Brussels, 1st July 2008
(See also IP/08/1063)
Why do we need Guidelines on the application of competition rules in the maritime sector?
Since EU competition rules now apply fully to the maritime sector, under the provisions of Council Regulation (EC) 1/2003, companies have to assess themselves whether their agreements comply with those rules. The Guidelines on the application of competition rules in the maritime sector are intended to help companies carry out this task.
What is the scope of the Guidelines?
The Guidelines cover all maritime sectors that are concerned by Regulation 1419/2006 on the application of the competition rules to the maritime sector, namely cabotage, liner and tramp shipping services (see below for definitions). The principles set out in the Guidelines should be applied bearing in mind the circumstances specific to each case and this guidance should not be used in other economic sectors. The section dealing with the liner sector will apply for a period of five years starting from the effective date of repeal of the Liner Conference Block Exemption, i.e., from 18 October 2008.
Is existing Commission guidance relevant for the assessment of business practices in the shipping sector?
The Commission Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements (see IP/00/1376), the Guidelines on the application of Article 81(3) of the Treaty, the Commission Notice on the definition of the relevant market and the Commission Notice on agreements of minor importance are particularly relevant when assessing business practices in shipping markets.
What are liner shipping services?
Liner shipping involves the transport of cargo, chiefly by container, on a regular basis, to ports on a particular geographic route, generally known as a "trade". The timetables and sailing dates for liner shipping are advertised in advance and the services are available to any user.
What are tramp shipping services?
Tramp services concern the non-regular, maritime transport of bulk cargo that is not containerised, and include a range of economically important services, such as the transport of oil, agricultural and chemical products.
What are cabotage services?
Cabotage services are maritime transport services, either scheduled (i.e. liner) or unscheduled (i.e. tramp shipping) that take place exclusively between ports in the same EU Member State. The Guidelines apply to cabotage in so far as it qualifies as either a liner service or a tramp service.
What is the relevant market in the shipping sector?
The main purpose of defining a relevant market is to identify in a systematic way the competitive constraints faced by companies in the market(s) in which they operate. The Guidelines set out the Commission's analytical framework when defining liner and tramp shipping markets. Market definition is generally based on; inter alia, the principles expressed in the Commission's 1997 Notice on the definition of the relevant market.
In the liner sector, the Guidelines integrate the existing case-law of the EU courts on the definition of deep-sea liner markets.
In tramp shipping, the relevant market comprises all transport services which are regarded as interchangeable by the transport user (i.e. the shipper). Tramp vessels are geographically mobile, which however does not automatically imply that the vessels compete with each other worldwide, as it takes time and money to reach the pick-up point required by the shipper. Hence the relevant market may be defined as global, regional or on the basis of specific routes or port ranges. A case-by-case analysis has to be carried out.
The EU has abolished liner conferences. They are tolerated in other jurisdictions. What consequences does this have for the industry?
The end of the exemption from competition rules for shipping lines operating as conferences (see IP/06/1249) means that as of 18 October 2008 all EU and non-EU carriers which currently take part in conferences operating on trades to and from the EU will have to end their conference activities, in particular price-fixing and capacity regulation, on those trades.
Although conferences are tolerated in other jurisdictions, no conflict of law arises. This would only be the case if one jurisdiction were to require carriers to participate in conferences, whereas another was to prohibit it. This is not the case.
Liner carriers will continue to be allowed to take part in consortia. Block Exemption Regulation 823/2000 allows shipping lines to engage in operational co-operation for the purpose of providing a joint liner service, but not to fix prices.
What type of cooperation is still allowed among liner operators?
Liner operators may choose to exchange information on the business and/or to meet in a trade association. The Guidelines explain that under certain circumstances, the exchange of commercially sensitive information may be anti-competitive. The Guidelines provide the analytical framework and the relevant factors so that liner operators are able to self-assess the compatibility of their possible information exchange schemes with the EU competition rules. The Guidelines also summarise the current legal position on the extent of permissible discussions within trade associations.
What is a pool agreement?
Although pool agreements vary widely, a pool generally brings together a number of vessels that are under different ownership but of a similar type. A pool is usually operated under a single administration (e.g. a pool manager), which is responsible for the commercial management.
Is joint selling in tramp shipping pools compatible with EU competition rules?
Any agreement between competitors that results in joint selling requires careful consideration under the competition rules. If a pool agreement includes joint selling but also includes elements of joint production, it must be ascertained whether the centre of gravity of the agreement is joint selling or joint production. In the latter case, the agreement would appear less likely to infringe Article 81 of the EC Treaty.
Are all tramp pools problematic for competition?
Tramp pool agreements do not pose competition problems if the participants cannot be considered actual or potential competitors. Moreover, under certain conditions, pools that have very low market shares are unlikely to raise competition problems. Finally, even pools that appear to feature anti-competitive elements may be compatible if it can be shown that the pool brings better service or better prices to its customers. It is up to the parties to the pool agreement to demonstrate this point.
Do tramp shipping pools fall under the EU's Merger Regulation?
A tramp shipping pool falls under Council Regulation (EC) No 139/2004 (the EC Merger Regulation) if it qualifies as a full-function joint venture and has a Community dimension that is it meets the turnover thresholds set out in the Merger Regulation.
In order to be considered a full-function joint venture, a tramp shipping pool has to perform on a lasting basis all the functions of an autonomous economic entity on the same market. It must have, inter alia, a management dedicated to its day-to-day operations and access to sufficient resources including finance, staff and assets. Further information on full-functionality can be found in the Commission consolidated jurisdictional notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (see IP/07/1043).
Will the Guidelines have an impact on the Block Exemption Regulation on liner shipping consortia?
No. In 2005, the Regulation was extended until 2010 (see IP/05/477) as both shipping lines and transport users considered it to be working well. As regards the post-2010 period, the Commission will soon publish a preliminary draft Regulation and accompanying technical paper in order to consult stakeholders on the renewal of the block exemption regulation for liner shipping consortia.