JUDGMENT OF THE COURT (Sixth Chamber)

30 April 1998 (1)

(Competition — Vehicle distribution — Validity of exclusive dealership agreement— Article 85(1) and (3) of the EC Treaty — Regulation (EEC) No 123/85 —Regulation (EC) No 1475/95)

In Case C-230/96,

REFERENCE to the Court under Article 177 of the EC Treaty by the Courd'Appel, Douai, France, for a preliminary ruling in the proceedings pending beforethat court between

Cabour SA and Nord Distribution Automobile SA

supported by

Automobiles Peugeot SA and Automobiles Citroën SA ,

and

Arnor 'SOCO‘ SARL,

on the interpretation of Article 85(1) of the EC Treaty and certain provisions ofCommission Regulation (EEC) No 123/85 of 12 December 1984 on the applicationof Article 85(3) of the EEC Treaty to certain categories of motor vehicledistribution and servicing agreements (OJ 1985 L 15, p. 16), and of CommissionRegulation (EC) No 1475/95 of 28 June 1995 (OJ 1995 L 145, p. 25),

THE COURT (Sixth Chamber),

composed of: H. Ragnemalm, President of the Chamber, R. Schintgen(Rapporteur), G.F. Mancini, P.J.G. Kapteyn and G. Hirsch, Judges,

Advocate General: G. Tesauro,

Registrar: D. Louterman-Hubeau, Principal Administrator,

after considering the written observations submitted on behalf of:

—    Arnor 'SOCO‘ SARL, by Henri-Patrick Bednarski, of the Lille Bar, PierreDemolin and Yves Brulard, of the Mons and Paris Bars, and MiguelTroncoso Ferrer, of the Brussels and Pamplona Bars,

—    Automobiles Peugeot SA and Automobiles Citroën SA, by Xavier de Rouxand Marie-Pia Hutin, of the Paris Bar, and Jacques Loesch of theLuxembourg Bar,

—    the French Government, by Catherine de Salins, Head of Subdirectorate inthe Legal Affairs Directorate of the Ministry of Foreign Affairs, and RégineLoosli-Surrans, Chargé de Mission in the same directorate, acting as Agents,

—    the Commission of the European Communities, by Francisco EnriqueGonzález Diaz, of its Legal Service, and Guy Charrier, a national civilservant on secondment to that service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Arnor 'SOCO‘ SARL, Automobiles PeugeotSA and Automobiles Citroën SA, the French Government and the Commission atthe hearing on 25 September 1997,

after hearing the Opinion of the Advocate General at the sitting on 16 December1997,

gives the following

Judgment

1.

    By judgment of 20 June 1996, received at the Court on 8 July 1996, the Courd'Appel (Court of Appeal), Douai, referred to the Court for a preliminary rulingunder Article 177 of the EC Treaty three questions on the interpretation of Article85(1) of the EC Treaty and certain provisions of Commission Regulation (EEC)

No 123/85 of 12 December 1984 on the application of Article 85(3) of the EECTreaty to certain categories of motor vehicle distribution and servicing agreements(OJ 1985 L 15, p. 16), and of Commission Regulation (EC) No 1475/95 of 28 June1995 (OJ 1995 L 145, p. 25).

2.

    Those questions were raised in unfair competition proceedings brought by CabourSA ('Cabour‘) and Nord Distribution Automobile SA ('NDA‘), supported byAutomobiles Peugeot SA ('Peugeot‘) and Automobiles Citroën SA ('Citroën‘),against Arnor 'SOCO‘ SARL ('Arnor‘).

The dispute in the main proceedings

3.

    Cabour and NDA are sole dealers in Douai for Citroën and Peugeot carsrespectively. Considering that Arnor, which does not belong to any carmanufacturer's distribution network, had engaged in unfair competitive practicesand in unlawful and misleading advertising, in that it too sold new cars of thosemakes, Cabour and NDA brought an action before the Tribunal de Commerce(Commercial Court), Douai, seeking an order that Arnor pay them damages andan injunction restraining it from carrying on its business.

4.

    By judgment of 16 June 1994, the Tribunal de Commerce, Douai, found against theappellants, the applicants in the main proceedings, on the ground that the exclusivePeugeot and Citroën dealership contracts were incompatible with Regulation No123/85, and thus could not be relied on as against Arnor.

5.

    Cabour and NDA appealed against that judgment, claiming that the acts of unfaircompetition alleged against Arnor were subject to penalties under national law.

6.

    Arnor replied that the unfair competition proceedings should be dismissed since thedealers had not established that their distribution networks were lawful underCommunity law.

7.

    Taking the view that resolution of the dispute pending before it requiredinterpretation of Community law, the Cour d'Appel, Douai, stayed proceedings andreferred the following questions to the Court of Justice for a preliminary ruling:

'1.    Can Commission Regulation No 123/85 of 12 December 1984 on theapplication of Article 85(3) of the EEC Treaty be interpreted as meaningthat an exclusive dealership agreement binding a car manufacturer to adealer qualifies for the exemption under Article 1 of that regulation wherethat contract:

    (a)    does not exemplify the ”objectively valid reasons” referred to inArticle 5(2)(1)(a) and (b) and Article 5(3) of that regulation;

    (b)    rules out any possibility for the dealer to sell new vehicles other thanthose offered for supply by the manufacturer, even at commercialpremises separate from those at which contract goods are offered forsale, except where objectively valid reasons not existing at the timewhen the contract was concluded are proved, a stipulation which hasto be considered in relation to the interpretation of Article 3(3) andArticle 5(2) of the regulation;

    (c)    lays down a sales target whereby the dealer undertakes to use its bestendeavours to sell during each annual period a quantity of contractvehicles which, if not specified by agreement between the parties, isfixed by the manufacturer on the basis of forecasts made by it orcriteria determined by it, and specifies that, in the event that 90% of7/11ths of the sales objective has not been achieved on 31 August inthe current annual period and the ”aggregate percentage penetration”of contract vehicles in the territory to which the concession relates,assessed on 31 July of the current annual period, is 15% to 45% —depending on where the territory is located — lower than the nationalaverage penetration of contract vehicles, the manufacturer may, ongiving three or six months' notice, alter the contract territory and/orwithdraw from the dealer its exclusivity in the territory, or terminatethe dealership contract, which stipulations should be considered inrelation to the interpretation of Article 4(1)(3), Article 5(2)(2) andArticle 5(2)(3) of the regulation?

2.    Can Commission Regulation No 1475/95 of 28 June 1995 replacing theaforementioned Regulation No 123/85 be interpreted as meaning that anexclusive dealership contract containing clauses of the sort referred to inQuestion 1(b) and (c) qualifies for the exemption under Article 1 of thatregulation, having regard respectively to Article 3(3) and Article 4(1)(3) ofRegulation No 1475/95 in conjunction with Article 5(2)(2), Article 5(2)(3)and Article 5(3)?

3.    If Regulations Nos 123/85 and 1475/95 cannot be interpreted as conferringthe benefit of the exemption for which they provide on dealership contractsof the kind referred to in the first two questions, must Article 85(1) of theEEC Treaty be interpreted as meaning that an exclusive distributionnetwork of a motor vehicle manufacturer which is based, throughout theterritory of a Member State, on such dealership contracts is caught by theprohibition set out in that provision?‘

The relevant provisions

8.

    By virtue of Article 1 of Regulation No 123/85 and Article 1 of Regulation No1475/95, which replaced Regulation No 123/85 from 1 October 1995, agreements

by which a supplier makes an authorised reseller responsible for promoting thedistribution of the contract goods within a defined territory and agrees to reservethe supply of vehicles and spare parts, within that territory, to that dealer, areexempted from the prohibition laid down in Article 85(1) of the Treaty.

9.

    In accordance with Article 3(3) of Regulation No 123/85, the exemption underArticle 85(3) of the Treaty also applies where the obligation described in Article1 is combined with an obligation on the dealer 'neither to sell new motor vehicleswhich compete with contract goods nor to sell, at the premises used for thedistribution of contract goods, new motor vehicles other than those offered forsupply by the manufacturer‘.

10.

    Article 4(1)(3) of that regulation provides that the exemption also covers anyobligation imposed on the dealer to 'endeavour to sell, within the contract territoryand within a specified period, such minimum quantity of contract goods as may bedetermined by agreement between the parties or, in the absence of suchagreement, by the supplier on the basis of estimates of the dealer's potential sales‘.

11.

    Article 5 of Regulation 123/85 provides, inter alia:

'2.    In so far as the dealer has (...) assumed obligations for the improvement ofdistribution and servicing structures, the exemption referred to in Article 3,points 3 and 5 shall apply to the obligation not to sell new motor vehiclesother than those within the contract programme or not to make suchvehicles the subject of a distribution and servicing agreement, provided that

    (1)    the parties

        (a)    agree that the supplier shall release the dealer from theobligations referred to in Article 3, points 3 and 5 where thedealer shows that there are objectively valid reasons for doingso;

        (b)    agree that the supplier reserves the right to concludedistribution and servicing agreements for contract goods withspecified further undertakings operating within the contractterritory or to alter the contract territory only where thesupplier shows that there are objectively valid reasons for doingso;

    (2)    the agreement is for a period of at least four years or, if for anindefinite period, the period of notice for regular termination of theagreement is at least one year for both parties, unless

        —    the supplier is obliged by law or by special agreement to payappropriate compensation on termination of the agreement, or

        —    the dealer is a new entrant to the distribution system and theperiod of the agreement, or the period of notice for regulartermination of the agreement, is the first agreed by that dealer.

    (3)    each party undertakes to give the other at least six months' priornotice of intention not to renew an agreement concluded for adefinite period.

3.    A party may only invoke particular objectively valid grounds within themeaning of this Article which have been exemplified in the agreement ifsuch grounds are applied without discrimination to undertakings within thedistribution system in comparable cases.

4.    The conditions for exemption laid down in this Article shall not affect theright of a party to terminate the agreement for cause.‘

12.

    The wording of the corresponding articles in Regulation No 1475/95 is not the sameas that of Regulation No 123/85.

13.

    Thus, pursuant to Article 3(3) of Regulation No 1475/95, the exemption still appliesto the obligation not to sell new motor vehicles offered by persons other than themanufacturer on the same commercial premises, but the sale of new cars of adifferent make is to be allowed if it takes place 'on separate sales premises, underseparate management, in the form of a distinct legal entity and in a manner whichavoids confusion between makes‘.

14.

    Article 4(1)(3) of the same regulation provides that the exemption is to applynotwithstanding any obligation whereby the dealer undertakes to 'endeavour tosell, within the contract territory and during a specified period, a minimum quantityof contract goods, determined by the parties by common agreement or, in the eventof disagreement between the parties as to the minimum number of contractualgoods to be sold annually, by an expert third party, account being taken inparticular of sales previously achieved in the territory and of forecast sales for theterritory and at national level‘.

15.

    Article 5 of Regulation No 1475/95 provides:

'2. Where the dealer has, in accordance with Article 4(1), assumed obligations forthe improvement of distribution and servicing structures, the exemption shall applyprovided that:

...

(2)    the agreement is for a period of at least five years or, if for an indefiniteperiod, the period of notice for regular termination of the agreement is atleast two years for both parties; this period is reduced to at least one yearwhere:

    —    the supplier is obliged by law or by special agreement to payappropriate compensation on termination of the agreement, or

    —    the dealer is a new entrant to the distribution system and the periodof the agreement, or the period of notice for regular termination ofthe agreement, is the first agreed by that dealer;

(3)    each party undertakes to give the other at least six months' prior notice ofintention not to renew an agreement concluded for a definite period.

3.    The conditions for exemption laid down in (1) and (2) shall not affect;

—    the right of the supplier to terminate the agreement subject to at least oneyear's notice in a case where it is necessary to reorganise the whole or asubstantial part of the network,

—    the right of one party to terminate the agreement for cause where the otherparty fails to perform one of its basic obligations.

In each case, the parties must, in the event of disagreement, accept a system forthe quick resolution of the dispute, such as recourse to an expert third party or anarbitrator, without prejudice to the parties' right to apply to a competent court inconformity with the provisions of national law.‘

Admissibility

16.

    The French Government, the Commission, Peugeot and Citroën have cast doubton the relevance of the questions to a settlement of the dispute in the mainproceedings, having regard to the judgments given on 15 February 1996 in CaseC-226/94 Grand Garage Albigeois and Others v Garage Massol [1996] ECR I-651,and Case C-309/94 Nissan France and Others v Dupasquier and Others [1996] ECRI-677, from which it is clear that, whilst Regulation No 123/85 concerns thecontractual relations between suppliers and their approved distributors, it does notserve to regulate the activities of third parties who may operate in the marketoutside the framework of distribution agreements.

17.

    The same conclusion holds good in this instance, they submit, since the case in themain proceedings concerns not a dispute between a supplier and its dealer but an

action brought by approved dealers against a reseller independent of the officialnetworks.

18.

    The French Government adds that, in any event, there is no need to answer thesecond question on the interpretation of Regulation No 1475/95, because the factsgiving rise to the request for a preliminary ruling occurred while Regulation No123/85 alone was in force.

19.

    So far as concerns the interpretation of Regulation No 123/85, the Cour d'Appel,Douai, considers that the outcome of the case before it depends on whether theclauses challenged by the defendant in the main proceedings are compatible withthat regulation. In the first place, the judgment appealed against considered thisquestion, and concluded that the clauses were incompatible with the regulation. Second, the question whether the dealers' situation is legally protected vis-à-vis non-approved resellers may be decisive when determining whether the exclusivedealership agreements may be relied on as against third parties. If there were nosuch protected situation, an action for unfair competition would be unlikely tosucceed.

20.

    It is also necessary to interpret Regulation No 1475/95, the Cour d'Appel, Douai,considers, because the action for unfair competition seeks not only compensationfor loss suffered while Regulation No 123/85 was applicable but also an injunctionrestraining the activity of the independent reseller for the period after RegulationNo 1475/95 entered into force.

21.

    With a view to ruling on the admissibility of the questions, it must be borne in mindthat, as the Court has consistently held, it is for the national courts alone, beforewhich the proceedings are pending and which must assume responsibility for thejudgment to be given, to determine, having regard to the particular features of eachcase, both the need for a preliminary ruling to enable them to give judgment andthe relevance of the questions which they refer to the Court. A request for apreliminary ruling from a national court may be rejected only if it is quite obviousthat the interpretation of Community law sought by that court bears no relation tothe actual nature of the case or the subject-matter of the main action (see, interalia, Case C-143/94 Furlanis v Anas and Itinera [1995] ECR I-3633, paragraph 12).But that is not the case here.

22.

    First, the national court has adequately explained that, even if the exclusive motorvehicle dealership contracts cannot be relied on as against third parties, by virtueof the judgments in Grand Garage Albigeois and Nissan France, cited above, theoutcome of an action for unfair competition under national law may depend on thevalidity of those contracts in the light of Regulation No 123/85.

23.

    Second, the fact that it may be necessary to order the defendant in the mainproceedings to cease its activities in the future provides sufficient justification forinterpreting the relevant provisions of Regulation No 1475/95 (see, to that effect,

Case C-408/95 Eurotunnel and Others v Seafrance [1997] ECR I-0000, paragraph24).

24.

    In those circumstances, the questions referred by the national court must beanswered.

Question 1

25.

    By its first question, the national court is in substance asking whether, on a properconstruction of Regulation No 123/85, the exemption which it grants applies to acontract which (i) does not exemplify the objectively valid reasons for which thecontracting parties may be released from the obligation not to compete, (ii)prevents the dealer from selling new cars of any other make, even at commercialpremises separate from those at which the contract goods are offered for sale and(iii) imposes on the distributor a fixed sales target set by the manufacturer, failureto achieve which is penalised by alteration of the territory conceded, withdrawal ofthe exclusive dealership or termination of the dealership agreement.

26.

    As regards the first part of this question, it must be borne in mind that underArticle 5(2)(1)(a) and (b) of Regulation No 123/85, exemption in respect of anobligation not to sell new vehicles other than those within the contract programmeor not to make such vehicles the subject of a distribution and servicing agreementis subject to the condition that the parties provide that it is possible for them to bereleased from their respective obligations by adducing objectively valid reasons.

27.

    As the Advocate General has rightly stressed at point 22 of his Opinion, thoseprovisions do no more than lay down the principle that the parties must state in theagreement that it is possible for them to be released from the obligation not tocompete by advancing evidence of such objectively valid reasons, but the agreementneed not necessarily contain an exhaustive list of the reasons which may be putforward.

28.

    On a proper construction of Article 5(2)(1)(a) and (b) of Regulation No 123/85,therefore, the exemption granted by the regulation applies to a clause in anexclusive dealership agreement which does no more than provide that the partiesmay, in order to be released from their respective obligations not to compete, putforward objectively valid reasons, without indicating specifically what those reasonsmay be.

29.

    As regards the second part of the first question, it must be noted that Article 3(3)of Regulation No 123/85 allows a manufacturer to require a dealer neither to sellnew vehicles which compete with the contract goods nor to sell, at the premisesused for the distribution of the contract goods, new vehicles offered for supply byother manufacturers.

30.

    Having regard to the general principle prohibiting anticompetitive agreements laiddown in Article 85(1) of the Treaty, provisions in a block exemption regulationwhich derogate from that principle cannot be interpreted widely and cannot beconstrued in such a way as to extend the effects of the regulation beyond what isnecessary to protect the interests which they are intended to safeguard (Case C-70/93 BMW v ALD [1995] ECR I-3439, paragraph 28).

31.

    Accordingly, the exemption referred to in Article 3(3) of the regulation does notcover an obligation imposed on a dealer not to sell new vehicles other than thoseoffered for supply by the manufacturer at commercial premises other than thoseat which the contract goods are offered for sale.

32.

    That interpretation applies even if the dealer may put forward objectively validreasons as provided for in Article 5(2). As the Advocate General rightly observedat point 25 of his Opinion, the possibility for a dealer to put forward objectivelyvalid reasons merely permits dealers, where they can show good reason, to sellvehicles of a different make, but not competing with the contract goods, even at thepremises where those are sold. It cannot, however, mean that it is necessary toadduce evidence of objectively valid reasons in order to be able to sell vehiclesother than those offered for supply by the manufacturer at commercial premisesother than those at which the contract goods are sold.

33.

    On a proper construction of Article 3(3) and 5(2) of Regulation No 123/85,therefore, the exemption granted by the regulation does not apply to a clause in acontract which, unless there are objectively valid reasons, prevents the dealer fromselling new vehicles of any other make, even at commercial premises separate fromthose at which the contract goods are offered for sale.

34.

    With regard to the third part of the first question, it must be borne in mind thatArticle 4(1)(3) of Regulation No 123/85 allows manufacturers to require dealers toendeavour to sell a minimum quantity of contract goods within the contractterritory.

35.

    It follows, first, that Regulation No 123/85 expressly provides for the possibility offixing sales targets and, second, that the obligation imposed on the dealer to attainsuch a target can be no more than an obligation to use its best endeavours.

36.

    Article 5(2) of Regulation No 123/85, furthermore, prescribes time-limits forterminating contracts and Article 5(4) allows the parties to terminate the agreementfor cause.

37.

    It follows that, where a dealer has failed to meet the sales target set because it isin breach of its duty to use its best endeavours, Regulation No 123/85 does notprohibit penalties, which may extend to termination of the agreement.

38.

    On a proper construction of Articles 4(1)(3) and 5(2)(2) and (3) of Regulation No123/85, therefore, the exemption granted by the regulation applies to a clause ina contract which imposes on a dealer a fixed sales target and provides for penalties extending to termination of the contract if the target is not met, provided, however,that determination of the sales target represents simply an obligation to use bestendeavours.

Question 2

39.

    By its second question, the national court seeks in essence to ascertain whether theanswers to the second and third parts of the first question also hold good for thecorresponding provisions of Regulation No 1475/95.

40.

    As regards the first part of this question, it suffices to note that Article 3(3) ofRegulation No 1475/95 expressly states that the exemption applies to the obligationnot to sell new motor vehicles of a different make except on separate salespremises, under separate management, in the form of a distinct legal entity and ina manner which avoids confusion between makes.

41.

    On a proper construction of Articles 3(3) and 5(2) of Regulation No 1475/95,therefore, the exemption granted by the regulation does not apply to a clause in acontract which, unless there are objectively valid reasons, prevents the dealer fromselling new vehicles of any other make, even at commercial premises separate fromthose at which the contract goods are offered for sale.

42.

    As regards the second part of the second question, it must first be borne in mindthat although Article 5(3) of Regulation No 1475/95 provides, like Article 5(4) ofRegulation No 123/85, that a party is entitled to terminate the agreement for cause,the article in the new regulation specifically states that that right arises where theother party fails to perform one of its basic obligations.

43.

    Next, Article 4(1)(3) of Regulation No 1475/95 lays down one more condition thanthe same provision in Regulation No 123/85. If sales targets are to be covered bythe provision, they must not only represent simply an obligation to use bestendeavours, but must also be determined by common agreement between theparties or, where they disagree, by an expert third party.

44.

    It follows that Regulation No 1475/95 does not permit the manufacturer to fix salestargets unilaterally.

45.

    On a proper construction of Articles 4(1)(3) and 5(2) and (3) of Regulation No1475/95, the exemption granted by the regulation applies to a clause in a contractwhich imposes on a dealer a fixed sales target and provides for penalties, whichmay extend to termination of the contract if the target is not met, provided,

however, that the sales target represents simply an obligation to use bestendeavours and is determined by common agreement between the parties or, wherethey disagree, by an expert third party.

Question 3

46.

    By its third question, the national court is in substance asking whether theprohibition laid down by Article 85(1) of the Treaty applies to a motor vehicledealership contract if that contract is not covered by the block exemption.

47.

    Regulation No 123/85, like Regulation No 1475/95, as regulations applying Article85(3) of the Treaty, are limited to providing economic agents in the motor vehicleindustry with certain possibilities enabling them to remove their distribution andservicing agreements from the scope of the prohibition contained in Article 85(1)despite the inclusion in those agreements of certain types of exclusivity andno-competition clauses. However, the provisions of the exempting regulations donot compel economic agents to make use of those possibilities. Nor do they havethe effect of amending the content of such an agreement or of rendering it voidwhere all the conditions laid down in the regulation are not satisfied (see Case10/86 VAG France v Magne [1986] ECR 4071, paragraph 12).

48.

    Where an agreement does not satisfy all the conditions provided for by anexempting regulation, it will be caught by the prohibition laid down by Article 85(1)only if its object or effect is perceptibly to restrict competition within the commonmarket and it is capable of affecting trade between Member States (see Case 56/65Société Technique Minière v Maschinenbau Ulm [1966] ECR 235, and Joined Cases56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299).

49.

    It is for the national court to determine, on the basis of all the evidence at itsdisposal and in the light of the economic and legal context surrounding theagreement, whether in the case pending before it those conditions are satisfied.

50.

    However, an agreement cannot be examined in isolation from the factual or legalcircumstances causing it to prevent, restrict or distort competition. In that context,the existence of similar contracts is a circumstance which, together with others, iscapable of being a factor in the economic and legal context within which thecontract must be judged (see Case 23/67 Brasserie de Haecht v Wilkin [1967] ECR407).

51.

    If the national court should declare one or more of the clauses in the contract void,it must be added that, as the Court has held (see VAG France, cited above,paragraph 14), the consequences, for all other parts of the agreement or for otherobligations flowing from it, of the fact that those contractual provisions which areincompatible with Article 85(1) are automatically void are not a matter forCommunity law. It is therefore also for the national court to determine, in

accordance with the relevant national law, the extent and consequences, for thecontractual relation as a whole, of the nullity of certain contractual provisions byvirtue of Article 85(2).

52.

    The answer to be given to the third question must therefore be that the prohibitionset out in Article 85(1) of the Treaty applies to clauses in a motor vehicledealership contract which are not covered by the block exemption if, having regardto the economic and legal context, their object or effect is perceptibly to restrictcompetition within the common market and they are capable of affecting tradebetween Member States.

Costs

53.

    The costs incurred by the French Government and by the Commission of theEuropean Communities, which have submitted observations to the Court, are notrecoverable. Since these proceedings are, for the parties to the main proceedings,a step in the action pending before the national court, the decision on costs is amatter for that court.

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the Cour d'Appel, Douai, by judgmentof 20 June 1996, hereby rules:

1.     On a proper construction of Article 5(2)(1)(a) and (b) of CommissionRegulation (EEC) No 123/85 of 12 December 1984 on the application ofArticle 85(3) of the EEC Treaty to certain categories of motor vehicledistribution and servicing agreements, the exemption granted by theregulation applies to a clause in an exclusive dealership agreement whichdoes no more than provide that the parties may, in order to releasethemselves from the obligation not to compete, put forward objectively validreasons, without indicating specifically what those reasons may be.

    On a proper construction of Article 3(3) and 5(2) of Regulation No 123/85,the exemption granted by the regulation does not apply to a clause in acontract which, unless there are objectively valid reasons, prevents thedealer from selling new vehicles of any other make, even at commercialpremises separate from those at which the contract goods are offered forsale.

    On a proper construction of Articles 4(1)(3) and 5(2)(2) and (3) ofRegulation No 123/85, the exemption granted by the regulation applies toa clause in a contract which imposes on a dealer a fixed sales target andprovides for penalties, extending to termination of the contract if the targetis not met, provided, however, that the sales target represents simply anobligation to use best endeavours.

2.     On a proper construction of Articles 3(3) and 5(2) of CommissionRegulation (EC) No 1475/95 of 28 June 1995 on the application of Article85 (3) of the Treaty to certain categories of motor vehicle distribution andservicing agreements, the exemption granted by the regulation does notapply to a clause in a contract which, unless there are objectively validreasons, prevents the dealer from selling new vehicles of any other make,even at commercial premises separate from those at which the contractgoods are offered for sale.

    On a proper construction of Articles 4(1)(3) and 5(2) and (3) of RegulationNo 1475/95, the exemption granted by the regulation applies to a clause ina contract which imposes on a dealer a fixed sales target and provides forpenalties, which may extend to termination of the contract if the target isnot met, provided, however, that the sales target represents simply anobligation to use best endeavours and is determined by common agreementbetween the parties or, where they disagree, by an expert third party.

3.    The prohibition set out in Article 85(1) of the Treaty applies to clauses ina motor vehicle dealership contract which are not covered by the blockexemption if, having regard to the economic and legal context, their objector effect is perceptibly to restrict competition within the common marketand they are capable of affecting trade between Member States.

RagnemalmSchintgen Mancini             Kapteyn                        Hirsch

Delivered in open court in Luxembourg on 30 April 1998.

R. Grass

H. Ragnemalm

Registrar

President of the Sixth Chamber

1: Language of the case: French.