Competition Law Volkswagen v.

Commission of the European Communities

Anti-Competitive Agreements à Vertical Restraints (Sec. 14)
SUMMARY
Volkswagen vehicles are sold in the Community within a
framework of exclusive distribution by authorized dealers with
which Volkswagen has concluded a dealership agreement.
Subsequently, Volkswagen made requests (or “calls at issue”) to
its dealers with the intention to influence them regarding its
pricing policy. The Commission argues that these calls at issue
is covered by an agreement under Art. 81(1). The Court ruled
that this is not so.
2003 Tiili
DOCTRINE
For an agreement within the meaning of Article 81(1) EC to be
found to exist, it is necessary to prove a concurrence of wills. In
addition, such a concurrence of wills must cover particular
conduct, which must, therefore, be known to the parties when
they accept it.
It does not follow that for a request of a manufacturer to its
dealers to form part of a contract, the decisive element is that
the request be intended to influence the dealer in the
performance of the contract.

FACTS

▪ Volkswagen, a holding company, operates in the automobile construction sector. The motor vehicles produced are sold in the
Community within the framework of a system of selective and exclusive distribution by authorized dealers with which Volkswagen
has concluded a dealership agreement.
▪ The different dealership agreements throughout 1995 to 1989 contain the following clauses:
o Clause 4(1): Volkswagen grants the dealer an agreed territory.
o Clause 2(6)/2(1): The dealer undertakes to defend the interests of Volkswagen and to comply with all instructions issued
for the purposes of the agreement regarding distribution of cars.
o Clause 8(1): Volkswagen will issue non-binding price recommendations concerning retail prices and discounts.
▪ Following a buyer’s complaint, the Commission sent Volkwagen requests for information concerning its pricing policy and the
fixing of selling price of the Passat model. The Commission then accused Volkwagen of having infringed Art. 81(1) EC by
agreeing with the German dealers in its distribution network to strict price discipline for sales of the Passat model. Commission’s
accusation was based on the “calls at issue”, or the circulars and letters sent by Volkswagen to its German dealers on
various dates from 1996 to 1998.
▪ Commission then issued the contested Decision stating that Volkswagen has infringed Art. 81(1) EC by setting the selling price of
Passat on the basis of exhortations to its German authorized dealers to grant limited discounts or no discounts at all to its
customers in selling the Passat.
▪ Volkswagen’s arguments
o There was no agreement within the meaning of Art. 81(1) between Volkswagen and the German dealers. Assuming that
the calls at issue were subject of an agreement, they were not capable of affecting trade between Member States.
o Under case-law, the concurrence of wills between undertakings is the central element in the concept of agreement.
Unilateral measures taken without agreement of their addressee are not covered by the provision. Agreements are
prohibited only exceptionally, when they are unilaterally purely by appearance and their addressee agrees to them
tacitly.
o Commission is wrong to allege that unilateral calls by a manufacturer constitute Art. 81(1) agreement when they are
“intended to influence” the dealer in the performance of its contract. This enlarges the meaning of the agreement. This
argument means that an attempt to influence would be capable of infringing Art. 81(1).
o That apparently unilateral behavior may be covered by Article 81(1) EC only if it “forms part” of the contractual relations,
that is to say that it is compatible with the existing contractual relationship by reason of the unanimous interpretation of
both parties to the contract. It is only in such cases that the “materialization” of the contractual links alleged by the
Commission can take place. It is not therefore sufficient that the manufacturer's calls “form part” of a pre-existing
contractual link, nor that the manufacturer refers, in such calls, to the dealership agreement.
o A dealer who joins a distribution network can agree to a distribution policy only in so far as it is already established. Later
changes to that policy can take place only if the contract contains an appropriate reservation, and only within its limits. If
there is none, the contract would have to be varied by both parties.
▪ Commission’s arguments
o The calls at issue became integral parts of the dealership agreement and therefore constitute 'agreements' within the
meaning of Article 81(1) EC.
o It is not necessary, at least in the case of selective distribution systems such as that in this case, to look for
acquiescence to a call by the manufacturer in the behavior which the dealer adopts in the context of that call (for
example after its receipt). Such acquiescence must be regarded as established as a matter of principle, from the
mere fact that the dealer has entered the distribution network. It is therefore deemed to have been given by the
dealer.
o For a call by the manufacturer to become part of the contract, it is not necessary that the distribution agreement include
an express reservation clause. The decisive point is the purpose of the call, which is to influence dealers in the
performance of that contract. Thus, an unlawful policy of a manufacturer adopted in the context of a lawful distribution
agreement, can become an integral part of that contract without the necessity of the contract containing an express
reservation to that effect. It is presumed that by joining a distribution system, the dealer approves the manufacturer's
distribution policy in advance, a policy which is naturally not foreseeable in all its details when the dealer joins.

RATIO

W/N the “calls at issue” are considered “agreement” under Art. 81(1) EC?

NO.

Case-law:
• In order for there to be “agreement” within the meaning of Article 81(1) EC, it is sufficient that the undertakings in question should
have expressed their joint intention to conduct themselves on the market in a specific way.
 • As regards the form in which that common intention is expressed, it is sufficient for a stipulation to be the expression of the
parties’ intention to behave on the market in accordance with its terms.
• The concept of “agreement” within the meaning of Article 81(1) EC, as interpreted by the case-law, centers around the existence
of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant so long as it
constitutes the faithful expression of the parties’ intention.
• Where a decision of the manufacturer constitutes unilateral conduct of the undertaking, that decision escapes the prohibition in
Article 81(1) EC.
• In certain circumstances, measures adopted or imposed in an apparently unilateral manner by a manufacturer in the context of its
continuing relations with its distributors have been regarded as constituting an agreement within the meaning of Article 81(1) EC.

Court’s decision:
• However, a distinction should be drawn between cases in which an undertaking has adopted a genuinely unilateral measure, and
thus without the express or implied participation of another undertaking, and those in which the unilateral character of the
measure is merely apparent. The latter must be regarded as revealing an agreement between undertakings and may therefore
fall within the scope of Art. 81(1). That is the case, in particular, with practices and measures in restraint of competition which,
though apparently adopted unilaterally by the manufacturer in the context of its contractual relations with its dealers, nevertheless
receive at least the tacit acquiescence of those dealers.
• Commission cannot hold that apparently unilateral conduct on the part of a manufacturer, adopted in the context of the
contractual relations which it maintains with its dealers, in reality forms the basis of an agreement between undertakings within
the meaning of Article 81(1) EC if the Commission does not establish the existence of an acquiescence by the other
partners, express or implied, in the attitude adopted by the manufacturer.

In this case:
• It has not been established that the calls at issue were implemented in practice.
• The argument of the Commission, in which it disregards as irrelevant the question whether the applicant's dealers actually
acquiesced in the calls at issue when they became aware of them, that is to say after they were sent to them, cannot succeed.
• A contractual variation could be regarded as having been accepted in advance, upon and by the signature of a lawful dealership
agreement, where it is a lawful contractual variation which is foreseen by the contract, or is a variation which, having regard to
commercial usage or legislation, the dealer could not refuse. By contrast, it cannot be accepted that an unlawful contractual
variation could be regarded as having been accepted in advance, upon and by the signature of a lawful distribution agreement. In
that case, acquiescence in the unlawful contractual variation can occur only after the dealer has become aware of the variation
desired by the manufacturer.
• Commission is wrong to assert that the signature by the applicant's dealers of the dealership agreement involves acceptance on
their part of the calls at issue. Such an assertion is contrary to Article 81(1) EC which requires proof of a concurrence of wills.
• Commission was wrong to rely on its contention that the signature of a distribution agreement implies, as a matter of principle and
irrefutably, the tacit acceptance of future unlawful variations of that agreement.
• For an agreement within the meaning of Article 81(1) EC to be found to exist, it is necessary to prove a concurrence of
wills. In addition, such a concurrence of wills must cover particular conduct, which must, therefore, be known to the
parties when they accept it.
• Contrary to the Commission’s argument, it does not follow from the case-law that, for a request to form part of a
contract, the decisive element is that the request be intended to influence the dealer in the performance of the contract.
• In the present case, the Commission has merely observed, as was evident, that the calls at issue were intended to influence the
dealers in the performance of their agreements. It did not consider it relevant to prove actual acquiescence by the dealers to
those requests when they had become aware of them, but submitted, wrongly, that the signature of a lawful contract implied tacit
acceptance of those calls in advance. Therefore, it must be held that the Commission has not proved the existence of an
agreement within the meaning of Article 81(1) EC.

FALLO

[You may paraphrase this as long as the essence of Fallo is there.] WHEREFORE, premises considered, Dela Cruz is guilty of jaywalking.
SO ORDERED.

SEPARATE OPINION NOTES

Put here any notes regarding separate opinions, if need. Especially if requested by professor.