94/980/EC: Commission Decision of 19 October 1994 relating…, PART IV: LEGAL ASSESSMENT (Article 1–Article 6) — Full Text

Article 6

This Decision is addressed to the members of the TAA, which are listed in Annex I. Done at Brussels, 19 October 1994. For the Commission Karel VAN MIERT Member of the Commission (1) OJ No L 175, 23. 7. 1968, p. 1. (2) OJ No L 378, 31. 12. 1986, p. 4. (3) OJ No L 376, 31. 12. 1988, p. 1. (4) OJ No L 336, 31. 12. 1993, p. 1. (5) OJ No No L 209, 21. 8. 1969, p. 11. (6) TAA letter, 30 March 1993. (7) TAA letter, 5 April 1993. (8) TAA letter, 26 April 1993. (9) North Europe-USA Rate Agreement (Neusara) and USA-North Europe Rate Agreement (Usanera) conferences. (10) OOCL currently operates using former conference members' ships, while NYK did not operate Atlantic services before 1993. See also the explanation of the presence of these two shipping lines on the Committee set out in recital 137. (11) Contract between a shipper and shipping companies under which the shipper undertakes to ship a minimum quantity over a given period, in exchange for a rate of carriage that is less than the tariff (see recital 78). (12) A 20-foot container equals 1 TEU, a 40-foot container equals 2 TEU. (*) [. . .]: In the published version of this Decision, some information has hereinafter been omitted, pursuant to Article 28 of Regulation (EEC) No 1017/68 concerning non-disclosure of business secrets. (13) TAA reply, 17 March 1994, Annex 16 (reply concerning Article 85). (14) Tramp vessel services are defined in Article 1 (3) (a) of Regulation (EEC) No 4056/86. (15) Charter-party: 'A contract by which an entire ship or some principal part of it is let by her owner to a charterer.' (Dictionary of Shipping Law, Hardy Ivamy). (16) The TAA refers to 'charters' as a further source of competition (points 3.88 et seq.), but these are the same as tramp vessels. Charters and tramps are not two forms of transport, but the same form under two different names: the term 'tramp' refers to unscheduled shipping, and a 'charter' is the most common means whereby a tramp vessel is hired. (17) Bill of lading: this document sets out the terms of the contract between the shipper and the carrier, and includes a clear allocation of responsibilities and a breakdown of the transport costs. (18) Other horizontally loaded vessels are also called roro ships by the TAA, but these are in fact specialized vessels, usually for carrying non-containerized loads (e.g. cars), and are not economically suitable for container transport. LASH (lighter abroad ship) transport is the transport of barges in the holds of specialized ships. Containers can be carried on barges. But this type of shipping is suited to river transport or to congested or shallow ports. Here the TAA is in fact referring to specialized carriers. (19) TAA reply, 17 March 1993, point 3.76 (Article 85). (20) There has been as much as a 50-fold increase in port-handling productivity. (21) OJ No L 134, 18. 5. 1992, p. 1. (22) OJ No L 34, 10. 2. 1993, p. 20. (23) TAA reply, 17 March 1994, point 3.72, p. 55 (Article 85). (24) TAA reply, 17 March 1994, point 3.76 (Article 85). (25) TAA reply, 17 March 1994, point 3.73 (Article 85). (26) Report produced for the purposes of the proceeding by Dynamar and presented by the TAA in Annexes 12 and 15 of its reply of 17 March 1994 (Article 85). (27) Some of which are containerized liner shipping companies which the Commission has taken into account in its analysis of this market. (28) The TAA stresses the importance of the weekly frequency of scheduled services for the quality of service. (29) Two points should be made here: - traffic between northern Europe and the United States via the Canadian ports accounts for a relatively small share of the relevant market, as can be seen in recital 147, and competes with only some of the services via ports in the United States, - United States and Canadian law is different, with the result that the TAA, which is subject to United States law, covers only traffic via ports in the United States. (30) As far as the Commission is aware, only some shippers in the south of France have been able to shift their traffic to the Mediterranean ports following the entry into force of the TAA. (31) TAA reply, 17 March 1994, point 3.1, p. 32 (Article 85). (32) Section 5 (b) (8) of the United States Shipping Act of 1984 stipulates that the right of independent rate action is mandatory in trades to or from the United States. (33) Pierre Bauchet, Le Transport Maritime, Economica 1992, pp. 17 and 34. (34) Strategy and Profitability in Global Container Shipping, Drewry, November 1991, p. 122. A figure of [. . .] was given by the TAA in its notification of 28 August 1992, p. 2. (35) Drewry, Container market profitability to 1997, December 1992, p. 79. (36) Drewry, November 1991, p. 123, included in the TAA notification, 28 August 1992, p. 19. (37) North America except west coast, Drewry, November 1991, p. 123, included in the TAA notification, 28 August 1992, p. 19. (38) Trade between Europe and the United States (three coasts), excluding Canada, JOC/Piers. United States Liner Trade Review 1991 Annual Issue, included in the TAA notification, 28 August 1992, p. 17. See also Europe/North American (excluding west coast) trade, Drewry, November 1991, p. 123, and TAA notification, 28 August 1992, p. 19: westbound: - 2,5 %; eastbound: + 10,2 %. (39) Trade between Europe and the United States (three coasts), excluding Canada, JOC/Piers United States Liner Trade Review 1991 Annual Issue, included in TAA notification, 28 August 1992, p. 17. See also trade between Europe and North America (including west coast and Canada), Drewry, December 1992, p. 54: westbound 9,1 %; eastbound + 8,1 %. (40) Trade between Europe and the United States (three coasts), JOC/Piers and TAA reply, 15 July 1993. (41) European containerized exports to the United States moving via north European ports, TAA reply, 17 March 1994, point 3,57 (Article 85). See also Figure 23 presented at the hearing of 28/29 April 1994 and TAA letter, 1 June 1994. (42) Traffic from the three coasts of the United States, JOC/Piers 1991, and TAA notification, 28 August 1992, p. 17. (43) Trade with the three coasts of the United States, JOC/Piers, and TAA reply, 15 July 1993. (44) Drewry, December 1992, p. 54. (45) See Figure 26 presented at the hearing of the TAA of 28/29 April 1994. See also 12,7 % imbalance according to the figures supplied by the TAA on 25 May 1994 concerning volumes excluding transhipment. See also imbalance of 26 % on all trades between Europe and the United States, TAA reply, 17 March 1994, Tables 13 and 14 (Article 85). (46) TAA reply of 19 November 1993 to a request for information. See also TAA reply of 25 May 1994 to a request for information. (47) Drewry, November 1991, p. 1. (48) Drewry, December 1992, p. 81. The rates are based on the volumes transported excluding military cargoes, and relay traffic; they are therefore lower than the actual rates of vessel utilization. (49) For 1991, see notification of 28 August 1992, p. 25. For 1992, see TAA reply, 15 July 1993. (50) TAA notification, 28 August 1993, p. 23. (51) Drewry, December 1992, p. 9. (52) Drewry, November 1991, p. 1, referred to in the TAA notification, 28 August 1992, p. 24. (53) TAA reply of 25 May 1994. (54) In the continental Europe-United States Atantic coast trade in 1993, the rates in the maritime sector range from US $ 500 to US $ 3 500 for a 40-foot container depending on the category of goods being shipped. (55) In current United States dollars. (56) Drewry, December 1992, p. 115. (57) TAA notification, 28 August 1992, p. 27. (58) In current United States dollars. (59) TAA reply to the statement of objections of 14 April 1993, 24 May 1993, Part I, p. 8. (60) TAA reply to a request for information, 15 July 1993. with the exchange rates communicated by the TAA in its reply of 24 May 1993, Annex 17. (61) TAA members' losses in the transatlantic trade, expressed in term of the eastbound and westbound volumes carried by TAA members in the relevant year (see point 146). (62) TAA reply, 17 March 1994, point 2.58, p. 31 (Article 85). (63) TAA reply, 17 March 1994, Annex 4 (Article 85). (64) FMC Statistics, 19 July 1993. (65) FMC Statistics, 19 July 1993. (66) Eurocorde I (EC-I) and Eurocorde Discussion Agreement (EDA). See Commission communication of 3 July 1990 (OJ No C 162, 3. 7. 1990, p. 13). (67) See Commission communication of 29 March 1990 (Gulfway) (OJ No C 130, 29. 5. 1990, p. 3). (68) See editorial of the Journal of Commerce of 20 March 1990, in which the point was made that 'the line between conference carriers and independent lines was becoming blurred' and that 'if conference carriers and independent lines can discuss rates and capacity programmes together at any time, why bother having a federally sanctioned conference at all?' See also the Journal of Commerce (International Edition Special Report), 2 July 1990, p. 12. (69) Speech by Karl Heinz Sager, chairman, Senator Line, Bremen, Germany, before the Eurofreight conference, Brussels, Belgium, 9 to 11 April 1990. Speech by Karl Heinz Sager, chairman, Senator Line, Bremen, Germany, before the 'Financial Times' conference, Amsterdam, Netherlands, RAI International Exhibition Centre, 12 November 1991. (70) See the record of a meeting between all the future members of the TAA plus [. . .] (independent) on 13 January 1992 in Geneva sent to [. . .] (independent) by [. . .], a member of the TAA and containing a number of points indicating the desire to maintain a difference in treatment between the conference members and the former independents: [. . .]. (71) See minutes of the 'Gulfway meeting', 8 October 1992. (72) See FEFC conference on the Europe-Far East trade, in which NYK participated. (73) See TAA reply to the Commission, 11 January 1993, Annex 1. (74) See Tariff Formation Committee, 1 October 1992. (75) See telex of 1 December 1992 on 'Highlights of TAA principals meeting - London 23 November 1992': 'Addressed DG IV complaint to TAA that fixed differentials by non-rate committee lines on class tariff would be violation of EC competition laws. Lines then agreed with counsel to file class tariff as uniform and common rates for all members. Non-rate committee lines may establish differentials via independent action, if necessary.' See legal analysis, recitals 320 to 358. (76) See TAA proposal to [. . .] of 30 November 1992 and TAA proposal to [. . .] of 13 November 1992, proposing within the same service contract different rates for structured members and others. (77) Data shown rounded off to nearest tenth of 1 %. (78) Source: JOC/Piers, reproduced by the TAA in its notification (p. 17, 28 August 1992) and in its reply of 15 July 1993 to a request for information (Annex 2, Table 4). (79) Source: JOC/Piers Special Data Run, TAA reply, 17 March 1994, Table 12. Figures calculated on a similar basis to those for 1991 and 1992, but without the total westbound and eastbound volumes combined. See also figures supplied by TAA on 25 May 1994, taken from JOC/Piers Global Container Report but calculated on a different basis from the figures supplied for 1991 and 1992. According to these new statistics, the TAA had in 1993 a share of the direct transatlantic trade between northern Europe and the United States of 69,7 % in the westbound sector and 71,7 % in the eastbound sector. (80) Cargo volume shown in TEUs, rounded off to the nearest 100 TEU increment and excluding bulk, military and government cargoes. (81) TAA reoly, 17 March 1994, point 3.44 (Article 85). (82) FMC Statistics, 19 July 1993. (83) [. . .]. (84) TAA reply, 17 March 1994, point 3.97 et seq. (Article 85). (85) See TAA 1993 Revenue Programme, TAA meeting, 4 September 1992. (86) See TAA Tariffs, 4 November 1992. (87) See TAA proposal to [. . .] of 6 November 1992, TAA proposals to [. . .] of 13 November 1992 and 26 October 1992. (88) See TAA proposal to [. . .] of 25 November 1992. (89) This limit was reduced to 200 TEU in 1994. (90) See Hapag Lloyd proposal to [. . .] of 4 December 1992. (91) See: - letter from [. . .] of 4 December 1992, - TAA proposal to [. . .] of 6 November 1992, - TAA proposal to [. . .] of 13 November 1992. (92) See record of Gulfway meeting, 8 October 1992. (93) See TAA 1993 Revenue Programme. (94) See: - letters sent by [. . .] to the TAA and the CNUT on 14 December 1992, - letter sent by [. . .] to the FMC on 7 December 1992, - letter sent by [. . .] to the BSC on 27 January 1993, - letter to [. . .] of 13 November 1992, - letter sent by the TAA to [. . .] on 3 December 1992. (95) TAA reply to the statement of objections (interim measures), 24 May 1994. (96) JOC/Piers, included in the TAA's reply to the statement of objections (interim measures), 24 May 1993, p. 46. (97) JOC/Piers, included in the TAA's reply to the statement of objections (interim measures), 24 May 1993, p. 46. (98) See fax sent by [. . .]. (99) See article describing the Canadian route as being more expensive, Lloyds Antwerp, 16 January 1993. (100) TAA notification, 28 August 1992, p. 3. (101) TAA letter to the Commission, 14 August 1992, and TAA notification, 28 August 1992, Annex 2. (102) See Commissions's Twelfth Report on Competition Policy, 1982, p. 44. (103) The notified TAA agreement provides for the possibility of such capacity exchange or chartering agreements (see recital 24). However, the TAA has not notified, in accordance with the procedural rules in force, any specific agreement on the rationalization of capacities through such capacity exchanges or chartering. (104) TAA reply of 16 June 1993 to a request for information, Annex 3. (105) TAA reply, 17 March 1994, point 2.36 (Article 85). (106) TAA reply of 17 March 1994, Table 8, p. 26 (Article 85). (107) Containerisation International, August 1992, p. 38. (108) See TAA reply to a request for information, 15 July 1993, Tables 9 and 10. (109) [1991] ECR I, p. 1979 paragraphs 32 and 33. (110) [1993] ECR II, p. 389, paragraph 134. (111) See sixth recital to Regulation (EEC) No 4056/86. (112) [1987] ECR, p. 4789, paragraph 18. (113) TAA reply to the statement of objections (interim measures), 24 May 1993, p. 72, point 2.32. (114) TAA reply to the statement of objections (interim measures), 24 May 1993, p. 68, point 2.26. (115) See the opinion of Advocate-General Van Gerven in Case C-234/89 Delimitis, [1991] ECR I, p. 955, point 5 and p. 960, point 10. (116) See the amended proposal for Regulation (EEC) No 4056/86, in OJ No C 212, 23. 8. 1985, p. 2, and the Commission's Fifteenth Report on Competition Policy (1985), point 34, p. 45, for the alignment of the definition of liner conference in the Regulation on that in the Code of Conduct, and Article 1 (3) (b)of the Regulation, and the Code of Conduct, Annex I. (117) OJ No L 121, 17. 5. 1979, p. 1. (118) Juda, Lawrence, The Unctad Liner Code: United States Maritime Policy at the Crossroads, Westview Press Inc., Boulder, Colorado, 1983, p. 15. 'The definition of "liner conference" as finally approved in the wording of the Code clearly limits the conception of liner conference to its traditional meaning, leaving independent non-conference operators outside of that definition and thus beyond the purview of the Code which is a Code of Conduct for Liner Conferences. Another indicator of the fact that Code framers envisaged a continued role for independent liner shipping is implicit in the text of Article 18 of the Code which treats fighting ships and states: Members of a conference shall not use fighting ships in the conference trade for the purpose of excluding, preventing or reducing competition by driving a shipping line not a member of the conference out of the said trade. Further, the diplomatic conference which adopted the Unctad Code also adopted a resolution, albeit non-binding in nature, which resolves that shippers should not be deprived by the Liner Code of the option of utilizing non-conference lines so long as those lines adhere to the principle of "fair competition on a commercial basis".' (119) According to Croner's World Directory of Freight Conferences, there were more than 270 conferences in existence in May 1989. This figure is subject to frequent variation. (120) Fawcett, F. Conger and Nolan, David C., 'United States Ocean Shipping: the History Development and Decline of the Conference Antitrust Exemption', in Northwestern Journal of International Law and Business, Volume I, 1979, p. 538. (121) Herman, Amos, Shipping Conferences, Lloyds of London Press Ltd, London, 1984, p.23. (122) Shah M. J., an overview in Shipping Nationalism and the Future of the United States Liner Industry: the Unctad Code and Bilateralism - proceedings of a workshop, November 1983, Center Ocean Management Studies, edited by Lawrence Juda; Time Press Educational Publishing Wakefield, Rhode Island, 1984, p. 3. (123) Report of the Royal Commission on Shipping Rings, 1909, Majority Report, point 127, p. 41 and point 147, p. 45. See also points 111, 132, 136 and 142. (124) Ibid. (125) The words 'selon les exigences propres à un trafic, et spécifier un taux de fret' appear in the French and other language version but have been unintentionally omitted from the English version. (126) Stability enables shippers to avoid the effects of 'excessive and unforeseeable variations in freight rates' (document COM(81) 423 final, preliminary draft of Regulation (EEC) No 4056/86, p.6), and quote c. i. f prices in safety. According to the Unctad report, United Nations Document TD/B/C/4/62/Rev. 1, p. 5, points 28 and 29: 'Conferences further argue that they provide fixed rates which are reasonably stable. In the case of most of the conferences under normal circumstances, rates are increased only on "current plus two months" notice. Stable rates fix the transport element in the c. i. f. price and shippers are able to quote prices and make contracts for future delivery without the fear that fluctuations in freight rates will introduce a speculative element'. (127) On this point see for example Marx, Daniel, International Shipping Cartels, Princeton, New Jersey, 1953, p. 117: 'The practice of making rates lower by a fixed percentage from those of other carriers destroys stability and is detrimental to the nation's commerce'. (128) United Nations Document TD/B/C/4/62/Rev. 1, point 156. (129) Ibid., point 161. (130) Ibid., point 29. (131) United Nations Document TD/104/Rev. 1, point 6. (132) See Censa documents of 19 and 30 January and 5 February 1974. (133) Report of the Royal Commission on Shipping Rings, 1909, point 147. (134) Unctad report referred to above at recitals 76 to 81, p. 12. (135) See for example Herman, A., Shipping Conferences, 1983, already referred to, p. 89; 'Continental North Atlantic Westbound Freight Conference and the North Atlantic Continental Freight Conference filed with the FMC proposed amendments to their agreements providing for the division of membership into two classes, A and AA. Class AA may quote 8,5 to 10 % lower rates that those of Class A. The differentiation in rates was requested by the Conferences because of the disparity in the kind of service supplied by the two classes. Class A provides full container service and Class AA provides traditional, break-bulk service' (italics added for emphasis). (136) See The Liner Conference System, Unctad, 1970, Chapter III, p. 12: point 78: 'Associate members are subject to all the duties and obligations of full members in respect of the cargo handled in the trade covered by the conference agreements'; point 81: 'Membership of the conference [. . .] obliges the line to follow the conference tariff rates and the rules and regulations of the conference. Membership of the conference thus eliminates the freedom of each line to operate an individual pricing policy within the sphere of the conference.' (137) See the document mentioned in footnote 70. (138) The Regulated Ocean Shipping Industry, a report of the United States Department of Justice, January 1977, p. 69. (139) Ibid., p. 142. (140) According to the information provided by the TAA in reply to the statement of objections, there were 772 cases of independent rate action by members of Neusara and Usanera in 1991. The figure for 1988 was 801. This figure is tiny in comparison with the number of cases of independent rate action in 1988 under what are known as the transpacific agreements, whose members operate between the west coast of the United States and Asia, where the figure was 69 775, and the east coast of the United States and Asia, where the figure was 28 798 (see section 18 of the Federal Maritime Commission Report on the Shipping Act of 1984, September 1989, p. 662). (141) Loyalty arrangements are described in Chapter 4 of the Unctad report referred to in point 327 of this Decision, at points 144 to 155, pp. 17 to 23. (142) The United States Shipping Act of 1984 includes a de facto ban on loyalty agreements in United States trades. Section 3 (14) of the Act, 46 USC app. 1702 (14), defines a 'loyalty contract' as follows: 'loyalty contract' means a contract with an ocean common carrier or conference, other than a service contract or contract based upon time-volume rates, by which a shipper obtains lower rates by committing all or a fixed portion of its cargo to that carrier or conference.'. Under Section 10b (8) and (9), 46 USC app. 1709, 6 (8) and (9): 'No common carrier, either alone or in conjunction with any other person, directly or indirectly may (8) offer or pay any deferred rebates; (9) use a loyalty contract except in conformity with the antitrust laws'. (143) It may be noted that the system initially provided for differentiated between structured and unstructured members even in respect of independent rate action, demonstrating more clearly again that as far as prices were concerned there were two categories of member: structured members were give advance notice of 10 days, while unstructured members had no such obligation; this was intended to maintain the price flexibility distinguishing the independents from the old conference members. The system was changed following the Commission's letter of 27 August 1992, which explained that this was one of the reasons why the TAA could not be considered a conference within the meaning of Regulation (EEC) No 4056/86. (144) The Commission considers that it would not be a proper exercise of this right to invoke it in an agreement in order to establish rates differentiating between two or more categories of parties to the agreement; such an agreement would not constitute a conference exempted by Regulation (EEC) No 4056/86. (145) See the eighth recital to Regulation (EEC) No 4056/86. See also the Unctad report of 1970, referred to in recital 327 of this Decision, at points 9 to 11, p. 3. (146) Commission proposal of 13 October 1981. For explanatory memorandum see COM(81) 423 final. (OJ No C 282, 5. 11. 1981, p. 4). (147) See Article 19 of the Unctad Code of Conduct, which expressly refers to such fluctuations. (148) In the English version the term 'shippers' is used instead of 'carriers'. This is clearly a mistake because: 1. the recital would be meaningless if 'shippers' were the correct term; 2. all the other language versions of the Regulation talk of carriers. (149) TAA reply, 17 March 1994, Annex 18, points 8 and 15 (Article 85). (150) The English version of Article 3 of Regulation (EEC) No 1017/68 has omitted the word 'sole', which is included in the original text of this Regulation and in Council Regulations (EEC) No 4056/86 (Article 2) and (EEC) No 3975/87 (Article 2) (OJ No L 374, 31. 12. 1987, p. 1). (151) [1992] ECR II, p. 1995, paragraph 69. (152) Ibid., paragraph 74. See also the judgments of the Court of Justice in Joined Cases 43 and 63/82 VBVB and VBBB v. Commission [1984] ECR, p. 19 and in Case 42/84 Remia v. Commission [1985] ECR, p. 2545. (153) On the concept of stability, see also footnote 126. (154) TAA reply, 17 March 1994, point 2.7 (Article 85). (155) TAA reply to the statement of objections (interim measures), 24 May 1993, p. 32, point 1.77. (156) TAA reply, 17 March 1994, point 2.27 (Article 85). (157) This objective of protecting the weakest lines had already been put forward by the shipping lines and disputed by the 1970 Unctad report (point 33). 'From the point of view of the conference shipping lines, it is claimed that . . . The conference system also prevents elimination of weaker shipping lines, which could happen in the face of free competition, although it is difficult to see why this is an advantage to anyone but the weaker lines' (italics added for emphasis). (158) TAA reply, 17 March 1994, point 4.58, p. 85 (Article 85). (159) On the concept of stablility, see recitals 388 and 389 and footnote 126. (160) See TAA reply to the statement of objections, 17 March 1994, Tables 1 and 2. (161) See for example the disappearance of calls in a number of ports in northern Europe. (162) TAA reply, 29 October 1993. (163) According to the information provided by the TAA in reply to the statement of objections, there were 772 cases of independent rate action by members of Neusara and Usanera in 1991. The figure for 1988 was 801. This figure is tiny in comparison with the number of cases of independent rate action in 1988 under what are known as the transpacific agreements, whose members operate between the west coast of the United States and Asia, where the figure was 69 775, and the east coast of the United States and Asia, where the figure was 28 798 (see Section 18 of the Federal Maritime Commission Report on the Shipping Act of 1984, September 1989, p. 662). (164) This analysis relates exclusively to these services. (165) TAA reply, 17 March 1994, footnote 9, p. 37. (166) TAA reply, 17 March 1994, point 3.113, p. 66 (Article 85). (167) See the record of the TAA hearing, 28 and 29 April 1994, p. 98. (168) To show that Evergreen did not saturate its capacity in 1993, the TAA merely refers to a statement made in 1994 by an Evergreen representative, in a newspaper distributed in the United States, which appears to concern the eastbound sector rather than the westbound sector under discussion here. (169) FMC Statistics, 19 July 1993. (170) TAA reply, 17 March 1994, point 3.38. (171) For a general view of the question of the fixing of overland transport rates by liner conferences or groupings of shipowners see the Commission's report on the application of the competition rule to maritime transport, 8 June 1994 (SEC(94) 933 and IP(94) 508).

94/980/EC: Commission Decision of 19 October 1994 relating… PART IV: LEGAL ASSESSMENT

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