceptable to the market if Entaco could present a 'face of independence'. Coats' representative then stated that 'he had no problem with the new approach, subject to two points: (i) That Entaco did not sell competitive products to competition at lower prices than they gave Coats. (ii) That Mr F [Coats' Chief Executive] was in agreement'.

(b) Overview of agreements concluded in 1994

26 On 10 September 1994, the agreements listed below, which, according to the Commission, are unlawful, were entered into by the following undertakings.

27 The agreements concluded between Prym (or Prym Consumer) and Entaco are as follows:

- Heads of Agreement (signed on 15 or 16 June 1994 but entering into force on 10 September 1994);

- Agreement for the sale and purchase of 10.1% of the entire issued share capital of Entaco and on certain future shareholder relationships ('the 10.1% Agreement');

- Purchasing agreement;

- Distribution agreement.

28 The agreements concluded between Coats and Entaco are as follows:

- Agreement for the sale and purchase of a business;

- Supply and purchase agreement.

Heads of Agreement

29 In June 1994, Entaco and Prym signed Heads of Agreement which entered into force on 10 September 1994. That agreement was drawn up by the parties for the purchase of the packaging and finishing activities of NIL (formerly owned by Coats Holdings) and took effect from the date of such purchase. The agreement, as stated in its preamble, was to remain in effect as long as Prym held at least 10.1% of the ordinary shares of Entaco.

30 According to that agreement, Prym committed itself to assisting in developing Entaco as a specialist needle producer. It therefore instructed its US subsidiary, Prym-Dritz Inc., to purchase all the sewing needles it required from Entaco. In return, Entaco agreed 'during the period of [the] Agreement to restrict its manufacturing and distribution activities in the haberdashery sector to needles only, and not to widen its activities to embrace pins, safety pins, four-piece fasteners, knitting pins, or any other haberdashery product without the prior agreement of Prym', and 'to appoint Prym as its exclusive distributor for all packaged hand sewing needles, other than Coats brands in Europe with the exception of the UK and Republic of Ireland'.

10.1% Agreement

31 This agreement provided for Prym Consumer to buy 10.1% of the issued share capital of Entaco from the 3i Group plc, a shareholding which was held by Prym Consumer's subsidiary, Newey Group, between September 1994 and March 1997.

Purchasing and distribution agreements

32 According to the purchasing agreement, Prym Consumer was not to compete with Entaco and agreed to purchase all of its requirements for products specified in schedule 1 to the agreement exclusively from Entaco (clauses 2.2 and 2.3 of the purchasing agreement).

33 Under the distribution agreement, Entaco committed itself to selling products in 'the Territory' (Europe, excluding the United Kingdom and the Republic of Ireland) only to clients known as 'Label Accounts', to 'the Distributor' (Prym Consumer) and to Coats (clause 2.2 of that agreement). The relevant products were supposed to be specified in schedule 1 to the agreement, which is, however, a blank document.

(d) Agreements between Coats and Entaco

Agreement for the sale and purchase of a business

34 By an agreement entitled 'Agreement for the sale and purchase of a business' (business sale agreement), Coats sold the remainder of its needle manufacturing and packaging business to Entaco on 10 September 1994 (second management buy-out). Under clause 17.1 of that agreement, the sale was 'conditional upon the execution of the Prym agreements' (the distribution and purchasing agreements and the 10.1% Agreement entered into by Entaco and Prym Consumer described above). Clause 17.2 provided that if that obligation was not fulfilled, the agreement would lapse.

Supply and purchase agreement

35 On the same date, J & P Coats and Entaco entered into a three-year agreement entitled 'Supply and Purchase Agreement' for the exclusive purchase by Coats of Milward branded needles and accessories from Entaco. Clause 2.2 provides that Entaco 'shall -� not supply Products to a customer of [Coats UK] other than those customers to whom [Entaco] [supplied] Products prior to the date hereof at existing business levels' (subparagraph (a)) and 'shall fulfil its obligations of cognate nature pursuant to an agreement between [Entaco] and Prym dated 8 September 1994' (subparagraph (b)). Clause 2.2.4 provides that 'in continental Europe [Coats] shall purchase all of its requirements for Products from [Entaco] and Prym [Consumer]'.

36 According to the Decision, Entaco was obliged, by virtue of that supply and purchase agreement, on the one hand to enter into the purchasing agreement with Prym in order to buy the remaining packaging and finishing needles business from Coats (which was a prerequisite to becoming a competitor to Prym at the wholesale level and to Coats and Prym at the retail level) and, on the other hand, to respect the obligations contained in the agreements signed with Prym (which were effectively keeping Entaco from competing with Prym at the wholesale level and with Prym and Coats at the retail level). Finally, Entaco had to confine itself to being a supplier of Prym and Coats, but with the security of an outlet for its production.

(e) Inter-conditional clauses contained in the agreements

37 In the Decision, the Commission takes the view that all the agreements listed in the above section were inextricably linked through a series of reference or inter-conditional clauses.

38 The Commission regards the complex system of inter-conditional clauses as having had a twofold effect. First, it made those formally bilateral agreements an overarching tripartite agreement. Second, the system compelled Entaco (i) to sign the distribution and purchasing agreements with Prym Consumer, thereby giving effect to the principles set out in the Heads of Agreement, since the sale of NIL and the exclusive supply contract with Coats were conditional upon those signatures, and (ii) to respect the geographic and product market sharing with Prym Consumer even after its acquisition of NIL (which would have enabled Entaco to become an effective competitor to Prym at the wholesale and retail levels and to Coats at the retail level). That effect was produced by clause 2.2 of the supply and purchase agreement with Coats.

39 The Commission relies in that regard upon a written statement by Mr E dated 7 October 2003 in which he provides the following information on the objectives of the market sharing agreements:

'In 1994 Entaco's then Managing Director, Victor [B], signed up to Agreements with ... Coats and Prym, in return for which Coats at the same time sold the assets of [NIL] to [Entaco]. The Distribution Agreements which were signed up to in 1994 with both Coats and Prym, although separate Agreements, were in reality effectively one Tripartite Agreement. In return for the secure supply of needles to Coats and Prym, Entaco agreed not to enter into the market for other haberdashery items such as pins and fasteners.'

2. Events after 1994

40 On 13 March 1997, Prym sold its 10.1% shareholding in the capital of Entaco to Entaco Group by an agreement relating to the sale of 11 222 ordinary shares in the capital of Entaco. The agreement was conditional upon the purchasing and distribution agreements between Entaco and Prym Consumer being extended for five years commencing 1 April 1997.

41 A second distribution agreement between Prym Consumer and Entaco was signed on 1 April 1997, thereby extending the previous distribution agreement relating to hand sewing needles. The market concerned was Europe, excluding the United Kingdom and the Republic of Ireland. The purchasing agreement too was extended by another agreement signed on 1 April 1997, which provided that Prym should not manufacture or distribute hand sewing needles or craft needles. The clauses cited above thus maintained the principle of a market sharing agreement between Entaco and Prym, although its scope was limited only to needles.

42 The supply and purchase agreement between Entaco Group and J & P Coats was renewed on 10 September 1997 for a three-year period, expiring in September 2000.

3. Termination of the various agreements and concerted practices

43 Prym's sale in March 1997 of the 10.1% stake in Entaco terminated the Heads of Agreement. The Commission believes that that did not, however, mean the end of the product market sharing agreement, since clause 7 of the agreement of 13 March 1997 (relating to the sale of 11 222 shares) maintained the principle of the same kind of collusion between Prym and Entaco as that contained in the 1994 Heads of Agreement.

44 Prym Consumer terminated the purchasing agreement by letter of 14 December 1998, giving 12 months' notice. That agreement was thus terminated on 31 December 1999. The Commission says it is unaware as to whether the distribution agreement was also terminated on 31 December 1999 but, according to the Commission, the fact that Prym referred to the purchasing and distribution agreements as being 'one' agreement suggests that the distribution agreement would have terminated as a result of the termination of the purchasing agreement.

45 Prym states that the parties to the agreements ceased to abide by the two agreements at the latest by the end of April 1999. However, in the Commission's view, in reality, the purchasing agreement remained legally in force until 31 December 1999, and the distribution agreement remained in force at least until that date. The Commission concludes that those two agreements ended on 31 December 1999. By contrast, the 1997 supply and purchase agreement remained in force until September 2000.

C - Legal assessment

1. Application of Article 81 EC

46 According to the Decision, Entaco, Coats and Prym participated in numerous meetings, either together or in a bipartite manner, and also signed a series of, formally bilateral, agreements aimed at restricting competition and which amounted to a tripartite agreement.

47 According to the Commission, that conduct led to a change in the conditions of competition, which ceased to be as they should have been, and prevented the participating competitors from determining their policy on the market independently as required by Article 81(1) EC. The Commission concludes that, in the present case, the tripartite agreement and the preliminary meetings between Prym, Entaco and Coats, and also the bilateral meetings between Prym and Entaco, may be characterised as agreements and/or concerted practices.

48 The Commission finds that the anti-competitive behaviour in question had the object and effect of restricting competition in the Community. It notes that in all of the agreements and concerted practices considered in this case, the following elements can be regarded as relevant for the purposes of establishing an infringement of Article 81(1) EC:

- product and geographic market sharing;

- participating in preliminary and/or regular meetings and having other contacts in order to agree on those restrictions and to implement and/or modify them as required.

49 The Commission takes the view that the continuing agreement between the manufacturers had an appreciable effect on trade between the Member States of the European Union, as the agreements entered into by the members of the cartel extended to virtually all trade throughout the European Union in the needle industrial sector, and also affected trade in the more important industrial sectors of other hard haberdashery products by preventing Entaco from entering those markets.

2. Fines

50 In the Decision, the Commission set the fine to take into account the gravity and duration of the infringement, which are the two criteria expressly referred to in Article 23(3) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 [EC] and 82 [EC] (OJ 2003 L 1, p. 1).

51 In assessing the gravity of the infringement, the Commission notes that it must take account of its nature, its actual impact on the market (where this can be measured) and the size of the relevant geographic market. In the present case, the Commission is of the opinion that the undertakings concerned by the Decision committed a 'very serious' infringement, leading it to fix the starting amount of the fine imposed on Coats at EUR 20 million.

52 As regards the duration of the cartel, the Commission takes the view that the product and geographic market sharing agreements between Prym, Entaco and Coats lasted from the entry into force of the Heads of Agreement and the signature on 10 September 1994 of the bilateral agreements, which in practice amounted to a tripartite agreement, until at least 31 December 1999, the date of termination of the distribution and purchasing agreements between Prym Consumer and Entaco. The duration of the infringement is therefore at least five years and three months. As a result, it increased the starting amount by 50% to take account of the duration of the infringement. It thus set the basic amount of the fine imposed on Coats at EUR 30 million.

53 As to the attenuating circumstances, the Commission takes the view that the fact that another undertaking may have acted as ringleader - which was not the position in the present case - has no bearing on the assessment of Coats' involvement. Furthermore, Coats gained, in particular, an economic advantage from the infringing practices concerned: the protection of its Milward brand and a certain stability in the needles and pins markets and other hard haberdashery markets. The Commission explains that, for the purposes of assessing the gravity of the present case, it is required to take account of the size of the relevant markets and the effective economic capacity of the offenders to cause significant damage to other operators.

54 As regards the application of the Commission Notice of 18 July 1996 on the non-imposition or reduction of fines in cartel cases (OJ 1996 C 207, p. 4), the Commission takes the view that Entaco was the only undertaking to have informed it of the existence of the market sharing agreements and to have supplied decisive evidence without which those agreements might not have been disclosed. As a result, the Commission considers that Entaco alone satisfies the conditions set out in Section B of that Notice.

D - Operative part

55 In conclusion, the Commission adopted the operative part of the Decision, Article 2 of which, applying the criteria referred to above, imposes the following fines:

- EUR 30 million on Prym and Prym Consumer, which are jointly and severally liable;

- EUR 30 million on Coats Holdings and J & P Coats, which are jointly and severally liable.

56 The applicants were notified of the operative part of the Decision on 26 October 2004, whereas the full text of the Decision, including the summary of grounds, was not communicated to the applicants until 22 November 2004.

Procedure and forms of order sought by the parties

57 By application lodged at the Registry of the Court of First Instance on 31 January 2005, the applicants brought the present action.

58 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Second Chamber) decided to open the oral procedure and to put certain questions to the parties. The parties replied within the time-limit allowed.

59 The parties presented their arguments and their replies to the Court's questions at the hearing on 22 November 2006.

60 The applicants claim that the Court should:

- annul the Decision in its entirety;

- in the alternative, annul such parts of the Decision as the Court finds that the Commission has failed to prove or are vitiated by manifest error or inadequate reasoning;

- annul or reduce the fine imposed on Coats;

- order the Commission to pay the costs.

61 The Commission contends that the Court should:

- dismiss the application;

- order the applicants to pay the costs.

Law

62 In the light of the pleas in law put forward, the form of order sought by the applicants must be regarded as seeking, principally, the annulment of the Decision and, in the alternative, the annulment or reduction of the associated fine. In fact, if an addressee of a decision decides to bring an action for annulment, the matter to be tried by the Community judicature relates only to those aspects of the decision which concern that addressee (Case C-310/97 P Commission v AssiDomän Kraft Products and Others [1999] ECR I-5363, paragraph 53).

63 As to the merits, Coats advances two pleas in law, one of which, concerning the erroneous assessment of the evidence, is advanced in support of the application for annulment of the Decision, while the other supports the claim for annulment or reduction of the fine.

I - Plea in law seeking annulment of the Decision

64 By the first plea, comprising several parts, the applicants submit that the Commission's assessment of the evidence as a whole is vitiated by manifest errors such that it has failed to demonstrate to the requisite legal standard that Coats was a party to an unlawful agreement between 1994 and 1999. It is appropriate first of all, therefore, to establish the relevant rules relating to the burden of proof and the assessment of the evidence.

A - Burden of proof and assessment of the evidence

1. Applicants' arguments

65 According to the applicants, the Court of Justice and the Court of First Instance have repeatedly confirmed that the Commission must produce 'sufficiently precise and consistent evidence' to support the 'firm conviction' that the alleged infringement took place. That standard of proof is not satisfied if a 'plausible explanation' could be given which rules out an infringement. The applicants rely in that respect on Joined Cases 29/83 and 30/83 Compagnie Royale Asturienne des Mines and Rheinzink v Commission [1984] ECR 1679 ('CRAM and Rheinzink'), paragraph 20; Joined Cases T-185/96, T-189/96 and T-190/96 Riviera auto service établissements Dalmasso and Others v Commission [1999] ECR II-93 ('Riviera auto service'), paragraph 47; and Case T-62/98 Volkswagen v Commission [2000] ECR II-2707, paragraphs 43 and 72.

66 The Commission disputes the applicants' assertion that it must produce evidence to support the 'firm conviction' that the alleged infringement was committed. Contrary to the applicants' contention, CRAM and Rheinzink (cited in paragraph 65 above) does not refer to the concept of 'firm conviction'.

67 Furthermore, the existence of an alternative plausible explanation of the facts is relevant only if the Commission has failed to establish the existence of the infringement on the basis of the documentary evidence adduced by it.

2. Findings of the Court

68 The Court recalls that, as regards establishing an infringement of Article 81(1) EC, the Commission must prove the infringements which it has found and adduce evidence capable of demonstrating to the requisite legal standard the existence of the facts constituting an infringement (Case C-185/95 P Baustahlgewebe v Commission [1998] ECR I-8417, paragraph 58, and Case C-49/92 P Commission v Anic Partecipazioni [1999] ECR I-4125, paragraph 86).

69 Any doubt in the mind of the Court must operate to the advantage of the addressee of the decision finding an infringement. The Court cannot therefore conclude that the Commission has established the infringement at issue to the requisite legal standard if it still entertains any doubts on that point, particularly in proceedings for annulment of a decision imposing a fine.

70 In the latter situation, it is necessary to take account of the principle of the presumption of innocence resulting in particular from Article 6(2) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, one of the fundamental rights which, according to the case-law of the Court of Justice and as reaffirmed in Article 6(2) EU, are general principles of Community law. Given the nature of the infringements in question and the nature and severity of the ensuing penalties, the principle of the presumption of innocence applies in particular to the procedures relating to infringements of the competition rules applicable to undertakings that may result in the imposition of fines or periodic penalty payments (Case C-199/92 P Hüls v Commission [1999] ECR I-4287, paragraphs 149 and 150, and Case C-235/92 P Montecatini v Commission [1999] ECR I-4539, paragraphs 175 and 176).

71 Thus, the Commission must show precise and consistent evidence in order to establish the existence of the infringement (Joined Cases T-44/02 OP, T-54/02 OP, T-56/02 OP, T-60/02 OP and T-61/02 OP Dresdner Bank and Others v Commission [2006] ECR II-0000, paragraph 62) and to support the firm conviction that the alleged infringements constitute appreciable restrictions of competition within the meaning of Article 81(1) EC (Riviera auto service, cited in paragraph 65 above, paragraph 47). That requirement is not satisfied, in particular, where a plausible explanation can be given for those alleged infringements which rules out an infringement of Community rules on competition (CRAM and Rheinzink, cited in paragraph 65 above, paragraph 16 et seq., and Riviera auto service, cited in paragraph 65 above, paragraph 47).

72 However, the Commission rightly observes that the case-law, according to which it is sufficient for the applicants to prove circumstances which cast the facts established by the Commission in a different light and thus allow another 'plausible explanation' of the facts to be substituted for the one adopted by the Commission, is applicable only where the Commission's reasoning is based on the supposition that the facts established cannot be explained other than by concerted action between undertakings. It is not, therefore, applicable where the Commission's findings are based on documentary evidence (see, to that effect, 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 [1999] ECR II-931 ('PVC II'), paragraphs 725 to 727, and Joined Cases T-67/00, T-68/00, T-71/00 and T-78/00 JFE Engineering and Others v Commission [2004] ECR II-2501 ('JFE Engineering'), paragraphs 186 and 187).

73 The question in the present case is therefore whether there is documentary evidence to support the Commission's complaints. In that regard, the Commission claims that the Decision is based on an ample case-file of direct evidence disclosing the inter-conditional clauses and the nature of the negotiations that resulted in them being agreed.

74 However, as regards the inter-conditional obligations contained in the agreements, the direct evidence adduced implicates only Prym and Entaco. As to Coats, that evidence is ambiguous. Since the evidence calls for interpretation, the Commission's argument is unconvincing. According to the Commission, as there is documentary evidence, it is not sufficient for the applicants to provide a plausible explanation. However, that evidence is 'documentary evidence' only if the Commission's, rather than the applicants', explanation is accepted. It follows that, in the present case, there is no documentary evidence within the meaning of the case-law. As far as the inter-conditional obligations are concerned, the applicants are thus free to put forward a 'plausible explanation' of the facts as an alternative to the one adopted by the Commission.

B - Areas of dispute

75 Most of the facts set out in the Decision are not at issue in the present dispute between the Commission and Coats. The following are the key areas of dispute:

- the Commission relies on Coats' participation in two trilateral meetings held on 11 February and 11 August 1993 involving Coats, Prym and Entaco, at which a cartel was allegedly discussed;

- the Commission claims that Coats influenced the terms of the Heads of Agreement and enabled anti-competitive agreements to come into force;

- according to the Commission, the combination of, first, the inter-conditional obligations contained in the 1994 Entaco/Prym agreements and the 1994 Coats/Entaco agreements and, second, Coats' alleged ability to require Entaco to comply with certain obligations owed to Prym, made Coats the 'cornerstone' of a tripartite cartel arrangement;

- the Commission maintains that, by deciding in April 1997 to renew the 1994 Coats/Entaco supply and purchase agreement on virtually the same terms, Coats continued the alleged tripartite cartel agreement;

- the Commission claims that a payment made by Coats to Entaco in October 2000 in settlement of a dispute relating to a breach of the 1997 Coats/Entaco supply and purchase agreement in reality compensated Entaco for Prym's non-compliance with their cartel and demonstrated that Coats was enforcing a tripartite arrangement.

76 In the Decision, the Commission relied on the above points to demonstrate that Coats had committed an infringement of Article 81 EC. It is appropriate, therefore, for the assessment of the first plea in law to be structured by reference to those points. In addition, since the 1994 agreements ended in March 1997, a distinction will need to be made between the period from 10 September 1994 to 13 March 1997 and the period from 1 April 1997 to 31 December 1999.

C - Coats' liability for the period from September 1994 to March 1997

1. Coats' participation in the trilateral meetings

(a) Arguments of the parties

77 The applicants claim that the trilateral meetings in which Coats took part, namely the meetings held on 11 February and 11 August 1993, did not involve an infringement by Coats of Article 81(1) EC. Next, they challenge the Commission's assertion that the mechanism of inter-conditional clauses did not require Coats to attend, after 10 September 1994, meetings concerning the day-to-day business of the market sharing agreements concluded by Prym and Entaco. Thus, the fact that Coats did not participate in any of the meetings held after 1994 demonstrates that it was not a party to the cartel formed by Entaco and Prym.

78 As regards the first trilateral meeting, which was held on 11 February 1993, the applicants dispute its characterisation, in recital 78 of the Decision, as a '[meeting] where infringements were very clearly expressed and detailed'. According to the applicants, a proper examination of the minutes of the meeting permits no such conclusion and demonstrates that it was an entirely legitimate meeting in the context of the sale of a business, as a result of which Coats believes that it created a new competitor in the needles sector.

79 Coats claims that it did not concur with Prym's view (see paragraph 22 above) that 'there was a moral obligation on Coats to tidy up' the NIL situation; that the letter from Entaco to Prym dated 10 May 1993 (see paragraph 23 above) was not sent to it, and thus that it did not at any point agree with the views expressed in that letter; and that the Commission drew a similar, unjustified conclusion in relying on the letter from Prym to Coats of 30 June 1993 (see paragraph 24 above), in which Prym suggests 'cooperat[ing] to ensure that the European needle market does not suffer from further self-inflicted wounds'.

80 Finally, as regards the trilateral meeting on 11 August 1993, Coats claims that it was obviously not an anti-competitive meeting.

81 According to the Commission, the minutes of the meeting held on 11 February 1993 and the letter of 10 May 1993 must be assessed in the context of the longstanding cooperation between Prym and Coats. Those documents illustrate the direct development of events leading to the letter of 30 June 1993, which was sent directly to Coats, and finally to the signing of the agreements in September 1994. The letters and faxes are interconnected and, taken together, give a very coherent picture of events and of the nature of those events.

82 The Commission states that, according to settled case-law, where the participation of an undertaking in cartel meetings has been established, it is for that undertaking to put forward evidence to establish that its participation was without any anti-competitive intention by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs. In that regard, there is no evidence that Coats expressed the slightest opposition or objection to what was being discussed at those meetings, although Coats was fully informed of the anti-competitive nature of the negotiations and meetings and did not distance itself from what was being discussed.

(b) Findings of the Court

83 According to case-law, participation in meetings between undertakings of a manifestly anti-competitive nature (Hüls v Commission, cited in paragraph 70 above, paragraph 155), or with an anti-competitive object (JFE Engineering, cited in paragraph 72 above, paragraph 327), or at which anti-competitive agreements were concluded (Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P Aalborg Portland and Others v Commission [2004] ECR I-123, paragraph 81) may establish the existence of a cartel.

84 It should be noted that the Commission counted five trilateral meetings, four of which took place between February and October 1993, that is, one year before the agreements at issue were concluded. Two meetings (those of 11 February and 11 August 1993) were categorised by the Commission as anti-competitive meetings.

85 As regards the trilateral meeting held on 11 August 1993, Coats correctly observes that, in the text of the Decision, the Commission omits any reference to that meeting, although it categorises it as a market sharing meeting in Table 2.

86 In fact, a reading of the agreed note of that meeting (annexed to the reply to the statement of objections) demonstrates that the only subject of discussion was the sale of NIL, in particular the assets to be sold. That meeting cannot, therefore, be categorised as a market sharing meeting.

87 As regards the meeting held between Coats, Entaco and Prym on 11 February 1993, in categorising it as a market sharing meeting, the Commission relies on a fax of 18 February 1993 from Prym to Entaco containing minutes of the meeting drawn up by Prym. Paragraph 11 of the minutes records that Mr G of Prym believed that 'there was a moral obligation on Coats to tidy up the present [NIL] situation' (see paragraph 22 above).

88 First of all, it should be noted that that is only the opinion of Mr G of Prym. Similarly, the two letters of 10 May and 30 June 1993 which, according to the Commission, show why the three undertakings have an interest in sharing the European market, are not from Coats. There is, therefore, no evidence that Coats concurred with those statements.

89 Coats nevertheless concedes that its representatives did not contest those statements. In those circumstances, it remains to be considered whether Coats could simply not endorse those statements or whether it was under an obligation publicly to distance itself from such a step if it is to be regarded as not having participated in the cartel in question.

90 It is settled case-law that where participation in cartel meetings has been established, it is for that undertaking to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention, by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs (Aalborg Portland v Commission, cited in paragraph 83 above, paragraph 81, and Hüls v Commission, cited in paragraph 70 above, paragraph 155). As the Court of Justice explained in paragraph 82 of Aalborg Portland v Commission, the reason underlying that principle of law is that, having participated in the meeting without publicly distancing itself from what was discussed, the undertaking has given the other participants to believe that it subscribed to what was decided there and would comply with it. The Court of First Instance has applied that case-law also to meetings in which not only competing manufacturers took part but also customers, which is what Coats was in the present case (Joined Cases T-202/98, T-204/98 and T-207/98 Tate & Lyle and Others v Commission [2001] ECR II-2035, paragraphs 62 to 66).

91 However, the case-law concerning tacit approval is based on the premiss that the undertaking concerned participated in meetings at which anti-competitive agreements were concluded (Aalborg Portland v Commission, cited in paragraph 83 above, paragraph 81) or which were of a manifestly anti-competitive nature (Hüls v Commission, cited in paragraph 70 above, paragraph 155). However, the anti-competitive nature of the meeting on 11 February 1993 has not been established beyond doubt. The words 'there was a moral obligation on Coats to tidy up the present [NIL] situation' are relatively ambiguous in the context of the sale of a business and are not necessarily a reference to market sharing. They could equally mean that Coats should accept Prym's earlier offer instead of selling NIL to Entaco. The rest of the minutes have no relevance. Furthermore, the Commission cannot rely on the letter of 30 June 1993 - which makes no reference to the meeting of 11 February 1993 and which was not from Coats - to assess the nature of a meeting held more than four months earlier.

92 As regards the letter of 10 May 1993 from Entaco to Prym, it is clear from its wording (for example, '[u]nder an agreement between Prym Consumer and Entaco both companies would be anxious to maintain the status quo') that the discussions between Entaco and Prym were bilateral in nature. The letter was written neither by nor to Coats. Thus, the letter is not capable of proving that Coats was implicated in the cartel.

93 Furthermore, even if the Commission's assertion were correct, Coats took part in only one anti-competitive meeting, since, contrary to the Commission's claim, the meeting of 11 August 1993 cannot be regarded as a cartel meeting (see paragraph 86 above). The only meeting which could possibly be characterised as a cartel meeting took place on 11 February 1993, 19 months before the conclusion on 10 September 1994 of the agreements to which the Decision relates.

94 Moreover, the only trilateral meeting after 1993, which took place on 6 October 1995, was not characterised by the Commission as an anti-competitive meeting. It follows that Coats did not attend any of the meetings concerning the day-to-day implementation of the market sharing agreements between Prym and Entaco. According to the Commission, the mechanism of inter-conditional clauses did not require Coats to attend meetings after 10 September 1994, but that is not a convincing argument. Clearly, Entaco's obligation to sell only to existing customers in continental Europe was not self-enforcing. The existence of an obligation, whether inter-conditional or not, cannot guarantee its observance. If Coats had intended to require Entaco to comply with its obligation to sell only to existing customers in continental Europe, it would, in any event, have needed to attend those meetings in order to check Entaco's compliance with its obligation.

95 Finally, the Commission submits in its rejoinder that, in the present case, the case-law relating to participation in cartel meetings is important not for the purpose of establishing the existence of an agreement, but because the meetings help to explain the objectives of the written agreements, the Commission proceeding on the premiss that, in the present case, 'the agreements were written agreements and there is no need to deduce Coats' consent from its presence in the meetings'. In other words, the Commission itself is not seeking to establish Coats' liability on the basis of its participation in the meetings, but refers to those meetings simply in order to interpret the written agreements, as Coats' presence in those meetings demonstrates its underlying intentions.

96 In those circumstances, mere participation in the meeting on 11 February 1993 - the anti-competitive nature of which has not been established to the requisite legal standard - cannot render Coats liable for a cartel which was formed by Prym and Entaco more than a year and a half later and which lasted until the end of 1999. Nevertheless, it remains to be considered whether the Commission's other objections are sufficient to justify the operative part of the Decision. In examining that point, the correspondence analysed above will be taken into account in order to interpret Coats' conduct.

2. Coats' influence on the drafting and entry into force of the Heads of Agreement

(a) Arguments of the parties

97 It is common ground that Coats was never formally involved in the Heads of Agreement or in the other anti-competitive written agreements between Prym and Entaco. Although the Commission claims that a complex system of inter-conditional clauses made those formally bilateral agreements an overarching tripartite agreement (see paragraph 37 et seq. above), it acknowledges that there is no agreement signed by all three parties, since the tripartite signing which Coats suggested in its letter of 11 August 1994 did not take place.

98 By contrast, Coats and the Commission disagree as to whether Coats was actively involved in the drafting and entry into force of the Heads of Agreement. The applicants dispute the Commission's assertion that they were in a position to influence the drafting of the Heads of Agreement. They say that the final form of the Heads of Agreement was signed on 15 June 1994, without Coats having any involvement either in its negotiation or drafting. Moreover, Coats claims that it did nothing with the intention of 'enabling' the Heads of Agreement to come into force, as it would have sold its business in any event. Furthermore, Entaco and Prym explicitly discussed the continuation of their cartel agreement even if the transaction with Coats did not proceed.

99 To substantiate its claims, Coats cites the testimony of Mr G of Prym at the hearing before the Commission, according to which 'there was never at any time any Coats input regarding the Heads of Agreement which were signed in June 1994'. Furthermore, the applicants observe that the two faxes, dated 11 and 30 August 1994, relied upon by the Commission as evidence that Coats intervened in the drafting of the Heads of Agreement, were sent two months after the Heads of Agreement were finalised and signed.

100 As regards the tripartite signing which had been suggested in its letter of 11 August 1994, Coats emphasises that the only reason for such a signing was to ensure that the sale took place within a reasonable period of time, following earlier delays as a result of ongoing discussions between Entaco and Prym. Furthermore, no tripartite signing took place.

101 The Commission explains that since Coats did not directly sign the Heads of Agreement and the distribution and purchasing agreements, it was not a party to the bilateral agreements between Entaco and Prym, but that it adhered to the common plan, the implementation of which was ensured by a network of interconnected bilateral agreements.

102 In the Decision, the Commission found that Coats was informed about the existence of that agreement and its precise content, and therefore about the fact that the entry into force of an agreement containing collusive clauses by two of its suppliers depended on Coats' own actions. By deciding to sign the sale agreement, Coats, according to the Commission, helped to enforce the anti-competitive agreements reached in the Heads of Agreement.

103 The Commission states in that regard that Coats was informed about the content of the Heads of Agreement at the latest on 16 June 1994 and that, knowing of the content of the agreement, it could, and indeed did, try to influence the final shape of the agreement reached. Furthermore, the two faxes of 11 and 30 August 1994 show that Coats tried to change the text of the Heads of Agreement which had already been signed but which had not yet entered into force.

104 The Commission takes the view that the fact that the entry into force of the Heads of Agreement was conditional upon the execution of the sale agreement, which was conditional upon Entaco meeting its obligations under the 1994 distribution and purchasing agreements, supports the Commission's interpretation of the word 'tripartite'.

(b) Findings of the Court

105 It should be noted that Coats was informed at least of the existence of the Heads of Agreement at the latest on 16 June 1994. A letter of 16 June 1994 from Mr G (Prym) to Mr B (Entaco) stated that he had 'spoken to Martin Flower [Coats' CEO] and advised him of the situation'. That letter, together with the faxes of 11 and 30 August 1994 (see paragraphs 106 and 116 above), prove that Coats knew of the cartel before it came into force. Nevertheless, the mere fact of being informed about an anti-competitive agreement cannot give rise to liability for the infringement. The Commission acknowledges that implicitly when it states, in recital 137 of the Decision, that '[b]eing informed about a market sharing agreement may not constitute an approval, however, actively participating in its drafting and enabling it to come into force certainly constitutes such an approval'.

Coats' involvement in drafting the Heads of Agreement

106 As regards Coats' involvement in drafting the Heads of Agreement, it must be noted that the Commission has not produced any evidence that Coats was informed of that agreement before it was signed. According to the case-file, the final form of that agreement was signed on 15 June 1994 without Coats' prior intervention. Admittedly, after it had been signed, Coats tried to persuade Prym and Entaco to change the terms of the Heads of Agreement. In a fax of 11 August 1994, Coats said:

'Thank you for sending me a copy of the Heads of Agreement between Prym and Entaco under cover of your fax dated 25 July 1994. Overall we have no objection, excepting -� . I do not believe we can accept such a clause and ask that it be removed as a condition of the sale proceeding as planned.'

107 Nevertheless, that fax indicates that Coats was not involved in drafting the agreement and that a signed copy was sent to it subsequently. Furthermore, the provision which Coats was contesting was not in fact amended, even though Coats signed the 1994 agreements with Entaco. Moreover, Mr G of Prym confirmed at the hearing before the Commission that '[t]he discussions between Entaco and Prym [had taken] place exclusively between Entaco and Prym and to the best of [his] recollection there [had] never at any time [been] any input from the Coats side regarding those discussions or about the detailed content of the two agreements which were signed and -� there [had] never at any time [been] any Coats input regarding the Heads of Agreement which were signed in June 1994'. Although he contradicts the statement by Mr E referred to in paragraph 39 above, the Commission made no reference to that testimony in its Decision.

108 Furthermore, in the defence the Commission does not repeat its assertion in the Decision that 'Coats could influence the drafting of the Heads of Agreement'. Rather, it claims that '[t]he Decision simply [found] that Coats was informed -� about the existence of this agreement and its precise content'. In those circumstances, the Commission has not established that Coats did in fact influence the drafting of the Heads of Agreement.

Entry into force of the Heads of Agreement

109 As regards the complaint that Coats enabled the Heads of Agreement to come into force, the Commission's reasoning seems to imply that, since Coats knew of the Heads of Agreement, it could no longer sell its business without becoming liable for the cartel, since its entry into force was conditional upon the sale. Coats' decision to proceed with the sale of its business is not, however, capable by itself of proving that its purpose was to contribute to the objectives of the Prym/Entaco cartel. The fact that Prym and Entaco decided to make that event the date on which their cartel would come into force cannot therefore, at first sight, be attributed to Coats.

110 However, in the circumstances of the present case, the fact that Coats triggered the mechanism of the Prym/Entaco cartel could implicate Coats in that cartel, if that act was part of a common plan.

111 In that respect, it must be recalled that the various points at issue in the present case cannot be examined in isolation. As the Court has acknowledged, the evidence must be assessed in its entirety, taking into account all relevant factual circumstances (Case T-141/94 Thyssen Stahl v Commission [1999] ECR II-347, paragraph 175).

112 In the present case, Coats' conduct must therefore be examined in the light of the ongoing collaboration between Coats and Prym, which started in the 1970s. That collaboration intensified in the meetings and exchanges of correspondence referred to in paragraph 87 et seq. above. As a result of them, Coats was fully informed of Prym's and Entaco's intentions. In particular, the statement about 'cooperat[ing]' in the letter of 30 June 1993 clearly demonstrates that Entaco and Prym regarded Coats as a partner.

113 As for Coats' anti-competitive intentions, these are demonstrated first of all by the fact that the Heads of Agreement were disclosed to it. In that regard, the Commission rightly observes that suppliers do not generally inform their customers about the cartels of which they are members. In fact, such conduct is highly unusual and shows that, contrary to Coats' claim, it was not the 'victim' of a cartel. The very fact that Entaco and Prym discussed confidential issues (such as the creation of a cartel) shows that Coats' intentions must have been of an anti-competitive nature. According to the settled case-law of the Court, the fact that an exchange of information involves information which an independent operator scrupulously preserves as business secrets is sufficient to demonstrate the existence of an anti-competitive intention (Tate & Lyle v Commission, cited in paragraph 90 above, paragraph 66).

114 The Heads of Agreement clearly state that Entaco and Prym would share product markets and the geographic market. It is clear from the first sentence that the Heads of Agreement were to take effect from the date of Entaco's purchase of NIL's finishing and packaging business. Coats was thus informed of the existence of that agreement and of its content, just as it was informed of the fact that the entry into force of an agreement containing collusive clauses between two of its suppliers was dependent on its own actions. By deciding to sign the sale agreement, Coats knowingly contributed by its own conduct to the achievement of an objective that was common to Prym and to Entaco, namely the entry into force of the anti-competitive measures agreed in the Heads of Agreement.

115 Furthermore, Entaco would not have entered into any agreement with Prym without being able to enter into agreements with Coats. Entaco expressed that view in a fax of 24 November 1993 addressed to Prym ('we [Entaco] would not seek to have -�handcuffs on our wrists-� in Europe if we were not cushioned by a supply agreement with Coats'). Coats was aware of that, since, under clauses 7.1.4 and 17.1, the 1994 business sale agreement between Coats and Entaco was conditional upon agreements between Entaco and Prym and the supply and purchase agreement. It follows that the cartel would not have been established if Coats had not participated in it.

116 Moreover, evidence of Coats' intention is contained in a fax addressed to Entaco of 30 August 1994 and copied to Prym, in which Coats mentions a meeting organised with Prym in order to 'clarify some issues regarding the sale of NIL', and emphasises that 'Coats is, at the end of the day, a shareholder of Prym and must therefore ensure that Prym is happy about what we [Entaco and Coats] are about to conclude'. In that fax, Coats summarises its discussion with Prym concerning the draft supply and purchase agreement. It also makes precise comments as to how, according to Coats and Prym, the distribution and purchasing agreements interact with the supply and purchase agreement, and the improvements required.

117 Finally, it should be noted that Coats itself suggested a tripartite signing. Furthermore, although the agreements were not signed at a trilateral meeting, they were all signed bilaterally on the same day. In those circumstances, knowingly contributing to the entry into force of the Heads of Agreement cannot be regarded as a purely factual and innocuous act, but shows at the very least a concerted practice.

118 The fact remains that Coats' contribution was limited to facilitating the entry into force of the Heads of Agreement. The question of the extent of Coats' liability therefore arises.

The extent of Coats' liability

119 As the Court stated in paragraph 370 of JFE Engineering (cited in paragraph 72 above), an undertaking may be held responsible for an overall cartel, even though it is shown to have participated directly only in one or some of its constituent elements, if it is shown that it knew, or must have known, that the collusion in which it participated was part of an overall plan intended to distort competition and that the overall plan included all the constituent elements of the cartel. Similarly, the fact that different undertakings have played different roles in the pursuit of a common objective does not mean that there was no identity of anti-competitive object and, therefore, of infringement, provided that each undertaking has contributed, at its own level, to the pursuit of the common objective.

120 In the present case, Coats was aware of the market sharing provided for in the Heads of Agreement and of the fact that the entry into force of the cartel depended on its conduct. It therefore shares responsibility for the overall Prym/Entaco cartel.

121 In terms of the time-frame, however, the effects of Coats' conduct in enabling the Heads of Agreement to come into force were limited to the period during which that agreement remained in force. Liability for participation in a cartel cannot extend beyond its existence. Upon the sale of its 10.1% share in Entaco (on 13 March 1997), Prym brought the Heads of Agreement (see paragraph 43 above), and thus the cartel, to an end. Admittedly, some aspects of the cartel were maintained by Prym and Entaco in the 1997 agreements. However, the entry into force of the 1997 agreements did not depend on Coats' collaboration. The 1997 agreements between Prym and Entaco were not conditional upon the conclusion of the 1997 supply and purchase agreement. In fact, that agreement was signed more than five months later and contained different provisions concerning its duration and termination. In those circumstances, the termination of the Heads of Agreement represents a break which brought Coats' liability to an end. For Coats to be liable beyond that date, it would have had to perform a new anti-competitive act (see paragraph 175 et seq. below) or been in a position to require Entaco to comply with certain obligations towards Prym pursuant to the inter-conditional clauses contained in the 1997 agreements as well as in the 1994 agreements (see paragraph 123 et seq. below).

122 It follows from all of the foregoing that by facilitating the entry into force of the Heads of Agreement between Prym and Entaco, Coats became liable until that agreement came to an end on 13 March 1997.

3. The inter-conditional clauses and implementation of the various agreements concerned

123 It should be noted that, according to the Decision, the 1994 agreements between Coats and Entaco and between Entaco and Prym were interlinked through a series of reference or inter-conditional clauses which created a chain of interconnections from which it can be seen that those formally bilateral contracts amounted, in practice, to a tripartite agreement (see paragraph 37 et seq. above). Under clause 2.2(b) of the 1994 supply and purchase agreements, in particular, Coats obliged Entaco to comply with the 1994 distribution and purchasing agreements. Coats thus participated in the implementation of the various cartels established by Prym and Entaco and, consequently, is itself implicated in those agreements and/or concerted practices.

(a) Arguments of the parties

124 The applicants dispute those assertions by the Commission. First of all, they say that the Commission failed to take account of the extensive evidence in the Commission's file suggesting that the Entaco/Prym cartel was freestanding and would have proceeded regardless of the sale of the Coats needle finishing and packaging business to Entaco. The freestanding nature of the cartel is reflected in the Heads of Agreement, since the latter provides for its own continuation in the event of the supply and purchase agreement coming to an end.

125 Second, according to the applicants, the Commission demonstrates an ignorance of the commercial realities in its analysis of the inter-conditional obligations of the 1994 agreements, as the various conditions precedent were obviously all commercially logical and necessary.

126 In that regard, Coats claims that clause 2.2 of the 1994 supply and purchase agreement between Coats and Entaco (see paragraph 35 above) was intended purely to give Coats legitimate protection in its principal sales areas from competition from Entaco in return for Coats agreeing to an exclusive purchasing obligation. Such wording is standard in exclusive purchasing agreements and permitted by Commission Regulation (EEC) No 1984/83 of 22 June 1983 on the application of Article [81](3) [EC] to categories of exclusive purchasing agreements (OJ 1983 L 173, p. 5), as amended.

127 In Coats' view, the interpretation of its insertion of the 'cognate nature' wording as showing an intention to enable the Entaco/Prym geographic market sharing agreement to be implemented is implausible, given that the wording was introduced at the last minute and that, at that point, the 1994 agreements between Entaco and Prym had already been signed. Furthermore, the existing evidence clearly shows that the 'cognate nature' wording was suggested by Entaco rather than by Coats. It is a manuscript amendment to the agreement, which replaces an earlier longer and more complex draft.

128 Coats states that there was also a commercial rationale from Entaco's point of view as to why, according to clause 17.1 of the 1994 Coats/Entaco business sale agreement, that agreement was conditional upon the 1994 Entaco/Prym purchasing agreement: Entaco could not risk buying the packaging business, which included a large stock of unfinished Chinese needles (around 300 million), without secure outlets for packaged needles.

129 As regards the implementation of the agreements, the applicants claim that it was impossible for Coats to influence Entaco's and Prym's respective market shares by varying the amounts, without being in clear breach of contract.

130 The Commission claims that the reference to 'obligations of cognate nature' in clause 2.2(b) of the supply and purchase agreement forced Entaco to comply with a geographic market sharing agreement concluded with Prym. As a result, that clause enabled Coats to implement the market sharing and made Coats a party to the tripartite agreement.

131 In the Commission's view, it is irrelevant whether the anti-competitive clauses were introduced by Entaco or by Coats, by hand and at the last minute, or by other means and well in advance. Moreover, it claims that Regulation No 1984/83 cannot be applied to the supply and purchase agreements.

132 In conclusion, the Commission claims that the supply and purchase agreement was the 'cornerstone' of a tripartite agreement.

(b) Findings of the Court

133 In order to assess the Commission's findings concerning the inter-conditional obligations and the tripartite nature of the cartel, it is necessary, first, to analyse the clauses upon which the Commission relied in reaching its conclusions. The agreements to which Coats was a party include only two clauses that refer to other agreements: clause 2.2 of the supply and purchase agreement and clause 17.1 of the business sale agreement.

Enforcement of the various agreements as a result of clause 2.2 of the supply and purchase agreement

134 Clause 2.2 of the 1994 supply and purchase agreement provides that Entaco shall:

'(a) not supply Products to a customer of [Coats, established in the United Kingdom] other than those customers to whom [Entaco] supplies Products prior to the date hereof at existing business levels; ...

(b) fulfil its obligations of cognate nature pursuant to an agreement between [Entaco] and Prym dated 8 September 1994.'

135 Essentially, the Commission claims that the reference in clause 2.2(b) to 'obligations of cognate nature' forced Entaco to comply with a geographic market sharing agreement concluded with Prym. Therefore, that clause enabled Coats to enforce the market sharing and thus made it a party to the tripartite agreement. That interpretation is unconvincing, however, for a number of reasons.

- Wording of the clause

136 First, that interpretation contradicts the wording of clause 2.2(b). That clause refers to 'an agreement between [Entaco] and Prym dated 8 September 1994'. However, it must be noted that there is no agreement dated 8 September 1994. It is nevertheless apparent from Coats' response to the statement of objections that the final version of the Entaco/Prym agreements was drawn up on 8 September 1994 and left in abeyance until the agreements with Coats were signed on 10 September 1994.

137 It is necessary therefore to identify the agreement to which the above wording refers, given that three agreements between Entaco and Prym were drawn up on that date (namely, the 10.1% Agreement and the purchasing and distribution agreements). According to the Commission, the reference is to the 1994 distribution agreement and the 1994 purchasing agreement. Therefore, Entaco was obliged to fulfil its obligations under those agreements and thus to comply with the geographic market sharing agreement with Prym.

138 However, clause 2.2(b) mentions only 'an agreement' in the singular. If the Commission's interpretation of clause 2.2(b) were correct and that clause was to force Entaco to comply with its obligations under the contracts concluded with Prym, 'agreement' would be in the plural.

- Structure and context of the clause

139 Second, the Commission's interpretation does not take account of the structure or context of the clause. Clause 2.2(a) contains an obligation on Entaco not to compete, which covers the territory of the United Kingdom. Therefore, given that the manuscript amendments to clause 2.2(a) and (b) replaced a much longer and more complex draft which included not only the United Kingdom but also other territories, clause 2.2(b) can readily be interpreted as covering the other territories in which Entaco was prohibited by Coats from competing. Thus, 'obligations of cognate nature' refers, in fact, to clause 2.2 of the 1994 Entaco/Prym distribution agreement, which provides that '[Entaco] will not sell Products to any person in the Territory [Europe, excluding the United Kingdom and the Republic of Ireland] other than the Label Accounts [Entaco's existing clients] and/or the Distributor [Prym] and/or the Coats Group'.

140 Indeed, if it were the case that clause 2.2(b) did not contain a non-compete obligation in favour of Coats, but required Entaco to fulfil its obligations towards Prym, the protection from competition from Entaco sought by Coats in its principal sales areas would be guaranteed only in the territory of the United Kingdom.

141 That interpretation is unconvincing, since it conflicts with Coats' intentions. In the context of the non-compete obligation specified in clause 2.2(a), it appears more probable that the phrase 'obligations of cognate nature' also refers to a non-compete obligation. If clause 2.2(b) had been intended to apply to the cartel comprised in the agreements between Entaco and Prym, the words 'of cognate nature' would have no relevance and the clause should instead read '[Entaco shall] fulfil its obligations pursuant to the agreements -�'.

142 Furthermore, it should be noted that the clause which was replaced by clause 2.2(b) did not include a reference to the Entaco/Prym agreements. If that reference had effectively been the 'cornerstone' of the cartel, it is unlikely that it would have been inserted at the last minute and that it would not have been contained in the initial draft of the agreement.

143 Therefore, the structure and the context of the clause support Coats' interpretation that clause 2.2(a) related to the United Kingdom, whereas clause 2.2(b), in referring to another agreement, was intended to achieve the same aim in continental Europe where Coats also carried on its business.

- Intended objective of the clause

144 Third, on the Commission's interpretation, clause 2.2(b) could not, in practice, have achieved its aim. According to the Commission, 'to enforce the market sharing agreements, all Coats (as the overwhelming buyer in UK) had to do was to buy from Entaco rather than Prym'. That argument is based on the premiss that Coats was in a position to discipline the two undertakings by means of its product orders. However, according to the 1994 supply and purchase agreement between Entaco and Coats, the latter was under a contractual obligation to purchase exclusively from Entaco in the United Kingdom. Therefore, Coats did not have the flexibility to be able to discipline Entaco or Prym by varying the amounts, without being in breach of contract.

145 A dispute between Entaco and Coats arose precisely because Coats was not entitled to substitute orders from Prym for those from Entaco. In Italy, Coats was required to purchase exclusively from Entaco (except for purchases from third parties at the levels existing when their 1994 supply and purchase agreement was signed). When Coats started to purchase larger quantities of needles from Prym than the quantity it bought at the date of signature of the 1994 supply and purchase agreement, Entaco claimed damages.

- History of the clause

146 Finally, account should be taken of the circumstances in which the manuscript amendment was inserted. Coats states that Prym never intervened in the negotiations between Coats and Entaco. That assertion was confirmed by Prym at the hearing before the Commission. However, if, as the Commission claims, Prym had needed the support of Coats to prevent Entaco from entering the continental European market, it would have taken steps to intervene in those negotiations.

147 In addition, Coats submits that the wording of clause 2.2(b) was introduced at the last minute, and that, at that point, the 1994 Entaco/Prym agreements had already been signed (on 8 September 1994). Furthermore, during the hearing before the Commission, Coats produced the testimony of its in-house lawyer, who attended the signing meeting on Coats' behalf, according to which that wording was introduced at the request of Entaco's lawyers in order to simplify the text and to make it dovetail with the 1994 distribution agreement between Entaco and Prym, which had been signed shortly before.

148 The Commission took the view that it was extremely unlikely that Entaco's lawyers would have insisted on imposing an obligation on their own client at the last minute, thus obliging Entaco to comply with another contract. Nevertheless, that objection would be relevant only if the Commission's interpretation of the meaning of 'obligations of cognate nature' were accepted. If it is accepted that that wording was intended to have the same effect as the original provision (which was more complex and which was deleted), it follows that it did not impose any additional obligation on Entaco.

149 On the contrary, in response to a written question from the Court, the applicants confirmed that the geographic coverage of the non-compete obligation in the Entaco/Prym distribution agreement did not include the United States or the 'World Territory' beyond continental Europe. It was therefore in Entaco's own interest to refer to that non-compete clause in the supply and purchase agreement with Coats in order to restrict its obligations to the United Kingdom and continental Europe, and in order to have only one commitment to honour.

150 In those circumstances, Coats' explanation - that the words of the manuscript amendment are intended to have the same effect as the non-compete obligation which they replaced - is plausible and convincing. It follows that clause 2.2(b) was not intended to implement the market sharing agreed between Entaco and Prym, but to give Coats protection from competition from Entaco in its principal sales areas in return for Coats agreeing to an exclusive purchasing obligation.

The role of the supply and purchase agreement as the 'cornerstone' of a tripartite agreement

151 According to the Commission, the Coats/Entaco supply and purchase agreement was the 'cornerstone' of a tripartite agreement. However, it must be noted that the Heads of Agreement provide that, '[s]hould the supply arrangement between Coats and Entaco be discontinued for any reason then Prym and Entaco will discuss sales policy in order to restrict the loss of production volume at Entaco'. Thus, the Heads of Agreement envisaged that the supply and purchase agreement might end, notwithstanding the continuation of the Heads of Agreement themselves.

152 Clause 2.4 of the Entaco/Prym distribution agreement similarly specifies that '[i]f the Coats Viyella Supply Agreement terminates or expires for any reason whatsoever, the Distributor [Prym] agrees to liase with the Company [Entaco] with a view to restricting the loss of sales by Entaco which may result therefrom'.

153 Thus, if the cartel could have subsisted without any involvement by Coats, no credence can be given to the Commission's interpretation that the supply and purchase agreement was the 'cornerstone' of a tripartite agreement: if a 'cornerstone' is removed, the whole building collapses. However, in the present case, the Heads of Agreement and the distribution agreement specifically provided that the termination of the supply and purchase agreement would not preclude their continuation.

Clause 17.1 of the business sale agreement

154 Under clause 17.1 of the business sale agreement, the sale of the business to Entaco was 'conditional upon the execution of the Prym Agreements'. Those were defined as follows in the 'Interpretation' section of the agreement: 'the agreement for the sale and purchase of 10.1%', 'the purchasing agreement' and 'the distribution agreement to be entered into between -� [Entaco] and -� Prym Consumer'.

155 According to Coats, there is an obvious commercial rationale as to why the business sale agreement between Coats and Entaco was conditional upon the 'Prym Agreements' (see paragraph 128 above). Thus, the condition was not for the benefit of Coats, but commercially essential for Entaco. The Commission does not dispute the commercial logic of clause 17.1, but simply claims that Coats was the 'cornerstone' of the market sharing agreements.

156 While it is true that Coats' participation was important for Prym and Entaco, that does not conflict with Coats' assertion that the reason for the inter-conditional obligation was Entaco's commercial interest. Since it is the Commission's interpretation that Coats sought to impose such conditions in order to be in a position to implement the Entaco/Prym cartel, it should be noted, first, that, when the business sale agreement was signed, the 'Prym Agreements' had already been signed (on 8 September 1994). Thus, the cartel had already been established. Second, since the business sale agreement achieved its objective with the sale of NIL, it could not ensure future compliance with the cartel.

157 It follows from all of the foregoing that the Commission has not demonstrated to the requisite legal standard that clause 2.2(b) of the supply and purchase agreement was intended to implement the market sharing agreed between Entaco and Prym. Nor has the Commission produced evidence that the formally bilateral 1994 agreements between Coats and Entaco, and between Entaco and Prym, amounted in practice to a tripartite agreement. By contrast, Coats has proved - within the meaning of JFE Engineering, cited in paragraph 72 above - circumstances which cast the facts established by the Commission in a different light and thus allow another plausible explanation of the facts to be substituted for the one adopted by the Commission in the Decision.

158 Accordingly, the Commission cannot rely on the purportedly tripartite nature of the agreements in order to prove Coats' liability in relation to the Prym/Entaco cartel.

4. Other parts of the plea in law

(a) The economic size of the markets concerned

Arguments of the parties

159 Coats disputes the assertion in recital 19 of the Decision that 'the distribution of needles and pins in Europe is dominated by Coats'. On that point, the applicants observe that, in recital 45 of the Decision, the Commission estimated the size of the wholesale market in question (hand sewing needles) as approximately EUR 30 million and considerably larger at the retail level. Sales of Coats' needles to retailers and wholesalers in the European Union amounted to EUR 2.98 million in 2002. Its share of the market in the European Union is therefore less than 10% at wholesale level and even less at retail level.

160 The Commission submits that that plea is ineffective, since it is not capable (in the event that it is well founded) of leading to the annulment of the Decision.

Findings of the Court

161 It is settled case-law that, for the purpose of applying Article 81(1) EC, there is no need to demonstrate the actual anti-competitive effects of an agreement once it appears that it has as its object the prevention, restriction or distortion of competition (Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299, p. 342, and Case T-143/89 Ferriere Nord v Commission [1995] ECR II-917, paragraph 30). The cartel's aim was to share the geographic and also the product markets, and was, therefore, an obvious restriction of competition.

162 It follows that, for the purpose of establishing an infringement of Article 81(1) EC, the economic size of the markets in question is irrelevant in the present case.

(b) Mr E's testimony

Arguments of the parties

163 According to the applicants, the Commission seeks to interpret the objectives of the agreements almost exclusively in the light of the statements made by Mr E, the former managing director of Entaco, and, in particular, the statement concerning the tripartite nature of the agreements (see paragraph 39 above). However, in the applicants' view, a number of points need to be made about the quality and credibility of Mr E as a witness.

164 The Commission claims that the interpretation of the objectives of the agreements was made on the basis of the evidence gathered during the administrative procedure, and only corroborated by Mr E's statements.

Findings of the Court

165 The applicants correctly point out that Mr E was not involved in the negotiation of the 1994 agreements and that the judge rejected his evidence as unreliable in the litigation between Entaco and Prym in the High Court of Justice in September 1999. In addition, the Commission itself concedes that it treated Mr E's statements with caution and that it did not use them where it did not find sufficient evidence, for example concerning the allegations on price-fixing.

166 As regards the compensation scheme, Mr E's statements are contradictory (see paragraph 188 et seq. below). Thus, it cannot be ruled out that the complaint initially filed at the Commission by Mr E in August 2000 was motivated by resentment for the fact that Prym had terminated the 1997 purchasing agreement and that Coats had refused to renew the 1997 supply and purchase agreement.

167 In those circumstances, Mr E's testimony is unreliable and incapable of corroborating the Commission's case. However, since the Commission has relied on other evidence which is sufficient to establish Coats' liability, the complaint relating to the credibility of Mr E's testimony is not capable of leading to the annulment of the Decision.

5. Conclusion

168 It follows from the foregoing that, although the Commission made some errors in its assessment of the evidence, the fact that Coats facilitated the entry into force of the Heads of Agreement between Prym and Entaco rendered it liable until the termination of that agreement on 13 March 1997 (see paragraphs 109 to 122 above). Accordingly, the applicants' plea in relation to the annulment of the Decision must be dismissed in so far as it concerns the period from 10 September 1994 to 13 March 1997.

D - Coats' liability between April 1997 and December 1999

1. The 1997 agreements

(a) Arguments of the parties

169 As regards the 1997 agreements, the applicants observe that neither the 1997 Entaco/Prym distribution agreement nor the 1997 Entaco/Prym purchasing agreement was conditional in any way upon the 1994 Coats/Entaco supply and purchase agreement or upon its renewal in 1997.

170 The Commission claims, first, that the 1997 agreements perpetuated a tripartite cartel, since the effects of the agreements (apart from the reduction in scope of the product market sharing agreement) were the same as they were before that date. In particular, Coats obliged Entaco to comply with the 1997 distribution and purchasing agreements by means of clause 2.2(b) of the 1997 supply and purchase agreement. Nevertheless, unlike the situation in September 1994, the parties were merely continuing the cartel which they had already established. Consequently, the different dates on which various contracts were extended had no bearing on the cartel's existence and functioning.

171 Next, according to the Commission, the fact that the 1997 distribution and purchasing agreements were not conditional upon the 1994 supply and purchase agreement or its renewal is irrelevant, since the 1994 and 1997 supply and purchase agreements were conditional upon the 1994 and 1997 distribution and purchasing agreements. Further, clause 2.4 of the 1997 distribution agreement refers to the 1997 supply and purchase agreement.

(b) Findings of the Court

172 The applicants correctly assert that neither the 1997 Entaco/Prym distribution agreement nor the 1997 Entaco/Prym purchasing agreement was conditional upon the 1994 Coats/Entaco supply and purchase agreement or upon its renewal. Nor was the agreement relating to the sale of 11 222 ordinary shares in the capital of Entaco conditional upon the extension of the Coats/Entaco supply and purchase agreement.

173 The only reference in the 1997 Entaco/Prym agreements to the Coats/Entaco supply and purchase agreement is in clause 2.4 of the 1997 distribution agreement. It reproduces the provision under which the 1997 Entaco/Prym distribution agreement would continue to apply even if the Coats/Entaco supply and purchase agreement were terminated, which demonstrates the independence of each of the two sets of agreements from the other. In addition, Coats' explanation that that wording was reproduced merely for ease and simplicity is convincing, since that paragraph corresponds word for word with that of the 1994 agreement.

174 Conversely, contrary to the Commission's assertion, the 1997 supply and purchase agreement was not conditional upon the 1997 Entaco/Prym distribution and purchasing agreements. It was signed more than five months later and contained different provisions concerning its duration and termination.

175 Furthermore, it has already been found that the Commission has not demonstrated to the requisite legal standard that clause 2.2(b) of the 1994 supply and purchase agreement - which is identical to that contained in the 1997 agreement - was intended to implement the market sharing agreed between Entaco and Prym (see paragraph 134 et seq. above).

176 Accordingly, the Commission has not proved that the 1997 agreements were a continuation of a tripartite agreement.

2. Attendance at meetings

(a) Arguments of the parties

177 Coats claims that, after April 1997, it did not take part in any trilateral meeting and that it took no steps to implement the Entaco/Prym cartel or to have it implemented.

178 The Commission submits that, according to case-law, the fact that an undertaking did not attend meetings is of minor significance where it contributed by its own conduct to the common objectives pursued by all the participants. In addition, the Commission takes the view that, after the agreements entered into force, the mechanism of inter-conditional clauses did not require Coats to participate in the meetings, as it knew that both Entaco and Prym depended on the Entaco/Coats supply and purchase agreement.

(b) Findings of the Court

179 It is common ground that Coats did not participate in any trilateral meeting, and thus in any meeting to implement the Entaco/Prym cartel, after April 1997. On the contrary, the dispute between Entaco and Coats indicates that Coats ignored its obligations towards Entaco (see paragraph 145 above and paragraph 182 et seq. below).

180 The Commission's argument - that the mechanism of inter-conditional clauses obviated the need for Coats to attend meetings after 10 September 1994 concerning the implementation of the cartel - is unconvincing. Entaco's obligation to sell only to existing customers in continental Europe was not self-enforcing (see paragraph 94 above). Thus, the fact that Coats did not participate in any of the meetings after 1994 is, instead, evidence that it ceased to be a party to the Entaco/Prym cartel after the termination of the Heads of Agreement in 1997.

181 In any event, it is clear that, as regards the period between April 1997 and December 1999, Coats cannot incur liability as a result of presence at an anti-competitive meeting.

3. The compensation scheme

182 In the Decision, the Commission claims that, as regards the dispute mentioned in paragraph 145 above (arising from the fact that Coats was not entitled to substitute orders from Prym for those from Entaco), Coats did not settle its own dispute with Entaco but effectively settled a dispute between Entaco and Prym concerning Prym's non-compliance with their cartel.

(a) Arguments of the parties

183 Coats disputes that assertion, which the Commission made in order to prove that Coats was implementing the cartel in question. According to the applicants, the correspondence as a whole shows that Entaco's action related to Coats' non-compliance with their 1997 supply and purchasing agreement, rather than to the breach of the 1997 Entaco/Prym agreements.

184 The Commission states that, for Coats, the compensation scheme represented another means of implementing the tripartite agreement, and recalls that the evidence must be assessed in its entirety, taking into account all relevant factual circumstances. It takes the view that its interpretation is corroborated by Mr E's remarks.

(b) Findings of the Court

185 According to recital 214 of the Decision:

'Coats was perfectly aware of the content and the implication of the Entaco/Prym agreements as the Supply and Purchase agreement was conditional upon these agreements and since it had communication of these agreements. Therefore it knew that all orders placed by Coats to Prym have to be supplied by Entaco. As a consequence, compensating Entaco for a switch of business from Entaco to Prym by Coats makes sense only if Coats accepts that Prym does not respect its agreement with Entaco and ultimately could be interpreted as compensation on behalf of Prym made by Coats.'

186 That line of argument suggests that the Commission meant that Entaco would suffer no loss if Coats changed supplier, because if Prym replaced Entaco as supplier, Prym would still have to procure needles from Entaco pursuant to the 1997 Prym/Entaco purchasing agreement, so that a claim would make sense only if Prym was not purchasing all of its supplies from Entaco and was breaching the 1997 purchasing agreement between those two undertakings.

187 However, it should be noted that, depending on the prices agreed under the 1997 Entaco/Prym purchasing agreement and the 1997 Coats/Entaco supply agreement respectively, it could have been much more profitable for Entaco to supply Coats direct rather than via Prym. In any event, the breach by Coats of its exclusive purchasing obligation can still be invoked. The argument would simply be about the quantum of damages. It seems pointless, therefore, to resort to as complex a construction as that of the Commission in order to make sense of Entaco's damages claim.

188 The Commission takes the view that its interpretation is corroborated by Mr E's statement:

'Since the reference to maintaining the status quo was actually in the Entaco/Coats Agreement and since Prym had not compensated Entaco for its loss of business, Entaco chose to go after Coats for the loss of profit and the matter was settled between the two companies, on a confidential basis, by the payment of a [GBP] 60 000 cash settlement from Coats to Entaco.'

189 However, the Commission's version is not corroborated by the correspondence annexed to the reply to the statement of objections. Indeed, as far as that dispute is concerned, Mr B of Entaco stated in a letter of 9 June 1999 adressed to Coats that he 'enclose[s] faxes -� in which Coats admits breaching the Agreement'. In fact, Mr E himself said in a letter of 25 September 2000 to Coats:

'I am writing to you -� to confirm Entaco's understanding of the current position with regard to our request for compensation following alleged breaches of the September 1997 Agreement between our two companies.'

190 Finally, the Commission concedes in the Decision itself that compensation 'could be interpreted', rather than 'must be interpreted', in that way. Accordingly, the Commission has failed to establish that the compensation scheme was intended to settle a dispute between Entaco and Prym about the latter's non-compliance with their cartel, rather than a dispute between Coats and Entaco.

E - Conclusion

191 In so far as the Commission seeks to establish Coats' liability in respect of the period after the termination of the Heads of Agreement, the Decision is vitiated by a manifest error of assessment. It follows that the plea relating to the annulment of the Decision must be upheld as regards the period after 13 March 1997. The remainder of the plea must be dismissed. The legal consequences for the calculation of the fine will be addressed in paragraph 204 et seq. below.

II - Plea in law seeking annulment or reduction of the fine

192 The plea for annulment or reduction of the fine consists of several complaints relating, inter alia, to erroneous assessment of the gravity of the infringement, lack of differential treatment and breach of the principle of proportionality.

A - Arguments of the parties

193 The applicants observe that, in assessing the appropriate amount of the fine, the Commission reached the conclusion that '[t]he three parties were equally active since the infringing agreements could only succeed as a result of the tripartite agreement between the three undertakings and their subsidiaries'. According to Coats, that assessment is manifestly erroneous. On the Commission's own case, Coats participated in only two preliminary meetings at which intended infringements were allegedly discussed. That cannot be described as being 'equally active'.

194 As regards the statements in recital 325 of the Decision that Coats was a leading distributor of haberdashery products in Europe and that Coats and Prym were the main competitors at the retail level with their respective brands of hand sewing needles, namely Milward and Newey, Coats claims that the Commission produces no evidence of Coats' share of the distribution of haberdashery products, yet Coats supplied evidence showing that its share was between 8% and 25%. Furthermore, the claim that Coats was one of the main hand sewing needles distributors is contradicted by the figures put forward in the Decision itself. Coats' share at retail level by value was, according to the figures in recital 45 of the Decision, much less than 10%.

195 Furthermore, the applicants complain that the Commission does not distinguish between the legitimate protection sought by Coats and unlawful protection from competition. Coats concludes that the Commission has made serious errors of assessment concerning the gravity of the alleged infringement. Furthermore, the fine imposed on Coats is grossly disproportionate to its turnover in the relevant market.

196 According to the Commission, the fact that Coats did not participate in the meetings between Entaco and Prym after 1993 is irrelevant for the purpose of assessing the gravity of its own participation in the cartel. As far as Coats' arguments regarding its 'weight' are concerned, the Commission notes that the relative weight, that is to say, the effective economic capacity to cause significant damage, is not determined only by the market share for the products which are the subject-matter of the infringement concerned.

197 The Commission submits that Coats' market share at retail level was higher than it now claims. The fact that Entaco and Prym, who are practically the only manufacturers of needles and, more particularly, of hand sewing needles, supplied their needles to Coats should be sufficient evidence of Coats' size and strength at the distribution level.

198 In the Commission's view, Coats was the leading distributor, in the same way as Prym was the leading manufacturer. Taking into account the different weight at each economic level, it saw no reason to impose fines with different starting amounts for the two major undertakings. Furthermore, Coats' conduct cannot, according to the Commission, be described as passive. Coats participated in the crucial meetings which led to the infringement and concluded the agreements which constitute the subject-matter of the infringements. The bilateral meetings between Entaco and Prym were of ancillary importance.

B - Findings of the Court

199 It is settled case-law that, in fixing the amount of a fine, the Commission must have regard to all relevant circumstances (Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983] ECR 1825, paragraph 106; Joined Cases C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P Dansk Rørindustri and Others v Commission [2005] ECR I-5425, paragraph 241; Joined Cases T-236/01, T-239/01, T-244/01 to T-246/01, T-251/01 and T-252/01 Tokai Carbon and Others v Commission [2004] ECR II-1181, paragraph 331) and particularly to the gravity and duration of the infringement, which are the two criteria explicitly referred to in Article 23(3) of Regulation No 1/2003. That basic amount will be increased to take account of aggravating circumstances or reduced to take account of attenuating circumstances.

1. Assessment of the gravity of the infringement

200 According to 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; 'the Guidelines'), the gravity of the infringement is calculated by reference to a large number of factors, some of which the Commission must take into account (Case T-224/00 Archer Daniels Midland and Archer Daniels Midland Ingredients v Commission [2003] ECR II-2597, paragraph 183, upheld on appeal in Case C-397/03 P Archer Daniels Midland and Archer Daniels Midland Ingredients v Commission [2006] ECR I-4429, paragraph 91).

201 It should be noted in that regard that the Guidelines are not explicitly referred to in the Decision. However, the methodology used in calculating the fine shows unequivocally that the fine was calculated on the basis of the Guidelines. Furthermore, in its pleadings, the Commission explains and justifies the imposition of the fine on the basis of the Guidelines.

202 As to the assessment of the gravity of the infringement, the applicants complain that the Commission considered only the nature of the infringement and failed to take the circumstances of the present case into account. The Commission, in particular, overestimated Coats' size and strength in the relevant market and also its role in the operation of the cartel.

203 However, in the circumstances of the present case, the Court finds that in any event it is not necessary to alter that amount, since the description of the infringement as 'very serious' is well founded and the Commission chose the minimum starting amount laid down by the Guidelines in respect of such an infringement, namely EUR 20 million.

2. Assessment of the duration of the infringement

204 As regards the increase in the fine to take account of the duration of the infringement, the second indent of Section 1 B of the Guidelines provides that, for 'infringements of medium duration (in general, one to five years)', there may be an 'increase of up to 50% in the amount determined for gravity'. The third indent of Section 1 B provides that, for 'infringements of long duration (in general, more than five years)', there may be an increase 'of up to 10% per year in the amount determined for gravity'. As stated in paragraph 52 above, the Commission took the view that the infringement lasted for five years and three months. Consequently, the Commission applied the third indent of that provision and increased the starting amount by 50% (EUR 10 million) to take account of the duration of the infringement.

205 In view of the fact that the Decision is to be annulled in so far as the applicants were found to have infringed Article 81(1) EC after 13 March 1997 (see paragraph 191 above), the Commission's findings on the duration of the infringement cannot be taken into account in the present case. In light of the Commission's evidence in the Decision, Coats' liability has been established for the period from 10 September 1994 to 13 March 1997, that is, for a period of two years and six months. Therefore, it is appropriate for the second indent of Section 1 B of the Guidelines to be applied, and it is for the Court to fix an appropriate rate of increase pursuant to Article 31 of Regulation No 1/2003.

206 In application of its unlimited jurisdiction and in order to take account of the proven duration of the infringement, which is equivalent to approximately half of the period determined by the Commission, the rate of increase is reduced to 25%, resulting in an additional amount of EUR 5 million and a total fine of EUR 25 million.

3. Consideration of attenuating circumstances

207 It has already been noted that, in fixing the amount of a fine, the Commission must have regard to all relevant circumstances. According to Section 3 of the Guidelines, that may lead to a reduction in the basic amount of the fine, depending on the attenuating circumstances. In the present case, there are a number of unusual circumstances. However, clearly the Commission did not assess all those circumstances correctly.

208 First of all, Coats attended only two of the allegedly unlawful meetings, neither of which can be described as determinative (see paragraph 96 above). In fact, in recital 77 of the Decision, the Commission itself describes them as 'preliminary' meetings. The Commission dismisses the fact that Coats did not participate in 13 other unlawful meetings on the unsubstantiated grounds that those bilateral meetings between Prym and Entaco were of 'ancillary importance'. That assessment is incorrect, particularly in the light of recital 258 of the Decision, where the Commission claims that '[t]he regularity of those meetings ensured the continuing implementation of the signed agreements'.

209 The Commission is mistaken in taking the view that the fact that Coats did not participate in the meetings between Entaco and Prym after 1993 is irrelevant to the assessment of the gravity of Coats' own participation in the cartel. According to the Court of Justice, the fact that an undertaking has not taken part in all aspects of an anti-competitive scheme or that it played only a minor role in the aspects in which it did participate must be taken into consideration when the gravity of the infringement is assessed and when determining any fine (Commission v Anic Partecipazioni, cited in paragraph 68 above, paragraph 90).

210 Equally, the Court of First Instance has held in Cheil Jedang v Commission that it is clear from case-law that one circumstance that may indicate the adoption by an undertaking of a passive role within a cartel is where the undertaking's participation in cartel meetings is significantly more sporadic than that of the ordinary members of the cartel (Case T-220/00 Cheil Jedang v Commission [2003] ECR II-2473, paragraph 168).

211 Accordingly, in fixing the fine, the Commission cannot disregard Coats' absence from all of the meetings held after 1993, since that absence can be indicative of a 'passive -� role' within the meaning of the first indent of Section 3 of the Guidelines.

212 Furthermore, it is apparent from the case-law that such a role can be inferred where the undertaking does not actively participate in the creation of any anti-competitive agreements (see, to that effect, Cheil Jedang v Commission, cited in paragraph 210 above, paragraph 167). It is clear in the present case that, contrary to the Commission's assertion, Coats did not play any role in drawing up the Heads of Agreement, the crucial part of the cartel (see paragraph 106 et seq. above), or in drawing up the other anti-competitive agreements concluded by Prym and Entaco.

213 Finally, it should be acknowledged that, as regards protection from competition, the Commission cannot base its assessment of the fine on protection which does not infringe the competition rules. As far as Entaco is concerned, Coats was entitled, under Regulation No 1984/83, to protect itself from competition from that company in its principal sales areas by entering into an exclusive purchasing agreement with it. That is what the 1994 and 1997 supply and purchasing agreements between the two companies were intended to achieve. As regards competition from Prym, Coats did not obtain any protection from that company, which continued to compete with Coats through its Whitecroft and Newey brands.

214 It follows that Coats' role was essentially limited to facilitating the entry into force of the Heads of Agreement. Its role is therefore more akin to that of a mediator than that of a full member of the cartel.

215 Therefore, in the exercise of its unlimited jurisdiction, the Court considers it appropriate to reduce the amount of the fine by 20% to take account of those attenuating circumstances. Since the amount of the fine has already been reduced to EUR 25 million (see paragraph 206 above), that further reduction results in a total fine of EUR 20 million.

4. The other parts of the plea

216 Finally, the applicants rely on two complaints relating to the alleged disproportionality of the fine and the lack of differential treatment.

217 As regards differential treatment, the sixth paragraph of Section 1 A of the Guidelines provides for the possibility in some cases to apply weightings to the amounts determined within each of the categories of gravity 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.

218 However, it is apparent from the use of the expression 'in some cases' and the word 'particularly' in the Guidelines that weighting according to the individual size of the individual undertakings is not a systematic step in the calculation which the Commission has imposed on itself, but an opportunity for flexibility which it has conferred on itself in cases where that is required (Case T-44/00 Mannesmannröhren-Werke v Commission [2004] ECR II-2223, paragraph 246).

219 Furthermore, Coats' minor and passive role in the operation of the cartel has already been assessed above (see paragraph 207 et seq. above) and has resulted in a reduction of the fine. In those circumstances, a further reduction would mean that that attenuating circumstance would be taken into account twice.

220 The same line of argument applies to the proportionality of the fine. In any event, Coats' argument that the fine is disproportionate is not adequately substantiated in its application. In fact, Coats has simply mentioned the word 'disproportionate' in the application. However, under Article 44(1)(c) and (d) of the Rules of Procedure of the Court of First Instance, the application must state, inter alia, the subject-matter of the proceedings, the form of order sought by the applicant and a summary of the pleas in law on which the application is based. Those elements must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court of First Instance to rule on the application, should this be necessary, without further supporting information. That requirement is not satisfied here.

C - Conclusion

221 It follows from the aforementioned considerations that the applicants' plea in relation to a reduction of the fine is partly justified. Accordingly, the amount of the fine is set at EUR 20 million (see paragraph 215 above).

Costs

222 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. Under the first subparagraph of Article 87(3), the Court may, where each party succeeds on some and fails on other heads, order costs to be shared.

223 As the applicants have been successful in part of their pleadings, the Court will make an equitable assessment of the case in holding that they are to bear two thirds of their own costs and pay two thirds of the costs incurred by the Commission, and that the Commission is to bear one third of its own costs and pay one third of the costs incurred by the applicants.

On those grounds,

THE COURT OF FIRST INSTANCE (Second Chamber)

hereby

1. Annuls Commission Decision C (2004) 4221 final of 26 October 2004 relating to a proceeding under Article 81 [EC] (Case COMP/F-1/38.338 - PO/Needles) in so far as the Decision finds that the applicants infringed Article 81(1) EC after 13 March 1997;

2. Sets the amount of the fine imposed on the applicants under Article 2 of the Decision at EUR 20 million;

3. Dismisses the remainder of the application;

4. Orders the applicants to bear two thirds of their own costs and to pay two thirds of the costs incurred by the Commission, and the Commission to bear one third of its own costs and to pay one third of the costs incurred by the applicants.

Pirrung

Forwood

Papasavvas

Delivered in open court in Luxembourg on 12 September 2007.

E. Coulon

J. Pirrung

Registrar

President

Judgment of the Court of First Instance (Second Chamber) of 12 September 2007 - Coats Holdings and Coats v Commission

(Case T-36/05)

Competition - Cartels - European haberdashery market (needles) - Product market sharing - Geographic market sharing - Assessment of evidence - Participation in meetings - Tripartite agreement - Fine - Gravity and duration of the infringement - Attenuating circumstances

1. Competition - Administrative procedure - Commission decision finding an infringement consisting in the conclusion of an anti-competitive agreement - Compliance with the principle of the presumption on innocence - Degree of probative force required for the Commission's evidence (Art. 81(1) EC) (see paras 68, 70-72, 74)

2. Competition - Agreements, decisions and concerted practices - Participation of an undertaking in a meeting of the parties to a planned cartel - Circumstance permitting the conclusion that it participated in the subsequent cartel - Condition (Art. 81(1) EC) (see paras 90-91, 96)

3. Competition - Agreements, decisions and concerted practices - Undertaking which facilitated the entry into force of an anti-competitive agreement which required action on its part - Circumstance permitting the conclusion that it participated in the agreement - Merely being informed of the existence of the agreement not sufficient (Art. 81(1) EC) (see paras 105, 110, 117, 119-120, 168)

4. Competition - Fines - Amount - Determination - Criteria defined in guidelines issued by the Commission - Seriousness and duration of the infringement - Attenuating circumstances - Passive or 'follow-my-leader' role of the undertaking (Art. 81(1) EC; Commission Notice 98/C 9/03) (see paras 199-200, 204-207, 210, 212)

Re:

APPLICATION, principally, for annulment of Commission Decision C(2004) 4221 final of 26 October 2004 relating to a proceeding under Article 81 [EC] (Case COMP/F-1/38.338 - PO/Needles) and, in the alternative, for annulment or reduction of the fine imposed on the applicants.

Operative part

The Court:

1.

Annuls Commission Decision C(2004) 4221 final of 26 October 2004 relating to a proceeding under Article 81 [EC] (Case COMP/F-1/38.338 - PO/Needles) in so far as the Decision finds that the applicants infringed Article 81(1) EC after 13 March 1997;

2.

Sets the amount of the fine imposed on the applicants under Article 2 of the Decision at EUR 20 million;

3.

Dismisses the remainder of the application;

4.

Orders the applicants to bear two thirds of their own costs and to pay two thirds of the costs incurred by the Commission, and the Commission to bear one third of its own costs and to pay one third of the costs incurred by the applicants.

* Language of the case: English.