Judgment of the Court of 14 February 1978.

A — The structure of the market

B — UBC's market behaviour

C — Appraisal of the situation by the Commission and the grounds for its decision

The Commission first of all gives its definition of a dominant position and states that undertakings turn such a position to their advantage when they have the power to behave independently without taking into account, to any substantial extent, their competitors, purchasers and suppliers. Such is the case when an undertaking's market share, either in itself or when combined with its knowhow, access to raw materials, capital or other major advantage such as brand loyalty, enables it to determine the prices or to control the production or distribution of a significant part of the relevant goods. It is not necessary for the undertaking to have total dominance such as would deprive all other market participants of their commercial independence, as long as it is strong enough in general terms to devise its own strategy as it wishes, even if there are differences in the extent to which it dominates individual submarkets.

The Commission then proceeds to consider the market which has to be taken into consideration and states in this connexion that the banana market is not the fruit market in general. It mentions as evidence of this view the research carried out on the markets at Rungis (France), Frankfurt and London which showed that the effects of the prices and available quantities of other fruits are too brief, too effective and too sporadic to be regarded as forming part of the same market as bananas or as a substitute therefor. It points out again that the relevant geographic market which must be investigated to ascertain whether UBC has the power to hinder effective competition, is limited to Germany, Denmark, Ireland, the Netherlands and BLEU. France, Italy and the United Kingdom must therefore be excluded from the said market owing to the special circumstances in these countries. Such circumstances include the import arrangements and trading conditions in these countries and the fact that bananas of various types and origin are sold there.

The Commission then deals with the dominant position of UBC and the way it has been set up. It points out that the reason why UBC has a share of about 45 % of the market in question is that its marketing policy has been concentrated on the sale of bananas under the ‘Chiquita’ brand name which it has adopted since 1967 and is based upon regular, intensive publicity campaigns which were accompanied by a thorough reorganization of the arrangements for production, packaging, carriage, ripening and sale of the bananas. This policy has given and enabled UBC to maintain an appreciable advantage over its competitors who have not only had to face the high cost of mounting such publicity campaigns but have also had considerable difficulty in supplying large quantities of bananas of uniform quality. The loyalty of consumers to the Chiquita brand puts UBC in a powerful position on a substantial part of the Community banana market. The fact that it sells in all Member States enables it to organize its distribution so as to be more flexible and to divert supplies so as to take advantage of price differences as between Member Sutes. This ability to adopt such a marketing policy based on the sales of bananas under the Chiquita brand is determined by the following facts:

• the very substantial control which UBC has over the sources of banana supplies in tropical countries and on the world banana market in which it controls about 35 % of the world's entire banana exports;

• the ownership of a very large fleet of refrigerator vessels which are essential for the shipping of bananas regularly;

• the extensive knowhow UBC has acquired compared with its competitors, thanks to its research into new varieties of banana less prone to disease and wind damage;

• the financial power and reduced risk which UBC derives from its multinational organization and status as a conglomerate; in 1973 the production, transport, distribution and marketing of bananas throughout the world accounted for only 18,5 % of UBC's total turnover.

On the basis of all these facts the Commission concludes that, since UBC enjoys a degree of general independence in its behaviour on the market in question which enables it to hinder effective competition within this part of the Community, it must be considered to be an undertaking in a dominant position.

Starting with this finding the Commission takes the view that UBC has been abusing this dominant position in a number of ways :

1. First because it forbids its distributor/ripeners to resell its bananas while still green; now, the effect of this requirement is to prevent them — and they are frequently the main ripeners of bananas in the Member States concerned — from entering into competition at the resale level with UBC and the other importer/distributors on the banana market, since at that suge all trade has to be in green bananas only. The prohibition on the resale of green UBC bananas therefore amounts to a prohibition on exports and distorts the normal pattern of trade. Furthermore it maintains a relatively effective partitioning of the market, since it applies to all bananas sold by UBC to its customers in a part of the EEC and may thus appreciably affect trade between Member States. In answer to UBC's argument that this obligation helps to guarantee the quality of the products sold to the consumer the Commission calls attention to the fact that the prohibition at issue not only forbids the resale of green bananas to consumers but all resales of green bananas at whatever the suge of marketing. In the notification of its complaints the Commission stated that because of the risk of damage to yellow bananas this amounts in fact to a prohibition on the resale of all bananas at the wholesale level. This abuse of a dominant position which prevents UBC's distributors from freely acting as wholesalers helps to maintain an effective partitioning of the market between the Member States concerned.

2. Next, because UBC is charging its distributor/ripeners in the Member States concerned, without any objective justification, in the ports of Bremerhaven and Rotterdam, differing prices for equivalent transactions and quantities of ‘Chiquita’ bananas. These differences can in some weeks amount to as much as 30 to 50 % for equivalent transactions and have been charged in the case of Germany, BLEU and the Netherlands since 1971, in the case of Denmark from the beginning of 1973 and in the case of Ireland since November 1973. These differing prices prevent the various distributor/ripeners of the Member States from reselling bananas in equivalent conditions of competition in another Member State, more especially as they cannot sell them while still green. By reason of these practices, competition has thus been distorted. It is true that, in order to justify these price differences, UBC has explained that it has adapted its prices to what each part of the market could bear, since these differing prices are justified by the fact that retail prices for ripened bananas vary between Member States. The Commission's answer to this argument is that the marketing conditions in these Member States are in fact broadly comparable and that, in addition, for an undertaking in a dominant position, a policy of systematically setting prices at the highest possible level, resulting in wide price differences, cannot be objectively justified, especially where that undertaking maintains a partitioning of the market. Such a policy of differing prices accordingly constitutes an abuse of a dominant position, in that UBC is applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage. In any event, since these differing prices may encourage or discourage the export of bananas from one Member Sute to another according to the various price levels in these two countries, they may appreciably affect trade between Member States.

3. Further UBC has also abused its dominant position by charging certain of its distributor/ripeners unfair prices resulting in differences in price which cannot be justified objectively. The lowest prices are those charged to its customers in Ireland and UBC still makes a profit from them as it itself acknowledges; they may therefore be regarded as at least reflecting the costs of this undertaking for the bananas in question and, therefore, the amount by which actual prices f.o.r. Bremerhaven and Rotterdam exceed the delivered Rotterdam prices to Irish customers, and this is sometimes more than 100 %, must represent a profit of the same order of magnitude. Therefore UBC's prices in the area under consideration less Ireland are excessive in relation to the economic value of the product supplied.

   In these circumstances it would be sufficient if UBC were to reduce its price level to prices at least 15 % below those currently charged by UBC to its customers in Denmark and Germany (other than the Scipio group): These prices are therefore unfair and for this reason constitute an abuse by UBC of its dominant position which may affect appreciably trade between Member States, since charging such unfair prices is bound to encourage exports from Member States where such prices are not charged and vice versa.

4. Finally, UBC has abused its dominant position by ceasing to supply its ‘Chiquita’ bananas to one of its distributor/ripeners, the Danish company Olesen, on the grounds that the latter had taken part in an advertising campaign for bananas of a competing brand. Following the refusal on the part of UBC in October 1973 to sell to it Olesen applied to UBC's other vendors in Denmark and also the Scipio group at Hamburg for green Chiquita bananas. They all refused Olesen's request. Olesen thus lost several customers and also suffered losses because part of this ripening rooms was suddenly not in use. The effect of this withdrawal of supplies was to damage the business interests of this distributor/ripener and consequently to discourage it — and other distributor/ripeners — from selling bananas under a competing brand name or, at least, from participating in advertising and sales promotion campaigns for such brands, as is normally the practice in this field. In this way UBC succeeds in keeping its principal distributor/ripeners within its own marketing network and in preventing its competitors from having access to them, thus denying to such competitors the essential facilities which they may require in order to ripen their bananas before sale and therefore in fact from having access to the market, and all this consolidates the dominant position of UBC. Moreover the refusal to continue supplies to Olesen which is one of the largest distributor/ripeners of bananas in Denmark affected appreciably trade between Member States, because this refusal made it impossible for Olesen, who could have increased his business in other Member States, to carry on such business; the effect on trade between Member States is also determined by the fact that, because of the withdrawal of supplies, Olesen was no longer able to import the same quantities of bananas into Denmark.

   The Commission, in order to determine the fine which had to be imposed in respect of all these complaints, took into consideration the fact that the infringements by UBC were, at the very least, negligent, since UBC was, or at any rate should have been aware, of the anti-competitive effects of such conduct, especially as certain of its practices in this respect are specifically referred to in Article 86 of the Treaty; when the Commission evaluated this market behaviour constituting more than one abuse it also had in particular to take account of the fan that in their economic and legal context they are interrelated.

   The Commission also took account of the duration of the infringements: the prohibition on the sale of green bananas dates from January 1967 in the case of customers in Germany, the Netherlands and BLEU, from January 1973 in the case of customers in Denmark and from November 1973 in the case of customers in Ireland.

   The course of conduct relating to the pricing policy has been adopted since 1971 in Germany, the Netherlands and BLEU, since January 1973 in Denmark and from November 1973 in Ireland.

   Finally the refusal to sell to Olesen lasted from 10 October 1973 to 11 February 1975.

   As regards the gravity of the infringement, the Commission finds that UBC's' conduct is manifestly inconsistent with the Treaty objectives of integrating markets and establishing a system where competition exists and that it must also be borne in mind that all the acts of UBC are designed in the long term to strengthen and consolidate its dominant position. However the Commission, in order to determine the amount of the fine to be imposed upon UBC, took into account the circumstances militating in favour of this company:

   1. The notification by UBC to the Commission of 15 November 1968 of its general conditions of sale in the Netherlands, which included the prohibition on the resale of green bananas. Although this notification only applied to the Netherlands, the Commission is of the opinion that UBC could reasonably have believed that it referred to all the Member States concerned and the Commission therefore concludes that, as far as concerns the acts of UBC after 15 November 1968 which remained within the scope of the operations described in the notification, there has accordingly been no negligence on the part of UBC and no fine should be imposed on account of its acts in this respect.

   2. The fact that this is the first occasion on which the Commission has carried out a thorough examination of every aspect of a pricing policy in the light of Article 86 of the EEC Treaty and that the decision also provides that the Commission is to be informed for a period of two years of the prices charged by UBC, so that it may check that they do not amount to an abuse.

   3. As far as the refusal to continue supplies to Olesen is concerned, the fact that UBC has already put an end to this infringement of its own accord, following the intervention of the Commission.

For all these reasons the Commission, before taking the decision referred to above, which is designed to bring to an end the infringements of Article 86 which it had established, thought it right, since it was anxious that its decision should be effective, to explain the measures which it had to adopt.

With regard to the prohibition on the resale of green bananas the Commission requires UBC not only to delete this prohibition from the general conditions of sale but also to inform all its distributor/ripeners in the relevant Member States to that effect.

With regard to the discontinuance of the practice of charging its commercial partners dissimilar prices which are not justified objectively, the Commission requires UBC to eliminate differences in the prices charged to its distributor/ripeners in so far as the transactions are equivalent.

Finally with regard to the charging of unfair prices to its customers in Germany (with the exception of the Scipio group) Denmark, the Netherlands and BLEU, the Commission requires UBC to cease charging such prices but stresses however that the responsibility for fixing prices rests exclusively with the undertaking.

However, it is for the Commission to give the undertaking sufficiently clear indications of the manner in which the infringement may be brought to an end.

This method of terminating this infringement — according to the Commission — consists in reducing the prices charged to customers in the BLEU, Denmark, Germany (other than to the Scipio group) and the Netherlands to a level on average at least 15 % below that of the prices currently charged to its customers in Germany and Denmark, the Commission acknowledging that UBC will afterwards remain free to charge its prices in accordance with its costs, as long as such prices are not unfair, and this should be disclosed by the checking of these prices of which UBC has to inform the Commission every six months.

D — The operative part of the decision of 17 December 1975

It is on this statement of reasons that the Commission based its Decision IV/26.699, the operative part whereof is as follows:

‘Article 1

It is hereby declared that United Brands Company has infringed Article 86 of the Treaty establishing the European Economic Community:

1. by requiring its distributor/ripeners in the Belgo-Luxembourg Economic Union, Denmark, Germany, Ireland and the Netherlands to refrain from reselling its bananas while still green;

2. by, in respect of its sales of Chiquita bananas, charging other trading parties, namely distributor/ripeners other than the Scipio group in the Member States referred to above, dissimilar prices for equivalent transactions;

3. by imposing unfair prices for the sale of Chiquita bananas on its customers in the Belgo-Luxembourg Economic Union, Denmark, the Netherlands and Germany (other than the Scipio group);

4. by refusing from 10 October 1973 to 11 February 1975 to supply Chiquita bananas to Th. Olesen A/S, Valby, Copenhagen, Denmark.

Article 2

A fine of one million units of account is imposed on United Brands Company in respect of the infringements of Article 86 of the Treaty referred to in Article 1 hereof.

Article 3

1. United Brands Company shall bring to an end without delay the infringements referred to in Article 1 hereof, unless it has already done so of its own accord.

2. United Brands Company shall

   1. inform all its distributor/ripeners in the Belgo-Luxembourg Economic Union, Denmark, Germany, Ireland and the Netherlands that it has ceased to apply the prohibition on the resale of green bananas and inform the Commission that it has done so by not later than 1 February 1976;

   2. inform the Commission by 20 April 1976 and thereafter twice yearly not later than 20 January and 20 July for a period of two years of the prices charged during the previous six months to customers in the Belgo-Luxembourg Economic Union, Denmark, Germany, Ireland and the Netherlands.

Article 4

In respect of each obligation set out in Article 3 (b) hereof a periodic penalty payment of 1 000 units of account per day shall be payable in respect of each day of delay from the dates stated therein.

Article 5

This Decision shall be enforceable in accordance with the provisions of Article 192 of the Treaty establishing the European Economic Community.

Article 6

This Decision is addressed to United Brands Company, New York, United States of America, and to its representative United Brands Continentaal B.V., Van Vollenhovenstraat 32, Rotterdam 3002, the Netherlands, which shall be notified thereof.’

(a) Procedure for the adoption of an interim measure

By a separate document the applicants made an application for the adoption of an interim measure under Article 185 of the Treaty requesting the President of the Court to suspend the enforcement of Article 3 (a) and (b), paragraph 1 of the Decision until a decision on the application for annulment pending before the Court has been made.

In support of this application UBC submitted several arguments and pointed out that there were measures which had already been adopted in accordance with certain orders of the Commission.

As far as concerns the Commission's order to delete from their conditions of sale the condition prohibiting the resale of green bananas the applicants stated that on 30 January 1976 they sent a circular to all their distributor/ripeners which clarified the clause at issue and completed it by inserting the words ‘except for sales between Chiquita ripeners’.

As far as concerns the order to apply a uniform price, UBC called attention to the fact that by reason of the price fluctuations on the market in bananas, which are a highly perishable agricultural commodity, this order appeared to it to be ‘unintelligible, contradictory and unworkable’, that its immediate and ruthless application would cause it considerable irreversible damage and would adversely affect the whole trade and especially the profit margins of its distributor/ripeners and all this would place the latter in a difficult position vis-à-vis their local competitors.

It also pointed out that this pricing method had lasted for 50 years and from all these considerations concluded that the Commission cannot claim that it was suddenly a matter of urgency for the applicants to give up a practice which has been established for so long; however in order to show its goodwill it agreed to notify its prices to the Commission.

Although in its observation submitted on 29 March 1976 the Commission challenged the arguments realting to the substance of the application, it left the matter to be determined by the Court.

By an order of 5 April 1976 the President of the Second Chamber of the Court of Justice of the European Communities, exercising the functions of the President of the Court by virtue of the second paragraph of Article 85 and the first paragraph of Article 11 of the Rules of Procedure after finding that:

‘The file shows that the application to suspend the operation of the decision refers in practice to:

• the obligation to bring to an end the prohibition on the distributor/ripeners' reselling UBC bananas while still green, and to inform all the distributor/ripeners concerned without delay that it has ceased to apply the prohibition, as well as to inform the Commission that it has done so by not later than 1 February 1976 (Article 3 (a) and 1 (a); Article 3 (b), first indent);

• the obligation to cease to charge the distributor/ripeners dissimilar prices for equivalent transactions (Articles 3 (a) and 1 (b));

• the obligation to cease imposing unfair selling prices (Articles 3 (a) and 1 (c)).’

and taking note of the parties' statements concerning the amendment of the clause relating to the resale of bananas while still green, made the following order:

‘The suspension of the operation of Article 3 (a) and the first indent of Article 3 (b) of the Decision of the Commission of 17 December 1975 (IV/26.699) is granted until judgment is given on the substance of Case 27/76, in so far as the applicants have not already of their own accord brought to an end the infringements referred to by the Commission in Article 1 of the said decision;’

and reserved the costs.

(b) Conclusions of the parties

The applicants in their application respectfully petition the Court to

1. Set aside the decision under review

   • for infringement of Articles 85 and 86 of the Treaty establishing the European Economic Community, the rules of law relating to their application, in particular Regulation No 17 of the Council of 6 February 1962;

   • for lack of motivation, violation of substantial forms and lack of clarity.

2. Order the Commission to pay to applicants moral damages in the amount of one unit of account.

3. Cancel or reduce the fines imposed by the Commission should its decision be upheld on the substantive points.

4. Order the Commission to bear the costs of the proceedings.’

and upheld their conclusions in their reply.

The defendant in its defence and rejoinder contends that the Court should:

1. Dismiss the application by UBC as unfounded.

2. Order the applicant to bear the costs’.

(a) The product market

The applicants challenge the Commission's argument that there is a banana market which includes bananas sold under a brand name as well as those to which no label is affixed.

They maintain that the banana market is part of the fresh fruit market, since bananas are reasonably interchangeable by consumers with other kinds of fresh fruit: for example, apples, oranges, grapes, peaches, strawberries etc. and these other kinds of fruit offered on the same stalls or shelves at comparable prices can be substituted for bananas at the level of consumption, distribution and of the wholesale trade.

Consequently the presence of other varieties of fresh fruit is a factor of major importance to be taken into account especially when pricing bananas (the applicants produce some graphs showing that bananas sell best in March through mid June, when other fruits are only available in small quantities at relatively high prices). From two studies made by the FAO (Food and Agriculture Organization) in 1969 and 1973, upon which the Commission relies to show that the banana market is a separate market, the applicants draw conclusions which are the opposite of the Commission's and are confirmed by a more recent study by the FAO entitled ‘Price Elasticity of Bananas at Retail’ and a study of the Belgian apple market by the Institut Économique Agricole Belge (Le marché de la pomme en Belgique, Analyse globale de la fluctuation des prix à la production de 1950 to 1957 — Jansen (1969), pp. 58 to 59).

The Commission points out in its defence that it has never stated that bananas and other fruit are never or almost never interchangeable.

Substitutability of products is almost never total, but practically always a matter of degree. Therefore the problem in this case is not to decide whether bananas can be replaced by other fruit but to decide what degree of substitutability is required under competition law for two or more different products to be regarded as constituting a single ‘product market’, for the purpose of answering the question whether a specific undertaking has a dominant position or not on the said market.

In competition law for two products to be treated as constituting a single product market, it is essential that there should be a high degree of substitutability between them (as a judgment of the American Supreme Court has held: ‘For every product substitutes exist. But a relevant market cannot meaningfully encompass that infinite range. The circle must be drawn narrowly’ (Times-Picayune Case, 1953).

The degree of substitutability is evaluated having regard to all the features of the products involved and all the factors which influence consumer choice.

Now, bananas have special characteristics

1. physical (appearance, chemical composition, taste, softness, vitamin and mineral content)

2. functional (easy and hygienic handling, convenience in eating, special nutritional value, digestibility)

3. economic (constant level of production throughout the year, a fruit which lends itself particularly to advance planning of production and supply, marketing on lines normally associated with industrial products).

No other fruit possesses all these characteristics. Bananas therefore are particularly apt to satisfy constant needs.

The banana is a fruit which is in season throughout the year, consequently any investigation into substitutability should relate to the whole year.

As far as prices are concerned, the two FAO studies prove that bananas are only affected by the prices of other fruits (and only in the case of peaches and table grapes) to a limited extent and only during the summer months, to be more precise, in July (FAO Studies 1973, p. 1, paragraph 6).

It is therefore fair to assume that the effects of the prices and availabilities of other types of fruit are too brief, too ineffective and too sporadic for such fruit to be regarded as forming part of the same market as bananas, as a substitute therefor.

In short, the Commission takes the view that the banana is ‘only to a limited extent interchangeable with other products’ because it is ‘particularly apt’ to satisfy the constant needs of consumen.

The applicants begin their reply, in which they deal with the nature of the market under consideration, with an interesting brief description of the world banana trade and of the Chiquita banana in particular, that is to say with a description of:

• the sources of supply

• the quantities, qualities and costs of products offered and purchased, of which there are many because there is a very high degree of interchangeability between fresh fruits, all of which are capable of satisfying the same needs (the analyses of seasonal consumption of fresh fruits on a comparative basis prove this)

• the perishable nature of the raw material which entails carriage, ripening, distribution, checking and the affixing of brand names to bananas of sufficiently high standard to be offered under the Chiquita brand name

• marketing and pricing having regard to seasonal and geographic fluctuations (on the last point the work ‘The Banana Common Market’ proves that the German market is in a privileged position and that it is impossible to treat the market considered by the Commission as a single territorial market)

• the resultant price levels.

The Commission states in its rejoinder that the main difference between it and the applicants is the question whether the relevant market is the fresh fruit market or, as the Commission maintains, the banana market. The Court has held that there can be limited interchangeability between products which belong to a given market and products which do not belong to it and this is tantamount to saying that there would have to be unlimited or at least a very high degree of interchangeability in order to establish that there is a single market for the products in question. Now the average consumer distinguishes between the banana and other fresh fruits; this is what the FAO calls the ‘desire for variety in the consumption of fruits’; neither the ordinary housewife nor the retailer disagrees with this. But there are more striking examples at the level of the wholesaler and a typical case is that of Olesen who, when deprived by the applicants of bananas, found himself in appalling difficulties both because of the nature of the demand and of the special features of his plant. The banana is therefore interchangeable to some slight extent with other fruits, and has been in particular in the post-war period when throughout the world the banana as a foodstuff ready to eat has been second only to milk (this accords with the UBC Annual Report 1972 annexed as Annex II b to its defence!). If the various factors below are added together:

• taste (only a banana … tastes like a banana!);

• appearance, softness, easy and hygienic handling, seedlessness, which make it a select food for all consumers and especially for certain categories of consumers;

• the chemical composition, vitamin and mineral content, nutritional value and digestibility;

• production of a fresh fruit on industrial lines throughout the year,

it must be inferred that the banana is particularly apt to satisfy constant needs and is only to a limited extent interchangeable with other products. It therefore constitutes the relevant product market. as the antitrust actions brought against the applicants in the USA prove.

Studies by experts have proved three points beyond doubt:

• there is no constant interchangeability between the banana and all other fresh fruits;

• there is no generalized crosselasticity between the banana and the other fruits which, like the banana, are available all the year round (FAO study of 1973);

• even among seasonal fruits a significant degree of cross-elasticity has not been established or could only possibly be inferred in the case of certain fruits.

Even if all the factors in favour of UBC's arguments were to be accepted it remains nevertheless true that any substitutability of the banana with seasonal fruits is by definition limited to part of the year and to a proportion of these fruits; as far as concerns the two fruits available throughout the year (oranges and apples), the first are not substitutable and in the case of the second only a relative degree of substitutability was recorded in 1969, while in 1975 it was recorded in only two of the seven countries studied. Therefore the relevant market is indeed the market in bananas whether the factual tests of European law or of American law (see the Cellophane and Brown Shoe Cases) are adopted.

UBC produced as an annex to its application and later to its reply, in order to counter this evidence, two papers by two officials of the FAO, Messrs Viton and Perkins, and it may be asked whether they express the official views of their organization and have not read the pleadings (in the case of the second). The Commission asks the Court:

‘that, if it has doubts as to the interpretation of those points in the FAO's studies which it considers relevant to this case, it should hear a representative of the FAO who is duly qualified and authorized to give a clear and authoritative statement of this organization's point of view”.

The argument used in the note written by Perkins is that there are cyclical seasonal variations of prices and in the quantities of bananas sold. Although these cycles are short-lived they exist and appear to indicate some seasonal cross-elasticity. It can be concluded that “fluctuations in prices and quantities of bananas are only to be taken into account in so far as they reflect a crosselasticity. This cross-elasticity by its irregular and short-term character cannot lead to a definition of the relevant product market as covering all fresh fruits”.

(b) The geographic market

The applicants in their application lay down the principle that “only areas where competitive conditions are homogeneous may be included in the relevant market”.

Now the Commission has excluded France, Italy and the United Kingdom from this market because of the special circumstances in those countries:

• in the case of France, because of State measures reserving the banana market for the production of those countries which have special relations with France;

• in the case of the United Kingdom, because it benefits from “Commonwealth preferences” ;

• in the case of Italy, because the State monopoly which regulated the market was abolished in the mid-sixties and replaced by import quotas on bananas coming from countries which are not members of the EEC; however bananas of the “Cavendish” variety as well as the “Chiquita” brand are sold on this market.

The applicants criticize the Commission for having failed to take account of the differences in the conditions of competition between the other Member States. Because of them three substantially different systems of customs duty apply in this area;

• a zero tariff in Germany,

• a transitional tariff in Denmark and beland,

• the Common Customs Tariff, that is to say 20 %, in Benelux countries.

Other equally significant factors differentiate these various markets, such as their size, consumer habits (the consumption of fresh fruit per capita in Germany is 109 kg per year, that is to say 2,5 times that of beland and twice that of Denmark, whereas it is 93 kg in the Netherlands and 76 kg in Belgium), the concentration at various levels (a very high degree of concentration in Germany), and the different financial points of view.

The applicants draw the conclusion from all these factors that the geographic market includes areas in which the conditions of competition are so different that they cannot be considered as constituting a single market and that the decision adopted by the Commission covering France, Great Britain and Italy should also be applied to the six other Member States.

The Commission points out that the reason why it excluded these three countries from the “relevant market” is that their applicable domestic arrangements favoured bananas other than UBC bananas and that the latter were not on equal terms with the other bananas sold in these three States, whereas the market in Germany is entirely free and the other five Member States also constitute a free market, if the application of certain non-discriminatory tariff headings is disregarded.

The Commission does not take seriously and rejects the argument that, if the market to be taken into consideration is not homogeneous, the dissimilarities should at least not be “appreciable”.

(a) Characteristics of the product under consideration

The Commission first of all points out that unlike most other agricultural produce bananas are produced and harvested fairly evenly over the whole year.

For this reason the banana is a fruit which lends itself particularly well to production and marketing on industrial lines. Only the production stage could possibly be affected by the inelasticity of supply and even in this connexion it must be borne in mind that UBC cultivates directly in a number of separate countries only about 50 % of the bananas which it sells, but that it is primarily an importer and distributor of bananas.

The importer is in a strong position since he is in full control of the initial distribution of a highly perishable commodity, and is therefore in a position to control the volume of the supply to the importing markets.

In these circumstances the perishability of bananas does not have the same implication for him as it does farmers who have succeeded in disposing of production which they do not control.

In other words the perishability of bananas would only be seriously harmful to UBC if it erred in assessing what the market will bear and this may explain why the amounts transported are nearly always lower than the orders given by UBC's customers.

(b) Prices

It must also be noted that demand is also relatively inelastic. If it is true that the price is determined by demand the material problem is to decide whether and, if so, to what extent the supplier can control prices at a given level of demand.

Now, in all the countries which were considered it was found that the elasticity of prices directly attributable to demand is less than minus one which means that a given percentage increase in prices will cause consumption to decline by only a smaller percentage.

The direct price elasticity of the demand for bananas varies from minus 0,72 in Germany and minus 0,44 in the Netherlands which means that a 100 % price increase would lead only to a 72 % drop in demand in Germany and a 44 % drop in demand in the Netherlands.

Furthermore, through advertising, the supplier can increase the relative inelasticity of demand.

(c) UBC's market share

UBC's market share has been calculated specifically by the Commission at 45 %, because in order to establish the existence of a dominant position, it is necessary to assess the extent of the firm's power; it is therefore unnecessary in this case to exclude in the calculation of the market share the sales f.o.b. to Scipio and sales of unlabelled bananas⁽⁴⁾ and this share unquestionably has evidential value so far as UBC's power on the banana market is concerned.

The Commission has never claimed that competition had been eliminated; in order to establish the existence of a dominant position there is no need to show that the firm has impeded effective competition; it is sufficient to show that the firm has been in a position to impede effective competition on the relevant market.

The ‘behaviour’ of competitors and in particular of Castle and Cooke might ave been ‘aggressive’ but the ‘declarations of war’ failed to attain their objectives and Castle and Cooke has not succeeded in increasing its market share to a significant extent.

Therefore the Commission submits that:

UBC was able to make ‘Chiquita’ the leading brand name for bananas;

• by having the highest volume of sales compared with its competitors backed up by a quality control organization at least equivalent to that of its major competitors and by operating throughout the Community UBC is of all firms the one which benefits from the greatest ‘economies of scale’ in advertising;

• because UBC sells bananas in all Community countries it can apply a more flexible distribution system, able to profit from the price differences existing between Member States (and to profit from the different prices that the market can bear in different Member States).

(d) Vertical integration

UBC cannot deny that it is vertically integrated to a high degree and, for the assessment of its dominant position, it is indeed necessary to bear in mind that this vertical integration affects every one of the links in the chain of distribution which brings bananas from the plantations to the consumer.

Only a tiny number of competitors benefit from such integration and never quite on the same scale as UBC.

UBC also derives advantages from ‘know-how’ and from the results of its research.

Finally the reason why the Commission referred to UBC as a multinational company carrying on operations typical of a conglomerate is that it considers that this advantage contributed, along with all the others mentioned in the decision, to UBC's dominant position.

(e) Barriers to competitors entering the market

The major barrier to entry for the potential competitor is constituted by a characteristic which only one of UBC's leading competitors also possesses, namely: vertical integration.

As far as ‘Del Monte's’ entry into the market is concerned, it is only necessary to remember that this was only made possible by the American authorities' ‘consent decree’ (décision d'agrément) compelling UBC's predecessor in title, the United Fruit Company, to divest itself of a complete division of its banana operations in November 1972.

As far as concerns the countervailing power of its customer Scipio and other customers the Commission denies that this power exists because Scipio is unable to do without the sales of ‘Chiquita’ bananas the quality whereof is undeniable and which is maintained by its advertising and sales promotion. Scipio does submit to technical control by UBC, is subject to the ban on reselling green bananas and for the last 30 years has never sought to act independently of UBC.

(f) Profits and performance

The Commission points out that it cannot be maintained that UBC's profits on its activities as a whole or on its banana operations alone have been abnormally low or non-existent over a substantial period.

However it must be added that this does not matter much, because in defining monopoly the first question, which is crucial, is whether there is a dominant position and not whether the use made of it is reasonable. Any test claiming to assess an undertaking's power according to its performance is of limited value.

In fact a low profit margin is not inconsistent with a monopoly situation just as high profits can be consistent with a situation of effective competition. Business performance cannot, then, be taken as a test for determining the existence or non-existence of a dominant position for the purposes of competition law.

But ‘the best and simplest evidence, of course, that defendants have a requisite degree of power over market price, or over competitors' entry is its actual use’ (report of the Attorney General's National Committee to Study the Antitrust Laws, 31 March 1955).

Now the greater the distributor/ripeners' countervailing power — as described by UBC — the greater must have been the power that enabled UBC to insist that they refrain from exporting its bananas or selling them in the green state.

Similarly UBC's practice of charging different prices for equivalent transactions (and prices which were sometimes excessive), confirms the extent of UBC's power.

The Commission regarded UBC's dominant position as proved by the preponderance of its market share taken together with a whole series of advantages of which UBC is not always the sole beneficiary, nor in certain cases even the main beneficiary, but from all of which, taken together, only UBC can profit.

The applicants in their reply point out that since this case is concerned with allegations of abuse of a dominant position contrary to Article 86 of the Treaty, it is for the Commission to establish in the first place, as a matter of fact and not as a matter of assertion, that the applicants enjoy a dominant position in what is properly to be regarded as the relevant market. Unless that is established, no question of abuse can arise.

Since the Treaty does not define what is meant by a ‘dominant position’, it is necessary in the first instance to ascertain from the context what is the concept which the phrase encapsulates. The context of Article 86 shows that what is meant is such a position in the market as enables an undertaking to engage in unfair and anti-competitive practices.

Accordingly, a ‘dominant position’ assumes that a market in which a particular undertaking operates lacks that degree of competitiveness which could be relied upon to exercise restraint upon the activities of the undertaking and in particular to prevent or restrict any significant, unfair or anticompetitive behaviour. In short, a finding that an undertaking occupies a dominant position in a particular market involves a finding that the market is not competitive to any material extent. Per contra, if on analysis the relevant market is seen to be competitive, that situation excludes a finding that an undertaking operating in the market occupies a dominant position.

In seeking to establish that the applicants occupy a dominant position the Commission has embarked upon something which is inherently improbable, for what the applicants are supplying is one variety of fresh fruit to the market for fresh fruit as a whole, in all its varieties. It could not sensibly be denied that the fresh fruit market is intensely competitive, with suppliers of the different varieties competing for a share of consumers' total expenditure on fresh fruit.

In order to escape from that situation, the Commission seeks to define the product market more narrowly as bananas, for which, as they allege (second paragraph of Section II 12 of the Decision) there is a ‘separate demand’. But it is really an affront to common sense to seek to isolate bananas in this way when they are so clearly in competition with other fruits, and the availability and prices of other fruits so clearly impact upon the volumes of bananas which any given market will absorb and the prices which bananas can command. Bananas have no doubt some characteristics, for example, bananas are an ‘industrial fruit’ and produced all-the-year-round, which are not shared at least in the same degree by other fruits and even ‘industrial’ fruits. But it is sophistical to dwell upon such differences, and irrelevant in the context, unless as a result other fruits exert substantially no competitive pressures upon bananas, and that is not the case. The only sound rule in delimiting a product market is to include within that market all products which significantly compete for the same use. If that test is applied, the relevant product market is manifestly the fruit market as a whole (and the figure 45 % of the banana market alone is therefore irrelevant).

Even if that submission were rejected and bananas were held to be the relevant product market, it still remains that there is an inherent improbability in the view that the applicants have a dominant position in that market. Bananas are an agricultural commodity, and what is more, a perishable one which cannot be stored, and the demand for which cannot be met from a previous surplus. Since the demand for this product is inelastic in the short-term, it does not permit a price policy on the part of the suppliers. With such a commodity it is not possible to secure such product differentiation as will effectively insulate the brand from market pressures. Therefore in principle a dominant position could only be achieved by a supplier to a particular market if either he had ‘cornered’ the greatest part of the available supplies or he had such control of the distribution chain as to deny to other suppliers all but limited access.

It cannot be inferred from any precise figure that there is automatic control of one sector of the supply permitting the conclusion to be drawn that in fact and without a thorough examination of the situation a dominant position exists.

The applicants are not in any such position. As has been shown, the applicants have under their control only a small proportion of supplies of bananas going to world export markets. In the international trade there are two other major concerns of substantially co-ordinate status, and each supplies large quantities of bananas into the geographical market selected by the Commission, while each of the national markets making up that market is characterized by the presence of other substantial importers shipping to them. In none of the markets (except Belgium, where they have a subsidiary carrying on business as a distributor/ripener) have the applicants any interest in the distributive chain and they have no power to deny any competitor access to it.

Because of the inherent improbability in those circumstances of the applicants having a dominant position as properly understood, and because the Commission cannot deny the existence in fact of effective competition between suppliers of bananas in Community markets, the Commission is forced to define ‘dominance’ in some other way. In effect, it adopts a definition of a dominant position cast solely in terms of a company having the same attributes as the applicants. It then declares that since only the applicants have all those attributes, the applicants are by the Commission's own definition in a dominant position. A company in a dominant position, it declares, is the one that has the largest individual share of the market; that operates in all Member States; that advertises throughout the Community; that is vertically integrated; that conducts research activities; and is a conglomerate. In other words, the Commission defines a dominant position by describing the applicants, asserts that no other competitor meets that description and, therefore, concludes that the applicants have a dominant position. This kind of reasoning is especially in evidence in the case of the argument concerning advertising in which all the competitors engage … and which in any event, a priori, benefits the entire banana trade; it is equally in evidence in the case of the argument concerning vertical integration which clearly in this matter cannot cover the ownership of the means of production, transport, ripening and distribution but is a necessity arising solely out of the perishability of the product which is the subject-matter of the trade in question; it is also in evidence in the case of the so-called control of sources of supply in a situation of world over-production … The technical examples could be multiplied in this way:

• UBC's ‘large fleet’ only represents 7 % of the world isothermal fleet;

• UBC's best return on its knowhow would not necessarily be greater than that of its competitors;

• the difficulties of access to the market — owing to technical reasons — have been overcome by enterprising competitors;

• UBC's financial performance either on the world market or on the market under consideration does not appear to be anything other than a normal return on its investments.

Apart from the peculiarity of the Commission's reasoning, the fact remains that a firm may have competitive advantages and a market share higher than that of any other competitor, without the market being other than intensely competitive and thus providing its own regulation against any significant anti-competitive behaviour. To establish dominance it is necessary to go further and to show that the firm in question can determine its policies substantially free from competitive restraint, that is, that it is free to act without taking into account, to any substantial extent, its competitors, purchasers or suppliers.

The Commission does not show, or even seek to establish, that the market is not competitive. It contents itself with the simple assertion that the applicants would be the only undertaking in the banana market to enjoy all the competitive advantages to which it points, and that the applicants therefore are in a position to obstrua the effective competition of their existing competitors to a substantial degree. The Commission does not condescend to any particulars of how that obstruction is to be achieved by the applicants. The Commission's assertion does not proceed from any analysis; it is no more than ipse dixit. In truth and in fact the applicants are in no position to ‘obstruct’ the competition of other suppliers to the market otherwise than by themselves offering effective competition in terms of price, quality and service.

Since the Commission has not established, as a matter of fact, in accordance with the proper legal criteria, that the applicants are in a dominant position, the decision under review should be set aside. But the applicants submit that even if they are held to occupy a dominant position, the Commission has failed to establish that they have committed any abuse of that position.

The Commission in its rejoinder believes that it can point to certain contradictions in the conception which UBC has formed of its dominant position. The Commission stresses that a monopoly does not presuppose absolute market power and that Article 86 moreover only mentions a dominant position; it refers to ‘a competitive position so much stronger than that of any competitors that it gives the holder a market position of which it can take substantial advantage without losing business to its competitors in a way or to an extent which would not be possible in conditions of effective competition’. What has to be done is to determine whether there is a certain degree of market power and how seriously the free play of the market is fettered under Article 85 and also under Article 86.

The effect of and the degree of resistance to the influence exerted by the dominant position everywhere or on everybody may not be the same having regard to the opportunities available to the interested parties to react or to their capacity to do so.

If the criteria for determining a dominant position are added together it may often be found that when taken by themselves they are not necessarily determinative; as was done in the Continental Can decision the existence of a dominant position can be deduced from a combination of the various market factors (market share, technical knowledge, availability of raw materials and of capital). A specific form of behaviour, whatever its nature may be, only has effect in a particular context.

That is why it can be said that a dominant position is a question of degree.

The application of Article 86 and also of Article 85, the two instruments which the authors of the Treaty have given the Commission in the field of competition, makes it possible, by the application of such criteria when making an evaluation, to see to it that the general objective laid down by Article 3 (f) of the EEC Treaty is attained.

In order to achieve such a result the Commission considers it necessary:

• to take into account, when defining the degree of power which gives rise to a dominant position, the seriousness of the hindrance on the normal market play that the enterprise is capable of producing;

• to include in the concept of a dominant position such scope that a dominant position is disclosed when an enterprise through the exercise of its power creates a substantial hindrance to the free play of the market;

• to detect the existence of a dominant position not only on a priori consideration of the characteristics of the market but also through the manifestations of the enterprise's market power and the anticompetitive effects of such manifestations'.

This approach which enables a general and coherent idea to be formed of the amount of competition which has to be generated is set out clearly in Paragraph 25 of the Continental Can judgment. Therefore, bearing in mind these objectives which have first to be attained, one can proceed to consider the particular features of this case.

Paragraph 1. The Product Market

12 As far as the product market is concerned it is first of all necessary to ascertain whether, as the applicant maintains, bananas are an integral part of the fresh fruit market, because they are reasonably interchangeable by consumers with other kinds of fresh fruit such as apples, oranges, grapes, peaches, strawberries, etc. or whether the relevant market consists solely of the banana market which includes both branded bananas and unlabelled bananas and is a market sufficiently homogeneous and distinct from the market of other fresh fruit.

13 The applicant submits in support of its argument that bananas compete with other fresh fruit in the same shops, on the same shelves, at prices which can be compared, satisfying the same needs: consumption as a dessert or between meals.

14 The statistics produced show that consumer expenditure on the purchase of bananas is at its lowest between June and December when there is a plentiful supply of domestic fresh fruit on the market.

15 Studies carried out by the Food and Agriculture Organization (FAO) (especially in 1975) confirm that banana prices are relatively weak during the summer months and that the price of apples for example has a statistically appreciable impact on the consumption of bananas in the Federal Republic of Germany.

16 Again according to these studies some easing of prices is noticeable at the end of the year during the ‘orange season’.

17 The seasonal peak periods when there is a plentiful supply of other fresh fruit exert an influence not only on the prices but also on the volume of sales of bananas and consequently on the volume of imports thereof.

18 The applicant concludes from these findings that bananas and other fresh fruit form only one market and that UBC's operations should have been examined in this context for the purpose of any application of Article 86 of the Treaty.

19 The Commission maintains that there is a demand for bananas which is distinct from the demand for other fresh fruit especially as the banana is a very important part of the diet of certain sections of the community.

20 The specific qualities of the banana influence customer preference and induce him not to readily accept other fruits as a substitute.

21 The Commission draws the conclusion from the studies quoted by the applicant that the influence of the prices and availabilities of other types of fruit on the prices and availabilities of bananas on the relevant market is very ineffective and that these effects are too brief and too spasmodic for such other fruit to be regarded as forming part of the same market as bananas or as a substitute therefor.

22 For the banana to be regarded as forming a market which is sufficiently differentiated from other fruit markets it must be possible for it to be singled out by such special features distinguishing it from other fruits that it is only to a limited extent interchangeable with them and is only exposed to their competition in a way that is hardly perceptible.

23 The ripening of bananas takes place the whole year round without any season having to be taken into account.

24 Throughout the year production exceeds demand and can satisfy it at any time.

25 Owing to this particular feature the banana is a privileged fruit and its production and marketing can be adapted to the seasonal fluctuations of other fresh fruit which are known and can be computed.

26 There is no unavoidable seasonal substitution since the consumer can obtain this fruit all the year round.

27 Since the banana is a fruit which is always available in sufficient quantities the question whether it can be replaced by other fruits must be determined over the whole of the year for the purpose of ascertaining the degree of competition between it and other fresh fruit.

28 The studies of the banana market on the Court's file show that on the latter market there is no significant long term cross-elasticity any more than — as has been mentioned — there is any seasonal substitutability in general between the banana and all the seasonal fruits, as this only exists between the banana and two fruits (peaches and table grapes) in one of the countries (West Germany) of the relevant geographic market.

29 As far as concerns the two fruits available throughout the year (oranges and apples) the first are not interchangeable and in the case of the second there is only a relative degree of substitutability.

30 This small degree of substitutability is accounted for by the specific features of the banana and all the factors which influence consumer choice.

31 The banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling, a constant level of production which enable it to satisfy the constant needs of an important section of the population consisting of the very young, the old and the sick.

32 As far as prices are concerned two FAO studies show that the banana is only affected by the prices — falling prices — of other fruits (and only of peaches and table grapes) during the summer months and mainly in July and then by an amount not exceeding 20 %.

33 Although it cannot be denied that during these months and some weeks at the end of the year this product is exposed to competition from other fruits, the flexible way in which the volume of imports and their marketing on the relevant geographic market is adjusted means that the conditions of competition are extremely limited and that its price adapts without any serious difficulties to this situation where supplies of fruit are plentiful.

34 It follows from all these considerations that a very large number of consumers having a constant need for bananas are not noticeably or even appreciably enticed away from the consumption of this product by the arrival of other fresh fruit on the market and that even the personal peak periods only affect it for a limited period of time and to a very limited extent from the point of view of substitutability.

35 Consequently the banana market is a market which is sufficiently distinct from the other fresh fruit markets.

Paragraph 2. The geographic market

36 The Commission has taken the Federal Republic of Germany, Denmark, Ireland, the Netherlands and the BLEU as the geographic market and it is in respect of this market that it is necessary to consider whether UBC has the power to hinder effective competition.

37 It takes the view that the economic conditions in this part of the Community allow importer/distributors of bananas to market their products there in the ordinary course without there being any significant economic barriers for UBC to overcome compared with other importer/distributors.

38 The other Member States -of the Community (France, Italy, the United Kingdom) must however be excluded from this geographic definition of the market notwithstanding the significant presence of UBC in these States, because of the special circumstances relating to import arrangements and trading conditions and the fact that bananas of various types and origin are sold there.

39 The applicant points out that the geographic market where an undertaking's economic and commercial power is taken into consideration should only comprise areas where the conditions of competition are homogeneous.

40 Although the Commission had good reason to exclude France, Italy and the United Kingdom from the said market it failed to take account of the differences in the conditions of competition in the other Member States which should have led it to come to the same conclusions with regard to the latter as it came to in the case of the three countries referred to above.

41 In fact three substantially different systems of customs duty apply in the Member States concerned: a zero tariff in Germany covering a banana quota which meets most of this country's requirements, a transitional tariff in Ireland and Denmark and the Common Customs Tariff of 20 % for imports into Benelux.

42 The Commission has not either taken account of the consumer habits of the Member States concerned the annual consumption of fresh fruits per capita in Germany is equal to 2,5 times that of Ireland and twice that of Denmark), differing commercial patterns, concentrations and monetary points of view.

43 The applicant draws the conclusion from all these findings that the geographic market taken by the Commission includes areas in which the conditions of competition are so different that they cannot be considered as constituting a single market.

44 The conditions for the application of Article 86 to an undertaking in a dominant position presuppose the clear delimitation of the substantial part of the Common Market in which it may be able to engage in abuses which hinder effective competition and this is an area where the objective conditions of competition applying to the product in question must be the same for all traders.

45 The Community has not established a common organization of the agricultural market in bananas.

46 Consequently import arrangements vary considerably from one Member State to another and reflect a specific commercial policy peculiar to the States concerned.

47 This explains why for example the French market owing to its national organization is restricted upstream by a particular import arrangement and obstructed downstream by a retail price monitored by the Administration.

48 This market, in addition to adopting certain measures relating to a ‘target price’ (‘prix objectif’) fixed each year and to packaging and grading standards and the minimum qualities required, reserves about two thirds of the market for the production of the overseas departments and one third to that of certain countries enjoying preferential relations with France (Ivory Coast, Madagascar, Cameroon) the bananas whereof are imported dutyfree, and it includes a system the running of which is entrusted to the “Comité interprofessionnel bananier” (“C.I.B.”).

49 The United Kingdom market enjoys “Commonwealth preferences”, a system of which the main feature is the maintenance of a level of production favouring the developing countries of the Commonwealth and of a price paid to the associations of producers directly linked to the selling price of the green banana charged in the United Kingdom.

50 On the Italian market, since the abolition in 1965 of the State Monopoly responsible for marketing bananas, a national system of quota restrictions has been introduced, the Ministry for Shipping and the Exchange Control Office supervising the imports and the charterparties relating to the foreign ships which carry the bananas.

51 The effect of the national organization of these three markets is that the applicant's bananas do not compete on equal terms with the other bananas sold in these States which benefit from a preferential system and the Commission was right to exclude these three national markets from the geographic market under consideration.

52 On the other hand the six other States are markets which are completely free, although the applicable tariff provisions and transport costs are of necessity different but not discriminatory, and in which the conditions of competition are the same for all.

53 From the standpoint of being able to engage in free competition these six States form an area which is sufficiently homogeneous to be considered in its entirety.

54 UBC has arranged for its subsidiary in Rotterdam — UBCBV — to market its products. UBCBV is for this purpose a single centre for the whole of this part of the Community.

55 Transport costs do not in fact stand in the way of the distribution policy chosen by UBC which consists in selling f.o.r. Rotterdam and Bremerhaven, the two ports where the bananas are unloaded.

56 These are factors which go to make relevant market a single market.

57 It follows from all these considerations that the geographic market as determined by the Commission which constitutes a substantial part of the common market must be regarded as the relevant market for the purpose of determining whether the applicant may be in a dominant position.

Paragraph 1. The structure of UBC

69 It is advisable to examine in turn UBC's resources for and methods of producing, packaging, transporting, selling and displaying its product.

70 UBC is an undertaking vertically integrated to a high degree.

71 This integration is evident at each of the stages from the plantation to the loading on wagons or lorries in the ports of delivery and after those stages, as far as ripening and sale prices are concerned, UBC even extends its control to ripener/distributors and wholesalers by setting up a complete network of agents.

72 At the production stage UBC owns large plantations in Central and South America.

73 In so far as UBC's own production does not meet its requirements it can obtain supplies without any difficulty from independent planters since it is an established fact that unless circumstances are exceptional there is a production surplus.

74 Furthermore several independent producers have links with UBC through contracts for the growing of bananas which have caused them to grow the varieties of bananas which UBC has advised them to adopt.

75 The effects of natural disasters which could jeopardize supplies are greatly reduced by the fact that the plantations are spread over a wide geographic area and by the selection of varieties not very susceptible to diseases.

76 This situation was born out by the way in which UBC was able to react to the consequences of hurricane “Fifi” in 1974.

77 At the production stage UBC therefore knows that it can comply with all the requests which it receives.

78 At the stage of packaging and presentation on its premises UBC has at its disposal factories, manpower, plant and material which enable it to handle the goods independently.

79 The bananas are carried from the place of production to the port of shipment by its own means of transport including railways.

80 At the carriage by sea stage it has been acknowledged that UBC is the only undertaking of its kind which is capable of carrying two thirds of its exports by means of its own banana fleet.

81 Thus UBC knows that it is able to transport regularly, without running the risk of its own ships not being used and whatever the market situation may be, two thirds of its average volume of sales and is alone able to ensure that three regular consignments reach Europe each week, and all this guarantees it commercial stability and well being.

82 In the field of technical knowledge and as a result of continual research UBC keeps on improving the productivity and yield of its plantations by improving the draining system, making good soil deficiencies and combating effectively plant disease.

83 It has perfected new ripening methods in which its technicians instruct the distributor/ripeners of the Chiquita banana.

84 That is another factor to be borne in mind when considering UBC's position since competing firms cannot develop research at a comparable level and are in this respect at a disadvantage compared with the applicant.

85 It is acknowledged that at the stage where the goods are given the final finish and undergo quality control UBC not only controls the distributor/ripeners which are direct customers but also those who work for the account of its important customers such as the Scipio group.

86 Even if the object of the clause prohibiting the sale of green bananas was only stria quality control, it in fact gives UBC absolute control of all trade in its goods so long as they are marketabale wholesale, that is to say before the ripening process begins which makes an immediate sale unavoidable.

87 This general quality control of a homogeneous product makes the advertising of the brand name effective.

88 Since 1967 UBC has based its general policy in the relevant market on the quality of its Chiquita brand banana.

89 There is no doubt that this policy gives UBC control over the transformation of the product into bananas for consumption even though most of this product no longer belongs to it.

90 This policy has been based on a thorough reorganization of the arrangements for production, packaging, carriage, ripening (new plant with ventilation and a cooling system) and sale (a network of agents).

91 UBC has made this product distinctive by large-scale repeated advertising and promotion campaigns which have induced the consumer to show a preference for it in spite of the difference between the price of labelled and unlabelled bananas (in the region of 30 to 40 %) and also of Chiquita bananas and those wich have been labelled with another brand name (in the region of 7 to 10 %).

92 It was the first to take full advantage of the opportunities presented by labelling in the tropics for the purpose of large-scale advertising and this, to use UBC's own words, has “revolutionized the commercial exploitation of the banana” (Annex II a to the application, p. 10).

93 It has thus attained a privileged position by making Chiquita the premier banana brand name on the relevant market with the result that the distributor cannot afford not to offer it to the consumer.

94 At the selling stage this distinguishing factor — justified by the unchanging quality of the banana bearing this label — ensures that it has regular customers and consolidates its economic strength.

95 The effect of its sales networks only covering a limited number of customers, large groups or distributor/ripeners, is a simplification of its supply policy and economies of scale.

96 Since UBC's supply policy consists — in spite of the production surplus — in only meeting the requests for Chiquita bananas parsimoniously and sometimes incompletely UBC is in a position of strength at the selling stage.

Paragraph 2. The situation with regard to competition

97 UBC is the largest banana group having accounted in 1974 for 35 % of all banana exports on the world market.

98 In this case however account must only be taken of its operations on the relevant market.

99 As far as this market is concerned the parties disagree as to the extent of UBC's market share in the Federal Republic of Germany and as to the applicant's entire share of the whole of the relevant market.

100 In the first place UBC does not include in its entire share of the whole of the relevant market the percentage attributed to the Scipio undertaking which buys its bananas f.o.b. in Central America.

101 However it must be included, because almost all the bananas ripened by Scipio are “Chiquita” bananas the shipment of which to Europe is coordinated by the Sven Salène company, because Scipio submits to UBC's technical supervision, because these two groups have entered into supply and price agreements with each other, because Scipio abides by the obligation not to resell “Chiquita bananas” while still green and because for the last 30 years it has never attempted to act independently of UBC.

102 There are working arrangements between Scipio and UBC and there is joint action on prices and also on making points of sale attractive and in connexion with advertising campaigns.

103 It must furthermore be recorded that the sale prices charged by Scipio are the same as those of the other suppliers supplied by UBC.

104 Consequently UBC and Scipio are not in competition with each other.

105 In the second place the Commission states that it estimates UBC's market share at 45 %.

106 However UBC points out that this share dropped to 41 % in 1975.

107 A trader can only be in a dominant position on the market for a product if he has succeeded in winning a large part of this market.

108 Without going into a discussion about percentages, which when fixed are bound to be to some extent approximations, it can be considered to be an established fact that UBC's share of the relevant market is always more than 40 % and nearly 45 %.

109 This percentage does not however permit the conclusion that UBC automatically controls the market.

110 It must be determined having regard to the strength and number of the competitors.

111 It is necessary first of all to establish that on the whole of the relevant market the said percentage represents grosso modo a share several times greater than that of its competitor Castle and Cooke which is the best placed of all the competitors, the others coming far behind.

112 This fact together with the others to which attention has already been drawn may be regarded as a factor which affords evidence of UBC's preponderant strength.

113 However an undertaking does not have to have eliminated all opportunity for competition in order to be in a dominant position.

114 In this case there was in fact a very lively competitive struggle on several occasions in 1973 as Castle and Cooke had mounted a large-scale advertising and promotion campaign with price rebates on the Danish and German markets.

115 At the same time Alba cut prices and offered promotional material.

116 Recently the competition of the Villeman et Tas firm on the Netherlands market has been so lively that prices have dropped below those on the German market which are traditionally the lowest.

117 It must however be recorded that in spite of their exertions these firms have not succeeded in increasing their market share appreciable on the national markets where they launched their attacks.

118 It must be noted that these periods of competition limited in time and space did not cover the whole of the relevant market.

119 Even if the local attacks of some competitors can be described as “fierce” it can only be placed on record that UBC held out against them successfully either by adapting its prices for the time being (in the Netherlands in answer to the challenge from Villeman et Tas) or by bringing indirect pressure to bear on the intermediaries.

120 Furthermore if UBC's position on each of the national markets concerned is considered it emerges that, execpt in Ireland, it sells direct and also, as far as concerns Germany, indirectly through Scipio, almost twice as many bananas as the best placed competitor and that there is no appreciable fall in its sales figures even when new competitors appear on these markets.

121 UBC's economic strength has thus enabled it to adopt a flexible overall strategy directed against new competitors establishing themselves on the whole of the relevant market.

122 The particular barriers to competitors entering the market are the exceptionally large capital investments required for the creation and running of banana plantations, the need to increase sources of supply in order to avoid the effects of fruit diseases and bad weather (hurricanes, floods), the introduction of an essential system of logistics which the distribution of a very perishable product makes necessary, economies of scale from which newcomers to the market cannot derive any immediate benefit and the actual cost of entry made up inter alia of all the general expenses incurred in penetrating the market such as the setting up of an adequate commercial network, the mounting of very large-scale advertising campaigns, all those financial risks, the costs of which are irrecoverable if the attempt fails.

123 Thus, although, as UBC has pointed out, it is true that competitors are able to use the same methods of production and distribution as the applicant, they come up against almost insuperable practical and financial obstacles.

124 That is another factor peculiar to a dominant position.

125 However UBC takes into account the losses which its banana division made from 1971 to 1976 — whereas during this period its competitors made profits — for the purpose of inferring that, since dominance is in essence the power to fix prices, making losses is inconsistent with the existence of a dominant position.

126 An undertaking's economic strength is not measured by its profitability; a reduced profit margin or even losses for a time are not incompatible with a dominant position, just as large profits may be compatible with a situation where there is effective competition.

127 The fact that UBC's profitability is for a time moderate or non-existent must be considered in the light of the whole of its operations.

128 The finding that, whatever losses UBC may make, the customers continue to buy more goods from UBC which is the dearest vendor, is more significant and this fact is a particular feature of the dominant position and its verification is determinative in this case.

129 The cumulative effect of all the advantages enjoyed by UBC thus ensures that is has a dominant position on the relevant market.

Paragraph 1. The clause prohibiting the resale of bananas while still green

130 The Commission takes the view that the applicant has abused its dominant position vis-à-vis ripener/distributors in the first place by using a clause incorporated in its general conditions of sale forbidding its distributor/ripeners to resell its bananas while still green, to sell bananas other than those supplied by UBC while they were distributors of UBC's bananas and to resell UBC's bananas to competing ripeners.

131 The Commission in the second place blames UBC for having insisted that its ripener/distributors should not sell bananas to dealers from other countries and giving them an assurance that it had imposed the same requirement on its distributor/ripeners in other countries.

132 This abuse was brought into practice in January 1967 when UBC was endeavouring to launch in Europe the new “Cavendish Valery” banana under the “Chiquita” brand name which was taking the place of the Gros Michel variety known under the “Fyffes” label.

133 The prohibition on reselling of bananas while still green has been applied strictly since 1967, although it does not always appear in a written document, in all the Member States forming the relevant market to UBC's importer/ripener/distributors including the Scipio group.

134 There was an example of this prohibition in December 1973 when UBC refused to sell to the Danish firm Olesen which found that all the distributors (including the Scipio group) whom it had requested to supply it with green bananas turned down its requests because they were prevented from doing so under their contracts.

135 Apart from the fact that this obligation indirectly helps to strengthen and consolidate UBC's dominant position, it makes any trade in UBC's green bananas whether branded or not, either within a single State or between Member States, almost impossible. Thus this clause has a similar effect as a prohibition of exports.

136 The effect of this clause is further increased by the policy adopted by UBC of only supplying its customers with smaller quantities of bananas than those which they have ordered and this makes it impossible for them to take any competitive action against the difference in prices from one Member State to another and forces them to confine themselves to their role of ripeners.

137 According to the Commission these prohibitions and practices are both the essential constituent of an overall system enabling the applicant to control the entire marketing of its product and to restrict competition and also form the basis of the three other abuses for which UBC is blamed.

138 It was not until the month (31 January 1976) following the Decision of 17 December 1975, which found that the applicant had infringed Article 86 of the Treaty, (and therefore before 1 February 1976, the last date fixed by the Commission by which the applicant had to inform it that it had ceased to apply the prohibition on the resale of green bananas) that the applicant sent a circular letter to all its established customers on the relevant market to the effect that the object of the clause had never been to forbid the sale by a duly appointed ripener to another Chiquita ripener of green Chiquita bananas or the resale of unbranded green bananas.

139 The applicant points out in answer to these complaints that the clause at issue was worded as follows for Belgium, Denmark and the Netherlands: “bananas can only be resold when they are ripe” (the Danish clause states that only bananas of picture No 3 can be resold).

140 The clause relating to the Netherlands was notified to the Commission on 15 November 1968 as follows: “the sale of bananas supplied by us to competing ripeners is not allowed”.

141 The applicant is surprised that the Commission did not request it to give the wording of the conditions of sale and if necessary amend it for the purpose of considering whether the applicant could be exempted under Article 85/3 and that it took the Commission seven years to prepare and finalize its decision finding that there had been an infringement.

142 The only purpose of this clause was to protect the brand name and therefore ultimately the consumers by ensuring that the quality of the products — selected and labelled in the tropics — is exemplary, by reserving them for experienced ripeners who have adequate ripening installations, apply advanced technical methods perfected by UBC's engineers and accept their supervision, and to bring “Chiquita” bananas on to the market when their quality is at its peak.

143 This clause has never been understood as being a prohibition of exports and has never been applied nor enforced as such.

144 The applicant never intended to impose sanctions in the event of noncompliance.

145 Furthermore dealers in bananas sell an extremely perishable semi-finished product which owing to its nature must be ripened immediately rather than dealt in horizontally and trade in ripe bananas — if there was any — could only be marginal.

146 The ripener's function is only to ripen the bananas and distribute them to the retailers.

147 Moreover the ripener's gross profit margin is greater than the profits which he could make by speculating on the average price differences between the various markets except for some weeks each year and it is not therefore in his interest to effect horizontal sales of green bananas.

148 The Olesen case is the only one in which it would appear that the clause was invoked.

149 This was an exceptional case which arose out of a dispute between UBC and this Danish ripener in circumstances different from those in which the prohibition of the sale of green bananas is applied.

150 In any case the order to delete the clause, which was imposed on the applicant, appears to it to be “unreasonable and unjustified”, because, since it does not have any ripening installation of its own — except Spiers in Belgium representing. 3,3 % of the ripening capacity of the “relevant market” — it would be unable to guarantee the quality of its bananas to the consumer and this would lead to the collapse of its entire commercial policy.

151 The Court's examination must be limited to the clause relating to the prohibition of the resale of green bananas in the form in which it was notified to the Commission on 15 November 1968 without it being necessary to consider the clause as drawn up by UBC on 31 January 1976, that is to say at a date subsequent to the Commission's decision.

152 The clause applied in Belgium, Denmark and the Netherlands, in so far as it has been drawn up in writing, prohibited the resale of bananas while still green whether branded or unbranded and even between ripeners of Chiquita bananas.

153 Since UBC thought it should state in the circular letter of 31 January 1976, which it sent to all ripener/distributors including those established in Germany, that the clause had not been put in writing for Germany, it thereby impliedly acknowledges that the said clause was in force on the German market, since it had clearly been implied or mentioned orally.

154 Under the terms of the clause UBC “required their customers to ensure forthwith that the bananas in their possession are not resold to foreign dealers; it had imposed the same requirement on its foreign customers as far as the Netherlands are concerned. It would not hesitate to take such steps as it deems to be necessary if the foregoing is not complied with in some way or other”.

155 This wording implies that UBC, far from rejecting the idea of imposing sanctions on duly appointed ripener/distributors which do not comply with its directions, held out this possibility as a threat.

156 Moreover Olesen unquestionably experienced the harsh effects of this clause after UBC refused to supply it and it wanted to obtain supplies of Chiquita bananas from Scipio and the duly appointed Danish distributors.

157 To impose on the ripener the obligation not to resell bananas so long as he has not had them ripened and to cut down the operations of such a ripener to contacts only with retailers is a restriction of competition.

158 Although it is commendable and lawful to pursue a policy of quality, especially by choosing sellers according to objective criteria relating to the qualifications of the seller, his staff and his facilities, such a practice can only be justified if it does not raise obstacles, the effect of which goes beyond the objective to be attained.

159 In this case, although these conditions for selection have been laid down in a way which is objective and not discriminatory, the prohibition on resale imposed upon duly appointed Chiquita ripeners and the prohibition of the resale of unbranded bananas — even if the perishable nature of the banana in practice restricted the opportunities of reselling to the duration of a specific period of time — when without any doubt an abuse of the dominant position since they limit markets to the prejudice of consumers and affects trade between Member States, in particular by partitioning national markets.

160 Thus UBC's organization of the market confined the ripeners to the role of suppliers of the local market and prevented them from developing their capacity to trade vis-à-vis UBC, which moreover tightened its economic hold on them by supplying less goods than they ordered.

161 It follows from all these considerations that the clause at issue forbidding the sale of green bananas infringes Article 86 of the Treaty.

162 On this point the contested decision is therefore justified.

Paragraph 2. The refusal to continue supplies to Olesen

163 The Commission is of the opinion that UBC has infringed Article 86 of the Treaty by refusing to continue supplies of Chiquita bananas to Olesen from 10 October 1973 to 11 February 1975

164 According to a telex message of 11 October 1973 from UBC to Olesen these supplies were discontinued because the ripener/distributor took part in an advertising campaign mounted during October 1973 in Denmark for Dole bananas.

165 Following this discontinuance of supplies Olesen applied in vain to UBC's seven other ripener/distributors in Denmark and also to a company of the Scipio group in Hamburg for green Chiquita bananas.

166 It has suffered considerable damage as a result of this situation due to losses of sales and several important customers including l'Association des Coopérateurs (F.D.B.) which bought 50 % of its bananas.

167 On 11 February 1975 UBC and Olesen entered into an agreement under which UBC undertook to resume supplies of bananas to Olesen and the latter withdrew the complaint which it had lodged with the Commission.

168 The Commission regards this refusal to continue supplies to Olesen, which cannot be justified objectively, as an arbitrary interference in the management of the Olesen business which has caused it to suffer damage and was designed to dissuade UBC's ripeners from selling bananas bearing competing brand names or at least from advertising them and these are facts which amount to an infringement of Article 86 of the Treaty.

169 The applicant claims that the marketing policy it pursues is more liberal than that of its competitors.

170 Its ripeners are free to sell products bearing competing brand names, to advertise these products, to reduce their orders, to cancel them and to terminate their relations when they think fit.

171 The Olesen incident must be seen in this setting.

172 In 1967, since the latter had become the largest importer of “Chiquita” bananas in Denmark, it put pressure on UBC to give it preferential treatment compared with the seven other Danish ripeners duly appointed by the applicant.

173 When UBC refused to do so, Olesen became in 1969 the exclusive importer/distributor of the Standard Fruit Company.

174 In 1973 Standard Fruit announced at a press conference that the Dole banana was going to oust the “Chiquita” banana throughout the world.

175 Olesen then sold less and less Chiquita bananas and deliberately pushed the sale of Dole bananas. It did not take the same amount of trouble when ripening Chiquita bananas as it did when ripening bananas bearing other brand names.

176 The breach, which was not unexpected and unforeseeable, arose in these circumstances, punctuated by discussions spread over a long period.

177 This breach was therefore fully justified by the fact that if a firm is directly attacked by its main competitor who has succeeded in making one of that firm's most important long standing customers his exclusive distributor for the whole of the country, that firm in its own interest and that of competition has no option but to fight back or else disappear from this national market.

178 The applicant goes on to say that this refusal to sell to Olesen, which was justified, was not an abuse, because it did not affect the actual competition on the Danish market which recorded a fall of 40 % in two weeks at the end of 1974 in the retail price of Chiquita bananas as a result of the competition between competitors which was generated by these circumstances.

179 Finally the refusal to sell to Olesen did not affect trade between Member States, because Dole bananas only pass through Germany from Hamburg and Chiquita bananas from Bremerhaven.

180 These transactions are not therefore intra-Community trade but are in fact trade between Denmark and the third countries where the bananas come from.

181 For all these reasons, since the refusal to sell to Olesen is not in itself a specific breach, the applicant takes the view that the finding of an infringement under this head is unjustified.

182 In view of these conflicting arguments it is advisable to assert positively from the outset that an undertaking in a dominant position for the purpose of marketing a product — which cashes in on the reputation of a brand name known to and valued by the consumers — cannot stop supplying a long standing customer who abides by regular commercial practice, if the orders placed by that customer are in no way out of the ordinary.

183 Such conduct is inconsistent with the objectives laid down in Article 3 (f) of the Treaty, which are set out in detail in Article 86, especially in paragraphs (b) and (c), since the refusal to sell would limit markets to the prejudice of consumers and would amount to discrimination which might in the end eliminate a trading party from the relevant market.

184 It is therefore necessary to ascertain whether the discontinuance of supplies by UBC in October 1973 was justified.

185 The reason given is in the applicant's letter of 11 October 1973 in which it upbraided Olesen in no uncertain manner for having participated in an advertising campaign for one of its competitors.

186 Later on UBC added to this reason a number of complaints, for example, that Olesen was the exclusive representative of its main competitor on the Danish market.

187 This was not a new situation since it goes back to 1969 and was not in any case inconsistent with fair trade practices.

188 Finally UBC has not put forward any relevant argument to justify the refusal of supplies.

189 Although it is trae, as the applicant points out, that the fact that an undertaking is in a dominant position cannot disentitle it from protecting its own commercial interests if they are attacked, and that such an undertaking must be conceded the right to take such reasonable steps as it deems appropriate to protect its said interests, such behaviour cannot be countenanced if its actual purpose is to strengthen this dominant position and abuse it.

190 Even if the possibility of a counter-attack is acceptable that attack must still be proportionate to the threat taking into account the economic strength of the undertakings confronting each other.

191 The sanction consisting of a refusal to supply by an undertaking in a dominant position was in excess of what might, if such a situation were to arise, reasonably be contemplated as a sanction for conduct similar to that for which UBC blamed Olesen.

192 In fact UBC could not be unaware of that fact that by acting in this way it would discourage its other ripener/distributors from supporting the advertising of other brand names and that the deterrent effect of the sanction imposed upon one of them would make its position of strength on the relevant market that much more effective.

193 Such a course of conduct amounts therefore to a serious interference with the independence of small and medium sized firms in their commercial relations with the undertaking in a dominant position and this independence implies the right to give preference to competitors' goods.

194 In this case the adoption of such a course of conduct is designed to have a serious adverse effect on competition on the relevant banana market by only allowing firms dependant upon the dominant undertaking to stay in business.

195 The applicant's argument that in its view the 40 % fall in the price of bananas on the Danish market shows that competition has not been affected by the refusal to supply Olesen cannot be upheld.

196 In fact this fall in prices was only due to the very lively competition — called at the time the ‘banana war’ — in which the two transnational companies UBC and Castle and Cooke engaged.

197 The applicant submits that the refusal to supply Olesen could not have any effect on intra-Community trade because in its view all those bananas coming from third countries (Latin America) and merely transiting the Common Market countries before they reach the Member State where they are consumed are not part of intra-Community trade.

198 If this argument was valid the whole of UBC's European trade in goods of third countries would not be governed by Community law.

199 In fact when Olesen's supplies were cut off it was unable to buy Chiquita bananas at Bremerhaven and therefore had to impon into Denmark the same quantities of bananas as it did before this step was taken.

200 It was forced to buy bananas bearing other brand namens outside Denmark and to import them into Denmark.

201 Furthermore, if the occupier of a dominant position, established in the common market, aims at eliminating a competitor who is also established in the Common market, it is immaterial whether this behaviour relates to trade between Member States once it has been shown that such elimination will have repercussions on the patterns of competition in the Common Market.

202 Consequently the refusal to supply a long standing regular customer who buys with a view to reselling in another Member State has an influence on the normal movement of trade and an appreciable effect on trade between Member States.

203 The finding in the decision that UBC has infringed Article 86 of the Treaty by refusing to supply Olesen is therefore justified.

Paragraph 1. Discriminatory prices

204 All the bananas marketed by UBC under the brand name ‘Chiquita’ on the relevant market have the same geogrophic origin, belong to the same variety (Cavendish Valery) and are of almost the same quality.

205 They are unloaded in two ports, Rotterdam and Bremerhaven, where unloading costs only differ by a few cents in the dollar per box of 20 kilogrammes, and are resold, except to Scipio and in Ireland, subject to the same conditions of sale and terms of payment after they have been loaded on the buyers' wagons or lorries, the price of a box amounting on average to between 3 and 4 dollars and going up to 5 dollars in 1974.

206 The costs of carriage from the unloading ports to the ripening installations and the amount of any duty payable under the Common Customs Tariff are borne by the purchaser except in Ireland.

207 This being so all those customers going to Rotterdam and Bremerhaven to obtain their supplies might be expected to find that UBC offers them all the same selling price for ‘Chiquita’ bananas.

208 The Commission blames the applicant for charging each week for the sale of its branded bananas — without objective justification — a selling price which differs appreciably according to the Member State where its customers are established.

209 This policy of charging differing prices according to the Member States for which the bananas are intended has been applied at least since 1971 in the case of customers of the Federal Republic of Germany, the Netherlands and the BLEU and was extended in January 1973 to customers in Denmark and in November 1973 to customers in Ireland.

210 The maximum weekly differences recorded between two destinations were on average during the whole of 1971, 17,6 % — in 1972, 11,3 % — in 1973, 14,5 % — in 1974, 13,5 %.

211 The highest weekly differences (per box) were respectively between customers in Germany on the one hand and Belgo-Luxembourg and Netherlands customers on the other hand :

• in 1971: 32 % and 37 %

• in 1972: 21 % and 30 %

• in 1973: 18 % and 43 %

• in 1974: 25 % and 54 %

and between customers in Denmark on the one hand and Belgo-Luxembourg and Netherlands customers on the other hand:

• in 1973: 24 % and 54 %

• in 1974.: 16 % and 12 %

212 The price customers in Belgium are asked to pay is on average 80 % higher than that paid by customers in Ireland.

213 The greatest difference in price is 138 % between the delivered Rotterdam price charged by UBC to its customers in Ireland and the f.o.r. Bremerhaven price charged by UBC to its customers in Denmark, that is to say the price paid by Danish customers is 2,38 times the price paid by Irish customers.

214 The Commission treats these facts as an abuse of a dominant position in that UBC has applied dissimilar conditions to equivalent transactions with the other trading parties, thereby placing them at a competitive disadvantage.

215 The applicant states that its prices are determined by market forces and cannot therefore be discriminatory.

216 Further the average difference in the price of ‘Chiquita’ bananas between the national markets in question was only 5 % in 1975.

217 The price in any given week is calculated so as to reflect as much as possible the anticipated yellow market price in the following week for each national market.

218 This price is fixed by the Rotterdam management after discussions and negotiations between the applicant's local representatives and the ripener/ distributors must perforce take into account the different competitive context in which ripener/distributors in the different countries are operating.

219 It finds its objective justification in the average anticipated market price.

220 These price differences are in fact due to fluctuating market factors such as the weather, different availability of seasonal competing fruit, holidays, strikes, Government measures, currency denominations.

221 In short the applicant has been asked by the Commission to take appropriate steps to establish a single banana market at a time when it has in fact been unable to do so.

222 According to the applicant as long as the Community institutions have not set up the machinery for a single banana market and the various markets remain national and respond to their individual supply/demand situations differences in prices between them cannot be provented.

223 UBC's answers to the Commission's requests for particulars (the letters of 14 May, 13 September, 10 and 11 December 1974 and 13 February 1975) show that UBC charges its customers each week for its bananas sold under the Chiquita brand name a different selling price depending on the Member State where the latter carry on their business as ripener/distributors according to the ratios to which the Commission has drawn attention.

224 These price differences can reach 30 to 50 % in some weeks, even though products supplied under the transactions are equivalent (with the exeption of the Scipio group, subject to this observation that the bananas from Scipio's ripening installations are sold at the same price as those sold by independent ripeners)

225 In fact the bananas sold by UBC are all freighted in the same ships, are unloaded at the same cost in Rotterdam or Bremerhaven and the price differences relate to substantially similar quantities of bananas of the same variety, which have been brought to the same degree of ripening, are of similar quality and sold under the same ‘Chiquita’ brand name under the same conditions of sale and payment for loading on to the purchaser's own means of transport and the latter have to pay customs duties, taxes and transport costs from these ports.

226 This policy of discriminatory prices has been applied by UBC since 1971 to customers of Germany, the Netherlands and the BLEU and was extended at the beginning of 1973 to customers in Denmark and in November 1973 to customers in Ireland.

227 Although the responsibility for establishing the single banana market does not lie with the applicant, it can only endeavour to take ‘what the market can bear’ provided that it complies with the rules for the regulation and coordination of the market laid down by the Treaty.

228 Once it can be grasped that differences in transport costs, taxation, customs duties, the wages of the labour force, the conditions of marketing, the differences in the parity of currencies, the density of competition may eventually culminate in different retail selling price levels according to the Member States, then it follows those differences are factors which UBC only has to take into account to a limited extent since it sells a product which is always the same and at the same place to ripener/distributors who — alone — bear the risks of the consumers' market.

229 The interplay of supply and demand should, owing to its nature, only be applied to each stage where it is really manifest.

230 The mechanisms of the market are adversely affected if the price is calculated by leaving out one suge of the market and taking into account the law of supply and demand as between the vendor and the ultimate consumer and not as between the vendor (UBC) and the purchaser (the ripener/distributors).

231 Thus, by reason of its dominant position UBC, fed with information by its local reprensentatives, was in fact able to impose its selling price on the intermediate purchaser. This price and also the ‘weekly quota allocated’ is only fixed and notified to the customer four days before the vessel carrying the bananas berths.

232 These discriminatory prices, which varied according to the circumstances of the Member States, were just so many obstacles to the free movement of goods and their effect was intensified by the clause forbidding the resale of bananas while still green and by reducing the deliveries of the quantities ordered.

233 A rigid partitioning of national markets was thus created at price levels, which were artificially different, placing certain distributor/ripeners at a competitive disadvantage, since compared with what it should have been competition had thereby been distorted.

234 Consequently the policy of differing prices enabling UBC to apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage, was an abuse of a dominant position.

Paragraph 2. Unfair prices

235 The Commission is of the opinion that UBC has also abused its dominant position by charging its customers in Germany (other than the Scipio group), Denmark, the Netherlands and the BLEU unfair prices, which in the circumstances it considers are ‘excessive in relation to the economic value of the product supplied’.

236 The policy of partitioning the relevant market has enabled UBC to charge pirces for Chiquita bananas which are sheltered from effective competition and which, bearing in mind that bananas are a food product that is widely consumed, often amount to wide differences in price which cannot be justified objectively.

237 These price differences show that the highest prices are excessive compared with the lowest prices, more especially as the latter yield a profit.

238 Following a letter from UBC of 10 December 1974 it appeared to the Commission to be justifiable, without analysing UBC's costs structure, to treat the prices charged to Irish customers as representative and the differences between the prices c.i.f. Dublin delivered Rotterdam and the other prices charged by UBC for its sales f.o.r. Rotterdam or Bremerhaven show profits of the same order of magnitude as these differences.

239 The prices charged by UBC to its customers in Germany (other than the Scipio Group), Denmark, the Netherlands and the BLEU are considerably higher, sometimes by as much as 100 %, than the prices charged to customers in Ireland and produce for it a substantial and excessive profit in relation to the economic value of the product supplied.

240 The significance of these observations is accentuated by the fact that there is a 20 to 40 % difference between the price of Chiquita and unbranded bananas, even though the quality of the latter is only sligthly lower than that of labelled bananas and by the fact that the price of unbranded bananas of similar quality sold by its principal competitors is lower even though their undertakings are running at a profit.

241 Having regard to this situation the Commission considers a reduction by UBC of its price levels to prices at least 15 % below the prices it charges its customers in the relevant market, except in beland, to be appropriate, since the unfair prices charged currently are an abuse by UBC of its dominant position.

242 The applicant, which does not accept the Commission's argument, lays stress on the very low price of bananas at all stages of the banana chain and illustrates this by the example of a metric ton of bananas which could be imported into Germany in 1956 for DM 697, the price whereof fell in 1973 to DM 458, the difference corresponding to a 50 % reduction in real terms.

243 The argument put forward by the Commission to prove that UBC charges excessive prices is wrong because it is based on the letter of 10 December 1974 pointing out ‘that UBC sold bananas to Irish ripeners at prices allowing it a considerably smaller margin than in some other Member States’, the wording of which, settled before 31 December 1974, the date of the end of the financial year, has been retracted on two different occasions by the applicant and it appears from a document annexed to the application that the prices charged in Ireland produced a loss for UBC.

244 It is therefore arbitrary for the Commission to proceed on the basis of the prices charged in Ireland for a few months for the purpose of access to the Irish market, which only represented 1,6 % of the total volume of bananas imported during 1974 into the whole of the relevant market, in order to calculate the profits which have been made on the remainder of the relevant market and during the previous years when the prices charged did not allow any profits to be made from 1970 to 1974 inclusive on the relevant market.

245 The applicant takes the view that the difference in the price of branded and unlabelled bananas is justified, because the precautions taken between cutting and sale to the consumer fully explain this difference.

246 It endeavours to prove by another way that there are genuine differences in the quality of Chiquita bananas and those bearing other brand names and that the price difference — averaging 7,4 % between 1970 and 1974 — is justified.

247 It submits that the order to reduce its prices by 15 % is unintelligible, since the prices in question vary each week on the whole of the relevant market, and unworkable, because a reduction of this size would cause it to sell a banana of a higher quality than its competitors below the prices which they charge for theirs.

248 The imposition by an undertaking in a dominant position directly or indirectly of unfair purchase or selling prices is an abuse to which exception can be taken under Article 86 of the Treaty.

249 It is advisable therefore to ascertain whether the dominant undertaking has made use of the opportunities arising out of its dominant position in such a way as to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition.

250 In this case charging a price which is excessive because it has no reasonable relation to the economic value of the product supplied would be such an abuse.

251 This excess could, inter alia, be determined objectively if it were possible for it to be calculated by making a comparison between the selling price of the product in question and its cost of production, which whould disclose the amount of the profit margin; however the Commission has not done this since it has not analysed UBC's costs structure.

252 The questions therefore to be determined are whether the difference between the costs actually incurred and the price actually charged is excessive, and, it the answer to this question is in the affirmative, whether a price has been imposed which is either unfair in itself or when compared to competing products.

253 Other ways may be devised — and economic theorists have not failed to think up several — of selecting the rules for determining whether the price of a product is unfair.

254 While appreciating the considerable and at times very great difficulties in working out production costs which may sometimes include a discretionary apportionment of indirect costs and general expenditure and which may vary significantly according to the size of the undertaking, its object, the complex nature of its set up, its territorial area of operations, whether it manufactures one or several products, the number of its subsidiaries and their relationship with each other, the production costs of the banana do not seem to present any insuperable problems.

255 In this case it emerges from a study by the United Nations Conference on trade and development of 10 February 1975 that the pattern of the production, packaging, transportation, marketing and distribution of bananas could have made it possible to compute the approximate production cost of this fruit and accordingly to calculate whether its selling price to ripener/distributors was excessive.

256 The Commission was at least under a duty to require UBC to produce particulars of all the constituent elements of its production costs.

257 The accuracy of the contents of the documents produced by UBC could have been challenged but that would have been a question of proof.

258 The Commission bases its view that prices are excessive on an analysis of the differences — in its view excessive — between the prices charged in the different Member States and on the policy of discriminatory prices which has been considered above.

259 The foundation of its argument has been the applicant's letter of 10 December 1974 which acknowledged that the margin allowed by the sale of bananas to Irish ripeners was much smaller than in some other Member States and it concluded from this that the amount by which the actual prices f.o.r. Bremerhaven and Rotterdam exceed the delivered Rotterdam prices for bananas to be sold to Irish customers c.i.f. Dublin must represent a profit of the same order of magnitude.

260 Having found that the prices charged to ripeners of the other Member States were considerably higher, sometimes by as much as 100 %, than the prices charged to customers in Ireland it concluded that UBC was making a very substantial profit.

261 Nevertheless the Commission has not taken into account in its reasoning several of UBC's letters in which were enclosed a confidential document retracting what is said in its letter of 10 December 1974 and pointing out that the prices charged in Ireland had produced a loss.

262 The applicant also states that the prices charged on the relevant market did not allow it to make any profits during the last five years, except in 1975.

263 These assertions by the applicant are not supported by any accounting documents which prove the consolidated accounts of the UBC group or even by the consolidated accounts for the relevant market.

264 However unreliable the particulars supplied by UBC may be (and in particular the document mentioned previously which works out the ‘losses’ on the Irish market in 1974 without any supporting evidence), the fact remains that it is for the Commission to prove that the applicant charged unfair prices.

265 UBC's retractation, which the Commission has not effectively refuted, establishes beyond doubt that the basis for the calculation adopted by the latter to prove that UBC's prices are excessive is open to criticism and on this particular point there is doubt which must benefit the applicant, especially as for nearly 20 years banana prices, in real terms, have not risen on the relevant market.

266 Although it is also true that the price of Chiquita bananas and those of its principal competitors is different, that difference is about 7 %, a percentage which has not been challenged and which cannot automatically be regarded as excessive and consequently unfair.

267 In these circumstances it appears that the Commission has not adduced adequate legal proof of the facts and evaluations which formed the foundation of its finding that UBC had infringed Article 86 of the Treaty by directly and indirectly imposing unfair selling prices for bananas.

268 Article 1 (c) of the decision must therefore be annulled.