COMMISSION - EUR-Lex

No L 286/32 Official Journal of the European Communities 14. 11 . 79

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 5 September 1979

relating to a proceeding under Article 85 of the EEC Treaty (IV/29.021 — BP Kemi —DDSF)

(Only the Danish text is authentic)

(79/934/EEC

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the EuropeanEconomic Community, and in particular Article 85thereof,

Having regard to Council Regulation No 17 of6 February 1962 ( 1), and in particular Article 3 thereof,

Having regard to the application made to theCommission under Article 3 (2 ) (b) of RegulationNo 17 on 18 March 1975 by A/S Atka, Copenhagen,Denmark,

Having regard to the Commission Decision of 24 April1978 to initiate proceedings against BP Kemi A/S andA/S De Danske Spritfabrikker,

Having heard the undertakings concerned in accordancewith Article 19 ( 1 ) of Regulation No 17 andCommission Regulation No 99/63 (2),

Having regard to the opinion of the AdvisoryCommittee on Restrictive Practices and DominantPositions obtained pursuant to Article 10 of RegulationNo 17 on 13 February 1979 ,

Whereas :

I. THE FACTS

1 . The subject of the proceedings

1 These proceedings concern the cooperationbetween BP Kemi A/S (hereinafter referred to asBP Kemi), a wholly-owned subsidiary of thegroup headed by the British Petroleum Co. Ltd(hereinafter referred to as BP), and A/S DeDanske Spritfabrikker (hereinafter referred to asDDSF) in the field of distribution of syntheticethanol in Denmark during the period 1 July1973 to 31 December 1976 .

2 . The product2 Ethanol is a colourless, clear liquid with a fresh

and characteristic odour. It is completely misciblewith water and many solvents, oils , chemicalsand chemical products . Ethanol can be producedeither on the basis of a raw material which isextracted from mineral oil or gas or on the basisof sugar-holding raw materials ( for instancewine, fruits , potatoes , grain or molasses). Thefirst type of ethanol , which has been availableonly since 1945 , is called synthetic ethanol, andthe second is called agricultural ethanol.The two kinds of ethanol do not differ from eachother physically or chemically ; in fact it is only

(!) OJ No 13 , 21 . 2 . 1962, p . 204/62 .( 2) OJ No 127, 20 . 8 . 1963 , p . 2268/63 .

14 . 11 . 79 Official Journal of the European Communities No L 286/33

production capacity are indicated in thefollowing table.

recently that a method of distinguishing them hasbeen developed, though it has always beenpossible for experts within the trade todistinguish them by smell . (in 1 000 hi)

Synthetic etanol

Output in1976

Productioncapacity

BPCL

SODES

Veba-Chemie

Erdölchemie

British Celanese

}

2 080

895

1 232

440

2 970

1 230

1 640

760

500

3 Ethanol is used in particular in the production ofpotable spirits, vinegar, pharmaceutical products ,cosmetics, solvents, products for domesticapplications ('household spirit') and for chemicalsynthesis . As agricultural and synthetic ethanoltechnically can be used for the same purposes ,and since the costs of production of the latter arethe lower (although they have increasedconsiderably with the increase in the oil pricessince 1973 ), the production of agriculturalethanol is protected in the different MemberStates through provisions which restrict the useof synthetic ethanol . Both the means by whichprotection is ensured and the extent of theprotection vary from Member State to MemberState ; thus in the United Kingdom and Denmarksynthetic ethanol may be used for all purposesexcept potable spirits and vinegar, whereas inGermany it may be used for chemical synthesisand solvent purposes only and in France it maynormally be used for chemical synthesis only.

Until July 1973 DDSF also produced syntheticethanol ; its yearly output was then around150 000 hi .

3 . Production

4 In 1976 the total output of agricultural ethanolin the EEC was 7 million hi of which the majorpart was produced in France (2.4 million hi),Italy (2 million hi ) and Germany (0.9 million hi).Output in the United Kingdom was 0.5 million hiand output in Denmark was 0.2 million hi, all ofwhich was produced by DDSF.

4 . The undertakings

7 BPCL produces around 45 % of the syntheticethanol produced for sale in the EEC. Throughundertakings of the BP Group, this ethanol issold in a number of EEC countries , including theUnited Kingdom, Ireland, Belgium and Denmark.In 1977 the total turnover from BPCL's sales ofsynthetic ethanol in the EEC was £ 32.73 million(around Dkr 335 million) of which £ 2.65 million(around Dkr 27 million) relates to products soldin Denmark. Its total sales of agricultural ethanolin 1977 amounted to £ 5.43 million (around Dkr55 million), all of which was sold in the UnitedKingdom and Ireland.

8 BP Kemi is a trading undertaking, operating onlyin Denmark, which sells petrochemical productssuch as detergents , plastic raw materials anddifferent grades of ethanol . The total turnover ofthe company in 1975 was around Dkr 119million (excluding taxes ) of which around Dkr. . .(*) million came from the sale of ethanol .

BP Kemi decided late in 1977 to install facilitiesfor drumming and full denaturing in Denmark;these facilities became operative on 1 April 1978 .Until then BP Kemi was in general supplying itscustomers with ethanol only by bulk road tanker.

9 DDSF is primarily a production undertakingwhose main product is agricultural ethanol . Afteropening a new factory in 1975 it produces

5 Annex 1 gives details of synthetic ethanol output.The largest producer in the EEC is the UnitedKingdom undertaking BP Chemicals Limited(hereinafter referred to as BPCL); like BP Kemi,BPCL is a wholly-owned subsidiary of the BPGroup. The only other producers of syntheticethanol in the EEC are SODES, France,Veba-Chemie AG, Germany, ErdölchemieGmbH, Germany (a joint subsidiary of Bayer andGerman BP), and British Celanese, UnitedKingdom. However, British Celanese does notmarket synthetic ethanol, its output being usedonly by the company itself.

6 In 1976 the total output of these undertakingswas 4.6 million hi of synthetic ethanol . Theoutput of each undertaking as well as its

(*) In the published version of this Decision, some data havehereinafter been omitted, pursuant to the provisions ofArticle 21 of Regulation No 17, concerning non-disclosureof business secrets.

No L 286/34 Official Journal of the European Communities 14 . 11 . 79

150 000 to 160 000 hi of this product a year. Amajor part thereof is used by the undertakingitself in the production of schnapps and otherpotable spirits , but some is sold to producers ofvinegar, fruit wines, etc . and some has previouslybeen exported to BPCL pursuant to an agreementbetween DDSF and BPCL of 4 November 1975( in 1975/76 some ..... hi and in 1976/77some hi).

10 DDSF has not been producing synthetic ethanolsince July 1973 , and the synthetic ethanol whichthe company is now buying is undergoing onlysimple processes (denaturing, addition of certainsubstances, etc.) before it is resold ; some ethanolis even being resold without any furthertreatment. In 1974 DDSF bought hi ofethanol , and in 1977 around hi, all ofwhich was supplied by BP Kemi .

15 During the period from 1 January 1973 to 30June 1977, customs duties were levied on importsof ethanol into Denmark from the originalMember States , including France and Germany,whereas at no time since 1 January 1973 havecustoms duties been levied in respect of ethanolimported into Denmark from the UnitedKingdom, since both Denmark and the UnitedKingdom had been members of the EuropeanFree Trade Association .

16 Duties on ethanol imported into Denmark fromthe original Member States have been reducedfrom Dkr 30 per hectolitre to zero. Depending onthe selling price, which rose substantially as aresult of the oil crisis, the proportion of theselling price accounted for by import duties was21.2 to 25-2 % on 1 April 1973 , 11.8 to 15.4 %on 1 January 1974, 7.8 to 9.3 % on 1 April1974, and fell to 5 % and lower on 1 January1975 (for details see Annex 2).

17 Amongst the original Member States , exportsand imports were under the control of officialbodies in both France and Germany until 1977 .One effect was that authorizations to exportfrom these countries were given only to theextent that adequate quantities for consumptionon the respective domestic markets were ensured.Nevertheless , as Annex 1 shows, even in 1973considerable quantities were exported from thesecountries ; in 1973 the total exports from Franceand Germany to other EEC Member States were334 000 hi and 125 000 hi respectively, and in1976 the corresponding figures were 120 000 hiand 40 000 hi . These figure include substantialexports to Denmark; thus in 1973 15 000 hi and2 000 hi were exported from France andGermany respectively to Denmark ( x); in 1976exports from France and Germany to Denmarkwere 14 000 hi and 8 000 hi respectively (seeAnnex 3 ).

11 The total turnover of DDSF in 1975 was aroundDkr 275 million (taxes excluded) of whicharound Dkr 35 million came from the sale ofethanol . The total exports of the company toother EEC countries in 1975 were around Dkr 3million ( taxes excluded); this amount rose to

million, when the exports of agriculturalethanol to BPCL took place.

12 The complainant, Atka A/S, Copenhagen, owns100 % of the shares in Atka Kemi A/S , Roskilde,Denmark . Atka Kemi A/S was selling householdspirits in bottles in competition with DDSF andhad around 25 % of this market in Denmark upto 1 March 1974, when it stopped its activitiesfor financial reasons . Since 1971 it had beenpurchasing synthetic ethanol from BP Kemi

6 . Prices

18 Annex 4 shows the prices applied in theindividual Member States . The price of ethanolvaries greatly according to the amount purchased(either in an individual delivery or over the year)and according to the purity and the use to whichit is to be put, so that it has not been possible toproduce representative average prices .Nevertheless average minimum and maximumprices for ethanol for particular uses do permit asufficiently precise comparison.

5 . Regulations concerning tradein synthetic ethanol

13 In the United Kingdom there have been norestrictions in respect of production or exports ofsynthetic ethanol since the country became amember of the EEC on 1 January 1973 .

14 In Denmark, DDSF enjoyed the sole productionrights for alcohol, including synthetic ethanol ,until the end of 1972 under a concession fromthe Danish Ministry of Commerce; imports weresubject to a licensing system. However, inconnection with Danish membership of the EECon 1 January 1973 , the production concessionwas terminated and the licensing system wasaltered so that, in practice, any applications forimports rights were granted.

(*) Although it cannot be verified statistically, it is possiblethat these exports were partially intended not for consumption in Denmark but for re-export, in which case the dutypaid would have been reimbursed.


19 It emerges that prices in Denmark have beenwithout exception higher than in France andUnited Kingdom, and higher even than in othercountries with no domestic output, such as theBenelux countries . Prices in Germany are higherthan in France and the United Kingdom, andonly slightly lower than in Denmark . It should beborne in mind that these are domestic pricesfixed or influenced by the public authorities .Export prices are not controlled and may belower, as is shown by the offer made to DDSF inApril 1976 concerning ethanol produced byVeba-Chemie; this offer was about 20 % belowthe domestic German price, causing BP Kemi tolower its price by 10 % in order to keep DDSF asa customer. In 1973 and later, French suppliersalso tried to secure a better foothold in theDanish market by making offers to DDSF.

obtain import licences from the Danishauthorities .

23 During the negotiations with BPCL, DDSF triedto get the sole distribution rights for BP ethanolin Denmark, arguing that it was the biggestundertaking on the Danish spirits market. Thisrequest was refused by the BP Group, however,because as BP Kemi stated, 'our main interestwas to continue to sell synthetic ethanol of BPGroup origin to the larger accounts to whom wecould supply in bulk, leaving DDSF to supply thesmaller customers, the speciality grades and thepacked business which they were better equippedto handle. Indeed our limited facilities forhandling ethanol do not permit any appreciableincrease in the range of activities'.

24 When it became clear to DDSF that it could notobtain the sole distribution rights , it wantedinstead to get 'effective protection against thepotential threat inherent in the fact that oursupplier at the same time was our competitor'.

25 At the end of 1972 an understanding wasreached between DDSF and BPCL, and DDSFinformed customers in a circular letter of22 December 1972 that it had decided to stopproduction of synthetic ethanol as from 1 July1973 and that from 1 January 1973 it wouldbegin charging the lower prices which would beapplied for imported spirit. Yet it was only afterfurther negotiations between DDSF and BP Kemi ,which carried on the negotiations on behalf ofthe BP Group , that a 'Purchasing Agreement' anda 'Cooperation Agreement' were entered in

20 Certain quantities are occasionally offered on themarket at particularly low prices (the spotmarket). As the parties have stated, thesequantities are not sufficient to completely coverrequirements such as those of DDSF on a regularbasis, but they do influence the supply structureto an appreciable extent. In this connection itmay be noted that in the United States, which isthe biggest producer of synthetic ethanol in theworld, only 70 % of capacity is utilized, and astransport costs are in no way prohibitive, UnitedStates undertakings are capable of supplying toEurope and indeed have supplied to Denmark.

8 . The agreementsS

26 The Purchasing Agreement was signed by BPKemi and DDSF on 26 March 1973 and 12 April1973 respectively, and came into force on 1 July1973 .

7 . The history of the agreements

21 As a result of the regulations applied inDenmark, DDSF was in 1972 the only producerof synthetic (and agricultural ) ethanol inDenmark and was by far the largest distributor.Furthermore, it was the only undertaking whichhad at its disposal the necessary facilities forsupplying customers with synthetic ethanol inbottles, cans and drums. But its productionfacilities were relatively old and small , it had topay a higher price for the necessary raw materialsthan its foreign competitors . DDSF thereforerealized that it could not continue a profitableproduction of synthetic ethanol for very longand, after having invited quotations fromdifferent companies, it entered into negotiationswith BPCL in 1972 .

It included the following provisions :

(a ) DDSF was to buy its total requirements ofundenatured synthetic ethanol from BP Kemi ;

(b) BP Kemi would have no obligation to supplyDDSF in any calendar year with more than25 000 tonnes of ethanol (DDSF'srequirements did not exceed .... tonnes);

( c) DDSF would be free to buy quantities ofethanol in excess of 25 000 tonnes from thirdparties, provided that it first gave BP Kemithe opportunity of supplying such excessquantities on the same terms and conditionsas those laid down for the 25 000 tonnes ;

22 BPCL had in 1968 started to expand its syntheticethanol production capacity in the UK, and asfrom 1971 BP Kemi had started to supply four orfive big customers in Denmark who were able to


(d) either party could terminate the agreement bygiving not less than 12 months' writtennotice, such notice not to expire earlier than30 June 1979 ;

( e) the prices fixed in the contract could beincreased by BP Kemi for any reason, not lessthan six months' notice being given to expireon 1 January. If DDSF should find that theincrease was unreasonable a procedure ofmeetings was provided for, and if agreementhad not been reached by 31 October eitherparty could then terminate the agreement bygiving six months' notice. Beyond this theprice could be increased as a result inter aliaof changes in the exchange rate .

27 The Cooperation Agreement was not signed bythe parties , nor dated, but according to BP Kemiit was designed to complement the PurchasingAgreement and it was only made a separatearrangement because this was 'simply moreconvenient'. The parties started to comply withthe terms of the Cooperation Agreement as from1 July 1973 when the Purchasing Agreementcame into force, and it was due to last as long asthe Purchasing Agreement was in force, i.e. atleast until mid-1979 .

more than 100 000 litres a year, and it wasprovided that discussions were to take placebetween the parties if the stipulations neededto be departed from. In respect of customerswith special prices , i.e. customers with anannual consumption of more than 500 000litres, it was provided that they could beaccorded special terms of credit which in eachcase had to be discussed beforehand betweenDDSF and BP Kemi;

■(e) BP Kemi would in the main interest itself incustomers having an annual consumption ofat least 100 000 litres, and it did not envisageselling 'A spirits' or ethanol in bottles ;

(f) in so far as DDSF could prove an offer at alower price from another source, BP Kemiwould either match this price or withdrawfrom the contract, provided that the offerfulfilled a number of detailed conditionsregarding inter alia quantity and quality (aso-called 'English clause'); the quantity

y involved in the present case had tocorrespond to DDSF's requirements for atleast a year.

29 The parties informed the Commission that theCooperation Agreement was terminated witheffect as from 31 December 1974 . Thetermination took place after discussions whichwere not put in writing as minutes , protocols orthe like. DDSF has indicated that theCooperation Agreement was terminated becauseof practical difficulties caused by the applicationof the terms, particularly in the field of prices,and BP Kemi has stated that it felt that thearrangements on quota and compensation and onprices were a hindrance to the development of itsown sales efforts .

30 In connection with the termination of theCooperation Agreement, BP Kemi undertook topay to DDSF an amount of Dkr 2.2 million. Thisamount represented the compensation which theparties calculated that BP Kemi would have hadto pay to DDSF until the termination of theCooperation Agreement on 30 June 1979 . Theamount was calculated on the basis of theexpected trend in the market shares of the partiesand with regard to the advantage to DDSF ofreceiving the compensation in 1975 .

31 DDSF has stated that this obligation wasundertaken by BP Kemi because the terminationof the Cooperation Agreement withoutcompensation would have meant a complete shiftin the preconditions under which DDSF hadentered into the Purchasing Agreement.

28 The Cooperation Agreement included thefollowing provisions :

(a) BP Kemi could sell yearly up to 25 % of thecombined DDSF and BP Kemi annual sales ofspirits in Denmark. This share was to applyunchanged during the period of validity of themain contract;

(b ) BP Kemi was to pay compensation to DDSFif BP Kemi's sales should exceed the 25 %limit. The amount of compensation per litrewas calculated as the difference between thelist price minus quantity rebate and yearlybonus on the one side and the invoiced priceplus BP Kemi 's distribution costs on theother ;

( c) BP Kemi was to forward a monthly statementto DDSF concerning sales of ethanol showingthe quantity sold to each customer, and DDSFwas to inform BP Kemi each month of itstotal sales , as well as of its individual sales tocustomers purchasing over 100 000 litres ;

(d) BP Kemi was to keep to the listed prices ofDDSF for ethanol and in principle to applythe same conditions of payment as DDSF.Detailed stipulations were laid down as to thecalculation of net prices to customers buying


(b ) Supplies to DDSF

35 Since the Purchasing Agreement came into forcein 1973 , DDSF has received a number of offersfrom other sources of supply ; the offers havebeen made partly at the initiative of these sourcesand partly at the initiative of DDSF. Only on oneoccasion was a contract entered into as a resultthereof; this was in 1973 when DDSF, with theapproval of BP Kemi , bought a small amountfrom a Norwegian company. On anotheroccasion, in 1976, when BP Kemi 's price wasDkr 2.09 per litre 100 % , DDSF was offeredethanol produced by Veba-Chemie at a price ofDkr 1.92—1.95 per litre 100 % ; influenced bythis offer, however, BP Kemi reduced its price toDkr 1.88 , with the result that no contract withVeba-Chemie was entered into.

The payment never took place, however, becauseafter the Commission had sent the first requestfor information to the parties in January 1976 ,the parties decided to suspend the paymentpending the outcome of the proceedings .

32 On 2 September 1975 BP Kemi and DDSF signedan addendum to the Purchasing Agreement ;according to BP Kemi the addendum operatedretroactively from 1 January of the same year.

DDSF informed the Commission that theaddendum was entered into at its own initiativebecause it was eager to have an English clauseregulating the purchasing obligation .

33 According to the addendum, it formed part of,and was to be regarded as additional to, thePurchasing Agreement. It contained an Englishclause which DDSF could invoke to a greaterextent than the previous one in the CooperationAgreement; the clause in the addendum could beinvoked if the offer came from a 'serious WesternEuropean supplier of alcohol ' and concerned 'notless than two million litres in shipments of notless than 500 000 litres for delivery over notmore than six months'. If the clause was invoked,BP Kemi could either reduce its price or thequantity which DDSF was obliged to buy, but inthe latter event BP Kemi was also entitled toterminate the agreement.

By letter dated 11 July 1978 DDSF terminatedthe Purchasing Agreement, with effect from15 July 1979 . The parties do not however ruleout a continuation of contractual links .

36 In all other cases the prices offered have beenhigher than those applied by BP Kemi at the sametime. Thus no further negotiations took placebetween DDSF and the French tradingundertaking SOFECIA, which effects sales ofethanol produced by SODES amongst others,when SOFECIA on 24 April 1973 offered DDSFethanol at a price which in the latter' s opinionwas considerably higher than the price agreedbetween DDSF and BP Kemi . This was despitethe fact that, according to an internal DDSFdocument of 24 January 1973 , the representativeof SOFECIA, in connection with an offer of 23January 1973 'to supply spirit to cover the consumption in this country' had indicated that'these prices were proposals and that he wasready to negotiate them'.

9 . The behaviour of the parties

(a ) Market position

34 The following table shows the total sales ofethanol in Denmark and the market shares ofDDSF and BP Kemi in that country in the years1973 to 1977 .

37 According to another internal DDSF documentdated 18 October 1973 a meeting took placebetween DDSF and SODES on 17 October 1973where it was decided to maintain the contact,although SODES 'understood that (because ofthe purchasing obligation) there was no immediate possibility for supplies of spirits fromSODES to DDSF'.

At the same meeting SODES indicated that itwould 'continue the supplies to Denmark to thepresent extent'.

YearTotalsales

in 1 000 hiDDSF BP Kemi Others

BP Kemi as% of DDSF+ BP Kemi

1973 71 % 21 % 8 % 23 %

1974 . 66 % 30 % 4 % 31 %

1975 58 % 34 % 8 % 37 %

1976 56 % 28 % 16 % 33 %

1977 45 % 37 % 18 % 45 %

( c) Exchange of information

38 In July 1973 BP Kemi and DDSF started toexchange detailed information each monthconcerning quantities sold to individualcustomers, in accordance with the terms of theCooperation Agreement. BP Kemi has

The major part of the quantity sold by 'others 'comes from France and Germany .

No L 286/38 14 . 11 . 79Official Journal of the European Communities

the termination of the Cooperation Agreementhas been postponed pending the outcome of thecase.

acknowledged that although the CooperationAgreement was terminated formally as from31 December 1974, this exchange of informationcontinued until the end of 1976 . The continuation of this information arrangement is also indicated by a list forwarded to the Commission byBP Kemi showing the quantities sold by BP Kemiand DDSF in 1975 and 1976 to individual ' spiritcustomers '.

10 . The complaint

42 The complaint of 18 March 1975 states thatAtka Kemi A/S stopped production becauseDDSF and BP Kemi were charging the sameprices for bulk spirits . As Atka Kemi A/S hadbeen buying ethanol from BP Kemi and was apotential customer of DDSF, which had formerlysupplied Atka Kemi A/S , it had the legitimateinterest in the case required by Article 3 (2 ) (b) ofRegulation No 17 .

It should be noted that the Commission hadinformed the parties in writing in December 1976that the stipulations of the CooperationAgreement appeared to violate Article 85 ( 1 ) ofthe EEC Treaty .

(d) Customers of BP Kemi

39 BP Kemi has acknowledged that it did not supplyany customer having an annual consumption ofless than 100 000 litres during the validity of theCooperation Agreement. Only when thisagreement was formally terminated did it start tosell to customers taking less than 100 000 litres .It had four such customers in 1975 , six in 1976and seven in 1977 .

II . APPLICABILITY OF ARTICLE 85 (*)

43 Article 85 ( 1 ) of the Treaty establishing theEuropean Economic Community prohibits asincompatible with the common market allagreements between undertakings, decisions byassociations of undertakings and concertedpractices which may affect trade betweenMember States and which have as their object oreffect the prevention, restriction or distortion ofcompetition within the common market, and inparticular those which

( a) directly of indirectly fix purchase or sellingprices or any other trading conditions ;

(b ) limit for control production, markets,technical development, or investment ;

( c) share markets or sources of supply.

( e ) Prices

40 The parties do not deny that BP Kemi wasapplying the same prices as DDSF to comparablecustomers during the validity of the CooperationAgreement, and that it continued to do so afterthe formal termination of this agreement. In fact,BP Kemi has stated that ' the price competitionstarted in September of 1976 and has continuedto an increasing extent since then'. However, theparties have indicated only one example in 1976of BP Kemi undercutting the prices charged byDDSF, and they have not contested the examplesgiven by the Commission in the Statement ofObjections of identical prices being charged bythe parties in the last months of 1976. Examplesof different prices being charged become morefrequent only in the course of 1977 .

A. AGREEMENTS AND CONCERTED PRACTICESBETWEEN UNDERTAKINGS

44 1 . DDSF and BP Kemi are undertakings withinthe meaning of Article 85 ( 1 ).

( f) Compensation

41 As BP Kemi had only 23% of the combined salesby itself and DDSF in 1973 , and thus did notexceed the 25 % limit laid down in theCooperation Agreement, no compensation waspaid to DDSF in that year. In 1974 , when BPKemi's share of the combined sales had increasedto 31 % , it paid compensation of Dkr217 628.20 to DDSF. As indicated above,payment of the Dkr 2-2 million which BP Kemiundertook to pay to DDSF in connection with

45 2 . The Purchasing Agreement, which came intoforce on 1 July 1973 , the CooperationAgreement, which began to operate on the samedate, and the addendum of 2 September 1975 areagreements within the meaning of Article 85 ( 1 ).Although the Cooperation Agreement was neversigned, it was nevertheless applied by bothparties, as is indicated in particular by thepayment to DDSF of Dkr 217 628-20 by BPKemi as compensation in 1974 .


DDSF would therefore have been willing to enterinto a purchasing obligation which wouldcontinue after the customs duties had becomeinsignificant only if this obligation werecounterbalanced by some protection of itsinterests . The terms which DDSF and BP Kemiagreed upon in this respect were laid down in theCooperation Agreement.

46 The Cooperation Agreement and PurchasingAgreement form a unit. Not only did theCooperation Agreement refer to the PurchasingAgreement as 'the main contract', but clauses ofthe Cooperation Agreement must be considered anecessary counterpart to the obligation to buyonly from BP Kemi during six years which DDSFhad undertaken in the Purchasing Agreement,and this purchasing obligation must beconsidered a precondition of at least some of theobligations undertaken by BP Kemi in theCooperation Agreement. This close connectionbetween the two agreements is also shown by thefact that the addendum was a supplement to thePurchasing Agreement, whereas its content,including the English clause, replaced stipulationswhich previously had been contained in theCooperation Agreement.

50 3 . A number of the essential terms of theCooperation Agreement Continued to be appliedfor two years after the end of 1974, i . e . up to theend of 1976, when BP Kemi and DDSF were firstinformed of the Commission's views on theCooperation Agreement.

51 It is not disputed that the parties continued toexchange information to the same extent asbefore.

47 The close connection between the agreements ,uncontested by the parties, is a result of theinterplay of their interests .

52 The parties also continued to charge the sameprices to comparable customers. BP Kemi hasstated that it started competing on prices fromSeptember 1976 onwards, but has not suppliedany concrete facts to counter the examples givenby the Commission to show that similar pricingcontinued up to the end of 1976 . Cases in whichBP Kemi's and DDSF's prices differed becomemore frequent only in the course of 1977, andmainly in the second half of that year.

48 When DDSF, because of its old productioninstallations , and the termination of its protectedposition on the Danish market, decided to enterinto negotiations with the BP Group, it had formany years been practically the only undertakingselling ethanol in Denmark. When it becameclear that BP Kemi would not grant it soledistribution rights for ethanol in Denmark, it wasin DDSF's interest that BP Kemi shouldguarantee it the supply of the quantities itneeded. BP Kemi , on its side, was at that timeincapable of supplying the entire Danish marketby itself, since it did not have the necessarycontacts with users of ethanol ; nor did it have thenecessary denaturing, drumming, canning andbottling facilities in Denmark for supplyingspeciality grades and small customers . It was inthe interests of BP Kemi and of BPCL to supplyDDSF's total requirements ; if DDSF undertookto buy only from BP Kemi, this would ensurethat BP Kemi — and thus BPCL — suppliedmore than 90 % of the ethanol market inDenmark, representing around 10 % of BPCL'syearly ethanol production.

53 Both parties have held that the similar pricescharged were not the result of an agreement or aconcerted practice but were the natural outcomeof the market mechanism : BP Kemi had to followthe market leader and align its prices on DDSF'spublished price lists . Against this it should bepointed out that as DDSF's supplier BP Kemi atall times had an inherent market advantage, andwas in a position to exploit it, as became clear in1977, although DDSF was at that time still themarket leader. At no time did market conditionsforce BP Kemi to align its prices on those of itscustomer and after the termination of thecompensation arrangement it had a cleareconomic interest in expanding its sales at theexpense of DDSF. Moreover, there seems to be acontradiction between the view of the parties thatit was 'normal' that BP Kemi followed DDSF'sprices and DDSF's statement that the pricestipulation in the Cooperation Agreement 'wasaimed at giving DDSF a necessary protectionagainst the only supplier of DDSF undercuttingit'; in fact this statement shows that DDSF

49 However, an obligation on DDSF to buy onlyfrom BP Kemi would have given a decisivecompetitive advantage to BP Kemi in respect ofsupplies to the larger customers in the short termand in respect of the whole market in the longterm, since BP Kemi, by charging DDSF the sameprice as other purchasers in Denmark, couldmake it difficult for DDSF to compete in sales tocustomers whom BP Kemi was able to supply.


considered it 'normal' that BP Kemi should useits better supply position to undercut DDSF at atime when DDSF's position in the market wasstronger than it became later .

entered into contact with the French producerSODES ; however, this did not lead to theconclusion of a contract.

B. RESTRICTION OF COMPETITION WITHINTHE COMMON MARKET

1 . Restriction of competition with third parties

54 It does not seem possible that the parties couldhave continued the application of the same pricesto individual customers without coordination. Anapplication of identical prices may not by itselfprove a concerted practice, but it may amount tostrong evidence of such a practice when it isunlikely to occur in the normal conditions of themarket ; such evidence is further reinforced whenthe companies concerned were previously boundby an express price stipulation and when theyregularly exchange detailed informationconcerning quantities sold to individualcustomers . Similarly, it does not seem possiblethat the exchange of sensitive information of thesaid kind could take place without coordinationof the behaviour of the parties , in particularwhen such behaviour was previously laid downin an express stipulation . In 1974, when theexpress stipulations of the CooperationAgreement were still in force, BP Kemi 's share ofthe combined sales amounted to 31 % and it didnot change significantly in 1975 and 1976 : in1975 it was 37 % and in 1976 it fell back to33 % . Only in 1977, when the exchange ofinformation and the application of similar priceshad been terminated did it rise to 45 % .

57 Contrary to the view of the parties the questionhere is not at whose wish DDSF's obligation tobuy its total requirements of synthetic ethanolfrom BP Kemi was agreed upon, whether theprincipal motive was DDSF's desire for securesupplies or BP Kemi's desire for secure sales, orwhether the purchasing obligation suited bothparties ' interests . The decisive question iswhether the obligation had the restriction ofcompetition as its object or effect.

58 As the Court of Justice has pointed out'competiton may be distorted within the meaningof Article 85 ( 1 ) not only by agreements whichlimit it as between the parties, but also byagreements which prevent or restrict thecompetition which might take place between oneof them and third parties . For this purpose, it isirrelevant whether the parties to the agreementare or are not on a footing of equality as regardstheir position and function in the economy. Thisapplies all the more, since, by such an agreement,the parties might seek, by preventing or limitingthe competition of third parties in respect of theproducts, to create or guarantee for their benefitan unjustified advantage at the expense of theconsumer or user, contrary to the general aims ofArticle 85 ' f 1).

55 In view of the circumstances , the continuedexchange of information and the continuedapplication of similar prices can be explainedonly as the outcome of a concerted practicewithin the meaning of Article 85 ( 1 ). Thisconcerted practice replaced the correspondingexpress stipulations of the CooperationAgreement — which were applied by the partiesduring the period 1 July 1973 to 31 December1974 — and was followed by them from1 January 1975 until the end of 1976 .

59 When a purchaser undertakes to buy all hisrequirements for a given product from onemanufacturer during a certain period, othermanufacturers of the product in question areprevented from supplying the purchaser with theproduct during the period concerned. Thus allcompetition between the manufacturer who gets

56 A further clause in the Cooperation Agreement,the English clause, appeared so important that ina modified form it was included in the addendumto the Purchasing Agreement, and that accordingto BP Kemi it was even applied from the date offormal termination of the CooperationAgreement. The purpose of this clause was toexclude any doubt about the possibility ofpurchasing from other producers and to leave itto BP Kemi in each case to decide whether DDSFshould be allowed to purchase from othersuppliers . In March 1975 , when the CooperationAgreement had been formally terminated, but theaddendum had not yet been agreed, DDSF

( J ) Judgment of the Court of Justice in joined cases 56 and58/64 (Consten and Grundig v. Commission) [ 1966] ECR,299, 339 .

14.11.79 Official Journal of the European Communities No L 286/41

sources of supply since in such a situation DDSFwould be obliged first to give BP Kemi theopportunity of supplying such excess quantities.

such a contract and other manufacturers of theproduct is excluded during this period in so far assupplies to the purchaser in question areconcerned. Depending inter alia, on the length ofthe period and on the economic context,including the market shares and positions of thepurchaser and seller such a purchasing obligationmay constitute a restriction on competitionwithin the meaning of Article 85 ( 1 ). 62 The parties have argued that the English clause in

its different versions means a protection of theinterests of DDSF since DDSF as a result of theclause can buy at a lower price when theconditions of the clause are fulfilled, and sincethe clause means that such purchases maypossibly be made from another supplier .However, the conditions for the clause cominginto play are so severe that its practicalimportance is limited. The clause, moreover, byits nature confirms the restrictive relationshipbetween the parties and means a protection ofthe interests of BP Kemi .

60 It is true that when any agreement concerning thepurchase of a given quantity of a product hasbeen concluded, other producers of the productin question are excluded to that extent (but nofurther) from covering the needs of thepurchaser, but such producers are able tocompete for each such contract before it issigned. This is the result of the normal role ofcompetition which gives any interested party thepossibility of putting forward his offer and whichenables the purchaser to decide freely which ofthe offers is the most attractive when all factorsare taken into account. However, when apurchasing obligation of a longer duration isentered into , the relationship of supply is frozenand the role of offer and demand is eliminated tothe disadvantage of inter alia new competitorswho are thereby prevented from supplying thiscustomer and old competitors who in the meantime may have become more competitive than theactual supplier. If the conditions of the marketare thereby influenced to an appreciable extent, itis possible that competition is restricted withinthe meaning of Article 85 ( 1 ).

63 The English clause in the CooperationAgreement, according to its terms, could beinvoked only if the quantity offered by thecompetitor corresponded to DDSF's total annualrequirements ; thus the purchase of smallerquantities from other suppliers was not possible.However, even if DDSF had found anothersupplier who could have supplied DDSF with itsannual requirement, DDSF might have abstainedfrom invoking the clause since this , according tothe clause, would have meant that BP Kemi couldwithdraw from the contract.

61 In the present case the purchasing obligationmeans that all foreign suppliers except BPCL areprevented for a period of six years from selling toDDSF which represents not only the largest, butalso in a number of respects the only practicalsales possibility for them in Denmark . Therestrictive character of this obligation on thepart of DDSF is not affected by the fact that BPKemi has no obligation to supply DDSF withmore than 25 000 tonnes a year . DDSF is obligedto purchase all its requirements up to 25 000tonnes from BP Kemi, with a resulting exclusionof other suppliers in respect of such quantities .Furthermore, since the actual consumption ofDDSF has not exceeded hi, whichcorresponds to approximately . . . tonnes (thespecific gravity of pure alcohol is around 0.8 ), thelimit of 25 000 tonnes is of no practicalimportance. Moreover, even if the limit of25 000 tonnes were reached, this would notmean that DDSF would be free to buy possiblequantities in excess of 25 000 tonnes from other

The English clause contained in the addendumrelaxes the purchasing obligation only to aninsignificant extent. Minimum purchases are stillprovided for, the quantity being not less than twomillion litres in shipments of not less than500 000 litres for delivery over not more than sixmonths . Moreover, the offer has to come from a'serious Western European supplier of alcohol'.This excludes inter alia offers of smallerquantities from West European countries, andoccasional offers on the spot market, which arefrequently used by consumers to supplementexisting supplies in order to cover theirrequirements . Although DDSF could not affordto be completely dependent on such sources, theiruse as a supplement would _ have beeneconomically attractive . Furthermore, even ifDDSF should receive an offer fulfilling the saidconditions, DDSF might not invoke the clause forfear that BP Kemi would use the right this gives itto terminate the agreement.


price lower than that charged by BP Kemi . It is ,of course, true that import duties were leviedupon imports into Denmark until 30 June 1977but even in 1973 when they made up 25.2 % ofthe selling price they did not prevent foreignsuppliers from making offers or proposals ofnegotiation to DDSF in order to begin businesswith DDSF and to enter a new market whichshortly would be no longer cut off by customstariffs . If DDSF had not been bound by thepurchasing obligation as supplemented by theEnglish clause, DDSF would also have been freeitself to look for offers on the spot market orelsewhere which did not fulfil the conditions ofthe English clause but which would have beeneconomically attractive for the company. DDSFwas thus deprived of the possibility of usingother sources , either occasionally or on apermanent basis and with a view to growth, andthus to lessen the degree of its dependence on BPKemi .

64 In so far as the conditions for the application of,for instance, the English clause in the addendumcould have been fulfilled and DDSF, as a resultcould decide to apply the clause, the result is thatBP Kemi was being informed of details of anoffer made by one of its competitors ; suchinformation concerning the market behaviourand supply possibilities of a competitor would beof importance to BP Kemi . Consequently theEnglish clause restricted competition between BP ,Kemi and its competitors because it provided itwith information about their prices which itwould not otherwise have been likely to get. Theapplication of the English clause also means thatit was up to BP Kemi in each case to decide, inview of all circumstances , whether a competitorwho was offering ethanol at lower prices andunder the other conditions stipulated in theclause was to be allowed to supply DDSF. DDSFwas not free to purchase from such a competitorif BP Kemi decided to meet the price offered bythis competitor ; it not being necessary for BPKemi to underquote the competitor's offer. Thisis not contradicted by the fact that BP Kemi inthe case of the offer concerning ethanol producedby Veba-Chemie actually offered a lower price.

65 In spite of the alleged advantage of the Englishclause for DDSF, it is even doubtful whether theclause could help in bringing the prices down tothe level prevailing in a competitive situation . Ina competitive situation it would be expected thata supplier who learns that his price has beenunderquoted by a competitor would seek to getthe order through a further price reduction, but acompetitor with knowledge of the English clausemight not reduce his price further, if this werepossible, because he might think such a reductionwas likely to be useless .

67 The restrictive effects of the purchasingobligation as supplemented by the English clauseare particularly clear in the market in question .The undertaking tied to BP Kemi by theseclauses, DDSF, is the largest buyer on the Danishmarket with a market share of 71 % in 1973 and56 % in 1976 . Considering that BP Kemi itselfhad a market share in the said years of 21% and28 % respectively, only a minor part of themarket was open to other suppliers. Moreover,supply is oligopolistic throughout theCommunity. Apart from BPCL the onlyproducers to be taken into consideration areSODES in France and Veba-Chemie andErdölchemie in Germany. However, Erdölchemieis not a really independent competitor ; it is ajoint undertaking in which Bayer and BP(through a German subsidiary) each holds a50 % stake, and which, since Bayer has no otherinterests in the ethanol field, is stronglyinfluenced by BP. Apart from these producers,there are only a few suppliers to be considered ascompetitors of BP Kemi on the Danish market;these trade in ethanol produced in theCommunity or in non-member countries and sellonly limited quantities .

66 The purchasing obligation as supplemented bythe English clause appreciably limits — andlimited — other suppliers than BP Kemi'schances of selling on the Danish market. Theovercapacity existing everywhere shows thatquantities could be made available by such othersources of supply and the transport costs playonly a secondary role as for instance shown bythe fact that certain imports from the USA takeplace. As to prices, the prices on the Danishmarket were always attractive, even forproducers from countries in which relatively highdomestic prices apply, such as Germany forexample . In practice synthetic ethanol producedby Veba-Chemie had been offered to DDSF at a

68 When on such a market, which already displays aweak competitive structure, one of the mostimportant suppliers enters into long-termcontracts with one of the most importantpurchasers, which induce the purchaser to takeall his requirements or the major part of his


appear from the statistics. Also, it should benoted that the import prices from other countriesconcern relatively small quantities and thereforedo not reflect the more favourable prices whichDDSF would probably have obtained, if it hadbeen free to buy from sources other than BP.

requirements from the same supplier, there existsan appreciable disadvantage for the supplier'scompetitors and for purchasers, and there is thusa restriction of competition for the purposes ofArticle 85 ( 1 ). A six-year agreement certainlygoes beyond what is appropriate under EEC rulesof competition to the nature of the legal andeconomic relationship between the parties .Certainly DDSF's interest in a regular guaranteedsupply is to be recognized, as is BPCL's interestin lasting and steady sales of its output. But theseinterests could be met by concluding purchasingagreements stipulating fixed quantities , withoutreference to the purchaser's unspecified or notprecisely specified requirements and without therestrictions resulting from an English clause ; suchagreements could be regularly renewed afterrenegotiating to adapt them to changing interestsand the shifting competitive position.

71 BP Kemi has argued that the purchasingobligation has not restricted competition becauseof the governmental measures applied in Franceand Germany; these measures have meant thatexports from these countries have only beenallowed to the extent that national requirementscould be met.

However, the production capacities in Franceand Germany exceed the actual production inthese countries to a significant extent andconsiderable exports from Germany and inparticular from France have taken place. ToDenmark, for instance, in 1976 — when thegovernmental measures in France and inGermany were still in force and when thecustoms duties in Denmark were insignificant —the exports were around 14 000 hi from Franceand around 8 000 hi from Germany.Furthermore, SOFECIA in January 1973 offeredDDSF ethanol 'to cover the consumption inDenmark' and in October 1973 DDSF andSODES decided to maintain the contact,although SODES 'understood that (because ofthe purchasing obligation) there was noimmediate possibility for supplies of spirits fromSODES to DDSF'. It also seems that SODES didnot foresee any difficulties in continuing itssupplies to other customers in Denmark.

69 DDSF has argued that since DDSF can terminatethe purchasing obligation every time agreementcannot be obtained between the company and BPKemi in respect of price increases made by BPKemi , what is under consideration is not abinding six-year agreement but a number ofsuccessive agreements made every time priceincreases have taken place and only entered intoafter negotiations where each of the parties hasbeen free to defend its interests .

However, the purchasing obligation has beenentered into for six years. It is binding for theparties during this period and it is in no wayautomatically terminated by a price increase.

Under these circumstances it must be assumedthat the governmental measures in France andGermany would not have prevented DDSF fromgetting at least some of its supplies frommanufacturers in these countries if the companyhad been free to do so .

70 DDSF has further referred to the official Danishstatistics concerning foreign trade and indicatedthat, since the import prices (duties excluded)since 1973 have been lower for ethanol importedfrom the United Kingdom than from any otherEEC country, DDSF would in any case only havebought ethanol produced by BPCL.

2 . Restriction of competition between BP Kemiand DDSF

As regards this argument it should be indicatedthat when DDSF is buying from BP Kemi it is notpaying the import price but a higher price whichcontains the profit of BP Kemi ; a comparison ofimport prices does not therefore seem to berelevant . Moreover, offers which are notaccepted, such as the favourable offer concerningethanol from Veba-Chemie, which did not result . 72in a sale because of the subsequent pricereduction made by BP Kemi , naturally do not

(a) General

BP Kemi and DDSF have contended that thecompetition between them is not a type ofcompetition which is protected by Article 85 ( 1 ).


76 That there is competition between the parties isshown among other things by what happened in1977, when BP Kemi began to compete withDDSF on prices , with the result that DDSF'smarket share was reduced. Moreover, the partieshave elsewhere referred to the fact that pricesconstitute only one dimension of competition,and that the range of offers and customer servicealso play a role in competition for customers.Lastly , on the price clause in the CooperationAgreement, DDSF has itself stated that it was'intended to provide DDSF with the necessaryprotection against undercutting by its ownsupplier'.

77 Of course a producer is not obliged to enter theterritory of his sole distributor, but ifcircumstances prompt him to do so, eitherdirectly or through a subsidiary or affiliatedcompany, he becomes an operator on the marketin the territory like the distributor. Economicallyhe then exercises functions on the market similarto those of the distributor, and any restriction ofhis free behaviour on the market becomes arestriction of competition just as a restriction inan agreement between two distributors on themarket.

Their argumentation may be summarized asfollows :

73 Although formally BP Kemi — and not BPCL —is the party to the agreements , this is merely theresult of the internal allocation of tasks withinthe BP Group. In effect therefore, the agreementsshould be considered as having been madebetween a producer, BPCL, which was incapableof supplying the entire Danish market, and adistributor, DDSF, which was wholly dependenton BPCL for its supplies . Thus each party wasdependent on the other, and the situation wasfundamentally the same as that which exists in asole distributorship arrangement where theproducer has reserved to himself the right ofselling the contract product to certain customersin the territory of the sole distributor.Competition between a producer and a soledistributor is not the kind of competition whichArticle 85 is designed to protect ; in fact, it is ofthe essence of any sole distribution arrangementthat the freedom of the producer to sell in thedistributor's allotted territory be restricted, and itwould be senseless to require a manufacturer insuch a situation to compete with his distributorsince, in the long run, the result wouldnecessarily be the elimination of the distributorwith no- resulting benefit for competition ingeneral .

74 The Commission agrees with the parties thatsince both BP Kemi and BPCL belong to the BPGroup BPCL should be included in theassessment of the agreements with DDSF. It isnot true to say, however, that there is nocompetition between BP Kemi and DDSF towhich Article 85 ( 1 ) applies .

75 The competition between the parties in this caseis protected by Article 85 ( 1 ). The Court ofJustice has ruled that Article 85 ( 1 ) makes nodistinction between businesses operating incompetition with each other at the same level orbetween businesses not competing with eachother and operating at different levels and that itis not possible to make a distinction where theTreaty does not make one ( 1). However, Article85 ( 1 ) makes no distinction either between thesaid categories of agreements and arrangementsbetween businesses operating at different levelsand competing with each other. Consequently, anagreement between such competing businesses atdifferent levels may have the object or effect ofrestricting competition within the meaning ofArticle 85 ( 1 ).

To exclude the relationship between amanufacturer and his distributor in a giventerritory from the application of the rules ofcompetition would mean that they could freelyagree to sell at identical prices or to dividecustomers between them. The producer and thedealer may have completely different views onsales policy, which will find their expression indifferent prices , terms and customer service, tothe advantage of the customer.

(b ) Exchange of information

78 BP Kemi regularly informed DDSF of its sales ofethanol, indicating the quantities sold to eachcustomer; DDSF regularly informed BP Kemi ofits total sales as well as of its sales to eachcustomer in the case of 100 000 litres and above .An exchange of information of this kind meansthat both , parties are informed of importantaspects of the conduct of the other, and that asystem of solidarity and reciprocal influence isestablished between them, necessarily leading toa coordination of their market behaviour, onprices amongst other things (see (c) below). Thus

( x ) Judgment of the Court of Justice in Case 32/65 ( Italy v.Council and Commission), [ 19661 ECR, 389 , 407.


the normal risks of competition are replaced bypractical cooperation leading to conditions whichdiffer from those obtained in a normal market.Conduct such as this is contrary to Article 85 ( 1 ).

was, therefore, agreement in principle betweenBP Kemi and DDSF on the customers each was tosupply, which hindered any more effectivecompetition between them, to the disadvantageof consumers .

(d ) Price protection

81 The obligation undertaken by BP Kemi in theCooperation Agreement to follow the list pricesof DDSF, as well as the later concertedapplication of identical prices , prevented BPKemi from freely fixing its sales prices and hadthe object and effect of restricting pricecompetition between the parties . In the same waythe obligation contained in the CooperationAgreement on the part of BP Kemi to follow inprinciple the conditions of payment of DDSFmeant a restriction of competition between theparties in this field.

79 The parties have referred to the CommissionDecision of 15 December 1975 in the SABAcase ( 1 ), which held that an agreed exchange ofinformation between a manufacturer and a dealerdid not consitute a restriction of competitionwithin the meaning of Article 85 ( 1 ). In the saiddecision the Commission stated that theobligation imposed on SABA's sole distributorsto inform SABA upon request of their grossincome and of discounts granted to theircustomers and to supply any informationrequired by SABA's representatives was ,not initself to be regarded as a means of restrictingcompetition, as long as SABA refrained fromrecommending them not to sell products whichwere covered by the agreement outside their ownarea or to apply particular prices , and did notoffer advantages or threaten disadvantages inorder to achieve these ends . As SABA itself didnot sell in the territories of the sole distributors,the information would only have restrictiveeffects if it were used to influence the marketbehaviour of the sole distributors. In the presentcase, however, the exchange of information has arestrictive effect on the market behaviour of eachof the recipients .

( c) Customer allocation and market sharing

(e) Quota and compensation arrangement

82 The application of the price clause wassupplemented by the quota and compensationarrangement. According to this arrangement, BPKemi had to pay DDSF compensationcorresponding to the benefit which BP Kemiwould have obtained itself by selling at DDSF'slist prices in so far as BP Kemi 's sales exceeded25 % of the combined sales of the companies .Since the 25 % limit was actually reached, BPKemi had no economic interest in increasing itsmarket share above the 25 % limit at the expenseof DDSF ; in particular it had no interest in doingso by means of a price reduction since this wouldhave meant a loss to BP Kemi. Consequently thearrangement encouraged BP Kemi to followDDSF's prices and thus reinforced the expressprice stipulation by inter alia making control ofits application unnecessary. The quota andcompensation arrangement also meant the BPKemi had to pay to DDSF 75 % of the profitresulting from selling to customers who had notpreviously been supplied by DDSF. Because thearrangement was based on DDSF's listed prices ,BP Kemi had no strong incentive to deviate fromthe prices laid down in DDSF's price list whenselling to such customers . Indeed, thearrangement reduced the incentive which BPKemi would normally have to sell to newcustomers . The quota and compensationarrangement therefore was likely to influence the

80 The information arrangement was supplementedby a clause according to which BP Kemi would,in the main, interest itself in customers having anannual ethanol consumption of at least 100 000litres . The parties have stated that this clausemerely reflected the fact that BP Kemi at thattime did not have the necessary facilities tosupply the smaller customers. But if this were sothere would have been no reason to provide forsuch a restrictive obligation . And in 1975 , whenthe Cooperation Agreeement had been ended, butthe facilities of BP Kemi were still the same, BPKemi started to supply customers with an annualconsumption of less than 100 000 litres . There

I 1 ) OJ No L 28 , 3 . 2 . 1976, p. 19 .


conditions of competition between BP Kemi andits competitors apart from DDSF too.

duties . Indeed, there were imports from othercountries than the United Kingdom, even if thesemay have been partly intended for re-export. By1 April 1974 the relative burden of import dutieshad fallen to between 7.8 % and 9.3 % , and wasto fall further in 1975 and 1976. The generallevel of prices in Denmark was sufficiently highto make exports to Denmark from MemberStates other than the UK attractive in spite of thecustoms duties .

C. EFFECTS ON TRADE BETWEEN MEMBERSTATES

83 During the whole of the period underconsideration, i . e . from 1 July 1973 until the endof 1976, the restrictive cooperation between BPKemi and DDSF was such as to affect tradebetween Member States .

84 All ethanol sold in Denmark is imported, most ofit from other EEC Member States . Pursuant tothe Purchasing Agreement, DDSF, which formany years was the only supplier of ethanol onthe Danish market and which is still the largestimporter and seller of ethanol in Denmark, wasobliged only to buy ethanol produced by BPCL,which is the largest producer of the product inthe EEC and which also exports to a number ofother Member States . Because of the closeconnection between this purchasing obligationand the other restrictions applied by the partiesthe purchasing obligation is related to theCooperation Agreement and to the concertedpractice which replaced this agreement andcannot be considered in the light of thePurchasing Agreement only.

87 As DDSF and BP Kemi during the period coveredby this decision sold more than 80 % — andduring most of the period more than 90 % — ofthe ethanol sold on the Danish market theDanish customers were therefore in the mainoffered only ethanol produced by the UKcompany BPCL in this period. Because of thecoordinated behaviour between DDSF and BPKemi — which acted on behalf of BPCL —concerning exchange of information, prices,conditions of payment, sharing of customers andquota and compensation the Danish customersfurthermore had practically no possibility ofchoice between independent offers of ethanol ofBPCL origin. As a result of this coordinatedbehaviour DDSF and BP Kemi together had sucha strong position on the Danish market that thedufficulties for other suppliers than BPCL ofpenetrating the Danish market due to the purchasing obligation were reinforced. Thus thequota and compensation arrangement meant thatif BP Kemi could not satisfy a particular customer's needs BP Kemi would benefit if the customers bought from DDSF because this wouldincrease the sales which BP Kemi could makewithout exceeding the 25 % limit. On the whole,the fact that BP Kemi and DDSF could maintaintheir combined position on the market resultingfrom the restrictions during a period of three anda half years shows that the cooperation betweenthem was likely to cause trade flows to developbetween Denmark and other territories of thecommon market differently from what wouldotherwise have occurred.

85 The purchasing obligation rendered the import ofethanol into Denmark from Member States otherthan the UK more difficult . It prevented allsuppliers (producers and dealers from anycountry) except BP Kemi — and thus BPCL —from selling through DDSF. The same applied tooffers of ethanol on the Spot market, which ,although it operates in irregular and limitedquantities , appreciably influences the competitionstructure and the price level . Thus only 'seriousWestern European' producers were in a positioneven to submit offers to DDSF ; even in this case,as the example from 1976 shows, BP Kemi wasable to step in to keep such a supplier off themarket. This meant that the positive effect of the opening

up of the Danish market which was the object ofaccession to the Community were to a greatextent as far as ethanol was concernedneutralized by the cooperation between theparties .

86 Exports into Denmark from Member States otherthan the UK would have been possible in theabsence of the purchasing obligation . Thecapacity of the German and French producers isnot fully utilized ; they export to a range ofcountries. Transport costs play only a secondaryrole . On 1 July 1973 customs duties were stillrelatively high ; but this did not prevent producersfrom other Member States from submitting offerswhich would have been attractive to both sides inthe long term, after the planned scaling down of

D. APPRECIABLE EFFECTS

89 The restrictive effects of the exclusive purchasingobligation which prevented or hindered other


significant quantities of ethanol directly to largecustomers in Denmark, and certain of thesequantities have been purchased for resale.

manufacturers from supplying DDSF(' interbrand' competition) were reinforced byrestrictions of competition between the partiesthemselves (' intra brand ' competition), asdescribed above, so as to worsen the position ofconsumers even further. In view of theimportance of the parties on the Danish market,a substantial part of the common market, thislimitation of the various forms of competitionundoubtedly had an appreciable effect.

94 Contrary to the view of the parties , thePurchasing Agreement does not fall within thecategory of agreements exempted by Article 1 ( 1 )(b ) of the Regulation either.

90 Consequently, the cooperation between BP Kemiand DDSF has violated Article 85 ( 1 ).

III . INAPPLICABILITY OF REGULATIONNo 67/67/EEC

91 The parties have argued that Regulation No67/67/EEC applies to the Purchasing Agreementconcluded between them, so that the agreement isexempt from Article 85 ( 1 ) of the EEC Treaty.This argument cannot be accepted.

95 In interpreting and applying this provision wecannot confine ourselves solely to the letter of thetext; its spirit and purpose and its function withinthe general objectives of the Regulation have alsoto be considered. As is clear from its recitals,Regulation No 67/67/EEC is intended tofacilitate the distribution of goods within thecommon market. Exclusive supply andpurchasing agreements concluded with a view tothe resale of the goods are exempted underArticle 85 (3 ) from the general prohibition onrestrictive practices , in spite of their restrictiveeffects, because in general they facilitate thegeneral sale of the product, make it possible tocarry out more intensive marketing, and ensurecontinuation of supplies to customers while atthe same time rationalizing distribution .However, such improvements in distributionexist only where the parties apply a clear verticalseparation of activities . The economicjustification for exclusive arrangements applieswhere the supplier is not developing his ownactive sales activities in the territory allocated tothe dealer and thus does not enter intocompetition with him there. This principle is thedistinctive factor in the exclusive distributionagreements defined in Article 1 ( 1 ) (a) and (c) ofthe Regulation. It also applies to those definedunder subparagraph (b ).

92 The block exemption defined in Article 1 ( 1 ) ofRegulation 67/67/EEC applies to agreements towhich only two undertakings are party andwhereby :

(a ) one party agrees with the other to supply onlyto that other certain goods for resale within adefined area of the common market; or

(b ) one party agrees with the other to purchaseonly from that other certain goods for resale ;or

( c) the two undertakings have entered intoobligations , as in (a) and (b ) above, with eachother in respect of exclusive supply andpurchase for resale.

96 The Purchasing Agreement concluded by theparties does not meet these conditions. In DDSF'smain sales area, Denmark, DDSF and BP Kemicompete in respect of goods covered by theagreement. Both take their offers to what is ,essentially, the same category of customers . Thisfact also explains why protective clauses inDDSF's favour were included in the cooperationagreement, stating that BP Kemi should followDDSF's list prices and that BP Kemi shouldcompensate DDSF if its annual sales were toexceed a quarter - of the two undertakings'combined sales . The Purchasing Agreement istherefore partly a 'horizontal ' agreement,concluded between two undertakings at the samelevel of trade, limiting the commercial freedom ofthe party undertaking to purchase exclusivelyfrom the other and the access of other suppliers

93 The Purchasing Agreement is clearly not anexclusive distribution agreement to whichsubparagraphs (a ) and (c) of this provision wouldapply. DDSF's efforts to secure the exclusivedistribution rights for BP ethanol in Denmarkfailed because the BP Group wanted to sell itsown products on the Danish market (see aboveunder points 23 and 24 ). BP Kemi has beencarrying out this intention since 1973 , supplying


to the Danish market, without howeverintroducing any improvement in the distributionof goods which would tend to outweigh thesedisadvantages . An agreement of this kind clearlyruns contrary to the spirit of Article 1 ( 1 ) (b ) ofRegulation No 67/67/EEC.

99 Under Article 4 ( 1 ) of Regulation No 17,agreements and concerted practices must benotified to the Commission in order to obtain anindividual exemption under Article 85 (3 ). Nosuch notification took place.

100 Under Article 4 (2 ) ( 1 ) of the same Regulation,the requirement to notify does not apply toagreements and concerted practices where theonly parties thereto are undertakings from oneMember State and the agreements and practicesdo not relate either to imports or exportsbetween Member States .

97 Even if the Purchasing Agreement were coveredby Article 1 ( 1 ) (b ), the block exemption definedin Regulation No 67/67/EEC would not apply toit. The Regulation does not permit the parties toan exclusive purchasing agreement to enter intorestrictive obligations other than the exclusivepurchasing obligation itself. In the present casethe exclusive purchasing obligation is inseparablylinked with a number of supplementaryrestrictions ; these are the arrangements betweenBP Kemi and DDSF on sales quotas andcompensation, prices and conditions of payment,customer-market sharing and exchange ofinformation as well as the English clause. Thefact that these arrangements were laid down in aseparate document does not alter the position . Ashas been pointed out, the Purchasing Agreementand the Cooperation Agreement form oneeconomic unit. They must therefore beconsidered together in assessing whether or notRegulation No 67/67/EEC applies .

101 The subject of the arrangements is ethanolimported into Denmark from the UnitedKingdom, and the arrangements prevent the mostimportant distributor in Denmark fromimporting from other sources of supply in thecommon market; no such sources of supply existin Denmark. For these reasons the arrangements' relate to' imports and exports within themeaning of Article 4 (2 ) ( 1 ) of Regulation No 17.Although the parties which have signed thePurchasing Agreement and are acting inaccordance with the agreements and theconcerted practice in question are both situatedin Denmark, the arrangements furthermore donot involve undertakings in only one MemberState because one of the parties is selling onlygoods which are imported from a company inanother Member State and this other companyand the party in question are both controlled bythe same third company. In effect, therefore, thearrangements , as admitted by the parties (cf.point 73 ), should be considered as having beenmade between BPCL and DDSF. The fact that theagreements were made formally between BPKemi and DDSF makes no difference. If this wasnot so the benefit of Article 4 (2 ) could beobtained merely by delegating the formalconclusion of agreements to local subsidiaries . Inany case, the parties have conceded that Article 4(2 ) ( 1 ) is not applicable.

102 For formal reasons it is therefore not necessary toconsider the question of whether an exemptioncould have been granted under Article 85 (3 ).

IV. INAPPLICABILITY OF ARTICLE 85 3 )

98 Article 85 (3 ) states that the provisions of Article85 ( 1 ) may be declared inapplicable in the caseof:

— any agreement or category of agreementsbetween undertakings ,

— any concerted practice or category ofconcerted practices

which contributes to improving the productionor distribution of goods or to promotingtechnical or economic progress , while allowingconsumers a fair share of the resulting benefit,and which does not :

( a ) impose on the undertakings concernedrestrictions which are not indispensable to theattainment of these objectives ;

V. APPLICABILITY OF ARTICLE 3 OFREGULATION No 17

( b ) afford such undertakings the possibility ofeliminating competition in respect of asubstantial part of the products in question.

103 The subject of these proceedings is thecooperation as actually practised between BP


Kemi and DDSF, which has been investigated upto the end of 1976. Comprehensive furtherinvestigation to cover market behaviour since1977 has not been considered necessary, asDDSF has given notice of the termination of theexisting contractual relations with effect as from15 July 1979 and as no fine is being imposed inthe absence of proof of negligent or intentionalinfringement in this case .

As the parties have denied that their cooperationinfringed Article 85 ( 1 ), and as they have raisedthe prospect of fresh negotiations, it is necessaryby decision to establish in what respects theircooperation between 1 July 1973 and the end of1976 constituted an infringement of Article 85( 1 ). This will also inform the parties that theymay render themselves liable to fresh proceedingsunder Article 85 if the present contractualrelationship is extended or replaced in such away that DDSF is de jure or de facto tied to asingle producer in respect of its totalrequirements or a major part of its requirementsof synthetic ethanol , excluding or obstructingother European or non-European suppliers oflarge or small quantities ,

a result of a concerted practice during the period1 January 1975 to 31 December 1976 ;

(c) the sharing of customers pursuant to the stipulationsof the Cooperation Agreement during the period1 July 1973 to 31 December 1974 ;

(d) the application of similar prices pursuant to thestipulations of the Cooperation Agreement duringthe period 1 July 1973 to 31 December 1974 and asa result of a concerted practice during the period1 January 1975 to 31 December 1976 ;

(e) the application of similar conditions of paymentpursuant to the stipulations of the CooperationAgreement during the period 1 July 1973 to31 December 1974 ; and

(f) the application of the quota — and compensationarrangement pursuant to the stipulations of theCooperation Agreement during the period 1 July1973 to 31 December 1974,

infringed Article 85 ( 1 ) of the Treaty establishing theEuropean Economic Community.

Article 2

This Decision is addressed to :HAS ADOPTED THIS DECISION:

Article 1

BP Kemi A/S, Øresundsvej 152, 2300 Copenhagen S,Denmark,

and

BP Kemi A/S and A/S De Danske Spritfabrikker have, A/S De Danske Spritfabrikker, Raffinaderivej 10,Postboks 1256,

2300 Copenhagen S , Denmark.

as a result of:

( a ) the obligation on A/S De Danske Spritfabrikker toobtain its total requirements of synthetic ethanolfrom BP Kemi A/S pursuant to the stipulations ofthe Purchasing Agreement of 12 April 1973 assupplemented by the English clause in its differentversions during the period 1 July 1973 to31 December 1976 ;

(b ) the exchange of information concerning quantitiessold to individual customers pursuant to thestipulations of the Cooperation Agreement duringthe period 1 July 1973 to 31 December 1974 and as

Done at Brussels, 5 September 1979 .

For the Commission

Raymond VOUEL

Member of the Commission

ANNEX1

ProductionandexportsbyproducersofsyntheticethanolintheEEC

(inI000hi)

France

Germany

UnitedKingdom

I1972

1973

1974

1975

1976

1977

1972

1973

1974

1975

1976

1977

1972

1973

1974

1975

1976

1977

Production

1071

1203

1167

1222

895

1205

973

1197

1522

11171232

1280

1786

2930

1980

2520

2723

Capacity

1230

2400

3470

Export:

World

901

673

536

105

311

680

35136

116

2843-8

46-1

205

182

689

404

455

590

France

—

(32)

38—

0.3

0.5

——

——

XX

Belgium/Luxembourg

1560

6910

2122.2

2820

2316

3335.3

——

—

266(3)

XX

Netherlands

1788

8142

—14.7

—77

(4)

—0.3

0.2

——

—21

X'X

Germany

2—

——

22-1

33—

——

——

—

Italy

204

174

9035

51.5

81.4

—26

12—

0.4

0.6

——

——

XX

UnitedKingdom

——

85(4)

11.1

12-4

——

——

0.1

0.1I

Ireland

——

——

——

——

——

0.2

0.1

XX

X(67)

XX

Denmark

(19)

(2)12

56

14.2

23.5

—2

26

6.5

4.8

(29)

(178

)(194

)(188

)(181.5)

(151.3)

No L 286/50

Official Journal of the European Communities 14.

11.

79

{1)Source:CouncildocumentS/788/77of23May1977

.(2

,Figuresinbrackets:importfigures.

(3)BPkeepsastockinAntwerp.

(x)Aprecisebreakdownoftheexportfigureshasnotbeenmade.


ANNEX 2

Customs duties levied on imports of ethanol into Denmark from the originalMember States

% of selling prices

Customs dutiesin Dkr/ 100 l DRAA (') for chemical synthesis Ethanol as solvents

Dkr/ 100 l ( 2 ) % Dkr/ 100 1 ( 2 ) %

1 . 1 . 1972

1 . 4 . 1973

1 . 1 . 1974

1 . 4 . 1974

1 . 7 . 1974

1 . 1 . 1975

1 . 10 . 1975

1 . 1 . 1976

1 . 7 . 1977

30

24

18

18

18

12

12

6

0

95

95

117

194

226

225

208

200

199

316

25.2

15.4

9.3

80

5.3

5.8

30

0

113

153

231

248

283

263

263

253

21.2

118

7.8

7.3

4.2

4.6

2.3

0

(') Abreviation of Doubly Rectified Absolute Alcohol .( 2) Information given by the parties .

ANNEX 3

Imports of synthetic ethanol into Denmark

(in 1 000 hi)

Origin 1972 (') 1973 (') 1974 1975 1976 1977

United Kingdom 29 83 185 183 181 139

France 19 15 6 6 14 21

Germany — 2 2 5 8 5

United States — — — 4 7 8

Sweden — — — — 01 01

Norway — 6 — — — —

Other — 3 1 — — —

Source: Council document S /788/ 77 of 23 May 1977.( 1 ) In these years DDSF was still producing synthetic ethanol .

ANNEX4

Pricesforsyntheticalcohol(S)andmolassesalcohol(M

)intheMemberStates

I

1973 II

III

I

1974 II

III

I

1975 II

III

I

1976 II

III

I(•)

1977

IIIII

Germany

S M

18-19

38-43

18.6—20

18.6—20

23-27

49-55

24-6-29-424-6-29-4

25-30

51-57

29.4

29.4

30-32

50-55

32.2—32.9

32.2—32.9

36-38

54-67

38—40.3

38-40-3

France

S M

9-12 16

11.9—14.1

16.4—16.2

12-18 15

15-7-23-4

15-8-26-9

21 22

23-8-25-3

27.3—29

21 22

26.5—23.1

28.6—24.9

22 24

26.8—27.2

28.7—29

Italy

S M32-44

35-44

25-36

22-32

33-34

Belgium/

SLuxembourg

M

12-15

20-39

28-29

23-47

29

30-54

21-29

33-52I

25-41

37-60

Netherlands

S M

16-20

16-39

21-27

21—46

24-27

24-26

23-24

23-46

18

28-51

•

United

SKingdom

12 36

11-9.8

15.3—13.9

19 33

20-3-19-4

20-23-5

26 38

22-23-8

25-6-27-6

26 34

26.8—24.7

30.2—27.6

30 43

29.5—31.534-6-37-8

Ireland

S M.

12 29

19 49

26 47

26 48

30 51

Denmark

S M

15

21-28

125

14.9

15-32

28—40

15.5—29.920.2—32.6

34-37 41

34.1—27.5

37.4—34.7

33-34 37

26.4—25.934.7—33.4

38 43

30.1—29.6

38.3—39.6

No L 286/52

Official journal of the European Communities 14.

11.

79

I:Source:CouncildocumentS/788/77of23May1977

(baseduponinformationprovidedbytheMemberStates).

Thehighestandthelowestaveragepriceydependupontheapplication,thequantitysuppliedandthetimeofthecontract

.IIandIII

:Informationgivenbythepartiesonthebasisoftheofficialsalesprices

(GermanyandFrance

)orthepricechargedbywholesalers

(United

KingdomandDenmark).

II:Informationconcerningpricesforalcoholforchemicalsynthesis.

Ill:Informationconcerningpricesforalcoholfortheproductionofsolvents.

(')InformationconcerningJanuary1977

.(2)BecauseofnationalregulationspracticallynosyntheticethanolwasusedinItaly

;intheNetherlandssuchuseonlybegantoanyappreciableextentin1977

.

Documents

COMMISSION - EUR-Lex