Fase VI: Organización del trabajo final
1. Datos generales del docente
The “relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer by reason of the products' characteristics, their prices and their intended use”.81 In order to define the product market – especially in long distance trades – the Commission studied the substitutability of other types of transport and the substitutability of the services offered on those and other routes (i.e. the geographic substitutability).
To begin with, we have to distinguish between ocean-borne shipping and intra-European short sea transport. In the latter, substitutability can be easily achieved by other modes (e.g. inland waterways, rail, road, air).82 For the purposes of the thesis we examine only the ocean borne shipping that includes EU catchment areas.83
The basis of this methodology exists in the Commission’s Notice of December 199784 and was followed in TACA85 (1998) (in different
80 For example, in the Indian Subcontinent and Southeast Asia, where most of the demolition yards are currently located, much of the scrap metal is used by the local steel market, though availability of scrapping facilities is sometimes a consideration. In virtue of the market forces, prices can be very volatile, fluctuating from a trough of $100/lwt in the 1980’s, to $200 / lwt in the 1990’s and $650 in the 2008 with an immediate drop to $260 in the 2009. The price also varies from ship to ship, depending on its suitability for scrapping and on how it is equipped.
81 Commission Notice on the definition of relevant market for the purposes of Community competition law [OJ C 372 of 9.12.1997]. This definition is also adopted in the special Competition Maritime Guidelines (2008). See: on the application of Article 81 of the EC Treaty to maritime transport services [OJ 2008/C 245/02] para 17.
82 Voionmaa Tapani, ‘Competition Law and Short Sea Shipping including some anomalies along the line’, in Wareham (2010) op. cit. p175
83 See Delimitations Section in Conclusion p.281
84 EU Commission Notice on the Definition of Relevant Market for the purposes of Community Competition Law [1997] C372/5-13
85 TACA Decision (1998) paras 60-75.
56 order and different focus) and several other decisions noted in Blanco (2007)86. Paragraph 20 of the aforementioned EU Commission Notice explains situations whereby ‘Supply Substitutability’ (SS) is relevant:
“...whereby a supplier is able to switch production to other products and market them in the short term without incurring significant costs, signifying thus the importance of SS in connection with potential competition”. The above acquires significant importance in the effort to identify the key players and actual market size. Regardless of whether there is any competition among scheduled / non-scheduled shipping or other modes, a narrower product market (limited to a particular type of product transported by sea) would reduce competitive factors, while a wider one would allow the opposite. The same would apply for the service provided by certain vessels, should one want to take into account the carrying capacity rather than the demand for a certain type of transport service (e.g. bulk cargo, cars, containers). For example, if we conclude a narrow market interpretation, the transport of perishable goods could be limited to reefer containers or include transport in conventional reefer vessels.
The resolution arrives from Community decisions rather than the published guidelines of the EU Commission that appear from time to time. For instance, the EU Commission, within its Guidelines for Maritime Transport (2008)87, defines the relevant market as follows:
The relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products' characteristics, their prices and their intended use.
Obviously the above Guidelines, however recent they may be, cover a substantial area; in my opinion, they also leave many grey areas untouched. Firstly, the Guidelines assume that there is sufficient
86 Blanco (2007) ibid. pp. 432-443
87 EU Commission’s Guidelines (2008) on the application of Article 81 of the EC Treaty to maritime transport services, op. cit. para 17
57 guidance on the definition of "the relevant market" from case law.
Undoubtedly the current jurisprudence consistently defines the market narrowly; Chuah88 notes this, in addition to pointing out that there is no adequate case law for the tramp sector. Secondly, I believe that there is a general inconsistency in the geographical definition of the market, as concepts such as homogeneity, substitution and potential competition do not bind well in liner shipping; however, they constitute useful tools for defining market power in tramp shipping. I discuss this matter infra in the section referring to the aggregation across markets. Overall, I believe that the Maritime Guideliness do not significantly contribute89 or add any pioneering information to the existing interpretation, especially to shipping professionals; yet the Guidelines will be updated every 5 years. As mentioned above, the competent EU institutions endorsed long ago (since 1998) the option of the product definition of the market by limiting the market to the liners. Despite the recent Guidelines (2008), product definition in liner shipping has not changed much in recent years. In fact, one could claim that it has not changed at all, despite the “agonising” efforts of the liner cartels to reverse this interpretation that became a trend.
Accordingly, EU Courts90 clearly rejected the argument that the service market is wider than the routes in which the liners operate,
“as there is in the majority of cases there is no substitutability by tramp vessels and other transport modes”. The Commission has held91 in various cases that tramp operators compete marginally with liners; in contrast, the latter are able to fully compete with tramp vessels.
88 Chuah Jason, (2008) op. cit §25 p. 365
89 Fergus Randolph, "The European Commission's draft guidelines - a promising starting-point or a missed opportunity?", Shipping & Transport International [2008] 7(1) pp. 11-13.
90 Atlantic Container Line and Others vs Commission (TAA judgment) CFI [2002 ECR II-875] para 273. See also Atlantic Container Line AB and Others vs Commission (TACA Judgment ) [2003 ECR II-3275] para 809.
91 TAA Decision (1994) op.cit. paras 34, 47-49. See also: Maersk/POLN Commission decision, Case COMP/M.3829 [OJ 2005 C207/8] para 13
58 Likewise the practice of the Commission, as also stated within the Maritime Guidelines,92 tends to narrow the market as much as possible, examining whenever appropriate if the market can be limited to a particular type of product e.g. perishable goods transported in reefer containers or conventional reefer vessels.
While it is possible in exceptional circumstances for some substitution to take place between break bulk and container transport,93 there appears to be no lasting change from container use towards bulk. For the vast majority of categories of goods and users of containerized goods, break bulk does not offer a reasonable alternative to containerized liner shipping.94 Once the cargo becomes regularly containerised, it is unlikely to be transported ever again as non-containerised cargo. To this day, non-containerised liner shipping is, therefore, mainly subject to one way substitutability.95 In general, liner companies can attract bulk or neo-bulk goods due to discrimination with respect to type of cargo, and the cross-subsidies between expensive and cheap goods.
It is my view, however, that the presumption of non-substitutability between tramp and liner sectors may not be entirely true; a condition as such can be properly evaluated in a given time context and not as doctrine. I analyse the matter further supra.96 Moreover I observe a paradox, especially when one measures interchangeability from the supply side of the market. For example, in Continental Can Co.97, the ECJ criticised the Commission for not taking into account the point
92 Maritime Guidelines (2008) op. cit. para 19
93 TACA decision, op. cit. Para 71
94 TAA ibid. para 273 and TACA Judgment of 30.9.2003, CFI, Joined Cases 191/98, T-212/98, T-213/98 and T-214/9 [2003 ECR p. II-3275] para 809. As regards the substitutability between break-bulk and container, there is no lasting change from container vessels towards bulk/break bulk. This is only one way substitutability: once cargo becomes regularly containerised it is unlikely to be transported again as non-containerised cargo.
95 TAA ibid. para 281. Also see: MAERSK/PONL, op. cit. para 13
96 Infra p. 151 et seq
97 Supra § 66
59 that producers of other types of cans could amend their method of production to compete with Continental Can without much difficulty.98 I will try to develop the above argument as follows:
In a similar situation in shipping, one can claim that – provided a liner market is not closed to actual and potential competition (absence of restrictions and barriers to entry) – nothing impedes bulk carriers to change their operations from spot to liner shipping; thus expanding to liner shipping operations. Perhaps the reason for not doing so could be that potential competitors have developed a special and workable modus operandi which they prefer not to change for entering the liner market. In other words, they prefer not to compete based on their own choice and initiative. This is an important factor that has to be included as an indicator of potential competition within a market.
But, I believe that is not the case, for two reasons:
- First, the market is not similar, not to mention homogeneous, in terms of product;
- Second, the business strategy and operational details and setting are significantly different between liner and spot shipping; hence, not only are the products not interchangeable, but the producers cannot substitute the demand, due to known reasons that relate to the nature of the business: capital, economies of scale and special innovation99 are required.
98 Ibid. para 36
99 As innovation in shipping (pronoun)we can deem the special business strategy that a company has to improvise in order to be successful. The innovative element is that this strategy has to change and adapt in the constantly dynamic environment of shipping.
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