E1994C0021

DECISION OF THE EFTA SURVEILLANCE AUTHORITY No 21/94/COL of 6 April 1994 on the issuing of three notices in the field of competition

THE EFTA SURVEILLANCE AUTHORITY,

Having regard to the Agreement on the European Economic Area (1),

Having regard to Articles 5 (2) (b) and 25 (1) of the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (2),

Whereas the EC Commission has adopted three notices which are of relevance also for the European Economic Area;

Whereas it is necessary to provide guidance for undertakings by indicating the principles and rules which will guide the EFTA Surveillance Authority when applying Articles 53 to 60 of the EEA Agreement to a particular case in order to ensure a uniform application of the EEA competition rules throughout the European Economic Area,

HAS ADOPTED THIS DECISION:

1. The EFTA Surveillance Authority issues the following notices which are annexed to this Decision as Annexes 1 to 3;

- Notice of the EFTA Surveillance Authority concerning the assessment of cooperative joint ventures pursuant to Article 53 of the EEA Agreement.

- Notice of the EFTA Surveillance Authority modifying the notice concerning the acts referred to in points 2 and 3 of Annex XIV to the EEA Agreement on the application of Article 53 (3) of the EEA Agreement to categories of exclusive distribution and exclusive purchasing agreements.

- Notice of the EFTA Surveillance Authority clarifying the activities of motor vehicle intermediaries.

2. These notices shall be authentic in the English language and shall be published in the EEA Section of and the EEA Supplement to the Official Journal of the European Communities.

Done at Brussels, 6 April 1994.

For the EFTA Surveillance Authority

Nic GRÖNVALL

Acting President

(1) Hereinafter referred to as the EEA Agreement.

(2) Hereinafter referred to as the Surveillance and Court Agreement.

ANNEX 1

NOTICE OF THE EFTA SURVEILLANCE AUTHORITY CONCERNING THE ASSESSMENT OF COOPERATIVE JOINT VENTURES PURSUANT TO ARTICLE 53 OF THE EEA AGREEMENT

A. The present notice is issued pursuant to the rules of the Agreement on the European Economic Area (EEA Agreement) and the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (Surveillance and Court Agreement).

B. The Commission issued a notice concerning the assessment of cooperative joint ventures pursuant to Article 85 of the EEC Treaty (OJ No C 43, 16. 2. 1993, p. 2). This non-binding act contains principles and rules which the Commission follows in the field of competition.

C. The EFTA Surveillance Authority considers the abovementioned act to be EEA relevant. In order to maintain equal conditions of competition and to ensure a uniform application of the EEA competition rules throughout the European Economic Area, the EFTA Surveillance Authority adopts the present notice exercising the power conferred to it in Article 5 (2) (b) of the Surveillance and Court Agreement. It intends to follow the principles and rules laid down in this notice when applying the relevant EEA competition rules to a particular case.

I. Introduction

1. Joint ventures (JVs), as referred to in this notice, embody a special, institutionally fixed form of cooperation between undertakings. They are versatile instruments at the disposal of the parents, with the help of which different goals can be pursued and attained.

2. JVs can form the basis and the framework for cooperation in all fields of business activity. Their potential area of application includes, inter alia, the procuring and processing of data, the organization of working systems and procedures, taxation and business consultancy, the planning and financing of investment, the implementation of research and development plans, the acquisition and granting of licences for the use of intellectual property rights, the supply of raw materials or semi-finished products, the manufacture of goods, the provision of services, advertising, distribution and customer service.

3. JVs can fulfil one or more of the aforementioned tasks. Their activity can be limited in time or be of an unlimited duration. The broader the concrete and temporal framework of the cooperation, the stronger it will influence the business policy of the parents in relation to each other and to third parties. If the JV concerns market-oriented matters such as purchasing, manufacturing, sales or the provision of services, it will normally lead to coordination, if not even to a uniformity of the competitive behaviour of the parents at that particular economic level. This is all the more true where a JV fulfils all the functions of a normal undertaking and consequently behaves on the market as an independent supplier or purchaser. The creation of a JV which combines wholly or in part the existing activities of the parents in a particular economic area or takes over new activities for the parents, brings, over and above that, a change in the structure of the participating enterprises.

4. The assessment of cooperative JVs pursuant to Article 53 (1) and (3) of the EEA Agreement does not depend on the legal form which the parents choose for their cooperation. The applicability of the prohibition of restrictive practices depends, on the contrary, on whether the creation or the activities of the JV may affect trade between Contracting Parties and have as their object or effect the prevention, restriction or distortion of competition within the territory covered by the EEA Agreement. The question whether an exemption can be granted to a JV will depend on the one hand on its overall economic benefits and on the other hand on the nature and scopes of the restrictions of competition it entails.

5. In view of the variety of situations which come into consideration it is impossible to make general comments on the compliance of JVs with competition law. For a large proportion of JVs, whether or not they fall within the scope of application of Article 53 of the EEA Agreement depends on their particular activity (1). For other JVs, prohobition will occur only if particular legal and factual circumstances coincide, the existence of which must be determined on a case-by-case basis (2). Exemptions from the prohibition are based on the analysis of the overall economic balance, the results of which can turn out differently (3). Cooperative joint ventures can however be divided into different categories, which are each open to the same competition law analysis.

6. In the notice of the EFTA Surveillance Authority concerning agreements, decisions and concerted practices in the field of cooperation between enterprises (4), the EFTA Surveillance Authority listed a series of types of cooperation which by their nature are not prohibited because they do not have as their object or effect the restriction of competition within the meaning of Article 53 (1) of the EEA Agreement. The notice of the EFTA Surveillance Authority on agreements of minor importance (5) sets out quantitative criteria for those arrangements which are not prohibited because they have no appreciable impact on competition or inter-State trade. Both notices apply to JVs. The acts referred to in Annex XIV to the EEA Agreement on the application of Article 53 (3) of the EEA Agreement to specialization agreements (6), research and development agreements (7), patent licensing agreements (8) and know-how licensing agreements (9), include JVs amongst the beneficiaries of these group exemptions (10). Further general indications on the assessment of cooperative JVs for competition purposes can be found in the Commission decisions which have been issued in individual cases. The EFTA Surveillance Authority will take due account of the principles applied by the EC Commission in the decisions which are cited in this notice.

7. With this notice the EFTA Surveillance Authority informs undertakings about both the legal and economic criteria which will guide it in the future application of Article 53 (1) and (3) of the EEA Agreement to cooperative JVs. This notice applies to all JVs which do not fall within the scope of application of Article 3 of the act on the control of concentrations between undertakings referred to in Annex XIV to the EEA Agreement (11). It forms the counterpart of the notice regarding concentrative and cooperative operations (12) and the notice on restrictions ancillary to concentrations (13) which clarify the abovementioned act. Links between undertakings other than JVs will not be dealt with in this notice, even though they often have similar effects on competition in the territory covered by the EEA Agreement and on trade between Contracting Parties.

8. This notice is without prejudice to the power of national courts in the EFTA States to apply Article 53 (1) and group exemptions pursuant to Article 53 (3) of the EEA Agreement on the basis of their own jurisdiction. Nevertheless it constitutes a factor which the national courts can take into account when deciding a dispute before them. It is also without prejudice to any interpretation which may be given by the EFTA Court.

II. The concept of cooperative joint ventures

9. The concept of cooperative JVs can be derived from the act on the control of concentrations between undertakings referred to in Annex XIV to the EEA Agreement (14). According to Article 3 (1), a JV is an undertaking under the joint control of several other undertakings, the parents. Control, according to Article 3 (3), consists of the possibility of exercising a decisive influence on the activities of the undertaking. Whether joint control, the prerequisite of every JV, exists, is determined by the legal and factual circumstances of the individual case. For details refer to the notice of the EFTA Surveillance Authority regarding concentrative and cooperative operations (15).

10. According to Article 3 (2) of the abovementioned act any JV which does not fulfil the criteria of a concentration, is cooperative in nature. Under the second subparagraph, this applies to:

- all JVs, the activities of which are not to be performed on a lasting basis, especially those limited in advance by the parents to a short time period,

- JVs which do not perform all the functions of an autonomous economic entity, especially those charged by their parents simply with the operation of particular functions of an undertaking (partial-function JVs),

- JVs which perform all the functions of an autonomous economic entity (full-function JVs) where they give rise to coordination of competitive behaviour by the parents in relation to each other or to the JV.

The delimitation of cooperative and concentrative operations can be difficult in individual cases. The abovementioned notice contains detailed instructions (16) for the solution of this problem (17).

11. Cooperative JVs are outside the scope of the provisions on merger control. The determination of the cooperative character of the JV has however no substantive legal effects. It simply means that the JV is subject to the procedures set out in Chapters II, VI, IX and XI of Protocol 4 of the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice when determining its compliance with Article 53 (1) and (3).

III. Assessment pursuant to Article 53 of the EEA Agreement

1. General comments

12. JVs can be caught by the prohibition of cartels only where they fulfil all the requisite elements pursuant to Article 53 (1) of the EEA Agreement.

13. The creation of a JV is usually based on an agreement between undertakings and sometimes on a decision of an association of undertakings. The exercise of control as well as the management of the business is likewise usually governed by contract. Where there is no agreement, which is the case for instance in the acquisition of a joint controlling interest in an existing company by the purchase of shares on the stock exchange, the continued existence of the JV depends on the parent companies coordinating their policy towards the JV and their manner of controlling it.

14. Whether the aforementioned agreements, decisions or concerted practices are likely to affect trade between Contracting Parties, can be decided only on a case-by-case basis. Where the JV's actual or foreseeable effects on competition are limited to the territory of one Contracting Party or to territories not covered by the EEA Agreement, Article 53 (1) of the EEA Agreement will not apply.

15. Article 53 (1) therefore does not apply to certain categories of JV because they do not have as their objective or effect the prevention, restriction or distortion of competition. This is particularly true for:

- JVs formed by parents which all belong to the same group and which are not in a position freely to determine their market behaviour: in such a case its creation is merely a matter of internal organization and allocation of tasks within the group,

- JVs of minor economic importance within the meaning of the notice of the EFTA Surveillance Authority on agreements of minor importance (18); there is no appreciable restriction of competition where the combined turnover of the participating undertakings does not exceed ECU 200 million and their market share is not more than 5 %,

- JVs with activities neutral to competition within the meaning of the EFTA Surveillance Authority on cooperation between enterprises (19): the types of cooperation referred to therein do not restrict competition because:

- they have as their sole object the procurement of non-confidential information and therefore serve in the preparation of autonomous decisions of the participating enterprises (20);

- they have as their sole object management cooperation (21);

- they have as their sole object cooperation in fields removed from the market (22),

- they are concerned solely with technical and organizational arrangements (23),

- they concern solely arrangements between non-competitors (24),

- even though they concern arrangements between competitors, they neither limit the parties competitive behaviour nor affect the market position of third parties (25).

The aforementioned characteristics for distinguishing between conduct restrictive of competition and conduct which is neutral from a competition point of view are not fixed, but form part of the general development of EEA rules. They must therefore be construed and applied in the light of the case-law of the Court of Justice of the European Communities, the EFTA Court as well as in the light of the EFTA Surveillance Authority's decisions. In addition, notices of the EFTA Surveillance Authority may be modified from time to time in order to adapt them to the evolution of the law.

16. JVs which do not fall into any of the abovementioned categories must be individually examined to see whether they have the object or effect of restricting competition. The basic principles of the notice on cooperation can be useful in such examination. The EFTA Surveillance Authority will explain below on what criteria it assesses the restrictive character of a JV.

2. Criteria for the establishment of restictions of competition

17. The appraisal of a cooperative JV in the light of the competition rules will focus on the relationship between the enterprises concerned and on the effects of their cooperation on third parties. In this respect the first task is to check whether the creation or operation of the JV is likely to prevent, restrict or distort competition between parents. Secondly, it is necessary to examine whether the operation in question is likely to affect appreciably the competitive position of third parties, especially with regard to supply and sales possibilities. The relationship of the parents to the JV requires a separate legal assessment only if the JV is a full-function undertaking. However, even here the assessment must always take into account the relationship of the parents to each other and to third parties. Prevention, restriction or distortion of competition will be brought about by a JV only if its creation or activity affects the conditions of competition on the relevant market. The evaluation of a JV pursuant to Article 53 (1) of the EEA Agreement therefore always implies defining the relevant geographic and product market. The criteria to apply in that process are to be drawn from the notice on agreements of minor importance (26). Special attention must be paid to networks of JVs which are set up by the same parents, by one parent with different partners, or by different parents in parallel. They form an important element of the market structure and may therefore be of decisive influence in determining whether the creation of a JV leads to restrictions of competition.

(a) Competition between parent companies

18. Competition between parent companies can be prevented, restricted or distorted through cooperation in a JV only to the extent that companies are already actual or potential competitors. The assumption of potential competitive circumstances presupposes that each parent alone is in a position to fulfil the tasks assigned to the JV and that it does not forfeit its capabilities to do so by the creation of the JV. An economically realistic approach is necessary in the assessment of any particular case.

19. A set of questions has been drawn up which aims to clarify the existing theoretical and practical possibilities for the parents to perform the tasks individually instead of together. Although these questions are designed to apply in particular to the case of the manufacturing of goods, they are also relevant to the provision of services. They are as follows:

- Contribution to the JV

Does each parent company have sufficient financial resources to carry out the planned investment? Does each parent company have sufficient managerial qualifications to run the JV? Does each parent company have access to the necessary input products?

- Production of the JV

Does each parent know the production technique? Does each parent make the upstream or downstream products itself and does it have access to the necessary production facilities?

- Sales by the JV

Is the actual or potential demand such as to enable each parent company to manufacture the product on its own? Does each parent company have access to the distribution channels needed to sell the product manufactured by the JV?

- Risk factors

Can each parent company on its own bear the technical and financial risks associated with the production operations of the JV?

- Access to the relevant market

What is the relevant geographic and product market? What are the barriers to entry into that market? Is each parent company capable of entering the market on its own? Can each parent overcome existing barriers within a reasonable time and without undue effort or cost?

20. The parents of a JV are potential competitors, in so far as in the light of the above factors, which may be given different weight from case-to-case, they could reasonably be expected to act autonomously. In that connection, analysis must focus on the various stages of the activity of an undertaking. The economic pressure towards cooperation at the R& D stage does not normally eliminate the possibility of competition between the participating undertakings at the production and distribution stages. The pooling of the production capacity of several undertakings, when it is economically unavoidable and thus unobjectionable as regards competition law, does not necessarily imply that these undertakings should also cooperate in the distibution of the products concerned.

(b) Competition between the parent companies and the JV

21. The relationship between the parents and the JV takes a specific significance when the JV is a full-function JV and is in competition with, or is a supplier or a customer of, at least one of the parents. The applicability of the prohibition on cartels depends on the circumstances of the individual case. Since anti-competitive behaviour between the parents will as a rule also influence business relationships between the parents and the JV and conversely, anti-competitive behaviour by the JV and one of the parents will always affect relationships between the parents, a global analysis of all the different relationships is necessary.

22. The restriction of competition, within the meaning of Article 53 (1) of the EEA Agreement, between parents and JVs typically manifests itself in the division of geographical markets, product markets (especially through specialization) or customers. In such cases the participating undertakings reduce their activity to the role of potential competitors. If they remain active competitors, they will usually be tempted to reduce the intensity of competition by coordinating their business policy, especially as to prices and volume of production or sales or by voluntarily restraining their efforts.

(c) Effects of the JV on the position of third parties

23. The restrictive effect on third parties depends on the JV's activities in relation to those of its parents and on the combined market power of the undertakings concerned.

24. Where the parent companies leave it to the JV to handle their purchases or sales, the choice available to suppliers or customers may be appreciably restricted. The same is true when the parents arrange for the JV to manufacture primary or intermediate products or to process products which they themselves have produced. The creation of a JV may even exclude from the market the parents' traditional suppliers and customers. That risk increases in step with the degree of oligopolization of the market and the existence of exclusive or preferential links between the JV and its parents.

25. The existence of a JV in which economically significant undertakings pool their respective market power may even be a barrier to market entry by potential competitors and/or impede the growth of the parents' competitors.

(d) Assessment of the appreciable effect of restrictions of competition

26. The scale of a JV's effects on competition depends on a number of factors, the most important of which are:

- the market shares of the parent companies and the JV, the structure of the relevant market and the degree of concentration in the sector concerned,

- the economic and financial strength of the parent companies, and any commercial or technical edge which they may have in comparison to their competitors,

- the market proximity of the activities carried out by the JV,

- whether the fields of activity of the parent companies and the JV are identical or interdependent,

- the scale and significance of the JV's activities in relation to those of its parents,

- the extent to which the arrangement between the firms concerned are restrictive,

- the extent to which market access by third parties is restricted.

(e) JV networks

27. JV networks can particularly restrict competition because they increase the influence of the individual JV on the business policy of the parents and on the market position of third parties. The assessment under competition law must take into account the different ways of arranging JV networks just as much as the cumulative effects of parallel existing networks.

28. Often competing parent companies set up several JVs which are active in the same product market but in different geographical markets. On the top of the restrictions of competition which can already be attributed to each JV, there will then be those which arise in the relationships between the individual JVs. The ties between the parents are strengthened by the creation of every further JV so that any competition which still exists between them will be further reduced.

29. The same is true in the case where competing parents set up several JVs for complementary products which they themselves intend to process or for non-complementary products which they themselves distribute. The extent and intensity of the restrictive effects on competition are also increased in such cases. Competition is most severely restricted where undertakings competing within the same oligopolistic economic sector set up a multitude of JVs for related products or for a great variety of intermediate products. These considerations are also valid for the service sector.

30. Even where a JV is created by non-competing undertakings and does not, on its own, cause any restriction of competition, it can be anti-competitive if it belongs to a network of JVs set up by one of the parents for the same product market with different partners, because competition between the JVs may then be prevented, restricted or distorted (27). If the different partners are actual or potential competitors, there will additionally be restrictive effects in the relationships between them.

31. Parallel networks of JVs, involving different parent companies, simply reveal the degree of personal and financial connection between the undertakings of an economic sector or between several economic sectors. They form, in so far as they are comparable to the degree of concentration on the relevant market, an important aspect of the economic environment which has to be taken into account in the assessment from a competition point of view of both the individual networks and the participating JVs.

3. Assessment of the most important types of JV

(a) Joint ventures between non-competitors

32. This group rarely causes problems for competition, whether the JV fulfils merely partial or the full functions of an undertaking. In the first case one must simply examine whether market access of third parties is significantly affected by the cooperation between the parents (28). In the second case the emphasis of the examination is on the same question and the problem of competition restrictions between one of the parents and the JV (29) is usually only of secondary significance.

33. JVs between non-competitors created for research and development, for production or for distribution of goods including customer service do not in principle fall within Article 53 (1) of the EEA Agreement. The non-application of the prohibition is justified by the combination of complementary knowledge, products and services in the JV. That is, however, subject to the reservation that there remains room for a sufficient number of R& D centres, production units and sales channels in the respective area of economic activity of the JV (30). The same reasoning also applies to the assessment of purchasing JVs for customers from different business sectors. Such JVs are unobjectionable from a competition point of view as long as they leave suppliers with sufficient possibilities of customer choice.

34. JVs which manufacture exclusively for their parents' primary or intermediate products or undertake processing for one or more of their parents do not, as a rule, restrict competition. A significant restriction of the supply and sales possibilities of third parties, a prerequisite for the application of the prohibition, can occur only if the parents have a strong market position in the supply or demand of the relevant products.

35. In the assessment of a full-function JV it is essential whether the activities the JV pursues are closely linked to those of the parents. In addition, the relationship of the activities of the parents to each other is of importance. If the JV trades in a product market which is upstream or downstream of the market of a parent, restrictions of competition can occur in relation to third parties, if the participants are undertakings with market power (31). If the market of the JV is upstream of the market of one of the parents and at the same time downstream of the market of another parent, the JV functions as a connection between the two parents and also possibly as a vertical multi-level integration instrument. In such a situation the exclusive effects with regard to third parties are reinforced. Whether it fulfils the requisite minimum degree for the application of Article 53 (1) of the EEA Agreement can be decided only on an individual basis. If the JV and one of the parents trade in the same product market, then coordination of their market behaviour is probable if not inevitable (32).

(b) Joint ventures by competitors

36. In this situation the effects of the JV on competition between the parents and on the market position of third parties must be analysed. The relationship between the activities of the JV and those of the parents is of decisive importance. In the absence of any interplay, Article 53 (1) of the EEA Agreement will usually not be applicable. The competition law assessment of the different types of JV leads to the following results.

37. A research and development JV may, in exceptional cases, restrict competition if it excludes individual activity in this area by the parents or if competition by the parents on the market for the resulting products will be restricted. This will normally be the case where the JV also assumes the exploitation of the newly developed or improved products or processes (33). Whether the restriction of competition between the parents and the ensuing possible secondary effects on third parties are appreciable can be decided only on a case-by-case basis.

38. Sales JVs, selling the products of competing manufacturers, restrict competition between the parents on the supply side and limit the choice of purchasers. They belong to the category of traditional horizontal cartels which are subject to the prohibition of Article 53 (1) of the EEA Agreement (34), when they have an appreciable effect on the market.

39. Purchasing JVs set up by competitors can give the participants an advantageous position on the demand and reduce the choice of suppliers. Depending on the importance of the jointly-sold products to the production and sales activities of the parents, the cooperation can also lead to a considerable weakening of price competition between the participating undertakings. This applies even more so when the purchase price makes up a significant part of the total cost of the products distributed by the parents. The application of Article 53 (1) of the EEA Agreement depends on the circumstances of the individual case (35).

40. JVs which manufacture primary or intermediate products for competing parent companies, which are further processed by them into the final product must be assessed on the same principles. On the other hand, if the JV undertakes the processing of basic materials supplied by the parents, or the processing of half-finished into fully-finished products, with the aim of resupplying the parents, then competition between the participating undertakings, taking into consideration the market proximity of their cooperation and the inherent tendency to align prices, will usually exist only in a weaker form (36). This is particularly so when the entire production activities of the parents are concentrated in the JV and the parents withdraw to the role of pure distributors. This leads to the standardization of manufacturing costs and the quality of the products so that essentially the only competition between the parents is on trade margins. This is a considerable restriction of competition which cannot be remedied by the parents marketing the products under different brand names (37).

41. Different situations must be distinguished when assessing full-function JVs between competing undertakings (38).

- Where the JV operates on the same market as its parents, the normal consequence is that competition between all participating undertakings will be restricted.

- Where the JV operates on a market upstream or downstream of that of the parents with which it has supply or delivery links, the effects on competition will be the same as in the case of a production JV.

- Where the JV operates on a market adjacent to that of its parents, competition can only be restricted when there is a high degree of interdependence between the two markets. This is especially the case when the JV manufactures products which are complementary to those of its parents.

Combinations of various types of JV are often found in economic life so that an overall assessment of the resultant restrictions of competition between participating undertakings and the consequences of the cooperation on third parties must be carried out. In addition the economic circumstances must be taken into account, especially the association of a JV to a network with other JVs and the existence of several parallel JV networks within the same economic sector (39).

42. Even JVs between competitors, which are usually caught by the prohibition in Article 53 (1) of the EEA Agreement, must be examined to see whether in the actual circumstances of the individual case they have as their object or effect the restriction, prevention or distortion of competition. This will not be the case where cooperation in the form of a JV can objectively be seen as the only possibility for the parents to enter a new market or to remain in their existing market, provided that their presence will strengthen competition or prevent it from being weakened. Under these conditions the JV will neither reduce existing competition nor prevent potential competition from being realized. The prohibition in Article 53 (1) of the EEA Agreement will therefore not apply (40).

IV. Assessment pursuant to Article 53 (3) of the EEA Agreement

1. Group exemptions

43. JVs falling within the scope of Article 53 (1) of the EEA Agreement are exempted from the prohibition if they fulfil the conditions of a group exemption. Two acts referred to in Annex XIV to the EEA Agreement legalize cooperation between undertakings in the form of JVs (see (a) and (b)). Two other acts referred to in Annex XIV to the EEA Agreement authorize certain restrictive agreements on the transfer of technology to a JV by its parents (see (c)). The field of application of these group exemptions will be considerably expanded, notably for JVs, by the act amending the acts referred to in points 5, 6, 7 and 9 of Annex XIV to the EEA Agreement (41).

(a) Specialization regulation

44. The act on the application of Article 53 (3) of the EEA Agreement to categories of specialization agreements (42) includes, inter alia, agreements whereby several undertakings leave the manufacture of certain products to a JV set up by them. This transfer can be for existing or future production. The creation and use of production JVs are exempted only if the aggregate market share of the participating undertakings does not exceed 20 % and the cumulated turnover does not exceed ECU 1 000 million. Agreements between more sizeable undertakings, the turnover of which exceeds ECU 1 000 million, also benefit from the group exemption if they are properly notified and the EFTA Surveillance Authority does not object to the agreement within six months. This procedure is not applicable when the market share threshold is exceeded.

45. The abovementioned rules apply exclusively to cooperation at the production level. The JV must supply all its production - which can include primary, intermediate or finished products - to its parents. The latter are not permitted to be active as manufacturers in the JV's area of production, but they may manufacture other products belonging to that product market. Products made by the JV are then sold by the parents, each of which can deal as exclusive distributor for a given territory.

46. Agreements in which the parents entrust JVs with the distribution of the contract products are also covered by the group exemption, though only under more rigorous conditions. The aggregate market share of the participating undertakings must not exceed 10 %. In this case also, there is a turnover threshold of ECU 1 000 million, the effect of which undertakings can avoid by resorting to the opposition procedure. The abovementioned act leaves the undertakings concerned free to organize their cooperation at the production and distribution stages. It allows for separate production followed by joint distribution of the contract products through a sales JV, as well as for the merging of production and distribution in a full-function JV, or the separation of both functions through the creation of a production JV and a sales JV. The production and/or distribution of the contract products can be entrusted to several JVs instead of one, which may, as the case may be, fulfil their function on the basis of exclusive contracts in various territories.

(b) Research and development regulation

47. The act on the application of Article 53 (3) of the EEA Agreement to categories of research and development agreements (43) provides for the exemption of JVs whose activities can range from R& D to the joint exploitation of results. The term exploitation covers the manufacture of new or improved products as well as the use of new or improved production processes, the marketing of products derived from R& D activities and the granting of manufacturing, use or distribution licences to third parties. The exemption is subject to the requirement that the joint R& D contributes substantially to technical or economic progress and is essential to the manufacture of new or improved products.

48. The abovementioned act also links exemption from the prohibition to quantitative conditions in the form of a two-fold market share limit. Cooperation in the form of a JV dealing with R& D, production and licensing policy will be permitted for parents who have an aggregate market share of up to 20 %. In the area of R& D as well as manufacture, the regulation allows all forms of coordination of behaviour because it does not require specialization. The parents can themselves remain or become active within the field of activity of the JV. They are also allowed to determine in what way they wish to use the possibilities of production by themselves or the licensing of third parties. By the allocation of contract territories the parents can protect themselves for the duration of the contract from the manufacture and use of the contract products by other partners in the reserved territories; furthermore, they can prevent other partners from pursuing an active marketing policy in those territories for five years after the introduction of the new or improved product into the territory covered by the EEA Agreement. If, on the contrary, the partners entrust one or more JVs with the distribution of the contract products, a market share threshold of 10 % is applicable to the whole of their cooperation. Since the abovementioned act does not provide for a turnover threshold, all undertakings regardless of their size can benefit from the group exemption.

(c) Patent-licensing and know-how licensing regulations

49. The act on the application of Article 53 (3) of the EEA Agreement to categories of patent licensing agreements (44) applies also to such agreements between any one of the parents and the JV affecting the activities of the JV. If the parents are competitors on the market of the contract products, the group exemption applies only up to a certain market share limit. This is 20 % if the JV simply carries on manufacturing or 10 % if it carries on the manufacture and marketing of the licensed products.

50. The abovementioned act also permits the granting of exclusive territorial manufacture and distribution licences to the JV, the protection of the licence territories of the JV and of the parents against active and passive competition by other participants for the duration of the contract and the protection of the licence territory of the JV against other licensees. The parents can protect the JV from an active distribution policy by other licensees for the full duration of the contract. During an initial five-year period from the introduction of a product into the territory covered by the EEA Agreement, it is possible to forbid direct imports of contract products by other licensees into the JV's licensed territory.

51. The act on the application of Article 53 (3) of the EEA Agreement to certain categories of know-how licensing agreements (45) contains similar provisions, except that the territorial protection between the JV and the parents is limited to 10 years, beginning from the signature of the first know-how agreement concluded for a territory inside the EEA. This point in time also marks the beginning of the period for which the JV can be protected against active competition (10 years) and passive competition (five years) by other licensees.

2. Individual exemptions

(a) General comments

52. JVs which fall within Article 53 (1) of the EEA Agreement without fulfilling the conditions for the application of a group exemption regulation are not inevitably unlawful. They can be exempted by an individual decision of the EFTA Surveillance Authority in so far as they fulfil the four conditions of Article 53 (3) of the EEA Agreement. According to Articles 4, 5 and 15 of Chapter II of Protocol 4 of the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (hereinafter referred to as 'Chapter II`) an individual exemption can be issued only if the participating undertakings have notified the agreement, decision or concerted practice on which cooperation is based, to the EFTA Surveillance Authority. Certain arrangements which are less harmful to the development of the territory covered by the EEA Agreement are dispensed from the requirement to notify by Article 4 (2) of Chapter II. They can therefore be exempted without prior notification. The same applies to transport cartels within the meaning of the acts referred to in points 10 and 11 of Annex XIV to, points 7 and 11 of Protocol 21 and point 13 of Protocol 21 of the EEA Agreement.

53. The EFTA Surveillance Authority must, pursuant to Article 53 (3) of the EEA Agreement, examine:

- whether the JV contributes to improving the production or distribution of goods or to promoting technical or economic progress,

- whether consumers are allowed a fair share of the resulting benefit,

- whether the parents or the JV are subject to restrictions which are not indispensable for the attainment of these objectives,

and

- whether the cooperation in the JV affords the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products or services in question.

An exemption from the prohibition in Article 53 (1) of the EEA Agreement can be issued only if the answer to the first two questions is in the affirmative and the answer to the second two questions is negative.

(b) Principles of assessment

54. In order to fulfil the first two conditions of Article 53 (3) of the EEA Agreement the JV must bring appreciable objective advantages for third parties, especially consumers, which at least equal the consequent detriment to competition.

55. Advantages in the abovementioned sense, which can be pursued and attained with the aid of a JV, include, in the EFTA Surveillance Authority's opinion, in particular, the development of new or improved products and processes which are marketed by the originator or by third parties under licence. In addition, measures opening up new markets, leading to the sales expansion of the undertaking in new territories or the enlargement of its supply range by new products, will in principle be assessed favourably. In all these cases the undertakings in question contribute to dynamic competition, consolidating the territory covered by the EEA Agreement and strengthening the competitiveness of the relevant economic sector. Production and sales increases can also be a pro-competitive stimulant. On the other hand, the rationalization of production activities and distribution networks are rather a means of adapting supply to a shrinking or stagnant demand. It leads, however, to cost savings which, under effective competition, are usually passed on to customers as lower prices. Plans for the reduction of production capacity however lead mostly to price rises. Agreements of this latter type will be judged favourably only if they serve to overcome a structural crisis, to accelerate the removal of unprofitable production capacity from the market and thereby to re-establish competition in the medium term.

56. The EFTA Surveillance Authority will give a negative assessment to agreements which have as their main purpose the coordination of actual or potential competition between the participating undertakings. This is especially so for joint price-fixing, the reduction of production and sales by establishing quotas, the division of markets and contractual prohibitions or restrictions on investment. JVs which are created or operated essentially to achieve such aims are nothing but classic cartels the anti-competitive effects of which are well known.

57. The pros and cons of a JV will be weighted against each other on an overall economic balance, by means of which the type and the extent of the respective advantages and risks can be assessed. If the parents are economically and financially powerful and have, over and above that a high market-share, their exemption applications will need a rigorous examination. The same applies to JVs which reinforce an existing narrow oligopoly or belong to a network of JVs.

58. The acceptance pursuant to Article 53 (3) (a) of the EEA Agreement of restrictions on the parents or the JV depends above all on the type and aims of the cooperation. In this context, the decisive factor is usually whether the contractual restriction on the parties' economic freedom is directly connected with the creation of the JV and can be considered indispensable for its existence (46). It is only for the restriction of global competition that Article 53 (3) (b) of the EEA Agreement sets an absolute limit. Competition must be fully functioning at all times. Agreements which endanger its effectiveness cannot benefit from individual exemption. This category includes JVs which, through the combination of activities of the parents, achieve, consolidate or strengthen a dominant position.

(c) Assessment of the most important types of JV

59. Pure research and development JVs which do not fulfil the conditions for group exemption under the act on the application of Article 53 (3) of the EEA Agreement to categories of research and development agreements (47) can still in general be viewed positively. This type of cooperation normally offers important economic benefits without adversely affecting competition. That is also the case where the parents entrust the JV with the further task of granting licences to third parties. If the JV also takes on the manufacture of the jointly researched and developed product, the assessment for the purpose of exemption must include the principles which apply to production JVs (48). JVs which are responsible for R& D, licensing, production and distribution are full-function JVs and must be analysed accordingly (49).

60. Sales JVs belong to the category of classic horizontal cartels. They have as a rule the object and effect of coordinating the sales policy of competing manufacturers. In this way they not only close off price competition between the parents but also restrict the volume of goods to be delivered by the participants within the framework of the system for allocating orders. The EFTA Surveillance Authority will therefore in principle assess sales JVs negatively (50). The EFTA Surveillance Authority takes a positive view however of those cases where joint distribution of the contract products is part of a global cooperation project which merits favourable treatment pursuant to Article 53 (3) of the EEA Agreement and for the success of which it is indispensable. The most important examples are sales JVs between manufacturers who have concluded a reciprocal specialization agreement, but wish to continue to offer the whole range of products concerned, or sales JVs set up for the joint exploitation of the results of joint R& D, even at the distribution stage. In other cases, an exemption can be envisaged only in certain specific circumstances (51).

61. Purchasing JVs contribute to the rationalization of ordering and to the better use of transport and store facilities but are at the same time an instrument for the setting of uniform purchase prices and conditions and often of purchase quotas. By combining their demand power in a JV, the parents can obtain a position of excessive influence vis-à-vis the other side of the market and distort competition between suppliers. Consequently, the disadvantages often outweigh the possible benefits which can accompany purchasing JVs, particularly those between competing producers. The EFTA Surveillance Authority is correspondingly prepared to grant exemptions only in exceptional cases and then only if the parents retain the possibility of purchasing individually (52). No decision has, however, concerned the most important of the purchasing JVs so far.

62. Production JVs can serve different economic purposes. They will often be set up to create new capacity for the manufacture of particular products which are also manufactured by the parents (53). In other cases the JV will be entrusted with the manufacture of a new product in the place of the parents (54). Finally, the JV can be entrusted with the combination of the production capacities of the parents and their expansion or reduction as necessary.

63. In view of the various tasks of production JVs their assessment for exemption purposes will be carried out according to different yardsticks. JVs, for the expansion of production capacity or product range, can contribute not only to the prevention of parallel investment - which results in costs savings - but also to the stimulation of competition. The combination or reduction of existing production capacity is primarily a rationalization measure and is usually of a defensive nature. It is not always obvious that measures of this kind benefit third parties, especially consumers and they must therefore be justified individually. Generally applicable quantitative thresholds, for instance in the form of market share limits, cannot be fixed for production JVs. The more the competition between the parents is restricted, the more emphasis must be put on the maintenance of competition with third parties. The market share limit of 20 % in the group exemption regulations can serve as a starting point for the assessment of production JVs in individual cases.

64. Full-function JVs, in so far as they are not price-fixing, quota-fixing or market-sharing cartels or vehicles for a coordination of the investment policies conducted by the parents which goes beyond the individual case, often form elements of dynamic competition and then deserve a favourable assessment (55). As cooperation also includes distribution, the EFTA Surveillance Authority has to take special care in assessing individual cases that no position of market power will be created or strengthened by entrusting the JV with all the functions of an undertaking, combined with the placing at its disposal of all the existing resources of parents. To assess whether a full-function JV raises problems of compatibility with the competition rules or not, an important point of reference is the aggregate market share limit of 10 % contained in the group exemption regulations. Below this threshold it can be assumed that the effect of exclusion from the market of third parties and the danger of creating or reinforcing barriers to market entry will be kept within justifiable limits. A prerequisite is however that the market structure will continue to guarantee effective competition. If the said threshold is exceeded, an exemption will be considered only after a careful examination of each individual case.

V. Ancillary restrictions

1. Principles of assessment

65. A distinction must be made between restrictions of competition which arise from the creation and operation of a JV, and additional agreements which would, on their own, also constitute restrictions of competition by limiting the freedom of action in the market of the participating undertakings. Such additional agreements are either directly related to and necessary for the establishment and operation of the JV in so far as they cannot be dissociated from it without jeopardizing its existence, or are simply concluded at the same time as the JV's creation without having those features.

66. Additional agreements which are directly related to the JV and necessary for its existence must be assessed together with the JV. They are treated under the rules of competition as ancillary restrictions if they remain subordinate in importance to the main object of the JV. In particular, in determining the 'necessity` of the restriction, it is proper not only to take account of its nature, but equally to ensure that its duration, subject matter and geographical field of application do not exceed what the creation and operation of the JV normally requires.

67. If a JV does not fall within the scope of Article 53 (1) of the EEA Agreement, then neither do any additional agreements which, while restricting competition on their own, are ancillary to the JV in the manner described above. Conversely, if a JV falls within the scope of Article 53 (1) of the EEA Agreement, then so will any ancillary restrictions. The exemption from prohibition is based for both on the same principles. Ancillary restrictions require no special justification pursuant to Article 53 (3) of the EEA Agreement. They will generally be exempted for the same period as the JV.

68. Additional agreements which are not ancillary to the JV normally fall within the scope of Article 53 (1) of the EEA Agreement, even though the JV itself may not. For them to be granted an exemption pursuant to Article 53 (3) of the EEA Agreement, a specific assessment of their benefits and disadvantages must be made. This assessment must be carried out separately from that of the JV.

69. In view of the diversity of JVs and of the additional restrictions that may be linked to them, only a few examples can be given of the application of the principles that will be applied.

2. Assessment of certain additional restrictions

70. Assessment of whether additional restrictions constitute an ancillary agreement must distinguish between those which affect the JV and those which affect the parents.

(a) Restrictions on the JV

71. Of the restrictions which affect the JV, those which give concrete expression to its object, such as contract clauses which specify the product range or the location of production, may be regarded as ancillary. Additional restrictions which go beyond the definition of the venture's object and which relate to quantities, price or customers may not. The same can be said for export bans.

72. When the setting-up of the JV involves the creation of new production capacity or the transfer of technology from the parent, the obligation imposed on the JV not to manufacture or market products competing with the licensed products may usually be regarded as ancillary. The JV must seek to ensure the success of the new production unit, without depriving the parent companies of the necessary control over exploitation and dissemination of their technology (56).

73. In certain circumstances, other restrictions on the JV can be classified as ancillary such as contract clauses which limit the cooperation to a certain area or to a specific technical application of the transferred technology. Such restrictions must be seen as the inevitable consequences of the parent's wish to limit the cooperation to a specific field of activity without jeopardizing the object and existence of the JV (57).

74. Lastly, where the parent companies assign to the JV certain stages of production or the manufacture of certain products, obligations on the JV to purchase from or supply its parents may also be regarded as ancillary, at least during the JV's starting-up period.

(b) Restrictions on the parent companies

75. Restrictions which prohibit the parent companies from competing with the JV or from actively competing with it in its area of activity, may be regarded as ancillary at least during the JV's starting-up period. Additional restrictions relating to quantities, prices or customers, and export bans obviously go beyond what is required for the setting-up and operation of the JV.

76. A territorial restriction imposed on a parent company where the JV was granted an exclusive manufacturing licence in respect of fields of technical application and product markets in which both the JV and the parent were to be active may be regarded as ancillary (58). The grant to the JV of an exclusive exploitation licence without time limit may be regarded as indispensable for its creation and operation, e.g. where the parent company granting the licence was not active in the same field of application or on the same product market as that for which the licence was granted (59). This will generally be the case with JVs undertaking new activities in respect of which the parent companies are neither actual nor potential competitors.

(1) See (EEC) III.I, point 15.

(2) See (EEC) III.2 and 3, points 17 et seq. and 32 et seq.

(3) See (EEC) IV.1 and 2, points 43 et seq. and 52 et seq.

(4) OJ No L 153, 18. 6. 1994, p. 25.

(5) OJ No L 153, 18. 6. 1994, p. 32.

(6) Point 6 of Annex XIV to the EEA Agreement (Regulation (EEC) No 417/85 as amended by Regulation (EEC) No 151/93).

(7) Point 7 of Annex XIV to the EEA Agreement (Regulation (EEC) No 418/85 as amended by Regulation (EEC) No 151/93).

(8) Point 5 of Annex XIV to the EEA Agreement (Regulation (EEC) No 2349/84 as amended by Regulation (EEC) No 151/93).

(9) Point 9 of Annex XIV to the EEA Agreement (Regulation (EEC) No 556/89 as amended by Regulation (EEC) No 151/93).

(10) See below IV.1, points 43 et seq.

(11) Point 1 of Annex XIV to the EEA Agreement (Regulation (EEC) No 4064/89).

(12) OJ No L 153, 18. 6. 1994, p. 7.

(13) OJ No L 153, 18. 6. 1994, p. 3.

(14) Cited in footnote 11.

(15) Cited in footnote 12; see points 6 to 14.

(16) See points 15 to 16.

(17) Additional indications can also be gained from the past practice of the Commission of the European Communities under Regulation (EEC) No 4064/89 (Act referred to in point 1 of Annex XIV of the EEA Agreement). See on the one hand Decisions (pursuant to Article 6 (1) (a) of Regulation (EEC) No 4064/89): Renault/Volvo, OJ No C 281, 7. 11. 1990, p. 2; Baxter/Nestlé/Slavia, OJ No C 37, 6. 2. 1991, p. 11; Apollinaris/Schweppes, OJ No C 203, 24. 6. 1991, p. 14; Elf/Enterprise, OJ No C 203, 24. 7. 1991, p. 24; Sunrise, OJ No C 18, 31. 1. 1992, p. 15; BSN/Nestlé/Cokoladovny, OJ No C 47, 17. 2. 1992, p. 23; Flachglas/Vegla OJ No C 120, 12. 5. 1992, p. 30; Eureko, OJ No C 113, 1. 5. 1992, p. 12; Herba/IRR, OJ No C 120, 28. 4. 1992, p. 13; Koipe-Tabacalera/Elosua, OJ No C 227, 3. 9. 1992, p. 10; on the other hand Decisions (pursuant to Article 6 (1) (b) of Regulation (EEC) No 4064/89): Sanofi/Sterling Drugs, OJ No C 156, 10. 6. 1991, p. 10; Elf/BC/Cepsa, OJ No C 172, 18. 6. 1991, p. 8; Dräger/IBM/HMP, OJ No C 236, 28. 6. 1991, p. 6; Thomson/Pilkington, OJ No C 279, 23. 10. 1991, p. 19; UAP/Transatlantic/Sun Life, OJ No C 296, 11. 11. 1991, p.12; TNT/GD Net; Lucas/Eaton, OJ No C 328, 9. 12. 1991, p. 15; Courtaulds/SNIA, OJ No C 333, 19. 12. 1991, p. 16; Volvo/Atlas, OJ No C 17, 14. 1. 1992, p. 10; Ericsson/Kolbe, OJ No C 27, 22. 1. 1992, p. 14; Spar/Dansk Supermarket, OJ No C 29, 3. 2. 1992, p. 18; Generali/BCHA OJ No C 107, 28. 4. 1992, p. 24; Mondi/Frantschach OJ No C 124, 16. 5. 1992, p. 19; Eucom/Digital, OJ No C 140, 18. 5. 1992, p. 12; Ericsson/Ascom OJ No C 201, 8. 8. 1992, p. 26; Thomas Cook/LTU/West LB OJ No C 199, 6. 8. 1992, p. 12; Elf-Atochem/Rohm & Haas, OJ No C 201, 8. 8. 1992, p. 27; Rhône-Poulenc/SNIA OJ No C 212, 18. 8. 1992, p. 23; Northern Telecom/Matra Telecommunications OJ No C 240, 19. 9. 1992, p. 15; Avesta/British Steel, NCC/AGA/Axel Johnson OJ No C 258, 7. 10. 1992, p. 9.

(18) Cited in footnote 5.

(19) See footnote 4.

(20) See II, point 1 of the abovementioned notice.

(21) See II, point 2 of the abovementioned notice.

(22) See II, point 3 of the abovementioned notice.

(23) See II, point 4 of the abovementioned notice.

(24) See II, points 5 and 6 of the abovementioned notice.

(25) See II, points 7 and 8 of the abovementioned notice.

(26) Cited in footnote 5.

(27) Commission Decision Optical Fibre, OJ No L 236, 22. 8. 1986, p. 30.

(28) See III.2 (c) points 23, 24 and 25.

(29) See III.2 (b) points 21 and 22.

(30) See Section II of the notice on cooperation (cited in footnote 4), points 3 and 6, and the act on the application of Article 53 (3) of the EEA Agreement to categories of research and development agreements (cited in footnote 7).

(31) See Commission decisions where no negative effect was found: Decision 86/405/EEC (Optical Fibres), OJ No L 236, 22. 8. 1986, p. 30, and in Decision 90/410/EEC (Elopak/Metal Box-Odin), OJ No L 209, 8. 8. 1990, p. 15).

(32) See III.2 (b) point 22, and Decision 87/100/EEC (Mitchell Cotts/Sofiltra), OJ No L 41, 11. 2. 1987, p. 31.

(33) See Section II of the notice on cooperation (cited in footnote 4), point 3 and the act on the application of Article 53 (3) of the EEA Agreement to categories of research and development agreements (cited in footnote 7).

(34) See the following decisions: NCH, OJ No L 22, 26. 1. 1972, p. 16; Cementregeling voor Nederland, OJ No L 303, 31. 12. 1972, p. 7; Cimbel, OJ No L 303, 31. 12. 1972, p. 24; CSV, OJ No L 242, 4. 9. 1978, p. 15; UIP, OJ No L 226, 3. 8. 1989, p. 25 and Astra, OJ No L 20, 28. 1. 1993, p. 23.

(35) See the following Commission decisions: Socemas, OJ No L 201, 12. 8. 1968, p. 4; Intergroup, OJ No L 212, 9. 8. 1975, p. 23; National Sulphuric Acid Association I, OJ No L 260, 3. 10. 1980, p. 24 and (II) OJ No L 190, 5. 7. 1989, p. 25; Filmeinkauf Deutscher Fernsehanstalten, OJ No L 284, 3. 10. 1989, p. 36; and IJselcentrale, OJ No L 28, 2. 2. 1991, p. 32.

(36) See notice in Exxon/Shell, OJ No C 92, 2. 4. 1993, p. 2.

(37) See Commission Decision 91/38/EEC (KSB/Goulds/Lowara/ITT), OJ No L 19, 25. 1. 1991, p. 25; the anti-competitive character of joint economic production is acknowledged in principle in the act referred to in point 6 of Annex XIV to the EEA Agreement (Regulation (EEC) No 417/85).

(38) See in particular the following Commission decisions: Bayer/Gist-Brocades, OJ No L 30, 5. 2. 1976, p. 13; United Reprocessors and KEWA, OJ No L 51, 26. 2. 1976, pp. 7 and 15; Vacuum Interrupters I, OJ No L 48, 19. 2. 1977, p. 32, and II, OJ No L 383, 31. 12. 1980, p. 1; De Laval/Stork I, OJ No L 215, 23. 8. 1977, p. 11, and II, OJ No L 59, 4. 3. 1988, p. 32; GEC/Weir, OJ No L 327, 20. 12. 1977, p. 26; WANO/Schwarzpulver, OJ No L 322, 16. 11. 1978, p. 26; Langenscheidt/Hachette, OJ No L 39, 11. 2. 1982, p. 25; Amersham/Buchler, OJ No L 314, 10. 11. 1982, p. 34; Rockwell/Iveco, OJ No L 224, 17. 8. 1983, p. 19; Carbon Gas Technologie, OJ No L 376, 31. 12. 1983, p. 17; Enichem/ICI, OJ No L 50, 24. 2. 1988, p. 18; Bayer/BP Chemicals, OJ No L 150, 16. 6. 1988, p. 35; Iveco/Ford, OJ No L 230, 19. 8. 1988, p. 39; Alcatel Espace/ANT, OJ No L 32, 3. 2. 1990, p. 19; Konsortium ECR 900, OJ No L 228, 22. 8. 1990, p. 31; Screensport/EBU - Eurosport, OJ No L 63, 9. 3. 1991, p. 32; Eirpage, OJ No L 306, 7. 11. 1991, p. 22; Procter and Gamble/Finaf, OJ No C 3, 7. 1. 1992, p. 2 and Infonet, OJ No C 7, 11. 1. 1992, p. 3.

(39) See III.2 (e), points 27 to 31.

(40) See the following Commission decisions: Alliance des constructeurs français de machines-outils, OJ No L 201, 12. 8. 1968, p. 1; SAFCO, OJ No L 13, 17. 1. 1972, p. 44; Metaleurop, OJ No L 179, 12. 7. 1990, p. 41; Elopak/Metal Box - Odin, OJ No L 209, 8. 8. 1990, p. 15; Konsortium ECR 900, OJ No L 228, 22. 8. 1990, p. 31.

(41) Points 5, 6, 7 and 9 of Annex XIV to the EEA Agreement (Regulation No 151/93).

(42) Cited in footnote 6.

(43) Cited in footnote 7.

(44) Cited in footnote 8.

(45) Cited in footnote 9.

(46) See below V.2, point 70 et seq.

(47) Cited in footnote 7.

(48) See points 62 and 63.

(49) See point 64.

(50) See the NCH, OJ No L 22, 26. 1. 1972, p. 16; Cementregeling voor Nederland, OJ No L 303, 31. 12. 1972, p. 7; Cimbel, OJ No L 303, 31. 12. 1972, p. 24; CSV, OJ No L 242, 4. 9. 1978, p. 15 and Astra, OJ No L 20, 28. 1. 1993, p. 23.

(51) See Decision 89/467/EEC (UIP), OJ No L 226, 3. 8. 1989, p. 25.

(52) See the National Sulphuric Acid Association, OJ No L 260, 3. 10. 1980, p. 24; Filmeinkauf deutscher Fernsehanstalten, OJ No L 284, 3. 10. 1989, p. 36; IJsselcentrale decisions, OJ No L 28, 2. 2. 1991, p. 32.

(53) See Exxon/Shell, OJ No C, 2. 4. 1993, p. 2.

(54) See the KSB/Goulds/Lowara/ITT, OJ No L 19, 25. 1. 1991, p. 25.

(55) See the following Commission decisions: Amersham/Buchler, OJ No L 314, 10. 11. 1982, p. 34; Rockwell/Iveco, OJ No L 224, 17. 8. 1983, p. 19; Carbon Gas Technologie, OJ No L 376, 31. 12. 1983, p. 17; Enichem/ICI, OJ No L 50, 24. 2. 1988, p. 18; Bayer/BP Chemicals, OJ No L 150, 16. 6. 1988, p. 35; Iveco/Ford, OJ No L 230, 19. 8. 1988, p. 39; Alcatel Espace/ANT, OJ No L 32, 3. 2. 1990, p. 19; Eirpage, OJ No L 306, 7. 11. 1991, p. 22; Bayer/Gist-Brocades, OJ No L 30, 5. 2. 1976, p. 13; United Reprocessors and KEWA, OJ No L 51, 26. 2. 1976, p. 7; Vacuum Interrupters I, OJ No L 48, 19. 2. 1977, p. 32 and II, OJ No L 383, 31. 12. 1980, p. 1; De Laval/Stork I, OJ No L 215, 23. 8. 1977, p. 11 and II, OJ No L 59, 4. 3. 1988, p. 32; GEC/Weir, OJ No L 327, 20. 12. 1977, p. 26, Langenscheidt/Hachette, OJ No L 39, 11. 2. 1982, p. 25; Procter and Gamble/Finaf, OJ No C 3, 7. 1. 1992, p. 2 and INFONET, OJ No C 7, 11. 1. 1992, p. 3.

(56) Commission Decision Mitchell Cotts/Sofiltra, OJ No L 41, 11. 2. 1987, p. 31.

(57) Commission Decision Elopak/Metal Box-Odin, OJ No L 209, 8. 8. 1990, p. 15.

(58) See Mitchell Cotts/Sofiltra (footnote 32).

(59) See Elopak/Metal Box-Odin (footnote 31).

ANNEX 2

NOTICE OF THE EFTA SURVEILLANCE AUTHORITY MODIFYING THE NOTICE CONCERNING THE ACTS REFERRED TO IN POINTS 2 AND 3 OF ANNEX XIV TO THE EEA AGREEMENT (COMMISSION REGULATIONS (EEC) No 1983/83 AND (EEC) No 1984/83) ON THE APPLICATION OF ARTICLE 53 (3) OF THE EEA AGREEMENT TO CATEGORIES OF EXCLUSIVE DISTRIBUTION AND EXCLUSIVE PURCHASING AGREEMENTS

A. The present notice is issued pursuant to the rules of the Agreement on the European Economic Area (EEA Agreement) and the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (Surveillance and Court Agreement).

B. The EC Commission issued the notice concerning Commission Regulations (EEC) No 1983/83 and (EEC) No 1984/83 on the application of Article 85 (3) of the EEC Treaty to categories of exclusive distribution and exclusive purchasing agreements (OJ No C 101, 13. 4. 1984, p. 2). This non-binding act contains principles and rules which the Commission follows in the field of competition. The judgment of the European Court of Justice in Case C-234/89 'Delimitis/Henninger Bräu` required the EC Commission to modify its notice on the application of Article 85 (3) of the EEC Treaty to categories of exclusive distribution and exclusive purchasing agreements by issuing a new notice (OJ No C 121, 13. 5. 1992, p. 2). The EFTA Surveillance Authority considers these acts to be EEA relevant.

C. The EFTA Surveillance Authority has adopted a corresponding notice on the application on Article 53 (3) of the EEA Agreement to categories of exclusive distribution and exclusive purchasing agreements on 12 January 1994 (1). In order to maintain equal conditions of competition and to ensure a uniform application of the EEA competition rules throughout the European Economic Area the EFTA Surveillance Authority considers it necessary to modify its notice by issuing the present one exercising the power conferred to it in Article 5 (2) (b) of the Surveillance and Court Agreement. It intends to follow the principles and rules laid down in this notice when applying the relevant EEA competition rules to a particular case.

In the notice of the EFTA Surveillance Authority concerning the acts referred to in points 2 and 3 of Annex XIV to the EEA Agreement (Commission Regulations (EEC) No 1983/83 and (EEC) No 1984/83 of 22 June 1983) on the application of Article 53 (3) of the EEA Agreement to categories of exclusive distribution and exclusive purchasing agreements the following passage is inserted after point 39, and beneath the heading 'V. Beer supply agreements`. Points 40 to 66 become points 41 to 67. The subheadings, under heading V, become:

'B. Exclusive purchasing obligation`;

'C. Other restrictions of competition that are exempted`;

'D. Agreements excluded from the block exemption`.

'1. Agreements of minor importance

40. It is recalled that the EFTA Surveillance Authority's notice on agreements of minor importance (*) states that the EFTA Surveillance Authority holds the view that agreements between undertakings do not fall under the prohibition of Article 53 (1) of the EEA Agreement if certain conditions as regards market share and turnover are met by the undertakings concerned. Thus, it is evident that when an undertaking, brewery or wholesaler surpasses the limits as laid down in the above notice, the agreements concluded by it may fall pursuant to Article 53 (1) of the EEA Agreement. The notice, however, does not apply where in a relevant market competition is restricted by the cumulative effects of parallel networks of similar agreements which would not individually fall pursuant to Article 53 (1) of the EEA Agreement if the notice was applicable. Since the markets for beer will frequently be characterized by the existence of cumulative effects, it seems appropriate to determine which agreements can nevertheless be considered de minimis.

The EFTA Surveillance Authority is of the opinion that an exclusive beer supply agreement concluded by a brewery, in the sense of Article 6, and including Article 8 (2) of Regulation (EEC) No 1984/83 does not, in general, fall pursuant to Article 53 (1) of the EEA Agreement if

- the market share of that brewery is not higher than 1 % on the national market for the resale of beer in premises used for the sale and consumption of drinks, and

- if that brewery does not produce more than 200 000 hl of beer per annum.

However, these principles do not apply if the agreement in question is concluded for more than seven and a half years in as far as it covers beer and other drinks, and for 15 years if it covers only beer.

In order to establish the market share of the brewery and its annual production, the provisions of Article 4 (2) of Regulation (EEC) No 1984/83 apply.

As regards exclusive beer supply agreements in the sense of Article 6, and including Article 8 (2) of Regulation (EEC) No 1984/83 which are concluded by wholesalers, the above principles apply mutatis mutandis by taking account of the position of the brewery whose beer is the main subject of the agreement in question.

The present communication does not preclude that in individual cases even agreements between undertakings which do not fulfil the above criteria, in particular where the number of outlets tied to them is limited as compared to the number of outlets existing on the market, may still have only a negligible effect on trade between Contracting Parties or on competition, and would therefore not be caught by Article 53 (1) of the EEA Agreement.

Neither does this communication in any way prejudge the application of national law to the agreements covered by it.

`

(1) OJ No L 153, 18. 6. 1994, p. 13.

(2*) See page 32 in this Official Journal.

ANNEX 3

NOTICE OF THE EFTA SURVEILLANCE AUTHORITY CLARIFYING THE ACTIVITIES OF MOTOR VEHICLE INTERMEDIARIES

A. The present notice is issued pursuant to the rules of the Agreement on the European Economic Area (EEA Agreement) and the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (Surveillance and Court Agreement).

B. The Commission issued a clarification of the activities of motor vehicle intermediares (OJ No C 329, 18. 12. 1991, p. 20). This non-binding act contains principles and rules which the Commission follows in the field of competition.

C. The EFTA Surveillance Authority considers the abovementioned act to be EEA relevant. In order to maintain equal conditions of competition and to ensure a uniform application of the EEA competition rules throughout the European Economic Area the EFTA Surveillance Authority adopts the present notice exercising the power conferred to it in Article 5 (2) (b) of the Surveillance and Court Agreement. It intends to follow the principles and rules laid down in this notice when applying the relevant EEA competition rules to a particular case.

This notice is to supplement the notice (1) published with the act referred to in point 4 of Annex XIV to the EEA Agreement (Regulation (EEC) No 123/85), herinafter referred to as 'the Act`, in order to clarify the scope of the activities of the intermediaries mentioned in the Act. The relationship between an intermediary and the person for whom he or it is acting is primarily governed by their contract and by the national law applicable, and does not affect the rights and obligations of third parties to the contract. This notice does not therefore summarize all the obligations of an intermediary.

1. Principles

The following guidelines, which are in line with the balanced objectives pursued by the Act, are based on two principles. The first is that the intermediary referred to in the Act is a provider of services acting for the account of a purchaser and final user; he cannot assume risks normally associated with ownership, and is given prior written authority by an identified principal, whose name and address are given, to exercise such activity. The second is the principle of the transparency of the authorization, and in particular the requirement that, under national law, the intermediary pass on to the purchaser all the benefits obtained in the negotiations carried out on his behalf.

In this context, three groups of criteria should be distinguished:

(a) with regard to the validity of the authorization and to the provision of assistance;

(b) with regard to the intermediary's scope for advertising;

(c) with regard to the intermediary's possibilities of supply.

The EFTA Surveillance Authority suggests that the following guidelines and criteria appear appropriate for dealing with the practical requirements. Activities which do not conform to these guidelines and criteria will justify the presumption, in the absence of evidence to the contrary, that an intermediary is acting beyond the limits set by Article 3 (11) of the Act, or creating a confusion in the mind of the public on this point by giving the impression that he is a reseller.

2. Practical criteria

(a) The validity of the authorization and the service of assistance

The intermediary is free to organize the structure of his activities. However, operations involving a network of independent undertakings using a common name or other common distinctive signs could create the misleading impression of an authorized distribution system.

An intermediary may use an outlet in the same building as a supermarket if the outlet is outside the premises where the principal activities of the supermarket are carried on, provided that he complies with the principles set out in the present notice.

Although he cannot assume the risks of ownership, the intermediary must be free to assume the transport and storage risks associated with the vehicle and the credit risks relating to the final purchaser for the financing of the purchase in a foreign country. The services must be provided in total transparency with regard to the various services offered and to payment, and this must be verifiable through the presentation of detailed and exhaustive accounts to the purchaser.

The intermediary must list in detail to the client, in a document which may be separable from the written authorization, the various services offered to him and must give him the possibility to choose those which suit him. In this document, an intermediary not supplying the full range of services associated with the putting into circulation of an imported vehicle should state which services he is not supplying.

(b) Advertising by the intermediary

The intermediary must be able to advertise, though without creating in potential purchasers minds any confusion between himself and a reseller. Subject to this restriction, he should be able to:

- concentrate his activities, and thus his advertising, on a given brand or on a particular model, provided that he expressly adds an appropriate disclaimer indicating that he is not a reseller, but acts as an intermediary offering his services,

- provide full information on the price which he can obtain, making it clear that the price indicated is his best estimate,

- display cars which have been bought by his clients using his services, or a particular type or model which he can obtain for them, provided that he expressly and visibly makes it clear that he is acting as an intermediary offering his services and not as a reseller, and that types or models which he displays are not for sale,

- use all logos and brand names, in accordance with the applicable rules of law, but without creating any confusion in the mind of the public with regard to the fact that he is an intermediary and not part of the distribution network of the manufacturer or manufacturers concerned.

Where a supermarket carries on a distinct activity as an intermediary, all necessary measures must be taken to avoid confusion in the minds of buyers (final users) with its principal commercial activities conducted under its usual or distinctive sign.

(c) Supply of the intermediaries

In general, the intermediary is free to organize his business relationship with the various dealers in the distribution networks of the different manufacturers; this should not lead the intermediary to establish with such dealers a relationship which is privileged and contrary to contractual obligations accepted in accordance with the Act, especially Article 3 (8) (a) and (b), (9) and Article 4 (1) (3). In particular the intermediary must obtain supplies on conditions which are normal in the market, and he must not:

- make agreements by which he undertakes obligations to buy,

- receive discounts different from those which are customary on the market of the country in which the car is purchased.

In this context, sales of more than 10 % of his annual sales by any one authorized dealer through any one intermediary would create the presumption of a privileged relationship contrary to the Articles cited above.

(1) OJ No L 153, 18. 6. 1994, p. 20.