OPINION OF ADVOCATE GENERAL

GEELHOED

delivered on 27 April 2006 (1)

Case C-125/05

VW‑Audi Forhandlerforeningen, acting on behalf of

Vulcan Silkeborg A/S

Skandinavisk Motor Co. A/S

(Reference for a preliminary ruling from the Østre Landsret (Denmark))

(Interpretation of Article 5(3) of Commission Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements – Termination of an agreement by a supplier where it is necessary to reorganise the whole or a substantial part of the network – Obligation to provide a statement of reasons and the extent of that obligation)

I – Introduction

1. The present reference from the Østre Landsret (Eastern Regional Court) (Denmark) concerns the lawfulness of the termination of a distribution agreement subject to one year’s notice in the light of Article 5(3) of Commission Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements. (2)

2. A particular feature of this case is that answering the questions referred is made somewhat more difficult by a significant difference between the Danish version of Article 5(3) of Regulation No 1475/95 and other language versions and by sometimes substantial discrepancies between the previously published views of the Commission on the interpretation of the aforementioned provision and the views it has expressed in the current proceedings.

II – Legislative background

3. The 19th recital in the preamble to Regulation No 1475/95 reads:

‘… In order to avoid obstructing the development of flexible and efficient distribution structures, however, the supplier should be entitled [(3)] to terminate the agreement where there is a need to reorganise all or a substantial part of the network. …’

Article 5(2) and (3) of the aforementioned regulation reads:

‘2. Where the dealer has, in accordance with Article 4(1), assumed obligations for the improvement of distribution and servicing structures, the exemption shall apply provided that:

…

(2) the agreement is for a period of at least five years or, if for an indefinite period, the period of notice for regular termination of the agreement is at least two years for both parties; …

…

3. The conditions for exemption laid down in (1) and (2) shall not affect:

– the right of the supplier to terminate the agreement subject to at least one year’s notice in a case where it is necessary to reorganise the whole or a substantial part of the network, [(4)]

– …

In each case, the parties must, in the event of disagreement, accept a system for the quick resolution of the dispute, such as recourse to an expert third party or an arbitrator, without prejudice to the parties’ right to apply to a competent court in conformity with the provisions of national law.’

4. In the brochure (5) about the regulation, the Commission states its answer to Question 16(a), (6) which concerns the early termination of agreements with dealers, as follows:

‘The manufacturer has the right to terminate the agreement early (on one year’s notice) where it needs to restructure the whole or a substantial part of the network. Whether it is necessary to reorganise is established between the parties by agreement or at the dealer’s request by an expert third party or an arbitrator. Recourse to an expert third party or an arbitrator does not affect the right of either party to apply to a national court under national law (Article 5(3)). Where the supplier provides for himself in the contract unilateral rights of termination exceeding the limits set by the Regulation, he automatically loses the benefit of the block exemption (Article 6(1)(5) …).

This possibility for early termination has been introduced to provide the manufacturer with an instrument for flexible adaptation to changes in distribution structures (19th recital). A need for reorganising may arise due to the behaviour of competitors or due to other economic developments, irrespective of whether these are motivated by internal decisions of a manufacturer or external influences, e.g. the closure of a company employing a large workforce in a specific area. In view of the wide variety of situations which may arise, it would be unrealistic to list all the possible reasons.

Whether or not a “substantial part” of the network is affected must be decided in the light of the specific organisation of a manufacturer’s network in each case. “Substantial” implies both an economic and a geographical aspect, which may be limited to the network, or a part of it, in a given Member State. The manufacturer has to reach an agreement – either with or without the intermediation of an expert third party or arbitrator – with the dealer, whose distribution agreement will be terminated, but not with other dealers (who are only indirectly affected by an early termination).’ (7)

5. On 1 October 2002, Regulation No 1475/95 was replaced by Regulation No 1400/2002. (8)

Article 3(5) of Regulation No 1400/2002 reads as follows:

‘The exemption shall apply on condition that the vertical agreement concluded by the supplier of new motor vehicles with a distributor or authorised repairer provides:

…

(b) … that the agreement is concluded for an indefinite period; in this case the period of notice for regular termination of the agreement has to be at least two years for both parties; this period is reduced to at least one year where:

…

(ii) the supplier terminates the agreement where it is necessary to reorganise the whole or a substantial part of the network.’

Article 10 of Regulation No 1400/2002 reads:

‘The prohibition laid down in Article 81(1) shall not apply during the period from 1 October 2002 to 30 September 2003 in respect of agreements already in force on 30 September 2002 which do not satisfy the conditions for exemption provided for in this Regulation but which satisfy the conditions for exemption provided for in Regulation (EC) No 1475/95.’

6. In its explanatory brochure concerning Regulation No 1400/2002, (9) the Commission states the following in its answer to Question 20: (10)

‘… The expiry of Regulation 1475/95 on 30 September 2002 and its replacement by a new Regulation does not in itself imply that there should be a reorganisation of the network. After the entry into force of the Regulation, a vehicle manufacturer may nonetheless decide to substantially reorganise its network. To comply with Regulation 1475/95 and thus, to benefit from the transitional period, notices of regular contract termination should thus be given two years in advance unless a reorganisation is decided upon or if there is an obligation to pay compensation.’

The fourth paragraph of the answer to Question 68 in that brochure reads as follows:

‘The question as to whether or not it is necessary to reorganise the network is an objective one, and the fact that the supplier deems such a reorganisation to be necessary does not settle the matter in case of dispute. In such a case it shall be for the national judge or arbitrator to determine the matter with reference to the circumstances.’

III – The facts underlying the main action

7. On 21 September 1996, Skandinavisk Motor Co. A/S (‘SMC’) concluded a distribution agreement for Audi vehicles with Vulcan Silkeborg A/S (‘VS’), an undertaking which has been dealing in Audi vehicles in Denmark since 1975.

8. Clause 19(1) of that agreement, entitled ‘Termination on reduced notice’, reads as follows:

‘… the supplier is entitled to terminate this contract by written notification by registered letter and on 12 months’ notice where a radical reorganisation of the whole or part of the supplier’s sales organisation proves necessary.’

9. On 16 May 2002, Audi AG (‘Audi’) approved a plan for the reorganisation of its distribution network in Denmark (‘the reorganisation plan’). The plan set out various possible scenarios for annual sales of Audi cars on the Danish market in the light of the foreseeable development of economic conditions on that market and of desirable business results for the dealers. The number of dealers required for achieving the envisaged financial objectives was identified for each scenario.

10. On 2 September 2002, SMC sent the following letter to the 28 Audi dealers in Denmark:

‘In the light of the new Community exemption for categories of vertical agreements and concerted practices in the motor vehicle sector, which enters into force on 1 October 2002, we are compelled to restructure our dealer network within a period of one year and to adapt our dealership contracts to the new block exemption regulation.

Therefore, with reference to the necessary reorganisation we must, pursuant to Clause 19(1) of the dealership agreement, give 12 months’ notice of termination of your Audi passenger car contract, expiring on 30 September 2003.’

11. On the same date, SMC sent a separate letter to VS, in which it stated that it would, in the next few months, be setting out Audi’s other requirements for the various dealers, stating that it was too early to assess fully the consequences for the current Audi dealer network.

12. By letter of 3 October 2002, SMC informed VS that, in order to respond to future market demand and to strengthen the economic base for Audi’s distribution, the existing distribution network would be reduced from 28 to 14 dealers and that a new dealership agreement would not be offered to VS.

13. In those circumstances, the VW‑Audi Forhandlerforeningen (an association of Volkswagen and Audi dealers) brought proceedings before the Østre Landsret in the name of and on behalf of the dealers whose contracts had been terminated, claiming that the period of notice given should have been 24 months.

IV – Questions referred for a preliminary ruling

14. Taking the view that the dispute before it raised questions concerning the interpretation of the relevant Community law, the national court referred the following questions to the Court for a preliminary ruling:

‘(1) Is Article 5(3) of Commission Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements to be interpreted as meaning that reasons must be stated for a supplier’s termination of an agreement with a dealer on one year’s notice which go beyond the supplier’s reference to that provision?

(2) If Question 1 is answered in the affirmative:

What requirement may be placed under Community law on the content of such a statement of reasons and when must such a statement be provided?

(3) What are the consequences of not providing a proper or timeous statement of reasons?

(4) Is Article 5(3) of [Regulation No 1475/95] to be interpreted as requiring that the termination of an agreement with a dealer on one year’s notice must be effected on the basis of a reorganisation plan already drawn up by the supplier?

(5) If Question 4 is answered in the affirmative:

What requirement can be placed under Community law on the content and form of a reorganisation plan drawn up by the supplier and when must the reorganisation plan be submitted?

(6) If Question 4 is answered in the affirmative:

Must the supplier inform the dealer whose contract has been terminated of the content of the reorganisation plan, and when and in what form must notification to the dealer be effected in a particular case?

(7) If Question 4 is answered in the affirmative:

What is the consequence of a reorganisation plan not fulfilling the requirement which may be placed on the form and content of such a plan?

(8) According to the Danish version of Article 5(3) of [Regulation No 1475/95], the supplier’s termination of an agreement with a dealer on one year’s notice presupposes that “… it is necessary to reorganise radically the whole or part of the network …ˮ. The word “necessaryˮ appears in all the language versions of [Regulation No 1475/95] but the word “radicallyˮ appears only in the Danish version.

In this context:

What requirement may be placed on the nature of the reorganisation so that the supplier is able to terminate the dealer’s contract on one year’s notice under Article 5(3) of [Regulation No 1475/95]?

(9) In assessing whether the conditions for the supplier to be able to terminate the agreement on one year’s notice under Article 5(3) of [Regulation No 1475/95] are satisfied, is it of importance what the economic consequences would be for the supplier if it had terminated the dealer’s contract on two years’ notice?

(10) Who bears the burden of proving that the conditions for the supplier being able to terminate the agreement on one year’s notice under Article 5(3) of [Regulation No 1475/95] are satisfied, and how can such a burden of proof be lifted?

(11) Is Article 5(3) of [Regulation No 1475/95] to be interpreted as meaning that the conditions for the supplier to be able to terminate the agreement on one year’s notice under that provision can be satisfied simply on the grounds that the implementation of Block Exemption Regulation No 1400/2002 in itself could have necessitated a radical reorganisation of the supplier’s dealer network?’

V – Preliminary comments

A – The wording of Article 5(3) of Regulation No 1475/95 in the various language versions

15. As the referring court rightly points out in Question 8, there is a significant difference between the wording of the Danish version of Article 5(3) of Regulation No 1475/95 and that of the other language versions, the Danish version being the only one to qualify further the phrase ‘necessary to reorganise’, which appears in all the language versions, by specifying that it must be ‘necessary to reorganise radically’ (gennemgribende).

16. It is not desirable to have fairly significant divergences between the different language versions of Community legislation but, given the vast quantities of legislation produced by the Community, which must now be available in 20 languages, it is not altogether avoidable. This situation calls for the Community institutions to be alert to the existence of such differences and imperfections, especially where they are liable to have legal repercussions in society.

17. As evidenced by the case-file, that alertness was obviously lacking in the Commission service concerned when, in the autumn of 2002, it exchanged correspondence with the Danish competition authority about the interpretation and application of the very aspect of Article 5(3) of Regulation No 1475/95 at issue in the present case. I am surprised that, on that recent occasion, it failed to draw the attention of the Danish competition authority to this linguistic difference and to rectify it. It might then have been unnecessary for the Danish court to refer to the Court the questions arising from that divergence.

18. Given the need for a uniform interpretation of Community law, as laid down in the various language versions, the Court has developed four principles.

19. Firstly, the relevant texts should not be considered on their own but, in case of doubt, interpreted and applied in the light of other authentic language versions. (11)

20. Secondly, where the various language versions differ, the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms part. (12)

21. Thirdly, for the sake of legal certainty, the wording of a given version of the text must have its natural and usual meaning, and the points arising must, if possible, be solved without preference being given to one of the language versions. (13)

22. Lastly, all authentic language versions have the same weight, and it makes no difference which section of the population of the Community is represented by the language version concerned. (14)

23. With these premisses as a guide, it is relatively easy to solve the problem raised by the – slight – difference in the Danish wording of Article 5(3) of Regulation No 1475/95.

24. The specific qualifier found only in the Danish version for the necessity of reorganisation through the use of the adverb ‘radically’ (‘gennemgribende’) can, if interpreted literally, indeed give Article 5(3) of Regulation No 1475/95 a somewhat different meaning as compared with the other language versions, in that it seems to impose more stringent conditions on the reorganisation as a condition enabling the application of reduced notice periods to dealership agreements concluded for an indefinite period.

25. It seems to me that, in the light of the content and purpose of Article 5(3), the qualification ‘radically’ is, strictly speaking, superfluous, since reorganisation of the whole or a substantial part of the distribution network is in itself radical. The term ‘radically’ adds nothing to the quantitative criteria ‘the whole’ and ‘a substantial part’. The fact that none of the other language versions contains this specific qualifier confirms that it is superfluous.

26. Accordingly, no particular importance should be attached to the term ‘radically’ in the Danish version when it comes to interpreting and applying Article 5(3) of Regulation No 1475/95.

B – The discrepancies between the views expressed by the Commission in its explanatory brochures on Regulations No 1475/95 and No 1400/2002 and the views expressed in its written and oral observations in the present case

27. In its answers to Question 16(a) in the explanatory brochure on Regulation No 1475/95 (15) and to Question 68 in the explanatory brochure on Regulation No 1400/2002, (16) the Commission stated that the condition which Article 5(3) of Regulation No 1475/95 imposes on the use of the shorter notice period, namely that reorganisation should be ‘necessary’, is of an objective nature, the existence of which in specific cases falls to be verified by the national courts.

28. The order for reference shows that the Commission was still defending that position in late 2002 in informal contacts with the Danish competition authority, which referred to it in a letter of 20 December 2002 to the Dansk Automobilforhandlerforeningen (Danish Car Dealers’ Association).

29. Without referring to its earlier views as published in the brochures, in its written observations the Commission puts forth a different position, namely that the necessity for reorganisation depends entirely on the manufacturer’s subjective commercial opinion which is not subject to closer judicial examination.

30. When questioned about this by the Judge-Rapporteur and myself, the Commission expressly distanced itself during the hearing from the views it had expressed in the brochures.

31. Irrespective of which position is the correct one – and I will come back to this point later – a number of brief comments on the Commission’s conduct must be made.

32. The brochures at issue in the present case must be regarded as non-binding communications from the Commission, in which it states its views on the interpretation and application of the block exemption regulations concerned. They must not depart from the Treaty or secondary law. (17)

33. Although documents like those at issue in the present case are not legally binding, they may well have legal consequences, as has been confirmed in the case-law of the Court and the Court of First Instance on several occasions, (18) in that, when combined with the principle of legitimate expectations, they entail a commitment by the Commission in the exercise of its powers.

34. Apart from those possible legal consequences in the strict sense, great care is required of the Commission in the interest of the effectiveness of the competition policy which it pursues.

35. In their market conduct, economic operators tend to take careful account of the views which the Commission expresses in its explanatory communications, such as the brochures in question in this case. They thus produce effects not only on the vertical relations between the Commission and market operators but also on the horizontal relations among market operators. This is evident from the facts underlying the dispute in the main proceedings and the arguments put forward by the parties before the referring court, making explicit reference to the relevant passages in the brochures.

36. The importance of the Commission’s communications, as in the case of the brochures at issue, for policy-making and the administration of justice in the Member States has increased since responsibility for supervising the compliance with Community competition rules was transferred to the national competition authorities and the national courts under Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty. (19) Legal certainty and unity of law in the application of and compliance with those rules, and the effectiveness thereof, are ensured if the Commission provides clear guidance on the application of the components of those rules. This is also confirmed by the events underlying the dispute in the main proceedings, where prior contacts took place between the Commission and the Danish competition authority and, according to the order for reference, the referring court sought guidance in the brochures in question.

37. As already explained, the communications in question do not have the nature of binding legal rules, but serve to clarify how the applicable primary and secondary Community legal rules are to be interpreted. It therefore cannot be ruled out that, on reflection, the Commission comes to the conclusion that the clarification and interpretation given by it in its brochures are not entirely correct from a legal standpoint. Given the scale and complexity of Community competition rules, one might also sometimes observe that the Commission, as the responsible executive body, sometimes has a ‘progressive perception’.

38. It is of vital importance, however, in the interests of legal certainty for the operators concerned and the effective application of and compliance with Community competition rules at national level, that the Commission communicate its amended views as quickly as possible. If it fails to do so, it seriously undermines the credibility of its communications on the interpretation and application of Community competition law, or elements thereof, and therefore also the effectiveness of its policy.

39. In the circumstances of the present case, the Commission rashly disregarded that risk when it announced at the hearing, without further explanation, that its interpretation of Article 5(3) of Regulation No 1475/95, as presented in the passages of the two brochures cited in points 4 and 6 above, was ‘no longer applicable’.

40. This lack of diligence is all the more serious since, as can also be deduced from other references for preliminary rulings pending before the Court, (20) the replacement of Regulation No 1475/95 by Regulation No 1400/2002 prompted many motor vehicle manufacturers to reorganise their distribution networks by giving the reduced 12-month notice to terminate all existing agreements with dealers, only then to conclude dealership agreements with a limited number of dealers under the new conditions provided for by Regulation No 1400/2002. (21) Those situations raise legal issues comparable to those being considered in the present case.

C – Consideration of the questions referred

41. The questions referred to the Court can be divided into four groups:

– by the first three questions, the referring court asks whether a manufacturer wishing to give reduced notice to terminate a dealership agreement must give reasons for that termination and, if so, what is the extent of that obligation;

– Questions 4 to 9 concern the nature of the reorganisation which is liable to provide a basis for termination on reduced notice as referred to in Article 5(3) of Regulation No 1475/95 and Questions 4 to 7 relate more specifically to information which must be provided to demonstrate the necessity for reorganisation;

– Question 10 asks who bears the burden of proving whether or not the conditions for termination of a dealership agreement on reduced notice are satisfied;

– lastly, Question 11 asks whether the entry into force of Regulation No 1400/2002 in itself makes it necessary to reorganise the whole or a substantial part of a dealership network.

42. I propose to consider the questions as they are grouped above.

VI – Analysis and answers to the questions referred

A – Questions 1 to 3: the obligation to provide a statement of reasons

43. Article 5(3) of Regulation No 1475/95 does not lay down an explicit obligation to state reasons for the existence of the necessity to reorganise the whole or a substantial part of a distribution network. The 19th recital in the preamble to the regulation, which concerns this aspect, is also silent on the point.

44. An obligation of this nature is, on the other hand, explicitly provided for in Article 3(4) of Regulation No 1400/2002. That provision is explained further in the ninth recital in the preamble to the regulation. (22)

45. However, as is apparent from the wording of Article 3(4) and the ninth recital, that obligation applies not only in cases where the agreement is terminated on reduced notice but in all cases where the agreement is terminated. Termination on reduced notice is not subject to any specific, tailor-made obligation to state reasons under Article 3(5)(b)(ii). (23)

46. The Commission nevertheless relies on the existence of a general obligation to provide a statement of reasons in the event of termination of a distribution agreement as provided for under Regulation No 1400/2002 to argue against the application of an – implicit – obligation to demonstrate that the condition under which, under Article 5(3) of Regulation No 1475/95, such an agreement may be terminated on reduced notice is fulfilled.

47. The Commission’s current position differs moreover significantly from that which it communicated to the Danish competition authority as recently as late 2002, when it stated briefly that reasons for the termination must be given in a detailed plan. (24)

48. Whatever the background to this sudden change of position, it certainly cannot be based, with a contrario reasoning, on the wording and scope of Article 3(4) of Regulation No 1400/2002. That provision concerns a general obligation to provide a statement of reasons which seeks, in particular, to prevent motor vehicle suppliers from abusing their power to terminate agreements with dealers in order to keep distributors from engaging in pro‑competitive behaviour.

49. The present case, however, concerns the question whether and to what extent reduced notice of termination requires a specific statement of reasons tailored to the exercise of that extraordinary power of termination.

50. That question cannot be answered with a line of argument based heavily on the absence in Regulation No 1475/95 of a general obligation on the manufacturer to provide a statement of reasons in the event of termination of a distribution agreement and on the failure of Regulation No 1400/2002 to provide for such an obligation.

51. In the context of the present proceedings, the Commission has combined inconsistent behaviour with a contestable line of argument in its written and oral comments, thereby undermining the credibility of its position.

52. In the scheme of Regulation No 1475/95, and more specifically that of Article 5(2)(2) and the first indent of Article 5(3), provision is explicitly made for agreements concluded for an indefinite period to be terminated on reduced notice of one year as an exception to the main rule, which requires two years’ notice of termination.

53. If a manufacturer wishes to take advantage of the possibility of termination on exceptional reduced notice, he must at least ensure that the conditions for that exceptional notice are satisfied.

54. If that requirement is not imposed, the application of the special reduced notice period ceases to be exceptional. That outcome does not seem to me to be compatible with the scheme and purpose of Article 5(2) and (3) of the regulation.

55. Accordingly, a manufacturer wishing to terminate a distribution agreement on reduced notice is required, under the provisions referred to in the preceding point, to explain why he wishes to terminate the agreement in that manner.

56. To answer the question as to the extent of the obligation to state reasons, it is necessary to consider the wording of the first indent of Article 5(3). It refers to three elements:

(a) the necessity of

(b) reorganising

57. Something of a qualification of the first two elements can be found in the 19th recital in the preamble to Regulation No 1475/95. (25) According to the second sentence of that recital, the normal period of notice of termination of two years should not obstruct the development of flexible and efficient distribution structures.

58. I infer from this that the necessity for reorganisation as a reason for utilising the special reduced notice period must be linked to the economic efficiency of the distribution structures in the dynamic economic environment in which the manufacturer operates.

59. The third element is more quantitative in content: the necessity of reorganisation must be so significant that it relates to the whole or a substantial part of the distribution network.

60. Following the settled case-law on the subject, (26) I agree fully with the view expressed by the Commission and the parties to the main action that the dealership network, being part of a manufacturer’s overall distribution network, may be regarded as a ‘substantial part of the network’.

61. Thus interpreted, the three elements, taken together, mean that a manufacturer terminating a distribution agreement on reduced notice must at least state as the reason for availing himself of that extraordinary right the necessity of maintaining or improving the economic efficiency of the distribution network in the light of the – internal or external – objective economic changes with which the manufacturer is confronted, a necessity which, furthermore, must be so significant that it gives cause to reorganise the whole or a substantial part of the network.

62. Logically, those reasons must be stated in the notice from the manufacturer to the dealer by which he gives reduced notice of termination of the distribution agreement. In the absence of such a statement of reasons, the purpose of which is to show plausibly that the factual conditions for termination on reduced notice are satisfied, the termination will not satisfy the requirements laid down in the first indent of Article 5(3) of Regulation No 1475/95.

B – Questions 4 to 9: the necessity of termination

63. It follows from the answer proposed above to the first three questions that the manufacturer must show plausibly that the conditions for termination on reduced notice have been satisfied.

64. This necessarily implies that there must be some kind of judicial review of the existence of the objective necessity claimed by the manufacturer as the reason for the reorganisation.

65. Otherwise, the manufacturer would need only to invoke that necessity without any actual substantiation capable of verification in order to be able to terminate the distribution agreement. As already stated in point 53 above, the protection which Article 5(2) of Regulation No 1475/95 seeks to give the dealer would then become merely symbolic.

66. Such extreme consequences of the position put forward by the Commission in these proceedings, which differs from the one contained earlier in the explanatory brochures on Regulations No 1475/95 and No 1400/2002, (27) cannot be intended and make that position untenable.

67. That approach results in a situation where, in the event of termination on reduced notice, the distributor no longer enjoys any legal protection as regards the question whether that termination is due to an objective economic necessity.

68. A manufacturer wishing to terminate a distribution agreement on reduced notice is therefore required to show that there is an objective economic necessity for so doing. That requirement, stemming from the necessity to afford the dealer a minimum of legal protection, need not, moreover, detract from the opportunities open to the manufacturer to react flexibly to the changing economic circumstances in which he operates.

69. Although the national court need not delve into the business considerations underlying the precise preparation and implementation of the reorganisation of the distribution network, it may ensure itself of a change in the – internal or external – objective economic circumstances which may give rise to such an operation.

70. It follows from the foregoing that the change in objective economic circumstances relied on must be so significant as to give sufficient cause for the rather drastic step of reorganising the whole or a substantial part of the distribution network. It should also be possible for the national court to verify this quantitative relationship.

71. If the requirement that the manufacturer show plausibly that there are objective economic circumstances – internal or external – which are so significant that they justify reorganisation of the whole or a substantial part of the distribution network is satisfied, the dealer is at least protected against a mere change of mind on the manufacturer’s part as to the optimum arrangement of his distribution network without a change of objective circumstances being involved. This complies with the first indent of Article 5(3) of Regulation No 1475/95, as substantiated by the 19th recital (28) in the preamble thereto.

72. The fact that it is necessary that the termination of a distribution agreement on reduced notice be capable of – limited – judicial review implies that, in the event of termination of a distribution agreement, the manufacturer must provide the information which demonstrates plausibly the need to carry out a substantial reorganisation.

73. It follows from the foregoing that the information to be provided by the manufacturer in the event of termination on reduced notice need not include a fully developed reorganisation plan. Such a requirement would go further than necessary for the lawful application of the special notice period.

74. As already stated in points 15 to 26 above, no particular importance is to be attached to the term ‘radically’ (‘gennemgribende’) in the Danish version of the first indent of Article 5(3), other than that the necessity demonstrated plausibly by the manufacturer must be such that the reorganisation of the whole or a substantial part of the distribution network is proportionate in the circumstances.

75. The answer to Question 9 has already been given implicitly in point 71: where a change in the objective economic circumstances – internal or external – makes it necessary for the manufacturer to reorganise the whole or a substantial part of his distribution network, it may be assumed – conversely – that failure to reorganise in this way will have significant adverse economic implications for him.

C – Question 10: who bears the burden of proof?

76. The answer to the question as to who bears the burden of proof can be easily deduced from the foregoing: as it is the manufacturer who wants to take advantage of the special means of terminating the agreement, it is for him to show plausibly that the conditions for reduced notice have been satisfied.

77. In addition, according to the Court’s case‑law, anyone seeking an exemption as referred to in Article 81(3) EC, including a block exemption, must demonstrate that the conditions to do so are met. (29) Accordingly, a party wishing to terminate an agreement in a particular manner, such as that provided for in a block exemption, must show that the conditions for doing so are satisfied.

D – Question 11: does the entry into force of Regulation No 1400/2002 in itself give sufficient cause for terminating a distribution agreement on reduced notice?

78. In order to answer this question, a distinction should be drawn between the entry into force of the new regulation as such and the possible changes in the economic context of the manufacture and sale of motor vehicles due to that regulation.

79. The entry into force of the regulation does not in itself create a fact or circumstance which, as an objective economic change, might necessitate the termination of existing distribution agreements on reduced notice.

80. The block exemption is one of the options offered to economic market operators to enable certain anti-competition clauses in distribution agreements concluded by them to evade the prohibition laid down in Article 81(1) EC. They are, however, free to decide whether or not to take advantage of that option. (30)

81. This does not alter the fact that the entry into force of a new block exemption may well have economic consequences and that this will change the economic context in which the manufacturers of motor vehicles are forced to operate to such an extent that it becomes necessary to reorganise the distribution network.

82. The new block exemption provided for by Regulation No 1400/2002 differs significantly from its predecessor in Regulation No 1475/95 and, by giving both manufacturers and dealers a number of different options, it opens up a wide range of distribution possibilities allowing the economic operators concerned to compete amongst themselves, to the benefit of the consumer.

83. According to the explanatory brochure on Regulation No 1400/2002, (31) the new block exemption seeks to pave the way for greater use of new distribution techniques, such as internet sales and multi-brand dealerships. In addition, car owners will have more opportunities to choose where they have repair and maintenance work carried out and what spare parts are used.

84. To that end, restrictive practices, such as the option of combining exclusive and selective distribution and the obligation to ensure both the sale of new vehicles and after‑sales service, will be eliminated.

85. It follows that the economic conditions for the manufacture, sale and maintenance of cars may change appreciably after the entry into force of Regulation No 1400/2002, an outcome which, according to the recitals in the preamble to that regulation, is explicitly sought. (32)

86. In those circumstances, the new block exemption is likely to influence objective economic conditions for the marketing of motor vehicles to such an extent as to necessitate the adaptation of existing distribution networks. (33)

87. It is for the national court to determine whether the new circumstances resulting from the new block exemption are such as to give rise to a sufficiently serious need for the reorganisation of the whole or a substantial part of a distribution network.

VII – Conclusion

88. In the light of the foregoing, I propose that the Court should answer the questions referred to it by the Østre Landsret as follows:

Questions 1 to 3

– A manufacturer who, on the basis of the first indent of Article 5(3) of Commission Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements, gives reduced notice of one year of termination of a distribution agreement must at least give as reasons for availing himself of that extraordinary notice period the necessity of maintaining or improving the economic efficiency of the distribution network in the light of the objective economic changes – internal or external – faced by him, a necessity which is, moreover, so significant that it must entail the reorganisation of the whole or a substantial part of the distribution network.

Questions 4 to 9

– In the notice informing the dealer of the termination on reduced notice, the manufacturer must refer to the objective economic circumstances – internal or external – which are such as to establish the necessity of reorganising the whole or a substantial part of the distribution network.

– The national court may verify the existence of those economic circumstances and their importance.

– The information which the manufacturer is required to provide need not, however, contain more than is necessary for him to avail himself of the reduced notice period.

– The term ‘radically’ (‘gennemgribende’) in the Danish version of the first indent of Article 5(3) of Regulation No 1475/95 is of no consequence other than that the necessity demonstrated plausibly by the manufacturer must be such that the reorganisation of the whole or a substantial part of the distribution network is proportionate in the circumstances.

– If a change in the objective economic circumstances – internal or external – makes it necessary for the manufacturer to reorganise the whole or a substantial part of his distribution network, it may be assumed – conversely – that failure to reorganise in this way will have significant adverse consequences.

Question 10

– The manufacturer bears the burden of proving that the conditions for termination on reduced notice, in accordance with the first indent of Article 5(3) of Regulation No 1475/95, are satisfied.

Question 11

– The first indent of Article 5(3) of Regulation No 1475/95 must be interpreted as meaning that the entry into force of Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector does not in itself result in the conditions for the manufacturer to be able to terminate a distribution agreement on reduced notice being satisfied.

– The entry into force of the latter regulation may, however, entail such a change in the objective economic circumstances for the manufacturer that termination on reduced notice is justified.

– It is for the manufacturer to show that this is the case.

1 – Original language: Dutch.

2 – OJ 1995 L 145, p. 25.

3 – Similar terms are used in the French and Danish versions of the text – ‘extraordinaire’ and ‘ekstraordinaert’ [TN: corresponding roughly to ‘exceptionally’ which should appear after ‘entitled’] – whereas the English language version lacks anything equivalent.

4 – The first indent of the Danish version of Article 5(3) refers to the need to carry out a thorough [gennemgribende] reorganisation of ‘the whole or a part of the network’.

5 – European Commission, Directorate-General IV – Competition. Distribution of motor vehicles (Regulation (EC) No 1475/95 published in Official Journal L 145 of 29 June 1995), Explanatory brochure IV/9509/95 EN. This brochure is available only in French, English and German.

6 – This question reads: ‘Are there any possibilities for early termination of the agreement?’

7 – [TN: Note which appeared in the original Dutch version of this Opinion but which is not necessary to the English version.]

8 – Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector (OJ 2002 L 203, p. 30).

9 – European Commission, Directorate-General for Competition. Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector, Explanatory brochure (http://europa.eu.int/comm/competition /car_sector/explanatory_brochure_en.pdf).

10 – Question 20 reads as follows: ‘How can termination of contracts which comply with Regulation No 1475/95 be effected during the transitional period?’

11 – See, inter alia, Case 19/67 Van der Vecht [1967] ECR 345, and Case C‑327/91 France v Commission [1994] ECR I‑3641, paragraph 35.

12 – See, inter alia, Case C‑72/95 Kraaijeveld and Others [1996] ECR I‑5403, paragraphs 28 to 31, and Joined Cases C‑267/95 and C‑268/95 Merck and Beecham [1996] ECR I‑6285, paragraphs 21 to 24.

13 – See, inter alia, Case 80/76 NorthKerry Milk Products [1977] ECR 425, paragraph 11.

14 – See, inter alia, Case C‑296/95 EMUTabac and Others [1998] ECR I‑1605, paragraph 36.

15 – See point 4 above.

16 – See point 6 above.

17 – See, inter alia, Case 310/85 Deufil v Commission [1987] ECR 901, paragraph 22, and Case C‑169/95 Spain v Commission [1997] ECR I‑135, paragraph 22.

18 – See, inter alia, Case C‑313/90 CIRFS and Others v Commission [1993] ECR I‑1125, paragraphs 34 and 36; Case T‑105/95 WWF UK v Commission [1997] ECR II‑313, paragraphs 53 to 55; and Case T‑23/99 LR AF 1998 v Commission [2002] ECR II‑1705, paragraph 274.

19 – OJ 2003 L 1, p. 1.

20 – Case C‑376/05 A. Brünsteiner (OJ 2006 C 10, p. 8); Case C‑377/05 Autohaus Hilgert (OJ 2006 C 10, p. 8); and Case C‑421/05 City Motors Groep (OJ 2006 C 36, p. 21).

21 – See, inter alia, P. Kileste and C. Staudt, ‘Le règlement n^o 1400/2002 du 31 juillet 2002, de la Commission européenne en matière de distribution automobile’, Journal des Tribunaux 2003, p. 141, paragraph 76.

22 – Article 3(4) of Regulation No 1400/2002 reads: ‘The exemption shall apply on condition that the vertical agreement concluded with a distributor or repairer provides that a supplier who wishes to give notice of termination of an agreement must give such notice in writing and must include detailed, objective and transparent reasons for the termination, in order to prevent a supplier from ending a vertical agreement with a distributor or repairer because of practices which may not be restricted under this Regulation.’

The ninth recital reads: ‘In order to prevent a supplier from terminating an agreement because a distributor or a repairer engages in pro-competitive behaviour, such as active or passive sales for foreign consumers, multi-branding or subcontracting of repair and maintenance services, every notice of termination must clearly set out in writing the reasons, which must be objective and transparent. Furthermore, in order to strengthen the independence of distributors and repairers from their suppliers, minimum periods of notice should be provided for the non-renewal of agreements concluded for a limited duration and for the termination of agreements of unlimited duration.’

23 – See Article 3(5), cited in point 5.

24 – That position is set out in the letter referred to above (point 28) from the Danish competition authority to the Danish Car Dealers’ Association.

25 – Cited in point 3.

26 – By analogy, see, inter alia, the judgment in Case 246/86 Belasco and Others v Commission [1989] ECR 2117.

27 – See paragraphs 27 to 40 above.

28 – This concerns in particular the first sentence of the 19th recital: ‘Article 5(2)(2) and (3) and Article 5(3) lay down minimum requirements for exemption concerning the duration and termination of the distribution and servicing agreement, because the combined effect of the investments the dealer makes in order to improve the distribution and servicing of contract goods and a short‑term agreement or one terminable at short notice is greatly to increase the dealer’s dependence on the supplier.’

29 – Joined Cases 43/82 and 63/82 VBVB and VBBB v Commission [1984] ECR 19, paragraphs 52 and 61.

30 – Case 10/86 VAG France [1986] ECR 4071, paragraph 16; Case C‑41/96 VAG [1997] ECR I‑3123, paragraph 61; and Case C‑230/96 Cabour [1998] ECR I‑2055, paragraph 46.

31 – Cited in footnote 9, pp. 3 and 11.

32 – See, inter alia, 12th recital et seq.

33 – The Commission implicitly acknowledged this in its answer to Question 20 in the explanatory brochure on Regulation No 1400/2002: ‘The expiry of Regulation 1475/95 on 30 September 2002 and its replacement by a new Regulation does not in itself imply that there should be a reorganisation of the network. After the entry into force of the Regulation, a vehicle manufacturer may none the less decide to substantially reorganise its network … .’ The Commission adopts a far more explicit position in its written observations.