3.1 Introduction

3.1 Introduction

3.1.1 The alternatives object v effect

No cooperation between liner shipping companies, neither as agreements, decisions of associations, nor concerted practices, are deemed contrary to Art. 101 unless they cause the prevention, restriction, or distortion of competition.(1) TFEU art. 101 (1). The provision lists certain conduct which "in particular" restricts competition, including, among others, direct or indirect price fixing (a), limiting or controlling production (b), sharing markets (c), discriminatory treatment (d) and excessive contractual obligations (e). One may either establish anti-competitive conduct based on the cooperation itself, or by examining its actual effects on the liner shipping market. This chapter introduces both alternatives and their relationship, before examining when information exchanges between competing carriers can restrict competition by object.

Information may be shared “purely” through direct exchanges, or “ancillary” via an agreement or a third-party. Container Shipping provides an example of the former, while consortia, pools, and alliances exemplify the latter. The information exchanged ancillary should be assessed in the context of its “channel.”(2) Communication 2011/C11/01 para.56. This adds another nuance, namely whether the cooperation, and the information exchanged accordingly, restrict competition by object or effect.

Art. 101 (1)‘s wording reveals that these are alternative conditions. However, they are not mutually exclusive.(3) Case C-228/18 Gazdasági Versenyhivatal v Budapest Bank Nyrt. and Others (Budapest bank) para.44. The CJEU has consistently held that ‘object or effect’ implies it necessary to consider the effects only if one cannot establish an anti-competitive object. In the case S.T.M. (1966), the Court determined “first the need to consider the precise purpose of the agreement” (its object) and further, where that analysis “does not reveal the effect on competition to be sufficiently deleterious, the consequences of the agreement” should be considered (its effects).(4) Case 56/65 Société Technique Minière v Maschinenbau Ulm p.249; See also Case C-67/13 P Groupement des cartes bancaires v Commission (CB) paras.49-52. This approach has been continuously affirmed, also in Container Shipping.(5) Case AT.39850 Container Shipping para.48.

Although these procedural steps seem straight-forward in theory, the interpretations remain inconsistent, and legal scholars continue to debate the distinction between the concepts.(6) Whish & Bailey (2021) pp.126-127.Container Shipping, for instance, illustrates how this division may allow competition authorities to “avoid” the normally complex assessment of showing anti-competitive effects by prematurely conclude on the existence of a restriction by object. Consequently, one may risk that excessively wide interpretation of the object-alternative can intercept cooperation with potentially pro-competitive effects.(7) Hjelmeng & Østerud (2022) p.81. Such a practice has been rejected by the Court, emphasising that there is nothing preventing the competent authority from examining the effects where it is considered appropriate.(8) Case C-228/18 Budapest Bank para.40. The development of how widely the ‘object’-alternative has been interpreted is further commented under Section 3.1.2 infra.

Recent case law offers some clarification of the required assessment of ‘object’ before ‘effect.’ In Generics, which concerned a settlement agreement in a patent dispute, the Court held that the existence of an infringement by object may be assumed if it is “plain from the analysis” of the conduct, that it “cannot have any explanation other than the commercial interests [… of the parties] to not engage in competition.”(9) Case C-307/18 Generics (UK) and Others v Competition and Markets Authority (Generics) para.87. Thus, the analysis should stop at the object-alternative only when there is little doubt about the cooperation’s anti-competitive object.

Besides the dichotomy, both alternatives have since the case Völk (1969) been interpreted to also require an appreciable impact on competition (de minimis). Völk concerned an agreement granting territorial exclusivity of sales, which normally falls under the ‘object’-alternative. Cooperation evades the provision “when it has only an insignificant effect on the markets, taking into account the weak position which the persons concerned have on the market of the product in question.”(10) Case 5/69 Völk v Vervaecke para.7 p.302. Following this, even the most serious anti-competitive conduct such as price-fixing falls short of Art. 101, provided it only has an insignificant impact on the market.(11) Whish & Bailey (2021) p.145.

Accordingly, minimal cooperation between competing carriers, such as a pools, conferences, or consortia consisting of only a few ships, may be perfectly legal. However, in the case Expedia (2012) the Court held that an infringement by object which may affect intra-Member State trade “constitutes, by its nature and independently of any concrete effect that it may have, an appreciable restriction on competition.”(12) Case C-226/11 Expedia v Autorité de la concurrence and Others (Expedia) para.37. From this it seems only necessary to consider the appreciable impact in the case of infringements ‘by effect.’ Some scholars have contested that Expedia does not overturn Völk, continuously debating whether the de minimis-doctrine is appropriate for the ‘object’-assessment.(13) King (2015) p.223. When preparing Expedia, AG Kokott took the view that the de minimis-doctrine in principle is applicable both to ‘object’ and ‘effect’-infringements, but the required proof of appreciable impact differs.(14) Opinion of Advocate General Kokott in Case C-226/11 Expedia paras.47-48. Such an approach may resonate with the fundamental idea that the more obvious restriction, the less rigorous assessment is required.

Arguably, such a reasoning provides a sufficient basis for examining the cooperation’s impact on the market. However, the Commission’s guide to how it will apply the doctrine (De Minimis Notice) does not apply to ‘by object’-infringements,(15) Communication 2014/C291/01 para.8. and the Consortia BER does not exempt cooperation which has “as its object” the fixing of prices, limitation of capacity of allocation of markets.(16) Regulation 936/2009 art.4. Thus, depending on the categorisation of the cooperation, one may face different thresholds regarding its impact.

In sum, the ‘object’-alternative should be reserved for the clearer infringements of competition where it is “plain from the analysis”(17) Case C-307/18 Generics para.87. that there is little need for further examination of the information exchange’s effects. This is likely to be the case where an agreement regarding sailing routes is followed by a practice where carriers share the relevant routes and ports between them. Another example is where competing carriers meet to discuss future freight rates, followed by stable rate levels across the market. Should the cooperation be more sophisticated and not resemble an apparent cartel, the decisive question under Art. 101 (1) becomes whether it has anti-competitive effects. The remainder of Chapter 3 analyses the ‘object’-alternative and whether cooperation in liner shipping can constitute such infringements.

3.1.2 Restriction by object

Restrictions to competition by object are deemed the most explicit forms of anti-competitive conduct. The general perception has been that such types of coordination “can be regarded, by their very nature, as being harmful to the proper functioning of normal competition”(18) Case C‑32/11 Allianz Hungária Biztosító and Others v Gazdasági Versenyhivatal (Allianz Hungária) para.35 One may argue that such restrictions pose the most severe threat to normal competition in a market, and the CJEU has elaborated that

“certain collusive behaviour, such as that leading to horizontal price-fixing by cartels, may be considered so likely to have negative effects, in particular on the price, quantity or quality of the goods and services, that it may be considered redundant, for the purposes of applying Article 81(1) EC, to prove that they have actual effects on the market”(19) Case C‑286/13 P Dole Food and Dole Fresh Fruit Europe v Commission (Dole (CJEU)) para.115. (emphasis added).

For instance, competing carriers agreeing to set common sales prices of liner transport services may heavily distort or completely remove normal competition on prices. Such conduct poses, in itself, a risk to normal competition.

The Court’s formulations suggest a substantial threshold to conclude on a restriction by object. This assumption has been challenged through gradually widening interpretations by the Court, criticised by authors as expanding the “object box.”(20) Whish & Bailey (2021) p.127; See also Jones, Sufrin and Dunne. (2019) pp.226-228. Formulations in the case T-Mobile (2009) illustrate the “high tide,”(21) Hjelmeng & Østerud (2022) p.71. where the Court held that

“it is sufficient that it has the potential to have a negative impact on competition. In other words, the concerted practice must simply be capable in an individual case, having regard to the specific legal and economic context, of resulting in the prevention, restriction or distortion of competition”(22) Case C-8/08 T-Mobile para.31. (emphasis added).

This standard was repeated in the case Allianz Hungaria (2013).(23) Case C‑32/11 Allianz Hungária para.38. However, the Court quickly corrected these statements in the case CB (2014). The Court recognized the limits to the scope of the ‘object’-alternative, most prominent by holding that the GC (the judgement under appeal) erred in law when stating that “the concept of restriction of competition by object must not be interpreted restrictively.”(24) Case C-67/13 P CB para.58. Subsequent case law has explicitly required a restrictive interpretation of the ‘object’-alternative, and the substantial threshold is now clearly confirmed. The case Generics is illustrative, as the Court held that “the concept of restriction of competition ‘by object’ must be interpreted strictly and can be applied only to some concerted practices.”(25) Case C-307/18 Generics para.67.

It remains debatable whether the ‘object’-alternative requires documenting an appreciable negative impact on competition (see Section 3.1.1 supra). Regardless of views, it is arguably in practice easier to establish an appreciable impact having already confirmed that the conduct reaches the ‘object’-threshold. This is because the alternative requires that the conduct, after a restrictive interpretation, by its very nature is harmful to normal competition.

Whether information exchanges restrict competition require a case-by-case approach.(26) Capobianco (2004) p.1250. The Court has stated that an exchange which is

capable of removing uncertainty between participants as regards the timing, extent and details of the modifications to be adopted by the undertakings concerned in their conduct on the market must be regarded as pursuing an anticompetitive object”(27) Case C‑286/13 P Dole (CJEU) para.122. (emphasis added).

In sum, the ‘object’-alternative must be interpreted strictly and is reserved to the most serious forms of anti-competitive cooperation between carriers. Information exchanges which facilitate price cartels, or sharing of liner shipping markets will normally be captured. Such cooperation will, in itself, be likely to have an appreciable adverse impact on competition in liner shipping.

However, case law has seen different formulations when conducting the ‘by object’-assessment, leaving legal scholars debating whether the practice points toward a specific methodical approach. Analysing the legal application of the Courts can provide guidance to competition authorities and companies when evaluating potential infringements. However, analyses of different statements have given rise to particularly two different approaches.