2.

In this connection, as has been stated, we are first of all concerned with the question whether Article 86 can be applied at all to processes of concentration.

Admittedly this question needs first of all to be limited to some extent.

Firstly, it must be stressed that Article 86 certainly does not without any more ado permit control of mergers. In this respect, there is no dispute between the parties and it will suffice to make a comparison with the provision of Article 66 of the Coal and Steel Treaty (which came into effect at an earlier date and which contained extensive rules in regard to mergers) for us to realize that the authors of the EEC treaty did not in Article 86 wish to adopt the aims and procedures of Article 66 of the European Coal and Steel Treaty. It is on the other hand equally certain that there is no justification for the thesis that a change in the market structure by mergers of undertakings cannot ever be caught by Article 86. In this connection I would only refer to the view, recognized by legal authorities generally as well as by the applicants, that Article 86 takes effect when a dominant undertaking brings its market power into play and, say, by means of its price policy, exercises pressure upon a competitor for the purpose of forcing him to cease his competition and to force him to merge with the dominant undertaking. In such circumstances the application of Article 86 can be approved of, having regard to the fact that we are there dealing with the behaviour on the market of a dominant undertaking, the purpose of which clearly is to restrict competition.

On the other hand, one must add immediately that the last-mentioned possibility of interpretation does not play a part in the present case. Though there are certain indications on the part of the Commission which appear to hint in this direction (e.g., when the Commission considers that the ending of the licensing agreements existing between Continental and Thomassen and the necessity of negotiating new agreements could possibly have been of importance in connection with the decision on the part of the Thomassen board to advise the shareholders to sell). In the final result it is quite clear from the applicants' comments concerning the date of the negotiations on the licence and the course which these negotiations took, as well as the conditions attaching to the acquisition of the shares, that the Commission does not go so far as to maintain that the takeover of Thomassen by Europemballage (in connection with which, after all, the shareholders of Thomassen had the decisive word) involved the use of unfair means.

The only question of interest in the present case — that much is clear from the attempts at limiting the issues which have just been undertaken — is purely whether Article 86 also applies if an undertaking in a dominant position on the market, by means of the acquisition of another undertaking reinforces its position on the market, to such an extent that ‘in practice’ nothing remains in the way of competition of economic significance. As we know, this is the basic thesis of the Commission in the present context and precisely this point of view is emphatically under attack by the applicants.

To do justice to the central issues of the case thus set out, one has to examine a number of points.

In the first place it is clear that circumstances such as those envisaged by the Commission are not directly covered by any of the four instances enumerated in Article 86, second paragraph. That much emerges from a simple perusal of the instances of abuse there set out. This however is not the final word on the application of Article 86, for undoubtedly the cases of abuse mentioned are only examples and not an exhausive enumeration — that already emerges from the use of the term ‘in particular’.

Going on, one must also concede that the wording of Article 86, first paragraph, with its expression ‘abuse … of a dominant position within the Common Market’, appears to hint that its application can be considered only if the position on the market is used as an instrument and is used in an objectionable manner; these criteria are therefore essential prerequisites of application of the law. If this is indeed so, then the application of Article 86 to the present case must certainly be excluded since, as has already been stated, even the Commission takes the view that the applicant Continental did not in connection with the acquisition of the Thomassen shares use their market strength acquired through Schmalbach, as an instrument.

As against this however, the Commission argues that the factor mentioned (the use of market strength) admittedly does play a part in the case of the examples mentioned in Article 86, second paragraph (a) (c) and (d), but in the case of the example quoted under (b), it clearly recedes as a factual characteristic to a considerable extent. Under this provision there is also to be treated as an abuse the ‘limiting of production, of markets or technical development to the prejudice of consumers’; i.e., there enter into consideration internal events, in relation to which market strength is not relevant, provided only that there is a case of harm to the consumer, i.e., the occurrence of a certain effect upon the market. Proceeding from this basis, the Commission is above all intent upon justifying its theory previously outlined, which leans upon Article 86, second paragraph (b), and upon applying the term ‘abuse’ to a diminution of competition by reason of an increase in market strength, because in such a case the limitation of choice for the consumer could result in his interests being jeopardized. It is in the Commission's view important to refer back to the principles and aims of the Treaty, such as those that can be gleaned from the Preamble to the Treaty (ensuring ‘fair competition’) and Article 3 (f) ‘the institution of a system ensuring that competition in the Common Market is not distorted’. From Article 85 (3) (b) the Commission furthermore deduces a basic principle applicable to the law on competition contained in the Treaty, that is the principle that there must not be an elimination of competition ‘in respect of a substantial part of the products in question’.

Thus the decisive questions of the case are really narrowed down to whether we are able to follow the Commission in these deductions or whether — as the applicants think is the case — they give rise to grave objections. After weighing up all relevant aspects I have come to the conclusion — and here I shall mention the result of my considerations at the very outset — that there are serious objections as regards the soundness of the theories put forward by the Commission.

It is quite clear that the Commission is attempting to interpret Article 86 extensively by equating the damage to consumer interest which occurs when competition ceases to exist, i.e., when there is a limitation of possibilities of choice, with damage to the consumer consequent upon a limitation of production as a result of a dominant position. As a matter of principle, this interpretation must be subject to doubt in the face of a provision as drastic as that contained in Article 86 which constitutes a prohibition (probably having as a consequence nullity in civil law) and for the infringement of which a penalty is provided. In the light of this, there is a great deal to be said for the theory that one ought to give a narrow interpretation, i.e., that one ought to be cautious in attempting analogies and that one ought to demand — as the applicants consider correct — that there must be a case of an infringement of at any rate the kind enumerated in the examples set out in Article 86, paragraph 2 (a) to (d). Put into other words therefore, one ought in this connection to proceed from the principle ‘in dubio pro libertate’, as that principle was emphatically underlined by well-known authors in relation to the relevant regulation of paragraph 22 of the German law against restriction on competition, with the object of adhering closely to the text of the provision.

Indeed, it cannot be denied — and I say this with reference to the important requirement of legal certainty — that harm to the consumer within the meaning of Article 86, second paragraph (b), the only relevant norm in the present context, represents a rather more precise element than the limitation of possibilities of choice for consumers by the elimination of a competitor, which only may lead to harm. The present case itself emphasizes how difficult the economic assessments to be undertaken in this connection are and to what extent there is, on the basis of the theory put forward by the Commission, a lack of foreseeability of the legal consequences. In the face of this, it likewise does not help to refer to the possibility of obtaining a negative clearance under Article 2 of Regulation No 17, since, apart from the time taken by such procedures, it is clear that no validating effect would result from such clearance. Insofar as the Commission, for the purpose of providing a foundation for its point of view, refers to principles and objects of the Treaty that may be deduced from the Preamble to the Treaty and its introductory Articles, one must counter this with the following. It is probably agreed that the provisions under discussion amount to declarations and rules which are not suitable for direct applicability. That emerges above all from the text of Article 3; this obviously provides in many respects for the promulgation of implementing rules by the Member States or the Council, or — as is shown by the term ‘as provided in this Treaty’ — there are references to the more detailed provisions contained within the Treaty itself. With reference to Article 3 (f), the provision of interest in the present context, such a result emerges, if only because of the indefinite nature of the terminology used. Indeed, it is just as difficult to deduce from it what is meant by ‘distortion of competition’, as it is to deduce from the Preamble to the Treaty a precise test for the expression ‘fair competition’. Rather is it necessary in this respect to refer back to the specific Articles 85 and 86 of the Treaty. One can however roughly deduce from Article 85 that a restriction of competition, i.e., a breach of the principle of undistorted competition, is indeed acceptable, provided that the conditions of paragraph 3 are complied with. It further follows from Article 86 that the Treaty will even accept the total absence of any competition, i.e., a complete monopoly. One is in my opinion entitled to say this, because Article 86 clearly does not distinguish between different degrees of domination of the market and because it does not declare to be prohibited even an attempt at creating a monopoly situation, as was done by Section 2 of the Sherman Act, well known to those who drafted the Treaty. Furthermore, it is significant that Article 86 of the EEC Treaty, contrary to Article 66 of the ECSC Treaty and Article 85 (3) (b) of the EEC Treaty, does not contain the proviso that ‘effective competition’ must not be hindered (Article 66 of the ECSC Treaty), or that there must not be a possibility of eliminating competition in respect of a substantial part of the products in question (Article 85 (3) (b) of the EEC Treaty).

If therefore reference to the basic Treaty Articles does not show anything to support the Commission's thesis, one might finally refer to two further not unimportant considerations which further militate against its soundness. Firstly, one must not forget that Article 86 sets out a prohibition without exception, i.e., no possibility of validation is provided. If therefore one were to apply it to cases such as the present one, then this interpretation could under certain circumstances result in very undesirable consequences from the point of view of industrial policy. Furthermore, to adopt the Commission's thesis, by which it would like to get a grip on at least the worst cases of undesirable mergers, could result in attention being distracted from the general problem of the control of mergers. This too would surely be undesirable. In the light of this, it is in my view, in the interest of bringing about a healthy system of competition within the Community, more sensible to say that in principle, Article 86 is not suitable for the purpose of controlling mergers; not to make it appear that the important problem of preventing mergers could be solved, at least partially, by bringing within the terms of the law, by means of a wide interpretation of Article 86, cases where in any event an insignificant vestigial remnant of competition is destroyed, and which, from the point of view of the law of competition, are not therefore of the most important kind. Admittedly, all this represents merely some ideas on the policy of the law, without decisive importance. However, in judging the problem as a whole, one cannot neglect them altogether.

Thus, in coming to the end of my arguments as to the central issues of the case, I can only conclude as follows. I am convinced that the applicants' arguments, deduced from the wording and system of the competition provisions of the Treaty, accompanied as they are by comments on the previous history of the Treaty and by opinions of eminent men of learning, are so woighty that thereafter the Commission's thesis on the interpretation of Article 86 and its application to cases of increase in market strength without the use of any unfair means, no longer seems well founded. Accordingly, the contested decision ought to be annulled on the grounds that it has no legal basis in Article 86 of the Treaty.

3.

As I have already said, I shall not after this finding break off my examination. I would now rather like to go further into the question whether the Commission's finding that Continental, via Schmalbach, had a dominant position on a substantial part of the Common Market, is justified. I shall further examine whether the Commission has correctly evaluated the effects upon the competitive conditions in the Common Market flowing from Schmalbach's merger with Thomassen into the holding company Europemballage. In this connection it is admittedly not my object — a fact which may be understandable in the light of my conclusions so far — to be exhaustive in my examination of the questions, which are somewhat complex and of a predominantly economic kind. My intention is purely to point to some of the problems that arise and to attempt a summary appreciation thereof.

Likewise, in relation to the problem of change of competitive conditions, one cannot avoid the impression that the Commission's findings have not been proved beyond doubt, and accordingly on this aspect of the economic appraisal it is hardly a case of the Commission's decision being based upon a certain and unassailable foundation.

4.

Two further objections by the applicants, with which I shall now deal in a cursory fashion refer solely to Continental's legal position.

These objections relate to the fact that the criticized acquisition of shares had been undertaken by Europemballage, a subsidiary of Continental, having its own legal personality. In this situation however it was doubtful whether the subsidiary's conduct could without more ado be attributed to the parent company, i.e., whether one was justified in treating the Continental group as a unit. Furthermore, it is argued that Continental is not engaged in business with the Common Market and, following international practice in these matters, one had to assume that the Community authorities had no jurisdiction over them.

In my view, one can without the need for long discourses show that these objections are not really well-founded.

5.

There finally remains a series of criticisms of both form and procedure on which a few words will also have to be said.

6.

After having said all this, allow me to summarize my views for the purposes of this opinion.

Bearing in mind my point of view on the question of principle, which relates to the application of Article 86 to events such as those before the Court, but also because the economic material submitted by the Commission on the problem of the dominant position and the change in competitive conditions does not appear to be completely sound, the action brought by Europemballage and Continental must be declared well-founded. The Commission's decision of 9 December 1971 should accordingly be annulled. Further, in accordance with the applicants' claim, the costs of the proceedings should be awarded against the Commission.