Language of document : ECLI:EU:C:1997:531

JUDGMENT OF THE COURT

11 November 1997(1)

(Competition — Articles 85, 86 and 90 of the EC Treaty — Rejection of acomplaint concerning both State measures and private conduct — Applicability ofArticles 85 and 86 to undertakings complying with national legislation)

In Joined Cases C-359/95 P and C-379/95 P,

Commission of the European Communities , represented by Francisco EnriqueGonzález Díaz and Richard Lyal, of the Legal Service, acting as Agents, with anaddress for service in Luxembourg at the office of Carlos Gómez de la Cruz, of theLegal Service, Wagner Centre, Kirchberg,
and
French Republic, represented by Jean-François Dobelle, Deputy Director of theLegal Affairs Directorate of the Ministry for Foreign Affairs, assisted by Catherinede Salins, Head of Section in that directorate, and Jean-Marc Belorgey, SpecialAdviser in that directorate, acting as Agents, with an address for service inLuxembourg at the French Embassy, 8B Boulevard Joseph II,

appellants,

APPEALS against the judgment of the Court of First Instance of the EuropeanCommunities (First Chamber, Extended Composition) in Case T-548/93 LadbrokeRacing v Commission [1995] ECR II-2565), seeking to have that judgment set aside,the other party to the proceedings being:

Ladbroke Racing Ltd,a company incorporated under English law, represented byJeremy Lever QC and Christopher Vajda, Barrister, instructed by Stephen Kon,Solicitor, with an address for service in Luxembourg at the Chambers of Winandy& Err, 60 Avenue Gaston Diderich,

THE COURT,



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

Advocate General: G. Cosmas,

Registrar: H. von Holstein, Deputy Registrar,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 21 January 1997,

after hearing the Opinion of the Advocate General at the sitting on 13 May 1997,

gives the following

Judgment

  1. By applications lodged at the Court Registry on 22 and 27 November 1995, theCommission of the European Communities (C-359/95 P) and the French Republic(C-379/95 P) each brought an appeal under Article 49 of the EC Statute of theCourt of Justice against the judgment of the Court of First Instance of 18September 1995 in Case T-548/93 Ladbroke Racing v Commission ([1995] ECR II-2565, hereinafter 'the contested judgment‘) annulling the decision of theCommission in its letter of 29 July 1993 to reject a complaint lodged by LadbrokeRacing Ltd ('Ladbroke‘) under Articles 85 and 86 of the EC Treaty ('thecontested decision‘).

  2. By order of the President of the Court of Justice of 29 January 1996, CasesC359/95 P and C-379/95 P were joined for the purposes of the written and oralprocedure and the judgment.

  3. The contested judgment states (paragraphs 2 to 7) that Ladbroke lodged acomplaint (No IV/33.374) with the Commission on 24 November 1989 against theFrench Republic under Article 90 of the EC Treaty and against the 10 main racingcompanies (sociétés de courses) in France and against the Pari Mutuel Urbain('PMU‘), an economic interest grouping created by the 10 companies in Franceto manage their rights to organize off-course totalizator betting on horse racing,under Articles 85 and 86 of the Treaty.

  4. The PMU initially managed the rights of the racing companies to organize suchbetting as a 'joint service‘ operating in the context of a decree of 11 June 1930 onthe extension of off-course totalizator betting, adopted in implementation of Article186 of the Finance Law of 16 April 1930. Article 1 of the decree provided: 'Withthe authorization of the Minister for Agriculture, totalizator betting may beorganized and operated outside racecourses by the Parisian racing companies actingjointly with the aid of the provincial racing companies‘. Under Article 13 ofDecree No 74-954 of 14 November 1974 on horse-racing companies, the PMU has,since that date, exclusive responsibility for managing the rights of the racingcompanies in relation to off-course totalizator betting, inasmuch as the articleprovides that 'the racing companies authorized to organize off-course totalizatorbetting ... shall entrust its management to a joint service to be called the PariMutuel Urbain‘. The exclusive rights thereby conferred on the PMU are alsoprotected by the prohibition on the placing or accepting of bets on horse-races byanyone other than the PMU (Article 8 of the Interministerial Decree of 13September 1985 governing the Pari Mutuel Urbain). This exclusivity extends tobets taken abroad on races organized in France and bets taken in France on racesorganized abroad, which likewise may be taken only by the authorized companiesand/or the PMU (Article 15(3) of Law No 64-1279 of 23 December 1964 on the1965 Finance Law and Article 21 of Decree No 83-878 of 4 October 1983 on thehorse-racing companies and the PMU) (paragraph 3 of the contested judgment).

  5. The complaint was directed principally against that method of organizing off-coursetotalizator betting in France.

  6. As regards its complaint against the PMU and its member companies, Ladbrokealleged that there were agreements or concerted practices between the racingcompanies authorized in France and between them and the PMU the object ofwhich was, in breach of Article 85 of the Treaty, to grant the latter exclusive rightsin the management and organization of off-course totalizator betting on racesorganized or controlled by those companies, (paragraph 5 of the contestedjudgment). The complaint also alleged that the grant of such exclusive rights to thePMU constituted an abuse of a dominant position on the part of the racingcompanies, in breach of Article 86 of the Treaty (paragraph 6 of the contestedjudgment).

  7. That part of the complaint was also directed moreover against agreements andconcerted practices whose object was to support a request for State aid to thePMU, thereby enabling the PMU to extend its activities to Member States otherthan the French Republic, in breach of Article 85 (paragraph 5 of the contestedjudgment). It also requested that the breaches of Article 86 resulting from thePMU's receipt of illegal State aid and the use of advantages procured by that aidto meet competition be terminated. Lastly, Ladbroke notified the Commission ofother abuses of a dominant position by the PMU, consisting in the exploitation ofthose placing bets, the users of its services (paragraph 6 of the contestedjudgment).

  8. As regards its complaint against the French Republic, Ladbroke claimed that thelatter had infringed, first, Articles 3(g) [formerly Article 3(f)], 5, 52, 53, 85, 86 and90(1) of the EC Treaty by enacting and maintaining in force legislation providinga legal basis for the agreements between the racing companies inter se and betweenthem and the PMU granting the latter exclusive rights to take off-course bets andprohibiting anyone else from placing or accepting off-course bets on horse-racesorganized in France otherwise than through the PMU. Secondly, it had furtherbreached Articles 3(g) [formerly Article 3(f)], 52, 53, 59, 62, 85, 86 and 90(1) of theEC Treaty by enacting and maintaining in force legislation prohibiting the placingin France of bets on races organized abroad save through authorized companiesand/or the PMU. Lastly, it had breached Articles 90(1), 92 and 93 of the ECTreaty by granting the PMU illegal aid (paragraph 7 of the contested judgment).

  9. By the contested decision the Commission rejected the complaint under Articles85 and 86 of the Treaty against the PMU and its member companies on thegrounds, first, that Articles 85 and 86 were not applicable and, secondly, theabsence of a Community interest (paragraphs 13 to 19 of the contested judgment).

  10. The Commission did not take a position on the aspects of the complaint directedagainst the French Republic under Article 90 of the Treaty. Before theCommission adopted the contested decision Ladbroke brought an action for failureto act on the ground that the Commission had failed to exercise the powersconferred on it by Article 90(3) of the Treaty, which was declared inadmissible bythe Court of First Instance in its judgment of 27 October 1994 in Case T-32/93Ladbroke v Commission [1994] ECR II-1015, paragraph 37 (paragraph 10 of thecontested judgment).

  11. In the contested judgment the Court of First Instance annulled the contesteddecision on the ground that, by definitively rejecting the part of the complaintdirected against the PMU and its member companies on the ground that Articles85 and 86 of the Treaty did not apply and there was no Community interest,without first having completed its examination of the compatibility of the Frenchlegislation with the Treaty rules on competition, the Commission had failed to fulfilits duty to examine carefully the factual and legal issues brought to its attention bythe complainants so as to satisfy the requirement of certainty which a final decisiondetermining whether an infringement exists must satisfy (paragraph 50 of thecontested judgment). The Commission's reasoning was thus based on amisinterpretation of the conditions governing the definitive determination of theexistence of alleged infringements (paragraph 51 of the contested judgment).

  12. For a more detailed account of the facts which gave rise to the dispute referencemay be made to paragraphs 1 to 19 of the contested judgment.

  13. The Commission submits that the Court should:

    (1)    quash the judgment in so far as it annuls the contested decision;

    (2)    dismiss the application under Article 173 of the EC Treaty as unfounded;    and

    (3)    order Ladbroke to pay the costs in the proceedings before both the Court    of First Instance and the Court of Justice.

  14. The French Republic submits that the Court should:

    (1)    set aside the judgment in so far as it annuls the contested decision; and

    (2)    uphold the submissions put forward by the Commission before the Court     of First Instance.

  15. Ladbroke submits that the Court should:

    (1)    dismiss the appeals in Cases C-359/95 P and C-379/95 P;

    (2)    order the Commission and the French Republic to pay Ladbroke's costs;

    (3)    alternatively, if the Court allows the appeals, retain the case and give    judgment on the outstanding issues in Ladbroke's application in CaseT-548/93 or remit the case to the Court of First Instance for judgment onthose issues.

  16. The Commission puts forward three pleas in support of its appeal. The first is thatthe Court of First Instance erred in law in holding that where both Article 90 andArticles 85 and 86 of the Treaty may be relevant to a case, the Commission mustcomplete its investigation under Article 90 of the Treaty before ruling on either theapplicability of Articles 85 and 86 or the existence of a Community interest ininvestigating the complaint. The Court of First Instance has thereby established anorder of priority as between the procedure provided for in Regulation No 17 of theCouncil of 6 February 1962, the first regulation implementing Articles 85 and 86of the Treaty (OJ, English Special Edition 1959-1962, p. 87) and the procedureagainst a Member State for failure to fulfil its obligations, which is incompatiblewith the Commission's discretion to decide what aspect of a complaint should beconsidered first and against whom (the undertakings or the State) proceedingsshould be first initiated.

  17. The second plea is that the Court of First Instance erred in law in holding that thisgeneral principle must apply even where a finding on Article 90 is not logicallynecessary for a ruling on the applicability of Articles 85 and 86 of the EC Treaty. The Court has thus overlooked the Commission's finding that, regardless of thecompatibility of the French legislation with the Treaty, certain prior conditionsnecessary for the application of Articles 85 and 86 were not satisfied and, in anyevent, there was insufficient interest in investigating the complaint under Articles85 and 86.

  18. The third plea is based on lack of reasoning, inasmuch as the Court of FirstInstance failed, first, to explain why the Commission was bound to examine theFrench legislation in the light of Article 90 before rejecting the requests made inthe complaint relating to Articles 85 and 86 and, secondly, failed to state why theCommission was not entitled to take into account the Community interest in orderto determine the priority to be given to different aspects of the complaint, or inwhat way the Commission's appraisal of the Community interest in this case wasmanifestly wrong.

  19. The French Government also relies on three pleas in support of its appeal. Thefirst is that the Court of First Instance erred in law by failing to take into accountthe Court's case-law to the effect that, where State measures leave no freedom ofaction to undertakings, as was the position in this case from 1974 onwards, Articles85 and 86 of the Treaty cannot be applied to such undertakings as long as thosemeasures remain in force.

  20. In response to that plea, however, the Commission submits that it is necessary todistinguish between State measures requiring undertakings to engage in conductcontrary to Articles 85 and 86 and measures that do not require any conductcontrary to those rules but simply create a legal framework that itself restrictscompetition. In the first case, the Commission considers that Article 85 remainsapplicable to undertakings' conduct despite the existence of national statutoryobligations and irrespective of the possible application of Articles 3(g), 5 and 85 ofthe Treaty with regard to those State measures. In fact, the Commission arguesthat an undertaking can and, by virtue of the primacy of Community law and thedirect effect of Articles 85(1) and 86 of the Treaty, must refuse to comply with aState measure that requires conduct contrary to those provisions.

  21. In the second case, by contrast, Article 85 may in certain circumstances not apply. That is the case here, since the 1974 legislation does not require the conclusion ofan agreement between the main racing companies but itself grants the PMU theexclusive right to organize off-course totalizator betting. The restriction ofcompetition thus flowed directly from the national legislation, without any actionon the part of undertakings being necessary.

  22. The second plea relied on by the French Government is that the Court of FirstInstance erred in law in failing to take into account well-established case-law to theeffect that a complainant under Regulation No 17 is not entitled to a final decisionas to the existence of an alleged infringement of Articles 85 and 86 of the Treaty. In particular, the Court of First Instance overlooked the Commission's reasoningas to the lack of Community interest in investigating the complaint, based on thefact that since 1974 the absence of competition on the French market for takingbets resulted directly from the legislation. Accordingly, a finding that the racingcompanies and the PMU had infringed Articles 85 and 86 would have had no effecton competition after that date; as regards the period prior to 1974, the finding ofan infringement of the Treaty rules could lead only to an award of damages andinterest, which the Commission has no power to order.

  23. The third plea relied on by the French Government is that the Court of FirstInstance erred in law by calling in question the Commission's discretion as towhether to take action against a Member State in respect of legislation which isallegedly contrary to the Treaty.

  24. It is to be noted that in their pleas the Commission and the French Republicchallenge, albeit in different terms and for different purposes, the Court of FirstInstance's reasoning that it was necessary for the Commission to complete itsexamination of the compatibility of the French legislation with the Treaty rules oncompetition before it could definitively reject the complaint concerning Articles 85and 86 of the Treaty.

  25. Accordingly, it is necessary to consider that finding and the reasoning on which itis based.

  26. In paragraph 46 of the contested judgment the Court of First Instance found thatthe Commission had 'initiated the procedure for examining the applicant'scomplaint under Article 90 of the Treaty in order to assess the compatibility of theFrench legislation with the other Treaty provisions; that procedure is still inprogress‘. The Court stated that 'consequently, the question to be considered iswhether the Commission could definitively reject the applicant's complaint underArticles 85 and 86 of the Treaty and Regulation No 17 without having previouslycompleted its examination of the complaint under Article 90 of the Treaty‘.

  27. In paragraph 47 of the judgment it stated that 'the Commission has submitted,both in its pleadings and at the hearing, that the competition issue raised by theapplicant's complaint could be resolved only by examining the compatibility of theFrench legislation concerning the PMU's statutory monopoly with the Treaty rulesand by taking action, if appropriate, under Article 90 of the Treaty and that,accordingly, that examination was a priority, since the result of it would hold goodfor any prior or future agreements between the sociétés de courses (defence, point46)‘. The Court of First Instance concluded that 'the conduct of the sociétés decourses and the PMU, impugned by Ladbroke in its complaint, could not have beenfully assessed under Articles 85 and 86 of the Treaty without a prior evaluation ofthe national legislation in the light of the provisions of the Treaty‘.

  28. The Court of First Instance stated that if the Commission were to find that thenational legislation was consistent with the provisions of the Treaty, then conductof the racing companies and the PMU complying with that national legislationwould likewise have to be regarded as compatible with Articles 85 and 86 of theTreaty, whereas if their conduct was not in compliance with the national legislation,it would remain to be determined whether it infringed Articles 85 and 86 of theTreaty (paragraph 48 of the contested judgment). If, however, the Commissionwere to find that the legislation infringed the Treaty, it would then have to considerwhether or not the fact that the companies and the PMU were complying with thatlegislation could lead to the adoption of measures against them in order toterminate infringements of Articles 85 and 86 of the Treaty (paragraph 49 of thecontested judgment).

  29. The Court of First Instance therefore concluded, in paragraph 50 of the contestedjudgment, that 'by deciding to definitively reject the applicant's complaint underArticles 85 and 86 of the Treaty without first completing its examination of thecompatibility of the French legislation with the provisions of the Treaty, theCommission cannot be regarded as having carried out its duty to examine carefullythe factual and legal issues brought to its attention by the complainants ... so as tosatisfy the requirement of certainty which a final decision determining whether ornot an infringement exists must [satisfy] ... It was not therefore entitled to concludeat that stage that the abovementioned provisions of the Treaty were inapplicableto the conduct of the main sociétés de courses and the PMU to which the applicanthad objected and then that there was no Community interest in finding that thematters alleged by the applicant were infringements on the ground that theyinvolved past infringements of the competition rules‘.

  30. That reasoning is thus based on the premiss that the lawfulness, in terms of Articles85 and 86, of conduct of undertakings complying with national legislation, and theaction which should be taken against them, depends on whether that legislation iscompatible with the Treaty.

  31. However, the compatibility of national legislation with the Treaty rules oncompetition cannot be regarded as decisive in the context of an examination of theapplicability of Articles 85 and 86 of the Treaty to the conduct of undertakingswhich are complying with that legislation.

  32. Although an assessment of the conduct of the racing companies and the PMU inthe light of Articles 85 and 86 of the Treaty requires a prior evaluation of theFrench legislation, the sole purpose of that evaluation is to determine what effectthat legislation may have on such conduct.

  33. Articles 85 and 86 of the Treaty apply only to anti-competitive conduct engaged inby undertakings on their own initiative (see to that effect, as regards Article 86 ofthe Treaty, Case 41/83 Italy v Commission [1985] ECR 873, paragraphs 18 to 20;Case C-202/88 France v Commission — the so-called 'telecommunications terminals‘judgment — [1991] ECR I-1223, paragraph 55; and Case C-18/88 GB-Inno-BM [1991] ECR I-5941, paragraph 20). If anti-competitive conduct is required ofundertakings by national legislation or if the latter creates a legal framework whichitself eliminates any possibility of competitive activity on their part, Articles 85 and86 do not apply. In such a situation, the restriction of competition is notattributable, as those provisions implicitly require, to the autonomous conduct ofthe undertakings (see also Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73,111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663,paragraphs 36 to 72, and more particularly paragraphs 65, 66, 71 and 72).

  34. Articles 85 and 86 may apply, however, if it is found that the national legislationdoes not preclude undertakings from engaging in autonomous conduct whichprevents, restricts or distorts competition (Joined Cases 209/78 to 215/78 and 218/78Van Landewyck and Others v Commission [1980] ECR 3125; Joined Cases 240/82to 242/82, 261/82, 262/82, 268/82 and 269/82 Stichting Sigarettenindustrie and Othersv Commission [1985] ECR 3831; and Case C-219/95 P Ferriere Nord v Commission[1997] ECR I-0000).

  35. When the Commission is considering the applicability of Articles 85 and 86 of theTreaty to the conduct of undertakings, a prior evaluation of national legislationaffecting such conduct should therefore be directed solely to ascertaining whetherthat legislation prevents undertakings from engaging in autonomous conduct whichprevents, restricts or distorts competition.

  36. The Court of First Instance therefore erred in law in holding that by definitivelyrejecting the complaint on the ground that Articles 85 and 86 did not apply, andthat there was no Community interest, before having completed its examination ofthe compatibility of the French legislation with the Treaty rules on competition, theCommission was relying on an interpretation of the conditions governing thedefinitive determination of the existence of alleged infringements which was wrongin law.

  37. Consequently, the contested judgment should be set aside, without its beingnecessary to examine the other arguments relied on by the appellants.

    Referral of the case to the Court of First Instance

  38. According to the first paragraph of Article 54 of the EC Statute of the Court ofJustice, if the appeal is well founded the Court of Justice is to quash the decisionof the Court of First Instance. It may itself give final judgment in the matter,where the state of the proceedings so permits, or refer the case back to the Courtof First Instance for judgment.

  39. Since it is not possible at this stage to give final judgment because the Court ofFirst Instance ruled on only one of the complaints raised by Ladbroke, it isnecessary to refer the case back to that Court.

    On those grounds,

    THE COURT

    hereby:

    1. Sets aside the judgment of the Court of First Instance of 18 September1995 in Case T-548/93 Ladbroke Racing v Commission.

    2. Refers the case back to the Court of First Instance.

    3. Reserves costs.



Rodríguez Iglesias        Gulmann Ragnemalm
Schintgen        Mancini        Kapteyn Murray
Edward        Puissochet            Hirsch            Jann                

Delivered in open court in Luxembourg on 11 November 1997.

R. Grass

G.C. Rodríguez Iglesias

Registrar

President

1: Language of the case: English.