94/29/EC: Commission Decision of 21 December 1993 relating to a proceeding under Article 85 of the EC Treaty (IV/29.420 - Grundig's EC distribution system) (Only the German text is authentic)

• Published date: 25 January 1994
• Subject Matter: Competition,Agreements, decisions and concerted practices
• Official Gazette Publication: Official Journal of the European Communities, L 20, 25 January 1994

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31994D0029

94/29/EC: Commission Decision of 21 December 1993 relating to a proceeding under Article 85 of the EC Treaty (IV/29.420 - Grundig's EC distribution system) (Only the German text is authentic)

Official Journal L 020 , 25/01/1994 P. 0015 - 0023

COMMISSION DECISION of 21 December 1993 relating to a proceeding under Article 85 of the EC Treaty (IV/29.420 - Grundig's EC distribution system) (Only the German text is authentic) (94/29/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 85 and 86 of the Treaty (1), as last amended by the Act of Accession of Spain and Portugal, and in particular Articles 6 and 8 thereof,

Having regard to the application submitted by Grundig AG on 12 January 1989 for extension of the exemption,

Having published a summary of the notification in accordance with Article 19 (3) of Regulation No 17 (2),

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

Whereas:

A. THE FACTS (1) By Decision 85/404/EEC (3), the Commission exempted until 28 March 1989 the EC dealership agreements for the distribution of consumer electronics products notified by Grundig AG on 29 March 1977. On 12 January 1989, Grundig AG applied for the exemption to be extended.

I. The market (2) The market for consumer electronics products is one in which there is keen competition, due to the large number of manufacturers with different distribution strategies and to rapid technical development, resulting in constant technical innovation. Since the early 1980s, manufacturers from the Far East in particular have penetrated the European market, resulting not only in fierce price competition and falling prices, but also in a decline in market shares for European manufacturers.

(3) At the same time, at the distribution level, there has been not only an increase in concentration, but also a trend towards new forms of distribution, in particular the 'cash-and-carry' wholesale markets. In contrast to the specialized dealers, the cash-and-carry outlets offer the consumer neither advice nor after-sales service. For this reason, and also because of the advantages of size associated with the wholesale markets, particularly chains of such markets, they charge prices which independent small and medium-sized dealers cannot match. Consequently, many such dealers are squeezed out of the market, which in turn results in further concentration at the distribution level.

(4) This sort of development at the distribution level has certain disadvantages both for consumers and for manufacturers. While consumers may benefit from falling prices, they also lose the advantages associated with specialized dealers, in particular contact with the customer, advice from expert staff and after-sales service, which are becoming increasingly important for many consumers in the face of constant technological innovation. For manufacturers, it is more difficult to build up a dense network of specialized dealers who can provide all the services required in the interests of customers (particularly in rural areas) and at the same time try to optimize sales of the relevant brand.

(5) The extent to which use is made of selective distribution systems for consumer electronics products differs from one Member State to another within the Community. In Germany, they are traditionally more common than in other Member States. Even so, in Germany as in other Member States, many manufacturers sell their products without dealer selection. Where use is made of selective dealerships, the detailed arrangements sometimes differ. Furthermore, several of the distribution systems notified to the Commission are limited to the national territory and do not extend to other Member States. All in all, the number of notified distribution systems has not increased substantially since the original exemption of Grundig's EC distribution system in 1985. Since selective distribution systems entail considerable costs for the manufacturers (administration and supervision, attending to and training dealers, etc.), the incentive for introducing new systems seems to be limited.

II. Grundig's market position and distribution system (6) Grundig AG, Fuerth, Germany ('Grundig') is one of Europe's largest manufacturers of consumer electronics equipment, with a turnover of approximately DM 4,23 billion in the financial year 1991/92. At Community level, its market shares for its top-selling lines (colour televisions and video recorders) amount to some 9,5 and 5,3 % respectively. In some Member States, its shares are significantly higher, amounting to 14,3 % in Germany, 10,9 % in Italy and 17,5 % in Portugal in the case of colour televisions and 9,8 % in Germany, 6,4 % in Italy and 8,9 % in Portugal in the case of video recorders. By comparison, Grundig's most important competitors - Thomson and Sony with regard to colour television sets - have a market share of 15 and 11 % respectively and - with regard to videorecorders - the Matsushita Group has a market share of about 16 %.

(7) Since 1 April 1984, Grundig has been controlled by Philips Electronics, Eindhoven, the Netherlands ('Philips'), which had previously held about 40 % of the shares of Grundig and recently acquired all of the shares. At Community level, Philips has a market share of 17 % for colour televisions and 8,7 % for video recorders (both figures excluding Grundig's market shares). In some Member States, its market shares are higher, amounting to 24,1 % in the Netherlands and 19,5 % in Belgium in the case of colour televisions and 18,5 % in the Netherlands and 11,3 % in Belgium in the case of video recorders. Grundig and Philips so far distribute their products independently of each other via different distribution channels. Unlike Grundig, Philips does not operate a Europe-wide selective distribution system.

(8) Grundig distributes its products through selected specialist wholesalers and retailers, who are supplied direct by Grundig in Germany and by exclusive distributors (in some cases Grundig subsidiaries) in other Member States. All in all, some 29 000 specialist retailers in the Community belong to the distribution network. The distribution network is densest in Germany, with around 16 000 dealers. In Germany and Denmark, Grundig also distributes its products under special agreements with three associations of small and medium-sized specialist retailers who are supplied exclusively by Grundig with certain ranges of equipment. Such agreements are the subject of a separate notification and a separate proceeding, with regard to which investigations have not yet been completed.

(9) The prices of Grundig products, like those of other manufacturers of consumer electronics equipment, vary from one Member State to another. The reasons for this have to do, amongst other things, with differing technical standards, differing distribution costs and differing tax rates. Within one and the same Member State, prices also fluctuate considerably as a result of keen price competition between dealers.

III. Grundig's distribution system 1. Grundig's EC dealership agreements with retailers

(10) Under Grundig's EC dealership agreement with retailers, the dealer is admitted to the distribution system if he satisfies the following criteria:

- he must carry on a retail business specializing in the sale of consumer electronics equipment, or have within his business a department specializing in such equipment (e.g. a specialist department within a department-store-type retail...