Judgments - Inntrepreneur Pub Company (CPC) and others (Original Appellants and Cross-respondents) v. Crehan (Original Respondent and Cross-appellant)

(back to preceding text)

    46.  After Delimitis, the Commission issued a Notice on Cooperation between National Courts and the Commission in Applying Articles 81 and 82 of the EC Treaty (OJ 1993 C39/6) which enlarged upon the guidance which had been provided by the Court of Justice. It described the respective functions of the Commission and the national courts:

    "4.  The Commission is the administrative authority responsible for the implementation and for the thrust of competition policy in the Community and for this purpose has to act in the public interest. National courts, on the other hand, have the task of safeguarding the subjective rights of private individuals in their relations with one another."

    47.  The notice went on to say, at para 20, that a national court, before answering the question of whether an agreement infringed article 81:

    "should ascertain whether the agreement, decision or concerted practice has already been the subject of a decision, opinion or other official statement issued by an administrative authority and in particular by the Commission. Such statements provide national courts with significant information for reaching a judgment, even if they are not formally bound by them."

    48.  The matter was taken further by the decision of the Court of Justice in Masterfoods Ltd v HB Ice Cream Ltd (Case C-344/98) [2000] ECR I - 11369. Masterfoods Ltd, a subsidiary of Mars Inc, brought proceedings in Ireland against HB Ice Cream Ltd, a subsidiary of Unilever, for a declaration that its agreements to provide retailers with freezer cabinets on terms that they stocked only HB ice cream contravened articles 81 and 82. On 28 May 1992 the High Court dismissed the action and, on HB's counterclaim, granted an injunction to restrain Masterfoods from inducing retailers to break their agreements by stocking Masterfoods ice cream. On 18 September 1991 Masterfoods made a complaint to the Commission under article 3 of 17/62 and on 4 September 1992 it gave notice of appeal to the Supreme Court. In the course of discussions with the Commission, HB offered to make some changes in its agreements and the Commission issued a notice saying that it proposed to grant exemption under article 81(3). However, as in this case, the Commission changed its mind and on 11 March 1998 issued a decision (98/531) stating that HB's agreements infringed articles 81 and 82. HB immediately applied to the Court of First Instance to annul the decision of the Commission. That was the state of affairs when the appeal came before the Supreme Court in June 1998. The court made a reference to the Court of Justice seeking guidance as to how it should proceed. It asked whether it should stay the Irish proceedings pending the decision of the Court of First Instance and whether the decision of the Commission on the HB agreements prevented HB from seeking to uphold the contrary decision of the national court.

    49.  Advocate General Cosmas, starting from the proposition that it was necessary to avoid conflict between the decisions of Community institutions and national courts, discussed the question of what counted as a conflict, at para 16. There could be no risk of conflict, he said, where:

    "where the legal and factual context of the case being examined by the Commission is not completely identical to that before the national courts."

    50.  Significantly for the situation in the present case, he gave as an example of such lack of identity a case in which:

    "the national courts are examining the legality of an exclusivity agreement in respect of the use of ice cream freezer cabinets between a particular company and retailers 1, 2 and 3 in Ireland, whilst the Commission is monitoring a similar agreement in respect of the same products in the same market between another company and retailers 4, 5 and 6"

    51.  In such a case, said the Advocate General:

    "The Commission's decision may provide important indications as to the appropriate way to interpret Articles 85(1) and 86, but in this case there is no risk, from a purely legal point of view, of the adoption of conflicting decisions."

    52.  A risk of conflict:

    "only arises when the binding authority which the decision of the national court has or will have conflicts with the grounds and operative part of the Commission's decision. Consequently the limits of the binding authority of the decision of the national court and the content of the Commission's decision must be examined every time."

    53.  In Masterfoods, the High Court had examined the agreements and the Irish ice cream market as they stood before its decision in 1992, whereas the Commission had examined the amended agreements and the market as it stood in 1996. It followed that the decisions of the High Court and the Commission were not necessarily in conflict. Conflict would arise only if the High Court's injunction continued to apply after the Commission had ruled that the agreements were unlawful. But that was exactly what HB were asking the Supreme Court to do. The appeal therefore presented an imminent risk of conflict.

    54.  The Court of Justice accepted the Advocate General's analysis that the risk of conflict arose out of the possibility of the Supreme Court continuing an injunction to enforce agreements which the Commission had held to be unlawful:

    "59.  In this case it appears from the order for reference that the maintenance in force of the permanent injunction granted by the High Court restraining Masterfoods from inducing retailers to store its products in freezers belonging to HB depends on the validity of Decision 98/531."

    55.  The ruling of the Court of Justice was that the Irish courts had to give priority to the decisions of the European institutions on the validity of the agreements which they were being asked to enforce. The Supreme Court could suspend the proceedings until the outcome of the application to the Court of First Instance for annulment was known. Or it could make a reference to the Court of Justice for a preliminary ruling on the validity of Decision 98/531. What it could not do was dismiss the appeal and enforce the injunction while the Commission's decision remained in effect.

    56.  It is clear that the duty to avoid conflicting decisions, as stated by the Court of Justice in the two leading cases of Delimitis and Masterfoods, has no application to the present case. There is no possibility of conflict, in the sense discussed in those cases, between a decision of the Commission that the Whitbread agreements infringed article 81 and a decision of the national court that the Inntrepreneur agreements did not. The case rather resembles Advocate General Cosmas's example of the two ice cream manufacturers operating in the same market.

    57.  Before leaving the jurisprudence of the Court of Justice, I should mention the opinion of Advocate General Van Gerven in HJ Banks & Co Ltd v British Coal Corporation (Case C-128/92) [1994] ECR I-1209, which was relied upon by Mr David Vaughan QC for Mr Crehan. The reference arose out of an action for damages brought by HJ Banks & Co Ltd ("Banks") against the British Coal Corporation ("British Coal") for abuse of a dominant position, contrary to article 66(7) of the European Coal and Steel Community Treaty ("ECSC Treaty"). This resembles article 82 of the (EC) Treaty in being designed to prevent abuse of a dominant position but differs, as the Court of Justice eventually decided in the Banks case, in not being directly enforceable by individuals. However, in proceedings before this judgment had been given, arising out of a complaint to the Commission by the National Association of Licensed Opencast Operators ("NALOO") and two other trade organisations, the Commission issued a decision, in the form of a letter addressed to NALOO and the two other complaining trade organisations, rejecting NALOO's complaint in relevant part. HJ Banks was a member of NALOO and argued that that decision was not binding upon the national court. The High Court in London made a reference asking, among other things, whether article 66(7) of the ECSC Treaty created directly enforceable rights and, if so, to what extent a national court was bound, as to issues of fact or the construction of the ECSC Treaty, by a decision of the Commission. The Court of Justice decided that no directly enforceable rights were created and therefore did not answer the question about the effect of the Commission's decision. But Advocate General Van Gerven dealt with the question in the general terms in which it had been framed.

    58.  He first put on one side administrative letters issued by the Commission, (such as, in this case, the "comfort letter" issued to Inntrepreneur in 2000). These do not count as "decisions" and were usually given without going through the procedural requirements of article 19 of 17/62. In relation to such documents, the Advocate General cited, at para 60, what the Court of Justice had said in NV L'Oréal v PVBA De Nieuwe AMCK (Case 31/80) [1980] ECR 3775, 3789-3790:

    "11   Such a letter…does not have the effect of preventing national courts, before which the agreements in question are alleged to be incompatible with article 85, from reaching a different finding as regards the agreements concerned on the basis of the information available to them. Whilst it does not bind the national courts, the opinion transmitted in such a letter nevertheless constitutes a factor which the national courts may take into account in considering whether the agreements or conduct in question are in accordance with the provisions of article 85."

    59.  Interestingly, Advocate General Van Gerven classified an actual decision giving negative clearance under article 2 of 17/62 with a comfort letter. He appears to have considered that negative clearance would create a legitimate expectation against the Commission but not bind an individual who brought proceedings for infringement of articles 81(1) or 82 in a national court.

    60.  Advocate General Van Gerven then turned his attention to decisions that articles 81(1) or 82 had been infringed, addressed to parties not involved in the litigation in the national court. He said that it was self-evident that:

    "no obstacles may be placed in the path of third parties seeking to challenge before the national court findings which the Commission has arrived at in a decision of that kind."

    61.  Who, for this purpose, is a third party? Obviously not the person to whom the decision was addressed and upon whom, in accordance with article 249, the decision is binding. In Banks, that would have been NALOO. But the notion of a third party also excludes persons to whom the decision is of "direct and individual concern" and who would have locus standi under article 225 or 230 to institute proceedings before the Court of First Instance or the Court of Justice for its annulment. In respect of others, however, the decision is not binding but the duty of sincere cooperation nevertheless requires a national court not to give a conflicting ruling. It must be remembered that in Banks, if article 66(7) had created private rights in the same way as article 82, the possibility of a conflict of decisions in the Delimitis and Masterfoods sense would have been very real. The same issue which the court had to decide, namely whether British Coal had abused its dominant position, had been decided by the Commission. But the Advocate General also dealt with the situation in which the national court took a view different from that of the Commission on some question of fact or law:

    "If, on the basis of the parties' arguments, the national court comes to the conclusion that the issues of fact and/or law decided by the Commission are incorrect or insufficient, or if at any rate it has serious doubts in that regard, then in the light of the Delimitis judgment…[it] must take the following course of action: in the case of findings which carried no weight in the final decision and do not therefore underlie the reasoning of the Commission, the national court is at liberty to adopt a different interpretation: in those circumstances the risk of conflicting decisions and the resultant impairment of the principle of legal certainty is extremely small. On the other hand, in the case of findings which have an influence on the final decision arrived at by the Commission, the national court is well advised, in accordance with the provisions of its national procedural law, to suspend the proceedings in the case and to seek the necessary information from the Commission or make a direct reference to the court for a preliminary ruling concerning the validity of the decision in question or the interpretation of the relevant Community competition rules."

    62.  I cannot say that I find this passage altogether easy to understand; in particular, whether the Advocate General was using the expression "conflicting decisions" in the sense in which it was used in Delimitis and Masterfoods or in some wider meaning, but the use of the words "the national court is well advised" and the recommendations of asking for information or making a reference, do not suggest that the national court is under any duty to follow the decision of the Commission.

    63.  The law on the relationship between the Commission and the national courts was, so to speak, codified by article 16 of Council Regulation (EC) No 1/2003 on the implementation of the rules on competition laid down in articles 81 and 82 of the Treaty, generally called the Modernisation Regulation, which replaced 17/62 with effect from 1 May 2004. It was of course not in force at the time of the events in this case but its significance is that it appears accurately to reflect the previous case law:

    "Article 16 Uniform application of Community competition law

    "1. When national courts rule on agreements, decisions or practices under article 81 or article 82 of the Treaty which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission. They must also avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings it has initiated. To that effect, the national court may assess whether it is necessary to stay its proceedings. This obligation is without prejudice to the rights and obligations under article 234 of the Treaty.

    2. When competition authorities of the member states rule on agreements, decisions or practices under article 81 or article 82 of the Treaty which are already the subject of a Commission decision, they cannot take decisions which would run counter to the decision adopted by the Commission.

    64.  This article makes it clear that a relevant conflict exists only when the "agreements, decisions or practices" ruled on by the national court have been or are about to be the subject of a Commission decision. It does not apply to other agreements, decisions or practices in the same market.

    65.  These authorities therefore show that the Commission stated the legal position accurately in its letter to Mr Crehan which I have already quoted (see para 32), which said that the question of whether or not article 81(1) applied was one which "the national court is in a position to decide"; that it could "take into account" the views expressed by the Commission in its "general market description" in the Whitbread article 19(3) notice; and that "indirect guidance" on questions of law could be derived from the article 19(3) notice issued after Inntrepreneur's first application. This letter, coming soon after the Whitbread notice, would have been highly misleading if the position was that, provided only that the recipients waited for the Commission to adhere to its view in an actual decision in the Whitbread or some other case, the issue in a national court would be concluded in their favour.

    66.  The Court of Appeal accepted, at para 97, that the Commission left it to the national court to determine whether article 81(1) had been infringed or not. But it said, at para 77, that it was clear that "the Commission expected the English court to follow its view…that article 81(1) applied". If that means no more than that the Commission thought it was right, I would not think that particularly surprising. But if it means that the Commission thought that the English court would be obliged as a matter of Community law to follow its view, I think that is neither what the Commission said nor what the authorities require. The Court of Appeal said, at para 74, that the Whitbread and other decisions did not "formally bind" Inntrepreneur but nevertheless held that the judge had erred in law in allowing Inntrepreneur to adduce evidence to show that the Commission was wrong This suggests a concept of being informally bound which I find difficult to understand. If, as the Court of Appeal said, the defendant is precluded from adducing evidence to show that the Commission was wrong, the distinction is not visible to the naked eye.

    67.  The Court of Appeal said, at para 76, that it was left "profoundly uneasy" by the judge's decision to allow Inntrepreneur to challenge the Commission's opinion. But I must confess that I am left profoundly uneasy by the unfairness of the Court of Appeal's decision that Inntrepreneur could not do so. The Court of Appeal said that Inntrepreneur could have raised the matter before the Commission in its own application. It is true that if Inntrepreneur had pursued its application for negative clearance on the old agreements, it could have obtained a ruling and, if necessary, challenged that ruling in an application for annulment to the Court of First Instance. But the suggestion that it withdraw that application and litigate the matter in England came from the Commission and the Court of Appeal confirmed the judge's decision that this did not involve any abuse of process. For Inntrepreneur then to find its main defence shut out by a subsequent decision of the Commission in which it took no part seems to me a denial of a fair trial.

    68.  The Court of Appeal said, at para 98, that the judge's decision had created "an irreconcilable inconsistency in the application of the Community's competition policy to the relevant market". But that again seems to me the opposite of what the Commission said. In its letter to Mr Crehan it said that there was no Community interest which could justify the Commission in deciding whether the old agreements infringed article 81(1) or not. If the Commission had thought that it was important to have uniformity of decision on this point, it could have given a decision on the article 3 applications and, subject to an application for annulment, that would have bound Inntrepreneur: see Iberian UK Ltd v BPB Industries plc [1997] Eu LR 1. Instead, as an exercise in subsidiarity, it left the decision to the national court. To leave a decision to someone else necessarily implies that he may decide it. In my opinion, for the judge to have made his own decision was to respect the policy of the Commission rather than to flout it.

    69.  There was a good deal of discussion, both before the Court of Appeal and in argument before the House, about the degree of "deference" which a national court should show to a decision of the Commission. Mr Vaughan QC is recorded (in para 96 of the judgment of the Court of Appeal) as having constructed a scheme of three degrees of deference (absolute deference, very great deference and deference) which might have to be paid to a decision of the Commission. For my part, I do not find deference in this context a very helpful expression. It is commonly (if not altogether happily) used in administrative law when a court decides that the decision-making power on a particular question properly belongs to someone else and that the court should not substitute its own view. But the decision-making power on whether article 81(1) applies plainly belonged to the English court, exercising concurrent jurisdiction, and I find it difficult to see how the exercise of this power can be combined with "deference" to the decision of someone else. The correct position is that, when there is no question of a conflict of decisions in the sense which I have discussed, the decision of the Commission is simply evidence properly admissible before the English court which, given the expertise of the Commission, may well be regarded by that court as highly persuasive. As a matter of law, however, it is only part of the evidence which the court will take into account. If, upon an assessment of all the evidence, the judge comes to the conclusion that the view of the Commission was wrong, I do not see how, consistently with his judicial oath, he can say that as a matter of deference he proposes nevertheless to follow the Commission. Only a rule of law, in the nature of an issue estoppel which obliges him to do so, could produce such a result and the Court of Appeal accepted that there was no such rule.

    70.  Mr Vaughan submitted that if your Lordships did not accept that the judge was obliged to follow the opinion of the Commission, it should make a reference to the Court of Justice asking whether he was so obliged or, alternatively, whether in the light of the judge's findings of fact, the decision in the Whitbread case was valid. I see little point in either question: on the first issue, it is conceded that there is no rule of Community law which required the court to follow the Commission, and on the second, the House will either be asking about the validity of a decision about agreements between other parties or else asking the Court of Justice to decide a question of fact which was within the jurisdiction of the national court.

    71.  In my opinion, therefore, the judge was right in deciding that he could decide Delimitis 1 for himself and the Court of Appeal was wrong to reverse his decision on the ground that he should have followed the Commission.

    72.  Although it appears that counsel for Mr Crehan mounted a full-scale appeal against the judge's findings of fact, the Court of Appeal did not suggest that if he had been free to decide the case for himself, his conclusions could not be supported. As I mentioned earlier, on the one point on which they made any comment on his reasoning, they said that his view was ("at its lowest") tenable. Mr Brealey QC, who appeared with Mr Vaughan for Mr Crehan, wished to challenge the judge's findings before the House. But the Court of Appeal gave Inntrepreneur leave to appeal which was limited to the issues on Delimitis 1 and 2, the block exemption and the type of loss falling within article 81. They gave Mr Crehan leave to appeal on the measure of damages. Neither side petitioned the House for leave to argue any other points and the transcripts and other materials which would have been needed for dealing with a full appeal on fact were not made available to the House. Your Lordships therefore declined to hear argument on the facts. It follows that the judge's finding on Delimitis 1 must stand and the appeal must be allowed. I have had the privilege of reading in draft the speech delivered by my noble and learned friend Lord Bingham of Cornhill and would associate myself with his remarks.

    73.  It is unnecessary to say anything about Delimitis 2 (on which the judge, given the artificiality of the necessary hypothesis in the light of his finding on Delimitis 1, stated no concluded opinion) or on the block exemption. The block exemption points raised two points of construction which are now obsolete because the relevant regulation has been revoked and replaced by another block exemption in different terms. There is therefore little point in the House expressing a view on what the true construction would have been. Your Lordships did not invite argument on any of the questions relating to damages, which in the circumstances do not arise. The cross-appeal on quantum must therefore be dismissed.

    74.  Finally, I must mention the intervention of Visa UK Ltd, who are in dispute with the OFT on a point related to the question at issue in this appeal. Mr Stephen Morris QC, who appeared on their behalf, made some succinct submissions which I found very helpful in relation to the questions which the House has to decide. But I say nothing about whether today's decision has any application to Visa, whose position as against the OFT may well be different from that of Mr Crehan against Inntrepreneur.

LORD RODGER OF EARLSFERRY

My Lords,

    75.  I have had the privilege of considering the speeches of my noble and learned friends, Lord Bingham of Cornhill and Lord Hoffmann, in draft. I agree with them and for the reasons they give, I too would allow the appeal.

LORD WALKER OF GESTINGTHORPE

My Lords,

    

 
Continue  Previous