This Decision is addressed to the undertakings listed in Annex I.
Done at Brussels, 30 April 1999.
For the Commission
Karel VAN MIERT
Member of the Commission
(1) OJ L 378, 31.12.1986, p. 4.
(2) OJ L 376, 31.12.1988, p. 1.
(3) Regulation since repealed and replaced by Commission Regulation (EC) No 2842/98 (OJ L 354, 30.12.1998, p. 18) and Commission Regulation (EC) No 2843/98 (OJ L 354, 30.12.1998, p. 22).
(4) CGM SA is the legal successor to CGM Orient SA. DSR-Senator Linie GmbH is the legal successor to Deutsche Seereederei Rostock GmbH and Senator Linie GmbH. In 1996, CGM was purchased by Compagnie Maritime d'Affretement. In 1997, Nedlloyd Lijnen BV and P& O Containers Limited merged to form P& ONedlloyd, Hapag Lloyd AG transferred its containerised liner shipping activities to Hapag Lloyd Container Linie GmbH and Hanjin acquired control of DSR/Senator.
(5) OJ C 97, 6.4.1993, p. 2.
(6)
"WHEREAS:
(a) The Parties operate scheduled international maritime transport services between North Europe and Asia;
(b) the economic and trading environment in the Eastbound North Europe to Asian Trades has resulted in a combination of overcapacity and consistently depressed freight rates;
(c) the economic imbalances described in recital (b) above have led to consistently uneconomic rates of return on investment for the parties ...
(d) the said economic imbalances and their consequences as described in recitals (b) and (c) above are continuing to deteriorate, leading to a threat to the future financial viability and stability of scheduled liner services from North Europe to Asia;
(e) ...".
(7) TEU/FEU is the industry standard abbreviation for (
"20-foot equivalent unit/40-foot equivalent unit") and refers to the size of the containers.
(8) Non-scope Cargo is cargo lifted from ports outside the geographical scope of the EATA.
(9) See paragraph 4.2.7 of the application for exemption. See also the comments of the Japan Shipper's Council at recital 147 of this Decision.
(10) See application for exemption at paragraph 1.5.
(11) Members: APL, Evergreen, Hanjin, Hapag-Lloyd, Hyundai, Maersk, Mitsui OSK, Nedlloyd, NOL, NYK, OOCL, P& OCL, Sea-land, Yangming.
(12) Drewry, Global container markets, London 1996, p. 72.
(13) OJ L 376, 31.12.1994, p. 1.
(14) See reply to the Statement of Objections at paragraph 2.51.
(15) Drewry, Global container markets, p. 73.
(16) Drewry, Global container markets, p. 162.
(17) Case C-333/94 P, Tetra Pak International v. Commission [1996] ECR I-5951, at paragraphs 13, 14 and 15.
(18) See the definition of "tramp vessel services" in Article 1(3)(a) of Regulation (EEC) No 4056/86, which emphasises the freely negotiated nature of tramp service freight rates
(19) It should be noted that containers generally measure 20 feet of 40 feet by 8 feet on the outside and that vessel slots are sized to match. Accordingly cargoes which are larger in width or length than these dimensions use up slots in an inefficient manner.
(20) Such oneway substitutability is not restricted to shipping: for example, although soft drinks are not a substitute for bottled waters, it is not necessarily the case that bottled waters are not a substitute for soft drinks - see Commission Decision 92/553/EEC in Case No IV/M.190 - Nestlé/Perrier (OJ L 356, 5.12.1992, p. 1).
(21) Drewry Global container markets, pp. 38 to 48.
(22) According to Mats Jansson, President of Unicool and Cool Carriers, "The reefer container capacity deployed is still limited and the negative impact so far on the demand for specialised reefers is small" (Fairplay, 3 July 1997).
(23) Drewry, Global container markets, pp. 69 and 71.
(24) Drewry, Global container markets, p. 70.
(25) Drewry, Global container markets, p. 76.
(26) EACBen was a party to all three agreements. DSR/Senator and Yangming became members of the FEFC in 1996. Hyundai became member of the FEFC in 1998.
(27) The FEFC includes the Europe/Japan and Japan/Europe Freight Conferences, Hong Kong/Europe Freight Conference, Philippines/Europe Conference and Sabah, Brunei and Sarawak Freight Conference.
(28) Article 3 of Regulation (EEC) No 4056/86
(29) See letter from the EATA secretary to the Commission dated 19 October 1993.
(30) See letter from CNUT to the Commission dated 27 September 1991.
(31) See letter from the FETTCSA secretariat to the Commission dated 19 October 1993.
(32) "It is generally accepted that the FEFC tariff, in the Europe to Asia trades acts as an industry reference point, and independents compete aggressively against the FEFC by offering rates, which are set at a discount from the FEFC tariff". Per FEFC reply to the statement of objections in Case IV/33.218 - DSVK/FEFC, 31 March 1993 at p. 23. That case led to Commission Decision 94/985/EC (OJ L 378, 31.12.1994, p. 17).
(33) Drewry, Global container markets, p. 110.
(34) See letter from the FETTSCA secretariat to the Commission dated 19 October 1993 referred to in note 31.
(35) Drewry, Container market profitability to 1997, London, December 1992, p. 87.
(36) According to figures supplied to the "The American shipper" by NYK and published in the August 1993 edition, westbound capacity (2,42 million TEU) at that time exceeded eastbound capacity (1,75 million TEU) by some 38 %.
(37) 'An analysis of cost and supply conditions in the liner shipping industry', J. E. Davies, The Journal of Industrial Economics, June 1983, at p. 425.
(38) See application for individual exemption at paragraphs 2.5.46 and 2.5.47.
(39) See the Commission's proposal for a Council Regulation laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport (OJ C 282, 5.11.1981, p. 4) and the accompanying memorandum. COM (81) 423 final.
(40) See reply to the Statement of Objections at paragraph 1.6.
(41) No examples have ever been put forward by the EATA parties of shortages of capacity arising from the withdrawal of vessels from the trade.
(42) See for example the judgement in Case T-29/92 SPO v. Commission [1995] ECR II-289, at paragraph 294, where the Court of First Instance of the European Communities considered that no distinction could be made between normal and destructive competition. The appeal was rejected as manifestly inadmissible by Order of the Court of Justice in Case C-137/95 P [1996] ECR I-1611.
(43) Dr Pirrong, Core theory and liner shipping markets, Journal of law and economics, 1992, footnote on p. 11.
(44) Competition, contestability and the liner shipping industry, 1986, p. 310.
(45) See for example, Jankowski in "The development of liner shipping conferences", International Journal of transport economics, October 1989; Jansson and Schneerson in their book Liner shipping economics, 1987; the report of the US Federal Trade Commission, "An analysis of the maritime industry and the effects of the 1984 Shipping Act"; November 1984, the analysis of the US Department of Justice, "Analysis of the impact of the Shipping Act of 1984", March 1990; the lecture given by Professor S. Gilman at Tarporley in February 1994.
(46) Proponents of the theory of the empty core argue that a competitive equilibrium is only sustainable if there is no coalition of consumers and producers (actual or potential) that can be made better off by deviating from the proposed equilibrium and forming its own agreement. According to the theory, any outcome where firms have excess capacity, or wehre the market would not clear unless firms operate at output levels that exceed their minimum average costs, could potentially produce incentives for opportunistic behaviour by a coalition consisting of an existing firm, or a potential entrant, and a group of consumers. This opportunistic behaviour arises as firms try to eliminate excess capacity, or as potential entrants lure customers away from existing firms that offer prices in excess of average cost. In such circumstances, firms will exit the industry rather than engage in price competition that, for any significant period of time, leads to prices that are below the level consistent with the recovery of all costs. Thus, the market is constantly unstable as firms continually enter and leave the market in response to existing price conditions.
(47) See for example Jansson and Schneerson, see footnote 45, at Chapter 10.2: "Ccommon costs and indivisibility".
(48) See the article "Sea-Land's computer wars" in Containerisation international, August 1995, and the article "Market share isn't everything" in American shipper, July 1995; see also Drewry "Strategy and Profitability" in Global Container Shipping, London 1991, p. 104-106. For example, the article in American shipper states in relation to Atlantic Container Line: "the company developed a contribution model which works off equipment flows. The model serves as a cargo-acceptance guideline. As a result sales staff are much more aware these days of the overall value of a business prospect". See also "The liner industry: structural changes and future outlook", Industrial Bank of Japan Quarterly Survey (1995 IV) p. 43: "There has been a fundamental shift from the profit management system by ship or route to management by cargo unit. The profit for each cargo unit yields the net contribution of each container per voyage. The introduction of unit management has resulted in one container having the same meaning that one ship had in the past".
(49) See footnote 48, at pp. 105-6.
(50) See in particular the Gilman lecture cited in footnote 45.
(51) See footnote 45.
(52) See for example Jankowski, "Notes and comments: competition, contestability and the liner shipping industry", Journal of transport economists and policy, May 1989, or Jankowski, "The Development of Liner Shipping Conferences", cited in footnote 45 and the Gilman lecture cited in footnote 45.
(53) See footnote 44.
(54) See inter alia, the US Federal Trade Commission report, cited in footnote 45, at p. 20; Jansson and Schneerson, cited in footnote 45, at Chapter 10.2; and the article "Sea-Land's computer wars", cited in footnote 48.
(55) See footnote 44.
(56) 'Revenue pooling and cartel', p. 173. See also 'The economics of ocean freight rates', Bennathan and Walters, 1969, Praeger.
(57) See footnote 48, at p. 69.
(58) Scherer und Ross, Industrial market structure and economic performance, 1990, Houghtlin Mifflin, at p. 674.
(59) See footnote 48, at p. 120.
(60) See also Jansson and Schneerson, cited in footnote 44, at Chapter 10.2 and Annex A.
(61) Such arrangements are subject to the obligations on shipping lines contained in Article 5(2) of Regulation (EEC) No 4056/86.
(62) See the reply to the Statement of Objections at paragraph 2.102.
(63) See application for individual exemption at paragraph 4.3.3.
(64) See application for individual exemption at paragraph 4.3.4.
(65) Joined Cases 56 and 58/64 Consten and Grundig [1966] ECR 322, at p. 341.
(66) Case C-41/90 Höfner and Elser v. Macrotron [1991] ECR I-1979, paragraphs 32 and 33, and Case T-65/89, BPB Industries and British Gypsum v. Commission [1993] ECR II-389, at paragraph 134.
(67) Joined Cases T-24/93, T-25/93, T-26/93 and T-28/93, Compagnie maritime belge transports and Others v. Commission [1996] ECR II-1201, at paragraph 205.
(68) Commission Decision 86/398/EEC in Case IV/31.149-Polypropylene (OJ L 230, 18.8. 1986, p. 1), at paragraph 30.
(69) Commission Decision 92/262/EEC in Case IV/32.450 - French-West African shipowners' committees, (OJ L 134, 18.5.1992, p. 1) at paragraph 43.
(70) See the sixth recital of Regulation (EEC) No 4056/86. See also the Compagne maritime belge transports case cited in footnote 67, at paragraph 202.
(71) Case 136/86 BNIC v. Aubert [1987] ECR 4789, paragraph 18. Similarly, the Court ruled under Article 92 in Joined Case 67, 68 and 70/85 Van der Kooy v. Commission (Dutch natural gas prices 1) [1988] ECR 219, at paragraph 59, that subsidisation of the price of natural gas to Dutch glasshouse crop producers by 5,5 % affected trade between Member States because of the importance of energy costs (25 to 30 % of the selling price) and of the market share (65 %) and the exports (91 %) of the firm receiving the State aid.
(72) Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiana and Commercial Solvents v. Commission, [1974] ECR 223, at p. 252. The EATA parties have argued in the reply to the statement of objections (Annex 12 at paragraph 13) that jurisprudence of the Court of Justice under Article 86 is not relevant to the present proceedings under Article 85. In the Commission's view, the test of an effect on trade between Member States is identical for the purposes of Article 85 and Article 86. Furthermore, it is clear from the two paragraphs following the one quoted above that the principles being discussed by the Court in Commercial Solvents are applicable to Article 85 as well as to Article 86:
"32. The prohibitions of Articles 85 and 86 must be interpreted and applied in the light of Article 3(f) of the Treaty, which provides that the activities of the Community shall include the institution of a system ensuring that competition in the common market is not distorted, and Article 2 of the Treaty, which gives the Community the task of promoting 'Throughout the Community harmonious development of economic activities'. By prohibiting the abuse of a dominant position within the market in so far as it may affect trade between Member States, Article 86 therefore covers abuse which may directly prejudice consumers as well as abuse which indirectly prejudices them by impairing the effective competitive structure as envisaged by Article 3(f) of the Treaty.
33. The Community authorities must therefore consider all the consequences of the conduct complained of for the competitive structure in the common market without distinguishing between production intended for sale within the Market and intended for export. When an undertaking in a dominant position within the common market abuses its position in such a way that competition in the common market is likely to be elimated, it does not matter whether the conduct relates to the latter's exports or its trade within the common market, once it has been established that this elimination will have repercussions on the competitive structure within the common market."
(73) Trans-Atlantic Agreement, Commission Decision 94/980/EC of 19 October 1994 (OJ L 376, 31.12.1994, p. 1 at recitals 365 and 366).
(74) Case T-66/89 Publishers Association v. Commission [1992] ECR II-1995, paragraph 69.
(75) The EATA parties have, somewhat confusingly, described the alleged overcapacity as both structural and cyclical.
(76) See application for individual exemption at paragraph 6.1.22.
(77) See application for individual exemption at paragraph 6.1.28.
(78) See the Interim report of the multimodal group at paragraph 65, published in March 1996 by the Office for Official Publications of the European Communities (ISBN 92-827-6964-X).
(79) See application for individual exemption at paragraph 2.5.43.
(80) See footnote 4.
(81) See reply to the Statement of Objections at paragraph 6.3.4.
(82) See the Decision on the Trans-Atlantic Agreement, cited in footnote 13, at recital 345, et seq.
(83) Notice pursuant to Article 23(3) of Council Regulation (EEC) No 4056/86 concerning Case No IV/33.677 Irish Club Rules, (OJ C 263, 29.9.1993, p. 6 at point).
(84) See the reply to the Statement of Objections at paragraph 3.77.
