Crehan v Inntrepreneur Pub Company CPC
| Jurisdiction | England & Wales |
| Judge | Lord Justice Peter Gibson,LORD JUSTICE PETER GIBSON,LORD JUSTICE TUCKEY,SIR MARTIN NOURSE |
| Judgment Date | 01 July 2004 |
| Neutral Citation | [2004] EWCA Civ 637,[2004] EWCA Civ 895 |
| Docket Number | Case No: A3/2003/1725,A3/2003/1725 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 July 2004 |
[2004] EWCA Civ 637
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Park J.
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Peter Gibson
Lord Justice Tuckey and
Sir Martin Nourse
Case No: A3/2003/1725
CH1998C801
Mr. David Vaughan CBE Q.C., Mr. Mark Brealey Q.C. and Ms. Marie-Eleni Demetriou (instructed by Messrs Maitland Walker of Minehead) for the Appellant
Mr. Iain Milligan Q.C., Mr. Nicholas Green Q.C., Mr. James Flynn Q.C. and Mr. Martin Rodger (instructed by Messrs Sprecher Grier Halbertstam of Clerkenwell) for the Respondent
This is the judgment of the court to which all of its members have contributed.
We have before us an appeal by the Claimant, Bernard Crehan, against the order made by Park J. on 26 June 2003. The judge dismissed Mr. Crehan's claim against the First Defendant, Inntrepreneur Pub Company (CPC) ("Inntrepreneur"), for damages for breach of Art. 81 of the EC Treaty. The appeal is brought with the permission of the judge. By a Respondent's Notice, Inntrepreneur advances additional grounds for upholding the judge's order relating to points which the judge decided or on which he expressed a view adverse to Inntrepreneur or which he found it unnecessary to decide. In the result we have heard argument on virtually all the points in issue before the judge.
Art. 81
It is convenient at the outset to set out the relevant provisions of Art. 81 (formerly Art. 85) and of the Regulations which govern the obtaining of exemptions from Art. 81.
Art. 81 provides:
"(1) The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
….
(2) Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
(3) The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings;
….
which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question."
The European Court of Justice ("the ECJ") has given definitive guidance on the conditions to be satisfied if a beer supply agreement is prohibited by Art. 81 (1) (see Delimitis v Henninger Bräu AG [1991] ECR I– 935) . There are two cumulative conditions, to which, like the judge, we will refer as Delimitis conditions 1 and 2. The first, which goes to what is called the foreclosure of the market, is that, having regard to the economic and legal context of the agreement at issue, it is difficult for competitors who could enter the market or increase their market share to gain access to the national market for the distribution of beer in premises for the sale and consumption of drinks. The fact that, in that market, the agreement in issue is one of a number of similar agreements having a cumulative effect on competition constitutes only one factor amongst others in assessing whether access to that market is indeed difficult. The second condition is that the agreement in question must make a significant contribution to the sealing off effect brought about by the totality of those agreements in their economic and legal context. The extent of the contribution made by the individual agreement depends on the position of the contracting parties in the relevant market and on the duration of the agreement.
The exemptions provided by Art. 81 (3) might be block exemptions or individual exemptions.
By Council Regulation 1984/83 ("the Block Exemption") an exemption was given for "beer supply agreements", viz. long term exclusive purchasing agreements entered into for the resale of beer in premises used for the sale and consumption of beer. The relevant provisions are contained in Art. 6 of that Regulation:
"(1) Pursuant to Article 85(3) of the Treaty, and subject to Articles 7 to 9 of this Regulation, it is hereby declared that Article 85(1) of the Treaty shall not apply to agreements to which only two undertakings are party and whereby one party, the reseller, agrees with the other, the supplier, in consideration for according special commercial or financial advantages, to purchase only from the supplier, an undertaking connected with the supplier or another undertaking entrusted by the supplier with the distribution of his goods, certain beers, or certain beers and certain other drinks, specified in the agreement for resale in premises used for the sale and consumption of drinks and designated in the agreement.
(2) The declaration in paragraph 1 shall also apply where exclusive purchasing obligations of the kind described in paragraph 1 are imposed on the reseller in favour of the supplier by another undertaking which is itself not a supplier."
Art. 7 of the Block Exemption provides:
"(1) apart from the obligation referred to in Article 6, no restriction on competition shall be imposed on the reseller other than:
(a) the obligation not to sell beers and other drinks which are supplied by other undertakings and which are of the same type as the beers or other drinks supplied under the agreement in the premises designated in the agreement.
….
(2) Beers or other drinks of the same type are those which are not clearly distinguishable in view of their composition, appearance and taste."
Individual exemptions were provided for in Council Regulation 17/62/EEC ("Reg. 17") . By Art. 4 of Reg. 17 agreements in respect of which an exemption under Art. 81 (3) is sought must be notified to the Commission. By Art. 9 (1) the power to grant individual exemptions was given to the Commission alone subject to review of the Commission's decision by the Court of First Instance ("the CFI") . Art. 19 (3) provided for the publication of what are known as advance notices when the Commission intends to take a decision on various matters, including whether to grant individual exemptions. The Commission was required to publish a summary of the application or notification and invite all interested third parties to submit observations.
Also in Reg. 17 is Art. 2 by which the Commission is empowered to give what is known as a negative clearance, that is to say a certificate that on the basis of the facts in its possession there are no grounds under Art. 81 (1) for action on the part of the Commission in respect of an agreement, decision or practice. The Commission can grant a negative clearance if the undertakings concerned apply for it. A more informal procedure for disposing of an application is frequently adopted by the Commission, which may issue a "comfort letter". Such letter is published in the Official Journal so as to bring it to the attention of interested third parties.
Art. 3 of Reg. 17 empowers the Commission, when it finds that there is an infringement of Art. 81, to require the undertakings concerned to bring such infringement to an end.
The facts
The judge's full and careful judgment is now reported at [2003] EuLR 663. We propose only to refer to the salient facts.
In the 1980s each of Grand Metropolitan plc ("GM") and Courage Ltd. ("Courage"), then owned by the Australian company Elders IXL, had major interests in the United Kingdom brewing and pub businesses. Each owned a large number of pubs. Some pubs were not let but were managed by employees as part of the managed estate of each. Other pubs were let to tenants under tenancy agreements which almost invariably contained beer ties. Such ties obliged the tenant to buy all or most of the beer sold in the pub from the brewery which owned the pub. Before 1991 pub tenancies were for short terms generally not exceeding 5 years, but the tenancies were usually renewed on expiry. The tenancies were not assignable. Other publicans borrowed money from a brewery, a term of the loan commonly being that the borrower would buy some proportion of his beer from the brewery. Such loan ties therefore had an effect similar to beer ties.
In August 1986 the Director General of Fair Trading instructed the Monopolies and Mergers Commission ("the MMC") to investigate and report on the existence, or possible existence, of a monopoly situation in relation to the supply of beer within the United Kingdom for retail sale on licensed premises. In February 1989 the MMC reported. It found that a complex monopoly situation existed in favour of the brewers with tied estates and loan ties. The Government responded by making two statutory instruments (known as the Beer Orders) under the Fair Trading Act 1973. By one, the Supply of Beer (Tied Estates) Order 1989 ("the TEO"), a brewery or brewery group owning over 2,000 pubs was required to reduce by 31 October 1992 the number of outlets comprised in their tied and managed estates to 2,000 plus one half of the excess over 2,000 owned since July 1989. The TEO also restricted the permitted scope of beer ties in pub leases, requiring...
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