Commission notice pursuant to Article 23(3) of Regulation (EEC) No 4056/86 concerning Case IV/MAR/36.253 - P& O Stena Line (98/C 39/06)

(Text with EEA relevance)

1. On 31 October 1996, The Peninsular and Oriental Steam Navigation Company ('P& O`) and Stena Line Limited ('Stena`) submitted to the Commission pursuant to Article 12(1) of Regulation (EEC) 4056/86 an application in accordance with the MAR form for negative clearance pursuant to Article 85(1) or, in the alternative, exemption pursuant Article 85(3) in respect of a proposed joint venture merging their respective ferry operations on the Short French Sea and Belgian Straits.

2. On 13 March 1997, pursuant to Article 12(2) of Regulation (EEC) 4056/86 the Commission published a summary of the application in the Official Journal of the European Communities and invited interested parties to submit their comments within 30 days (1).

3. On 10 June 1997, before the expiry of the 90-day deadline provided for in Article 12(3) of Regulation (EEC) 4056/86, the Commission informed the parties that there existed serious doubts within the meaning of that Article as to the applicability of Article 85(3) to the agreement in question (2).

4. The Commission intends to take decision finding that the parties' proposed joint venture infringes Article 85(1) but is capable of exemption within the meaning of Article 85(3).

5. In its letter of serious doubts the Commission stated its concern that the creation of the joint venture could lead to a duopolistic market structure conducive to parallel behaviour of the joint venture and Eurotunnel on the Short Sea tourist market. Following detailed examination of the agreement and its likely effects in a market into which new entry cannot be expected, the Commission considers that despite a high degree of concentration in the market after the operation, and despite the significance and the similarity of market shares for both the joint venture and Eurotunnel, the absence of capacity constraints, at least in the short to medium term, and the differences in cost structure of the joint venture and Eurotunnel mean that they can reasonably be expected to compete with each other. The Commission therefore considers that a duopoly would not be brought about by the creation of the joint venture. The agreement can thus not be regarded as affording the parties the possibility of eliminating competition. However, after the abolition of duty-free sales within the EU in 1999, there is uncertainty about the evolution of the market.

6. With regard to the Anglo/Continental freight market, the Commission considers that there is sufficient competition from other operators in the market for the agreement not to risk affording the parties the possibility of eliminating competition and that the other conditions for the exemption within the meaning of Article 85(3) are fulfilled.

7. In its letter of serious doubts the Commission stated its concern about potential spillover effects on other markets where the parent companies are competitors, which could occur through cooperation in various forms, including joint marketing. After detailed examination, the evidence suggests that prices on the Short Sea constrain prices on the Western Channel and North Sea tourist markets, but not vice versa. Thus, any attempt by the parties to co-ordinate behaviour on either market will be destabilised by competition from the Short Sea. The parties' co-operation is therefore unlikely to spill over onto their activities on the North Sea and Western Channel. On the Irish Sea, it is only on the northern corridor that the parties compete directly. In view of the low proportion and low amount of inter-State traffic on the northern corridor, it can be concluded that there is no appreciable effect on trade between Member States.

8. The Commission considers that in view of the effects of the abolition of duty-free sales being uncertain the duration of the exemption should be limited to three years from the date of implementation of the agreement.

9. The Commission does not intend to attach conditions or obligations to the exemption.

10. In accordance with Article 23(3) of Regulation (EEC) 4056/86, before the Commission adopts a decision it invites interested parties to send their comments within 30 days from the date of publication of this notice, quoting reference IV/MAR/36.253, to:

European Commission,

Directorate-General for Competition,

Unit IV/D2,

Rue de la Loi/Wetstraat 200,

B-1049 Brussels

Fax (32-2) 296 98 12.

Internet: CharlesWilliams@dg4.cec.be

(1) OJ C 80, 13.3.1997, p. 3.

(2) See press release IP/97/511 of 11 June 1997.