COMMISSION DECISION of 06/10/1999 declaring a concentration to be compatible with the common market (Case No IV/M.1651 - MAERSK / SEA-LAND) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 06.10.1999

To the notifying party

Dear Sirs,

Subject: Case No IV/M. 1651 - MAERSK/SEA-LAND

Notification of 3 September 1999 pursuant to Article 4 of Council Regulation No 4064/89.

1. On 3 September 1999 the Commission received a notification concerning a transaction whereby the A.P. Møller Group will acquire the international container liner business of Sea-Land Service Inc. ("Sea-Land"). Maersk will also acquire certain of Sea-Lands related activities, including terminals, vessels and containers.

2. After examining the notification, the Commission has concluded that the notified operation falls within the scope of Council Regulation (EEC) No 4064/89 and does not raise any serious doubts as to its compatibility with the common market and with the EEA Agreement.

I. THE PARTIES AND THE OPERATION

3. The A.P. Møller Group is active in container shipping (Maersk Line - "Maersk"), as well as in other areas, such as the operation of bulk carriers, tankers, supply vessels and drilling rigs. A.P. Møllers activities also cover shipbuilding, container production, oil and gas exploration and production, terminal operations, freight forwarding and inland transportation.

4. Sea-Land, which hitherto belonged to the CSX Corporation, is a container shipping line operating a fleet of containerships serving ports worldwide. In addition to the provision of maritime transportation services, Sea-Land provides other services such as warehousing and distribution services, freight forwarding, logistic services and truckload transportation. Sea-Land also has interests in various terminals worldwide, including Algeciras and Bremerhaven, and has lease arrangements for a container terminal at Rotterdam.

II. CONCENTRATION

5. The transaction consists in the acquisition by the A.P. Møller Group of control of the international container liner business and related services of Sea-Land Service Inc. ("Sea-Land"), by purchase of shares and assets, and is a concentration within the meaning of article 3(1)(b) of the Merger Regulation.

III. COMMUNITY DIMENSION

6. The combined aggregate worldwide turnover of the undertakings concerned exceeded EUR 5 000 million (A.P. Møller: EUR [ ] million; Sea-Land: EUR [ ] million). The aggregate Community-wide turnover of each party exceeds EUR 250 million (A.P. Møller: EUR [ ] million; Sea-Land: EUR [ ] million) [1]. They do not achieve more than two-thirds of their turnover in one and the same Member State. The operation therefore has a Community dimension.

[1] The notifying party has included the revenues of Safmarine Container Line (SCL), acquired by the A.P. Møller Group in April 1999, in the figures provided.

IV. RELEVANT MARKETS

A. Relevant service markets

Containerised liner shipping services

7. In previous cases [2], the Commission has found that the relevant market is that for containerised liner shipping between a range of ports in either Northern Europe or the Mediterranean and a range of ports on another continent or in another region. A service between two ranges of ports is called a trade.

[2] P&O/Royal Nedlloyd (IV/M.831), Maersk/Safmarine (IV/M.1474) and TACA (IV.35.134).

8. The notifying party identifies the market for containerised liner shipping services as the service market primarily affected by the operation. This is consistent with the service market definition adopted by the Commission in the above cases.

Sea transport services relating to intra-Europe shipping

9. The parties are also active on a number of short-sea container shipping routes within Europe, referred to as intra-Europe shipping. The services concerned consist of shipping containers from one European port to another, either as direct hinterland traffic (traffic to or from a particular hinterland that is connected to the port of origin or the destination) or as feeder traffic (transhipping containers from and to deep-sea ports). The notifying party argues that the relevant market includes other forms of transport, in particular road transport. In the present case, it is not necessary to determine whether the relevant product market includes other forms of transport. The Commissions investigation has shown that even on the basis of a narrower market definition consisting of containerised liner shipping services on a particular route or bundle of routes, the notified operation will not create or strengthen a dominant position (cf. section V.B).

Terminal services

10. A.P. Møller also acquires certain landside activities operated by Sea-Land, in particular terminals. These terminals are partly used for captive purposes and partly provide services to other container lines, i.e. loading and unloading, storing, etc. (also referred to as stevedoring services). Services for container ships are different from services for ships carrying, for example, liquid bulk cargo, essentially because a different infrastructure ("superstructure") is required.

11. The market for stevedoring services may be further sub-divided according to the size of the vessels which require handling, i.e. deep-sea vessels (operating between continents, more than 3000 TEUs [3]) or short-sea vessels (operating on shorter distances), given that different berthing and land-side equipment facilities are needed. However, the Commissions investigation has shown that even on the basis of this narrower market definition, the notified operation will not create or strengthen a dominant position (cf. section V.C) .

[3] Twenty foot equivalent units.

B. Geographic aspects

Containerised liner shipping services

12. In previous cases [4], the Commission has found that container shipping to and from Northern Europe constitutes a distinct market from transport to and from the Mediterranean. On that basis, the parties container shipping activities overlap on the following trades:

[4] P&O/Royal Nedlloyd (IV/M.831), Maersk/Safmarine (IV/M.1474) and TACA (IV/35.134).

- Northern Europe - North America

- Mediterranean - North America

- Northern Europe - Middle East

- Mediterranean - Middle East

- Northern Europe - Far East

- Mediterranean - Far East

13. With respect to the trades to North America, the notifying party submits that Canada, the US East Coast, the US Gulf Coast and the US West Coast should not be considered as separate markets. However, third parties have expressed the opinion that ports on the US East and West Coasts are largely not interchangeable when transport cost and time are considered. For the purpose of the present decision it is not necessary to decide this issue as the transaction will not create or strengthen a dominant position under either definition of the market.

Sea transport services relating to intra-Europe shipping

14. The parties have suggested that the market for intra-Europe container shipping is Europe-wide. The Commission has found that in this instance the exact definition of the relevant market(s) can be left open, as the merger will not lead to the creation or reinforcement of a dominant position under any alternative market definition (cf. section V. B).

Terminal services

15. Ports or groups of ports serve a particular hinterland or are used for transhipment to smaller ports. The geographic area they generally serve determines the geographic scope related to their services. Based on the Commissions conclusion in the P&O/Nedlloyd case (IV/M.831) that substitution between Northern European and Mediterranean ports does not take place to any considerable degree because of their different catchment areas, these two regions might be considered as separate markets for the provision of stevedoring services. Independent industry sources commonly make a distinction between Northern Europe, West-Mediterranean and the East-Mediterranean/Black Sea as the relevant geographic ranges [5]. In the present case, the operation would not lead to the creation or strengthening of a dominant position under either definition of the market. Therefore, the exact definition of the geographic market for container terminal (stevedoring) services can be left open.

[5] See for example Ocean Shipping Consultants - The European Container Market - Prospects to 2008 (1997) Drewry Shipping Consultants identifies Southern Europe/Mediterranean/Black Sea as one range (see Drewry - World Container Terminals)

C. Further markets

16. The notifying party has identified European inland transportation as a further relevant market, since both parties hold a share in the European Rail Shuttle, together with P&O Nedlloyd. The ERS operates rail shuttle services to and from Rotterdam to an area covering North, West, South and Central Europe. According to the notification, both parties are also provide limited freight forwarding (including logistics) services within Europe.

V. COMPETITIVE ASSESSMENT

A. Container shipping

A.1. World-wide position of Maersk/Sea-Land

17. The notified concentration will create the largest liner operator world-wide. However, a number of other large operators exist, such as Evergreen Marine Corporation, P&O Nedlloyd Container Line Ltd, Hanjin Shipping Co Ltd, COSCO Container Lines, Mediterranean Shipping Company, American President Lines, Mitsui-OSDK Lines and Nippon Usen Kaisha. The notifying party states that Maerks and Sea-Lands combined share of the worlds fleet capacity is approximately [ ] and that the top 20 competitors control not more than about one half of the worlds liner shipping market. This statement is consistent with information provided to the Commission by third parties.

A.2. Relevance of shipping conferences and consortia for the assessment

18. In previous decisions concerning the liner shipping market [6], the Commission has taken into account the parties participation in contractual arrangements, such as conferences and consortia, and the market positions of such conferences/consortia on the relevant trades. Conferences and consortia [7] are arrangements between shipping lines that play an important role in the organisation of the liner shipping industry and restrict competition between their members, although not every carrier on a particular trade is a member of a conference or consortium and on some trades important carriers operate outside conferences and consortia. In its previous decisions, the Commission considered whether the notified concentration would strengthen the cohesion within an existing conference or consortium and would thus create or strengthen a collective dominant position.

[6] P&O/Royal Nedlloyd (IV/M.831), Maersk/Safmarine (IV/M.1474).

[7] Liner conferences are defined as "a group of two or more vessel-operating carriers which provides international services for the carriage of cargo on a particular route or routes within specified geographical limits and which has an agreement or an arrangement, whatever its nature, within the framework of which they operate under uniform or common freight rates and any other agreed conditions with respect to the provision of liner services" (Council Regulation (EEC) No 4056/86, OJ L378 of 31 December 1986). Liner conferences have the effect of limiting competition amongst their members in respect of pricing, timetabling, frequency of service, ports called at, carrying capacity, and allocation of cargo and revenue.

19. The notifying party submits that the notified operation will not strengthen to any significant degree the cohesion within the relevant conferences or consortia. To the extent that Maersk and Sea-Land are members of conferences on each of the European trades on which they operate, they are members of the same conference. According to the notifying party, decision-making within conferences is nearly always based on one vote per member line regardless of the size of the line. Therefore, Maersk/Sea-Lands position and influence within conferences would not increase and would not result in the merged entity obtaining control of any conference. Moreover, the notifying party submits that Maersk and Sea-Land have already formed their own consortia in the form of vessel sharing agreements, without participation of other carriers, on most of the East-West trades. Exceptions are the Europe - North America routes (cf. section A.3) ).

20. The notifying party also submits that Maersk and Sea-Land are not party to discussion agreements or stabilization agreements in any of the European trades on which both are active.

A.3 Position of the parties and relevant conferences/consortia in individual markets

Northern Europe - North America

21. Both Maersk and Sea-Land belong to the revised Trans-Atlantic Conference Agreement (TACA) which at present counts 8 members (ACL, OOCL, P&O Nedlloyd, Hapag-Lloyd, MSK, NYK, Maersk and Sea-Land). Sea-Land is a member of the VSA (Vessel Sharing Agreement) consortium together with P&O Nedlloyd and OOCL. The notifying party has provided the following market share figures for 1998 [8]:

[8] Based on volumes transported.

* indicates the conferences to which the parties belong

22. The parties combined market share has been confirmed by third parties and does not give rise to concerns about single dominance, taking into account the presence of sizeable competitors. This assessment does not change if the routes to the US East, Gulf or West Coast or Canada are considered as separate markets. The parties combined market share did not exceed [20-25%] in any of these segments in 1998.

23. The combined market share of the present TACA members was [