EC WINS LANDMARK LEGAL CASES AGAINST TACA, FEFC
In three long-awaited judgements made today, the Court of First Instance of Luxembourg has rejected the appeals of ocean carriers of the Trans-Atlantic Agreement, the Trans-Atlantic Conference Agreement and the Far Eastern Freight Conference of key decisions made by the European Commission in the last eight years.
The European court backed the European Commission’s rulings against the carrier agreements on all main points of principle, including that EC Regulation No. 4056/86, the law that provides an antitrust exemption to liner conferences, does not allow them to set inland and intermodal rates.
“This is really a complete victory for the Commission,” a source at the European Commission said. “The Commission won on the substance.”
“The TAA, in so far as it included price-fixing agreements on both maritime and inland transport services and agreements on the non-utilization of maritime transport capacity, involved… an agreement which manifestly restricted competition,” the court ruled.
Commenting on the TAA’s controversial capacity management program, the court said that “it cannot therefore be denied that the capacity management program constituted a restriction of competition within the meaning of Article 85(1)(b) of the Treaty.”
The court backed the European Commission’s view that the TAA was not a liner conference agreement exempted by Regulation No. 4056/86, because it established at least two rate levels.
“The existence of a liner conference within the meaning of Regulation No.4056/86 thus depends on the charging of ‘uniform or common’ freight rates by its members,” the court judgement said.
The court ruled that because the TAA’s dual-rate structure disqualified it as a conference, “it is unnecessary to determine whether the Commission also rightly decided that the capacity management program and the price-fixing agreements on inland transport in the context of intermodal transport did not qualify for the block exemption.”
The shipping lines of the TAA obtained from the court the annulment of Article 5 of the European Commission’s decision concerning service contracts. The decision had required carriers to inform customers that they were entitled to renegotiate the terms of those contracts or to terminate them.
In the TAA case, the court dismissed the carriers’ appeal and ordered them to bear their own legal costs and to pay four fifths of the costs incurred by the European Commission and by the shippers’ councils that intervened.
The carriers that lost the TAA appeal case are Atlantic Container Line, Cho Yang (now bankrupt), DSR-Senator Lines, Hapag Lloyd, Mediterranean Shipping Co., A.P. M'ller-Maersk Line (now Maersk Sealand), Nedlloyd Lijnen (now P&O Nedlloyd), Neptune Orient Lines, NYK Line, Orient Overseas Container Line, P&O Containers (now P&O Nedlloyd), Polish Ocean Lines, Sea-Land Service, Tecomar and Transportaci'n Mar'tima Mexicana.
The Court of First Instance also rejected the appeal of Trans-Atlantic Conference Agreement carriers of a decision by the European Commission to lift their immunity from fines.
The court requested the carriers to bear their own legal costs and those of the European Commission. The government of France, which backed the appeal by the carriers, was also ordered to bear its own legal costs.
The TACA carriers were Atlantic Container Line, Cho Yang, DSR-Senator Lines, Hanjin Shipping, Neptune Orient Lines, NYK Line, Orient Overseas Container Line, P&O Nedlloyd, Hapag-Lloyd, A.P. M'ller-Maersk Line, Mediterranean Shipping Co., POL-Atlantic, Sea-Land Service, Tecomar and Transportaci'n Mar'tima Mexicana.
In the appeal case concerning the Far Eastern Freight Conference, the court ruled that conferences in Europe were not allowed to set inland or intermodal rates, as decided by the European Commission in a ruling in 1994.
The court said that “it is clear that the ‘maritime transport services’ ordinarily refers, precisely, to transport by sea.”
“Contrary to the applicants’ argument, there is nothing to warrant interpreting ‘maritime transport services’ as including inland transport, consisting of the on- or off-carriage of containers, provided in combination with other services as part of an intermodal transport operation.”
“If the Council had wanted to include within that term other services provided in conjunction with maritime transport, such as the inland on- or off-carriage of cargo, it would have said so expressly, as indeed the American legislature has done,” the court said.
The European court canceled the fines imposed by the European Commission on FEFC carriers. The EC had fined each carrier of the Asia/Europe conference, except Wilh. Wilhelmsen, a “symbolic fine” of 10,000 Ecu.
“Since the FEFC tariff was a matter of public knowledge, and therefore known to those primarily affected, namely the shippers, the contested agreement, even though it is a horizontal price agreement, cannot in any way be equated with a secret cartel,” the court judgement said. The FEFC introduced an inland tariff in about 1971.
“Numerous factors led the applicants (the conference carriers) to believe that the contested agreement was lawful,” the court said, referring to the inland pricing practices of the FEFC.
The carriers of the FEFC that lost the appeal are Compagnie Generale Maritime, Hapag-Lloyd, “K” Line, Lloyd Triestino, A.P. M'ller-Maersk Line, Malaysian International Shipping Corp., Mitsui O.S.K Lines, Nedlloyd Lijnen, Neptune Orient Lines, NYK Line, Orient Overseas Container Line, P&O Containers and Wilh. Wilhelmsen.
“This is a great day for shippers, and confirms our long-standing concerns about the practices of liner cartels,” said Nicolette van der Jagt, policy manager at the European Shippers’ Council.
“The European court today upheld European shipper complaints against inland price fixing by the TAA and FEFC and against attempts by the TAA to cartelize the U.S. container trades,” the European Shippers’ Council said.
“In 1992 the TAA imposed exorbitant rate increases which drove shippers to challenge the cartel.”
The ESC said that the judgement “throws into doubt current arrangements that the TACA lines have introduced to deal with so-called temporary fluctuations in demand.”
The response of the carriers of the TAA, TACA and FEFC to today’s rejection of their appeals is unknown. They can now decide to appeal the rulings of the Court of First Instance by going to the European Court of Justice, the highest court in European Union.