1. 

In order to determine whether an agency contract binding dealers, under a selective distribution system for motor vehicles, to the leasing company belonging to the manufacturer's group is compatible with Community law, the Bundesgerichtshof (Federal Court of Justice) has referred to the Court for a preliminary ruling four questions on the interpretation of Article 85(1) of the EEC Treaty and a number of provisions of Regulation (EEC) No 123/85. ( 1 )

More specifically, the national court asks (a) whether an obligation imposed on dealers through an agency contract to commit themselves in the leasing sector exclusively to the company belonging to the manufacturer's group constitutes an agreement prohibited by Article 85(1) of the Treaty; (b) in the event that the answer to that question is in the affirmative, whether that obligation qualifies for block exemption under Regulation No 123/85; and (c) if so, whether the national authorities may nevertheless prohibit that agreement under national rules on competition.

2.

With a 28.8% market share, Volkswagen AG (hereinafter *VAG') is the leading manufacturer of motor vehicles in Germany. It distributes vehicles under the VW and Audi brand names in Germany through a network of 1664 dealers (hereinafter ‘the VAG dealers’). The relationship between VAG and its dealers is governed by an exclusive distribution contract by which VAG entrusts them with the sale to the public within a specified territory of new VW and Audi vehicles and spare parts and with after-sales service. Dealers are also entrusted with the responsibility of offering a number of services (paragraphs 1(1), 2(3) and 4(1) of the distribution contract), including, and this is the relevant point in this case, the leasing operations carried out by VAG Leasing GmbH (Part III, section 1, of Annex 2 to the distribution contract).

VAG Leasing GmbH, a VAG group company which was formed in 1966, initially leased only VW vehicles exclusively to business users. Starting in 1977, its leasing activity, which by then also included Audi vehicles, was extended to private users as well. As from its inception, VAG Leasing — as it explained during these proceedings — carried on its business by establishing forms of collaboration with the dealers, in particular through exclusive agency contracts. That practice was generalized from 1989 onwards: all VAG dealers in Germany are now bound to VAG Leasing by uniform agency contracts.

3.

In April 1989 VAG and VAG Leasing sent out a letter to all the dealers, which they were to return (duly signed) in order to signify their agreement, relating to the ‘agency activity undertaken by VAG dealers for the account of VAG Leasing GmbH’. ( 2 ) In particular, that letter embodied (section 1) the following exclusivity clause:

‘It is an essential interest of Volkswagen AG, which it is the duty under paragraph 2(6) of the VW and Audi dealership agreements of all businesses in the VAG sales organization to represent and advance in every way, that VAG dealers act for VAG Leasing GmbH in leasing transactions by means of active and exclusive sales promotion and agency functions.’

Section 1 of the letter further states that ‘incorporation of VAG Leasing GmbH into the VAG distribution system will of necessity result in direct legal relations between VAG Leasing GmbH and the VAG dealers in their capacity as intermediaries’.

4.

In addition to selling to the public, which they carry out on their own behalf and on their own account, the VAG dealers carry out leasing business for the account of VAG Leasing. In their capacity as intermediaries, it is therefore the dealers who negotiate and conclude the leasing contracts; they acquire the relevant motor vehicles (on their own behalf and on their own account) and then transfer ownership in them to VAG Leasing at the price which they themselves paid. For every leasing contract concluded, the dealers receive an agent's commission corresponding to the profit which they would have received in the case of a normal sales transaction. Subsequently, when the leasing contract expires, they buy back the vehicle.

VAG makes approximately 18% of its sales on its domestic market through VAG Leasing, which makes use of a subsidiary of its own, Seat Leasing GmbH. In addition, according to estimates provided by VAG itself, approximately 80% of leasing contracts relating to VW and Audi vehicles are concluded by VAG dealers on behalf of VAG Leasing.

5.

It is important at this point to point out that the obligation imposed on dealers not to engage in leasing on their own account, to forward the leasing contracts to VAG Leasing and not to procure leasing contracts for competing leasing undertakings does not preclude the sale of vehicles to independent leasing companies — as appears from the order for reference itself —, provided that it was those companies themselves which acquired the customer directly or the customer spontaneously asked for a particular company to be involved. However, under Article 2(1) of the dealer contract, there is an absolute ban on supplying independent leasing companies where the aim of the purchase is to build stocks.

In addition to VAG Leasing, about 400 leasing companies operate on the German market; they include companies affiliated to other manufacturers and undertakings linked with vehicle suppliers or with major credit institutions. According to the Bundesk artellamt (Federal Cartels Office), companies controlled by motor vehicle manufacturers have 60% of the market.

6.

On the grounds that the exclusive tie between VAG dealers and VAG Leasing constituted an unfair impediment to the dealers' commercial activity and to that of the independent leasing companies, the Bundeskartellamt, by order of 25 July 1990, prohibited VAG and VAG Leasing from imposing on the dealers the obligation to procure leasing contracts solely for VAG Leasing. It also prohibited VAG from preventing dealers from selling new motor vehicles to independent leasing companies where the dealers had forwarded the relevant leasing contracts to the companies.

The Bundeskartellamt based its decision on Paragraph 26(2) of the Gesetz gegen Wettbewerbsbeschränkungen (Law against Restraints on Competition, ‘the GWB’), which provides that undertakings in a dominant position are forbidden unfairly to impede an undertaking's access to commercial activities which are normally accessible to similar undertakings (first sentence). That prohibition also applies to undertakings on which small and medium-sized undertakings are dependent inasmuch as they supply, or are supplied with, a certain type of product or commercial services, and there are no reasonable possibilities for them to turn to other undertakings (second sentence).

7.

On an appeal brought by VAG and VAG Leasing, the Kammergericht (Berlin Court of Appeal) annulled the Bundeskartellamt's decision on the ground that the requirements for the application of Paragraph 26(2) of the GWB were not met. It held, on the one hand, that VAG and VAG Leasing did not have a dominant position on the market in motor vehicles and, on the other, that the VAG dealers could not be regarded as being on a par with small or medium-sized undertakings.

The Bundeskartellamt brought an appeal on a point of law (‘Rechtsbeschwerde’) against that decision in the Bundesgerichtshof.

8.

Unlike the Kammergericht, the Bundesgerichtshof took the view that the VAG dealers were small and medium-sized undertakings within the meaning of the second sentence of Paragraph 26(2) of the GWB on the ground that, in view of the special features of the subordinate position of vehicle distributors, it had to be considered that they were not sufficiently large to have sufficient possibilities of offsetting the effects of the impediments placed (by VAG) on their commercial activity.

In the Bundesgerichtshofs opinion, however, the obligation imposed on the dealers by VAG and VAG Leasing which had been prohibited by the Bundeskartellamt's order would certainly constitute an unlawful impediment if it were contrary to the Community competition rules. In contrast, there would be no unlawful impediment if the conduct in question should prove to be compatible with those rules, provided that if it were found compatible that would debar the national authorities from prohibiting the conduct on the basis of national law.

9.

As it took the view that the determination of the dispute depended on the interpretation of a number of Community competition rules, the Bundesgerichtshof referred the following questions to the Court for a preliminary ruling:

10.

The national court first asks — obviously on account of the aim of the requirement that trade between Member States should have been affected, which is precisely that of defining, in the context of the law governing competition, the areas respectively covered by Community law and the law of the Member States ( 3 ) — whether the exclusivity clause at issue in this case is likely to affect trade between Member States.

In that connection, it should be called to mind in the first place that, as the Court has consistently held, in order for that requirement to be satisfied, ‘it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or fact that [the agreement, decision or concerted practice] may have an influence, direct or indirect, actual or potential on the pattern of trade between Member States, such as might prejudice the realization of the aim of a single market in all the Member States’. ( 4 )

11.

It appears from the order for reference that it is uncontested that the distribution system of VAG, which is the leading German motor vehicle manufacturer, covers the whole of Germany and that all VAG dealers in Germany are bound by the exclusivity clause at issue. The upshot is that they cannot act as intermediaries for leasing companies based in other Member States, including leasing companies belonging to VAG's foreign dealers. ( 5 ) Likewise, dealers are debarred from concluding themselves leasing contracts relating to lessees based in other Member States. On top of this, VAG, as has already been mentioned, accounts for over 28% of the market in new vehicles and, through VAG Leasing, for about 20% of the leasing sector.

It is clear from those findings alone that the clause in question definitely may affect trade between Member States, given that, as the Court has repeatedly held, a ‘practice restricting competition and extending over the whole territory of a Member State by its nature has the effect of reinforcing the compartmentalization of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is intended to bring about’. ( 6 )

12.

Admittedly, leasing companies based in other Member States may take the initiative of forming commercial relations with VAG dealers based in Germany and thereby acquire from those dealers vehicles for the purpose of carrying out leasing contracts which were not negotiated and, in any event, not procured by those dealers. However, such a possibility may not in these circumstances be regarded as being an ‘access clause’ capable of ruling out the existence of barriers to trade between Member States. ( 7 ) The fact remains that the economic interpénétration sought by the Treaty, and taken by the Court to be one of the requirements for Article 85 of the Treaty to be applicable, would be distorted if trade could be carried out in one direction only.

13.

Lastly, neither can the fact — evidenced by the respondents in the main proceedings — be regarded as conclusive that until April 1989 VAG dealers had not sold any vehicles to leasing companies based in other Member States. In that connection, it is sufficient to observe, as the Court has made clear, that such a situation cannot be regarded as sufficient to ‘exclude the possibility that restrictions on [the traders'] freedom of action may impede intra-Community trade, since the situation may change from one year to another in terms of alterations of the conditions or composition of the market as a whole and in the individual national markets’. ( 8 )

In the final analysis, the exclusivity clause in question must be regarded as being likely to affect trade between Member States.

14.

In its second question, the national court asks whether the exclusivity clause is caught by Article 85(1) of the Treaty. Since that clause occurs in uniform agency contracts, it will, however, first be necessary to ascertain the circumstances in which Article 85 may be applicable to that type of contract.

15.

The very nature of an agency contract, in so far as it is concluded with a person who, as a self-employed intermediary, ‘has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, hereinafter called the “principal”, or to negotiate and conclude such transactions on behalf of and in the name of that principal’, ( 9 ) has raised doubts as to its relevance for the purposes of Article 85(1) of the Treaty. The terms of the problem may be summarized as follows: is an agency contract by its nature outside the application of Article 85(1), in which case it must be held that there is no agreement between separate undertakings within the meaning of that provision, or should it be regarded in any event as an agreement within the meaning of Article 85(1) and consequently assessed in the light of any restrictions on competition to which its clauses give rise?

To date, the answers given to that question have not been at all clear and, in any case, not of such a kind as to facilitate the identification of criteria which would enable exclusive agency contracts to be taken outside the prohibition laid down by Article 85(1). I therefore consider it appropriate to recall, for present purposes, the terms in which the problem has been tackled, starting with the relevant administrative practice and case-law.

16.

The Commission's approach in the matter, as set out in the ‘Communication on exclusive representation contracts concluded with commercial representatives’, ( 10 ) and likewise the Court's case-law ( 11 ) seem to suggest that intermediaries (or agents) may be categorized in two different ways: they may be independent traders, in which case they definitely constitute undertakings for the purposes of Article 85, or auxiliary organs forming an integral part of the principal's undertaking, in which case they constitute, together with that undertaking, an economic unit which, in prinaple, falls out with the prohibition laid down in Article 85.

Where the representative forms an integral part of the principal's undertaking, this would seem to entail the agent's ‘disappearance’ as an independent economic operator, ( 12 ) thereby eliminating one of the requirements for the applicability of Article 85, that is to say the existence of an agreement between (separate) undertakings within the meaning of that provision, with the further consequence that all the clauses of the contract, including the exclusivity clause, would in any event fall outside the prohibition contained in Article 85(1).

17.

However, it is no easy matter to identify criteria which will enable it to be found that the agent has been completely integrated into the principal's undertaking and that an economic unit therefore exists. It can be stated that at least on a prima facie basis the following are not regarded as auxiliary organs forming an integral part of the undertaking: (a) intermediaries who bear, at least in part, the financial risk associated with the performance of the agency contract; ( 13 ) intermediaries who undertake business for their own account in the same market in which the principal is operating; ( 14 ) and (c) intermediaries who act on behalf of several (competing) undertakings. ( 15 )

Manifestly, the criterion of financial risk constitutes the very essence of an agency contract, in so far as it indicates that the intermediary is simply the longa manus of the principal, who has all the rights and obligations — determined by the principal himself — which arise out of the performance of the agency contract. More than proving that the agent forms an integral part of the principal's undertaking — unless that expression is intended to mean simply that the agent has no economic independence in performing the contract ( 16 ) — the financial risk criterion must therefore be regarded as being an essential factor in determining whether or not a ‘typical’ agency contract is involved.

As for the two other requirements mentioned above, that is to say, the agent must not undertake business for his own account and must not act on behalf of more than one undertaking, it is hardly necessary to observe that the non-application of Article 85 to agency contracts certainly cannot be made to depend on the presence of clauses of that type. ( 17 ) It is self-evident that the fact (which is assumed as a precondition) that it is precisely such clauses which cause or, at any rate, reinforce the agent's integration into the principal's undertaking makes the argument that they escape the prohibition set out in Article 85(1) by reason of the very fact that they are so integrated untenable. ( 18 )

18.

It is quite plain from the foregoing that the economic unit theory is completely inadequate for the purposes of the proper, coherent determination of the conditions for the applicability of Article 85 to agency contracts. In particular, to decide what treatment to give to an agency contract on the basis of the economic unit criterion — and hence on the basis of the alleged absence of an agreement between separate undertakings — would mean that all the clauses of the contract would have general immunity with respect to the provisions of Article 85. Such an outcome, which is unanimously contested, is unacceptable. ( 19 )

Indeed, to my mind, the search for universal parameters capable of providing a general answer applicable to all agency contracts and every individual contract viewed as a whole is doomed to fail. Seen from this angle, the degree to which the agent forms an integral part of the principal's undertaking — within the limits adumbrated above (absence of financial risk) — and the economic reality underlying each agency contract constitute parameters which are suitable solely for determining, for the purposes of Community competition law, the degree to which an agency contract is a ‘typical’ one, and its only consequence is that the subsequent consideration of the contract's compatibility with Article 85 will or will not take account of the characteristic features of agency contracts.

19.

In the final analysis, it must be acknowledged that, since the intermediary is in any event an independent economic operator, an agency contract is indeed invariably concluded by two separate undertakings, with the result that, in principle, it has to comply with the competition rules. It follows that individual clauses of a contract escape the application of those rules only in so far as neither their object nor effect is to restrict competition.

Exclusivity clauses, which are certainly frequently encountered in agency contracts, ( 20 ) may therefore be considered to be compatible with Article 85(1) only if they are essential in order for the contract to be able to perform its function in full. ( 21 ) It is to that effect, moreover, that the Court's statement that, where the intermediary in question assumes no financial risk, clauses conferring exclusive rights are not in themselves incompatible with Article 85 must be understood. ( 22 ) Viewed the other way about, what this means is that such a clause is not taken outside the scope of Article 85 simply because it occurs in a contract described as an agency contract; in contrast, what is necessary in order for this to be the case is that the restriction on competition entailed by the clause must be necessary on account of the legal/economic nature of the contract embodying it.

20.

It follows, as far as the instant case is concerned, that it is necessary first to determine whether or not a ‘typical’ agency contract is involved. In that connection, it is scarcely necessary to point out that the clause at issue requires the VAG dealers to act as intermediaries exclusively for the leasing company belonging to the VAG group.

I am unable to accept VAG's argument that the agency contract in question falls outside Article 85(1) in that it satisfies both the criteria contained in the Commission's 1962 Communication and the relevant case-law of the Court. Having regard to the foregoing analysis, it does not seem relevant to me to argue — as VAG does — that the dealers in question constitute an economic unit together with VAG itself and VAG Leasing, on the ground that they carry out their activity as intermediaries in relation to a single make of vehicle and, in addition, within the framework of the same, single organizational structure.

21.

In contrast, I would observe that, as moreover the Bundeskartellamt argues, the VAG dealers/intermediaries themselves assume at least part of the financial risks connected with the transactions carried out on behalf of VAG Leasing. Apart from anything else, the very fact that they are bound, when the leasing contracts run out, to repurchase the vehicles concerned and resell them in accordance with the predetermined detailed rules laid down in the agency contract is not a typical feature of an agency contract and means that, when all is said and done, the dealers themselves bear the commercial risk of the transactions carried out on behalf of VAG Leasing.

In addition, although the sales and leasing markets are separate, in this case it is particularly difficult to dissociate sales business from leasing business, since in both cases the dealers/intermediaries utilize the organizational structure available to them as VAG dealers and, to all intents and purposes, in both cases ‘sell’ new vehicles. Even when a dealer engages in activity as an intermediary for VAG Leasing, the dealer nevertheless is selling new vehicles: in the first place, he sells to himself in his capacity as intermediary (at the price at which the vehicle was supplied to him); he then transfers ownership in the vehicle to VAG Leasing, whereupon he receives from the latter the price he paid plus commission equal to the profit which he would have earned in the case of a normal sale. In those circumstances, it is moreover legitimate to consider that the freedom enjoyed by the representatives as dealers may be likely to influence the leasing business carried on in favour of VAG Leasing.

22.

In the final analysis, it follows from the economic context and the special features of the contract binding the VAG dealers to VAG Leasing, in particular the fact that the dealers themselves assume part of the commercial risk connected with the transactions carried out on behalf of VAG Leasing, that what is involved is not a ‘typical’ agency contract within the meaning of the relevant case-law.

It therefore remains to be determined, above and beyond the classification of the contract in question, whether dealers belonging to a selective distribution network can lawfully be bound by means of an exclusivity clause to the manufacturer or to one of the manufacturer's companies, not only in regard to the sale of new vehicles and spare parts, but also in regard to activity carried out as an intermediary for the account of leasing companies.

23.

During the proceedings, stress was placed on the fact that the clause in question considerably restricts dealers' commercial freedom: on the one hand, the dealers may not act as intermediaries or in any way collaborate with leasing companies other than VAG Leasing; on the other, they may not carry on leasing business in their own name and on their own account. It is therefore argued that the clause in question restricts competition by reason of its actual object.

According to fairly well-defined guidance in the case-law, in order to determine whether a given clause has the object of restricting competition within the meaning of Article 85(1), it is necessary to consider the aims pursued by the agreement as such in the light of the economic context in which the agreement is to be applied. ( 23 ) From that point of view, the Court normally considers that clauses which, viewed in the abstract, are necessary in order to ensure that a contract which in itself is not detrimental to competition can fully carry out the legal/economic function characterizing it, do not have as their object the restriction of competition. ( 24 )

24.

Turning to the instant case, it is necessary first to consider whether the exclusivity clause in question, under which dealers belonging to the VAG distribution network are obliged to negotiate and conclude leasing contracts solely in favour of the company belonging to the manufacturer of VAG vehicles, is necessary in order to achieve the aim of the contract in which it is embodied.

Certainly, there is no doubt that, in so far as it enables dealers to offer customers, in addition to new vehicles for sale, a range of ancillary services, including leasing, the contract in question aims increasingly to integrate dealers into the manufacturer's distribution strategy and to strengthen VAG's position on the market. ( 25 ) In addition, it should be noted, first, that VAG Leasing has been leasing vehicles to trade customers since 1967 and to private customers since 1977 and, secondly, that, as is stated in the contract itself, VAG intends to ‘develop ... VAG leasing as a mode of selling vehicles which is particularly well suited to the new requirements of the modern vehicle market’.

25.

In those circumstances, it is therefore obvious that for VAG it is not a matter either of access to the market or of promoting the leasing of its own products, something which it could achieve, for instance, by means of an appropriate advertising campaign, but rather a means of ensuring that in every case VW and Audi vehicles are marketed — be they sold or leased — through its distribution network. To all intents and purposes, therefore, the exclusivity clause in question aims at ensuring that leasing — which is viewed as an alternative mode of marketing to selling — is not carried out by companies outside the distribution network.

Consequently, the clause has the clear object of restricting competition, since its purpose is to place the group company specializing in leasing at an advantage by using the existing sales distribution network. Moreover, this is to the detriment of competing (independent) companies, to which the dealers are obliged not to sell new vehicles in the event that they are intended for the purpose of the performance of contracts procured by the dealers themselves.

26.

Even if it were considered that the clause did not have the effect of restricting competition, its effects, as they appear from the legal and factual circumstances set out by the national court, are in any event incompatible with the proper ‘functioning’ of competition in the common market.

It appears from the case-file that the clause in question, which is embodied in uniform agency contracts additional to the distribution agreements concluded between the same parties, is binding on all VAG dealers in Germany (1664), which account for more than 28% of sales of new vehicles. ( 26 ) Those dealers are, however, precluded from carrying out activities as intermediaries or in any way collaborating with independent leasing companies, whether they are established in Germany or in other Member States.

27.

As to whether the web of agreements in question is likely significantly to restrict free trade, regard being had to the (actual and potential) level of competition on the market in question, I consider that the situation which emerges from the particulars gathered from the documents before the court — without prejudice to any findings which may be made by the national court — is sufficiently clear.

VAG carries out 18% of its sales through VAG Leasing; the latter has approximately a 20% share of the motor vehicle leasing market, which, according to the information provided, is markedly larger than its competitors'. On top of this, the market share of leasing companies controlled by manufacturers is 60% and, for its part, VAG Leasing accounts for about 80% of leasing transactions relating to VW and Audi vehicles. In these circumstances, it is only too obvious that competition is reduced and the access to the market of new independent companies is made considerably more difficult by the existence of the clause at issue.

28.

In conclusion, I consider that I am entitled to state, on the basis of information obtained from the documents and without prejudice to any further findings by the national court, that the clause in question is likely to have anticompetitive effects.

29.

In its third question, the national court asks whether the conduct in question is nevertheless taken outside the application of Article 85(1) of the Treaty by Regulation No 123/85. It will therefore be necessary to determine whether the exclusivity clause contained in the agency contract tying the VAG dealers to VAG Leasing qualifies for exemption under that regulation.

For that purpose, the rationale of the exemption is particularly important and this is a matter which I have had occasion to consider in my Opinion in Case C-70/93 Bayerische Motorenwerke AG v ALD Auto-Leasing D GmbH, which I delivered today. However, in view of the fact that to some extent different aspects are important in the instant case and for the sake of the reader's convenience, it is appropriate to go over the essential characteristics of the relevant regulation again before specifically considering the clause at issue in the light of the rationale for the exemption.

30.

Regulation No 123/85 — which has been the subject of much discussion — exempts from the prohibition set out in Article 85(1) agreements by which the supplier entrusts an (authorized) dealer with promoting the distribution of contract goods within a defined territory and undertakes to supply in that territory only that dealer with motor vehicles and spare parts (Article 1). Exemption is also granted for any obligation on the supplier neither to sell contract goods to final consumers nor to provide them with servicing for contract goods in the contract territory (Article 2).

The block exemption is also applicable to the obligation on the dealer not to manufacture or sell vehicles or spare parts of competing makes (Article 3(2), (3) and (4)), not to carry on business outside the contract territory (Article 3(8) and (9)) and not to sell contract goods to resellers which do not belong to the distribution network (Article 3(10)), except in the case of intermediaries, that is to say, traders acting in the name and on behalf of final consumers who have written authority to that effect. ( 27 ) All those non-competition clauses are intended to ensure that dealers focus their activity on the sale of contract goods and the associated after-sales service in a specific, easily supervisable area so as to improve their knowledge of the market and consumers' needs, which should have the effect of stimulating both intra-brand and inter-brand competition, while at the same time yielding significant advantages for consumers.

31.

In the light of the foregoing, it can certainly be said that Regulation No 123/85 has provided a sectoral solution to the problem of the conflict between the manufacturer's interest in choosing an effective sales strategy and the dealer's interest in retaining a measure of freedom of action. Thus, the territorial protection granted to the dealer has its counterpart in the obligation which is imposed on him not to manufacture or sell vehicles and/or spare parts of competing makes, together with the obligation — within the limits mentioned above — not to sell contract goods to resellers which do not belong to the distribution network.

Whilst it is true that such a system ultimately secures protection for the distribution network, it is also true that this is certainly not its purpose. In fact, as the fourth recital in the preamble to the regulation makes clear, ‘The exclusive and selective distribution clauses can be regarded as indispensable measures of rationalization in the motor vehicle industry because motor vehicles are consumer durables which at both regular and irregular intervals require expert maintenance and repair, not always in the same place. Motor vehicle manufacturers cooperate with the selected dealers and repairers in order to provide specialized servicing for the product. On grounds of capacity and efficiency alone, such a form of cooperation cannot be extended to an unlimited number of dealers and repairers.’

32.

The justification for the exclusivity and for quantitative selection, as referred to above, manifestly implies that any bars on competition cannot be regarded as being essential for the purposes of rational, efficient distribution unless they are, inter alia, necessary in order to improve the quality of the after-sales service, having regard to the nature of the product. ( 28 ) It follows that, at least prima facie, the exclusivity clause at issue is not eligible to qualify for the protection afforded by Regulation No 123/85.

In order to secure sales and servicing tailored to the specific nature of the product (cars), it is a matter of some indifference with which leasing company the dealer may collaborate, since the after-sales service is in any event provided by authorized dealers. Moreover, the services offered by leasing companies do not exhibit particular links with automotive technology: it would therefore be unwarranted to require leasing companies to carry on their business in relation to a single make of vehicle or, in any case, to agree to manufacturers' controlling their leasing business as regards their own vehicles. In this connection, I cannot but observe, moreover, that VAG itself does not seem to regard an exclusivity clause of the type at issue as essential in order to guarantee efficient distribution: in the other Member States, as has already been pointed out, it has not imposed such a clause on its dealers.

33.

Moreover, Regulation No 123/85 contains no provision which expressly covers and exempts conduct such as that in question in this case. Nothing is provided with regard to possible no-competition clauses (eligible for exemption) which place dealers under a duty to procure leasing contracts exclusively for the company belonging to the manufacturer's group or, in any event, prevent them from selling new vehicles to independent leasing companies where the dealers forwarded the leasing contracts to the companies in question. ( 29 )

The absence of an express provision concerning the conduct in question, albeit not conclusive, is clearly significant, since the regulation in question contains very detailed provisions and derogates from the general prohibition of anticompetitive agreements. In that connection, I would point out that the Court of First Instance has held, precisely with regard to Regulation No 123/85, that ‘having regard to the general principle of the prohibition of anticompetitive agreements laid down by Article 85(1) of the Treaty, provisions which derogate from this in a block exemption regulation cannot be interpreted widely and cannot be interpreted so as to extend the effects of the regulation further than is necessary for the protection of the interests which it is intended to safeguard’. ( 30 ) I agree entirely with that statement, which I regard as uncontestable.

34.

However, VAG and VAG Leasing argue — inter alia in view of the increasing demand for leased vehicles — that, from the manufacturer's point of view, there is no difference between purchasing and leasing in economic terms, not even where the leasing contract embodies no option to purchase on the part of the lessee. Instead, regard should be had to the fact that in practice there are two distinct legal forms of vehicle distribution, which are defined precisely by the manner of acquisition by the final consumer, namely purchase and leasing. Whether the vehicle is owned by the user or whether the user merely enters into a leasing contract is therefore completely irrelevant for the purposes of the application of the regulation, this being a legal distinction which in this context is only a formal one.

According to VAG and VAG Leasing, that argument is confirmed by Article 13(12) of Regulation No 123/85, according to which ‘“distribute” and “sell” include other forms of supply such as leasing’. The respondents in the main proceedings infer from that definition that exempted no-competition clauses applicable to selling also apply by analogy to leasing.

35.

In that regard, it is observed in the first place that that definition (a) must be read in the light of the fact that Regulation No 123/85 is concerned with the relationship between the manufacturer and its dealers and (b) must be referred to a substantive provision, namely one of the no-competition clauses exempted by the regulation, if it is to assume its proper proportions.

What I mean is that block exemption extends to cover leasing only in so far as a commitment is involved — covered by the regulation, of course — which binds the contracting parties, namely the manufacturer and the dealer. ( 31 ) In an appropriate case, it will therefore be the manufacturer who is debarred from leasing out (in that it is equivalent to selling) contract goods to final consumers (Article 2) and it will be the distributor who is debarred from leasing out new vehicles competing with the contract goods, in the same way as he is precluded from selling such vehicles (Article 3(3)); should the dealer himself undertake leasing business, he will have to respect the limits of his contract territory.

36.

If we may now turn to the individual provisions of the regulation which are relied upon in order to argue that the agreement in question qualifies for exemption, that is to say the provisions which are alleged to apply by analogy also to the conduct at issue in this case, I would say straight away that I do not consider that paragraphs 8 and 9 of Article 3, albeit raised in the course of the proceedings, are relevant. ( 32 ) Those provisions, as I have already stated in my Opinion in Case C-70/93, ( 33 ) relate solely to the dealer's activity outside the contract territory and impose restrictions on it which encourage it to concentrate its activity of distribution and servicing in a defined, supervisable area so as to improve customer service. In contrast, I consider it appropriate to carry out a more detailed examination of the provisions of Article 3(3) and (10)(a) in relation to the instant case.

37.

Article 3(3) enables an obligation to be imposed on the dealer not to ‘sell new motor vehicles which compete with contract goods’; a similar clause is provided for in respect of spare parts competing with contract goods (Article 3(4)). On a proper view, these provisions relate to the only exclusivity clauses imposed on the dealer to which Regulation No 123/85 grants exemption.

However, VAG and VAG Leasing argue that Article 3(3), read in the light of the definition given in Article 13(12), could be interpreted as covering the contractual bar on dealers concluding, themselves or in favour of third parties, leasing contracts for vehicles supplied by the manufacturer. On this view, therefore, the exemption for the prohibition of competition set out in Article 3(3) applies also to the bar on concluding leasing contracts in the dealer's own name and for its account or in favour of companies other than the leasing company belonging to the manufacturer's group. In other words, the dealers are lawfully tied to the manufacturer by an exclusivity clause, not only as regards the sale of new vehicles and spare parts, but also as regards the ‘sale’ of the services which ‘gravitate’ around the car market.

38.

It is only too obvious that the clause in question enables the manufacturer to integrate the dealer even more into its sales strategy, while at the same time benefiting its own leasing company and thereby, in the final analysis, its own economic interests. However, it is less obvious how the definition set out in Article 13(12) is capable of supporting the interpretation advocated by the respondents in the main proceedings.

Article 3(3), even read in the light of the definition in question, simply means that the dealer may not lease out (in so far as it is equivalent to selling) products of competing makes. In this case, however, it is undisputed that the activity of leasing relates solely to VW and Audi vehicles: consequently, the dealer is not leasing competing products but collaborating (possibly) with leasing companies which are in competition with the manufacturer's leasing company. This is not enough to make the obligation imposed on the dealers to commit themselves in the leasing sector exclusively to the company belonging to the manufacturer's group qualify for exemption. In this regard, it is sufficient to note, on the one hand, that that interpretation is clearly at odds with the rationale of the regulation, as described above, ( 34 ) and, on the other, that leasing definitely does not fall within the contract goods defined in Article 13(4) of the regulation. ( 35 )

39.

Under Article 3(10)(a), the dealer may be put under an obligation to supply to a reseller ‘contract goods or corresponding goods only where the reseller is an undertaking within the distribution system’. The parties' observations concentrate on this very provision — reaching opposite conclusions —, which is certainly essential for the very survival of a selective distribution system for vehicles.

VAG and VAG Leasing take the view that if Article 3(10) and Article 13(12) — to which reference has been repeatedly made — are read together, this leads to the conclusion that the exemption also covers an absolute bar on supplying independent leasing companies. They take this view on the ground that, on the basis of the provisions in question, the leasing companies are to be regarded as resellers which do not, however, belong to the distribution network, inasmuch as they purchase vehicles in order to ‘resell’ them by means of leasing. As they therefore consider that an absolute bar on supplying independent leasing companies is eligible for exemption, VAG and VAG Leasing argue that the ban imposed on dealers' negotiating, concluding and, in any way, procuring leasing contracts for such companies should a fortiori be regarded as lawful.

40.

Clearly, that interpretation presupposes equating the leasing companies to resellers not belonging to the distribution network. Far from equating an independent leasing company to a reseller outside the distribution network, the definition set out in Article 13(12) merely equates selling and leasing, which means, as I have already pointed out, that the clauses relating to selling which are exempted also apply to leasing in so far as they relate to obligations on the dealer vis-à-vis the manufacturer and vice versa, and matters could not be otherwise. ( 36 )

In this case, however, the matter at issue is the obligation imposed by the manufacturer on the dealer to commit itself in the leasing sector exclusively to the group's leasing company, together with the obligation not to sell new vehicles to outside leasing companies where the relevant contracts have been negotiated, concluded or, in any way, procured by the dealer. Vis-à-vis such a company, for present purposes the dealer merely sells new vehicles, with the result that the equation leasing=sales is not relevant or, better, has no raison d'être. In other words, to equate to selling a different legal phenomenon, such as leasing, on the basis of the provision in question, is of no help at all in this case for the simple reason that that which is imputable to the person of relevance for the purposes of the provision is a sale and nothing other than a sale. ( 37 )

41.

Moreover, neither can the independent leasing companies be regarded, for the purposes and effects of Article 3(10), as ‘undertakings’ outside the distribution network.

In so far as such companies confine themselves to leasing out vehicles and their contracts do not contain any option to purchase, they should be regarded as being on a par with final consumers: in other words, they are traders purchasing vehicles for trade purposes, since they remain the owners of the vehicles. ( 38 )

42.

Lasdy, it should be stressed that to equate leasing to reselling would mean putting a complete bar on independent leasing companies' buying VW and Audi vehicles. Indeed, were leasing companies to be equated to unauthorized resellers, the result would be that, under Article 3(10) of the regulation in question, independent leasing companies would be completely prevented from buying vehicles in order to lease them out. ( 39 )

It is only too obvious that such an outcome is unacceptable (if not for VAG): to hold otherwise would be to concede that only leasing companies which belong to or, in any event, are linked with the parent company are authorized to conclude leasing contracts for VW and Audi vehicles; more generally, it is worth repeating that such an interpretation of Article 3(10) could lead to the disappearance of independent companies from the motor vehicle leasing sector.

43.

In the light of the above considerations, I therefore consider that the obligation imposed on dealers to commit themselves in the leasing sector exclusively to the company belonging to the manufacturer's group does not fall within the scope of Regulation No 123/85.

44.

The outcome arrived at would make it unnecessary to answer the fourth question in which, I would remind the Court, the national court asks whether a decision of the national authority prohibiting conduct such as that in point can be reconciled with a different result which may have been dictated, at the Community level, with respect to the same conduct, in the light of Article 85(1) alone or of Regulation No 123/85.

For the sake of completeness, and in the event that the Court should not subscribe to the solution which I propose, I nevertheless consider it useful to answer that question which, in regard to Case C-70/93 in which I have given my Opinion today, calls for further discussion. In the present case the Court is asked to rule on a possible conflict between Community law and national competition law not only where an exemption is granted pursuant to Regulation No 123/85 but also where the conduct at issue does not fall within the prohibition laid down in Article 85(1).

45.

This question brings back before the Court the question of the relationship between Community law and national competition law, on which supporters of the so-called single barrier and those of the so-called double barrier have long been at odds.

If the agreement in question was exempted under Regulation No 123/85, it is a question of deciding whether the primacy of Community law prevents the national authorities from prohibiting — under national legislation on competition — an agreement enjoying the protection of an exempting regulation, having regard to the fact that the regulation in question does not preclude — or at least not in particular circumstances — the application of more restrictive national rules. With regard to such a situation, I will confine myself here to repeating, for the reader's convenience, the observations which I made in that regard in connection with Case C-70/93.

46.

The 29th recital in the preamble to the regulation states that it is ‘without prejudice to laws and administrative measures of the Member States by which the latter, having regard to particular circumstances, prohibit or declare unenforceable particular restrictive obligations contained in an agreement exempted under this Regulation; the foregoing cannot, however, affect the primacy of Community law’.

I shall say forthwith that to reconcile the primacy of Community law with the possibility of prohibiting an agreement which has been exempted by and under Community law seems to me to be a desperate undertaking, even a diabolical one. However, I do not intend to shirk from it.

47.

The starting point for this examination can only be the judgment in Walt Wilhelm, ( 40 ) in which the Court recognized the possibility of a parallel application of Community and national provisions concerning a single agreement, given that the Community provisions consider restrictive practices from the point of view of the barriers to which they may give rise for trade between Member States whilst national provisions are based on considerations peculiar to each State and consider the restrictive practices in that context alone.

However, in that judgment the Court pointed out that such parallel application ‘can only be allowed in so far as it does not prejudice the uniform application throughout the Common Market of the Community rules on cartels and of the full effect of the measures adopted in implementation of those rules’. ( 41 )

48.

That reservation should be regarded as being of fundamental importance since it indicates in the final analysis that the application of national law operates in parallel whenever the provisions of the Treaty so require; that is to say, not only in the sense — which moreover is uncontested — that the existence of an infringement of Article 85 or Article 86 of the Treaty precludes the applicability of less strict national law.

Indeed, in the judgment in Walt Wilhelm, the Court held that the Treaty ‘also permits the Community authorities to carry out certain positive, although indirect, action with a view to promoting a harmonious development of economic activities within the whole Community’. ( 42 )

49.

From the rulings of the Court which have been cited it is sufficiently clear that agreements which have been granted exemption are, for that reason alone, outside the jurisdiction of the national authorities, in the sense that those authorities are debarred from prohibiting them. Useful indications to that effect are also to be found in the judgment in Giry and Guerlain, in which, in order to find that mere ‘comfort letters’ were not such as to exclude the application of national law, the Court found in limine that the agreements in question did ‘not benefit from any decision in application of Article 85(3)’ and did ‘not come within the scope of any regulation granting block exemption’. ( 43 )

50.

Some writers, however, have continued to argue that an exempted agreement is not outside the jurisdiction of the national authorities, on the ground that the objectives of the Treaty are not invariably adversely affected by the application of stricter national rules. In particular, the argument has been put forward — and adopted, moreover, by the United Kingdom in these proceedings — that the exemption granted by Community law to an anticompetitive agreement precludes the application of stricter national law only where the exemption in question constitutes a measure of Community policy. ( 44 )

The Commission itself took the view shortly after the judgment in Walt Wilhelm that that judgment had not resolved the ‘problem as to whether the primacy of Community exemptions constitutes a rigid rule or whether it is a more flexible principle which enables account to be taken in its application of the respective interests of the Community and the Member States’. ( 45 )

51.

Those arguments do not, however, appear acceptable. I take the view that, since the agreements in question are liable to affect trade between Member States and therefore fall in principle within the prohibition set out in Article 85(1), the exemption granted to them cannot but prevent the national authorities from ignoring the positive assessment put on them by the Community authorities. ( 46 ) Otherwise, not only would a given agreement be treated differently depending on the law of each Member State, thus detracting from the uniform application of Community law, but the full effectiveness of a Community measure — which an exemption under Article 85(3) undoubtedly is — would also be disregarded.

52.

Neither does it appear to me that a different conclusion may be reached with regard to agreements protected, not under an individual exemption, but under an exempting regulation. In that connection, it is sufficient to observe that exempting regulations — in the same way as Articles 85(1) and 86 — ‘produce direct effects in relations between individuals and create rights directly in respect of the individuals concerned which the national courts must safeguard’. ( 47 )

A national court is therefore bound not to take decisions which are incompatible with the provisions of an exempting regulation by extending its scope to cover agreements not covered by it or by disregarding its scope in relation to agreements which are covered by the exemption; if need be, it should first make a reference to the Court of Justice for a preliminary ruling under Article 177 of the Treaty.

53.

The considerations set forth above make it obvious that to allow the national authorities to prohibit an agreement which has been granted exemption — even on the ground of particular circumstances — necessarily calls in question the primacy of Community law, unless the view is taken that the particular circumstances involved are of such a kind as not to give rise to any conflict between national and Community law.

However, it is not easy to identify such a special kind of ‘particular circumstances’. The explanation given by the Commission at the hearing with regard to the infelicitous wording of the 29th recital in the preamble to the regulation suggests that a particular circumstance might be, for example, the possibility for a dealer to sell products of several brands, provided that this is essential in order to ensure the dealer's own economic survival.

54.

Since, however, express provision is made for that possibility in the regulation itself (Article 5(2)(2)(b)), the most that can be inferred is that possible anticompetitive agreements, which are in principle eligible for exemption under a provision of the regulation, may be prohibited by national law, but only on condition that this is expressly provided for by some other provision of the regulation. This, to my mind, is the only way of making sense of the statements contained in the 29th recital, which are still contradictory despite this interpretation.

55.

In view of the foregoing, it must therefore be held that the statements contained in the unhappily-worded 29th recital of Regulation No 123/85 are irreconcilable: the principle of the primacy of Community law cannot tolerate a different assessment (and application) by national authorities of an agreement which has been granted exemption under an exempting regulation. Such an agreement cannot therefore be prohibited on the basis of national law.

56.

It remains to be considered whether the same solution must also apply where the agreement in question does not even fall within the prohibition under Article 85(1). On this point, the dominant view is that all agreements that are in conformity with, or at least not contrary to, Community law, save those, of course, that benefit from an individual or block exemption, are not such as to preclude the application of national law, with the result that conduct which is lawful from the point of view of Community law may well be penalized under provisions of national law.

There can be no doubt that national law is applicable where the agreement in point, inasmuch as it is held not to be liable to have an adverse effect on trade between Member States, does not even fall within the field of application of Community competition law. In that regard, it is immaterial whether such a rinding is made in a comfort letter, ( 48 ) a negative clearance, a formal decision or, of course, a judgment of the Court.

57.

In contrast, some doubts may properly be entertained in a case where the Commission's assessment is positive, the Commission considering, for example, that the agreement in point, whilst in principle restrictive of competition, does not constitute a restriction falling within Article 85(1), since it also contributes towards the attainment of the objectives of the Treaty. Situations of this kind do indeed frequently arise in the context of negative clearances and it is specifically with respect to such a situation that some writers argue that the favourable view taken by the Commission cannot be called into question through the application of more rigorous provisions of national law. ( 49 )

There is no doubt that there are solid arguments in favour of that point of view. They point inter alia to inconsistencies in application which could result from a different approach: it is all too clear that the fate of an agreement declared by the Commission to be in conformity with Community law will depend on the national provisions applicable in the matter, with the result that conduct which is prohibited in one Member State will be lawful in others. On the other hand, there can be no denying that an assessment by the Commission which does not find expression in a binding measure cannot by definition be such as to bind the national court, entrusted as it is by the Treaty with the application of the provisions on competition. ( 50 )

58.

After thus setting out the nature of the problem, I do not however consider it necessary to dwell further on these questions, which are doubtless of the greatest interest but fall outside the scope of the present case and would thus fall to be considered in another context and in greater depth.

In the present case it need only be noted that any assessment of compatibility with Article 85(1) would be the subject of a judgment of the Court and, as such, in my view, could not be called into question by the national court or by the competent national authorities. In other words, should the Court come to the conclusion that the conduct here in point, whilst it is liable to have an adverse effect on trade between Member States, does not constitute a threat to competition for the purposes of Article 85(1), it necessarily follows that such an assessment would have the same effect as an exemption, with the result that the national court would not, for the same reasons as those I have already set out with respect to exempted agreements, be able to prohibit the conduct in question.

59.

Such an interpretation is fully in accordance with the considerations underlying the judgment in Walt Wilhelm, frequendy cited above. It would be inimical to the full effectiveness of Community competition law to accept that a national decision may conflict with and prevail over a judgment of this Court finding that the agreement in point does not fall within the prohibition under Article 85(1) because it does not constitute a restriction of competition.

In the result, whenever a particular case does not fall within Article 85(1) because there is no adverse effect on trade between Member States, the competent national authorities may well hold the agreement in point to be anticompetitive in view of the harmful effect it has on the domestic market. Conversely, a binding finding of the Commission or, a fortiori, a judgment of the Court, to the effect that the agreement does not adversely affect competition, precludes, in my view, its being penalized at the national level. In such a case, in my opinion, the requirements for asserting the primacy of Community law are satisfied.

60.

In the light of the foregoing observations, I therefore propose that the Court should reply as follows to the questions referred by the Bundesgerichtshof:

‘An obligation imposed by a motor vehicle manufacturer on dealers in its distribution network to procure leasing contracts exclusively for its own leasing company or a prohibition imposed on those dealers from selling new motor vehicles to leasing companies other than the leasing company belonging to the manufacturer's group where the vehicles in question are intended for the performance of leasing contracts procured by the dealers constitutes an agreement prohibited by Article 85(1) of the Treaty and does not qualify for exemption under the provisions of Regulation No 123/85.’

Should the Court not take this view with regard to the possibility of exempting the clause in question on the basis of Regulation No 123/85, or, in any case, should it hold that the clause is not such as to fall under the prohibition laid down in Article 85(1) of the Treaty, I propose that the reply to the national court's last question should be as follows:

‘As a consequence of the principle of the primacy of Community law, an agreement qualifying for the protection of an exempting regulation or declared compatible with Article 85(1) of the Treaty inasmuch as it does not adversely affect competition may not be prohibited by the national authorities on the basis of more restrictive national provisions.’