## Facts

- Grundig, a German electronics manufacturer, appointed Consten, a French wholesaler, as its exclusive distributor for France.
- The distribution system sought to secure Consten “absolute territorial protection” in France.
- Grundig agreed not to supply other distributors for the French territory and to prevent other authorized distributors in the Community from exporting Grundig products into France.
- Consten was authorized to register and use a national trade mark in France connected to Grundig products, which facilitated monitoring and blocking parallel imports.
- A parallel trader imported Grundig goods from Germany into France and sold them at lower prices; Consten and Grundig attempted to stop these imports, including by invoking trade-mark rights.
- The Commission found that the agreement’s export-ban/territorial-protection system restricted competition and affected trade between Member States, refused exemption, declared the restrictive clauses void, and ordered the undertakings not to use national trade-mark rights to obstruct parallel imports.
- Consten and Grundig sought annulment of the Commission decision.

## Issues

1. Whether an exclusive distribution agreement combined with export bans and absolute territorial protection restricts competition by object or effect under Article 85(1) EEC.
2. Whether such arrangements may affect trade between Member States even if overall sales increase.
3. Whether the Commission may, in applying Article 85(1) and Regulation 17, prohibit use of national trade-mark rights when used to implement market partitioning.
4. Whether Article 85(2) renders the entire contract void or only the infringing clauses, if severable.
5. Whether alleged procedural defects in the Commission proceedings required annulment.

## Decision

- The Court dismissed the actions and upheld the Commission decision.
- The Court held the contractual system providing absolute territorial protection, including export prohibitions, restricted competition by object under Article 85(1).
- The Court held the arrangements were capable of affecting inter-State trade because they threatened to restore national divisions and impede common-market integration.
- The Court held national trade-mark rights could not be used as instruments to enforce an anti-competitive market-partitioning agreement; the Commission could order cessation of such use.
- The Court held nullity under Article 85(2) attached to the infringing clauses (and only extended further if the illegal provisions were inseparable from the remainder).
- The Court rejected procedural challenges as insufficient to invalidate the decision.

## Legal Principles

- Article 85(1) reaches agreements between undertakings, including vertical distribution arrangements, when their object is to restrict competition.
- “Absolute territorial protection” (measures eliminating parallel imports and insulating a national territory) is a restriction by object because it tends to re-create national barriers within the common market.
- The “effect on trade between Member States” requirement is satisfied where an agreement is apt to alter trade patterns or impede market integration, even absent a proven net reduction in trade volumes.
- Sole-distribution contracts are not categorically outside Article 85(1); legality depends on the concrete restraints, particularly export bans and market-partitioning mechanisms.
- Article 85(2) voids the prohibited parts of an agreement; broader invalidity depends on severability and whether the unlawful terms are inseparably linked to the rest.
- The existence of national intellectual property rights is not denied, but their exercise may be limited when used to implement or reinforce an Article 85(1) infringement.

## Conclusion

The Court affirmed that a distribution system designed to seal off a Member State through export bans and trademark-based enforcement constitutes an Article 85(1) restriction by object and may affect inter-State trade, while limiting automatic nullity to the severable infringing clauses and permitting constraints on trademark enforcement used to block parallel imports.


Établissements Consten S.à.r.l. & Grundig-Verkaufs-GmbH v. Comm’n, Joined Cases 56 & 58/64, 1966 E.C.R. 299 (Ct. J. 1966)