2002/190/EC: Commission Decision of 21 December 2000 relating to a proceeding under Article 81 of the EC Treaty Case COMP.F.1/35.918 — JCB) (Notifications IV-28.694, IV-28.695, IV-28.696, IV-28.697, IV-28.700, IV-28.702) (Notified under document number C(2000) 3887)

• Published date: 12 March 2002
• Official Gazette Publication: Diario Oficial de las Comunidades Europeas, L 69, 12 de marzo de 2002,Gazzetta ufficiale delle Comunità europee, L 69, 12 marzo 2002,Journal officiel des Communautés européennes, L 69, 12 mars 2002

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32002D0190

2002/190/EC: Commission Decision of 21 December 2000 relating to a proceeding under Article 81 of the EC Treaty Case COMP.F.1/35.918 — JCB) (Notifications IV-28.694, IV-28.695, IV-28.696, IV-28.697, IV-28.700, IV-28.702) (Notified under document number C(2000) 3887)

Official Journal L 069 , 12/03/2002 P. 0001 - 0049

Commission Decision

of 21 December 2000

relating to a proceeding under Article 81 of the EC Treaty

Case COMP.F.1/35.918 - JCB)

(Notifications IV-28.694, IV-28.695, IV-28.696, IV-28.697, IV-28.700, IV-28.702)

(Notified under document number C(2000) 3887)

(Only the English text is authentic)

(2002/190/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 81 and 82 of the Treaty(1), as last amended by Council Regulation (EC) No 1216/1999(2), and in particular Articles 3, 15(2) and 16(1) thereof,

Having regard to the application for negative clearance and the notification for exemption submitted by JC Bamford Excavators Ltd, pursuant to Articles 2 and 4 of Regulation No 17, of 30 June 1973,

Having regard to the complaint lodged on 15 February 1996 by Central Parts SA,

Having given the undertakings concerned the opportunity of being heard on the matters to which the Commission has taken objection, in accordance with Article 19(1) of Regulation No 17 read in conjunction with Commission Regulations No 99/63/EEC and (EC) No 2842/98 on the hearings provided for in Article 19(1) and (2) of Council Regulation No 17(3),

Having consulted the advisory Committee on Restrictive Practices and Dominant Positions,

Whereas:

I. FACTS

A. INTRODUCTION: GENERAL

(1) This case concerns the agreements and practices governing the distribution in the Community of construction and earthmoving equipment and spare parts manufactured and sold by the JCB Group ("JCB" hereinafter, unless a more specific name for a subsidiary is used). Following a complaint regarding JCB's behaviour, the case includes an examination of the agreements notified to the Commission by JCB since 1973. However, the case is limited neither to the complainant's allegations nor to the agreements notified. It also draws on evidence gathered through inspections, requests for information and JCB's factual and legal arguments throughout the procedure.

1. THE COMPLAINT AND THE PROCEDURE

(2) On 15 February 1996, Central Parts SA, a company incorporated under French law, lodged a complaint with the Commission. Central Parts was formed in 1984 for the purposes of importing and selling construction and earthmoving machinery. Its headquarters are near Orléans, and it has branches in France at Besançon, Bordeaux and Nîmes. Its turnover in 1995 amounted to some FRF 25 million (about ECU 4 million). Its activities focus on equipment manufactured by JCB. The complaint alleged that, from 1987, JCB had taken active steps to prevent Central Parts from obtaining supplies of JCB equipment from sources in the United Kingdom, where prices were appreciably lower than in France(4).

(3) In order to check and supplement the information at its disposal, the Commission undertook an inspection at the premises of JCB, of its subsidiary company in France, JCB SA, and of two of its distributors in the United Kingdom, Gunn JCB Ltd in Altrincham and Watling JCB Ltd in Leicester, under Article 14(3) of Regulation No 17. That inspection began on 5 November 1996.

(4) On 24 March 1998, the Commission initiated the procedure and sent a statement of objections to JCB. In its written(5) and oral submissions at the hearing held on 16 October 1998, JCB pointed out, among other things, that the Commission had not recognised the earlier notification of its agreements. The Commission took into account JCB's comments and sent a new statement of objections on 30 July 1999, on which JCB presented written(6) and oral submissions at a hearing held on 16 January 2000.

2. THE PARTIES

(5) The JCB Group comprises 28 companies, excluding dormant companies, 26 of which are direct or indirect subsidiaries of Transmissions and Engineering Services Netherlands BV, the other two being owned directly by members of the Bamford family. Transmissions and Engineering Services Netherlands BV owns JCB Service, which, with the Bamford family, owns and controls directly (100 %) or indirectly (50 %, with the Bamford family also holding 50 %) the companies of the JCB Group. The principal activities of the JCB Group are the design, manufacture and distribution of excavating, earthmoving, materials handling and agricultural machines and the provision of related spare parts. Group sales in 1997 totalled more than GBP 770 million (ECU (1150 million).

B. THE RELEVANT MARKETS AND JCB'S POSITION

1. PRODUCT MARKETS

(a) Construction equipment

(6) Construction equipment covers a wide range of machines that are used in the preliminary phases of building construction and civil engineering. These machines excavate, remove, level and displace over a short distance earth, stones and other materials. They prepare the site where works are carried out.

(7) The Commission has repeatedly indicated that construction and earthmoving equipment include light equipment products, primarily used for small scale construction or maintenance works, and heavy construction products, primarily used for large scale construction and building works, including infrastructure works(7).

(8) JCB manufactures 57 different models of light equipment machines of five sorts: loaders, excavators, telescopic handlers, rough terrain forklifts and skid steers. Machines may be classified according to their traction, the degrees (180° or 360°) through which they can turn and, above all, the functions performed. Sales for each product group manufactured by JCB are not closely correlated to other groups in the EC. JCB's main commercial success is the backhoe loader. Its market share in the United Kingdom is [in excess of 40 %](8). Competitors' sales are also mainly driven by one particular group. Market leaders differ accordingly: wheeled loaders, tracked excavators for Caterpillar, skid steer loaders for Ingersoll Rand (Bobcat), mini excavators for Volvo(9).

(9) Documents copied at JCB's premises and other market surveys show statistics broken down by groups of machines. If competition took place equally over the whole of the construction and earthmoving machinery market, it would be useless to track down market shares at a lower level of aggregation. This is an indication, among others, of the existence of relevant product markets in which companies compete effectively.

(10) The Commission has also indicated that each product group, and in particular, the backhoe loader, forms a distinct product market, owing to a number of factors. In particular, no two products can perform exactly the same functions; for instance, backhoe loaders and rough terrain forklifts may be used for lifting whilst digging might be performed either with a backhoe loader or a small 360° excavator, but not with a forklift. Similarly, a telescopic handler may in no useful way perform the functions carried out with an excavator. Products within different groups are used by different customers. There are also substantial price variations from one product group to another. A small (5 to 10 %) but permanent relative price increase in either product group would not lead customers to switch to other products or combinations of products such as to make the price rise unprofitable(10).

JCB contests the Commission's view and argues that the relevant product market is that for earthmoving and construction equipment, which it would be inappropriate to further break down into individual product categories(11).

(11) The Commission has no reason to depart in this case from its previous assessment that each product group forms a distinct product market. In any event, the precise market definition needs not to be explored further. As further shown below, under JCB's proposed definition the likely effects of the agreements and practices within JCB distribution network on trade between Member States and competition would also be appreciable.

(b) Spare parts

(12) Construction machines are primary products in respect of spare parts. Sales of spare parts are dependent on previous sales of machines, subject to frequency of use(12). Market shares in past sales of machines are a proxy of current market shares for all related spare parts. For instance, sales objectives on spare parts are based, among other things, on the stock of JCB machines operating in JCB distributor's territories, weighted by the age of such machines (the "six-year park")(13).

(13) However, prices for spare parts are a low proportion of the prices for the machine and remain low in relation to the machins' residual value over a long period; a particular spare part amounts to a very minor proportion of that ration. Although producers are assumed to minimise abnormally the high demand for spare parts, machine use under demanding conditions makes it absolutely necessary to replace some parts, in situations where delays are costly. Accordingly, pricing policies on spare parts are less constrained by competition than for new machines. Though related to, their spare parts do not therefore, pertain to the product markets of each machine group.

(14) Spare parts fall into four broad categories, set out below in decreasing order, according to the degree of control held by the manufacturer of machines:

(a) parts manufactured by manufacturers themselves "in house", like fabricated elements, booms, dippers, axles, transmissions;

(b) parts supplied by third parties on an original equipment manufacturer (OEM) basis in accordance with manufacturers' designs, specifically for their equipment, like oil coolers;

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