1.

I shall deal first with the second of these objections, because it seems to me to be the simpler. I must say immediately that it is justified.

As I have already stated, the complaints put forward by Metro in the administrative proceedings concerning the Distribution Agreement were taken into consideration and they led to a certain modification of the system. In so far as they were disregarded, it must be said that they had already been rejected by implication by the decision of exemption. That decision therefore produced the relevant legal effects in relation to the applicant. On the other hand, the letter of 14 January 1976 contains in fact only an explanation of the decision and the reasons why it was impossible to regard any more extensive complaints by the applicant as being well founded. The legal situation created by the decision of exemption was accordingly not further affected by that letter.

The second conclusion which, incidentally, was put forward only as a precaution, because the applicant was no doubt not completely clear as to the legal appraisal, must therefore be held to be inadmissible in view of the legal nature of the measure to which it refers.

2.

With regard to the other objection, the question arises whether the applicant, as a third party not involved in the distribution system, to whom the decision was, moreover, not addressed, as is clear from its contents, being in fact merely informed of it, fulfils the conditions laid down in Article 173 of the EEC Treaty for lodging an application against the decision of exemption, in other words, whether the latter is of individual and direct concern to the applicant.

Doubts might arise if one bears in mind the decisions of the Court on similar facts arising from the area to which the EEC Treaty applies; the relevant decisions based on the EEC Treaty must be disregarded because the system of legal protection laid down in the ECSC Treaty is of a different nature and contains no mention of individual concern. In fact, it is necessary to remember that the result of exemption is that any person who is eligible to participate in the distribution of SABA products by virtue of his business activities, but who does not fulfil the requirements of the system, is excluded therefrom. It may therefore be said that such persons, who are not involved in the system, constitute, within the meaning of the case-law of the Court of Justice, only a category viewed in the abstract and that it is impossible to determine the members of that category exhaustively.

However, like the Commission, I doubt whether this view appears conclusive and whether it must in fact result in the inadmissibility of the application.

In the first place, it must be granted that there is without doubt a difference between the facts involved in the above-mentioned decided cases and the facts in this case: those decisions were always related to measures which were directed to Member States and which were aimed at the adoption of national legislative measures, while in this case we are concerned with the approval of a distribution system governed by private law. The field of application of the measures which were at issue in the decided cases is therefore entirely different from that which must be assumed in the present case and the adoption of different criteria for the appraisal of the admissibility of the application might therefore be justified. In the present case it might be regarded as sufficient that the contested decision displays strong individual features in so far as it approves criteria for a distribution system which are made the subject-matter of individual agreements or which exclude such agreements.

Moreover, it must not be overlooked that Article 85 of the EEC Treaty is also intended to protect competition in relation to third parties who are not involved in an agreement. If their right to bring proceedings is not acknowledged, legal review in such cases is in practice excluded since the parties to the agreement will in general not bring proceedings if the agreement is exempted. On the other hand, it is not possible to point to the procedure under Article 177 and the possibilities of legal review which exist thereunder, or at least not with the same justification as in factual situations involving national sovereign implementing provisions. In competition law factors prompting recourse to national procedures in cases such as this are not in fact equally apparent and in this field the delay caused by the circuitous route by way of national procedures with questions being referred to the Court of Justice for a preliminary ruling under Article 177 must give cause for serious concern.

Therefore I consider it justifiable in competition cases of this nature to put aside the doubts which one may certainly have as to the admissibility of the application and, bearing in mind the principle that Article 173 should not be restrictively construed, which has been repeatedly emphasized in the case-law of the Court, acknowledge that any person who by virtue of his occupation may qualify for a distributorship but is excluded therefrom by the approved system is entitled to bring proceedings. This incontestably applies to the applicant, who runs a special department for electronic equipment for the leisure market.

Even if one does not wish to go so far, it is possible to consider taking into account with regard to the question of individual concern the fact that the applicant lodged a complaint with the Commission against the distribution system pursuant to Article 3 of Regulation No 17, which as we know requires a legitimate interest, that it took part in the proceedings with written and oral argument and that it was specially informed of the decision of exemption; we may therefore say that the applicant was informed of the reasons for the rejection of the application within the meaning of Article 6 of Regulation No 99/63 (OJ. English Special Edition 1963 to 1964, p. 47). Even though the abovementioned Article 3, to which SABA has referred, only permits applications for a declaration that there have been infringements of the provisions relating to competition, in other words not applications relating to exemptions or the grant of negative clearances, the lodging of an application links the applicant so closely with the case that it is possible to say that the applicant is also particularly, that is, individually, concerned by the decision which forms the outcome of the proceedings, because the proceedings for a declaration that there has been such an infringement and for the grant of an exemption formed a single entity.

I am therefore of the opinion that the plea of inadmissibility put forward by SABA should not be accepted and that consequently there is no obstacle to an examination as to whether the principal claim is well founded.

1.

Before I deal with these points in detail, I whould like to consider two comments which the Commission has made, in my opinion correctly.

First, it should not be forgotten that the assessment of a system such as this involves difficult economic judgments. In particular, the question whether the restriction on competition which is linked thereto is counterbalanced by certain advantages calls for complex assessments. This necessarily means that the Commission has a margin of discretion in this respect and this means at the same time that there is a corresponding restriction on judicial review. Reference has already been made to this in the decided cases on competition law under the ECSC Treaty (Joined Cases 36, 37, 38 and 40/59, Präsident Ruhrkohlen-Verkaufsgesellschaft mbH, Geitling Ruhrkohlen-Verkaufsgesellschaft mbH, Mausegatt Ruhrkohlen-Verkaufsgesellschaft mbH and I. Nold KG v High Authority of the European Coal and Steel Community, judgment of 15 July 1960 Rec. Vol. VI, p. 922). This notion was also said to be correct with regard to competition law under the EEC Treaty in the judgment in Joined Cases 56 and 58/64 (Consten and Grundig v Commission of the EEC judgment of 13 July 1966, [1966] ECR 299). According to those judgments, the Court of Justice cannot examine all the details of an evaluation: basically, it has only to determine whether the decision of the Commission resulting therefrom was justifiable as a whole or whether serious objections may be raised against it

Secondly, it should not be overlooked that the points of importance with regard to the decision of the Commission are the appraisal which it was possible to make at the date of its adoption and the evaluation of the further developments, which could be foreseen at that date on the basis of the facts known at the time. Findings which are possible today, in other words a year and half later, must therefore be taken into consideration with caution. This applied for example to the assessment of price competition as it has developed since the system was established, and this also applies to the fact that other manufacturers are increasingly introducing identical or similar distribution systems. I shall come back to these questions in a later connexion.

2.

In examining the applicant's criticismus I shall first deal with the statement that SABA occupies a dominant position with regard to certain electronic products on the leisure market, a statement which, as I have said, no doubt conceals the complaint that the distribution system should have been evaluated in accordance with Article 86.

The Commission countered this by referring to the facts that there are on the market in question also large numbers of small and medium-sized manufacturers, that some large suppliers — unlike SABA — have a wide selection of other products which the trade cannot do without, and that there are many imported brands on the market from various other countries. It appears that SABA's share of the market in 1974 amounted to 5 to 10 % in the Federal Republic of Germany for individual pieces of equipment but less than 1 % in other Member States. With reference to colour televisions alone, which account for 60 % of SABA's turnover, SABA's share of the market comes to approximately 7 %, since there are seven other manufacturers on the market. There can thus be no question of a dominant position; on the contrary, there is keen competition between the various manufacturers.

The applicant was unable to counter this with any substantial argument. It did no more than state that not all the manufacturers named by the Commission are competitors of SABA. It referred to the special reputation of the SABA trade-mark and claimed without further details that SABA's shares of the market are higher than calculated by the Commission.

Accordingly it is necessary to ask whether the allegation of a disregard of Article 86 of the EEC Treaty, if the applicant's submission should in fact be understood to that effect, was still maintained at all later on. According to the facts of which we have become aware it is possible to say in any case that there is no reason to suppose that SABA occupies a dominant position on the market; its conduct must therefore not be judged on the basis of Article 86.

3.

With regard to the evaluation of the distribution system in the light of Article 85, to which the Commission restricted itself, we should first consider those features which in the opinion of the Commission are in no way covered by Article 85 (1).

This is the case with regard to the requirement that dealers to whom supplies may be delivered must fulfil certain technical conditions. This also applies to the prohibition imposed on wholesalers on supplying private consumers, making it impossible to supply institutional bulk purchasers such as old people's homes, hospitals, the Red Cross, religious establishments and so forth, whereby supplies to trade consumers are permitted only if it is guaranteed that the products will be used for commercial purposes.

No criticism was made concerning the first point, that is delivery of supplies only to dealers who fulfil particular technical conditions. It is also clear that any such criticism would not be justified. In fact the Commission is right when it states that there are no objections in this respect on the basis of competition law because these conditions are relatively easy to fulfil and because no quantitative restriction is linked thereto; what is concerned here is in fact an open system to which any person who fulfils the conditions is admitted.

The applicant has, rather, criticized both other aspects. It objects that these restrictions required checks to be made on delivery. Such checks are however impossible on account of the structure of the self-service wholesale trade and that trade is therefore excluded from competition with regard to SABA products. It further claims that, so far as supplies to institutional bulk purchasers are concerned, there is an impermissible restriction on normal wholesale activities. In so far as the delivery of supplies to trade consumers is subject to restrictive conditions, the applicant is moreover of the opinion that the latter are unreasonable both in their original version and in the less onerous form to which they were modified during the proceedings, not only with regard to wholesalers but also to trade consumers.

They are based on a separation of roles between wholesalers and retailers in the interest of fair competition and the protection of the consumer. It is true that problems of detail in this connexion still have to be settled. It seems however that especially in the decided cases there is a marked trend with regard to the concept of the ‘final consumer’, who must obtain supplies from retailers; increasingly, traders who buy for their own private needs or needs unconnected with the business are placed in that category. In this connexion I would refer the Court to the judgment of the Oberlandesgericht Hamburg of 16 December 1976 which was produced during the proceedings. I would also refer to a reply by the Government of the Federal Republic of Germany to a parliamentary question which was likewise produced before this Court, and finally, to the article ‘Cash-and-Carry-Betriebe zwischen Groß- und Einzelhandel’ which was published in ‘Wettbewerb in Recht und Praxis’ 1977, p. 69 et seq. According to these sources, it is necessary to ensure that wholesalers principally supply retailers and trade consumers in the abovementioned sense. In other words, under German law strict criteria apply in order to exclude the supply by the self-service wholesale trade to what are really final consumers, that danger being particularly great where trade consumers are widely admitted.

On the other hand, it is relevant and in fact even more important that the distribution system established by SABA is based on a clear separation between the roles of wholesalers and retailers. Wholesalers must perform special services relating to sales promotion and participate in the development of the sales network. They are supposed to concentrate on this and in this connexion an excessive number of business relations with partners other than persons who are definitely retailers would be a hindrance. In view of these special services wholesalers are also granted larger profit margins. In my opinion it is necessary to accept immediately that disregard of the demarcation line between wholesalers and retailers, would lead to discrimination between consumers and to distortions of competition to the disadvantage of retailers. If wholesalers came into competition with retailers in this way their interest in the sale of SABA products would diminish and a deterioration in service to customers would result. Therefore it is understandable that a strict watch is kept that wholesalers do not engage in what are in fact retail transactions, which also explains why supplies to trade consumers by wholesalers are subject to the condition that the purchased goods are intended for business purposes. I cannot see how objections could be raised against this from the point of view of competition law.

If this viewpoint is adopted it is likewise impossible to raise any objections against the obligations placed upon suppliers and purchasers in this connexion for the purpose of safeguarding the demarcation line which they have established.

Thus provision is made, as the Court is aware, for traders to make a declaration, originally made by the manager of the undertaking but since the beginning of 1977 also by an agent, setting out the intended use, declaring that the goods are exclusively intended for the specific commercial requirements of the undertaking and stating that it is prohibited to pass on the goods to a third person for a period of two years. Wholesalers must check the existence of a commercial undertaking and the particulars of the intended use. Under the original version of the Distribution Agreement for SABA Wholesalers, they had to ensure that SABA products were used only for such commercial purposes as would promote the efficiency of the business; under the latest version they only have to confirm, taking the care expected of a reasonable man of business, that the goods are used for the commercial purposes of the undertaking. On a sensible interpretation, this amounts to no more than ascertaining that there is a factual connexion with a business undertaking and that the statements of the trade consumer appear to be plausible. This should in fact bear an appropriate relationship to the aim pursued, which is unobjectionable from the point of view of competition law.

If, however, the view is taken that the version of the undertaking initially applicable was too strict and could have stood in the way of business transactions, the view could accordingly be taken that this is immaterial with regard to competition law since on account of its scope its effects could scarcely be appreciable.

With regard to the aspects of the distribution system which in the Commission's view did not come under Article 85 (1) of the EEC Treaty, all these considerations lead me to the conclusion that the Commission's assessment cannot with justification be contested.

4.

We must accordingly deal in a further section with those elements which the Commissions considers to come under Article 85 (1) of the EEC Treaty but which qualify for exemption under Article 85 (3).

I stated at the beginning what is concerned in this connexion. It is the obligation upon wholesalers to achieve a certain turnover in SABA products, to conclude long-term supply contracts and to engage in the consolidation of the sales network. On the other hand, it is the obligation upon specialist retailers to effect certain turnovers, to stock the SABA range as fully as possible and to display SABA products to their best advantage.

In this respect the applicant is of the opinion that in fact the conditions for exemption laid down in Article 85 (3) do not obtain: there is said to be no improvement in the production or distribution of goods, no advantages for consumers and in particular, price competition with regard to SABA products is excluded. It has stated in particular that the conditions of the Cooperation Agreement are unacceptable to the self-service wholesale trade. The latter is therefore excluded from the distribution network and this is a disadvantage to the consumer. The exclusion through the distribution system of smaller dealers who could obtain supplies precisely from the self-service wholesale trade has the same effect The applicant further considers that the effect of the system is to concentrate dealers on one brand; consumers, and this is also a disadvantage, therefore lack the desired choice and are not given impartial advice. Moreover, the Commission did not, or did not sufficiently, take into consideration the fact that such distribution systems are increasingly being introduced by manufacturers of electronic equipment for the leisure market, which strengthens the abovementioned repercussions on the market; it is also said to have disregarded the fact that under the antitrust laws of the United States such selective distribution systems are judged very strictly.

The following observations on these issues are, in my opinion, appropriate.

5.

There still remains one last point of criticism, namely the view that the period of exemption was too liberally calculated. Only brief comments are necessary, particularly because the statements of the applicant relating thereto are highly succinct.

It is true, on the one hand, that the market situation can change quickly and that therefore findings on questions of competition law may often be made only with regard to a limited period. On the other hand, the Commission correctly pointed out that this case involves a difficult assessment of the economic consequences of a complex system in relation to which there was no question of considering too short a period. There is no doubt that in this connexion the Commission enjoys a considerable measure of discretion. I do not see any indication that that discretion has been exercised improperly.

In addition, there is the fact that SABA was placed under certain obligations by the decision. The annual report required thereunder permits the Commission to examine the practice regarding appointment and if necessary to take action.

For all these reasons likewise no objection can be made to the period of validity of the decision of exemption.

III —

Finally, I can therefore only suggest that the application lodged by Metro should be dismissed, as being inadmissible in so far as it relates to the letter of 14 January 1976 and unfounded in so far as it is directed against the decision of exemption. Since, if this view is accepted, the applicant and its intervener must be regarded as the unsuccessful parties, it seems appropriate to order them to bear the costs of the proceedings, including the costs of the interlocutory proceedings, and also the costs of the party intervening in support of the Commission, if it is not considered more appropriate to restrict the order for costs to the applicant and to order the intervener which supported it to bear its own costs.