On 31 August 2016, the European Commission published its decision rendering the commitments offered by fourteen container liner shipping companies legally binding. The Commission closed its formal investigation that it started in 2011 without finding any competition law infringements. However, the Commission did establish that the practice of publishing future price increases for identified trade routes could potentially allow competitors to coordinate their pricing behavior.
The carriers regularly announced their intended future price increases for freight services on their websites, via the press, or in other ways. These announcements indicated the amount of the increase per transported container unit, the relevant trade route and the planned implementation date. The Commission found that after such a price announcement, some or all of the other carriers announced similar intended rate increases for the same or similar routes and implementation dates. Announced price increases were sometimes postponed or modified by some of the container shipping companies, possibly aligning them with the announcements made by other carriers.
The Commission had concerns that the price announcements were of little value for customers, as they did not provide information on the new full prices they would be asked to pay. In addition, the announcements only had little committal value, so customers could not rely on them when making purchasing decisions. Furthermore, the Commission expressed concern that the carriers' practice may have allowed the companies to explore each other's pricing intentions and coordinate their behaviour. According to the Commission, this may have enabled the carriers to 'test' the implementation of a potential price increase, thereby reducing strategic uncertainty about the companies' future behaviour.
In order to address the Commission's competition concerns, the carriers offered commitments pursuant to Article 9 of Regulation 1/2003. The parties offered that price announcements would: (i) contain at least the main elements of the total price, such as the base rate and security and handling charges, the services to which they apply and the period to which they relate; (ii) not be made more than 31 days before their implementation date; and (iii) be binding on the carriers for their validity period as maximum prices.
Public price announcements are common practice in several sectors and the Commission has not taken action against price signalling for a long time. However, in line with the ACM's views in the mobile operators case in the Netherlands, the Commission's commitment decision shows that announcements on future commercial conditions warrant extra caution, such as providing definite information that is valuable for customers.
This article was published in the Competition Law Newsletter of October 2016. Other articles in this newsletter:
- Court of Justice ends Pilkington's fight against fine in the car glass cartel
- General Court upholds Commission's decision that reverse payment settlements constitute a 'by object' infringement
- European Commission puts price signalling on the agenda
- European Commission orders Ireland to recover illegal tax benefits worth up to €13 billion from Apple
- Commission publishes Preliminary Report on the e-commerce sector inquiry
- Brussels Court of Appeal confirms interim measures against exclusive TV broadcasting rights