Case T-427/08

Confédération européenne des associations d’horlogers-réparateurs (CEAHR)

v

European Commission

(Agreements, decisions and concerted practices – Abuse of dominant position – Decision rejecting a complaint – Refusal of Swiss watch producers to supply spare parts to independent watch repairers – Community interest – Relevant market – Primary market and after market – Duty to state reasons – Manifest error of assessment)

Summary of the Judgment

1.      Competition – Administrative procedure – Examination of complaints – Determination of priorities by the Commission

(Arts 81 EC, 82 EC and 85 EC)

2.      Competition – Dominant position – Relevant market – Delimitation – Criteria – Primary market and after-market

(Art. 82 EC)

3.      Competition – Administrative procedure – Examination of complaints – Taking into account the Community interest in investigating a case – Criteria for assessment

(Arts 81 EC and 82 EC)

4.      Competition – Administrative procedure – Examination of complaints – Decision to take no further action motivated by the possibility of the claimant bringing the matter before the national courts – Legality – Condition

(Arts 81 EC and 82 EC)

1.      The Commission, entrusted by Article 85(1) EC with the task of ensuring the application of Articles 81 EC and 82 EC, is responsible for defining and implementing the competition policy of the European Union and for that purpose has a discretion as to how it deals with complaints.

When, in the exercise of that discretion, the Commission decides to assign different priorities to the examination of complaints submitted to it, the Commission may not only decide on the order in which they are to be examined but also reject a complaint on the ground that there is an insufficient Community interest in further investigation of the case.

The Commission’s discretion is not unlimited, however. It must take into consideration all the relevant matters of law and of fact in order to decide on what action to take in response to a complaint. More particularly, it must consider attentively all the matters of fact and of law which the complainant brings to its attention. Similarly, it is under an obligation to state reasons if it declines to continue with the examination of a complaint, and those reasons must be sufficiently precise and detailed to enable the Court effectively to review the Commission’s use of its discretion to define priorities.

Review by the Courts of the European Union of the Commission’s exercise of the discretion conferred on it in this regard must not lead them to substitute their assessment of the Community interest for that of the Commission, but focuses on whether the contested decision is based on materially incorrect facts, or is vitiated by an error of law, manifest error of appraisal or misuse of powers.

(see paras 26-28, 65)

2.      In the context of proceedings concerning an abuse of a dominant position, the concept of the relevant market in fact implies that there can be effective competition between the products or services which form part of it and this presupposes that there is a sufficient degree of interchangeability between all the products or services forming part of the same market in so far as a specific use of such products or services is concerned. The interchangeability or substitutability is not assessed solely in relation to the objective characteristics of the products and services at issue, but the competitive conditions and the structure of supply and demand on the market must also be taken into consideration.

It is also apparent from the Commission notice on the definition of the relevant market for the purposes of Community competition law that a relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use.

According to that notice, the assessment of demand substitution entails a determination of the range of products which are viewed as substitutes by the consumer. One way of making this determination can be viewed as a speculative experiment, postulating a hypothetical small but lasting change in relative prices and evaluating the likely reactions of customers to that increase. It is stated in point 17 of that notice that the question to be answered is whether the parties’ customers would switch to readily available substitutes in response to a hypothetical small (in the range 5% to 10%) but permanent relative price increase in the products and areas being considered. If substitution were enough to make the price increase unprofitable because of the resulting loss of sales, additional substitutes are included in the relevant market.

In addition, according to point 56 of the notice, there are certain areas where the application of the principles above has to be undertaken with care. This is the case when considering primary and secondary markets, in particular, when the behaviour of undertakings at a point in time has to be analysed pursuant to Article 82 EC. The method of defining markets in these cases is the same, i.e. assessing the responses of customers based on their purchasing decisions to relative price changes, but taking into account as well constraints on substitution imposed by conditions in the connected markets. A narrow definition of market for secondary products, for instance, spare parts, may result when compatibility with the primary product is important. Problems of finding compatible secondary products together with the existence of high prices and a long lifetime of the primary products may render relative price increases of secondary products profitable. A different market definition may result if significant substitution between secondary products is possible or if the characteristics of the primary products make quick and direct consumer responses to relative price increases of the secondary products feasible.

In the light of the above, the Commission was rightly able to consider that the spare parts market for primary products of a particular brand may not be a separate relevant market in two situations: first, if it is possible for a consumer to switch to spare parts manufactured by another producer; second, if it is possible for the consumer to switch to another primary product in order to avoid a price increase on the market for spare parts. That finding is valid provided, however, that it is shown that, in the event of a moderate and permanent increase in the price of secondary products, a sufficient number of consumers would switch to other primary or secondary products, in order to render such an increase unprofitable. Consequently, a purely theoretical possibility of switching to another primary product is not a sufficient demonstration for the purposes of the definition of the relevant market.

Moreover, it is also apparent from the above that the mere possibility for the consumer to choose from several brands on the primary market is not sufficient to treat the primary market and the after markets as a single market, unless it is established that the choice is made, among others, on the basis of the competitive conditions on the secondary market. Furthermore, if certain economic operators are specialised and are active solely on the after market of a primary market, that constitutes in itself a strong indication of the existence of a specific market.

(see paras 67-70, 79-80, 102, 105, 108)

3.      In order to assess the Community interest in further investigation of a case, the Commission must take account of the circumstances of the case and, in particular, of the matters of law and fact set out in the complaint referred to it. In particular, it must weigh the significance of the alleged infringement as regards the functioning of the common market against the probability of its being able to establish the existence of the infringement and the extent of the investigative measures necessary in order to fulfil, under the best possible conditions, its task of ensuring the observance of Articles 81 EC and 82 EC.

(see para. 158)

4.      Where the effects of the infringements alleged in a complaint are essentially confined to the territory of one Member State and where proceedings in respect of those infringements have been brought before the courts and competent administrative authorities of that Member State by the complainant, the Commission is entitled to reject the complaint for lack of Community interest, provided however that the rights of the complainant can be adequately safeguarded by the national courts, which presupposes that the latter are in a position to gather the factual information necessary in order to determine whether the practices at issue constitute an infringement of the abovementioned provisions of the Treaty.

Nevertheless, the consideration that the national authorities and courts are well placed to address the possible infringements complained of is insufficient, in itself, to conclude that there is no sufficient Community interest when the practice complained of exists in at least five Member States, or possibly in all the Member States, and is attributable to undertakings which have their head offices and places of production outside of the European Union, which suggests that action at European Union level could be more effective than various actions at national level.

(see paras 173, 176)