The Tramp Shipping Sector
Philip Wareham, Partner
The London Shipping Law Centre
COMPETITION LAWS AND SHIPPING
The Tramp Shipping Sector
Philip Wareham, Partner
Holman Fenwick & Willan, London
Four questions
(1)
What chance exemption for pools?
(2)
What are the pros & cons of FFJVs?
(3)
What are the other options?
(4)
Will the promised Commission guidelines help?
What is causing the splash?
(1) What chance exemption?
• Role of self-assessment
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Precautionary
Identify the major risks
Paper trails
Expert advice
Involving customers
• Guidelines: solution or problem?
– General guidelines on Article 81(3)
– Highly theoretical approach
– Horizontal guidelines strict about joint commercialisation
What chance exemption?
• Is the price fixing etc. justified?
• Not unless "it is indispensable for the integration of
other marketing functions, and this integration will
generate substantial efficiencies."
• More likely for consumer than industrial goods
• Not savings only from elimination of costs "that are
inherently part of competition", but from integration
What chance exemption?
• What is "joint production"?
– Cf. Specialisation Bloc Exemption (Regulation 2658/2000)
– What does a pool manager do?
– Functional integration essential
• Contrast liners
– More obviously price fixing
– Effect on the market
– Supply-demand balance of power
• Member vs. administration-controlled
– Different models?
– Same analysis?
– Multiple pools
What chance exemption?
• Consumer pass-on
– Perhaps not a given
– But buyer power a factor
• Indispensability
– Non-compete and other problematic clauses
• Foreclosure
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Market definition issues
Demand-side substitution said to be key
Distinction by type of vessel
Importance of supply-side substitution
Global geographical markets
(2) The pros & cons of FFJVs
• Regulation 139/2004 (EC Merger Regulation)
– Applies to full-function joint ventures
– Focus on substantially impeding effective competition
– But prior filing and clearance
• Must satisfy two criteria:
– Autonomous undertaking operating on the market on a lasting basis
– Jointly controlled
– NYKLauritzenCool model
• Permanent loss of commercial control
– Risk of commercial fallout
– Out of the frying pan….?
(3) What are the options?
• Go for a minimalist option
– e.g. remove non-compete clauses
• Find a safe harbour and defend
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No impact on competition at all?
De minimis market share
Analogy with liner consortia
Specialisation or other possible harbours
• Restructure
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Other options apart from FFJVs include ad hoc chartering
M&A
• Disband
(4) Will the Commission guidelines
help?
• When?
• More than a broad statement of principles?
• How safe a "safe harbour" anyway?
• Risk of Commission action?
• Who is for a test case?
• Conclusions
The London Shipping Law Centre 29 May 2007
The Tramp Shipping Sector
Philip Wareham, Partner
Marlow House, Lloyds Avenue London EC3N 3AL, UK
[email protected]
Tel: +44 20 7264 8403
hfw.com
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