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Language of document : ECLI:EU:C:1998:148

JUDGMENT OF THE COURT

31 March 1998 (1)

(Community control of concentrations between undertakings Collectivedominant position)

In Joined Cases C-68/94,

French Republic, represented by Edwige Belliard, Deputy Director in the Directorate for Legal Affairs, Ministry of Foreign Affairs, Catherine de Salins,Assistant Director in that directorate, and Jean-Marc Belorgey, Chef de Mission inthat directorate, acting as Agents, with an address for service in Luxembourg at theFrench Embassy, 8B Boulevard Joseph II,

applicant,

Commission of the European Communities, represented by Berend Jan Drijber,of its Legal Service, acting as Agent, assisted by Jacques Bourgeois, of the BrusselsBar, with an address for service in Luxembourg at the office of Carlos Gómez dela Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

Federal Republic of Germany, represented by Ernst Röder, Ministerialrat in theFederal Ministry of Economic Affairs, and Bernd Kloke, Regierungsrat in thatministry, acting as Agents,

intervener,

and C-30/95,

Société Commerciale des Potasses et de l'Azote (SCPA) and Entreprise Minière etChimique (EMC), represented by Charles Price, of the Brussels Bar, with anaddress for service in Luxembourg at the Chambers of Lucy Dupong, 14A Rue desBains,

applicants,

intervener,

defendant,

Kali und Salz GmbH and Kali und Salz Beteiligungs-AG, represented by KarlheinzQuack, Rechtsanwalt, Berlin, and Georg Albrechtskirchinger, Rechtsanwalt,Frankfurt am Main, with an address for service in Luxembourg at the Chambersof Marc Loesch, 11 Rue Goethe,

interveners,

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, C. Gulmann (Rapporteur), H. Ragnemalm (Presidents of Chambers), G.F. Mancini, J.C. Moitinho de Almeida,P.J.G. Kapteyn, J.L. Murray, D.A.O. Edward, J.-P. Puissochet, G. Hirsch andP. Jann, Judges,

Advocate General: G. Tesauro,

Registrar: R. Grass,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 12 March 1996, atwhich the French Republic was represented in Cases C-68/94 and C-30/95 by Jean-François Dobelle, Deputy Director in the Directorate for Legal Affairs, Ministryof Foreign Affairs, acting as Agent, and by Jean-Marc Belorgey; the Commission,in Cases C-68/94 and C-30/95, by Berend Jan Drijber, assisted by JacquesBourgeois; the Federal Republic of Germany, in Case C-68/94, by Ernst Röder;Société Commerciale des Potasses et de l'Azote (SCPA) and Entreprise Minièreet Chimique (EMC), in Case C-30/95, by Charles Price; and Kali und Salz GmbHand Kali und Salz Beteiligungs-AG, in Case C-30/95, by Karlheinz Quack andGeorg Albrechtskirchinger,

after hearing the Opinion of the Advocate General at the sitting on 6 February1997,

gives the following

Judgment

Facts and procedure

1.

On 14 July 1993 the Commission, pursuant to Article 4(1) of Council Regulation(EEC) No 4064/89 of 21 December 1989 on the control of concentrations betweenundertakings (OJ 1990 L 257, p. 14, hereinafter 'the Regulation), was notified ofa proposed concentration between Kali und Salz AG (hereinafter 'K+S), asubsidiary of the BASF chemicals group, and Mitteldeutsche Kali AG (hereinafter'MdK), whose sole shareholder is the Treuhandanstalt (hereinafter 'Treuhand),a public-law institution entrusted with the task of restructuring the undertakings ofthe former German Democratic Republic.

2.

K+S essentially operates in the potash, rock salt and waste disposal sectors. MdKcombines all the activities of the former German Democratic Republic in thepotash and rock salt sectors.

3.

The concentration plan was for MdK to be converted into a private limitedcompany (MdK GmbH), to which K+S would contribute its potash and rock saltactivities and Treuhand would contribute DM 1 044 million. K+S would have 51%and Treuhand 49% of the shares and voting rights in the joint venture thus created.

4.

By letter of 5 August 1993 the Commission informed the parties to the proposedconcentration of its decision to continue the suspension of the concentration,pursuant to Articles 7(2) and 18(2) of the Regulation, pending its final decision.

5.

On 16 August 1993 the Commission decided, pursuant to Article 6(1)(c) of theRegulation, to initiate the detailed examination procedure on the ground that theconcentration notified raised serious doubts as to its compatibility with the commonmarket.

6.

On 13 October 1993 the Commission informed the parties of the objections againstthem, in accordance with Article 18 of the Regulation. In its opinion, theconcentration as envisaged in the plan notified could create a collective dominantposition on the Community market apart from Germany and Spain.

7.

Following that statement of objections, the parties offered to enter into certaincommitments vis-à-vis the Commission, in order to dispel its concern that theconcentration would create an oligopolistic dominant position on the market inquestion.

8.

The Commission thereupon submitted a draft decision to the Advisory Committeeon Concentrations set up under paragraph 3 et seq. of Article 19 of the Regulation,which delivered a favourable opinion, by a majority of its members, at its meetingon 3 December 1993 (OJ 1994 C 199, p. 5).

9.

By Decision 94/449/EC of 14 December 1993 relating to a proceeding pursuant toCouncil Regulation (EEC) No 4064/89 (Case No IV/M.308 Kali +

Salz/MdK/Treuhand) (OJ 1994 L 186, p. 38, hereinafter 'the contested decision),the Commission declared the proposed concentration compatible with the commonmarket, subject however to compliance with certain commitments entered into bythe parties vis-à-vis the Commission, in accordance with the second paragraph ofArticle 8(2) of the Regulation. Under that provision, the Commission 'may attachto its decision [declaring a concentration compatible with the common market]conditions and obligations intended to ensure that the undertakings concernedcomply with the commitments they have entered into vis-à-vis the Commission witha view to modifying the original concentration plan.

10.

The relevant product market, as identified in the contested decision, concernspotash-salt-based products for agricultural use, which include both potash sold fordirect application in agriculture and potash sold for use in the manufacture ofcompound fertilisers. As to the geographical market of the product in question, theCommission identified two distinct markets: the German market, and theCommunity market apart from Germany.

11.

With respect to the German market, the Commission found in point 46 of thecontested decision that the planned concentration would lead to a de factomonopoly, since the market shares of K+S and MdK were 79% and 19%respectively, and concluded in point 50 that the effect of the proposedconcentration would be to strengthen the dominant position of K+S on theGerman potash market. However, applying the theory of the 'failing companydefence, it reached the conclusion that the proposed concentration was not thecause of the strengthening of the dominant position of K+S on the Germanmarket. According to point 95 of the contested decision, the conditions for the'failing company defence were met, namely that 'K+S's dominant position wouldbe reinforced even in the absence of the merger, because MdK would withdrawfrom the market in the foreseeable future if it was not acquired by anotherundertaking and its market share would then accrue to K+S; it can be practicallyruled out that an undertaking other than K+S would acquire all or a substantialpart of MdK (see also point 71 of the contested decision). The Commissionfurther observed in point 95 that, given the severe structural weakness of theregions in East Germany which were affected by the proposed concentration, andthe likelihood of serious consequences for them of the closure of MdK, theconclusion it had reached was also in line with the fundamental objective ofstrengthening the Community's economic and social cohesion, referred to in the13th recital in the preamble to the Regulation.

12.

With respect to the Community market apart from Germany, the Commissionstated in point 51 of the contested decision that, as a result of the proposedconcentration, two entities would enjoy a dominant position: K+S/MdK and SociétéCommerciale des Potasses et de l'Azote (hereinafter 'SCPA), a subsidiary of theFrench group Entreprise Minière et Chimique (hereinafter 'EMC) whichdistributes potash.

13.

The Commission's analysis was based, first of all, on its finding that supply outsidethe K+S/MdK and SCPA grouping was fragmented and came from operators whodid not appear to be able to attack the total market share of about 60% held bythe duopoly, and, second, on the strong probability that there would be no effectivecompetition between K+S/MdK and SCPA, because of the characteristics of thepotash market, the past behaviour of K+S and SCPA, and their long-standing closecommercial links. Those links consisted essentially of (a) the control of a jointventure in Canada, Potacan, in which K+S and SCPA each had 50% of the shares,(b) cooperation in the export cartel Kali-Export GmbH (hereinafter 'Kali-Export),a company governed by Austrian law established in Vienna, which coordinated itsmembers' sales of potash-based products in non-member countries and in whichK+S, MdK, EMC/SCPA and the Spanish potash producer Coposa each had a 25%interest, and (c) long-established links on the basis of which SCPA provided almostall of K+S's supplies in France (see points 54 to 61 of the contested decision).

14.

In those circumstances, the Commission considered in points 57 and 62 that theconcentration, which would involve the addition of the market share in theCommunity outside Germany held by MdK, the second largest Communityproducer, would lead to the creation of a K+S/MdK and SCPA duopoly enjoyinga dominant position.

15.

To prevent the Commission from declaring the concentration between K+S andMdK incompatible with the common market, the parties to the concentrationoffered the Commission certain commitments, set out in point 63 of the contesteddecision, as follows:

' Kali-Export GmbH, Vienna

K+S and the joint venture will withdraw without delay from Kali-ExportGmbH ...

In the same way K+S and the joint venture will terminate the existingagency contract with Kali-Export GmbH ... in accordance with thetermination arrangements provided for therein. After that date, the jointventure will enter into competition with Kali-Export GmbH via its owndistribution organisation ...

Distribution in France

K+S and the joint venture will establish in the Community their owndistribution organisation where not already in existence and willdistribute their products through this distribution network in accordancewith normal commercial practice. A distribution organisation will beestablished in France for potash products, including potash specialities. Thiswill cover the whole of the French market and its nature and size will be

commensurate with the importance of the French market. Its establishmentwill conform to the principle of economic efficiency.

The current cooperation with SCPA as distribution partner in the Frenchmarket will be terminated ... It will be possible on the one hand for SCPAto fulfil contracts already agreed with its own customers and on the otherhand for the joint venture to build up its own distribution organisation. Thesale to SCPA on normal market conditions is allowed.

It was precisely in consideration of those commitments that the Commission, asnoted in paragraph 9 above, declared the proposed concentration compatible withthe common market.

16.

Point 65 of the contested decision notes that K+S, acknowledging the Commission'sconcerns about the negative effects of the concentration on conditions ofcompetition, undertook to adapt the structure of Potacan by 30 June 1994 in sucha way as to enable each partner to market the potash produced by Potacanindependently of each other on the Community market. However, point 67 of thedecision states that the Commission has decided not to make that commitment intoa formal obligation, since 'in the event that K+S is not able to reach an agreementwith EMC, despite K+S's best efforts, an appropriate solution of the competitionproblems arising from the current form of the Potacan joint venture is to be foundin the proceedings [of notification of the Potacan joint venture] under RegulationNo 17/62 [Regulation No 17 of the Council of 6 February 1962, First Regulationimplementing Articles 85 and 86 of the Treaty, OJ, English Special Edition 1959-1962, p. 87, hereinafter Regulation No 17].

17.

By application lodged at the Court Registry on 18 February 1994, the FrenchRepublic sought annulment of the contested decision under Article 173 of the ECTreaty (Case C-68/94).

18.

By order of the President of the Court of 9 September 1994, the Federal Republicof Germany was granted leave to intervene in that case in support of the form oforder sought by the Commission.

19.

By application lodged at the Registry of the Court of First Instance on 25 February1994, SCPA and EMC sought partial annulment of the contested decision underArticle 173 of the Treaty.

20.

In those proceedings, the President of the Court of First Instance, by order of 10May 1994 in Case T-88/94 R Société Commerciale des Potasses et de l'Azote andEntreprise Minière et Chimique v Commission [1994] ECR II-263, ordered operationof Article 1 of the contested decision to be suspended, inasmuch as it might entaildissolution of Kali-Export, until an order was made terminating the interimproceedings, and dismissed the remainder of the application for interim measures.

21.

By order of the President of the Court of First Instance of 15 June 1994 in CaseT-88/94 R Société Commerciale des Potasses et de l'Azote and Entreprise Minière etChimique v Commission [1994] ECR II-401, operation of Article 1 of the contesteddecision was suspended, in so far as it required K+S/MdK to withdraw from Kali-Export, until judgment in the main action.

22.

By order of the President of the First Chamber of the Court of First Instance of7 July 1994, the French Republic was granted leave to intervene in Case T-88/94in support of the form of order sought by the applicants.

23.

By order of the President of the Second Chamber, Extended Composition, of theCourt of First Instance of 18 January 1995, Kali und Salz Beteiligungs-AG(formerly K+S) and Kali und Salz GmbH (formerly MdK) (hereinafter 'theintervener undertakings) were granted leave to intervene in Case T-88/94 insupport of the form of order sought by the Commission.

24.

In view of the fact that the cases before the Court of Justice and the Court of FirstInstance called into question the validity of the same act, the Court of FirstInstance, by order of the Second Chamber, Extended Composition, of 1 February1995 in Case T-88/94 Société Commerciale des Potasses et de l'Azote and EntrepriseMinière et Chimique v Commission [1995] ECR II-221, declined jurisdiction in orderto enable the Court of Justice to rule on the application for annulment. That casewas registered in the Registry of the Court of Justice on 8 February 1995 as CaseC-30/95.

25.

Upon hearing the Report of the Judge-Rapporteur and the views of the AdvocateGeneral, the Court decided to open the oral procedure in the two cases withoutany preparatory inquiry.

Forms of order sought by the parties

Case C-68/94

26.

The French Republic claims that the Court should:

Annul the contested decision;

Order the Commission to pay the costs.

27.

The Commission contends that the Court should:

Dismiss the application as unfounded;

Order the French Republic to pay the costs.

28.

The Federal Republic of Germany, intervening in support of the form of ordersought by the Commission, contends that the Court should:

Dismiss the application.

Case C-30/95

29.

SCPA and EMC claim that the Court should:

Annul Article 1 of the contested decision in part, in so far as it makes thedeclaration that the concentration is compatible with the common marketconditional on compliance with the conditions set out in point 63 of thedecision;

Annul the contested decision in part, in so far as it accepted thecommitment referred to in point 65 by which K+S undertook to adapt thestructure of Potacan by 30 June 1994 so as to enable each partner inPotacan to market the potash obtained from Potacan in the Communityindependently of the other partner;

Order the Commission to pay the costs;

Order the interveners to bear their own costs.

30.

The Commission contends that the Court should:

Dismiss the application as inadmissible;

Dismiss the application as unfounded;

Order the applicants to pay the costs.

31.

The French Republic, intervening in support of the form of order sought by theapplicants, contends that the Court should:

Uphold the applicants' claim for partial annulment of the contesteddecision;

Order the Commission to pay the costs.

32.

The intervener undertakings Kali und Salz Beteiligungs-AG and Kali und SalzGmbH, the successors to K+S and MdK respectively, support the form of ordersought by the Commission and ask the Court to order the applicant companies topay the costs.

Joinder of Cases C-68/94 and C-30/95

33.

In view of the connection between the two cases, confirmed during the oralprocedure, it is appropriate to join them for the purposes of the judgment inaccordance with Article 43 of the Rules of Procedure.

Admissibility (Case C-30/95)

34.

The Commission, while presenting argument on the substance of the case, raisesa plea of inadmissibility against the application for annulment brought by SCPAand EMC, consisting of three limbs. First, it disputes the possibility of bringing anapplication for partial annulment in the present case. Second, it submits that theapplicant companies are neither directly nor individually concerned by thecontested decision. Third, it submits that the commitment relating to Potacan,which the Commission merely took note of, is not in the nature of a decision.

Partial annulment

35.

The Commission submits that annulment even of one only of the conditionsattached to the declaration of compatibility with the common market would alterthe very substance of the contested decision, as the conditions for authorising theconcentration would no longer be satisfied. The Commission would consequentlybe compelled to revoke the decision in its entirety.

36.

The applicant companies submit, on the other hand, that the conditions in issuecould be severed from the rest of the decision, and the effect of their annulmentwould merely be to make it unconditional. Article 8(5) of the Regulation, whichauthorises the Commission to revoke its decision if a commitment is not compliedwith by the parties, does not therefore apply.

37.

As the Advocate General observes in point 26 of the Opinion, this objection shouldbe examined together with the substance of the case, since it will thus be possibleto establish whether annulment of the conditions would be liable to affect theremainder of the decision by making it necessary to annul it in its entirety.

Right to bring proceedings

38.

The Commission submits that under Article 173 of the Treaty, individuals who arenot addressees of a decision of the institutions addressed to other individuals maybring an action for its annulment only if the decision is of direct and individualconcern to them. In its view, neither SCPA nor EMC is directly and individuallyconcerned by the contested decision.

39.

The Commission observes in particular that, contrary to what is required by settledcase-law (see Case 25/62 Plaumann v Commission [1963] ECR 95 and Case 26/86Deutz und Geldermann v Council [1987] ECR 941), the applicant companies are notaffected by reason of certain attributes which are peculiar to them or by reason ofa factual situation which differentiates them from all other persons anddistinguishes them individually in the same way as the person to whom the decisionis addressed. The applicant companies, who were mentioned by name in thecontested decision, did not take part in the proceedings before the Commission,and thus cannot be regarded as individually concerned by the decision. In thisrespect the Commission submits in particular that, contrary to the criteria laid downin Case 169/84 Cofaz and Others v Commission [1986] ECR 391, the applicantcompanies were not involved in the procedure from the outset and did not largelydetermine its course by their observations. Moreover, SCPA, as a shareholder inKali-Export, is affected by the contested decision in the same way as the othermember of the cartel, Coposa, while EMC cannot argue that it is individuallyconcerned by a concentration decision on the basis that it is a shareholder of acompany involved in that decision (Case T-83/92 Zunis Holding and Others vCommission [1993] ECR II-1169). Finally, the fact that EMC owns a 50%shareholding in Potacan is not sufficient for it to be regarded as individuallyconcerned by the decision, since the commitment concerning Potacan is not in thenature of a decision.

40.

The intervener undertakings submit that only they are affected by the conditionsimposed by the Commission. Those conditions could at most have an indirect effecton the interests of the applicant companies, which, according to the case-law, is notsufficient reason to give them a right of action against the said conditions (Case72/74 Union Syndicale-Service Public Européen and Others v Council [1975] ECR401 and Case 135/81 Groupement des Agences de Voyages v Commission [1982] ECR3799).

41.

In support of the admissibility of their action, the applicant companies submit inthe first place that not only are they mentioned by name in the contested decision,they are at the centre of the Commission's arguments and reasoning.

42.

They observe, moreover, that in deciding whether a person is individuallyconcerned by a decision, account must be taken, according to the case-law, inparticular Cofaz and Others v Commission, both of the detriment caused to theundertaking in question and of the role played by that undertaking in the procedurebefore the Commission.

43.

With respect to detriment, the applicant companies submit that SCPA suffersdetriment by reason of the dissolution of Kali-Export, which is a direct consequenceof the compulsory withdrawal of K+S from Kali-Export. Similarly, K+S's obligationto terminate the distribution arrangements with SCPA is necessarily detrimental tothe latter. Furthermore, the acceptance by the Commission of K+S's commitment

to change the structure of Potacan amounts to requiring production to be shared,which would cause severe damage to EMC and Potacan but would be likely to beof considerable benefit to K+S. As to the second condition laid down by the Courtin the Cofaz and Others judgment, it is beyond doubt that the applicant companiesboth took part in the procedure which culminated in the contested decision.

44.

Finally, SCPA and EMC submit that they are affected by the decision by reason ofcertain attributes which are peculiar to them.

45.

They submit that SCPA is largely dependent on Kali-Export for its large-scaleexport sales, a factor which distinguishes it clearly from Coposa: between 50% and60% of SCPA's exports are effected via Kali-Export, with large-scale export salesaccounting for some 15% of all sales. SCPA's situation is also distinguished fromCoposa's by the fact that SCPA is affected by the condition concerning thetermination of the existing distribution links between itself and K+S and by thecommitment concerning Potacan. In any event, it does not follow from Plaumannthat two or more persons cannot be individually concerned by the same decision.On the contrary, the Court has often held that actions brought by several personsmay all be declared admissible (Cofaz and Others; Joined Cases 41/70 to 44/70International Fruit Company and Others v Commission [1971] ECR 411; and Case323/82 Intermills v Commission [1984] ECR 3809).

46.

According to the applicant companies, EMC is individually concerned by thecontested decision, which, on the one hand, means that K+S will have to proposechanges to the structure of Potacan which will be detrimental to both Potacan andEMC, and, on the other, entails the dissolution of Kali-Export, thus leaving theEMC group with no sales network as regards large-scale exports. Moreover, EMCowns all the shares in SCPA.

47.

As to the question whether the applicant companies are directly concerned by thecontested decision, they observe that both the withdrawal of SCPA from Kali-Export and the termination of the existing distribution links between SCPA andK+S are direct consequences of that decision.

48.

The Court notes that, under the fourth paragraph of Article 173 of the Treaty, anatural or legal person may bring proceedings against a decision addressed toanother person only if that decision is of direct and individual concern to him. Sincethe contested decision is addressed to K+S, MdK and Treuhand, it must beascertained whether the applicant companies are directly and individuallyconcerned by it.

49.

With respect, first, to the question whether the contested decision is of directconcern to the applicant companies, it is clear that the conditions with which thedeclaration of compatibility of the concentration with the common market mustcomply relate to commitments, entered into by the parties to the concentration vis-à-vis the Commission, the implementation of which affects the position of SCPA

in law and in fact. First, fulfilment of the condition concerning the withdrawal ofK+S/MdK from Kali-Export will call into question the very survival of that exportcartel, and hence in particular the position of SCPA, which has no sales networkfor disposal of its products on large-scale export markets. Second, fulfilment of theother condition referred to in Article 1 of the contested decision will involvetermination of the distribution links between SCPA and K+S.

50.

As to EMC, it appears from the contested decision that the Commission regardedit as forming part of one and the same entity with SCPA. In particular, EMC wasregarded in point 64 of the contested decision as the relevant addressee, withSCPA, of the condition relating to Kali-Export, despite the fact that only SCPA isformally a member of the cartel in question. In this case the confusion between thetwo companies derives from the fact that EMC owns all the shares in SCPA. Theposition of EMC therefore cannot be differentiated from that of SCPA as regardsthe right to bring proceedings.

51.

Finally, while the conditions attached to the contested decision of the Commissioncan admittedly affect the applicant companies' interests only in so far as thecommitments referred to therein are implemented by the parties to theconcentration, it is beyond doubt that since those parties have undertaken vis-à-visthe Commission to take certain measures in return for a declaration that theconcentration is compatible with the common market, they are firmly resolved tocomply with those commitments, especially as under Article 8(5)(b) of theRegulation the Commission may revoke its decision if the undertakings concernedcommit a breach of an obligation attached thereto (see to that effect Case 11/82Piraiki-Patraiki and Others v Commission [1985] ECR 207, paragraphs 7 to 9).

52.

Consequently, SCPA and EMC must be regarded as directly concerned by thecontested decision in that it sets out the conditions referred to in paragraph 49above.

53.

With respect, second, to the question whether the contested decision is also ofindividual concern to the applicant companies, it should be borne in mind first ofall that, as the Court held in Plaumann, persons other than those to whom adecision is addressed may only claim to be individually concerned if the decisionaffects them by reason of certain attributes which are peculiar to them or by reasonof a factual situation which differentiates them from all other persons anddistinguishes them individually in the same way as the persons addressed.

54.

In view of the fact that the Court's case-law in this respect underlines the partplayed by natural or legal persons in the administrative procedure (see to thateffect Case 264/82 Timex v Council and Commission [1985] ECR 849, and Cofazand Others, paragraph 24), it should be noted, first, that the applicant companiessubmitted observations in the administrative procedure before the Commission,which took those observations into account for the purposes of the contested

decision. In particular, the documents in the case show that in response to theconcerns expressed by the applicant companies, the Commission decided not tomake the commitment of the parties to the concentration relating to Potacan aformal condition for the concentration to be compatible with the common market.

55.

Moreover, the very wording of the contested decision, in particular points 51 to 64thereof, shows that the situation of EMC/SCPA with respect to the concentrationin issue is clearly differentiated from that of the other potash suppliers considered.The conditions attached to the declaration of compatibility are the result of theCommission's assessment of the competitive situation after the concentration,taking account principally of the position of EMC/SCPA as a constituent of aduopoly with K+S/MdK.

56.

Finally, it appears that those conditions, which are aimed at dissolving the linksbetween K+S and EMC/SCPA, touch primarily the interests of the latter, and areliable to have an appreciable effect on its position on the market.

57.

In those circumstances, the mere fact that Coposa's interests are also concerned byone of the conditions in question, that relating to the withdrawal of K+S/MdK fromKali-Export, cannot in itself preclude the applicant companies from beingindividually concerned by the contested decision in that it lays down thoseconditions.

58.

Accordingly, it must be held that the applicant companies are individuallyconcerned by the contested decision in so far as it lays down the abovementionedconditions.

59.

The second limb of the plea of inadmissibility raised by the Commission musttherefore be rejected.

Possibility of contesting the decision at issue in so far as it concerns the commitmentrelating to Potacan

60.

The Commission and the intervener undertakings submit that the part of thedecision which relates to the commitment concerning Potacan may not be treatedas a decision which may be the subject of an action under Article 173 of the Treaty,since it is not liable to produce binding legal effects of such a kind as to affect theinterests of the applicant companies. That commitment was not made the subjectof a formal condition within the meaning of Article 8(2) of the Regulation. TheCommission observes that it merely took note of the commitment by K+S.

61.

According to the applicant companies, the commitment proposed by K+S andaccepted by the Commission must, inasmuch as it creates an obligation on the partof K+S, be treated as a condition within the meaning of Article 8(2) of theRegulation. In their view, the commitment in question may be regarded as similar

to that entered into by the undertakings concerned in the 'Woodpulp II case(Joined Cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 toC-129/85 Ahlström and Others v Commission [1993] ECR I-1307), in which theCourt treated the obligations imposed on those undertakings by that commitmentas equivalent to directions under Article 3 of Regulation No 17 requiringinfringements to be brought to an end.

62.

It is settled case-law that any measure which produces binding legal effects such asto affect the interests of an applicant by bringing about a distinct change in his legalposition is an act or decision which may be the subject of an action under Article173 of the Treaty for a declaration that it is void (Case 60/81 IBM v Commission[1981] ECR 2639, paragraph 9).

63.

To determine whether an act or decision produces such effects, it is necessary tolook to its substance.

64.

It appears from points 65 and 67 of the contested decision that the Commissiontook note, but without making it a formal obligation, of the commitment by K+Sto adapt the structure of Potacan by 30 June 1994 so as to enable each partner tomarket the potash produced by Potacan independently of the other on theCommunity market, and proceeded on the assumption that K+S would use its bestefforts to reach an agreement with EMC/SCPA on restructuring Potacan to meetthose conditions.

65.

Point 66 of the contested decision states that the restructuring of Potacan can becarried out only by agreement with the French partner.

66.

It is thus apparent that the object of K+S's commitment, in short, is to enter intonegotiations with EMC/SCPA with a view to restructuring Potacan.

67.

Even if, therefore, the part of the contested decision which relates to K+S'scommitment concerning Potacan is legally binding on K+S, it cannot in any eventproduce binding legal effects of such a kind as to affect the interests of EMC/SCPAby bringing about a distinct change in that entity's legal position. The legal positionof EMC/SCPA cannot be affected in the present case except of its own volition.That amounts in this case essentially to a finding that the part of the contesteddecision which concerns the commitment relating to Potacan does not directlyaffect EMC/SCPA.

68.

That being so, attention should nevertheless be drawn, as the Advocate Generaldoes in point 38 of the Opinion, to the ambiguous nature of the Commission'sapproach, which, as appears from point 67 of the contested decision referred to inparagraph 16 above, created an unfortunate blend of the procedure under theRegulation and that pursuant to Regulation No 17.

69.

In the light of the foregoing, the third limb of the Commission's plea ofinadmissibility must be upheld.

No interest in bringing proceedings

70.

The intervener undertakings submit that since the two commitments which theapplicant companies were subject to as a result of the conditions imposed by theoperative part of the contested decision have already been complied with, they nolonger have any interest in the annulment by the Court of conditions which havethus become obsolete. The Commission, on the other hand, has not challenged theapplicant companies' interest in bringing proceedings.

71.

According to the applicant companies, it follows from Case 76/79 Könecke vCommission [1980] ECR 665 that the fact that a decision has been implementeddoes not preclude an application for annulment, since such an application stillconstitutes an interest as the basis for a possible action for damages.

72.

On this point, it should be noted that under the fourth paragraph of Article 37 ofthe Protocol on the EC Statute of the Court of Justice, submissions made in anapplication to intervene are limited to supporting the submissions of one of theparties. Moreover, under Article 93(4) of the Rules of Procedure, the intervenermust accept the case as he finds it at the time of his intervention. It follows that theinterveners have no standing to raise a plea of inadmissibility and the Court is thusnot obliged to examine the pleas put forward by them (see to that effect CaseC-225/91 Matra v Commission [1993] ECR I-3203, paragraphs 11 and 12).

73.

However, as the Court stated in its order of 24 September 1987 in Case 134/87Vlachou v Court of Auditors [1987] ECR 3633, paragraph 6, under Article 92(2) ofthe Rules of Procedure it may at any time of its own motion consider whetherthere exists any absolute bar to proceeding with the case.

74.

Whether or not the objection raised by the intervener undertakings should beconsidered an absolute bar to proceeding with the case, the fact remains that,according to Könecke v Commission, paragraph 9, even if in the circumstances itproved impossible for the institution whose act was declared void to fulfil theobligation to take the necessary measures to comply with the Court's judgment, theapplication for annulment would still constitute an interest at least as the basis fora possible action for damages.

75.

In any event, therefore, the applicant companies would not appear to lack aninterest in bringing proceedings.

Substance

Pleas in law of the applicants

76.

The French Republic and the applicant companies seek respectively annulment ofthe whole, and annulment of part, of the contested decision. The variouscomplaints they make overlap in part and may be grouped around four main pleasin law, the first two of which have been put forward by the French Governmentonly. The other two are joint pleas and will be treated together. First, theCommission is alleged to have failed to comply with its obligation to cooperate withthe national authorities. Second, it made an incorrect assessment of the effects ofthe concentration on the German market. Third, it made an incorrect assessmentof the effects of the concentration on the Community market apart from Germany.Fourth, the Regulation does not permit the declaration of compatibility to besubjected to conditions and obligations affecting third parties not involved in theconcentration.

A Failure to comply with the obligation to cooperate with the national authorities

77.

By this plea the French Government criticises the Commission for failing to complywith the obligations laid down by Article 19 of the Regulation to remain in closeand constant liaison with the competent authorities of the Member States, inparticular by transmitting to them as soon as possible copies of the most importantdocuments lodged with it or issued by it, and to place the Advisory Committee ina position to deliver its opinion in full knowledge of the facts.

78.

As to the first obligation, the French Government submits that the Commission didnot provide the competent national authorities in good time with the data whichwas essential for assessing the correctness of the definition of the relevant marketsand the effect of the concentration on competition. These were figures, used by theCommission as a basis for its statement of objections, which concerned thebreakdown of each operator's sales by Member State, expressed in terms ofvolume. Following repeated requests by the French authorities (Service de laConcurrence et de l'Orientation des Activités du Ministère de l'Économie), theCommission merely communicated by telephone some of the data sought. TheFrench Government states that although the French authorities then sent theCommission another letter asking for communication of all the necessaryinformation and for confirmation in writing of the information given orally, it wasnot until 3 December 1993, the date of the Advisory Committee's meeting, that theCommission formally communicated the information which had been asked forsince 18 October of that year. Furthermore, the document containing thatinformation incorrectly stated that SCPA sold 221 000 tonnes of products, insteadof 22 000, in Belgium and Luxembourg.

79.

As to the second obligation, the French Government submits that the provision ofthe figures on the occasion of the Advisory Committee meeting was far too late.In its view, that information should have been transmitted at the latest with the

preliminary draft decision annexed to the notice of the Advisory Committeemeeting, which must be sent at least fourteen days before the meeting. By actingas it did, the Commission prevented the Advisory Committee from delivering aninformed opinion on the preliminary draft decision.

80.

In conclusion, the French Government submits that the Commission infringed theessential procedural requirements for taking the contested decision and that thismay very well have led to an outcome different from that which would have beenreached if those requirements had been complied with (Case C-142/87 Belgium vCommission [1990] ECR I-959).

81.

The Commission denies that the data on the volume of potash sold in eachMember State by the various undertakings operating in the Community areamongst the most important documents in the procedure before it, within themeaning of Article 19(1) of the Regulation. In any event, that data had beencommunicated to the French authorities by telephone on 5 November 1993, subjectto verification in view of the fact that the Commission's examination was inprogress.

82.

The Commission observes that the statement of objections, which was transmittedto the French Government on 14 October 1993, and the preliminary draft decision,communicated on 16 November 1993, contained all the main elements, includingthe market shares of the operators in the Community, so that the competentauthorities of the Member States were sufficiently well informed to be able to givea well-founded opinion. The information on the volume of potash sold in factserved only to substantiate the information on market shares.

83.

The typographical mistake concerning the volume of potash sold by SCPA inBelgium and Luxembourg cannot, in the Commission's view, have had any influenceon the Advisory Committee's opinion, given that it was an obvious mistake. On thispoint, the Commission observes that the incorrect figure had no effect either on themarket shares entered in the second column of the part of the table relating to theBelgian/Luxembourg market or on the total amount of sales attributed to thatmarket. In those circumstances, it is unlikely that the members of the AdvisoryCommittee, who are experts on concentrations, could have been misled by theerror.

84.

Article 19(1) of the Regulation requires the Commission to 'transmit to thecompetent authorities of the Member States copies of notifications within threeworking days and, as soon as possible, copies of the most important documentslodged with or issued by the Commission pursuant to this Regulation. Article 19(2)prescribes that the Commission is to 'carry out the procedures set out in thisRegulation in close and constant liaison with the competent authorities of theMember States, which may express their views upon those procedures. Finally,Article 19 provides for representatives of the authorities of the Member States toserve on an ad hoc Advisory Committee whose task is to deliver an opinion on the

basis of a summary of the case together with an indication of the most importantdocuments and a preliminary draft of the decision.

85.

It is not disputed in the present case that the Commission transmitted to theFrench authorities and the Advisory Committee in good time both the objectionssent to the parties who had notified the proposed concentration and thepreliminary draft of the decision relating to that concentration.

86.

The latter document included the following information:

The German market

The German potash producers have a quasi-monopoly of the Germanmarket, which for various reasons is a market not easily penetrable byimports;

The Community market apart from Germany

Coposa has about 85% of the Spanish market. However, unlike Germany,Spain imports considerable and increasing quantities of potash from theBritish producer Cleveland Potash Ltd (hereinafter 'CPL) and to a lesserextent from producers in non-member countries such as DSW (an Israeliproducer);

SCPA does not control distribution in France to the same extent as K+S inGermany. Thus CPL has succeeded in establishing its own distributionnetwork there. Moreover, unlike the situation in Germany, the range ofpotash fertilisers which the French mines are able to produce is alsoavailable from sources outside France;

K+S/MdK and SCPA have aggregated market shares of approximately 50%(between 15% and 20% for K+S, less than 10% for MdK and about 25%for SCPA). However, taking into account the fact that SCPA also marketslarge quantities of potash from other producers, in particular imports fromnon-member countries, the total sales controlled by K+S/MdK and SCPArepresent a combined market share of about 60%;

Imports from the Commonwealth of Independent States (CIS) amount to8% (about 5% if imports from the CIS via SCPA are excluded);

CPL has 15% of the market;

Coposa has less than 10% of the market;

DSW has a market share of slightly over 5%;

PCA (a Canadian producer) has a market share of less than 5%;

Canpotex (a Canadian producer) has a market share of less than 1%;

APC (a Jordanian producer) has a market share of less than 1%;

All the Member States apart from Germany, whether or not they have theirown potash production, import considerable quantities of products fromother Member States, and sometimes from non-member countries.

87.

In those circumstances, the document giving a breakdown by Member State of eachoperator's sales cannot be regarded as one of the most important documents whichthe Commission was obliged, under Article 19 of the Regulation, first, to transmitto the competent authorities of the Member States as soon as possible and, second,to indicate in the summary of the case annexed to the notice of the AdvisoryCommittee meeting. The data in that document are not such as to call intoquestion the state of the market, as reflected by the information in the preliminarydraft decision, mentioned in paragraph 86 above. That is also true of the figuregiven in that document for the volume of potash sold by SCPA in Belgium andLuxembourg, its erroneous character being made evident, as the Commission rightlyobserves, by the other relevant figures in the document.

88.

Consequently, the Commission's obligations under Article 19 of the Regulationwould not appear to have been infringed in the present case.

89.

The first plea must therefore be rejected as unfounded.

B Incorrect assessment of the effect of the concentration on the German market

90.

The French Government criticises the Commission for applying the Regulationincorrectly by authorising, through the use of the 'failing company defence andwithout imposing any conditions, a concentration leading to the creation of amonopoly on the German potash market.

91.

As regards the incorrect use of the 'failing company defence, the FrenchGovernment notes that this defence is derived from United States antitrustlegislation, under which a concentration may not be regarded as causing a dominantposition to come into being or strengthening it if the following conditions are met:

(a) one of the parties to the concentration is in a position such that it will beunable to meet its obligations in the near future;

(b) it is unable to reorganise successfully under Chapter 11 of the BankruptcyAct;

(d) the failing undertaking would be forced out of the market if theconcentration were not implemented.

92.

The Commission, it is submitted, referred to the 'failing company defence withouttaking into account all the criteria used in the United States antitrust legislation, inparticular those mentioned at (a) and (b), whereas only application of the UnitedStates criteria in full ensures that a derogating mechanism is established whoseapplication does not have the effect of aggravating a competitive situation alreadyin decline.

93.

The French Government submits that the Commission, which considered that K+Swould take over MdK's market share in Germany in any case, arbitrarily introducedthe criterion of the absorption of market shares.

94.

It submits that the absorption by K+S of MdK's market share if MdK is forced outproves that the German market is impermeable to competition, but does not meanthat the anticompetitive nature of the concentration can be dismissed.

95.

In addition, it submits that the Commission did not show that the criteria it adoptedconcerning the undertaking's elimination from the market and the absence of a lessanticompetitive alternative were in fact satisfied in this case.

96.

As regards the allegation that MdK would be forced out if the concentration didnot take place, the French Government states that the Commission completelyignored the possibility that MdK might become viable again following anautonomous restructuring operation carried out with financial assistance fromTreuhand compatible with Articles 92 and 93 of the EC Treaty.

97.

Finally, it considers that the Commission has not shown that there was no otherway of carrying out the acquisition which was less harmful to competition. Itobserves in this respect that the MdK trade unions had stated that there was a lackof transparency in the tendering procedure.

98.

As regards the absence of conditions for authorisation of the concentration on theGerman market, the French Government submits that in any event the contesteddecision is vitiated by a manifest error of assessment, inasmuch as it authoriseswithout any conditions the concentration on the German market where the jointundertaking will have a market share of 98%, and is contrary to Article 2(3) of theRegulation. The concentration will clearly strengthen K+S's dominant position inGermany, with the result that competition will be significantly impeded in asubstantial part of the common market.

99.

On this point, the Government observes that while the objective of economic andsocial cohesion mentioned in Articles 2 and 3(j) of the EC Treaty and also referredto in the 13th recital in the preamble to the Regulation, which the Commissionreferred to in its decision, must be taken into account in assessing concentrations,it cannot in any case justify an authorisation which frustrates the essential aim ofCommunity control of concentrations, namely the protection of competition.Ultimately, the Commission could authorise the concentration by reference to theobjective of economic and social cohesion only if the notifying undertakings hadentered into precise and adequate commitments to open the relevant market tocompetition, as Nestlé did in Commission Decision 92/553/EEC of 22 July 1992relating to a proceeding under Council Regulation (EEC) No 4064/89 (Case NoIV/M.190 Nestlé/Perrier) (OJ 1992 L 356, p. 1, hereinafter 'the Nestlé/Perrierdecision).

100.

The Commission concedes that in the contested decision it did not adopt theAmerican 'failing company defence in its entirety. However, it fails to see howthat could affect the lawfulness of its decision.

101.

It considers, moreover, that it has shown to the necessary legal standard that thecriteria it used for the application of the 'failing company defence were indeedsatisfied in the present case.

102.

With respect to the likelihood that MdK would soon be forced out unless it wasacquired by another operator, the Commission observes that in points 76 and 77of the contested decision it stated that Treuhand could not be expected to usepublic funds to cover the long-term debts of an undertaking which was no longereconomically viable, and that even if it does not happen immediately, for social,regional and general policy reasons, it is very probable that MdK will close downin the near future.

103.

It is also not disputed that MdK's share of the market in Germany will in allprobability be absorbed by K+S.

104.

As regards the condition that there should be no less anticompetitive alternativeto the acquisition of MdK, the Commission refers to points 81 to 90 of thecontested decision. It considers, moreover, that the French Government has notshown how the criticisms of the MdK trade unions could call into question itsassessment. After all, the Commission was not satisfied with the finding that thetendering procedure had not permitted another purchaser to be found, but haditself carried out a further inquiry.

105.

With respect to the absence of conditions for authorisation of the concentration onthe German market, the Commission observes that the French Government doesnot specify what commitments K+S and MdK could have entered into in order toopen the German market to competition. The argument which the FrenchGovernment attempts to base on the Nestlé/Perrier decision is immaterial. In that

decision, according to the Commission, it was possible to authorise theconcentration in view of certain commitments relating to the structure ofcompetition in the relevant product market. In the present case, however, in orderto open the German market to competition, it would be necessary to attack not thestructure of competition but the behaviour of buyers. In the Commission's opinion,even if the means to open the German market could have been structural, nosolution to the acquisition of MdK with a lesser effect on competition was available.

106.

The German Government submits that, under Article 2(3) of the Regulation, aconcentration may be prohibited only if it will worsen conditions of competition.There is no causal link between the concentration and its effect on competitionwhere the identical worsening of conditions of competition is to be expected evenwithout the concentration. That will be the case when the three conditions appliedby the Commission are satisfied.

107.

The German Government submits that, contrary to the French Government'scontention, the Commission has shown to the necessary legal standard that theconditions it laid down were satisfied. First, MdK is not viable on its own, that isto say, it is not possible to restructure the undertaking while preserving itsautonomy in the market. In point 76 of the contested decision, the Commissiongave solid reasons for considering that with Treuhand's 100% ownership beingmaintained MdK was not likely to be rescued in the long term. Second, there is nodoubt that MdK's market share would automatically be absorbed by K+S, sinceK+S would be alone on the relevant market after MdK had been forced out, andthat is an essential condition in this context. Third, the German Governmentsubmits that the Commission gave exhaustive reasons as to why no alternativemeans of acquiring MdK was available.

108.

As to the approval of the concentration on the German market without conditionsor obligations, the German Government observes that in the absence of a causallink between the concentration and the strengthening of a dominant position, oneof the conditions for imposing a prohibition under Article 2(3) of the Regulationwas not fulfilled. The concentration therefore had to be authorised withoutobligations or conditions.

109.

The Court observes at the outset that under Article 2(2) of the Regulation, a'concentration which does not create or strengthen a dominant position as a resultof which effective competition would be significantly impeded in the commonmarket or in a substantial part of it shall be declared compatible with the commonmarket.

110.

Thus if a concentration is not the cause of the creation or strengthening of adominant position which has a significant impact on the competitive situation onthe relevant market, it must be declared compatible with the common market.

111.

It appears from point 71 of the contested decision that, in the Commission'sopinion, a concentration which would normally be considered as leading to thecreation or reinforcement of a dominant position on the part of the acquiringundertaking may be regarded as not being the cause of it if, even in the event ofthe concentration being prohibited, that undertaking would inevitably achieve orreinforce a dominant position. Point 71 goes on to state that, as a general matter,a concentration is not the cause of the deterioration of the competitive structureif it is clear that:

the acquired undertaking would in the near future be forced out of themarket if not taken over by another undertaking,

the acquiring undertaking would gain the market share of the acquiredundertaking if it were forced out of the market,

there is no less anticompetitive alternative purchase.

112.

It must be observed, first of all, that the fact that the conditions set by theCommission for concluding that there was no causal link between the concentrationand the deterioration of the competitive structure do not entirely coincide with theconditions applied in connection with the United States 'failing company defenceis not in itself a ground of invalidity of the contested decision. Solely the fact thatthe conditions set by the Commission were not capable of excluding the possibilitythat a concentration might be the cause of the deterioration in the competitivestructure of the market could constitute a ground of invalidity of the decision.

113.

In the present case, the French Government disputes the relevance of the criterionthat it must be verified that the acquiring undertaking would in any event obtainthe acquired undertaking's share of the market if the latter were to be forced outof the market.

114.

However, in the absence of that criterion, a concentration could, provided the othercriteria were satisfied, be considered as not being the cause of the deterioration ofthe competitive structure of the market even though it appeared that, in the eventof the concentration not proceeding, the acquiring undertaking would not gain theentire market share of the acquired undertaking. Thus, it would be possible to denythe existence of a causal link between the concentration and the deterioration ofthe competitive structure of the market even though the competitive structure ofthe market would deteriorate to a lesser extent if the concentration did notproceed.

115.

The introduction of that criterion is intended to ensure that the existence of acausal link between the concentration and the deterioration of the competitivestructure of the market can be excluded only if the competitive structure resultingfrom the concentration would deteriorate in similar fashion even if theconcentration did not proceed.

116.

The criterion of absorption of market shares, although not considered by theCommission as sufficient in itself to preclude any adverse effect of theconcentration on competition, therefore helps to ensure the neutral effects of theconcentration as regards the deterioration of the competitive structure of themarket. This is consistent with the concept of causal connection set out in Article2(2) of the Regulation.

117.

As to the criticism of the Commission that it failed to show that if theconcentration did not proceed MdK would inevitably have been forced out of themarket, it should be observed that the Commission stated in point 73 of thecontested decision that, even though MdK had been restructured by 1 January1993, that undertaking continued to make considerable losses in the first six monthsof the year. According to the Commission, MdK's serious economic situation wasessentially a result of its obsolete operating structure and the crisis in salesattributable primarily to the collapse of markets in eastern Europe. MdK alsolacked an efficient distribution system (see points 74 and 75 of the contesteddecision).

118.

In point 76 of the contested decision, the Commission observed that MdK had beenable to continue operating until now only because Treuhand had consistentlycovered its losses. The Commission added, however, that Treuhand could not coverMdK's losses in the long term from public aid, since that was in any caseincompatible with the Treaty provisions on State aid.

119.

In the light of the foregoing, the Commission cannot be criticised for finding thatMdK was no longer economically viable and for considering that it was probablethat, on its own, MdK would continue to accumulate losses even if Treuhandprovided the funds envisaged for restructuring purposes in the proposedconcentration.

120.

In those circumstances, the Commission's forecast that MdK was highly likely toclose down in the near future if it were not taken over by a private undertakingcannot be regarded as unsupported by a consistent body of evidence.

121.

Finally, with respect to the condition concerning the absence of an alternative, lessanticompetitive method of acquiring MdK, it should be noted that the FrenchGovernment's complaint is that the Commission, because of the lack oftransparency in the tendering procedure, failed to show that that condition was infact satisfied.

122.

Suffice it to note that the French Government has merely observed that the MdKtrade unions pointed to a lack of transparency in the tendering procedure, withoutproviding any details as to what constituted the alleged lack of transparency.

123.

In the absence of any details of that complaint, it cannot be upheld.

124.

It follows from the foregoing that the absence of a causal link between theconcentration and the deterioration of the competitive structure of the Germanmarket has not been effectively called into question. Accordingly, it must be heldthat, so far as that market is concerned, the concentration appears to satisfy thecriterion referred to in Article 2(2) of the Regulation, and could thus be declaredcompatible with the common market without being amended. Consequently,contrary to the French Government's assertion, it is not possible withoutcontradicting that premiss to require the Commission, with respect to the Germanmarket, to attach any condition whatever to its declaration of the concentration'scompatibility.

125.

The second plea must therefore be rejected as unfounded.

C Incorrect assessment of the effects of the concentration on the Communitymarket apart from Germany

126.

By this plea the French Government and SCPA and EMC criticise the Commission,first, for incorrectly defining the geographical market outside Germany, second, forinterpreting the Regulation as applying to collective dominant positions and, third,for misapplying the concept of a collective dominant position.

1. Definition of the relevant geographical market

127.

According to the applicants, the definition of the Community apart from Germanyas a distinct relevant geographical market for potash is unsupported by a sufficientstatement of reasons and is based on an incorrect and in any event partial analysisof the factors to be taken into account. Besides, the Commission lumped togethercompetitive situations which were entirely heterogeneous.

128.

Thus the Commission, it is said, equated States with no domestic production,producer States in which production is structurally greater than or equal toconsumption, such as Spain and the United Kingdom, and producer States in whichproduction is structurally smaller than consumption, such as France.

129.

The French Government observes that virtually all intra-Community trade resultsfrom one-way flows, not from the reciprocity in trade which characterises a genuinehomogeneous market. It notes that the non-producer Member States are exclusivelyimporters, that Spain imports only from the United Kingdom and does not exportthere, that France imports from Germany, Spain and the United Kingdom butexports almost nothing to those countries, and that the United Kingdom importslarge quantities from Germany but that its exports there are insignificant.

130.

Moreover, the purchasing strategies of the Member States differ. France obtainsrelatively balanced supplies from the other three producer States and also importsfrom non-member countries. By contrast, the United Kingdom's imports come

essentially from Germany. Of the non-producer States, Ireland and Portugal importexclusively potash of Community origin, whereas Denmark, Belgium andLuxembourg import about a quarter of their consumption from non-membercountries, and Italy and the Netherlands over half.

131.

Further evidence of the lack of homogeneity of the relevant market derives,according to the French Government, from an examination of the suppliers' marketshares, which vary considerably from one State to another. Only K+S actuallyoperates in all the Member States, with the exception of Spain.

132.

The degree of concentration of supply is substantial in Spain, France and Belgiumand Luxembourg. That factor militates in principle in favour of an approach whichisolates the markets where there is such a concentration.

133.

According to the French Government, even an analysis of the characteristics ofdemand confirms that a geographical market consisting of all the Member Statesapart from Germany does not exist. The Commission's assessment of theinterchangeability of products is incorrect, since the choice of potash-basedproducts depends on the geological nature of the soil, the agricultural surface area,consumer habits and agricultural policies, and on the presence of potash industrieswithin the national territory. Thus almost twice as much potash is sold in theUnited Kingdom as in Italy, and three times as much in Belgium and Luxembourgas in the Netherlands, countries which are comparable in size. In Portugal twelvetimes less potash is sold than in Denmark.

134.

The applicants challenge the reliability of the Commission's examination oftransport costs and potash prices within the reference market. As regards transportcosts, the Commission essentially did no more than assert that they do not appearto constitute a barrier to trade flows. In particular, the circumstance that there isno trade flow from the United Kingdom to Italy or from Spain to the Netherlandsor Denmark raises doubts as to the conclusion that transport costs have noinfluence on supplies. As regards prices, the Commission omitted to carry out acomparative examination of the prices charged by the various operators in eachMember State. The French Government submits that the Commission based itsanalysis of transport costs and prices only on some information provided by K+Sand on statistics which were five years old.

135.

The French Government considers that the Commission should have isolated theSpanish and French markets, where, because of their particular characteristics, theconditions of competition are not comparable to those found in other MemberStates. In particular, the Spanish market has similar characteristics to the Germanmarket, whereas the French market is clearly distinguished from all the othernational markets by production which is lower than consumption and the presenceof a largely dominant major operator.

136.

The Commission counters that the inclusion in one market of Member States withno domestic production or with domestic production either higher or lower thanconsumption does not mean that the relevant geographical market was wronglydefined. Moreover, the existence of one-way trade flows in the geographical marketso defined does not, in economic theory, rule out the possibility of that marketbeing a homogeneous one as regards conditions of competition.

137.

According to the Commission, the extent to which producers from one geographicalarea operate on the market of another geographical area depends on the salesstrategies of the suppliers, who for various reasons prefer to focus their efforts onone or other geographical area. The alleged purchasing strategies of the MemberStates do not as such point to the absence of sufficiently homogeneous conditionsof competition.

138.

As to the argument that there are considerable differences between States in termsof the market shares of the suppliers, the Commission argues that those differencesmay not as such be regarded as evidence that suppliers cannot penetrate themarkets and hence that there are separate geographical markets. That criterion isthus not a decisive factor in defining the relevant geographical market.

139.

Nor is the relatively high degree of concentration of supply in certain MemberStates a decisive criterion in defining a separate market, in particular where thereare substantial trade flows between those Member States.

140.

As to the characteristics of demand for potash products, the Commission observesthat it has already established, first, a high degree of interchangeability, given thatin no Member State apart from Germany do users have a clear preference for localproducts, and, second, the capacity of all the Community producers in the sectorconcerned to produce the various kinds of potash. Moreover, it observes thatdespite the considerable differences between the quantities of potash consumed inthe various Member States, potash is sold in substantial quantities throughout theCommunity apart from Germany. In short, there is no factor in the present case toestablish that the structure of demand reflects the existence of separate nationalmarkets.

141.

The Commission does not accept that its analysis of transport costs is superficialor mistaken, arguing that the lack of trade flows between producer countries andimporter countries is not necessarily caused by such costs. In addition, the presenceof trade movements between certain non-contiguous States shows that transportcosts are by no means prohibitive. As regards the prices of potash in MemberStates other than Germany, the Commission observes that the differences betweenthem are slight. The maximum price difference between Member States other thanGermany is 10%, while for Germany it is never less than 15%.

142.

Finally, the Commission submits that neither the Spanish nor the French marketmay be regarded as distinct relevant markets. With its 16% share of imports the

Spanish market is more open than the German market, where imports account foronly 2%. The share of imports on the Spanish market has a tendency to grow atthe expense of the market share held by Coposa. Moreover, Spanish potashproducts can largely be substituted for those of other Member States apart fromGermany. Finally, there are no noticeable differences between potash prices inSpain and in the rest of the Community apart from Germany. As to the Frenchmarket, the Commission observes that it is even more widely supplied by importsthan the Spanish market. The observations regarding prices and theinterchangeability of Spanish potash products apply mutatis mutandis to Frenchproducts. The Commission also points out that the distribution methods used inthose two States are identical to those used in the rest of the Community apartfrom Germany.

143.

The Court notes, to begin with, that a proper definition of the relevant market isa necessary precondition for any assessment of the effect of a concentration oncompetition. With reference to the application of the Regulation as envisaged inthe present case, the relevant geographical market is a defined geographical areain which the product concerned is marketed and where the conditions ofcompetition are sufficiently homogeneous for all economic operators, so that theeffect on competition of the concentration notified can be evaluated rationally (see,to this effect, Case 27/76 United Brands v Commission [1978] ECR 207, paragraphs11 and 44).

144.

It is common ground that all Member States apart from Germany importsubstantial quantities of potash from other Member States, and sometimes fromnon-member countries. Thus Spain, whose domestic producer Coposa is the mostfirmly established on its national market of all Community producers, importspotash amounting to over 15% of the Spanish market. France for its part importspotash amounting to more than 20% of its market, and the United Kingdom morethan 50%. The other Member States apart from Germany have no production oftheir own and are therefore necessarily dependent on imports.

145.

As appears from points 53 and 56 of the contested decision, producers from non-member countries hold, in the Community apart from Germany, a free marketshare for potash of approximately 15%. That percentage is moreover confirmed bythe figures contained in the document giving a breakdown of sales by each operatorby Member State, produced during the administrative procedure and referred toin paragraph 78 et seq. above.

146.

A geographical zone such as that referred to in the present case, in so far as it issubstantially open to the circulation of potash of both Community and non-Community origin, constitutes in principle an area open to competition.

147.

It is also common ground that users in the various Member States apart fromGermany obtain supplies of potash-based products which are largely

interchangeable and have no marked preference for speciality products availableonly from local producers.

148.

Moreover, it may be seen from data provided by the United Nations Food andAgriculture Organisation that in the period from 1987 to 1989 potash prices in eachMember State apart from Germany did not differ significantly, whereas Germanprices were 20% higher than those in other Member States. According toinformation supplied by the parties, the prices charged in 1992 by K+S for 'Korn-Kali (a potash product containing magnesium) and kali granular 40/8 were strictlyidentical in Belgium and the Netherlands, for example, but were respectively 15%and 20% lower than the German prices for the same products (see point 43 of thecontested decision). That information, although approximate, as the FrenchGovernment observes, nevertheless indicates, in the absence of any evidence to thecontrary, that potash prices charged in the Community apart from Germany arereasonably homogeneous and differ markedly from those charged in Germany.

149.

Furthermore, as the Commission observes, transport costs do not appear toconstitute a barrier to trade flows within the Community apart from Germany. Thatview is supported by the fact that trade flows exist between non-contiguous Statessuch as the United Kingdom and Spain, Spain and Ireland, Spain and Italy, Spainand Belgium/Luxembourg, Germany and Ireland, Germany and Portugal, Germanyand Italy, and France and the Netherlands.

150.

Finally, the Commission's assertion that there do not appear, at distribution level,to be any barriers to the entry of products in the Community apart from Germanyof the kind that exist in Germany has not been contested by the applicants.

151.

In those circumstances and in the absence of evidence to the contrary, theCommission's economic assessment that the Community apart from Germanyconstitutes a unit which is sufficiently homogeneous to be regarded overall as aseparate geographical market appears sufficiently well founded, in particular bycontrast with the German market where imports are negligible, as K+S and MdKhold 98% of the national potash market.

2. Applicability of the Regulation to collective dominant positions

152.

The French Government and the applicant companies submit that the Regulationdoes not authorise the Commission to apply it in cases where there is a collectivedominant position. On this point, they observe that the wording of the Regulation,in particular Article 2 thereof, unlike Article 86 of the EC Treaty does notexpressly refer to collective dominant positions. Whereas Article 86 of the Treatyprohibits 'abuse by one or more undertakings of a dominant position, Article 2of the Regulation regards as compatible with the common market concentrationswhich do not create or strengthen an anticompetitive dominant position, and asincompatible those which do.

153.

Moreover, the legal bases of the Regulation do not justify the interpretationadopted by the Commission. It is not a measure for the application of Article 86of the Treaty. According to the French Government, the Regulation is basedprimarily on Article 235 of the EC Treaty, and while it is also based on Article 87of the Treaty, which empowers the Council to adopt appropriate regulations ordirectives to give effect to the principles set out in Articles 85 and 86, that isprecisely because, although the Court had decided that Article 86 may be used tocontrol certain concentrations (Case 6/72 Europemballage and Continental Can vCommission [1973] ECR 215), it reduces the scope thereof, by providing inparticular in Article 22(1) that 'this Regulation alone shall apply to concentrationsas defined in Article 3.

154.

Furthermore, there is nothing in the legislative history of the Regulation to supportthe view that the legislature intended it also to cover collective dominant positions.To accept that such positions are covered by the Regulation would amount toadopting a very wide and, above all, very uncertain scope for prohibitions orconditional authorisations. The French Government therefore considers that if theCommunity legislature, one of whose essential concerns was to ensure legalcertainty for undertakings, had wished to introduce that concept in the Regulation,it would have done so expressly, as in Article 86 of the Treaty.

155.

EMC and SCPA submit that the interpretation of the Regulation put forward bythe Commission has the effect of distorting its scheme. In support of that argument,they submit that that interpretation may lead to the Regulation being applied evenwhere the market share of the undertakings concerned does not exceed 25% eitherin the common market or in a substantial part of it, contrary to the 15th recital inthe preamble to the Regulation. According to that recital, an indication thatconcentrations are not liable to impede effective competition and may therefore bepresumed to be compatible with the common market exists in particular where themarket share of the undertakings concerned does not exceed 25% either in thecommon market or in a substantial part of it.

156.

Finally, the lack of adequate procedural safeguards for third parties confirms, in theapplicants' view, that the Regulation is not designed to be used as a framework forthe application of the concept of a collective dominant position. Thus undertakingswhich are not parties to the concentration being examined under the Regulationbut which in the Commission's view constitute an oligopoly together with theundertakings involved in the concentration are not at the outset given any specificinformation to indicate what the consequences of the procedure in progress mightbe for them. The French Government observes that while the Commission or thecompetent authorities of the Member States do indeed, under the first sentence ofArticle 18(4) of the Regulation, have the possibility of hearing third parties andhence, if appropriate, the representatives of undertakings not involved in theconcentration, that step is not compulsory, and if it is taken, it is informal and doesnot offer the safeguards prescribed for hearings of parties to the concentration.

Furthermore, since third parties who are regarded as sharing in a collectivedominant position are not informed of the decision the Commission intends to take,by the same token they are deprived of the opportunity to make effective use ofthe possibility, provided for in the second sentence of Article 18(4) of theRegulation, of applying to be heard.

157.

The Commission counters that the wording of the Regulation does not exclude itsbeing used also to prevent the creation or strengthening of collective dominantpositions. In particular, Article 2(3) of the Regulation links the dominant positionto the concentration, not to the undertakings concerned, and refers to theconsequences of the proposed concentration for the structure of competition, thusreferring to an objective situation.

158.

Moreover, the use in conjunction with one another of Articles 87 and 235 of theTreaty as the legal basis of the Regulation shows that its objective is to fill in alacuna in competition law left by Articles 85 and 86 of the Treaty, with referenceto the control of oligopolistic dominant positions.

159.

According to the Commission, nothing in the travaux préparatoires permits theconclusion to be drawn that the Council intended to exclude the use of theRegulation to prevent collective dominant positions on the market, that is,situations of dominance linked to the presence of several strongly interdependenteconomic entities. The Commission notes that when it appeared that thedelegations of the Member States were divided on the question of the control ofoligopolies, agreement was reached on a neutral formulation which left the questionopen. That is the formulation eventually adopted in Article 2 of the Regulation.

160.

Moreover, the interpretation advanced by the French Government would meanthat, following the adoption of the Regulation, concentrations previously subject tothe control of oligopolies in some Member States were henceforth subject only toCommunity control as to the existence of an individual dominant position.

161.

According to the Commission, the procedural rules for applying the Regulation giveample protection to the interests of third parties, since they permit them to putforward their views. In any event, a decision to authorise a concentration, even ifconditions and obligations are attached as permitted by Article 8(2) of theRegulation, is binding only on the parties to the concentration. Those conditionsand obligations are intended to ensure that the parties to the concentration complywith the commitments they have entered into vis-à-vis the Commission.Alternatively, the Commission submits that since the right to a hearing is afundamental principle of Community law, which must apply even in the absence ofany express provision, it cannot be deduced from the lack of any reference to athird party's right to be heard that the Regulation intended to exclude measureswhich might affect the interests of third parties.

162.

Finally, the Commission submits that the possibility of prohibiting a concentrationwhich strengthens the oligopolistic nature of the market derives, first, from theeconomic theory that competition, where certain conditions are satisfied, does notfunction properly in an oligopolistic market and, second, from the need to maintainand develop effective competition in the common market, in accordance withArticle 2(1)(a) of the Regulation.

163.

According to the German Government, the Regulation applies to cases involvinga collective dominant position in particular because it is an instrument whichsupplements Articles 85 and 86 of the Treaty and because it was adopted in orderto attain the general objective set out in Article 3(f) of the EEC Treaty (nowArticle 3(g) of the EC Treaty). The Regulation should allow effective control ofconcentrations which might prove incompatible with a system of undistortedcompetition. For such control to be effective, it must be possible to prohibit anyconcentration leading to the creation or strengthening of a dominant position,whether it derives from one or from several undertakings.

164.

The German Government observes that if the Regulation were interpreted asmeaning that its scope was limited to cases where a dominant position is held bya single undertaking, the effect would be that concentrations taking place after theadoption of the Regulation which were previously subject to control by a MemberState would no longer be subject to control.

165.

The Court finds, first of all, that the applicants' submission, to the effect that thechoice of legal bases in itself militates in favour of the argument that theRegulation does not apply to collective dominant positions, cannot be accepted. Asthe Advocate General observes in point 83 of the Opinion, Articles 87 and 235 ofthe Treaty can in principle be used as the legal bases of a regulation permittingpreventive action with respect to concentrations which create or strengthen acollective dominant position liable to have a significant effect on competition.

166.

Second, it cannot be deduced from the wording of Article 2 of the Regulation thatonly concentrations which create or strengthen an individual dominant position, thatis, 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 orstrengthening of a collective dominant position, that is, a dominant position heldby the parties to the concentration together with an entity not a party thereto.

167.

Third, with respect to the travaux préparatoires, it appears from the documents inthe case that they cannot be regarded as expressing clearly the intention of theauthors of the Regulation as to the scope of the term 'dominant position. In thosecircumstances, the travaux préparatoires provide no assistance for the interpretation

of the disputed concept (see, to that effect, Case 15/60 Simon v Court of Justice[1961] ECR 115).

168.

Since the textual and historical interpretations of the Regulation, and in particularArticle 2 thereof, do not permit its precise scope to be assessed as regards the typeof dominant position concerned, the provision in question must be interpreted byreference to its purpose and general structure (see, to that effect, Case 11/76Netherlands v Commission [1979] ECR 245, paragraph 6).

169.

As may be seen from the first and second recitals in its preamble, the Regulationis founded on the premiss that the objective of instituting a system to ensure thatcompetition in the common market is not distorted is essential for the achievementof the internal market by 1992 and for its future development.

170.

It follows from the sixth, seventh, tenth and eleventh recitals in the preamble thatthe Regulation, unlike Articles 85 and 86 of the Treaty, is intended to apply to allconcentrations with a Community dimension in so far as they are likely, because oftheir effect on the structure of competition within the Community, to proveincompatible with the system of undistorted competition envisaged by the Treaty.

171.

A concentration which creates or strengthens a dominant position on the part ofthe parties concerned with an entity not involved in the concentration is liable toprove incompatible with the system of undistorted competition which the Treatyseeks to secure. 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 in particular by theabovementioned recitals would be partially frustrated. The Regulation would thusbe deprived of a not insignificant aspect of its effectiveness, without that beingnecessary from the perspective of the general structure of the Community systemof control of concentrations.

172.

Neither the argument based on the lack of procedural safeguards nor the argumentbased on the 15th recital in the preamble to the Regulation can cast doubt on itsapplicability to cases where a collective dominant position is the result of aconcentration.

173.

As to the first argument, it is true that the Regulation does not expressly providethat undertakings, not involved in the concentration, which are regarded as theexternal members of the dominant oligopoly must be given an opportunity to maketheir views known effectively where the Commission intends to attach to the'authorisation of the concentration conditions or obligations specifically affectingthem. The same applies in a situation where the Commission intends to attachconditions or obligations affecting third parties to a concentration which will leadsimply to the creation or strengthening of an individual dominant position.

174.

In any event, even on the assumption that a finding by the Commission that theproposed concentration creates or strengthens a collective dominant positioninvolving the undertakings concerned on the one hand and a third party on theother may in itself adversely affect that third party, it must be borne in mind thatobservance of the right to be heard is, in all proceedings liable to culminate in ameasure adversely affecting a particular person, a fundamental principle ofCommunity law which must be guaranteed even in the absence of any rulesgoverning the procedure (see, to that effect, Case 85/76 Hoffmann-La Roche vCommission [1979] ECR 461 and Case C-32/95 P Commission v Lisrestal and Others[1996] ECR I-5373, paragraph 21).

175.

Given the existence of that principle, and the purpose of the Regulation asexplained above, the fact that the Community legislature did not expressly providein the Regulation for a procedure safeguarding the right to be heard of third partyundertakings alleged to hold a collective dominant position together with theundertakings involved in the concentration cannot be regarded as decisive evidenceof the Regulation's inapplicability to collective dominant positions.

176.

As to the second argument, the presumption that concentrations are compatiblewith the common market if the undertakings concerned have a combined marketshare of less than 25%, as stated in the 15th recital in the preamble, is notdeveloped in any way in the operative part of the Regulation.

177.

The 15th recital in the preamble to the Regulation must, having regard inparticular to the realities of the market underlying this recital, be interpreted asmeaning that a concentration which does not give the undertakings concerned acombined share of at least 25% of the reference market is presumed not to createor strengthen an anticompetitive dominant position on the part of thoseundertakings.

178.

It follows from the foregoing that collective dominant positions do not fall outsidethe scope of the Regulation.

3. Finding of the existence of a collective dominant position in the presentcase

179.

In the third limb of this plea, both the French Government and EMC and SCPAsubmit that the Commission's reasoning concerning the alleged creation of adominant duopoly is based on an assessment which is wrong in fact and in law, andis in any event inadequate. They submit that the Commission based its analysis ofthe collective dominant position on criteria which are not those stated in the case-law on Article 86 of the Treaty, and further made manifest errors in applying thecriteria it had itself laid down in other decisions for the purpose of establishingwhether a collective dominant position had been created.

180.

In reply, the Commission states that there is no contradiction between the criteriait used in the contested decision and those it used in other decisions concerningcollective dominant positions. To establish, in the present case, the existence of acollective dominant position, it based its decision essentially on three criteria: thedegree of concentration on the market which would follow from the concentration,the structural factors relating to the nature of the market and the characteristics ofthe product, and the structural links between the undertakings concerned.Furthermore, the Commission does not accept that the criteria for determining theexistence of a collective dominant position must be the same in the context ofArticle 86 of the Treaty as in the context of the Regulation. With Article 86 it isthe past which must be referred to, whereas in the case of the Regulation theanalysis is directed to the future, its purpose being to maintain an effectivecompetitive structure, not to put an end to an abuse of a dominant position.

(a) The degree of concentration on the market

181.

The French Government and the applicant companies submit that the increase inthe degree of concentration on the market is not substantial, since the marketshares held by K+S and SCPA increased as a result of the concentration from 54%to 61%. According to the French Government, the Commission's analysis is onlya partial one, because it does not take into account that following the concentrationthe number of competitors on the market fell only from ten to nine, nor does ittake proper account of the role of two substantial operators, CPL and Coposa.

182.

In reply, the Commission states that its analysis takes full account of the marketshares of all the Community producers and those from outside. It did not discountthe existence of CPL and Coposa, but found that those two Community producerscould not further increase their sales to win a share of the market from K+S/MdKand SCPA.

(b) Characteristics of the eliminated competitor

183.

The French Government submits that it follows from the Nestlé/Perrier decisionthat, in evaluating the creation of a collective dominant position, the Commissionattaches great importance to the fact that the concentration entails the eliminationof a competitor who, by virtue of his size and market share, is an essential factorif competition is to be effective. In the present case, however, it is clear that theacquisition of MdK by K+S would not entail the elimination of such a competitor.MdK accounts for only 7% of the relevant market. In addition, the question ofMdK's 'impressive production capacities mentioned by the Commission in itsdefence was not addressed in the contested decision.

184.

According to the French Government, the Commission, having considered thatMdK was experiencing serious difficulties, ought to have concluded that MdK wasnot a competitor whose elimination would bring about a substantial alteration inmarket structures which could give rise to the formation of a duopoly.

185.

The Commission, referring to point 120 of the Nestlé/Perrier decision, considersthat in order to determine whether the reduction in the number of producersshould be taken into account for the purpose of establishing whether a collectivedominant position exists, it is essential to ascertain whether that reduction is morethan a purely formal alteration to the structure of the market. That is indeed thecase with respect to the acquisition of MdK by K+S. On this point, the Commissionrefers to MdK's impressive production capacities which, after a thoroughrestructuring, will constitute very substantial competitive potential. It submits, inaddition, that the significance of MdK as a competitor on the Community marketapart from Germany is also apparent from the fact that it has not been establishedwith a sufficient degree of certainty that the competitive situation would bepractically the same whether MdK was forced out of the market or theconcentration went ahead.

186.

According to the French Government, the Commission's analysis relating to thedegree of competitive pressure which rivals will be able to exert on the allegedduopoly formed by K+S/MdK and SCPA tends to give a false impression of thetrue competitive situation on the Community market apart from Germany. TheCommission attempts to minimise the importance of the various operators whomight counterbalance the alleged predominance of the leading undertakings.

187.

In the French Government's view, there are inconsistencies in the Commission'sanalysis. It observes that while the Commission emphasises the limited productioncapacities of CPL and Coposa in the context of defining the geographical market,it stresses the substantial volume of exports from Spain and the United Kingdomto other Member States. The Commission further minimises the significance ofimports from non-member countries by observing that France is the largest potashconsumer in the Community and that its imports from non-member countries arechannelled through SCPA. Thus, in a manner inconsistent with its own definitionof the relevant geographical market, the Commission assesses the position ofcompetitors either from the point of view of the French market or from that of theCommunity apart from Germany. The French Government further submits that,contrary to the Commission's assertion, potash continues to be imported from theCIS and the market share represented by such imports has not declined, as isshown by the initiation of a review of Council Regulation (EEC) No 3068/92 of 23October 1992 imposing a definitive anti-dumping duty on imports of potassiumchloride originating in Belarus, Russia or Ukraine (OJ 1992 L 304, p. 41,hereinafter 'the anti-dumping regulation). Moreover, according to IFA andCustoms sources, imports from the CIS amounted to 11% of sales in theCommunity in 1993.

188.

According to the French Government, the Commission's reasoning is in factfundamentally flawed, since it is based on the existence of a geographical market

comprising all the States of the Community apart from Germany, whereas it is clearthat France at least should not have been included, in view of its particularcharacteristics regarding production, importation and distribution of potashproducts.

189.

The Commission submits that there is no contradiction between the finding thatthere are significant export flows from Spain to other Member States and thefinding that Coposa does not constitute a counterweight to the duopoly.

190.

According to the Commission, the channelling of imports from non-membercountries through one member of the duopoly, namely SCPA, in a substantial partof the relevant geographical market, namely France, the most buoyant market,implies that the competitive pressure of non-member countries on that duopoly isnecessarily limited.

191.

The Commission submits that it did not confine itself to adopting criteria relatingexclusively to the French market. As to imports from the CIS, it found merely thatthe market share of K+S/MdK and SCPA would increase further in future not onlybecause of the anticipated decline in imports from the CIS but also because the lastindependent potash producer in Canada, PCA, had been acquired by PCS, amember of the Canpotex export cartel, whose supplies to France and Ireland arechannelled through SCPA. Moreover, the review of the anti-dumping measuresdoes not constitute proof of continuing potash imports from the CIS. In that regard,the Commission notes, it found that sales by the main distributor of CIS potash inthe Community had declined since the adoption of the anti-dumping regulation toone-eighth of their 1992 level.

(d) The market position of K+S/MdK and SCPA

192.

In the first place, the French Government criticises the Commission for givingexcessive weight, among the criteria applied to establish the existence of anoligopolistic dominant position, to the aggregate market share held by K+S/MdKand SCPA.

193.

In the second place, the French Government criticises the Commission for failingto take account of the absence of symmetry between the two entities alleged toconstitute the duopoly, even though in previous decisions that absence had on thecontrary been a significant factor in ruling out the existence of an oligopolisticdominant position. The Government states that there is a substantial differencebetween the market shares of K+S/MdK (23%) and SCPA (37%). In addition, theCommission is said to have disregarded numerous factual elements which revealeda manifest imbalance between SCPA and K+S/MdK, such as their productioncapacity, economic strength and differing degree of vertical integration.

194.

The Commission observes that it is settled-case law that a market share of about60% points to the existence of a collective dominant position, in particular where,

as in the present case, there is an appreciable difference as compared with themarket shares held by the competitors.

195.

While conceding that there are differences between K+S/MdK and SCPA, theCommission challenges the notion that a duopoly is conceivable only if the positionsof the undertakings in question are similar, especially where, as in the present case,there are significant links between those undertakings which prevent effectivecompetition on the market.

(e) Economic power of the customers

196.

The French Government criticises the Commission for not taking account of thecriterion relating to the economic power of the customers. In its view, an analysisof that factor would have led the Commission to conclude that the customersconstitute a counterweight such as to cast doubt on the creation of the allegedduopoly. Moreover, the noticeable fall in demand for potash following the changesto the common agricultural policy is a factor of intensive competition as regardspotash producers. That is all the more so since, as the French Governmentobserves, demand for potash fell from 1988 to 1993 by almost 30% in Europe,while imports declined by only 23% over the same period.

197.

In reply, the Commission states that although in some of its decisions it was ableto conclude that there was no dominant position in view of the counterweightformed by customers, that is only one factor among others which it takes intoconsideration. As to the fall in demand for potash, the Commission admits that ittook place, but adds that it affects all Community producers. Furthermore, the fallwas not very substantial, given that the elasticity of demand is limited as potash isan essential fertilizer for agriculture which cannot be replaced by any other.

(f) Barriers to entry for potash products in the Community

198.

The French Government submits that in the passage in the decision relating to thegeographical market, the Commission put forward factors which point to an openmarket easy to attack. However, when finding that K+S/MdK and SCPA were ina collective dominant position, the Commission completely disregarded the lowlevel of barriers to entry for potash products within the Community.

199.

According to the Government, the Commission's arguments, advanced for the firsttime in its defence and based on anti-dumping duties and SCPA's statutorymonopoly, do not establish the existence of barriers to entering the geographicalreference market. With regard to the first argument, the Government submits thatanti-dumping duties are measures intended to restore competitive conditions, notto introduce a restriction on cross-border trade. With reference to the secondargument concerning SCPA's statutory monopoly, the Government considers thatwhile that monopoly may create a barrier to entering the French market, it has no

effect on the access of products from non-member countries to the markets of theother Member States which, together with the French market, make up therelevant geographical market.

200.

The Commission observes that there are no barriers to entry within theCommunity. On the other hand, there are two kinds of barrier to the entry ofproducts from undertakings in non-member countries: anti-dumping measures forimports from the CIS, and SCPA's statutory monopoly under which all Frenchimports from non-member countries must pass through SCPA. According to theCommission, anti-dumping duties constitute barriers to entry because, together withtransport costs, they limit the price margin available to importers. It also submitsthat the fact that all imports from non-member countries into France, which is themost buoyant market with consumption three times greater than that of the secondlargest market, pass through SCPA is a barrier to entry for imports on theCommunity market generally.

(g) Characteristics of the market and of the product

201.

The French Government considers that the Commission's analysis in point 57 ofthe contested decision, concerning the objective factors favouring the creation ofa collective dominant position, on which it laid emphasis in earlier decisions suchas the Nestlé/Perrier decision cited above, and Decision 94/359/EC of 21 December1993 declaring a concentration to be compatible with the common market (CaseNo IV/M.358 Pilkington-Techint/SIV) (OJ 1994 L 158, p. 24), is vague andinconclusive. It submits that the Commission completely ignored basic analyticalcriteria such as prices and price trends, the degree of elasticity of demand, and thecosts of the two undertakings alleged to constitute the duopoly. It also contests thesoundness of some of the considerations relied on by the Commission. With respectto the homogeneity of the product, it observes that the general designation'potash covers a wide variety of products. As to the Commission's assertion thatthe potash market is transparent, that is contradicted by the difficulty theCommission encountered in obtaining without delay a clear view of the market interms of value and volume.

202.

The Commission counters, first, that it referred quite clearly to the structuralfactors relating to the characteristics of the market and the product. It states thatthe contested decision refers to a situation different from those which were thesubject of the decisions cited by the French Government. The background to thatdecision was a situation in which even before the concentration there was noeffective competition between the two largest suppliers of potash in theCommunity. In those circumstances, the factors examined in the decisions referredto by the French Government are only one of the factors to be taken intoconsideration. Second, with reference to the homogeneity of the product, theCommission finds that potash is identical as regards both its chemical compositionand its use. Third, with reference to the transparency of the market, theCommission submits that each producer is aware of his position and that of his

competitors. Production figures and prices are generally known, and there arestatistics on potash consumption and detailed studies of the potash market.

(h) Existence of parallel conduct

203.

According to the French Government, the Commission's aim is to establish apattern of persistent anticompetitive conduct between K+S and SCPA by statingthat despite the declaration of incompatibility with Article 85 of the Treaty of acooperation agreement made in the 1970s between those two undertakings(Commission Decision 73/212/EEC of 11 May 1973 (OJ 1973 L 217, p. 3)), anddespite the excess production capacity in Germany, there is very little tradebetween Germany and France which is not routed through SCPA. On this point,the Government observes, first of all, that to demonstrate the existence of acollective dominant position it is essential for the anticompetitive conduct to berecent. Second, the practices declared incompatible with Article 85 of the Treatyconcerned the whole of the Community, yet to support its view that the agreementin question still subsists, the only factual element the Commission refers to islimited to trade movements from Germany to France. Third, the low level of tradenot channelled through SCPA is highly relative. Supplies to France amount to only87 000 tonnes, or 6% of French consumption, of which only 47 000 tonnes passthrough SCPA. Finally, the French Government disputes the Commission'sargument that the weak presence of K+S on the French market is enough to showthat a duopoly between K+S/MdK and SCPA exists in the Community apart fromGermany.

204.

The Commission observes that it did not state in the contested decision that it hadbased its conclusion as to the existence of a collective dominant position on acooperation agreement from the 1970s. It found that the virtual absence of K+Sfrom the French market and the channelling of most of its imports through SCPAindicated that a collective dominant position existed.

(i) Existence of structural links between the undertakings

205.

According to the French Government, the three links between K+S and SCPAlisted by the Commission, namely the Potacan joint venture, the cooperation withinthe Kali-Export export cartel and the channelling of K+S's supplies to Francethrough SCPA, are incapable of establishing that the duopoly was created followingthe acquisition of MdK by K+S. As to the Kali-Export export cartel, its purpose,according to the French Government, is to promote and coordinate exports of itsmembers' potash outside the Community. The cartel does not, on the other hand,concern their sales within the Community. The Commission's fear that cooperationwithin that cartel would restrict competition between K+S and SCPA in theCommunity is not based on any evidence.

206.

As to Potacan, the applicant companies submit that the Commission has failed tojustify the assertion that the present structure of Potacan prevents its shareholdersK+S and SCPA from obtaining supplies independently from their joint subsidiaryto supply the European Community markets.

207.

In its reply, the French Government points to four errors of assessment. First, itstates that in its analysis of the links between K+S and SCPA the Commission hasnot established any connection between those links and their consequences over thewhole of the relevant market, but has merely shown that those links extend only toFrance. Thus the Commission concluded, from the fact that there is no competitionbetween K+S and SCPA in the State which consumes the largest quantity of potashproduced, that those undertakings enjoy a dominant position on the entireCommunity market apart from Germany. Such an approach runs counter to theCommission's argument that national situations are of little importance once it hasbeen established that the reference market is the Community apart from Germany.

208.

Second, the French Government observes that for the purposes of its argument theCommission at one point considers that Coposa exports autonomously substantialquantities to France (in the context of the definition of the geographical market)and at another point submits that Coposa is hardly present in France and that alarge proportion of its sales is channelled (to show that cooperation within Kali-Export influences the cartel members' competitive behaviour in the Community).Moreover, the criteria as applied by the Commission could equally have led to thefinding of an oligopoly involving K+S/MdK, SCPA and Coposa. The contesteddecision is at the very least inadequately reasoned on this point.

209.

Third, the French Government considers that the channelling in France throughSCPA of part of K+S's supplies of potash, accounting for only 1.4% ofconsumption in the reference market, cannot be regarded as evidence of thecreation of a duopoly on that market following the acquisition of MdK by K+S.Similarly, the relatively low level of sales by K+S in France is not sufficient tosupport the conclusion that anticompetitive links exist between K+S and SCPA,since there may well be other reasons for it. Thus it might derive from thestructures of the French market or from K+S's industrial strategy. In this respect,the French Government states that K+S's export policy appears to be directedtowards countries outside Europe, non-producer Member States, and one producerState, the United Kingdom, where there is demand for potash.

210.

On this point, the applicant companies submit that the only distribution linkbetween K+S and SCPA consists of a contract for the distribution of kieserite, anon-potash product which belongs to a different product market. Relations betweenK+S and SCPA concerning potash products, on the other hand, do not include anycooperation regarding distribution and are strictly limited to relations betweensupplier and purchaser in normal market conditions.

211.

Fourth, the French Government submits that the Commission has not establisheda causal link between the acquisition of MdK and the alleged creation of a duopolybetween K+S/MdK and SCPA. In its view, neither the fact that the combinedmarket share of K+S and SCPA has increased from 54% to 61% following theconcentration nor the fact that MdK is one of the largest Community producers isa factor in the creation of a duopoly on the relevant market.

212.

The applicant companies for their part submit that since the Commission hadfound in its examination of the effects of the concentration on the German marketthat MdK would be forced out of the market in any case, it could not conclude thatthe acquisition of MdK by K+S would give rise to the creation of a dominantposition on the part of K+S/MdK and SCPA.

213.

With regard to Potacan, the Commission observes that it follows in particular fromits organisational structure that no important decision on the policy of theundertaking may be taken against the will of either partner. Thus supplying theFrench group with potash in substantial quantities would not be possible if K+Sopposed it.

214.

With regard to Kali-Export, the Commission submits that a finding that an exportcartel does not concern its members' sales within the Community is not sufficientto establish that it does not restrict competition between them in the Community.Because K+S and SCPA are interdependent in various ways, there is no effectivecompetition between the two members of the oligopoly in the Community apartfrom Germany. The Commission observes that (i) although French territory is themost buoyant market for potash products in the Community and there are nobarriers to entry, K+S is present only marginally on that market despite havingsufficient production capacity broadly to supply the whole Community; (ii) althoughK+S has established a well-developed distribution network in all the MemberStates, it has as yet no distribution network of its own in France; and (iii) CPL wasnot able to gain access to the French market until it had left Kali-Export, and insix years it won a share of the French market amounting to 13%; Coposa, amember of Kali-Export, is scarcely present on the French market and a substantialproportion of its potash is sold in France by SCPA. On the basis of those elements,the Commission concludes that participation in Kali-Export clearly interferes withsales in France.

215.

In its rejoinder the Commission submits, first of all, that it established a clearrelationship between the links binding together K+S and SCPA, which concernFrance only, and the lack of competition on the entire Community market apartfrom Germany (points 57, 59, 61 and 67 of the contested decision).

216.

The Commission submits, second, that it did not assert that Coposa's exports toFrance are substantial. On the contrary, it stated that although Coposa does exportto France, those exports are limited and pass mainly though SCPA. According to

the Commission, Coposa should not be included in the duopoly with K+S/MdK andSCPA, since it is linked to K+S and SCPA only by its holding in Kali-Export.Moreover, it exports more potash to France than K+S, despite the geographicalproximity of the German deposits and the fact that in Germany production is fourtimes higher than consumption. In addition, the distribution links between K+S andSCPA have been in existence for a long time.

217.

The Commission submits, third, that the structure of the French market has notprevented CPL from penetrating French territory without passing through SCPA.Moreover, K+S's commercial policy of not selling in France is incomprehensiblecommercially in view of the fact that France is also a State where there is demandfor potash and in view of the substantial overcapacity in Germany and thegeographical proximity of the German deposits.

218.

The Commission submits, fourth, that the acquisition of MdK substantially alteredthe structural conditions of the market and led to the creation of a collectivedominant position between K+S/MdK and SCPA for the following reasons: (i)MdK accounts for 25% of total potash production in the Community (point 51 ofthe contested decision) and has substantial potash reserves; (ii) only about 50% ofMdK's capacity is currently being utilised (point 73 of the decision), which impliesthat production could easily be increased; (iii) MdK's market share of 7% is thecrucial factor in creating the joint dominant position (point 62), having regard tothe fact that supply outside the K+S/MdK and SCPA grouping is fragmented(point 54) and that the market share of K+S/MdK and SCPA is likely to increasefurther (point 53).

219.

Before the applicants' criticisms are examined of the manner in which theCommission applied the concept of a collective dominant position in the presentcase, it should be noted that, in concluding that a collective dominant positionbetween K+S/MdK and SCPA would be created which was likely significantly toimpede competition in the Community market apart from Germany, theCommission found in the contested decision in particular that:

the potash market is a mature market characterised by a largelyhomogeneous product and the lack of technical innovation (point 57 of thecontested decision);

the market circumstances are very transparent, so that information onproduction, demand, sales and prices is generally available (point 57);

exceptionally close links have existed for a long time between K+S andSCPA, which might in themselves suggest that there is no effectivecompetition between those undertakings which, moreover, account for about53% of the Community market apart from Germany, calculated on the basisof sales, including not only sales from K+S and SCPA's own production butalso sales by SCPA of potash imported directly from non-member countries,

which has to be channelled through SCPA, thus giving it control oversupplies from outside the Community (points 52, 56 and 57);

despite over-production in Germany, there is still only a small flow ofpotash supplies from K+S to France which is not channelled through SCPA,France being by far the largest potash-consuming State in the Community(points 56 and 57);

K+S and MdK, which will form a joint undertaking following theconcentration, and SCPA account for 35%, 25% and 20% respectively oftotal potash production in the Community (point 51);

MdK is the second largest potash producer in the Community, even thoughutilisation of the undertaking's capacity is currently only around 50% (points51 and 73);

following the concentration, the K+S/MdK and SCPA grouping will hold atotal market share, calculated on the basis of sales, of about 60% (point 52);

supply outside that grouping is fragmented (point 54);

the other producers do not have the sales base necessary to survive on themarket against a K+S/MdK and SCPA duopoly (point 62).

220.

As stated above, under Article 2(3) of the Regulation, concentrations which createor strengthen a dominant position as a result of which effective competition wouldbe significantly impeded in the common market or in a substantial part of it mustbe declared incompatible with the common market.

221.

In the case of an alleged collective dominant position, the Commission is thereforeobliged to assess, using a prospective analysis of the reference market, whether theconcentration which has been referred to it leads to a situation in which effectivecompetition in the relevant market is significantly impeded by the undertakingsinvolved in the concentration and one or more other undertakings which together,in particular because of correlative factors which exist between them, are able toadopt a common policy on the market and act to a considerable extentindependently of their competitors, their customers, and also of consumers.

222.

Such an approach warrants close examination in particular of the circumstanceswhich, in each individual case, are relevant for assessing the effects of theconcentration on competition in the reference market.

223.

In this respect, however, the basic provisions of the Regulation, in particular Article2 thereof, confer on the Commission a certain discretion, especially with respect toassessments of an economic nature.

224.

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.

225.

That being so, it must be held that the Commission's analysis of the concentrationand of its effects on the market in question is flawed in certain respects whichaffect the economic assessment of the concentration.

226.

As points 51 and 52 of the contested decision show, K+S/MdK and SCPA will holdshares of the relevant market, after the concentration, of 23% and 37%respectively, calculated on the basis of sales. A market share of approximately 60%,subdivided in that way, cannot of itself point conclusively to the existence of acollective dominant position on the part of those undertakings.

227.

As to the alleged structural links between K+S and SCPA, which were the essentialfactor relied on by the Commission in making its own assessment, some of theapplicants' criticisms playing down the significance of those links as evidence of thecreation of a collective dominant position on the part of the two undertakings arewell founded.

228.

Thus the Commission's finding that the holding of K+S and SCPA in the Kali-Export export cartel may have an impact on their competitive behaviour in theCommunity would not appear to be supported by a sufficiently cogent andconsistent body of evidence. The Commission merely notes, on this point, that theBritish producer CPL started marketing its products independently on the Frenchmarket only after it had left the cartel in 1987, because it could not reconcile directcompetition with SCPA on the French market with its membership of the cartel(see point 60 of the contested decision). Even if the fact were disregarded that theCommission's argument concerns the alleged effects of membership of the cartelonly on part of the Community market apart from Germany, it must be observedthat the Spanish producer Coposa, likewise a member of Kali-Export, marketsindependently in France a quantity of potash corresponding to slightly over 5% ofFrench consumption. That quantity accounts for about 47% of Coposa's exports tothe market in question as well as two-thirds of its exports to France, and wasindeed also considered significant in the context of the definition of the relevantgeographical market (see point 38 of the contested decision). In thosecircumstances, it would appear that the Commission has not established to thenecessary legal standard the existence of a causal link between K+S and SCPA'smembership of the export cartel and their anticompetitive behaviour on therelevant market.

229.

As regards the alleged links between K+S and SCPA relating to supplies by K+Sin France, the Commission required K+S to terminate its existing cooperation withSCPA as associated distributor on the French market, and accepted that K+Scould conclude sales contracts with SCPA in normal market conditions (see point

63 of the contested decision). The Commission accordingly considered that therewas a partnership between K+S and SCPA for the distribution of German potashin France.

230.

It appears from the documents in the case that the only specific distribution linksbetween those two undertakings related to kieserite, that is to say, a product notforming part of the relevant product market. Apart from that, SCPA merely boughtfrom K+S, on normal market conditions, potash used by EMC or intended for saleoutside the French market.

231.

It is thus apparent that K+S and SCPA did not have a privileged relationship forthe distribution of potash-based products.

232.

It follows from the foregoing that the cluster of structural links between K+S andSCPA, which, as the Commission itself concedes, constitutes the core of thecontested decision, is not in the end as tight or as conclusive as the Commissionsought to make out.

233.

It should be noted, moreover, that the Commission stated in the contested decisionthat there was no effective competition between K+S and SCPA on the relevantmarket. According to point 57 of the contested decision, 'the main reason forassuming an absence of real competition between K+S and SCPA is the existenceof exceptionally close links between the two companies extending over a longperiod of time.

234.

It also follows from point 57 of the contested decision that the acquisition of MdKby K+S following the concentration would involve the addition of MdK's marketshare to K+S, an addition which the Commission described in its observations assubstantial.

235.

On this point, it should be noted that in addition to its market share of 7% in theCommunity apart from Germany, MdK, although operating its plants at only 50%of capacity, is the second largest potash producer in the Community, after K+S(see points 51, 52, 62 and 76 of the contested decision).

236.

The effect of the concentration would thus be considerably to strengthen K+S'sindustrial capacity. K+S and MdK account for 35% and 25% respectively of totalpotash production in the Community, while SCPA levels off at 20% and its ownpotash reserves will be completely exhausted by 2004 (see points 51 and 66 of thecontested decision).

237.

In addition, the documents in the case show that K+S is a subsidiary of one of theleading fertiliser processors, BASF, whose economic power is much greater thanthat of the EMC group to which SCPA belongs.

238.

Finally, it is common ground that demand for potash fell by nearly 30% in Europefrom 1988 to 1993, particularly as a result of changes to the common agriculturalpolicy. A falling market is generally considered to promote, in principle,competition between the undertakings in the sector concerned.

239.

In those circumstances, and bearing in mind that the structural links between K+Sand SCPA have been shown to be less substantial than alleged by the Commission,the argument underlying the finding of a collective dominant position betweenK+S/MdK and SCPA, namely that the 'substantial addition of MdK to K+Salone would preserve a common interest on the part of the German group andSCPA in not actively competing with each other, does not appear to be sufficientlywell founded in the absence of other decisive factors.

240.

With regard to the other evidence adduced by the Commission in support of itsconclusion that the acquisition of MdK by K+S would lead to the creation of acollective dominant position, reference must be made to point 57 of the contesteddecision, according to which: 'The potash market is a mature commodity marketcharacterised by a largely homogeneous product and the lack of technologicalinnovation. The market circumstances are very transparent, information onproduction, demand, trade and prices being generally available in the industry. Inaddition, the market shares of K+S and SCPA have been stable over the last fouryears ... Finally, in the past there was an agreement between K+S and SCPArelating inter alia to the joint determination of the quantities and qualities of potashproducts exported by each party. That agreement was declared incompatible withArticle 85 of the EEC Treaty ... In this context, it should, however, be noted that,subsequent to this decision and despite over-production in Germany, there is stilllittle cross-border trade from Germany into France that is not channelled throughSCPA.

241.

In the present case, those facts cannot be regarded as lending decisive support tothe Commission's conclusion. In particular, the agreement between K+S andSCPA, which was declared incompatible with Article 85 of the Treaty in 1973 (OJ1973 L 217, p. 3), constitutes, in view of the lapse of time of 20 years between thedeclaration of incompatibility and the notification of the proposed concentration,extremely weak, indeed insignificant evidence of the absence of competitionbetween K+S and SCPA and a fortiori between K+S/MdK and SCPA. Theassertion by the Commission that there is still only little cross-border trade fromGermany to France that is not channelled through SCPA cannot in this casecorroborate the evidential value of that agreement in the way the Commissioncontends. First, the alleged minor cross-border trade flow nevertheless accounts foralmost half of K+S's potash sales in France. Second, the Commission's analysis, inso far as it is confined exclusively to the French market, is in any event incomplete,since the relevant market is the Community market apart from Germany.

242.

As regards the Commission's analysis of the degree of competitive pressure whichrivals could exert on the grouping allegedly formed by K+S/MdK and SCPA, the

Commission explained in the contested decision that imports from the CIS, whichin 1992 amounted to 8% of the Community market apart from Germany (includingimports channelled through SCPA), appear to have declined since the anti-dumpingregulation was adopted (see point 53 of the contested decision).

243.

However, according to information provided by the French Government which hasnot been challenged by the Commission, those imports amounted in 1993 to 11%of sales within the Community.

244.

In view of the fact that the German market is not easily accessible to foreignproducers and that the ratio of approximately 4 to 1 between the Communitymarket apart from Germany and the German market does not appear to havechanged in the meantime, it may thus be concluded that if imports of potash fromthe CIS constituted 11% of sales within the Community in 1993, they must haveaccounted for a greater percentage of sales within the Community apart fromGermany.

245.

Consequently, the Commission's assertion in point 53 of the contested decision that,with reference to the Community market apart from Germany, those importsappear to have fallen, at least in part, since the anti-dumping regulation wasadopted does not correspond to the true state of affairs, in that it obscures the factthat the market share of the CIS increased on the reference market.

246.

Moreover, having regard to the growth in 1993 of imports from the CIS to theCommunity apart from Germany, the finding that the competitive pressure whichthose imports might exert on the K+S/MdK and SCPA grouping would be limitedfor reasons related to the quality of the products and the difficulty of ensuringrapid supplies delivered on time appears to be based on reasoning which is, to saythe least, inconsistent. To assess with a sufficient degree of probability the effectwhich a concentration might have on competition on the relevant market, it isessential to rely on a rigorous analysis of the competitors' weight.

247.

With regard to Coposa, which holds a market share in the Community apart fromGermany of slightly under 10%, the Commission asserted that its productioncapacity would be considerably reduced in the following year because of the closureof one of its mines. On this point, the French Government has observed, withoutbeing challenged by the Commission, that Coposa's present level of overcapacityis about 70%. Hence the statement that Coposa's production capacity would soonfall appreciably, without further detail, does not in itself support the argument thatCoposa lacks the necessary base to maintain, let alone increase, its market shareand thus exert pressure on the alleged duopoly, especially as the potash market isdeclining, as stated in paragraph 238 above.

248.

Thus the Commission has not succeeded in showing that there is no effectivecompetitive counterweight to the grouping allegedly formed by K+S/MdK andSCPA.

249.

In the light of the foregoing, and without its being necessary to decide whether theCommission's findings in the contested decision would, in the absence of the flawsdescribed above, provide a sufficient basis for the conclusion that a collectivedominant position exists, it is apparent that the Commission has not on any viewestablished to the necessary legal standard that the concentration would give riseto a collective dominant position on the part of K+S/MdK and SCPA liable toimpede significantly effective competition in the relevant market.

250.

The third limb of the applicants' plea in law must therefore be upheld.

Annulment in whole or in part

251.

The French Government, in its pleadings, seeks the annulment of the contesteddecision in its entirety, whereas the applicant companies expressly limit theirapplication for annulment to the conditions attached to the declaration ofcompatibility in that decision.

252.

According to the applicant companies, partial annulment would leave intact thecore of the contested decision, which would simply become unconditional.

253.

The Commission submits that the conditions attached to the contested decisioncannot be the subject of limitation, since they form part of the very substance ofthe decision.

254.

It must be observed that the section of the operative part declaring theconcentration to be compatible with the common market is favourable to theinterests of the undertakings formally concerned by the contested decision and hasnot been regarded by the applicant companies as adversely affecting them.

255.

As to the French Government, although in its pleadings it sought annulment of thedecision in its entirety, it explained during the procedure before the Court that itdid not seek to have the concentration between K+S and MdK prohibited.

256.

It follows from the Court's case-law that partial annulment of a decision, limitedsolely to the conditions it imposes, is possible if those conditions may be severedfrom the remainder of the decision (see, to that effect, Case 37/71 Jamet vCommission [1972] ECR 483, paragraph 11, and Case 17/74 Transocean MarinePaint v Commission [1974] ECR 1063, paragraph 21). The partial annulment of aCommission decision concerning the control of concentrations is, moreover, one ofthe cases expressly provided for in Article 10(5) of the Regulation.

257.

However, it does not appear that annulment limited to the section of the operativepart of the contested decision which relates to the conditions and obligations setout in point 63 thereof is possible without the substance of the decision beingaltered.

258.

It follows from the decision and the documents in the case taken as a whole thatthose conditions and the declaration of compatibility in the operative part form anindivisible whole. The conditions are the result of a negative assessment by theCommission of the concentration as notified, and are regarded by that institutionas essential if the concentration is to be declared compatible with the commonmarket.

259.

Consequently, the whole of the operative part of the contested decision must beannulled.

Costs

260.

Under Article 69(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. In Case C-68/94 the Commission must therefore be ordered to pay thecosts. In Case C-30/95 the Commission must likewise be ordered to pay the costs,since Société Commerciale des Potasses et de l'Azote (SCPA) and EntrepriseMinière et Chimique (EMC) have essentially been successful. In accordance withthe final subparagraph of Article 69(4) of the Rules of Procedure, which providesthat the Court may order an intervener to bear his own costs, Kali und Salz GmbHand Kali und Salz Beteiligungs-AG are to bear their own costs.

261.

Under the first subparagraph of Article 69(4) of the Rules of Procedure, MemberStates which intervene in the proceedings are to bear their own costs. TheGovernments which have intervened in the present cases must therefore be orderedto bear their own costs.

On those grounds,

THE COURT

hereby:

1. Annuls Commission Decision 94/449/EC of 14 December 1993 relating toa proceeding pursuant to Council Regulation (EEC) No 4064/89 (Case NoIV/M.308 Kali + Salz/MdK/Treuhand);

2. In Case C-68/94, orders the Commission of the European Communities topay the costs;

3. In Case C-30/95, orders the Commission of the European Communities topay the costs, and Kali und Salz GmbH and Kali und Salz Beteiligungs-AGto bear their own costs;

4. Orders the Federal Republic of Germany, which intervened in Case C-68/94,and the French Republic, which intervened in Case C-30/95, to bear theirown costs.

Rodríguez IglesiasGulmann

Ragnemalm

Mancini

Moitinho de Almeida

Kapteyn

Murray

Edward

Puissochet

Hirsch

Jann

Delivered in open court in Luxembourg on 31 March 1998.

R. Grass

G.C. Rodríguez Iglesias

Registrar

President

1: Language of the case: French.