1999/243/EC: Commission Decision of 16 September 1998 relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty (Case No IV/35.134 - Trans-Atlantic Conference Agreement) (notified under document number C(1998)2617) (Text with EEA relevance)
Date: 1998-09-16
Institutions: European Commission
Subjects: carriage of goods, freight rate, maritime transport, provision of services, restriction on competition, transportation tariff

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 16 September 1998

relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty

(Case No IV/35.134 – Trans-Atlantic Conference Agreement)

(notified under document number C(1998)2617)

(Only the Danish, German, English and Swedish texts are authentic)

(Text with EEA relevance)

(1999/243/EC)

THE
COMMUNITIES,

COMMISSION

OF

THE

EUROPEAN

Having regard to the Treaty establishing the European
Community,

rules for the application of Articles 85 and 86 of the
Treaty to maritime transport (3), as last amended by
the Act of Accession of Austria, Finland and Sweden,
and in particular Articles 11 and 19 thereof,

Having regard to the Commission Decision of 24 May
1996 to initiate proceedings in this case,

Having regard to the Agreement establishing the
European Economic Area,

Having regard to Council Regulation No 17 of 6
February 1962, first Regulation implementing Articles
85 and 86 of the Treaty (1), as last amended by the Act
of Accession of Austria, Finland and Sweden, and in
particular Articles 3 and 15 thereof,

the

given

concerned

undertakings

Having
the
opportunity to make known their views on the
objections raised by the Commission and to present
any other comments in accordance with Article 19 of
Regulation No 17, Article 26 of Regulation No (EEC)
1017/68 and Article 23 of Regulation (EEC) No
read in conjunction with Commission
4056/86,
Regulations No 99/63/EEC (4), (EEC) No 1630/69 (5)
and (EEC) No 4260/88 (6),

Having regard to Council Regulation (EEC) No
1017/68 of 19 July 1968 applying rules of competition
to transport by rail, road and inland waterway (2), as
last amended by the Act of Accession of Austria,
Finland and Sweden, in particular Articles 11 and 22
thereof,

consulting

on
the Advisory Committee
After
Restrictive Practices and Dominant Positions,
the
Advisory Committee on Restrictive Practices and
Dominant Positions in the Transport Industry and the
Advisory Committee on Restrictive Practices and
Dominant Positions in Maritime Transport,

Having regard to Council Regulation (EEC) No
4056/86 of 22 December 1986 laying down detailed

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ L 175, 23.7.1968, p. 1.

Whereas:

(3) OJ L 378, 31.12.1986, p. 4.
(4) OJ 127, 20.8.1963, p. 2268/63.
(5) OJ L 209, 21.8.1969, p. 11.
(6) OJ L 376, 31.12.1988, p. 1.

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THE FACTS

(4)

I. THE APPLICATION

(1)

On 5 July 1994, the parties listed below ((cid:28)the
TACA parties’, further details of which are set
out in Annex I) submitted an application to the
Commission pursuant
to Article 12(1) of
Regulation (EEC) No 4056/86 seeking an
exemption under Article 85(3) of the EC Treaty
and Article 53(3) of the EEA Agreement
in
respect
the Trans-atlantic Conference
of
Agreement (TACA):

A.P. Møller-Maersk Line (Maersk)

Atlantic Container Line AB (ACL)

Hapag-Lloyd AG (Hapag Lloyd)

Nedlloyd Lijnen BV (Nedlloyd)

P&O Containers Limited (P&O)

Sea-Land Service, Inc. (Sea-Land)

Mediterranean Shipping Co. (MSC)

Orient Overseas Container Line
(OOCL)

(UK) Ltd

Polish Ocean Lines (POL)

DSR/Senator Lines (DSR/Senator)

Cho Yang Shipping Co., Ltd (Cho Yang)

Neptune Orient Lines Ltd (NOL)

Nippon Yusen Kaisha (NYK)

Transportaci(cid:243)n Marit(cid:237)ma Mexicana SA de CV
(TMM)

Tecomar SA de CV (Tecomar).

Tecomar has been a subsidiary of TMM since
January 1994. In 1997, Nedlloyd Lijnen BV and
P&O Containers Limited merged to form P&O
Nedlloyd. Also in 1997, Hapag Lloyd AG
shipping
transferred its
activities
to Hapag Lloyd Container Linie
GmbH and Hanjin Shipping Company Limited
(Hanjin) acquired control of DSR/Senator.

containerised liner

Pursuant to Article 4(8) of Regulation (EEC)
No 4260/88, the TACA parties were informed
and invited to comment on the fact that the
Commission also intended to examine
the
exemption made
individual
application for
under Regulation No 17 and Regulation (EEC)
No 1017/68, for the reason that some of the
notified activities
fell outside the scope of
application of Regulation (EEC) 4056/86.

(2)

(3)

TACA

adopted

replaced

Commission

Trans-atlantic
the
The
Agreement
(TAA), an agreement originally
notified to the Commission on 28 August 1992.
The
Decision
94/980/EC (7) on 19 October 1994 prohibiting
the TAA (The TAA Decision). The TAA
Decision prohibited the parties to whom it was
addressed
alia,
price-fixing activities which have the same or a
similar object or effect to those contained in the
TAA.

from engaging

inter

in,

The parties formerly party to the TAA are all
party to the TACA. Hanjin became a party to
the TAA on 26 August 1994 and a party to the
TACA on 31 August 1994. Hyundai Merchant
Marine Co. Ltd (Hyundai) became a party to
the TACA on 31 August 1995.

1994,

15 December

On
the Deputy
Director-General of the Directorate-General for
Competition of the Commission wrote to the
TACA parties
the
informing
preliminary assessment that certain provisions
of
the
the TACA did not appear to fulfil
conditions of Article 85(3), and inviting the
the TACA parties on the
observations of
preliminary assessment.

them of

the
On 21 June 1995 and 1 March 1996,
Commission adopted a Statement of Objections
and a supplementary Statement of Objections
addressed to the TACA parties
(with the
exception of Hyundai, since it had not been a
party to the TACA at the time of the adoption
of the first Statement of Objections) stating that
the Commission was disposed to adopt a
decision withdrawing any immunity from the
fines which resulted from the
imposition of
the
the TACA in respect of
notification of
agreement between the parties to the TACA to
fix prices for inland transport services supplied
within the territory of
the Community. A
Decision to withdraw any such immunity was
adopted on 26 November 1996 (8).

inter

On 24 May 1996, the Commission adopted a
Statement of Objections (9) addressed to the
stating,
TACA parties
it
considered that
the TACA falls within the
prohibition contained in Article 85(1) of the
Treaty and that
it contains a number of
elements which do not fall within the scope of
Article 85(3) of the Treaty. The Statement of
the Commission was
Objections stated that

alia,

that

(5)

(6)

(7)

(8)

(7) OJ L 376, 31.12.1994, p. 1.
(8) C(96) 3414 final.
(9) The Statement of Objections was based on Article 3 of
Regulation No 17, Article 10 of Regulation (EEC) No
1017/68 and Article 10 of Regulation (EEC) No 4056/86.

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disposed to adopt a decision finding the TACA
parties to be in breach of Article 85(1) and
requiring them to bring to an end those
practices which fall outside the scope of Article
85(3). The Statement of Objections also stated
that the Commission considered that the TACA
parties had abused their dominant position,
contrary to Article 86 of the Treaty.

(cid:28)It seems to me that the changes we propose
are so substantial that they result in a new
agreement rather than an amended old one.

This being so, I think the most clear-cut
thing we can do is to notify the Commission
that the lines are abandoning the old TAA
and formally notify the new agreement.’
(letter dated 21 June 1994).

(9)

(47)),

A supplementary Statement of Objections was
adopted by the Commission on 11 April 1997,
in which it was stated that notwithstanding the
notification of the TACA hub-and-spoke system
(see recital
the Commission remained
disposed to adopt a decision finding the TACA
parties to be in breach of Article 85(1) and
requiring them to bring to an end those
practices
Statement of
Objections of 24 May 1996 to fall outside the
scope of Article 85(3), including the practice of
the TACA parties of fixing prices for carrier
haulage services supplied within the Community
where these fall outside the scope of the TACA
hub-and-spoke system.

considered in the

(10) The TACA parties presented their views at oral
hearings held on 6 May 1996 and 25 October
1996. Annex II contains an outline of the main
procedural steps relating to the TAA and the
TACA.

II. THE NOTIFIED AGREEMENT

(11)

liner

exemption

the TACA to the
In the notification of
Commission, the parties argued that it was a
liner conference falling within the scope of the
group
conferences
for
contained in Regulation (EEC) No 4056/86.
for
The parties applied in the alternative
individual exemption. Although the TACA had
been notified to the Commission on 5 July
1994,
it did not come into effect until 24
October 1994, the earliest date on which it was
permitted to do so under American law.

(12) Two weeks before notification of the TACA,
Lord Sterling of Plaistow (in his capacity as
Chairman of TACA) wrote to Mr Van Miert,
Member of
the Commission responsible for
competition matters, in the following terms:

(13) The TACA provides

rate,

including ocean rates,

for agreement by its
charges and other
members on the
its
conditions of carriage applicable under
common tariff,
inland
portions of through-rates and multimodal rates.
The common tariff contains a matrix of prices
for
the carriage of cargo between defined
points: 26 classes of cargo are defined and a
rate is specified for each class. The tariff is
published by the TACA and is available to all
shippers.

(14) The scope of

non-Baltic

the TACA is eastbound and
westbound shipping routes between, on the one
hand, ports in Europe situated in latitudes from
Bayonne, France to the North Cape of Norway
(except
Russia,
Mediterranean ports and ports in Spain and
Portugal), and points in Europe via those ports
other than points in Spain and Portugal, and on
the other hand, ports in the 48 contiguous
States of the United States of America and the
District of Columbia and points in the United
States via those ports (the Trade).

ports

in

(15) Apart from the increase in membership from 11
to 17 lines (and down to 16 with the merger of
P&O and Nedlloyd),
the more
significant differences between the TAA and the
TACA are the following:

among

arrangements

(a) the TACA parties have abandoned their
to
the
their maritime
(the Capacity Management

complex
non-utilisation of part of
capacities
Programme);

relating

(b) the TACA parties have formally abandoned
the different categories of membership and
the two-tier
structure which were
tariff
features of the TAA;

(c) the TACA parties have abandoned their
detailed provisions relating to the exchange
between them of vessel slots and equipment;

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(d) the TACA parties have modified their rules
independent

taking of

to the

relating
action (IA) (10);

(e) the TACA parties have changed their rules
on service contracts so as to allow unilateral
action (11) on TACA service contracts and
individual service contracts;

(f) the TACA parties have agreed among
themselves to withdraw from membership of
the Gulfway and Eurocorde Discussion
Agreements (12).

(16) The TACA contains identical provisions relating
to the fixing of prices for inland transport
services provided within the territory of
the
Community to those contained in the TAA.

A. The July 1994 version of the TACA

(17) The July 1994 version of the TACA contained

the following principal provisions:

(a) agreement on the rates, charges and other
conditions of carriage applicable under its
common tariff including ocean rates, inland
portions of through rates and multimodal
rates;

and

inland

portions

(b) entitlement to depart from all ocean tariff
rates
taking
independent action (13) on the expiry of five
working
writing.
Independent action on other tariff rates and
other charges
required 10 days’ written
notice;

notice

days’

by

in

(10) I.e. charge a rate different from the tariff rate. Under
American law, the right of members of an exempted
conference to take independent action is mandatory with
regard to tariff rates: this means that any member of a
conference has the right to depart from the conference
tariff in respect of a particular class of goods, providing
the
that notice is given to the other members of
conference.

agreements dating

(11) The equivalent of independent action.
(12) The Gulfway and Eurocorde Discussion Agreements
were
the
the conferences operating between the
members of
United States and Northern Europe discussed prices and
transport
liner
shipping companies operating on those trades.

conditions with the non-conference

from 1985 whereby

(c) agreement

of

service-contract

inland transport

rates,
loyalty-contract rates and rates and charges
for
services and other
services related to the maritime transport of
cargo in the Trade. Examples of the latter
include terminal handling charges, currency
and fuel adjustment charges, equipment
handover/usage charges as well as other
charges relating to the use of containers on
land such as detention and demurrage
charges;

(d) agreement on the rates and other terms and
conditions of service contracts (including
charges for services provided in addition to
maritime
between
shippers and one or more TACA parties in
accordance with the following mechanism:

transport

services)

agreement,

(i) parties to the TACA could, following the
agreement of not less than a majority
minus two of the parties voting under
the
service
contracts with any shipper that agrees a
minimum cargo commitment of 100 teu
or USD
(20-foot
equivalent
freight
100 000 net ocean port/port
revenue;

enter

unit)

into

it

in

particular
take

(ii) if a party to the TACA did not wish to
service
a
participate
(cid:28)unilateral
contract
could
action’ (14) in respect of not less than
100 teu (20-foot equivalent unit)
in
addition to the minimum agreed under
provided the
contract,
that
unilateral action is for the same duration
as the service contract, and

service

— where the minimum volume agreed
under the service contract was not
more than 1 000 teu, the unilateral
action was in respect of not more
than 100 teu, or

(13) See footnote 10.

(14) I.e. charge a rate different from the service contract rate.

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— where that minimum volume was
more than 1 000 teu, the unilateral
action was in respect of not more
than 10 % of that minimum, subject
to a maximum of 200 teu;

(18) The TACA is said to be of indefinite duration
(Article 9). Parties may withdraw without
penalty on giving 90 days’ notice in writing
(Article 7(3)).

(e) agreement on prices for intermodal service
contract rates and on independent action or
unilateral action in respect of those rates;

(19) The notification made reference to a further 25
provisions of the agreement which, in the view
the parties, might have affected their
of
commercial
independent
commercial decisions. These included provisions
relating to:

freedom to

take

of

for

one

seasonal

(f) the restriction of all service contracts (other
than
or
certain
non-containerisable cargo) to a maximum
period
(Article
14(2)(a)). None of the parties to the TACA
could participate, individually or with any
other party to the TACA, in more than one
service
time with any
particular shipper in respect of cargo to be
carried on the Trade (Article 14(2)(d));

calendar

contract

year

at

a

(a) agreements concerning amounts,

levels or
rates of brokerage and freight-forwarder
remuneration,
and
conditions for the payment of such sums
and the designation of persons eligible to act
as brokers (Article 5(1)(c)(3));

including

terms

the

(g) a prohibition on the inclusion in service
contracts of any clause which provided for a
reduction in the rate payable under that
service contract by reference to terms agreed
other
shippers
with
other
Such
(Article
arrangements
provisions are called (cid:28)contingency clauses’
by the TACA and are discussed further at
recitals (489) to (490);

under
14(2)(b)).

(h) the regulation of the capacity available for
carrying cargo in both the eastbound and
westbound
in
accordance with the following principles:

the Trade

sectors

of

(b) minimum and maximum prices to be paid to
rail, air, motor or water carriers for the
European
of
through-transport
(Article
5(1)(c)(6));

segment

services

inland

(c) the ability to meet together and with other
persons for the purpose of negotiating and
including
entering into other agreements,
information-exchange
(Article
5(1)(f)).

agreements

(i) the

to

parties

the TACA would
continuously review conditions of supply
and demand in the Trade and would
consult with
the
Commission and with transport users for
this purpose;

services

the

of

(ii) the aggregate

subject

capacity to be made
available would be 125 % of forecast
demand for cargo carried between ports
and points
to
in the Trade,
quarterly adjustment. Of that aggregate
capacity, 85 % would be allocated
between the individual parties to the
TACA and the remaining 15 % would
be unallocated. The capacity of
the
TACA parties’ ships in excess of 125 %
of forecast demand could not be offered
to the market.

(20) The July 1994 version of

detailed

provisions

freedom to

the TACA also
contained
to
relating
space/slot chartering and equipment exchange,
include these
although the parties did not
provisions in their list of provisions of
the
agreement which, in their view, may affect their
commercial
independent
commercial decisions. These provisions allowed
the parties to inform the other parties of any
need for, or availability of, spare vessel capacity
for chartering purposes. The parties to the
TACA were also authorised to charter to other
TACA parties space or slots on line-haul, feeder
or relay vessels used for transporting cargo
falling within the scope of the TACA (Annex B,
Section 3).

take

(21) Article 10 of the TACA provides for the setting
up of (cid:28)the Enforcement Authority’, whereby the

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role

and scope of

parties agree
to establish and finance an
independent body to police the duties and
obligations of the parties under the agreement.
The
the Enforcement
Authority are defined in Annex C of the TACA
(Rules governing self-policing). Under
these
rules the Enforcement Authority may, acting on
its own initiative or following a complaint,
investigate any alleged breach of the terms of
the agreement.

(22) The Enforcement Authority has (cid:28)total unfettered
access … to all documents which may be
related to a carrier’s activities in the Trade’ and
is authorised to inspect records and property,
interview and take statements from persons.
The Enforcement Authority is also authorised to
impose fines of between USD 100 000 and USD
150 000 for any breach of the agreement and in
particular the various price-fixing arrangements.
Furthermore, any refusal to allow access by the
party under
investigation carries mandatory
fines of USD 75 000 for the first incident, USD
150 000 for the second and USD 250 000 for
each incident
thereafter within a two-year
period. Recidivism, in respect of all breaches, is
subject
to maximum fines of USD 300 000
within any one year period. All such sums
collected are distributed to the other parties.

(23)

In the Notification of 5 July 1994, the TACA
parties also offered to make to the Commission
the following undertakings, to come into effect
if the Commission granted the TACA individual
exemption or stated that the TACA fell within
the scope of
the group exemption for liner
conferences.

(a) The TACA parties would produce

an
interim report to the Commission on actual
capacity and forecast demand with a view
to rationalising such services in the most
efficient way.

(b) The TACA parties would consult with the
the Commission and with
the
in

services of
transport users
requirements of
particular, to forecast future demand.

in order
transport users and,

to assess

(c) The TACA parties would notify business
plans and modifications of
three
months (including current month) before
their entry into force.

rates

(d) The TACA parties would, on request,
review rate modifications which caused
individual shippers substantial competitive
disadvantage and, failing satisfaction after
such review, the matter could be put to a
panel of TACA and shipper representatives
which would recommend a solution.

(e) Those TACA parties which were also parties
to the Eurocorde Discussion Agreement
the Gulfway Agreement would
and/or
withdraw from those agreements.

(f) The TACA parties would not exchange
confidential business information with other
and
carriers
serving
Europe/Canadian
trades
except for the purpose of rationalising their
services.

Europe/Canada
Gateway/USA

(g) The TACA parties would provide quarterly
reports to the Commission on the operation
of the Agreement.

(h) The TACA parties would inform the
Commission of any contacts between the
Agreement and other carriers concerning
price-fixing or capacity regulation.

B. October 1994 version of the TACA

(24) On 17 October 1994, the TACA parties notified
to the Commission the modifications to the
TACA described below.

(25) The detailed provisions

relating to capacity
non-utilisation were deleted. Notwithstanding
the deletion of the detailed provisions relating
to the capacity regulation programme,
the
TACA continues to provide that the parties may
cooperate with the objective of regulating the
them
carrying capacity offered by each of
(Article
no
explanation of how the TACA parties intend to
do this.

5(3)). The

notification

gives

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(26) Article 5(1)(c)(6) which provided for common
agreements with rail, air, motor, or water
carriers for the European inland segment of
multimodal
the
minimum/maximum prices to be paid to such
carriers
in connection with such transport
services was deleted.

transport

services

and

statistics

including the exchange of

(27) Article 5(1)(f) concerning activities with other
relevant
persons,
information,
in
connection with inter-conference agreements
and
cooperative
preferential
working arrangements with marine terminal
operators or vessel or non-vessel operating
common carriers was deleted.

and other data

exclusive,

or

would abandon their 1995 business plan, revert
to 1994 rates
a number of
and make
modifications to the TACA agreement. The
main provisions of
the proposed Settlement
Agreement were as follows:

(a) the cancellation of several other agreements
between liner shipping companies relating to
the Trade (including the Eurocorde and
Gulfway Agreements);

(b) a number of technical modifications to the
TACA’s
provisions
whereby the following requirements were
imposed:

independent

action

(28) The notice period for taking independent action
on ocean tariff rates and inland portions (under
Article 13(1)(a)) was reduced from five to three
business days.

(i)

the

that
secretariat would publish
immediately notices of intention to take
independent action,

(29) The minimum volume commitment for service
contracts (referred to in Article 14(2)(b)) was
reduced. A new provision that the unilateral
action must be agreed with the shipper and
provided to the TACA secretariat for filing with
the Federal Maritime Commission (FMC) no
later than 15 days following the filing of the
original contract and must have the same
termination date as the original contract was
introduced.

(30) The formula for permitting TACA parties to
enter into service contracts (a majority less two)
was replaced by approval by any five of the
parties to the agreement (Article 14(3)(b)). The
service
the negotiation of
arrangements
contracts are described at recital (132).

for

C. February 1995 version of the TACA

(31) On 3 February 1995,

the TACA parties
informed the Commission that
they had
concluded a conditional settlement agreement
with the FMC. In return for the FMC’s agreeing
to put an end to a number of investigations into
alleged breaches of the American Shipping Act
1984 by the TACA parties, the TACA parties

(ii) that the TACA parties should have the
right but not the obligation to discuss
independent action with other parties in
advance,

(iii) that each line should adopt

its own
policy as to who within the organisation
was entitled to authorise independent
action;

(c) space chartering arrangements (other than
ad
taken
outside the scope of TACA: connective
carrier arrangements (16) were cancelled;

arrangements) (15) were

hoc

(15) Following receipt of the preliminary observations of the
Commission (see recital
the TACA parties had
(6)),
written to the Commission on 24 January 1995
informing it that the TACA parties proposed to amend
the TACA to limit the scope of the TACA to ad hoc slot
and space chartering arrangements.

(16) Connective carrier arrangements concern the inclusion in
vessel sharing agreements (VSAs) of provisions such as
the following, (cid:28)A party may utilise space made available
to it hereunder to provide space to a non-party ocean
common carrier (pursuant to another agreement). … A
party may make a available to another party hereunder
space provided by a non-party ocean common carrier
(pursuant to another agreement), …’. An example of
how this works in practice is as follows. Carriers A, B
and C are parties to TACA. Carriers A and B participate
in different VSAs. Under the (cid:28)connective space chartering
authority’, carrier A may make space available to carrier
C (space that is provided to carrier A on a carrier B
vessel) without carrier C needing to be a party to the
VSA between carriers A and B.

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(d) the

greater

promotion

carrier
of
participation in service contract negotiations
(but existing approval arrangements were
retained and the TACA secretariat was given
the option of attending service contract
negotiations with shippers): the removal of
against
certain
non-vessel
carriers
(NVOCCs);

practices
common

discriminatory

operating

coordinated reaction to the application by the
Commission of the Community’s competition
rules to inland price fixing.

(34) According to the TACA parties:

(cid:28)the effects of the changes are perceived to
be as follows.

(e) changes to the practices of a number of
TACA parties in relation to charges for
access
to American land-based container
pools;

(f) the roll-back of 1995 price increases to
1994 rates (at an estimated cost to TACA
lines of USD 60 to 70 million).

(32) On 9 March 1995, the TACA parties informed
the Commission that the FMC had imposed a
further condition on the TACA parties. This
condition required the TACA parties to amend
the TACA so as to allow individual TACA
parties to enter into 1996 service contracts
without having received the approval of the
other TACA parties, provided that
those
contracts
complied with the provisions of
Article 14(2) of the TACA.

(1) So long as one party takes overall
entire
responsibility
import/export movement,
the shippers
who actually make use of the import
and export legs may be different.

the

for

(2) Now that

the import movement may
start and the export movement may
finish in different ports, and now that
the inland location for unloading the
import movement and reloading the
export movement may be different, more
shippers will find that an import/export
combination could be used to meet their
haulage requirements.

(3) The import/export combinations remove
the requirements to pick up an empty
container from a port and to return it to
the same port. They therefore reduce
both empty container movements and
reduce
such
shippers’
combinations’ (18).

costs

for

D. October 1995 version of the TACA

E. November 1995 version of the TACA

(33)

In October 1995, the TACA parties informed
the Commission of a set of changes concerning
(cid:28)inland arrangements relating to import and
export combinations of haulage under both
carrier and merchant haulage’ which had come
into effect on 20 July 1995. These changes
the
reflect
Intra-industry Intermodal Committee
(IMC)
concerning steps to be taken to remove (cid:28)any
discriminatory
and
regulations in conference tariffs’ (17). The IMC
had been set up by the liner shipping industry
industry produced a
to ensure

recommendations made

transport

inland

rules

that

the

by

(17) See letter of Mr V. L Bijvoets, Chairman of the IMC and
Chief Executive Officer of Nedlloyd, to the Commission
dated 28 July 1995.

(35) On 24 November 1995,

the TACA parties
informed the Commission that changes had
been made to Article 14(2)(a) and 14(2)(f) of
the TACA concerning service contracts. The
changes increased the maximum duration of a
TACA service contract from one to two years
(19) and allowed for currency adjustment factor
(CAF) levels to be subject to limits on their
variation during the term of service contracts.

(18) See letter of Lovell White Durrant, the legal advisers to
the TACA parties, to the Commission dated 3 October
1995.

(19) According to (cid:28)Contracts between shippers and shipping
conferences’, a study carried out on behalf of EC
Directorate-General for Transport by Brinkman-ship Ltd
in February 1996,
(cid:28)Only 17 two-year contracts were
signed’.

9.4.1999

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Official Journal of the European Communities

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(36) On 29 November 1995,

the TACA parties
notified to the Commission the establishment of
the (cid:28)European Inland Equipment
Interchange
Arrangement’ (EIEIA).

(40)

Each applicant reports:

(a) its name;

(37) The

of

the

between

objective

(cid:28)European

empty containers

Inland
the
Equipment Interchange Arrangement’ is said to
be to improve efficiency with regard to the
inland positioning of
in
Europe by promoting interchanges of empty
containers
The
Arrangement provides a computerised reporting
system through which individual TACA carriers
can enter
container
information on their
surpluses and deficits at various European
locations so that other TACA carriers can easily
have access to the information to determine
whether they can use the containers to serve a
particular customer demand at that or a nearby
location.

applicants.

(38)

For example, the Arrangement enables a TACA
requiring an empty container at a
carrier
particular port or inland point,
to ascertain
from the information in the reporting system
whether any other TACA carrier has or expects
to have empty equipment available at or near
that location. Equally, the Arrangement would
enable a carrier with an actual or anticipated
surplus stock of containers at a location to
contact a carrier with a reported shortage to see
if its equipment can be supplied for use by that
carrier.

(39) This system went into operation with the first
reporting under the Arrangement by carriers on
1 August 1995 for the Benelux area, and with
reporting extended to other Member States
within the TACA’s geographic scope at various
dates up to 10 October 1995 (20). The key
locations are, primarily, ports and cities (such as
Antwerp or Paris), each of which are taken to
include the surrounding region and,
in some
cases, named regions (the Rhine or the Ruhr).
is of
like
The Arrangement,
indefinite duration, although any TACA party
may
the
terminate
Arrangement at any time.

participation

the TACA,

its

in

(20) 29 August 1995 – France; 12 September 1995 –
Germany; 26 September 1995 – United Kingdom,
Ireland; 10 October 1995 – Austria, Italy, Denmark,
Sweden, Finland.

(b) the weeks to which the report relates;

(c) any surplus or deficit of each equipment
type, namely standard equipment (dry van
the key
and high cube
locations;

containers) at

(d) details of the person at that carrier whom
interested carriers should contact to reach
agreement on a case-by-case basis for the
interchange of equipment.

(41) Reports are made using standard (cid:28)symbols’.
Imbalances are stated as (i) a significant surplus
[(cid:28)++’] (where a carrier has a significant number
of surplus containers);
(ii) a less significant
surplus [(cid:28)+’]; or (iii) a shortage [(cid:28)-’]. The reports
are made fortnightly with each report providing
a summary of equipment inventory projections
for the following two weeks. Reports of actual
transactions under the Arrangement are made
to the TACA secretariat every four weeks.

(42) The

agreed

applicants

documentation
interchange
terms)
(Shortform Agreement).

standard
have
documentation which may be used by the
they have not
exchanging parties whenever
negotiated or will not in the future negotiate
interchange agreements. This
specific bilateral
the
standard
consists
pro-forma
terms
agreement
Interchange
(pro-forma
Agreement
The
standard set of
contained in the
terms
pro-forma terms deal with such aspects as
maintenance and insurance of containers as well
as the delivery re-delivery of containers. The
Shortform Agreement would incorporate the
pro-forma terms and add the particular details
of the interchange in question.

and

the

of

(43) The applicants have agreed guideline per diem
charges for each of the equipment types but are
said to be free to negotiate other levels. The
guideline per diems are said to reflect typical
market
rates on the basis of ad hoc or
occasional interchanges.

L 95/10

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Official Journal of the European Communities

9.4.1999

Inland

Equipment

(44) The TACA parties have stated (21) that during
the first seven months of operation of
the
European
Interchange
Arrangement over 3 600 containers had been
(cid:28)leading to a reduction in the
exchanged,
number of container moves
inland and to
increased efficiency’. However, this information
was qualified by the following statement made
by the parties:

(cid:28)This figure represents the total number of
container interchanges in which [the TACA
parties] participated.
In addition to the
relevant authority under the EIEIA some of
the respondents are also party to other
agreements containing similar authority’ (22).

to

bilateral

pursuant

(45) Accordingly, the figure of 3 600 exchanges of
containers does not
relate to exchanges of
containers which have taken place as a direct
the European Inland Equipment
result of
Interchange Arrangement. That figure relates to
all exchanges between the TACA,
including
arrangements
those
Inland
concluded
before
Equipment
Interchange Arrangement entered
into effect. No information as to the practical
effects of
the European Inland Equipment
Interchange Arrangement have been supplied to
the Commission. At the oral hearing held on 6
May 1996, counsel for the TACA parties stated
that it was impossible to determine how many
of the 3 600 exchanges of containers could be
directly attributed to the European Inland
Equipment Interchange Arrangement (23).

European

the

any such benefits have been passed on to
shippers. As will be seen below,
the TACA
parties have provided no evidence to support
the
inland
haulage can be said to be indispensable to the
operation of the European Inland Equipment
Interchange Arrangement.

conclusion that price-fixing for

F. January 1997 version of the TACA

(47) On 10 January 1997, the TACA parties notified
the implementation, with effect from 1 January
1997, of a (cid:28)hub-and-spoke’ system of inland
cooperation
locations,
three
Frankfurt/Mainz, Lyons and Munich. According
to the notification,
the TACA parties may
extend the system to up to 15 hub locations.

trial

for

(48) The TACA parties have argued that this new
cooperation, in addition to the other forms of
cooperation already existing between them,
causes the conditions in Article 85(3) of the EC
Treaty to be met for the grant of exemption for
the collective fixing of prices for all their inland
transport activities.

(49) Under the hub-and-spoke system, the price fixed
by TACA parties for carrier haulage between an
ocean port and an inland destination is
calculated
inland
movements:

basis

two

the

on

of

(46) Thus,

exchanges of

in relation to the EIEIA,

the TACA
parties have provided no information as to the
number of
empty containers
which have resulted from the Arrangement.
They have provided no information as to which
of the TACA parties have participated in the
exchange of containers. They have provided no
information as to cost savings or other benefits.
They have provided no information as to how

(a) the haulage between the ocean port and the

inland hub (the trunk leg);

(b) the haulage between the inland hub and the

shipper’s premises (the local leg).

(21) Paragraph 3.17 of

the reply to the supplementary

Statement of Objections.

(22) Footnote 3 to Annex VIII of

the
supplementary Statement of Objections.

reply to the

(23) In any event, it may be noted that the figure of 3 600
exchanges over a period of seven months amounts to one
container exchanged per carrier per day.

(50)

For 1997, the trunk leg rates under the hub and
spoke tariff (called the (cid:28)basic hub rates’) are
claimed to have been fixed by the TACA parties
at, or close to the average cost to the TACA
parties of providing the inland service. The
basic hub rates are composed of four elements:

9.4.1999

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Official Journal of the European Communities

L 95/11

(a) the average one-way laden transport cost

(c) empty positioning/imbalance factor

incurred by the TACA parties

this is said to reflect the rates payable by the
TACA parties to the relevant national inland
operator. For example, where the trunk leg
between a German port and Munich is
served by rail, the applicable tariff rate will
reflect the average rate at which that inland
haulage is purchased by the TACA parties
from the relevant inland operator — in that
case, Transfracht; similarly, rates payable
between Le Havre and the Lyons hub will
reflect rates paid by the TACA parties to the
French national rail freight operator, CNC.

this is said to be the average cost to the
TACA parties
empty
containers at the hub locations in order to
address cargo imbalances;

positioning

of

(d) administration

is

the

claimed that

(Under the existing tariff,

It
introduction of
one-way rates will significantly reduce the
amount payable by shippers and forwarders
the repositioning of empty
in respect of
containers.
the
inland rate is a round-trip rate calculated on
cost of
the basis of 100 % of
transporting a full container from the ocean
port to the point of destination and 85 % of
cost of
that
repositioning the empty container at
the
port);

sum in respect of

the

the

(b) inland handling

this is said to include the following cost
elements:

— release and receipt of the container at

the terminal,

— inspection and reporting of the condition

of the container equipment,

— lifting of

the

container onto/off

a

trailer/barge/rail wagon,

— movement of

the container to/from a

container stack, and

— storage of empty/laden containers;

a

is

fixed-fee

this
cover
administrative matters such as completion of
any necessary customs documentation.

charge

to

(51) Under the hub-and-spoke systems, the trunk leg
of a container move is required to be made
either by rail or by inland waterway. The basic
hub rate is fixed at a single level applicable to
all carriers, regardless of the address of the
nominated terminal and the election by the
individual carrier to operate that leg via rail or
barge.

leg,

(52) Where a shipper or forwarder elects also to use
carrier haulage for the local
the tariff
provides a rail/road or barge/road rate which is
a combination of the basic hub rate and the
tariff rate for the inland transport by road
between the hub and the shipper’s premises.
However, a shipper may use carrier haulage for
the trunk leg but switch to merchant haulage
for the local leg. In such cases, that shipper will
be allowed access to the inland depot subject to
payment of the basic hub rate and payment of a
handling charge. No further additional charge is
the switch to
payable by the shipper
merchant haulage for the local leg provided that
the container is collected and returned to the
same hub location. The
shipper who is
importing goods from the USA will be able to
collect a laden container from the hub and
subsequently drop off the empty container, and
a shipper who is exporting goods will be able to
pick up an empty container from the hub and
drop off the laden box.

for

L 95/12

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Official Journal of the European Communities

9.4.1999

(53) Although it is claimed in the notification that
the basic hub rates have been fixed by the
TACA parties (cid:28)at or close to the average cost to
the TACA parties of providing the inland
service’ (24), subsequent
information provided
by the TACA parties has revealed that the trunk
leg rates have been based not on the average
costs of all of the TACA parties but on the costs
of only seven of them. Furthermore, it is clear
from this information that a nominal figure has
been taken for administration costs and not an
estimate of actual administration costs. While
rates for Frankfurt and Munich appear to be
close to the average of the seven lines, from
information supplied by the TACA parties it
would appear that the basic hub rates for the
Lyons hub via Benelux ports are up to (Business
secrets omitted) % higher than the average
costs of the seven lines on which those hub
rates are claimed to be based, as the following
table shows.

system,

hub-and-spoke
therefore, would
(cid:28)contribute to a reduction in transport by road’,
thereby
congestion and bringing
environmental benefits.

reducing

a

for

request

(55) On 17 February 1997, the Commission sent the
information
TACA parties
pursuant
to the previsions of Article 16 of
Regulation (EEC) No 4056/86 and Article 19 of
requesting
Regulation (EEC) No 1017/68,
confirmation that the Munich and Lyons hubs
could be served by container barge transport.
The TACA parties replied on 10 March 1997 to
the Commission, confirming that both hubs
could be served by barge transport: (cid:28)The TACA
parties confirm that both the Munich and Lyons
hubs may be served either by rail or by barge’.

Table 1

(56)

stated that

the TACA parties

Further,
(cid:28)the
to the
system does
hub-and-spoke
transportation of containers by barge to and
from the Munich and Lyons hubs. The basic
hub rates set out for the Munich and Lyons
hubs at Annex 5 to the notification of 10
January are equally applicable to barge moves’.

apply

Comparison of Lyon hub rates with average costs

Lyons
via Benelux

TEU
(< 13T)

TEU
(> 13T)

FEU

Average cost
(FRF)

Basic hub rate
(FRF)

(Business secrets omitted)

4 215

5 150

5 795

Difference (FRF)

(Business secrets omitted)

(%)

(Business secrets omitted)

Source: TACA parties.

(57) On 12 March 1997, the Commission sent the
TACA parties a further request for information
(also made pursuant to the provisions of Article
16 of Regulation (EEC) No 4056/86 and Article
19 of Regulation (EEC) No 1017/68) requesting
further
barge
movements. In reply, the TACA parties on 26
March 1997 wrote to the Commission stating
that there is no barge service operating between
northern European ports and either the Lyons
for Munich hubs.

of Munich/Lyons

details

(54)

In their application for individual exemption
with respect to the hub-and-spoke system, the
the arrangements
TACA parties argued that
notified to the Commission contribute
to
improving transport services and thus fulfil one
of the necessary criteria for the granting of an
individual exemption in respect of the notified
arrangements. They stated that
the
hub-and-spoke system,
the trunk leg of a
container move will be made either by rail or
by inland waterway’. The use of the TACA’s

(cid:28)under

(24) Application for exemption, paragraph 4(10).

(58)

the TACA parties

In a letter to the Commission dated 14 April
1997,
stated that unless
express agreement
is made to the contrary,
where a hub location is established by the
TACA parties, a single set of rates will apply to
and from the hub location, and those rates will
be equally applicable to transport by rail and by
barge and will not generally specify the actual
mode to be used. Thus, the fact that the rates
apply equally to rail and to barge does not

9.4.1999

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Official Journal of the European Communities

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necessarily mean that both modes of transport
are geographically relevant
to the particular
hub. The TACA parties also explained that
sections of the inland waterways connecting the
Munich and Lyons hubs to northern European
ports are not navigable by container barge.

(59)

Finally, the rates established for the trunk leg
the
between
Frankfurt/Mainz hub apply only to a barge
move.

Benelux

ports

and

the

III. THE RELEVANT MARKET

(60)

It was claimed in the application from the
TACA members to the Commission that the
parties face actual external competition from:

(a) other

operators

of

containerised

liner

services on the direct trades;

(b) operators of containerised liner services on

alternative routes;

(c) other operators of liner services;

(d) non-liner operators;

could easily be

container
switched to air
transport (26). On the North Atlantic, air
transport for cargo is up to 20 times more
expensive than maritime transport and up to
nine times faster. These figures do not include
the additional delays and consequent costs of
port congestion, particularly when it comes to
unloading larger vessels which can amount to a
further eight days at both ends (27).

(63)

In the reply to the Statement of Objections the
TACA parties no longer maintained their claim
that air transport services were substitutable for
maritime transport services.

of maritime

(64) The Commission also takes the view that, for
the vast majority of categories of goods and
users of containerised liner shipping, the other
forms
including
liner transport, do
conventional
to
alternative
reasonable
not
containerised transport services on the routes
falling within the relevant geographic market in
this case and that these services constitute one
or more markets in their own right.

(break-bulk)
a

transport,

offer

(e) air transport operators.

(65)

(61)

Pak

P Tetra

International

In its judgement of 14 November 1996 in Case
v.
C-333/94
Commission (25), the Court of Justice stated that
the stability of demand for a certain product is
the appropriate basis for defining a relevant
market and that the fact that different products
are, to a marginal extent, interchangeable does
not preclude the conclusion that those products
belong to separate product markets.

It is clear that many bulk commodities can be
containerised and that before the advent of
containerisation all goods
travelled in bulk
consignments of some description or another. In
this case, in order to determine the competitive
conditions in the relevant market, it is necessary
to consider the effect of substitutability from
carriage
in bulk:
substitution from bulk to container is irrelevant.

in container

to carriage

A. Relevant
transport

product market

– maritime

(62) The Commission takes

forms

the view that air
transport
from
containerised liner shipping for the reason, inter
it has not been shown that a
alia,
substantial proportion of the goods, carried by

separate market

that

a

(25) [1996] ECR I-5951, paragraphs 13, 14 and 15.

it

(66) Almost all cargo can be containerised and, over
time,
of
containerisation in most maritime markets
involving Member States will be very high. In
northern
such
mature markets,

degree

likely

that

the

the

as

is

(26) Goods are transported on container vessels in sealed
boxes, the most common types of which are 20-foot
equivalent units
(teus) and 40-foot equivalent units
(feus).

(27) See The Journal of Commerce, Shipping Review &
Outlook, 6 January 1997 at page 73C. Transit times on
the North Atlantic are typically two to three weeks for a
scheduled liner service.

L 95/14

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Official Journal of the European Communities

9.4.1999

the

Europe/USA or the northern Europe/Far East
markets,
towards
containerisation is more or less complete and
few, if any, non-containerised cargoes are left
which are capable of being containerised.

process

change

of

(67)

Furthermore, once a type of cargo regularly
becomes containerised it is unlikely ever to be
transported again as non-containerised cargo.
The reasons for this are that shippers become
accustomed to shipping in smaller but more
frequent quantities and become accustomed to
the fact that once cargo has been loaded into a
container, it is easier to ship onwards from the
port of delivery to the ultimate consignee using
multimodal transport.

(71)

bulk to container, possibly on a route-by-route
basis, the differences in the nature of the service
that
being
transformation period is over, a shipper
is
highly unlikely to revert to bulk shipping (29).

provided mean

once

that

In this context, it is not important that certain
commodities may still travel by either means:
the essential question for determining demand
substitutability is whether the choice of mode is
made on the basis of the characteristics of the
mode. Thus, the fact that some steel products
may travel by bulk and others by container
does not
two modes are
substitutable, since it does not take into account
the diverse nature (and value) of steel products
nor the delivery requirements of customers. The
same is true for the other products for which
the TACA parties claim substitutability between
bulk and containers.

show that

the

(68) Thus,

of

as

the

degree

containerisation
increases, shippers of non-containerised cargoes
turn towards containerised services but once
those shippers have become accustomed to
shipping in containers they do not revert to
non-containerised shipping. Such examples of
one-way substitutability are not uncommon.

(69) Drewry (28) makes a cautious estimate that the
containerised share of the world’s general cargo
trade has risen from 20,7 % in 1980, to 35,1 %
in 1990, to 41,6 % in 1994. Drewry forecasts
that by the year 2000, this percentage will rise
to 53,8 %. The
transformation from bulk
shipping to containerisation reflects not only a
change in the nature of the goods being shipped
(essentially from raw materials to manufactured
inherent
commodities),
characteristics of containerised liner shipping.

also

but

the

(70) These

the

include

characteristics

following.
Smaller, more frequent, shipments as is typically
the case with container shipping lead to reduced
inventory costs. Containerised goods are less
likely to suffer from damage and pilferage.
ship
are
Containerised
multimodally. For
a
these
commodity has made the transformation from

reasons, once

goods

easier

to

(28) Drewry, Global Container Markets, London 1996, pp.

38 to 48.

is

([Business

secrets omitted])

(72) The single specific example given by TACA
an
parties
interesting one since, as discussed at recitals
(210) to (213), it demonstrates the ability of the
TACA parties to price-discriminate so as to
attract marginal products away from bulk
carriers without affecting freight rates generally.
There is no evidence that bulk carriers are
likewise
as between
to discriminate
customers.

able

(73)

So far as reefer (that is, refrigerated) services
are concerned,
the TACA parties argue that
reefer containers are substitutable for bulk
reefer services. Even to the extent that this may

(29) Such one-way 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 (IV/M.190 –
Nestle´/Perrier) (OJ L 356, 5.12.1992, p. l.)

9.4.1999

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Official Journal of the European Communities

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be the case (30), for the reasons given above this
does not mean that bulk reefer services are
substitutable for reefer container services. Apart
from the advantages offered by liner container
services such as smaller volumes and speed of
transfer to other modes of transport, a wider
variety of products
in reefer
can travel
than can travel as bulk reefer
containers
cargoes.
and
leathers, pharmaceuticals, electronic goods and,
because of
the steady temperatures and the
ability to control ripening, soft fruits.

Such products

include

furs

(74) On this basis, while it

circumstances

is possible that

in
substitution
exceptional
may occur between break-bulk and container
transport,
it has not been demonstrated that
there is any lasting changeover from container
towards bulk for the vast majority of cases.

some

(75) On the supply side,

the TACA parties have
argued that break and neo-break carriers could
readily convert their vessels so as to enter the
relevant market and for this reason should be
regarded as potential competitors. Further, they
have argued that there are a significant number
of very large liner operators intending to enter
the transatlantic trades. These questions of
potential competition (and the evidence which
the TACA parties have put forward to support
their case, the Dynamar Report) are considered
at recitals (278) to (282).

B. The relevant geographic market – maritime

transport

(76)

shippers

Similarly, while northern European ports are for
some
some
Mediterranean ports, very few, if any, shippers
find that Mediterranean ports are substitutable
for northern European ports.

substitutable

for

(77)

all ports

First, notwithstanding the TACA parties’ claims
that
in the Mediterranean are
substitutable
for northern European ports
falling within the scope of the TACA, there is
no realistic possibility and no evidence has been
provided that Mediterranean ports east of
latitude 20(cid:30) or south of longitude 36(cid:30) (which
includes parts or
all of Greece, Turkey,
Lebanon, Israel, Cyprus, Egypt, Libya, Tunisia,
Algeria and Morocco) could, with the possible
exception of Algeciras in Spain, be used by
shippers in northern Europe as a substitute for
northern European ports (or for that matter,
vice versa).

(78)

Secondly, the evidence of substitution of ports
in France, Spain, Italy and Croatia does not
lead to the conclusion that ports
in those
countries are substitutable to a sufficient degree,
if at all, for the conclusion to be drawn that
they are in the same market as northern
European ports. The TACA parties have
provided the following evidence of substitution
by shippers of Mediterranean ports for northern
European ports:

secrets

omitted]

diverted
its volume

a
(cid:28)[Business
significant proportion of
to
Mediterranean ports in 1994/1995. Whilst
TACA lines continue to carry some of the
secrets
shipper’s
omitted) continues to ship approximately
(business secrets omitted) teus per annum
via the Mediterranean’.

total volume,

(business

(cid:28)(Business secrets omitted) also moves an
estimated (business secrets omitted) teu of
cargo via the Mediterranean ports, both
with SEAC carriers and with independent
lines. Some of that cargo was previously
carried via northern Europe. It is understood
that cargo originating from (business secrets
omitted)’s production plant on (business
secrets omitted) continues to move through
both northern European and Mediterranean
ports’.

(30) According to Mats Jansson, President of Unicool and
Cool Carriers, (cid:28)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).

switched
secrets omitted) has
(cid:28)(Business
approximately (business secrets omitted) teu
to
from TACA
of
cargo
Mediterranean
by
services
Evergreen’.

services
operated

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Official Journal of the European Communities

9.4.1999

(79) On the basis of

this evidence (

the alleged
substitutability of some 8 000 to 10 000 teu),
the TACA parties consider that some 48 000 teu
should be included in the overall market in
which the TACA operates. According to the
TACA parties, the effect of this would be to
increase the total market by 2 %. Since they do
not include in the TACA market share, cargo
carried by TACA parties on trades
falling
outside the geographic scope of the TACA, this
would decrease the TACA parties’ share of the
relevant market by approximately 1 %.

(80) The Commission does not consider that

that ports

substitutable

the
forward by the TACA parties
evidence put
in the
evidence
outweighs
the
Mediterranean
for
not
are
northern European ports. First, the inadequacy
of Mediterranean ports for shipments to North
America is demonstrated by the fact that the
TACA parties which are also VSA parties
operate two to three round trip rail shuttles a
week between Milan and Rotterdam: the TACA
parties have provided no evidence that any
shipper has sent material quantities of cargo to
Mediterranean ports
from northern Europe
with North America as the ultimate destination.

(81)

(82)

Secondly, there is no evidence that the specific
cargoes in question could have been carried via
northern European ports. Thirdly, of the three
examples given by the TACA parties, it would
appear that
the three cases the
shipments in question were made using the
Mediterranean service of one of
the TACA
parties.

in two of

is relevant

to note that
In this context,
it
Mediterranean ports do not appear
to be
substitutable for northern European ports even
for Europe/Far East
the
geographic advantages of Mediterranean ports
are significantly greater than for trans-atlantic
services. Thus, Drewry considers:

services, where

infrastructural

in anything like the foreseeable future, given
the
the
southern ports
and the European rail
system’ (31).

limitations

of

(83)

Finally, the effect of marginal competition from
other means of transport for certain categories
of goods can be limited. This situation arises
because liner shipping companies are able to
identify shippers of such goods and, because of
the differentiated price
in liner
shipping, offer lower prices to such shippers
without affecting prices generally (see recitals
(203) et seq.).

structure

C. Conclusions

as
transport market

to

relevant maritime

(84)

(85)

that

the market

For the reasons given above, the Commission
considers
sea-transport
services to which the TACA relates is that for
containerised liner shipping between northern
Europe and the United States using the sea
routes between ports in northern Europe and
ports in the United States and Canada (32).

for

D. Shares of the relevant maritime transport

market

going

Figures provided by the TACA parties for their
market shares are set out in Tables 2 and 3.
These figures include some bulk and break-bulk
commodities
through the Canadian
gateway in the product market and Iceland and
Puerto Rico in the geographic market, none of
which fall within the scope of the TACA: the
consequence of this is that the figures given
below underestimate the TACA’s market share,
although probably not to a significant degree.
The effect of potential competition is considered
at recitals (276) to (306).

in

turning

the Mediterranean,
(cid:28)By
Europe-Far East ships could save at least
two weeks on their average nine-week
round voyage time (a 22 % increase in
vessel productivity), but this seems unlikely

(31) Drewry, Global container markets, p. 76.
(32) This market is described in greater detail at recitals (25)
to (70) of
the TAA Decision is
referred to by the TACA parties at recital (1)(4) of the
application for exemption of the EIEIA.

the TAA Decision:

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Table 2

Market shares for containerised cargo 1994 to 1996

(Northern Europe/USA including via Canadian gateway)

1994
teu

1994
(%)

1995
teu

1995
(%)

1996
teu

1996
(%)

1 317 785

57 455

1 358 983

90 607

1 342 684

86 406

1 375 240

60,65

1 449 590

61,55

1 429 090

59,83

574 776

317 339

25,35

14,00

643 675

261 536

27,34

11,11

638 194

321 067

26,72

13,45

Total

2 267 355

100

2 354 801

100

2 388 351

100

TACA

Direct NE/USA

Via gateway

Total TACA

Non-TACA

Direct NE/USA

Via gateway

Source: PIERS/TACA.

(86) These figures can be broken down into four distinct segments based on the coast on
which the North American port of entry is located: these are the US east, gulf and
west coasts and Canadian east coast ports for goods shipped to the American
mid-west (the Canadian Gateway).

Table 3

Market share by segment 1994 to 1996

1994

1995

1996

(%)

TACA

Evergreen

Lykes

Others

TACA

Evergreen

Lykes

Others

TACA

Evergreen

Lykes

Others

TACA

Evergreen

Lykes

Others

71

13

5

12

59

0

18

23

72

14

0

14

15

0

0

85

69

14

5

12

56

0

19

24

68

15

0

17

26

0

0

74

69

13

5

12

61

3

17

18

68

15

0

17

21

0

0

79

NE-USA

East coast

NE-USA

Gulf coast

NE-USA

West coast

NE-USA

Gateway

Source: PIERS.

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(87) The relative importance of each of these segments is apparent from the diagram

below.

Diagram

Market breakdown by coast 1995

NE/USA via Gateway 15 %

NE/USA 
west coast 9 %

NE/USA gulf coast 13 %

NE/USA east coast 63 %

(88) The following conclusions may be drawn from
Tables 2 and 3 and from the diagram each of
the three years 1994, 1995 and 1996,
the
TACA parties enjoyed market shares of some
60 %. In each year they also enjoyed market
shares in excess of 55 % on each of the market
segments
trade between northern
Europe and the USA. In each year they enjoyed
approximately 70 % of the northern Europe/US
east coast segment, the market segment which is
over four times larger than the next largest
segment.

for direct

(89) According to Drewry (33), demand for maritime
transport services between northern European
ports and ports
in the USA, Canada and
Mexico grew by more than 7 % between 1993
and 1994 and by nearly 6 % between 1994 and
1995. On 1 October 1997,
the Journal of
Commerce stated that the trade was (cid:28)growing
between 6 % and 9 % per year’.

(33) Drewry, (cid:28)Global container markets’, p. 88.

(90) On 13 October 1997,

forecast

the TACA parties,
published their 1998 business plan: the plan
included a
growth in 1998 of
(cid:28)approximately 8 % to 9 % westbound and 3 %
to 4 % eastbound’. The plan added, (cid:28)The 1997
growth in the market has absorbed the capacity
introduced by new trade entrants, both in terms
of American direct services and cross-border via
Canada. The continued growth in 1998 will
thus
translate into real growth for TACA
carriers’.

E. The relevant inland transport market

(91) The land transport services that are of relevance
to this Decision are the inland transport services
undertaken within
the
the
Community which shippers acquire together
with other services as part of a multimodal
transport
of
containerised cargo between northern Europe
and the United States of America. These
services do not form part of the market for

operation

territory

carriage

the

for

of

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maritime transport services described above but
form part of a distinct market.

V. THE TACA TARIFF

(92) These land transport services can be supplied in
one of two ways: merchant haulage or carrier
haulage. Where supplied by carrier haulage,
they are supplied by one of the liner shipping
sea
companies present
transport services described above. In 1995 the
TACA parties provided carrier haulage services
within the territory of the Community for some
the cargo they carried between
48 % of
northern Europe and the United States.

in the market

for

(96) As with many conference tariffs,

the TACA
tariff is a five part tariff showing separate rates
for each of the following services:

(a) inland transport to the port,

(b) cargo handling in the port (transfer from the
mode of inland transport to the vessel),

IV. LINER SHIPPING CONFERENCES

(c) sea transport (maritime transport from one

port to another),

(93)

of

by

served

In general terms, liner shipping conferences are
associations
a
shipowners
secretariat. The shipowners act together to set
common or uniform freight rates and to make a
common policy on the discounts or rebates
which may be offered to certain shippers.
Depending on the trade, they may share the
cargo between themselves
in various ways,
coordinate sailing timetables, pool revenues and
agree measures to combat competition from
non-conference competitors. They deal with
applications for membership (34).

(94) Unlike liner shipping consortia, conferences do
not bring about the joint operation of a liner
shipping service. The question of operational
issues, other than scheduling, falls outside the
scope
not
uncommon to find one or more consortia
operating within a liner conference.

conference

activity.

of

It

is

(95) Conference secretariats organise the meeting of
the members of the conference and monitor
trade conditions. They do the latter by collating
statistics of trade volumes and prices which are
supplied to the secretariat by the members of
the conference. In the case of the TACA, the
TACA secretariat has played an especially
prominent
role, becoming directly involved,
inter alia, in service contract negotiations and in
policing compliance by the TACA parties with
the TACA’s rules.

(34) In the US trades, conferences may be joined without the
the existing members and are accoringly

consent of
termed (cid:28)open’ conferences.

(d) cargo handling in the port of destination
(transfer from the vessel to the mode of
inland transport),

(e) inland transport from the port of destination

to the place of final destination.

(97) The first and fifth of these services are invoiced
to the shipper in local currency. The second,
third and fourth are invoiced in US dollars.

(98) A rate is also shown for: container service
forwarding and customs
clearance
charges;
(UK/Ireland); CFS/breakbulk service
charges
terminal handling charges; CFS/pier
charges;
charges;
stuffing/stripping
charges,
cargo
optional delivery/discharge – additional charges;
diversion of cargo – administration fees; port
drayage – (cotton in containers); advance
charges – collection fees; temporary insulation
or
fees,
kit
flexitank/flexibag
demurrage
removal
charges; stop-off charges – consolidated cargo;
pick-up charges – consolidated charges; and
wharfage and handling charges.

liner
fees,

removal

bag

–

(99) The TACA tariff is based on the TAA tariff
which was introduced in 1993. The TAA tariff
replaced
by
conferences in the northern Europe/USA trades.
The westbound tariff which was replaced by the
TAA tariff has been described by the TAA

previously

tariffs

used

the

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secretariat as follows: published in six volumes,
has close to 2 500 pages, covers approximately
10 000 tariff positions, stacks one-quarter of a
metre in height and weighs over 12 kg (35).
According to the TACA parties the current
TACA tariff runs to many thousands of pages:
consequently, when the Commission requested a
copy, the TACA parties preferred to supply it in
electronic form.

operate under uniform rates. These rates make
up the conference tariff which is published and
available to all shippers. The conference tariff
sets out a number of different rates: standard
rates, time/volume rates, loyalty contract rates.
Conference members sometimes also offer secret
discounts from the conference tariff in order to
gain market share at
the expense of other
conference members.

VI. THE PROVISION OF INLAND TRANSPORT
SERVICES BY THE TACA PARTIES

(100) The extension of

liner

shipping companies’
activities to inland transport was discussed at
recitals (12) to (29) of Commission Decision
94/985/EC (36) (IV/33.218 – Far Eastern freight
conference: hereinafter (cid:28)the FEFC Decision’).
Those comments are equally applicable to the
TACA parties and, indeed, 10 out of 15 of the
TACA parties are also members of the FEFC.

lines of

(101) Thus, apart from the collective fixing of prices
and conditions for carrier haulage, no inland
transport activities are directly or indirectly
organised through the medium of the TACA.
The member
the TACA negotiate
individually the terms and conditions on which
they buy in inland transport. Until now, only
some member lines of the TACA have invested
in and own inland transport infrastructure (such
as depots) or equipment (such as tractors), the
most notable being P&O’s inland depots in the
UK and the various carrier-owned road haulage
companies (such as Nedlloyd and Maersk).

(102) As was explained above, the TACA parties have
established, and applied for exemption for, two
arrangements which distinguish their situation
from that described in the FEFC Decision: the
European Inland Equipment Inland Equipment
Interchange Agreement and the hub-and-spoke
system.

(104) Under American law, the right of members of
an exempted conference to take independent
action is mandatory with regard to tariff rates:
this means that any member of a conference has
the right to depart from the conference tariff in
respect of a particular class of goods, provided
that the other members of the conference are
notified.

(105) Tariff arrangements

arrangements

include the carriage of
cargo not only at standard tariff rates but also
loyalty
time/volume
arrangements where the goods will also travel
at tariff rates, but rates which are lower than
standard tariff rates. Under tariff arrangements
certain terms of the relationship are determined
by the tariff.

and

VII. SERVICE CONTRACTS

A. The difference between tariffs and contracts

(103) The essential feature of conference agreements
is that the members of the conference agree to

(35) Letter from TAA to the European Shippers’ Councils

dated 13 October 1992.
(36) OJ L 378, 31.12.1994, p. 17.

(106) Carriers operating under tariff arrangements are
expected to hold themselves out to the public as
common carriers. In brief, a common carrier is
one who plies between fixed places, does not
differentiate between those who demand to use
his services, and accepts an obligation to carry
any goods brought to him, if suitable and if he
has space. Few liner shipping companies have
legal obligations to act as common carriers, but
there is nevertheless an expectation that they

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will behave as such (37). American law requires
members of liner conference to act as common
carriers if they are to benefit from antitrust
immunity under American law.

(110) Section 3(21) of

the American Shipping Act

(1984) defines a (cid:28)service contract’ as:

(107) There is a major distinction to be drawn
between tariff arrangements and contractual
arrangements. Contractual arrangements do not
depend on the terms set out in the tariff and the
parties are free to negotiate the terms they
consider appropriate.

is not

the price

arrangements,

(108) The main difference is that in the case of the
tariff
an
individually negotiated price but that set out in
the tariff. In the case of contract carriage (for
example, a service contract) the price is not one
which appears in the tariff. The TACA parties
acknowledged this distinction in a letter to the
Commission dated 10 August 1995 in which it
is stated that the TACA parties (cid:28)use the term
“tariff” to refer to the document in which the
conference rates are published’.

B. Service contracts under American law

for

(109) The American Shipping Act (1984) specifically
authorised for the first time a form of contract
in
common carriers
carriage
American trades: service contracts. While their
use was not unknown in American trades prior
to 1984, their development had been impeded
by legal uncertainty as to whether they were
unlawfully discriminatory under American law.

for use

(cid:28)… a contract between a shipper and an
ocean common carrier or conference in
which the shipper makes a commitment to
provide a certain minimum quantity of
cargo over a fixed time period and the
ocean
conference
carrier
commits to a certain rate or rate schedule as
well as a defined service level – such as,
assured space, transit time, port rotation, or
similar service features; …’

common

or

conferences

serving American

(111) Service contracts were introduced following the
prohibition of collective (cid:28)loyalty contracts’ by
the American Shipping Act (38). At the time of
enactment of the 1984 Act, the tariffs of some
33
trades
contained loyalty contract rates. Conference or
collective loyalty contracts were considered
excessively anti-competitive by the USA because
they could discriminate against small shippers.
It was also considered that service contracts
would serve the long-term interests of American
export
trade and would be one of the two
counterbalances (the other being independent
action) to ensure that antitrust immunity for
conferences did not
lead to an excessive
reduction in price competition between liner
shipping companies.

(37) See Unctad, The liner conference system. TD/B/C4/62
1970, paragraph 10. The distinction between common
carriage and contract carriage predates liner shipping
conferences. An example of the distinction may be found
in the UK Carriers Act 1830 (11(cid:30) Geo. IV. & 1(cid:30) Gul.
IV), an Act of Parliament
limiting the liability of
common carriers, which provides that, (cid:28)Provided always,
and be it
further enacted, That nothing in this Act
contained shall extend or be construed to annual or in
anywise affect any special contract between such mail
contractor, stage-coach proprietor, or common carrier,
and any other parties, for the conveyance of goods and
merchandises’.

(112) Under US law, service contracts may be entered
into by shippers either with individual carriers
or with conferences. They must be filed with

(38) Section 3(14) of the American Shipping Act 1984 defines
a (cid:28)loyalty contract’ as (cid:28)… a contract with an ocean
common carrier or conference, other than a service
contract or contract based on time-volume rates, by
which a shipper obtains lower rates by committing all or
a fixed portion of its cargo to that carrier or conference’.

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the FMC on a confidential basis. A concise
statement of the essential terms (39) of service
contracts must also be filed: this is published by
the FMC and the same terms must be made
available, (cid:28)to all shippers similarly situated’.

C. Loyalty arrangements

the Unctad
be considered in the light of
Code (40). Council Regulation
(EEC) No
954/79 (41) permitted but did not oblige
Member States
to ratify the Code, which
eventually came into effect on 6 October 1983
but which has never been ratified by the United
States. The Unctad Code, in particular Chapter
III of the Code (Relations with shippers), clearly
recognises no form of contract between shippers
and conferences other than loyalty contracts,
which are specifically dealt with in Article 7 of
the Code.

an additional

(113) The carriage of cargo under the tariff system
does not preclude
contract
between the shipper and shipowner relating to
loyalty arrangements. Such a contract is, for the
reasons explained above, of a wholly different
nature from a purely contractual relationship
such as a service contract. The definition of a
service contract used by the American Shipping
Act
(110)) does not extend to
contracts for a percentage or portion of a
shipper’s cargo.

(see recital

(114) Unlike service contracts,

loyalty arrangements
are specifically referred to in Regulation (EEC)
No 4056/86, and Article 5(2) of that Regulation
attaches to the group exemption a number of
detailed
loyalty
arrangements. The 10th recital of Regulation
(EEC) No 4056/86 provides as follows:

obligations

relating

to

the

whereas,

furthermore,

freedom of users

(cid:28)…
loyalty
arrangements should be permitted only in
accordance with rules which do not restrict
unilaterally
and
consequently competition in the shipping
industry, without prejudice, however, to the
right of a conference to impose penalties on
users who seek by improper means to evade
the
in
exchange for the rebates, reduced freight
rates or commission granted to them by the
conference’.

obligation

required

loyalty

of

(115) The provisions of Regulation (EEC) No
4056/86 relating to loyalty arrangements should

(39) The essential terms of a service contract include: (a) the
origin and destination port ranges or geographic areas;
(b)
the
minimum volume; (d) the line-haul rate; (e) the duration;
(f)
the liquidated
damages for non-performance, if any.

the commodity or commodities involved;

the service commitments; and (g)

(c)

(116) There are three types of loyalty arrangement:
the deferred rebate system, the loyalty contract
system and the dual-rate contract.

rebate

(117) Under the deferred-rebate system, a shipper
who utilises exclusively the vessels of
the
member lines of the conference for the carriage
of cargoes between the ports covered by the
conference is initially charged at the full freight
rate, but is entitled to receive a deferred rebate
of a certain percentage of his total
freight
computed for a
payments. The
designated period (shipment period), usually
three to six months, but is paid after a period
(deferment period) of the same length following
the shipment period, on the condition that the
shipper has given his exclusive support to the
conference
shipment
lines during both the
period and the deferment period. The reward
for loyalty in the past is thus made conditional
on continuing loyalty in the future. The rebate
is not a legal right which the shipper has, since
there is no contract covering its payment.

is

(118) Under the loyalty contract system, the carrier
offer an immediate discount to those shippers
who sign a contract to the effect that they agree

(40) United Nations Conference of Plenipotentiaries on a
Code of Conduct for Liner Conferences, Final Act and
Annexes, UN, Geneva, Doc TD/Code/11/Rev. 1, 9 May
1974. The third recital of Regulation (EEC) No 4056/86
provides as follows: (cid:28)… whereas the Regulation applying
the rules of competition to maritime transport foreseen
in the last recital of Regulation (EEC) 954/79 should
take account of the adoption of the Code; whereas as far
as conferences subject
to the Code of Conduct are
concerned, the Regulation should supplement the Code
or make it more precise’.

(41) OJ L 121, 17.5.1979, p. 1.

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(FEFC) General

to give their entire support to the conference
carriers. An example of this is the Far Eastern
Freight Conference’s
cargo
contract:
in return for a 9,5 % discount on
conference tariff rates, shippers who sign the
General cargo contract agree to (cid:28)give the
[conference] carriers their entire support’,
to
(cid:28)ensure that all contracts for the carriage of
conference cargo … are made with one or more
of the [conference] carriers’ and to (cid:28)refrain from
in any
participating directly or
arrangements
carriage of
conference cargo by any vessel not operated by
the [conference] carriers’. Conference
one of
cargo is defined as cargo falling within the
geographic
and
scope
excludes a small number of
commodities
usually shipped in bulk.

conference

indirectly

to the

relating

the

of

are, in effect, discounts on standard rates and
are designed to protect the overall market share
of
to
by
conference carriers.

conference

shippers

tying

the

action

possibility

mandatory

law the
is

of
(121) Under American
independent
on
time/volume rates, since they are tariff rates:
this means that any member of a conference has
the right to depart from the conference tariff in
respect of a particular class of goods, provided
that the other members of the conference are
informed.

(119) The third form of loyalty arrangement is the
dual-rate contract. Under this contract, the full
conference tariff rate is charged to shippers who
do not sign an exclusive patronage contract
with the conference lines, and a lower rate to
shippers who do sign such a contract.

E. Service contracts in practice

(122)

under

travels

probably

In teh transatlantic trades, some 50 % to 60 %
of
service
cargo
contracts (43),
consolidated
although most
cargo (44) travels under conference time/volume
rates (which form part of the conference tariff).
The high proportion of service contracts on the
transatlantic trades is due to the American
prohibition of loyalty contracts, a prohibition
which does not exist under other systems of
competition law.

(123)

In the transpacific trades westwards from the
USA to the Far East, there have been, until
recently, very few service contracts as a result of

(43) According to a presentation made by TACA to selected
shippers on 6 July 1995, in the first quarter of 1995
some 59,5 % of all TACA carryings moved pursuant to
service contracts and 40,5 % at tariff rates. According to
(cid:28)Contracts between shippers and shipping conferences’, a
study carried out on behalf of
the Commission
Directorate-General for Transport by Brinkman-ship Ltd
in February 1996, (cid:28)TACA has signed some 450 contracts
(westbound) for 1996, representing close to 65 % of the
annual carryings of the conference ’.
(44) I.e. parcels consolidated by freight
shipments of 20 or 40-foot loads.

forwarders

into

D. Time/volume rates

(120) Time/volume rates are part of the conference
tariff: they are lower than standard tariff rates,
depending on the volume of cargo offered over
a specified period of time. Thus separate rates
are shown for different volumes of a particular
shipped (42).
commodity undertaken to be
Time/volume rates have no additional service
element. Time/volume rates, like loyalty rates,

(42) A rate published in a tariff which is conditional on
receipt of a specified aggregate volume of cargo or
aggregate freight revenue over a specified period of time.

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loyalty

hundred

apparently

agreements

conference opposition to their conclusion and,
where they existed, they were for very large
quantities (45). In the opposite direction, there
are
service
several
In the northern Europe/Far East
contracts.
trades, where
are not
prohibited, there are no service contracts of the
type
trades.
the
Arrangements are either made with the FEFC,
on the basis of a loyalty agreement, or are
individual arrangements, on the basis of a
the
discount
involvement of
is
possible to negotiate all-in rates (prices which
include surcharges) on these trades.

volume,
and without
the FEFC secretariat.

American

found

for

in

It

prohibited under the American Shipping Act. It
is reported that some service contracts covered
as little volume as 3 teu and some were for as
brief a period as seven days.

(126) To

their

impact

negative

beginning

individual

the
since

counteract

from around
Furthermore,

on
revenues, conferences serving the transpacific
service
trades began to prohibit
of
contracts
1986 (46).
independent
action on service contracts is not mandatory
under American law,
these conferences also
began to prohibit the taking of independent
action on joint-service contracts. Conferences
on the transatlantic routes had never openly
permitted individual service contracts until their
introduction by the TACA parties in 1996.

(124) As can be determined from the number of
filings with the FMC, the popularity of service
contracts grew tremendously following their
introduction in 1984, reaching a pinnacle in
January 1986. Shippers entered into service
contracts in order to obtain a lower price than
the standard tariff rates. Carriers offered them
because they were the next best thing to the
their main
prohibited
attraction being the chance to tie shippers to a
particular carrier or conference, although they
do also assist shipping lines to plan forward.

contracts,

loyalty

(125) By 1986 many service

contracts

required
if any, extra services
carriers to provide few,
and they were used merely to obtain a lower
rate than the standard conference tariff, ad hoc
discounting from the conference tariff being

rates

from tariff

(45) According to Albert A. Pierce Jr., Executive Director of
the Transpacific Westbound Rate Agreement (as reported
in American Shipper in December 1994),
in October
1994 the TWRA was in the course of negotiating its
third-ever service contract and had offered a 2 %
discount
for a minimum-volume
commitment of 5 000 feu. The October 1995 edition of
American Shipper reported that this one-year contract
took some eight months to negotiate and the minimum
volume eventually agreed is 9 100 feu for which space is
guaranteed. The February 1996 edition of American
Shipper reported that in the first week of 1996 a further
20 contracts had been signed. It is understood that the
number of such service contracts has further increased in
1997.

F. TACA service contracts

(127) The Commission has

examined some 350
TACA 1995 joint-service
contracts. Almost
none of those contracts contain any individually
negotiated terms
relating to service. They
merely set a tariff rate lower than the standard
tariff rate, depending on volume. The TACA
parties have disputed the Commission’s finding
in the Statement of Objections that very few of
the 1995 service contracts contain individually
negotiated services, claiming that 98 1995
service contracts contained one or more of 48
different types of additional service.

(128)

In the Commission’s view, only 16 of the 48
different clauses identified by the TACA parties
could be classified as relating to service as
opposed to price. Of
those 16 clauses, 12
appear in one contract each and concern in

(46) The prohibition of individual service contracts by the
Transpacific Westbound Rate Agreement (TWRA) and
the Asia-North America Eastbound Rate Agreement
(ANERA) with effect from 1 July 1986 resulted in the
immediate departure of Evergreen from both agreements.
See (cid:28)Service contracts: a case study of unfulfilled
promises’, N. Shashikumar, Marit. Pol. Mgmt, 1986,
Vol. 16, No 1, 13-26.

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total a mere seven shippers: four appeared only
in the (business secrets omitted) contract, two
in the (business secrets omitted) contract and
two with (business secrets omitted). ([Business
secrets omitted] each had a single clause of that
type). Of the other four types of clause, two
concern merchant haulage, one cash-on delivery
payment and one in-transit storage.

intended to promote

(129) The mandatory right of independent action on
rates under American law (a
time/volume
measure
competition)
probably explains why shipping lines on the
transatlantic routes have preferred to offer
service
than time/volume
rather
contracts
rates (47). The attitude of
the TACA parties
towards independent action is apparent from a
TACA briefing paper dated 15 February 1996,
where it is described as (cid:28)a tool of last resort’.

(130)

In its 1989 report on the American Shipping
Federal Maritime Commission
Act,
commented:

the

expressly

1984 Act

authorises
(cid:28)The
time/volume rates, defining them as rates
that “… may vary with the volume of cargo
offered over a specified period of time”… .
of
the
However, with

promulgation

(47) See (cid:28)The Effectiveness of collusion under antitrust
immunity – The case of liner shipping conferences’, Paul
S. Clyde and James D. Reitzes, Bureau of Economics
Staff Report, Federal Trade Commission, December
1995, (cid:28)unlike independent action on regular tariff rates
where the “discount” must be offered to all shippers of
that commodity on that route, [service] contracts could
be written in a manner which effectively allowed the
conference carrier to offer a “selective” discount to that
(or a small group of “similarly-situated”
shipper
shippers). Due
circumstances, permitting
independent action on service contracts could have
increased the attractiveness of cheating and inhibited the
ability of the conference to detect and punish cheating’.

to these

provisions

the
service-contract
subsequent wider-ranging use of
service
contracts, few carriers or conferences have
availed themselves of the time/volume rate
provisions’.

and

(131) The absence of independent action on service
contracts and the TACA rules on the terms of
service contracts, including the rules requiring
disclosure to the other TACA parties, mean that
less price competition is generated between the
parties to the TACA than would be the case if
the lines offered genuine time/volume rates
than time/volume rates disguised as
rather
service contracts.

(132) Until

service

Service

individual

TACA members.

the introduction of

service
contracts, all
contracts between a
shipper and the TACA parties were negotiated
by the TACA secretariat for and on behalf of
the
contracts
negotiated by the TACA secretariat are then put
to the voting procedure of the TACA. A TACA
party which does not wish to participate in that
service contract may take (cid:28)unilateral action’ on
that
the
service
(cid:28)unilateral action’
is limited in a number of
important ways which are likely to prove
disincentives to the taking of (cid:28)unilateral action’.

contract. The

scope of

shipper

(133) First, the unilateral action must be agreed with
the
and provided to the TACA
secretariat for filing (with the Federal Maritime
Commission) no later than 15 days following
the filing of the original service contract. This
is designed to limit
(cid:28)window of opportunity’
significantly the possibility for
to
negotiate with lines which do not wish to
participate in TACA service contracts. It also
means that shippers will be unable to take
advantage of changing market conditions.

shippers

(134) The second important limitation on the scope of
the (cid:28)unilateral action’ on service contracts is
that such action can only be in respect of cargo
which is additional to the minimum agreed to
contract.
be

carried

service

under

the

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9.4.1999

Furthermore,
the TACA party engaging in
(cid:28)unilateral action’ will not then be allowed to
participate in the service contract.

parcelled out for carriage by a number of other
carriers. This limitation may be exacerbated
because the TACA parties are likely to be in a
position to anticipate the likely total annual
requirements of individual shippers as a result
of past commercial relations.

a

as

they

volume

think they

(135) The consequences of this are twofold. Shippers
for as
will normally seek a service contract
great
are
reasonably likely to require, since this enables
them to get a bigger discount from the tariff
rate (48). Since (cid:28)unilateral action’ can only be in
respect of volumes above the minimum quantity
if
commitment, a shipper knows
it
quantity
negotiates
commitment it will get a smaller discount from
the tariff rate but it will be uncertain whether it
will be able to obtain a lower rate for the rest
(cid:28)unilateral action’.
of
find
unlikely
Shippers
(cid:28)unilateral action’ sufficiently advantageous for
it to have any significant effect in increasing
competition between the TACA parties.

its needs by virtue of

minimum

therefore

that

low

are

to

a

(136) The second consequence of this limitation is
that it makes (cid:28)unilateral action’ unattractive to
carriers since they would be unable to carry any
part of the minimum quantity commitment and
would be obliged to carry goods only at the
rate
action’.
the
Furthermore the (cid:28)unilateral action’ must be
effective for the duration of the service contract.
is accordingly an inflexible
(cid:28)Unilateral action’
system so far as the carriers are concerned and
is unlikely to stimulate competition to any
significant degree between the TACA parties.

agreed under

(cid:28)unilateral

that

(138) The fourth important limitation arises from the
fact
takes place
within the context of the TACA service contract
and cannot therefore be for a longer period
than the TACA service contract.

the (cid:28)unilateral action’

(139) On 17 November 1995,

the TACA parties
informed the Commission that as at 10
November 1995, (cid:28)no unilateral action has been
taken with respect to TACA service contracts in
1995’ (49).

(140)

It is also important to note that under the TAA,
those parties which were not members of the
Contract Committee (50) were free to enter into
individual
service contracts at rates directly
negotiated between a shipper and the individual
line. Under the TACA as notified in July 1994,
this possibility was removed and all TACA
parties became bound by
restrictions
contained in the TACA relating to service
contracts.

the

the

informed

TACA parties

(141) As was indicated at recital (32), on 9 March
the
1995
Commission that they had amended the TACA
so as to allow individual TACA parties to enter
into 1996 service contracts without having
received the approval of not less than five other
TACA parties, provided that
those contracts
complied with the provisions of Article 14(2) of
the TACA.

(137) The third important

limitation is

the
that
carried under
quantities permitted to be
(cid:28)unilateral action’ are
to make
(cid:28)unilateral action’ widely useful. The quantity to
be carried under the service contract will have
to be smaller than overall requirements and the
rest of a shipper’s requirements will have to

too small

(142)

In the reply to the Statement of Objections, the
TACA parties stated that as at 28 August 1996
some 60 individual service contracts had been
entered into with TACA parties. Such contracts
were not put to the vote of the TACA parties
although their terms were disclosed to the other
TACA parties.

(48) Under service contracts, the discounts from tariff class
rates are generally determined by reference to bands of
minimum quantity commitments, for example 500 to
749 teu may attract a discount of, say, USD 40 per teu.

(49) See LWD letter to the Commission dated 17 November

1995.

(50) Cho Yang, MSC, DSR/Senator, POL, OOCL.

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(143) These 60 contracts accounted for some 3,2 %
of the TACA parties’ carryings on the direct
USA/northern Europe trades in the first two
quarters of 1996. Some 75 % of the volumes
carried under these contracts was carried by six
carriers (51), all of
them being traditionally
non-conference members and none of them a
member of the TAA’s Contract Committee.

(144) This means that the former members of the
TAA’s Contract Committee carried between
them less than 1 % (0,8 %) of the TAA’s total
carryings on the direct
to
individual
service contracts, a figure which
should be compared to the figure of 59,4 % of
to TACA service
carryings carried pursuant
contracts.

trades pursuant

(145) This shippers’ representatives have argued that
prior
service
to the TAA and the TACA,
contracts on the transatlantic were negotiated
individually and included a wide variety of
different services. They were then submitted to
the
for
information/approval and filing with the FMC.
There was no direct contact between the
secretariat and the shipper.

conference

secretariat

(146) Since the TAA and TACA came into operation,
the possibility of negotiating service contracts
which include different services has, apparently,
the TAA/TACA
role of
disappeared. The
secretariat has been much enhanced and,
according to the shippers, is the main obstacle
contracts. The
negotiated
to
Commission
sales
been
representatives of the lines claim they are not
allowed under the terms of the TAA/TACA to
offer anything other than a standard service
contract, namely a volume-related contract
without additional services.

individually

that

told

has

(148)

(149)

openly

(147) Although conferences on the transatlantic have
never
service
permitted
contracts, the shippers’ representatives have told
the Commission that before the TAA there were
unfiled individual service contracts, as well as
conference service contracts of which not all the

individual

terms were filed. The TAA/TACA rules on
service contracts have apparently put an end to
the use of such terms. Examples of such unfiled
terms were as follows:

(a) cash refunds to separate accounts,

(b) classification of cargo into a lower-rated

category,

(c) no invoicing for services such as inland

haulage,

(d) no charge for special equipment,

(e) lower rates with the same line on a different

trade,

(f) non-enforcement of

liquidated damages
clauses for under-performance of a service
contract.

In a TACA briefing paper dated 15 February
1996, it is stated that (cid:28)single factor intermodal
rates’ and (cid:28)rates inclusive of CSC, THC, CAF,
etc.’ are (cid:28)cornerstone principles of TAA/TACA’.
This is borne out by the observation that service
contracts
Usanera
(TAA/TACA’s predecessor) could be negotiated
on an all-in basis (52).

with Neusara

and

service contracts, TACA has

In addition to imposing rules for the negotiation
of
imposed a
number of binding (cid:28)guidelines’ (Article 14(2))
concerning the contents of service contracts and
the circumstances under which they may be
restrictions placed on the
concluded. The
contents of service contracts include restrictions
as to duration, bans on contingency clauses and
multiple
to
non-confidentiality and agreement as to the
for
level
non-performance of the contract.

obligations

liquidated

contracts,

damages

of

as

(51) Cho Yang, DSR/Senator, Hanjin, Hyundai, POL,

Tecomar/TMM.

(52) See for example SC92-017.

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(150)

It is apparent from a review of TACA’s 1995
service contracts that a very large number of
service
contracts with no-vessel operating
common carriers (NVOCCs) have been entered
into only by those TACA parties (53) which
were formerly unstructured members of
the
TAA (54) (see footnote 84). These lines were the
former
lines
operating on the transatlantic routes.

non-conference

independent,

TAA. The reduction varies between USD 50 and
USD 100 per teu although in at least one case it
is as much as USD 150. These dual-rate
structures are also found in TACA’s 1996 and
1997 service contracts.

(153) The TACA parties have explained the dual-rate

service contract pricing structures as follows:

(151) The TACA parties have explained that

the

former

against

the
former structured members intentionally do not
compete
unstructured
members for this cargo (55). This should be seen
that, according to
in the light of
(cid:28)Contracts between shippers
and shipping
conferences’, the study carried out on behalf of
the
for
Commission Directorate-General
Transport by Brinkman-ship Ltd in February
1996, (cid:28)on the north Atlantic some 23 % of all
cargo is said to be booked by NVOCCs’.

the fact

the Commission’s TAA
(cid:28)In the light of
Decision, TACA 1995 service-contract offers
have been made to prospective shipper
parties at uniform rates i.e. rates which are
equally applicable to all participating lines.
This is to say that the TACA parties, acting
on legal advice, agreed that,
in order to
comply with the TAA Decision on this
point, service contract offers should not
include or reflect a dual-rate structure, i.e. a
in
predetermined spread of
service contract offers, as in the tariff, a rate
for a particular commodity or class of
commodities
all
(participating) TACA parties, as is consistent
with the TACA comprising a sole class of
members.

rates. Thus,

applicable

to

is

(152) Finally it is also apparent from a review of
TACA’s 1995 service contracts that a significant
(approximately one-third) contain a
number
dual-rate
former
(cid:28)unstructured’ members of
the TAA charge
lower rates within the same service contract
than the former (cid:28)structured’ members of the

structure whereby

the

(53) Cho Yang, DSR/Senator, MSC, Hanjin, POL, Tecomar

and TMM.

(54) See the TAA Decision recitals (135) and (136).
(55) See

letter

load (FCL) cargo, however,

(second) Lovell White Durrant

to the
(cid:28)In relation to full
Commission dated 3 May 1995:
container
some TACA
parties have elected, as part of their overall corporate
business policy, planning, marketing and investment
strategy, not
forces and/or
to maintain large sales
extensive agency networks to solicit cargo from the
numerically great number of small and medium-sized
proprietary shippers of FCL cargo. As a consequence,
such carriers tend to utilise and depend to a greater
extent on the broad NVOCC industry to solicit and
aggregate
In
distinction to such TACA parties, others have elected to
maintain and bear the fixed costs of extensive internal
sales
service functions and agency
networks. These carriers tend to deal to a much greater
extent directly with FCL proprietary shippers and
therefore tend to view NVOCCs as competitive and rival
carriers (since they too are competing for proprietary
shipper FCL cargo)’.

volumes of FCL cargo.

forces, customer

significant

rates

During the ensuing negotiation of a number
of service contract offers, the prospective
in
shipper party requested lower
respect of certain participating lines, in view
of the shipper’s perception of the different
levels of service offered. Each such request
was
a
on
terms
case-by-case
negotiated with each shipper were then
submitted to the service contract voting
procedures of the conference’ (56).

considered

lines
final

the
The

basis.

by

(154) No evidence has been put forward to support
this assertion that, in each case, the initiative
for a dual-rate service contract came from the
shipper party to the contract. In any event, it is
clear that the dual-rate structure was agreed by

(56) See (second)

letter of Lovell White Durrant

to the

Commission dated 3 May 1995.

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contract

the TACA members acting together as a whole.
The application for exemption dated 5 July
the mechanism for agreeing
1994 describes
service
rates at paragraph 4.2.2.
However, neither here nor elsewhere in the
notification is any mention made of the fact
that
their
the TACA parties considered that
agreement permitted them to enter into service
contracts with a dual-rate structure. The highly
significant fact did not come to light until after
the Commission had formally requested copies
of the TACA service contracts.

(155) As discussed at recital (296), the effect of the
reservation of the NVOCC service contracts to
the former non-structured TAA members and
the systematic inclusion of dual-rate prices in
service contracts for the benefit of the former
non-structured TAA members is to lead to an
extension of the membership of the TACA to a
much wider number of shipping lines than
would otherwise be the case.

VIII. NON-VESSEL OPERATING
INTERMEDIARIES

(156) Shippers acquire maritime transport services in
one of three ways. First, they may approach
carriers direct. Secondly,
they may use the
services of a non-vessel operating common
carrier. Third, they may use the services of a
freight forwarder. The TACA parties consider
transport
that,
services by the TACA parties is substitutable
of
with
by
the provision
non-vessel operating
intermediaries, namely
freight
forwarders and non-vessel operating
common carriers’ (57).

(cid:28)the provision of multimodal

services

such

(157) This is a new argument, not reflected in the
application for exemption where the TACA
parties defined the relevant market as follows:

of

containerisable

(cid:28)The applicants face competition for the
transportation
cargo
between Europe and the USA in both the
westbound
directions
(a) other operators of
(sectors)
containerised liner services on the direct

eastbound

from:

and

trades; (b) operators of containerised liner
(c) other
services on alternative routes;
operators of
(d) non-liner
liner
operators; (e) air transport operators, and (f)
potential entrants and cross-entrants to the
transatlantic trades’ (58).

services;

A. Non-vessel operators

requirements

(158) A distinction must be drawn between two
different types of non-vessel operators (NVOs)
on the north transatlantic trades. The first type
of NVO is the type which, although it does not
operate vessels on the trade in question (buying
from actual operators,
in its
usually on a long-term basis), operates vessels
on other trades. This type included parties to
the TACA such as Hanjin and Hyundai. The
price at which these NVOs buy in maritime
transport services from the TACA parties which
actually operate vessels on the north Atlantic is
not
acting
collectively but is fixed on a bilateral basis. The
level of such prices is regarded by the TACA
parties as a business secret and confidential to
the parties to the bilateral arrangement.

the TACA parties

fixed

by

(159) The

second type of NVO on the north
transatlantic trade is the type which does not
operate vessels anywhere. Examples of this kind
of NVO include the K(cid:252)hne & Nagel Group,
Danzas, Schenker International and Panalpina
Welttransport. In addition to undertaking the
forwarding of goods these NVOs also provide
other forwarder services such as documentation,
Such
customs
NVOs obtain their maritime transport services
from the TACA parties in the same way as
other shippers, either at tariff rates or (more
usually) on the basis of a TACA service
contract.

and warehousing.

clearance

(160) Clearly, neither type of NVO competes with the
actual carrier in terms of the quality of the
maritime transport service provided. So far as
competition on price is concerned, the first type
of NVO (namely the type which operates
vessels on other trades) is able to compete on

(57) See reply to the Statement of Objections, paragraph 44.

(58) See application for exemption paragraph 2(5).

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except

to the

price
that he has
voluntarily restricted that freedom by becoming
a party to an agreement such as the TACA and
agreeing not to compete on price.

extent

charges) from a shipping line in addition to
payment from their shipper clients.

(161) The second type of NVO (namely the type
which does not operate vessels anywhere) does
not compete with the TACA parties on price at
all. Whil such an NVO may have a degree of
buying power and may therefore be able to
obtain lower service contract prices (but not
tariff rates) than other shippers, those prices are
fixed by the TACA parties.

B. Freight forwarders

(162) Freight

forwarders carry on the business of
arranging for the carriage of goods for other
people. They generally act in one of two ways
vis-a` -vis liner shipping companies. First, they
may act as shippers themselves, undertaking to
the consignors or consignees of the goods to
the goods to the agreed
ensure delivery of
destination. The goods in question may less
than a container load (LCL) or many container
loads: in either case the freight forwarder deals
with the shipping line as principal and not as
agent. In such cases, the freight forwarder is
rewarded by the margin he earns between what
he pays
the
container and the price he obtains from the
(together with his
consignor or
rendered).
services
payment
Freight forwarders who act in this way may
even
non-vessel
out
operating common carriers
(NVOCC) and
publish a tariff.

consignee
for any other

transporting

themselves

carrier

hold

the

for

as

(163) Alternatively, the freight forwarder may act as
agent for a shipper. In this case his main task
will be to arrange for a carrier to transport the
goods and to negotiate the terms and conditions
on which the transport takes place. He may
the
also undertake other
preparation of documentation and customs
clearance. Crucially, when acting
in this
capacity the fright forwarder acts as agent for
shipper and not as principal. Freight
the
in
as
forwarders who act
arranging for the provision of shipping services
to shippers
from shipping lines customarily
receive a commission of around 2,5 to 50 % of
the cost of those services (excluding ancillary

intermediaries

such as

services

(164) Under Article 5(1)(c)(3) of

terms

brokerage

the TACA,

freight
the

and
including

the
TACA parties agree the amounts, levels or rates
forwarder
of
remuneration
and
conditions for the payment of such sums and
the designation of persons eligible to act as
brokers. The TACA parties have claimed that
the practice of conference members of fixing the
levels of commission paid to freight forwarders
acting as agents for shippers is a long-standing
one and that within parts of the Community the
practice dates back to the beginning of this
century. The TACA parties have stated that it is
not the practice for any ocean carriers serving
the United Kingdom and Irish export trades to
pay any commission or compensation to freight
forwarders providing services
in the United
Kingdom and Ireland (59).

C. Arguments put to the Commission by NVOs

(165) Freight forwarders, through their pan-European
trade association Clecat, have stated that they
the TACA parties for sea
are customers of
transport services and not
their competitors.
This is acknowledged by the TACA parties, in
their description (60) of NVOs
(cid:28)large,
powerful and well-informed buyers of ocean
transport capacity’.

as

(166) Separately from the arguments put

to the
Commission by Clecat, a trade association
called Freight Forward Europe
(FFE) also
submitted arguments to the Commission. The
members of FFE are Europe’s nine largest
freight
forwarders, all of which are also
members of Clecat.

(167) On 10 July 1996, FFE submitted a letter to the
Commission setting out its members’ position
on the Transatlantic Conference Agreement,
stating that they were in favour of conference
lines
agreements
and
between
supporting TACA’s
concerning
inland price-fixing. The TACA parties relied on
this letter in the reply to the Statement of
Objections (61) sent to the Commission on 6
September 1996 and included it as an Annex to
that reply.

shipping
arguments

(59) See reply to the statement of objections, paragraph 332.
(60) See reply to the statement of objections, paragraph 49.
(61) See reply to the statement of objections, paragraph 305.

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(168) On 1 August 1996, the TACA parties put into
effect (cid:28)a temporary incentive plan for non-vessel
operating common carriers in the westbound
trade from northern Europe to the USA’. Under
the plan TACA reduced its NVO rates by USD
75 per teu and USD 125 per feu.

(169) On 9 October 1996,

in reply to a formal
request for information, the TACA supplied the
details of the contacts and meetings with FFE,
including those described below.

(170) On 12 October 1995,

to the TACA parties

the TACA secretariat
concerning a
wrote
meeting which had taken place between TACA
and the members of FFE on 6 October 1995, in
the following terms: (cid:28)The FFE was particularly
pleased that they are deemed to be customers in
their business relationship with TACA’. This
relationship is also reflected in a letter dated 9
October 1995 sent by Charles F. McCann,
President of Cho Yang (America) Inc., to the
freight forwarders which attended the meeting
on 6 October 1995, in which it is stated that,
(cid:28)[Cho Yang’s] corporate policy is focused on the
vital partnership with you and other global
forwarder/consolidator operators… . We will
diligently work to protect your interest as they
are also Cho Yang’s’.

(171) On 21 June 1996 P&O circulated an internal
memorandum concerning a meeting which had
taken place between TACA and the members of
FFE on 20 June 1996:

(173)

to the

contribute

(cid:28)FFE will
cause of
“stabilisation”. They do not want carriers to
subsidise inland transportation from the
ocean revenue. FFE will fire the bullets but
the bullets.
to manufacture
TACA has
Pheasant
Therefore,
that
agreed
to the TACA
[European special counsel
parties] will assist in developing a “working
paper” which is well-reasoned and cites the
need for smaller shippers for stability with
FFE’.

J.

to Mr

July 1996. A reading of the final version of the
FFE letter sent to the Commission and the draft
substantial
sent
differences. Unsurprisingly,
these differences
involve the introduction of a number of the key
arguments put forward by the TACA parties,
none of which is accepted by the Commission.

Pheasant

reveals

(cid:28)conferences are not
lower freight rates’,

incompatible with

(cid:28)despite the fact that the transatlantic trade
has always been a conference environment,
rates have continued to fall over time’,

(cid:28)conferences doe not inhibit innovation or
investment
in the development of new
services’,

(cid:28)if service contracts were invisible,
large
shippers would get disproportionate benefits
at the expense of small shippers…’,

(cid:28)it is important for conferences to determine
common rates for service contracts’,

(cid:28)if there were free competition on through
shipping lines
rates or on inland rates,
would cross-subsidise their inland rates by
reducing ocean rates to destructive levels’.

In October 1996, as a result of disagreement
among its members as regards this support for
the TACA parties,
the
Commission to withdraw the letter.

FFE wrote

to

IX. COMPETITION BETWEEN THE TACA
PARTIES

(172) On 1 July 1996, FFE wrote to John Pheasant:
(cid:28)Dear John, In view of our meeting on July 3 at
8 am at your offices, please find a draft position
as basis for our discussion. Best regards, Kurt
Vandenberghe’, attaching a draft version of the
letter eventually sent to the Commission on 10

(174) The first point concerning internal competition
to American law.
within the TACA relates
the American Shipping Act 1984,
Under
conferences exempted from American antitrust
laws are required to file their tariffs publicly
with the Federal Maritime Commission and are
required to adhere to those filed rates.

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apparent necessity

(175) Carriers are not allowed to grant any special
discount or excuse a shipper from any charge
for any reason, regardless of the commercial
desirability or
in any
individual case (62). One consequence (and even
purpose) of the obligation to adhere to filed
a
tariffs
conference
is
exempted
law cannot
discriminate in favour of large shippers. Thus,
the difference in purchasing power between
large
substantially
shippers
reduced.

that members of
American
under

and small

is

(176) Each breach of

this

requirement may be
sanctioned by civil penalties of up to USD
25 000. Thus, policing against cheating of a
the TACA’s activities is
substantial part of
undertaken
regulatory
authority. The policing activities of the Federal
Maritime Commission are undertaken by its
Bureau of Enforcement which employs seven
lawyers and eight investigators to perform this
task.

an American

by

(177) Adherence to the TACA is also ensured by the
extensive enforcement provisions described at
recitals (21) and (22). Policing has taken the
form of the payment of substantial guarantees,
fines
the
for exceeding quotas as well as
appointment of an independent body to act as
(cid:28)the Enforcement Authority’ which has (cid:28)total
unfettered access … to all documents which
may be related to a carrier’s activities in the
Trade’.

(178) The independent body so appointed is called
(cid:28)The Adherence Group bv’. The tasks entrusted
to this body include the task of explaining the
TACA’s complex rules to the TACA parties. An
example of this is found in a letter from The
Adherence Group bv to Hanjin dated 28 April
1995 in which it is stated that (cid:28)there is NO
possibility [under TACA’s rules] to apply an
S.C. [service contract] rate together with an
inland tariff-IA [independent action]’.

(179) The TACA parties have also adopted measures
which are intended to present the TACA parties
as a single united body and so diminish pressure
from customers. Of
for price

reductions

(62) Section 18 Report on the Shipping Act of 1984, Federal

Maritime Commission, September 1989, p. 544.

particular importance in this respect has been
the role of
the TACA secretariat and the
publication of annual business plans (see Annex
extensive
III). The TACA secretariat has
is
It
administrative and financial
authorised to act as agent for the TACA parties
by entering into transport contracts on their
behalf. It has the right to attend service contract
negotiations between shippers and individual
TACA parties.

functions.

(180) The spirit of cooperation within TACA is
evidenced by a letter from POL to Hanjin dated
28 December 1995 concerning service contracts
with NVOCCs in which it is stated that:

(cid:28)… all NVOCC issues are very delicate and
sensitive. This can be handled properly only
with the
full harmony within TACA,
collectively, without any individualism, as
any independence may totally destroy this
part of the market, so carefully built by the
group throughout the years. … We therefore
kindly ask you to settle this problem with
spirit of avoiding mutual
POL in the
competition within TACA…’
(emphasis
added).

A. Other restrictive arrangements affecting the

transatlantic trade

(181)

In addition to the TACA,
it is necessary to
consider pressures other than the TACA which
are likely to reduce competitive pressure.

(182) A significant number of TACA parties do not
operate their own vessels on the northern
Europe/USA trades: P&O, Nedlloyd, OOCL,
NYK, NOL, POL, Hanjin, Hyundai. These
shipping lines accordingly use space on vessels
operated by other TACA parties. Furthermore,
even those TACA parties which do operate
vessels on the northern Europe/USA trades also
use space on the vessels of other TACA parties.
None of the TACA parties uses space on vessels
operated by shipping lines which are not party
to the TACA.

(183) The TACA parties were asked to provide the
Commission with
other
agreements, whether operative or contemplated,
which relate to the transatlantic trade and

details

all

of

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(in any sense) or not.

which involve TACA parties, whether under
TACA auspices
In
the TACA parties supplied to the
response,
Commission
is
In supplying this
reproduced in Annex IV.
information, the TACA parties excluded details
of agreements involving TACA parties falling
outside the geographic scope of the TACA (63).

information which

the

(184) The agreements appear to be exclusively space
charter and sailing arrangement agreements.
Pursuant to these agreements, the parties to the
TACA engage in cooperative arrangements for
the sharing of space on each other’s vessels.

(185)

It is apparent from the information contained in
Annex IV that the shipping lines operating on
the transatlantic have concentrated into three
groupings. These are:

(a) P&O, Nedlloyd, Sea-Land, Maersk, OOCL

(the VSA and related agreements);

(187) The VSA is a liner

shipping consortium
established in March 1988 by Sea-Land, P&O
and Nedlloyd which operates on the northern
Europe/USA and Mediterranean/USA trades.
The VSA parties jointly operate nine vessels, all
of which are owned and crewed by Sea-Land.
The VSA parties are collectively party to the
further agreements with OOCL and Maersk.
Under these arrangements, OOCL obtains in
each direction 1 450 teu slots per week from
the VSA parties and 400 teu slots per week
from Maersk. The VSA parties and Maersk
provide each other with 180 teu slots per
week (64). For
the VSA,
Sea-Land made considerable investments in the
acquisition of vessels and P&O and Nedlloyd
contributed to financing those
investments.
Furthermore, P&O, Nedlloyd and OOCL
agreed to withdraw their existing vessels and to
use Sea-Land’s vessels.

the purposes of

(b) ACL, Hapag-Lloyd, MSC, TMM, Tecomar,
(the

Hyundai,
POL
ACL/Hapag Lloyd et al. agreements);

NOL,

NYK,

(c) Cho Yang, DSR/Senator, Hanjin

(the

Hanjin/Tricon agreement).

(186) The first aspect of these arrangements that is
relevant is that they do not concern the TACA
as such but individual groupings of shipping
lines acting independently of the TACA and its
secretariat. The second aspect is that the first
and third groupings operate on a much more
closely integrated basis than the second.

(63) The effect of this is that the TACA parties excluded
the
the

affecting
relevant
Europe/Canadian
trades
Mediterranean/American trades.

conditions
and

agreements

on

(188) Under the ACL/Hapag Lloyd et al. agreements
five liner
(A-Service, PAX
shipping services
Service, GUMEX Service, North Atlantic
Service and South Atlantic Service) are currently
provided between northern Europe and the
USA. One of these is provided by ACL, two by
MSC, one by Hapag Lloyd, NOL and NYK and
one by Hapag Lloyd and TMM/Tecomar. Table
4 sets out details of which lines operate which
services and which lines charter space on those
services.

(64) A detailed description of the VSA and related agreements
was published in OJ C 185, 18.6.1997, p. 4. In the
context of the application for individual exemption of
the VSA parties have undertaken to the
the VSA,
Commission not
to exercise in the geographic area
covered by the EC Treaty the provisions relating to
inland and maritime
rate-making, discussion and
agreement on the terms relating to freight forwarder
compensation and discussion and agreement on common
essential terms in service contracts.

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Table 4

Vessel sharing and slot chartering arrangements

ACL, Hapag Lloyd, TMM/Tecomar, MSC, NOL, NYK, Hyundai, POL

A-Service

PAX Service

GUMEX Service

NAS Service

SAS Service

ACL

Operator

Charterer

Charterer

Charterer

Charterer

Hapag Lloyd

Charterer

Operator

Operator

TMM/Tec

MSC

NOL

NYK

Hyundai

POL

Charterer

Operator

Operator

Operator

Operator

Operator

Charterer

Charterer

Charterer

Charterer

(189) Under the Tricon Agreement, DSR/Senator and
Cho Yang jointly provide international
liner
shipping services on three trades from and to
the Community, namely:

(191)

(a) the northern Europe/USA trade

(North

Atlantic trade);

(b) the northern Europe/Far East trade;

(c) the

Asia/Mediterranean/America

trade

(AMA trade).

In addition to the agreements described above
on the northern Europe/USA trades, some of the
TACA parties are also party to agreements on
the northern Europe/Canadian trades and on
In particular,
the Mediterranean/USA trades.
both OOCL and DSR/Senator are party to
arrangements with Canada Maritime (as
to
which see recitals (265) to (273) relating to
services operated between ports in Europe and
ports in Canada. Hapag Lloyd charters space
on
service
operating between Montreal
and northern
Europe.

the Canada Maritime/OOCL

(190) The northern Europe/USA/Far East Service is
operated on a round-the-world basis with one
string of vessels operating eastbound and one
string westbound. At present, DSR/Senator and
Cho Yang operate 11 vessels eastbound and 11
round-the-world
vessels westbound on their
service and 13 vessels in total on their AMA
service. DSR/Senator and Cho Yang have
cooperated with Hanjin in the North Atlantic
trade since 1 January 1995, pursuant to the
Hanjin/Tricon Agreement. By this agreement,
Hanjin charters
slots on the Tricon North
Atlantic service. On 25 February 1997, Hanjin
acquired
in
a
DSR/Senator.

shareholding

majority

(192) The

by

Europe/USA

arrangements

entered into

these
groupings do not contain binding rate-making
provisions; however,
they do contribute to
coordination and discipline between their
parties. For example, in 1995, the parties to the
VSA and related agreements took a mere 92
independent actions between them on the
the
northern
transpacific trades, where the VSA does not
apply,
in 1995 the VSA parties (other than
P&O which was not then operating transpacific
services)
actions
between them in the same year. The USA's
Federal Maritime Commission has publicly
stated that no significant
rate
action took place on the northern Europe/USA
trades in 1994.

trades. On

independent

independent

4 880

took

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(193)

Furthermore,

thus the effect of these agreements has been to
restrict intra-TACA competition, particularly by
their achievement of curtailment of independent
action.
the
this
the two kinds of restrictive
combination of
agreements (conferences and consortia) between
the parties (including the VSA agreement to
maintain common essential terms) is likely to
restrict non-price
competition between the
TACA parties.

case,

in

(cid:28)product’ on offer

(194) This arises from the extensive use of space on
other TACA parties` vessels which means that
each TACA party has a severely reduced
incentive and ability to compete in terms of
speed of crossing and safety of cargo. In fact,
the
from each carrier
becomes indistinguishable from the others. This
effect is reinforced by the fact that seven of the
TACA parties do not operate their own vessels
on the northern Europe/USA trades. The
identity of the owner of the vessel on which his
goods travel is evident to a shipper because the
vessel name (65) appears not only on each
carrier's shipping schedule but also on the bill
of lading.

is

that

(195) Two conclusions may be drawn from this
analysis. The first
the benefits or
drawbacks which are due to vessel-sharing and
slot-exchange agreements do not depend on the
TACA but on agreements between individual
shipping lines. Any benefits which are brought
about cannot be attributed to the TACA.
However, even if they could be so attributed,
the restrictions on competition which the TACA
entails are not indispensable to the achievement
of the objectives for which the vessel-sharing
and slot-exchange agreements have been entered
into.

on

impact

(196) Second, whether or not each individual set of
arrangements may qualify for exemption, their
on
overall
competition which result from the TACA itself
must be taken into account
in considering
whether
can qualify for
individual exemption. In particular, the impact
on competition as between the parties to the
TACA is important.

the TACA itself

restrictions

the

(65) The owner of a liner vessel is usually readily identifiable
from the name of the vessel because of the practice of
adopting names including the name of the owner or
other means of
identifying the owner: e.g. Atlantic
Conveyor (ACL), Neptune Jade (NOL), MSC Pamela
(MSC), etc.

(often

known

the effect of

these kinds of
(197) Concern about
agreements
or
(cid:28)VSAs’
as
(cid:28)vessel-sharing agreements’) has been expressed
by
than the
Commission. In particular, Karen Gregory, an
Industry Economist with the USA’s Federal
Maritime Commission has stated on affidavit as
follows:

authorities other

regulatory

coordination

(cid:28)While VSAs may be a means to manage
capacity, service schedules, and frequency,
they also affect competition among carriers.
Coordination of services and investments
requires a certain amount of cooperation.
The
in VSAs
promotes solidarity between carriers which
intra-conference
in
competition on pricing … . In an article
discussing a newly formed VSA in the
transpacific trade, a Mitsui OSK Lines
official commented that “There are still a
IA’s [independent actions] but we
lot of
hope this kind of agreement will help”.’ (66).

diminishes

inherent

turn

(198) The Commission understands that the comment
of the representative of Mitsui OSK Line was
intended to suggest
that consortia such as
vessel-sharing agreements have the effect of
reducing the number of
independent actions
entered into by their members.

B. Evidence of internal competition

(a) Price evidence

(199)

that

the TACA parties claim that restrictions on
internal competition have been significantly
reduced in comparison with the TAA. They
maintain
service
independent
contracts, unilateral action on service contracts,
time/volume rates and independent action on
time/volume rates are all evidence of internal or
also claim to
external
competition. They
compete on other elements,
in particular in
relation to service.

action,

(66) Affidavit of Karen V. Gregory, Fact finding investigation
No 21 — Activities of the transatlantic agreement and
its members, dated 20 October 1994.

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(200) The TACA parties argue that the fact that some
goods travel at service contract prices and that
some goods travel at discounts from tariff rates
are proof that (cid:28)there is significant internal price
competition between the TACA parties’ (67).
The TACA parties claim that (cid:28)an absence of
competitive pressures within the conference
would mean that the TACA parties would have
no incentive to carry cargo at anything other
than TACA class tariff rates’ (68).

(201)

the
is unclear what economic argument
It
TACA parties are here putting forward. In any
event, the Commission does not accept that the
fact that different shippers are charged different
prices is evidence of competition. The mere fact
that there are prices other than laid down in the
tariff is no more evidence of the existence of
competition than it
the absence of
competition.

is of

(202) Second,

is not

the fact

evidence of

that certain customers are
either unwilling or unable to pay a cartel's
internal
target price
competition but may be evidence that the target
price is set
too high to serve to maximise
profits. In those circumstances, a cartel unable
to discriminate as between customers would
lower the cartel price to a level at which it was
profit maximising. However, as will be seen
from the discussion below, the TACA parties
are able to discriminate as between customers.

Price discrimination

(203) The first point to observe is that the purpose of
the TACA’s pricing strategy is to ensure profit
maximisation:
this is the basic objective of
every pricing strategy and is achieved by
capturing consumer surplus and converting it
into additional profit
firm. The
establishment of the tariff is a means to this end
and not the end in itself.

the

for

do

those
shippers pay different prices and that
differences
cost
reflect
not
differences. Further pricing mechanisms, such as
discounts from tariff rates and service contract
prices, are no more than an elaboration of an
already elaborate pricing system.

always

(205) The fundamental requirement for the TACA’s
system of discriminatory pricing is that different
shippers have different price
elasticities of
demand: the TACA parties aim to charge what
each different shipper will bear. Each price is set
so that its percentage deviation from marginal
cost is inversely proportional to the item's price
elasticity of demand.

costs. There

(206) Price discrimination is profitable because it
allows a firm to enhance revenues without
increasing
three major
categories of price discrimination: first, second
first degree price
and third degree. Under
discrimination, a customer pays a specific price
for a specific unit or service and a different
price for subsequent units or services.

are

(207) Second-degree price discrimination involves
the quantity
setting prices on the basis of
purchased. This
form of discrimination is
practised by the TACA parties in the form of
time/volume rates and service contracts.

from the first

(208) The third form of price discrimination, third
is qualitatively
degree price discrimination,
different
It results
when a firm separates its customers into several
classes and sets a different prices for each
customer class. The TACA maritime tariff
establishes 2 080 different classes of customer.
These classes are divided on the basis described
in the following paragraphs.

two types.

(204) To better understand this point, it is necessary
to understand that the tariff is the embodiment
of a pricing policy based on discrimination as
between customers. That is to say that different

(67) See reply to the statement of objections, paragraph 223.
(68) See reply to the statement of objections, paragraph 131.

(209) Each commodity shipped with the TACA is
for example, dairy
given a headcode. Thus,
products are found in the commodity index
with headcode 0400. Likewise, fabrics have a
headcode of 6000 and firearms 9300. The basic
pricing mechanism of TACA is to place each of

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these commodities into one of 26 classes for
each of which there is a basic price established
by the TACA parties.

is

the

14.

example,

Similarly,

standard headcode

the TACA parties

(210) This third form of price discrimination also
to discriminate
allows
between shippers by adjusting the headcode
attributed to the goods of a particular shipper.
For
for
biblious paper is 4803: the tariff class for the
shipment of such goods from USA gulf
to
continent
standard
headcode for kraft linerboard is 4808 and the
class for the same route is also 14. However, in
secrets
contract 96-EC3 ([business
service
omitted]), the headcodes for biblious paper and
kraft linerboard are both given as 4804 for
which the relevant class for a voyage from USA
gulf to continent is 8. In terms of 1998 tariff
the difference in price resulting from
rates,
adjusting the headcode in such a way amounts
to a price per feu of USD 1 535 instead of USD
1 985, a difference of nearly 25 %.

the

(211) Evidence of

is

the

are made

reason for which such
adjustments
contained in a
memorandum from the TACA secretariat to the
TACA parties dated 12 October 1995, (cid:28)It was
also pointed out that TLI (tariff line item) class
tariff had been used
adjustments
selectively in previous years
to maintain a
balanced trading climate’ (emphasis added).

in the

different classes depending on whether it
is
being shipped eastbound or westbound. Second,
the class into which the commodity is placed
differs according to its origin and destination.
Commodities shipped from Europe are divided
into five categories: Continent, UK, Denmark,
Sweden/Norway/Finland,
Goods
shipped from the USA are divided into 16
categories: north USA to continent, south USA
to continent, gulf USA to continent, Pacific USA
to continent, and so on.

Poland.

Independent action

(214) To the extent that independent action may be
regarded as evidence of competition, there are a
number of comments to be made.

In

such

cases

short

periods.

(215) First, independent action may be exercised for
very
the
independent action resembles a spot market
price where the customer is unable to rely on
the carrier's having capacity available to ship
his goods and where he is therefore offered a
lower price. This is another form of price
discrimination and could be compared to the
stand-by prices offered by most airlines.

(212) The third form of price discrimination is also
readily recognisable in the independent actions
sometimes undertaken by TACA parties which
are limited in time (say, 30 days), volume and
port coverage. They are in fact one-off pricing
strategies aimed at capturing specific parcels of
goods from a specific shipper and represent the
equivalent of a spot market purchase. The
such discrimination may be to
purpose of
prevent
a
non-conference carrier or, in certain trades, as
non-containerised cargo.

travelling with

goods

the

(216) Secondly,

short-term
there is evidence that
independent actions may be used as a stop-gap
measure while service contract negotiations are
taking place (69).

(217) Thirdly, it is clear that many of the independent
actions undertaken by the TACA parties are not
in response to internal competition but are
legitimate responses to external competition.
For example, five lines exercised independent
to westbound
action in 1996 with respect
travelling peanuts. Peanuts are typical of the
kind of product that needs to travel in bulk or
in ventilated or moisture-controlled containers
in the case of peanuts, this is due to the deadly

(213) However, the class into which the commodity is
placed (and thus the basic price payable) is not
standard. First, a commodity may be placed in

(69) For example on 29 December 1994, Hanjin wrote to the
TACA secretariat in the following terms: (cid:28)This [IA] is
being taken until S/C is concluded’.

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they

under

toxins
certain
produce
circumstances. Since such containers have only
recently become available, peanuts appear to be
one of the kind of product described above (see
recitals (66) to (71)) which are in the process of
becoming a product carried in containers but in
respect of which there is still some residual
competition from bulk carriers.

(219) There are also other products where

the
widespread exercise of independent action by
the TACA parties suggests that those actions
were intended to meet external as opposed to
in 1996
internal competition. For example,
eight TACA parties
exercised independent
action with respect to paper carried westbound
to
from the UK and nine with respect
crispbread
from the
continent and Sweden.

carried westbound

(218) A similar product to peanuts in terms of the
need for ventilation and the transformation
from carriage in bulk to containerised transport
is coffee. In 1996, 14 TACA parties exercised
joint independent action with respect
to the
westbound carriage of
green decaffeinated
coffee from continental Europe.

(220) Finally,

the

into

to put

in order

perspective, Table

extent of
independent action practised by the TACA
gives
parties
comparative figures
independent actions
for
undertaken by those TACA parties which are
also members of
the Asia North America
Eastbound Rate Agreement and the Transpacific
Westbound Rate Agreement.

5

Comparison of independent actions between transatlantic and transpacific

Table 5

Transatlantic

Transpacific

1994

1995

1996

1994

1995

1996

Sea-Land

Maersk

Nedlloyd (1)

P&O (2)

OOCL

Hapag Lloyd

NOL

NYK

14

7

5

7

13

10

6

1

17

9

13

19

34

25

19

0

61

45

44

66

78

64

10

8

684

1 177

1 429

1 460

1 702

1 536

0

0

189

0

502

145

1 080

1 812

3 514

575

891

1 091

671

541

827

14 990

1 340

1 372

(1) Nedlloyd joined ANERA & TWRA in 1995.
(2) P&O joined ANERA in April 1996.

(221) As these figures show, even allowing for the fact
that the transpacific trade is larger than the
transatlantic trade, the number of independent
actions exercised on the northern Europe trade
by those TACA parties which are also members
of
is comparatively
insignificant.

transpacific conferences

(222)

In the reply to the Statement of Objections, the
TACA parties argued that (cid:28)In any event, an
analysis of the significance of independent rate
action within a conference should take account
not only of
individual-rate
the number of
actions, but also of the total volume of cargo
lifted at those rates…’. This statement flatly

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contradicts the views of the TACA secretariat
stated in a briefing paper dated 15 February
1996 that (cid:28)the problem is not so much the
number of IA/ISC and teu coverage, but rather
the commodity coverage, structure and targeted
market segments’. The TACA parties have put
forward no arguments on the basis of
commodity coverage,
targeted
market segment.

structure or

(226) The conditions for this effect are easily met in
the case of service contracts. First, there is a
capacity asymmetry between the incumbent and
the potential new entrants
together with a
minimum scale of production. Second, TACA
service contracts contain a liquidated damages
clauses for underperformance of the contract by
the shipper. The level of the liquidated damages
has been set by the TACA parties at USD 250
per teu which is an amount greater than the
shipper can expect
to gain by breaking the
contract and switching to the new entrant.

(b) Other evidence of internal competition

The prevalence of service contracts

contracts

(223) The TACA parties have claimed that the fact
that many of their customers have entered into
service
internal
competition, since service contracts contain a
price which is lower than the regular tariff rate
for the same goods (although it may not be too
dissimilar from the tariff time/volume rate for
those goods).

evidence

of

is

(224)

there are

considerable benefits

In contrast to the possibilities which exist in
relation to independent action and individual
service contracts,
it is clear that there is no
internal competition as to price between those
TACA parties which are party to a joint service
contract. Moreover, from the carrier's point of
view,
from
entering into service contracts with shippers
which offset the fact that the service contract
price is lower than the tariff rate. First, service
contracts are usually for one or two years.
Given the prevalence of service contracts on the
transatlantic trades (some 60 % of all TACA’s
carryings are made under service contracts), this
relatively long-term arrangement helps the lines
to
and
guarantees them a stable revenue flow.

requirements

capacity

their

plan

(225) The

of

second

benefit

principal

service
contracts, from the carrier's point of view, is
that, although not as effective a barrier to entry
as a loyalty (or exclusive) arrangement, they act
as a highly effective device
for deterring
entry (70).

(70) See Unctad interim report on restrictive business
practices, New York 1971 and (cid:28)Excluding capacity
constrained entrants through exclusive dealing: theory
and an application to ocean shipping’, Jong-Say Yong,
The journal of industrial economics, June 1996.

(227) Thus,

are

damages
the

clauses
equivalent

for
liquidated
underperformance
to
customer switching costs, the effect of which is
universally recognised as an barrier to entry.
For shippers acquiring services under the tariff,
costs,
switching
equivalent
there
although there may be some search costs.

are

no

(228) Accordingly, it is apparent that far from being
evidence of effective internal competition, the
existence of
is perfectly
consistent with the profit maximising behaviour
of an undertaking with market power.

contracts

service

(229) Evidence of the value to a new entrant of being
a party to service contracts may be found in a
letter from Hanjin to TACA written on 19
August 1994 in anticipation of entering the
(cid:28)In preparation for our
transatlantic trade:
commercial activity, we would request access to
all relevant documents and statistics by TACA
(including tariff,
contracts, portcall,
lifting and performance) …’.

service

(230) The minutes of a meeting of the TACA senior
executives (TACA PWSC meeting No 95/8)
report the the executive director advised that
(cid:28)Hyundai had sought inclusion in 1995 service
contracts,
in which three or more members
currently pariticpate eastbound, three or more
members currently participate westbound, and
three or more members currently pariticipate in

L 95/40

EN

Official Journal of the European Communities

9.4.1999

joint eastbound/westbound service contracts, at
the rate levels applicable to the majority of
members in such contracts. In this regard, he
confirmed that steps were in hand to so notify
such
shipper
service
inclusion
with
Hyundai’s first transatlantic sailings’.

parties
coincidentally

effective

contract

of

Switching between carriers

(231) Table 26 of

the reply of

the Statement of
Objections is described as being a (cid:28)comparison
of the share of individual shippers’. It purports
to be evidence of competition as between the
TACA parties in relation to cargo to be carried
under a TACA service contract. In particular, it
purports to show that even where an individual
shipper has a TACA service contract,
it does
not use the same carrier or carriers each year
the
but
participating carriers in accordance with ist
commercial jugdment based on an evalution of
the
various
offerings
carriers’ (71).

competitive

(cid:28)allocate(s)

between

cargoes

the

ist

of

(232) Under a TACA service contract, there is no
question of competition on price once the
contract has been entered into: the price has
already been agreed. What
the
possibility of competition on service quality, the
main elements of which are, for a maritime
transport operation, the reliability of the service
and the convenience of the schedule. Where a
carrier is party to an agreement such as the
VSA, such forms of competition are excluded
because the parties to such an agreement share
vesels and operate to a joint schedule.

remains

is

(233) Therefore,

individual

to demonstrate the existence of
internal competition it would be necessary to
show that
shippers moved their
cargoes between different groupings of carriers
and not simply within groupings. Annex V
shows that even on the basis of the shippers
selected by the TACA parties the shares enjoyed
by the groupings of carriers have remained
largely stable and that, except in few cases, the
switching that has taken place has not been
between groupings.

(71) See reply to the statemant of objections, paragraph 155.

Fluctuations in market shares

from Table 37 that

(234) The TACA parties’ reply to the Statement of
Objections, paragraph 222 claims that
is
clear
there have been
significant movements in the respective market
shares of the TACA parties. These movements
unequivocally indicate competition between the
TACA parties’.

(cid:28)It

(235) However, the figures provided by the TACA
in Table 37 ((cid:28)% increase/decrease:
parties
highest to lowest point during period’) do not
give a fair picture of the movement in shares a
between the TACA parties.

(236) For example, the TACA parties claim that the
share of NOL varied by 33,3 % during the
reference period. To put this figure in context, it
should be noted that NOL carried 935
containers in 1994, 1 169 in 1995 and 217 in
the first quarter of 1996. Given that
the
combined carryings of the TACA parties on the
direct trades were over 1,3 million in each of
1994 and 1995,
it is insignificant that NOL
carried 234 more containers in 1995 than in
1994. It is certainly not unequivocal evidence of
competition between the TACA parties.

(237) Furthermore,

susceptible

each line will be

the evidence of movements by
quarter fails to take into account the fact that,
liner shipping being a demand-driven service
to
industry,
fluctuations in the demands of its individual
client base which result from seasonal and other
variations in the demand for that shipper’s
products. Thus, a particular shipper which has
a preference for a particular carrier may have a
much greater demand for liner shipping services
in certain quarters. Examples of such variations
in demand are for drink products
in the
summer and consumer goods in the run-up to
Christmas.

(238) A true picture is obtained by looking at the
overall annual fluctuations in shares a against
the other TACA parties. This information is set
out in Table 6.

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L 95/41

Table 6

Individual shares of TACA liftings on direct trades 1994 to 1996

(%)

Carrier

1994

1995

1996

ACL

DSR/Cho Yang

Hanjin

Hapag Lloyd

Maersk

MSC

Nedlloyd

NOL

NYK

OOCL

P&O

POL

Sea-Land

TMM

Tecomar

7

11

0

13

12

7

6

0

2

7

11

6

17

1

1

6

10

1

13

12

8

6

0

1

7

10

6

17

1

0

6

10

1

12

12

8

7

0

1

8

10

5

18

1

1

Source: Annex 5 of the reply to the statement of objections and PIERS.
Note: Hyundai and its carryings are excluded as it was not present on the transatlantic trade in 1994.

(239) The attitude to fluctuations in market share
may be seen from a TACA briefing paper dated
15 February 1996 in which the TACA chairman
is recommended by the TACA secretariat to
(cid:28)Encourage
to
persuade
collectively find a way to enable Hanjin to
build up a market share consistent with its slot
capacity in the trade, which does not have a
negative knock-on effect’. In any event it can be
seen from Table 6 that the relative shares of the
TACA parties have remained remarkably stable.

carriers

and

all

Competition on quality

(240)

In the TAA reply (of 17 March 1994) to the
Article 85 issues of the Statement of Objections
dated 10 December 1993,
the TAA parties
stated that:

(cid:28)3.10. Each TAA party operates as a separate
commercial
separate
marketing organisation and distinct
reputation in the marketplace.

entity with a

of

3.11. Annex 6 sets out examples from the
for
shipping press of advertisements
each
the TAA parties. These
advertisements demonstrate that each
TAA party presents itself on the market
as a separate marketing organisation
compete
the TAA parties
and that
against each other and against others
also on quality, namely with regard to
the services
the nature and range of
the
offered

including

shippers,

to

L 95/42

EN

Official Journal of the European Communities

9.4.1999

frequency and reliability of
ports served, transit times,
transportation,
maintenance
containers,
support, etc.’.

specialist
and

documentation,

service,
intermodal
equipment,
of
customer

condition

(241) These claims have disappeared from the reply
to the TACA Statement of Objections
(see
Chapter 6, (cid:28)Non-price competition’). Instead the
TACA parties seek to confuse two different
issues. The first is whether the TACA parties
compete against each other in respect of the
quality of the services they provide at tariff
rates. The second is whether TACA service
contracts contain any individually negotiated
service elements.

type of

individually

contain
relating to the

(242) As discussed in recital (127), few TACA service
tailored
contracts
provisions
service
offered. Under tariff arrangements, there are no
individually tailored provisions relating to the
type of service offered. This is not to say that
the TACA parties
to
differentiate their products by use of advertising
in journals or by providing electronic schedule
information over the Internet.

attempt

not

do

containerised liner services on the direct trades
and operators of containerised liner services on
alternative routes. The issues of competition of
bulk and reefer shipping and air transport have
been considered in recitals (66) to (75).

A. Other operators of Containerised Liner

Services on the Direct Trades

in

shares

(244) The TACA parties claim that they face five
transatlantic
main competitors on the direct
trades: Evergreen (10,2 %), Lykes (5,7 %),
Atlantic Cargo Service (3,2 %),
Independent
Container Line (2,7 %) and Carol Line (1,0 %)
brackets). The
(1995 market
Commission describes the competitive position
of each of these carriers below. In addition to
these sources of competition, in 1998 a number
of new operators have entered the transatlantic
trade (Mitsui OSK and APL), although without
introducing any new capacity. However, as a
general point, it is necessary first to examine
whether each of these carriers has sufficient
capacity to win significant market share from
the TACA parties.

X. EXTERNAL COMPETITION

(243) The TACA parties consider that they face actual
external competition from other operators of

(245) Thus Table 7 provides a comparison of capacity
on the direct northern Europe/USA trades as at
mid-summer 1995 (72).

Table 7

Capacity mid-summer 1995 — direct trades

eastbound

westbound

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

TACA

Evergreen

Lykes

ACS/Star

ICL

Others

(72) Drewry, Global container markets, page 85.

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Official Journal of the European Communities

L 95/43

(246) The importance of capacity constraints on direct competitors to the TACA lies in the
fact that in order to wrest significant volumes away from the TACA parties it would
be necessary to introduce new capacity. Further discussion of
the costs of
introducing new capacity are considered at paragraphs (288) to (299).

Evergreen

(247) Table 8 sets out Evergreen’s share of the direct northern Europe/USA trades for
1993, 1994, 1995 and the first quarter of 1996. These figures give an overall share
of direct trade in 1995 of 11 % eastbound and 14 % westbound.

Table 8

Evergreen: share of direct trade 1993 to 1996

1993

1994

1995

1996

15

0

21

12

0

13

12

0

12

14

0

16

14

1

16

14

2

15

(%)

13

2

15

14

4

15

NE to US EC

NE to US GC

NE to US WC

US EC to NE

US GC to NE

US WC to NE

Source: PIERS.

(248) For the three years 1993 to 1995 the TACA
parties had over 70 % of the available capacity
on the direct northern Europe/USA trades (76
%, 74 %, 75 %) (73). Over the same period,
Evergreen has had a share of capacity of 8 %
eastbound and 12 % westbound: the difference
being due to the fact that Evergreen operates its
round the world service using vessels of
different sizes depending on the direction in
which they are travelling.

such

lines

independent

market means that, in the absence of significant
overcapacity,
as
Evergreen, are more likely to follow the price
rises of the market leader than to attempt to
leader’s
gain market
expense.
is
this
Evergreen’s
In
demonstrated by the fact that Evergreen has
announced identical price rises to TACA for
1996 (74).

the market

share at

case

(249)

In any event, the inability to store capacity and
the time lag in bringing new capacity to the

(73) Source: Lloyds Shipping Economist.

(74) On 1 December 1995, Evergreen announced price
increases for its transatlantic eastbound to Europe trades
of USD 110 per teu and USD 140 per feu to take effect
from 1 January 1996. Compare this with the TACA
1996 business plan at Annex III.

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Official Journal of the European Communities

9.4.1999

(250) The fact

that

suggests

the largest of

that Evergreen,

the mutual
limit

the
independent lines, was a party to the Eurocorde
Discussion Agreement (EDA) and is a member
the Southern Europe America Conference
of
interests
(SEAC)
the true
arising from these networks
extent
is
this
currently
Transpacific
Stabilisation Agreement and was a party to the
it was
Europe Asia Trades Agreement until
discontinued
The
Transpacific Stabilisation Agreement and the
Europe Asia Trades Agreement were both
capacity non-utilisation agreements.

competition. Evergreen
the

September

1997.

party

of

to

in

a

(251) Furthermore,

the competitive pressure from
that given
Evergreen is limited by the fact
current high capacity-utilisation levels in the
transatlantic
only
trade, Evergreen
compete to win market share by introducing
new vessels.

could

Lykes

(252) The second significant non-TACA operator is
Lykes. Lykes filed for bankruptcy protection
under American law on 11 October 1995. This
situation was reportedly brought about owing
to a combination of poor management and the
fact that its revenues were in dollars and its
loan commitments in yen. This latter seems to
have proved harmful given the major change in
relative values between the two currencies.
seem highly likely to
These
inhibit
freedom of
Lykes on the
relevant market. Lykes has
recently been bought by Canada Maritime.

circumstances
the range of commercial

Atlantic Cargo Service

(253) Atlantic Cargo Service (Atlanticargo) operates a
weekly service between northern Europe and
the USA gulf coast. Unlike the other direct
competitors of the TACA parties, Atlanticargo
operates vessels which carry mainly bulk
products but which also carry a limited number
of containers. The ability of operators of such
vessels to compete with the operators of fully
containerised vessels
is discussed in recitals
(300) to (306).

Independent Container Line

(254)

Independent Container Line (ICL) currently
operates four vessels, all of which are operated
on a fixed-day weekly service between Antwerp
and the USA ports of Chester and Richmond.
This service was upgraded from a nine-day
service using three vessels in April 1995 thereby
increasing ICL’s annualised total capacity from
some 80 000 teu to some 110 000 teu.

(255)

ICL’s market share was 2,5 % in 1994 and 2,7
% in 1995. According to Drewry, it had 2,6 %
of available capacity in 1994 and 3,1 % in
its
1995. On the basis of available capacity,
in 1995
maximum potential market
would have been 4,3 % even assuming that
none of its capacity was unusable through the
carriage of empty containers.

share

(256)

low level,

In order to increase market share beyond this
ICL would need to
relatively
introduce new capacity. Given the need to offer
shippers a fixed-day weekly service, this would
require the introduction of four similarly sized
vessels. As ICL possesses no other vessels than
the ones currently operated on the Antwerp to
Chester and Richmond service,
these would
have to be bought or chartered in. The first
year fixed costs of establishing such a new
service would be in the region of USD 20 to 30
million.

(257) Furthermore, there is reason to believe that the
trade between Antwerp and the ports of Chester
and Richmond would not be sufficient
to
sustain a further string of vessels. Both USA
ports are considered to be niche ports and ICL
currently accounts for a high proportion of
their containerised trade.

(258) Thus, it seems reasonable to expect that, given
its lack of currently available capacity and the
difficulty of increasing capacity incrementally,
coupled with the need to operate to new ports,
ICL is unlikely to adopt an aggressive pricing
strategy vis-a` -vis the TACA parties.

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Official Journal of the European Communities

L 95/45

Carol Line

(259) The TACA parties claim (75) that Carol Line is
one of the main non-TACA operators on the
direct transatlantic trades. According to Piers,
in 1995 Carol Line
carried 2,8 % of
containerised cargo from northern Europe to
the USA east coast and was not present on any
other northern Europe/USA trade (including the
USA east coast to northern Europe trade).

(260) The TACA parties fail to mention that Carol
Line is in fact a consortium which has been
called the (cid:28)New Caribbean Service’ since 1993
and which operates between northern Europe
and the Caribbean, Central and South American
east coast ports. One of its ports of call
is
Ponce
in Puerto Rico: Puerto Rico is a
self-governing commonwealth in association
with the United States whose Head of State is
the President of the USA (76).

scope of

(261) The TACA parties also fail to mention that two
the TACA parties, Hapag Lloyd and
of
P&ONedlloyd have a 43 % share in the
activities of the (cid:28)New Caribbean Service’. The
(cid:28)New Caribbean Service’ members are also
members of the two price-fixing arrangements
falling
operating in the geographical areas
within the
(cid:28)New Caribbean
Service’. These are the Association of West
Indies Transatlantic Steam Ship Lines (WITASS)
and the New Caribbean Service Rate Agreement
(NCSRA). The purpose of the NCSRA is to
comply with the requirement of the American
Shipping Act 1984 that in order to qualify for
antitrust exemption, price-fixing agreements in
the liner shipping sector must be restricted to
goods entering or leaving the USA through USA
ports.

the

(75) See reply to the statement of objections, paragraph 31.
(76) The reason for which figures

for Puerto Rico are
included with those of the USA east coast may be related
to the fact that Puerto Rico is included with the Seventh
District Circuit of the United States Federal Court along
with Massachusetts.

(262) Thus,

in so far as Puerto Rico may be
considered as
relevant
falling within the
market (77), the Commission does not consider
that Carol Line (or more accurately the (cid:28)New
Caribbean Service’) can be said to be exercising
any significant competitive pressure on the
TACA parties. This arises from the fact that its
two biggest members are both members of
TACA and the fact that the (cid:28)New Caribbean
to two price-fixing
Service’
agreements.

is itself

subject

Cosco/K Line/Yangming

(263) Cosco entered the USA northern Europe trade
on 16 February 1997 under
consortium
arrangements with K Line and Yangming, both
of which were also new entrants to the trade.
Under the arrangements, Cosco provides two
vessels and the other lines one each which are
operated on a fixed-day weekly basis. Under the
arrangements, Cosco controls 900 teu per week
in each direction and the other two lines 450
teu each (78).

(264) On the basis of the capacity on the trade in
mid-1995, this new capacity would have given
Cosco 2,8 % share of eastbound capacity and
2,7 % of westbound capacity on the direct
trades and 2,3 % and 2,2 % respectively on the
trades including Canadian trades. The other
lines would each have had exactly half this
capacity.

B. Operators of containerised liner services on

alternative routes

Canada

(265) Cargo originating in or destined for

the
to and from northern

mid-west may travel

the

form part of

(77) The Commission did not argue in the administrative
proceedings leading to the adoption of this Decision that
Puerto Rico does not
relevant
geographic market in this case since it was not until the
stage of the reply to the statement of objections that the
TACA parties appeared to put forward this claim. In the
present case, this question does not seem to raise any
significant issues although it is possible that in another
case dealing with, for example liner shipping services in
the Caribbean,
it would be necessary to examine in
detail whether or not Puerto Rico falls within the same
geographic market as the Continental USA States.

(78) See Economic analysis of China Ocean Shipping Co.
and Agreement

1994-1997, Bureau of Economics
Analysis, Federal Maritime Commission, June 1997.

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Official Journal of the European Communities

9.4.1999

Europe either by USA ports or Canadian ports
(principally Montreal and Halifax), the latter
being known as
the Canadian Gateway.
Canadian Gateway cargo falls neither within
the scope of American antitrust exemptions nor
Canadian antitrust exemptions (although under
Community law it receives the same treatment
as direct cargo). Carriers are not
therefore
lawfully permitted to fix either maritime or
inland prices for the carriage of such cargo,
which, accordingly falls outside the scope of the
Canadian Conferences.

(266) For certain shippers,

the Canadian Gateway
may be substitutable for USA east coast ports.
However,
the effect of potential competition
through the Canadian Gateway is limited by the
fact that OOCL, Hapag Lloyd, ACL and POL
(all TACA parties)
the
Canadian conferences. The only non-TACA
members are CAST and CanMar (which form
part of
the same group of companies) and
CanMar is in a joint venture with OOCL on
that trade (79). Hapag Lloyd charters space from
OOCL and CanMar on its (SLCS) service.

are members of

(267) Maersk, another TACA party, also operates
through the Canadian Gateway but is not a
In
member of
Sea-Land
September
commenced
northern
Europe/Canada service using three relatively
small chartered vessels.

the Canadian conferences.

1997, Maersk

dedicated

and

a

(268) Competitve

to

on

the

the

conditions

northern
Europe/Canada trades have been a matter of
concern
competition
authorities. The following is an extract from the
Notice of Application dated 19 December 1996
before
the Canadian Competition Tribunal
concerning the acquisition of Cast by Canadian
Pacific:

Canadian

(cid:28)Conclusion

of

or

[of

Investigation and
129. The Director
Research
Canadian
the
Competition Bureau] submits that the
merger [between CP and Cast] will
prevent or
likely to
lessen, or
is
competition
lessen
prevent
substantially in the market comprised
containerised
of
transportation
between
Ontario and Quebec and northern
Continental Europe and the United
Kingdom. Due
to reduced service
characteristics and switching costs,
bulk and break-bulk shipping services
to
are not
containerised transportation services.

non-refrigerated

substitutes

acceptable

services

130. The Director submits that the merger
confers market power
to Canada
Maritime by providing it with a
market share of approximately 63 %
in a market that was already highly
to
concentrated and with respect
which there are significant barriers to
entry. The market share of the SLCS
increases to approximately 85 % as a
result of the merger. The existence of
the SLCS enhances Canada Maritime’s
ability to exercise the market power
conferred on it as a result of
the
merger’.

shipments

(269) The services of Hapag Lloyd, ACL and POL are
not separate services since they call at Halifax
as their first or last port of call when serving
the USA east coast ports. Thus, the same slots
are used both for direct
and
shipments via the Gateway. The Commission
considers that it is unrealistic to believe that
one line will compete against itself to sell the
same slot depending on the inland route of the
cargo. Although some competition may exist,
that competition is
likely to be diminished
because some of the TACA parties also have a
significant influence on competitive conditions
on the trades between northern Europe and
Canada.

(79) See Commission press release IP/96/400 of 8 May 1996
to oppose
announcing the Commissions decision not
exemption of
the St Lawrence coordinated service
(SLCS), a consortium agreement relating to a joint
service operated by CanMar and OOCL between
Montreal and ports in northern Europe.

(270) Even if the services were distinct, this would
those services compete
not demonstrate that
with
normal market
conditions. The fact that an individual line may

under

other

each

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Official Journal of the European Communities

L 95/47

charge a different price for a cargo going from,
say, Birmingham to Chicago depending on
whether or not
the cargo goes through the
Canadian Gateway does not prove the existence
of competition between the services, since the
carrier may well have other reasons for having
different price levels. It is a question of the
cross-price elasticity between the two services
and not the level of price. The TACA parties
have provided no evidence of the degree of
cross-price elasticity between the two routes.

9/5/94

7/11/95

The joint inland committee have
agreed in line with an adjacent
trade that all references to barge
terminals should be deleted from
the tariff and that where more
than one rate is shown for a
given postal code the lowest rate
available should be tariffed.

to our

Further
faxes of 31
October and 3 November we
have now obtained revised rates
as set out in the second draft of
page 23-6 attached. These have
been checked with the lines in an
adjacent trade, and now conform
to their tariff.

to members of

the Canadian conferences

(271) Evidence of the influence of the TACA over the
activities of
is
evidenced in the extracts of correspondence
(emphasis added) from the Canadian conference
secretariat
Inland
Committee of the Canadian Conferences. This
the
correspondence also demonstrates
members of
the Canadian conferences have
detailed knowledge of the pricing practices of
the TACA parties. The
to (cid:28)an
adjacent trade’ are undoubtedly references to
the TACA.

references

the Joint

that

(cid:28)19/5/93

Re:

application

Further to our fax yesterday a
line has asked to add DIC/DOC
to the agenda for the meeting on
25 May [1993] as follows —
Quote
of
DIC/DOC — Coatbridge suggest
the application of
to discuss
surcharges/additionals
in
connection with DIC/DOC ex
Coatbridge
inland
committee meeting. HL [Hapag
to apply
Lloyd] proposal
is
surcharges/additionals
the
original grids only and to exempt
DIC/DOC from any additionals
which would be in line with TAA
procedures. PLS add to agenda
for further discussion.

next

on

on

26/2/96 Whilst

in principle the inland
committee follow the rates
in
another trade, in this case, three
to do so would
lines felt
result
for
their lines.

in substantial

losses

that

26/2/96

Understand that in an adjacent
trade agreement has been reached
to increase the current
[French
road] rates by 2 % across the
board, subject to final agreement
on an implementation date. We
would therefore propose that our
rates
increase,
subject to the agreement of the
and
inland
subsequently of the owners.

committee,

same

take

the

7/6/93

By a 4:1 majority the inland
committee have agreed that
in
line with an adjacent trade the 10
% hazardous surcharge should
apply only on the base rate, and
not
in rate including
DIC/DOC of CD 120/20’ and
CD 175/40’.

the all

29/2/96 We refer to our e-mail of 26, and
the proposal to increase the rates
by 2 % was declined by owners
yesterday. This followed similar
action in an adjacent trade’.

(272) Finally,

1995,

it should be noted that

in October
the Continental Canadian Westbound

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Freight Conference and the Canadian North
Atlantic Westbound Freight Conference (80)
announced identicial price rises for 1996 to
those announced by the TACA parties (see
Annex III).

(273) For all

the above reasons,

the Commission
considers that the market share of the TACA
parties
services provided through the
Canadian Gateway should be aggregated with
the market share of the TACA parties for direct
services and not treated as a distinct competitor.

for

XII. POTENTIAL COMPETITION: OTHER
OPERATORS OF LINER SERVICES

a major

factor
sources

is
trade. The

(276) The TACA parties have argued that potential
the
competition
transatlantic
such
competition are said to be carriers already
operating on the transatlantic trade, who are
able without significant expense or technical
difficulty to increase the number of containers
they carry, and the cross-entry by container
operators not present on the transatlantic trade.

in
of

Mediterranean

(277) Before discussing each of these in turn,

it is
necessary to consider as a preliminary issue the
experts’ report put forward as evidence by the
TACA parties.

(274) For the reasons discussed above in recitals (76)
the Commission does not consider
to fall within the

to (83),
Mediterranean services
relevant market.

A. Dynamar report

XI. CONCLUSIONS ON THE STATE OF ACTUAL
COMPETITION ON THE TRANSATLANTIC
ROUTES

(278)

In view of the reliance placed by the TACA
parties on a report attached to the reply to the
Statement of Objections, on 18 September 1997
the Commission addressed a formal request for
information in the following terms:

(275) The evidence that

the market share of

the
TACA parties have remained stable during
1994, 1995 and 1996, despite regular, albeit
modest, price increases, suggests that actual
external competition is limited. This cannot be
low
explained by a claim that rates are still
since there have been new entrants to the
transatlantic trade, in particular as members of
the TAA/TACA. Furthermore,
relative
stability of the aggregate market share of the
TACA parties, despite the increase in the
numbers of
is
explained by the fact that, with the exception of
TMM and Tecomar, the new TACA parties are
new entrants to the trade and so did not have
an existing clientele. It is also explained by the
fact that those new entrants have entered the
market without
any
actually
capacity.

to the TACA,

the parties

introducing

the

(cid:28)A report prepared by Dynamar dated 30
August 1996 is attached to the reply as
Annex 10. Please provide full details of all
instructions given to Dynamar by or on
behalf of the TACA parties concerning the
preparation of this report. In so far as such
in
found
to
instructions
correspondence
documents
concerning the preparation of, previous
reports by Dynamar, please also provide
copies of these documents’.

be
other

are

or

(279)

In response the TACA parties claimed legal
professional privilege in respect of (cid:28)instructions
given to an expert witness by or on behalf of a
party to administrative or judicial proceedings’.
This claim was repeated at the oral hearing held
on 6 May 1996.

(80) Members: ACL, Canada Maritime/Cast, Hapag Lloyd,
OOCL and POL. These tariffs do not include Canadian
Gateway cargo. The following price increases were
announced with effect from 1 January 1996, (cid:28)All freight
rates in [their] tariffs will be increased by USD 110 per
teu and USD 160 per feu container in respect of general
cargo, and the tariff premium for specialised equipment
(open top and flat rack containers) will be increased to
USD 400 per teu and USD 500 per feu’.

(280)

In the Commission’s view, it is not established
that under Community law legal professional
privilege attaches to reports prepared other than
under a client/attorney relationship. Even if
such reports were protected under the doctrine
of privilege, the Commission would not accept
that instructions given to the expert witness

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should be treated as privileged where a report
prepared by that expert
is relied on by a
defendant party.

they are unable as a rule to eliminate as far
as a substantial proportion of the shipping
services in question is concerned;’.

(281)

In this context, the Commission notes that its
own practice in this respect has been recently
clarified:

(284)

(cid:28)Special note concerning studies

It is generally accepted (see recital (365)) that
trade lane such as the North
on a major
Atlantic,
competitive
is
it
disadvantage for a carrier not to be able to
offer a weekly, preferably fixed-day weekly,
service.

tremendous

a

in

in

be

directly

stressed

that
connection

indirectly
be made

It
should
studies
with
commissioned
proceedings or for a specific file, whether
used
the
or
proceedings, must
accessible
irrespective of their intrinsic value. Access
must be given not only to the results of a
study (reports, statistics, etc.) but also to the
Commission’s
the
contractor, the tender specifications and the
study. However,
the
methodology
correspondence
financial
aspects of a study and concerning the
contractor’s references remain confidential
in the interests of the latter (81)’.

correspondence with

relating to the

of

(282)

In the view of the Commission, the purpose of
making available this additional information is
to enable all parties to assess the reliability of
in the
conclusions drawn by an expert and,
absence of such additional
it is
difficult to assess the probative value of any
report. In the present case, the TACA parties
to
have not sought
supply the information requested and, in those
circumstances, one reasonable inference is that
the conclusions of the report were coloured by
the instructions given to the expert.

to explain their refusal

information,

B. Mobility of fleets

(283) Regulation (EEC) No 4056/86 places particular
emphasis on potential competition as a means
liner
of
conferences:

controlling the market power of

(cid:28)whereas the mobility of fleets, which is a
the structure of
characteristic feature of
availability in the shipping field, subjects
conferences to constant competition which

(81) Commission notice on the internal rules of procedure for
processing requests for access to the file in case pursuant
to Articles 85 and 86 of the EC Treaty, Articles 65 and
66 of the ECSC Treaty and Council Regulation (EEC)
No 4064/89 (OJ C 23, 23.1.1997, p. 3).

(285) Weekly services have become an essential part
to
the supply chain from manufacturer
of
ultimate consumer. Longer intervals between
services can lead to increased costs for shippers,
in particular because of
the need to hold
increased stocks at both ends oft the supply
chain. This can be even more expensive in the
case of perishable goods. Thus, not only is the
supply chain slowed down, leading to delays in
payment for goods manufactured, but there are
also storage costs and the fact that goods may
lose value as a result of delayed delivery.

(286) The reason why a fixed-day weekly service is
preferred to a 10, 12 or even four-day service, is
that it enables shippers to plan ahead more
easily without the need to check whether there
will be a vessel available when necessary. This
phenomenon is well -known to providers and
consumers of regular transport services. Thus
passengers,
passengers,
expect airlines to provide a daily or even hourly
service:
to
have services which are not only regular but
predictable in the sense that the timetable is
relatively simple to comprehend and remember.

train and ferry passengers expect

especially

business

C. Cost of increasing capacity

(287) Generally, the special features of transatlantic
trade substantially reduce the likelihood of
potential competition. Transatlantic trade is a
high-volume
regular,
high-capacity services. Lines need enough large,
modern vessels, and must operate a weekly

needs

trade

and

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service, calling at a sufficient numbers of ports.
It is estimated that the cost savings per slot are
30 % to 40 % for a 4 000 teu ship as against a
2 500 teu ship.

trade since the inception of the TAA has done
so by joining the TAA/TACA (83).

Version I (28.8.1992) – 11 lines

(288) To operate a fixed-day weekly service calling at
three or four ports in northern Europe and the
same in the United States requires a string of
five vessels of
speed and capacity
together with a complement of containers of
three times the capacity of the string. The cost
of introducing such a service would be in the
region of USD 500 million plus the related
on-shore
and
administration.

management

similar

costs

of

D. Container ship cross entry

(289) The Commission’s general observations on the
mobility of fleets, and the contestability of liner
shipping markets, are set out at recitals (350) to
(357). Nevertheless,
to
the TACA,
demonstrate that
potential competition in the form of mobility of
fleets is unlikely to be effective.

it
in the case of

possible

is

(290) This

all

from two facts:

situation arises
of
are

first,
shipping
the major
almost
companies
the
on
already
transatlantic trade (the ones that are not are
discussed below) and secondly entry by smaller
shipowners is unlikely.

liner
present

set

regularly
operations,

(cid:28)The days when ambitious and opportunistic
entrepreneurs
small
transatlantic
usually with
chartered tonnage of less than 1 000 teu,
have long since gone-such enterprise having
been killed off by the remorseless and
unforgiving economics of the market (82)’.

up

(291) Furthermore, a chronology of TACA party
membership shows that, until the introduction
of the Cosco/KLine/Yangming service in 1997
(see recital (263)), every significant potential
competitor that has entered the transatlantic

(82) Drewry, Global container markets, p. 87.

ACL

Hapag Lloyd

P&O

Nedlloyd

Sea-Land

Maersk

MSC

OOCL

POL

DSR/Senator

Cho Yang

Version II (12.3.1993) – 12 lines

NYK

Version III (31.3.1993) – 13 lines

NOL

Version IV (7.4.1993) – 15 lines

TMM

Tecomar

Version V (26.8.1994) – 16 lines

Hanjin

Version VI (31.8.1995) – 17 lines

Hyundai

(292) On 30 January 1996, Olav Rakkenes,

the
Chairman of the TACA (who is also Chairman
of ACL) wrote to Hanjin as follows:

(83) TMM and Tecomar

the
had
transatlantic trade but had not been conference members
and, in any event, their carryings of full containers in,
for example, the second quarter of 1995 represent less
than 1 % and 2 % respectively of all TACA carryings.

present

been

on

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(cid:28)As I have said to every line concerned
trying to enter the market, please come and
talk to me and we will do everything we can
to help you succeed with that goal’.

relation to dual-rate tariffs and the elimination
of competition, this has substantially the same
effects as those described in the TAA decision,
recitals (341), (342), and (343) (84).

(293)

It is especially significant that not one of the
four Asian carriers which entered the trade
between 1992 and 1996 (NYK, NOL, Hanjin
and Hyundai) did so as an independent carrier
operating in competition with the TACA
parties. Furthermore, various arrangements with
TACA parties have allowed each of
these
carriers to enter and obtain a foothold in the
market without facing the competition normally
to be expected in such circumstances. This
indicates that entry to the transatlantic trades
can be relatively easily done with the agreement
of the TACA parties.

(294)

for

In particular, Hanjin and Hyundai have been
able to enter the market on a slot charter basis
without having had to make any investment in
the trade. The TAA/TACA had
vessels
significant
argued that
potential competitors to the TAA/TACA:
in
fact, the TAA has been able to ensure that they
did not
as
independent lines but as parties to the TACA.

carriers were

transatlantic

trade

these

enter

the

(297) There are two significant liner carriers which
have recently entered the transatlantic trade but
which have not become party to the TACA:
American President Lines Ltd (APL) and Mitsui
OSK Lines Ltd (Mitsui). Both are, however,
linked with TACA carriers in other trades.

(298) APL and Mitsui are already in partnership on
the transpacific trades with OOCL (85). APL is a
members of the TransPacific Westbound Rate
Agreement,
the TransPacific Conference of
Japan, the Asia North America Eastbound Rate

(84) See footnote 7. Commission Decision 94/980/EC on the
transatlantic agreement of 19 October 1994, OJ L 376,
21.12.1994, p. 1, recitals (341) to (343).

(cid:28)(341) The

the

real

bring

inside

purpose

introduction

independents

of
of
differentiated rates in a case such as that of the
the
to
TAA is
agreement:
if they were not allowed to quote
prices lower than those of the old conference
members, these independents would continue as
outsiders
conference,
especially in terms of price. The advantage to the
old conference members is that this limits the
activities of outsiders and thus the competition
they offer. Such a system substantially reduces
effective
competition from outsiders, whose
existence is the main safeguard for the block
exemption given to liner conferences.

competing

against

the

(295) This is not intended to suggest that entry to a
particular trade on the basis of slot charter
arrangements without putting actual tonnage in
place
anti-competitive. The
question here is whether any benefits of such
cooperation are accompanied by changes in the
competitive structure of the market such as the
elimination of potential competition.

necessarily

is

(342) This objective reveals the true nature of the TAA;
it emerges clearly from various points already
made here. Reference should be had to recital 117
et seq., which describes the recent history of the
trade, the document summarising the conclusions
of a meeting of all members of the TAA held in
Geneva on 13 January 1992 (see footnote 70);
and the speech by the President of Senator Lines,
a member of the TAA, delivered shortly before
the agreement entered into force.

(296) This ability to absorb potential competitors has
come about in part by the practice of the TACA
contracts which
service
offering
contain a dual-rate price structure and by the
fact that the majority of the TACA parties do
not compete to participate in service contracts
with NVOCCs (see recitals (150) and (151)). In

shippers

is

(343) This type of agreement seeks to disguise as a
conference what
really an agreement with
outsiders, independents wishing to maintain price
flexibility. This is not a genuine liner conference,
but an agreement between a conference (i.e. the
or
rate
the
“structured members”) and outsiders
“unstructured members”:
to
144). Such agreements do not benefit from the
block
conventional
granted
conferences.’
Agreement

committee members
(i.e.
see recitals 133,

APL/MOL/OOCL

203-011468.

exemption

contract

and

to

(85) FMC

Asia-Pacific Alliance Agreement ((cid:28)A-Pac’).

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9.4.1999

conference

Agreement and the Transpacific Stabilisation
Agreement. Both APL and Mitsui OSK are
members of the Far Eastern Freight Conference,
a
northern
Europe/Far East trades to which the following
TACA parties are also party: DSR, Hapag
Lloyd, Maersk, NOL, NYK, OOCL,
P&ONedlloyd and Sea-Land.

operating

the

on

(299) Finally, as discussed at recitals (355) and (356),
the cost of withdrawing from transatlantic
trade, with resultant damage to reputation and
to competitive positions elsewhere, and lower
prospects of returning to the trade, reduces the
incentive to enter.

note that the characteristics and performance of
non-fully containerised vessels are significantly
different
fully containerised
vessels:

from those of

to

that

cellular

efficient

is more

(cid:28)It is crystal clear, and almost implicit in the
containership
terminology,
capacity
and more
productive than non-cellular space when it
comes
(i.e.
containerised) cargo, and hence of greater
significance as far as the supply/demand
balance is concerned. Each slot on a cellular
vessel will provide more container carrying
capacity in any given year than a slot on a
non-cellular vessel, since the cellular ship:

carrying

unitised

E. Competition from non-container vessels

— spends less time in port,

containers

competition

from operators

(300) The TACA parties have argued that they face
potential
of
non-container vessels which could adapt those
vessels in order to carry containers or increase
carried. Their
the numbers of
conclusion is that non-container operators on
the relevant market are able immediately to
increase
some
200 000 teu, which is equivalent to about 15 %
of the capacity of the TACA parties. In support
of this claim, the TACA parties rely solely on
the Dynamar report,
the probative value of
which is discussed in recitals (278) to (282).

capacity by

carrying

their

(301)

(302)

in

and

(86)

recitals

In principle, any vessel can carry containers and
the market share figures for the TACA parties
given
include
(85)
containers carried on non-fully containerised
vessels. The effect of potential competition from
operators of non-fully containerised vessels
could only be material if both of the following
two conditions were fulfilled. It would have to
be shown, first, that suppliers of such services
could economically compete with the TACA
parties on even terms and,
that
regarded carriage on a non-fully
customers
functionally
containerised
interchangeable with carriage on a
fully
containerised vessel.

secondly,

vessel

being

as

In considering whether
cumulative tests is fulfilled,

the

first of

these
it is essential to

— usually

possesses

a much

higher

sea-speed,

— operates on regular liner schedules (86).

While ro-ros may achieve 80 % or more of
the productivity of a cellular vessel, a
semi-containership or a con-bulker will be
considerably less efficient on the grounds of
both speed and cargo-handling time in port.
An
relative
overall
and
productivity
non-cellular capacity might reasonably be
2:1’ (87).

estimate
ratios

the
cellular

for

of

(303) Apart

from the performance

characteristics
which militate against supply-side conversion,
there are a number of technical characteristics.
The first of these is the additional expenditure
required to carry containers on vessels which
were not specifically built as container vessels.
Such costs are both one-off in the sense that
chains and fittings have
to be purchased
(according to Dynamar at a cost of some ECU
150 per slot) and variable in the sense that the
cost of labour is higher for stowing containers
than on container
on non-container vessels

(86) Drewry, Global container markets, p. 69.
(87) Drewry, Global container markets, p. 71.

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vessels. Account needs also to be taken of the
involved in carrying
additional port
to slower
containers on such vessels due
stowing
longer
and
periods spent in port.

consequentially

times

costs

(306) Other differences

fact

so far as customers are
concerned are the absence of scheduled weekly
sailings and the
in many cases
non-fully containerised vessels use different port
terminals or berths to the ones used by fully
consequential
vessels, with
containerised
inefficiencies
transport
for
operations.

multimodal

that

slot

(304) The second reason for which the potential
capacity of non-fully containerised vessels is less
than the TACA parties assert is the fact that the
operators of such vessels do not possess the
same fleets of containers as do operators of
fully containerised vessels. Typically, each of the
TACA parties has three containers for every
vessel
it operates. Many operators of
breakbulk services will own no containers at
all. The
especially
important given that (cid:28)the global box inventory
has seldom, and certainly not for the last 10
years or more been sufficient to permit all the
nominal
the
non-cellular fleet to be used’ (88). This situation
is compounded by the fact that the operators of
non-fully containerised vessels do not generally
possess
the same land-side facilities as do
operators of fully-containerised vessels.

significance of

containership

capacity

this

of

is

(305) So far as the customers are concerned,

that

the
the vast
Commission does not accept
majority of customers of
the TACA parties
would regard carriage on a bulk or neo-bulk
vessel as being substitutable for carriage on a
fully-containerised
is
vessel.
demonstrated in the following extract from an
advertisement for ACL in January 1997:

This

fact

(cid:28)If your present carrier tells you that your
shipment will be securely slowed on deck,
don't believe it. Cargo can really take a
beating on its journey across the North
Atlantic … ACL's containerised cargo is
also safely secured in uniquely-designed cell
carriers whose
those
guides,
containers are only lashed down in place’.

unlike

(88) Drewry, Global container markets, p. 70.

XIII. PRICE MOVEMENTS

A. Average revenues and prices

(307)

In the reply to the Statement of Objections, the
TACA parties claimed, contrary to evidence put
forward by the European Shippers’ Associations
and referred to in the Statement of Objections,
(cid:28)that, for many shippers, 1996 service contract
rates are lower than 1994 rates’. The TACA
parties also claimed in the Reply to the
Statement of Objections (cid:28)that TACA class tariff
rates were reduced in August 1996’.

(308)

In order to assess these claims and to put them
into perspective, the Commission has examined
average revenues per teu earned by the TACA
parties (both as a whole and individually) as
well as the price movements contained in a
number of service contracts. All
the figures
given below are actual figures which have not
been adjusted for inflation.

to

of

points

general

(309) Before considering that evidence, there are a
be made
number
concerning price movements for liner shipping
services supplied by the TACA parties. The first
that, owing largely to the
such point
complexities of
the TACA's discriminatory
it is very difficult to track
pricing structure,
prices for individual commodities. This means
that in looking at average revenues, no account
is taken of the fact that the mix of cargo is of
fundamental importance to the end result.

is

(310) Secondly, average revenues do not

take into
account the fact that the TACA parties have
significantly
capacity
utilisation. This means that average revenues at
a given level could be highly profitable for one
line but not for another.

different

degrees

of

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(311) Thirdly,

it is important to bear in mind that
trading conditions in the three main world
trades have been markedly different in recent
transpacific
years.
northern
and
trades have seen substantial
Europe/Far East
pressure on rates. The Journal of Commerce
stated on 18 October 1996 that:

Both

(cid:28)The Atlantic is the only major trade lane
that has not endured a serious price war this
year. While prices on the Pacific and
Europe-Asia
lanes have dropped
significantly over
the last year, Atlantic
freight rates have remained fairly stable’.

trade

(312) According to Drewry (89)

trades

in the

inability to access

(cid:28)The transatlantic was the poor relation of
the arterial
early 1990s,
deprived of high growth by its greater
the
maturity and its
magical “Asian x-factor”. In 1992 reported
collective carrier losses on the route were
USD 400 million (an estimated – 22 %
return on sales), but since then the concerted
efforts of carriers within TAA/TACA have
seen a radical improvement and in 1996 the
trade is forecast to generate an aggregate
surplus of USD 350 million for a very
healthy 10,1 % margin (+ 9,1 % in 1995)
which will make it the most profitable of
the east-west markets. The TAA and TACA
may have occasioned much bad publicity for
carriers, not to mention considerable legal
the market
costs, but given the scale of
recovery, it could doubtless be considered as
a price worth paying. The profitability
outlook for the balance of the decade seems
eminently
carriers
(regulatory uncertainties aside), with little
sign of any likely rate or volume instability’.

satisfactory

for

(313) Fourthly, it is significant that between March
1993 and August 1995,
the most
powerful liner shipping companies in the world
(NYK, NOL, Hanjin and Hyundai) entered the

four of

(89) Drewry, Gobal container markets, p. 8.

northern Europe/USA trades without appearing
to have had any adverse impact on prices.

(314) Finally before considering actual price increases,
it is necessary to recall that on 9 March 1995,
the TACA parties agreed with the American
Federal Maritime Commission to reduce tariff
and service contract rates for the remainder of
1995 to levels prevailing as at 31 December
1994. This roll-back of rates means that the
overall price increase for services provided by
the TACA parties in the context of the TAA and
TACA is lower than it would have been in the
absence of regulatory intervention by the USA
authorities.

(315) The cost to the TACA lines of the roll-back of
rates was estimated by the FMC as being in the
region of USD 60 to 70 million. So far as
individual shippers are concerned, the TACA
parties have stated in the reply of the Statement
of Objections
the
cancellation from the date of
the settlement
(and hence not with effect for the 10 weeks of
1995) of increases of the following order:

the roll-back meant

that

From France

Iron and steel

From Germany

Non-hazardous
chemicals

Paper

Automobile spare
parts

Automobile electrical
equipment

Computers, parts

Electrical, medical
equipment

Machinery parts

From Netherlands

Dairy produce

From Denmark

Meat

Dairy produce (dry
container)

Dairy produce
(reefer containers)

Biscuits

Furniture

(%)

23

7

17

12

12

13

10

11

14

7

11

3

11

11

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From UK

From Belgium

Non-hazardous
chemicals

Beverages

Non-hazardous
chemicals

(%)

6

4

10

Hazardous chemicals

9

(316) The TACA parties

refused to supply the
Commission with port-port prices on the
grounds
do.
Accordingly, Table 9 sets average revenue per
teu figures for the TACA parties as a whole for
the period 1992 to 1996.

this was

difficult

that

to

Table 9

Average revenue per teu 1992 to 1996

eastbound rates

westbound rates

u
e
t
/

D
S
U

1 800

1 700

1 600

1 500

1 400

1 300

1 200

1 100

1 000

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

(317) From Table 9 it can be seen that average revenues per eastbound teu increased by
approximately 7 % in 1994 over 1993 average revenues. In 1995 average revenues
per westbound teu increased by approximately 11 % over 1994 revenues and would
have increased by an even greater amount had not the TACA parties been forced by
the Federal Maritime Commission to roll back their 1995 rates to 1994 levels.
Notwithstanding these price increases, the TACA parties increased the total volume
of their carryings in the relevant market by 5,4 % in 1995 as compared with 1994.

(318) Taken as an average, the TACA parties increased their revenues per teu (that is, the
average price paid by shippers for the maritime transport of 1 teu) between 1992
and 1996 by 8 % eastbound and 18 % westbound. This average figure, however,
masks the fact that during this period, as can be seen from Table 10, many of the
TACA parties were able substantially to outperform the average.

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Table 10

Average revenue per teu 1996

155

145

135

125

115

105

95

85

eastbound

westbound

A

B

C

D

E

F

G

H

I

J

K

L M

e
g
a
r
e
v
A

1992 = 100

(319) Table 10 should be viewed in combination with
Table 6 (Fluctuations in market shares), since it
demonstrates that a number of TACA parties
have been able to increase average revenues per
teu substantially without suffering any loss in
market share. Equally, a number of the TACA
in the
parties have
average revenues per teu without seeming to
have benefited in terms of increased market
share.

experienced decreases

B. Statistical analysis of price movements in the
maritime and Community inland legs of
TAA/TACA service contracts, 1992 to 1997

Methodology

(320) A list of 1996 service contracts quoting prices
for Community inland legs was completed.
Using this list, a survey was done of the other
years’ contracts in order to select a group of
contracts on which to base the analysis. For a
set of contracts between any given shipper and
the liner conferences to be chosen, there had to
be at least one 1992 contract and one 1996
contract which fulfilled the required criteria, or
in lesser priority a 1993 contract and a 1996
contract. All the available 1992 contracts with
an appropriate 1996 partner contract have been
surveyed, and approximately 40 % of
the
available 1993 contracts with an appropriate

1996 partner contract have been surveyed. The
cut-off point in the survey of the 1993 contracts
was determined by the chronological order in
which they appeared in relation to the list of
the 1996 contracts;
the
that
survey terminated approximately 40 % of the
way down the list of appropriate contracts.

is to say that

(321) The criteria which the contracts had to fulfil in
order to be surveyed were as follows: separate
non-tariff westbound maritime and Community
inland rates had to be quoted for at least one
identical commodity or group of commodities
for at least one identical routing in every year's
contract. Westbound rates only were analysed
in order to focus the survey on the effect of
TACA parties’ activities on European exporters.
Where there were more than two Community
inland routings which appeared in all
the
contracts between the relevant shipper and the
selected at
two routings were
conference,
random, and the currencies in which the rates
were quoted were left the same as long as the
same currencies in which the rates were quoted
were left the same as long as the same currency
was used each year for each routing. Currencies
were not converted, so as to avoid the distortive
effects of currency exchange fluctuations. All
the commodities and routings which appeared
in both 1992/1993 and 1996 were surveyed for

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all relevant container types/sizes, meaning that
in large contracts (such as [business secrets
omitted]) there could be up to 144 different
prices per year recorded, and a total of up to
576 prices recorded in total for the contract
over the full period surveyed.

(322) Excluded from the prices were all ancillary
charges unless otherwise noted,
including
arbitraries, currency adjustment factors, interim
fuel participation, container
service charges,
terminal handling charges, etc.

(323) At a late stage of the survey, the 1997 service
contracts were submitted to the Commission.
All appropriate prices which match the criteria
set down above have been added to the figures
for the final contracts used.

Analysis

(324) The clearest conclusion to be drawn from the
survey is that the price increases from 1993 to
1996 in the maritime legs of the journey are
10,4 percentage points greater than increases
for the Community inland legs. As Table 11
shows, there was an overall 15,5 % increase
from 1993 to 1996 in the maritime legs,
in the
compared with a 5,1 % increase
Community inland legs. Without
the large
increase in the inland rates paid by (business
secrets omitted) (24,3 %), these increase would
be even smaller (2,1 %). The period of 1993 to
1996 offers the widest number of contracts,
commodities and routings to be surveyed, and
so these can be seen as the most representative
statistics to be drawn in the survey. While there
was some rate reduction in the inland leg for
this period, there were only rate increases in the
maritime leg, the very smallest of which were
about 7 %. Table 11 is based on the
information set out in Annex VI.

Table 11

Overall price movements in service contracts 1992 to 1997

(%)

Period

1993/4 to 1995
maritime

1993/4-1995
EC inland

1992-1996
maritime

1992-1996
EC inland

1993-1996
maritime

1993-1996
EC inland

1992-1997
maritime

1992-1997
EC inland

1993-1997
maritime

1993-1997
EC inland

Overall

10,9

2,5

33,1

58,2

15,5

5,1

29,9

22,8

8

(cid:159) 4,0

(325) This conclusion supports

the Commission's
view that the maritime service offered by the
TACA parties is the area of
their activities
where they exercise the most market dominance
and are
to competitive
pressure. Conversely, inland haulage is a market
where the TACA parties are subject to more
competitive pressure.

subject

least

the

been able to demand. The (business secrets
omitted) contracts show a 133,6 % increase in
the rates for inland legs from 1992 to 1996,
with a 36 % increase for the same period for
the (business
secrets omitted) contract. The
(business secrets omitted) contract also shows a
64,2 % increase in the maritime rate for the
same period. The other 1992 contract, which
was entered into after the creation of the TAA,
shows far more modest rate increases from
1992 to 1996, through here the inland rates
increased more than the maritime rates (2 %
maritime to 5 % inland).

(326) The 1992 to 1996 contract period surveyed
offered a much narrower range of contracts to
analyse, only three being available. Of those
three,
two were pre-TAA contracts, namely
contracts from the Neusara conference, and the
increases in both the maritime and the inland
legs between these 1992 contracts and the
contracts in the TAA/TACA period reflect the
large rate rises that TAA/TACA parties have

(327) Where the narrow range of figures added to the
picture by the 1997 contracts is taken into

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account, the situation changes somewhat. As far
as inland legs are concerned, there are either
decreases in the overall rates from 1993 to
1997 or no change. The exception is
the
(business secrets omitted) contract, where there
is a modest increase of 4 % from 1996 to 1997,
making the 1992 to 1997 rates increase for this
contract 40 %. Overall, however, the inland leg
rates from 1993 to 1997 showed a decrease of
4 %. Conversely, if the period selected is 1992
to 1997,
then there are marked increases
overall, due to the jump from pre-TAA to
post-TAA. The maritime legs show an overall
increase of 8 % from 1993 to 1997, although in
four contracts there were drops in the overall
1993 to 1997 rates when 1997 prices were
included.

(328) The following conclusions can be drawn. There
were substantial price rises from 1993 to 1996
in maritime rates on westbound journeys. The
rises in EC inland leg rates for the same period
and journeys were 10 percentage points lower,
suggesting less market power on the inland
routes. Where 1992 prices
from pre-TAA
contracts are included, the increases for both
maritime and inland journeys are much greater,
suggesting that the creation of TAA/TACA has
allowed the parties to exact substantial rate
rises on both maritime and inland routes.
Where 1997 prices
included, overall
maritime rate rises are smaller than for 1993 to
1996, and inland leg rates actually decrease
overall. Similarly, 1992 to 1997 rises are
smaller than 1992 to 1996 rises. This suggests a
more careful approach to rate rises being
adopted by the TACA parties in the 1997
contract period.

are

reduction in the price fluctuations which would
be expected in a normally competitive market
may benefit shippers by reducing uncertainty as
to future trading conditions (90).

(330) The rate stability envisaged by Regulation
(EEC) No 4056/86 has the consequential effect
of assuring shippers of reliable services. Liner
services are, by their nature, regular in the sense
of an evenly-spread timetable. Reliable services
are those which are of a reasonable quality,
such that the shipper's goods come to no harm,
and at the same price irrespective of which day
and which line is chosen to carry the cargo.
Reliability in the supply of transport services is
the maintenance over
time of a scheduled
service, providing shippers with the guarantee
of a service suited to their needs.

(331) For

the

these

reasons,
liner

the
customers of
members of
shipping conferences are
considered to obtain a fair share of the benefits
arising from the restrictions on competition
brought about by liner shipping conferences.
Therefore, provided that they remain subject to
effective competition, agreement between the
members of a liner shipping conference as to
from group
the rates
exemption.

they charge benefits

XIV. THE NOTION OF STABILITY

(329) A liner shipping conference brings stability to
the trades if affects by fixing a uniform tariff
which serves as a reference point
the
market. Prices set
in this way are likely to
remain unchanged for a longer period of time
lines. This
than if they are set by individual

for

(332) However, a thesis frequently put forward by
liner shipping companies operating on the main
world trades (including the TACA parties in
their application for exemption and elsewhere)
is that the liner shipping market is so different
from all other markets for goods and services
that it must be exempt from the normal rules of
competition which apply
other
markets. The TACA parties would like the
notion of stability to amount to the assurance
that any particular
shipping line on any
particular trade should be guaranteed sufficient
return on its capital not to tempt its owners to
invest that capital elsewhere.

to those

(90) See 1981 Commission memorandum (COM(81) 423
final: Proposal for a Council Regulation (EEC) 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).

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(333) Their main argument

the
rise

short-run

costs,
gives

existence of
to

is that since the liner
shipping industry has considerable fixed but
reserve
avoidable
capacity
price
competition at levels close to marginal cost,
resulting in the withdrawal of capacity as
operators either move their vessels to more
profitable trades or go bankrupt. In theory (91),
this could lead to a shortage of capacity which
would cause a large increase in prices drawing
in new capacity and operators into the market.
Capacity would then increase until an adequate
level of reserve capacity were reached (a level
necessary for the provision of reliable services)
and the cycle would begin again.

lines

since

could,

otherwise

market go even further. They argue that joint
price-fixing must be extended to the inland
sector where lines offer multimodal transport
services,
by
charging less than the cost to them of inland
transport,
in effect charge rates lower than
those in the conference maritime tariff. By
implication, the measures to restrict competition
have to be extended to any service provided by
even a single member of the conference lest the
the conference are tempted to
members of
undermine their agreement
to fix maritime
prices by competing in other ways.

(334) These potentially large fluctuations in price and
available capacity are a form of market failure:
the market is inherently unstable. In order to
break out of that cycle, strict price discipline is
necessary,
from offering
services at levels which the advocates of this
to say,
is
thesis
(cid:28)destructive price competition’). That,
in their
view,
is recognised by Regulation (EEC) No
4056/86, which grants exemption for certain
price-fixing activities of liner conferences.

too low (that

preventing

regard as

lines

(337) This analysis is an instance of the arguments
made in many competition cases by cartel
members seeking to draw a distinction between
(cid:28)fair’ and (cid:28)destructive’ competition (92). In fact,
most of the factors relied on in support of the
thesis that there is no equilibrium in the liner
to liner
shipping market are not peculiar
to liner
shipping market are not peculiar
shipping. The existence of reserve capacity is
common to most capital-intensive industries,
where there are large sunk costs but where
marginal variable costs of production are low.
In certain circumstances, there is an incentive to
lower prices in order to increase turnover, by
means of an increase in volume.

as

such

(335) Moreover, simple price-fixing is not sufficient;
additional measures
capacity
non-utilisation agreements are necessary in
order to limit the volume of goods which each
line is allowed to transport, so as to eliminate
the temptation for lines to transport additional
goods at a price close to marginal cost. Such
measures, they say, do not give conferences the
power to raise prices as much as they wish since
supra-competitive prices would draw hitherto
potential competitors into the market.

(336) Those who argue that

there is a lack of
equilibrium leading to an inherently unstable

(91) No examples have ever been put forward by the TACA
parties (or any other shipping line) of shortages of
capacity arising from the withdrawal of vessels from a
trade.

to apply to sea transport:

(338) The arguments of those who put forward the
thesis of inherent instability are based on two
very controversial theories which Pirrong (93),
Sjostrom and Davies (94)
in particular have
the core
sought
theory and the theory of contestable markets.
The hypotheses necessary for the application of
these theoretical models (the presence of fixed
impossibility of
but
adjusting capacity in accordance with demand
and suicidal conduct of shipowners in setting

avoidable

costs,

the

(92) See for example the judgement of the Court of First
Instance in Case T-29/92 SPO v. Commission [1995]
ECR II-289, point 294, where the Court of First Instance
considered that no distinction could be made between
normal and destructive competition. Appeal rejected as
manifestly inadmissible by Order of the Court of 25
March 1996 (Case C-137/95 P, [1996] ECR I-1611).

(93) Dr Pirrong,

(cid:28)Core theory and liner shipping markets’
(Journal of law and economics 1992, footnote on p. 11).
shipping
contestability and the

liner

(94) (cid:28)Competition,

industry’, p. 310.

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are

therefore not

cannot be allocated to individual consignments.
They
included in the
calculation of what a particular freight rate
should be, and the charging floor becomes the
direct handling costs. The view that capacity
costs
cannot be allocated is made more
complicated by price discrimination between
commodities, with the result that the rate paid
for one commodity may be five times as much
as another for the same service.

their own prices) appear unrealistic to most
commentators. It is thus hardly surprising that
the work of the economists who apply these
heterodox theoretical models has not been
accepted by most analysts of sea transport (95).

A. The

core

theory
contestable markets

and

the

theory

of

(339) According to the core theory, the maintenance
of adequate reserve capacity in order to provide
regular and reliable service in spite of demand
fluctuations can lead shipowners in forget the
this reserve capacity (which
raison d'eˆtre of
to remain unused unless there is an
ought
exceptional
increase in demand at constant
prices, for example seasonal demand), so that
they decide to lower their prices in order to fill
their reserve capacity by attracting additional
customers. Such a commercial strategy aims at
maximising the use of ships.

(340) The decision to lower

rates

leads other
shipowners to enter into a price war which
leads to very low price levels, close to marginal
variable cost, since shipowners are not able
quickly to adapt capacity to demand. It is in
this way that the cycle of excessive swings in
prices and service quality described above
begins,
inherent
instability of the industry.

constitutes

and this

the

(341) Without going into the question whether the
core theory is anything more than a theory
without application, it is clear in any event that
the hypotheses which underlie the core theory
are not applicable to the liner shipping industry.

(342) First,

of

the

reserve

concept

capacity
corresponds to the problem of the indivisibility
of factors of production in regular transport
services (96). Thus, from the point of view of the
individual shipping line, the capacity costs of
ships are common costs to all cargo carried and

(95) See for example, Jankowski in (cid:28)The development of liner
shipping conferences’, International Journal of Transport
Economics 1989; Jansson and Schneerson in their book
the
Liner shipping economics, 1987;
Federal Trade Commission,
the
maritimeindustry and the effects of the 1984 Shipping
Act’, November 1989;
the American
the analysis of
(cid:28)Analysis of the impact of the
Department of Justice,
Shipping Act of 1984’, March 1990; the lecture given by
Professor S. Gilman at Tarporley in February 1994.
(96) See for example Jansson and Scheerson, Chapter 10.2

the analysis of
(cid:28)An analysis of

(cid:28)Common costs and indivisibility’.

a

is

(343) However, as Jansson and Schneerson point out,
there
general problem of part-load
transport markets, both for passengers and
freight where, if part-loads are relatively small
(for example a single container on a cargo
indivisibility may arise,
liner), a problem of
leading to the conclusion that the capacity cost
should not be included in the marginal cost. To
the extent that this has ever been a problem, it
the means of minimising its
is clear
negative effect on profitability now exist and
are well understood by the liner
shipping
industry. The definition of reasonable prices at
the margin is generally achieved by the use of
the principles of yield management which are
well known in the fixing of air fares. Today, the
main shipping lines use these principles of
marginal pricing in order to avoid any pollution
of their normal rates by sales at the margin (97).

that

(97) See

equipment

(cid:28)Sea-Land's

the Article

computer wars’

share isn't everything’

in
Containerisation international, August 1995 and the
article (cid:28)Market
in American
Shipper, July 1995; see also the Drewry report 1991, pp.
104 to 106. For example,
the article in American
Shipper states in relation to Atlantic Container Line: (cid:28)the
company developed a contribution model which works
off
a
flows. The model
chargo-acceptance guideline. As a result sales staff are
much more aware these days of the overall value of a
business prospect’. See also the (cid:28)liner industry: structural
changes and future outlook’ Industrial Bank of Japan
Quarterly
IV), 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
unit
management has resulted in one container having the
same meaning that one ship had in the past (p. 43).

Survey (1995,

voyage. The

introduction

serves

per

of

as

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(344) The 1991 Drewry Report (98) pointed out that
prices at the level of marginal variable cost
would be in the vicinity of USD 20 to 400 per
feu container (depending on whether equipment
was owned or leased), which is well below any
rate recorded at the time. The analysis in the
Drewry report shows the absurdity of the idea
put forward by proponents of the destructive
competition theory that certain occasional rates
on marginal shipments (at a level approaching
marginal variable cost) will contaminate all
rates. Shipping lines,
like other businesses,
realise the impossibility of making a profit on
their operations by offering rates which on
average are lower than average total cost.

Investments in,
for

(345) Secondly, the hypothesis of capacity fluctuation
is essential to the application of the core there.
However, it is inconsistent with the existence of
large sunk investments on the part of shipping
lines.
for example, container
each service, port and terminal
ships
facilities, and the
sales and administrative
structures necessary to build up a satisfactory
customer base cannot be made without loss if a
line suddenly decides to withdraw from a route.
Since withdrawal from a route normally takes
place at a time of difficulty, the line must expect
to sell its assets at very low second-hand prices.

(346) The collapse of US Line in 1986 is a signal
example of sunk costs in ships. It has been
estimated that about 40 % to 50 % of the
residual value of investments was not recovered
in that case (99). The investments are so large
that lines have no interest in withdrawing from
a market as
to slide.
soon as prices
Consequently, potential competitors must also
expect a vigorous reaction from lines already on
the market in the event of any change in the
competitive structure of the trade. Accordingly,
the existence of significant sunk costs limits the
risk of hit and run entry predicated by the core
theory.

start

(347) Thirdly,

that

the
the core theory suggests
withdrawal of capacity results in a diminution
of service quality (frequency and capacity), then
a price rise which draws new competitors into
the market. This hypothesis reflects the view
that
the services and capacities operated by
lines on the market are rigidly defined, with no
flexibility for adaptation to demand. This
hypothesis corresponds to an incorrect view of
the stability of services, according to which the
stability of transport means the protection of all
existing services and requires protection against
all competition, which is considered destructive.
Such a hypothesis does not correspond to the
circumstances of the main liner routes.

a

the

not

provide

study of

(348) For the above reasons, the Commission does
not accept that the core theory is applicable to
shipping industry.
liner
the
Moreover, in addition to the fact that the core
theory
satisfactory
does
theoretical framework,
it should be observed
that the specialists of that theory are not able to
solutions. Dr Pirrong (100)
propose
states (cid:28)Other forms of
institutions may also
rectify empty core problems. These include
monopoly,
long term contracts and vertical
integration.’ As pointed out at recital (122),
some 60 % of TACA's business
is done
pursuant to service contracts fixed for periods
of up to two years.

specific

(349) Accordingly, a commercial strategy based on a
differentiation of service quality according to
client and on the conclusion of
individual
service contracts makes it possible to resolve
in the
(cid:28)inherent
any problem of
industry. Since these commercial strategies are
well-known to shipping lines,
it must be
concluded that the core theory, even if it were
applicable, provides no justification for cartels.

instability’

(350) Shipowners

on

rely

also

of
contestable markets in order to argue that the
existence of potential competition guarantees
services at competitive prices. The
efficient
sudden entry of ompetitors
threat of

theory

the

the

(98) Pp. 105 and 106.
(99) See in particular Gilman, Tarporley 1994.

(100) See footnote 93.

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to
subjects the lines present on the market
certain
The
applicability of this theory to liner shipping is,
however, disputed by many economists (101).

constraints

efficiency.

of

specialists and by shipowners themselves (102).
The observations of Dr Davies concerning entry
to and exit from the Europe-Canada trade also
support the idea of flexibility in redeployment
of ships rather than any real contestability of
the market

(351)

is that

In addition to the existence of significant sunk
costs which limit profitable entry to the market,
it should be observed that a condition of the
applicability of the theory of the contestable
there should be no entry or
market
withdrawal, the threat of potential competition
being sufficient. According to the contestability
theory, it is only if potential competition does
not exert any real competitive pressure that
high prices or supply-side inefficiencies may
arise and attract new entrants hoping to profit
from these inefficiencies.

(352)

Jankowski has pointed out that a large number
of instances of entry and exit from the market,
most of which are unprofitable and result in
failure, suggest a lack of contestability of the
market. In his 1986 study Dr Davies argued
that liner trade between Europe and Canada
was contestable precisely because of the number
of entries observed; he did not, however,
investigate the profitability of these movements.
The conclusions of Dr Davies concerning the
contestability of
therefore
questionable.

the market are

(353)

It should be added that most if not all of the
instances of entry and withdrawal observed by
Dr Davies concerned the redeployment of ships
by lines present on neighbouring trades. No
analysis of these redeployments was done in
order to determine whether these were in fact
hit and run entries.

the

influence

(cid:28)All the above analyses of entry and exit
have been made on the basis of services
creation or extinction, not of companies.
The movement of vessels by a firm from one
trade to another must give rise to the exit
and entry of a service – something which in
itself will
competitive
environment in each trade – but it may not
alter the number of companies involved in
the wider market environment
(Table 4)
shows the turnover of companies supplying
the liner services on Canadian trades, but
again the same problems arise: a company
that is new to Canada may not be new to
the rest of the world, and an exit from
Canada may imply not a death but a
movement to a non-Canadian route. Indeed,
of the 49 exits listed in Table 4, only six
were caused by the complete bankruptcy of
the company involved: the remainder were
brought about by a service movement or, in
the case of the further six by take-over or
merger
(Abbott et al, 1984). Similarly,
almost all the 60 firms which were new to
the Canadian trades over the period were
not newly established but existing foreign
that were redeploying their
corporations
tonnage,
to
presumably
perceived profit opportunities’ (103).

response

in

(355) Professor Gilman has also criticised the idea of
contestability
inherent
the
instability on the main world routes in the
following terms (Tarporley, February 1994):

idea

and

of

(354) The concept of mobility and flexibility in the
is accepted by most
ships

positioning of

(101) See for example Jankowski,

(cid:28)Notes and Comments:
Competition, Contestability and the Liner Shipping
Industry’, Journal of transport economics and policy,
May 1989, or from the same author (cid:28)The Development
of Liner Shipping Conferences’, International journal of
transport economics, October 1989, and Professor S.
Gilman, Tarporley, February 1994.

(cid:28)However, one does not actually need
empirical evidence relating to losses
in
individual cases to criticize the idea of low

(102) See,

inter alia, Federal Trade Commission Report,
November 1989, p. 20;
Jansson and Schneerson,
Chapter 10.2; and the article Sea-Land’s Computer
War’s, Containerisation international, August 1995.

(103) See footnote 94.

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two.

sunk costs. The basic argument comes down
to a question of industry structure as this
control relationships between markets. The
mainstream trades consist of
three large
markets, the Atlantic, the Pacific and the
Europe/Far East route. The availability of
capacity for entry, and the level of sunk
costs related to exit, from any one of these,
will clearly depend on conditions on the
the three routes were in
other
capacity
anything
equilibrium,
the
simply would not be available for
instant
the
of
incumbents in any one market. As ships
began to move out of the other two, rates
would go up, - the extent depending upon
demand elasticities – and the process would
quickly come to a stop. So even in the
complete absence of barriers to entry and
exit, the market could not be contested to
the extent of total replacement.

replacement

If
like

total

and

the

Very large scale entry via newbuildings
would also be quite impossible. To replace
all of the ships on the Europe Far East route
for example would cost in excess of USD 10
billion. And from the decision to build to
the full capacity coming on stream would
take up to five years on an optimistic view.
Ship prices would also escalate,
(which
would mean that the potential new entrants
could not obtain their ships at the price paid
by the incumbents) and the attempt to build
on this scale would set in train a major
disequilibrium in
shipping
industry.

the world

Concentration in global ownership of large
containerships also affect the possibility of
entry. The world fleet is dominated by some
twenty very large carriers, many of whom
operate on two, or even all three, of the
mainstream routes, so they basically count
as incumbents. The trend over the last two

decades has been towards concentration and
this is expected by many to continue during
the next ten years. New entry into this big
league is likely to be quite limited, and the
pool of potential new entrants is very small
indeed.

If one of

there would

Turning to exit, opportunities even for
limited re-deployment of vessels would
depend on market conditions in the sector
the three mainstream
targeted.
routes were over-tonnaged and the other
strong,
two were
be
opportunities
to re-deploy some vessels.
However,
if all routes were suffering the
effects of world recession then opportunities
would rather be limited. The point here is
that, to the extent that markets are affected
by a common set of influences, there will be
relatively easy exit (for a moderate number
of vessels) when market conditions are
strong, and much more difficult exit when
markets are weak. Thus relative ease of exit
is most likely to be available when it is least
likely to be of value. Very large scale
re-deployment would be impossible, and the
surplus capacity involved would have to go
into lay up.

It is clear from the above analysis that there
are a number of implicit assumptions about
the structure and performance of a set of
related markets, behind the idea of a single
market within the set in which the fixed
costs are not sunk. The first is that this
single market is small relative to the size of
the industry as a whole, the second that the
global set of markets is operating profitably,
and the third that the ownership structure is
enough to provide a pool of
diverse
potential new entrants. It is only in these
circumstances
to
replace that of
incumbents could quickly
and easily be found and could equally be
easily re-absorbed should the incumbents
retaliate. For individual liner markets, like
the mainstream sectors, which fare large
relative to global industry size, one can not
very easily envisage a low level of sunk costs

that capacity sufficient

L 95/64

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except for modest incursions. To come back
to current realities, incursions, of moderate
scale in a market in which there is no ease
of exit can result in ferocious competition,
capacity is a
transport
particularly as
perishable commodity.

in some

In other

cases output

Physical mobility of assets is directly related
to economic mobility
cases,
including that of the transport industries.
But it does not guarantee a low level of
is
sunk costs.
transportable, and the assets
can quite
happily stay in one place. A manufacturing
company in a single location, but with a
diversified strategy which enables it to cover
a range of world markets, might well be
able to switch its output (and therefore the
deployment of much of its fixed capital)
between markets, with ease, without moving
it an inch.’

(356) Even

of

the

this

analysis

contestability
understates the distinction between the mobility
of vessels and the contestability of markets.
This is because maritime companies offering
transport services need to make
multimodal
as
on-shore
management and marketing. Such assets are
considerably less mobile than vessels, if at all.
In any event the sunk costs of relocating or
terminating management
and marketing
functions can be considerable.

investments

areas

such

in

to the

(357) The economic analysis of liner transport is thus
a complex area of study. The present discussion
leads
conclusion that arrangements
between shipping lines on rates (conferences) or
capacity (consortia), or in cartels which are
even more
in
particular those which combine rate fixing with
capacity management, cannot be analysed solely
and simplistically on the basis of
the core
theory or the contestable market theory.

competition,

restrictive

of

TAA decision includes an annex in which
Professor Yarrow summarises
the different
concepts of
(cid:28)destructive competition’ which
appear in the instability theories (Annex 16 to
reply). Professor Yarrow distinguishes
the
between two types of destructive competition:
type A, which can exist
in industries with
certain characteristics, including marginal costs
well below average costs, excess or unused
capacity, and the presence of sunk costs; and
type B, which can exist in a situation where
there is no competitive equilibrium, such as that
described by the core or contestable market
theories.

required for

(359) The foregoing discussion has shown that the
conditions
type B destructive
competition are not met, inter alia, because of
the presence of sunk costs and the absence of
profitable hit and run entries. As for type A
Professor Yarrow
destructive
require particular
accepts
measures as regards the application of the rules
of competition, in part because:

it does not

competition,

that

(cid:28)Most
economists with a specialism in
competition policy, myself included, would
not, however, regard such an outcome as
itself a sufficient argument for exemption of
price agreements from the general provisions
of competition law. A central reason for this
is that, while firms may suffer protracted
accounting losses, customers benefit
from
low prices. Moreover, given that fixed costs
are sunk, consumers benefit more than firms
suffer: it is economically efficient for prices
to
in
average
circumstances of excess capacity.’

lower

costs

than

be

B. The question of destructive competition

(358) Economic evidence submitted by the former
TAA parties in the application to annul the

inherent

competition’

(360) Consequently, it is impossible to distinguish that
situation of
from
(cid:28)destructive
normal competition. Furthermore, the theories
of
certain
characteristics which run counter to them. For
example, the possibility of redeploying ships on
the main world routes as described by Professor
Gilman above allows supply to adapt itself to
considerable fluctuations in demand in order to

instability

disregard

9.4.1999

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avoid prolonged over-capacity and find a
balance between supply and demand. Dr
Reitzes summed up the situation in the 1989
Federal Trade Commission report as follows:

services more rigid, the interests of users, the
efficiency of services and the stability of rates
are endangered. E. Benathan and A. Walters
stated the following conclusion in their first
shipping
study on cooperation in the liner
industry:

a

at

that

level

sufficient

shipping markets

(cid:28)Ocean liner markets fail to exhibit the high
market-specific sunk costs (as opposed to
firm-specific sunk investments) that are a
key condition for destructive competition
(there is also little evidence in support of the
proposition
are
unsustainable natural monopolies vulnerable
to inefficient small scale entry). None of the
empirical studies of this industry have been
performed
of
sophistication to generate useful
insights
into this issue. For an illustration of how
this issue might be approached (see Evans
and Heckman (1984)). Ships are mobile
assets that, in some circumstances, may be
transferred from less profitable to more
profitable geographic markets in response to
fluctuations in demand. The FMC report
in certain regional
notes
markets can easily alter
their port call
patterns in response to changing market
165).
conditions
Furthermore,
can
negotiate long term contracts to minimize
the risks associated with uncertain demand
and supply conditions (while the theory of
the core stresses avoidable costs rather than
sunk costs, the difference does not appear
important in this case). Because ships are
term
mobile
contracting is available, ocean carriers have
latitude in deciding where and whether to
operate their ships. That latitude suggests
that carriers will operate their ships on
routes least burdened by excess capacity,
making destructive competition unlikely.’

carriers and shippers

(FMC Report,

and because

carriers

assets,

page

long

that

a

allows

(cid:28)Pooling,
shipping
as practised in the
industry for example, is generally regarded,
however, as the most anti-competitive form
findings are
of cartel organisation. Our
consistent with this view in so far as
competitive pricing is concerned. Since it is
more flexible than quotas regimes, revenue
stability to
pooling should give greater
and more
cartels.
fuller
It
continuous
profit
exploitation
opportunities by the cartel as a whole.
Hence it may avoid the disruptive crises of
the more rigid quota system. If, on the other
hand, a cartel is to be permitted (as in the
case of shipping cartels in most maritime
countries) then pooling does permit a better
allocation of
It
allows the expansion of efficient low-cost
firms
the
contraction of the inefficient ones. It should,
therefore, be
to technical
progress in the liner trade than simple quota
systems’ (104).

traffic within the cartel.

cartel, and promotes

inimical

in the

less

of

in particular

(362) Consequently, where the adaptation of supply
of services and rates to demand is prevented by
cartel agreements,
stabilisation
agreements involving a freeze on capacity use
and the imposition of artificial rate discipline,
the stability and efficiency of services, and thus
the interests of users, are endangered. In such
circumstances
the offer of capacity to the
market may be reduced artificially by a partial
freeze of capacity use which may lead to large
rate increases or at least to the maintenance of

(104) Revenue pooling and cartel, p. 173. See also The
economics of ocean freight rates, Bennathan&Walters,
1969, Praeger.

(361) The achievement of a balance between supply
and demand through the operation of
the
market ensures that the interests of transport
in the
users will be
determination
in
service
If however, cartel
maintaining rate stability.
transport
agreements make

taken into account
of

supply of

levels

and

the

L 95/66

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9.4.1999

an artificial rate level which does not encourage
the elimination of less efficient services and any
is to say, capacity in
excess capacities (that
excess of
reserve which is
necessary in order to provide a service which
corresponds to users’ needs).

reasonable

a

(363)

to

relation

(cid:28)stabilisation

In
agreements’
including a freeze on the use of part of capacity,
the 1991 Drewry report made the following
remarks (page 69):

synonymous with

(cid:28)Sub-optimal utilisation need not, of itself,
be
low profitability
provided that rates are kept are reasonable
levels and costs are contained. Indeed the
structural inevitability of over-tonnaging in
an open, competitive trade will almost
certainly produce a (cid:28)demand gap ratio’ of
between 15 % and 35 %. Clearly,
an
acceptable level of profitability is more
likely if that gap is nearer 15 % than 35 %
but, given some form of trade organisation
(whether it be a conference or a stabilisation
agreement) to regulate capacity and/or rates,
the market can be manipulated at any
reasonable level of demand gap ratio.’

are

example, as

advantage – for
travellers
patronize airlines with the most flights and
seats available at the last moment, or as
industrial buyers favour suppliers who were
their demands in unusually
able to meet
tight grey markets. Second, when cartel sales
quotas
allocated in proportion to
capacity, as they were under the US crude
oil prorationing system until
early
1970s, investment in excess capacity to get a
higher quota is encouraged. Third, excess
capacity may be carried to strengthen the
credibility of a monopolistic group's entry
deterrent. And fourth, monopolistic pricing
cushions the survival of capacity in secularly
declining industries.

the

is

that

reason

believe

the
to
There
relationship between monopoly power and
certain of
these propensities is nonlinear.
Thus, ocean shipping cartels that perfected
their monopoly through controls over entry,
investment, and scheduling were less prone
toward
or
overtonnaging than the looser open cartels
serving US routes.’

capacity

excess

costly

(364) The main risk in restrictive cartel agreements is
that competition between transporters will be
limited to competition on service quality. The
lines present on the trade will then be drawn
into a race to operate more and more ships of
larger and larger capacity (the Averch-Johnson
effect). The problem of monopoly-induced
waste is considered in Scherer and Ross (105):

(365) As an illustration of this phenomenon, the 1991
Drewry report described in the
following
manner the history of the trans-Atlantic trade in
the 1980s (page 120):

tacit oligopolistic
(cid:28)Price-fixing agreements,
collusion, and monopoly pricing can also
the wasteful accumulation of
stimulate
excess
four main
mechanism.

capacity. There

are

First,
capacity
ample
provides another kind of non-price rivalry

offering

reserve

(105) Sherer and Ross,

structure and
economic perfomance, 1990, Houghton Mifflin, p. 674.

Industrial market

(cid:28)All
the conference lines operate on a
seven-day schedule in all of their various
services, and this frequency is matched by
leaving only
all the leading independents,
some of the smaller operators with lower
quality schedules. In 1987 exactly half of
the 46 separate services were operated at
seven-day intervals, so there has been a
major advance in the quality of service
generally being provided. This suggests it is
becoming
less
increasingly difficult
frequent services to secure acceptance in the
market.’

for

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(366) Such an increase in capacity, which is logically
accompanied by a decline in rates, cannot
continue without an increase in rates to make
up for the increase in production costs. Supply
moves further and further away from the point
of equilibrium and users pay for this race
towards service quality through rates which are
higher than they wish. The cycle continues until
the point where market
cannot be
resisted. A return to commercial reality on the
trade then causes an abrupt adjustment in rates
which may cause carriers to leave the market
and affect the supply of capacity. That cycle is
clearly a source of instability for the market. It
is not however, a problem of inherent instability
or empty core, but simply the consequence of
the disturbance of normal market conditions as
a result of the misuse of the market power held
by the shipping lines’ cartel (106).

forces

(367) Furthermore,

forward in
the solutions put
Regulation (EEC) No 4056/86 to bring about
the stability recognised by that Regulation, that
is to say rate stability, are not and were never
intended to deal with any problems brought
about by liner shipping operators as a result of
uneconomic investment decisions.

C. Inland price-fixing in Europe

(368) The TACA parties argued in their application
for exemption that (cid:28)The ability of the lines to
agree through intermodal rates contributes to
the stabilising effect of the Agreement since the
ocean and inland legs are
complementary
services and agreement on the ocean leg alone is
incapable of having a sufficient
stabilising
effect’.

(369)

In the absence of instability and of any threat of
destructive competition, there is clearly no need
to extend price-fixing practices. In particular, no
economic
extension of
theory justified the
maritime price-fixing to inland price-fixing.

(106) See also Jansson and Schneerson in Liner shipping

economics, Chapter 10.2 and Annex A.

(370) The foregoing discussion of the inapplicability
of the core and contestability theories to liner
shipping tends to show the unlikelihood of any
destabilisation
by
of maritime
competition on inclusive multimodal tariffs. The
risk of destabilising conference
for
maritime
transport as a result of normal
competition with respect to inland haulage is
fully described in recitals (131) to (137) of the
FEFC decision.

tariffs

tariffs

(371) Moreover,

this

theoretical destabilisation by
means of underpricing of inland transport is
unlikely in Europe. Advocates of
the thesis
often take as their example the decline in
multimodal rates between Europe and the US in
1983. However, a slide in door-to-door rates
tariffs
compared
demands
any
conclusion can be drawn.

conference maritime

to
careful

examination

before

(372) First, a mere comparison of rates charged by
some independent lines with tariffs fixed by a
conference cannot replace a proper analysis of
the market conditions at that time. One can
argue that the conference rates may have been
fixed at such high levels that they were of very
little significance and were not even adhered to
by the conference members. The price slide
would then reflect a return to normal market
conditions rather than inherent instability.

the

(373) Moreover, one can argue that this period saw
the
entry of new competitors who, by
rates, were
undercutting,
conference
building up market share to break into the
market (US Line entered the Atlantic market in
1982). Therefore, the duration and the extent of
the price cutting (not its depth) need to be
considered. Certain cyclical
in
demand coupled with the operation of excess
capacities can also explain a sharp but brief
decline in independent
rates. A number of
possible normal market conditions and specific
carrier strategies could explain a decline in
compared to conference
independent
tariffs without providing any evidence
to
support the inherent instability thesis.

fluctuations

rates

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(374) Secondly, 1978 to 1984 was a period of great
change for the shipping industry in the US, with
the deregulation of the US rail sector from the
end of the 1970s to 1981, followed by the
development of the rail transport of containers.
The 1991 Drewry
sums up that
development in the following terms (page 68):

report

than

west/east

dramatic
coast
the
possibilities in North America, there is less
scope for competition on inland haulage
rates and so there is less likelihood of an
independent carrier offering a materially
different transport rate. By keeping inland
from the
transport additionals
ocean freight
rate
there
transparency than there is in the US trade
environment where through rates obscure
costs and thus do not act as a barrier to
erosion in quite the same way.’ (page 95)

separate
is

far more

The

mind

traffic.

(cid:28)The advent of double-stack train services in
North America in 1984 radically shifted the
emphasis from vessel capacity to rail-car
capacity for a major portion of world
container
and
micro-bridge concepts were well established
in the USA before the intervention of
double-stack technology, with APL,
for
instance, having abandoned its all-water
Asia to East Coast North America service as
the quantum leap in
early as 1978, but
efficiency and service which double stack
trains introduced to the container market
totally transformed the economics of
the
intermodal and all-water alternatives. No
other land-side development has occurred in
the
so
last
has
fundamentally
relationship
between slot supply and cargo volume for a
large part of the world container traffic,
in
although increasing transhipment has
itself generated a requirement for additional
ship space to move the same cargo volume.
At the same time, though, such moves to
transhipment services usually result in the
more intensive utilisation of the deep sea
vessels,
can
two factors
reasonably be treated as self-cancelling.’

years which

and so the

altered

ten

the

(375) However,

Europe,
institutional
report says:

the situation is very different
for

in
geographical
and
the 1991 Drewry

historical,
reasons. As

(cid:28)In Europe normal conference practice for
intermodal
traffic is to apply zone rates
(from a fixed inland haulage tariff) to the
port to port freight. Historically such rates
just below full cost
have been set at
recovery
for
customers to opt for carrier haulage, while
minimising
port
options within Europe tend to be much less

subsidy. Because

incentive

provide

any

an

to

the

and

general

European

institutional

Europe, while

for
particularly

(cid:28)There has been much speculation about the
landbridge
possibilities
volume
operations,
movement of North European cargo via
Mediterranean gateway ports, but there are
considerable
physical
barriers to any such developments, despite
the French strategy to create a high speed
rail network which could facilitate this
process. The Alps are a distincly unhelpful
obstacle to volume north-south rail moves
in
European
geography and demographics prevent US
double stack economics from playing any
role. Mediterranean
– most
particularly those in Italy – have also had an
unfortunate history and acquired a relatively
poor
reputation. Most
seriously of all, though, the fragmented and
nationalistic control of Europe's railways
makes
in
integrating disparate and individual systems
into a coherent whole on anything like the
scale which would be needed if
large
volumes of Europe-Far East containers were
to find themselves routes in this way’ (page
162) (107).

international

considerable

difficulties

ports

for

(376) The different characteristics of

the railway
industry and geography in Europe and the US
land
thus indicate that any development of

(107) See also Europe's great divide, American shipper,

December 1995.

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Official Journal of the European Communities

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transport of containers in Europe comparable to
that in the US is improbable.

(377) For all these reasons, the sudden repetition of a
in relation to
slump in multimodal
rates
conference maritime tariffs,
to that
similar
which occurred in 1983 (during which rates
remained well above the level of marginal
variable costs), is not credible.

restriction of

(380) These agreements have as their object or effect
the
competition within the
common market. In particular, they allow the
members of the TACA to restrict competition
between themselves with regard to tariffs,
freight rates and general transport conditions.
Such agreements fall within the scope of Article
85(1) of the EC Treaty and Article 53(1) of the
EEA Agreement generally and,
in particular
within Article 85(1)(a) and Article 53(1)(a).

LEGAL ASSESSMENT

XV. PRELIMINARY ASSESSMENT UNDER
ARTICLE 85(1)

A. Restriction, prevention or distortion of

competition

(381) There is no need to wait to observe the concrete
effects of an agreement once it appears that it
has as its object the prevention restriction or
distortion of competition (109). It is not disputed
by the TACA parties that the four agreements
identified
restrict
competition between them within the common
market.

intended

above

are

to

(378) The parties to the TACA are liner shipping
companies which are undertakings within the
meaning of Article 85(1) of the EC Treaty and
Article 53(1) of the EEA Agreement (108).

(382)

(379) The TACA comprises the following elements
which have the object or effect of preventing,
restricting or distorting competition within the
meaning of Article 85(1) of the EC Treaty and
Article 53(1) of the EEA Agreement:

(a) the price agreement between the parties to
the TACA relating to maritime transport;

appreciability

the restriction of competition
In this case,
between the parties to the TACA is likely to be
appreciable because of the very large number of
containers involved and the large market shares
of the TACA parties (see recital (85) and (86)).
the
of
The
restrictions of
competition intended to be
brought about by the price-fixing agreement for
carrier haulage services is indicated by the fact
that in 1995 the TACA parties also provided
carrier haulage services within the territory of
the Community for some 48 % of the cargo
they carried between Northern Europe and the
United States.

effect

the

of

(b) the price agreement between the parties to
the TACA relating to inland transport
services supplied within the territory of the
Community to shippers in combination with
services as part of a multimodal
other
carriage of
transport operation for
containerised
haulage
services’) between Northern Europe and the
United States of America;

the
((cid:28)carrier

cargo

(c) the agreement between the parties to the
TACA as to the terms and conditions on
and under which they may enter into service
contracts with shippers; and

(d) the agreement between the parties to the
TACA relating to the fixing of maximum
levels of freight forwarder compensation.

(108) In accordance with Article 56 of the EEA Agreement,
the Commission is the competent body in this case.

(383) The appreciability of the effect on competition
must also be considered in the light of the fact
that
the TACA parties are between them
members of some forty further liner shipping
conferences serving ports in the Community,
which also fix prices for maritime transport and
including the Far
carrier haulage
Southern
Eastern

Freight Conference,

services,

the

(109) Judgment of the Court of Justice in Joined Cases 56 and
58/64 Consten and Grundig v. Commission [1966] ECR
299, at p. 342. Commission Decision 84/405/EEC
(IV/30.350, Zinc
Producer Group) OJ L 220,
17.8.1984, p. 27 recital (71): (cid:28)In any case, for Article
85(1) to be applicable, it is sufficient for there to have
been the intention to restrict competition;
is not
necessary for the intention to have been carried out, in
full or only in part, that is to say, for the restriction of
competition to have been put into effect.’

it

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9.4.1999

America

Conference (110),
Conference,

the
Europe
Europe/Australia
the
Mediterranean-Canadian East Conference and
the Continental Canadian Westbound Freight
and Canadian North Atlantic
Conference
Westbound Freight Conference.

(387)

(384)

It is unclear at this stage whether and, if so, to
what extent the (cid:28)European Inland Equipment
Interchange Agreement’, affects competition to
any appreciable degree. The applicability of
Article 85(1) of the EC Treaty and Article 53(1)
of the EEA Agreement to the European inland
equipment interchange Agreement is therefore
not addressed in this Decision.

be taken into account in assessing the effect of
the restrictive arrangements on trade between
Member States (112).

the

In considering whether
restrictions of
competition identified at paragraph 379 are
capable of effecting trade between Member
States, it must be emphasised that the relevant
markets which are directly affected relate to the
provision of transport and intermediary services
to third
the
and not
countries (113).

export of

goods

(385) The

appropriate

4056/86. The

appropriate procedural

regulation for
dealing with agreements which fall within the
scope of Article 85(1) and which concern
maritime transport services is Regulation (EEC)
No
procedural
regulation for dealing with agreements which
fall within the scope of Article 85(1) and which
concern inland transport services is Regulation
(EEC) No 1017/68. Where an agreement
concerns both maritime transport and inland
it must be dealt under both
transport,
regulations.
procedural
regulation for dealing with agreements which
fall within the scope of Article 85(1) and which
do not concern transport services is Regulation
No 17.

appropriate

The

B. Effect on trade between Member States –

Article 85

(386)

the test of effect on trade between Member
States is met whenever it is possible to foresee
with a sufficient degree of probability, on the
basis of a set of objective factors of law or fact,
that
the agreement or concerted practice in
question is capable of having an influence,
direct or indirect, actual or potential, on the
pattern of trade in goods or services between
Member States (111). Accordingly, it is sufficient
to show that the conduct in question is capable
of having such an effect. Since a potential effect
is sufficient, future development of trade may

(388) The Commission considers that the agreements
between the parties to the TACA to fix prices
for maritime transport and carrier haulage
services, to impose conditions on the parties`
freedom to enter into service contracts and to
forwarder
fix maximum levels of
compensation
appreciably
affecting and are likely appreciably to have
affected trade between Member States in the
following ways.

freight
of

capable

are

(389) The TACA involves shipping lines operating in
several Member States and restricts competition
between such lines in respect of the price at
which each of them offers transport services,
some of which are carried out inland, some of
which are provided pursuant to the terms of a
contract, and some of which are
service
provided through a freight
forwarder. The
elimination or diminution of price competition
with respect to transport services between these
companies is likely to reduce significantly the
advantages which would accrue to the more
efficient or the more competitive of them.

(390) The

in

or

diminution

elimination

the number of

price
competition between the parties to the TACA
affects
transport operations
undertaken by each shipping line which would
be expected in the absence of the agreement.
This
between
shipowners operating in several Member States
consequently influences and alters trade flows

competition

restriction

of

(110) A number of the TACA parties (Sea-Land, Maersk and
P&O Nedlloyd) have recently left the Southern Europe
America Conference and formed the United States
Southern Europe Conference.

(111) See judgement in Consten and Grundig; footnote 109,

p. 341.

(112) See footnote 92; [1995] ECR II-289, paragraph 235.
(113) Judgment of the Court of First Instance of 8 October
1996 in Joined Cases T-24/93, T-25/93 and T-28/93,
CEWAL, Compagnie maritime belge transports SA and
Others v. Commission [1996] ECR II-1201, paragraph
205.

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in transport services within the Community
(that is to say across the internal frontiers of the
Community), which would be different in the
absence of the Agreement.

manufacturer's domestic market and the other
Community countries (115).

(391) Those

changes

in the normal pattern of
competitive behaviour by which more efficient
companies enjoy increases in market share may
also influence competition between ports in
different Member
artificially
increasing or decreasing the volume of cargo
which flows through them (114) and the market
shares of shipping lines operating out of those
ports.

States,

by

(395) The agreement as to the maximum level of
freight forwarder compensation (together with
the other restrictions on intermediaries) is likely
to affect trade between Member States in two
in affecting competition
main ways. First,
between the TACA parties themselves,
is
likely to affect the volume of goods which each
TACA party carries (or arranges to be carried)
across the internal frontiers of the Community.
Secondly, it is likely to distort the competitive
position of
located in
different Member States and affect the volume
of services they provide. This in turn may cause
deflections of
in the
Community.

trade between ports

forwarders

freight

it

(392) The effect on the supply of maritime transport
and carrier haulage services described in recitals
(386) to (391) is likely to have a consequential
effect on the supply of services related to the
and carrier
supply of maritime
transport
haulage services. Such services
include port
services and stevedoring services. The effect on
these services will principally be brought about
by the alteration in the flow of
transport
services between Member States.

transport

for maritime

(396) The Commission therefore considers that the
agreements of the parties to the TACA to fix
prices
services and
carrier haulage services, to impose conditions
on the TACA parties’ freedom to enter into
service contracts and to fix maximum levels of
freight forwarder compensation have an effect
on trade in goods and services between Member
States.

(393) The Commission thus

that

considers

the
agreement affects trade between Member States
transport and
in relation to the supply of
related services. This effect
likely to be
appreciable in view of the very large number of
containers involved. The value of the services in
question amounts to some ECU 2 billion.

is

contracts

(394) An agreement, such as the agreement of the
members of the TACA on prices for maritime
transport, inland transport, the terms on which
service
are offered and freight
forwarders are rewarded, which has an effect
on the cost of exporting to other countries
goods produced within the Community may
affect
the trade in those goods within the
Community. This effect arises from the fact that
manufactures seek alternative markets to which
the cost of transporting their goods is lower.
include both the
Such alternative markets

(114) See six recital of Regulation (EEC) No 4056/86
describing
practices
effects which
concerning international maritime transport may have
on Community ports. See footnote 113 CEWAL,
paragraph 202.

restrictive

the

XVI. ARTICLE 3 OF REGULATION (EEC) NO
4056/86: THE SCOPE OF THE GROUP
EXEMPTION

(397) Article 3 of Regulation (EEC) No 4056/86
grants exemption from the prohibition under
Article 85(1) of the Treaty to the members of a
liner conference in respect of
the fixing of
uniform or common freight rates and any other
agreed conditions with respect to the provision
of scheduled maritime transport services. It also
grants exemption to a limited number of other
activities if one or more of them is carried on
by the members of a liner conference in
addition to fixing prices and conditions of
carriage for maritime transport services. The

(115) Case 136/86, BNIC v. Aubert, Judgment of 3 December
1987, [1987] ECR 4789, paragraph 18. Similarly, the
Court ruled under Article 92 of the EC Treaty in Joined
Cases 67, 68 and 70/85 Kwekerij Gebroeders van der
Kooy BV and Others v. Commission (Dutch Natural
Gas Prices I, [1988] ECR 219, paragraphs 57, 58 and
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.

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reasons for which exemption is granted include
the benefits to shippers described in the recitals
to Regulation (EEC) No 4056/86 and in
particular the stabilising effect of conferences
which assures shippers reliable services:

granted by the regulation,
fact cannot
signify that every impairment of competition
brought about by shipping conferences
fall
outside the prohibition broadly laid down by
Article 85(1) of the Treaty (117).

this

the

reliable

efficient

adequate

generally

shippers
they

cooperation that

Whereas provision should be made for block
liner conferences; whereas
exemption of
liner conferences have a stabilising effect,
services;
of
assuring
to
whereas
contribute
providing
scheduled
maritime transport services and give fair
consideration to the
interests of users;
whereas such results cannot be obtained
without
shipping
companies promote within conferences in
relation to rates and, where appropriate,
availability of capacity or allocation of
cargo for shipment, and income; whereas in
most
to be
subject to effective competition from both
non-conference scheduled services and,
in
certain circumstances, from tramp services
and from other modes of transport; whereas
the mobility
a
the structure of
characteristic feature of
availability in the shipping field, subjects
conference to constant competition which
they are unable as a rule to eliminate as far
as a substantial proportion of the shipping
services in question is concerned.

fleets, which

conferences

continue

cases

of

is

(398) Activities which are not expressly referred to in
Article 3 are not exempted pursuant
to the
therein (116).
group
in
Moreover, whilst shipping conferences are,
certain
considered to bring about
general,
benefits and thereby justify the exemptions

exemption

contained

(116) See Judgments of the Court of Justice of 24 October
1995 in Case C-70/93, BMW v. ALD [1995] ECR
I-3439, at paragraph 28, and of Case C-266/93,
Bundeskartellamt v. Volkswagen and VAG, [1995] ECR
I-3477, at paragraph 33 (cid:28)…having regard to the general
principle prohibiting anticompetitive agreements laid
down in Article 85(1) of the Treaty, provisions in a
block exemption which derogate from that principle
cannot be interpreted widely and cannot be construed
in such a way as to extend the effects of the regulation
beyond what is necessary to protect the interests which
they are intended to safeguard.’

scope of

(399) Without prejudice to an examination as to
whether other aspects of the TACA fall outside
the
the
Commission
following
elements of the TACA are not covered by the
group exemption contained in Article 3 of
Regulation (EEC) No 4056/86:

group exemption,

the
considers

that

the

(a) the price agreement between the parties to
the TACA relating to inland transport
services supplied within the territory of the
Community to shippers in combination with
services as part of a multimodal
other
carriage of
transport operation for
containerised
haulage
services’) between Northern Europe and the
United States of America;

the
((cid:28)carrier

cargo

(b) the agreement between the parties to the
TACA as to the terms and conditions on
and under which they may enter into service
contracts with shippers;

(c) the agreement between the parties to the
TACA relating to the fixing of maximum
levels of
forwarder compensation;
and

freight

(d) (to the extent that it falls within the scope
of Article 85(1) of the Treaty, if at all) the
agreement between the parties to the TACA
in relation to the exchange of equipment.

XVII. INLAND PRICE FIXING AND EQUIPMENT
EXCHANGE

of

shippers

(400) For the reasons set out below, the Commission
is of the view that the price agreement between
the parties to the TACA relating to the supply
services
inland
to
undertaken within
the
of
the
Community in combination with other services
as part of a multimodal transport operation for
the carriage of containerised cargo between
Northern Europe and the United States of
America does not fall within the scope of the
group exemption contained in Article 3 of
Regulation (EEC) No 4056/86.

transport
territory

(117) See CEWAL, cited in footnote 113, paragraph 50.

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concerning

(401) The Commission has considered the question of
price-fixing
the
agreements
provision of carrier haulage services on a
number of occasions. It has presented a Report
to the Council concerning the Application of
the Community's Competition Rules
to
Maritime Transport (118), which dealt primarily
with this question, and it has adopted two
decisions
carrier
haulage services was discussed, and prohibited:
the TAA Decision and the FEFC Decision.

in which price-fixing for

(405)

cannot cover price-fixing in respect of carrier
haulage services (121).

it

relevant

In this context,
to note the
is
eleventh recital of Regulation (EEC) No
4056/86 and the fact that at the time of the
consultations
adoption of
Regulation (EEC) No 4056/86, the European
Parliament proposed the
the
following words
the draft
regulation proposed by the Commission:

to Article 3 of

addition of

to the

leading

(402) The grounds on which the TAA's rate-fixing
agreement for carrier haulage services did not
fall within the scope of Article 3 of Regulation
(EEC) No 4056/86 were set out at paragraphs
the TAA Decision. That
371 to 378 of
reasoning applies, mutatis mutandis,
to the
TACA rate fixing agreement for carrier haulage
services, the terms of which are identical to the
TAA rate fixing agreement for carrier haulage
services.

(cid:28)the aforesaid exemption shall also apply to
“intermodal
(i.e. maritime
transport including transport to and from
ports)’ (122).

transport”

(406) This proposed amendment was not adopted by
the Council, indicating that it was the intention
of the Council that price-fixing agreements for
inland transport services should not be covered
by the group exemption contained in Article 3
of Regulation (EEC) No 4056/86.

(403) Furthermore,

the Court

has
considered the scope of application of Council
Regulation (EEC) No 4055/86 (119)
in the
Spediporto case (120), ruling that

Justice

of

(cid:28)… Regulation (EEC) No 4055/86 does not
apply to the transportation by road of goods
unloaded from the vessel.’

(404) The Commission considers that the ruling of the
Court of Justice in Spediporto confirms the
Commission's view as previously stated in the
TAA and FEFC decisions, namely that the scope
of the group exemption cannot be wider than
the scope of the Regulation itself. If Regulation
(EEC) No 4056/86, like Regulation (EEC) No
4055/86, does not apply to the transportation
by road of goods unloaded from or loaded onto
vessels, then the scope of the group exemption

(118) SEC(94) 933 final, adopted by the Commission on 8

June 1994.

(119) OJ L 378, 31.12.1986, p. 1.
(120) Judgment of the Court of Justice in Case C-96/94,
Centro Servizi Spediporto v. Spedizoni Marittima del
Golfo [1995] ECR I-2883, paragraph 92.

(407)

is

the fact

important

It
that
to note that
price-fixing for carrier haulage services or for
multimodal services does not fall within the
scope of Article 3 of Regulation (EEC) No
4056/86 in no ways prevents the individual
TACA parties
offering
through rates for multimodal transport services,
since this involves no restriction of competition.

from individually

(408) The Commission accordingly considers that the
price agreement between the parties to the
TACA relating to the supply to shippers of
inland transport services undertaken within the
territory of
the Community in combination
with other services as part of a multimodal
transport
of
containerised cargo between northern Europe
and the United States of America does not fall
within the scope of the group exemption for
liner conferences contained in Article 3 of
Regulation (EEC) No 4056/86.

operation

carriage

the

for

(121) The Court of Justice did not accept the argument, made
by the United Kingdom as
the
effectiveness of Regulation (EEC) No 4055/86 would be
undermined if, given the prevalence of multimodalism
in international trade, the Regulation were held not to
apply at all to multimodal transport services.

intervener,

that

(122) See the European Parliament's amendments

to the
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 255, 3.10.1986, p.
176.

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XVIII. THE POSSIBILITY OF INDIVIDUAL
EXEMPTION

A. Inland price fixing

evidence been furnished by the members of the
TACA that price-fixing for carrier haulage
contributes to furthering technical or economic
progress, either
inland
in the provision of
transport
multimodal transport services.

in the provision of

services or

(409)

examined

the Commission

In both the TAA Decision and the FEFC
Decision,
the
question whether price-fixing in respect of the
inland segment of a multimodal
transport
operation fulfilled the conditions of Article
85(3) (as also set out in Article 5 of Regulation
(EEC) No 1017/68).
the
Commission concluded that such agreements
did not fulfil the conditions necessary for the
grant of
individual exemption. The TACA
provisions relating to price-fixing for carrier
haulage services are identical to those contained
in the TAA and substantially the same as to
those practised by the FEFC.

In both cases,

(410) There is no evidence that the charging of a
collectively agreed price for the provision of the
contributes
carrier
to
services
haulage
improving the quality of
inland transport
services. Further, although the price for carrier
haulage is established within the forum of the
TACA, the individual members negotiate with
inland
basis.
Improvements in the quality of the service to
respond to demand from shippers are not
brought about by the price-fixing activities but
by negotiations between individual shippers and
individual lines.

individual

carriers

on

an

(411) No evidence has been supplied by the members
of the TACA that the market in which carrier
haulage services are supplied is a market where
supply and demand are subject to considerable
temporal
in
question could be so categorised,
it has not
been shown that the collective fixing of rates
for inland transport by members of the TACA
would contribute to continuity and stability in
that market.

fluctuation. Even if

the market

(412) No evidence has been supplied by the members
of
the TACA that price-fixing for carrier
haulage has led or is likely to lead to increases
in productivity on the part of the undertakings
concerned in relation either to the provision of
inland transport services or to the provision of
transport services. Nor has any
multimodal

services

they sell

(413) So far as the actual providers of the inland
transport services are concerned, price-fixing by
the TACA has no direct bearing on the service
they provide or the way in which they are
provided since
to
their
members of
the TACA at prevailing market
rates and not at the price set by the conference.
the TACA are
So far as
concerned, they are not, on the whole, engaged
in
the
price-fixing agreement as to carrier haulage
does not therefore directly affect any service
themselves.
which
Price-fixing for carrier haulage services does not
therefore contribute to increasing productivity
or promoting technical or economic progress in
respect of such services.

the members of

themselves

actually

haulage

provide

inland

they

and

the opinion that
take fair account of
in so far as

the
(414) The Commission is of
the
TACA does not
interests of users
it concerns
price-fixing for inland haulage. Agreement by
the members of the TACA on the price for
carrier haulage services, without more, does not
take adequate account of
the interests of
shippers and other transport users. It simply
serves to ensure that prices are maintained at
levels higher than they would otherwise be.
This is directly contrary to the interests of users.

(415)

In the FEFC Decision, the Commission stated at
paragraph 141 that:

services,

transport

constitute

furthermore,

the development of multimodal
(cid:28)while
a means of
transport may
improving
collective
price-fixing for carrier haulage services does
transport users do not
not
obtain a fair
the benefits of
share of
price-fixing for carrier haulage services and
the
competition are not
indispensable. Accordingly, the conditions of
Article 85(3) and of Article 5 of Regulation
(EEC) No 1017/68 are not fulfilled.’

restrictions of

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(416) The

that

reasons

for which

the Commission
considers
is not
inland rate
indispensable for the preservation of maritime
rate stability brought about by liner conferences
was set out in recitals (127) to (137) of the
FEFC Decision,
the contents of which are
summarised below:

fixing

put forward by the TACA parties are set out in
recitals (329) to (377). The reasons given by the
Commission in the FEFC Decision for rejecting
the argument
carrier
haulage services is essential for the preservation
of the stability brought about by conference
price-fixing for maritime transport services are
equally applicable to the TACA.

that price-fixing for

(a) In the Commission's view, a conference
brings stability to the trades is affects by
fixing a uniform tariff which serves as a
reference point for the market. Prices set in
the way are likely to remain unchanged for
a longer period of time than if they are set
by individual
lines. This reduction in the
price fluctuations which would be expected
in a normally competitive market may
benefit shippers by reducing uncertainty as
to future trading conditions.

(418)

intermodal

cargoes’ because

In this context, it is relevant to note that there
is (cid:28)no agreement between Canadian Conference
lines when they operate via the Canadian
Gateway as to freight rates charged in respect
of US
(cid:28)Any
agreement on freight rates for US intermodal
cargoes between Canadian gateway operators
US
would
antitrust
immunity’ (123). An agreement
to fix inland
therefore demonstrably not
is
price prices
indispensable for the provision of multimodal
services
the Canadian
Gateway.

operating

through

attract

not

...

the

indispensable for

(b) It has not been shown that price-fixing for
the
carrier haulage is
(cid:28)stabilising role’ of
preservation of
conferences. In particular,
it has not been
shown that price-fixing for carrier haulage is
rate
essential
discipline on the maritime leg from which
the stability in question arises and that there
is no less restrictive way of doing so.

to preserve

in order

the

to

or

cheating

such as

susceptible

(c) In this context, it must be remembered that
the FEFC are no
conferences
exception to the general rule that all cartels
are
secret
discounting at times when members of the
cartel have spare capacity. Thus,
it is not
necessary to have absolute discipline in
order to maintain the stability which the
conference system brings about, that is say,
reliable services at prices which do not
In
fluctuate greatly in the short
particular, competitive discounting does not
upset the stability envisaged by Regulation
(EEC) No 4056/86, since it has not been
shown that it leads to the absence of reliable
services or of stable prices over a period of
time.

term.

(419) Furthermore, reference should also be made to
the Commission's Report
to the Council
concerning the application of the competition
rules to maritime transport (see paragraph 401),
which, whilst recognising the possible risk of
fixing
the
destabilising the maritime part of the services
provided by conferences, also contained the
following statement:

prohibition

inland

price

of

that

(cid:28)The mere fact
the shipowners are
offering door-to-door services, or the fact
that the shipowners wish to fix prices for
door-to-door
price
cutting on the land parts of the journey, are
not
justify
exemption (of multimodal price-fixing).’

themselves

services

prevent

enough

to

to

in

(420) As was pointed out in the Report, members of
liner
the
conferences generally sub-contract
inland part of multimodal transport operations
to inland hauliers. Individual lines make inland
transport arrangements on behalf of shippers

(417) The reasons for which the Commission does not
accept the definition of the notion of stability

(123) See reply to the statement of objections, paragraph (11).

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conference

without
involvement, with the
exception of pricing which is based on the
conference's inland transport tariff.

B. (cid:28)The European inland equipment interchange

arrangement’

sea

relation

(421) The role of conferences in relation to inland
transport is accordingly different from their role
transport. Whereas
to
in
in
conferences
the
do
organisation of
services
provided by their members, they play no role in
the organisation of the inland transport services
provided by their members:
they merely set
inland transport prices.

role
sea transport

perform a
the

(422) The Commission's Report

improve the quality of

to the Council
emphasised that multimodal price-fixing did not
in itself
the services
provided nor did it bring about any reduction
in costs.
Individual exemption can therefore
only be justified where cooperation between
shipping lines lead to improvements in services
and cost reductions. Further, the price-fixing
has to be indispensable to the achievement of
these aims.

(423) The Commission's analysis set out above as to
the applicability of Article 85(3) of
the EC
Treaty and Article 5 of Regulation (EEC) No
1017/68 to price agreements for carrier haulage
services is equally applicable to the question of
the applicability of Article 53(3) of the EEA
Agreement.

(424) For

the

above

the Commission
reasons,
considers that the price agreement between the
parties to the TACA relating to inland transport
the
services supplied within the territory of
Community to shippers in combination with
other services as part of a multimodal transport
operation for
the carriage of containerised
cargo between northern Europe and the United
States of America does not
lead to an
improvement in the quality of those transport
services, does not allow shippers a fair share of
the resulting benefits, and contains restrictions
indispensable.
of competition which are not
Accordingly, the conditions of Article 85(3) of
the EC Treaty and Article 5 of Regulation
(EEC) No 1017/68 and of Article 53(3) of the
EEA Agreement do not appear to be fulfilled.

(425) The TACA parties have argued that

the
European
interchange
arrangement (described above in recitals (36) to
(46)).

equipment

inland

also

qualifies

exemption,

(cid:28)to the extent it may not be covered by the
block
for
individual exemption under Article 85(3)
and, furthermore, justifies exemption being
granted to European Intermodal Authority
(that
is price-fixing for carrier haulage
services) under Article 85(3).’

(426) As was stated above, it is unclear at this stage
whether and, if so, to what extent the European
inland equipment interchange agreement affects
competition to any appreciable degree. The
applicability of Article 85(3) of the EC Treaty
and Article 53(3) of the EEA Agreement to the
European
Interchange
Agreement is therefore not addressed in this
Decision.

Equipment

Inland

concerning

(427) This Decision does, however, address the second
of the two claims put forward by the TACA
parties
Inland
the
Equipment Interchange Agreement: the question
whether
individual
exemption being granted to be TACA parties`
agreement
for carrier haulage
services.

to fix prices

European

justifies

EIEIA

the

(428) The TACA parties have argued that

the
agreement on multimodal rates is an integral
and necessary part of the (cid:28)framework’ in which
the inland cooperation is undertaken by all the
TACA parties. The cooperation by all seventeen
members of the TACA to promote and facilitate
empty container
such
interchanges
to take place on a scale not
otherwise feasible. Because of the number of
carriers involved, there is a greater possibility
and incentive for interchanges to take place:
there is greater opportunity over a wider
geographic range and a better chance for a (cid:28)fit’
or match between carriers with a deficit and
those with a surplus at a particular location.

interchanges

enables

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(429) The Commission

not

consider

the
does
introduction of a limited form of information
exchange on the location of empty containers
causes its analysis as to the exemptability of
price-fixing for carrier haulage services to be
revised. The arrangement provides only for
exchange of
information on the position of
empty containers and involves no duty on the
part of any company to make an empty
container available to any other company. In
itself, it makes no direct contribution to saving
money or to reducing the number of movements
of empty containers and the parties have not
facilitate
shown the extent
consequential bilateral exchanges of containers.

to which it will

(430)

In particular, the Commission does not consider
that price-fixing for carrier haulage services is
indispensable for or indeed contributes to any
benefits provided by the European inland
arrangement.
equipment
interchange
the Commission
Consequently,
not
consider that
these arrangements justify the
exemption of such price-fixing (124).

does

(431) There is no reason to believe that

inland
price-fixing is in any way related to the new
system of exchanging containers. It follows that
inland price-fixing is not indispensable for the
notified arrangements, the purpose of which is
to exchange information on the position of
empty containers. In particular, the absence of
any connection between the European inland
equipment interchange arrangement and inland
price-fixing is demonstrated by the fact that the
parties either agree bilaterally as to the charges
for the exchange of the equipment or apply the
TACA-agreed per diem rates (see paragraph
(43)). In any event, any line wishing to reduce
costs
environmental harm has
sufficient
incentive to participate in such an
arrangement.

and limit

even though it only consists in exchanging
information. Unlike concrete proposals for joint
facilities, no one can judge whether the new
system will have any significant impact. There
is nothing to ensure that lines will make use of
the information or that, if they try to do so, the
other
line will make the empty container
available.

(433) The only argument put forward by the parties
as to indispensability is that (cid:28)the agreement on
multimodal rates is an integral and necessary
part of
the “framework” in which the
cooperation is undertaken by all the applicants’.
entirely
argument which
This
unsubstantiated. The parties have made no
attempt
joint price-fixing is
indispensable to the European inland equipment
interchange Arrangement or to any benefits
which may flow from that arrangements.

to show that

an

is

is

(434) These views as to the nature of the new system
are largely confirmed by comments of Olav K
Rakkenes, Chairman of TACA and ACL
reported in the October 1995 edition of the
American Shipper:

(cid:28)It’s up to each individual line’.

(435)

It
is also worth noting the comments of
G(cid:252)nther Casjens, executive board members of
Hapag Lloyd (another of the TACA parties),
who was quoted in the Journal of Commerce
on 6 December 1995 as having described the
European
interchange
arrangement as a:

equipment

inland

(432)

It is not clear whether all the parties to the
TACA actually participate in the new system

(124) For a general discussion of this question see paragraphs
61 to 67 of the (cid:28)Interim report of the multimodal
group’, presented to Commissioner van Miert on 6
February 1996 by a group of independent experts set up
to consider
inland
price-fixing by liner shipping companies.

certain aspects of

collective

(cid:28)Mickey Mouse arrangement, a very minor
step in the right direction’.

(436) The Commission accordingly does not consider
that the European inland equipment interchange
agreement justifies individual exemption being
granted to the TACA parties’ agreement to fix
prices for carrier haulage services.

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C. The hub and spoke system

(437) Under

the TACA's

inland arrangements as
supplemented by the hub and spoke system, the
TACA parties will continue to fix prices for all
inland transport
services carried out under
conditions of carrier haulage. This includes:

(a) the rail or barge movement between the

port and the three hubs;

(b) the road movement between the hub and the

shipper's premises; and

(c) all carrier haulage operations which do not
involve a rail or barge move to or from one
of the three hubs (125).

(438) This Decision does not address the merits of the
hub and spoke system itself
(described in
recitals (47) to (59), nor whether price-fixing
for
the road
movement between the hub and the shipper's
premises
to bring
about any benefits which are derived from the
implementation of that system.

the basic hub rate and for

indispensable in order

is

is

tariff)

indispensable

(439) However, the TACA parties consider that the
introduction of the hub and spoke system not
only brings about substantial benefits but that
the collective fixing of prices for all their inland
transport activities (as set out in the TACA's
inland
the
achievement of those benefits. They argue that
the price reductions implemented under the hub
and spoke system are essential if such a system
is to be competitive with road haulage and that
the
this
to inland
cooperation and transparency as
price-fixing which is brought about by the
TACA parties’ agreement to fix inland prices
for all the carrier haulage service they provide
within the scope of the TACA.

achieved without

could not be

to

(440) The TACA parties have provided details of how
the hub and spoke system could, in theory, be

expanded to cover significant numbers of inland
movements of maritime containers in France
and Germany. However, the TACA parties have
not provided any evidence that
significant
numbers of containers have been transferred
from road haulage to rail or barge haulage as a
result of the hub and spoke system nor that
there are any concrete plans to extend its scope.
They have produced no evidence to support
their claim that they would not or could not
participate in the hub and spoke system unless
they are also allowed to fix prices for their
inland transport operations falling outside the
system.
scope
Accordingly,
that
there is no justification for concluding that the
implementation of the hub and spoke system
justifies the grant of exemption to the TACA
parties generalised practice of fixing prices for
all their inland transport activities (126).

and
the
the Commission considers

spoke

hub

of

(441) Finally, whilst it is true that the existence of
certain TACA rules discriminating
against
merchant haulage (see recital (33)) would have
a serious adverse effect on the likelihood of the
TACA being granted individual exemption,
it
cannot be said that their removal, in whole or
in part, makes
restrictions of
the other
competition identified in this decision less
objectionable.

XIX. SERVICE CONTRACTS — APPLICATION OF
ARTICLE 85(1)

(442) Until 1996, the TACA parties had an agreement
not to allow individual service contracts (service
contracts between a shipper and a single
carrier). Furthermore, all joint service contracts
(service contracts between a shipper and some
or all of the members of a conference) were
submitted to scrutiny and approval by the
TACA parties as a whole (see recital
(30).
Notwithstanding changes made to the TACA's
rules, all service contracts entered into by the

(125) It should be noted that, as indicated above, the hub and
spoke system does not cover rail movements between
the Benelux ports and the Frankfurt/Mainz hub.

(126) This view is consistent with the view expressed in the
Final Report of the multimodal group submitted to
Commissioner Van Miert on 18 November 1997.

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(443)

joint or

(whether

TACA parties
individual)
remain subject to the rules agreed by the TACA
parties governing the conditions under which
entered into including their
they may be
(29),
constants (see recitals (17)(f) and (g),
(31)(d), (32) and (35).

are

carriers

repeatedly

Individual service contracts to which only one
carrier is party and in respect of which the
parties are free to negotiate the terms, do not,
in principle, fall within the scope of Article
85(1). Joint service contracts to which two or
more
restrict
party may
competition,
inter alia, where there is an
express or implied agreement between those
carriers not individually to enter into a service
contract with that shipper. Such an agreement
may be implied where a pattern of behaviour
show that the carriers in question systematically
or
contracts
together with other carriers in circumstances
where they would be capable of providing the
services required under the terms of the service
contract on an individual basis. In making this
assessment, it is relevant to take into account
other cooperative arrangements on the relevant
trades, such as slot-chartering or vessel-sharing
arrangements,
to
determine whether the carrier in question was
individually capable of providing the services in
question. It would also be relevant if a carrier
was a party to an service contract but did not
carry any cargo under
that
contract.

the terms of

into service

this might

enter

since

help

(444) As indicated in recitals (142), (143) and (144),
in 1996 the former members of
the TAA's
Contract Committee carried between them less
than 1 % (0,8 %) of the TACA's total carryings
to individual
trades pursuant
on the direct
service
service
contracts. Of 46 individual
contracts entered into in the first six months of
1996, Sea-Land entered into one individual
service contract, as did Maersk and NYK,
Nedlloyd entered into two individual service
contracts and P&O into five: 36 were entered
into with the former non-Contract committee
members. Moreover, as was indicated in recitals
(181) to (198), the TACA parties have extensive
vessel-sharing and slot-chartering arrangements
on the northern Europe/US trades and are
accordingly in a position to provide on an
individual basis an extremely wide range of
vessel services.

(445)

Joint service contracts of the kind entered into
by the TACA parties
therefore fall within
Article 85(1) of the EC Treaty and Article 53(1)

of the EEA Agreement, since their object or
effect is to restrict competition on price and
other terms between competitors supplying the
same service rather than to offer a new service
to shippers. The TACA parties have supplied no
evidence that joint service contracts result in
additional benefits for shippers in comparison
with the services that could be offered by
individual lines.

(446) Where the service being supplied is capable of
being supplied by an individual shipping line, in
the absence of a joint service contract carriers
might offer such additional services as increased
freetime,
free
services
documentation
or
service
provided in other
contracts may therefore help to eliminate any
non-price competition.

credit
discounts
trades (127).

on
Joint

extended

and

(447) The agreement between the TACA parties to
place restrictions on the conditions under which
individual service contracts may be entered into
also fall within Article 85(1) of the EC Treaty
and Article 53(1) of the EEA Agreement since
its object or effect is to restrict competition on
price and other terms.

(448) For

it

the

purposes

this
consider

analysis,
that

the
of
Commission does not
is
necessary to draw a distinction between binding
guidelines (namely those to which the parties
agree to adhere) and non-binding guidelines.
The mere fact that in certain cases, some of the
TACA parties might not follow the guidelines
does not mean that the other TACA parties
would not be able to predict with a reasonable
degree of certainty the policy which would
generally be followed (128). Furthermore,
the
Commission agrees with the analysis of the US

(127) (cid:28)As a general guideline, any element of a supplier's offer
that has an economic value in the eyes of the customer
is likely to influence his choice between competing
offers and therefore enable one supplier,
through
modifying his terms, to gain a competitive advantage.’
Butterworths Competition Law II [849].

(128) Judgment of the Court of First Instance in Joined Cases
T-213/95 and T-18/96, SCK & FNK v. Commission,
[1997] ECR II-1739, paragraph 164.

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Department of transportation which considers
that (cid:28)it is likely that such guidelines would not
be used to produce lower rates or other benefits
for shippers but,
instead, would be used as
means of adversely affecting independent action
by conference members’ (129).

parties are traditional conference practices and,
although the Regulation makes no mention of
them, should be implicitly exempted pursuant
to Regulation (EEC) No 4056/86.

XX. JOINT SERVICE CONTRACTS –
APPLICATION OF ARTICLE 85(3)

(449) The group exemption for

liner conferences
contained in Regulation (EEC) No 4056/86
does not authorise:

(a) joint service contracts;

(452) Logically such an implication could only arise
in one of the following three ways. First, they
could form part of the common or uniform
tariff and therefore fall within Article 3 of
Regulation (EEC) No 4056/86. Secondly, they
could be the same as loyalty arrangements and
could therefore be covered by Article 5 of
Regulation (EEC) No 4056/86. Thirdly, it might
be considered that
the legislator must have
intended service contracts of the type entered
into by the TACA parties to be exempted as a
group, since otherwise the effective purpose of
the Regulation would have been reduced.

(b) a prohibition on individual service contracts
or
such

restrictions, whether

or
non-binding, on the
contracts;

contents of

binding

(c) a prohibition of independent action on joint

service contracts.

to

all

offer

(450) Under the group exemption, members of an
exempted
loyalty
conference may
arrangements or time/volume rates (or other
volume related rates) provided that they are
available
uniform
shippers
basis (130). Such rates are commonly found in
conference tariffs. Where individual lines which
are members of a conference enjoying a group
exemption offer services which are materially
different
from those normally provided to
shippers paying the conference tariff rates, they
may charge different prices.

on

a

A. Joint service contracts and the scope of the

group exemption

(454)

(451) The TACA parties have argued that service
contracts of the kind entered into by the TACA

(129) Letter from Ms Nancy E. McFadden, General Counsel,
US Department of Transportation,
to Senator John
McCain, Chairman of the US Senate Committee on
Commerce, Science and Transportation dated 8 October
1997.

(130) This Decision does not deal with the possible
application of Article 86 to such arrangements where
they have a significant foreclosing effect.

(453) Each of these points is wrong. Service contract
prices are not tariff rates and indeed are an
entirely different from of arrangement between
shippers and shipowners from the arrangements
which arise under a conference tariff. For that
contracts
and
are
different
arrangements. The
legislator did not intend service contracts to fall
within the scope of the group exemption.

reasons,
from loyalty

service

other

(a) Do TACA service

contracts

contain

common or uniform rates?

In answer to the question whether joint service
contracts lead to common or uniform rates, the
TACA parties have argued they contain a
certain rate or rate schedule and are accordingly
within the scope of the group exemption. This
was
to the
Commission dated 3 May 1995 as follows:

expanded upon in a

letter

cover

4056/86)

(cid:28)First, the terms of Article 3 (of Regulation
(EEC) No
agreements
between the members of a liner conference
to fix rates: no distinction is made between
time/volume, and
tariff,
service
to the
rates depart
extent

contract
that

loyalty contract,

rates. Secondly,

service contract

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is applicable

from the relevant tariff rates, the service
contract procedure
to all
TACA parties in the same way that the IA
procedure is applicable to all TACA parties:
service
in other words,
contract rates is consistent with the concept
of “common or uniform” as interpreted by
the Commission in the TAA Decision.’

the charging of

(455) That

interpretation

reasonable
is
interpretation, for the reasons set out in recital
(349) of the TAA Decision.

not

a

(457) Though

all

the

goods

process

supplier

between

same
of
description/category travel at
the same rate
under the tariff (131), under service contracts the
rate is not part of the standard published tariff
but is determined more or less ad hoc by the
bargaining
and
consumer. The result of that bargaining process
is that shippers shipping goods of the same
description do not necessarily pay the same
rate as one other. Service
service contract
contract rates are different from tariff rates but
do nit differ uniformly. This means
that
although each TACA party may be charging the
shipper, different
same rate to a particular
shippers (of the same category of goods) are
paying different
(cid:28)uniform or
common freight rates.’

rates and not

every

(cid:28)The reasoning of the TAA would in fact
mean that
agreement on prices
between shipping lines would be exempted,
provided it were reached “in common”,
which is an obvious feature of an agreement
of any kind, and used the name “liner
conference”. Such an interpretation would
be tantamount to treating Article 3 of the
Regulation as an automatic derogation from
Article 85(1) of the Treaty for every kind of
agreement which provides for some kind of
understanding
in the
maritime sector. The very criteria which
bring Article 85(1) into play would make
Article 3 of
the Regulation applicable
automatically. Such an interpretation is
impossible, as it would make Article 3 of
the Regulation incompatible with Article
85(3) of
the Treaty, which provides for
exemption only in specified circumstances
not present in this case.’

concerning prices

(456) Service contracts do not fall within the group
exemption merely because they contain a price
agreed upon by two or more members of a
conference. To have a common or uniform
tariff, a conference price must be common or
uniform not only as between the shipping lines
but also with regard to all shippers of the same
commodity. Not only does
(cid:28)common or
uniform’ preclude a two- or multi-tier price
structure as between carriers,
it precludes the
creation of different classes of shipper.

(458) Article 3 of Regulation (EEC) No 4056/86
requires that under the tariff all goods of the
same category travel at the same rate. This is
not possible under service contracts because, in
theory,
from individual
negotiations with the shipper. Paragraph 326 of
the TAA Decision reads as follows:

the price

results

uses

(cid:28)Article 1(3)(b) of Regulation (EEC) No
4056/86
uniform or
the words
“common freight rates”; this means that the
rates laid down in the tariff are to be
identical for all members of a conference as
far as any one commodity is concerned;’
(emphasis added)

(459) As can be seen from recitals (120) and (121),
time/volume rates form part of the tariff and
are common or uniform.

(460)

remembered

that
the TACA parties’

In addition to the fact that service contracts
contain prices which do not form part of the
tariff and which are not common or uniform, it
significant
must
be
service
proportion of
contracts contain a dual-rate structure whereby
the carriers which were formerly unstructured
members of the TAA charge prices which are
significantly lower than those charged by the
structured
carriers which were
members of the TAA.

formerly

a

(131) See the TAA Decision, paragraphs (322) and (323).

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(461) Contrary to the claims of the TACA parties,
agreements between carriers
relating to the
prices to be charged for contract carriage, are
not to be treated in the same way as the ability
of members of an exempted conference to
engage
Independent
action is the right of a conference member to
depart
from the tariff on a one-off basis.
Although the other members are informed,
In
there
particular, there is no agreement to charge a
rate different from the tariff rate.

is no agreement between them.

in independent action.

(462) Service contract prices are, accordingly, not part
of
the tariff and are neither common nor
uniform. They do not therefore fall within the
scope of Article 3 of Regulation (EEC) No
4056/86.

(b) Are TACA service contracts the same as

loyalty arrangements?

(463) Loyalty arrangements are expressly dealt with
in Regulation (EEC) No 4056/86, Article 5(2)
for
of which contains detailed safeguards
shippers. These provisions do not cover service
contracts because there is no express mention of
service contracts, and service contracts envisage
no obligation of
loyalty (in the sense of
(cid:28)exclusivity’) on the part of the shipper. Loyalty
arrangements envisage that a portion or a
percentage of a shipper’s cargo is carried by the
conference:
such arrangements are expressly
excluded from the US law definition of a service
contract. Furthermore,
it is not reasonable to
argue that service contracts are covered by
Article 3 of Regulation (EEC) No 4056/86
without any safeguard equivalent
to those
which apply to loyalty contracts.

(c) What was the intention of the legislator?

the conditions of Article 85(3) of the EC Treaty
and Article 53(3) of the EEA Agreement if they
are to qualify for individual exemption.

(465) The TACA parties have argued that contractual
arrangements of the kind entered into by the
TACA parties with shippers have existed from
the very beginning of the history of the liner
conference. The evidence which they have put
forward (recitals (250) to (302) of the reply of
the statement of objections) does not support
this view.

(466)

In general, the TACA have sought to confuse
the distinct notions of loyalty arrangements and
contract carriage by describing the contract for
a rebate in return for loyalty to the conference
tariff as a contractual arrangements of the type
entered into by the TACA parties. For the
reasons given in recitals (107) and (108), there
is a clear distinction to be drawn between tariff
arrangements and contract carriage. Almost all
of the examples relied on by the TACA parties
are examples of loyalty arrangements.

the

clear

that notwithstanding

(467) This is not to say that tariff arrangements have
entirely displaced contractual arrangements. It
is
virtual
extinction of contract carriage for liner cargoes
as a result of the introduction of the conference
system and the ubiquity of tariff arrangements,
certain cargoes have not lost the capacity to be
carried on a contract basis. These cargoes are
cargoes
usually distinguishable
because
government
size:
of
departments have been able to ship to colonies
on a contract basis, monopoly export boards
still manage to obtain contractual arrangements
for their cargoes and project cargo can be
shipped on a contract basis.

from liner
thus,

their

(464)

Joint service contracts of the kind entered into
by the TACA parties are not one of
the
traditional conference activities which have
been group-exempted,
since they were only
introduced following the implementation of the
US Shipping Act 1984.
It also follows that
restrictions on the availability or content of
individual
not
group-exempted and must be shown to satisfy

contracts

service

are

(468) The explanation for this is probably that such
cargoes, unlike liner cargoes, are not shipped in
small quantities on a regular basis. They are
cargoes which could be carried as bulk cargo
and which are attracted to liner shipping by the
use of special prices. This is another example of
price discrimination and also another example

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of one-way substitutability as discussed in
recitals (66) to (71).

B. The possibility of individual exemption

(469) One specific allegation by the TACA parties
deserves clarification. The TACA parties have
cited an aide-memoire sent to the US Senate
Subcommittee on Merchant Marine by a
number of governments in 1981 as evidence for
the proposition that
the current 15
Member States felt strongly enough about the
need to preserve the operation of conference
contracts that they wrote to the US Government
them’ (132). This
to voice their
would be irrelevant even if it were not for the
fact that the claim put forward by the TACA
parties is an inaccurate account of the point
addressed in the aide-memoire in question.

support

(cid:28)11 of

for

(470) The

to joint

aide-memoire

service
refers
agreements. The TACA parties claim that this
expression referred to conference contracts for
the carriage of a specific volume of cargo. In
fact it is clear both from the aide-memoire itself
and from academic authority that
in this
context the expression joint service agreement
relates to the provision of a joint service such as
might be offered by a liner shipping consortium.
As explained by Daniel Marx:

(cid:28)joint service agreements ... are agreements
between independent shipping companies to
cooperate in furnishing a liner service or
they may be agreements between owners of
individual
ships
operated
operating
agent’ (133).

to have
by

vessels
a

their

line

an

as

(471) Such arrangements have nothing to do with the
kind of service contracts entered into by the
TACA parties. On the other hand,
it is true
both that the Member States have recognised
the importance of jointly provided services and
that
adopted
Regulation (EC) No 870/95 granting group
exemption to them (134).

the Commission

1995

in

(132) See reply to the statement of objections, paragraph

(293).

(133) Daniel Marx Junior, International shipping cartels: a
shipping

study
self-regulation
conferences (Princeton University Press).

industrial

by

of

(134) OJ L 89, 21.4.1995, p. 7.

(472) Service contracts may be considered to provide
benefits to shippers for two main reasons (135).
First, improving the quality of the supply chain
from manufacturer to ultimate consumer is an
industrial
essential
competitivity; Community manufacturers have
frequently emphasised their need for special
services tailored to their own particular needs.
Examples (136) of such special services are as
follows:

improving

part

of

(a) notification

deadlines

for

arrival

and

pick-up of containers;

(b) handling of hazardous cargo;

(c) compliance with
management);

ISO 9002

(quality

(d) guaranteed just-in-time delivery;

(e) provision of special equipment.

(473) Secondly, because

the price negotiated is
established in advance and does not fluctuate
for a predetermined period of up to several
years, service contracts can contribute to price
stability – if that is what an individual shipper
wants. This kind of stability cuts both ways,
benefiting carriers in times of falling rates (low
demand and excess capacity) and shippers in
times of rising rates (high demand and tight
capacity) (137).

(474) Service contracts also help to reduce search
costs: shippers need not search for available

(135) Article 9 of Commission Regulation (EC) No 870/95
(the Consortia Group Exemption) demonstrates the
Commission’s positive attitude to service arrangements
– but does not accept that price-fixing is necessary to
obtain their advantages.

(136) See also Contracts between Shippers and Shipping
Conferences, Brinkman-ship Ltd, February 1996, p. 25.
Shipping
Conferences, Brinkman-ship Ltd, February 1996, p. 26.

(137) See Contracts

Shippers

between

and

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space in tight markets and carriers need not
search for customers. Both shipper and carrier
are assisted in making future output decisions.
They should also reduce bureaucracy.

(475) Service contracts can also offer (cid:28)all-in’ prices,
thereby removing the uncertainty as to the level
of surcharges to be imposed. Surcharges remain
one of the major complaints of shippers but
conferences, unlike independents, tend to try
and exclude them from the scope of service
contracts.

(476) On 30 April 1997, John Clancey, CEO and
President of Sea-Land, made clear why such
contracts are so important.

(cid:28)Customers of
the future will demand a
seamless, intelligent transportation chain – a
real
transportation chain that produces
value either in terms of cost
reduction,
enhancement or both. Global
strategy
are
tougher
shippers
of
a
competition
The
their
complexity
intermodal industry must find ways to help
our customers become more efficient and
productive’ (138).

today
and
in

businesses.

degree

higher

facing

that by prohibiting direct and
85(3) was
individual
between
negotiations
business
structured members of the TAA and shippers,
and by obliging clients to discuss transport rates
for both former
with the TAA secretariat
conference members and former independents,
the TAA limited the opportunities for direct
cooperation and partnership in the medium or
long term between suppliers and clients.

(479) At paragraph 6.3.3 of

the application for

exemption, the TACA parties claimed:

(cid:28)Any further reduction in the level of control
over service contract pricing would result in
the inability of
the lines to avoid rates
collapsing towards incremental costs thereby
undermining profitability and, in the longer
term, service.’

(480) Although the parties to the TACA made the
claim that the notified arrangements were the
bare minimum,
since been
modified to lessen the restrictive effect of the
relating to service contracts. No
provisions
corresponding
new
arrangements constitute the bare minimum has
been made.

the TACA has

statement

these

that

(a) The prohibition on individual

service

contracts

(481)

(477) Although the TACA parties no longer prohibit
individual
to
service contracts,
discuss the possibility of exempting such an
agreement both in relation to past behaviour
and in case the TACA parties decide once again
to agree not
service
contracts.

individual

is useful

to offer

it

to the

claims made

in the
In contrast
it is worth noting
application for exemption,
its settlement with the US
that, as part of
Federal Maritime Commission,
the TACA
parties agreed to remove the prohibition on
individual service contracts with effect
from
1996. The TACA parties have provided no
evidence that this, voluntary, (cid:28)reduction in the
level of control over service contract pricing’
has resulted in the inability of the TACA parties
to avoid a general collapse in rates.

(478) The Commission found in the TAA Decision (
recital (410)) that one of the reasons for which
the TAA did not fulfil the conditions of Article

(482)

(138) Sea-Land press release.

It should also be noted that the TACA parties
do not appear to be arguing that, in the absence
of severe restrictions of competition, service
contract prices will
towards incremental
fall
costs. Although prices for such contracts are

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at

around marginal

likely to fall (139), there is no evidence at all that
service contracts would be offered routinely at
or
prices
costs.
Furthermore,
the Commission categorically
rejects the argument that tariff rates are at all
susceptible to collapse towards marginal cost,
let alone that this would be likely to result from
the removal of the prohibition on individual
service contracts.

(483)

it is important to note that
In this context,
whatever opportunistic behaviour a shipping
in to obtain short-term
line may engage
advantages,
rational
explanation for a shipping line's entering into a
long-term arrangement with a shipper at prices
which were not profitable in one way or
another.

there would

no

be

(484) The

of

service

contracts

importance

is
unquestioned. Service contracts are at the centre
of the commercial relationship between those
shippers which require regular
services and
those shipowners which provide them. The
prohibition of
contracts
agreed by the TACA parties prior to 1996 did
not fulfil the conditions of Article 85(3) for the
following reasons:

individual

service

(a) it did not allow individual carriers to take
advantage of their individual circumstances:
individual carriers might use
for instance,
to reduce repositioning
service contracts
costs;

(d) it may have inhibited the development of

new value-added carrier services;

contractual

(e) it may have obstructed the negotiation of
specific
terms which might
benefit shippers, such as the negotiation of
higher liability limits for damaged goods or
liquidated damages;

(f) it prevented the negotiation of global service

contracts (140).

(485) Contrary to the assertions made by the TACA
parties in the application for exemption, the
prohibition of individual service contracts was
not indispensable. This is clear from the fact
that the TACA parties agreed to remove this
restriction on competition at the behest of the
FMC (see recital (32)).

(486) For the reasons given above, the Commission
considers that
the prohibition on individual
service contracts neither contributed to the
productivity of the shipping lines concerned nor
promoted technical or
economic progress.
Further, it did not allow shippers a fair share of
the benefits arising from it and in any event has
been shown not to have been indispensable.
Accordingly, the Commission does not consider
that the agreement by the TACA parties not to
enter into individual service contracts fulfilled
the conditions of Article 85(3).

(b) it may have hindered the development of
relationships between

long-term trading
shippers and individual carriers;

(b) Other restrictions on service contracts

(c) it may have

reduced the

service

provided to that of
member of the conference;

the

least

level
efficient

(139) See The Effectiveness of Collusion under Antitrust
Immunity – the Case of Liner Shipping Conferences,
Paul S. Clyde and James D. Reitzes, Bureau of
Economics Staff Report, Federal Trade Commission,
December 1995 – (cid:28)we do find that the level of freight
rates is significantly lower on routes where conference
members are free to negotiate service contracts with
shippers’.

(487) The various restrictions on the contents of
service contracts (restrictions as to duration,
bans on contingency clauses and multiple
contracts, obligations as to non-confidentiality,
agreement as to level of liquidated damages) are
intended to restrict competition between the
TACA parties and are also incapable of
individual exemption.

(140) This is particularly important for (cid:28)advanced’ shippers:
high volumes (1 000 teu or more per annum), global
coverage (three main trades plus others) and needing
value-added services (warehousing, labelling, etc).

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(488) For the reasons set out below, the Commission
considers that the conditions of Article 85(3)
are not fulfilled. Moreover, the TACA parties
have given no reasons why the prohibition of
these provisions should be exempted.

Contingency clauses

(489) Contingency clauses (see recital

(17(g)) may
provide important benefits to shippers. The
ACCOS (141) Report of April 1992, drawing on
an analysis by David Butz, concluded that:

shippers are willing to pay for

the
(cid:28)If
then the
guarantee of a maximum rate,
addition
and
most-favoured-customer clauses can increase
revenue and cargo volume.’

meet-or-release

of

Butz himself concluded that such provisions
effectively benefit the weakest producers and
the weakest shippers, and stated that:

(cid:28)Quite simply, most-favoured shipper clauses
serve as efficient and flexible price indexes
by ensuring that the terms in (shipper) A's
contract with carrier X adjust
to the
changing market
reflected in
subsequent tariff rates.’

conditions

(490) As indicated above, the TACA parties have not
put forward any arguments to show how and
why a prohibition on contingency clauses fulfils
the conditions for the application of Article
85(3). The Commission considers
that such
clauses are likely to be of benefit to certain
shippers and that no benefits to shippers arise
the
from their
Commission considers that the prohibition on
contingency
the
conditions of Article 85(3).

prohibition. Accordingly,

clauses

fulfil

does

not

competition and seems to militate against price
stability. The TACA parties have claimed that
the ban on longer service contracts leads to
(cid:28)administrative efficiencies’ and that without the
(cid:28)competitive
ban some shippers will
disadvantages’ (142) but no details have been
given of what these benefits amount to and how
a fair share will be passed on to shippers.

suffer

(492) No adequate explanation has been given as to
why this prohibition fulfils the conditions for
exemption and the Commission can discern no
benefit to users, let alone a fair share of the
benefit arising to shipowners. Accordingly, the
Commission concludes that the conditions of
Article 85(3) of the EC Treaty and Article 53(3)
of
fulfilled in
respect of the prohibition on service contracts
of one or more years’ duration.

the EEA Agreement are not

Ban on multiple contracts

enter

cannot

(493) The TACA parties agree that they will not enter
into more than one contract at a time with any
particular shipper. The effect of this is that a
TACA Party which is party to a joint service
contract
into an individual
contract and vice versa. The Commission has
been given no good reason why an individual
line should not be free both to enter into an
individual contract
for a certain minimum
quantity and to participate in a joint contract
for a further minimum quantity (wherever the
conclusion of the joint contract complies with
Community law).

The prohibition of contracts for longer than one
year

(494)

(491) The prohibition on service contracts for periods
of longer than one year (since increased to two
and then three years) undoubtedly restricts

is

contracts

to promote

It is probable that the effect of the prohibition
on multiple
the
conclusion of TACA service
contracts by
inhibiting lines from entering into individual
service contracts. That is not a sufficient reason
for
very
competition
important way. Individual service contracts may
be extremely important to individual shippers,
and the commission believes shipping lines must

restricting

this

in

(141) The US Advisory commission on Conferences in Ocean

(142) See (first)

letter of Lovell White Durrant

to the

Shipping.

Commission dated 3 May 1995.

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not be prevented from entering into them.
Accordingly, the Commission considers that this
restriction on service contracts does not fulfil
the conditions of Article 85(3) of the EC Treaty
and Article 53(3) of the EEA Agreement.

Liquidated damages

(495) The TACA parties agree on the

It

is

liquidated damages

level of
liquidated damages clauses included in service
contracts entered into by TACA parties and
have sought to justify the agreement relating to
the amount of
to be
included in service contracts on the basis of US
law (143).
the Commission's
not
service
understanding that US law requires
contracts
damages
contain
clauses (144), still less that US law specifies at
what level any that are included should be set.
In
the
Commission concludes that the agreement as to
the level of liquidated damages to be included
the
in
conditions of Article 85(3) of the EC Treaty and
Article 53(3) of the EEA Agreement.

justification

liquidated

contracts

absence

service

fulfil

does

any

not

the

to

of

Confidentiality of service contracts

(496) The TACA parties

require

currently

the
disclosure to each other of the terms of all
service contracts to which they are Party and
information available to carriers
make this
which become party to the TACA (see recital
(229)).

(497) The Commission considers

the supply
chain from manufacturer to consumer is at the
heart of industrial competitivity. One way in
which the improvement in the supply chain can
be brought about is through shippers’ discussing

that

reflects

(143) See (first) letter of LWD to the Commission dated 3
(cid:28)This provision relating to liquidated
May 1995:
the US legal
damages
framework that minimum cargo/value commitments
should be meaningful (see the Regulation of the FMC at
46 § 514.17 (d)(7)(vii), which states that “Mandatory
Term No 7 shall
for
non-performance”).’

include liquidated damages

the requirement of

(144) See Section 3(21) of the US Shipping Act 1984 (cid:28)... the
contract may also specify provisions in the event of
nonperformance on the part of either party’ and Section
8(c) (cid:28)The essential terms shall include ... the liquidated
damages for nonperformance, if any’ (emphasis added).

their transport needs direct with shipowners.
The fruits of such negotiations should remain
confidential unless both parties wish otherwise.
For the shipper, it is normal that he should seek
to obtain an advantage over his competitors by
improving his supply chain. For the shipowner,
it is normal that he should obtain the benefits
of having invested the time and effort
in
providing a tailored service to a particular
customer.

(498) Accordingly, the Commission does not consider
that an agreement to disclose the existence of
an individual service contract, or, a fortiori, the
terms of that contract to lines that are not party
to the contract fulfils the conditions of Article
85(3) of the EC Treaty and Article 53(3) of the
EEA Agreement.

(499) This analysis appears to be supported by at
least two of the TACA parties, Maersk and
Sea-Land. On 3 April 1997, Maersk wrote to
the US Senate's
(cid:28)Surface transportation and
Merchang Marine Subcommittee’ to make clear
its support for the right of

(cid:28)carriers and shippers to individually enter
into service contracts and to keep these
contracts confidential.’

Maersk added

(cid:28)It is especially important in relation to our
global partnership with Sea-Land that
Maersk and Sea-Land have the ability to
sign joint confidential contracts with our
major shippers.’

Prohibition of
service contracts

independent action (IA) on

(500) The TACA parties currently prohibit the taking
of independent action on service contracts, yet
have given no reasons why this prohibition
fulfils the conditions for exemption.
In this
respect, it is to be noted that independent action
on service contracts has been allowed by
conferences in the past (see recital (126)).

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to

be

not

appear

(501) Given the existence of independent action on
tariff rates (even to limited extent exercised by
the TACA parties),
the prohibition against
taking independent action on service contracts
indispensable,
would
particularly in view of the fact that in the past
some conferences in US trades have permitted
action
independent
contracts.
on
service
this prohibition provides no
Furthermore,
the
consumers. Accordingly,
to
benefits
Commission does not
this
that
prohibition fulfils
the conditions of Article
85(3) of the EC Treaty and Article 53(3) of the
EEA Agreement.

consider

Conclusions

technical or

(502) For the reasons given above, the Commission
considers that the placing of restrictions on the
contents of the service contracts entered into by
the TACA parties neither contributes to the
productivity of the shipping lines concerned nor
promotes
economic progress.
Further, it does not allow shippers a fair share
of the benefits arising from it and in any event
has not been shown to have indispensable.
Accordingly, the Commission considers that the
agreement by the TACA parties
to place
restrictions on the contents of
the service
contracts entered into by the TACA parties does
not fulfil the conditions of Article 85(3) of the
the EEA
EC Treaty and Article 53(3) of
Agreement.

XXI. SERVICE CONTRACTS AND INLAND
PRICE-FIXING

(503) The fixing of prices for carrier haulage services
provided pursuant to the terms of a service
contract falls outside the scope of the group
exemption for liner conferences contained in
Regulation (EEC) No 4056/86 for the same
reasons as the fixing of inland tariff rates falls
outside the group exemption.

XXII. FREIGHT FORWARDER COMPENSATION

A. The application of Article 85(1)

Agreement
commissions

to

fix

freight

to the
forwarder

and freight

(505) The TACA parties agree the amounts, levels or
rates of brokerage
forwarder
remuneration, the terms and conditions for the
payment of such sums and the designation of
persons eligible to act as brokers (see recital
(19)). This agreement prevents,
restricts or
distorts competition both between the TACA
parties and also between freight forwarders and
other intermediaries. Accordingly, it falls within
the scope of Article 85(1) of the Treaty and
Article 53(1) of the EEA Agreement. The TACA
parties acknowledge in paragraph 326 of the
reply that an agreement to fix maximum levels
of freight forwarder commission has the effect
of reducing competition to provide maritime
transport
to that
services by the parties
agreement.

(506)

(507)

It is clear that the issue of freight forwarder
compensation (in particular the agreement of
the TACA parties to fix maximum rates of
commission to freight forwarders) is limited to
the
freight
forwarders discussed in recitals (158) to (164)
namely where the freight forwarder is acting as
agent and not as principal.

two roles of

second of

the

supplied by such
In principle the services
intermediaries are not
transport services and
accordingly an agreement to fix the price for
the payment for such services falls within the
scope of Regulation No 17. (In the event that
some part of these services does not fall within
the scope of Regulation No 17 but within the
scope of one or other of
transport
in adopting this Decision the
regulations,
the
Commission
to
has
procedural
the
relevant regulations. In any event, the analysis
under the transport regulations is identical to
that under Regulation No 17).

of
arising under

requirements

adhered

the

all

(504) Finally, the fixing of prices for carrier haulage
services provided pursuant to the terms of a
service contracts
individual
exemption for the same reasons as the fixing of
inland tariff rates is incapable of
individual
exemption.

incapable of

is

(508) The reasons for which the agreement to fix
maximum levels
forwarder
of
compensation is likely to have the requisite
effect on trade between Member States
is
discussed above at paragraph 395.

freight

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B. The application of Article 85(3)

Agreement
commissions

to

fix

freight

to the
forwarder

(a) The application of the group exemption

(509) Article 3 of Regulation (EEC) No 4056/86
concerns the fixing of rates and conditions of
carriage, that is to say, the terms on which
maritime transport services are sold to shippers.
It does not expressly cover, and no arguments
have been put forward which suggest that it
implicitly covers, an agreement to fix the terms
on which
other
rewarded for providing
intermediaries
intermediary services
to the members of a
conference.

freight
are

forwarders

or

(510) The

fixing of maximum levels of

freight
forwarder compensation is likely to eliminate
competition between the TACA parties to win
the custom of such intermediaries by offering
higher commissions. The effect of
this on
competition is likely to be especially high in
relevant
countries where the proportion of
business
is
significant. It also restricts competitors between
intermediaries, since their incentive to provide a
better service than their competitors is reduced.
Such a restriction cannot be considered to fall
within the scope of the group exemption or to
be a technical agreement
falling within the
scope of Article 3 of Regulation (EEC) No
1017/68.

intermediaries

through

done

(511) Whilst the agreement to fix maximum levels of
freight forwarder compensation is intended to
have an effect on prices by reducing or
eliminating competition, it cannot be said that
it has as its object
the fixing of rates and
conditions of carriage. If the contrary were true
and the fact that an agreement had an effect on
prices meant that it had as its object the fixing
of those prices, the consequence would be that
every agreement between the TACA parties
falling within the scope of Article 85(1) of the
Treaty would automatically fall within the
Such an
scope of
interpretation
fundamentally
contradictory to the general principle that the
scope of group exemptions is to be construed
restrictively.

group exemption.
would

the

be

levels of freight forwarder compensation. They
have merely argued that conferences operating
on the Northern Europe/US trades have fixed
(cid:28)westbound levels of commissions agreed to be
paid to European (other than United Kingdom
and Irish) forwarders’ since the early 1970s.
They have also argued that other, unspecified,
conferences have fixed such prices since the
beginning of the twentieth century.

likely

intended to and is

(513) The Commission considers that such a practice
is
to restrict
competition between the parties to the TACA.
Thus, competition may be adversely affected as
regards the demand for services supplied by
freight forwarders to the TACA parties. This
may deprive customers of the benefits which
would result
from competition between the
TACA parties.

(514)

It may also inhibit competition between freight
forwarders and be distinctive to improvements
in the quality of services provided by freight
to
forwarders, who may
concentrate on the volume as opposed to the
quality of business. Thus, competition may also
be adversely affected on the supply side.

encouraged

be

(515) The Commission does not consider that

and so justify

the
removal of maximum levels of freight forwarder
commissions (together with the other restriction
described above) would lead to higher prices
overall
restriction of
competition. In any event, this is an argument
which could be made for every price-fixing
agreement on the demand side.
In order to
achieve optimal allocation, prices should reflect
economic value of products and
the
services as determined by individual buyers.

real

this

(b) The possibility of individual exemption

(516)

(512) The TACA parties have put

forward no
arguments to justify the settings of maximum

If the cost of using freight forwarder services
rose too sharply for shippers they would be
likely to switch very quickly to dealing with the
carrier.
forwarder is
perceived as being capable of contributing
material added value, there is no reason why
this should not be reflected in higher prices. In

If, however,

the freight

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this respect freight forwarders are in the same
position as very many other intermediaries: if
the cost of going through the intermediary
becomes too high, the consumer will seek other
distribution channels such as direct purchase
from the supplier.

of

freight

(517) These elements demonstrate that the agreement
forwarder
to fix maximum levels of
compensation does not improve production or
distribution
question.
Moreover, it does not bring about benefits to
consumers.
no
commissions are paid by the TACA parties to
in the UK and Ireland
freight
forwarders
suggests that an agreement
to fix maximum
rates of commission is not indispensable.

services

Finally,

that

fact

the

the

in

(518) Accordingly, the Commission does not consider
that the agreement between the TACA parties
to fix the amounts, levels or rates of brokerage
and freight forwarder remuneration, the terms
and conditions for the payment of such sums
and the designation of persons eligible to act as
brokers fulfils the conditions of Article 85(3) of
the EC Treaty and Article 53(3) of the EEA
Agreement.

XXIII. ASSESSMENT UNDER ARTICLE 86

A. Relevant market

(519) The relevant market

for maritime transport
services is described at paragraphs 60 to 75.
The geographic market considers of the area in
which the maritime transport services defined
in this case the
above are marketed, that is,
in Northern
catchment areas of
Europe.
is
commensurate with the scope of the TACA’s
inland tariff and constitutes a substantial part
of the common market.

the ports
geographic market

Such

a

B. Collective dominant position

(520) The first question is whether the TACA parties
are capable of being jointly dominant and the
second is whether
jointly
dominant in the geographic market in question
relevant maritime
for
transport services.

they are in fact

supply for

the

the

(a) Economic links

(521)

It is settled case law that Article 86 is capable
of applying to situations in which a number of

to

of

In

economically

Societa´
First
liner

links (145).
the Court
referred

independent undertakings
together hold a
dominant position on the relevant market,
provided that those undertakings are united by
economic
Italiana
Vetro (146),
Instance
specifically
shipping
conferences as an example of agreements
between
entities
which enable economic links to be formed that
jointly a dominant
can give those entities
position in relation to other operators on the
same market, and it found support for that
conclusion in the wording of Article 8 of
Regulation (EEC) No 4056/86. The principle
was confirmed in the CEWAL case (147),
in
which it was
specifically applied to liner
shipping conferences.

independent

(522)

(523)

of

It is noteworthy that the Court of First Instance
did not adopt the test suggested by the United
Kingdom as intervener, that it was necessary to
find
the
institutional
between
links
to those that exist
undertakings analogous
between parent and subsidiary (148). Thus the
Court of First
that
undertakings must act on the relevant market as
a single economic entity if they are to enjoy a
collective dominant position. This makes clear
that the continued existence of a possible degree
of competition between the parties does not
rule out the finding of a collective dominant
position.

Instance did not accept

parties

economic

In the CEWAL case, the Court of First Instance
links between the
examined the
members of
the CEWAL conference which
justified the finding that the market position of
assessed
those
should
collectively (149). The Court of First
Instance
the
referred specifically
conference formed a framework for a number
of committees to which conference members
belonged, such as the Zaire Pool Committee
and the Special Fighting Committee.

to the

that

fact

be

(524) The Court of First Instance also referred to the
intention to define and apply uniform freight
rates and other common conditions of carriage,
the
the

consequence of which was

that

(145) Judgment of the Court of Justice in Case C-393-92,
Gemeente Almelo and Others v. Energiebedriif IJsselmij
NV, [1994] ECR I–1477, paragraphs 42 and 43. See
also the opinion of Advocate-General Darmon at
paragraph 117.

(146) Judgment of the Court of First Instance in Joined Cases
T-68/89, T-77/89 and T-78/89 SIV and Others v.
ECR II-1403,
Commission
paragraphs 357 to 359.
(147) See footnote 113, recital (64)
(148) See footnote 146, recital (343).
(149) See footnote 113, recital (65).

(Flat Glass)

[1992]

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conference presented itself on the market as one
and the same entity. Lastly,
the Court also
observed that the practices of which CEWAL
members stood accused revealed an intention to
adopt together the same conduct on the market
to react unilaterally to a change,
in order
deemed to be a threat,
in the competitive
situation on the market an which they operated.
Those practices constituted aspects of an overall
strategy which CEWAL members pooled their
forces in order to implement.

(525) The Commission considers that the members of
the TACA collectively
a dominant
position by reason of the fact that they are
bound together by a considerable number of
economic links which has led to a significant
diminution of their ability to act independently
of each other.

enjoy

by entering into transport contractors on their
behalf. It has the right to attend service contract
negotiations between shippers and individual
TACA parties. The TACA Secretariat
issues
press notices on behalf of the TACA parties.

(530) Each year the TACA parties publish a (cid:28)business
plan’, examples of which are not out in Annex
III. These demonstrate that the TACA parties
appear to shippers as having a joint commercial
strategy on the market (150).

(531) The economic links between the TACA parties
are reinforced by the economic links between
individual TACA parties arising out of their
various consortia arrangements and which are
described above in recitals (180) to (198). Thus
the members of
the TACA have very close
economic links and are therefore capable of
enjoying a collective dominant position.

(526) The first such link is the tariff. As is indicated
at paragraph 174, the TACA parties not only
agree to adhere to a tariff but are required to
do so by US law: failure to adhere to the tariff
can result
liabilities of up to USD
in civil
25 000 per violation.

(b) Dominance

(527) Adherence to the TACA is also ensured by the
extensive enforcement provisions described at
paragraphs 21 and 22. These provisions are the
most extensive policing arrangements ever seen
by the Commission in the liner shipping sector.
the payment of
Policing takes the form of
exceeding
substantial
quotas
an
independent body to act as (cid:28)the Enforcement
Authority’ which has (cid:28)total unfettered access …
to all documents which may be related to a
Carrier’s activities in the Trade’.

fines
appointment

guarantees,
the

as well

for

of

(528) These restrictions on the TACA parties’ ability
to act independently of each other are intended
to eliminate substantially price competition
between them. The TACA parties have also
adopted measures which are intended to present
the TACA parties as a single united body and so
diminish pressure for price reductions
from
importance in this
customers. Of particular
the TACA
respect has been the
secretariat
annual
business plans.

and the publication of

role of

(529) The

TACA

extensive
administrative and financial
is
It
authorised to act as agent for the TACA parties

has
functions.

Secretariat

(532) The central element of a dominant position is
the power to prevent effective competition. The
best know formulation of this power, which is
equally applicable to collective dominance,
is
that set out in the Vitamins case (151):

(150) Judgment of the Court of Justice Joined Cases 6 and
7/73 Commercial Solvents v. Commission [1974] ECR
223, p 266: (cid:28)The consumer, after all, is interested only
in the end product, and it is detriment to the consumer,
whether direct or indirect, with which Article 86 is
concerned…’ Advocate-General Warner.

(151) Judgment of

and

the Court of

Justice in Case 85/76
Hoffman-La-Roche v. Commission [1979] ECR 461,
paragraphs 38 and 39. See also its judgment in Cases
78/70, Deutsche Grammophon v. Metro [1971] ECR
(cid:28)the ability to prevent effective
487, paragraph 17:
competition on an important part of
the relevant
market taking into account the existence of any other
producers selling similar products and their position on
the market’,
322/81 NV Nederlandsche
Banden-industrie Michelin v. Commission [1983] ECR
3461, paragraph 48:
(cid:28)it is not a precondition for a
finding that a dominant position exists in the case of a
given product that there should be a complete absence
of competition from other partially interchangeable
products so long as such there should be a complete
absence
partially
interchangeable products so long as such competition
does not affect the undertaking’s ability to influence
appreciably the conditions in which that competition
may be exerted or at any rate to conduct itself to a
large extent without having to take account of that
competition and without suffering any adverse effects as
a result of its attitude.’

from other

competition

of

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(cid:28)a position of economic strength enjoyed by
an undertaking which enables it to prevent
effective competition being maintained on
the relevant market by giving it the power
extent
to
independently of its competitors, customers
and, ultimately of its consumers.

appreciable

behave

an

to

much as five-fold. In other words, although the
is almost
cost of
transporting a container
entirely unrelated to the
goods
transported, freight rates are up to five times
higher for high value commodities than for low
value commodities (154).

type of

Such a position does not preclude some
competition, which it does where there is a
monopoly or a quasi-monopoly, but enables
the undertaking which profits by it, if not to
determine at least to have an appreciable
influence on the conditions under which
that competition will develop, and in any
case to act largely in disregard of it so long
as such conduct does not operate to its
detriment.’.

(535) This

the
system of differentiated pricing,
purpose of which is to maximise revenues, is
normally only found in market situations where
one or more undertakings has a substantial
degree of market power. In transport markets
where there was no significant concentration of
market power,
transport price would
probably be fixed by references to the type of
service on offer and not by reference to the
goods transported, on the basis of the actual
costs in line with market forces (155).

the

(533) As is indicated in recitals (85)

to (88),

the
TACA parties had a market share of some 60 %
in 1994, 1995 and 1996. In the most important
segment of the market, they had a share of
approximately 70 % in each year. This market
share must also be seen in the light of the
growing demand in the market. Such a large
market share give rise to a strong presumption
of a dominant position (152). This Decision does
not
the TACA parties
maintained their dominant position in 1997. In
any event, whilst decline in market
shares
in itself
which are still very large cannot
constitute proof of the absence of a dominant
position (153).
a matter of
follows,
principle, that the fact that an undertaking is
not currently in a dominant position cannot be
taken as proof that it was never in a dominant
position.

consider whether

as

It

(534) This presumption is confirmed,

inter alia, by
the fact that the TACA parties have succeeded
in maintaining a discriminatory price structure.
The TACA tariff for maritime transport services
sets different rates for different products on a
basis related to their value. Although the range
of
tariffs is considerably narrower than the
range of commodity values, prices can vary as

(152) Judgment of the Court of Justice in Case C 62/86 Akzo
Chemie BV [1991] ECR I-3359, paragraph 60, where
the Court held that (cid:28)very large (market) shares are in
themselves, save in exceptional circumstances evidence
of the existence of a dominant position… That is the
situation where there is a market share of 50 % such as
that found in this case’.

(153) See footnote 113, paragraph (77).

to

compensate

(536) A further example of discrimination in the
conditions of carriage imposed by TACA relates
to currency adjustment factors (CAF): this is a
surcharge imposed by the TACA parties which
is
currency
intended
In 1997, TACA charged 38 %
fluctuations.
CAF for shipments to and from ports between
Hamburg and Le Havre, 16 % CAF for
shipments to and from Scandinavian ports and
6 % for shipments to and from UK ports. To
the difference in CAF levels
the extent
cannot be economically justified, it is another
indication of discriminatory pricing arising from
market power (156).

that

for

the

contents of

(154) Compare this with the inland tariff, where rates are not
quoted by commodity and do not vary according to the
value of
container, although
variations may be encountered depending on whether
the container is a teu or an feu. The Commission
recognised in the TAA decision that the TAA parties
had not eliminated competition so far as the inland
transport of containers was concerned.

the

(155) Price discrimination is recognised as one of the most
frequently cited direct measurements of market power;
especially where the absence of cost differences is
readily discernible. See eg B. Hawk, US, common
market and international antitrust (1990), p. 790. See
also F M Scherer and David Ross, Industrial market
structure and economic performance, Chapter 13
(Houghton Mifflin, 1990).

(156) This Decision does not address the question whether the
TACA parties’ agreement relating to CAF meets the
conditions of Article 4 of Regulation (EEC) No
4056/86.

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to

justify

several

(537) The Commission has asked the TACA parties
on
current
occasions
differences in CAF levels by reference not only
to movements in the relative values of European
currencies as against the US Dollar, but also by
reference to the effect that this has had on
actual costs incurred. For example, where goods
are
from New York to
Rotterdam, the TACA parties were asked to
show how the costs incurred in Dutch guilders
had risen relative to freight rates such as to
justify a 38 % CAF surcharge. No explanations
have been forthcoming.

carried by

sea

(538) The final elements in demonstrating TACA’s
dominant position is the limited ability of its
customers to switch to alternative suppliers,
thereby making the TACA an unavoidable
disaffected
trading
customers. As the Court held in its judgement
in
v.
Commission (157), a market share must also be
viewed in the light of the strength and number
of competitors.

partner

Brands

United

27/76

Case

even

for

its

(541) This pattern of concentration allows the TACA
a disproportionate degree of
to exercise
influence over
its
the pricing policies of
competitors, who are likely to follow price
rises. The price leadership of the TACA is also
likely to be reinforced by the fact that it is one
of the most restrictive agreements between liner
shipping companies
in the world and has
acquired a reputation as the price leader in the
market.

are

complicated

(542) This situation is also reinforced by the fact that
the tariff schedules and rate structures on this
market
been
time. The
developed over a long period of
independent lines set their rates by reference to
the TACA’s tariff and are accordingly price
takers. Such a situation enables the TACA and
its
its members
competitors and its customers.

independently of

to act

have

and

(539) For

75 %). Their

the three years 1993-1995,

the TACA
parties had over 70 % of the available capacity
on the direct Northern Europe/US trades (76 %,
74 %,
competitor,
Evergreen, had 11 % in each year (158). The
capacity of
the other main competitors was
discussed in recitals (244) to (264). There is no
reason to believe that these figures changed to
any significant extent in 1996.

biggest

(543) The ability of

the TACA parties to impose
regular, albeit modest, price increases over the
period 1994 to 1996, in stark contrast to the
two other world arterial
trades (see recitals
(311) and (312)), demonstrates that the TACA
parties have been able to maintain or increase
prices. This has been made possible because of
the elimination of effective competition. There
is no evidence that the services in question have
not been profitable since the implementation of
the TACA: in any event, it is clear that lack of
profitability is not a determinative factor in
establishing a dominant position (159).

(540) The possibility of

switching to non-TACA
carriers should also be considered in the light of
the importance to shippers of service contracts
(see recital (122)). Shippers who require regular
maritime transport services over a period of one
year or more, and who therefore find service
contracts attractive, are unlikely to switch part
of their requirements to smaller carriers, since
this would reduce
their minimum volume
commitment under a TACA service contract
and lead to a smaller discount.

it so wished.

(544) There is no evidence that Evergreen is inclined
to abandon its role of price-taker (see recital
(249)) or that it has sufficient spare capacity to
In the Reply to the
do so if
Statement of Objections,
the TACA parties
produced a table showing examples of cargoes
which had switched from one or more of the
TACA parties to Evergreen. Examination of the
examples chosen by the TACA parties reveals
that in many cases the switching to Evergreen
which occurred represented only a portion, and
sometimes only a very small portion, of that
shipper’s requirements.

(157) United Brands [1978] ECR 207.
(158) Source: Lloyd’s shipping economist.

(159) See paragraph (538) and footnote 157, United Brands:

paragraphs 125 to 128.

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(545) Another

is

important

services which in turn requires

the substantial
factor
barriers to entry on these trades. This arises
from the commercial requirement of operating
regular
the
deployment of a large number of vessels and the
acquisition of a large fleet of containers. The
investment which this requires may be anything
between USD 400 million and USD 2 billion
and constitutes a considerable barrier to entry.

(546) Account must also be taken of the opportunities
for actual competitors to increase capacity for
potential competitors to enter the trade. The
contestability of the transatlantic trade so far as
potential competitors is concerned has been
discussed above. The increase of capacity by an
actual competitor to the TACA must be viewed
in the same way since increasing capacity
involves large fixed costs, some of which will be
sunk.

of

carriage

(547) The nature of the vessels deployed on these
routes is quite specialised. As one of the main
trading routes it is necessary to deploy vessels
of a relatively high standard and specialised in
Economic
the
developments such as just-in-time delivery and
the decline in the cost of fuel have increased the
importance of operating as fast a service as
possible. Since many vessels are unable to
perform to this standard the degree of vessel
mobility which may formerly have existed is
substantially decreased and this, too, constitutes
a barrier to entry.

containers.

(548) Finally, the fact the TACA is the price leader
makes it unlikely that any competitor would
with to risk destabilising the market by
competing aggressively against the TACA on
price.

(549)

that

the members of

In the light of these factors, the Commission
considers
the TACA
enjoyed a collective dominant position within
the meaning of Article 86 of the Treaty, on the
direct liner shipping trade between Northern
Europe and the Unites States in each of the
years 1994, 1995 and 1996. This Decision does
not consider whether that dominant position
was maintained in 1997.

C. Abuse of dominant position

(550) As a general principle, the fact that some of the
activities of the TACA may at the present time
be authorised by a block exemption does not
prevent Article 86 from being applied (160). The
Commission considers that the TACA parties
have abused their collective dominant position
to place
by
restrictions on the availability and contents of
service
the
and
competitive structure of the market so as to
reinforce the dominant position of the TACA.

into an agreement

contracts,

entering

altering

by

(a) Abusive imposition of restrictions on the

availability of service contracts

(551) The importance to shippers of service contracts
is examined in some detail in recitals (122) to
(126) and recitals (472) to (476). The TACA
parties have an agreement between themselves
to impose a number of restrictions on the
contents of the service contracts and,
in the
past, have agreed that they will not enter into
the
individual
purposes, of
imposing these restrictions has
been to prevent price competition (see recital
(479)). These
fully
described in recitals (487) to (502).

contracts. One

restrictions

are more

service

of

(552) As part of a settlement agreement with the US
Federal Maritime Commission,
the TACA
parties agreed in 1995 to abandon their
prohibition on individual service contracts, with
the result that shippers were able to negotiate
direct with individual
service
contracts covering shipments made in 1996.
service
However,
contracts were not freely negotiated because the
TACA parties agreed to restrict the contents of
individual service contracts and to disclose to
each other the terms of those contracts.

individual

carriers

those

even

for

(553) A refusal to supply can taken a number of
forms: it can be an outright refusal to supply, a
refusal to supply otherwise than on terms which
to be unacceptable (a
the supplier knows
constructive refusal) or a refusal to supply other
conditions.
than on the basis of unfair
Compliance with an agreement
to place
restrictions on the contents of service contracts
amounts to a refusal to supply services pursuant
to
in
accordance with the terms of that agreement

otherwise

contracts

service

than

(160) Commission Decision 88/501/EEC (IV/31.043 Tetra Pak
I) OJ L 272, 4.10.1988, p. 27, pp. 41, 42 and 43:
affirmed by the Court of First Instance on 10 July 1990,
in Case T-51/89 Tetra Pak v. Commission [1990] ECR
II-309, recitals 25, 29 and 30.

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place

refusals

and falls into the third of these three categories
to supply. Compliance with an
of
agreement
the
restrictions
to
availability and contents of service contracts
also limits the supply of transport products.
Accordingly, such behaviour falls within the
scope of Article 86 of
the Treaty, an in
particular points (a) and (b) thereof, where the
supplier in question is in a dominant position.

on

of
individual service contracts in 1995 is a
particularly serious abuse given the willingness
of the TACA parties to allow them in 1996. In
addition,
forward by the
TACA parties in the Application for Exemption
were demonstrably not correct
(see recital
(479)).

the arguments put

(554) The TACA parties have refused to supply
shippers with maritime and inland transport
services pursuant to a service contract except on
the basis of certain terms which have been
chosen by the TACA parties collectively. This
refusal covered joint service contracts for the
years 1994, 1995 and 1996 and individual
service contracts for the year 1996. The TACA
parties also refused in 1995 to supply transport
services at all on an individual basis and
consequently to supply in that year services
adapted to the needs of individual customers in
accordance with the individual capabilities of
individual carriers. This refusal would have
deprived shippers of any additional services
which individual TACA parties may have been
in a position to offer.

of

joint

(555) The Commission considers that the agreement
to place restrictions on the availability and
contents
service
and
contracts and the consequent refusal in 1994,
1995 and 1996 to supply transport services
pursuant to service contracts other than on the
basis of certain terms collectively agreed by the
the
TACA parties constituted an abuse of
TACA’s dominant position.

individual

(556) The Commission considers

that

in particular,

this abuse
arose,
in relation to the terms
imposed by the TACA parties (and without
which they refused to supply transport services
pursuant to service contracts in 1994, 1995 and
clauses,
1996)
the
duration of
the ban on
multiple contracts and liquidated damages.

contingency
contracts,

concerning

service

(557) The Commission considers that the prohibition
on individual service contracts in 1995 and the
consequent refusal in 1995 to supply transport
services pursuant to service contracts at all on
an individual basis also constituted an abuse of
the TACA’s dominant position. The prohibition

(558) These abuses are

likely to have had an
appreciable affect given the very large number
of containers involved (see recital
the
large market share of the TACA parties and the
fact that some 60 % of the containerised cargo
carried by the TACA parties between Northern
Europe
carried
pursuant to service contracts.

and the United States

(85)),

is

(b) Abusive

alteration of

the

competitive

structure of the market

(559)

In Continental Can, the Court held that the
mere fact
that competition was substantially
fettered on the relevant market by a dominant
undertaking constituted an abuse, regardless of
the means and procedure by which it was
achieved (161). In CEWAL, the Court of First
Instance held that Article 86 covers all conduct
of an undertaking in a dominant position which
is such as to hinder the maintenance or the
growth of
competition still
existing in a market where, as a result of the
very presence of that undertaking, competition
is weakened (162).

the degree of

the proposition that

(560) The judgment of the Court in Continental Can
the
is authority for
elimination of potential competition can be an
abuse of a dominant position. The elimination
of
certain
circumstances have a greater economic impact
than the elimination of actual competition. This
will, for example, be the case where the actual
competitor is weak and the potential competitor
is in a position to enter the market reasonably

competition

potential

can

in

(161) Judgment of

the Court of

Justice in Case 6-72,
Europemballage Corporation and Continental Can
Company Inc. v. Commission [1973] ECR 215. See also
its judgment in Case 66/86 Ahmed Saeed Flugreisen v.
of
Zentrale
Advocate-General Lenz in his first Opinion.

comments

[1989]

ECR

803;

(162) See CEWAL, cited in footnote 113, paragraph 106 and
judgment in Tetra Pak I, cited in footnote 160, recital
(114).

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easily and has the strength and resources to
exert significant competitive pressure. It is not
elimination of potential
necessary for
competition to have
led to a monopoly
situation:

the

competitor wished to enter the market it would
only do after it had become a party of the
TACA.

(563)

the

cause

(Article 86) states a certain number of abusive
practices which it prohibits. The list merely
examples and is not an exhaustive
gives
enumeration of
sort of abuses of a
dominant position prohibited by the Treaty. As
may further be seen from letters (c ) and (d) of
Article 86(2), the provision is not only aimed at
practices which may
to
consumers directly but also at those which are
detrimental to them through their impact on an
effective
is
mentioned in Article 3(f) of the Treaty. Abuse
may therefore occur if an undertaking in a
dominant position strengthens such position in
the degree of dominance
such a way that
reached substantially fetters competition,
i.e.
that only undertakings remain in the market
whose behaviour depends on the dominant
one (163).

competition structure,

such as

damage

(561)

and,

It is clear from the recitals to Regulation (EEC)
No 4056/86 that the existence of competing
in particular,
non-conference
services
potential competition in the form of
liner
shipping companies not currently present on a
particular trade but capable of entering that
trade, form one of the principal
justifications
for the grant of the group exemption. In this
context it is important to consider the statement
of the TACA Chairman quoted in recital (292):

(cid:28)As I have said to every line concerned
trying to enter the market, please come and
talk to me and we will do everything we can
to help you succeed with that goal.’

(562) However, it is clear that the intention of the
TACA parties was not
to assist potential
competitors enter the market in order for those
potential
competitive
pressure on the TACA parties. Such a strategy
would
sense
no
whatsoever. Rather, the intention of the TACA
if a potential
parties was

to ensure that

have made

competitors

commercial

to exert

(163) See Continental Can, cited in footnote 161, recital (26)

(emphasis added).

independent

In their reply to the statement of objections in
the TAA case (dated 17 March 1994), the TAA
specifically referred to Hanjin and
parties
Hyundai as
shipowners which
exerted (cid:28)significant competitive pressure’ on the
TAA parties by their threat of entry to the TAA
trade. However, it is apparent that the TACA
parties actively took measures to assist those
potential competitors successfully to enter the
market as parties to the TACA. This is evident
from the fact that in anticipation of its entry to
the trade and before it became a party to the
TACA, Hanjin requested details of (cid:28)all relevant
documents and statistics by TACA (including
Tariff, Service Contracts, Portcall,
lifting and
performance) …’
(229)). The
information, much of which
disclosure of
constitutes
secrets of
identities,
significant
commodities, prices, transport patterns) and is
not necessary for enabling a shipping line to
become a member of a liner shipper conference
engaged in activities falling within the scope of
the group exemption, would have acted as a
powerful
inducement to Hanjin to enter the
transatlantic trade as a party to the TACA and
not as an independent carrier.

confidential business
(customer

recital

value

(see

(564) Similarly, as can be seen from recital (230),
when Hyundai entered the transatlantic trade as
a party to the TACA, it was included as a party
in the TACA service contracts in which it
wished to be included with effect from its first
sailing on the trade. As has been explained
above,
service
the widespread existence of
contracts can act as a barrier to entry. The
immediate access to such contracts would have
acted as a powerful inducement to Hyundai to
enter the transatlantic trade as a party to the
TACA. Finally,
the TACA
Secretariat quoted at recital (239) concerning
Hanjin demonstrates a collective willingness to
(cid:28)enable Hanjin to build-up a market
share
consistent with its slot capacity in the trade …’.
Such a willingness on the part of the other
TACA parties would have substantially reduced
the commercial risks of entering a new market
and thereby acted as an inducement to Hanjin
to enter the transatlantic trade as a party to the
TACA.

the statement of

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for

certain service

(565) The steps taken by the TACA parties to include
potential competitors to enter the market as
parties to the TACA include the fact that the
TACA parties entered into a large number of
dual-rate service contracts, and the fact that the
structured TAA members did not
former
compete
contracts with
NVOCCs. As the Commission found in the
TAA case (see recital (296) and footnote 84),
the purpose and effect of offering a two-tier
rate structure was to limit competition from
independent shipowners by bringing them inside
the conference. Following the prohibition of the
the TACA parties abandoned
TAA in 1994,
their
tariff but nevertheless have
two-tier
continued to offer service contracts with higher
prices for the traditional conference members
traditional
and
lower
new entrants.
independents
Furthermore,
conference
members have in effect reserved certain cargoes
for the traditional
independents and the new
entrants by not competing for those cargoes.
The effect of this would have been to induce
potential competitors which wished to enter the
market to do so as parties to the TACA.

the
traditional

prices
and
the

the

for

for

(566) Each of

(theory of contestable markets),

these acts would have constituted
inducements to potential competitors to enter
the transatlantic trade, not as
independent
carriers but as parties to the TACA. In so far as
the existence of potential competition may have
worked as a restraint on the TACA’s market
the
power
elimination of this source of competition would
have worked in two ways: the elimination of
competition and the anticipatory
potential
The
elimination
Commission considers
such behaviour,
which was not disclosed in the Application for
Exemption,
competitive
damaged
structure of the market and amounted to an
abuse of the TACA parties’ collective dominant
position in 1994, 1995 and 1996.

competition.

actual

that

has

the

of

(567) The Commission considers that the purpose of
the members of the TACA was to eliminate
price competition by damaging the structure of
the market and limiting the supply of transport
services. It should be noted in this context that
an undertaking in a dominant position (cid:28)has a
special responsibility not to allow its conduct to
impair genuine undistorted competition’ (164).

(164) See Nederlandsche Banden-industrie v. Commission,

cited in footnote 151, paragraph (57).

D. Effect on trade between Member States –

Article 86

that

the abusive conduct

(568) With regard to the effect on trade between
Member States, according to Community case
law, for Article 86 to apply, it is both necessary
is
and sufficient
capable of affecting trade between Member
States. In this connection, it is not necessary to
establish the existence of an actual effect on
such trade. The condition of effect on trade
must
fulfilled where
to
intraCommunity trade has been affected at least
potentially to a significant extent (165). Changes
in the competitive structure of a market are
between
especially
Member States. (166)

deemed

affect

likely

trade

be

be

to

(569)

abuses

(cid:28)where

It should be pointed out that the sicth recital of
Council Regulation (EEC) No 4056/86 states
trade between Member States may be
that
concern
[…]
affected
international maritime transport […] from or to
Community ports’ and that (cid:28)such […] abuses
may influence
firstly, between
competition,
ports in different Member States by alterin their
and secondly,
respective
between activities in those catchment areas, and
disturb trade patterns within the
common
market’.

catchment

areas,

(570) The abuses described above are liable to affect
similar
trade between member
reasons to those set out above in relation to
Article 85(1).

States

for

(571) The TACA involves shipping lines operating in
several Member States. The refusal to supply
transport services pursuant to service contracts
either at all or only on the basis of certain
collectively agreed conditions, is likely to reduce
significantly the advantanges which would
accrue to the more efficient of
them. The
abusive alteration of the competitive structure
of the market leading to the neutralisation of

(165) Judgment of the Court of Justice in Case C 41/90
H(cid:246)fner and Elser v. Macrotorn [1991] ECR I-1979,
paragraphs 32 and 33 and also the judgment of the
Court of First Instance in Case T-65/89 BPB Industries
and British Gypsum v. Commission [1993] ECR II-389.
(166) Judgment of the Court of Justice in Case 30/87 Bodson

v. Pompes Fune`bres [1988] ECR 2479, paragraph 24.

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potential competition is likely to have the same
effect.

effect is likely to be appreciable in view of the
very large number of containers involved.

(572) The

to

refusal

transport

services
supply
pursuant to service contracts, either at all or
only on the basis of certain collectively agreed
conditions, and the abusive alteration of the
competitive structure of the market affects the
number of transport operations undertaken by
each shipping line which would be expected in
the absence of the agreement. This distortion of
competition between shipowners operating in
several Member States consequently influences
and alters trade flows in transport services
within the Community, which would be
abusive
different
imposition of restrictions on the availability of
service contracts.

absence of

in the

the

(573) These

changes

in the normal pattern of
competitive behaviour by which more efficient
companies enjoy increases in market share may
also influence competition between ports in
different Member
artificially
increasing or decreasing the volume of cargo
which flows through them (167) and the market
shares of shipping lines operating out of those
ports.

States,

by

E. Conclusion as to the applicability of Article

86

their

abused

(576) The Commission considers that the members of
the TACA have
collective
dominant position by placing restrictions on the
availability and contents of service contracts
and by altering the competitive structure of the
market so as to reinforce the dominant position
of the TACA and have thereby infringed Article
the Treaty. This Decision addresses
86 of
certain steps taken by the TACA parties to
induce potential
the
market as parties to the TACA. It does not
address and therefore does not prejudice the
ability of liner conferences whose activities fall
within the scope of
the group exemption
contained in Article 3 of Regulation (EEC) No
4056/86 to admit new members on the same
terms as existing members or the ability of the
members of such liner conferences to exchange
information necessary for the purposes of the
activities falling within the scope of that group
exemption.

competitors

to enter

of

competitive

(574) The effect on the supply of services pursuant to
service contracts and the abusive alteration of
the
the market
structure
described in the preceding paragraphs is likely
to have a consequential effect on the supply of
related services. Such services
include port
services and stevedoring services. The effect on
these services will principally be brought about
transport
by the alteration in the flow of
services between Member States.

(577)

XXIV. TERMINATION OF CONTRACTS

concluded

In Article 5 of the TAA decision, the members
of the TAA were required to inform customers
with whom they
service
had
contracts and other contractual relations in the
context of the TAA that such customers (were)
entitled, if they so wish(ed), to renegotiate the
terms of those contracts or to terminate them
forthwith. The Commission
it
appropriate to impose a similar requirement on
the TACA parties for the reasons given below.

considers

(575) The Commission thus considers that the abusive
imposition of restrictions on the availability of
service contracts and the abusive alteration of
the competitive structure of the market affects
trade between Member States in relation to the
supply of services related to services supplied
pursuant to the terms of service contracts. This

(578) The main basis for such a provision is the clear
principle that a party cannot take advantage of
its own wrongdoing, nor can it keep fruits
obtained unlawfully. A decision is adopted in
order to achieve a complete and effective end to
the infringement concerned.

(167) See sixth recital of Regulation (EEC) No 4056/86,
describing
practices
effect which
concerning international maritime transport may have
on Community ports.

restrictive

the

(579) This entails not only putting an end to the
unlawful arrangements between the parties, but
also the (cid:28)restrictive effects residing in contracts’
which were concluded with third parties (cid:28)under

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the

perpetuate

these arrangements (168). Such
the terms of’
contracts
effect
because they are determined under conditions
of distorted competition. Customers must be
given the (cid:28)right of readjustment’ (169) in order to
end these restrictive effects perpetuated by the
contracts.

restrictive

(580)

In the case of the TACA, the parties have made
joint service contracts that may be expected to
remain in force after the date of this Decision,
and in which prices are specified that have been
found by this Decision to have fixed unlawfully.
not
Although,
themselves void by reason of the operation of
Article 85(2),
(cid:28)be
‚assessed together and in the context of the
operation as a whole’ (170).

they must nevertheless

contracts

service

are

the

(581) Commission decisions are adopted to ensure
compliance with community competition law
and these
contracts would have been on
substantially different terms if the infringement
had not taken place. They must therefore no
longer be in operation although this does not
mean that the contracts themselves are caught
by Article 85(1) (cid:28)simply because of their links
with the restrictive horizontal agreement’ (171).

joint

(168) Commission Decision 93/50/EEC (IV/32.745 – Astra)
OJ 20, 28.1.1993, p. 23, paragraphs (32) and (33),
concerning
venture between BT and SES.
Restrictions vis-a` -vis third parties took the form of
foreclosure of other (potential) uplink providers, and
also the choice of consumers was limited since United
Kingdom customers were obliged to accept the uplink
service offered by BT if
they were interested in
broadcasting via Astra. Contracts with third parties
were made at a time when the third parties did not have
the choice of concluding separate contracts as two
different services. The terms of these contracts were
determined by BT and SES in the context of their joint
venture agreement.

(169) See footnote 168, recital (33) of the Decision.
(170) See Commission Decision 93/252/EEC (IV/33.440 and
IV/33.486 - Gillette) OJ L 116, 12.5.1993, p. 21, at
paragraph 34. Gillette had acquired an equity interest in
Eemland, the company that bought the EC and USA
interests of
the Wilkinson Sword business. Gillette
bought the interests of this business in the rest of the
world. The relevant agreements for the context were a
non-Community sale agreement, an intellectual property
agreement, and a supply agreement. As a result the
decision adopted by the Commission called for the sale
of the equity interest in Eemland owned by Gillette, as
well as the re-assignment to Eemland of the Wilkinson
Sword business.

(171) See footnote 168 (Astra), recital (33).

(582) Accordingly,

shippers must be offered the
opportunity to renegotiate or terminate any
joint service contract. Any renegotiation will
result in a new legal agreement, on new terms,
to take effect from the date of that agreement,
and in accordance with those terms. The
content of the new agreements is not an issue
for the commission, but for fresh negotiation
between the shippers and the parties. This
decision does not require shippers to renegotiate
their joint service contracts nor does it impose
any deadline within which any re-negotiation
should take place.

XXV. FINES

A. Basis for the imposition of fines

fines

turnover

each of

the
year of

(583) According to Article 19(2) of Regulation (EEC)
No 4056/86, the Commission may impose on
undertakings
from ECU 1 000 to 1
million, or a sum in excess thereof but not
in the
exceeding 10 % of
the
preceding business
undertakings participating in the infringement,
where either intentionally or negligently they
infringe Article 86 of the treaty (172). In fixing
the amount of the fine the Commission will
have regard both to the gravity and to the
duration of the infringement. The fines imposed
by this Decision are imposed pursuant to Article
19(2) of Regulation (EEC) No 4056/86.
However, in so far as the abuse of a dominant
position relating to service contracts also falls
within the scope of application of Regulation
(EEC) No 1017/68,
they are also imposed
pursuant to Article 22 of that Regulation.

(584) The fines provided for in Article 19(2)(a) of
Regulation (EEC) No 4056/86 may not be
imposed in respect of infringements of Article
85(1)
taking place after notification to the
Commission and before its Decision pursuant to
Article 85(3) of the Treaty, provided that they
fall within the limits of the activity described in
the notification. There is no possibility of

(172) As the Court of Justice held in Joined Cases 100 to
103/80 Musique Diffusion Franc¸aise v. Commission
to the
[1983] ECR 1825,
undertaking's total turnover. See also the judgment of
the Court of First Instance of 12 December 1991 in
Case T-30/89, Hilti v. Commission [1991] ECR II-1439,
paragraph 131.

that percentage

refers

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that

respect

from fines with

immunity
to
infringements of Article 86. Further, in view of
the fact
the Commission's statement of
objections in the TAA case specifically referred
to the possibility of imposing fines for breaches
of Article 86 (including breaches of Article 86
relating to service contracts), there is no reason
to believe that the TACA parties were unaware
of this possibility, even if the Commission did
not adopt a decision in that case finding that
the TAA parties had infringed Article 86.

(589)

(585) No exemption may be granted, in any manner
whatsoever, in respect of abuse of a dominant
position: such abuse is simply prohibited by the
Treaty (173). moreover, abuse of a dominant
position is an objective test, the intentions and
understandings of the parties being irrelevant to
the finding of an infringement of Article 86 of
the Treaty.

(586)

dominant

In this case, the Commission considers that the
the TACA have abused their
members of
placing
collective
restrictions on the availability and contents of
service contracts and by altering the competitive
structure of the market so as to reinforce the
dominant position of the TACA.

position

by

(587) This Decision imposes

for

fines only for

the
infringements of Article 86. This Decision does
inland rate fixing in
impose fines
not
the
the
accordance with
Commission
immunity
the
in
decision (174) to the effect that the Commission
intend to take any decision as to
did not
whether to impose fines until such time as the
Court of Justice or the Court of First Instance
has
scope of Article 3 of
Regulation (EEC) No 4056/86.

statement
TACA

ruled on the

of

containerised cargo where the services supplied
included a maritime element falling within the
geographic scope of the TACA).

it

that

is clear

contribute

It is impossible to estimate with any degree of
accuracy how much lower this figure would
have been in the absence of the infringements,
restrictions on service
but
contracts
significantly to raising
prices (175). Furthermore, account should also
be taken of the fact that the TACA parties took
measures to ensure that potential competitors
entered the market as parties to the TACA
thereby further restricting the degree of price
competition in the market.

(590)

In this context, it is useful to note three further
elements:

on

(a) First, the transatlantic trade has appeared
relatively immune to the competitive forces
trades
working
to bring
(transpacific and Europe/Asia)
about
thus
demonstrating the anti-competitive effect of
the TACA (176).

other main

reduction

prices,

the

in

a

(b) Secondly, since the advent of TAA/TACA
the members of the conference are reported
to have turned a USD 400 million aggregate
annual loss in 1992 (the year the TAA was
introduced) into a reported USD 350 million
aggregate annual profit in 1996 (177).

(c) Finally,

it has been calculated by the US
Federal Maritime Commission that the price
increases imposed by the TACA parties in
1995 were of the order of USD 70 to 80
in the event these increases were
million:
withdrawn as a result of pressure from the
FMC (see paragraph 31).

B. Impact of the infringements

(588) The value of the services directly affected by the
practices in question in 1996 – the last year of
the Article 86 infringements – was in the region
of ECU 3,2 billion (total turnover in respect of
transport services relating to the carriage of

(173) See footnote 161 (Ahmed Saeed), recital (32).
(174) Commission Decision of 26 November 1996, C(95)

(175) See The effectiveness of collusion under antitrust
immunity – the case of liner shipping conferences, Paul
S. Clyde and James D. Reitzes, Bureau of Economics
Staff Report, Federal Trade Commission, December
1995 – (cid:28)we do find that the level of freight rates is
significantly lower on routes where conference members
are free to negotiate (individual) service contracts with
shippers’.

(176) The Journal of Commerce stated on 18 October 1996
that The Atlantic is the only major trade lane that has
not endured a serious price war this year. (cid:28)While prices
on the Pacific and Europe-Asia trade lanes have
dropped significantly over the last year, Atlantic freight
rates have remained fairly stable’.

(177) Drewry, Global Container Markets, London, 1996, p.

3414 final.

8.

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C. Service Contracts

(591) The Commission considers that,

in general,
practices aimed at restricting price competition
are a matter of indisputable gravity (178). The
aim of abusing a dominant position in relation
to service contracts has been to increase the
general level of prices by substantially reducing
the
shippers. This
infringement concerned refusals to deal either at
all or only on the basis of certain conditions.

available

choice

to

(592) The

considers

Commission

this
infringement is a serious one. The duration of
the infringement relating to service contracts
covered part of 1994 and the whole of 1995
and 1996.

that

containerised cargo where the services supplied
included a maritime element. It is appropriate
to take world-wide liner shipping turnover as
the basis for the comparison of the relative size
the
the undertakings because it enables
of
Commission to assess the real resources and
importance of the undertakings concerned.

Table 12

Size of undertakings to be taken into account in order
to determine capacity to cause damage and
effectiveness of deterrence

D. Alteration of the structure of the market

Large carriers

Maersk

(593) The measures taken by the TACA parties to
eliminate competition and thereby damage the
structure of the market are also restrictions on
competition of indisputable gravity. Attempts to
eliminate potential competition must be viewed
as a very serious restriction of competition,
particularly in the liner shipping sector where
the existence of potential competition is one of
the principal
group
exemption. In view of the fact that the market
in question is one in which competition had
this
severely
already
infringement must be considered as being very
serious.

justifications

restricted,

been

the

for

(594) The duration of this infringement also covered

part of 1994 and the whole of 1995 and 1996.

(595)

E. Calculation of fines

to take account of

the effective
In order
capacity of the undertakings concerned to cause
significant damage and the need to ensure that
the fine has a sufficiently
the amount of
the Commission considers it
deterrent effect
appropriate that larger fines be imposed on the
larger TACA parties than on the smaller ones
because of the considerable disparity between
their sizes. It has therefore divided the parties
into four groups according to size and taken
this into account in determining the gravity of
the infringements.

(596) Table 12 indicates

final

these four groups and
relative size of each of the TACA parties in
1996 (the
the Article 86
year of
infringements) as compared with Maersk, the
largest of the TACA parties. The comparison is
made on the basis of turnover in respect of
transport services relating to the carriage of

(178) Commission Decision 94/210/EC (HOV SVZ/MCN),

OJ L 104, 23.4.1994, p. 34, recital 259.

Medium to large
carriers

Small to medium
carriers

Sea-Land

P&O

OOCL

NYK

Nedlloyd

Hanjin

Hapag Lloyd

Hyundai

DSR/Senator

NOL

MSC

Cho Yang

Small carriers

TMM/Tecomar

ACL

POL

Size

1,00

0,89

0,50

0,44

0,41

0,39

0,33

0,32

0,31

0,24

0,22

0,21

0,18

0,12

0,06

0,06

(597) The duration of each of the infringements was
two to three years: accordingly the level of the
fines imposed should be increased by 25 %.

(598) Table 13 sets out the calculation of the level of
fines taking into account the above elements.
Column 1 sets out the basic fines for the two
infringements calculated on the basis of
the
nature of the infringements and their gravity.
Column 2 set out
fine per
individual company to take into account the
duration of the infringements. Column 3 sets
out the final amount.

the additional

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Table 13

F. Aggravating and mitigating factors

Calculation of fines in accordance with Guidelines

(ECU million)

Column
1a

Column
1b

Column
2

Column
3

Maersk

Sea-Land

P&O

OOCL

NYK

Nedlloyd

Hanjin

Hapag Lloyd

Hyundai

DSR/Senator

NOL

MSC

Cho Yang

TMM/Tecomar

ACL

POL

2

2

1,5

1,5

1,5

1,5

1,5

1,5

1,5

1

1

1

1

0,5

0,5

0,5

20

20

15

15

15

15

15

15

15

10

10

10

10

5

5

5

5,50

27,50

5,50

27,50

4,13

20,63

4,13

20,63

4,13

20,63

4,13

20,63

4,13

20,63

4,13

20,63

2,06

18,56

2,75

13,75

2,75

13,75

2,75

13,75

2,75

13,75

1,38

6,88

1,38

6,88

1,38

6,88

(601) The purpose of the members of the TACA was
to eliminate price competition by damaging the
structure of the market and limiting the supply
of transport products. Accordingly, they could
not have been unaware that their activities had
as their object the restriction of competition.
Indeed, the Commission has been told by the
TACA parties
they had received legal
advice not to include dual-rate prices in service
contracts
since dual-rate pricing had been
specifically prohibited in the TAA Decision.

that

(602) On the other hand,

the TACA parties may
claim (although they have not actually done so)
that they were in doubt as to the scope of the
group exemption and that they considered that
they were immune from fines as a result of
having notified their rules on service contracts.

(603) The TACA parties have known since at least 10
the Commission has
December 1993 that
the TAA parties were in a
considered that
dominant position and that
the Commission
was minded to impose fines on the TAA parties,
inter alia,
their abuse of a dominant
position in relation to service contracts. They
the
have known since October 1994 that
Commission
of
banning
considered
individual service contracts to be a serious
restriction of competition (see recital (410) of
the TAA Decision).

the

for

(599) The facts that

in 1997 P&O merged with
Nedlloyd and Hanjin has bought DSR/Senator
are not relevant for the calculation of the fines
as the infringements occurred before the dates
of those events, even if in the first cases where
the companies no longer legally exist the order
to pay must be addressed to their successor in
business, P&O Nedlloyd Container Line Ltd.
However, it is relevant that Hyundai joined the
TACA during the course of 1995 and did not
therefore participate in the infringements for the
same period as the others: the fine imposed on
Hyundai should take this into account. It is also
relevant that Tecomar has been a subsidiary of
TMM since January 1994 since it is appropriate
to consider the two as a single undertaking for
the purpose of the imposition of fines.

(604)

In this context, it should also be borne in mind
the
the Deputy Director General of
that
Directorate-General
the
for Competition of
Commission wrote to the TACA parties on 15
December 1994 indicating clearly the view that
the TACA rules on service contracts did not fall
within the scope of the group exemption for
liner conferences. So far as uncertainty as to the
question of immunity from fines is concerned,
all of the TACA parties had access to sufficient
legal advice to know of the possibility of fines
for breaches of Article 86 notwithstanding the
notification of the TACA and, in particular, of
the Commission's view that notification cannot
confer immunity from fines for breaches of
Article 86.

(600)

In no case do the fines set out in column 3 of
Table 13 exceed 10 % of the turnover of the
group of companies of which each undertaking
forms part.

(605) Finally, none of

the TACA parties has put
forward any reason for which it should be
considered to have acted as a follower as
opposed to a ringleader. Nor have any of the
TACA parties given any evidence that any of
the other TACA parties acted as a ringleader.

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Accordingly, there is no reason which would
justify distinguishing between the individual
TACA parties as regards their participation in
the
in the manner
except
described above.

infringements,

(606)

In the light of
these factors, no adjustment
should be made to the level of fines in order to
take account of aggravating or attenuating
circumstances.

XXVI. CONCLUSIONS

(607) The following elements of the TACA fall within
the scope of the prohibition contained in Article
85(1) of the Treaty and Article 53(1) of the
EEA Agreement
between
undertakings which may affect trade between
Member States and which have as their object
or effect the prevention, restriction or distortion
of competition within the common market:

agreements

of

(a) the agreement

for

services

to fix prices

supplied within

inland
the
transport
territory of
the European Community to
shippers in combination with other services
as part of a multimodal transport operation
for
containerised cargo
between Northern Europe and the United
States of America;

carriage of

the

(b) the agreement between the parties to the
TACA as to the terms and conditions on
and under which they may enter into service
contracts with shippers; and

(c) the agreement to fix the amounts, levels or
rates of brokerage and freight
forwarder
remuneration, the terms and conditions for
the payment of
and the
designation of persons eligible to act as
brokers.

such sums

(608) None of these agreements fulfils the conditions
of Article 85(3) of the Treaty and Article 53(3)
of the EEA Agreement.

(609) The Commission also considers

the
the TACA have abused their

that

members of
collective dominant position:

(610) From an economic point of view, because the
majority of European exporters to the United
States are or may be affected by these abuses,
the
these
infringements are of a serious nature and the
Commission considers it appropriate to impose
fines.

Commission

considers

that

(611) The Commission has followed the procedures
laid down in Regulations (EEC) No 4056/86
and (EEC) No 1017/68 and, in so far as may be
appropriate in connection with the agreement
forwarder
to fix maximum levels of
the
compensation, Regulation No 17,
adoption of this Decision,

freight

for

HAS ADOPTED THIS DECISION:

Article 1

the European Community

The undertakings listed in Annex I have infringed the
provisions of Article 85(1) of the EC Treaty, Article
the EEA Agreement and Article 2 of
53(1) of
Regulation (EEC) No 1017/68 by agreeing prices for
inland transport services supplied within the territory
in
of
combination with other
a
multimodal transport operation for the carriage of
containerised cargo between Northern Europe and the
United States of America. The conditions of Article
85(3) of the EC Treaty, Article 53(3) of the EEA
Agreement and of Article 5 of Regulation (EEC) No
1017/68 are not fulfilled.

shippers
as part of

services

to

Article 2

The undertakings listed in Annex I have infringed the
provisions of Article 85(1) of
the EC Treaty and
Article 53(1) of the EEA Agreement by fixing the
and
or
amounts,
rates
levels
freight-forwarder
and
remuneration,
conditions for the payment of such sums and the
designation of persons eligible to act as brokers. The
the EC Treaty and
conditions of Article 85(3) of
Article 53(3) of the EEA Agreement are not fulfilled.

brokerage
terms

the

of

Article 3

(a) by placing restrictions on the availability

and contents of service contracts; and

(b) by altering the competitive structure of the
market so as to reinforce the dominant
position of the TACA.

The undertakings listed in Annex I have infringed the
provisions of Article 85(1) of
the EC Treaty and
Article 53(1) of the EEA Agreement by agreeing the
terms and conditions on and under which they may
contracts with shippers. The
enter
conditions of Article 85(3) of
the EC Treaty and
Article 53(3) of the EEA Agreement are not fulfilled.

into service

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Article 4

The undertakings listed in Annex I are hereby required
to put an end forthwith to the infringements referred
to in Articles 1, 2 and 3 and are hereby required to
refrain in future from any agreement or concerted
practice having the same or a similar object or effect
to the agreements referred to in Articles 1, 2 and 3.

Article 5

The undertakings listed in Annex I have infringed the
provisions of Article 86 of the EC Treaty and Article
54 of the EEA Agreement by altering the competitive
structure of
to reinforce the
dominant position of
the Transatlantic Conference
Agreement.

the market

so as

DSR/Senator Lines

ECU 13 750 000

Cho Yang Shipping Co., Ltd

ECU 13 750 000

Neptune Orient Lines Ltd

ECU 13 750 000

Nippon Yusen Kaisha

ECU 20 630 000

Transportaci(cid:243)n Mar(cid:237)tima
Mexicana S.A. de CV/Tecomar
S.A. de CV

ECU 6 880 000

Hanjin Shipping Co., Ltd

ECU 20 630 000

Hyundai Merchant Marine Co.,
Ltd

ECU 18 560 000.

Article 9

Article 6

The undertakings listed in Annex I have infringed the
provisions of Article 86 of the EC Treaty and Article
54 of the EEA Agreement by placing restrictions on
the availability and contents of service contracts.

The undertakings
listed in Annex I are hereby
required, within a period of two months of the date of
notification of this decision, to inform customers with
whom they have concluded joint service contracts that
those customers are entitled to renegotiate the terms of
those contracts or to terminate them forthwith.

Article 7

Article 10

The undertakings listed in Annex I are hereby required
to put an end forthwith to the infringements referred
to in Articles 5 and 6 and are hereby required to
refrain in future from any action having the same or a
similar object or effect to the infringements referred to
in Articles 5 and 6.

Article 8

In respect of the infringement of the provisions of
Article 86 of the EC Treaty and Article 54 of the EEA
Agreement
the
following fines are imposed:

referred to in Articles 5 and 6,

A.P. Møller-Maersk Line

ECU 27 500 000

Atlantic Container Line AB

ECU 6 880 000

Hapag Lloyd Container Linie
GmbH

P&O Nedlloyd Container Line
Limited

Sea-Land Service, Inc.

ECU 20 630 000

ECU 41 260 000

ECU 27 500 000

Mediterranean Shipping Co.

ECU 13 750 000

Orient Overseas Container Line
(UK) Ltd

Polish Ocean Lines

ECU 20 630 000

ECU 6 880 000

The fines imposed under Article 8 shall be paid, in
ECU, within three months of the date of notification
into
of
account No
the European Commission,
310-0933000-43
Banque Bruxelles Lambert, Agence Europe´enne,
Rond-Point Schumann 5, B-1040 Brussels.

this Decision,
of

bank

interest

expiry of

After
shall be
that period,
automatically payable on the fine at the rate charged
by the European Central Bank for transactions in ECU
on the first working day of the month in which this
Decision is adopted, plus 3,5 percentage points,
namely 7,5 %.

Article 11

This Decision is addressed to the undertakings listed in
Annex I.

This Decision shall be enforceable pursuant to Article
192 of the EC Treaty.

Done at Brussels, 16 September 1998.

For the Commission

Karel VAN MIERT

Member of the Commission

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ANNEX I

Paries to the TACA

Sea-Land Service, Inc.
6000, Carnegie Blvd
Charlotte
NC 28209
USA

A.P. Møller-Maersk Line
50, Esplanaden
DK-1098 Copenhagen K

Atlantic Container Line AB
Sydatlanten
Skandiahamnen
S-403 36 Gothenburg

Hanjin Shipping Co., Ltd
51 Sogong-Dong
Chung-Ku, Seoul
Korea

Hapag-Lloyd Container Linie GmbH
Ballindamm 25
D-20095 Hamburg

P&O Nedlloyd Container Line Ltd
Beagle House
Braham Street
London E1 8EP

Mediterranean Shipping Co.
40 Av Eugene Pittard
CH-1206 Geneva

Orient Overseas Container
Line (UK) Ltd
15th Floor, City Tower
40 Basinghall Street
London EC2V 5DE

Polish Ocean Lines
10 Lutego 24
Gdynia 81–364
Poland

DSR/Senator Lines
Martinistrasse, 62–66
D-28195 Bremen

Cho Yang Shipping Co., Ltd
Cheong-Ahm Bldg
85–3 Seosomun-Dong Chung-Ku
Seoul
Korea

Neptune Orient Lines Ltd
456, Alexandra Road
No 06-00 NOL Building
Singapore 119962
Republic of Singapore

Nippon Yusen Kaisha
Yusen Building
3-2 Marunouchi 2-Chome
Chiyoda-Ku
Tokyo
Japan

Transportaci(cid:243)n Mar(cid:237)tima Mexicana SA de CV
Av de la Cuspide No 4755
Col Parques del Pedregal
Deleg Tlalpan
14010 Mexico DF
Mexico

Tecomar SA de CV
Benjamin Franklin, 232
11800 Mexico DF
Mexico

Hyundai Merchant Marine Co. Ltd
4-10th Floor
Mukyo Hyundai Building
96, Mukyo Dong
Chung-Ku, Seoul
Korea

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ANNEX II

TAA/TACA CHRONOLOGY

1992

28.8.1992 Notification of the TAA.

1993

10.12.1993 TAA substantive statement of objections.

1994

11.4.1994

TAA oral hearing

5.7.1994

Notification of the TACA

30.9.1994

TAA advisory committee

19.10.1994 TAA decision

1995

21.6.1995

Statement of objections relating to the lifting of the TACA parties’ immunity in respect
of inland rate fixing in the EC.

29.11.1995 Notification of the European inland equipment interchange arrangement (EIEIA).

1996

1.3.1996

Supplementary statement of objections on the lifting of the TACA parties’ immunity
from fines in respect of inland rate fixing dealing with issues raised by the notification of
the EIEIA.

6.5.1996

TACA oral hearing

24.5.1996

TACA substantive statement of objections.

25.10.1996 TACA oral hearing

28.11.1996 Commission Decision lifting the TACA parties’ immunity in respect of inland rate fixing

in the Community.

1997

10.1.1997 Notification of the inland hub and spoke system.

11.4.1997

TACA supplementary substantive statement of objections dealing with the issues raised
by the notification of the hub and spoke system.

1998

26.5.1998

TACA advisory committee.

15.6.1998

Second TACA advisory committee.

9.4.1999

EN

Official Journal of the European Communities

L 95/107

ANNEX III

TACA 1995 and 1996 business plans (extracts)

(cid:28)TAA 1995 WESTBOUND BUSINESS PLAN

TARIFF — No structural changes have been contemplated. Our planned increases are:

Class (1-26)
(Dry and temperature controlled)

Non-class rates

40 ft

USD

160

20 ft rates will be at a level equal to 80 % of the 40 ft rate after the 1995 increase has been applied.

SERVICE CONTRACTS

Our service contract proposals for current and increased minimum volume commitments come in two
parts; the first part follows the lines of the 1994 programme with increases of:

Minimum volume commitment

200-499 teus

500-1 499 teus

1 500+ teus

20 ft

USD

130

115

100

40 ft

USD

160

140

120 …’

(cid:28)TAA 1995 EASTBOUND BUSINESS PLAN

TARIFF — No structural changes have been contemplated. Our planned increases are:
20 ft

40 ft

Class 1-17

Classes 18 and up

Temperature controlled containers

Non-class rates

USD

80

120

80(A)

zero

USD

100

150

100(A)

(A) — Except no increase where current rate value meets or exceeds the equivalent of the current
Class 18, by coast.

SERVICE CONTRACTS

Our service contract proposals for current and increased minimum volume commitments come in two
parts; the first part follows the lines of the 1994 programme with increase of:

Minimum volume commitment

200-499 teus

500-1 499 teus

1 500+ teus

20 ft

USD

130

100

80

40 ft

USD

160

120

100 …’

L 95/108

EN

Official Journal of the European Communities

9.4.1999

(cid:28)SUMMARY OF 1996 BUSINESS PLAN

1. TARIFF — eastbound and westbound:

per 20 ft container — USD 110

per 40 ft container — USD 140

Heated tanks additional — USD 250 per tank, eastbound and westbound,
contracts), to cover on-board and terminal plug-in.

(tariff and service

Westbound only:

(a) Pacific North-West differential

(tariff and service contracts)

To be adjusted:
From

20 ft — USD 250

40 ft — USD 350

To

subject

to CAF

20 ft — USD 320

not subject

40 ft — USD 450

to CAF

(b) special equipment surcharge

(tariff and service contracts)

To be adjusted:
From

20 ft — USD 200

40 ft — USD 300

To

20 ft — USD 450

40 ft — USD 550

No other changes to tariff assessorials are contemplated.

2. SERVICE CONTRACTS — renewed at, or above existing minimum commitment levels:

eastbound and westbound:

per 20 ft — USD 110

per 40 ft — USD 140

— subject to negotiated discounts, case-by-case.

3. SERVICE CONTRACTS — new or for reduced minimum volume commitments:

(a) westbound

MOC

Discount from 1996 Tariff

20 ft

USD

40 ft

USD

dry van:

up to 199 teus

Classes 1-3

4+

200 up to 499 teus

500 up to 1 499 teus

1 500+ teus

25

40

40

55

75

30

50

50

70

90

temperature controlled:

Down 1 Class, except Class 22 discounted:

USD 80/20 ft

USD 100/40 ft

(b) eastbound

Tariff less 1 Class (except Class 1 — no discount) …’

9.4.1999

EN

Official Journal of the European Communities

L 95/109

ANNEX IV

Schedule of agreements in effect or in contemplation which relate to the transatlantic trade and involve
TACA parties

as at 8 December 1995

Parties

of

agreement

Name
description where not apparent
name)

(and

brief
from

Date of
(a)
first entry into effect and
(b) additions/deletions of parties

Atlantic Container Line,
Hapag-Lloyd

ACL/H-L Reciprocal Space
Charter and Sailing Agreement
(previously ACL/GCL/CGMIH-L
Reciprocal space charter and
sailing Agreement)

(a) 19.7.1986
(b) Deletion

16.9.1991

of GCL, CGM:

Atlantic Container Line,
Mediterranean Shipping
Company, Polish Ocean
Lines

MPA Space Charter and Sailing
Agreement (previously MSC/POL
Space Charter and Sailing
Agreement)

(a) 9.7.1993
(b) Addition of ACL: 22.1.1995

Hyundai Merchant
Marine Co.,
Mediterranean Shipping
Company

Hapag Lloyd, Atlantic
Container Line

Hyundai/MSC Agreement (slot
charter agreement)

(a) 21.10.1995

(a) 15.11.1985
(b) Substitution

of

ACL

for

Incotrans: 30.3.1990

Cancelled

North American Pacific
Coast/Europe Space Charter and
Sailing Agreement by and among
Compagnie Ge´ne´rale Maritime,
Hapag-Lloyd Aktiengesellschaft
and Atlantic Container Line AB
(previously by and among
Compagnie Ge´ne´rale Maritime,
Hapag Lloyd Aktiengesellschaft
and Incotrans BV)

Hapag Lloyd, Nippon
Yusen Kaisha, Neptune
Orient Lines

Nippon Yusen Kaisha, Hapag
Lloyd, AG, and Neptune Orient
Lines, Ltd, Far East/United
States/North Europe Space Charter
and Sailing Agreement

(a) 22.2.1993

Hapag Lloyd
Transportaci(cid:243)n Mar(cid:237)tima
Mexicana

TMM/H-L Space Charter and
Sailing Agreement

(a) 24.12.1992

Hapag Lloyd, Nippon
Yusen Kaisha, Neptune
Orient Lines, P&O
Containers Ltd

HL/NYK/NOL and P&O Far
East/US Pacific- and Atlantic
Coasts/North Europe Discussion
Agreement (grants the parties
authority to discuss future
cooperation on various trades
including the transatlantic; at
present there are no details as to
actual contemplated cooperation
on the transatlantic)

Discussion Agreement:
(a) 27.7.1995

L 95/110

EN

Official Journal of the European Communities

9.4.1999

Parties

of

agreement

Name
description where not apparent
name)

(and

brief
from

Date of
(a)
first entry into effect and
(b) additions/deletions of parties

Hapag Lloyd, Nedlloyd
Lijnen P&O Containers
Ltd

North Europe/North American
Pacific Coast Space Charter and
Sailing Agreement

(a) 6.10.1988
(b) Substitution

of

ACL

for

Incotrans: 30.3.1990;

Deletion
Sea-Land: 31.5.1995

of CGM, ACL and

P&O Containers Ltd,
Nedlloyd Lijnen,
Sea-Land Service

P&O Containers/Nedlloyd/Sea-
Land Agreement (previously Trans
Freight Lines/Nedlloyd/Sea-Land
Agreement) (cooperative working
agreement)

(a) 28.3.1988
(b) Substitution of P&OCL for

TFL: 14.6.1990

P&O Containers Ltd,
Nedlloyd Lijnen,
Sea-Land Service, Orient
Overseas Container Line
(UK) Ltd

Space Charter and Sailing
Agreement Between Orient
Overseas Container Line (UK) Ltd
and Sea-Land Service, Inc., P&O
Containers Ltd, Nedlloyd Lijnen
BV; also known as the VSAO
Agreement

(a) 1.2.1993

P&O Containers Ltd,
Nedlloyd Lijnen,
Sea-Land Service,
AP Møller-Maersk

(a) 1.2.1993

Space Charter and Sailing
Agreement Between A.P.
Møller-Maersk Line and P&O
Containers Limited, Sea-Land
Service, Inc., Nedlloyd Lijnen BV;
also known as the VSA/Maersk
Agreement

P&O Containers Ltd,
Nedlloyd Lijnen,
Sea-Land Service,
AP Møller-Maersk,
Orient Overseas
Container Line (UK) Ltd

Cooperative Working Agreement
Among Orient Overseas Container
Line (UK) Ltd, A.P. Møller-Maersk
Line and Sea-Land Service, Inc.,
P&O Containers, Ltd, Nedlloyd
Lijnen BV; also known as Maersk,
OOCL, VSA Agreement

(a) 1.2.1993

P&O Containers Ltd,
Nedlloyd Lijnen,
Sea-Land Service,
AP Møller-Maersk

(a) 8.9.1995

Slot Exchange and Rationalisation
Agreement Between A.P.
Møller-Maersk Line and Sea-Land
Service, Inc., P&O Containers
Limited, Nedlloyd Lijnen, BV; also
known as the Maersk/VSA Slot
Exchange Agreement

P&O Containers Ltd,
Nedlloyd Lijnen,
Sea-Land Service,
Compagnie Ge´ne´rale
Maritime

Space Charter Agreement Between
Compagnie Ge´ne´rale Maritime and
Sea-Land Service, Inc., P&O
Containers Ltd and Nedlloyd
Lijnen, BV; also known as the
CGM Agreement

(a) 5.1.1991
Due to expire: 4.1.1996

P&O Containers Ltd,
Sea-Land Service, AP
Møller-Maersk

Maersk/P&O Containers/Sea-Land
Agreement (cooperative working
agreement)

(a) 11.10.1990

9.4.1999

EN

Official Journal of the European Communities

L 95/111

Parties

of

agreement

Name
description where not apparent
name)

(and

brief
from

Date of
(a)
first entry into effect and
(b) additions/deletions of parties

Cho Yang Shipping Co,
DSR-Senator Lines

Tricontinental Service Agreement
(space/slot charter, sailing and
cooperative working agreement)

(a) 10.12.1990
(b) Substitution of DSR-Senator
for DSR and Senator

Lines
Lines: 22.10.1994

Cho Yang Shipping Co,
DSR-Senator Lines,
Hanjin Shipping Co

Hanjin/Tricon Agreement
(slot charter agreement)

(a) 5.12.1994

(cid:28)Notes

For the purposes of this response to the Commission’s request for details of: “all other agreements, …,
which relate to the transatlantic trade and which involve TACA parties, …” the TACA parties have
interpreted “transatlantic trade” as synonymous with the geographic scope of the TACA ocean services
between North European and US ports; thus, for example, a cooperative agreement between two or
more TACA parties in respect of European inland rail transportation is not included in the above
schedule.

The above schedule does not include details of bilateral equipment interchange agreements between
TACA parties. Equipment interchange between TACA parties is the subject of the supplementary
notification of the TACA European Inland Equipment Interchange Arrangement lodged with the
Commission on 29 November 1995.

Further, the schedule does not include agreements which do not relate specifically to the transatlantic
trade, such as the International Council of Containership Operators (ICCO) an the Intra-Industry
Multi-Modal Committe (IMC), of which several TACA parties are members, and agreements relating
to terminal operations.’ LWD letter to the Commission dated 8 December 1995.

L 95/112

EN

Official Journal of the European Communities

9.4.1999

ANNEX V

Switching between Groups of Carriers

(Business secrets omitted)

ANNEX VI

(Business secrets omitted)