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The Tramp Shipping Sector

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?

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The Tramp Shipping Sector

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  1. The Tramp Shipping Sector Philip Wareham, Partner

  2. The London Shipping Law Centre COMPETITION LAWS AND SHIPPING The Tramp Shipping Sector Philip Wareham, Partner Holman Fenwick & Willan, London

  3. 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?

  4. What is causing the splash?

  5. (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

  6. 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

  7. 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

  8. 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

  9. (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….?

  10. (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

  11. (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

  12. The London Shipping Law Centre 29 May 2007The Tramp Shipping Sector Philip Wareham, Partner Marlow House, Lloyds Avenue London EC3N 3AL, 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

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