JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber,Extended Composition)

25 March 1999 (1)

(Competition — Regulation (EEC) No 4064/89 — Decision declaring aconcentration incompatible with the common market — Action for annulment —Admissibility — Legal interest in bringing proceedings — Territorial scope ofRegulation (EEC) No 4064/89 — Collective dominant position — Commitments)

In Case T-102/96,

Gencor Ltd, a company incorporated under South African law, established inJohannesburg, Republic of South Africa, represented by Paul Lasok QC, instructedby James Flynn and David Hall, Solicitors, London, with an address for service inLuxembourg at the Chambers of Marc Loesch, 11 Rue Goethe,

applicant,

v

Commission of the European Communities, represented by Richard Lyal, of itsLegal Service, acting as Agent, with an address for service in Luxembourg at theoffice of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

supported by

Federal Republic of Germany, represented by Ernst Röder, Ministerialrat, andBernd Kloke, Oberregierungsrat, acting as Agents, Federal Ministry of EconomicAffairs and Technology, Bonn, Germany,

intervener,

APPLICATION for the annulment of Commission Decision 97/26/EC of24 April 1996 declaring a concentration to be incompatible with the commonmarket and the functioning of the EEA Agreement (Case No IV/M.619 —Gencor/Lonrho) (OJ 1997 L 11, p. 30),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fifth Chamber, ExtendedComposition),

composed of: J. Azizi, President, B. Vesterdorf, R. García-Valdecasas, R.M. MouraRamos and M. Jaeger, Judges,

Registrar: J. Palacio González and A. Mair, Administrators,

having regard to the written procedure and further to the hearing on18 February 1998,

gives the following

Judgment

Facts

1. The concentration at issue

Parties to the concentration

1.

    Gencor Ltd ('Gencor‘) is a company incorporated under South African law. It isthe parent company of a group operating mainly in the mineral resources andmetals industries.

2.

    Impala Platinum Holdings Ltd ('Implats‘) is a company incorporated under SouthAfrican law bringing together Gencor's activities in the platinum group metal('PGM‘) sector. Held as to 46.5% by Gencor and 53.5% by the public, it iscontrolled by Gencor for the purposes of Article 3(3) of Council Regulation (EEC)No 4064/89 of 21 December 1989 on the control of concentrations between

undertakings (OJ 1989 L 395, p. 1, corrigenda at OJ 1990 L 257, p. 13; 'theRegulation‘).

3.

    Lonrho Plc ('Lonrho‘) is a company incorporated under English law. It is theparent company of a diversified group with interests in mining and metals, hotels,agriculture and general trade.

4.

    Eastern Platinum Ltd ('Eastplats‘) and Western Platinum Ltd ('Westplats‘),generally known under the name of Lonrho Platinum Division ('LPD‘), arecompanies incorporated under South African law which bring together Lonrho'sactivities in the PGM sector. They are held as to 73% by Lonrho and as to 27%by Gencor through its subsidiary Implats. The latter stake is the subject of ashareholders' agreement ('the Principals' Agreement‘) entered into on15 January 1990 by the Gencor and Lonrho groups. Under that agreement, anequal number of directors is to be appointed by each shareholder, those directorsare to have equal voting rights and no director is to have a casting vote. Theapproval of the board of directors is required for certain decisions, in particular inrelation to the following matters: diversification of the activities of LPD; the levelof dividend distribution; the annual strategic plan and budget; approval of theannual financial statements; and changes in the rates of fees paid to shareholders. Decisions concerning major investments and divestments require the approval ofthe shareholders. Pursuant to agreements signed by Eastplats and Westplats ('theManagement Agreements‘), the management of those companies is provided byLonrho Management Services ('LMS‘), a company incorporated under SouthAfrican law and controlled by Lonrho.

The proposed concentration

5.

    Gencor and Lonrho proposed to acquire joint control of Implats and, through thatundertaking, of Eastplats and Westplats (LPD), in a two-stage operation. In thefirst stage, Gencor and Lonrho were to acquire joint control of Implats. In thesecond stage, Implats was to be granted sole control of Eastplats and Westplats. In return for the transfer by it of its interest in Eastplats and Westplats, Lonrhowas to increase its holding in Implats.

6.

    Following the transaction, Implats was to have sole control of Eastplats andWestplats. Implats was to be held as to 32% by Gencor, 32% by Lonrho and 36%by the public. In addition, an agreement concerning the appointment of directorsand voting arrangements was to govern the conduct of the two main shareholderswith regard to the most important issues in the running of Implats, thus giving themjoint control of that company.

2. Administrative procedure

7.

    On 20 June 1995 Gencor and Lonrho announced that they had entered into headsof agreement to merge their respective PGM operations. On the same day theysent the Commission a copy of the press release announcing the transaction.

8.

    On 22 August 1995 the South African Competition Board informed the parties that,having regard to the documents which they had sent to it on 14 August 1995, thetransaction did not give rise to any concerns under South African competition law.

9.

    On 10 November 1995 Gencor and Lonrho signed a series of agreements relatingto the concentration. These included the purchase agreement, completion of whichwas subject to the fulfilment of a number of conditions precedent includingclearance of the concentration by the Commission by 30 June 1996 or, if the partiesso agreed, by no later than 30 September 1996, as provided in clauses 3.1.8 and 3.3of the purchase agreement.

10.

    On 17 November 1995 Gencor and Lonrho jointly notified the Commission of thoseagreements, together with the annexures thereto, by means of Form CO, inaccordance with Article 4(1) of the Regulation.

11.

    By decision of 8 December 1995 the Commission ordered the suspension of theconcentration, pursuant to Article 7(2) and Article 18(2) of the Regulation until ittook a final decision.

12.

    By decision of 20 December 1995 the Commission found that the concentrationraised serious doubts as to its compatibility with the common market and thereforeinitiated the proceedings provided for by the Regulation, in accordance withArticle 6(1)(c) thereof.

13.

    On 13 March 1996 Anglo American Corporation of South Africa Ltd ('AAC‘)acquired a 6% stake in Lonrho, with a right of first refusal over a further 18%. Through its associated company, Amplats, which is the leading supplier worldwide,AAC is the main competitor of Gencor and Lonrho in the PGM sector.

14.

    Following a meeting held by the Commission on 13 March 1996, Gencor andLonrho initiated discussions with the Commission to explore the scope for offeringcommitments under Article 8(2) of the Regulation.

15.

    On 27 March 1996 the Commission informed Gencor and Lonrho that one of itsmain concerns with regard to the concentration was that it might result in arestriction of output leading to upward pressure on prices. It pointed out in thatconnection that behavioural undertakings were not normally accepted by it.

16.

    On 1 April 1996, following a series of meetings and proposals in that regard,Gencor and Lonrho submitted the final version of the commitments offered bythem. Those commitments concerned, in particular, the level of output at aparticular site.

17.

    By letter of 2 April 1996, the Commission criticised those proposed commitmentson the ground that they did not meet its concerns. In particular, it noted thedifficulties which would be involved in monitoring them and the problems in settingthe transaction aside if they were infringed. It added that they failed to takeaccount of foreseeable growth in demand.

18.

    On 9 April 1996 the Advisory Committee on Concentrations ('the AdvisoryCommittee‘) gave its opinion on the concentration and on the commitmentsoffered by Gencor and Lonrho. It stated that it agreed with the Commission's draftdecision as regards the nature of the concentration, its Community dimension, therelevant product and geographical markets and the inadequacy of the commitmentsoffered. A majority of the Advisory Committee agreed with the Commission'sanalysis that the concentration would lead to the creation of a situation ofoligopolistic dominance in the markets concerned, and with its conclusion that theconcentration would be incompatible with the common market and the functioningof the Agreement on the European Economic Area ('the EEA Agreement‘). Aminority expressed doubts as to whether the Regulation could be applied tosituations of oligopolistic dominance, and for that reason abstained on the questionas to whether or not the transaction was incompatible with the common marketand the functioning of the EEA Agreement.

19.

    On 19 April 1996 the South African Deputy Minister of Foreign Affairs officiallysubmitted to the Commission his Government's observations on the proposedconcentration. In that letter, he limited himself to stating that he did not intend tocontest the policy position adopted by the Community in the field of concentrationsand collusive practices but, having regard to the importance of mineral resourcesto the South African economy, he favoured action in actual cases of collusion whenthey arose. With regard to the case at issue, the South African Governmentconsidered that, in certain situations, two equally matched competitors werepreferable to the situation prevailing at that time, where a single mining enterprisewas dominant in the sector. In the South African Government's view, although thebulk of platinum reserves were located in its country, those located abroad couldtheoretically satisfy demand for 20 years, excluding the significant potentialresources of Zimbabwe. Finally, the South African Government expressed itsdesire to explore those issues with the Commission and asked for the decision tobe postponed until such discussions had been held.

20.

    By Decision 97/26/EC of 24 April 1996 (OJ 1997 L 11, p. 30; 'the contesteddecision‘), the Commission declared, pursuant to Article 8(3) of the Regulation,that the concentration was incompatible with the common market and thefunctioning of the EEA Agreement, because it would have led to the creation ofa dominant duopoly position between Amplats and Implats/LPD in the worldplatinum and rhodium market as a result of which effective competition would havebeen significantly impeded in the common market.

21.

    By letter of 21 May 1996 Lonrho informed Gencor that it did not intend to extendfrom 30 June 1996 to 30 September 1996 the deadline set by the purchaseagreement for fulfilment of the conditions precedent if the condition set out inclause 3.1.8 of that agreement, requiring clearance of the concentration to beobtained from the Commission, was not satisfied within the period laid down.

Procedure before the Court

22.

    On 28 June 1996 the applicant brought this action for the annulment of thecontested decision.

23.

    On 3 December 1996 it made an application under Articles 49, 64 and 65 of theRules of Procedure for measures of organisation of procedure or of inquiry, witha view to establishing precisely the legal status and meaning of the official lettersfrom the South African competition authorities, the scope of South Africancompetition law and the conditions for its application.

24.

    On 18 December 1996, 24 January 1997 and 30 July 1997, the Commissionsubmitted its observations on that application.

25.

    On 25 November 1996 and 3 December 1996 the Federal Republic of Germanyand the United Kingdom of Great Britain and Northern Ireland submittedapplications for leave to intervene in support of the form of order sought by theCommission.

26.

    On 11 December 1996 and 3 January 1997, the applicant requested thatconfidential treatment be given to certain documents in the case, vis-à-vis,respectively, the Federal Republic of Germany and the United Kingdom.

27.

    On 19 February 1997 the Court invited the applicant and Lonrho to reply to anumber of questions concerning the admissibility of the action and to producecertain documents. On 1 April 1997 and 10 March 1997 respectively, the applicantand Lonrho replied to the questions put by the Court. The applicant lodged thedocuments requested, including the Management Agreements entered into byEastplats and Westplats with LMS on 15 January 1990 and the agreement knownas the Principals' Agreement, concerning the control of LPD, which the applicantand Lonrho had concluded on the same date.

28.

    By order of 3 June 1997 the President of the Fifth Chamber, ExtendedComposition, granted the Federal Republic of Germany and the United Kingdomleave to intervene and allowed in part the application for confidential treatment.

29.

    On 27 June 1997 the applicant submitted a further application for confidentialtreatment concerning certain data in the file.

30.

    By order of 16 July 1997 the President of the Fifth Chamber, ExtendedComposition, granted that application.

31.

    On 22 September 1997 the United Kingdom withdrew its intervention. On26 September 1997 the Federal Republic of Germany lodged its statement inintervention.

32.

    Upon hearing the Report of the Judge-Rapporteur, the Court decided to open theoral procedure and, by way of measures of organisation of procedure underArticle 64 of the Rules of Procedure, the applicant and the Commission wererequested to produce the full text of the commitments offered during theadministrative procedure by the parties to the concentration. They produced thedocument requested, on 6 and 12 February 1998 respectively.

33.

    The main parties presented oral argument and answered oral questions put to themby the Court at the hearing on 18 February 1998.

34.

    By letter of 17 July 1998 the Court asked the applicant whether, in view of thejudgment delivered by the Court of Justice on 31 March 1998 in Joined CasesC-68/94 and C-30/95 France and Others v Commission [1998] ECR I-1375, it wishedto withdraw its plea to the effect that concentrations creating joint dominance felloutside the scope of the Regulation. The applicant replied to the Court's questionby letter of 29 July 1998.

Forms of order sought

35.

    The applicant claims that the Court should:

—    annul the contested decision;

—    order the Commission to pay the costs.

36.

    The Commission contends that the Court should:

—    dismiss the action as inadmissible;

—    in the alternative, dismiss it as unfounded;

—    order the applicant to pay the costs.

37.

    The Federal Republic of Germany claims that the Court should dismiss the action.

Admissibility

Arguments of the defendant

38.

    The Commission pleads that the action is inadmissible on the ground that theapplicant no longer has any legal interest in bringing proceedings. The applicant'slegal position would not be altered by a decision of the Court in its favour, sincethe notified transaction can no longer be implemented.

39.

    The Commission notes in that regard that the transaction envisaged between theapplicant and Lonrho was subject to a number of conditions precedent, includingthe need to obtain clearance from the Commission under Article 6(1)(a) or (b) orArticle 8(2) of the Regulation. The final date for fulfilment of that condition was30 June 1996, failing which the entire purchase agreement lapsed, in accordancewith clause 3.3 thereof. Lastly, the same clause allowed for the extension of thetime-limit to 30 September 1996 by written agreement of the parties, but Lonrhorejected such an extension in a letter of 21 May 1996.

Findings of the Court

40.

    An action for annulment brought by a natural or legal person is admissible only inso far as that person has an interest in the contested measure being annulled (CaseT-46/92 Scottish Football Association v Commission [1994] ECR II-1039,paragraph 14). Such an interest exists only if the annulment of the measure is ofitself capable of having legal consequences (Case 53/85 Akzo Chemie v Commission[1986] ECR 1965, paragraph 21).

41.

    In that regard, it should be noted that under Article 176 of the EC Treaty theinstitution whose act has been declared void is required to take the necessarymeasures to comply with the judgment. Those measures do not relate to theelimination of the act from the Community legal order, because the very annulmentby the Court has that effect. They are concerned in particular with eradicating theconsequences of the act in question which are affected by the illegalities found tohave been committed. The annulment of an act which has already been carried outor which, in the meantime, has been repealed from a given date is still capable ofhaving legal consequences. The act could have produced legal effects during theperiod when it was in force and those effects are not necessarily eradicated by itsrepeal. An action for annulment is also admissible if it allows future repetition ofthe alleged illegality to be avoided. For those reasons, a judgment annulling an actis the basis upon which the institution concerned may be led to restore theapplicant sufficiently to his original position or avoid the adoption of an identicalact (see Case 92/78 Simmenthal v Commission [1979] ECR 777, paragraph 32, AkzoChemie v Commission, cited above, paragraph 21, and Case 207/86 Apesco vCommission [1988] ECR 2151, paragraph 16).

42.

    The fact that the contested decision declaring the concentration incompatible withthe common market was addressed to the applicant confers on it an interest in

bringing proceedings and having the legality of that decision examined by theCommunity judicature.

43.

    Furthermore, as the applicant has pointed out, the contested decision is capable ofaltering its legal position as a potential purchaser of Lonrho's interest in LPD.

44.

    Under clause 11 of the Principals' Agreement (in particular 11.1 and 11.6), any saleby Lonrho of any part of its 73% stake in LPD or any proposal by Lonrho to listany part of that stake on a stock exchange would entitle Gencor to acquire thewhole or part of that stake. Gencor's rights of acquisition would also be triggeredif one of the intermediate companies holding shares in LPD left the Lonrho groupand if any third party acquired 51% of Lonrho's share capital. The contesteddecision would constitute an obstacle to the exercise of those rights of pre-emption.

45.

    Finally, the Commission's argument would lead to the result that the legality ofadverse decisions under the Regulation could not be reviewed by the Court in caseswhere the contractual basis for the transaction disappears before the Court givesjudgment. The fact that the basis for the transaction has disappeared cannot initself exclude judicial review of the Commission's decision.

46.

    It follows that the plea of inadmissibility raised by the Commission must berejected.

Substance

47.

    The applicant relies in support of its action on a number of pleas, regarding: (i)lack of jurisdiction on the part of the Commission over the concentration at issueand related infringement of Article 190 of the Treaty; (ii) infringement of Article 2of the Regulation, in that concentrations which create or strengthen a collectivedominant position are not covered by the Regulation, and related infringement ofArticle 190 of the Treaty; (iii) infringement of Article 2 of the Regulation, in thatthe Commission wrongly found that the concentration would create a collectivedominant position, and related infringement of Article 190 of the Treaty; and (iv)infringement of Article 8(2) of the Regulation and related infringement ofArticle 190 of the Treaty.

I — The pleas alleging infringement of the Regulation, in that it did not conferjurisdiction on the Commission to examine the compatibility of the concentration withthe common market, and infringement of Article 190 of the Treaty

Arguments of the parties

48.

    The applicant submits, as its main argument, that the Regulation does not conferjurisdiction on the Commission to examine the compatibility of the concentrationwith the common market. In the alternative, if the Regulation does confer suchjurisdiction, it is unlawful and therefore inapplicable pursuant to Article 184 of theTreaty.

49.

    The Regulation was not applicable to the concentration at issue since it related toeconomic activities conducted within the territory of a non-member country, theRepublic of South Africa, and had been approved by the authorities of thatcountry. The Regulation applies only to concentrations carried out within theCommunity.

50.

    That analysis is consistent with the principle of territoriality, a general principle ofpublic international law which the Community must observe in the exercise of itspowers (Joined Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85Åhlström and Others v Commission [1988] ECR 5193 (the 'Wood pulp‘ case),paragraph 18, and Case C-286/90 Poulsen and Diva Corp. [1992] ECR I-6019,paragraph 9).

51.

    The legal bases on which the Council adopted the Regulation, namely Articles 87and 235 of the Treaty, cannot be construed in disregard of that principle in orderto establish extra-territorial jurisdiction. The principles which are set out inArticles 85 and 86 and referred to in Article 87, and the objectives of theCommunity mentioned in Article 235, concern solely competition within thecommon market and not competition between undertakings established within thecommon market and those outside the common market, nor competition betweenundertakings outside the common market. That conclusion follows both from therequirement in Articles 85 and 86 that there must be an effect on trade betweenMember States and from the objectives of the Community laid down in Articles 2and 3(g) of the Treaty.

52.

    That limitation on the scope of the Treaty competition rules is reflected both in thefirst to fifth and ninth to eleventh recitals in the preamble to the Regulation andin Article 2 thereof, inasmuch as they indicate that the Regulation concerns onlyconcentrations which take effect within the common market.

53.

    Although the Regulation does not expressly define its field of application byreference to the place where the concentration is effected, the 30th recital in itspreamble and Article 24 imply that a concentration involving Communityundertakings which is carried out in a non-member country falls within the purviewof the authorities of that country and not within that of the Commission.

54.

    The applicant explains that its analysis does not mean that the Regulation canapply only to concentrations between undertakings established in the Community. It is in fact not so much the place of establishment of the undertakings concernedwhich matters, but rather the place or places where the concentration is carried

out. The applicant relies in that regard on Case 6/72 Europemballage andContinental Can v Commission [1973] ECR 215, in which the Court of Justice heldthat the Commission was competent to apply Article 86 of the Treaty to aconcentration effected by an undertaking located outside the Community since thecase concerned the acquisition of an interest in a Community undertaking.

55.

    The Regulation is thus applicable only if the activities forming the subject-matterof the concentration are located within the Community. More particularly, as the11th recital in its preamble indicates, it applies to undertakings which havesubstantial operations in the Community. In the instant case, the location of theconcentration notified to the Commission is South Africa, where the undertakingscarrying it out have their main field of activity, namely the mining and refining ofPGMs. Neither the fact that Lonrho has a subsidiary with an office in theCommunity through which it sells its entire PGM production nor the fact that itcarries on other activities in the Community in the hotel and general trading fieldsmeans that it can be considered to have substantial operations in the Communitywithin the meaning of the 11th recital in the preamble.

56.

    The applicant compares the above analysis with that contained in the judgment inWood pulp, where the Court confirmed, in the context of pricing agreements, thatthe Community was competent to apply its competition rules to anti-competitivebehaviour within the common market by undertakings located outside theCommunity where the agreement or concerted practice originated or wasimplemented on Community territory. In the instant case, the concentrationoriginates and is implemented not within the Community but in the Republic ofSouth Africa. It is thus primarily relevant to the industrial and competition policyof that non-member country. Consequently, the Commission lacked territorialjurisdiction (Wood pulp, paragraphs 11 to 18, and the Opinion of Advocate GeneralDarmon in that case, point 20).

57.

    Even if the test for competence under the Regulation is whether the concentrationhas an immediate and substantial effect on competition within the Community, thattest is not satisfied in the present case.

58.

    First, the Commission found (paragraphs 206 and 210 of the contested decision)that the concentration would lead to the creation of a dominant duopoly positionin the medium term in the world platinum and rhodium markets. That finding isinsufficient for the criterion of immediate and substantial effect to be met in thiscase. The expression 'in the medium term‘ is ambiguous, inasmuch as it may refereither to the creation of a dominant position in the medium term or to its eventualdisappearance. If the former is meant, the consequences of the concentration arenot immediate, since they depend on the future conduct both of the undertakingresulting from the concentration and of the other member of the duopoly, namelyAmplats. If the latter is meant, the consequences of the concentration aretransitory and therefore not substantial.

59.

    Second, since the relevant markets are world markets, any dominant position whichthe concentration might create would not concern the Community more than anyother authority; consequently, the effect of the concentration is not substantial. The contested decision (paragraphs 16, 18 and 98) does not assert any claim tojurisdiction for the Community that is wider than that of the Republic of SouthAfrica or of any other non-member country, including Japan and the United States,but merely notes that the markets concerned are world markets, that Europeanconsumption of PGMs accounts for some 20% of world demand (17% on averagefor platinum) and that any effects on the world markets would necessarily bereflected in the Community and the EEA. Those factors are insufficient to conferjurisdiction on the Commission and do not, in any event, amount to adequatereasoning for the decision in accordance with the requirements of Article 190 of theTreaty.

60.

    The sectoral and geographical demand for platinum and rhodium at world levelshows that western Europe (including the Community), which in the period 1991-95accounted for only 17% to 22% of world demand, would be affected very little bya concentration taking place outside its territory, and would be less concerned byit than Japan, where consumption over the same period accounted for between47% and 51% of world demand, or North America (including the United States),where consumption over that period accounted for between 19% and 21% of worlddemand. That analysis is borne out by the relatively low combined market shares(approximately (...)(2) % for platinum and (...)% for rhodium in 1994) and combinedturnover (approximately ECU (...) million for platinum alone in 1994) achieved inrespect of platinum and rhodium within the Community by the two undertakingsinvolved in the concentration. In that regard, it is necessary, when assessing theCommunity dimension of the concentration and calculating the turnover of theundertakings concerned within the meaning of Article 5 of the Regulation, toconstrue the word 'undertaking‘ as referring to a company or legal person and notto an undertaking within the meaning of Articles 85 and 86 of the Treaty (see thecontested decision, paragraphs 24, 34, 44, 56, 98, 100 and 209, and Table 6 set outat paragraph 96).

61.

    Third, as regards the creation of a dominant duopoly position in the platinum andrhodium markets, the risk, raised by the Commission, of collusion or parallelbehaviour between the members of the oligopoly is essentially a matter for thecompetent South African competition authorities. The position could be otherwiseonly if the conditions laid down in the judgment in Wood pulp were fulfilled. However, the instant case can be distinguished from the Wood pulp case, since thelatter did not concern a concentration carried out in a non-member country but apricing agreement directed at, and carried out in, the Community (see Wood pulp,paragraph 13). In any event, the Commission cannot claim jurisdiction in respectof a concentration on the basis of future and hypothetical behaviour in which

undertakings in the relevant market might engage and which might or might not fallwithin its purview under the Treaty.

62.

    Last, the agreements in issue have been the subject of a decision by the competentSouth African competition authorities, namely the South African CompetitionBoard, dated 22 August 1995. That decision acknowledged that the notifiedtransaction did not give rise to any concerns as regards South African competitionpolicy. The transaction is thus lawful in the place in which it was to be carried out,so that, if the Commission were to declare it unlawful, it would necessarily createa conflict of jurisdiction with the South African authorities. The South AfricanDeputy Minister for Foreign Affairs clearly set out his concerns in that regard inhis letter to the Commission of 19 April 1996. The source of the conflict is the factthat the concentration constitutes an alteration in the industrial structure of a non-member country (the Republic of South Africa) which is more fundamental in itsconsequences for the undertakings involved, but also for the economy of the Stateconcerned, than mere agreements. To claim competence over such alterationsconsequently amounts to a more fundamental interference in the internal affairsof that State.

63.

    Finally, it may be inferred from the relatively limited impact of the concentrationwithin the Community that the Commission's claim to have jurisdiction has no legaljustification whatsoever and is disproportionate in nature.

64.

    The Commission submits that there are two fundamental bases founding itscompetence. The first is the principle of nationality, on the basis of which it hasjurisdiction ratione personae over the activities of Lonrho, a company incorporatedunder the laws of a Member State. The second is the principle of territoriality.

65.

    The Commission observes, as a preliminary point, that it was the parties to theconcentration which requested it to examine the compatibility of the transactionwith the common market and the EEA, by notifying it of their agreement and bymaking the grant of Commission approval a condition precedent to its completion. In those circumstances, for one of the parties to act as if the matter had not beenvoluntarily submitted to the jurisdiction exercised under the Regulation runscounter to the principles nemo auditur ... and venire contra factum proprium.

66.

    The Commission criticises the applicant's arguments relating to the location of theeconomic activity affected by the concentration and to the criteria and detailedrules governing its powers under the Regulation.

67.

    With regard to the location of the economic activity affected by the concentration,the Commission agrees with the applicant that the Regulation, just like Articles 85and 86 of the Treaty, is concerned with competition within the common market, butdoes not, in the instant case, subscribe to the conclusion drawn therefrom by theapplicant. Since the contested decision is based on the consideration that the

notified concentration, while carried out in South Africa by combining means ofproduction, would be implemented throughout the world and alter, both worldwideand at Community level, the competitive structure on the relevant product marketsby reason of the global nature of the geographical market, it is wrong to claim, asthe applicant does, that that decision is not concerned with the regulation ofeconomic activities within the territory of the Community. Although the parties donot mine platinum in the Community, a significant proportion of their activitiesnevertheless take place there.

68.

    The Commission submits that its reasoning is consistent with the judgment in Woodpulp and with the Opinion of Advocate General Darmon in that case. It points outthat, in that case, it was not so much the location of the undertakings concernedthat was important as the location of the anti-competitive effect within Communityterritory. The crucial factor in the present case is thus not the place where theundertakings are located but the alteration of the competitive structure within thecommon market. That alteration concerns not the mining or refining of theproducts at issue, as the applicant argues, but the market for the sale of platinumin the Community.

69.

    As regards the rules and criteria governing the international jurisdiction of theCommunity under the Regulation, the Commission considers that the contesteddecision is consistent with the approach laid down in Wood pulp, where the Courtof Justice specified the two acts required, namely the formation of the agreementand its implementation, and then observed that the agreement at issue wasimplemented within the common market. The concentration in the instant casewould be implemented and would alter the competitive structure throughout theworld. The Commission's competence therefore derives from the classic rules ofinternational jurisdiction, a conclusion which is reinforced by the fact that LPD'sworldwide sales are carried out through Western Metal Sales, a Belgian subsidiaryof Lonrho based in Brussels.

70.

    The Commission considers that the applicant's line of argument relating tosubstantial and immediate effect is entirely unfounded, inasmuch as the contesteddecision correctly sets out how the concentration would have such an effect on thestructure of competition within the common market and the EEA.

71.

    As regards the possibility of a conflict of jurisdiction with the South Africanauthorities, the concentration at issue would have little effect on competition inSouth Africa since demand for platinum in that country is low. The Commissionaccordingly compares the proposed transaction with export cartels, which generallyhave no effect on the structure of competition within the home countries of theparticipant undertakings, and whose effects may even be regarded as beneficial bythe authorities of those countries.

72.

    The German Government submits that the Regulation enables a proper assessmentto be made of the compatibility of the notified concentration with the common

market and the EEA. That analysis is consistent both with the principles of publicinternational law and with the case-law of the Court of Justice on Article 85 of theTreaty.

73.

    First, the Regulation itself sets out rules regarding its extraterritorial scope. It isapparent from the 11th recital in the preamble, read in conjunction withArticle 1(2)(b), that a conflict rule is laid down in relation to undertakings locatedoutside the Community. The 11th recital envisages inter alia the application of thecriterion laid down in Article 1(2)(b), namely the achievement by at least two ofthe undertakings involved in the concentration of an aggregate Community-wideturnover of more than ECU 250 million each, to concentrations effected byundertakings which do not have their principal fields of activities in the Communitybut which have substantial operations there. In the instant case, the transaction atissue meets the threshold fixed and the Commission has adequately demonstratedin its decision the effects of the concentration on the common market.

74.

    Secondly, as regards the consistency of that approach with public international law,the German Government states that both the conflict rule contained in theRegulation and its application in the present case fulfil the criteria arising from the'effects doctrine‘, otherwise known as the principle of objective territoriality. Theachievement by each of the two undertakings involved in the concentration of aturnover within the Community of at least ECU 250 million constitutes a sufficientconnecting factor. Furthermore, the facts referred to by the Commission in itsanalysis of the impact of the concentration on the EEA confirm that theextraterritorial application of the Regulation is consistent with international law.

75.

    Thirdly, endorsing the relevant arguments put forward by the Commission, theGerman Government states that its interpretation of the Regulation is notinconsistent with the judgment in Wood pulp.

Findings of the Court

76.

    It is necessary first of all to reject the Commission's argument that, by notifying theconcentration agreement for examination and by making clearance a conditionprecedent to its implementation, the applicant voluntarily submitted to theCommission's jurisdiction. Infringement of the obligations regarding notificationand suspension laid down in Articles 4 and 7 of the Regulation for allconcentrations with a Community dimension is punishable by severe financialpenalties under Article 14. No voluntary submission whatever by the applicant tothe jurisdiction of the Community can therefore be inferred from the notificationof the concentration agreement or from the suspension of its implementation. Besides, in order for the Commission to assess whether a concentration is withinits purview, it must first be in a position to examine that concentration, a fact whichjustifies requiring the parties to the concentration to notify the agreement. That

obligation does not predetermine the question whether the Commission iscompetent to rule on the concentration.

77.

    In the instant case, two questions must be examined. It must be ascertained firstwhether the Regulation covers concentrations such as the one at issue and then, ifit does, whether its application to concentrations of that kind is contrary to publicinternational law on State jurisdiction.

1. Assessment of the territorial scope of the Regulation

78.

    The Regulation, in accordance with Article 1 thereof, applies to all concentrationswith a Community dimension, that is to say to all concentrations betweenundertakings which do not each achieve more than two-thirds of their aggregateCommunity-wide turnover within one and the same Member State, where thecombined aggregate worldwide turnover of those undertakings is more thanECU 5 000 million and the aggregate Community-wide turnover of at least two ofthem is more than ECU 250 million.

79.

    Article 1 does not require that, in order for a concentration to be regarded ashaving a Community dimension, the undertakings in question must be establishedin the Community or that the production activities covered by the concentrationmust be carried out within Community territory.

80.

    With regard to the criterion of turnover, it must be stated that, as set out inparagraph 13 of the contested decision, the concentration at issue has a Communitydimension within the meaning of Article 1(2) of the Regulation. The undertakingsconcerned have an aggregate worldwide turnover of more thanECU 10 000 million, above the ECU 5 000 million threshold laid down by theRegulation. Gencor and Lonrho each had a Community-wide turnover of morethan ECU 250 million in the latest financial year. Finally, they do not each achievemore than two-thirds of their aggregate Community-wide turnover within one andthe same Member State.

81.

    The applicant's arguments to the effect that the legal bases for the Regulation andthe wording of its preamble and substantive provisions preclude its application tothe concentration at issue cannot be accepted.

82.

    The legal bases for the Regulation, namely Articles 87 and 235 of the Treaty, andmore particularly the provisions to which they are intended to give effect, that isto say Articles 3(g) and 85 and 86 of the Treaty, as well as the first to fifth, ninthand eleventh recitals in the preamble to the Regulation, merely point to the needto ensure that competition is not distorted in the common market, in particular byconcentrations which result in the creation or strengthening of a dominant position. They in no way exclude from the Regulation's field of application concentrationswhich, while relating to mining and/or production activities outside the Community,

have the effect of creating or strengthening a dominant position as a result of whicheffective competition in the common market is significantly impeded.

83.

    In particular, the applicant's view cannot be founded on the closing words of the11th recital in the preamble to the Regulation.

84.

    That recital states that 'a concentration with a Community dimension exists ...where the concentrations are effected by undertakings which do not have theirprincipal fields of activities in the Community but which have substantial operationsthere‘.

85.

    By that reference, in general terms, to the concept of substantial operations, theRegulation does not, for the purpose of defining its territorial scope, ascribe greaterimportance to production operations than to sales operations. On the contrary, bysetting quantitative thresholds in Article 1 which are based on the worldwide andCommunity turnover of the undertakings concerned, it rather ascribes greaterimportance to sales operations within the common market as a factor linking theconcentration to the Community. It is common ground that Gencor and Lonrhoeach carry out significant sales in the Community (valued in excess of ECU 250million).

86.

    Nor is it borne out by either the 30th recital in the preamble to the Regulation orArticle 24 thereof that the criterion based on the location of production activitiesis well founded. Far from laying down a criterion for defining the territorial scopeof the Regulation, Article 24 merely regulates the procedures to be followed inorder to deal with situations in which non-member countries do not grantCommunity undertakings treatment comparable to that accorded by the Communityto undertakings from those non-member countries in relation to the control ofconcentrations.

87.

    The applicant cannot, by reference to the judgment in Wood pulp, rely on thecriterion as to the implementation of an agreement to support its interpretation ofthe territorial scope of the Regulation. Far from supporting the applicant's view,that criterion for assessing the link between an agreement and Community territoryin fact precludes it. According to Wood pulp, the criterion as to theimplementation of an agreement is satisfied by mere sale within the Community,irrespective of the location of the sources of supply and the production plant. Itis not disputed that Gencor and Lonrho carried out sales in the Community beforethe concentration and would have continued to do so thereafter.

88.

    Accordingly, the Commission did not err in its assessment of the territorial scopeof the Regulation by applying it in this case to a proposed concentration notifiedby undertakings whose registered offices and mining and production operations areoutside the Community.

2. Compatibility of the contested decision with public international law

89.

    Following the concentration agreement, the previously existing competitiverelationship between Implats and LPD, in particular so far as concerns their salesin the Community, would have come to an end. That would have altered thecompetitive structure within the common market since, instead of three SouthAfrican PGM suppliers, there would have remained only two. The implementationof the proposed concentration would have led to the merger not only of the parties'PGM mining and production operations in South Africa but also of their marketingoperations throughout the world, particularly in the Community where Implats andLPD achieved significant sales.

90.

    Application of the Regulation is justified under public international law when it isforeseeable that a proposed concentration will have an immediate and substantialeffect in the Community.

91.

    In that regard, the concentration would, according to the contested decision, haveled to the creation of a dominant duopoly on the part of Amplats and Implats/LPDin the platinum and rhodium markets, as a result of which effective competitionwould have been significantly impeded in the common market within the meaningof Article 2(3) of the Regulation.

92.

    It is therefore necessary to verify whether the three criteria of immediate,substantial and foreseeable effect are satisfied in this case.

93.

    With regard, specifically, to the criterion of immediate effect, the words 'mediumterm‘ used in paragraphs 206 and 210 of the contested decision in relation to thecreation of a dominant duopoly position are, contrary to the applicant's assertion,entirely unambiguous. They clearly refer to the time when it is envisaged thatRussian stocks will be exhausted, enabling a dominant duopoly on the part ofAmplats and Implats/LPD to be created on the world platinum and rhodiummarkets and, by the same token, in the Community as a substantial part of thoseworld markets.

94.

    That dominant position would not be dependent, as the applicant asserts, on thefuture conduct of the undertaking arising from the concentration and of Amplatsbut would result, in particular, from the very characteristics of the market and thealteration of its structure. In referring to the future conduct of the parties to theduopoly, the applicant fails to distinguish between abuses of dominant positionwhich those parties might commit in the near or more distant future, which mightor might not be controlled by means of Articles 85 and/or 86 of the Treaty, and thealteration to the structure of the undertakings and of the market to which theconcentration would give rise. It is true that the concentration would notnecessarily lead to abuses immediately, since that depends on decisions which theparties to the duopoly may or may not take in the future. However, theconcentration would have had the direct and immediate effect of creating the

conditions in which abuses were not only possible but economically rational, giventhat the concentration would have significantly impeded effective competition in themarket by giving rise to a lasting alteration to the structure of the marketsconcerned.

95.

    Accordingly, the concentration would have had an immediate effect in theCommunity.

96.

    So far as concerns the criterion of substantial effect, it should be noted that, as heldin paragraph 297 below, the Commission established to the requisite legal standardthat the concentration would have created a lasting dominant duopoly position inthe world platinum and rhodium markets.

97.

    The applicant cannot maintain that the concentration would not have a substantialeffect in the Community in view of the low sales and small market share of theparties to the concentration in the EEA. While the level of sales in westernEurope (20% of world demand) and the Community market share of the entityarising from the concentration ((...)% in respect of platinum) were alreadysufficient grounds for the Community to have jurisdiction in respect of theconcentration, the potential impact of the concentration proved even higher thanthose figures suggested. Given that the concentration would have had the effectof creating a dominant duopoly position in the world platinum and rhodiummarkets, it is clear that the sales in the Community potentially affected by theconcentration would have included not only those of the Implats/LPD undertakingbut also those of Amplats (approximately 35% to 50%), which would haverepresented a more than substantial proportion of platinum and rhodium sales inwestern Europe and a much higher combined market share held by Implats/LPDand Amplats (approximately (...)% to 65%).

98.

    Finally, it is not possible to accept the applicant's argument that the creation of thedominant position referred to by the Commission in the contested decision is notof greater concern to the Community than to any other competent body and iseven of less concern to it than to others. The fact that, in a world market, otherparts of the world are affected by the concentration cannot prevent the Communityfrom exercising its control over a concentration which substantially affectscompetition within the common market by creating a dominant position.

99.

    The arguments by which the applicant denies that the concentration would have asubstantial effect in the Community must therefore be rejected.

100.

    As for the criterion of foreseeable effect, it follows from all of the foregoing thatit was in fact foreseeable that the effect of creating a dominant duopoly positionin a world market would also be to impede competition significantly in theCommunity, an integral part of that market.

101.

    It follows that the application of the Regulation to the proposed concentration wasconsistent with public international law.

102.

    It is necessary to examine next whether the Community violated a principle of non-interference or the principle of proportionality in exercising that jurisdiction.

103.

    The applicant's argument that, by virtue of a principle of non-interference, theCommission should have refrained from prohibiting the concentration in order toavoid a conflict of jurisdiction with the South African authorities must be rejected,without it being necessary to consider whether such a rule exists in internationallaw. Suffice it to note that there was no conflict between the course of actionrequired by the South African Government and that required by the Communitygiven that, in their letter of 22 August 1995, the South African competitionauthorities simply concluded that the concentration agreement did not give rise toany competition policy concerns, without requiring that such an agreement beentered into (see, to that effect, Wood pulp, paragraph 20).

104.

    In its letter of 19 April 1996 the South African Government, far from calling intoquestion the Community's jurisdiction to rule on the concentration at issue, firstsimply expressed a general preference, having regard to the strategic importanceof mineral exploitation in South Africa, for intervention in specific cases ofcollusion when they arose and did not specifically comment on the industrial orother merits of the concentration proposed by Gencor and Lonrho. It then merelyexpressed the view that the proposed concentration might not impede competition,having regard to the economic power of Amplats, the existence of other sources ofsupply of PGMs and the opportunities for other producers to enter the SouthAfrican market through the grant of new mining concessions.

105.

    Finally, neither the applicant nor, indeed, the South African Government in itsletter of 19 April 1996 have shown, beyond making mere statements of principle,in what way the proposed concentration would affect the vital economic and/orcommercial interests of the Republic of South Africa.

106.

    As regards the argument that the Community cannot claim to have jurisdiction inrespect of a concentration on the basis of future and hypothetical behaviour,namely parallel conduct on the part of the undertakings operating in the relevantmarket where that conduct might or might not fall within the competence of theCommunity under the Treaty, it must be stated, as pointed out above in connectionwith the question whether the concentration has an immediate effect, that, whilethe elimination of the risk of future abuses may be a legitimate concern of anycompetent competition authority, the main objective in exercising control overconcentrations at Community level is to ensure that the restructuring ofundertakings does not result in the creation of positions of economic power whichmay significantly impede effective competition in the common market. Communityjurisdiction is therefore founded, first and foremost, on the need to avoid theestablishment of market structures which may create or strengthen a dominant

position, and not on the need to control directly possible abuses of a dominantposition.

107.

    Consequently, it is unnecessary to rule on the question whether the letter of22 August 1995 from the South African Competition Board constituted a definitiveposition on the concentration, on whether or not the South African Governmentwas an authority responsible for competition matters and, finally, on the scope ofSouth African competition law. There is accordingly no need to grant theapplication for measures of organisation of procedure or of inquiry made by theapplicant in its letter of 3 December 1996.

108.

    In those circumstances, the contested decision is not inconsistent with either theRegulation or the rules of public international law relied on by the applicant.

109.

    For the same reasons, the objection, based on Article 184 of the Treaty, that theRegulation is unlawful because it confers upon the Commission competence inrespect of the concentration between Gencor and Lonrho must be rejected.

110.

    As regards the reasoning in the contested decision justifying Community jurisdictionto apply the Regulation to the concentration, it must be held that the explanationscontained in paragraphs 4, 13 to 18, 204 to 206, 210 and 213 of the contesteddecision satisfy the obligations incumbent on the Commission under Article 190 ofthe Treaty to give reasons for its decisions so as to enable the Communityjudicature to exercise its power of review, the parties to defend their rights and anyinterested party to ascertain the conditions in which the Commission applied theTreaty and its implementing legislation.

111.

    Accordingly, both pleas of annulment which have been examined must be rejected,without it being necessary to grant the application for measures of organisation ofprocedure or of inquiry made by the applicant in its letter of 3 December 1996.

II — The pleas alleging infringement of Article 2 of the Regulation, in that theCommission is not empowered to prevent concentrations which create or strengthen acollective dominant position, and infringement of Article 190 of the Treaty

Arguments of the applicant

112.

    The applicant maintains that the creation or strengthening of a collective dominantposition cannot be prohibited under the Regulation.

113.

    It is clear from an examination of the wording of the Regulation that the conceptof collective dominance is excluded from its scope. Unlike Article 86 of the Treaty,Article 2(3) of the Regulation makes no reference at all to the concept of a

collective dominant position. Consequently, the Commission has no power toprohibit a concentration on that ground.

114.

    Moreover, the 15th recital in the preamble to the Regulation, which states thatthere is an indication of compatibility with the common market in particular wherethe market share of the undertakings concerned does not exceed 25%, suggests thatthe Regulation rules out the possibility of preventing a concentration on the groundthat it creates a collective dominant position. In oligopolistic markets, aconcentration between two of the participants need not result in the creation of amerged entity with a market share exceeding 25%. The participants in the allegedcollective dominant position who are not involved in the concentration cannot beregarded as 'undertakings concerned‘ within the meaning of the Regulation.

115.

    The applicant refers to the legislative history of the Regulation and observes thatthe issue of collective dominance was debated at the time of its adoption. The factthat it does not cover oligopolies is not, therefore, the result of an oversight but adeliberate omission, inasmuch as the Member States within the Council did notreach agreement on that issue. In that context, it would be inappropriate andunnecessary to interpret the Regulation in a manner that was irreconcilable withthe outcome of the intense negotiations conducted within the Council at the timeof its adoption.

116.

    In the United Kingdom, Germany and France, merger control provisionsspecifically cover collective dominance, in sharp contrast to the Regulation. Inaddition, those systems provide for a special procedure involving all the companiesalleged to be part of the oligopoly.

117.

    An interpretation of Article 2(3) of the Regulation which embraced collectivedominance would create two particular legal problems by violating fundamentalprinciples of the EC Treaty, namely the principle of legal certainty and theprocedural rights of third parties.

118.

    Such an interpretation would be inconsistent with the principle of legal certaintyin view, in particular, of the penalties which may be imposed on undertakings underthe Regulation.

119.

    As regards the procedural rights of third parties, the applicant states that while, inpractice, the Commission consults third parties in the relevant market in the courseof the procedure and permits them to make observations and attend the hearing,they do not have the same rights or receive the same treatment as the undertakingsinvolved in the concentration; this shows that the Regulation does not coversituations of collective dominance.

120.

    It is important to apply the Regulation strictly in accordance with its terms in thecase of concentrations which only concern activities carried on within the territoryof a non-member country, particularly where the government of that country urges,

as the South African Government has done in the present case, that collusionshould be controlled when it occurs rather than by anticipation.

121.

    The applicant notes that, in Decision 92/553/EEC of 22 July 1992 relating to aproceeding under Council Regulation (EEC) No 4064/89 (Case No IV/M.190 —Nestlé/Perrier) (OJ 1992 L 356, p. 1; 'the Nestlé-Perrier Decision‘), theCommission stated when interpreting Article 2 of the Regulation that thefundamental objective, laid down in Article 3(g) of the Treaty, of ensuring thatcompetition in the internal market is not distorted, would be jeopardised by theabsence of any control of concentrations creating and/or strengthening a collectivedominant position. According to the applicant, the Commission accepted in its16th Report on Competition Policy that no such risk existed. In that report, theCommission considered that it could use Article 86 of the Treaty to control abuseson the part of undertakings in a collective dominant position. In any event, theCommission's powers are defined in the instant case by the Regulation and not bya general policy objective of preventing potentially anti-competitive behaviour. TheCommission's powers thus arise only where the concentration creates or strengthensa dominant position, thereby impeding effective competition, and not where itmerely might impede effective competition.

122.

    Finally, the application of the Regulation to a concentration resulting in thecreation of a collective dominant position without any reasoning as to the legalbasis for doing so constitutes an infringement of Article 190 of the Treaty.

Findings of the Court

123.

    Article 2(3) of the Regulation provides:

'A concentration which creates or strengthens a dominant position as a result ofwhich effective competition would be significantly impeded in the common marketor in a substantial part of it shall be declared incompatible with the commonmarket.‘

124.

    The question thus arises as to whether the words 'which creates or strengthens adominant position‘ cover only the creation or strengthening of an individualdominant position or whether they also refer to the creation or strengthening of acollective dominant position, that is to say one held by two or more undertakings.

125.

    It cannot be deduced from the wording of Article 2 of the Regulation that onlyconcentrations which create or strengthen an individual dominant position, that isto say a dominant position held by the parties to the concentration, come within thescope of the Regulation. Article 2, in referring to 'a concentration which createsor strengthens a dominant position‘, does not in itself exclude the possibility ofapplying the Regulation to cases where concentrations lead to the creation or

strengthening of a collective dominant position, that is to say a dominant positionheld by the parties to the concentration together with one or more undertakingsnot party thereto (France and Others v Commission, cited above, paragraph 166).

126.

    The applicant is not correct in its submission that, since other, national, systemscontained specific provisions for the control of concentrations resulting in thecreation or strengthening of collective dominant positions at the time when theRegulation was adopted, the deliberate choice of the Council not to enact such aprovision in that regulation necessarily means that it does not cover situations ofcollective dominance. The choice of neutral wording of the kind found inArticle 2(3) of the Regulation does not automatically exclude from its field ofapplication the creation or strengthening of a collective dominant position.

127.

    Finally, it should be noted that, however specific they may be, the national lawswhich were applicable to the creation or strengthening of a collective dominantposition before the Regulation entered into force can no longer be applied to suchconcentrations, in accordance with Article 21(2) of the Regulation. If theapplicant's argument were followed, it would thus be necessary to accept that allthe Member States whose systems for the control of concentrations applied to thecreation or strengthening of collective dominant positions, that is to say France,Germany and the United Kingdom amongst others, have abandoned that form ofcontrol so far as concerns concentrations with a Community dimension. In theabsence of clear indications to that effect, it cannot be assumed that such was thewill of the Member States.

128.

    As regards the applicant's arguments relating to the legislative history of theRegulation, it is necessary, when interpreting a legislative measure, to attach lessimportance to the position taken by one or other Member State when the measurewas drawn up than to its wording and objectives.

129.

    The legislative history cannot itself be considered to express clearly the intentionof the authors of the Regulation as to the scope of the term 'dominant position‘. In those circumstances, it provides no assistance for the interpretation of thedisputed concept (France and Others v Commission, paragraph 167, and thejudgment cited).

130.

    In any event, the fact that, after the adoption of the Regulation, certain MemberStates, in particular France, contested the view that it could apply to collectivedominant positions cannot mean that it does not cover situations of that kind. Since the Member States are not bound by positions which they may have acceptedat the time of the debate within the Council, the possibility cannot be ruled out thatone of them may change its view after the adoption of a legislative measure orsimply decide to raise the question of its legality before the Community judicature.

131.

    It is necessary, therefore, to interpret the Regulation, in particular Article 2 thereof,on the basis of its general scheme.

132.

    The applicant's argument that the scheme of the Regulation precludes itsapplication to situations of collective dominance must be examined. The applicantmaintains that such application would appear to be precluded by the reference tothe 25% threshold in the 15th recital in the preamble to the Regulation.

133.

    That recital states:

'... concentrations which, by reason of the limited market share of the undertakingsconcerned, are not liable to impede effective competition may be presumed to becompatible with the common market; ... without prejudice to Articles 85 and 86 ofthe Treaty, an indication to this effect exists, in particular, where the market shareof the undertakings concerned does not exceed 25% either in the common marketor in a substantial part of it‘.

134.

    As the Commission rightly points out, the reference to a 25% threshold for marketshare cannot justify a restrictive interpretation of the Regulation. Sinceoligopolistic markets in which one of the jointly dominant undertakings has amarket share of less than 25% are relatively rare, that reference cannot removecases of joint dominance from the scope of the Regulation. It is more common tofind oligopolistic markets in which the dominant undertakings hold market sharesof more than 25%. Thus, the market structures which encourage oligopolisticconduct most are those in which two, three or four suppliers each holdapproximately the same market share, for example two suppliers each holding 40%of the market, three suppliers each holding between 25% and 30% of the market,or four suppliers each holding approximately 25% of the market. All thosestructures are consistent with the 25% threshold set in the 15th recital in thepreamble to the Regulation.

135.

    Furthermore, that threshold is given purely by way of guidance, as is indeed madeclear by the 15th recital itself, and it is not incorporated in any way in theprovisions of the Regulation (France and Others v Commission, cited above,paragraph 176).

136.

    Accordingly, the interpretation of Article 2(3) of the Regulation in the light of the15th recital in its preamble cannot substantiate the applicant's view that theRegulation is not applicable to collective dominant positions.

137.

    It is appropriate to consider next the applicant's argument regarding the principleof legal certainty and the right to be heard.

138.

    The applicant takes the view that, having regard in particular to the penalties whichmay be imposed on undertakings under the Regulation, it would be inconsistentwith the principle of legal certainty to strain the ordinary meaning of Article 2(3)and extend its scope to situations of collective dominance.

139.

    The issue actually raised by the plea being examined is whether the correctinterpretation of the Regulation is that advocated by the Commission. If it is, thedecision is lawful from that point of view and the principle of legal certainty is notinfringed. If, on the other hand, the true interpretation of the Regulation is thatput forward by the applicant, the decision is unlawful for lack of competence, inwhich case there is no need to decide whether the principle of legal certainty mayhave been infringed.

140.

    Accordingly, the applicant's argument is misconceived.

141.

    As regards observance of the right to be heard, Article 18 of the Regulationprovides:

'1.    Before taking any decision provided for in Article 7(2) and (4), Article 8(2),second subparagraph, and (3) to (5), and Articles 14 and 15, the Commission shallgive the persons, undertakings and associations of undertakings concerned theopportunity, at every stage of the procedure up to the consultation of the AdvisoryCommittee, of making known their views on the objections against them.

...

3.    The Commission shall base its decision only on objections on which theparties have been able to submit their observations. The rights of the defence shallbe fully respected in the proceedings. Access to the file shall be open at least tothe parties directly involved, subject to the legitimate interest of undertakings in theprotection of their business secrets.

4.    In so far as the Commission or the competent authorities of the MemberStates deem it necessary, they may also hear other natural or legal persons. Natural or legal persons showing a sufficient interest and especially members of theadministrative or management bodies of the undertakings concerned or therecognised representatives of their employees shall be entitled, upon application,to be heard.‘

142.

    Contrary to the applicant's submissions, those provisions do not automaticallyprevent members of the oligopoly which are not party to the concentration frombeing able to enjoy the same rights in terms of being heard as the undertakingswhich are.

143.

    Under the scheme of Article 18 of the Regulation, the level of protection conferredon a given undertaking as regards its right to be heard depends only on whetherit is treated as an undertaking concerned, a party directly involved or a third partywith a sufficient interest, a question which, in turn, depends on whether thedecision which the Commission proposes to adopt is liable to affect it adversely. It follows that if the undertakings which are members of the oligopoly but not party

to the concentration were to be regarded as parties directly involved, they wouldenjoy the same procedural rights as the undertakings party to the concentration.

144.

    If, on the other hand, the decision of the Commission was not such as to have anadverse effect on the undertakings not party to the concentration, they would havethe right to be heard in so far as they were able to show a sufficient interest, inaccordance with Article 18(4) of the Regulation, an approach which would beconsistent with the case-law of the Court of Justice and the Court of First Instanceon the procedural rights of third parties.

145.

    Even assuming that a finding by the Commission that a proposed concentrationcreates or strengthens a collective dominant position on the part of theundertakings concerned and a third party may in itself adversely affect that thirdparty, it must be borne in mind that observance of the right to be heard is, in allproceedings liable to culminate in a measure adversely affecting a particular person,a fundamental principle of Community law which must be guaranteed even in theabsence of any rules governing the procedure (see, to that effect, Case 85/76Hoffmann-La Roche v Commission [1979] ECR 461, Case C-32/95 P Commissionv Lisrestal and Others [1996] ECR I-5373, paragraph 21, and France and Others vCommission, cited above, paragraph 174).

146.

    Given the existence of that principle, the fact that the Community legislature didnot expressly provide in the Regulation for a procedure safeguarding the right tobe heard of third party undertakings alleged to hold a collective dominant positiontogether with the undertakings involved in the concentration cannot be regardedas decisive evidence of the Regulation's inapplicability to collective dominantpositions (France and Others v Commission, paragraph 175).

147.

    It follows that the argument regarding the procedural rights of third parties cannotbe accepted.

148.

    Since the interpretations of the Regulation, and in particular Article 2 thereof,based on their wording and the history and the scheme of the Regulation do notpermit their precise scope to be assessed as regards the type of dominant positionconcerned, the legislation in question must be interpreted by reference to itspurpose (see, to that effect, Case 11/76 Netherlands v Commission [1979] ECR 245,paragraph 6, Joined Cases C-267/95 and C-268/95 Merck and Others v Primecrownand Others and Beecham v Europharm [1996] ECR I-6285, paragraphs 19 to 25, andFrance and Others v Commission, cited above, paragraph 168).

149.

    As is apparent from the first five recitals in its preamble, the principal objective setfor the Regulation, with a view to achieving the aims of the Treaty and especiallyof Article 3(f) thereof (Article 3(g) following the entry into force of the Treaty onEuropean Union), is to ensure that the process of reorganising undertakings as aresult in particular of the completion of the internal market does not inflict lasting

damage on competition. The final part of the fifth recital accordingly states that'Community law must therefore include provisions governing those concentrationswhich may significantly impede effective competition in the common market or ina substantial part of it‘ (see, to that effect, France and Others v Commission,paragraph 169).

150.

    Furthermore, it follows from the sixth, seventh, tenth and eleventh recitals in thepreamble to the Regulation that it, unlike Articles 85 and 86 of the Treaty, isintended to apply to all concentrations with a Community dimension in so far as,because of their effect on the structure of competition within the Community, theymay prove incompatible with the system of undistorted competition envisaged bythe Treaty (France and Others v Commission, paragraph 170).

151.

    A concentration which creates or strengthens a dominant position on the part ofthe parties to the concentration with an entity not involved in the concentration isliable to prove incompatible with the system of undistorted competition laid downby the Treaty. Consequently, if it were accepted that only concentrations creatingor strengthening a dominant position on the part of the parties to the concentrationwere covered by the Regulation, its purpose as indicated by the abovementionedrecitals would be partially frustrated. The Regulation would thus be deprived ofa not insignificant aspect of its effectiveness, without that being necessary from theperspective of the general structure of the Community system of control ofconcentrations (France and Others v Commission, paragraph 171).

152.

    The arguments regarding, first, the fact that the Regulation is capable of beingapplied to concentrations between undertakings whose main place of business is notin the Community and, secondly, the possibility that the Commission could controlthe anti-competitive behaviour of members of an oligopoly by means of Article 86of the Treaty, are not capable of calling into question the applicability of theRegulation to cases of collective dominance resulting from a concentration.

153.

    As regards the first of those arguments, the applicability of the Regulation tocollective dominant positions cannot depend on its territorial scope.

154.

    So far as concerns the possibility of applying Article 86 of the Treaty, it cannot beinferred therefrom that the Regulation does not apply to collective dominance,given that the same reasoning would hold for cases of dominance by a singleundertaking, which would lead to the conclusion that the Regulation is notnecessary at all.

155.

    Furthermore, since only the strengthening of dominant positions and not theircreation can be controlled under Article 86 of the Treaty (Europemballage andContinental Can, cited above, paragraph 26), the effect of the Regulation notapplying to concentrations creating a dominant position would be to create a gapin the Community system for the control of concentrations which would be liableto undermine the proper functioning of the common market.

156.

    It follows from the foregoing that collective dominant positions do not fall outsidethe scope of the Regulation, as the Court of Justice indeed itself held, subsequentto the hearing of 18 February 1998, in France and Others v Commission(paragraph 178).

157.

    Accordingly, the Commission was not required to include in the contested decisionany reasoning on the applicability of the Regulation to collective dominantpositions, in particular as it had already expressed its view on that subject both inthe annual reports on competition policy and in other concentration cases, includingthe Nestlé-Perrier decision. Thus, the ground of challenge alleging infringementof the obligation to state reasons laid down by Article 190 of the Treaty is notfounded.

158.

    The pleas under consideration must therefore be rejected.

III — The pleas alleging infringement of Article 2 of the Regulation, in that theCommission wrongly found that the concentration would create a collective dominantposition, and infringement of Article 190 of the Treaty

A — The contested decision

159.

    In order to conclude that a collective dominant position between Implats/LPD andAmplats would be created as a result of which effective competition would besignificantly impeded within the common market (paragraph 219 of the contesteddecision), the Commission made the following findings in particular (paragraphs 74to 214):

—    despite the fact that PGMs (platinum, palladium, rhodium, iridium,ruthenium and osmium) occur naturally together in the same ore body, theyare not sufficiently interchangeable to be considered to form a singleproduct market and therefore each PGM by itself constitutes a productmarket;

—    PGMs are high-value goods sold throughout the world on the same termsand there is thus an integrated world market for each PGM;

—    the world platinum and rhodium markets are characterised by producthomogeneity, high market transparency, price-inelastic demand in thecurrent price range, moderate growth in demand, mature productiontechnology, high entry barriers, a high level of concentration ofundertakings, financial links and contacts between suppliers on a number ofmarkets, a lack of negotiating power for purchasers, and a low level ofcompetition with only a few elements of competition in the past;

—    following the concentration, Implats/LPD and Amplats would each holdapproximately a 35% share of the world platinum market (a combinedmarket share of approximately 70%) which, following the anticipatedexhaustion of Russian stocks in two years, would rise to 40% each (acombined market share of approximately 80%), and each would hold 50%of a combined 89% share of estimated world PGM reserves;

—    following the concentration, Implats/LPD and Amplats would have similarcost structures;

—    the concentration would definitively remove the competitive threatpreviously posed by LPD in the market;

—    following the concentration, Russia would be only a minor player in themarket;

—    the marginal sources of supply, that is to say suppliers outside the oligopoly,recycling undertakings, holders of stocks other than the Russian stocks andthe substitution of palladium for platinum, would not be able to thwart theeconomic power of the duopoly comprising Implats/LPD and Amplats;

—    new entrants in the platinum and rhodium markets were unlikely.

B — General considerations

160.

    The applicant claims that the evidence and reasoning in the contested decision arenot sufficient to justify a finding of collective dominance in the present case, nordo they meet the standard of reasoning required by the case-law on Article 190 ofthe Treaty.

161.

    It maintains that, if the Commission had correctly applied the criteria previouslyused in its decision-making practice to the objective characteristics of the marketsfor platinum and rhodium, it would not have come to the conclusion that theconcentration would result in the creation of a collective dominant position.

162.

    It should be borne in mind that, in accordance with Article 2(3) of the Regulation,a concentration which creates or strengthens a dominant position as a result ofwhich effective competition would be significantly impeded in the common marketor in a substantial part of it is to be declared incompatible with the commonmarket.

163.

    In assessing whether there is a collective dominant position, the Commission istherefore obliged to establish, using a prospective analysis of the relevant market,whether the concentration in question would lead to a situation in which effectivecompetition in the relevant market would be significantly impeded by the

undertakings involved in the concentration and one or more other undertakingswhich together, in particular because of factors giving rise to a connection betweenthem, are able to adopt a common policy on the market and act to a considerableextent independently of their competitors, their customers and, ultimately, ofconsumers (France and Others v Commission, paragraph 221).

164.

    In that connection, the basic provisions of the Regulation, in particular Article 2thereof, confer on the Commission a certain discretion, especially with respect toassessments of an economic nature (France and Others v Commission,paragraph 223).

165.

    Consequently, review by the Community judicature of the exercise of thatdiscretion, which is essential for defining the rules on concentrations, must takeaccount of the discretionary margin implicit in the provisions of an economic naturewhich form part of the rules on concentrations (France and Others v Commission,paragraph 224).

166.

    The various arguments relied on by the applicant must be examined in the light ofthose considerations.

C — Alleged joint control of Gencor and Lonrho over LPD before the concentration

Arguments of the parties

167.

    The applicant claims that the Commission seems to have failed to give sufficientweight to all the evidence submitted to it concerning the situation prior to theconcentration, when the applicant and Lonrho had joint control of LPD. Thefactors which led the Commission to conclude that the proposed concentrationwould be incompatible with the common market already existed before theproposal. It is therefore difficult to understand what difference the concentrationwould have made to the level of competition in the common market or in asubstantial part of it.

168.

    The Commission maintains that, contrary to the applicant's assertion, LPD was notjointly controlled by Gencor and Lonrho prior to the proposed concentration. According to the Commission, the applicant's statement runs counter to itsassertion in the parties' reply to the statement of objections, namely that Implatsand LPD were entirely separate entities and that Implats' involvement in LPD wassolely as a minority shareholder.

Findings of the Court

169.

    In paragraphs 114 to 121 and 186 to 191 of the contested decision, the Commissionanalysed in detail the structural links existing between Implats and LPD before theconcentration and the impact of the concentration on the structure of competitionin the platinum market. According to the contested decision, the existence of thoselinks did not prevent LPD from remaining an independent competitor of Implats,but that independence would have been lost after the concentration.

170.

    It is therefore necessary to examine whether the concentration was liable to altersignificantly the degree of influence which the applicant could exercise over LPD,and thereby the conditions and structure of competition in the platinum andrhodium markets, or whether, since the concentration made no substantialalteration to the pre-existing market structure, the Commission should haveapproved it.

171.

    Under clause 8.2 of the Principals' Agreement, the day-to-day management andordinary control of the activities and business of Eastplats and Westplats, that is tosay of LPD, are exclusively controlled by Lonrho through its subsidiary LMS.

172.

    That clause stipulates:

'The ordinary and day-to-day management and control of the business, undertakingand affairs of each of the companies will vest in LMS in terms of the managementagreements and the parties shall procure that on the signature date, the companieswill conclude the management agreements with LMS pursuant to which suchmanagement of the affairs of the companies will be carried out by LMS. LSA[Lonrho South Africa] shall procure that LMS shall inform the board of each of thecompanies regularly and fully regarding all material aspects of the business of eachof the companies by means of (inter alia) monthly management accounts.‘

173.

    Moreover, according to clause 8.5 of the Principals' Agreement, the marketing andthe sale of LPD's production are also subject to the exclusive control of Lonrhothrough its subsidiary Western Metal Sales (paragraph 117 of the contesteddecision).

174.

    That clause states:

'The production of WPL [Westplats] and EPL [Eastplats], including the productionof the mining operation acquired by WPL in terms of the main agreement, will bemarketed and sold through the agency of WMS [Western Metal Sales] ...‘

175.

    In addition, clause 6.3 provides that 'for so long as the Lonrho Group holds in theaggregate 50% or more of the issued share capital of each of the companies, thechairman and managing director of each of the companies from time to time andthe chairman of board meetings shall be a director appointed by LSA‘. In thatregard, it is not disputed that LMS, as the provider of management services toLPD, was in the powerful and privileged position of both knowing and running

LPD's business and strongly influencing the outcome of all its business decisions(paragraph 118 of the contested decision).

176.

    Furthermore, the fact that the Gencor group exercised no influence over LPD'scompetitive strategies is borne out by the parties to the concentration themselvesin their reply to the statement of objections (see Appendix 5 to the reply of Gencorand Lonrho to the statement of objections, fourth paragraph of the section headed'Paragraphs 6, 7 and 8: control of LPD by Gencor and Lonrho‘), where they assertthat 'each of Implats and LPD were, and to date remain, entirely separate entities,managed individually on a day-to-day basis by their respective management with noreference to each other‘ and that 'Implats' interest in LPD was and remains ... thatof a 27% shareholder in LPD‘ (paragraph 118 of the contested decision). It is alsoborne out by clause 17 of the Principals' Agreement, which provides: 'Therelationship of the shareholders [the Gencor and Lonrho groups], inter se, shall begoverned by the terms of this agreement and nothing contained herein shall bedeemed to constitute a partnership, joint venture or the like ...‘.

177.

    Finally, it is not disputed, first, that LPD and Implats, by retaining separatemarketing departments, competed with each other before the concentration andsold their products to certain common customers on different terms, for exampleas to the discounts offered (paragraph 117 of the contested decision) and, secondly,that during the past decade LPD had, with Russia, been the main element ofcompetition in the market (paragraphs 174 to 177 of the contested decision).

178.

    It follows that Lonrho was able to control by itself, without the agreement ofGencor, a very important aspect of LPD's competitive strategy, namely itsmarketing policy.

179.

    After the concentration, however, that aspect of LPD's commercial policy wouldno longer have been under Lonrho's exclusive control, but under the joint controlof Lonrho and Gencor. The transaction would have led to the absorption ofWestern Metal Sales and LMS by the new entity and to all the mining, processing,refining and marketing activities being brought together within Implats/LPD undersingle management (paragraphs 120 and 186 of the contested decision).

180.

    Accordingly, contrary to the applicant's submissions, the concentration was liableto alter significantly LPD's prospects of competing with regard to the marketing ofPGMs.

181.

    So far as concerns production policy, the following clauses of the Principals'Agreement provided that decisions concerning any major investment beyond theprogramme already approved as well as the annual strategic plan and budget foreach of the companies comprising LPD were subject to the prior agreement ofGencor and Lonrho:

'6.1    LSA and Implats shall have equal representation and voting powers on theboards of the companies ...

...

8.3    Any further major investment above the already approved programme inrelation to the business of any of the companies including the financingthereof and major divestment decisions will be a matter for agreementbetween the shareholders. Should the shareholders fail to agree on anysuch matter, the shareholders will seek the views of a mutually acceptableindependent expert whose views will be taken into account.

8.4    Notwithstanding anything contained in the articles of association of each ofthe companies, the powers and functions of the board of each of thecompanies shall be the consideration and, as appropriate, approval of thefollowing:

    ...

    8.4.3    the annual strategic plan and budget for each of the companies‘.

182.

    It is common ground that Lonrho may, without Gencor's support, increase LPD'scurrent output level by up to a maximum of (...) ounces per annum from existingshafts and through other incremental expansions achieved by continual processimprovements and relieving supply-line bottlenecks (paragraph 5.1 of the reportdrawn up in March 1996 by National Economic Research Associates, economicconsultants; 'the NERA Report‘).

183.

    However, the applicant claims that the concentration would not have altered itspotential to block future expansion of LPD's production capacity above thatamount, given that, under the Principals' Agreement, its agreement was alreadyneeded for any major investment, including the investment necessary in order toexpand the mine shaft known as (...). In its view, its rights of veto over the annualstrategic plan and annual budgets enabled it to prevent LPD from obtaining thenecessary funding (whether bank borrowings or customer finance) for developingthe (...) shaft (NERA Report, paragraph 5.1).

184.

    It should be noted that, according to information provided by the parties and theanalysis submitted by R.W. Rowland, the former chairman of Lonrho, LPD'splanned development could, despite its debt, be financed through internallygenerated funds and that it was foreseen that limited additional capital expenditurewould allow LPD to expand its production to 900 000 ounces per annum (end ofparagraph 115 and paragraphs 121 and 191 of the contested decision). (...)

185.

    Under the final sentence of clause 8.3 of the Principals' Agreement, if Gencor andLonrho disagreed as to the future expansion of LPD, they were to seek the views

of an independent expert. It follows that, as the Commission points out, Gencorcould not, for reasons unconnected with the proper operation of the undertaking,indefinitely block investment decisions which were necessary for the expansion ofLPD's production capacity and liable to benefit all the shareholders (paragraph 191of the contested decision).

186.

    Following the concentration, however, that kind of conflict of interests was lesslikely to occur, given the change in the parties' financial interests.

187.

    Before the concentration, Gencor controlled Implats and held a minority 27% stakein LPD which was coupled with the Principals' Agreement. Lonrho held 73% ofLPD's capital but did not have any holding in Implats. In those circumstances,while it could have been in Gencor's interest before the concentration to imposedecisions advantageous to the development of the operations which it controlledby itself (and which proportionately yielded a higher profit), that is to say theoperations of Implats, if necessary to the detriment of LPD, that was not true forLonrho whose sole interest objectively was the most rational development of theoperations of its subsidiary LPD, since it operated in the PGM markets solelythrough LPD.

188.

    By contrast, that situation would have been liable to change radically following theconcentration, inasmuch as both Gencor and Lonrho would have held identicalshareholdings in the new entity Implats/LPD and would thus have been likely toshare the same financial objectives and interests, at least as regards strategicdecisions relating to the development of the new entity. In other words, theconcentration was therefore liable to alter the balance of interests of the two mainshareholders in LPD by bringing about greater convergence between the views ofGencor and Lonrho as regards, in particular, the development of the productioncapacity of the new entity, and thereby allow a duopolistic structure comprising,Gencor and Lonrho, on the one hand, and Amplats, on the other, to be created.

189.

    That conclusion is indeed confirmed by the parties themselves.

190.

    Paragraph 187 of the contested decision states:

'... As noted in the circular to the Lonrho shareholders prepared for the merger:

”Implats and Lonrho have in the past been unable to reach agreement on anumber of issues including plans proposed by Lonrho to expand LPD's operations. The directors believe that following the merger, the interests of both Lonrho andGencor in enhancing the value of the enlarged Implats will be aligned to bothshareholders' benefit.”‘

191.

    Paragraph 188 goes on to state:

'Furthermore, according to projections presented to (...), the alignment of interestsfollowing the merger will involve the scaling back of expansion plans, thus leadingto higher prices compared to a situation where the merger did not go ahead andboth companies continued with their existing future planning. In particular (...) hasbeen presented with two different production scenarios outlining the impact onproduction of Implats and LPD, if the merger were to be implemented or,respectively, not implemented:

(a)    (...)

(b)    (...)‘

192.

    Finally, paragraph 189 states that (...) believed in particular, according to the reportentitled (...) of August 1994, that there would be two main benefits on the marketside from the concentration (in addition to possible cost savings):

'(...) maintaining current production levels (...) should positively influence (...)prices‘; and, furthermore,

'(...) the merged group (...) will have a higher market capitalisation than theunderlying value of the merged entities. This is due to its size and ability to exertgreater influence in the market.‘

193.

    In those circumstances, the Commission was justified, despite the structural linksbetween the applicant and Lonrho under the Principals' Agreement, in consideringthat the proposed concentration would remove definitively the competitive threatposed by LPD to the high-cost operations of Implats and Amplats, as regards bothmarketing and production, and thus have a substantial effect on the pre-existingmarket structure.

194.

    The ground of challenge under consideration must therefore be rejected.

D — The Commission's categorisation of the collective dominant position

1. The market share criterion

Arguments of the parties

195.

    The applicant observes that the parties' shares of the world platinum market onwhich the Commission relied are respectively (...)% (for Implats) and (...)% (forLPD), representing a combined market share of (...)%. In the Community market,those shares amounted respectively to (...)% (LPD), (...)% (Implats) and (...)%(combined share). However, in other merger control cases in which collectivedominance was found, such as those giving rise to the Nestlé-Perrier Decision andto Commission Decision 94/449/EC of 14 December 1993 relating to a proceeding

pursuant to Council Regulation (EEC) No 4064/89 (Case No IV/M.308 — Kali +Salz/MdK/Treuhand) (OJ 1994 L 186, p. 38; 'the Kali und Salz Decision‘), thecombined market shares were substantially higher than in the present case, yet theCommission allowed those concentrations to proceed.

196.

    In the Nestlé-Perrier case, Nestlé and BSN had a combined market share of 82%of the market at issue, namely the French mineral water market (paragraph 119 ofthat decision). The concentration was cleared subject to compliance with certainconditions.

197.

    In the Kali und Salz case, the market share of Kali und Salz increased from 17%to 25% of the Community market excluding Germany and resulted in a de factomonopoly consisting in a 98% share of the German market which was consideredto be a relevant geographical market in its own right. Again, the concentration wasconditionally cleared by the Commission.

198.

    The Commission maintains that the comparison made by the applicant between themarket shares of the parties to the concentration and the aggregate market shareof all the members of the oligopoly in the Nestlé-Perrier case (82%) is incorrect,as is the comparison drawn with the Kali und Salz case.

Findings of the Court

199.

    The prohibition enacted in Article 2(3) of the Regulation reflects the generalobjective assigned by Article 3(g) of the Treaty, namely the establishment of asystem ensuring that competition in the common market is not distorted (first andseventh recitals in the preamble to the Regulation). The prohibition relates toconcentrations which create or strengthen a dominant position as a result of whicheffective competition would be significantly impeded in the common market or ina substantial part of it.

200.

    The dominant position referred to is concerned with a situation where one or moreundertakings wield economic power which would enable them to prevent effectivecompetition from being maintained in the relevant market by giving them theopportunity to act to a considerable extent independently of their competitors, theircustomers and, ultimately, of consumers.

201.

    The existence of a dominant position may derive from several factors which, takenseparately, are not necessarily decisive. Among those factors, the existence of verylarge market shares is highly important. Nevertheless, a substantial market shareas evidence of the existence of a dominant position is not a constant factor. Itsimportance varies from market to market according to the structure of thosemarkets, especially so far as production, supply and demand are concerned(Hoffmann-La Roche, cited above, paragraphs 39 and 40).

202.

    In addition, the relationship between the market shares of the undertakingsinvolved in the concentration and their competitors, especially those of the nextlargest, is relevant evidence of the existence of a dominant position. That factorenables the competitive strength of the competitors of the undertaking in questionto be assessed (Hoffmann-La Roche, paragraph 48).

203.

    Accordingly, the fact that the Commission has relied in other concentration caseson higher or lower market shares in support of its assessment as to whether acollective dominant position might be created or strengthened cannot bind it in itsassessment of other cases concerning, in particular, markets in which the structureof supply and demand and the conditions of competition are different.

204.

    Thus, since there is no reliable evidence that the mineral water market and/or thepotash market examined in the Nestlé-Perrier case and the Kali und Salz case, onthe one hand, and the platinum and rhodium market under consideration in thiscase, on the other, have fundamentally similar characteristics, the applicant cannotrely on any differences in the market shares held by the members of the oligopolywhich were taken into account by the Commission in one or other of those twocases in order to call into question the market-share threshold adopted as indicativeof a collective dominant position in this case.

205.

    Furthermore, although the importance of the market shares may vary from onemarket to another, the view may legitimately be taken that very large market sharesare in themselves, save in exceptional circumstances, evidence of the existence ofa dominant position (Case C-62/86 Akzo v Commission [1991] ECR I-3359,paragraph 60). An undertaking which has a very large market share and holds itfor some time, by means of the volume of production and the scale of the supplywhich it stands for — without those having much smaller market shares being ablerapidly to meet the demand from those who would like to break away from theundertaking which has the largest market share — is in a position of strength whichmakes it an unavoidable trading partner and which, already because of this, securesfor it, at the very least during relatively long periods, that freedom of action whichis the special feature of a dominant position (Hoffmann-La Roche, paragraph 41).

206.

    It is true that, in the context of an oligopoly, the fact that the parties to theoligopoly hold large market shares does not necessarily have the same significance,compared to the analysis of an individual dominant position, with regard to theopportunities for those parties, as a group, to act to a considerable extentindependently of their competitors, their customers and, ultimately, of consumers. Nevertheless, particularly in the case of a duopoly, a large market share is, in theabsence of evidence to the contrary, likewise a strong indication of the existenceof a collective dominant position.

207.

    In the instant case, as the Commission stated in the contested decision(paragraphs 81 and 181), Implats/LPD and Amplats would, following theconcentration, each have had a market share of about 30% to 35%, that is to say

a combined market share of approximately 60% to 70%, in the world PGM marketand approximately 89% of the world PGM reserves. Russia had a 22% marketshare and about 10% of world reserves, the North American producers held a 5%market share and 1% of world reserves, and the recycling undertakings had a 6%market share. It was probable that, after Russia had disposed of its stocks, that isto say in all likelihood in the two years following the contested decision,Implats/LPD and Amplats would each have had a market share of about 40%, thatis to say a combined market share of 80%, which would have constituted a verylarge market share.

208.

    Thus, having regard to the allocation of market share between the parties to theconcentration and to the gap in market share which would open up following thatconcentration between, on the one hand, the entity arising from the merger andAmplats and, on the other, the remaining platinum producers, the Commission wasentitled to conclude that the proposed concentration was liable to result in thecreation of a dominant position for the South African undertakings.

209.

    The comparison drawn by the applicant between the market shares of the partiesto the concentration and the aggregate market share of all the members of theoligopoly in the Nestlé-Perrier case (82%) is incorrect. As the Commission haspointed out, it would be necessary to compare the 82% share with the aggregatemarket share of the parties to the concentration and Amplats after the virtualelimination of the Russian producer (Almaz) as a significant influence on themarket, that is to say a total of approximately 80%. So far as concerns the Kaliund Salz case, the applicant was likewise wrong in comparing the market shares ofthe parties to the concentration in the instant case with those of Kali und Salz andMdK (98%) in Germany, where collective dominance was not an issue. In the Kaliund Salz case, the Commission found that a collective dominant position existed onthe European market excluding Germany, where the undertaking resulting from themerger together with the other member of the duopoly held an aggregate marketshare of about 60%. The applicant thus should have made a comparison with thelatter figure, which is markedly lower than the combined market share of Amplatsand Implats/LPD following the concentration.

210.

    As regards the applicant's argument that the combined market share ofImplats/LPD following the concentration would have amounted to only (...)% in theCommunity, it should be noted, first, that the geographical market at issue is adefined geographical area in which the conditions of competition are sufficientlyhomogeneous for all businesses. In that area, the undertaking or undertakingsholding a dominant position would have had the potential to engage in abuseshindering effective competition (see, to that effect, Case 27/76 United Brands vCommission [1978] ECR 207, paragraphs 11 and 44). Hence, the Commission wasable to carry out a rational assessment of the effects of the concentration oncompetition in that area. Secondly, by reason of the characteristics of the PGMmarket set out in paragraphs 68 to 72 of the contested decision, the geographical

market at issue in the instant case has a worldwide dimension, a fact which theparties do not contest.

211.

    It is accordingly not possible to refer to 'market shares‘ of the parties in theCommunity. In a world market, such as the platinum and rhodium market, theeconomic power of a group of the kind which Implats/LPD and Amplats wouldhave formed following the concentration is the power attached to its share of theworld market and not to its market share in part of the world.

212.

    The existence of regional differences in the market-share breakdown of themembers of an oligopoly dominating the market in a fungible, readily transportableproduct which has its price set at world level merely reflects traditional businessrelationships which could either easily disappear if the undertakings in a dominantposition decided to engage in predatory pricing in order to eliminate theircompetitors, or be difficult to break in the face of abusive pricing practices if themarginal sources of supply were not in a position comfortably to satisfy demand onthe part of customers of the dominant undertakings which were engaging in suchabusive pricing.

213.

    As the applicant itself acknowledges in paragraph 4.24 of its application, there isno evidence that the undertakings operating in the platinum markets outside theduopoly identified by the Commission, any more than the members of the duopolyitself, can isolate the common market, for example in order to counter selectivelya decision by the members of the dominant oligopoly to increase prices at worldlevel.

214.

    Even if, in the context of a world market such as the platinum and rhodiummarket, it were also necessary to consider the precise level of Community sales ofthe relevant businesses in the instant case, the fact remains that the market shareheld by Implats/LPD and Amplats as a whole in the Community was notsubstantially different from the share held by them in the world platinum market.

215.

    According to the information provided by the parties to the concentration on thenotification form CO, the combined market share of Implats/LPD in theCommunity was approximately (...)% on average during the period 1992-95 (seeparagraph 6.1.10 of Form CO, Annex 6 to the application), while the market shareof Amplats was estimated in 1994 at approximately 35% to 50% and that of Russiaat approximately 25% to 35%. In other words, the combined Community marketshare of Implats/LPD and Amplats as a whole was, at the time of theconcentration, approximately (...)% to 65% and was to rise, following theexhaustion of Russian stocks, to approximately (...)% to 78% since, according toinformation provided by the parties to the concentration themselves, Russia had,from 1994, effected roughly 50% of its sales from stocks (see paragraph 7.3.2 ofForm CO, Annex 7 to the application).

216.

    Accordingly, the ground of challenge relating to the criterion of market share mustbe rejected in its entirety.

2. Similarity of the cost structures of Implats/LPD and Amplats following theconcentration

Arguments of the applicant

217.

    In the applicant's view, the Commission was wrong in considering that the mergedentity and Amplats would inevitably act together on the market because of theirsimilar cost structures. The Commission's analysis ignores the wide variety inoperating cost levels of different shafts both at Implats and LPD and at Amplats. To look at average costs only is wholly misleading, since production decisions aremade on a shaft-by-shaft basis and competition takes place at the level of marginalcost.

Findings of the Court

218.

    The costs comparison carried out by the Commission is based on the graphsreproduced in Annex II to the contested decision showing the operating cost curvesof the three South African producers, as drawn by the parties to the concentrationthemselves.

219.

    In paragraph 138(b) of the contested decision, the Commission states, withoutchallenge from the applicant, that the platinum industry has an inflexible coststructure with high fixed costs, a fact which means that, in platinum mining, outputcannot be varied significantly even if a number of operating shafts make little orno contribution to profitability. It adds that a strategy of closing the less profitableshafts in favour of the most profitable ones would mean that the fixed costs wouldhave to be spread across the remaining shafts, making each marginal shaft lessprofitable and repeatedly making it necessary to close more shafts.

220.

    It was therefore entitled to conclude that, in the platinum industry, a producer mustlook at the overall cost of its operations in deciding the appropriate productionlevel and not simply at the operating costs of individual shafts. In thosecircumstances, the comparison of the costs of the merged entity and Amplats basedon the costs of operating all their shafts was fully justified.

221.

    The applicant cannot reasonably maintain that the Commission's analysis ignoredthe wide variety in the operating cost levels of different shafts both at Implats andLPD and at Amplats. In view of the graphs drawn up by the parties to thetransaction showing the operating cost curves, before and after that transaction, ofthe three South African platinum producers (Annexes II and IV to the contested

decision), the concentration would — notwithstanding the differences noted by theCommission in the contested decision and linked to the quality of the ore extracted,to the cost of processing and refining operations and to administrative costs(paragraph 182) — have resulted in the creation of a new company whose coststructure for the operation of mines would have been similar to that of Amplats.

222.

    Consequently, given the similarity in the market shares, shares of world reservesand cost structures of the undertakings at issue, the Commission was entitled toconclude that, following the concentration, the interests of Amplats andImplats/LPD with regard to the development of the market would have coincidedto a higher degree and that this alignment of interests would have increased thelikelihood of anti-competitive parallel behaviour, for example restrictions of output.

223.

    The grounds of challenge under consideration must therefore be rejected.

3. Characteristics of the market

(a) Market transparency

Arguments of the parties

224.

    The applicant maintains that the analysis of the market carried out by theCommission is incorrect. According to the applicant, while platinum is ahomogeneous product with high price transparency, such transparency does notautomatically mean that there is transparency as far as competitors' sales levels,production decisions and resources are concerned, as is demonstrated by the factthat, in 1994, Amplats had been able to conceal its production problems for somemonths by leasing platinum to meet its delivery obligations.

225.

    The Commission states that, in paragraphs 145 and 146 of the contested decision,it set out the reasons why there was high transparency not only in terms of pricesbut also in relation to production, sales, reserves and new investment. Theapplicant has adduced no evidence to rebut the findings in the decision. Furthermore, price transparency is the most important element in determining thelevel of market transparency where there is an oligopoly. Finally, the Commissionobserves that, according to Lonrho, Amplats was unable to conceal its productionproblems from the market, contrary to what is stated in the NERA Report.

Findings of the Court

226.

    The applicant does not dispute that platinum is a homogeneous product for whichthe market has a transparent price-setting mechanism.

227.

    Price transparency is a fundamental factor in determining the level of markettransparency where there is an oligopoly. By means of the price mechanism, themembers of an oligopoly can, in particular, immediately discern the decisions ofother members of the oligopoly to alter the status quo by increasing their marketshare and they may take such retaliatory measures as may be necessary in orderto frustrate actions of that kind.

228.

    In the instant case, as is set out in the contested decision (paragraphs 144, 145and 146), market transparency is relatively high, in particular because platinum isquoted on the metal exchanges, production and sale statistics are published, thelimited number of direct customers on the market is known, the platinum industrycomprises a small and relatively closed group of undertakings with close linksbetween them, the main contracts used are of a specific kind, namely long-termcontracts prohibiting resale of the product purchased, and new production capacityis normally added by means of investment projects whose details are usually knownin the industry.

229.

    In those circumstances, it must be concluded that the Commission was fully entitledto find that there was high transparency not only in terms of prices but also inrelation to production, sales, reserves and new investment.

230.

    The ground of challenge under consideration must therefore be rejected.

(b) Growth prospects in the platinum market

Arguments of the parties

231.

    According to the applicant, the analysis of the market carried out by theCommission is incorrect. The fact that growth in demand is slow cannot stand inthe way of vigorous competition and resulting shifts in market shares. Theapplicant supports its assertion by referring to the NERA Report. According toparagraph 4.1.4 of that report, where, as in this case, there is overcapacity in theindustry in question, the producers must compete, in particular by reducing theirproduction costs, in order to avoid the shutting down of their surplus production. In the applicant's view, changes in market share and the reduction in real platinumprices between 1985 and 1995, as well as the reaction of Amplats, which increasedits production at low prices, and of Implats, which adopted major rationalisationmeasures, demonstrate that the structure of the platinum market has not given riseto oligopolistic cooperation between the major producers.

232.

    The Commission submits that, following the proposed concentration, the two mainproducers would have had broadly similar cost structures. Parallel conduct, evenin relation to cost reduction, would therefore have been an intelligent strategy.

Moreover, it remains true that a market characterised by slow growth does notencourage new entrants or vigorous competition.

Findings of the Court

233.

    The applicant does not dispute that, in principle, a market characterised by slowgrowth does not encourage new entrants or vigorous competition. It simply relieson past market trends to deny that that principle is applicable to the platinummarket.

234.

    It has not disproved the Commission's analysis (paragraphs 160 to 172 of thecontested decision) that there has in the past been a tendency towards oligopolisticdominance, which the Commission based on an examination of market growth andchanges in market share over the past decade, on the low degree of direct pricecompetition in respect of long-term customer contracts, on sustained high pricelevels and on the behaviour of the main players in the market.

235.

    The applicant's reasoning is founded on premisses, in terms of growth in demand,which are not comparable with the forecasts for growth in demand in respect of theperiod from 1995 to 2000. During the period from 1985 to 1995, in which themarket share and price fluctuations and the reactions of Amplats and Implatsreferred to by the applicant occurred, demand had almost doubled, increasing from2 830 000 to 5 205 000 ounces per annum (see NERA Report, Figure 3.1, p. 15),whereas in the period from 1995 to 2000 demand was not forecast to increasesubstantially, rising from 4 705 000 to 5 570 000 ounces per annum (seeparagraph 127 of the contested decision).

236.

    Finally, the applicant's analysis fails to take into account the effect of theconcentration on the market structure and of the new entity vis-à-vis its principalcompetitor, Amplats. Even if the applicant's analysis is correct in relation to thepast, the effect of the concentration would none the less have been that the twomain producers would have had broadly similar cost structures and that, havingregard to the structure of the platinum market, anti-competitive parallel conductwould, economically, have constituted a more rational strategy than competing witheach other, thereby adversely affecting the prospect of maximising combinedprofits.

237.

    In those circumstances, having regard to the stability of the platinum market, forwhich average annual growth of approximately 3% was forecast in respect of theperiod from 1995 to 2000, the Commission was entitled to conclude that newcompetitors would not be encouraged to enter that market, or existing competitorsto adopt an aggressive strategy to capture that additional demand.

238.

    The ground of challenge put forward by the applicant must therefore be rejected.

(c) Balance between supply and demand

Arguments of the applicant

239.

    The applicant further claims that the Commission's concerns regarding a possiblerise in the price of platinum were also clearly coloured by its unjustified view thata supply deficit was likely to arise (paragraph 136 of the contested decision).

240.

    The applicant considers that the Commission's view was out of line with the weightof industry opinion which pointed to a supply surplus that might balance out in thefollowing years.

Findings of the Court

241.

    In paragraph 127 of the contested decision, the Commission refers to the variousforecasts provided by the parties concerning future changes in demand, that is tosay to the forecasts of the parties themselves and to the differing forecasts madeby Anderson, Wilson & Partners Inc., BOE Nat West Securities, SBC Warburg andEngelhard.

242.

    In paragraphs 128 to 131 of the contested decision, however, the Commission alsocarried out a detailed analysis, which moreover is not disputed by the applicant, ofthe factors underlying the forecasts that growth would tend to increase moderatelyin the following years.

243.

    Those factors were:

—    an increase in production of catalytic converters for automobiles, due to theenvisaged tightening and/or introduction of emission control legislation inthe United States, Europe, Brazil and Argentina between then and the endof the century, and greater use of platinum in catalytic converters for dieselcars;

—    growth in demand for platinum in the jewellery sector in Japan, the UnitedStates and probably China;

—    as regards industrial applications, replacement operations in the petroleumand chemical industries because plants shut down during the recession werebeing brought back on stream;

—    increasing use of personal computers, since more platinum would be utilisedin the disk coatings and other components;

—    last, the use, in the long term, of fuel cells.

244.

    Furthermore, irrespective of which of the supply forecasts provided by the partiesis the most accurate, the Commission explained in paragraphs 134, 135 and 136 ofthe contested decision that world platinum supply would, following theconcentration, have been dominated by the South African undertakings and thatany shortfall of supply in relation to demand could have been made good only bythose undertakings.

245.

    Having regard to those statements, which have not been challenged by theapplicant, it must be concluded that the Commission's analysis concerning changesin supply and demand for platinum was not vitiated by a manifest error ofassessment.

246.

    The ground of challenge under consideration must therefore be rejected.

(d) Marginal and alternative sources of supply

Arguments of the parties

247.

    The applicant submits that, in its consideration of barriers to market entry, theCommission failed to take due account of:

—    the cumulative effect of the various marginal and alternative sources ofsupply, in particular the growing potential for recycled platinum;

—    the 4 000 000 ounces of platinum stocks built up since 1985;

—    the increasing substitution of palladium for platinum;

—    Russia's production and sales from its stocks;

—    the substantial new production plans of marginal suppliers such as Stillwaterin the United States and Hartley in Zimbabwe.

248.

    The applicant points out in that regard that the South African Government's letterof 19 April 1996 indicates that world reserves outside South Africa and Zimbabwecould theoretically satisfy world demand for 20 years.

249.

    The Commission essentially failed to consider the impact which the variousmarginal sources of supply and other competitive influences would have had in theevent of a price rise of, for example, 10% or 20%. If such an increase could havebeen maintained, it would indeed have indicated that the merged entity, actingtogether with Amplats, was able to behave to an appreciable extent independentlyof its competitors, its customers and, ultimately, of consumers.

250.

    The Commission thus did not properly assess what would have happened to pricesif none of the factors relied on by the applicant had existed, still less did it addressthe greatly enhanced role which those factors would have played in the future if thehypothetical price rise, which was the Commission's principal concern, hadoccurred. That constitutes a lack of reasoning in breach of Article 190 of theTreaty, inasmuch as it is obvious that the 37% of the market accounted for by themarginal sources of supply, together with other influences, would have enabledprice increases to be contained.

251.

    The Commission, for its part, refers to paragraphs 91 to 95 of the contesteddecision concerning recycling, paragraphs 29 to 32 relating to the substitution ofpalladium for platinum, paragraph 138(c) which deals with stocks, paragraphs 122to 125, 134, 135 and 173 on Russian production and sales from stocks,paragraphs 85 to 90 and 138(c) regarding new production and paragraphs 193to 204 on the economic analysis presented by the parties. It concluded at the endof paragraph 138 of the contested decision that supply responses at the marginfrom stocks, new mines and recycling could not prevent an abuse of a dominantposition. It also stated, in paragraph 203, that it was highly unlikely that suppliersoutside the oligopoly, stocks outside Russia and the availability of recycled platinumwould have a sufficient impact on the market to prevent an abuse of a jointdominant position. The latter conclusion took into account the situation prevailingin Russia as the main source, other than LPD, of competition on the market.

252.

    As regards the applicant's argument that the 37% of the market accounted for bythe marginal sources of supply and other influences would have curbed priceincreases, the Commission points out that the South African producers aloneaccounted for 63% of the market in 1995, a figure that was to increase significantly(to a level approaching 80%) when, from 1997, Russia would no longer be sellingfrom its stocks. Furthermore, a significant proportion of the marginal competitionwas hypothetical and could not in any event have exerted any pressure on themarket for some years.

253.

    It submits finally that the applicant has not substantiated its assertion that reservesother than those of South Africa could theoretically have satisfied world demandfor the next 20 years. Nor does the applicant state what consequences that'theoretical‘ sufficiency of other reserves might have had for the market.

Findings of the Court

254.

    The applicant's view has no factual basis.

255.

    In paragraphs 93, 94 and 95 of the contested decision, the Commission examinesthe limits of the potential for increases in platinum recycling, in particular recyclingfrom catalytic converters where the limits relate to the costs of waste collection, to

the number of vehicles which are exported to the third world and thus escaperecycling systems, and to other factors.

256.

    In paragraph 138(c) of the contested decision, it takes due account of the 4 000 000ounces of platinum stocks built up since 1985.

257.

    In paragraphs 29 to 32 it notes the limits on the growing trend for palladium to besubstituted for platinum.

258.

    In paragraph 81 it considers Russia's production and sales from its stocks. Inparagraphs 123, 124, 125, 134 and 173 it assesses the prospects for the expansionof Russian production. In paragraphs 171 and 173 it contemplates, but finally rulesout, the possibility of Russia selectively using its stocks with a view to a possiblemonopolistic attempt to reduce production.

259.

    The plans of marginal suppliers such as Stillwater in the United States and Hartleyin Zimbabwe are examined in paragraph 88.

260.

    The cumulative effect of the various marginal and alternative sources of supply isanalysed in paragraphs 138(c) and 202.

261.

    It is therefore apparent that, contrary to the applicant's submissions, theCommission took due account of the abovementioned factors and gave properreasons for its decision in that regard.

262.

    So far as concerns the applicant's argument that the Commission did not properlyassess what would have happened to prices if none of the factors relied on by theapplicant had existed, suffice it to note that when the Commission assesses theforeseeable impact of a concentration on the market it is not required to considerwhat would have happened to the market in the past in the absence of one orother competitive factor. In its assessment, the Commission is required only toestablish whether, by reason of, inter alia, previous developments in the conditionsof competition in the market in question, the concentration may lead to thecreation of a position of economic power for one or more undertakings, therebyenabling them to engage in abuses, particularly abuses involving price increases.

263.

    It follows that the grounds of challenge put forward by the applicant must berejected.

(e) Structural links

Arguments of the parties

264.

    The applicant claims that the Commission did not take account of the case-law ofthe Court of First Instance (Joined Cases T-68/89, T-77/89 and T-78/89 SIV and

Others v Commission [1992] ECR II-1403; the 'Flat Glass‘ case) which, in thecontext of Article 86 of the Treaty, requires for findings of collective dominancethat there be structural links between the two undertakings, for example througha technological lead by agreements or licences, which give them the power tobehave independently of their competitors, of their customers and, ultimately, ofconsumers. In the instant case, the Commission has failed to demonstrate theexistence of structural links or to prove that the merged entity and Amplatsintended to behave as if they constituted a single dominant entity. That failure alsoinfringes the obligation to state reasons laid down in Article 190 of the Treaty.

265.

    The applicant notes that, in the contested decision, the Commission refers to thefollowing structural links between the merged entity and Amplats (paragraphs 156and 157):

—    links in certain industries, including a joint venture in the steel industry;

—    AAC's recent purchase of 6% of Lonrho with a right of first refusal over afurther 18%.

266.

    That analysis in inadequate in three respects.

267.

    First, neither of those matters directly concerned the PGM industry. The firstmatter specifically concerned links established with other industries, and both thefirst and the second were acts of AAC rather than its platinum subsidiary Amplats.

268.

    Second, those links were a long way from the kind of structural links envisaged inthe Flat Glass judgment as sufficient to constitute joint dominance for the purposesof Article 86 of the Treaty.

269.

    Finally, AAC's recent investment in Lonrho was an action hostile to Gencor andto the concentration. It constituted in itself an indication that the links existingbetween the various companies did not stand in the way of aggressive competitionbetween them.

270.

    The Commission states, first, that in its previous decision-making practice it had notalways relied on the existence of economic links in order to make a finding ofcollective dominance, and second, that the Court of First Instance, in its judgmentin the 'Flat Glass‘ case (paragraph 358), did not lay down the existence ofeconomic links as a requirement or restrict the notion of economic links to thestructural links relied on by the applicant. The Commission is therefore entitledto understand that notion as including the relationship of interdependence whichexists between the members of a tight oligopoly.

271.

    In addition, even assuming that the Court of First Instance did lay down arequirement of economic links in the context of Article 86 of the Treaty, that does

not mean that the same requirement should exist in connection with the control ofconcentrations.

272.

    Furthermore, even if the notion of economic links were to be construed in anarrower sense, there were, despite the applicant's tendency to underestimatethem, a number of such links between the parties to the proposed concentrationand Amplats which could have reinforced the common interest of the members ofa tight oligopoly (paragraphs 155, 156 and 157 of the contested decision).

Findings of the Court

273.

    In its judgment in the Flat Glass case, the Court referred to links of a structuralnature only by way of example and did not lay down that such links must exist inorder for a finding of collective dominance to be made.

274.

    It merely stated (at paragraph 358 of the judgment) that there is nothing, inprinciple, to prevent two or more independent economic entities from being unitedby economic links in a specific market and, by virtue of that fact, from togetherholding a dominant position vis-à-vis the other operators on the same market. Itadded (in the same paragraph) that that could be the case, for example, where twoor more independent undertakings jointly had, through agreements or licences, atechnological lead affording them the power to behave to an appreciable extentindependently of their competitors, their customers and, ultimately, of consumers.

275.

    Nor can it be deduced from the same judgment that the Court has restricted thenotion of economic links to the notion of structural links referred to by theapplicant.

276.

    Furthermore, there is no reason whatsoever in legal or economic terms to excludefrom the notion of economic links the relationship of interdependence existingbetween the parties to a tight oligopoly within which, in a market with theappropriate characteristics, in particular in terms of market concentration,transparency and product homogeneity, those parties are in a position to anticipateone another's behaviour and are therefore strongly encouraged to align theirconduct in the market, in particular in such a way as to maximise their joint profitsby restricting production with a view to increasing prices. In such a context, eachtrader is aware that highly competitive action on its part designed to increase itsmarket share (for example a price cut) would provoke identical action by theothers, so that it would derive no benefit from its initiative. All the traders wouldthus be affected by the reduction in price levels.

277.

    That conclusion is all the more pertinent with regard to the control ofconcentrations, whose objective is to prevent anti-competitive market structuresfrom arising or being strengthened. Those structures may result from the existenceof economic links in the strict sense argued by the applicant or from market

structures of an oligopolistic kind where each undertaking may become aware ofcommon interests and, in particular, cause prices to increase without having toenter into an agreement or resort to a concerted practice.

278.

    In the instant case, therefore, the applicant's ground of challenge alleging that theCommission failed to establish the existence of structural links is misplaced.

279.

    The Commission was entitled to conclude, relying on the envisaged alteration in thestructure of the market and on the similarity of the costs of Amplats andImplats/LPD, that the proposed transaction would create a collective dominantposition and lead in actual fact to a duopoly constituted by those two undertakings.

280.

    To the same end, it was also entitled to take into account the economic linksreferred to in paragraphs 156 and 157 of the contested decision.

281.

    The applicant is not justified in challenging the relevance of those links on theground that they did not directly concern the PGM industry and were acts of AACrather than Amplats. Links between the principal platinum producers relating toactivities outside PGM production (paragraph 156 of the contested decision) weretaken into account by the Commission not as factors attesting to the existence ofeconomic links in the strict sense given to that notion by the applicant, but asfactors contributing to discipline over the members of an oligopoly by multiplyingthe risks of retaliation should one of its members act in a manner consideredunacceptable by the others. That analysis is, moreover, confirmed by a consultant'sstudy regarding the possible competitive responses of Implats in relation to LPD,which is one of the papers submitted to the board of Gencor and Implats dated6 May 1994 (referred to in paragraph 158 of the contested decision): according tothat consultant, one of the possible scenarios was 'disciplining attacks and signals —focused price wars, for example Rh [rhodium]‘.

282.

    The fact that the links in question concern AAC and not Amplats directly cannotinvalidate the Commission's reasoning. Since Amplats was controlled by AAC, theCommission was justified in considering that the links which existed between AACand other undertakings, whether or not operating in the PGM markets, could havea favourable or an unfavourable impact on Amplats.

283.

    As for the argument that AAC's recent investment in Lonrho was an action hostileto Gencor and to the concentration, and constituted in itself an indication that thelinks existing between the various companies did not stand in the way of aggressivecompetition between them, the Court finds, first, that the applicant has notadduced the necessary proof of the hostile nature of that transaction, and secondly,that, irrespective of the reasons behind it, it tightened the links existing between thetwo most significant competitors in the market.

284.

    The ground of challenge under consideration must therefore be rejected.

(f) Means of competition other than technological development

Arguments of the parties

285.

    The applicant states that, although production and mining technology is mature, theCommission did not take into account the other non-technical aspects ofcompetitive advantage, such as available mineral reserves, management of thebusiness and the differing incentives of different producers, indicating amongstundertakings a wide diversity in competitive ability.

286.

    The Commission does not deny that competition is possible in an industry wheretechnology is mature. However, the absence of technological change eliminates apowerful source of competition. Moreover, the applicant's argument highlights theimportance of differing management styles and resource bases. One of the mostimportant features of the proposed concentration from the point of view of itsimpact on competition is that it would have eliminated a competitor (LPD) whosemanagement style and cost structure differed significantly from those of Implats andAmplats.

Findings of the Court

287.

    Contrary to the applicant's submissions, the Commission took account, inparagraphs 152 and 153 of the contested decision, of the fact that, even in anindustry where the technology is mature, competition remains possible through theapplication of new working methods and production technology, and of the factthat there were differences in management between the four major platinumproducers, that technological progress in the platinum mining industry is relativelyslow to develop and that no technological breakthroughs were expected whichwould fundamentally change the production structure of the platinum industry.

288.

    The contested decision thus took account of the other non-technical aspects ofcompetitive advantage. The ground of challenge put forward by the applicant musttherefore be rejected.

(g) Account taken of the reaction of interested third parties

Arguments of the applicant

289.

    According to the applicant, the Commission ignored the fact that, as pointed outin paragraphs 2.17 to 2.21 of the reply to the statement of objections, mostcustomers and other third parties contacted by the Commission reacted neutrallyor positively towards the concentration. If those third parties did not believe that

marginal and other competitive influences in the market would constrain any pricerise, they would surely have reacted negatively.

Findings of the Court

290.

    The applicant adduces no evidence capable of proving its assertion. The fact thatthe Commission, following its own analysis of the market, endorsed the view of thecustomers and other interested third parties who had reacted negatively to theproposed concentration does not mean that it failed to take account of the pointof view of those whose reaction had been positive or neutral.

291.

    In any event, while the opinions of customers and other third parties may constitutean important source of information on the foreseeable impact of a concentrationon the market, they cannot bind the Commission when it makes its own assessmentof the impact of a concentration.

292.

    The ground of challenge under consideration must therefore be rejected.

(h) Past oligopolistic tendencies

Arguments of the parties

293.

    The applicant claims that, in finding that there had been a past tendency in theplatinum industry towards collective dominance, the Commission ignored the factthat market shares had fluctuated over time (NERA Report, table on p. 15) andthat, as the Commission itself admits, the progressive decline in the market sharesof the leading producers had indicated a level of competition in the market. Furthermore, prices had declined in real terms over the past decade (NERAReport, Table 3.2 on p. 18; Annexure 3 of Appendix 10 to the reply to thestatement of objections, reproduced in Annex 11 to the application).

294.

    The Commission maintains that, while the contested decision itself acknowledgesthat there was some competition in the past, there was also parallel or cartel-likebehaviour.

Findings of the Court

295.

    Contrary to the applicant's assertions, it is clear from paragraphs 166 and 173, aswell as from paragraphs 168 to 172 and 204, of the contested decision that theCommission took due account both of the fluctuations in market share and of pricemovements in its analysis of the specific competitive framework within which theSouth African suppliers had operated before the transaction.

296.

    The ground of challenge put forward by the applicant must therefore be rejected.

(i) Conclusion

297.

    It follows from all of the foregoing that the Commission was fully entitled toconclude (paragraph 219 of the contested decision) that the concentration wouldhave led to the creation of a dominant duopoly on the part of Amplats andImplats/LPD in the platinum and rhodium market, as a result of which effectivecompetition would have been significantly impeded in the common market withinthe meaning of Article 2 of the Regulation. It also follows that the reasoning in thecontested decision fulfils the requirements laid down by Article 190 of the Treaty.

298.

    Since all the grounds of challenge put forward by the applicant have been rejected,the pleas under consideration must be rejected as well.

IV — The pleas alleging infringement of Article 8(2) of the Regulation, in that theCommission did not accept the commitments offered by the parties to theconcentration, and infringement of Article 190 of the Treaty

Arguments of the parties

299.

    The applicant asserts that the Commission erred in law by refusing to accept thecommitments offered by the parties to the concentration, and that it also failed tojustify the reasons for its refusal to the requisite legal standard, thereby infringingArticle 190 of the Treaty.

300.

    It recalls that, according to paragraph 215 of the contested decision, the partiesproposed to the Commission draft commitments which sought to allay thecompetition concerns raised by the transaction. Those commitments weresubmitted to the Member States and discussed at the meeting of the AdvisoryCommittee on 9 April 1996.

301.

    There were three commitments:

(a)    the development of an extra (...) ounces of capacity at the (...) mine shaft;

(b)    the maintenance of output at existing levels ((...) ounces (...));

(c)    the creation of a new supplier in the market.

302.

    In the applicant's view, the Commission (paragraph 216 of the contested decision)was wrong to reject those commitments, considering that they were behavioural innature and therefore could not be accepted under the Regulation. The applicantmaintains that the Commission has previously accepted behavioural commitments

under the Regulation. It cites a number of decisions in which the Commissionclearly accepted commitments of that kind.

303.

    The applicant observes that the commitments are rejected in paragraph 216 of thecontested decision on the ground that 'output could be reduced prematurely atother mine shafts, owned by the merged entity, simply to maintain output, at the(...) ounce level, thereby restricting overall supply‘. In its view, that argument doesnot make sense. According to the applicant, the commitment was to develop anextra (...) ounces of capacity at the (...) mine shaft and to maintain output atexisting levels. Consequently, there could not have been any reduction in outputbefore the additional capacity became available.

304.

    The applicant also challenges the Commission's argument (paragraph 216 of thecontested decision) that if one supplier had maintained output at a constant level,that would have been known by Amplats, the other member of the oligopoly, thusgenerating upward pressure on prices. It states that the commitment did notprovide for a cap on the output of the merged entity. Amplats could not thereforehave assumed that the merged entity would react to a growth in demand bykeeping its output at the existing level. In any event, businesses are entitled toderive a reasonable return from their economic activities, provided that it is notunacceptably or unfairly high from the point of view of competition law. Anybehaviour on the part of the merged entity and Amplats which resulted in such areturn could be dealt with by the South African authorities.

305.

    The applicant also claims that the Commission took no account whatsoever of thefinding of the South African authorities that Amplats already occupied a dominantposition and would have faced effective competition from the entity arising fromthe concentration. The Commission's attitude was thus inconsistent with theinformed concerns of the South African authorities about the existing marketstructure.

306.

    As regards the creation of a new supplier which, according to the Commission,would have had a negligible impact, the applicant submits that if it is justified in itsother criticisms of the Commission's approach to the commitments, that aspect ofthe contested decision cannot be upheld.

307.

    It also disputes the Commission's statement that the commitments did not reflectthe market growth which all commentators agreed would take place (paragraph 216of the contested decision). It considers that the Commission's view was out of linewith the weight of industry opinion, which pointed to a supply surplus that mightbalance out in a few years. That point of view was supported by at least threeindependent reports, attached to the parties' reply to the statement of objections,to which the Commission made only brief reference in the contested decision. Against that background, the parties' commitment to maintain output at its existinglevel constituted a step aimed at dispelling the Commission's main concern.

308.

    Furthermore, the applicant maintains that it would have been possible to ensurecompliance with the commitments offered. In particular, the maintenance ofoutput levels would have been verifiable by means of an obligation to producequarterly production figures to the Commission. They could then have beenchecked each year against the production figures published in the annual reportand accounts, which are audited. As regards the other commitment offered,namely the development of the (...) project, the applicant considers that, despiteits structural nature, it could in any event have been easily verified by means ofaudited progress reports and annual site visits. It would thus have been no moredifficult to enforce those commitments than commitments accepted in other cases.

309.

    Finally, the Commission could not, in rejecting the commitments offered, rely onthe fact that there was an added difficulty in ensuring compliance because all theproduction facilities of the combined group would have been in South Africa. Ifthe Commission has the power under Community law and international law toblock a merger which is carried out entirely outside the Community, it must at thevery least apply the same standards and tests in dealing with such a merger as itwould apply to mergers within the Community.

310.

    The Commission denies that the commitment was to maintain production and todevelop the (...) project, that is to say to increase output. According to theCommission, the commitment offered was only to maintain the existing level ofproduction while developing new production capacity. The contested decision(paragraph 216) explained why that would not in any event have been sufficient ina growing market. Moreover, the applicant's argument that Amplats could nothave assumed that the entity arising from the concentration would refrain fromincreasing production in response to a growth in demand amounts to a denial ofthe existence of an oligopoly. Finally, for the reasons advanced in relation to thefirst plea for annulment, it is fanciful to suggest that the South African competitionauthorities would have had any interest in intervening in the event of a deliberaterestriction of production.

311.

    The Commission considers that commitments which are behavioural in naturecannot be accepted. In the context of the Regulation, a remedy dealing with theconcentration of economic power on the market which would result from a mergermust itself be structural in nature. Since the purpose of the Regulation is toprevent situations from arising in which there is scope for anti-competitive conductwhich does not involve concertation, only commitments which help to eliminate thepossibility of abuse can be considered. Furthermore, Article 2 of the Regulationspecifically prevents the Commission from authorising a concentration whichcreates or strengthens a dominant position. In those circumstances, a promise notto abuse a dominant position is inadequate and does not meet the requirementslaid down by the Regulation.

312.

    The Commission does not agree with the applicant's analysis of commitmentsoffered and accepted in certain previous cases. A commitment can be regarded as

structural when it solves a structural problem, for example access to the market. There is no need to discuss the question whether the proposed commitment todevelop the (...) project was itself structural, since it would not in any event havesolved the competition problem at issue.

Findings of the Court

313.

    It is necessary to consider first of all what type of commitment may be acceptedunder the Regulation and in particular whether the Commission's view thatbehavioural undertakings cannot be accepted is correct in law.

314.

    In the light of the seventh recital in its preamble, which states that 'a new legalinstrument should therefore be created ... to permit effective monitoring of allconcentrations from the point of view of their effect on the structure of competitionin the Community‘, the principal objective of the Regulation is to monitor marketstructures, and not the behaviour of undertakings which is essentially to becontrolled only under Articles 85 and 86 of the Treaty.

315.

    Article 8(2) of the Regulation provides:

'Where the Commission finds that, following modification by the undertakingsconcerned if necessary, a notified concentration fulfils the criterion laid down inArticle 2(2), it shall issue a decision declaring the concentration compatible withthe common market.

It may attach to its decision conditions and obligations intended to ensure that theundertakings concerned comply with the commitments they have entered intovis-à-vis the Commission with a view to modifying the original concentration plan...‘

316.

    It follows from those provisions and from Article 2(3) of the Regulation that wherethe Commission concludes that the concentration is such as to create or strengthena dominant position, it is required to prohibit it, even if the undertakings concernedby the proposed concentration pledge themselves vis-à-vis the Commission not toabuse that position.

317.

    Since the purpose of the Regulation is to prevent the creation or strengthening ofmarket structures which are liable to impede significantly effective competition inthe common market, situations of that kind cannot be allowed to come about onthe basis that the undertakings concerned enter into a commitment not to abusetheir dominant position, even where it is easy to check whether those commitmentshave been complied with.

318.

    Consequently, under the Regulation the Commission has power to accept only suchcommitments as are capable of rendering the notified transaction compatible withthe common market. In other words, the commitments offered by the undertakingsconcerned must enable the Commission to conclude that the concentration at issuewould not create or strengthen a dominant position within the meaning ofArticle 2(2) and (3) of the Regulation.

319.

    The categorisation of a proposed commitment as behavioural or structural istherefore immaterial. It is true that commitments which are structural in nature,such as a commitment to reduce the market share of the entity arising from aconcentration by the sale of a subsidiary, are, as a rule, preferable from the pointof view of the Regulation's objective, inasmuch as they prevent once and for all, orat least for some time, the emergence or strengthening of the dominant positionpreviously identified by the Commission and do not, moreover, require medium orlong-term monitoring measures. Nevertheless, the possibility cannot automaticallybe ruled out that commitments which prima facie are behavioural, for instance notto use a trademark for a certain period, or to make part of the production capacityof the entity arising from the concentration available to third-party competitors, or,more generally, to grant access to essential facilities on non-discriminatory terms,may themselves also be capable of preventing the emergence or strengthening ofa dominant position.

320.

    It is thus necessary to examine on a case-by-case basis the commitments offered bythe undertakings concerned.

321.

    In the instant case, while the applicant categorises the development of the (...)project as a structural commitment, it does not deny, as the Commission states inthe contested decision (paragraph 216), that that commitment, like the othercommitments offered, namely to maintain output at a specified level and to createa new supplier, was incapable of solving the question of the oligopolistic marketstructure created by the concentration.

322.

    The first two commitments do not in any way alter the structure of the market inquestion as a duopolistic market, but merely bring the production policy ofImplats/LPD within the framework of a simple obligation as to minimum outputwhich, while it may reduce the potential for abuse of a dominant position in thefuture, depending on changes in demand, does not ensure either that there will beno abuse of any kind or, more importantly, that the dominant position will actuallybe eliminated.

323.

    Nor can the applicant maintain that the Commission was unable to refuse thecommitment on the ground that, if Implats/LPD had maintained output at aconstant level, that would have been known to Amplats, thus generating upwardpressure on prices. The argument expounded, far from proving that thecommitment offered was capable of eliminating the dominant duopoly created bythe concentration, merely challenges the very existence of a dominant position.

The applicant's arguments on that point have, however, already been rejected inconnection with the plea for annulment alleging infringement of Article 2 of theRegulation and relating to the finding that there was a collective dominant position.

324.

    So far as concerns the applicant's arguments, first, that businesses are entitled toderive a reasonable return from their economic activities and, secondly, that anybehaviour on the part of the merged entity and Amplats which resulted in such areturn could have been dealt with by the South African authorities, suffice it tostate that, whatever the merits of those arguments, they are irrelevant when itcomes to assessing whether or not the commitment offered was capable ofeliminating the impediment to the competitive structure created by theconcentration.

325.

    As for the third commitment, namely the creation of a new supplier, it need merelybe observed that the applicant does not dispute the Commission's analysis that itwould have had a negligible impact on the amount of the future platinum supplyto the ultimate consumer. The applicant merely states, thereby acknowledging theancillary nature of that commitment, that if it were right in its other criticisms ofthe Commission's approach to the commitments, that aspect of the contesteddecision could not be upheld.

326.

    Since, as held above, the Commission was justified in rejecting the first twocommitments, it did not manifestly err in its assessment by considering that,irrespective of its nature, the third commitment could not be accepted in view ofits negligible impact on the market.

327.

    In those circumstances, the applicant's arguments concerning the possibilities formonitoring the commitments offered are entirely irrelevant. Since thecommitments as a whole were not capable of eliminating the impediment toeffective competition caused by the concentration, the Commission was justified inrejecting them, even if there were no particular difficulties in verifying whether theyhad been carried out.

328.

    Accordingly, the Commission neither erred in law nor manifestly erred in itsassessment by rejecting the commitments offered by Gencor and Lonrho with aview to eliminating the competition problems raised by the concentration.

329.

    In the light of the above findings, the reasoning in the decision concerning therejection of the commitments is accordingly sufficient.

330.

    The pleas examined must therefore be rejected.

Costs

331.

    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the applicant has been unsuccessful and the Commission hasapplied for costs, the applicant must be ordered to pay the costs incurred by theCommission.

332.

    Under the first subparagraph of Article 87(4) of the Rules of Procedure, MemberStates which have intervened in the proceedings are to bear their own costs. TheFederal Republic of Germany must therefore be ordered to bear its own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Fifth Chamber, Extended Composition)

hereby:

1.    Dismisses the application;

2.    Orders the applicant to bear its own costs and those incurred by theCommission;

3.    Orders the Federal Republic of Germany to bear its own costs.

Azizi                        Vesterdorf García-Valdecasas         Moura Ramos                     Jaeger

Delivered in open court in Luxembourg on 25 March 1999.

H. Jung

J. Azizi

Registrar

President

Contents

    Facts

II - 2

        1. The concentration at issue

II - 2

            Parties to the concentration

II - 2

            The proposed concentration

II - 3

        2. Administrative procedure

II - 3

    Procedure before the Court

II - 6

    Forms of order sought

II - 7

    Admissibility

II - 7

        Arguments of the defendant

II - 8

        Findings of the Court

II - 8

    Substance

II - 9

        I — The pleas alleging infringement of the Regulation, in that it did not conferjurisdiction on the Commission to examine the compatibility of the concentrationwith the common market, and infringement of Article 190 of the Treaty

II - 9

            Arguments of the parties

II - 9

            Findings of the Court

II - 15

                1. Assessment of the territorial scope of the Regulation

II - 16

                2. Compatibility of the contested decision with public international law

II - 18

        II — The pleas alleging infringement of Article 2 of the Regulation, in that theCommission is not empowered to prevent concentrations which create orstrengthen a collective dominant position, and infringement of Article 190 of theTreaty

II - 21

            Arguments of the applicant

II - 21

            Findings of the Court

II - 23

        III — The pleas alleging infringement of Article 2 of the Regulation, in that theCommission wrongly found that the concentration would create a collectivedominant position, and infringement of Article 190 of the Treaty

II - 29

            A — The contested decision

II - 29

            B — General considerations

II - 30

            C — Alleged joint control of Gencor and Lonrho over LPD before theconcentration

II - 31

                Arguments of the parties

II - 31

                Findings of the Court

II - 31

            D — The Commission's categorisation of the collective dominant position

II - 36

                1. The market share criterion

II - 36

                    Arguments of the parties

II - 36

                    Findings of the Court

II - 37

                2. Similarity of the cost structures of Implats/LPD and Amplats following theconcentration

II - 41

                    Arguments of the applicant

II - 41

                    Findings of the Court

II - 41

                3. Characteristics of the market

II - 42

                    (a) Market transparency

II - 42

                    Arguments of the parties

II - 42

                    Findings of the Court

II - 42

                    (b) Growth prospects in the platinum market

II - 43

                    Arguments of the parties

II - 43

                    Findings of the Court

II - 44

                    (c) Balance between supply and demand

II - 45

                    Arguments of the applicant

II - 45

                    Findings of the Court

II - 45

                    (d) Marginal and alternative sources of supply

II - 46

                    Arguments of the parties

II - 46

                    Findings of the Court

II - 47

                    (e) Structural links

II - 48

                    Arguments of the parties

II - 48

                    Findings of the Court

II - 50

                    (f) Means of competition other than technological development

II - 52

                    Arguments of the parties

II - 52

                    Findings of the Court

II - 52

                    (g) Account taken of the reaction of interested third parties

II - 52

                    Arguments of the applicant

II - 52

                    Findings of the Court

II - 53

                    (h) Past oligopolistic tendencies

II - 53

                    Arguments of the parties

II - 53

                    Findings of the Court

II - 53

                    (i) Conclusion

II - 54

        IV — The pleas alleging infringement of Article 8(2) of the Regulation, in that theCommission did not accept the commitments offered by the parties to theconcentration, and infringement of Article 190 of the Treaty

II - 54

            Arguments of the parties

II - 54

            Findings of the Court

II - 57

    Costs

II - 59

1: Language of the case: English.

2:     Confidential information withheld.