EUR-Lex - 31978D0823 - EN

The fact that third parties may not import the same seed from other Community countries into Germany, or export from Germany to other Community countries, makes for market sharing and deprives German farmers of any real room for negotiation since seed is supplied by one supplier and one supplier only ; in particular, the action taken in this connection against Mr Robert Bomberault to discourage him from exporting to Germany on the strength of the exclusive contract held by the German licensee and the French Act of 11 June 1970 was, like the action taken by Mr Eisele against Louis David KG and A. Strothe, restrictive in this sense and in this respect ; the same applies to the action taken by Nungesser KG against Baywa AG to prevent the latter from exporting to France. The fact that INRA has transferred its original breeder's rights for Germany to, Mr Eisele and that Mr Eisele has thus become the registered breeder and holder of the derivative rights in Germany could not remove either the 1960 nor the 1965 contract from the scope of Article 85 ; as long as Mr Eisele is not himself the creator of the varieties in question, he remains purely a licensee despite his registration in Germany. On the contrary the grant to Mr Eisele of exclusive rights over INRA's seed varieties is a constituent part of the distribution system for those varieties in Germany, to the extent that the licensee may thus use his formal status as the holder of breeder's rights to resist imports of original products, thereby strengthening his position as exclusive licensee both against the licensor and against third parties.

(b) the obligation imposed upon INRA, FRASEMA and FRASEMA's members by Clause 5 of the 1965 contract to ensure that all exports to Germany are prevented, an obligation which reveals clearly the extent of Mr Eisele's exclusive sales rights and which implies for the parties, and was in practice interpreted by them, as entailing: - an obligation upon them to refrain from exporting to Germany (direct export ban), and

• an obligation to see to it that third parties did not export to Germany either (indirect export ban);

the effects of this obligation have already been considered in the context of exclusivity (see above);

(c) the obligation imposed on the licensee by Clause 1 of the 1965 contract not to produce and/or sell non-INRA varieties of maize seed, an obligation which resulted in the elimination of the licensee as a potential supplier of such varieties on the German market during the entire period for which the obligation was respected;

(d) the obligation imposed on the licensee by Clause 2 to supply the seed in question only to such German establishments as provided the requisite technical and other assurances, leaving it to the licensee to determine what these assurances should be, and thus providing him with an effective means of discouraging to sell or import without his authorization ; furthermore, since each bag of seed ultimately reaches an individual farmer who is in no way bound by Clause 2, the provision serves no useful purpose in the matter of quality control;

(e) the obligation imposed on the parties, also by Clause 2, to fix resale prices for Germany in concert ; however, the Commission's information is that this clause, which would have had the effect of restricting the licensee's freedom of action in an area vital to competition, has in fact remained a dead letter;

(f) the obligation imposed on the licensee by Clause 3 to import at least two thirds of the German market's requirements from France, and not to produce, himself or by others, more than one third, removed all freedom of action in another area vital to competition - production policy - for the duration of the period for which the obligation was observed, i.e., until 1977.

B. Settlement of 14 November 1973 between Louis David KG and Mr Eisele.

The obligation imposed on Louis David to refrain from importing into Germany which eliminates a competing supplier and contributes to the effects described in section A above. This obligation is rendered even more restrictive by the fact that the goods in question had already legitimately been marketed in France and should therefore, according to the Judgment of the Court of Justice of 8 June 1971 in Case 78/70, be able to move freely throughout the Community.

1. The restrictions described above set up a system of market sharing, placing trade between France and Germany under the sole control of a single intermediary. They appreciably affect trade between Member States, directly influencing the flow of trade between Member States in such a manner as to impede attainment of the objectives of a single market.

1. Seeds are listed in Annex II to the Treaty. It is therefore appropriate to examine whether the provisions of Article 2 of Council Regulation No 26 are applicable to the agreements in issue. In this respect, the exception for which Article 2 provides is not available, and Article 85 (1) is therefore applicable, for the following reasons: - the agreements do not form an integral part of, nor an extension of, a national market organization for maize seeds. In fact FRASEMA's sole purpose is the commercial exploitation of INRA maize seeds and the particular characteristics of such seeds are not such as to enable the market for them to be distinguished from the market for maize seeds in general. Thus the agreement between INRA and FRASEMA is not capable of constituting a national market organization for maize seeds. Further, such a national organization exists neither in France, nor in Germany, and the maize seed market is governed by Council Regulation (EEC) No 2358/71 of 26 October 1971 on the common organization of the market in seeds (1);

• the agreements are not necessary for the attainment of the objectives set out in Article 39 of the Treaty. It is clear from the third recital of Regulation No 26 that the exception in Article 2 is not intended to apply except to the extent that the application of Article 85 (1) of the Treaty to the agreements in issue would place at risk the attainment of the objectives of the common agricultural policy in the maize seed sector. The means necessary to that attainment have been defined in Council Regulation (EEC) No 2358/71, and the agreements in issue cannot in any way be considered as falling within the framework of the provisions of that Regulation. Thus their prohibition or alteration cannot endanger the effective application of those provisions. Further, by enabling Mr K. Eisele to eliminate all competition in INRA maize seeds on the German market, the agreements have had the result, as indicated above, that the prices of the seeds in Germany have long been much higher than the prices in France. Such a result is in itself contrary, at least in Germany, to two of the objectives of Article 39 of the Treaty, namely to ensure a fair standard of living for the agricultural Community, in particular by increasing the individual earnings of persons engaged in agriculture, and to ensure that supplies reach consumers at reasonable prices. Finally, by limiting INRA maize seed production in Germany, the agreements have for many years been of a type which runs counter to the objective of Article 39 relating to the availability of supplies, since they restrict significantly the geographical spread of such production in those parts of the Community where it would be practicable, while a wider spread could give the Community better protection against a shortfall in production due, for example, to adverse local weather conditions;

• the agreements are not agreements between farmers, farmers associations or associations belonging to a single Member State.

1. This proceeding does not relate to propagation material for tests, scientific researches or selection work. It cannot therefore obstruct performance of the tasks assigned INRA as a public undertaking, irrespective of whether INRA may or may not be considered an undertaking for the purposes of Article 90 (2) of the Treaty. Its tasks are in fact delimited as follows by Decree No 64-54 of the French Republic of 16 January 1964 relating to the Institut national de la Recherche agronomique (Title II), which makes no mention of the marketing of seeds for commercial profit:

"Article 8:

the Institute ... shall have as its task the organization, execution and dissemination of all forms of agricultural research, ... with particular reference to: - the improvement and development of crop production ...

• the preservation and processing of agricultural products ...

• the Institute shall engage in all forms of economic and sociological research relating to agriculture and rural life ; it shall study, determine and make public practical arrangements for applying the results of its research ...

• it shall take out patents to protect its inventions."

1. The question raised by the parties as to the inadvisability of strict application of the rules of competition or the rules on free movement of goods contained in the Treaty, given the nature of seeds and the specific subject matter of breeders' rights, does not arise here. The categories of seed to which this proceeding relates are clearly defined above, in a way which does not prejudice the Commission's position and powers of assessment as regards categories intended for research purposes ; the products concerned are thus marketed under the producer's responsibility and in accordance with official regulations especially designed to reduce the risks to which such vegetable products are by their nature exposed. This being so, and since the protection of a licensee against competition from the licensor, from other licensees or from third parties is not within the specific subject matter of breeders' rights, Article 36 of the Treaty cannot be invoked to justify barriers to the free movement between Member States of seed that has been officially certified, whether in the case of imports from one Member State to another (Article 30 of the Treaty) or exports from one Member State to another (Article 34 of the Treaty). (1)OJ No L 246, 5.11.1971, p. 1.

Further it has not been established that there are consequences flowing from the specific nature of seeds which would require the licensee's production to be restricted, for example because climatic conditions in his country are unsuitable. In particular, the Commission has been unable to establish how climatic conditions which allowed the production of 21 000 quintals in 1974 could be unsuitable for the production of the 80 000 quintals which was the requirement for German agriculture in that year. Furthermore, the parties have not shown and the Commission has been unable to establish that the seed lots of INRA varieties advertised in Germany by Mr Robert Bomberault in that year were in any way disappointing as regards germination or any other characteristic specific to maize seed. On the contrary, all the seed lots concerned were acquired on normal terms from French producers ; they had been duly certified and were offered for sale by a distributor who was officially recognized in France. In any event, conduct presumed harmful - to the user, and hence to the reputation of a brand - on the part of an uncontrolled link in a distribution chain can in no circumstances be advanced as grounds for a general non-application of Articles 30 and 34, or of Article 85 of the Treaty.

1. The present proceeding, in application of Article 85 of the Treaty, does not jeopardize rights granted by national laws or by a Member State's own constitutional regime either in relation to the existence of those rights or in relation to their specific subject matter. Its purpose is simply to define, as Article 36 of the Treaty requires, the limits within which such rights may be exercised if such exercise is to remain compatible with the principles of the Treaty.

1. It follows that Article 85 (1) is applicable.

III. INAPPLICABILITY OF ARTICLE 85 (3)

Under Article 85 (3), the provisions of Article 85 (1) may be declared inapplicable in the case of any agreement which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;

(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

1. In relation to the exclusive character of the licence: (a) In principle, just as in the case of a patent, where exclusive propagation rights are granted by the holder of breeder's rights to a licensee within the common market, as is the case for the rights granted to Mr K. Eisele by INRA or those deriving rights through INRA, (i.e. the other seed breeders and producers in FRASEMA) the exclusivity is capable of being considered to have satisfied all the tests for exemption under Article 85 (3). There are even circumstances in which exclusive selling rights linked with prohibitions against exporting could also be exempted, for example, when the exclusivity is needed to protect small or medium-sized undertakings in their attempts to penetrate a new market or promote a new product, provided that parallel imports are not restricted at the same time.

(b) In the present case, however, the Commission leaves open the assessment under Article 85 (3) of the exclusive propagation rights granted to Mr K. Eisele, since the tests for exemption of the exclusive selling rights and their accompanying export prohibitions are in any event not satisfied. This is for the following reasons: - there is no question of a new market being penetrated or a new product being launched;

• in any event, and even going back to the time when the INRA varieties 200 and 258 were launched or when they were introduced into Germany, Mr K. Eisele enjoyed absolute territorial protection in respect of the distribution in Germany of the seeds for which he had exclusive rights. The absolute nature of this protection has had the sole and direct consequence of totally preventing imports via other channels of the original products, i.e. INRA seeds from France, notwithstanding a persistent demand for such imports in Germany. Such a situation neither constitutes nor contributes to an improvement within the meaning of the first test under Article 85 (3). Further, it has enabled INRA varieties to be sold over this period to the ultimate users, i.e. German farmers, at a price level which, by comparison with French prices, has excluded them from obtaining "a fair share of the resulting benefit" as required by the second test of Article 85 (3).

In making this assessment, the Commission has not overlooked the fact that publicity, advertising and other expenses may be especially heavy for a licensee who covers an area which is large, or new, or which is markedly distinct in language, customs, regulations, climate etc. In such cases, those concerned can ease the situation without having recourse to restrictions which are incompatible with the Treaty. For example, lower prices can be reserved in favour of a licensee who has to meet such expenses, as is in fact done by FRASEMA in favour of Nungesser KG.

1. The prohibition against producing or selling competing products, when contained in licensing agreements and actually applied, impedes technical progress by preventing the licensee from developing other, possibly better, products or from taking out licences to this end. In the present case, the fact that Mr Eisele produced or sold the competing LG 11 variety shows that there is no technical reason linked with the intrinsic nature of seeds which could justify a priori (for the purposes of Article 85 (3)) a non-competition clause in seed propagation or sales agreements. In the present case, however, the clause is no longer applied.

1. The obligation imposed on the licensee to sell only to establishments offering technical and other assurances could contribute to the improvements envisaged in Article 85 (3) if the assurances were assessed objectively by reference to defined criteria. But no such criteria were applied in this case.

1. An obligation imposed on a licensee to set his resale prices in agreement with the licensor or breeder and to respect those prices thereafter is not such as to produce any of the favourable effects envisaged by Article 85 (3) ; however, the Commission's information is that the clause has never been applied.

1. The obligation imposed on the licensee to refrain from producing, himself or by others, more than a specified proportion of his sales requirements in his territory does not appear to be, in the present case, such as to make for technical or economic improvements. The parties have not shown and the Commission has been unable to establish that up until 1978 it was impossible to produce more than 20 000 or 25 000 quintals, or indeed any other quantity, of INRA seed in Germany under satisfactory conditions, having regard to Community quality standards.

1. Mr K. Eisele has alleged that the use of disc sowing machines - still the most widely used type in Germany whereas pneumatic machines are already common in France - imposes more stringent requirements in relation to size gradings of seed delivered to farmers in his territory. However this does not call for any modification of the foregoing assessments. Mr Eisele's allegations are in fact contradicted by the following matters: (a) three quarters of the maize seed sold in Germany during the last 20 years have been imported from France in lots of normal size grading as well as of normal germination and purity standards;

(b) it would not be very difficult to state, in writing, and if need be, orally at the time of delivery, the seed sizes and discs recommended. This is especially true for a wholesaler, who has a long record of specialization and competence in Germany as well as in France;

(c) users, in Germany as elsewhere, are themselves perfectly capable of selecting the appropriate disc and so loading a traditional machine, pending the more general use of the pneumatic machine which, it is true, more readily accommodates a variety of seed sizes.

For these reasons Mr K. Eisele is not justified in his contention that the exclusive distribution system as applied in the present case is the only sure way of avoiding uncontrolled imports of seeds which could be unsuitable for the German market and that the system accordingly improves distribution within the meaning of Article 85 (3). For the same reasons he is also not justified in his contention that in his capacity as exclusive distributor, absolute territorial protection is the only means by which he can undertake and maintain over a reasonably long period and in a satisfactory way the transport and conservation of the product as well as an advisory service for users ; and that any other solution would in time endanger the reputation of the INRA brand. Further, during the Commission's investigation of this case, not a single clear example of seeds being brought into Germany to the detriment of users or of the good name of the brand in question was either supplied to, or discovered by, the Commission.

1. The settlement between Mr Eisele and Louis David KG dated 14 November 1973 and the restrictions it contains are not such as to result in improvements within the meaning of Article 85 (3).

1. Since the agreements described in section I. D. do not satisfy all of the cumulative tests of Article 85 (3), they cannot be exempted from the prohibition in Article 85 (1).

The undertakings concerned are, in accordance with Article 3 of Regulation No 17, required to bring to an end all the infringements found in this Decision,

HAS ADOPTED THIS DECISION: