3.2 Different theoretical approaches

3.2 Different theoretical approaches

3.2.1 Introduction

Establishing one common methodical approach can help liner shipping companies and authorities when considering new and complex ways to share information. It may also assist in harmonising the application throughout Member States and provide legal certainty. However, the existence of several approaches may contribute to unclarity and legal uncertainty. Different views on assessing infringements by object could affect the outcome of specific cases of information exchanges between competing carriers, making it a potentially essential division.

3.2.2 The orthodox approach

The first approach, referred to as the “orthodox approach”,(1) King (2015) pp.29-30. separates obvious infringements from the complex, less obvious ones.(2) Bergqvist (2020) pp.107-109. By categorizing certain forms of cooperation as infringements by object, one presumes that these practices are so likely to have negative impact on competition that further examination is unnecessary.(3) Case C‑286/13 P Dole (CJEU) para.115. Practices evading this category must be examined in detail to uncover their effects. Whish & Bailey provides an example of how to categorise different types of agreements and place them outside or within the “object box.”(4) Whish & Bailey (2021) p.127.

One starting point has ever since the case Consten and Grundig (1966) been to examine the conduct’s “nature.” Concerning supply contracts with exclusivity clauses, the Court held that

“Grundig undertook not to deliver even indirectly to third parties products intended for the area covered by the contract. The restrictive nature of that undertaking is obvious if it is considered in the light of the prohibition on exporting which was imposed”(5) Cases C-56/64 Consten and Grundig v Commission p.343. (emphasis added).

The “nature” of agreements can illustrate if they “in themselves pursue an object restrictive of competition.” If so, that object “cannot be justified by an analysis of the economic context.”(6) Case C-403/04 P Sumitomo Metal Industries v Commission para.43. The Commission arguably endorses this approach by categorising certain conduct at “hardcore restrictions” in guidelines and BERs,(7) See Regulation 906/2009 art.4 and Communication 2004/C101/08 para.23. in addition to stating that the CJEU and CFI have “always qualified agreements containing export bans dual-pricing systems or other limitations of parallel trade as restricting competition ‘by object’.”(8) Cases 2001/791/EC Glaxo Wellcome and Others para.124.

One case which clearly advocates the orthodox approach is European Night Services. The CFI stated that an agreement should be assessed by considering its actual conditions and economic context “unless it is an agreement containing obvious restrictions of competition such as price-fixing, market-sharing or the control of outlets”(9) Joined cases T-374/94 European Night Services and Others v Commission (ENS) para.136. (emphasis added). The CFI categorised price-fixing, market-sharing, and control of outlets as ‘object’-infringements without having to place them within their context.

The three examples provided for in European Night Services are all relevant in liner shipping. Conference agreements which agree on common freight rates and pooling agreements concerning revenues, both have elements of price-fixing. Cargo pooling and liner consortia, due to coordination of sailing routes and operations, involve elements of market sharing. Large shipping alliances can resemble control of services, as large combined market shares on certain routes may allow the members to control and reduce the services offered. Following a strict orthodox approach, several such agreements may fall under the object-alternative if their restrictive nature is “obvious.” Pure information exchanges may be more discrete, and public announcements are likely to escape the object-box, unless the exchange clearly aims at coordinating prices, allocating markets or reducing the transport services offered.

On one hand, the orthodox approach offers legal predictability, as one may examine the conduct and attain substantial guidance by asking how the Court previously has categorised this type of infringement. Moreover, it offers procedural predictability, as it will be sufficient for competition authorities to evaluate the cooperation and demonstrate that it “fits into the object category and hence breaches”(10) Bennett & Collins (2010) p.314. Art. 101 (1). If not, the competition authority must assess the cooperation’s effects. On the other hand, the orthodox approach is arguably less suited to address modern and more sophisticated forms of cooperation. It can be criticised for over-simplifying the law and not taking into account the economic and legal context of the conduct.(11) King (2015) pp.48-49. Thus, one may argue that complex information sharing and operational agreements in liner shipping may be ineffectively assessed through such rigid categorisation.

3.2.3 The analytical approach

The second approach is based on a “two-step analysis”(12) Bergqvist (2020) pp.107-109. of the specific case, also referred to as the “analytical approach.”(13) King (2015) p.55. The first step is to evaluate the content of the practice, asking what the conduct involve and if its harmful nature is commonly accepted and easily identifiable.(14) Opinion of AG Wahl in Case C‑67/13 P CB paras.55-56. The second step is to place this content within the factual, economic, and legal context, thus widening the perspective and examining the cooperation in light of its circumstances.(15) Bergqvist (2020) p.107.

The two-step analysis may be derived from the Court referring to that “regard must be had inter alia to the content of its provisions, the objectives it seeks to attain and the economic and legal context of which it forms a part.”(16) Cases C-501/06 P GlaxoSmithKline para.58; See also Case C-67/13 P CB para.53. Also the EFTA Court has referred to the “specific legal and economic context” in its assessments.(17) Case E-3/16 Ski Taxi SA and Others v The Norwegian Government, paras.60 and 64-65. Such formulations may point to a concluding contextual analysis, after considering the conduct isolated.(18) Hjelmeng & Østerud (2022) p.76 footnote 43. The approach is explicitly supported by AG Bobek when preparing the case Budapest Bank (2019).(19) Opinion of AG Bobek in Case C-228/18 Budapest Bank paras.41-43. Regarding the border between the second contextual step and a full effects-analysis, Bobek regards the difference more of degree than of kind. He argues that the second step requires competition authorities to check on a general level “whether there are any legal or factual circumstances that preclude the agreement or practice in question from restricting competition”, thus carrying out a “basic reality check.”(20) Ibid. paras.49-50.

If the content of the conduct reveals sufficient harm to competition, it may still be justifiable or proven to be pursuing pro-competitive objectives when placed within its context. Of particular relevance would be the parties’ ability to refer to other, legitimate explanations for the cooperation.(21) Case C‑591/16 P Lundbeck v Commission paras.112-114. Within liner shipping, this approach would first consider the actual information exchange between carriers, for instance to discuss coordination of transport on a specific route (potentially resembling market-sharing) before interpreting the exchange within the liner shipping market and competitive circumstances, e.g. examining how many ships are part of the coordination, the companies’ market shares, and the saturation of the demand on that route.

Applying the analytical approach could lead to traditionally “clear”(22) See TFEU art. 101 (1) and footnote 99 supra for the list of particularly restrictive conduct, which can be permitted when applying the analytical approach. infringements such as horizontal price fixing falling outside the object-alternative, while normally benign agreements being included.(23) Bergqvist (2020) p.107. Arguably, the conduct itself cannot be sufficiently analysed without regarding its circumstances. However, once the market characteristics are examined, the evaluation resembles a ‘by effect’-assessment, and the analytical approach appears to operate with blurred lines. To consider the economic and legal context requires an examination of the services affected and the relevant market conditions, which in large amounts to an ‘effects’-analysis.

3.2.4 Main differences

In short, the orthodox approach considers “certain collusive behaviour”,(24) Case C‑286/13 P Dole (CJEU) para.115. for instance price fixing, as being so likely to have negative impact on competition that it is appropriate to place them within the “object box.”(25) Whish & Bailey (2021) p.125. It offers predictability and bright lines between the object and effect assessments but may be insufficient to correctly categorise modern and complex infringements. The analytical approach considers the actual content of the cooperation, before placing it within its “economic and legal context.”(26) Cases C-501/06 P GlaxoSmithKline para.58. This approach may provide accuracy, but also requires a circumstantial analysis which in principle has been reserved the ‘by effect’-assessment. Theoretically, one may also regard this approach as “a way out” of the object box for cooperation types which traditionally are deemed obvious threats to competition, but which in the specific context of the market are less harmful or even justified.

It is not obvious which one of the two approaches, if any, is feasible. One may view the public policy choice being between administrative advantages of predictable bright lines, and legal accuracy capturing the underlying economic structures of the conduct.(27) Smith, Ridyard & Petrescu (2015) p.35. When considering the legality of information exchanges within liner shipping, the chosen approach may affect the outcome. Having the legal starting points and theoretical approaches in mind, the paper now turns to discussing when information exchanges constitute restrictions by object.