Order of the President of the Court of 13 June 1989.
Publishers Association v Commission of the European Communities.
Agreements, decisions and concerted practices - Imposed book prices.
Case C-56/89 R.
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Publishers Association v Commission of the European Communities.
Application for interim measures - Suspension of operation of a measure - Prima facie case - Serious and irreparable damage - Need to weigh up all the interests involved
( EEC Treaty, Art . 185; Rules of Procedure, Art . 83(2 ) )
In Case 56/89 R
Publishers Association, represented by Jeremy Lever QC, Stephen Richards, barrister, and Robin Griffith, solicitor, with an address for service in Luxembourg at the Chambers of J . C . Wolter, 8 rue Zithe,
Commission of the European Communities, represented by its Legal Adviser, Anthony McClellan, and by Berend Jan Drijber, a member of its Legal Department, acting as Agents, assisted by Nicholas Forwood Q.C ., with an address for service in Luxembourg at the office of Georgios Kremlis, a member of its Legal Department, Wagner Centre, Kirchberg,
APPLICATION for suspension of the operation of Commission Decision 89/44/EEC of 12 December 1988 relating to a proceeding under Article 85 of the EEC Treaty ( IV/27.393 and IV/27.394, Publishers Association - Net Book Agreements ),
The President of the Court of Justice
of the European Communities
makes the following
1 By an application lodged at the Court Registry on 27 February 1989, the Publishers Association brought an action under the second paragraph of Article 173 of the EEC Treaty for the annulment of Decision 89/44/EEC of 12 December 1988 relating to a proceeding under Article 85 of the EEC Treaty ( IV/27.393 and IV/27.394, Publishers Association - Net Book Agreements ) ( Official Journal 1989, L 22, p . 12 ).
2 Article 1 of that decision states that certain agreements, decisions and rules adopted by the applicant association, listed in paragraphs ( a ) to ( f ) of that article and described below, constitute an infringement of Article 85(1 ) of the EEC Treaty to the extent to which they cover the book trade between Member States .
3 Article 2 of the decision refuses to grant an exemption under Article 85(3 ) of the Treaty for those agreements, decisions and rules .
4 Article 3 of the decision requires the applicant association to take all steps necessary to bring the infringement to an end forthwith and Article 4 of the decision requires it to inform the undertakings concerned, in particular booksellers, of those measures, stating the practical effects which they will have .
5 By a separate document lodged at the Court Registry, also on 27 February 1989, the applicant applied, pursuant to Articles 185 and 186 of the EEC Treaty and Article 83 of the Rules of Procedure of the Court, for an interim measure suspending the operation of the abovementioned decision in its entirety until the Court has delivered judgment on the application in the main proceedings .
6 The defendant submitted its written observations on 30 March 1989 . The parties presented oral argument on 12 May 1989, a hearing set for that purpose on 21 April 1989 having been deferred at the request of the applicant .
7 Before considering whether the application for an interim order is well founded, it is appropriate to describe briefly the content and context of the agreements, decisions and rules to which the contested decision relates .
8 The Publishers Association is an association comprising the majority of the publishers established in the United Kingdom . The objects of the association are, in addition to promoting and protecting the interests of its members, to encourage the widest possible dissemination of books and, for that purpose, to administer and enforce and secure the observance by all lawful means of the agreement known as the "Net Book Agreement, 1957 ".
9 Under that agreement, to which Article 1(a ) of the contested decision refers, firms which are members of the association and signatories to the agreement undertake to apply, for the sale of "net books", the standard conditions of sale (" Standard Conditions of Sale of Net Books ") laid down by the agreement . Those conditions apply to all sales to the public in the United Kingdom or Ireland by a wholesaler or retailer where the person publishing or distributing the book in question chooses to market it at an imposed price (" net price ") and fixes that price .
10 Under those standard conditions of sale, no "net book" may in principle be sold, offered for sale or permitted to be sold to the public below the "net price ".
11 The standard conditions of sale provide that a "net book" may be sold at a discount to such libraries, book agents and quantity buyers as have been previously authorized by the association, the amount and conditions of such discount being laid down in the authorization .
12 Pursuant to that provision, the association laid down rules determining the conditions for granting authorization to libraries, limiting the discount to 10% and specifying the conditions which libraries must meet, rules on quantity discounts, fixing a scale of discounts, and, finally, rules for discounts to book agents . Article 1(b ) of the contested decision refers to those rules .
13 In the event of a breach of contract by a person selling or offering for sale to the public a "net book", the signatories undertake, by virtue of the agreement, to enforce their contractual rights and the rights conferred on them by the Resale Prices Act, if the association asks them to do so and provided that they are indemnified by the latter for the costs thereby incurred by them .
14 An agreement which is identical, except as regards indemnification by the association in the event of legal proceedings in respect of breaches of contract, has been concluded between a large number of publishers who are not members of the association . Article 1(a ) of the contested decisions also covers that agreement .
15 The association has also adopted a number of decisions and rules which, directly or indirectly, relate to the marketing of "net books ". Those decisions and rules are enumerated in Article 1(c ) to ( f ) of the contested decision .
16 A "Code of Allowances" contains provisions concerning reduced "net prices", decided upon by the publisher, for new editions and cheap editions which must be announced beforehand in the trade press and which may give rise to individual reductions of the "net price" for copies held in stock by the bookseller .
17 Book club regulations apply to special editions intended for book clubs . They apply to books the trade editions of which are published as "net books" and allow for special editions for book clubs registered with the association as having agreed to comply with the regulations . Those regulations lay down, in particular, the conditions which book clubs must satisfy regarding club membership and govern the advertising which they may undertake for their books .
18 A decision of the association governs an annual national book sale . Booksellers are allowed, within the limits and under the conditions laid down in the decision, to sell their overstocks and, as the case may be, to dispose of wholesalers' and publishers' overstocks for less than the "net price ".
19 Finally, a directory of booksellers, which is brought up to date every two months, is published by the association, listing the booksellers who satisfy certain requirements and undertake to observe the standard conditions of sale of "net books ".
20 The abovementioned agreements do not provide for any sanctions to be applied to signatories who do not observe the agreement . Compliance with the standard sales conditions by booksellers is enforced, according to the association, where appropriate, by means of an injunction . In order to obtain such relief in Ireland and the United Kingdom, it is generally incumbent upon the publisher to prove a contractual relationship with the bookseller . In the United Kingdom, however, the publisher may also rely on Article 26 of the Resale Prices Act, 1976, which enables him to enforce conditions concerning a resale price without having to prove a contractual relationship, provided that the bookseller in question has notice of those conditions .
21 It is apparent from the contested decision that the number of new titles published each year by the publishing industry in the United Kingdom is about 40 000, of which about 80% are produced by members of the association, the total value of annual production being around UKL 1 700 million . 65% of the books published in the United Kingdom are sold on the UK market, and the rest are exported . About a quarter of the exports go to other Member States; 4.5% of the exports go to Ireland, where they represent more than 50% of total book sales .
22 It is undisputed as between the parties that around 75% of the books sold in the United Kingdom or exported by UK publishers to Ireland are marketed as "net books ".
23 The agreements, decisions and rules to which the contested decision relates were notified, at the time of the accession of the United Kingdom and Ireland to the Communities, to the Commission on 12 June 1973, pursuant to Article 25(2 ) of Council Regulation No 17/62 of 6 February 1962, the first regulation implementing Articles 85 and 86 of the Treaty ( Official Journal, English Special Edition 1959-62, p . 87 ), as amended by Article 29 of the Act of Accession ( Official Journal 1972, L 73, p . 47 ).
24 Under Article 185 of the EEC Treaty, actions brought before the Court of Justice are not to have suspensory effect . The Court may, however, if it considers that the circumstances so require order that the operation of the contested acts be suspended .
25 Pursuant to Article 83(2 ) of the Rules of Procedure, a decision ordering suspension may not be adopted unless there are circumstances giving rise to urgency and factual and legal grounds establishing a prima facie case for such a decision . As the Court has consistently held, the urgency of an application for suspension must be assessed in relation to the necessity for an order granting interim relief in order to prevent serious and irreparable damage to the party requesting suspension .
26 It is necessary to consider whether those conditions are fulfilled in this case .
27 As regards, in the first place, the requirement of a prima facie case, the applicant points out that, in its application in the main proceedings, it seeks in particular the annulment of the contested decision in so far as it rejects the application for an exemption under Article 85(3 ) of the EEC Treaty . That exemption was refused, it claims, solely because the agreements, decisions and rules notified do not satisfy the condition laid down in Article 85(3)(a ) because they impose upon the undertakings concerned restrictions which are not indispensable to the attainment of their objectives .
28 In that connection the applicant claims in particular that the contested decision does not contain an adequate statement of the reasons on which it is based and infringes Article 85(3 ). It states that the agreements to which the decision relates are as unrestrictive as possible, in so far as each publisher is free to decide whether or not to become a signatory, to decide whether a book is to be marketed as a "net book", to fix the "net price", to choose the booksellers through which the book is to be sold and to negotiate the price that they are to pay, and that the use of standard type conditions is dictated by reasons of practicality . It also states in particular that the agreements, decisions and rules to which the contested decision relates were on two occasions, in 1962 and 1969, considered in depth by the national court having jurisdiction in competition matters, the Restrictive Practices Court, which, after a long hearing and despite the fact that the fixing of sales prices is in principle prohibited by the national legislation, concluded that abrogation of the agreements would deny to the public, as purchasers, consumers or users of books, specific and substantial benefits or advantages enjoyed by them by virtue of the agreements and that the public would not suffer any significant detriment through continuation of the agreements, as compared with the detriments that would result from their abrogation .
29 It must be pointed out that in paragraph 71 of its preamble the decision states that the arguments put forward by the association in support of its application for exemption are the same as those put forward within the context of the national proceedings referred to above but that those proceedings concerned not so much the necessity of a common application of standard conditions but much more the question whether fixed book prices as such were indispensable in order to attain their alleged objectives . Considering that those two aspects must be considered separately, the Commission then proceeds ( in paragraphs 72 to 86 ) to consider the indispensability of the agreements in question without taking account of the appraisal made by the abovementioned national court .
30 It appears, however, from the national decisions referred to that the competent court proceeded, in conformity with the applicable national legislation, to evaluate the advantages accruing not only from fixed prices as such but also from the agreements laying down standard conditions of sale, the said agreements being, according to that national court, indispensable in order to maintain those prices in practice .
31 In those circumstances, it must be stated that, at the present interlocutory stage, the application does not appear to be devoid of all foundation and that accordingly the requirement that a prima facie case must be established is satisfied .
32 It must however be added that that finding relates only to the Commission' s refusal to grant an exemption under Article 85(3 ) of the Treaty ( Article 2 of the contested decision ). In fact, the applicant itself admits that, in principle, the system applied to "net books" is contrary to Article 85(1 ) of the Treaty to the extent to which it applies to trade between Member States ( Article 1 of the contested decision ).
33 As regards the requirement of urgency, the applicant association claims that in order to comply with the contested decision, in particular Articles 3 and 4 thereof, it would have either to abrogate the agreements and the marketing system established by them or to amend the agreements and the system so that they cease to cover the book trade between Member States . Abrogation of the agreements would, as the national court with jurisdiction in competition matters held, entail the consequence that there would be fewer stockholding book shops, fewer and less varied titles would be published and the prices of books would be higher overall . Those consequences would, for the members of the association, cause considerable commercial damage and lead to a development on the UK and Irish book markets which it would be impossible subsequently to reverse . Amendment of the agreements in the manner required by the Commission would result in the abolition of the system established on the Irish market with the abovementioned consequences and, as regards the UK market, would in particular entail the consequence that library suppliers and mail-order suppliers would be liable to transfer their businesses to Ireland . Those consequences would, even in the short term, lead to the elimination of the existing system .
34 It must be observed that there are serious grounds for believing that a change of the kind mentioned above in a marketing system as extensive and complex as the "net book" system on the UK and Irish markets might cause the economic operators concerned the serious and irreparable damage which it is claimed would occur .
35 A balance must be struck, in particular, between that risk and the Commission' s interest in bringing to an end forthwith the infringement of the competition rules contained in the Treaty which it claims to have ascertained . Since the agreements, decisions and rules in question set up a marketing system which has applied since 1957 and were duly notified to the Commission in 1973, the Commission' s interest, in 1989, in bringing the infringement to an end cannot override the applicant association' s interest in not running the risk of jeopardizing that system before the Court has delivered judgment in the main proceedings . In that context, it must also be observed that, according to abovementioned national decisions, the agreements in question confer advantages upon the public, particularly as regards ensuring an adequate and varied supply of books of all kinds, which might be irreversibly compromised by immediate implementation of the contested decision .
36 It follows that the condition concerning urgency must also be regarded as satisfied .
37 In the event of suspension of the operation of the contested decision being granted, the Commission claims that the suspension should not cover Article 1 of the decision . The effect of such a suspension would be to restore the provisional validity of the agreements, which would go beyond the scope of the jurisdiction of the Court of Justice in the matter of an application for interim relief . For its part, the applicant association contends that the case-law relied upon by the Commission in that connection relates only to cases where the agreement in question enjoyed no provisional validity before the Commission decision and the applicant relies on the fact that the Court recognized the provisional validity of certain agreements by reason of the indivisibility of the prohibition provided for in Article 85(1 ) and of the possibility of exemption provided for in Article 85(3 ).
38 It is unnecessary to consider those arguments at this stage; it need merely be pointed out that a prima facie case has been established only with respect to the refusal to grant an exemption ( Article 2 and, consequently, Articles 3 and 4 of the contested decision ) and be stated that the applicant has not established that in order to avoid serious and irreparable damage it is necessary to suspend the operation of the contested decision in its entirety .
39 It must be observed that, at the hearing, the applicant emphasized the fact that no sanctions against signatory undertakings which do not comply with the agreements in question are provided for in the latter or applied in practice by the applicant association . Moreover, it is apparent from the documents before the Court that in Ireland, where the consequences of the abolition of the standard conditions of sale in question would be more serious, in particular for the watertightness of the system, observance of those conditions by booksellers can be ensured only by the establishment of a contractual relationship between the publisher and the bookseller . However, that vertical relationship is not, according to the explanations provided by the Commission at the hearing, affected by the contested decision . In those circumstances, it appears at first sight that the suspension of the obligation to proceed with the measures required by Articles 3 and 4 of the contested decision and the fact that the application for exemption referred to in Article 2 thereof is still pending, the effects of that article likewise being suspended, are sufficient to avoid the damage feared by the applicant .
40 In view of the foregoing, it is appropriate to order the suspension of the operation of Articles 2 to 4 of the contested decision .
On those grounds,
hereby orders as follows :
( 1 ) The operation of Articles 2 to 4 of Commission Decision 89/44 of 12 December 1988 relating to a proceeding under Article 85 of the EEC Treaty ( IV/27.393 and IV/27.394, Publishers Association - Net Book Agreements ) is suspended;
( 2 ) For the rest, the application is dismissed;
( 3 ) The costs are reserved .
Luxembourg, 13 June 1989 .