1. 

This case concerns an appeal by Tetra Pak International SA (‘Tetra Pak’) against the judgment of the Court of First Instance of 6 October 1994 in Case T-83/91 Tetra Pak v Commission ( 1 ) (‘the judgment under appeal’). That judgment dismissed the action brought by Tetra Pak for the annulment of Decision 92/163/EEC ( 2 ) (‘the contested decision’), in which the Commission found that Tetra Pak was in a dominant position on the markets in aseptic machines and cartons intended for the packaging of liquid foods in the European Economic Community (‘the Community’) and that it had abused that position within the meaning of Article 86 of the EEC Treaty from at least 1976 until 1991 both on those markets and on the markets in non-aseptic machines and cartons. ( 3 ) The Commission imposed a fine of ECU 75 million on Tetra Pak and ordered it to bring to an end the infringements found.

2.

The facts giving rise to the present dispute have been determined by the Court of First Instance in paragraphs 1 to 15 of the judgment under appeal, on the basis of the findings made by the Commission in the contested decision, which have not been challenged in substance by Tetra Pak. I shall set out those facts below, although my arrangement will differ from that in the judgment under appeal.

3.

The dispute arose in the liquid and semi-liquid food packaging sector, which includes milk and liquid dairy products, fruit juice, wine, mineral water, sauces, tomato-based products and baby foods. Various materials, including plastic and glass bottles, are used for packaging such products but in recent years increasing use has been made of cartons for the marketing of certain of them. The facts in the present case relate to the market for cartons for the packaging of liquid and semi-liquid food products.

4.

Cartons are used preferentially for the packaging of dairy products and to a lesser extent for other food products. In 1983, some 90% of cartons were used for the packaging of milk and liquid dairy products. In 1987, that share was approximately 79%, of which 72% were for milk. Approximately 16% of cartons were at that time used for packaging fruit juice. Other products (wine, mineral water, tomato-based products, soups, sauces and baby foods) accounted for only 5% of cartons used.

5.

It should be noted that milk, the main sector of the packaging carton market, is sold mainly in a pasteurized form (fresh milk) or after an ultrahigh temperature treatment under aseptic conditions which makes it possible to attain a storage period of several months in a non-refrigerated environment (UHT milk). ‘Sterilized’ milk has only a relatively small market share in the Community.

6.

On the basis of those processes, the market for cartons may be divided into two sectors having different characteristics: the aseptic sector, comprising cartons and filling machines used for the packaging of foodstuffs which can be stored for several months in a non-refrigerated environment, and the non-aseptic sector, which covers cartons and machines used for packaging products intended for rapid consumption.

7.

Tetra Pak, whose registered office is in Switzerland and which coordinates the policy of a group of companies, originally Swedish, which has acquired a global dimension, is a major economic operator on the carton market. ( 4 ) The Tetra Pak group specializes in equipment for the packaging of liquid and semi-liquid food products, mainly milk, in cartons and operates in both the aseptic and the non-aseptic packaging sectors. Its activities consist essentially in manufacturing cartons and, using the group's own technology, carton-filling machines. In addition to Tetra Pak, there are other manufacturers on the market, ranging over both the aseptic and non-aseptic sectors.

8.

The structure of supply in the aseptic packaging systems sector is quasimonopolistic, with Tetra Pak holding 90 to 95% of the sector at the date of the contested decision. In 1985, Tetra Pak held approximately 89% of the market in aseptic cartons and 92% of that in aseptic machines in the Community. Tetra Pak's only real competitor in the aseptic sector was PKL, which held almost all of the remaining market share of 5 to 10%.

9.

In the aseptic sector, Tetra Pak manufactures the ‘Tetra Brik’ system, designed for packaging UHT milk in particular. According to information supplied by the applicant, that system was launched on the German market in 1968 and in the other European countries from 1970 onwards. In that process, the cartons are delivered to the user in the form of rolls, which are sterilized in the filling machine itself by being soaked in a hydrogen peroxide bath and are then used to package the liquid as it flows in an aseptic environment. In the same sector, only one competitor of Tetra Pak, PKL, controlled by the Swiss company SIG (Société Industrielle Générale), also manufactures a system of aseptic packaging in brick-type cartons, known as ‘Combiblocs’. In contrast to Tetra Pak's continuous packaging process, those cartons are pre-shaped at the time of packaging. For technical reasons and because in practice the manufacturers of aseptic machines also provide the cartons which must be used in their own machines, possession of an aseptic-filling technique is the key to market entry both for machines and for aseptic cartons.

10.

The structure of supply in the non-aseptic sector is more open but is still oligopolistic. At the time when the contested decision was adopted, Tetra Pak held 50 to 55% of the market in the Community. In 1985, it held approximately 48% of the market in non-aseptic cartons and 52% of that in non-aseptic machines in the territory of the twelve Member States. The Norwegian group Elopak held, in 1985, some 27% of the market in non-aseptic machines and cartons, followed by PKL which had approximately 11% of that market. Elopak acted solely as a distributor on the market in aseptic machines, before acquiring the ‘packaging machine’ division of Ex-Cell-O in 1987. The remaining 12% of the market in non-aseptic cartons was divided between three companies, Schouw Packing (Denmark, approximately 7%, now half-owned by Elopak), Mono-Emballage/Scalpack (France/Netherlands, approximately 2.5%) and Van Mierlo (Belgium, around 0.5%). Those companies, whose markets remained concentrated in one or more countries, manufactured their own cartons, generally under licence (Ex-Cell-O acquired by Elopak in 1987, Nimco, Sealrįght etc.). On the market in machines, they acted only as distributors. The 13% or so of the market in non-aseptic machines left in the Community by Tetra Pak, Elopak and PKL was shared between ten or so small manufacturers, the main ones being Nimco (USA, approximately 4%), Cherry Burrel (USA, around 2.5%) and Shikoku (Japan, approximately 1%).

In the non-aseptic sector, Elopak is thus Tetra Pak's main competitor, but its operations have not so far extended into the aseptic sector. The contested decision considers that the ratio between the turnover figures of Tetra Pak and Elopak in 1987 was in the order of 7.5:1. Elopak operates in Italy via a subsidiary, Elopak Italia (Milan), which imports cartons from other subsidiaries of the group.

11.

Non-aseptic packaging, in particular of fresh pasteurized milk, docs not require a high degree of sterility and so calls for less sophisticated equipment. On the non-aseptic carton market, Tetra Pak initially used brick-type cartons and continues to do so, but its main product on that market is now a gabletop carton, the ‘Tetra Rex’. That carton is in direct competition with the ‘Pure-Pak’ carton produced by Elopak.

12.

Tetra Pak manufactures its own machines for non-aseptic packaging. Moreover, like Elopak and PKL, it occasionally also distributes machines manufactured by some ten small producers, such as Nimco, Cherry Burrel and Shikoku.

13.

Tetra Pak has developed a particular commercial strategy in the Community with regard to patents, the terms of its sale and leasing contracts and the distribution of its products. In the first place, the group has followed a particularly extensive patent policy. Tetra Pak has patented the basic technology which it has developed in relation to machines, cartons and processes, and also the modifications made subsequently to those products and certain techniques, such as the method of folding the carton. The latest patents protecting the aseptic Tetra Brik cartons, developed in the 1960s, will expire in the early years of the next century (recital 22 of the contested decision). As both parties have indicated, Tetra Pak has granted no manufacturing licences for its cartons in the Community.

14.

Secondly, distribution of Tetra Pak machines and cartons is wholly undertaken by Tetra Pak group members, there being no independent distributors.

15.

During the period in question, various standard-form contracts for the sale and leasing of machines and the supply of cartons were in force between Tetra Pak and its customers in the various Member States. The content of the clauses incorporated in those contracts which had an effect on competition was summarized in paragraph 12 of the judgment under appeal, which in turn cites the contested decision, as follows:

‘2.1. Conditions of sale of Tetra Pak equipment (Annex II. 1)

Standard purchase contracts exist in the following five countries: Greece, Ireland, Italy, Spain and the United Kingdom. For each clause, the country or countries in which it is applicable are indicated in brackets.

2.1.1. Equipment configuration

In Italy, Tetra Pak reserves an absolute right of control over the equipment configuration by prohibiting the buyer:

2.1.2. Operation and maintenance of equipment

There are five clauses concerning the operation and maintenance of equipment, which are intended to give Tetra Pak an exclusivity and a right of inspection in this area:

2.1.3. Cartons

There are four clauses relating to cartons which also give Tetra Pak an exclusive right of control over the product:

2.1.4. Inspections

Two clauses are more specifically concerned with monitoring the purchaser's compliance with his contractual obligations:

2.1.5. Transfer of ownership or use of equipment

Two clauses in the contract limit the purchaser's right to resell or transfer the equipment to third parties:

2.1.6. Guarantee

2.2. Conditions for the leasing of Tetra Pak equipment (Annex II.2)

Standard lease contracts exist in all countries within the Community except Greece and Spain.

These contracts include the majority of the clauses contained in purchase contracts, adapted to the circumstances of leasing.

Other conditions are specific to leasing but invariably pursue the same goal, i.e. maximum reinforcement of the links between Tetra Pak and its customer.

2.2.1. Equipment configuration

Clauses (i), (ii) and (iii) (Italy in the case of clause (i); all countries in the case of clause (ii); France, Ireland, Italy, Portugal, United Kingdom in the case of clause (iii)) are included.

2.2.2. Operation and maintenance of equipment

Clauses (iv) and (v) (all countries) are included, granting Tetra Pak exclusive rights.

Likewise, clause (viii) appears, conferring on Tetra Pak ownership of the intellectual property rights to any modifications made by the user (Belgium, Germany, Italy, Luxembourg, the Netherlands) or, at the very least, requiring the leaseholder to grant an operating licence to Tetra Pak (Denmark, France, Ireland, Portugal, United Kingdom).

2.2.3. Cartons

Contracts also contain clauses (ix) (all countries) and (x) (Italy) concerning the exclusive use of Tetra Pak cartons, clause (xi) conferring on Tetra Pak ownership of the rights to any improvements (Denmark, Italy) or, at the very least, requiring leaseholders to grant an operating licence to Tetra Pak (France, Ireland, Portugal, United Kingdom), and clause (xii) giving Tetra Pak the right to inspect the wording or brand names which the client wishes to use on the cartons (Germany, Spain, Greece, Italy, the Netherlands, Portugal, United Kingdom).

2.2.4. Inspections

In the case of sale, the leaseholder must return a monthly report (clause (xiii) — all countries), failure to do so giving rise to fixed-rate invoicing (Belgium, Luxembourg, the Netherlands), and allow the premises at which the equipment is installed to be inspected (clause (xiv) — all countries) without notice (all countries except Denmark, Germany, Ireland, Portugal and the United Kingdom).

2.2.5. Transfer of the lease, subleasing, transfer of use or use on behalf of third parties

In the case of sale, ownership may be subsequently transferred only where very restrictive conditions are complied with.

2.2.6. Guarantee

The wording of lease contracts is less precise than that of purchase contracts: they link the guarantee to compliance with “instructions” given by Tetra Pak concerning the “maintenance” and “proper handling” of the machine (all countries). However, the terms “instructions”, “maintenance” and “proper handling” are sufficiently broad to be interpreted as also including at least the sole use of Tetra Pak spare parts, repair and maintenance services and packaging materials. Such an interpretation is confirmed by the written and oral replies given by Tetra Pak to the statement of objections.

2.2.7. Fixing of rental and conditions of payment

The rental is made up of the following components (all countries):

2.2.8. Term of the lease

The term of the lease and the conditions for its termination vary from one Member State to another:

2.2.9. Penalty clause

2.3. Conditions for the supply of cartons (Annex 113)

Standard supply contracts exist in Greece, Ireland, Italy, Spain and the United Kingdom: they arc compulsory whenever a client purchases rather than leases a machine.

2.3.1. Exclusive supplies

2.3.2. Contract term

2.3.3. Fixing of prices

2.3.4. Wording

Contracts again include Tetra Pak's right to inspect the wording or brand names which the client wishes to use on cartons (clause (xii)).’

16.

Tetra Pak's commercial strategy came under scrutiny by the Commission as a result of the complaint filed on 27 September 1983 by Elopak Italia against Tetra Pak Italiana and its associate companies in Italy. On 16 December 1988, the Commission decided to initiate proceedings against Tetra Pak, which undertook in a letter sent to the Commission on 1 February 1991 to abandon its system of tied sales and to amend its standard-form contracts; the new standard-form contracts were annexed to that letter. The Commission accepted those undertakings.

17.

The proceeding came to an end with the adoption by the Commission of Decision 92/163, Article 1 of which reads as follows: ‘Taking advantage of its dominant position on the so-called aseptic market in machines and cartons intended for the packaging of liquid foods, Tetra Pak has, at least since 1976, infringed the provisions of Article 86 of the EEC Treaty on both these aseptic markets and on the neighbouring and associated markets in non-aseptic machines and cartons by means of a variety of practices aimed at eliminating competition and/or maximizing, to the detriment of users, the profits which could be drawn from the positions it had acquired.’

The decision summarizes the essential elements of those infringements, imposes a fine of ECU 75 million on Tetra Pak and orders it to bring the infringements to an end, specifying the measures to be taken for that purpose.

18.

Tetra Pak brought an action for the annulment of Decision 92/163 before the Court of First Instance on 18 November 1991, which was dismissed in its entirety by the judgment under appeal. Tetra Pak brought the present appeal, seeking to have that judgment set aside by the Court of Justice, on 20 December 1994.

19.

Tetra Pak seeks to have the judgment under appeal set aside on the following grounds:

20.

In this plea, Tetra Pak challenges the Court of First Instance's definition of the relevant product market in the judgment under appeal which, essentially, upholds the Commission's reasoning in the contested decision. In fact, the plea is based on two separate arguments: the reasoning of the Court of First Instance in that regard is both contradictory and based on the wrong legal standard.

21.

Tetra Pak considers that the Court of First Instance erred in law in that its reasoning in paragraphs 64 and 73 of the judgment under appeal, concerning the definition of the relevant product market, was contradictory; either there is a general market for packaging liquid food products, in which case the Court of First Instance should have rejected the Commission's distinction between the aseptic and non-aseptic markets, or those markets are to be regarded as separate and it should not have accepted the inclusion of nondairy products within the relevant market without examining the market situation in that sector.

22.

In my view, this plea should be rejected; there is no contradiction whatever in the reasoning followed in paragraphs 64 to 73 of the judgment under appeal.

23.

In the contested decision, the Commission had identified four separate markets: aseptic cartons, aseptic filling machines, non-aseptic cartons and non-aseptic filling machines.

24.

In its review of that definition of the four relevant markets, the Court of First Instance applied the test of sufficient product substitutability having regard to objective product characteristics, conditions of competition and supply and demand structure on the market, as laid down by the Court of Justice in Case 322/81 Michelin v Commission. ( 5 )

The starting-point of the Court of First Instance's analysis is the general market in packaging systems for liquid food products. The Court held that general market to be divided into a number of submarkets depending on the packaging system used and not on the type of product packaged. It went on to consider that aseptic and non-aseptic filling machines and cartons were characterized by a comparable supply and demand structure: they not only shared the same characteristics of production but also satisfied identical economic needs. It applied the sufficient substitutability test to those markets and considered that the Commission was right in finding, after an analysis of milk packaging, the principal use of both aseptic and non-aseptic cartons, that there were four separate, albeit related, relevant markets.

25.

Tetra Pak submits that the Court of First Instance used the wrong legal standard when determining the relevant product market, for three reasons:

26.

As regards the application of the sufficient substitutability test, Tetra Pak argues that the Court of First Instance departed from the case-law of this Court in considering that filling machines and cartons for nondairy products formed part of the relevant markets. In its submission, there is no sufficient substitutability between aseptic and non-aseptic packaging systems for nondairy products and, moreover, their limited importance in comparison with milk packaging is of no relevance when defining the market.

27.

Sufficient substitutability, as a test for determining the relevant product market, was defined by the Court of Justice in Michelin:‘... for the purposes of investigating the possibly dominant position of an undertaking on a given market, the possibilities of competition must be judged in the context of the market comprising the totality of the products which, with respect to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited extent interchangeable with other products. However, it must be noted that the determination of the relevant market is useful in assessing whether the undertaking concerned is in a position to prevent effective competition from being maintained and behave to an appreciable extent independently of its competitors and customers and consumers. For this purpose, therefore, an examination limited to the objective characteristics only of the relevant products cannot be sufficient: the competitive conditions and the structure of supply and demand on the market must also be taken into consideration.’ ( 6 )

28.

In paragraph 65 of the judgment under appeal, the Court of First Instance considered that Tetra Pak's dominant position in the packaging of dairy products was adequately demonstrated by the fact that such products account for most of the uses of carton packaging systems and dismissed as irrelevant the existence of substitutable equipment in the nondairy product packaging sector. Tetra Pak challenges that reasoning on the ground that the relative size of the nondairy product packaging sector as compared with that of the dairy product packaging sector has no bearing whatever on the determination of the relevant product market, which requires the application of the sufficient substitutability test. In its opinion, the Court of First Instance was wrong to consider, in paragraphs 74 to 77 of the judgment under appeal, that there is no such substitutability between aseptic and non-aseptic packaging systems in the fruit juice sector, the main part of the nondairy product sector, by taking account only of the relative number of consumers who buy the two products and not their suitability for satisfying the same needs. Tetra Pak therefore considers that the Court of First Instance erred in including nondairy product packaging in the relevant markets.

29.

Its argument on that point cannot be upheld, and I consider that the Court of First Instance correctly applied the sufficient substitutability test in the judgment under appeal. That test, used to determine the relevant product market, is designed to ascertain whether the products in question are substitutable or sufficiently interchangeable, having regard to their objective characteristics and to market conditions (competition, structure of supply and demand). When such interchangeability is unavailable or very limited, the products belong to different markets.

30.

In any event, the definition of the relevant product market is not an abstract exercise but a tool to help determine whether an undertaking holds a dominant position. To apply the sufficient substitutability test, therefore, it is necessary to examine the conditions of competition, supply and demand on the market in question. ( 7 ) The reasoning applied by the Court of First Instance in the judgment under appeal, in which it considered that the proportions of cartons used in the packaging of milk and in that of other products was relevant to the market definition, is consequently perfectly valid. That factor forms part of the structure of demand for aseptic and non-aseptic filling machines and cartons and may accordingly be taken into account when applying the substitutability test in the same way as the inherent characteristics of the products in question.

When, as is the case with aseptic and non-aseptic cartons and filling machines, a product is capable of different uses (packaging milk and other nondairy products), there is no rule in the Community case-law that the markets are to be defined as separate according to the use to which the product is put. In paragraph 29 of its judgment in Case 85/76 Hoffmann-La Roche v Commission, ( 8 ) the Court of Justice considered the possibility that there might be two separate markets for vitamins depending on whether they were used for bio-nutritive or technological purposes, but decided that they in fact formed a single market regardless of their use, despite the fact that there were other products in competition with vitamins used for technological purposes. The judgment in Case C-62/86 AKZO v Commission ( 9 ) confirmed that organic peroxides formed a single relevant market, even though they could be used both in the manufacture of plastics and as additives in flour production. In fact, it depends on the circumstances in each case whether a product with several potential uses constitutes a single relevant market or several, and the Court of First Instance has amply demonstrated, in paragraph 64 of the judgment under appeal, that aseptic and non-aseptic filling machines and cartons form relevant markets regardless of whether they are to be used for the packaging of dairy products or of other liquid food products.

31.

Tetra Pak further considers that the Court of First Instance erred in law in stating, in paragraph 71 of the judgment under appeal, that the marginal share of the market held by aseptic containers other than cartons demonstrates that there is no sufficient substitutability with aseptic cartons. That criticism should be rejected since, as I have just indicated, the market share held by one product in comparison with another is a factor which may be taken into account when applying the sufficient substitutability test. If, over a reasonably long period, a parallel can be seen between growth or fall in demand for each of two products, that circumstance may be evidence that the two are sufficiently interchangeable. The judgment in Joined Cases 6/73 and 7/73 Commercial Solvents v Commission justifies that conclusion when it states that the existence of possible alternative processes of an experimental nature or which are practised on a small scale is not relevant when deciding whether the raw material (nitropropane or aminobutanol) for the manufacture of ethambutol and ethambutol-based specialities constitutes the relevant market. ( 10 )

32.

Finally, Tetra Pak challenges the judgment under appeal on the ground that it took into account only short-term interchangeability when deciding whether there was sufficient substitutability between the aseptic and non-aseptic packaging markets. That argument should be rejected, since the Court of First Instance has amply demonstrated, in paragraphs 66 to 70 of the judgment under appeal, that there is no substitutability between aseptic and non-aseptic filling systems and Tetra Pak has admitted that a long-term reversal of that situation would require a long and costly process of advertising and promoting container types in order to inform the consumer, given the limited importance of the cost of the container in the final price of the food product.

33.

The above considerations lead me to consider that the Court of First Instance applied the sufficient substitutability test correctly in the judgment under appeal and Tetra Pak's ground of appeal should be dismissed.

34.

The appellant considers that the Court of First Instance erred in holding that Tetra Pak had infringed Article 86 of the EC Treaty by its commercial practices on the non-aseptic markets, because it did not enjoy a dominant position on those markets. In its opinion, Article 86 requires the abuse to take place or to produce its effects on the dominated market — in other words, the dominant position and the abuse must both be on the same relevant product market.

35.

This plea is of considerable importance, since it requires the Court to rule on the relationship necessary, for the purposes of the prohibition in Article 86, between the dominant position and the abuse. It is a question which has never before been raised as clearly and as fully before this Court, and the answer is of crucial importance in defining the scope of Article 86.

36.

Before examining whether the solution reached by the Court of First Instance was correct in law, I think it useful to consider in general the link between the dominant position and the abuse — or between the dominated market and the market affected by the abuse, which amounts to the same thing — in the context of the application of Article 86.

37.

Article 86 prohibits ‘any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it ... in so far as it may affect trade between Member States’. Thus it must be established not only that there is an effect on intra-Community trade but also that the undertaking in question holds and has abused a dominant position. As regards the dominant position, Article 86 merely lays down requirements as to geographical extent (within the common market or in a substantial part of it) and this Court has developed the concept of the relevant product market in its case-law in order to define the commercial area within which the conditions of competition and the economic power of the undertaking are to be examined. ( 11 )

38.

Nor does Article 86 contain any indication as to the relationship between the dominant position and its abuse, thus in principle leaving completely open the question whether the abuse is situated within the relevant market or elsewhere. In the light of the Community case-law, it is possible to identify the following categories of relationship between the dominant position and the abuse:

It is possible to apply Article 86 in the first three categories, which have already been covered by the case-law of the Court of Justice, but it would not be feasible in the fifth. This is the first time that the Community judicature has had to consider the fourth category and in the judgment under appeal the Court of First Instance applied Article 86 to it, just as the Commission had done in its contested decision.

39.

Category (a), where the abuse takes place on the dominated market, is the typical example of the application of Article 86. This Court has been unequivocal in its rulings and, as the Commission and Tetra Pak agree, has always accepted that the prohibition in Article 86 applies in such cases. ( 12 )

40.

The opposite situation occurs when an undertaking holds a dominant position in a relevant market and is guilty of abusive commercial practices in a different market, neither related to nor connected with the dominated market (category (e)). In paragraph 18 of its rejoinder, the Commission submits that this Court should not rule on whether Article 86 may be applied to that type of case, where there is no link between, on the one hand, the dominant position and dominated market and, on the other, a non-dominated market and conduct thereon. In its view, the present case does not fall within that category and the parties have therefore not fully argued the point.

41.

In my opinion, the Commission cannot be followed in that submission; I consider it helpful to decide whether it is possible to apply Article 86 to cases where there is no link between the dominant position and the abuse because they exist on separate and unconnected markets. In relation to such a hypothesis there have been only two explicit — and, moreover, conflicting — Opinions of Advocates General in cases before the Court.

In his Opinion to the Court in Michelin, Advocate General VerLoren van Themaat stated that the prohibited abuse of a dominant position could take place, under the terms of Article 86, on a relevant market on which the undertaking in question did not hold a dominant position. ( 13 )

This Court has adopted an objective definition of abuse, under which the Commission is not obliged to demonstrate the existence of a causal relationship between the dominant position and the commercial practices which make up the abuse. ( 14 ) In AKZO, Advocate General Lenz considered that ‘this does not mean that the existence of a dominant position and its abuse may be so widely separated that they may be found in different relevant markets. If the requirement of unity of the dominated and relevant market were abandoned completely, it would break the already weak link that still exists here between market power and abuse.’ ( 15 )

42.

I myself consider that an absolute disjuncture of the dominant position and the abuse, to such an extent that they may occur on completely different and separate markets, is not acceptable. Such an approach would mean that an undertaking holding a dominant position on any one market would be unable to compete under conditions of equality with other undertakings on other markets, because the commercial practices required to penetrate those other markets would in most cases constitute an abuse of its dominant position. Nor, moreover, does a dominant position on one market necessarily place the undertaking which holds it in a better position than other undertakings to act on other markets. A major undertaking, for example, with a significant though not dominant share of several markets will have greater ability to penetrate a new market by an aggressive commercial strategy than will an undertaking having less economic power but a dominant position on one market. It is therefore unreasonable that the latter should have to bear the special responsibility imposed by Article 86 when it participates in markets completely separate from the dominated market. A contrary approach would not help to maintain undistorted competition in the internal market, the objective laid down in Article 3(g) of the EC Treaty, on which the interpretation of Article 86 must be based.

43.

Between those two extremes lie the three other categories. There have already been a number of judgments confirming the application of Article 86 in categories (b) and (c).

44.

In category (b), the abuse takes place on the dominated market but its effects are felt on another market on which the undertaking does not hold a dominant position. In Commercial Solvents, the applicant's conduct in refusing to supply Zoja with aminobutanol, the raw material necessary to manufacture the anti-tuberculosis drug ethambutol, was held to be contrary to the prohibition in Article 86. Commercial Solvents held a dominant position on the market for the raw materials necessary for producing the drug in question and its refusal to supply constituted an abuse of its dominant position within the dominated market, but whose effects extended to the market for anti-tuberculosis drugs, which Commercial Solvents wished to penetrate.

In Case 311/84 CBEM v CLT and IPB, ( 16 ) the refusal by CLT, the company owning the television channel RTL, advertising on which was exclusively handled by its subsidiary IPB, to supply the necessary services to telemarketing undertakings to enable them to carry on their activity via RTL television was held to be an abuse of a dominant position. CTL and IPB dominated the market in television advertising in French aimed at viewers in Belgium and their desire to penetrate the associated telemarketing market led to anticompetitive conduct on the dominated market — refusal to broadcast sales advertising not using IPB's telephone number — whose effects were felt on the ancillary market for telemarketing, where CTL and IPB did not hold a dominant position.

In both those cases, undertakings holding a dominant position on one market engaged in abusive commercial practices on that dominated market in order to reserve for themselves, without there being any objective need to do so, an ancillary or derived activity on a neighbouring, but separate, market on which they did not hold a dominant position. The effects of the abuse on that non-dominated market are to be taken into account when determining whether Article 86 applies. ( 17 )

45.

In category (c), the reverse of category (b), the abuse is committed on a market on which the undertaking does not hold a dominant position in order to strengthen its position on the dominated market.

The AKZO judgment rests on facts which, with certain nuances, fall within that category. The question concerned, basically, the predatory prices applied by AKZO to sales of organic peroxides used as flour additives, with a view to weakening ECS's position in that sector and thus preventing it from entering the market for organic peroxides used in the manufacture of plastics, where AKZO was dominant. The Court of Justice considered that the reference market was the market for organic peroxides as a whole although, somewhat confusingly, ( 18 ) it distinguished between two sectors, peroxides supplied for the manufacture of plastics and peroxides used as flour additives. AKZO's abuse — abnormally low pricing — took place in the latter sector of the relevant market but was intended to produce its effects in the sector of peroxides used in plastics production, which was AKZO's preferred sphere of trade. ( 19 )

In Case T-65/89 BPB Industries and British Gypsum v Commission, ( 20 ) upheld on appeal, ( 21 ) the Court of First Instance accepted that Article 86 was applicable to an advantage which the undertaking in question, which held a dominant position on the market for plasterboard, provided on a separate market, the market for plaster, only to ‘loyal’ customers who purchased plasterboard exclusively from it. The undertaking gave preferential treatment in the supply of plaster to customers who purchased their plasterboard from it, with the aim of preventing or hindering imports of plasterboard from other Member States. The commercial conduct on the plaster market was therefore intended to strengthen the undertaking's dominant position on the plasterboard market.

That case-law extends the scope of Article 86 to cover any abusive commercial conduct having an effect on the dominated market, regardless of whether it takes place on a separate market. ( 22 ) In such cases, the link between the dominant position and the abuse is weaker, although still present, since at least the effects of the abuse are produced on the dominated market.

46.

Category (d) — abuse on a market separate from, but related to and connected with, the dominated market — involves taking a step further than categories (b) and (c) along the path of relaxing the relationship between the abuse and the dominant position. In the absence of any previous instances in Community case-law which fell within that category, the judgment under appeal sets an important judicial precedent for the application of Article 86. I shall therefore set out the reasoning applied by the Court of First Instance in the judgment under appeal before going on to consider whether it was correct in the light of the arguments put forward by the appellant as grounds for setting that judgment aside.

47.

In paragraph 122 of the judgment under appeal, the Court of First Instance held that:

‘... Tetra Pak's practices on the non-aseptic markets are liable to be caught by Article 86 of the Treaty without its being necessary to establish the existence of a dominant position on those markets taken in isolation, since that undertaking's leading position on the non-aseptic markets, combined with the close associative links between those markets and the aseptic markets, gave Tetra Pak freedom of conduct compared with the other economic operators on the non-aseptic markets, such as to impose on it a special responsibility under Article 86 to maintain genuine undistorted competition on those markets’.

48.

It reached that conclusion by a process of reasoning which started with the finding that Tetra Pak held a dominant position on the markets for aseptic filling machines and cartons since it had a market share of approximately 90%, its only competitor was PKL, with the remaining 10% of the markets, and the entry of new competitors into the markets was hindered by substantial technological barriers and numerous patents.

49.

The Court of First Instance then went on to consider whether the conditions for the application of Article 86 to Tetra Pak's conduct on the non-aseptic markets were also satisfied. It accepted the Commission's reasoning in that regard in the contested decision and did not deem it necessary to decide whether Tetra Pak held a dominant position on the non-aseptic markets for the purposes of applying Article 86. In the light of this Court's case-law, ( 23 ) it was relatively easy to demonstrate the existence of that dominant position, as was acknowledged by the Court of First Instance ( 24 ) and the Commission. ( 25 ) In 1985, Tetra Pak held some 48% of the market for cartons and 52% of the market for non-aseptic filling machines; in 1987 the latter share had reached around 55% and was some 10 to 15% higher than the combined shares of its two main competitors.

50.

In paragraph 113 of the judgment under appeal, the Court of First Instance noted that Article 86 does not explicitly require the abuse to have taken place on the relevant product market. On an interpretation of the case-law of this Court, the Court of First Instance concluded that

‘the actual scope of the special responsibility imposed on an undertaking in a dominant position must therefore be considered in the light of the specific circumstances of each case, reflecting a weakened competitive situation ...’ (paragraph 115); and that

‘the applicant's arguments to the effect that the Community judicature has ruled out any possibility of Article 86 applying to an act committed by an undertaking in a dominant position on a market which is separate from the dominated market must [thus] be rejected’ (paragraph 116).

51.

In the present case, the Court of First Instance considered that Tetra Pak's commercial practices on the non-aseptic markets constituted a breach of the special responsibility imposed on it, by virtue of the prohibition in Article 86, as a result of its leading position on the non-aseptic markets and the close links between those markets and the aseptic markets, on which Tetra Pak held a dominant position.

52.

In paragraph 115 of the judgment under appeal, the Court of First Instance relies on the case-law of this Court in Commercial Solvents, CBEM, AKZO and BPB and British Gypsum to support the statement that Article 86 can apply to conduct of a dominant undertaking on a market separate from the dominated market. Those judgments fall within categories (b) and (c), as I have identified them above, and can only to a limited extent be relied on as precedents for deciding an issue such as the present. ( 26 ) In all those cases, the dominant position and the abuse shared a link with the relevant market, inasmuch as the abuse either took place on the dominated market and produced effects on another market or else occurred on a separate market but was intended to strengthen the undertaking's position on the dominated market. In the present case, Tetra Pak dominated the aseptic packaging markets and committed abuses on the non-aseptic packaging markets, so that the dominant position and the abuse were on separate relevant markets. The issue is therefore different from those hitherto examined in the Community case-law; it would appear to fall within category (d) by reason of the links between the aseptic and non-aseptic markets and not in category (e) — dominant position and abuse on different and unrelated markets — so that the application of Article 86 cannot be ruled out.

The judgments cited by the Court of First Instance support the approach taken in the judgment under appeal only in so far as they reflect a trend in the case-law of this Court towards a progressive relaxation of the relationship between the dominant position and the abuse, though without dispensing with it entirely, inasmuch as a link is maintained between the dominated market and the market on which the abuse takes place since the abuse and its effects impinge upon both markets.

53.

At this point, it must be asked whether it is permissible in the light of this Court's case-law on Article 86 to apply the prohibition in that article to the abuses committed by Tetra Pak on the non-aseptic markets, as was accepted in the judgment under appeal.

54.

I myself feel that the approach taken by the Court of First Instance in the judgment under appeal forms a coherent and acceptable development of the case-law and one which is logical in the light of the objective definition of abuse given by this Court. ( 27 ) I consider that the close relationship between the two relevant markets is sufficient to maintain the link between dominant position and abuse required, according to this Court's case-law, by Article 86.

No such link exists if the two relevant markets are unrelated. In such cases, as I have already pointed out, Article 86 could not be applied because the effects of doing so would be contrary to the maintenance of free competition within the internal market. Admittedly, when two markets are closely related or linked, the prohibition in Article 86 may be applicable to abuses committed on the non-dominated market by the undertaking holding a dominant position on the other market. That possibility would be in line with this Court's case-law relaxing the rule that the dominated market and the market affected by the abuse must be the same, allowing the application of Article 86 to situations where an abuse committed on the dominated market affects another market and those where the abuse takes place on a non-dominated market but is intended to strengthen the undertaking's dominant position on another market.

55.

Acceptance of the test of a close link between two markets no doubt marks the furthest extent to which it is possible to relax the rule that the dominated market and the market affected by the abuse must be the same. It is not too far removed from the test of the effects of the abuse which this Court has taken into account in its judgments in categories (b) and (c) examined above, since the closer the connection between the two markets the more clearly the effects of an abuse on one market will be felt on the other.

56.

The application of Article 86 to such cases in which an abuse is committed on a related market by an undertaking dominant on another market must be clearly circumscribed to prevent the Commission from using that possibility in order to extend unduly the scope of the prohibition of abuse of a dominant position. Such a result could be achieved by defining the relevant market very restrictively, making it possible to determine the dominant position of the undertaking easily, and then considering the relevant market to be closely linked to other neighbouring markets so that the undertaking in question had to bear the special responsibility imposed upon it by Article 86 with regard to its conduct on those other markets.

57.

In principle, it is not possible to define with complete accuracy what constitute closely related or linked markets. It is a question which must be decided on a casc-by-case basis by the authorities responsible for applying Community competition law. In reaching that decision, account must be taken of, inter alia, the following circumstances: supply and demand structure on the markets, characteristics of the products, use by the dominant undertaking of its power on the dominated market in order to penetrate the linked market, market share of the dominant undertaking on the non-dominated market and degree of control of the dominated market by the dominant undertaking. Such a process is not, as Tetra Pak suggests in its appeal, contrary to the principle of legal certainty. Furthermore, the link between the dominated market and the market affected by the abuse must be a close one, since this new application of Article 86 must be interpreted strictly and it is thus foreseeable that there will not be many situations falling within it. ( 28 )

58.

I turn now to whether in the judgment under appeal the Court of First Instance followed the premisses which I have just defined for the application of Article 86 to cases where the dominant position and the abuse arc on separate, though closely-linked markets.

59.

In paragraphs 120 and 121 of the judgment under appeal, the Court of First Instance demonstrated the existence of close links between the aseptic and non-aseptic markets on the basis of the following series of facts, which cannot be called into question in an appeal:

60.

With those findings of fact, I consider, the Court of First Instance amply demonstrated the close links between the aseptic and non-aseptic markets. It examined the characteristics of supply and demand, Tetra Pak's position on both the dominated and related markets and the dominant undertaking's strategy for penetrating the non-dominated market. All the conclusions drawn from that examination demonstrated the link between the aseptic and non-aseptic markets and made it possible to find that Tetra Pak also enjoyed freedom of conduct vis-à-vis other economic operators on the non-aseptic markets.

61.

The appellant considers that approach indefensible, on the ground that it is one which this Court has refused to take in similar situations brought before it, in particular in Hoffmann-La Roche and Michelin. The appellant's analysis of the judgments in those two cases should be rejected.

In Hoffmann-La Roche, the Court of Justice accepted that there were eight relevant markets, comprising eight different groups of vitamins. Hoffmann-La Roche held a dominant position on all of those markets with the exception of the vitamin B3 market, where its share was smaller. The undertaking was penalized for its abusive commercial practices on the seven dominated markets and not for those committed on the vitamin B3 market. In that case, the Commission did not rely on a close link between that market and the other seven vitamin markets, and the Court found, moreover, that Hoffmann-La Roche did not derive any advantage on the vitamin B3 market from the fact that it could supply the other seven vitamins, since its competitors could offer a range of other products to purchasers of vitamins. ( 29 ) In the present case, as the Commission has stated in its response, Tetra Pak's advantage on the non-aseptic markets, which derives from its quasi-monopoly on the aseptic markets, is not offset by the possibility that its competitors on the non-aseptic markets may offer other kinds of products to customers.

In paragraph 116 of the judgment under appeal, the Court of First Instance correctly found that the Michelin judgment was not relevant to the settlement of the point in issue here. In Michelin, an extra bonus linked to sales targets on the market in car tyres, offered by Michelin in the Netherlands, was not held to be contrary to Article 86 because it was not a payment linked to the bonus system — which was found to be incompatible with the prohibition in Article 86 — operated by Michelin on the market for heavy-vehicle tyres which it dominated. There was no close link between the market for car tyres and the market for heavy-vehicle tyres because there were significant differences between supply and demand structures on the two markets, which the Court emphasized when determining the relevant market. ( 30 ) The circumstances of that case are therefore not similar to those in issue in the judgment under appeal.

62.

In the light of all the above considerations, I consider that this plea in law should be rejected.

63.

In its third plea, Tetra Pak challenges the Court of First Instance's application of Article 86(d) in the judgment under appeal, alleging that it did not take account of the fact that Tetra Pak's system of tied sales was consistent with the natural link between cartons and filling machines and in accordance with commercial usage in the sector.

64.

In paragraphs 131 to 141 of the judgment under appeal, the Court of First Instance held that Tetra Pak included in its contracts standard clauses requiring only Tetra Pak cartons to be used on the machines sold by it (clause (ix)) and supplies of cartons to be obtained exclusively from Tetra Pak or a supplier designated by it (clauses (x) and (xxv)), in order to render the markets for cartons and filling machines completely interdependent.

The other 24 contractual clauses (clauses (i) to (viii), (xi) to (xxiv), (xxvi) and (xxvii)) formed part of an overall strategy aiming to make the customer totally dependent on Tetra Pak for the entire life of the machine once purchased or leased, thereby excluding in particular any possibility of competition at the level both of cartons and of associated products.

65.

The Court of First Instance considered that those tied-sales clauses were abusive because they strengthened Tetra Pak's dominant position by reinforcing its customers' economic dependence on it.

66.

In its appeal, Tetra Pak claims that the contractual clauses tying carton sales to sales of filling machines are lawful in the light of the wording of Article 86(d) since there is a natural link between the two products and because such tied sales are in accordance with commercial usage in the sector.

67.

Those arguments should be rejected.

68.

Article 86(d) provides that abuse as prohibited by that Article may consist in ‘making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts’.

69.

Systems of tied sales of products which are by nature separable and can be marketed separately thus constitute abuses contrary to Article 86, as do tied sales in sectors where they are not customary. The judgment under appeal rightly considered that cartons and filling machines were not by nature inseparable products nor did commercial usage in the sector require recourse to tied sales. There were undertakings on the non-aseptic markets, such as Elopak, which had long produced only cartons used in filling machines manufactured by other undertakings. Other small non-aseptic carton manufacturers, moreover, used filling machines from North American or Japanese undertakings. The absence of the alleged natural link between cartons and filling machines is in any event incontrovertibly shown by the fact that in response to the Commission's contested decision Tetra Pak undertook to abandon its system of tied sales and make technical specifications available to others needing to adapt cartons for use with its filling machines.

70.

Finally, I find unacceptable the interpretation put forward by Tetra Pak in its appeal, to the effect that Article 86(d) may be construed, a contrario, to mean that a dominant undertaking on a market does not commit an abuse if it sets up a system of tied sales for products which arc by nature inseparable or if such a practice is normal commercial usage in the sector. In that regard, as the Commission points out in its response, the Court of First Instance was right to state at paragraph 137 of the judgment under appeal that:

‘... Moreover and in any event, even if such a usage were shown to exist, it would not be sufficient to justify recourse to a system of tied sales by an undertaking in a dominant position. Even a usage which is acceptable in a normal situation, on a competitive market, cannot be accepted in the case of a market where competition is already restricted. ...’

Thus, a system of tied sales of products which arc by nature inseparable or one which is normal commercial practice in the sector will in principle constitute an abuse, unless it is objectively justified. This Court has held that an undertaking which is in a dominant position and ties purchasers directly or indirectly by an exclusive purchasing obligation abuses its position inasmuch as it deprives the purchaser of choice as to his possible sources of supply and limits access to the market by other producers. ( 31 ) In the final analysis, it is only in exceptional cases that tied sales by a dominant undertaking may be justified by the nature of the products or commercial usage.

71.

In view of the above considerations, the present plea in law should be rejected.

72.

In its fourth plea, Tetra Pak claims that the judgment under appeal should be set aside in so far as it finds that the sale at predatory prices of Tetra Rex cartons in Italy and non-aseptic filling machines in the United Kingdom constituted abuse of a dominant position. The appellant considers that those prices cannot be regarded as predatory in the light of the case-law of the Court of Justice, because Tetra Pak had no reasonable prospect of recouping the losses thereby incurred since the prices in question were charged on the non-aseptic market, on which it did not hold a dominant position.

73.

The application of Article 86 to predatory pricing has been defined by this Court in AKZO. Taking as its basis the objective concept of abuse, the Court held in that judgment that Article 86 ‘prohibits a dominant undertaking from eliminating a competitor and thereby strengthening its position by using methods other than those which come within the scope of competition on the basis of quality’. ( 32 ) From that point of view, the Court considered that competition based on pricing is not always legitimate and went on to identify two types of predatory pricing contrary to Article 86.

74.

First, it regarded ‘prices below average variable costs (that is to say, those which vary depending on the quantities produced) by means of which a dominant undertaking seeks to eliminate a competitor’ ( 33 ) as abusive.

When a dominant undertaking sells its products at below average variable cost prices, there is a presumption of predatory intention, since such an undertaking ‘has no interest in applying such prices except that of eliminating competitors so as to enable it subsequently to raise its prices by taking advantage of its monopolistic position, since each sale generates a loss, namely the total amount of the fixed costs (that is to say, those which remain constant regardless of the quantities produced) and, at least, part of the variable costs relating to the unit produced’. ( 34 )

75.

Secondly, the Court considered that ‘prices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor’. ( 35 ) Such abuse thus requires the existence both of prices below average total costs and of a plan to drive out the competitor.

76.

In neither of those cases of predatory pricing identified in AKZO did the Court of Justice require proof that the dominant undertaking have a reasonable possibility of subsequently recouping the losses deliberately incurred. The appellant's argument that paragraph 71 of AKZO posits the possibility of recouping losses as a prerequisite for the existence of predatory pricing should be rejected. In that paragraph, the Court merely explained the reason for which sales at below average variable costs are to be deemed to have a predatory intent.

77.

In support of its arguments, the appellant refers to the case-law of the Supreme Court of the United States, in particular to Brooke Group v Brown & Williamson Tobacco, ( 36 ) in which it was stated that belowcost prices can be predatory in nature only if the dominant undertaking had a reasonable prospect of subsequently recouping its deliberately incurred losses. The Supreme Court therefore considered that predatory pricing exists if sales are made below cost and the undertaking in question expects to recoup the losses incurred. That second requirement must be specifically proved, because the possibility of recouping the losses is the ultimate goal of the predatory pricing strategy and, were it not feasible, the practice would be one of advantage to consumers.

78.

I do not consider it desirable that the Court of Justice should lay down the prospect of recouping losses as a new prerequisite for establishing the existence of predatory pricing contrary to Article 86, for a number of reasons:

79.

In the judgment under appeal, the Court of First Instance correctly applied the tests laid down in AKZO, considering that the sale of Tetra Rex cartons in Italy below variable costs between 1976 and 1981 was contrary to Article 86 because, by its very nature, it was intended to oust Elopak and strengthen Tetra Pak's leading position on the non-aseptic markets. In addition, in 1982 Tetra Rex cartons were sold at below total cost and a series of factors, set out in paragraph 151 of the judgment under appeal, provide evidence that Tetra Pak planned to eliminate Elopak from the Italian market, so that the practice was rightly held to be abusive and contrary to Article 86. The same analysis must apply to the fundamentally parallel reasoning by which the Court of First Instance demonstrated the predatory nature of the pricing of non-aseptic filling machines in the United Kingdom from 1981 to 1984.

80.

The appellant considers that such predatory pricing does not infringe Article 86 because it took place on the non-aseptic markets on which Tetra Pak did not hold a dominant position. That argument should be rejected since, as I have considered above, the quasi-monopoly on the aseptic markets and the close links between those and the non-aseptic markets rendered Tetra Pak's abuses on the non-aseptic markets contrary to Article 86.

81.

For all those reasons, I consider that the present plea must be rejected.

82.

In its fifth plea, the appellant seeks the annulment, or at least a substantial reduction, of its fine on the ground that, in its view, the Court of First Instance wrongly failed to accept the mitigating factors adduced by Tetra Pak, in particular the fact that the contested decision set a new precedent in several important respects. Specifically, the appellant considers that as regards the calculation of the fine the Court of First Instance, like the Commission, took no account of the absence of precedents in the field of tied sales, predatory pricing and the possibility that an undertaking dominant on one market can commit abuses on a related market where it is not dominant.

83.

That argument cannot be accepted. In the judgment under appeal, the Court of First Instance took into consideration the allegedly innovative nature of the contested decision, since it noted the point as one of Tetra Pak's arguments at paragraph 228 of the judgment, in the following terms:

‘Fifth, the Commission has not taken into account the unprecedented nature of both its method of defining the product market and the “neighbouring market” theory by which it justified the application of Article 86 of the Treaty in the non-aseptic sector’.

84.

That argument was rejected in paragraph 239 of the judgment under appeal, in which the Court of First Instance held that ‘... even if in some respects defining the relevant product markets and the scope of Article 86 may have been a matter of some complexity, that factor cannot in this case lead to a reduction in the amount of the fine because of the manifest nature and the particular gravity of the restrictions on competition resulting from the abuses in question. The applicant's allegations set out in paragraph 228 above relating to the allegedly unprecedented nature of certain legal assessments in the Decision cannot therefore be accepted’.

85.

In my view, the Court of First Instance was thus right to reject as a mitigating factor the innovative nature of the decision by that reasoning concerning the calculation of the fine. There had already been Commission decisions and judgments of the Court of Justice relating to tied sales and predatory pricing. To apply Article 86 to abuses committed by a dominant undertaking on a related market on which it holds a leading but not dominant position is admittedly a significant innovation. However, that development in the application of Article 86 is in line with the previous case-law of this Court relaxing the rule that the dominated market and the market affected by the abuse must be the same. Furthermore, and in any event, the Commission could have penalized Tetra Pak's abuses on the non-aseptic markets by showing that it enjoyed a dominant position on them.

86.

For the rest, the judgment under appeal properly applies the criteria laid down by this Court for determining the amount of fines, concluding that the ECU 75 million fine imposed by the Commission on Tetra Pak — the heaviest ever imposed on a single undertaking — was proportionate to the duration, extent and gravity of Tetra Pak's anticompetitive practices.

87.

For the above reasons, I propose that this plea in law should be rejected.

88.

Under Article 69(2) of the Rules of Procedure, applicable to appeal proceedings under Article 118, the unsuccessful party is to be ordered to pay the costs. Accordingly, if, as I propose, the appellant's pleas are rejected, it must be ordered to pay the costs of the proceedings.

89.

In accordance with the above considerations, I propose that the Court should: