The Tramp Shipping Sector Philip Wareham Partner

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 – – – 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 – – – 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 – NYKLauritzen. Cool 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 – – No impact on competition at all? De minimis market share Analogy with liner consortia Specialisation or other possible harbours • Restructure – 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 EC 3 N 3 AL, UK Philip. Wareham@hfw. co. uk Tel: +44 20 7264 8403 hfw. com ALSO OFFICES IN: PARIS, ROUEN, PIRAEUS, DUBAI, HONG KONG, SHANGHAI, SINGAPORE AND MELBOURNE