CELEX: 32019M9450
Language: en
Date: 2019-10-31 00:00:00
Title: Commission Decision of 31/10/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9450 - PPG / TIL / JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 31.10.2019
                                                                C(2019) 7988 final
                                                                                 PUBLIC VERSION
                                                                   In the published version of this decision,
                                                                   some information has been omitted
                                                                   pursuant to Article 17(2) of Council
                                                                   Regulation      (EC)      No     139/2004
                                                                   concerning non-disclosure of business
                                                                   secrets     and      other     confidential
                                                                   information. The omissions are shown
                                                                   thus […]. Where possible the
                                                                   information omitted has been replaced by
                                                                   ranges of figures or a general description.
                                                                To the notifying parties
Subject:            Case M.9450 – PPG/TIL/JV
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 26 September 2019, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          Peel Ports Group Limited (United Kingdom, ‘PPG’) and Terminal Investments
          Limited S.a.r.l (Switzerland, ‘TIL’) acquire, within the meaning of Articles 3(1)(b)
          and 3(4) of the Merger Regulation, joint control of The Mersey Docks and Harbour
          Company (L2) Limited (United Kingdom, ‘MDHCL2’) (‘Transaction’)3. PPG and
          TIL are designated hereinafter as the 'Notifying Parties'.
1    OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the
     Functioning of the European Union (“TFEU”) has introduced certain changes, such as the replacement of
     “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU will
     be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).
3    Publication in the Official Journal of the European Union No C 332, 3.10.2019, p.18.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     PPG is a port group that provides ports, shipping and marine support services. PPG
        operates in various locations in the United Kingdom, Ireland, the Netherlands and
        Australia. PPG is jointly controlled by The Peel Group (UK) and Deutsche Bank AG
        (Germany). PPG owns and operates the two container terminals in the Port of
        Liverpool, namely the Royal Seaforth Container Terminal (‘RSCT’)4 and the L2
        Terminal. In the United Kingdom and Ireland, PPG also owns the Greenock Ocean
        Terminal in Clydeport, Scotland; the Marine Terminals Ltd. (South Quays Container
        Terminal), Dublin, Ireland; and the Irlam Container Terminal in Manchester,
        England.
(3)     TIL is a terminal operating company jointly controlled by MSC Mediterranean
        Shipping Company S.A. (Switzerland, ‘MSC’) and by certain equity funds managed
        by Global Infrastructure Management, LLC, and associated with Global
        Infrastructure Partners (USA). TIL invests in, develops and manages container
        terminals in various parts of the world, for example terminals in Antwerp and
        Rotterdam, but operates pre-Transaction no terminal in the United Kingdom or
        Ireland. MSC provides worldwide container transport services and terminal services,
        and is also active as a cruise operator and in maritime ancillary activities.
(4)     MDHCL2 is a newly established entity that currently does not have operating
        business activities. PPG established MDHCL2 for the purpose of this Transaction
        and will transfer the operation of the L2 Terminal to MDHCL2. Post-Transaction,
        MDHCL2 will become the operating entity of the L2 Terminal in the port of
        Liverpool.
2.      THE CONCENTRATION
(5)     TIL will acquire 50% of the shares in MDHCL2 from PPG. The Transaction
        comprises of the acquisition of joint control over MDHCL2, the future operating
        entity of the L2 Terminal in the port of Liverpool.
(6)     TIL and PPG will have the right to appoint an equal number of members to the
        Board of Directors of MDHCL2, which, amongst others, will have the right to adopt
        strategic decisions such as the annual business plan and budget. Decisions will be
        taken by simple majority and neither TIL nor PPG has a casting vote. The deadlock
        resolution mechanism provides that PPG and TIL shall meet and seek to resolve in
        good faith the dispute underlying the deadlock situation. No shareholder has a
        casting vote. This demonstrates that TIL and PPG must reach a common
        understanding in determining the commercial policy including strategic decisions of
        MDHCL2 and are required to cooperate.5
(7)     As a result, TIL and PPG will be jointly controlling MCHCL2 post-Transaction.
        Therefore, the Transaction constitutes a concentration within the meaning of Article
        3 (1)(b) of the Merger Regulation.
4   Also known as the “L1 Terminal”.
5   Form CO, para. 69 et seq., Annex 3.1.4 Shareholders’ Agreement of 5 September 2019.
                                                        2
 ---pagebreak--- (8)     Post-Transaction, MDHCL2 will be a full-function joint venture in the meaning of
        Article 3 (4) of the Merger Regulation since it has sufficient resources, activities
        beyond one specific function for the parents,6 access to the market and operates on a
        lasting basis.7
3.      EU DIMENSION
(9)     The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 5 000 million8 (PPG: […] EUR million, TIL: […] million). Each of
        them has an EU-wide turnover in excess of EUR 250 million (PPG: […] million,
        TIL: […] million), but they do not achieve more than two-thirds of their aggregate
        EU-wide turnover within one and the same Member State. The notified operation
        therefore has an EU dimension.
4.      MARKET DEFINITION
4.1.    Introduction
(10)    TIL operates terminals in Northern Europe, but not in the United Kingdom or
        Ireland. PPG only operates terminals in the United Kingdom and Ireland. The
        Transaction therefore gives rise to a horizontal overlap on the market for container
        terminal services in Northern Europe.
(11)    TIL is vertically integrated with the containerised shipping company MSC. MSC
        provides short-sea container liner shipping services via its subsidiary W.E.C. Lines.
        W.E.C. Lines operates schedules between Belgium, Germany, the Netherlands,
        Portugal, Spain and the United Kingdom. W.E.C. Lines calls at the Liverpool RSCT
        terminal with its British Isles-Iberia trade.9 MSC also provides deep-sea container
        liner shipping services on various trades to and from Northern Europe.10
(12)    The Transaction therefore gives rise to vertical links between MSC’s activities in the
        market for containerised liner shipping services and the market for container
        terminal services.
6   MSC’s current throughput at the port of Liverpool container terminals accounts for [<40]% of the current
    capacity of the L2 Terminal. The L2 Terminal will be expanded in the next 18 months. All permits and
    regulatory approvals for the expansion were obtained, the additional land is owned, the necessary cranes
    have been purchased and are partly already shipped to the United Kingdom, see Form CO paragraph 21 et
    seq. and reply to RFI 3, question 4. The Notifying Parties therefore expect the expansion of the L2
    Terminal to be completed in [early] 2021. Following completion of this expansion, MSC will occupy
    around [<50]% of the L2 Terminal’s capacity. All terminal services for MSC will remain at arm’s length.
    Therefore, the turnover achieved with third parties is sufficient to conclude that MDHCL2 is geared to
    play an active role on the market and can be considered economically autonomous from an operational
    viewpoint in the meaning of para. 98 of the Consolidated Jurisdictional Notice.
7   Form CO, para. 74 et seq.
8   Turnover calculated in accordance with Article 5 of the Merger Regulation.
9   Form CO, para. 260 et seq.
10 Form CO, para. 247.
                                                          3
 ---pagebreak--- 4.2.    Container terminal services
4.2.1. Relevant product market
(13)    In its prior decisional practice, the Commission has defined a separate market for
        container terminal services, and has considered a possible distinction between
        hinterland traffic (containers transported directly onto/from a container vessel
        from/to the hinterland via barge, truck or train) and transhipment traffic (containers
        destined for the onward transportation to other ports or other vessels).11
(14)    The Notifying Parties do not dispute the above mentioned market definition or its
        plausible segmentations.12
(15)    For the purpose of this Decision, the question of whether the market for container
        terminal services should be segmented between hinterland and transhipment traffic
        can be left open, as the Transaction would not raise serious doubts as to the
        Transaction’s compatibility with the internal market under any such product market
        definition.
4.2.2. Relevant geographic market
(16)    The Commission has considered in its prior decisional practice that the geographic
        market for container terminal services is determined by the geographic scope of the
        container terminal services (catchment area).13
(17)    For container terminal services for transhipment traffic, the Commission has
        considered in its prior decisional practice that the relevant geographic dimension is,
        in its broadest scope, regional, such as Northern Europe including the United
        Kingdom and Ireland.14
(18)    The Notifying Parties agree with the Commission’s market definition for container
        terminal services for transhipment traffic.15
(19)    The Commission therefore considers that, for the purpose of this case, the
        geographic scope of the market for container terminal services for transhipment
        traffic is Northern Europe including the United Kingdom and Ireland.
(20)    For hinterland traffic, the Commission has considered in previous cases the
        catchment area of the ports in a certain range, such as Hamburg-Antwerp, and
        possibly an even narrower geographic market, comprising the ports of a single
        Member State only.16
11  See e.g. Cases M.9093 – DP World Investments/Unifeeder, para. 12; M.9016 – CMA CGM/Container
    Finance, para. 51.
12  Form CO, para. 157.
13  See e.g. Case M. 8120 – Hapag-Lloyd / United Arab Shipping Company, para. 22.
14  See e.g. Cases M.9093 – DP World Investments/Unifeeder, para. 15; M.9016 – CMA CGM/Container
    Finance, para. 54; M.5066 – Eurogate/APMM, para. 16.
15  Form CO, para. 240.
16  See e.g. Cases M.9093 – DP World Investments/Unifeeder, para. 15; M.9016 – CMA CGM/Container
    Finance, para. 54; M.5066 – Eurogate/APMM, para. 16.
                                                       4
 ---pagebreak--- (21)    The Notifying Parties submit that the geographic range of container terminal services
        for hinterland traffic should comprise at least all container ports in mainland Great
        Britain and claim that a narrower range would “ignore the commercial and logistical
        reality of the existing hinterland connections, which connect mainland Great Britain
        quickly and efficiently”.17 In any event, the Notifying Parties consider that at least the
        ports of Southampton, Felixstowe, London Gateway and Liverpool are substitutable
        and that all four ports could handle large containerships with more than 20 000
        TEUs.18, 19
(22)    The majority of respondents to the Commission’s market investigation in this case
        confirmed that from a demand-side perspective, the ports of Southampton, London
        Gateway and Felixstowe could be considered as substitutable with the port of
        Liverpool.20 However, the majority of respondents to the market investigation
        indicated that other ports in mainland Great Britain such as Bristol, Clydeport
        (Glasgow and surroundings), Manchester, Newport or Cardiff would not be an
        alternative to the port of Liverpool, because these ports would either not have the
        facilities for larger containerships or because they lack the required hinterland
        connections.21
(23)    For the purpose of this Decision, the exact geographic scope of the market for
        container terminal services for hinterland traffic can be left open, as no serious
        doubts would arise as to the Transaction’s compatibility with the internal market also
        under the narrower plausible geographic market definition comprising only the four
        ports of Southampton, Felixstowe, London Gateway and Liverpool.
(24)    The Commission will assess the effects of the Transaction on the markets for
        container terminal services in its broadest scope (Northern Europe including the
        United Kingdom and Ireland) and in its narrowest possible scope (the ports of
        Liverpool, Southampton, London and Felixstowe as well as ports in mainland Great
        Britain for hinterland traffic).
4.3.    Deep-sea container liner shipping services
4.3.1. Relevant product market
(25)    In its prior decisional practice, the Commission has defined separate product markets
        for deep-sea container liner shipping services and short-sea container liner shipping
        services.22
17  Form CO, para. 233.
18  See the Notifying Parties’ reply to RFI 1 of 30 September 2019, question 4.
19  TEU refers to twenty-foot equivalent unit.
20  See agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal customer
    A, para. 7 and 8; agreed non-confidential minutes of a conference call of 2 October 2019 with a terminal
    customer, para. 5; agreed non-confidential minutes of a conference call of 10 October 2019 with a
    terminal customer, para. 5.
21  See agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal customer
    A, para. 8; agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal
    customer B, paras. 4 and 6; agreed non-confidential minutes of a conference call of 2 October 2019 with a
    terminal customer, para. 6.
22  See e.g. Case M. 8330 – Maersk Line/HSDG, para. 19.
                                                          5
 ---pagebreak--- (26)    Deep-sea container liner shipping services comprise the offer of regular, scheduled
        services for the sea transportation of containerised cargo.23
(27)    A possible narrower product market for deep-sea container liner shipping services is
        that for the transport of refrigerated goods, which could be limited to refrigerated
        (reefer) containers only or could include transport in conventional reefer vessels. In
        past cases, the Commission looked separately at the plausible narrower markets for
        reefer containers and non-refrigerated (warm) containers only when the share of the
        reefer containers in relation to all containerised cargo was 10% or more on both legs
        of trade.24 In the present Transaction, this is the case for three trades on which MSC
        is providing deep-sea container liner shipping services, namely the Northern Europe
        – Australia/New Zealand, the Northern Europe – West Africa and the Northern
        Europe – Caribbean & Central America trade.25
(28)    While the Notifying Parties do not dispute the above mentioned market definition,
        they argue that a reefer market would not be relevant for the purpose of assessing the
        Transaction.26 The Notifying Parties have nonetheless provided the Commission
        with the information necessary to assess the effects of the Transaction.
(29)    The Commission notes that the volume of reefer cargo shipped to and from the port
        of Liverpool on the legs of trade of the three trades mentioned above is basically
        non-existent and amounts to at most 0.007% of the overall reefer cargo volume on
        each leg of trade.27 This Decision assesses the competitive effects of the acquisition
        of joint control over the L2 Terminal in the port of Liverpool. Therefore, for the
        purpose of assessing the vertical link between container terminal services and deep-
        sea container shipping services created by the Transaction, the Commission
        considers it not meaningful to assess a narrower market segment for reefer
        containers only.
(30)    The Commission will therefore, for the purpose of this Decision, assess only the
        overall market for deep-sea container liner shipping services.
4.3.2. Relevant geographic market
(31)    While the Commission has in its prior decisional practice left open whether the
        geographic scope should comprise trades, defined as the range of ports which are
        served at both ends of the service (e.g. Northern Europe – North America) or each
        leg of trade (each direction of the route separately, e.g. westbound and eastbound
        within a given trade), in its more recent practice, the Commission concluded that
        container liner shipping services are geographically defined on the basis of the legs
        of trade (e.g. Northern Europe-North America eastbound and Northern Europe-North
        America westbound).28
23  See e.g. Case M.8330 – Maersk Line/HSDG, para. 10.
24  See e.g. Cases M.8594 – COSCO Shipping/OOIL, para. 13; M.8120 – Hapag-Lloyd/United Arab Shipping
    Company, para. 11.
25  Form CO, para. 376, table 64.
26  Form CO, para. 172 et seq.
27  See the Notifying Parties’ reply to RFI 3 of 11 October 2019, question 3.
28  See e.g. Cases M.8594 – COSCO Shipping/OOIL, para. 14; M.8330 – Maersk Line/HSDG, para. 15.
                                                          6
 ---pagebreak--- (32)    The Notifying Parties do not dispute the above mentioned market definition,29 and
        submit that the following ranges of ports constitute distinct ends of legs of trade:30
               Northern Europe;
               Australia and New Zealand;
               West Africa;
               South Africa;
               East Africa;
               Central America and Caribbean;
               South America East Coast;
               South America West Coast;
               Far East;
               Indian Subcontinent;
               Middle East;
               North America.
(33)    In line with the Commission’s prior decisional practice, the geographic market for
        deep-sea container liner shipping services is defined on the basis of legs of trades as
        set out in the previous paragraph.
4.4.    Short-sea container liner shipping services
4.4.1. Relevant product market
(34)    Short-sea container liner shipping services involve the provision of regular,
        scheduled intra-continental (usually costal trade) services for the carriage of cargo by
        container liner shipping companies.31
(35)    In its prior decisional practice related to the short-sea shipping services, the
        Commission concluded as regards the type of cargo transported, that short-sea
        container liner shipping services should be distinguished from non-containerised
        shipping, such as bulk shipping, but it has ultimately left open whether wheeled
        cargo and short-sea container liner shipping services should be considered as
        belonging to the same product market.32 The Commission considered in its prior
        decisional practice in short-sea container liner shipping, in trades with a share of
        reefer containers in relation to all containerized cargo below 10% in both directions,
29  Form CO, para. 252.
30  Form CO, para. 245 and 249.
31 See e.g. Case M.9016 – CMA CGM/Container Finance, para. 29.
32 See e.g. Cases M. 9016 – CMA CGM/Container Finance, para. 31 et seq.; M.8330 – Maersk Line/HSDG,
    para. 19.
                                                    7
 ---pagebreak---         transport in reefer containers is not assessed separately, but as part of the overall
        market for container liner shipping services.33
(36)    The Notifying Parties do not dispute the above mentioned market definition and
        submit that the precise market definition can be left open.34 Concerning reefer
        container transport, the Notifying Parties submit that MSC’s short-sea container liner
        shipping company W.E.C. Lines does not have any reefers in its container fleet and
        that an analysis of the reefer segment would not be relevant.35
(37)    Considering that the L2 Terminal is a container terminal36 and W.E.C. Lines does
        not have reefers in its container fleet, for the purposes of this Decision, the
        Commission will assess the effects of the Transaction on the market for short-sea
        container shipping services and will not assess a market for the transport of reefer
        containers only.
4.4.2. Relevant geographic market
(38)    In its prior decisional practice, the Commission considered that the relevant
        geographic market for short-sea container liner shipping services should be defined
        on the basis of (i) either single trades or corridors, defined by the range of ports
        which are served at both ends of the service;37 or (ii) single legs of trade.38 In a prior
        decision concerning a horizontal overlap in short-sea container liner shipping
        services on the trade between the British Isles and the Iberian Peninsula, the
        Commission, while ultimately leaving the market definition open, also considered
        Spain and Portugal as well as Ireland and the United Kingdom separately.39
(39)    The Notifying Parties consider that the geographic market for short-sea container
        liner shipping services should be defined on the basis of single trades. The Notifying
        Parties submit that considering Spain and Portugal as well as the United Kingdom
        alone would be too narrow.40 The Notifying Parties have nonetheless provided the
        Commission with the necessary information to assess the effects of the Transaction.
(40)    Given that the Transaction does not raise serious doubts as to its compatibility with
        the internal market under any plausible geographic market definition, the exact scope
        of the geographic market for the purposes of this Decision can be left open.
33  See e.g. Case M.9016 – CMA CGM/Container Finance, para. 33; M.7523 – CMA CGM/OPDR, para. 40;
    M.3829 – Maersk/PONL, para. 10; M.3973 – CMA CGM/Delmas, para. 7.
34  Form CO, para. 193.
35  See the Notifying Parties’ reply to RFI 3 of 11 October 2019, question 1.
36  Form CO, para. 2.
37  See e.g. Cases M.9016 – CMA CGM/Container Finance, para. 40 et seq.; M.7523 – CMA CGM/OPDR,
    para. 59.
38  See e.g. Case M. 9016 – CMA CGM/Container Finance, para. 44 et seq.; M.8330 - Maersk Line/HSDG,
    para. 20; M.7523 – CMA CGM/OPDR, para. 60.
39  See Case M.7523 – CMA CGM/OPDR, paras. 61 and 88 et seq.
40  See the Notifying Parties’ reply to QP2 of 24 September, question 8; reply to RFI 2 of 2 October, question
    1c.
                                                          8
 ---pagebreak--- 5.      COMPETITIVE ASSESSMENT
(41)    The Transaction gives rise to both a horizontal overlap in the market for container
        terminal services and vertical links between MSC’s activities in the market for
        containerised liner shipping services and the market for container terminal services.
5.1.    Horizontal overlap: container terminal services
(42)    In addition to the L2 Terminal and the RSCT in the port of Liverpool, at the time of
        this Decision, PPG owns and operates the following terminals: Greenock Ocean
        Terminal at the Clyde river in Glasgow (part of PPG’s Clydeport subsidiary,
        Scotland), the Marine Terminals Ltd. (South Quays Container Terminal) in Dublin,
        Ireland, and the Irlam Container Terminal in Manchester, England.41 (see Figure 1
        below)
(43)    TIL currently operates several container terminals in Northern Europe, namely
        Terminals Normandie MSC and Porte Océane S.A. in Le Havre, France, MSC Gate
        in Bremerhaven, Germany, DMT B.V. terminal in Rotterdam, the Netherlands, and
        MSC PSA European Terminal N.V. in Antwerp, Belgium.42 (see Figure 1 below)
                     Figure 1. Major container ports in Northern Europe43
(44)    The market shares of PPG and TIL on the market for container terminal services and
        its plausible segments are shown in Table 1 below.
41  Form CO, para. 9.
42  Form CO, para. 39.
43 A significant number of smaller container ports are not included, as this map shows only the most
    significant container ports in Northern Europe. Source: Form CO, Figure 5.
                                                          9
 ---pagebreak---  ---pagebreak---         Commission considers that the Transaction only has an immaterial effect on this
        market.
(46)    Therefore, in this this Decision, the Commission will further assess only the vertical
        links between the container terminal services and containerised liner shipping
        services.
5.2.    Vertical links between the container terminal services and container liner
        shipping services
5.2.1. Legal framework
(47)    The Commission will examine whether the Transaction is likely to result in
        foreclosure in any of the markets that are vertically affected by the Transaction.
(48)    According to the Non-Horizontal Merger Guidelines,50 foreclosure occurs when
        actual or potential rivals' access to markets is hampered, thereby reducing those
        companies' ability and/or incentive to compete.51 Such foreclosure can take two
        forms: (i) input foreclosure, when access of downstream rivals to supplies is
        hampered;52 and (ii) customer foreclosure, when access of upstream rivals to a
        sufficient customer base is hampered.53
(49)    For input or customer foreclosure to be a concern, three conditions need to be met
        post-transaction: (i) the merged entity needs to have the ability to foreclose its rivals;
        (ii) the merged entity needs to have the incentive to foreclose its rivals; and (iii) the
        foreclosure strategy needs to have a significant detrimental effect on competition on
        the downstream market (input foreclosure) or on customers (customer foreclosure).54
        In practice, these factors are often examined together since they are closely
        intertwined.
5.2.2. Analytical framework
(50)    Shipping companies provide their services either individually with their own vessels
        (owned or charted) or through co-operation agreements with third party shipping
        companies.55
(51)    Under a slot charter agreement, a shipping company “rents” a predetermined number
        of container slots on a vessel of another shipping company in exchange for cash
        (normal or regular slot charter) or slots on its own vessels (slot-exchange). Slot
        charter agreements do not normally involve joint decision making concerning
        marketing, ports of call, schedule or the use of the same port terminals.56
(52)    Consortia are operational agreements between shipping companies established on
        individual trades for the provision of a joint service. Alliances are matrices of vessel
50  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings, OJ C 265, 18.10.2008, p. 7.
51  Non-Horizontal Merger Guidelines, para. 29.
52  Non-Horizontal Merger Guidelines, para. 31.
53  Non-Horizontal Merger Guidelines, para. 58.
54  Non-Horizontal Merger Guidelines, paras. 32 and 59.
55  See e.g. Case M.8594 – COSCO Shipping/OOIL, para. 26.
56  See e.g. Case M.8594 – COSCO Shipping/OOIL, para. 27.
                                                        11
 ---pagebreak---         sharing agreements that cover multiple trades rather than one trade, as opposed to
        consortia. In its prior decisions relating to container liner shipping services, the
        Commission considered that shipping companies that are members of
        alliances/consortia (the latter are also called vessel sharing agreements, “VSAs”)
        jointly agree on the capacity that will be offered by the service, on its schedule and
        ports of call. Generally, each party provides a number of vessels for operating the
        joint service and in exchange receives a number of container slots across all vessels
        deployed in the joint service based on the total vessel capacity that it contributes.
        The allocation of containers is usually predetermined and shipping companies are
        not compensated if the slots attributed to them are not used. The costs for the
        operation of the service are generally borne by the vessel providers individually so
        that there is limited to no sharing of costs between the participants in a consortium.57
(53)    In previous cases, the Commission also considered that it is not appropriate to assess
        the effects of the concentration only on the basis of the parties’ individual market
        shares. Such an approach would not adequately take into account the fact that a
        member of an alliance/consortium can have a significant influence on operational
        decisions determining service characteristics. This influence can have a dampening
        effect on competition on the trade/s serviced by the alliances/consortia in question.
        Hence, the competitive assessment should also be based on the aggregate shares of
        the parties’ alliances/consortia.58
(54)    The Notifying Parties argue that the competitive analysis of the vertical links created
        by the Transaction should be based only on MSC’s market shares and should not
        include the market shares of MSC’s consortia partners.59
(55)    In line with its prior decisional practice,60 the Commission will assess the effects of
        the Transaction by taking into account the aggregate market shares of MSC and of
        its partners in the respective consortia.
5.2.3. Vertical link – market for container terminal services and deep-sea container liner
        shipping services
(56)    MSC is providing deep-sea container liner shipping services on various trades to and
        from Northern Europe. MSC’s market share (including its consortia partners) is
        shown in Table 2 below.
57  See e.g. Case M.8594 – COSCO Shipping/OOIL, paras. 28-29.
58  See e.g. Cases M.8594 – COSCO Shipping/OOIL, paras. 32-33; M.8330 – Maersk Line/HSDG, para. 60.
59 Form CO, paras. 173; 283; 330 et seq.
60 See also Case M.8459 – TIL/PSA/PSA DGD, para. 52.
                                                    12
 ---pagebreak---  ---pagebreak---          Northern Europe – South America East Coast               [20-30]%              [40-50]%68
         South America East Coast – Northern Europe               [20-30]%              [30-40]%69
         Northern Europe – South America West Coast               [20-30]%                  -
         South America West Coast – Northern Europe               [30-40]%                  -
(57)    As shown in Table 2 above, MSC (including its consortia partners) has a market
        share of above 30% on the following 13 legs of trade: Northern Europe – South
        Africa, South Africa – Northern Europe, East Africa – Northern Europe, Northern
        Europe – Far East, Far East – Northern Europe, Northern Europe – Indian
        Subcontinent, Indian Subcontinent – Northern Europe, Northern Europe – North
        America, North America – Northern Europe, Northern Europe – South America East
        Coast, South America East Coast – Northern Europe, Northern Europe-South
        America West Coast, South America West Coast – Northern Europe.
(58)    If an overall market for container terminal services or a market for container terminal
        services for hinterland traffic are considered on which the Notifying Parties’ market
        shares are below 30%, these legs of trade are vertically affected by the Transaction.
(59)    If a market for container terminal services for transhipment traffic is considered, on
        which the Notifying Parties’ combined market share is above 30%, all legs of trade
        mentioned in the table above are vertically affected markets.
(60)    Therefore, the Commission will assess in the following all of the above legs of trade
        as vertically affected markets.
5.2.3.1. Foreclosure of competing container liner shipping companies from procuring
           container terminal services
(61)    The Commission considers that the Transaction would not lead to any foreclosure
        strategy, aimed at foreclosure of competing container liner shipping companies from
        procuring container terminal services.
(62)    The Notifying Parties would not have the ability to engage in such a strategy. The
        vertical link between different legs of trades and container terminal services based
        on the established geographic market definitions does not seem to reflect the
        business reality, as no terminal, let alone a single harbour, is specific to any
        individual trade in this Transaction. Every container terminal serves vessels sailing
        on a variety of trades. The relevant end of trade in this Transaction for the deep-sea
        container liner shipping services, Northern Europe, encompasses the full range of
        harbours from the Atlantic coast of the Iberian Peninsula to the Baltic Sea. Any high
        market share of MSC, including its consortia partners as the case may be, on an
        affected leg of trade does not mean that it can foreclose the remaining container liner
        shipping companies active on that trade because it has also a substantial market share
        in the market for terminal services in a given harbour, here the L2 Terminal in the
    partners on this leg of trade are overstated since they include also the SCAs; see the Notifying Parties’
    reply to RFI 4 of 24 October 2019.
68 VSA with Hapag Lloyd.
69 VSA with Hapag Lloyd.
                                                          14
 ---pagebreak---         port of Liverpool. Instead, competing container liner shipping companies serving
        Northern Europe as one relevant end of a trade could procure port terminal services
        from several alternative providers. Following the Transaction, the competing
        container liner shipping companies will continue to be able to source container
        terminal services from alternative providers in the ports belonging to the same
        catchment area as the port of Liverpool. In England alone, deep-sea container liner
        shipping companies have the ports of London, Southampton and Felixstowe which
        are not controlled by any of the Notifying Parties as an alternative, which seem to be
        the closest competitors to the port of Liverpool.70
(63)    Moreover, in the Commission’s view, the Notifying Parties will not have the
        incentive to discontinue providing container terminal services to competing liner
        shipping companies in the L2 Terminal due to the following reasons.71 First, as the
        Commission has found in previous cases, the profit margins that terminal operators
        obtain from the provision of container terminal services are usually higher than those
        that vessels operators derive from their liner shipping activities.72 Therefore, the
        Commission considers that the Notifying Parties post-Transaction do not have an
        incentive to foreclose container liner shipping companies competing with MSC from
        procuring container terminal services at L2 Terminal. Second, while it is intended
        that MSC increases its throughput at the L2 Terminal, following expansion of the L2
        Terminal in 2021, MSC’s throughput at the L2 Terminal would amount to [<50]% at
        most.73 It is therefore intended to achieve the vast majority of the throughput at the
        L2 Terminal with third-party shipping lines. Moreover, Global Infrastructure
        Management (‘GIP’), the other shareholder in TIL, is an institutional investor, with
        no activities in the container liner shipping business in the EEA. GIP will not have
        an incentive to block access of MSC's rivals or to give preferential treatment to
        MSC, but would insist on arm's length dealings.
(64)    During the Commission’s market investigation, one liner shipping company
        currently calling at the RSCT in the port of Liverpool voiced concerns that PPG
        post-Transaction could potentially discontinue or reduce investments in the RSCT or
        its maintenance which would negatively affect the quality of services. 74 However, on
        the basis of the evidence submitted by the Notifying Parties and the Commission’s
        market investigation, the Commission is of the view that these concerns are not
        substantiated.
(65)    In particular, the majority of respondents to the Commission’s market investigation
        expressing an opinion on this question considered it unlikely that the Transaction
        would have a negative impact on the operation at the RSCT. For example, one
        respondent considered that the quality of service would remain the same post-
70 See Section 4.1.2 of the Decision.
71 As explained above in paragraph 49 of this Decision, for input or customer foreclosure to be a concern,
   three conditions need to be met: (i) the merged entity needs to have the ability to foreclose its rivals; (ii)
   the merged entity needs to have the incentive to foreclose its rivals; and (iii) the foreclosure strategy needs
   to have a significant detrimental effect on competition. These three conditions are cumulative. Therefore,
   the conclusion that the merged entity lacks the ability to foreclose is already sufficient for the Commission
   to conclude that the transaction would not lead to a foreclosure strategy.
72 See e.g. Case M.9093 – DP World Investments/Unifeeder, para. 64.
73 See also footnote 6.
74 See agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal customer
   A, para. 14.
                                                          15
 ---pagebreak---         Transaction at the RSCT. Another respondent explained that the L2 Terminal would
        rather be a supplement for deep-sea services than a replacement for the RSCT.75
(66)    PPG explained that the RSCT has been a profitable terminal with steady volumes
        which should continue post-Transaction.76 PPG submitted that it expects its
        customers (with the exception of MSC) to continue calling at the RSCT and that it
        had not made any proposal to its RSCT customers to switch volumes to the L2
        Terminal (with the exception of MSC).77 In addition, PPG’s five year business plan
        for the RSCT shows that [details about future investment plans].78 Furthermore, PPG
        has a management team responsible for the development and growth of the RSCT.79
(67)    The RSCT is solely controlled by PPG. Post-Transaction, the L2 Terminal will be
        jointly controlled by PPG and TIL. Considering that PPG will achieve the profit
        from the RSCT alone, whereas the profit from the L2 will be split between PPG and
        TIL, the Commission considers that PPG would not have any incentive to
        discontinue its investments in the RSCT.
5.2.3.2. Foreclosure of other terminal operators’ access to MSC’s demand of container
          terminal services
(68)    In the Commission’s view, the Notifying Parties would not have the ability or the
        incentive to foreclose access of the L2 Terminal’s competitors to MSC’s demand of
        container terminal services for deep-sea container liner shipping.
(69)    First, neither the market investigation nor the evidence submitted by the Notifying
        Parties provide any indication that post-Transaction the Notifying Parties would
        have the ability or incentive to engage in foreclosure strategies.80
(70)    Second, as regards ability, it is an industry practice that as a member of consortia,
        MSC cannot unilaterally choose to divert its deep-sea trade volume to the terminal in
        which it has an equity stake, because its consortia partners have a say and may have
        preferences for other ports.81 This is even less plausible to achieve at the entire
        consortia level which would require even more compromises. The Transaction is
        therefore unlikely to lead to any significant changes in the competitive environment
        in this area.
(71)    Third, the Commission’s market investigation showed that liner shipping companies
        typically procure port terminal services from several alternative providers which are
        chosen on the basis of various practical considerations, including commercial
75  See agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal customer
    B, paras. 11-12; agreed non-confidential minutes of a conference call of 10 October 2019 with a terminal
    customer, para. 10.
76  See the Notifying Parties’ reply to RFI 1 of 30 September 2019, question 3b.
77  See the Notifing Parties’ reply to RFI 1 of 30 September 2019, question 3d.
78  See the Notifying Parties’ reply to RFI 1 of 30 September 2019, question 3c and RFI 3 of 11 October
    2019, question 4.
79  See the Notifying Parties’ reply to RFI 3 of 11 October 2019, question 4.
80  See, for example, agreed non-confidential minutes of a conference call of 10 October 2019 with a terminal
    customer, para. 14 and agreed non-confidential minutes of a conference call of 2 October 2019 with a
    terminal customer, para. 8.
81  See Drewry Annual Report 2018, Drewry Global Container Terminal Operations – Annual Review and
    Forecasts, Form CO, Annex 7.4.a, p. 20.
                                                         16
 ---pagebreak---         conditions82 and transfer times.83 There is therefore also no incentive for MSC, as
        such a potential foreclosure strategy of competing terminals by concentrating its
        deep-sea services at the L2 Terminal would defeat the purpose of having access to
        various ports which is necessary in order to make sure that MSC is able to reach its
        customers at optimal transfer times.
(72)    Last, even if it were to engage in a foreclosure strategy, MSC’s deep-sea trade
        volume is not sufficiently large on the overall Northern European market in order to
        harm the other terminal operators competing with the L2 Terminal. Indeed, MSC’s
        volume on all Northern European trade legs combined was approximately […]
        million TEUs in 2018 (out of the estimated total of […] million TEUs), which
        amounted to less than [<40]%.84
(73)    The Commission therefore considers that following the Transaction, the competing
        container terminal services providers will continue to have economic alternatives to
        avoid being foreclosed.
5.2.3.3. Conclusion
(74)    In light of the above considerations, the Commission concludes that the Transaction
        would not raise serious doubts as to its compatibility with the internal market as a
        result of (input or customer) foreclosure concerns on the markets for container
        terminal services and deep-sea container liner shipping services.
5.2.4. Vertical link – market for container terminal services and short-sea container liner
        services
(75)    The L2 Terminal can accommodate the short-sea container vessels.85 The Notifying
        Parties submit that for short sea service, MSC calls at the RSCT through its
        subsidiary W.E.C. Lines that operates in short-sea container liner shipping service
        with its British Isles-Iberia trade.86 At present, MSC has no plans to transfer the
        W.E.C. Lines’ short-sea volumes from the RSCT to the L2 Terminal, however, there
        remains a possibility that it might switch to the L2 Terminal in the future.87
(76)    Given the market share data provided in Table 3 below, the Transaction gives rise to
        a vertically affected market between the container terminal services and the short-sea
        container liner services on the Portugal-United Kingdom leg of trade.
82  Agreed non-confidential minutes of a conference call of 2 October 2019 with a terminal customer, para. 7.
83  Agreed non-confidential minutes of a conference call of 10 October 2019 with a terminal customer, para.
    5.
84  Based on the information submitted by the Notifying Parties in Form CO, Table 38 and the Notifying
    Parties’ reply to RFI 3 of 11 October, question 2.
85  As explained by the Notifying Parties, the L2 Terminal can accommodate short-sea container vessels that
    are greater than approximately 2 000 TEUs. Smaller vessels cannot be accommodated at the L2 Terminal
    due to the tidal range of the river Mersey. See the Notifying Parties’ reply to RFI 2 of 2 October 2019,
    question 1. At present, approximately [20-30]% of the RSCT’s volumes are handled from vessels that are
    greater than 2 000 TEUs. See the Notifying Parties’ reply to RFI 3 of 11 October 2019, question 6b.
86  See Form CO, paras. 260-262.
87  See the Notifying Parties’ reply to RFI 2 of 2 October, question 1b.
                                                          17
 ---pagebreak---              Table 3. MSC’s market shares for various short-sea trades, 201888
                          Leg of Trade                                  MSC’s market share89
                    British Isles-Iberia trade                                   [5-10]%
                British Isles-Iberia leg of trade                                  [0-5]%
                Iberia-British Isles leg of trade                               [10-20]%
             Spain – United Kingdom leg of trade                                   [0-5]%
             United Kingdom – Spain leg of trade                                   [0-5]%
           Portugal – United Kingdom leg of trade                               [50-60]%
           United Kingdom – Portugal leg of trade                               [20-30]%
(77)   In the Commission’s view, the Notifying Parties would not have the ability or the
       incentive to engage in foreclosure due to the following reasons.
(78)   First, the Transaction would not lead to any foreclosure strategy aimed at foreclosure
       of competing container liner shipping companies from procuring container terminal
       services as no terminal, let alone a single harbour, is specific for any individual
       trade, including the Portugal – United Kingdom leg of trade, in this Transaction.
       Indeed, there are many other ports in the mainland Great Britain, which provide
       container terminal services to short-sea vessels, including the RSCT. Therefore,
       following the Transaction, the competing container liner shipping companies will
       continue to be able to source container terminal services for short-sea services from
       alternative providers.
(79)   Moreover, the L2 Terminal is only jointly-controlled by TIL which is then in turn
       jointly controlled by MSC and GIP, an institutional investor, with no activities in the
       container liner shipping business in the EEA. GIP will not have an incentive to block
       access of MSC's rivals or to give preferential treatment to MSC, but would insist on
       arm's length dealings. In addition, the other parent company of the L2 Terminal’s
       operating entity, PPG, would also not benefit from any foreclosure strategy as it
       operates other terminals in the mainland Great Britain.90 Therefore, PPG would be
       likely to block any such foreclosure strategy.
(80)   In addition, the Commission’s market investigation confirmed that the L2 Terminal
       might not be a preferred option to some customers due to big tidal swings, and
       strong current,91 therefore for such customers the RSCT or other competing
       terminals will remain a more viable option. Indeed, the L2 Terminal is directly at the
       riverside outside the lock and is made for larger vessels which are above 2 000
       TEUs,92 whereas the RSCT is inside the lock. In addition, the L2 Terminal is
88 These market shares are W.E.C. Lines’ own estimates and are based on volume in TEUs, see the
   Notifying Parties’ reply to QP2 of 24 September, question 8 and reply to RFI 2 of 2 October 2019,
   question 1c.
89 W.E.C. Lines is not a member of any consortia or vessel sharing agreement, see Form CO, para. 271.
90 For example, Greenock Ocean Terminal in Clydeport, Scotland and the Irlam Container Terminal in
   Manchester, England.
91 Agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal customer A,
   para. 11.
92 Agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal customer B,
   para. 7; the Notifying Parties’ reply to RFI 3 of 11 October 2019, question 6a.
                                                          18
 ---pagebreak---        equipped with bigger cranes, which are less suitable for smaller intra-regional
       vessels.93
(81)   The market investigation also showed that for certain customers, the L2 Terminal
       will not be a viable option due to its technical specifications. The L2 Terminal has a
       straight berth, therefore it cannot accommodate vessels with stern ramps which need
       a pontoon or berth at the rear of the vessel in order to drop the ramp to load and
       discharge cargo.94 This technical incompatibility may prohibit certain short-sea
       customers from calling at the L2 Terminal for technical reasons.95
(82)   Second, in the Commission’s view, the Transaction would not lead to any strategy
       aimed at foreclosure of other terminal operators’ access to W.E.C. Lines’ demand of
       container terminal services for short-sea container liner shipping. The Commission
       considers that there is close to no possibility that the Notifying Parties could benefit
       from a potential foreclosure strategy of competing terminals by concentrating its
       short-sea services at the L2 Terminal, because it would defeat the purpose of the
       short-sea shipping operations. Indeed, short-sea container liner shipping is the
       provision of regular, scheduled costal trade services linking various ports located at
       different costal locations. Given this, it would not make economic sense for W.E.C.
       Lines to seek concentrating its business at a single port.
(83)   In light of the above considerations, the Commission concludes that the Transaction
       would not raise serious doubts as to its compatibility with the internal market as a
       result of (input or customer) foreclosure concerns in the markets for container
       terminal services and short-sea container liner services.
6.     CONCLUSION
(84)   For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with the
       EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
       Merger Regulation and Article 57 of the EEA Agreement.
                                                              For the Commission
                                                              (Signed)
                                                              Margrethe VESTAGER
                                                              Member of the Commission
93 Agreed non-confidential minutes of a conference call of 30 September 2019 with a terminal customer B,
   para. 7.
94 See the Notifying Parties’ reply to RFI 3 of 11 October 2019, question 6a.
95 See the Notifying Parties’ reply to RFI 3 of 11 October 2019, question 6a.
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