Commission notice

pursuant to Article 12(2) of Council Regulation (EEC) No 4056/86 concerning Case COMP/D2/37.939 - P& O Stena Line 2

(2001/C 76/02)

(Text with EEA relevance)

Application

1. On 31 October 1996, The Peninsular and Oriental Steam Navigation Company ("P& O") and Stena Line Limited notified to the Commission in accordance with Article 12(1) of Regulation (EEC) No 4056/86, an agreement relating to the establishment and operation of a joint venture ("the agreement") merging the parties' respective ferry operations on the short sea (as defined below). The joint venture is operating under the name P& O Stena Line.

2. On 13 March 1997, pursuant to Article 12(2) of Regulation 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) No 4056/86, the Commission informed the parties that there existed serious doubts as to the applicability of Article 85(3) (now Article 81(3)) to the agreement(2).

4. On 6 February 1998, pursuant to Article 23(3) of Regulation (EEC) No 4056/86, the Commission published a notice indicating its intention to exempt the agreement(3). The Commission granted an exemption under Article 85(3) (now Article 81(3)) by decision dated 26 January 1999 for the period 10 March 1998 to 9 March 2001(4).

5. The exemption will come to an end on 9 March 2001. On 22 December 2000, P& O and Stena Line (UK) Limited ("Stena Line"), which holds Stena Line group's shareholding in P& O Stena Line and has therefore replaced Stena Line Limited as the relevant party, together with P& O Stena Line submitted to the Commission pursuant to Article 13(2) of Regulation (EEC) No 4056/86 an application for renewal of the Article 81(3) exemption until 2020. The application for renewal is made in the event that the Commission considers there to be a restriction of competition falling under Article 81(1).

The joint venture

6. Details of the agreement establishing the joint venture, which remains unchanged, can be found in the Commission's notice of 13 March 1997(5).

7. P& O Stena Line operates a regular passenger and freight ferry service across the short sea. On the Dover/Calais route it operates seven multi-purpose ro-ro (roll on-roll off) vessels carrying freight and tourist traffic. On the Dover/Zeebrugge route it operates three ro-ro vessels carrying freight traffic only. Its service on the Newhaven/Dieppe route ended on 31 January 1999.

Spillover

8. The parent companies have remained independent ferry operators on the western Channel, North Sea and Irish Sea. The parties state that the formation of the joint venture has not resulted in any wider cooperation between the parties and that there is no reason to expect such spillover in the future.

The market

9. The parties do not challenge the definition of the relevant markets in the Commission decision of 26 January 1999. The application is based on that definition, namely:

(a) the market for tourist passenger services (passenger and passenger vehicles) on routes across the short French sea (routes between Dover, Folkestone, Ramsgate, Newhaven and Calais, Dieppe, Boulogne, Dunkirk and the Channel Tunnel) and the Belgian Straits (Ramsgate/Ostend) ("the short sea tourist market"); and

(b) the market for unitised freight services (maritime services and door-to-door intermodal services) between England and mainland Europe (western Channel, short sea and North Sea routes) ("the Anglo/Continental freight market").

The parties' arguments for negative clearance

10. The parties believe that the market conditions in both the short sea tourist market and the Anglo/Continental freight market are more competitive with the continued operation of P& O Stena Line than they would be in the absence of the joint venture. It is therefore the parties' opinion that the restrictions in the agreement do not (now) restrict, distort or prevent competition to an appreciable extent.

The parties' arguments for renewal of exemption

11. The parties consider that even if Article 81(1) applies, the operation of P& O Stena Line continues to qualify for exemption pursuant to Article 81(3) for the following reasons.

12. The application considers that P& O Stena Line has yielded substantial benefits to consumers. The joint venture has maintained and improved the frequency of regular departures and reduced the waiting time on the quayside by using a continuous loading embarkation system. The annual cost savings achieved through the formation of the joint venture have enabled P& O Stena Line to keep price increases to the minimum and have created a viable platform for investments in the quality of onboard services and facilities as well as investments in new ticketing and reservation systems. The application considers that the reduced cost base for P& O Stena Line has allowed the parties to consider a proposed ship renewal programme which would maintain the high standard of service.

13. The application draws attention to Eurotunnel's increasing market position and Eurotunnel's competitive strength in the short sea tourist market, and states that P& O Stena Line is the only operator who is able to offer frequency of services and continuous loading which comes close to the service offered by Eurotunnel's Le Shuttle tourist service. No lesser forms of cooperation between the parent companies could yield similar benefits. In addition the parties believe that lesser forms of cooperation would be more restrictive of competition than a continued operation of P& O Stena Line.

14. The parties do not consider that the joint venture has eliminated competition in respect of any part of the markets under consideration. As regards the Anglo/Continental freight market, the application states that the conditions on the market are characterised by strong competition between a wide range of routes and operators, low barriers to market entry and material excess capacity.

15. As regards in particular the short sea tourist market, the application states that there is no evidence to indicate any grounds for a concern that duopolistic conduct between the joint venture and Eurotunnel has either occurred or is likely to develop in the future. The parties acknowledge the consumer concern over increased ticket prices, but argue that the end of duty-free concessions has contributed to the loss of passenger volumes, has significantly reduced the contribution from on-board spending and has also largely removed any positive contribution to profits during the low season quarters (October to March). Before the end of duty-free concessions, on-board spending was by far the most significant source of contribution to costs. The application states that overall the increase in ticket revenue has not compensated for the reduced contribution from on-board spending and has moreover itself contributed to declining passenger volumes. The application considers that there are no restrictions which limit entry to the market and the applicants are subject to effective and potential competition from other operators. There has furthermore been a new entrant on the market with the introduction of Norfolkline's services on the Dover/Dunkirk route.

16. The parties request a 20-year exemption until 2020 in order to enable the parties to finance a planned ship renewal investment programme which could replace half of P& O Stena Line's existing fleet. The application further states that a 20-year exemption is needed to maintain a long-term and effective competitive constraint on Eurotunnel's services and that there are no foreseeable major disruptions to market conditions on the horizon as was the case in 1996 with the loss of duty-free concessions.

Third party comments

17. This notice is issued pursuant to the procedure established by Article 12 of Regulation (EEC) No 4056/86. The Commission has not at this stage taken any position on the applicability of Article 81 of the Treaty to the agreement. In accordance with Article 12(2) of Regulation (EEC) No 4056/86, the Commission invites interested parties to submit their comments within 30 days from the date of publication of this notice, quoting reference "Case COMP/D2/37.939 P& O Stena Line 2", to: European Commission Directorate-General for Competition

Antitrust Greffe

Rue Joseph II/Jozef II-straat 70 B - 1000 Brussels Fax (32-2) 295 01 28.

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

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

(3) OJ C 39, 6.2.1998, p. 21.

(4) OJ L 163, 29.6.1999, p. 61.

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